Unit 1: Introduction to business management

In this first introductory unit, business management is set in context: students learn to analyse organizations ’internal
environment (for example, stakeholders, strategic objectives and CSR) and external environment (for example, the
impact of technological change and globalization). Unit 1 covers traditional business areas such as the different
types of organization and the idea of economies of scale, but it also includes more contemporary topics such as the
features of social enterprises, the nature of business activity in the quaternary sector and the distinction between
entrepreneurship and intrapreneurship.

Both SL and HL students learn to apply Business Management Tools (BMTs) such as social, technological,
economic, environmental, political, legal and ethical (STEEPLE) analysis as well as the strengths, weaknesses,
opportunities and threats (SWOT) analysis, a business plan as well as decision trees.
As this unit provides students with an overview of business management both as a topic of study (what the subject
covers overall) and as a professional practice (what business managers do), it lends itself to many TOK
considerations. On the one hand, students may inquire into how and why a particular model becomes established as
a mainstream strategy model. On the other hand, they may ask on what basis business managers make decisions in
the real world. Unit 1 is also an open invitation to consider a range of international examples, especially in relation
to issues of globalization, and to address businesses’ ethical, social or environmental obligations, which fits well
with the IB learner profile in terms of developing principled thinkers. It may also provide the impetus for
entrepreneurial service-learning projects in the local community as part of students’ CAS requirement.

Unit 1: Introduction to business management

1.1 What is a business?
1.2 Types of business entities
1.3 Business objectives
1.4 Stakeholders
1.5 Growth and evolution
1.6 Multinational companies (MNCs) 1.1

1.1 What is a business?

By the end of this topic, you should be able to:

Analyse and apply:

 the role of businesses in combining human, physical and financial resources to create goods and
services.
  the nature of business activity in each sector (Primary, secondary, tertiary and quaternary) and
the impact of sectoral change on business activity.
 Challenges and opportunities for starting up a business.
 Business plans.

Your task- write in the spaces provided

 Define a business
The action of actively exchanging of a item for another item or currency, usually for the
purpose of gaining a profit
-an enterprise entity involved in commercial trade
 Types of products
 Distinguish between a “good” and a “service”
Good- a type of product that involves a certain item/electronical item that the
consumer can use/access after it is under their possession
Service- a type of product that requires something/someone to do something for
the consumer: eg: janitors are paid to clean classrooms

 Distinguish between a consumer good and a capital/industrial goods

 Consumer good: something that a consumer purchases
 Capital/industrial good: something that a enterprise purchases to make/ help
make consumer goods
 Consumer good: an iphone 14
 Capital good: the glass that is used to make the iphone 14 or the aluminum
used in the shell of the iphone 14

 Distinguish between a ‘consumer’ and a ‘customer’

 Customer is the one who is purchasing the goods. (eg: an apple employee purchasing
glass for iphone production, is a consumer)
 Consumer is the one who is the end user of any goods or services
 (but the apple employee is not a customer, the customer is a person buying the iphone)

 What do businesses do?

They start/ organize the production of products(service or goods)
 Describe ‘production process’as;

The Mechanical or chemical steps used to create an object, usually repeated

to create multiple units of the same item. Generally involves the use of raw
materials, machinery and manpower to create a product. Every product is
produced and different types of products are produced differently and require
 different amounts and combinations of resources.

 Describe the ‘inputs’ or ‘factors of production’ that businesses use in their activity.
 Land
 Capital
 Labor
 entrepreneurship

 Define an “entrepreneur”
 a person who organizes and operates a business or businesses, taking on greater than normal financial risks in
order to do so
eg) elon musk invested in tesla, he took a risk of tesla failing(greater than normal
financial risk) so he operates tesla

 Businesses can be categorized by their ownership (Topic 1.2) as well as by the nature of
their activity (what they do).
 Define and explain the nature of business activity in each sector (Primary,
secondary, tertiary and quaternary).

Primary sector- harvesting/mining natural resources

Eg: coal mining
Secondary sector- this sector , buisnesses take capital goods(raw
materials) and turn it into goods
Eg) apple turns glass, aluminum,silicon into iphones

Tertiary sector-
Retailers , entertainments, financial companies

Eg: banks, KTVs, Supermarkets

Quaternary sector- involving the sharing of knowledge or intellectual
pursuits
Eg: consultants, Research and development, education

Describe and illustrate the “chain of production”

The production process is a sequence of productive activities leading to an end
use—a chain of linked functions, in other words. Each stage adds value to the
production sequence. (usally from primary to secondary, then to tertiary)

Identify the sectoral changes taking place in your country. (Which sectors are growing, and
which sectors are shrinking?)
Primary sector in china has been shrinking to due government policies regulating the depletion of
local natural resources and turning to importing these natural resources eg: china Imports a lot of
oil

Secondary sector has also been shrinking due to covid measures constantly effecting production
of products or even pause the production of products, whilst that happens, buisnesses still have to
pay rent and borrowed money from banks

tertiary sector has been constantly shifting to a online form now, as websites such as Taobao,
jd.com, and piduoduo have the benefit of selling products of convenient access to
consumers( through advanced shipping in china) and lower rent(Taobao stores don’t require a
good location to sell items, therefore, they simply rent a warehouse to store their products)

1.1.2 Starting a business

 What are the opportunities for starting up a business?

https://www.bbc.com/news/business-45246999
Turn your hobbies into success: why now’s the perfect time to start a business | The
unstoppables | The Guardian

Opportunities- when you get the feeling that you don’t often see a product that you
specifically want, I may be a potential business opportunity.
  Describe the challenges of starting a business\
 Funding is a major problem as many new startups come from people who find it difficult
to raise their starting funds, especially in china, as you don’t even have any assets to
rpove your credibility to the bank, making it difficult to borrow money
 Cashflow is very important(always keep cashflow or else you will be bankrupt)
 Legal restrictions(government can ban certain buisnesses, or things like minimum wage
can restrict buisnesses)

External enviorment (STEEPLE

Social
Technological( often competitors can think and develop an even better product using
technological innovation.)
Economic(inflation is high or cost of energy is high, a lot of buisnesses can no longer be run)(or
people simply stopping to buy goods due to economic reccessions such as massive lost of jobs)
Ecological(eg: droughts, big floods, )
Political( things like embargos can influnce the price for certain products and materials)(and a lot
of buisnesses can be effected eg: shops in ukraine being influenced by war)
Legal(legal restrictions such as minimum wage， or banning certain buisnesses such as gas cars
getting eliminated)
Ethical( if a buisnesses is considered unethical, constumers might stop buying from that
business)

Other buisneess copying your ideas

http://www.chinadaily.com.cn/business/2015-09/07/content_21804194.htm

1.1.3 A business plan

Describe a business plan

\
 The Elements of a business plan
 Mission statement and/or vision statement so you articulate what you’re trying to create.
  Description of your company and product or service.
 Description of how your product or service is different.
 Market analysis that discusses the market you’re trying to enter, competitors, where you
fit, and what type of market share you believe you can secure.
 Description of your management team, including the experience of key team members
and previous successes.
 How you plan to market the product or service.
 Analysis of your company’s strengths, weaknesses, opportunities, and threat, which will
show that you’re realistic and have considered opportunities and challenges.
 Develop a cash flow statement so you understand what your needs are now and will be in
the future (a cash flow statement also can help you consider how cash flow could impact
growth).
 Revenue projections.
 Summary/conclusion that wraps everything together (this also could be an executive
summary at the beginning of the plan).

BMT1- A business plan.

In groups, examine how a business plan can help entrepreneurs with the challenges and
opportunities for starting a business. [10 marks]

ToK Connection
To what extent do intuition, imagination and reason factor into the decision to set up a new
business?
EE connection
To what extent do the different sectors of the economy impact the starting up of new
businesses?
CAS connection
How can an individual make a change in their local community by setting up a new
business?

End of 1.1