N17/3/BUSMT/HP2/ENG/TZ0/XX
Business management
Higher level
Paper 2
Friday 10 November 2017 (morning)
2 hours 15 minutes
Instructions to candidates
� Do not open this examination paper until instructed to do so.
 A clean copy of the business management formulae sheet is required for this examination
paper.
 Section A: answer one question.
 Section B: answer two questions.
 Section C: answer one question.
� A calculator is required for this examination paper.
� The maximum mark for this examination paper is [70 marks].
7 pages
8817 – 5012
© International Baccalaureate Organization 2017
–2–
N17/3/BUSMT/HP2/ENG/TZ0/XX
Section A
2.
Pelican Pies (PP)
Pelican Pies (PP) produces high-quality pies that have limited brand loyalty outside of their local
market. The prices of the pies are higher than those of PP’s competitors.
Number of pies sold
8000
Price of each pie sold
$4.00
Cost of goods sold per pie
$1.75
Sales
yyAverage selling price of one cupcake: $5.
yySales of cupcakes: 1300 cupcakes in January and 1700 cupcakes per month from February
• 70 % of customers who purchase cupcakes will pay in cash. The supermarkets will buy the
remaining 30 % of cupcakes on credit and pay one month later.
Expenses
• Rent of premises per quarter
• Promotional expenses per year
8 % interest per year paid on a loan of
Tax
Tasty Cupcake (TC)
Luis has forecasted the following sales and cost figures for the first six months of operation,
beginning in January.
Table 1: Selected financial information for PP for the year ending 30 April 2017.
• Electricity per month
N17/3/BUSMT/HP2/ENG/TZ0/XX
Luis and José have set up a partnership, baking and selling cupcakes directly to consumers and
supermarkets. They called the business Tasty Cupcake (TC). They used their savings of $3000
as starting capital. The partners need an overdraft agreement from the local bank. The bank
manager asked for a cash-flow forecast.
Answer one question from this section.
1.
–3–
Costs
yyRent: $6500, payable at the start of each quarter.
yyLabour costs: $750 per month.
yyRaw materials: 50 % of sales revenue per month, paid in cash.
yyOverheads: $400 per month, paid in cash.
$200
$1000
$1000
$40 000
25 % of profits
For 2018, PP’s owner, Austin, is looking to increase sales beyond the local market by lowering
prices and spending a greater proportion of PP’s promotional budget on above-the-line methods
such as regional newspaper advertisements. To finance this type of promotion, Austin will have to
increase his loan amount by $10 000.
Table 2: Selected financial information for the year ending 30 April 2018.
Number of pies sold
20 % increase on 2017 figure
Price of each pie sold
30 % decrease on 2017 figure
Cost of goods sold per pie
(a)
State two features of a partnership.
[2]
(b) Prepare a monthly cash-flow forecast for TC for the first six months of operation.
[6]
(c)
[2]
Calculate TC’s forecasted net profit at the end of June (show all your working).
$1.75
Expenses
• Electricity per month
• Rent of premises per quarter
• Promotional expenses per year
8 % interest per year paid on a loan of
Tax
(a)
$200
$1000
200 % increase on 2017 figure
$50 000
25 % of profits
Describe one reason why brand loyalty would be important to PP.
(b) Construct a profit and loss account for PP for the year ending 30 April 2017 based on
the figures in Table 1 (show all your working).
(c)
Construct a forecasted profit and loss account for PP for the year ending 30 April
2018 based on the figures in Table 2 (show all your working).
[2]
[4]
[4]
Turn over
–4–
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Section B
4.
N17/3/BUSMT/HP2/ENG/TZ0/XX
Music Mania (MM)
Music Mania (MM) is an independent store selling new and used music compact discs (CDs),
DVD films and music vinyl records. It is a sole trader business owned by André, who has 25 years
of experience in the retail and music business. MM has loyal customers but its total revenue is
falling. The store currently has a low market share in DVDs and vinyl records.
Answer two questions from this section.
3.
–5–
Pedro
Pedro is a farmer who operates as a sole trader in a developing country. Like other farmers in his
community, he grows oranges, which are sold to buyers in developed communities and large cities.
Working in the primary sector often results in very low income and poverty for some of the farmers.
Most children do not go to school, as they are needed in the fields for manual work. Cooperation
between the farmers in this community is very limited due to linguistic and cultural differences.
Recently, farmers’ incomes have fallen further. Pedro has conducted social, technological,
economic, environmental, political, legal and ethical (STEEPLE) analysis and identified two main
external threats that are impacting on farmers’ incomes:
yycompetition from orange producers from developed communities and large cities with improved
technology and higher productivity rates
yya severe and sustained drought affecting the level of orange production in all developing
countries.
Pedro would like to improve productivity as an orange producer. Investing in new technology is
risky and would require extensive research and development. The internet is unreliable and Pedro
is unable to raise funds for this investment himself to change current production methods.
Pedro has arranged an emergency meeting of local farmers. He proposes that all farmers in his
community create an agricultural cooperative and collectively raise funds to invest in new
capital-intensive farming methods. The investment in technology could allow them to diversify into
the manufacturing of bottled orange juice drinks.
[2]
(a)
Define the term productivity rate.
(b)
Explain how each of the two external threats arising from the STEEPLE analysis would
have impacted on farmers’ incomes in the developing world.
[4]
(c)
Explain one cost and one benefit to Pedro of conducting extensive research and
development.
[4]
(d)
Examine Pedro’s proposal to create an agricultural cooperative in his community rather
than continuing to operate as a sole trader.
André decided to conduct some primary and secondary market research, as the entertainment
industry is changing rapidly. He discovered that:
yythe market for DVDs is in rapid decline
yyCD sales are declining slowly but new releases still sell well
yyMM has had to stock computer games, which are selling out very quickly, and the sales of new
vinyl records are growing slowly.
André is accustomed to variations in sales but the current sales forecasts are, in his experience,
the most worrying. He has decided to create an e-commerce website to increase his sales of new
and used vinyl records and CDs. André is also aware that new free online music streaming and
gaming sites are being launched.
André has only limited internal sources of finance to set up the website. Two new tactics to ensure
future success for MM being considered are:
yyto stop selling DVDs
yyto increase below-the-line promotional spending on vinyl records.
(a)
Define the term secondary market research.
[2]
(b)
Explain one advantage and one disadvantage for MM of using sales forecasting.
[4]
(c)
Explain one cost and one benefit for MM of setting up an e-commerce website.
[4]
(d)
Using the Boston Consulting Group (BCG) matrix, discuss the two new tactics André is
considering to ensure MM’s future success.
[10]
[10]
Turn over
–6–
5.
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Section C
Green Clean (GC)
Green Clean (GC) is a private limited company. Its unique selling point (USP) is offering
high‑quality and reliable cleaning services by teams of professional cleaners who clean offices
and houses.
Answer one question from this section. The organizations featured in sections A and B and in the
paper 1 case study may not be used as a basis to your answer.
GC has strong ethical objectives. They only use eco-friendly cleaning products and pay their
employees fair wages. Labour turnover is low and many cleaners have worked for the company
for over two decades.
6.
With reference to an organization of your choice, examine the impact of innovation on
operations management strategy.
[20]
However, the cleaning market has become very competitive. GC has been slow to react. Other
cleaning companies are beginning to offer a wider range of services. GC’s management has
decided to introduce a new gardening service to create new revenue streams. GC will have to
recruit professionally trained gardeners from wide geographical areas, as they are difficult to find. GC will have to pay these new gardeners at least 20 % more than cleaners to attract them. GC
has limited experience in recruiting employees other than cleaners.
7.
With reference to an organization of your choice, discuss the ways in which globalization
can influence organizational culture.
[20]
8.
With reference to an organization of your choice, discuss the ways in which ethics and
change can influence human resource management.
[20]
The cleaners are becoming demotivated because they are unhappy about the difference in pay
between cleaners and future gardeners. They believe that gardeners are not more skilled than
cleaners but just have a different skill set. Human resource managers are concerned about the
potential impact of demotivated cleaners and are looking for ways to improve morale. One option
they are considering is to offer cleaners an employee-share ownership scheme. Shareholders,
however, are opposed to this proposal.
(a)
Define the term ethical objective.
[2]
(b)
Explain one advantage and one disadvantage to GC of having low labour turnover.
[4]
(c)
Explain two possible steps in the recruitment process of gardeners for GC.
[4]
(d)
With reference to two motivation theories, examine the motivation of cleaners at GC.
[10]
M18/3/BUSMT/BP1/ENG/TZ0/XX/CS
Business management
Case study: Afghan Sun
For use in May 2018
Instructions to candidates
yy Case study booklet required for higher level paper 1 and standard level paper 1 business
management examinations.
4 pages
2218 – 5001
© International Baccalaureate Organization 2018
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M18/3/BUSMT/BP1/ENG/TZ0/XX/CS
Afghan Sun (AS)
Suchenlin has made her fortune from the success of her business, High-end Holidays (HH),
which sells individually designed holidays to luxury destinations in Africa, Asia and the Pacific
islands. Suchenlin no longer takes part in the day-to-day running of HH. Instead, she has an
input into strategic decision making and she provides the inspiration for the business.
5
10
15
20
25
30
35
40
Su, as her friends know her, has made more than enough money to keep her comfortable for
the rest of her life, but she still wants new challenges. She is looking for a completely new
project that will allow her to give back to society.
On a recent trip to Bangladesh, Su discovered the work of Arif Koomar. He founded a forprofit microfinance provider, which trades under the name AK Bank. Very successful, AK Bank
serves much of Bangladesh and has provided finance to over three million households to
buy solar power systems specifically commissioned by AK Bank. Each solar power system
generates enough electricity for a household.
Su made an immediate decision. She would find somewhere else in the world in which a similar
scheme would bring great benefits to communities. She eventually identified Afghanistan, a
country with around 34 million people. After years of war, many areas of Afghanistan lack a
reliable supply of electricity. Su saw an opportunity to manufacture a household-based solar
power systems similar to those used in Bangladesh and aimed at poor and often remote
families. She set up a social enterprise called Afghan Sun (AS), which operates as a private
limited company. Su recruited a team of volunteers from HH employees who are keen to work
on the project.
After more detailed research, the team had:
• decided the product to be made – solar power systems. These will be produced using
cellular manufacturing. The team wish to purchase cheap raw materials, using resources
efficiently to cut waste to enable a very low price to be charged for the units
• identified suppliers who share Su’s vision
• encouraged Arif Koomar to work with AS and expand the microfinance activities of AK Bank
into Afghanistan.
Su thinks it very important that she maintains a leadership role for both HH and AS. However,
she empowers her managers at HH to make day-to-day decisions, including organizing
resources, directing staff, coordinating, and taking tactical decisions. As well as empowering
managers, Su thinks that it is important to empower employees and encourage teamwork by
creating opportunities for employees to discuss working practice, quality issues and matters
concerning employees. Su’s intention is to empower managers similarly at AS while retaining
responsibility for strategic decisions. She believes that her managers are so well motivated and
committed to their work that she feels little need to interfere. There is seldom conflict between
managers, but when there is, Su will provide advice and guidance. Managers, both at HH and
AS, say that they are inspired by Su and have a clear understanding of her mission and share
it. As part of her leadership role, Su also enjoys some aspects of organizing, particularly when
fundraising events for AS are needed and meetings have to be arranged with governments
and non-governmental organizations (NGOs). She usually represents the businesses at such
meetings and conferences.
–3–
45
50
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To help begin the project to make and sell solar power systems, Su appointed David, who,
before asking to work on the AS project, worked in HH’s marketing department. He is an
Afghan. She also appointed Salima, also an Afghan, who has experience with a large
manufacturing business as a production director. Two more senior managers will be needed,
and Su needs to decide between selecting experienced HH managers or promoting junior
employees from within HH.
Salima does not want to outsource the main production facility of the solar power systems
but does wish to outsource the production of certain components. Ideally, this would be in
nearby countries.
An important decision to be made is the location of the main production facility for the solar
power systems. Su is considering two locations, as shown in Table 1.
Table 1: Location factors of the two countries Su is considering for the main production
facility
Country A
55
60
Country B
Nature of the economy
Developed economy
Developing economy
Unemployment
Low but rising
High
Skills level
High
Shortage of skills
Government assistance
Limited, free market
economy
Encourages investment
from overseas with grants
available
Local wage costs
High
Low
Currency
Stable
Falling
Facilities
New facilities would be
required, high rents
Suitable facilities available at
a low rent
Transport links to
Afghanistan
Complex
Straightforward
Political environment
Stable, but election may lead
to a change in government
One party state
International trade
Part of a major trading
agreement
No major trading
agreements
David believes that commercial marketing would have more of an impact than social marketing
because he sees the solar power systems as being product orientated rather than market
orientated. Customers would need to know not only about the solar power systems and the
benefits they will bring to households but also the means to provide finance to buy them.
However, David is unsure about which pricing and promotion methods would be appropriate
for the solar power systems. Customers may not have much money to spend and may have
other priorities.
Distribution will also be a problem, as the likely customers will be in remote locations with poor
infrastructure. David is investigating the possibility of using local agents and local transport
businesses to provide the link with customers.
Turn over
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65
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Su had already decided that most of the finance for the production facilities would come
from share capital provided by herself and loans from HH. She wondered whether other
stakeholders in HH, both internal and external, might want to support the project through some
kind of financial assistance. The microfinance to AS’s customers would be under completely
separate arrangements with AK Bank or other microfinance providers.
Su prepared a six-monthly cash-flow forecast for the first three years of operation.
Table 2: Six-monthly cash-flow forecast for AS for the first three years of operation
(figures in $000s)
2018
Second
half
30
−25
−20
−5
15
0
20
80
120
120
160
Capital
expenditure
200
50
25
25
10
10
Sales costs
0
15
40
60
60
70
Other costs
20
10
10
20
30
40
Closing
balance
30
−25
−20
−5
15
55
Su’s share
capital
200
Loans from
HH
50
Sales
75
2021
First half
0
First half
2020
Second
half
Opening
balance
70
2019
Second
half
First half
Su is aware that the project carries significant risks. Afghanistan is emerging from a long
and damaging war, and in some parts of the country it remains politically unstable. Not all
areas of the country are peaceful. International forces remain in the country to help rebuild its
infrastructure and help the Afghan government restore peace and reinforce democracy.
The management of AS need to make the decisions on production and distribution as soon as
possible to get the project into action. Su is also aware that she may have to create a plan to
help out when things go wrong and to prepare for possible changes in the external environment.
AS will have to carry out very careful marketing planning and human resource planning, as well
as ensure it is prepared for uncertainties.
[Source: © International Baccalaureate Organization 2018]
Companies, products, or individuals named in this case study are fictitious and any similarities with
actual entities are purely coincidental.
M18/3/BUSMT/HP1/ENG/TZ0/XX
Business management
Higher level
Paper 1
Friday 27 April 2018 (afternoon)
2 hours 15 minutes
Instructions to candidates









Do not open this examination paper until instructed to do so.
A clean copy of the business management case study is required for this examination paper.
Read the case study carefully.
A clean copy of the business management formulae sheet is required for this examination
paper.
Section A: answer two questions.
Section B: answer question 4.
Section C: answer question 5.
A calculator is required for this examination paper.
The maximum mark for this examination paper is [60 marks].
7 pages
2218 – 5011
© International Baccalaureate Organization 2018
–3–
M18/3/BUSMT/HP1/ENG/TZ0/XX
Section A
Answer two questions from this section.
1.
2.
3.
(a)
With reference to Table 2, describe two advantages for Su of using a cash-flow
forecast.
[4]
(b)
With reference to Su and her managers at HH and AS, explain the differences between
leadership and management.
[6]
(a)
With reference to AK Bank, describe two features of for-profit microfinance providers.
[4]
(b)
Su is considering two possible locations for the production facility (lines 51–52).
Explain the factors (reasons) that Su may consider when deciding between the two
locations.
[6]
(a)
Describe two advantages for AS of using cellular manufacturing in the production of its
solar power systems.
[4]
(b)
Explain the advantages for Su of forming AS as a private limited company.
[6]
Turn over
–4–
M18/3/BUSMT/HP1/ENG/TZ0/XX
Section B
Answer the following question.
4.
It is now mid-2019. Production of solar power systems has been going for over a year and sales
have exceeded forecasts and reached 5000 systems for the year. Profits have been reinvested
into developing new outlets and distribution channels for solar power systems in Afghanistan.
Lean production techniques have enabled AS to keep costs low, but AS has had some quality
issues: some cells produce lower quality systems than others. AS has found faults in components
bought from suppliers. Some solar power systems have been damaged in the supply chain.
Salima is thinking of instituting total quality management (TQM). She also needs to forecast sales
for 2020 but has decided the situation is not suitable for a four-part moving average.
In a separate development, Doorway Foundation (DF), a multibillion-dollar charity established by
the owners of one of the world’s largest IT businesses, has approached Su. The foundation has
a major IT initiative to bring IT to schools in Afghanistan, Myanmar and Bangladesh. By forming a
joint venture, DF could use AS’s expertise and local knowledge to help solve some of the electricity
supply and IT problems in Afghanistan.
The possibility of a joint venture encouraged managers and investors to think about whether AS
should grow. In response, Su decided to analyse the possibility of growth through change using a
force field analysis of AS.
[Source: © International Baccalaureate Organization 2018]
(This question continues on the following page)
–5–
M18/3/BUSMT/HP1/ENG/TZ0/XX
(Question 4 continued)
Table 3: Force field analysis for growth through change at AS
Driving forces
Su’s score
Restraining forces
Su’s score
Su wants to widen the
scope of the social
enterprise
5
Possible diseconomies
of scale from growing
4
Team of volunteers
keen to make even
more of a difference
3
Resistance to change
2
Businesses need to
grow
1
Su does not want to
neglect Afghanistan
project
4
Opportunities to be
taken in other Asian
countries
2
Su has already put a
great deal of finance
into the business
2
Opportunities to
develop new products
2
Worldwide economic
recession affecting HH
3
Clear needs for help
beyond Afghanistan
3
Quality issues need to
be solved first
1
Su still feels a need to
make a difference
5
Might not get further
financial support
2
Possibility of bringing
in new ideas from
external recruitment
2
Too much
responsibility for Su
3
All stakeholders share
Su’s enthusiasm for
progress so far
3
External recruitment
may cause problems
1
The business is
already high risk
2
Growth
through
change
[Source: © International Baccalaureate Organization 2018]
(a)
Define the term four-part moving average.
[2]
(b)
With reference to AS, explain the difference between commercial marketing and social
marketing of the solar power systems (line 53).
[4]
(c)
Explain how total quality management (TQM) could help AS improve the quality of its
products.
[4]
(d)
Using information from the case study, additional information from pages 4 and 5
and appropriate business tools, discuss the value to Su of the force field analysis in
deciding whether to grow through change.
[10]
Turn over
–6–
M18/3/BUSMT/HP1/ENG/TZ0/XX
Section C
Answer the following question.
5.
Su is considering two options.
Option 1: The joint venture
If AS goes ahead with the joint venture in 2019, there will be consequences it will need to face.
DF would have majority ownership in the joint venture, provide most of the senior managers, and
is likely to expect changes in the way AS operates. AS would have to significantly increase the
production of solar power systems and would have to restructure. Some managers may lose
influence over decisions. Su is worried that her Afghanistan project (AS) would take second place.
Having a close working relationship with DF would reduce AS’s risk of failure. Employees at AS
have heard rumours about the joint venture and are unhappy with the idea. They fear a loss of
identity, being overwhelmed by a much larger organization and possibly losing their jobs. Su is
concerned that resistance to change, particularly by employees and managers, is going to be an
important consideration in the decision. However she sees the situation as a huge opportunity to
make a real change in young people’s lives.
AS would invest $1 million. The net cash inflows to AS (ignoring inflows to DF and before
deduction of the investment cost) are forecast to be $0.4 million per year, giving a net present value
(NPV) at 6 % discount rate of $0.68 million and a payback of two years and six months. Su gives
the project a life of five years.
Option 2: Diversification into biomass
The research and development section of AS has developed a portable electricity generation
system based on biomass, a biomas power system (BPS), as an alternative to solar power
systems. A new factory costing $3 million will be needed. BPS will be particularly useful to those
communities that keep cattle − the dung* produced provides the fuel for BPS. Su has assembled
some relevant information.
[Source: © International Baccalaureate Organization 2018]
* dung: animal waste from the cattle
(This question continues on the following page)
–7–
M18/3/BUSMT/HP1/ENG/TZ0/XX
(Question 5 continued)
Table 4: Information relevant to the BPS project
Start
Mid-2019
Likely level of BPS sales per year
10 000 (target level of sales)
Likely payback period
Four years
Accounting rate of return (ARR)
13.3 %
Probable net present value (NPV)
+$1.04 million
Impact on sales of solar power systems
Not known
Location of factory
One idea is to locate in Afghanistan
Employment created
100 new jobs
Risk
High
[Source: © International Baccalaureate Organization 2018]
Using the case study, additional information on pages 6 and 7 and appropriate planning
tools, recommend whether Su should choose Option 1, Option 2, or neither. You will find it
useful to calculate the ARR for Option 1.
[20]
M18/3/BUSMT/HP2/ENG/TZ0/XX
Business management
Higher level
Paper 2
Monday 30 April 2018 (morning)
2 hours 15 minutes
Instructions to candidates
yy Do not open this examination paper until instructed to do so.
 A clean copy of the business management formulae sheet is required for this examination
paper.
 Section A: answer one question.
 Section B: answer two questions.
 Section C: answer one question.
yy A calculator is required for this examination paper.
yy The maximum mark for this examination paper is [70 marks].
8 pages
2218 – 5012
© International Baccalaureate Organization 2018
–2–
M18/3/BUSMT/HP2/ENG/TZ0/XX
Section A
Answer one question from this section.
1.
Visionary Toys (VT)
Visionary Toys (VT) produces highly innovative toys for children. VT began operation in January
2017 and its unique selling point/proposition (USP) is producing toy parts with a 3D printer. VT
uses the reducing balance method of depreciation. 3D technology changes rapidly and the
financial directors are also considering ways of reducing VT’s tax liabilities in 2018. The financial
director presented financial information for VT at the end of 2017.
Table 1: Revenue and expense information for the year 2017 and balance sheet items at
31 December 2017
Cash
Net fixed assets
Interest paid
Creditors
Debtors
Accumulated retained profit
– end of 2017
Costs of goods sold
Sales revenue
Short-term loans
Overdraft balance
Expenses
Share capital
Dividends paid
Long-term liabilities
Stock of toy parts
$1000
$27 000
$250
$4000
$3500
$10 000
$7500
$27 250
$1500
$2000
$7000
$13 500
$2500
$5000
$4500
[Source: © International Baccalaureate Organization 2018]
(a)
Define the term unique selling point/proposition (USP).
[2]
(b)
(i)
Construct a fully labelled balance sheet for VT for the end of 2017.
[5]
(ii)
Calculate the acid test (quick) ratio for VT for 2018.
[1]
(c)
Explain one reason for VT to use the reducing balance method of depreciation.
[2]
–3–
2.
M18/3/BUSMT/HP2/ENG/TZ0/XX
Jill Anderson
Jill Anderson operates a restaurant. Although Jill’s meals are viewed as being excellent quality,
sales are slowing. Jill is considering replacing existing meals with gluten-free meals. The following
financial and forecast information is for the month of May 2018. Jill’s restaurant can only produce
either existing or gluten-free meals.
Table 1: Existing meals
Average price of existing meals = $8
Rent = $2000 per month
Variable cost per unit of existing meals = $5
Sales of existing meals served = 800 per month
Jill’s salary = $400 per month, which is paid irrespective of the level of sales
Table 2: Estimated costs and price if Jill produces the gluten-free meals
Average estimated price of gluten-free meal = $14
Variable cost per unit of gluten-free meals = $10
Sales forecast of gluten-free meals = 1200 per month
Fixed cost increase for new machinery per month = $400
A local gluten-free manufacturer, which is not part of Jill’s existing supply chain, has offered to
supply already prepared gluten-free meals at $8 per meal. Jill is unsure whether to make or buy
the gluten-free meals.
[Source: © International Baccalaureate Organization 2018]
(a)
Define the term supply chain.
(b)
Calculate:
(c)
[2]
(i)
the total contribution of existing meals sold per month (show all your working);
[2]
(ii)
the total profit or loss on existing meals for May 2018 (show all your working);
[1]
(iii)
the forecast profit or loss if Jill decides to make and sell gluten-free meals (show
all your working);
[2]
(iv)
the contribution per unit of a gluten-free meal if Jill decides to buy-in the glutenfree meals (show all your working).
[1]
Using your answer from (b) (iii) and (iv), explain whether Jill should buy-in or make the
gluten-free meals herself.
[2]
Turn over
–4–
M18/3/BUSMT/HP2/ENG/TZ0/XX
Section B
Answer two questions from this section.
3.
Speedy Delivery (SD)
Speedy Delivery (SD) is a private limited company that delivers freshly cooked meals by bicycle.
SD only delivers. Restaurants subcontract SD to deliver meals to customers who place orders
online and expect quick and efficient delivery. SD has been operating profitably for two years.
Currently, it has the highest market share in the city.
SD is now facing two issues:
It operates at 98 % capacity utilization. Recently, some restaurant owners complained to SD
that meals arrived late and cold to customers.
• The market for home delivered, freshly cooked meals is growing quickly and some new delivery
companies have just entered the market.
•
The CEO wants to address the delivery quality issues and the threat of competitors, two of whom
recently merged. He is considering an internal growth strategy involving investing in new electric
scooters and employing more staff to deliver a greater number of meals more efficiently. SD must
raise a large sum of finance. Major shareholders are in disagreement regarding the internal growth
strategy.
The financial manager has provided some financial information.
Table 1: Current information
Gearing ratio
65 %
Current ratio
0.9
20 %
Gross profit margin (GPM)
Net profit margin (NPM)
9%
Return on capital employed (ROCE)
4%
Debtor days
90
Creditor days
60
Table 2: Predicted return on the investment
Average rate of return (ARR)
6%
Payback period
3.2 years
[Source: © International Baccalaureate Organization 2018]
(This question continues on the following page)
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(Question 3 continued)
(a)
Define the term market share.
[2]
(b)
Explain one advantage and one disadvantage for SD of working at almost full capacity
utilization.
[4]
(c)
Explain one advantage and one disadvantage for SD of using an internal growth
strategy.
[4]
(d)
Discuss two appropriate sources of finance for SD to purchase the scooters.
[10]
Turn over
–6–
4.
M18/3/BUSMT/HP2/ENG/TZ0/XX
Healthy Start (HS)
Tom Donat started Healthy Start (HS), a national chain of stores preparing and selling healthy
snacks, which are produced in batches. HS’s target market is teenagers and young adults. Tom
was concerned about high levels of fast food consumption and youth unemployment. His vision
statement for HS is: “To encourage life-long healthy eating habits and to train school leavers (drop
outs) in acquiring work skills”.
HS hires many school leavers without qualifications. Because of the valuable social service that
HS provides, an independent online media provider will feature HS in a new online reality TV show.
All employees, including managers, start at the lowest level of the organizational hierarchy and
train on the job. Job enlargement, job enrichment and intrapreneurship opportunities are available.
20 % of all profits earned are put back into HS to finance these opportunities. Staff turnover is
lower than the industry average.
Competition from global fast food restaurants has intensified. Their economies of scale mean that
HS struggles to increase its market share. Online reviews indicate that some customers perceive
HS’s snacks as healthy but overpriced and with small-sized portions.
Tom is considering two options:
• Option 1: Implement flow production. HS will buy new technology and assign each
employee to a specific job on the production line. HS will increase portion sizes and keep
prices the same.
• Option 2: Implement a new social media marketing campaign linked to the new online TV
show. The campaign will focus on the health benefits of HS’s snacks.
[Source: © International Baccalaureate Organization 2018]
(a)
Describe one role of a vision statement for HS.
(b)
Explain how the following can benefit HS:
[2]
(i)
job enlargement;
[2]
(ii)
intrapreneurship.
[2]
(c)
Explain two possible economies of scale available to global fast food restaurants but
not HS.
(d)
Discuss the two options that Tom is considering for HS in response to the intense
competition.
[4]
[10]
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5.
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Taxi-M (TM)
Taxi-M (TM) operates 2500 taxis in a developing country. All drivers are full-time employees
and have a professional taxi license. Although not compulsory, TM regularly conducts safety
inspections of the taxis. Though safe, most of TM’s taxis are old and TM charges high prices.
Many customers complain.
However, a multinational company, RE, with offices around the world, has started to offer a
mobile application (app) called Best-Taxi (BT). Using their mobile phones, passengers can use
BT to book and pay for a car journey. Any car owner can offer journeys through BT. For security
reasons, the BT app registers passengers’ and drivers’ personal details.
TM’s sales are falling and profits are down. A number of TM’s drivers are becoming demotivated.
Facing lower incomes, poor management and rumours of redundancies, many loyal drivers have
left to offer taxi services using their own cars and the BT app. Some of these drivers are earning
considerably higher wages than before.
The situation for TM appeared critical. However, local media have reported a higher rate of road
accidents by BT drivers than licensed taxi drivers. Several of its drivers have assaulted and
robbed customers. In response, TM’s management decided to downsize and differentiate itself
from BT by positioning its service as a high-price, high-quality traditional taxi service. TM will:
• sell older cars and lease new luxury cars
• develop a unique selling point/proposition (USP) emphasizing comfort and safety.
Customers can book taxis by telephone and by stopping them in the street. TM’s target market will
be business people, higher income families and passengers concerned about safety.
[Source: © International Baccalaureate Organization 2018]
(a)
Define the term redundancy.
[2]
(b)
Explain one positive and one negative impact of the multinational company, RE, on the
developing country.
[4]
(c)
With reference to Maslow’s motivation theory, explain two reasons that some TM
drivers left to drive for BT.
[4]
(d)
Discuss the new strategy to differentiate TM from BT.
[10]
Turn over
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M18/3/BUSMT/HP2/ENG/TZ0/XX
Section C
Answer one question from this section. The organizations featured in sections A and B and in the
paper 1 case study may not be used as a basis to your answer.
6.
With reference to an organization of your choice, examine the impact of globalization on
human resources strategy.
[20]
7.
With reference to an organization of your choice, examine the impact of ethics on
organizational change.
[20]
8.
With reference to an organization of your choice, examine the impact of innovation and
culture on an organization.
[20]