SL Essay Structure - Internal Assessment - Business Management

The SL IA

This document provides you with the essential ingredients for completing an outstanding internal assessment. You need to read through this document and be clear on the requirements before you get started!

The IB Business Management IA is marked out of 25, and the IA is worth 25 per cent of your total Business Management final score. Students produce a written commentary based on three to five supporting documents about a real issue or problem facing a particular organisation. Maximum 1500 words. Every extra mark you are awarded in the IA is an extra mark that you pick up in your final, overall grade. Every point is worth the effort, because every extra point you gain here will help push you up and across into a higher grade boundary. While you will of course reference outside sources, all work in the internal assessment must be entirely your own.

**Key Requirements**
SL students are required to: select a real business issue or problem for their written commentary that must relate to the SL syllabus. refer directly to a single business organisation, but may consider industry-wide issues that impact on that organisation. base their written commentary on secondary research, selected for its suitability, depth and breadth. Primary research may be used as support. provide a title for the commentary that, to give focus and direction, must be framed as a question. produce a written commentary that does not exceed 1,500 words. attach to the commentary three to five supporting documents from which the majority of the information for the commentary has been obtained. fully reference all supporting documents and additional sources and include them in a bibliography

SL IA - STRUCTURE

Although there is no required format for the written commentary, it should nonetheless be a structured piece of well-presented writing. An introduction that sets the scene, presentation, analysis and discussion of findings, and a conclusion that answers the commentary question provides an effective structure for the commentary. Good presentation additionally requires a title page, an accurate table of contents page, appropriate headings and sub-headings, consistent referencing, a complete bibliography and numbered pages.

Writing the SL IA

Writing the Introduction

Aim to keep your introduction short.
There are no explicit marks awarded here.
Briefly outline the issue.
This is not a history of the company.
End with - "This has therefore led to the following research question…"

“The introduction should briefly demonstrate some background information about the business organization, to give a clear outline of the issue or problem under investigation and to explain the methodology used to investigate this issue or problem.” - IBO

**Example of a good introduction**
Apple has experienced huge growth since the appointment of Steve jobs as CEO in 1997. Its market capitalisation at the end of that year was $1.68 billion' and it increased to $559 billion by March 2012. The chief reason for the increase in market value has been the release of innovative products such as the iPhone and IPad that have helped the company report record sales and profits. After the 1st Quarter financial report of 2012, the organisation reported that It had mound $100 billion is cash and equivalents. Apple had not issued a dividend since 1995 and having so much cash at hand, the shareholders began to criticise the organisation for not paying a dividend. On March 19 2012, Apple announced that it was initialising a dividend and share repurchase programme. They pan to pay a quarterly dividend of $2.65 per share starting sometime during their fourth fiscal quarter of 2014. Apple's senior management also plan to use $10 billion over three years to repurchase shores of the company. It is expected that the company will use $45 billion of the cash it has in the United States in the first three years of the programme. Using the following business tools: The SWOT analysis (1.3), the stakeholder model (1.4) and the liquidity ratios (3.5) as well as the opportunity cost and working capital (3.7), this commentary will evaluate the following research question: Should Apple go ahead with its dividend and share buyback programme? *Please note that the above introduction would need lots of in-text references to support quoted facts.

TOP TIP - (combine these three sections to save on word count)

Use sub-headings for each analytical tool and make the structure very clear
The information here should be coming from 'Activity B' in this document, which you will have previously completed and had checked by me!
Under each sub-heading include: Analytical tool, concept or theory + a link back to RQ + Results (graphs. tables, ratios, calculated results, SWOT, decision trees, force field analysis)
Summary of main findings + Relate findings to your answer of RQ
Include ALL findings and results but do so using tables and graphs which don't count towards your find word count, and use appendices to link findings/results back to original information (e.g. SWOT Analysis, financial information and interviews).
Relating the findings of each analysis back to your RQ should form the bulk of each sub-heading, and it MUST be well referenced
Use appropriate business terminology accurately throughout the paper
Look to demonstrate evidence of critical thinking the "because ..." or "in that ..." that shows you know Business Management theory well
If your research question did not include a clear choice between two options, discuss opportunity costs
Look to evaluate based on references; e.g. benefits and limitations of ratio analysis; advantages and disadvantages of sources of finance; interviews.

**Try and use the following structure for each part of this section:**
• Discussion of the Analytical Tool • Link back to RQ (why used) • Results (graph, diagram etc) • Summarise findings (what found) • Relate to RQ answer (how it’s relevant)

Exemplar SWOT (Tool A in the example) - remember this would be full of references!

STRENGTHS	WEAKNESSSES
• Approximately $100 billion in cash • Expanding into other markets such as China' • Most admired company in the worlds • Strong product portfolio • Innovative company	• High share price ($609.76 in Mach 2012) • Company will spend almost half of its current cash on the programme • Steve Jobs death could mean lack of confidence in the future of the company • Low bank interest rates
OPPORTUNITIES	THREATS
• Dividend and share repurchase programme widens the variety of investors in the business • High dividend yield • Share repurchase means regaining control of the company • Invest in R&D • Leave money in the bank to collect interest	• Higher dividend paying shares • Perception of future of the company by shareholders (slow future growth) • Current economic climate/recession • Slowed growth in China Loss of solvency

Exemplar Liquidity ratios (tool D in the example)

The current and quick ratio measures a firm's ability to cover its current liabilities. The difference between the ratios is that the current ratio does not consider stock as a current asset as these are the least liquid of assets. Ideally, a company should have a current ratio between 1.5 and 2 and a quick ratio that is above 1. As of the first quarter of 2012, Apple has a current ratio of 1.6 and a quick ratio score of 1.38 meaning that Apple is liquid. If Apple uses a vast amount of money in the dividend and share buyback programmes, then there is a risk that this will disrupt the balance between the company's current assets and liabilities, making the company insolvent, but also leading to problems with the managing of its working capital, for which the company needs the current assets to be greater than the current liabilities. Apple's CEO is adamant that the firm will maintain a sum large enough to keep the company solvent and continue pursuing opportunities. Apple is also looking to penetrate further into the Chinese market where it is already very popular. This means it is unlikely that Apple will face cash flow problems due to increases in sales revenue and could proceed with its programme.

Exemplar Stakeholder model paragraph (tool B in the example)

The diagram (Fig. 1) shows the main stakeholders of businesses. From it we can establish that the main stakeholders affected by the initiation of the programmes are the employees and the owners (shareholders). The launch of the programmes affects them in a positive way since they will now be able to profit through both the market capitalisation of the shares and through the dividends they receive on a quarterly basis. Apple's senior management will benefit from the buyback programme, since they will be able to regain control of the company and boost share prices by leaving a smaller volume available to the market. The employees will benefit from the programme since they will receive shares as bonuses. In this case they will have the same benefits as regular Apple shareholders.
Fig. 1Apple is looking to attract new investors. There are certain investment funds that only purchase shares that provide dividends, so they will now be able to include Apple shares in their portfolios after it issues shares. This could be a positive development for the company in case something happens and the share price begins to fall. If this happens, private investors will most likely sell their shares in Apple, further decreasing the shore price, but the dividend funds could keep Apple shares if it continues to pay dividends. As a consequence the variety of shareholders will keep the price of the company high.

The share buyback programme is aimed at counteracting the sale of Apple shares by Apple employees since these stakeholders will be offered shares as bonuses by the company. Sales of shares lowers share prices so with Apple buying back its own shares, it will limit the supply on the market and maintain share values. Another advantage of the programme is that the company will be regaining control if it buys its own shares. Additionally, the buyback programme which purchases more shares than are being issued to employees, would then increase the market value of Apple shares as there would then be a smaller volume of shares outstanding in the market. Further, if the directors foresee future growth, then Apple can afford to sell some of the shares it bought back at a higher price and make a profit.

Example paragraphs of threats according to the SWOT example

Weak growth forecasts by Investors

The main problem of the programmes is the way that investors will perceive the future of the company. Historically, technology companies have growth shares and only issue dividends when senior management forecasts low sales and profits. A forecast of fewer sales and lower profits means that the company's share price will not increase as much in the future, so current investors will profit less through market capitalisation from their investment. Technology companies issue dividends to compensate for low future growth and as a way to make the company continue to seem like an attractive investment. An example of a company that went through this is Microsoft. The business had been growing at a fast pace and it was in a similar position to where Apple is now. In 2003 they issued a dividends and since then, the stock has lost its value and the dividend has been the only way investors can profit from the company. People investing in Apple may fear the some thing wit happen to the company.

Opportunity cost

There is also the opportunity cost of a dividend and buyback. Instead of paying a dividend and buying back shares, the company could use its money in another way, such as in purchasing promising start-ups or investing in R&D. This would be a good use of its cash since it has been the company's innovation that has led it growth for the last few years. Entering the TV market would also be an attractive option for the company, but to do this it needs to Invest in R&D to develop the product it will eventually release. Leaving the cash asset in the bank to collect interest is not advisable because of the low rates offered by banks would mean that the company is actually losing money due to inflation.

Writing the Conclusion

Answer the RQ! Answer it in a straight forward way
Summarise what led you to this answer - a bullet-pointed list of brief conclusions is acceptable
Do NOT include any new Information here

**Exemplar conclusion**
This commentary addressed the research question: Should Apple go ahead with its dividend and share buyback programme? After careful and balanced consideration, the conclusion is that Apple should initiate its dividend and share buyback programme. The programmes will have a positive effect on the stakeholders and the company has assured that it will keep enough cash to remain liquid in the future. Similarly, the senior management of the company stated that they will keep enough cash at hand to pursue opportunities such as further market penetration in China or the continued creation of innovative products to propel future growth. There are those who fear that Apple's growth will go into decline like Microsoft's, however, considering what has just been discussed regarding growth opportunities, it seems unlikely that the company will stop growing any time soon. Some might argue that Apple should store its cash to ensure survival during the current economic climate, however the recession started in 2008 and Apple has managed to continue growing, so clearly the recession has not affected the company as it has affected others -meaning that there is no reason for Apple to keep its cash fearing any problems in the near future. In summary, the benefits of the dividends outweigh the negative impact this will have on the company.

At the end of the conclusion include a word count. IB markers are instructed not to read past the 1500^th word. If you have words to spare go back and try and squeeze in some more examples of critical thinking.

A final tip is to prepare a detailed gantt chart (see Unit 1.7 HL) at the beginning of the process and stick to it.