1.

1 INTRODUCTION TO
BUSINESS MANAGEMENT

Business Management
IB(1)BUSINESS MANAGEMENT
 IB Learner Profile: We are all trying to be more…
i) Inquirers
ii) Knowledgeable
iii) Thinkers

iv) Communicators

v) Principled
vi) Open minded

vii) Caring

viii) Risk takers

ix) Balanced

x) Reflective
 Theory of Knowledge
 International mindedness
 LEARNING OBJECTIVES


Identify inputs, outputs and processes of a business.

 Business functions
 Production/operations
 Marketing
 Finance
 Human resources/personnel
 Describe how business activity combines human, physical and financial resources to create goods and
services.
 Explain the role of the different business departments in overall business activity.
 Primary, secondary and tertiary sectors
 Explain the nature of business activity in each sector.
 Analyse the impact on business activity of changes in economic structure.
 INTRODUCTION TO BUSINESS
MANAGEMENT
 Definition of a business: An organization addressing the
needs and wants of people for profit
 Goods: physical products (computers)

 Services: intangible products (data)

 Business follow a Input-Processes-Output model

 Needs: necessities person must have to survive (eg food,

water, shelter, housing)
 Wants : luxury a person desires (eg holiday)
INPUTS : FACTORS OF PRODUCTION
Land … all the natural resources
INPUTS : FACTORS OF PRODUCTION
Labour … all the human effort (physical and
mental)
INPUTS:FACTORS OF PRODUCTION
Capital … the manufactured resource used
in the production process
INPUTS : FACTORS OF PRODUCTION
Enterprise … the unique ability certain
people have in organizing factors
of production
TYPES OF PRODUCTS

Consumer goods Capital goods

Goods sold to consumers, Goods used to make other
ready for use.Durables v products
Non – durable goods

Services
Intangible products provided by businesses. They
usually support the traditional production process
BUSINESS FUNCTIONS

Production Marketing
(Operations)

Finance

Human Resources
(Personnel)
 BUSINESS AS A PROCESS
 Inputs-Process-Outputs
 Creates Added Value
ADDED VALUE
The difference between the
value of inputs and the
value of outputs

Value added of a BMW sedan

Value (price) of a BMW $60,000

Value of components used $35,000

Value added $25,000

FORMS OF ADDED VALUE

•Design (physical appearance)

•Quality of a product
•Speed of a service
•Prestige associated with a product
•The feel-good factor
•Perceived value for money
•Inability to access a cheaper similar product
•Value is added at each level of business activity
SECTORS OF INDUSTRY
Primary … raw materials and natural
resources are extracted
 PRIMARY SECTOR

 First stage of the production

process
 Extraction of natural
resources:
 Mining
 Fishing
 Forestry
 Agricultural

 Renewable vs. Non-

renewable
SECTORS OF INDUSTRY
Secondary … output from primary is processed into
manufactured goods
 SECONDARY SECTOR

 Second stage of production

 Products from primary stage
are processed into
manufactured goods
 Activities include………
SECTORS OF INDUSTRY
Tertiary … production of service rather than
goods
 TERTIARY SECTOR

 Production/Provision of services
rather than goods
 Provide support to the first 2 stages
of production
 Can provide services to the public
or the state
 QUATERNARY SECTOR

 A sub sector of the tertiary sector

 It involves knowledge and intellectual based
activities that generate and share information
 Examples can include…
-ICT services
-Consultancy services
-Research and development
 REASONS FOR STARTING A BUSINESS
• To increase earnings (make profit)
• To become a market leader (to grow)
• It can be a way to challenge your entrepreneurial skills
• It can be a hobby
• To be your own boss (job security)
• It can be a way to transfer wealth to others
 PROBLEMS THAT A NEW BUSINESS MAY
FACE
• 1.Lack of finance
• 2.Cash flow (working capital) problems
• 3.Marketing challenges
• 4.Unestablished customer base
• 5. People management problems
• 6. Legal problems
• 7. Production problems
• 8. High production costs
• 9. Poor location
• 10. External influences ?
A BUSINESS ACTIVITY
It involves all activities that use inputs to produce goods and services

Inputs Processes Outputs

Land Marketing Goods

Labour Production Services
Production
Capital Finance
Enterprise H.R
+
Raw Materials
Components
 CHAINS OF PRODUCTION
Interdependence between industry sectors

Farmer Inputs Processes Output Primary

Miller Inputs Processes Output

Secondary

Baker Inputs Processes Output

Grocer Inputs Processes Output Tertiary

RELATIONSHIPS BETWEEN FACTORS OF
PRODUCTION ( IE RESOURCES)
 Availability & Cost of factors of Enterprise

production in MDCs and LDCs

 Combination of factors changes

over time
Land Labour

 Technology used to develop each

factor in LDCs and MDCs is
different

Capital
 COMBINING THE FACTORS
Labour Intensive Capital Intensive
COMBINING THE FACTORS

Labour Intensive Capital Intensive

When production requires When production requires high
high labour input than capital capital input than labour

Which products require Which products require

labour intensive production? capital intensive production?

Can a business combine these two techniques? How?

DIVISION OF LABOUR AND JOB
SPECIALIZATION
What can you tell from these pictures?
DIVISION OF LABOUR AND JOB
SPECIALIZATION

When workers are divided up into teams or

individuals and each team/individual is
allowed to work on one specific task

Is this strategy good or bad???

 DIVISION OF LABOUR AND JOB
SPECIALIZATION
 Benefits
 It can result in increased production
 It also results in lower Costs (in the short run)
 It also leads to more efficiency
 It promotes standardization

 Disadvantages
 Products are similar/standardized (reduces innovation)
 Increased interdependence (one worker depends on another)
 Small business cannot compete with highly specialized businesses
 Boring repetitive work
LEVELS SPECIALIZATION
Individual level Departmental level Corporate level
•Lawyers •Administration •Dell (computer hardware)
•Teachers •Human Resource •Hilton (hotel services)
•Doctors •Finance •Sony (Electronics)
•Engineers •Production •Boeing / Airbus (aircraft)
•Farmers •Marketing
•Taxi drivers
•Pilots
National level
Regional level
•Germany (manufacturing)
•Macao (entertainment) •Hawaii (tourism)
•Hollywood (entertainment) •Brazil (coffee)
•Silcon valley (technological development)
•Wall street (Finance & investment)
CHANGES IN ECONOMIC STRUCTURE

LDCs
•Large primary sector
•Medium secondary sector
•Small tertiary sector
MDCs
•Relatively small primary sector
•Primary sector is developed
•Medium secondary sector
•Large tertiary sector

Why is it better to have a

large secondary and
tertiary sector?
CHANGES IN ECONOMIC STRUCTURE
Also affected by factors such as…
•Household incomes
•Focus on customer services
•Reliance on certain sectors
•Amount of leisure time
•Government policies
•Cultural and social attitudes
 RELATIONSHIP TO DEVELOPMENT
 As an economy/country develops, more of
the workforce migrates to the higher sector
 In China there has been a steady migration
of workers from agriculture to
manufacturing
 As all the factories moved from Hong
Kong to China, there has been a transition
to services economy in.....

Hong Kong
THE ELEMENTS OF A BUSINESS PLAN
 A Business Plan is a report detailing how a business sets
out to achieve its goals
 It is a useful planning tool

 A business needs to consider its current and future

 marketing

 finance

 human resources
 End of unit

Mr MC