IB Business Management SL cheat sheet

Business activity transforms inputs (land, labour, capital, enterprise) into outputs; the four factors of production earn rent, wages, interest and profit respectively.

Sectors: primary extracts raw materials, secondary manufactures, tertiary provides services, quaternary handles knowledge/information; economies shift along this chain as income rises.

Sole trader: unlimited liability, no separate legal identity. Partnership: shared capital, unlimited liability unless a limited liability partnership. Company: separate legal personality and limited liability.

Private limited company cannot offer shares to the public; public limited company can list shares but typically must publish accounts and meet minimum capital requirements.

Mission states purpose; objectives are measurable targets derived from it; strategy is the long-term plan for allocating resources to achieve objectives.

SMART objectives are Specific, Measurable, Achievable, Relevant, Time-bound; they allow performance to be monitored and compared.

Ansoff matrix: market penetration (existing product/existing market), product development (new product/existing market), market development (existing product/new market), diversification (new product/new market).

STEEPLE analyses macro-environment: Social, Technological, Economic, Environmental, Political, Legal, Ethical. SWOT summarises internal strengths/weaknesses and external opportunities/threats.

Stakeholders include shareholders, employees, customers, suppliers, local community and government; their interests can conflict, so objectives are often a compromise.

Organisational structure: tall structures have many layers and narrow spans of control; flat structures have few layers and wide spans, giving shorter communication chains.

Span of control = number of subordinates directly reporting to a manager. Delayering removes management layers to cut cost and speed decision-making.

Taylor (scientific management) links pay to output; Mayo (human relations) shows social factors and attention affect productivity; Maslow orders needs from physiological to self-actualisation.

Herzberg separates hygiene factors (pay, conditions, policy) that prevent dissatisfaction from motivators (achievement, recognition, responsibility) that create satisfaction.

Labour turnover rate = (number of leavers in a period / average number of employees) x 100.

Absenteeism rate = (days lost through absence / total possible working days) x 100.

Recruitment: internal promotion is cheaper and motivating but limits fresh ideas; external recruitment widens the applicant pool but costs more and takes longer.

Training types: induction, on-the-job (coaching, job rotation) and off-the-job (courses, simulation). Appraisal reviews performance against agreed targets.

Dismissal ends employment for breach or capability; redundancy arises when a job no longer exists. Redundancy pay and consultation duties usually apply.

Accounting equation: Assets = Liabilities + Equity. Every transaction keeps it balanced (double entry).

Profit = Total revenue - Total costs. Contribution = Selling price - Variable cost per unit.

Break-even output (units) = Fixed costs / Contribution per unit. Break-even revenue = Break-even units x Selling price.

Margin of safety = Actual (or budgeted) output - Break-even output.

Gross profit = Revenue - Cost of sales. Gross profit margin = (Gross profit / Revenue) x 100.

Net profit = Gross profit - Expenses. Net profit margin = (Net profit / Revenue) x 100. Return on capital employed = (Net profit / Capital employed) x 100.

Current ratio = Current assets / Current liabilities (a value near 2 is commonly seen as comfortable). Acid-test ratio = (Current assets - Stock) / Current liabilities.

Cash flow forecast: Net cash flow = Cash inflows - Cash outflows. Closing balance = Opening balance + Net cash flow. Profit is not the same as cash.

Investment appraisal: payback period (time to recover outlay), average rate of return = (average annual profit / initial outlay) x 100, and net present value discounts future cash flows.

Market share = (Sales of the business / Total market sales) x 100. Market size can be measured by volume or by value.

Market segmentation divides a market by demographics, geographic, psychographic or behavioural factors; a niche targets a small segment, mass marketing targets most of the market.

Marketing mix (4Ps): Product, Price, Place, Promotion. Services marketing adds People, Process and Physical evidence (7Ps).

Product life cycle: development, introduction, growth, maturity, decline. Extension strategies include rebranding, new packaging, new markets and product upgrades.

Pricing strategies: cost-plus, penetration (low launch price), price skimming (high launch price), predatory, competitive, psychological and loss leader.

Price elasticity of demand = (% change in quantity demanded) / (% change in price). Demand is elastic if the value exceeds 1 in absolute terms.

Promotion: above-the-line uses paid media (advertising); below-the-line uses direct, targeted methods (sales promotions, direct mail, sponsorship).

Distribution channels range from direct (producer to consumer) to multi-level (producer to wholesaler to retailer to consumer); each intermediary adds cost and reach.

Market research: primary is collected first-hand for the specific purpose; secondary uses existing data. Qualitative explores reasons; quantitative measures scale.

Methods of production: job (one-off, high variety), batch (groups, moderate volume), mass/flow (high volume, standardised), and mass customisation (flexible but large scale).

Productivity = Output / Input (for example units per worker-hour). Increased productivity lowers unit costs if total costs stay constant.

Capacity utilisation (%) = (Actual output / Maximum possible output) x 100. Under-use wastes fixed costs; over-use risks quality and staff strain.

Stock control: buffer stock protects against demand spikes; lead time is the delay between ordering and delivery; reorder level triggers a new order.

Lean production reduces waste (muda): just-in-time stock, kaizen (continuous improvement), cell production, and zero-defect quality targets.

Quality: quality control inspects output at the end; quality assurance builds quality into each stage; TQM involves all staff in continuous quality improvement.

Break-even and location decisions: location factors include cost of land/labour, proximity to market and suppliers, infrastructure and government incentives.

Economies of scale: technical, purchasing, managerial, financial and marketing. Diseconomies arise from communication and coordination problems as firms grow.

The IA is a research project on a real business issue, structured around a research question, supporting documents, analysis, conclusion and evaluation.

A precise research question names the business, the issue and the decision or outcome being examined, so the analysis has a clear focus.

Supporting documents (typically three to five) must be recent, relevant and referenced; primary research such as interviews or surveys can supplement them.

Theoretical tools (SWOT, Ansoff, ratios, 4Ps, break-even) should be applied to the evidence rather than described generically.

Analysis must interpret the documents and link findings to the business context, not merely summarise what each document says.

Evaluation requires weighing up competing arguments, discussing limitations of the evidence and reaching a justified recommendation.

Referencing must be consistent; all data, quotations and figures need a source so the research is verifiable.

The written commentary has a strict word limit, so appendices hold raw data while the main text carries the argument.