1.1 What Is A Business 2024

1.1 What is a business?
IB Business Management
1.1 Introduction to business management
By the end of this topic, you should be able to understand:
 The nature of business (AO1)
 The difference between the primary, secondary, tertiary and
quaternary sectors (AO2)

 Characteristics of entrepreneurship (AO2)
 The challenges and opportunities for starting up a business
(AO2)
Exam tip
 Consumers are the people who use a good or service.
 Customers are the buyers of a good or service.
 Buyers and users are not necessarily the same.
Workpoint
 Define the term business.
 A business is an organization that makes decisions involved
in the process of using resources to meet the needs and
wants of consumers, with goods and services, which are
demanded, in order to generate a benefit.
 Distinguish between needs and wants.
 Distinguish between goods and services.
BUSINESS AS A TRANSFORMATION PROCESS
 State the four factors of production.
 Using a diagram, describe the role of businesses.
Workpoint
IB learner profile - Thinkers
 Identify two examples of each factor of production for the
following businesses.
Human Physical Financial Enterprise
Flower shop sellers flowers savings knowledge

manager shelves loan organization
coffee maker coffee beans vision

Coffee shop coffee grinder
investment
waiter mortgage innovation
Bakery baker establishment loan knowledge

cashier oven donations cooking
Workpoint
 Identify two examples of each factor of production for your
school.
Forms of production processes
 Labour-intensive: Uses a large proportion of labour
relative to other inputs, especially machinery.
 Capital intensive: Uses a large proportion of machinery
relative to other inputs, especially labour.
Workpoint
 State the four main business functions (functional areas).
To be a good organization you need to have the best,

well-motivated and effectively managed people in all
four areas of the business.
To be a successful business the challenge is making

the four areas work as one.
BUSINESS FUNCTIONS
● Finance and accounts

● Marketing
● Human resource (HR) management
● Operations management or production
Finance and
accounts
▹ Monitors the movement (flow) of funds into and out of the business.
▹ Keeps and analyses accounts.
▹ Prepares forecasts or budgets.
▹ Ensures that invoicing of customers happens and suppliers are paid.
▹ Provides financial information for other departments and decision makers.
Marketing
▹ Includes sales.
▹ Covers market research.
▹ Identifies what customers want.
▹ Looks at deciding the product’s price and the type of promotion used.
▹ Consider how it is to be distributed and sold.
HR
Management
▹ Covers the recruitment, rewarding and motivating, and training of staff
throughout the organization.
▹ Covers the releasing or redeployment of staff when necessary.
Operation
management
▹ Represents the engines room of the business.
▹ It is the production of goods or the delivery of service.
▹ It looks at quality and stock control, methods of production, and
productive efficiency.
▹ In service industries, ensures that the processes for the delivery of the
service are well tested, consistent and understood by all employees.
Workpoint
Identify which business function is most likely to undertake the
following roles:
 Setting prices of new products.
 Recruiting a new production manager.
 Allocating the financial resources to purchase capital

equipment.
 Deciding on the appropriate levels of stocks for raw
materials.
 Finding out if consumers prefer one product design to
another.
 Determining the level and number of employees the business
needs for future operations.

INTERRELATION OF FUNCTIONS
For example, the decision of by BMW to develop and launch its first electric-powered
sports car, the i8, required interaction between:
🞂 Marketing - will consumers be prepared to buy this car and at what price?
🞂 Finance – do we have the capital needed to develop and produce it?
🞂 HR management – do we need to recruit additional engineers before this project
can be turned into a market-ready car?
🞂 Operations management – can we produce this product at a cost which allows the
marketing department to set a profitable price level? Will quality of the vehicle be
up to normal BMW standards?
THE SECTORS
OF BUSINESS
ACTIVITIES
▹ Primary sector
▹ Secondary sector 18
▹ Tertiary sector
▹ Quaternary sector
Workpoint
Identify which sector of the business activity the following
businesses are in:
 An insurance company
 Shell (multinational energy provider)
 An auto electrician
 Eidos (computer games publisher)
 Nike (sportswear)
Workpoint
Outline the four sectors of the business activity.
Identify the primary, secondary, tertiary, and quaternary
businesses that would be involved in the production,
distribution and marketing of these products.
 An apple pie
 A cell phone
Exam tip
 During your IB Business Management course it is a good idea
to read the business section of newspapers regularly.
 This will help you to apply the work you have done in class to
the world outside.
 What, for example, was the major business story in your
country this week?
Sectoral change
 Developments are not, however, linear.
 Technological advances in one area and its related
workers can make other technologies and occupations
obsolete, such as typewriters and typists.
Sectoral change
 Businesses that can anticipate or adapt to the changing
environment can do well, even in industries that are perceived
as “in decline”.
 Developed economies have moved away from the primary
sector.
 The process of shifting from one sector in an economy to a
different can produce strains on resources, such as human
resources.
 As an economy shifts to the secondary sector, legislation and
other protections against environmental damage are often
weak.
 Manufacturing firms in developing countries often do more
damage to the environment than manufacturing in developed
economies.
Workpoint
 Define the term entrepreneurship.
 Action of designing, launching and running a business
venture.
 State the main characteristics of an entrepreneur.
 Distinguish between entrepreneurship and intrapreneurship.
“Inside each one of us there is an
entrepreneur. Sometimes it just takes a little
piece of opportunity to bring us to the
surface.”
Robert Kiyosaki
What do you need to become
a successful businessperson?
Information Attitude
Workpoint
IB learner profile - Risk-takers
 According to Bloomberg, eight out of ten entrepreneurs who start a
business fail within the first 18 months (Forbes, 2013).

 Predicting the success of a business is an incredibly difficult thing to
do.
 People who start a business and then see
them fail can lose large sums of money
and suffer a significant emotional pain
associated with business failure.
 To what extent do new entrepreneurs

have to be risk-takers?
 Write a 300-word essay.
Tomorrow’s big business is
today’s small business
Failure to plan is a plan to fail.
Anon
TOK discussion
 To what extent do intuition, imagination and reason
influence in the decision to set up a new business?
 What evidence can give an entrepreneur the certainty
that a new business will be successful?
Key concept link
 New enterprises need to differentiate themselves from rivals,
many of whom will be well established. One way of achieving this
is by innovating – providing either a different type of good or
service which is different from those of competitors or which is
delivered in a distinct way.
 The world is changing everyday - the population is changing,
market trends are changing, technology is changing and the
economy is changing. Businesses that fail to embrace change can
easily wind up as dinosaurs – out of touch and unable to
compete under current trading conditions.
Sources
 Stimpson, P., Smith, A. (2015). Business Management for the
IB Diploma. Cambridge, United Kingdom: Cambridge
University Press
 Lominé, L., Muchena, M., and Pierce, R. (2014). Business
Management. Oxford, United Kingdom: Oxford University
Press
 Clark, P. and Golden, P. (2009). Business and management
Course Companion. Oxford, United Kingdom: Oxford
University Press
 Gutteridge, L. (2009). Business and Management for the IB
Diploma. Oxford, United Kingdom: Oxford University Press
 Thompson, R. and Machin, D. (2003). AS Business Studies.
London, United Kingdom: Harper Collins Publishers

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1.1 What is a business?

 The difference between the primary, secondary, tertiary and

quaternary sectors (AO2)

 The challenges and opportunities for starting up a business

Human Physical Financial Enterprise

Flower shop sellers flowers savings knowledge

coffee maker coffee beans vision

Bakery baker establishment loan knowledge

To be a good organization you need to have the best,

To be a successful business the challenge is making

● Finance and accounts

 Recruiting a new production manager.

 Allocating the financial resources to purchase capital

needs for future operations.

 Shell (multinational energy provider)

 Eidos (computer games publisher)

business fail within the first 18 months (Forbes, 2013).

 To what extent do new entrepreneurs

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