IB Business Management SL flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Factors of production

The four inputs used to create goods and services: land (natural resources), labour (human effort), capital (machinery and finance) and enterprise (risk-taking and organisation).

Opportunity cost

The value of the next best alternative forgone when a choice is made. Businesses face it whenever scarce resources are allocated to one option rather than another.

Limited liability

A legal status where owners lose only the capital they invested if the business fails; their personal assets are protected. Companies have it, sole traders generally do not.

Public limited company

A company whose shares can be offered to the general public, usually listed on a stock exchange. It gains wider access to capital but faces disclosure and governance requirements.

Ansoff matrix

A grid of growth strategies crossing existing or new products with existing or new markets, producing market penetration, product development, market development and diversification.

STEEPLE analysis

A framework examining external influences on a business: Social, Technological, Economic, Environmental, Political, Legal and Ethical factors. It supports strategic planning and risk assessment.

Span of control

The number of subordinates who report directly to one manager. A wide span creates a flatter structure; a narrow span gives closer supervision but more management layers.

Delayering

Removing one or more levels of management to create a flatter structure. It reduces salary costs and shortens communication chains but can increase workload and lower morale.

Labour turnover

The proportion of employees leaving a business over a period, calculated as leavers divided by average employees, multiplied by 100. High rates raise recruitment and training costs.

Herzberg two-factor theory

Motivation theory separating hygiene factors (pay, conditions, policy) that prevent dissatisfaction from motivators (achievement, recognition, responsibility) that create genuine job satisfaction.

Job enrichment

Redesigning a job to give employees more responsibility, autonomy and variety, often adding planning or quality-checking duties. It draws on Herzberg's motivators rather than simply adding tasks.

Induction training

Introductory training given to new employees covering company policies, culture, health and safety and role expectations. It helps new staff settle in and reduces early turnover.

Accounting equation

Assets equal liabilities plus equity. Every transaction affects at least two items, so the equation stays balanced under double-entry bookkeeping.

Break-even output

The quantity at which total revenue equals total costs, giving neither profit nor loss. It is calculated as fixed costs divided by contribution per unit.

Contribution per unit

Selling price minus variable cost per unit. Each sale contributes this amount towards covering fixed costs, and any surplus becomes profit.

Margin of safety

The amount by which actual or forecast sales exceed break-even output. It shows how far sales can fall before the business makes a loss.

Current ratio

Current assets divided by current liabilities. It measures short-term liquidity, indicating whether a business can meet obligations due within a year.

Return on capital employed

Net profit divided by capital employed, expressed as a percentage. It shows how efficiently invested capital generates profit and allows comparison between investment options.

Cash flow forecast

A projection of expected cash inflows and outflows over a period, giving opening and closing balances. It identifies timing gaps even when the business is profitable.

Payback period

The time taken for cumulative cash inflows from an investment to equal the initial outlay. A shorter payback indicates lower risk and faster recovery of funds.

Market segmentation

Dividing a market into groups of buyers with similar characteristics or needs, such as by age, income, location or lifestyle, so marketing can be targeted effectively.

Niche marketing

Targeting a small, specialised segment with distinct needs, often allowing higher prices and customer loyalty but limiting sales volume and exposing the firm to demand shifts.

Price elasticity of demand

The percentage change in quantity demanded divided by the percentage change in price. Demand is elastic when the value exceeds one, meaning quantity responds strongly to price.

Price skimming

Setting a high launch price to maximise revenue from early adopters before lowering it. It suits innovative products with limited competition and strong brand appeal.

Product life cycle

The stages a product passes through: development, introduction, growth, maturity and decline. Sales and profit patterns differ at each stage, shaping pricing and promotion decisions.

Below-the-line promotion

Promotion using direct, targeted methods such as sales promotions, direct mail, sponsorship and public relations, rather than paid mass media advertising.

Just-in-time production

A lean method where materials arrive as needed for production, minimising stock holding costs. It requires reliable suppliers and accurate demand forecasting.

Capacity utilisation

Actual output divided by maximum possible output, expressed as a percentage. It indicates how fully a business uses its productive capacity and affects unit costs.

Total quality management

An approach where all employees take responsibility for quality at every stage, supported by continuous improvement and zero-defect aims, rather than relying on end-of-line inspection.

Economies of scale

Reductions in average cost per unit as output rises, arising from purchasing, technical, managerial, financial and marketing advantages of larger scale operations.

Research question

A focused question in the internal assessment naming the business and the issue investigated, guiding which evidence and theoretical tools are used in the analysis.

Supporting documents

Recent, relevant source materials such as company reports, articles and data used as evidence in the internal assessment. Each must be referenced and analysed rather than summarised.