Peter Stimpson and Alex Smith

458 Pages·2011·12.28 MB·English

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Business and
Management
for the IB Diploma
Peter Stimpson and
Alex Smith
Cambridge University Press’s mission is to advance learning,
knowledge and research worldwide.
Our IB Diploma resources aim to:
(cid:127) encourage learners to explore concepts, ideas and
topics that have local and global signifi cance
(cid:127) help students develop a positive attitude to learning in preparation
for higher education
(cid:127) assist students in approaching complex questions, applying
critical-thinking skills and forming reasoned answers.
cambridge university press
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Cambridge University Press
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Information on this title: www.cambridge.org/9780521147309
© Cambridge University Press 2011
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2011
Printed in the United Kingdom at the University Press, Cambridge
A catalogue record for this publication is available from the British Library
ISBN 978-0-521-14730-9
Cambridge University Press has no responsibility for the persistence or
accuracy of URLs for external or third-party internet websites referred to in
this publication, and does not guarantee that any content on such websites is,
or will remain, accurate or appropriate. Information regarding prices, travel
timetables and other factual information given in this work are correct at
the time of fi rst printing but Cambridge University Press does not guarantee
the accuracy of such information thereafter.
This material has been developed independently by the publisher and
the content is in no way connected with or endorsed by the International
Baccalaureate Organization.
Contents
Topic 1 Business organisation and environment
1 The nature of business activity 1
2 Types of organisation 8
3 Organisational objectives 22
4 Stakeholders 39
5 External environment 45
6 Organisational planning tools 57
7 Growth and evolution 68
H 88 Change and the management of change 82
99 Globalisation 89
Topic 2 Human resources
10 Human resource planning 96
11 Organisational structure 108
12 Communication 119
13 Leadership and management 129
14 Motivation 140
H 1155 Organisational and corporate cultures 156
H 1111666 Employer and employee relations 163
H 1111777 Crisis management and contingency planning 171
Topic 3 Accounts and fi nance
18 Sources of fi nance 174
19 Investment appraisal 185
20 Working capital 195
H 2211 Budgeting 205
2222 Financial accounts 212
23 Ratio analysis 226
Topic 4 Marketing
24 The role of marketing 240
25 Marketing planning 250
26 Product 271
27 Price 281
iii
Contents
28 Promotion and place (distribution) 293
29 International marketing and e-commerce 307
Topic 5 Operations management
30 Production methods 316
31 Costs and revenues 324
32 Break-even analysis 335
33 Quality assurance 342
34 Location 353
H 3355 Innovation 364
33366 Production planning 369
H 3377 Project management 383
Topic 6 Business strategy
H 3388 Business strategy 393
Examination skills
39 Examination skills 407
Glossary 426
Index 439
Acknowledgements 448
iv
Introduction
Nature of the subject
The IB Diploma Programme Business and Management is ● help students to develop an understanding of busi-
designed to develop an understanding of essential busi- ness theory and the ability to apply business princi-
ness theory and the ability to apply business principles, ples, practices and skills
practices and skills. It encourages students to analyse ● encourage students to consider the activities of business
the diverse range of business organisations and activities in a global market and appreciate cultural diversity
and the cultural and economic context in which busi- ● evaluate the diverse range of business organisations
nesses operate. The emphasis is placed on strategic deci- and activities
sion-making and the business functions of marketing, ● develop in students an awareness of the cultural and
production, human resource management and fi nance. economic context in which businesses operate
Business and management is the study of both the way ● encourage the appreciation of ethical issues and the
in which individuals and groups interact in an organisa- concept of social responsibility in the global business
tion and of the transformation of resources. It is, there- environment
fore, perfectly placed within the group 3 subject area ● enable the development of decision-making skills
(individuals and societies) of the IB Diploma Programme through the use of case studies that enhance students’
hexagon. ability to make informed business decisions
● make a clear distinction between higher level and
Who is this book for?
standard level content
This book accurately and comprehensively follows the Inter- ● help students improve their performance on the
national Baccalaureate (IB) higher level (HL) and standard internal and external assessments used in the Business
level (SL) syllabus for Business and Management. and Management syllabus
If you are a student preparing for the assessments ● show how the Business and Management syllabus
based on this syllabus, or a teacher preparing students relates to the Theory of knowledge part of the IB
for the assessments, you can be confi dent that the book Programme.
provides comprehensive coverage of the course. Other
students of business management courses at equivalent The focus on the higher level topic of business strategy
levels could also greatly benefi t from the subject content, in Chapter 38 also means that the book highlights
activities and advice that this book contains. the following very important aspects of business
management:
What are the aims of the book?
Apart from providing the appropriate subject content ● Strategic decision-making is holistic and cannot be
for the IB Business and Management course, the book undertaken effectively by studying a series of discon-
aims to: nected subject areas.
● There is no single perfect solution to a business
● introduce business and management as a study of the problem – a variety of strategic solutions might exist
ways in which individuals and groups interact in an that refl ect the objectives of the business, the external
organisation and of how resources are transformed by environment and the cultures of both the organisa-
businesses tion and the countries in which it operates.
● explain that business and management is a rigorous
and rewarding subject that examines dynamic deci-
sion-making processes and assesses how these deci-
sions impact on and are affected by internal and
external environments
v
Introduction
What are the key features of this book?
● Analysis and evaluation of business decisions
and business strategies and practices using critical
● Learning objectives – identifying the key syllabus- thinking.
related topics and concepts covered in each chapter. ● Decision-making by identifying the issue(s), selecting
● ‘Setting the scene’ case studies – raising important and interpreting data, applying appropriate tools and
areas for discussion on business issues through case techniques, and recommending suitable solutions.
studies drawn from many different countries. These ● Synthesise knowledge in order to develop a frame-
provide a context to the business applications of the work for business decision-making.
material to be covered in each chapter.
● Clearly laid out text – with easy-to-follow subsec- Difference between higher and
tions and many tables of data and key advantages and
standard levels
disadvantages.
The HL course in Business and Management differs from
● Examiner’s tips – helping to avoid common errors
the SL course in a number of important ways. These are
made by candidates in examinations.
refl ected in this book by the subject content in Chapter
● Activities – based on business case studies, these give
38 (Business strategy) and in the use of more evaluative
practice at applying learning.
questions and strategic decision-based tasks based on
● Revision checklists – allowing monitoring of under-
the activities and examination practice questions.
standing of key issues.
● Revision case studies and examination practice IB assessment
questions – testing the skills of application, analysis
The exam practice questions at the end of each chapter
and evaluation, using international business situ-
are IB-style questions designed to give students prac-
ations.
tice at answering examination questions. Additional
● Theory of knowledge assignments – these refl ect
case studies with differentiated Standard and Higher
the very close relationship between theory of know-
Level questions and markschemes are provided on
ledge and Business and Management.
the Cambridge IB teacher support website (ibdiploma.
Skills needed by Business and cambridge.org) along with sample schemes of work for
Standard and Higher Level, and revision materials.
Management students
The fi nal chapter of the book gives clear guidance
The skills acquired and developed by successful students
on the forms of assessment used at both SL and HL. It
of Business and Management interlink with the IB
explains the requirements for the extended essay course-
Learner Profi le. In particular, decision-making, risk-
work, internal assessment and examination papers.
taking and thinking skills are needed to weigh up and
Written by a senior IB examiner with many years’ expe-
make judgements on a wide range of business strategies,
rience in preparing students for both levels of the IB
and options will be transferable both to other disciplines
Diploma, it is essential reading for all those preparing for
and to higher level undergraduate study at university.
the assessment in IB Business and Management.
The assessments used in the IB Business and Manage-
ment course will test the following skills:
Peter Stimpson
Alex Smith
● Knowledge and understanding of business termi-
February 2011
nology, concepts, principles and theories.
● Application of skills and knowledge learned to hypo-
thetical and real business situations.
vi
1 BUSINESS ORGANISATION AND ENVIRONMENT
01
The nature of business activity
This chapter covers syllabus section 1.1
On completing this chapter
you should be able to: SETTING THE SCENE
● understand what business
activity involves Dulip starts his business
● identify inputs, outputs and
Dulip lives in a large country which has many natural resources such as coal
processes of a business
and timber. He plans to start a business growing and cutting trees to sell as
● identify and explain the main timber. He wants to buy a forest from a farmer and cut down a fi xed number of
business functions trees each year. As Dulip is concerned about the environment of his country,
he will plant two new trees for each one he cuts down.
● identify and explain the main
sectors of industry He has contacted suppliers of saws, tractors and other equipment to check on
prices. He plans to employ three workers to help him with much of the manual
H ●●● aanalyse the impact on
work. Dulip has also visited several furniture making companies to see if they
bbusiness activity of changes
would be interested in buying wood from him and he has even visited furni-
iin economic structure.
ture shops to see which types of wood sell best. He has arranged a bank loan
for much of the capital that he will need to get started.
Points to think about:
● Why do you think Dulip decided to
own and run his own business rather
than work for another fi rm?
● What resources (or inputs) does Dulip
Photo 1.1
need to run his business successfully?
● What do you think are the essential
differences between these three
businesses: Dulip’s forestry business;
a furniture manufacturer; a shop
selling furniture?
111111
01
The nature of business activity
Introduction
● Land – this general term not only includes land itself
This chapter explains what a business is and what busi- but all of the renewable and non-renewable resources
nesses do. It outlines the main business functions (or of nature, such as coal, crude oil and timber.
departments) and explains the differences between ● Labour – manual and skilled labour make up the work-
primary, secondary and tertiary sectors of industry. force of the business. Some fi rms are labour intensive,
Higher Level additional material analyses the impact that is they have a high proportion of labour inputs
on business activity of changes in economic structure. to other factors of production, e.g. house cleaning
services.
What is a business?
● Capital – this consists of the fi nance needed to set up
A business is any organisation that uses resources to meet a business and pay for its continuing operations as
the needs of customers by providing a product or service well as all of the man-made resources used in produc-
that they demand. There are several stages in the prod- tion. These include capital goods such as computers,
uction of fi nished goods. Business activity at all stages machines, factories, offi ces and vehicles. Some fi rms
involves adding value to resources such as raw mate- are capital intensive, that is they have a high propor-
rials and semi-fi nished goods and making them more tion of capital to other factors of production, e.g. power
desirable to – and thus valued by – the fi nal purchaser. stations.
Without business activity we would all still be entirely ● Enterprise – this is the driving force of business,
dependent on the goods that we could make or grow provided by risk-taking individuals, which combines
ourselves – as people in some communities still are. the other factors of production into a unit that is
Business activity uses the scarce resources of our planet capable of producing goods and services, It provides
to produce goods and services that allow us all to enjoy a a managing, decision-making and co-ordinating role.
much higher standard of living than would be possible if Without this essential input, even very high quality
we remained entirely self-suffi cient. land, labour and capital inputs will fail to provide the
goods and services that customers need.
What do businesses do?
Businesses identify the needs of consumers or other fi rms. Businesses have many other needs before they can
They then purchase resources, which are the inputs of successfully produce the goods and services demanded by
the business, or factors of production, in order to produce customers. Figure 1.1 shows the wide range of these needs.
output. The ‘outputs’ of a business are the goods and
Business functions
services that satisfy consumers’ needs, usually with the
aim of making a profi t. Business activity exists to produce Most businesses have four main functional departments.
goods or services, which can be classifi ed in several ways: These will be staffed by people with specifi c qualifi ca-
consumer goods, consumer services and capital goods. tions and experience in the work of the functional areas.
KEY TERMS MARKETING
consumer goods the physical and tangible goods sold to the This department is responsible for market research
general public. They include cars and washing machines, and for analysing the results of such research so that
which are referred to as durable consumer goods. Non- consumer wants can be correctly identifi ed. This infor-
durable consumer goods include food, drinks and sweets mation will then be discussed with other departments of
that can only be used once. the business so that the right product decisions are made.
consumer services non-tangible products that are sold to the Once a product is available for sale, the marketing func-
general public and include hotel accommodation, insurance tion will have to make important decisions concerning
services and train journeys its pricing, how and where to promote it and how to sell it
capital goods physical goods that are used by industry to aid in and distribute it for sale.
the production of other goods and services, such as machines
and commercial vehicles FINANCE
This function has responsibility for monitoring the fl ow
What are business ‘inputs’?
of fi nance into and out of the business, keeping and
FACTORS OF PRODUCTION analysing accounts and providing fi nancial informa-
These are the resources needed by business to produce tion to both senior management and other departments.
goods or services. Firms will use different combinations Without adequate fi nance, no effective decisions can be
of inputs, depending on the product being produced and made within the other functional areas, so fi nance is a
the size of the business. There are four main inputs: key division of any business.
2