M17/3/BUSMT/HP1/ENG/TZ0/XX
BUSINESS MANAGEMENT
STANDARD LEVEL
PAPER 1
Practice examination 2017 – Utopia
1 hour 15 minutes
INSTRUCTIONS TO CANDIDATES








Do not open this examination paper until instructed to do so.
A clean copy of the IB Business Management case study – Utopia is required for this
examination paper.
Read the case study carefully.
A clean copy of the IB Business Management formulae sheet is required for this examination
paper.
Section A: answer two questions.
Section B: answer question 4.
A calculator is required for this examination paper.
The maximum mark for this examination paper is [40 marks].
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
SECTION A
Answer two questions from this section.
QUESTION ONE
a.
Outline the importance of market research (line 69) to Utopia in achieving its sales
targets.
[4 marks]
b.
Examine why Utopia sets ethical objectives (line 17) and implements corporate social
responsibility strategies.
[6 marks]
QUESTION TWO
a.
Explain the importance to Utopia of having a unique selling point (USP; line 4).
[4 marks]
b.
With reference to Utopia, distinguish between strategic alliance (line 74) and joint
venture (line 50).
[6 marks]
QUESTION THREE
a.
With reference to Utopia, outline two key features of operating as a private limited
company (line 1).
[4 marks]
b.
Analyse how John Ariki’s paternalistic leadership style would impact on the business
objectives of Utopia.
[6 marks]
Page 2|8
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
SECTION B
Answer the compulsory question from this section.
QUESTION FOUR
The following financial information for the latest financial years is Utopia’s.
Table 1: Selected financial information for Utopia
Selected financial information for Utopia
Year ending 31st December
2016
Year ending 31st December
2015
Cash
$200 000
$600 000
Creditors
$85 000
$75 000
Debtors
$31 000
$35 000
Short-term loans
$90 000
$40 000
Stock
$37 500
$30 500
$2 900 050
$4 330 405
$852 112
$600 054
$3 504 900
$2 904 510
Sales revenue
Cost of goods sold
Expenses
a.
Explain why the capital expenditure (line 64) required to rebuild the 17 damaged villas
would not feature in Utopia’s profit and loss account.
[4 marks]
b.
Using information in Table 1 above calculate
c.
i.
Gross profit margins for the years ending 2016 and 2015
[1 mark]
ii.
Net profit margins for the years ending 2016 and 2015
[1 mark]
Apply the Ansoff matrix to Utopia’s objective of increasing growth.
[4 marks]
Page 3|8
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
d.
Using the additional information in the case study, table 1 above, and items 1- 4 below
evaluate the strategies of developing a souvenir business for Utopia and selling JAC
coffee to other markets.
[10 marks]
Page 4|8
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
Additional information
ITEM 1: GROWTH IN PACIFIC ISLAND TOURISM
Source: KPMG report into Tourism in the Asia Pacific (Jan 2017)
* Strong demand for Pacific Island tourism leads to significant growth in the future. However, this growth is
somewhat restrained by relatively low rates of infrastructure development in the Pacific Islands (e.g., ports,
airports, hotels and resorts).
Page 5|8
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
ITEM 2: COFFEE PRICES CONTINUE TO RISE ON FALLING SUPPLY AND INCREASING DEMAND
’13
’14
’15
’16
’17
‘18
’12 ’13
’14
’15 ’16
‘17
’13 ’14 ’15 ’16 ’17 ’18 ‘19
Global coffee prices are expected to increase as droughts in Brazil and Sub-Saharan Africa continue
to limit the supply of coffee, and at the same time global demand for coffee continues to increase.
This is expected to put pressure on both wholesalers and retailers who will not be able to increase their
prices in a highly competitive market.
Page 6|8
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
ITEM 3: UTOPIA – SUMMARY SWOT ANALYSI S
Strengths:










Established and profitable business operation.
Finance. Strong balance sheet with low levels
of debt.
Established brand.
Differentiated product.
Customers are mostly wealthy and relatively
insensitive to price.
Relatively high gross profit margins.
The location of Utopia.
Privately held company.
Low cost of local labour.
Effective supply chains sourcing fresh local
produce.
Opportunities:








Increase prices as wealthy customers may be
relatively insensitive to higher prices.
Expand the number of villas to cater for higher
numbers of guests.
Pursue additional revenue streams – souvenirs.
Pursue additional revenue streams – selling
Aora coffee beans in New Zealand.
Pursue additional revenue streams – develop
additional tours and activities for guests (e.g.,
weddings).
Pursue additional revenue streams – develop
a new resort in a new location on Ratu or
other Pacific Island.
Improving internet infrastructure will enable
better and faster communication and allow
Utopia to establish an effective social media
presence.
Develop a promotional campaign to target
potential customers instead of relying on
word-of-mouth promotion.
Weaknesses:




Finance. The business will only consider internal
sources of finance to pursue growth opportunities.
Relatively undiversified with just two revenue streams.
Marketing. Utopia’s reliance on word-of-mouth
advertising limits its promotional opportunities and
reduces sales revenues.
Management. The paternalistic style of John’s
leadership has resulted in businesses that are familyrun and this means that they are unlikely to have the
skills of qualified and professional managers.
Threats:







Natural disasters such as hurricanes and tsunamis can
quickly destroy Utopia’s own infrastructure as well as
the supporting infrastructure on Ratu (e.g., roads) and
neighbouring islands (e.g., airports and ports) that
tourists are reliant on to reach Utopia.
Other threats from nature such as mosquito borne
diseases (dengue fever and Zika virus) or an influx of
jellyfish.
Sea level rises and an increase in the number and size
of storm surges.
Increased competition from a new resort on Ratu or
nearby islands.
Poor word-of-mouth promotion from guests (e.g., a
shark attack or bout of food poisoning amongst
guests).
Supply chains. The café (and potential wholesale
operation) is reliant on a single supplier of coffee
beans.
Coffee is a commodity, and thus subject to high
levels of price volatility.
Page 7|8
IB Business Management Standard Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com
ITEM 4: BREAKING NEWS
News item appearing in major newspapers and global media.
American antitrust regulators rule that the Ford and Hyundai
merger can proceed
NEW YORK
Zika virus disease is caused by a virus transmitted primarily by Aedes mosquitoes.
REUTERS/MILENA BAENSCH
For the relatively few people who show signs of a Zika infection, the illness is
often very mild. But in pregnant woman, the effects can be devastating, and
can include pregnancy loss or a baby born with an abnormally small head and
brain – a condition known as microcephaly.
The Zica virus has now been confirmed in Southern Fiji and across all parts of
Samoa. Experts predict that the Aedes mosquito which carries the Zika virus
and transmits it to people will quickly spread across most, if not all, of the
South Pacific.
The first cases of babies born with microcephaly have been reported in Fiji and
Samoa and health professionals are warning women travelling to Pacific
Islands to take extra precautions.
Page 8|8