Issuu

2022 EDITION

BUSINESS MANAGEMENT

COURSE COMPANION

Martin Muchena

Robert A. Pierce

Loykie Lominé

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a la memoria de Gisela

Unit 2: Human resource management

Unit 4: Marketing

Unit 5: Operations management

Unit 3: Finance and accounts

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

INTRODUCTION

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.

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.

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

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.

INTRODUCTION TO CONCEPTS

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 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.

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.

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!

As IB learners we strive to be: KNOWLEDGEABLE

We develop and use conceptual understanding, exploring knowledge across a range of disciplines. We engage with issues and ideas that have local and global significance.

Source: IB Learner Profile

2. The four key concepts will help you make connections to other IB subjects. For example, ethics is one of the four components of the knowledge framework in TOK, and creativity is at the heart of all literature and artistic endeavour. Thinking through concepts can help you learn across disciplines, which is a key aspect of the “knowledgeable” attribute of the IB Learner Profile.

3. Your conceptual understanding is assessed in your internal assessment (IA), where you write about an organization from a conceptual viewpoint, ie from the perspective of one of the four key concepts. The way you connect your chosen concept and your chosen organization is assessed through criterion A, worth up to 5 marks (one fifth of your total IA score!).

4. Your ability to think and reason conceptually will also help you with your exams, even in the absence of a direct question about the concepts themselves. For example, Paper 3 has a social entrepreneurship focus; social enterprise is about ethics, creativity, change and sustainability, so the four key concepts give you a framework to analyse the scenario of the exam paper.

Concept CHANGE

Due to changes in their external environment (such as new competitors) and changes in their internal environment (such as restructuring), organizations may need to modify their objectives and strategies.

Do some research to find examples of such changes in objectives or strategies.

The four key concepts in this book

The four key concepts are not “extra topics” that would be added to the rest of the syllabus. Therefore there is no specific chapter about them; they are present throughout. In many cases, you will see boxes drawing your attention to important conceptual links, like the example in the margin.

However, these boxes are not the only instances where you can link the concepts and the contents of the syllabus. As you progress through the book, and you learn more about Business Management, you should keep making links between the contents and the four key concepts. Likewise, as you discover new examples and case studies, and as you learn about business issues in their context, you should keep identifying links to the key concepts. This will help you to understand the concepts … and the contents! Ultimately, the three aspects are linked (concepts, contents, contexts), as shown by this diagram.

INTRODUCTION TO THE BUSINESS MANAGEMENT TOOLKIT

The Business Management (BM) toolkit is a collection of tools designed to help in the analysis and evaluation of the course. These tools can be broadly categorized as either situational, planning or decision-making tools.

• Situational tools assist in examining the internal and external factors affecting a business.

• Planning tools review the action steps that businesses need to take while implementing their projects.

• Decision-making tools assess the possible alternatives facing a business before a decision is made.

Despite this categorization, the tools provided in this BM toolkit do have overlapping applications. They should be used to help you learn about the course content, concepts and contexts. Each unit in this book contains toolkit boxes that provide suggestions about how the BM tools are integrated throughout the course, like the one below.

The BCG matrix is a planning and decision-making 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 tables on the next two pages show the BM tools used in the course as well as their brief definitions.

BCG matrix

Business management tools

Ansoff matrix (pages 48, 297)

Boston Consulting Group (BCG) matrix (pages 215, 276–79)

Business plan (pages 10, 301, 324)

Circular business models (pages 42, 275, 318, 331, 391)

Brief definition

The Ansoff matrix is a tool that provides a business with a framework to analyse and plan its growth strategies. The four growth strategies it includes are: market penetration, market development, product development, and diversification.

The BCG matrix is a tool that evaluates an organization’s portfolio potential based on relative market share and industry growth rate factors. It helps in long-term strategic planning and decision-making with regard to what the organization should invest in, discontinue or develop in the future. It is a four-square matrix that uses graphical representations to plot the organization’s offerings.

A business plan is a road map that provides a detailed account of a business’s goals and how it plans to achieve those goals. It is a guide that lays out a business’s functions from finance, human resources and marketing to operations and other elements essential to its success. It can be used to attract investment for the business as well as keep it on track.

Circular business models signify the diverse ways in which goods and services are produced and consumed. These models explore how organizations create, offer and deliver value to their stakeholders while reducing environmental pressure and social costs resulting from economic activity. In this BM course the following circular business models will be studied:

• Circular supply models

• Resource recovery models

• Product life extension models

• Sharing models

• Product service system models

Decision trees (pages 68, 342)

Descriptive statistics (pages 91, 98, 121, 126, 168, 245, 369)

A decision tree is a graphical tool that uses a branching model to demonstrate every possible outcome of an organization’s decision. These tree-like branches represent various choices facing the organization, including costs, results, probabilities or risks. Businesses use decision trees to determine specific courses of action.

Descriptive statistics are quantitative means that are used to summarize a given set of data. It is a process of using and analysing given statistical data. Descriptive statistics help to present a large amount of quantitative data in a simplified or manageable form. They are broken down into measures of central tendency and measures of variability. In this BM course the following measures will be used:

• Mean

• Mode

• Median

• Bar charts

STEEPLE analysis (pages 59–62)

SWOT analysis (pages 45–48, 83, 192, 303)

• Pie charts

• Infographics

• Quartiles

• Standard deviation

STEEPLE stands for Social, Technological, Economic, Environmental, Political, Legal and Ethical. STEEPLE analysis is a useful tool for a business that aims to study its external environment. It provides a detailed overview of or insight into the various external factors influencing an organization.

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal aspects influencing an organization, while opportunities and threats are external factors affecting an organization. In conducting a SWOT analysis, a business must examine all of these elements as they all have the potential to impact its success or failure.

Business management tools

Contribution (pages 168, 220, 349–50)

Brief definition

Contribution in this context refers to a set of tools that are used to aid decision-making in a business after analysing and evaluating its given revenue and cost situations. Businesses need to pay particular attention to the decisions they make due to their direct impact on their financial performance. The contribution tools studied in this case are:

• Make or buy analysis

• Contribution costing

• Absorption costing

Critical path analysis (page 367)

Force field analysis (page 347)

Gantt chart (page 372)

Hofstede’s cultural dimensions (pages 109, 311)

Critical path analysis is a tool that helps a business to schedule and manage complex and time-sensitive projects. It is used to map out all important tasks that are essential to complete a project. It helps to set realistic deadlines for a project and monitor the achievement of project goals, providing remedial action where required. In this BM course the following will be required:

• Completion and analyses of a critical path diagram (drawing of the diagram is not expected)

• Identification of the critical path

• Calculation of free and total float

Force field analysis is a tool used by businesses to analyse the forces for and against change to inform decision-making. It is useful when organizations are planning and implementing programmes on change management. The force field analysis diagram provides a comprehensive overview by illustrating the driving and restraining forces influencing a given situation.

A Gantt chart is a graphical tool that helps to plan and schedule project tasks. It shows a given project schedule, including how the tasks or activities are performed over a set period of time. It is useful in breaking down complex projects into a simpler display that is easy to understand. In addition, where large teams of stakeholders are involved, it helps to keep tasks on track.

Hofstede’s cultural dimensions is a tool aimed at understanding the cultural similarities and differences across countries and determining the various ways that business can be conducted in these cultures. It is a framework that compares the different national cultures and their dimensions as well as examining their impact on a given business setting. Countries can be classified according to six cultural dimensions: power distance, individualism/collectivism, masculinity/femininity, uncertainty avoidance, long-term/short-term orientation, and indulgence/restraint.

Porter’s generic strategies (page 246)

Simple linear regression (pages 253, 254, 351)

Porter’s generic strategies explore how a business can obtain a competitive advantage over other similar businesses across its specified market scope. These strategies help a business to determine its direction as well as how to beat its competition. The generic strategies include: cost leadership (producing at a low cost); differentiation (offering uniquely different and value-added quality products); and focus (selling its product to specialized market segments). Focus is further subdivided into cost focus and differentiation focus.

Simple linear regression includes a set of tools that describe or predict the relationship between two variables. They estimate how changes in an independent variable (the variable used to predict the value) may affect changes in the dependent variable (the variable being predicted).

The simple linear regression models explored in the BM course are:

• Scatter diagrams

• Line of best fit

• Correlation/extrapolation

TOK links

1. To what extent does knowing help us in predicting?

2. How do we know that our sales predictions are reliable?

3. Is it ethical to knowingly overpredict?

INTRODUCTION TO THEORY OF KNOWLEDGE (TOK)

Every Diploma Programme (DP) student must complete the DP course called Theory of Knowledge (TOK), which is unique to the IB. TOK is about critical thinking and inquiry into the process of knowing. It is not about learning a new body of knowledge. Instead it explores the nature of knowledge and how we know what we claim to know.

TOK is taught in two ways:

• Through 100 hours of tuition (compared to 150 hours for a subject at standard level and 240 hours for a subject at higher level).

• Through the DP subjects themselves, as they all give students the opportunity to ask questions that contribute to their overall understanding of TOK.

TOK in this book

As TOK encourages students to analyse knowledge claims and explore how knowledge is constructed, each chapter in this book suggests relevant TOK knowledge questions. They are meant to illustrate TOK and ignite classroom discussion, giving opportunities to explore the nature of knowledge and TOK connections to Business Management.

How is TOK assessed?

TOK is assessed in two ways:

• Through an essay (on one of the six prescribed titles issued by the IB for each examination session, and submitted at the end of the second year of DP for external assessment).

• Through an exhibition (normally organized in the first year of DP, internally marked by the teacher and externally moderated by the IB).

For the exhibition, students explore how TOK manifests in the world around us. You will select three specific objects (or images of objects) that connect to one of the 35 “internal assessment (IA) prompts” listed in the TOK guide. Some of those prompts have a direct relevance for Business Management; for example, “Who owns knowledge?” (number 29) conjures up images of copyright agreements and patents (see Chapter 5.8) or of data centres (see Chapter 5.9).

Links between TOK and Business Management

Name of TOK element

Core theme: “Knowledge and the knower”

Brief definition

The core theme encourages students to reflect on themselves as “knowers”, on what shapes their views and perspectives, where their values come from, and how they make sense of the world around them.

Possible links and applications to Business Management

This core theme can be addressed by discussing what counts (or not) as knowledge in Business Management; where (and how) we can gain knowledge in this subject; and who created this knowledge, for what purposes, with which authority. Notions of values and communities are important, with regard to both the subject knowledge and the students themselves, within their own sociocultural and economic context.

Optional themes

Areas of knowledge

Those themes all have a significant impact on the world today and play a key role in shaping people’s perspectives and identities. You will explore two from a list of five:

• Knowledge and technology

• Knowledge and language

• Knowledge and politics

• Knowledge and religion

• Knowledge and indigenous societies

The theme “knowledge and technology” is particularly relevant to Business Management. For example, Chapter 5.9 considers how advanced computer technologies (enabling data mining and data analytics) and innovations (such as artificial intelligence) may impact decision-making processes in business organizations, and raise ethical issues, for example about data anonymity and privacy.

The theme “knowledge and language” is relevant to Business Management as some models (such as the seven Ps of the marketing mix (HL only) or the five Vs of big data) were coined in English. When translating them into other languages, we lose the consistency of the initial letters and therefore the overall coherence of the model. This shows that this knowledge about the marketing mix and about big data was constructed through the English language and is linked to that specific language.

The five areas of knowledge (AOK) are specific branches of knowledge, with their own nature and methods for producing knowledge:

• History

• Human sciences

• Natural sciences

• Mathematics

• The arts

Knowledge framework This tool helps to explore the themes and the AOK. It is composed of four elements:

• Scope

• Perspectives

• Methods and tools

• Ethics

As Business Management is one of the human sciences, it is interesting to explore how research methods such as questionnaires are trusted as reliable ways to gain knowledge (eg about a market, a product or a business), given the challenges around neutral language, leading questions, or sampling and selection effect. Market research is often undertaken to help companies increase their profits, so it could also be worth examining the purpose and context within which knowledge is pursued in the human sciences in general, and in Business Management specifically.

Ethics is particularly relevant as it is one of the four key concepts underpinning the DP Business Management curriculum. The first aim of the course is “to develop ... confident, creative and compassionate business leaders, entrepreneurs, social entrepreneurs, and ... change agents”. Ethical decision-making is relevant in all areas of the curriculum, from the moral objectives of social enterprises to privacy issues relating to big data and consumer profiling. From a TOK viewpoint, the focus should be on ethics concerning knowledge, for example about criteria used to make judgements, who decides, and based on which values.

Perspectives is also relevant, especially as the topic of stakeholders is recurrent in Business Management, regarding their differing viewpoints, conflicting objectives, and how they are affected by change. It is helpful to consider the differing perspectives of stakeholder groups in order to gain a greater understanding of issues as diverse as financial accounts and workforce participation.

As IB learners we strive to be: INQUIRERS

We nurture our curiosity, developing skills for inquiry and research. We know how to learn independently and with others. We learn with enthusiasm and sustain our love of learning throughout life.

Source: IB Learner Profile

INTRODUCTION TO INQUIRY

Inquiry is a key aspect of the IB approaches to teaching (ATT) and approaches to learning (ATL): the principles that, according to the IB, can help you be a successful IB learner. Being an inquirer is the first of the ten attributes of the IB learner profile.

In Business Management, learning through inquiry can take different forms, especially:

• Inquiry through research

• Inquiry through “inquiry questions”

• Inquiry through problem-based learning (PBL)

Inquiry through research

Inquiry and research go together. This book covers the syllabus of the IB DP Business Management, but for your studies you will also need to carry out your own research to find contemporary examples of business issues around you, locally, regionally, nationally and internationally. For instance, after learning about franchising (Chapter 1.5) or about crowdfunding (Chapter 3.2), you should do research to learn about examples of franchises near you, or about recent crowdfunding campaigns on topics that interest you. This will also help you to link the contents of the course to the world around you, and appreciate the relevance of our subject to business news in the media.

Your internal assessment (IA) is a research project. The task has specific requirements regarding research activities, but research will also be necessary throughout the course to help you contextualize your theoretical learning.

Inquiry through “inquiry questions”

These open questions can help you to link the content of this textbook, the key concepts (sustainability, ethics, change, creativity) and the contexts (of the examples that you will find through your research). Formulating such questions is a good exercise in itself, as it makes you create links. Answering them will also help you to develop your thinking skills and your writing skills.

The table below gives you some examples of such inquiry questions. Unit

Unit 1

Introduction to business management

Unit 2

Human resource management

Unit 3

Finance and accounts

Examples of inquiry questions

• How can change lead to conflicts between stakeholders?

• Is the impact of multinational corporations on host countries always ethical?

• How can a democratic style of leadership encourage creativity in a business?

• Can fringe payments sometimes be regarded as not fair and thus not ethical?

• Why could final accounts analysis be essential in changing stakeholder perspectives?

• In some countries, the state subsidizes many organizations in the creative industries. Does that mean that they do not need to be financially sustainable?

Unit 4 Marketing

Unit 5

Operations management

• How can social media change an organization’s marketing strategies?

• Are all pricing strategies ethical?

• Is intellectual property protection only about ethics and creativity?

• How has digital technology enabled new business models to flourish?

Inquiry through problem-based learning (PBL)

PBL is about analysing a real-world problem faced by an organization and proposing solutions to it, using your knowledge of business management tools, theories and techniques. Comparing different investment options (Chapter 3.8) or different pricing strategies (Chapter 4.5) will help you appreciate the applied nature of our subject. Beyond the Business Management subject itself, this can also help you to improve other skills such as evaluation, reasoning, critical thinking, communication skills and even teamwork, if you collaborate with other students.