IB B&M Note

4/15/2019 IB B&M Note - Google Docs
Topic 1

consumer goods the physical and tangible goods sold to the general public. They include cars and washing
machines, which are referred to as durable consumer goods. Non durable consumer goods include food, drinks
and sweets that can only be used once.

consumer services nontangible products that are sold to the general public and include hotel accommodation,
insurance services and train journeys

capital goods physical goods that are used by industry to aid in the production of other goods and services, such
as machines and commercial vehicles

primary sector business activity firms engaged in farming, fishing, oil extraction and all other industries that
extract natural resources so that they can be used and processed by other firms

secondary sector business activity firms that manufacture and process products from natural resources,
including computers, brewing, baking, clothing and construction

tertiary sector business activity firms that provide services to consumers and other businesses, such as retailing,
transport, insurance, banking, hotels, tourism and telecommunications
private sector comprises businesses owned and controlled by individuals or groups of individuals

public sector comprises organisations accountable to and controlled by central or local government (the state)
mixed economy economic resources are owned and controlled by both private and public sectors
freemarket economy economic resources are owned largely by the private sector with very little state intervention
command economy economic resources are owned, planned and controlled by the state
privatisation the sale of public sector organisations to the private sector
entrepreneur someone who takes the financial risk of starting and managing a new venture
sole trader a business in which one person provides the permanent finance and, in return, has full control of the
business and is able to keep all of the profits
partnership a business formed by two or more people to carry on a business together, with shared capital
investment and, usually, shared responsibilities
limited liability the only liability – or potential loss – a shareholder has if the company fails is the amount invested
in the company, not the total wealth of the shareholder
private limited company a small to mediumsized business that is owned by shareholders who are often members
of the same family. This company cannot sell shares to the general public
shareholder a person or institution owning shares in a limited company
share a certificate confirming part ownership of a company and entitling the shareholder to dividends and certain
shareholder rights
public limited company (plc) a limited company, often a large business, with the legal right to sell shares to the
general public. Its share price is quoted on the national stock exchange
public corporation a business enterprise owned and controlled by the state – also known as nationalised industry
nonprofit organisation any organisation that has aims other than making and distributing profit and which is
usually governed by a voluntary board
https://docs.google.com/document/d/1LRZpNU085hqa8IGzlYYOwxkiKQYxumnbNc-9z7L5ENM/edit 1/19
nongovernmental organisation (NGO) a legally constituted body with no participation or representation of any
government
pressure group an organisation created by people with a common interest or objective who lobby businesses and
governments to change policies so that the objective is reached
social enterprise a business with mainly social objectives that reinvests most of its profits into benefiting society
rather than maximising returns to owners
triple bottom line the three objectives of social enterprises: economic, social and environmental
mission statement a statement of the business’s core aims, phrased in a way to motivate employees and to
stimulate interest by outside groups
vision statement a statement of what the organisation would like to achieve or accomplish in the long term
corporate or strategic objectives important, broadly defined targets that a business must reach to achieve its
overall aim
corporate social responsibility this concept applies to those businesses that consider the interests of society by
taking responsibility for the impact of their decisions and activities on customers, employees, communities and the
environment
tactical or operational objectives short or mediumterm goals or targets which must be achieved for an
organisation to attain its corporate objectives
ethics moral guidelines that determine decisionmaking
ethical code (code of conduct) a document detailing a company’s rules and guidelines on staff behaviour that
must be followed by all employees
environmental audit assesses the impact of a business’s impact on the environment
social audit an independent report on the impact a business has on society. This can cover pollution levels, health
and safety record, sources of supplies, customer satisfaction and contribution to the community
stakeholders people or groups of people who can be affected by, and therefore have an interest in, any action by
an organisation
stakeholder concept the view that businesses and their managers have responsibilities to a wide range of groups,
not just shareholders
PEST analysis – an acronym standing for political, economic, social, technological that refers to an analytical
framework for external environmental factors affecting business objectives and strategies. PEST is sometimes
rearranged as STEP and has also been extended to STEEPLE (social, technological, economic, environmental,
political, legal and ethical) and PESTLE (same categories as STEEPLE but without ethical considerations)
fiscal policy changes in government spending levels and tax rates
monetary policy changes in the level of interest rates which make loan capital more or less expensive
economic growth increases in the level of a country’s Gross Domestic Product (total value of output)
inflation the rate of change in the average level of prices
unemployment the numbers of people in an economy willing and able to work who cannot find employment
recession six months (two quarters) of falling GDP (negative growth)
exchange rate the value of one currency in terms of another currency
costpush inflation caused by rising costs forcing businesses to increase prices
demandpull inflation caused by excess demand in an economy, e.g. an economic boom, allowing businesses to
raise prices
information technology the use of electronic technology to gather, store, process and communicate information
computeraided design using computers and IT when designing products
computeraided manufacturing the use of computers and computercontrolled machinery to speed up the
production process and make it more flexible
internet the worldwide web of communication links between computers
business plan a written document that describes a business, its objectives and its strategies, the market it is in and
its financial forecasts
intuitive decisionmaking involves making decisions based on instinct or ‘gut feeling’ (perhaps based on the
manager’s experience) for a situation and the options available
scientific decisionmaking involves basing decisions on a formal framework and a data analysis of both the
problem and the options available
internal constraints limiting factors in decisionmaking that can be controlled by the organisation
external constraints limiting factors in decisionmaking that are beyond the organisation’s control
SWOT analysis a form of strategic analysis that identifies and analyses the main internal strengths and
weaknesses and external opportunities and threats that will influence the future direction and success of a business
scale of operation the maximum output that can be achieved using the available inputs (resources) – this scale
can only be increased in the long term by employing more of all inputs
economies of scale reductions in a firm’s unit (average) costs of production that result from an increase in the
scale of operations
diseconomies of scale factors that cause average costs of production to rise when the scale of operation is
increased
internal growth expansion of a business by means of opening new branches, shops or factories (also known as
organic growth)
external growth business expansion achieved by means of merging with or taking over another business, from
either the same or a different industry
horizontal integration integration with firm in the same industry and at same stage of production
forward vertical integration integration with a business in the same industry but a customer of the existing
business
backward vertical integration integration with a business in the same industry but a supplier of the existing
business
conglomerate integration merger with or takeover of a business in a different industry
merger an agreement by shareholders and managers of two businesses to bring both firms together under a
common board of directors with shareholders in both businesses owning shares in the newly merged business

takeover when a company buys over 50% of the shares of another company and becomes the controlling owner –
often referred to as ‘acquisition
joint venture two or more businesses agree to work closely together on a particular project and create a separate
business division to do so
strategic alliances agreements between firms in which each agrees to commit resources to achieve an agreed set
of objectives
franchise a business that uses the name, logo and trading systems of an existing successful business
Ansoff’s matrix a model used to show the degree of risk associated with the four growth strategies of market
penetration, market development, product development and diversification
market penetration the objective of achieving higher market shares in existing markets with existing products
product development the development and sale of new products or new developments of existing products in
existing markets
market development the strategy of selling existing products in new markets
diversification the process of selling different, unrelated goods or services in new markets
globalisation the growing trend towards worldwide markets in products, capital and labour, unrestricted by barriers
multinational companies business organisations that have their headquarters in one country, but with operating
branches, factories and assembly plants in other countries
free international trade international trade that is allowed to take place without restrictions such as ‘protectionist’
tariffs and quotas
tariff tax imposed on an imported product
quota a physical limit placed on the quantity of imports of certain products
TOPIC 2
human resource management (HRM) the strategic approach to the effective management of an organisation’s
workers so that they help the business gain a competitive advantage
human resource or workforce planning analysing and forecasting the numbers of workers and the skills of those
workers that will be required by the organisation to achieve its objectives
occupational mobility of labour extent to which workers are willing and able to move to different jobs requiring
different skills
geographical mobility of labour extent to which workers are willing and able to move geographical region to take
up new jobs
workforce audit a check on the skills and qualifications of all existing employees
workforce plan thinking ahead and establishing the number and skills of the workforce required by the business to
meet its objectives
recruitment the process of identifying the need for a new employee, defining the job to be filled and the type of
person needed to fill it, attracting suitable candidates for the job and selecting the best one
job description a detailed list of the key points about the job to be filled, stating all the key tasks and
responsibilities of it
person specification a detailed list of the qualities, skills and qualifications that a successful applicant will need to
have
training workrelated education to increase workforce skills and efficiency
onthejob training instruction at the place of work on how a job should be carried out
offthejob training all training undertaken away from the business, e.g. workrelated college courses
induction training introductory training programme to familiarise new recruits with the systems used in the
business and the layout of the business site
staff appraisal the process of assessing the effectiveness of an employee judged against preset objectives
dismissal being removed or ‘sacked’ from a job due to incompetence or breach of discipline
contract of employment a legal document that sets out the terms and conditions governing a worker’s job
unfair dismissal ending a worker’s employment contract for a reason that the law regards as being unfair
redundancy when a job is no longer required so the employee doing this job becomes redundant through no fault
of his or her own
organisational structure the internal, formal framework of a business that shows the way in which management is
organised and linked together and how authority is passed through the organisation
level of hierarchy a stage of the organisational structure at which the personnel on it have equal status and
authority
chain of command this is the route through which authority is passed down an organisation – from the chief
executive and the board of directors
span of control the number of subordinates reporting directly to a manager

effective communication the exchange of information between people or groups, with feedback
communication media the methods used to communicate a message
information overload so much information and so many messages are received that the most important ones
cannot be easily identified and quickly acted on – most likely to occur with electronic media
nonverbal communication messages sent and received without verbal information such as facial expressions,
eye contact, tone of voice, body posture and gestures and position within a group
informal communication unofficial channels of communication that exist between informal groups within an
organisation
communication barriers reasons why communication fails
leadership the art of motivating a group of people towards achieving a common objective
autocratic leadership a style of leadership that keeps all decisionmaking at the centre of the organisation
laissezfaire leadership a leadership style that leaves much of the business decisionmaking to the workforce – a
‘handsoff’ approach and the reverse of the autocratic style
situational leadership effective leadership varies with the task in hand and situational leaders adapt their
leadership style to each situation
democratic leadership a leadership style that promotes the active participation of workers in taking decisions

motivation the intrinsic and extrinsic factors that stimulate people to take actions that lead to achieving a goal
intrinsic motivation comes from the satisfaction derived from working on and completing a task
extrinsic motivation comes from external rewards associated with working on a task, for example pay and other
benefits
selfactualisation a sense of selffulfilment reached by feeling enriched and developed by what one has learned
and achieved
job enrichment aims to use the full capabilities of workers by giving them the opportunity to do more challenging
and fulfilling work
hygiene factors aspects of a worker’s job that have the potential to cause dissatisfaction such as pay, working
conditions, status and oversupervision by managers
motivating factors (motivators) aspects of a worker’s job that can lead to positive job satisfaction such as
achievement, recognition, meaningful and interesting work and advancement at work
hourly wage rate payment to a worker made for each hour worked
piece rate a payment to a worker for each unit produced
salary annual income that is usually paid on a monthly basis
commission a payment to a sales person for each sale made
performancerelated pay a bonus scheme to reward staff for aboveaverage work performance
profitrelated pay a bonus for staff based on the profits of the business – usually paid as a proportion of basic
salary
job enlargement attempting to increase the scope of a job by broadening or deepening the tasks undertaken
team working production is organised so that groups of workers undertake complete units of work
job redesign involves the restructuring of a job – usually with employees’ involvement and agreement – to make
work more interesting, satisfying and challenging
organisational culture the values, attitudes and beliefs of the people working in an organisation that control the
way they interact with each other and with external stakeholder groups
power culture concentrating power among a few people
role culture each member of staff has a clearly defined job title and role
task culture based on cooperation and teamwork person culture when individuals are given the freedom to
express themselves and make decisions
entrepreneurial culture encourages management and workers to take risks, to come up with new ideas and test
out new business ventures
TOPIC 3
startup capital capital needed by an entrepreneur to set up a business
working capital the capital needed to pay for raw materials, daytoday running costs and credit offered to
customers. In accounting terms: working capital=current assets–current liabilities
overdraft bank agrees to a business borrowing up to an agreed limit as and when required
factoring selling of claims over debtors to a debt factor in exchange for immediate liquidity – only a proportion of the
value of the debts will be received as cash
leasing obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. This
avoids the need for the business to raise longterm capital to buy the asset. Ownership remains with the leasing
company
hire purchase an asset is sold to a company which agrees to pay fixed repayments over an agreed time period –
the asset belongs to the company
longterm loans loans that do not have to be repaid for at least one year
equity finance permanent finance raised by companies through the sale of shares
debentures or longterm bonds bonds issued by companies to raise debt finance, often with a fixed rate of
interest
rights issue existing shareholders are given the right to buy additional shares at a discounted price
venture capital risk capital invested in business startups or expanding small businesses, that have good profit
potential, but do not find it easy to gain finance from other sources
investment appraisal evaluating the profitability or desirability of an investment project
annual forecasted net cash flow forecasted cash inflow – forecasted cash outflows
payback period length of time it takes for the net cash inflows to pay back the original capital cost of the investment
average rate of return (ARR) measures the annual profitability of an investment as a percentage of the initial
investment
ARR(%) = (annual prof it(net cash f low)/initial capital cost) × 100

criterion rate or level the minimum level (maximum for payback period) set by management for investment
appraisal results for a project to be accepted
working capital the capital needed to pay for raw materials, daytoday running costs and credit offered to
customers. In accounting terms: making capital = current assets − current liabilities
liquidity the ability of a firm to be able to pay its shortterm debts
liquidation when a firm ceases trading and its assets are sold for cash

working capital cycle the period of time between spending cash on the production
process and receiving cash payments from customer
cash flow the sum of cash payments to a business (inflows) less the sum of cash
payments made by it (outflows)
liquidation turning assets into cash may be insisted on by courts if suppliers have not been paid
insolvent when a business cannot meet its shortterm debts
cash inflows payments in cash received by a business, such as those from customers (debtors) or from the bank,
e.g. receiving a loan
outflows payments in cash made by a business, such as those to suppliers and workers
debtors customers who have bought products on credit and will pay cash at an agreed date in the future
cashflow forecast estimate of a firm’s future cash inflows and outflows
net monthly cash flow estimated difference between monthly cash inflows and outflows
opening cash balance cash held by the business at the start of the month
closing cash balance cash held at the end of the month becomes next month’s opening balance
credit control monitoring of debts to ensure that credit periods are not exceeded
bad debt unpaid customers’ bills that are now very unlikely to ever be paid
overtrading expanding a business rapidly without obtaining all of the necessary finance so that a cashflow
shortage develops
budget a detailed financial plan for the future
budget holder individual responsible for the initial setting and achievement of a budget
delegated budgets control over budgets is given to less senior management
incremental budgeting uses last year’s budget as a basis and an adjustment is made for the coming year
zero budgeting setting budgets to zero each year and budget holders have to argue their case to receive any
finance
variance analysis the process of investigating any differences between budgeted figures and actual figures
adverse variance exists when the difference between the budgeted and actual figure leads to a lower than
expected profit
favourable variance exists when the difference between the budgeted and actual figure leads to a higher than
expected profit
income statement records the revenue, costs and profit (or loss) of a business over a given period of time
gross profit equal to sales revenue less cost of sales
sales revenue (or sales turnover) the total value of sales made during the trading period = selling price × quantity
sold
cost of sales (or cost of goods sold) this is the direct cost of purchasing the goods that were sold during the
financial year
operating profit (net profit) gross profit minus overhead expenses
profit after tax operating profit minus interest costs and corporation tax
dividends the share of the profits paid to shareholders as a return for investing in the company
retained profit the profit left after all deductions, including dividends, have been made. This is ‘ploughed back’ into
the company as a source of finance
lowquality profit oneoff profit that cannot easily be repeated or sustained
highquality profit profit that can be repeated and sustained THE BALANCE SHEET
balance sheet an accounting statement that records the values of a business’s assets, liabilities and shareholders’
equity at one point in time
assets items of monetary value that are owned by a business liabilities a financial obligation of a business that it is
required to pay in the future
shareholders’ equity total value of assets less total value of liabilities
share capital the total value of capital raised from shareholders by the issue of shares
Gross profit margin(%) (gross prof it/sales revenue) × 100

Net profit margin(%) (net prof it/sales revenue) × 100
return on capital employed(%) (net prof it/capital employed) × 100
Capital employed = (noncurrent assets+current assets) − current liabilities OR noncurrent liabilities +
shareholders equity
current ratio = current assets/current liabilities
Acid test ratio = liquid assets/current liabilities
liquid assets = current assets – stocks
stock (inventory) turnover ratio = cost of goods sold/value of stock (average)
debtor days (days’ sales in receivables) = (trade debtors(accounts receivable)/sales turnover ) ×365(days)
Creditor days ratio: estimates the average time it takes a business to settle its debts with trade suppliers
×
= (trade creditors/credit purchases) 365
dividends the share of the profits paid to shareholders as a return for investing in the company
share price the quoted price of one share on the stock exchange
dividend yield ratio (%) = (dividend per share/current share price) × 100
dividend per share = total annual dividends/total number of issued shares
earnings per share profit earned per share in the company profit after tax
= prof it af ter tax/total number of ordinary shares
gearing ratio (%) = (long − term loans /capital employed)×100
TOPIC 4 Marketing
marketing the management task that links the business to the customer by identifying and meeting the needs of
customers profitably – it does this by getting the right product at the right price to the right place at the right time
market size the total level of sales of all producers within a market
market growth the percentage change in the total size of a market (volume or value) over a period of time
market share the percentage of sales in the total market sold by one business

consumer markets markets for goods and services bought by the final user of them
industrial markets markets for goods and services bought by businesses to be used in the production process of
other products
market orientation an outwardlooking approach basing product decisions on consumer demand, as established
by market research
product orientation an inwardlooking approach that focuses on making products that can be made – or have been
made for a long time – and then trying to sell them
marketing plan a detailed report on an organisation’s marketing strategy
marketing planning the process of formulating appropriate strategies and preparing marketing activities to meet
marketing objectives
marketing mix the key decision that must be taken in the effective marketing of a product
coordinated marketing mix key marketing decisions complement each other and work together to give customers
a consistent message about the product
marketing audit a regular review of the cost and effectiveness of a marketing plan including an analysis of internal
and external influences
marketing objectives the goals set for the marketing department to help the business achieve its overall objectives
marketing strategy longterm plan established for achieving marketing objectives
market research process of collecting, recording and analysing data about customers, competitors and the market
➔ to reduce the risks associated with new product launches
➔ To predict future demand changes
➔ To explain patterns in sales of existing products and market trends
➔ To assess the most favored designs, flavours, styles, promotions and packages for a product
primary research the collection of firsthand data that are directly related to a firm’s needs
secondary research collection of data from secondhand sources
quantitative research research that leads to numerical results that can be presented and analysed
qualitative research research into the indepth motivations behind consumer buying behaviour or opinions
Focus groups a group of people who are asked about their attitude towards a product, service, advertisement or
new style of packaging
Test marketing marketing a new product in a geographical region before a fullscale launch
sample group of people taking part in a market research survey selected to be representative of the target market
overall
sampling error errors in research caused by using a sample for data collection rather than the whole target
population
random sampling every member of the target population has an equal chance of being selected
stratified sampling this draws a sample from a specified subgroup or segment of the population and uses random
sampling to select an appropriate number from each stratum
cluster sampling using one or a number of specific groups to draw samples from and not selecting from the whole
population, e.g. using one town or region
quota sampling gathering data from a group chosen out of a specific subgroup, e.g. a researcher might ask 100
individuals between the ages of 20 and 30 years
snowball sampling using existing members of a sample study group to recruit further participants through their
acquaintances
market segment a subgroup of a whole market in which consumers have similar characteristics
market segmentation identifying different segments within a market and targeting different products or services to
them
consumer profile a quantified picture of consumers of a firm’s products, showing proportions of age groups,
income levels, location, gender and social class
target market the market segment that a particular product is aimed at
corporate image consumer perception of the company behind a brand
unique selling point/proposition (USP) differentiating factor that makes a company’s product unique, designed to
motivate customers to buy
product the end result of the production process sold on the market to satisfy a customer need
consumer durables manufactured products that can be reused and are expected to have a reasonably long life,
such as cars and washing machines
product line a set of related products sold by a business product mix the variety of product lines that a business
produces or a retailer stocks
product range all of the types of products made by a business
product life cycle the pattern of sales recorded by a product from launch to withdrawal from the market
→ there is no two product are likely to have exactly the same pattern of sales growth/maturity and decline
extension strategies marketing plans that extend the maturity stage of the product before a brand new one is
needed
brand an identifying symbol, name, image or trademark that distinguishes a product from its competitors
brand awareness extent to which a brand is recognised by potential customers and is correctly associated with a
particular product – can be expressed as a percentage of the target market
brand development measures the infiltration of a product’s sales, usually per thousand population. If 100 people in
1000 buy a product, it has a brand development of 10
brand loyalty the faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of
the marketing pressure from competing brands
costplus pricing adding a fixed markup for profit to the unit price of a product
fullcost/absorptioncost pricing setting a price by calculating a unit cost for the product (allocated fixed and
variable costs) and then adding a fixed profit markup
competitionbased pricing a firm will base its price upon the price set by its competitors
price leadership one dominant firm in a market sets a price and other firms simply charge a price based upon that
set by the market leader
goingrate pricing the price charged is based upon a study of the conditions that prevail in a certain market and the
prices charged by major competitors
Penetration pricing setting a relatively low price often supported by strong promotion in order to achieve a high
volume of sales
Market skimming setting a high price for a new product when a firm has a unique or highly differentiated product
with low price elasticity of demand
promotion the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public
relations to inform consumers and persuade consumers to buy
abovetheline promotion a form of promotion that is undertaken by a business by paying for communication with
consumers, e.g. advertising
belowtheline promotion promotion that is not a directly paidfor means of communication but based on
shortterm incentives to purchase, e.g. sales promotion techniques
sales promotion incentives such as special offers or special deals directed at consumers or retailers to achieve
shortterm sales increases and repeat purchases by consumers
promotion mix the combination of promotional techniques that a firm uses to communicate the benefits of its
products to customers
channel of distribution this refers to the chain of intermediaries a product passes through from producer to final
consumer international marketing selling products in markets other than the original domestic market
Political differences
Economic and social differences
Legal differences
Cultural differences
Differences in business practices
panglobal marketing adopting a standardised product across the globe as if the whole world were a single market
– selling the same goods in the same way everywhere
global localisation adapting the marketing mix, including differentiated products, to meet national and regional
tastes and cultures
Benefit:
local needs, tastes and cultures are reflected in the marketing mix of the business and this could lead
to higher sales and profit
There is no attempt to impose foreign brands/products/advertisements on regional markets
The products are more likely to meet local national legal requirements that if they are standardised
products
There will be less local opposition to multinational business activity
Limitations
The scope for economies of scale is reduced
The international brand could lose its power and identity if locally adapted product become more
popular than the international product
There will be additional costs of adapting products, adverts, store layouts, etc. to specific local needs,
these costs might lead to higher prices than a global marketing strategy would result in.

ecommerce the buying and selling of goods and services on the internet
viral marketing the use of social networking sites or SMS text messages to increase brand awareness or sell
products
TOPIC 5 Operations management
job production producing a oneoff item specially designed for the customer

batch production producing a limited number of identical products – each item in the batch passes through one
stage of production before passing on to the next stage
flow production producing items in a continually moving process – also known as line production
mass production producing large quantities of a standardised product
mass customisation the use of flexible computeraided production systems to produce items to meet individual
customers’ requirements at mass production cost levels
direct costs these costs can be clearly identified with each unit of production and can be allocated to a cost centre
indirect costs costs which cannot be identified with a unit of production or allocated accurately to a cost centre –
also known as overhead costs
fixed costs costs that do not vary with output in the short run
variable costs costs that vary with output
semivariable costs costs that have both a fixed cost and a variable cost element
marginal costs the extra cost of producing one more unit of output
revenue the income received from the sale of a product total revenue total income from the sale of all units of the
product = quantity × price
contribution per unit selling price of a product less variable costs per unit
total contribution total revenue from sale of a product less total variable costs of producing it
breakeven point of production the level of output at which total costs equal total revenue
margin of safety the amount by which the sales level exceeds the breakeven level of output
contribution per unit selling price of a product less variable costs per unit
quality product a good or service that meets customers’ expectations and is therefore ‘fit for purpose’
quality standards the expectations of customers expressed in terms of the minimum acceptable production or
service standards
quality control this is based on inspection of the product or a sample of products
quality assurance this is a system of agreeing and meeting quality standards at each stage of production to ensure
consumer satisfaction
ISO 9000 internationally recognised certificate that acknowledges the existence of a quality procedure that meets
certain conditions
total quality management an approach to quality that aims to involve all employees in the quality improvement
process
lean production producing goods and services with the minimum of wasted resources while maintaining high
quality
internal customers people within the organisation who depend upon the quality of work being done by others
zero defects the aim of achieving perfect products every time
optimal location a business location that gives the best combination of quantitative and qualitative factors
quantitative factors these are measurable in financial terms and will have a direct impact on either the costs of a
site or the revenues from it and its profitability
Site and other capital costs such as building or shopfitting costs
Labour cost
Transport costs
Sales revenue potential
Government grants
Techniques can be used to assist in the location decision:
Profit estimates
Investment appraisal
Breakeven analysis
qualitative factors nonmeasurable factors that may influence business decisions
Safety
Room for further expansion
Managers’ preferences
Labour supply
Ethical considerations
Environmental concerns
infrastructure
stock (inventory) materials and goods required to allow for the production of and supply of products to the
customer
economic order quantity (EOQ) the optimum or leastcost quantity of stock to reorder taking into account delivery
costs and stockholding costs
buffer stocks the minimum stocks that should be held to ensure that production could still take place should a
delay in delivery occur or production rates increase
reorder quantity the number of units ordered each time
lead time the normal time taken between ordering new stocks and their delivery
reorder stock level the level of stocks
that will trigger a new order to be sent
to the supplier
just in case (JIC) holding high stock
levels ‘just in case’ there is a production
problem or an unexpected upsurge in
demand
just in time (JIT) a stock control
method that aims to avoid holding
stocks by requiring suppliers to arrive
just as they are needed in production
and completed products are produced
to order

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4/15/2019 IB B&M Note - Google Docs

ARR(%) = (annual prof it(net cash f low)/initial capital cost) × 100

Gross profit margin(%) (gross prof it/sales revenue) × 100

dividend per share = total annual dividends/total number of issued shares

gearing ratio (%) = (long − term loans /capital employed)×100

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