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458 Pages·2011·12.28 MB·English
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This page intentionally left blank 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 Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo, Delhi, Tokyo, Mexico City Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK www.cambridge.org 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

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