1 Introduction to business management

Introduction to business management studies what a business is, the legal forms it can take, the objectives it sets, the people and groups it affects, and how and why it grows, including across national borders. These ideas apply to every organisation, from a street food stall to a multinational company, and they are the base on which the study of human resources, finance, marketing and operations is built.

Questions that frame the unit

The unit is organised around a small number of questions that any owner, manager or investor faces at some point.

• Why do people give up a secure job to start a business, and why do so many new businesses close within a few years?

• Should a growing family business stay privately held, or sell shares to the public to raise finance?

• Can a business aim for profit and behave ethically at the same time?

• When a business expands, whose interests come first: its shareholders, its employees or the local community?

• Do multinational companies help or harm the countries that host them?

What the unit covers

The unit has six subtopics. Each answers one main question, and all six are studied in the same depth at SL and HL.

How the subtopics connect

The unit starts with the nature of business. A business combines the factors of production to create goods and services and added value, and its work is divided into four business functions: human resources, finance and accounts, marketing and operations. Each of the other units studies one of these functions, so the first subtopic is also a map of the whole course. It introduces the entrepreneur who takes the risk of starting a business, and the challenges a start-up faces.

The concept map shows three questions that follow from the first subtopic: who owns the business, what it aims for and whom it affects. Ownership comes first because the legal form decides who carries the risk. A sole trader has unlimited liability, while the shareholders of a privately held company have limited liability. The legal form also decides which sources of finance are open, and so how fast the business can grow. A social enterprise or a cooperative has a different purpose from a company run for its owners, and that purpose shapes its objectives.

Objectives and stakeholders are linked in both directions. The objectives a business sets, from profit and growth to ethical objectives, affect its stakeholder groups, and stakeholders with power push the business to change its aims. Corporate social responsibility is where the two meet: it is the set of commitments a business makes because of its effects on people beyond its owners.

Growth draws the earlier ideas together. A business that grows may gain economies of scale, but it needs finance, it may change its legal form, and every method of external growth, such as a merger, a joint venture or a franchise, creates winners and losers among stakeholders. When growth crosses national borders the business becomes a multinational company, and the stakeholder analysis is applied to a whole host country: its workers, suppliers, government and environment.

Several toolkit tools are used with the unit. A business plan sets out how a start-up will operate, a SWOT analysis and a STEEPLE analysis assess a business and its environment, the Ansoff matrix classifies growth strategies by product and market, and a decision tree compares growth options with uncertain outcomes. Circular business models show how a business can grow while using fewer resources.

Change, creativity, ethics and sustainability in the unit

The four key concepts appear throughout the unit, often in the same decision.

The concepts often pull in different directions. A takeover that brings economies of scale may lead to job losses in the business that is bought, and an MNC that brings jobs to a host country may also put pressure on local suppliers or the environment. Evaluating a decision in the unit therefore means weighing its effects on each stakeholder group and against each concept.

How SL and HL differ

Unit 1 has the same content at SL and HL. None of its subtopics is HL only, and none of its subtopics contains HL-only parts, so SL and HL students study every idea in the unit in the same depth.

The difference lies in the tools HL students apply to unit 1 content. Porter’s generic strategies describe how a business competes as it grows, and simple linear regression can be used to forecast a trend, such as the growth of a market a business plans to enter. HL students also study international marketing, which builds directly on multinational companies, and organisational culture, which explains why many mergers and acquisitions fail.

Assessment

Unit 1 is examined in Paper 1 and Paper 2 at both SL and HL. Because it has no HL-only content, every part of it can appear in Paper 1, whose pre-released case study usually centres on one organisation: its legal form, its objectives, its stakeholders and its plans to grow. Questions are mostly qualitative. Typical short questions ask students to define a term from the case (a cooperative, limited liability, a franchise), or to explain two advantages or disadvantages of a legal form or a method of growth for that business.

The 10-mark extended responses often ask students to discuss or evaluate a strategic choice, such as whether a business should become a publicly held company, take over a rival, or adopt ethical objectives, sometimes with reference to a named key concept. In Paper 2, unit 1 content is set alongside data, for example a growth decision supported by financial figures. At HL, Paper 3 is about a social enterprise, so the features of social enterprises, their objectives and their stakeholders are central to it.

Studying the unit