BUSINESS MANAGEMENT SLYOXFORD UNIVERSITY PRESS (Great Clarendon Strect, Oxford, OX2 6DP, United Kingdom, Oxford University Press is a department of the University of Oxford. furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press the UK and im certain other countries © oxford University Press 2014 ‘he mora rights of the authors have boon asserted rst published in 2014 Al rights reserved. No par of this publication may be reproduce stored ina retieval system, or transmitted, in any form ex by aly means, without the prior permission in writing of Oxfoed University Pres, or as expressly permitted by law, by licence oF under terms agreed with the appropriate reprographice rights ‘organization. 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Bennett, Coleman & Co, Ltd (BCL) for "Pepsico targeting sats marketing, wil cater to diferent segments of consumer Manu Anand by Ratna Bhushan, 6 June 2011, Econom: Ties, ‘Times of India Group. copyright © BCCL 201. All Rights Reserved Pearson Education for ‘The Power Interest Mode! original mode! by AL Mendelow published in the Proceedings of he Second Innerational Confrence on nfrmation Sytem, Cambridge MA, 1991, this version from G Johnson & K Scholes Exploiig Corporate Strat Se, Prentice Hall, 1999) UNDP for Summary from ‘Vodafone and Safavicom: Extending Financial Service to the Pooe in Rural Kenya’ by Winifted NKarugu and Tuiza Mwendwa, copyright © 2007 United National Development Programme, published at www, _growinginclusivemarketsorg, ll rights reserved, ‘Although we have made every effort to trace and contact all, copyright holders before publication this has not been possible in all cases. noted, the publisher will rectify any errors or ‘omissions at the earliest opportunity.Course book definition The IB Diploma Programme course books are resource materials designed to support students throughout their two-year Diploma Programme course of study in a particular subject. They will help students gain an understanding of what is expected from the study of an IB Diploma Programme subject while presenting content in a way that illustrates the purpose and aims of the IB. They reflect the philosophy and approach of the IB and encourage a deep understanding of each subject by making connections to wider issues and providing opportunities for critical thinking. The books mirror the IB philosophy of viewing the curriculum in terms of a whole-course approach; the use of a wide range of resources, international mindedness, the 1B learner profile and the IB Diploma Programme core requirements, theory of knowledge, the extended essay, and creativity, action, service (CAS), Each book can be used in conjunction with other materials and indeed, students of the 1B are required and encouraged to draw conclusions from a variety of resources. Suggestions for additional and further reading are given in each book and suggestions for how to extend research are provided. In addition, the course companions provide advice and guidance on the specific course assessment requirements and on academic honesty protocol. They are distinctive and authoritative without being prescriptive. IB mission statement The International Baccalaureate aims to develop inquiring, knowledgeable and caring young people who help to ercate a better and more peaceful world through intercultural understanding and resped. To this end the organization works with schools, governments and international organizations to develop challenging programmes of international education and rigorous assessment, These programmes encourage students across the world to become active, compassionate and lifelong learners who understand that other people, with their differences, can also be right. The IB Learner Profile The aim of all IB programmes to develop internationally minded people who work to create a better and more peaceful world. The aim of the programme is to develop this person through ten learner attributes, as described below. Inquirers: They develop their natural curiosity They acquire the skills necessary to conduct \quiry and research and snow independence in learning. They actively enjoy learning and this love of learning will be sustained throughout their lives Knowledgeable: They explore concepts, ideas, and issues that have local and global significance In so doing, they acquire in-depth knowledge and develop understanding across a broad and balanced range of disciplines. Thinkers: They exercise initiative in applying thinking skills critically and creatively to recognize and approach complex problems, and make reasoned, ethical decisions. Communicators: They understand and express ideas and information confidently and creatively in more than one language and in a variety of modes of communication. They work effectively and willingly in collaboration with others. Principled: They act with integrity and honesty, with a strong sense of fairness, justice and respect for the dignity of the individual, groups and communities. They take responsibility for their own action and the consequences that accompany them. Open-minded: They understand and appreciate their own cultures and personal histories, and are open to the perspectives, values and traditions of other individuals and communities. They are accustomed to seeking and evaluating a range of points of view, and are willing to grow from the experience, Caring: They show empathy, compassion and respect towards the needs and feelings of others. They have a personal commitment to service, and to act to make a positive difference to the lives of others and to the environment, Risk-takers: They approach unfamiliar situations and uncertainty with courage and forethought, and have the independence of spirit to explore new roles, ideas, and strategies. They are brave and articulate in defending their beliefs,Balanced: They understand the importance of intellectual, physical and emotional ballance to achieve personal well-being for themselves and others. Reflective: They give thoughtful consideration to their own learning and experience. They are able to assess and understand their strengths and limitations in order to support their learning and personal development. Anote on academic honesty I is of vital importance to acknowledge and appropriately credit the owners of information when that information is used in your work. Alter all, owners of ideas (intellectual property) have property rights. To have an authentic piece of work, it must be based on your individual and original ideas with the work of others fully acknowledged. Therefore, all assignments, written or oral, completed for assessment must use your own language and expression. Where sources are used or referred to, whether in the form of direct quotation or paraphrase, such sources must be appropriately acknowledged. How do | acknowledge the work of others? The way that you acknowledge that you have used the ideas of other people is through the use of footnotes and bibliographies. Footnotes (placed at the bottom of a page) or endnotes (placed at the end of a document) are to be provided when you quote or paraphrase from another document, or closely summarize the information provided in another document. You do not need to provide a footnote for information that is part of a “body of knowledge’. That is, definitions do not need to be footnoted as they are part of the assumed knowledge. Bibliographies should include a formal list of the resources that you used in your work. ‘Formal’ ‘means that you should use one of the several accepted forms of presentation. This usually involves separating the resources that you use into different categories (e.g. books, magazines, newspaper articles, internet-based resources, Cds, and works of art) and providing full information as to how a reader or viewer of your work can find the same information. bibliography is compulsory in the Extended Essay. What constitutes malpractice? Malpractice is behaviour that results in, or may result in, you or any student gaining an unfair advantage in one or more assessment component. Malpractice includes plagiarism and collusion. Plagiarism is defined as the representation of the ideas or work of another person as your own. The following are some of the ways to avoid plagiarism: © words and ideas of another person to support one’s arguments must be acknowledged © passages that are quoted verbatim must be enclosed within quotation marks and acknowledged © CD-Roms, email messages, web sites on the Intemet and any other electronic media must be treated in the same way as books and journals © the sources of all photographs, maps, illustrations, computer programs, data, graphs, audio-visual and similar material must be acknowledged if they are not your own work © works of art, whether music, film dance, theatre arts or visual arts and where the creative use of a part of a work takes place, the original artist must be acknowledged. Collusion is defined as supporting malpractice by another student, This includes: © allowing your work to be copied or submitted for assessment by another student © duplicating work for different assessment components and/or diploma requirements. Other forms of malpractice include any action that gives you an unfair advantage or affects the results of another student, Examples include, taking unauthorized material into an examination room, misconduct during an examination and falsifying a CAS record,Contents Unit 1: Business organization and environment 1.1 Introduction to business management ue L 1.2. Types of organizations 18 1.3 Organizational objectives mmm 37 1.4 Stakeholders .... 5S 1.5 External environment ol 1.6 Growth and evolution 6 1.7 Organizational planning tools (HL only) 80 Unit 2: Human resource management 2.1, Functions and evolution of human resource management ... 94, 2.2. Organizational structure xn 17 2.3. Leadership and management .. 127 2A Motivation emnnnnnnnnnn 135 2.5. Organizational (coxporate) culture (HL OMY) conn senses 147 2.6 Employer and employee relations a ~ - 155 Unit 3: Finance and accounts 3.1 Sources of finance ........... wou LEE 3.2. Costs and revenues .. 174 3.3. Break-even analysis 179 3.4. Final accounts (some HL ODIY) osm 191 3.5. Profitability and liquidity ratio analysis .. 207 3.6 Efficiency ratio analysis (HL only) .. 216 3.7 CASH HOW remem sie 228 3.8 Investment appraisal (some HI. only) au. 233 3.9. Budgets (HL ORY) en a. 240 Unit 4: Marketing 41 42 43 44 45 46 47 48 The role of marketing 247 Marketing planning (including introduction t0 the fOUF PS) ene 263 Sales forecasting (HL only) .. 274 Market research . ~ sens 281 The four Ps (product, price, PLOMOTION, PlACE) omen ian The extended marketing mix of seven Ps (HL OMI) sess 320 International marketing (HL only) E-commerce 326 Unit 5: Operations management 5a 52 53 5A 55 The role of operations management Production methods Lean production and quality management (HL only) Location Production plant 5.6 Research and development (HL only) ..... 384 5.7. Crisis management and contingency planning (HL only) .. 392 External Assessment ocionnninnnnnnnninne 397 Intemal Assessment .... 406 Index 43a. Introduction This book is a companion for students of Business Management in the International Baccalaureate Diploma Programme, IB Business Management is a component of an exciting education that seeks to “develop inquiring, knowledgeable and caring young people who help to create a better and more peaceful world through intercultural understanding and respect.” During the two years of your IB Diploma Programme Business Management Course you will study a diverse range of business organizations, allowing you to develop a robust understanding of the core principles of modern business activity, as well as the skills needed to manage businesses successfully. The structure of our book is closely based on the programme in the Subject Guide and covers both, Standard and Higher Level material. As well as covering all the syllabus content, this book aims to capture the spirit of the 1B learner profile (see page ii), allowing you to make links to your other subjects, to TOK, and to the wider world, Throughout the book, you will find the following features: Contexts and concepts Contexts and concepts are essential features of the Diploma Programme Business Management course, By considering concepts and contexts, as ‘well as content (lots of ‘cs!), you should develop a ‘wide-reaching, holistic understanding of business ‘management and its place in the world, Contexts are the case studies and examples that you will encounter throughout your course - in this book, in other resources, and in your own research, By looking at these examples, you will find real-world context for the ideas and principles you learn about. You are encouraged to analyse and evaluate these examples, and think carefully about the issues they raise. The Subject Guide has identified six key concepts which underpin all of the content in the course They are: © change © culture © ethics © globalization © innovation © strategy Throughout this book, we have aimed to integrate all six concepts. Sometimes, this is simply as part of the discussion of the content, but we have also Included some exira ‘concept boxes’ which identify additional links to the concepts and suggest research and activities for you to take forward in class or as part of your assessment, These are just some of our thoughts — the concepts can be applied tw all areas of the course and you should keep them in mind from the very beginning. Student workpoints These activities encourage you to reflect on what you've learned and apply new skills. Many encourage you to do your own research, which, can bea great opportunity to find new case studies which you could use in assessment Exam practice Throughout the book, you'll find exam and exam-style questions to help you prepare for your assessment. Many of these follow on from case studies, encouraging you to think critically about solutions to real-world problems. We've also included dedicated chapters on the examination and the internal assessment. Theory of knowledge We've included lots of links to TOK in the book and encourage you to find more! In common. with the other subjects in its group, Business ‘Management is concerned with the activities and attitudes of individuals and societies, and the relationships between them We hope that this book is useful to you in your studies. The authors, as well as being experts in IB. Business Management, are truly international, and have tried to reflect this in the examples and case studies used. It is not expected that this book will be your only resource. The business world is ever- changing and the more research you do, the more case studies you find, and the more questions you ask, the more you will get out of this course, We wish you the best of luck in your studies and assessment!