Oxford IB Business Management Course Guide

OXFORD IB DP BUSINESS MANAGEMENT Comprehensive support for the 2022 syllabus • Explore changes to the course structure • Look inside the new Course Companion • Find out how to evaluate and order

Choose Oxford IB resources and discover...

New ideas Use the explanations and activities in our resources to engage and support any class.

In-depth knowledge Trust our expert IB authors to provide the most accurate and up-to-date syllabus match.

Meaningful inquiry Develop key interdisciplinary skills with integrated support for TOK, ATL and concept-based learning.

Stronger results Consolidate essential exam skills and knowledge with our assessment-focused resources.

EXPLORING THE CHANGES TO THE DP BUSINESS MANAGEMENT SYLLABUS From Loykie Lominé, Martin Muchena, and Robert A. Pierce, experienced IB teachers, workshop leaders and examiners

Why has the course changed?

The IB DP Business Management course has been revised to better reflect current changes in the business world, for example with the inclusion of topics such as crowdfunding and data analytics, or the addition of the concept of sustainability.

At its heart, the course aims to develop students to be change agents as well as confident, creative and compassionate business leaders, entrepreneurs and social entrepreneurs.

The revised course is even better aligned to the IB mission, to the IB learner profile and to the pedagogical principles of the IB. It also reflects the value of using a concept-based and inquiry approach to teaching and learning.

The course is similar to past programmes with regards to the units and business functions covered (Human Resources, Marketing, Finance, Operations) but there are several new elements.

What are the changes?

A revised conceptual framework The four key concepts that underpin the new Business Management course are:

Ethics Creativity Change Sustainability

These four interdisciplinary concepts are not extra topics, but are present throughout, and the course empowers students to explore them from a business perspective. Each unit begins with conceptual understanding statements that include the key concepts and summarize important ideas and core processes that are central to a unit, for example “Change in operations impacts other business activities” or “Sustainability ensures efficiency in business operations”.

An integrated business management toolkit The toolkit is a set of tools that students can apply in different business contexts.

It forms an integral part of the syllabus.

It includes well-known models such as Ansoff Matrix and SWOT analysis, as well as new tools such as descriptive statistics (mean, standard deviation, quartiles) and theoretical models (such as Hofstede’s cultural dimensions and Porter’s generic strategies). Each unit contains toolkit boxes that provide suggestions about how the BM tools are integrated throughout the course, like the one below:

BCG matrix The BCG matrix is a planning and decisionmaking tool that uses graphical representations of a firm’s goods or services in order to help the firm to decide what to keep, sell or invest more in.

How can the knowledge of this tool help businesses to improve their financial decision-making?

The role of inquiry

Assessment

Students of Business Management have always been expected to learn from realworld examples. In the new course, this expectation has been enhanced by the emphasis on inquiry as a teaching and learning strategy. Each Unit includes suggested inquiry statements that can be explored, such as “Why change could bring conflict among stakeholders” and “How technological advancement could help businesses manage their human resources department in a more efficient way”. Students will develop their international-mindedness and higher order critical thinking skills by investigating real-world examples.

Paper 1 overview (SL and HL)

What will students gain from the new courses?

Both SL and HL will help students to: • develop as confident, creative and compassionate business leaders, entrepreneurs, social entrepreneurs and as change agents • foster an informed understanding of ethical and sustainable business practices • explore the connections between individuals, businesses and society • engage with decision-making as a process and as a skill • develop an understanding of business tools, and theories in a range of local, national and international examples • develop as principled and reflective thinkers and communicators on a range of business topics • critically understand business news in the media and the role of business in the world

Paper 1: Common paper for SL and HL students. Three months before the examination the IB will release a statement that specifies the context and theme for the upcoming unseen case study.

Paper 2 overview (SL and HL) SL and HL students will sit different examinations, but these will be similar in intent and form. Most questions will be quantitative. Students will receive an examination booklet with questions based on unseen stimulus material, combining written and diagrammatic stimulus such as charts and infographics.

Paper 3 overview (HL only) Paper 3 will be about a social enterprise.

The stimulus material will consist of a short introduction to an organization, supported by a visual representation of a product, and five or six excerpts from various documents (such as emails, Twitter feeds, newspaper articles etc). Students are required to write a decision-making document that includes a business recommendation.

Internal Assessment overview The IA is a research project in which students apply appropriate business management tools and theories to a real organizational issue or problem using a conceptual lens. It is common for both HL and SL.

Assessment summary Assessment

Standard level

Higher level

Time

Weight

Time

Weight

Paper 1 Based on a pre-released statement that specifies the context and background for the unseen case study

1 hour 30 minutes

35%

1 hour 30 minutes

25%

Paper 2 Based on unseen stimulus material with a quantitative focus

1 hour 30 minutes

35%

1 hour 45 minutes

30%

Paper 3 Based on unseen stimulus material about a social enterprise

X

X

1 hour 15 minutes

25%

Internal assessment Business research project

1,800 words

30%

1,800 words

20%

Loykie Lominé has taught IB Business Management in several European countries and has led hundreds of workshops to train and support IB teachers, both face-to-face and online. He served as Assistant Examiner, Team Leader, Chief Examiner, Principal Examiner and Principal Moderator. He is also the author of the Oxford’s “IB Prepared: Business Management” book that focuses on assessment. He is a National Teaching Fellow in the UK.

Martin Muchena is an experienced IB educator who has been involved in international education for more than 20 years. He has served as an IB Business Management and Economics teacher, Workshop Leader, Assistant Examiner, Team Leader, online workshop facilitator, as well as IB coordinator. He has taught and held school leadership positions in East, South and West Africa.

He continues to be actively involved in curriculum design and development.

Rob Pierce is a career teacher. Since 2001, he has been involved with IB Business Management, first as a teacher and then in assessment roles. He served as Assistant Examiner, Team Leader, Deputy Chief Examiner, and Chief Examiner and as a Principal Examiner. For four years, he taught at the International School of Luxembourg, but most of his teaching experience is in the United States, including at Grafton High School in Yorktown, Virginia.

Currently, he is Associate Professor of Business at George Mason University in Fairfax, Virginia.

Altrendo Images/Shutterstock; p239: ndrew Kemp/Alamy Stock Photo; p242: 3: Freebird7977/Shutterstock; p248: otie/Shutterstock; p261: ispyfriend/Getty archive/Alamy Stock Photo; p267: Kalki/ astock/Alamy Stock Photo; p281: Ned pix/Alamy Stock Photo; p285: Tupungato/ lamy Stock Photo; p294: GoodLifeStudio/ /Shutterstock; p303: Nick Beer/ es/Alamy Stock Photo; p315: sirtravelalot/ erstock; p319: Jason Mintzer/ es, LLC/Alamy Stock Photo; p322 (M): ): Nordroden / Shutterstock; p328: Cum on Pablo/Shutterstock; p334: Hadrian/ /Alamy Stock Photo; p340: MDart10/ erstock; p354: Vitaly Titov/Shutterstock; Getty Images; p363 (R): Corbis/VCG/ s/Shutterstock; p371: balajisrinivasan/ erstock; p380: Gorodenkoff/Shutterstock; utterstock; p389: kornnphoto/ /Shutterstock; p405: Jasmin Merdan/ ov/Shutterstock; p401: Oleksii Didok/Getty

Deliver clear support for the new syllabus with our IB DP Business Management Course Companion Address all aspects of the curriculum, with resources developed in cooperation with the IB, providing an accurate match to the new syllabus, for first teaching in September 2022.

Recommendations on how to teach through inquiry An entire unit dedicated to assessment, both external assessment (exams) and the new internal assessment Contents Introduction

iv

Introduction to concepts

v

Introduction to the Business Management toolkit

4.1 Introduction to marketing

227

4.2 Marketing planning

235

4.3 Sales forecasting (HL only)

251

4.4 Market research

256

x

4.5 The seven Ps of the marketing mix

270

xii

4.6 International marketing (HL only)

308

vii

Introduction to Theory of Knowledge (TOK) Introduction to inquiry

Unit 4: Marketing

1.2 Types of business entities

14

5.1 Introduction to operations management

ateful to those who have given wing extracts and adaptations of

1.3 Business objectives

34

5.2 Operations methods

320

1.4 Stakeholders

52

ecycling’ published by bio-bean Limited. ean Limited.

1.5 Growth and evolution

59

5.3 Lean production and quality management (HL only)

327

1.6 Multinational companies (MNCs)

76

5.4 Location

338

5.5 Break-even analysis

349

5.6 Production planning (HL only)

362

5.7 Crisis management and contingency planning (HL only)

374

5.8 Research and development (HL only)

378

of microfinance in India’ by Jhanvi a on 25 March 2020. Used with

ya created the world’s most successful rea Esther Barry, published by HBS rmission of the Author.

Accounting Ethics?’, published tps://corporatefinanceinstitute. ting/accounting-ethics/). Used with

1.1 What is a business?

1

Unit 2: Human resource management 2.1 Introduction to human resource management

80

2.2 Organizational structure

94

2.3 Leadership and management

102

Residents and Staff Secured as Care published by Real Business Rescue.

2.4 Motivation and demotivation

111

f sustainable finance’, published by an Union, 1995-2021. Used under CC-

2.5 Organizational (corporate) culture (HL only)

131

2.6 Communication

139

2.7 Industrial/employee relations (HL only)

144

Brands Create Social Media Sales In hed by Jing Daily (4 September 2020). y.

Differentiation Strategy Examples d in mktoolboxsuite.com. Used with

ive Companies Changed Using Market hed by SurveyPolice Blog (21 March urvey Police.

en Ps marketing mix’ by Kevin Vejo.

Unit 3: Finance and accounts 3.1 Introduction to finance

149

3.2 Sources of finance

152

3.3 Costs and revenues

166

r economy giant you’ve never heard of is Madeleine Cuff, published by GreenBiz. z.

3.4 Final accounts

170

e already taken over our work, but y Brett Frischmann and Evan Selinger. a Ltd 2021. Used with permission of

3.5 Profitability and liquidity ratio analysis

187

3.6 Debt/equity ratio analysis (HL only)

194

3.7 Cash flow

202

3.8 Investment appraisal

210

3.9 Budgets (HL only)

219

ort to trace and contact all copyright as not been possible in all cases. If any errors or omissions at the earliest

5.9 Management information systems (HL only)

313

This book is a companion for students of Business Management in the International Baccalaureate Diploma Programme (IB DP). It rigorously follows the DP Business Management Guide published by the IB, regarding not only the syllabus (the curriculum content) and the assessment strategy, but also the IB educational philosophy (the IB Learner Profile) and pedagogy (the IB approaches to teaching and learning, especially regarding the importance of concepts and contexts).

As IB educators, we wrote this book to help you study business management, and also to inspire you to become a lifelong learner, giving you the keys to make sense of the dynamic business world around you.

385

During your course, you will study a diverse range of organizations, both for-profit (commercial) ones and not-for-profit ones, and you will learn about many topics, from marketing to finance, and from human resources to operations. You will discover how the concepts of change, creativity, ethics and sustainability can help us understand the world of business management as it is today, and as it will develop tomorrow. Regarding contexts, you will explore local, national and international examples and case studies of business organizations, and how they adapt to their environments.

Unit 6: Assessment External Assessment

396

Internal Assessment

403

Index

407

INTRODUCTION TO CONCEPTS

INTRODUCTION

Unit 5: Operations management

Unit 1: Introduction to business management

Access your support website for the answers to the student workpoints, toolkits and practice questions here: www.oxfordsecondary.com/9781382016834

Some of the questions and activities in the book will challenge you and you will want to learn more. This book can act as a foundational resource if you plan to study business management at university, or if you want to set up your own business. It also gives you the skills necessary to work in an organization and understand its structure, functions and operations. Even if you do not plan to study business management at university or set up your own business, this book and your IB DP Business Management course will help you to better understand the world around you and give you valuable knowledge and skills applicable to whatever vocation calls you.

In this book we also make many links to theory of knowledge (TOK), which is at the core of the Diploma Programme. TOK can help you understand Business Management (for example, the sources of knowledge we have in our subject), and in turn Business Management can help you better understand what TOK aims to achieve in terms of critical thinking.

This book will help you as you study IB DP Business Management, at standard level or at higher level, and it will also help you become an even better IB learner!

The authors

Concepts can be defined as big ideas that reach beyond the boundaries of a specific subject. For example, topics such as “social media marketing” (Chapter 4.5) and “benchmarking” (Chapter 5.3) are subject-specific: they belong exclusively to Business Management. However, big ideas such as ethics and creativity are not specific to Business Management: they are “concepts”.

IB DP Business Management has four key concepts: change, creativity, ethics and sustainability.

Defining the four key concepts There is no universally accepted definition of these terms, but the table below gives you a solid starting point. You are not expected to memorize the definitions; what matters is that you understand these four key concepts, both in general and in Business Management.

Concepts

Initial definitions

Change

Change refers to modification or transformation from one form, state or value to another, over time or across places.

In Business Management, change is usually the result of internal or external influences. For example, externally, new competitors and new trends in consumer behaviour may lead an organization to adapt its objectives and operations; internally, the arrival of a new CEO may lead to a shift in the priorities of the organization’s strategic plan.

Creativity

Creativity refers to the process of generating new ideas and considering existing ideas from new perspectives. It includes the ability to recognize the value of ideas when developing innovative responses to problems. In Business Management, creativity may lead to the incremental or radical improvement of a business idea, of a product or of a process, in order to be more successful or more competitive. For many organizations, a key challenge is bringing innovation and managing the process of improvement in a sustainable way that does not create conflict.

Ethics refer to the moral principles and values that form the basis of how a person or an organization conducts their activities. In Business Management, it is important to realize that every decision may have moral implications, impacting on internal and external stakeholders and the natural environment. Ethics is present throughout the organization, from marketing communication to operations, and from recruitment of new staff to accounting practices.

Ethics

Sustainability

Sustainability refers to the ability of the present generation to meet its needs without compromising the ability of future generations to meet their own needs. It can be enhanced by conserving resources, finding more efficient ways to produce or discovering new resources. In Business Management, decisions should consider the triple bottom line of people, planet and profit, and their resulting impact, taking into account not only financial aspects, but also communities and the natural environment.

Why learn about the four key concepts?

There are several reasons why it is important to learn about the four key concepts.

iii

The “In cooperation with IB” logo signifies the content in this textbook has been reviewed by the IB to ensure it fully aligns with current IB curriculum and offers high quality guidance and support for IB teaching and learning.

1. The four key concepts enable you to gain a better understanding of Business Management as a whole by realizing how the different topics relate to one another. For example, creativity connects research and development, product development, and promotional activities.

You could otherwise have the impression that the elements constituting the course are disconnected, but they are not: the concepts enable us to make these links!

v

iv

Developed in cooperation with the IB

Access in the classroom and at home and embed knowledge with key digital resources and functionality via Kerboodle, including access to the Online Course Companion

Resource bank on Kerboodle for easy access to digital extras

Kerboodle features an easy-to-use navigation bar aligned with the contents of the Course Companion

Revision quizzes on Kerboodle to test student knowledge

Chapter quizzes available throughout the online Kerboodle

Introduction to business management

1.2 Types of business entities

1.2 Types of business entities

➔ Outline the main features of the following types of organizations:

1

Introduction to business management

1 Introduction to business management

Key terms Private sector the portion of an economy not controlled or owned by the government Public sector those portions of the economy owned or controlled by the government, such as government services, public schools, and state-owned corporations Sole trader a business owned and operated by one person.

No legal distinction exists between the business and the owner. Thus, the owner has unlimited liability for the liabilities of the business, and the business ceases to exist when the owner dies.

Accessible definitions of all key terms to keep students on top of what they’re learning

Partnership a business owned and operated by two or more people. No legal distinction exists between the business and the partners, each of whom are legally responsible for 100% of the liabilities of the partnership.

14

●

sole traders

●

partnerships

●

privately held companies

●

publicly held companies

Outlinesaying the main features of the types of for-profit Dr Dao➔ objected, that a patient wasfollowing scheduled to see him thesocial enterprises: following morning.

United Airlines personnel called security personnel, who forcibly removed Dr Dao from the airplane and, in the process, ● private sector companies injured him. ●

public sector companies

This incident was reported to the media, and the story quickly affected the ● industry. cooperatives entire airline Many members of Congress (the legislative branch of the government of main the United States) thatofthe matter be ➔ Outline the features of thedemanded following type non-profit social investigated and that new regulations regarding the treatment of passengers enterprise: be set for the entire airline industry. This impacted on all airlines, which ● non-governmental were therefore all affected by the organizations actions of one(NGOs) of their competitors (United Airlines).

Conflict betweenbetween stakeholders’ Difference theinterests private and public sectors Public sector refers to thoseinterest, parts of the controlled by the Groups of people with a common sucheconomy as a business, may also term “public sector”makes can besense: used in a broadall sense, have government. differences ofThe opinion.

This situation although meaninghave any atype of activity the military, police, and public stakeholders “stake” in the (including business, their focuses are different. education) that is run by the government and has meaningful economic Consider the example of a pay for employees.

Shareholders implications.

However, in rise business, “public sector” generallymay has a narrower objectusage. to theAidea, as sector it could reduce profits reduce owns. their Common public company is one and that therefore the government return on investment.

At the other end of theutilities, spectrum are the employees types of public sector companies include telecommunications themselves, who and would favour pay rises which could give them a higher companies, public transport. standard of living. In between these two positions there will be various Private who sector those parts of the economy not controlled by the stakeholders willrefers haveto different opinions. government. The private sector is managed by individuals and companies ● The senior managers would in principle probably support thatCEO are and not owned by the government.

Most private sector businesses are paying higher wages, as this would make the employees happier. for-profit.

However, the CEO and senior managers are responsible for ensuring profit targets and return on investment ratios are met, so they would also be worried that pay rises would reduce profits. ●

●

Main features of the most common types of profit-based (commercial) organizations

Managers may also be concerned that by reinforcing the use of extrinsic motivating factors, a pay rise might undermine efforts to foster but Profit-making businesses come in various typestheir of legal organization, a the culture intrinsicare: motivation. Extrinsic motivating factors are mostofcommon types of external rewards, such as pay increases or bonuses. Intrinsic ● Sole traders motivation occurs when people do things because they find that doing so● is rewarding.

PartnershipsOften the use of extrinsic motivating strategies weakens intrinsic motivation.

Those in the local community would in principle favour higher wages for employees, as it would mean that employees would have more money to spend in the local community – at restaurants and shops, for example. However, if the pay rises in any way threatened the existence of the business, the community would probably not favour the idea.

Thus, any decision of importance, such as a general pay rise at the business, will elicit different reactions from different stakeholders. In this situation, friction may result and alliances may be formed as each stakeholder group tries to achieve their desired outcome.

One feature of successful businesses is that the interests of stakeholders are sufficiently satisfied most of the time. In some instances, managing stakeholders’ interests is not particularly complicated. An individual running a small shop as a sole trader typically has relatively few internal stakeholders: the sole trader and perhaps an employee or two. While in

54

●

Publicly held companies or corporations

One of the main aims of all of these types of business is to generate profit.

The profits a business receives can be shown using the following formula: Profits = total revenues – total costs

Total revenues, often called “sales” or “sales revenue”, are all the income received by the business in a specified period of time. Total costs are all the costs incurred by that business in the same period of time. (The way that revenue and expenses are measured is actually more complex than this simple formula suggests, but for now the simple form is enough.)

Sole trader

1.4 Stakeholders

Most people starting their own business typically begin with a limited budget and a simple organization. Facing these constraints, they often theory the business would several(sometimes external stakeholders, as choose to operate as a have sole trader called a solesuch proprietor), the community, government, and suppliers, these external which is thethe simplest form offinanciers business to organize. stakeholders typically (though not always) have such a small stake in the Being a sole trader fulfills many of the reasons why people start a business: business that the decisions of the shop are relatively inconsequential. being their own boss, seeing a gap in the market and wanting to respond Thus,quickly, for this creating type of business, interests of stakeholders is living their ownsatisfying product, the serving the community, or just not complicated. their dream.The main requirement is for the business to be profitable enough to pay for expenses and provide the sole trader with an income, The main features of a sole trader business include the following: and to be in compliance with laws and government regulations and with community ● Thestandards. sole trader owns and runs the business. Sole traders may employ other people, including those empowered to make some of the For other types of business, especially large ones, coordinating the interests decisions, but the sole traders themselves make management decisions of stakeholders is a much more formidable challenge. When a large and have ultimate responsibility for the business. business operates a factory in a small city or in a town, the factory may be the employer in thebetween area. In this various ● most No important legal distinction exists theinstance, businessthe and the sole stakeholders have a major stake isinthe thebusiness success of thethus, business. trader.

The sole trader and, is liable for all the debts of the business or other claims (such as the outcome of a lawsuit).

For example, in the case of a factory that is the main employer in a town, In other words, sole traders have “unlimited liability”. a 20% reduction in the workforce might lead to reduced expenses for the business.

It might also is make the retained more productive if money they ● The finance usually limited.workers Here, finance refers to the were pressured working to make upItfor smaller that theinto business hasharder available for use. canthe come fromworkforce. the personal Shareholders might be sole happy withorthis outcome, as might the as CEO andfrom savings of the trader from other sources, such a loan senior managers (who mayor receive bonuses). family and friends from agreater bank. year-end Regardless, sole traders typically have limited finance, either because their personal savings are limited The workers, however, would be dissatisfied. Those losing their jobs would or because family, friends, banks, and other financial institutions may be unhappy. Even those keeping their jobs would not like seeing their cobe reluctant to lend the sole trader money because of the high failure workers go. Even if the business was not pressuring the remaining workers rate of start-up businesses. to work harder to make up for the lost work of those retrenched, a general Concept sense●of The fear –business of more job cuts –geographically would affect theclose workers. is often to the customer. A sole trader is usually a small business that allows the sole trader to interact Many other stakeholders would be affected as well. Here are just a few of SUSTAINABILITY with each customer. Sole traders get to know their customers on an the implications for the local community and the local government. individual basis, which allows them to provide a more personalized Sustainable development may ● Manyservice employees could struggle to find new jobs, in which case than larger businesses. be a cause of conflict between government expenses (support for the unemployed persons) ● The sole trader has privacy and limited accountability. Most of stakeholders, when some are would increase. focused more on short-term profit the time, sole traders do not have to declare their finances to anyone ● People mightthe move away from the town, selling houses ormuch moving out the maximization, while others are except tax authorities, which want to know how profit concerned about long-term social of rental properties, thusfor depressing the real estate market. business has made tax purposes.

Sometimes sole traders borrow and environmental impacts. ● When families move away, the number of children in the schools may Can you find an example of such reduce, thus leading to lay-offs of teachers in those schools. a stakeholder conflict around sustainability? This could be ● Local businesses would suffer, as fewer employees at the factory would a starting point for your IA mean fewer people with the resources to spend money in local shops research project. and restaurants.

1 Introduction to business management

Exact match to the new syllabus, for first teaching from September 2022

Privately held companies or corporations

By the end of this chapter, you should be able to: ➔ Distinguish between the private and the public sectors

Links to the concepts throughout the book, with suggestions on how to teach through concepts helping teachers lead engaging lessons

●

1 Introduction to business management

1 Introduction to business management

1

15

Stakeholder analysis Large businesses or those businesses that have complicated stakeholder interests often perform a stakeholder analysis. The first step is to prioritize or rank the interests of various stakeholders. One conceptual approach to this step is to determine how “close” each stakeholder is to decision-making in the business. This is shown in Figure 1.4.1.

55

3.9 Budgets (HL only)

●

h costs and revenues are usinesses to calculate how ●

o as to judge the ness. For example, Toyota he market by comparing the ich geographical location is

Centre conflicts. Staff and managers could consider the performance in their own centres to be superior to the overall performance of the organization. This could lead to unhealthy competition between the centres for the firm’s resources and a lack of sharing of vital information.

Staff stress. The pressure of managing a cost and profit centre may be very high for some staff, especially if they lack the right skills. This could lead to staff demotivation.

Assessment advice provided throughout the book, for the strongest results

Constructing a budget (HL only) The following terms (some of which have been used in earlier chapters) are important when constructing a budget:

ded according to product, in addition to cost, revenue

●

●

●

tres help to hold specific managers who perform d and held accountable for

●

●

centres enable particular For example, if in one store ting in a high number of ecked by the use of a cost

●

Total income – this is a summation of all income or money received by a business. Common income sources include sales revenue and interest earned.

3 Finance and accounts

entres help in providing he different parts of a deciding whether to ar product. With such least profitable products can but more profitable products.

Total expenses – this is a summation of all expenses or cost of operations incurred by a business. Common expenses include material costs, salaries and wages, rent, and advertising costs.

Net income – this is the difference between the total income and total expenses.

Budgeted figure – this is the estimated amount of money to be received or spent as set out in the budget.

Actual figure – this is the amount of money that is definitely received or spent as a result of business activity.

Exercises and practice questions with answers available on Kerboodle

Variance – this is the difference between the budgeted figure and the actual figure.

Table 3.9.1 shows how the above terms are applied.

Table 3.9.1 Budget for PQR Ltd for the period ended 2021 ($m).

F = favourable, A = adverse

Budgeted figures

nce in the various cost and the areas that are most or parts of a business can help s.

ch as advertising, rent ally to particular cost orting the overall business

ol of the business may tly. There may be more hereby negatively influencing greater levels of competition.

Actual figures

Variance

Income Sales revenue Interest earned Total income

600 50 650

650 45 695

50 (F) 5 (A) 45 (F)

Expenses Salaries and wages Materials Rent Advertising Electricity Total expenses

180 90 10 7 14 301

200 85 10 10 11 316

20 (A) 5 (F) 0 3 (A) 3 (F) 15 (A)

Net income

349

379

30 (F)

1

Introduction to business management

Practice question

1 Introduction to business management

mental managers and staff ses) to enable them to orale within cost and profit ontrol to the managers in e motivation.

Assessment advice The format for the budget shown in Table 3.9.1 is the recommended one as indicated in the IB Business Management Guide.

Ecosoluciones Ecosoluciones is a non-profit research organization located in Madrid, Spain. One of their objectives is to try to introduce non-polluting sources of electricity in developing countries.

1 Introduction to business management

By placing each stakeholder group in the matrix, a business can decide on likely strategies. ●

employees owners

pressure groups

media

managers

●

financiers

consumers ●

local community

Figure 1.4.1 The comparative closeness of stakeholders to decision-making

●

Under this approach, owners and managers are central to decision-making, while suppliers, employees, financiers, and consumers are further removed.

Most distant are government, pressure groups, the media and the local community. Decision-makers try to satisfy those stakeholders closest to the centre.

Another conceptual approach involves a tool called stakeholder mapping. Numerous models for mapping stakeholders exist. One particularly valued model was formulated by Johnson and Scholes and is called the power–interest model.

High

Group A: minimal effort

Group B: keep informed

Stakeholders in group A. These stakeholders, who have minimal interest in the business and have limited power over it, are rarely a problem for the business. Owners and managers can fairly safely ignore these stakeholders, or at least devote limited energy and attention to satisfying their interests.

Stakeholders in group C. This pivotal group of stakeholders must be kept satisfied. They have the power to influence other groups. The business must find ways to flatter the self-esteem of members of this group to make them feel important.

Stakeholders in group D. These stakeholders are the most important.

The business must not merely communicate with them; it must also consult with them before any major decisions are made. The business should focus on their needs in preference to the others. Failure to involve and satisfy these stakeholders can have very negative consequences for the business.

Be reflective One theory for running a business is that management should focus solely on legally making profits and increasing shareholder value.

Another theory, which emerged in the 1980s, argues that when making major decisions, management should communicate with all of the relevant stakeholders and consider their interests.

Which of these two theories makes most sense to you and why?

Low

➔ Outline the difference between inter

➔ Explain the following external growt ●

mergers and acquisitions (M&As

●

takeovers

●

joint ventures

●

strategic alliances

●

franchising

The impact of the external e a business

All businesses, no matter how small or b business, “environment” does not have t as the word usually means or implies. R (including ecological ones) external to th manages to control its internal environm be difficult – elements external to a busi evolution. The environment may also re

a) Identify one internal stakeholder and three external stakeholders mentioned in the above case study.

[4 marks] b) Discuss two possible areas of conflict between stakeholders in the Alumbre Project.

[10 marks]

Stakeholders in group B. For owners and managers, making this group feel included is important. Newsletters, events, and other ways of conveying a sense of belonging are important.

Student workpoint 1.10

Level of interest Low

➔ Explain reasons for businesses to re

Unfortunately, in 2008 a severe financial crisis hit Europe and the Spanish government suspended part of its funding for research organizations such as Ecosoluciones. As a direct result, the management of Ecosoluciones felt it may no longer be able to maintain Alumbre’s wind generators.

1 Introduction to business management

government

➔ Explain reasons for businesses to gr

Ecosoluciones also promised, in partnership with Peru Telecom and the Peruvian government, to help fund the improvements in communication between Alumbre and the rest of Peru. This also allowed regional trade to develop. The entire community experienced significant improvements in their quality of life. The Peruvian government saw this as a practical solution to develop other depressed areas of the country.

1.4 Stakeholders

suppliers

➔ Define the terms economies and dis

In Alumbre, wind generators were installed by Ecosoluciones to supply electricity for the first time to a textile factory: one of the few firms in the area operating in the secondary sector. Ecosoluciones also agreed to maintain and repair the generators. There was a complete transformation in the production process. The factory was able to buy new machinery.

Productivity increased dramatically. New jobs were created.

Introduction to business management

Embeds the IB learner profile attributes through student workpoint activities

By the end of this chapter, yo

One successful application of their research was the Alumbre Project. This provided electricity created by wind generators to the remote village of Alumbre, Peru, which previously had no electricity.

221

1

1.5 Growth and e

To answer the question below effectively, see Unit 6 pages 398–402.

Businesses have only limited means to in environment. They can, however, prepar order to have greater control over their p

One common tool for this type of planni begins with a STEEPLE analysis, which h and focuses on these external elements. versions of the STEEPLE analysis include PESTLE analysis. All elements of those a incorporated in the STEEPLE framework Figure 1.5.1.

TOK discussion 1. Is it possible to be both an “internal stakeholder” and an “external stakeholder” of an organization at the same time?

What is the difference between PEST, PE STEEPLE analyses?

2. Are all stakeholders equally important? If not, who decides on their relative importance?

Which criteria are used?

●

●

3. If anyone can potentially be considered a stakeholder, how useful is the notion of “stakeholder”?

PEST – Political, Economic, Social an Technological

PESTLE – Political, Economic, Socia Technological, Legal and Ecologica

58

Revision checklist ✓ Stakeholders are individuals or groups who have a direct interest in the business.

Degree of power

Revision checklists provide reflective summaries to each unit ensuring students are on track for exams High

Group C: keep satisfied

Group D: key players

✓ Internal stakeholders are individuals or groups that work within the business, such as employees and managers. ✓ External stakeholders are individuals or groups outside the business, such as customers and suppliers.

Suggestions on how to embed TOK in Business Management, with helpful examples

✓ The interests of the various stakeholders will differ. Interests might include return on investment, the impact on the local area, working conditions, and the quality of the product produced.

Figure 1.4.2 The power–interest model (Johnson and Scholes)

57

56

Contextual examples and case studies from around the world, using contemporary content provide a fresh perspective to the course and ensure students are well equipped to access unseen materials in exams

2.1 Introduction2to Human human resource management

actors

affecting the HR plan can also occur when a business acquires another business or is itself acquired.

aphic change – an aging population, reduced fertility rates, es in immigration and emigration patterns are just some of graphic changes that can have an impact on the potential s available and their specific requirements to work.

ends – changes in society, such as the role of women in rise in the number of single-parent families, or the importance in the “work–life balance” can all have significant impacts on r pool.

e of the economy – an economic boom will lead to a strain ol of labour available and consequently lead to increased recession will have the opposite effect, as more unemployed are available and so they may accept lower wages.

in education – some would consider changes in levels ion a factor of demography. Regardless, rising or falling n levels can have a direct impact on the suitability of labour for ent. Also relevant is the range and type of courses available ts.

mobility – many factors can influence labour mobility, which either to occupational mobility (changing occupations) or ical mobility (changing locations). In either case, the mobility rkforce significantly affects the labour pool.

tion – a shift in immigration can result in new workers being or a change in the skillset of newly arrived workers.

such as flexi-time, remote working, or gig-economy contracts nfluence how people work.

ctors

rs stem from within the business itself and will have an e current HR plan, which may have to change as a result of :

●

●

2 Human resource management

ment regulations – changes in laws or government ns regarding health and safety issues can influence a potential e. Laws or government regulations can affect maximum orking hours or contractual issues, such as equality in place irrespective of age, gender, ethnicity, or disability. erally determine obligations such as pension provisions or nt age.

Changes in labour relations – labour relations can have a significant impact on workforce planning. If the labour force chooses to unionize, for example, the business will have to contend with the work requirements of the union. If the power of a union decreases, on the other hand, the business may have more flexibility with workers. Either way, the long-term labour circumstances will change.

Changes in business strategy – whether in response to changes in circumstances in the market or to the business re-orienting itself, changes in business strategy may lead to amendments to the HR plan.

Changes in business finance – the financial situation of a business will have a bearing on the HR plan. A business that has limited resources may not be able to pay the highest wages and salaries, which can affect recruitment and retention. Other financial factors can have an impact as well. For example, unfunded pension liabilities can influence available resources for the current workforce, or a significant increase in profitability may allow for a greater number of staff.

2

SWOT analysis Companies often use a SWOT analysis as part of their strategic planning process (see Chapter 1.3). However, SWOT analyses can also be used for narrower purposes.

Consider, for example, a company planning on opening a new factory in a different region of their home country. The HR manager must recruit qualified new employees to work in the factory. They could do a SWOT analysis with a narrow focus on the strengths, weaknesses, opportunities, and threats that they will face as they look for staff for the new factory.

2.1 Introduction to human resource management

Work–life balance and the “right to disconnect” In 2000, the French government reduced the statutory working week from 39 to 35 hours. Then in 2017, the French government introduced the “right to disconnect”. This new law prohibited companies with more than 50 employees from sending or replying to emails when not at work. The aim of the legislation was to protect workers from having to do additional work from home, for which they were not being compensated.

In 2018, Spain adopted a similar right to allow employees to disconnect. The right to disconnect is spreading. The Philippines, Belgium, the Netherlands, Luxembourg, India, Québec, and the federal government of Canada are considering or have proposed adopting the right to disconnect. Even the “city that does not sleep”, New York City, is considering adopting a right to disconnect legislation.

Some of the factors changing the working environment include:

Table 2.1.1 Top 10 sought-after jobs in 2020

How would the SWOT analysis of one function, such as recruitment of new employees to work at the new factory, be different compared to a SWOT analysis for strategic planning purposes?

1 2 3 4 5 6 7 8 9 10

Changes in work patterns, practices, and preferences Since the 1970s, many changes that affect employers and employees have occurred in work patterns, practices, and preferences. Some of these changes have stemmed from external factors affecting the pool of labour.

For example, social trends have led many employees to want a better work–life balance, and many businesses are trying to respond to the desires of these employees. Other social trends have stemmed from internal factors affecting businesses, which can benefit from some of the new work practices.

Software developer Sales representative Project manager IT administrator Customer service specialist Digital marketer IT support/help desk Data analyst Financial analyst Graphic designer

Source: https://www.cnbc. com/2020/07/02/linkedin-theworlds-10-most-in-demand-jobsthat-dont-need-a-degree.html

●

●

Privatization and the move away from public-sector to private-sector employment.

Increased migration of potential employees in a country or region and across the globe.

●

Increasing participation of females in the workforce.

●

Changing educational opportunities.

●

Increasing urbanization and the consequent rise in stress levels.

●

An aging population and increasing average age of the workforce.

Changes in work patterns One change has been in the patterns of work – the types of jobs required by businesses, as well as the types of jobs people want.

Table 2.1.1 shows the top 10 jobs that employers around the world were trying to fill in 2020, according to LinkedIn. Table 2.1.2 shows the 10 fastest-declining occupations in the United States (forecast for 2019–2029).

Table 2.1.2 Ten fastest-declining occupations in the United States, forecast for 2019–2029

in business organization – businesses change the way organized to better meet their strategic objectives. Any ation can affect the current HR plan. Organizational changes

Occupation 83

Support for toolkit skills through the use of toolkit boxes throughout the book

Human resource management

Case study

●

2 Human resource management

ors have an impact on the size and availability of the pool of ployees for the business, and include the following:

ogical change – improvements in ICT can lead to more ng and working from home. Infrastructure improvements, ew roads or other transport links, can make employing who lives further away easier than before.

Word processors and typists Parking enforcement workers Nuclear power reactor operators Watch and clock repairers Cutters and trimmers, hand Telephone operators Travel agents Data entry keyers

84

Employment in 2019 Employment in 2029 (000s) (000s) 52.7 8.1 5.3 3.2 9.8 5.0 82.0 172.4

33.5 5.2 3.4 2.1 6.9 3.6 60.8 130.0

Percentage change (%) −36.4 −36.2 −35.7 −32.3 −29.9 −27.9 −25.9 −24.6

Occupation Electronic equipment installers and repairers, motor vehicles Switchboard operators, including answering service

Employment in 2019 Employment in 2029 (000s) (000s)

Percen chang

10.4

8.0

−23

69.9

54.1

−22

Source: Adapted from https://www.bls.gov/emp/tables/fastest-declining-occupations.htm One significant change that has happened, especially with the improvements in ICT, has been an increase in occupational and geographical mobility.

Today it is fairly easy to determine which occupations will experience an expanding number of positions and which will experience a contracting number. For example, email, electronic banking and online bill payment services are reducing the need for traditional mail services. Letter carriers, or other individuals in contracting professions, can easily work out which occupations are growing and then seek to acquire the necessary skills for those positions. Thus, occupational mobility is more common than previously.

Similarly, ICT also provides opportunities to match people seeking positions with countries or regions that have shortages of people with certain skills.

Prior to the Covid-19 pandemic, the United Kingdom and Belgium, for example, had shortages of both nurses and chefs. Many countries have shortages of pharmacists and ICT professionals.

Before the ICT revolution, matching skilled people to places where they were needed was vastly more challenging than it is today. ICT allows for faster processing of data (who has what skills and what skills are needed in particular geographic regions). Then, ICT allows for easier dissemination of that information. For example, Skills Panorama, a website run by the European Commission, offers data and information on where mismatches exist between skills needed and jobs available in different countries.

Changes in work practices Not only have the types of jobs changed. The nature of work routines has also changed as businesses have responded to greater demands for more flexible working practices.

Work practices in decline ●

●

Full-time work – when employees work the maximum hours per week accepted by law (for example, working 35 hours a week in Europe).

Permanent contracts – when employees are hired for positions without a predetermined time limit.

Work practices on the increase ●

Part-time work – when employees work less than the full-time weekly maximum hours.

Student workpo 2.1 Be reflective

Look at the jobs li tables 2.1.1 and 2 any of the results you?

CHOOSE RESOURCES THAT FULLY ADDRESS THE FIRST TEACHING 2022 DP BUSINESS MANAGEMENT SYLLABUS Suitable for 2022 and 2023 assessments

Business Management Course Companion 978 138 201683 4

Business Management Study Guide 978 138 202294 1

Business Management Kerboodle 978 138 203373 2

Available late 2022

IB Prepared (print) 978 019 843760 4 IB Prepared (online) 978 019 843763 5

Available early 2022

Find out more: www.oup.com.au/ib Request an advanced copy: www.oup.com.au/contact

oup.com.au

ANZ Customer Help Centre: oup.com.au/help Free Tel: 1300 650 616 Free Fax: 1800 813 602

@OxfordAustralia

facebook.com/oupanz