IB Reading Notes
Chapter 1 - The Concept of Business in Context
Introduction
● Business in Context Model has 4 levels
○ (1) Activities Level
○ (2) Strategic Level
○ (3) Organizational Level
○ (4) Environmental Level
● Analyzing Business organizations through 2 approaches
○ (1) Systems approach
○ (2) Contingency approach
● Business operates in the following areas
○ (1) Manufacturing industry
○ (2) Retailing
○ (3) Banking
○ (4) Other financial services
○ (5) Transport
○ (6) Media
○ (7) entertainment
Business Activities
● 5 business activities (FIMOH (femur) bones are essential to making you be
active)
○ (1) Finance and accounting
○ (2) Innovation
○ (3) Marketing
○ (4) Operations
○ (5) Human Resource Management
● Business - “The organized effort of individuals to produce goods and
services to meet the needs of society”
○ When examining business activities there are 2 points to consider
■ (1) Activates interact with ones another
■ (2) Activities do not exist in a vacuum, but are shaped by, and
consequently shape the contexts within which they operate
Business Contexts
● BIC Model has 3 types of contexts:
○ (1) Strategic
○ (2) Organizational
○ (3) Environmental
● Strategic Level
○ Concerned with:
■ Management decisions
■ The influences of management decisions that determine the
direction of the business activities
○ Strategy - “A set of objectives and methods of achieving those
objectives”
■ A strategy is usually formulated by top management
■ A strategy is based on a mix of careful analysis of the
environment and the organization, the personal preferences of
the managers, and a process of negation with various other
stakeholders
● Organizational Level
○ Concerned with:
■ Issues under the following headings:
● Goals
● Structure
● Ownerships
● Size
● Organizational or corporate culture
○ Organization - “The way in which people are grouped and the way in
which they operate to carry out the activities of the business”
○ Key elements of an organization:
■ Goals and the way goals are formulated
■ Ownership and control
■ Size
■ Structure
■ Organizational culture
● Environmental Level
○ Concerned with:
■ The economy
■ The state
■ Technology
■ Labor
■ Cultural and institutional differences
○ The influence of all these elements and their interaction with
individual organizations takes place within the context of
globalization
Interaction - Influence, Systems and Contingency Approaches
Interaction-influence model
o The Systems Approach = Living organisms’ analogy
The systems approach is a perspective of business that
involves 2 related concepts
(1) Businesses are made up of a series of interaction,
involving business activities, various aspects of the
organization
(2) Businesses are a series of inputs from the
environment, internal processes and eventual outputs
Assumes all organization are made up of interdependent
parts which can only be understood by reference of the whole
Organizations are analyzed in terms of inputs, processes
and outputs
The evolvement of the systems approach of an organizational
perspective began with the analogy of the firm as living
organisms
To be effective, the firm, like an organism must adapt
to its environment to survive
The inputs, processes, and outputs must obtain equilibrium
Application of the system approach first earned prominence
using a socio-technical systems perspective
Based on assumption that social systems of the firm
and its technical system interact in a complex way
o The Contingency Approach
The contingency approach focuses on the relationship
between the organization and its environment
Analysis of the key environmental variables that shape the
organization
Assumes successful firms = those that adapt to key influences
and achieve some sort of “best fit” with their environment
Strategists attempt to match environmental opportunities and
threats with organization’s own strengths and weaknesses to
develop an optimal strategy
o Criticism of both approaches
Limited range of environmental variables
Being deterministic
For ignoring the influence of the organization on its
environment and the values and behavior of management and
the workforce
Summary of the chapter: The Business in Context model is used to explain the
complex relationships between context and the various business activities. To
examine this complex relationship the contingency and systems approaches are
adopted to simply this model. The contingency approach focusses on how the
environment shapes the organization, meanwhile the system approach analyzes
the internal business in terms of inputs, processes, and outputs.
Questions
● What is the business in context model used for? I can be used to analyze
industrial and service sectors as well as the events at a single firm
● How do we analyze business organizations? Through 2 approaches: the
contingency approach and the systems approach
● Define and illustrate business as a broadly based and varied activity
● Identify and illustrate the key activities of business and the relationships
between them
● Identify the strategic, organizational and environmental contexts within
which business operates
● Articulate the complex interactions that operate within and between
business activities and their contexts
● Use the Business in Context Model to analyze a variety of business
situations and cases
● Define systems and contingency theories as they apply to business and
asses their contribution to an understanding of business
● What are the 5 business activities?
● What is the Business in Context Model?
● How is the Business in Context Model related to the other courses?
● What variables in the Business in Context Model are identified? And how do
these variables interact with business? Why are these variables arranged in
levels?
● What is the contingency approach?
● The 5 environmental, 5 organizational variables and 5 business activities
have been identified in the model. By necessity these represent broad
categories. What else might be considered under various headings used in
the model of business?
● Take an industry, a firm, and a specific issue and analyze each using the
Business in Context Model.
● What is the value of the systems and contingency approach to an
understanding of business?
● Compare and contrast the systems approach to the contingency approach