In this unit, students return to the fundamental rationale of business management: to make goods and services that meet consumers’ needs and wants. Without efficient operations leading to products and experiences customers are satisfied with, success in the other business functions is unsustainable. In unit 5, students learn how organizations manage their operations, whether in terms of achieving an optimal cost– quality ratio or the shortest supply chain; using the most ethical means or the latest innovative techniques; or applying the highest levels of quality assurance.

Unit 5 is the part of the business management course where the relative weight of the HL material is greatest. Both SL and HL students look at different production methods and their implications as well as different ways of organizing production. At HL, students explore additional areas such as lean production, quality management, and research and development.

Unit 5 can be taught through case studies in a variety of settings; visits to factories or service businesses are a good way to make the topic come alive. This unit has a very concrete dimension that invites students to explore and understand the importance of manufacturing and other types of operations, bringing the other units of the course together in a dynamic way. The nature of operations is varied and rapidly evolving across industries and locations, and thus there are plenty of opportunities to explore the concepts of change, culture, ethics, globalization and innovation.

TopicSL/HL Content
The role of operations management>> Operations management and its relationship with other business functions;
>> Operations management in organizations producing goods and/or services;
>> Operations management strategies and practices for
ecological, social (human resource) and economic
Production methods>> production methods;
>> The most appropriate method of production for a given situation
Lean production and quality management
(HL only)
>> features of lean production;
>> methods of lean production;
>> Features of cradle to cradle design and manufacturing;
>> Features of quality control and quality assurance;
>> methods of managing quality;
>> The impact of lean production and TQM on an organization;
>> The importance of national and international quality standards
Location>> The reasons for a specific location of production;
>> ways of reorganizing production, both nationally and internationally.
Production planning
(HL only)
>> The supply chain process;
>> The difference between JIT and just-in-case (JIC);
>> Stock control charts;
>> Capacity utilization rate;
>> Productivity rate;
>> Cost to buy (CTB);
>> Cost to make (CTM).
Research and Development
(HL only)
>> The importance of research and development for a business;
>> The importance of developing goods and services that address customers’ unmet needs;
>> types of innovation;
>> The difference between adaptive
creativity and innovative creativity;
>> How pace of change in an industry, organizational culture and ethical considerations may influence research and development practices and strategies in an organization
Crisis management and contingency planning
(HL only)
>> The difference between crisis
management and contingency planning;
>> factors that affect
effective crisis management;
>> advantages and disadvantages of contingency planning.

Theory of knowledge—suggested links
• Is there a difference between a product that consumers perceive to be of good quality and one that businesses know is? What ethical dilemmas does the information advantage businesses have over consumers pose?
• Is a quality product always more expensive to manufacture or buy than a mediocre product? How does time perspective affect our assessment of such statements?
• Is there such a thing as an optimal production method? What evidence and whose experiences could business leaders look at to decide on this?
• Environmental costs of production are often referred to as “externalities” as they harm third parties. How does our formulation of problems affect our sense of responsibility for solving them?
• What ways of knowing do you think business leaders use in deciding where to locate their production?
• What is the role of creativity, imagination and emotion in a business context?
• Can one make an argument that the more people’s needs and wants are met, the more difficult innovation is?
• Can a business plan for a crisis?