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State one key difference between goods and services.
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1.1.120 cards
State one key difference between goods and services.
Goods are tangible and can be stored; services are intangible and cannot be stored.
Tangible vs intangible.
Exam tip: What must you include to get full marks when defining a business?
Mention that a business provides goods or services to satisfy customer needs and wants.
Hit: goods/services + needs/wants.
Define a customer need.
A need is an essential requirement for survival, such as food, water, or shelter.
Need = essential.
Define a business.
A business is an organization that provides goods or services to satisfy customer needs and wants.
Use: goods or services + needs/wants.
What is meant by goods?
Goods are tangible (physical) products that can be touched and stored.
Tangible = physical product.
Give two examples of goods.
Examples of goods include clothing and smartphones.
Physical products.
Define a customer want.
A want is a desire that is not essential for survival but improves quality of life.
Want = non-essential.
State two ways goods and services differ.
Goods are tangible and can be stored; services are intangible and cannot be stored.
Tangible + storage.
Give one example of a need and one example of a want in transportation.
Need: basic public transport to get to work. Want: a luxury sports car.
Same category, different level.
Give two examples of services.
Examples of services include healthcare and banking.
Activities performed for customers.
What is meant by services?
Services are intangible activities performed for customers and cannot be stored.
Intangible = not physical.
State one example of added value.
A café adds value by turning coffee beans, milk, and labor into a latte sold at a higher price than input costs.
Inputs -> product customers pay for.
Why can services be harder to standardize than goods?
Services depend on people and customer experience, so quality can vary between employees, locations, and times.
Think: customer experience varies.
Why is the difference between needs and wants useful for businesses?
It helps businesses design products, set prices, and target customers based on what is essential versus desirable.
Think: product + price + target market.
State one need and one want.
Need: shelter. Want: a luxury holiday.
Need essential; want desirable.
Give one example of a customer need and one example of a customer want.
Need: clean water. Want: premium bottled sparkling water.
Need = essential; want = improves life.
Why do all businesses exist in one sentence (IB style)?
To satisfy customer needs and wants by providing goods or services and adding value through transformation.
One sentence, include add value.
Give one example of a business that provides both goods and services.
A restaurant provides goods (food) and services (table service).
Many businesses are mixed.
What does it mean to add value?
Adding value means transforming inputs into outputs that customers are willing to pay more for than the cost of inputs.
Inputs -> transformation -> outputs.
How can a want become a need over time?
If society changes so the item becomes essential for normal living or work, such as internet access in many countries.
Think: social/tech change.
1.1.220 cards
Define business functions.
Business functions are the main areas of activity within a business that work together to achieve organizational objectives.
Main areas of activity.
Give one example of interdependence between Marketing and Operations.
Marketing may promise product features and delivery dates, and Operations must produce the product to that specification and schedule.
Promises vs production.
State two responsibilities of HR.
HR is responsible for recruitment and training (and also motivation/rewards and employee relations).
People-related tasks.
List the four main business functions.
Human Resources, Finance and Accounts, Marketing, Operations.
HR + Finance + Marketing + Operations.
State two responsibilities of Finance and Accounts.
Finance and Accounts records financial transactions and manages cash flow (also budgeting and financial reporting).
Money management.
Match the function to what it manages: People.
Human Resources (HR).
People = HR.
List the four main business functions in IB Business Management.
Human Resources, Finance and Accounts, Marketing, Operations.
HR, Finance, Marketing, Operations.
How does Finance support Operations during a product launch?
Finance provides budgets for materials/equipment and monitors cash flow so production can be funded.
Money enables production.
State two responsibilities of Marketing.
Marketing carries out market research and decides on promotion/pricing (also product development).
Customer needs focus.
Match the function to what it manages: Money.
Finance and Accounts.
Money = finance.
Which function is mainly responsible for managing people?
Human Resources (HR).
People = HR.
How does HR support Marketing during growth?
HR recruits and trains sales/marketing staff to deliver promotions and customer service effectively.
People power.
Match the function to what it manages: Creating products/services.
Operations.
Making = operations.
What problem can occur if functions do not communicate well?
Marketing may advertise features or delivery times that Operations cannot deliver, leading to customer dissatisfaction.
Misalignment.
State two responsibilities of Operations.
Operations manages production methods and quality management (also inventory and supply chains).
Making + quality.
Which function is mainly responsible for producing goods/services?
Operations (production).
Making = operations.
Which function links most directly to customer needs and wants?
Marketing, because it identifies customer needs through research and creates strategies to satisfy them.
Customer focus.
Why is interdependence important for achieving business objectives?
Objectives require coordinated decisions across functions, so resources, people, and processes align toward the same targets.
Objectives need coordination.
Exam tip: In interdependence questions, what should you always include?
A specific example showing how decisions in at least two functions affect each other.
Use a product launch example.
Why must business functions work together?
Because decisions in one function affect others, and coordination is needed to meet objectives efficiently.
Interdependence.
1.1.320 cards
State the key activity of the primary sector.
Extracting raw materials (e.g., farming, mining).
Extraction.
State the four sectors of business activity.
Primary, Secondary, Tertiary, Quaternary.
Extraction -> manufacturing -> services -> knowledge.
Classify a fishing business by sector.
Fishing is in the primary sector because it extracts a raw resource from nature.
Extraction.
Classify a retail shop by sector.
Retail is in the tertiary sector because it provides a service (selling and distributing products).
Service activity.
What is the primary sector?
The primary sector extracts raw materials from the earth, such as farming, fishing, mining, and forestry.
Extraction from nature.
State the key activity of the secondary sector.
Manufacturing/constructing products from raw materials.
Manufacturing.
Classify an IT consultancy by sector.
IT consultancy is in the quaternary sector because it provides knowledge-based and information services.
Knowledge work.
Classify a car manufacturing business by sector.
Car manufacturing is in the secondary sector because it makes products using raw materials and components.
Manufacturing.
Give two examples of tertiary sector businesses.
Examples include a bank and a hotel.
Services for customers.
State the key activity of the tertiary sector.
Providing services (e.g., retail, transport, healthcare).
Services.
What is the secondary sector?
The secondary sector manufactures or constructs products using raw materials, such as factories and construction firms.
Manufacturing/construction.
Give two examples of primary sector activities.
Examples include farming and mining.
Raw materials.
State the key activity of the quaternary sector.
Providing knowledge/information services (e.g., IT, R&D, consultancy).
Knowledge.
What is the tertiary sector?
The tertiary sector provides services to consumers and other businesses, such as retail, banking, transport, and healthcare.
Services.
Give two examples of quaternary sector businesses.
Examples include a research lab and a software development firm.
Knowledge and information.
Give two examples of secondary sector activities.
Examples include construction and food processing.
Making/constructing.
How does economic development usually change a country’s sector balance?
As countries develop, tertiary and quaternary sectors tend to grow while primary becomes a smaller share of employment/output.
Developed = more services/knowledge.
What is the quaternary sector?
The quaternary sector focuses on knowledge and information, such as IT, research, consultancy, and education.
Knowledge-based.
Why is the secondary sector sometimes called the manufacturing sector?
Because it converts raw materials into finished or semi-finished products using production processes.
Raw -> finished products.
Exam tip: What should you add after classifying a business into a sector?
A brief reason linked to the sector definition (e.g., “provides services”, “extracts raw materials”).
Always justify.
1.1.420 cards
Define a business plan.
A business plan is a written document outlining the business idea and how it will succeed.
Written plan for success.
State the first step in starting a business.
Identify a business opportunity, such as a gap in the market (unmet need).
Start with a gap/problem.
What is meant by a gap in the market?
A gap in the market is an unmet customer need or want that existing businesses do not satisfy well.
Unmet need.
State one reason market research reduces risk.
It checks if there is real customer demand and identifies competitors before money is invested.
Validate demand.
State two key questions market research should answer.
Who are the customers and what do they want? Who are the competitors and what do they offer?
Customers + competitors.
Why is market research an important step before launching?
It reduces risk by checking customer demand, competitors, and acceptable prices before investing.
Validate demand.
State three typical sections of a business plan.
Examples include market analysis, marketing strategy, and financial projections (also operations plan, funding requirements).
Plan sections.
State one reason a business plan helps attract finance.
It shows lenders/investors how the business will operate and generate revenue, with financial projections.
Shows viability.
What is the purpose of a business plan?
To outline the business idea, strategy, operations, and finances, and to persuade investors/lenders to provide funding.
Plan + funding.
Give two possible sources of start-up finance.
Personal savings and a bank loan.
Internal vs external.
Why do many new businesses fail if they skip market research?
They may misjudge demand, set wrong prices, or underestimate competition, leading to low sales and losses.
Wrong assumptions.
Why do investors/lenders ask to see a business plan?
To judge the viability of the idea, the strategy to achieve sales, and whether finances support repayment/returns.
They want proof it will work.
Give two common sources of start-up finance.
Examples include personal savings and bank loans (also family/friends, angels, crowdfunding, grants).
Where does the money come from?
State the correct sequence: business plan or finance first?
Usually the business plan comes before finance because it is used to persuade lenders/investors.
Plan supports funding.
What is meant by start-up capital?
Start-up capital is the money needed to set up a business before it starts earning revenue.
Money to begin operations.
Give one example of improving on an existing product to create a business idea.
Creating a longer-lasting phone battery or a more sustainable packaging option than competitors.
Improve existing offer.
What does it mean to identify a target market?
It means defining the specific group of customers the business will focus on, based on needs, income, location, and preferences.
Who exactly are you selling to?
Why is choosing a legal structure a key step?
It affects liability, control, taxation, and access to finance, so it shapes risk and long-term growth.
Liability + control + tax + finance.
Why is choosing a legal structure important in one sentence?
It determines liability, control, and how the business is financed and taxed.
Liability + control + tax.
Give two external sources of finance for a start-up.
Examples include bank loans and angel investors (also crowdfunding, grants).
External = outside the owner.
1.1.515 cards
What is meant by a market opportunity?
A market opportunity is a chance to meet customer needs or wants better than existing businesses, often due to gaps, trends, or technology.
Opportunity = unmet/changed demand.
State one financial opportunity of starting a business.
Potential for profits and building wealth/assets.
Money-related rewards.
State one financial and one personal opportunity of starting a business.
Financial: profits. Personal: independence/being your own boss.
Balance categories.
What is one benefit of first-mover advantage?
It can capture market share early before competitors enter.
Be first, gain share.
State one personal opportunity of starting a business.
Independence and being your own boss (also flexibility and pursuing passion).
Personal reward.
Give one example of a gap in the market creating a new business opportunity.
If a town has no affordable healthy lunch options, a new salad bar can meet that unmet need.
No existing supply.
How can new technology create opportunities for new businesses?
Technology can enable new products/services or cheaper delivery methods, creating markets that did not exist before.
Tech enables new solutions.
State one way consumer trends can create opportunities.
Changing preferences (e.g., healthier diets) create demand for new products/services (e.g., plant-based foods).
Trends shift demand.
How can starting a business benefit the community?
It can create employment and provide new or improved goods/services.
Jobs + value for society.
What is meant by capital gains for an entrepreneur?
Capital gains are the increase in value of the business that can be realized if it is sold.
Sell later for more.
Define first-mover advantage.
First-mover advantage is the benefit gained by being the first business to enter a market, helping it build brand recognition and capture market share early.
Be first.
State one community benefit of new businesses.
They create jobs and increase choice for consumers.
Jobs + choice.
Exam tip: When asked to discuss opportunities, what should you also mention?
Briefly acknowledge that opportunities come with risks/challenges (covered in the next section).
Balance your answer.
State one reason entrepreneurship can increase personal satisfaction.
Entrepreneurs may feel achievement from building something and solving customer problems.
Non-financial reward.
State two possible benefits of first-mover advantage.
Benefits include early brand recognition and customer loyalty (also setting industry standards).
Early lead.
1.1.620 cards
Why are established competitors a challenge for new businesses?
They often have loyal customers, strong brands, and economies of scale that allow lower prices.
Loyalty + scale.
State one financial challenge faced by new businesses.
Lack of capital/funding to start or grow.
Money shortage.
Name two categories of challenges new businesses face.
Financial challenges and market/competition challenges (also personal, operational, and legal).
Think categories.
State one operational challenge for new businesses.
Finding reliable suppliers.
Suppliers affect quality and timing.
What is meant by cash flow problems?
Cash flow problems occur when cash inflows are insufficient to pay cash outflows on time, even if the business is profitable.
Timing of cash.
Why is recruiting skilled employees a challenge for start-ups?
They may not afford high wages/benefits and have less job security than established firms.
Hard to attract talent.
Why is cash flow often the biggest financial threat to start-ups?
Because running out of cash stops the business paying bills, even if sales look strong on paper.
Cash timing kills.
What is meant by difficulty building brand awareness?
New businesses may struggle to get noticed by customers, so sales grow slowly and marketing costs can be high.
Hard to be known.
State one personal challenge of entrepreneurship.
Long working hours and stress (also poor work-life balance).
Personal pressure.
Give one example of a legal/regulatory requirement a business must comply with.
Health and safety regulations (also tax rules, employment law, licenses/permits).
Compliance matters.
Why is finding a target market a challenge for start-ups?
Without clear targeting, promotion is inefficient and the product may not match customer needs, reducing sales.
No target = wasted marketing.
Why can it be hard for start-ups to get bank loans?
They often have no track record, limited collateral, and higher perceived risk for lenders.
No history = risky.
What is meant by protecting intellectual property (IP)?
Protecting IP means securing legal rights over ideas/creations (e.g., brand name, designs) to prevent copying.
Prevent imitation.
Give one operational challenge and one legal challenge.
Operational: recruiting staff. Legal: complying with tax and employment laws.
One from each bucket.
Give one example of personal financial risk for an entrepreneur.
The entrepreneur may lose personal savings invested in the business if it fails.
Owner bears risk.
What is price competition and why is it a challenge?
Price competition is when rivals lower prices; start-ups may not afford low margins because costs per unit are higher.
Small firms have higher unit costs.
Give one reason changing market conditions can harm start-ups.
Demand, costs, or trends can shift quickly, and start-ups may lack resources to adapt fast.
Low flexibility/resources.
Why can “unexpected costs” be dangerous for new businesses?
Start-ups have limited cash buffers, so unexpected expenses can quickly cause cash flow crises.
Low reserves.
Exam tip: When discussing challenges, what should you add to score higher?
A practical way the entrepreneur can reduce or manage the challenge (e.g., business plan, research, advice).
Challenge + solution.
How can entrepreneurs reduce operational and legal risks?
By using planning and professional advice (accountants/lawyers/mentors) and setting up reliable systems early.
Advice + systems.
Topic 1.1 study notes
Full notes & explanations for What is a business?
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