Practice 1.5 Growth and evolution with authentic IB Business Management exam questions for both SL and HL students. This question bank mirrors Paper 1, 2, 3 structure, covering key topics like systems and structures, human behavior and interaction, and sustainability and ethics. Get instant solutions, detailed explanations, and build exam confidence with questions in the style of IB examiners.
Paper
Level
Question 1
SLPaper 2
FreshBurst Ltd.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector. Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
1.[2]
Using Figure 1, identify the break-even level of output for FreshBurst Ltd.’s new product.
2.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
3.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
4.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
5.[2]
Using Figure 1, calculate the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
Question 2
SLPaper 2
Global Beans Ltd. (GBL)
Global Beans Ltd. (GBL) is a multinational company (MNC) that sources, roasts, and sells premium coffee in over 30 countries. The company started as a family-run business and experienced rapid internal growth before expanding overseas through joint ventures and franchising.
GBL recently released its final accounts. Table 1 shows selected financial data.
Table 1: Selected financial data for GBL
| Item | Amount ($ million) |
|---|---|
| Revenue | 300 |
| Gross profit | 120 |
| Net profit | 30 |
| Current assets | 90 |
| Current liabilities | 60 |
GBL’s plans for further growth have sparked concerns from local stakeholders in some developing countries where it operates. Local farmers fear that expansion could shift sourcing to cheaper markets, reducing their income. Meanwhile, GBL’s investors are pressuring the company to boost profitability.
1.[2]
Identify two stakeholder groups affected by GBL’s growth.
2.[2]
Calculate GBL’s gross profit margin and net profit margin. Show all your working.
3.[2]
Outline one reason why GBL’s investors might be concerned about its net profit margin.
4.[2]
State one advantage and one disadvantage of using franchising as a method of growth for GBL.
5.[2]
Explain one ethical conflict that may arise when a multinational company like GBL tries to cut costs in developing countries.
Question 3
HLPaper 2
CleanCurrent Ltd.
CleanCurrent Ltd. is a renewable energy start-up that installs solar panels for residential and small business clients. Initially formed as a sole trader, the business recently transitioned into a private limited company (Ltd) to scale operations and attract investment. Its primary business objectives are to increase market share in suburban regions, reduce customer acquisition costs, and achieve positive monthly cash flow by the end of the fiscal year.
The business recently launched a referral programme and expanded into two new districts. While customer inquiries have increased, installation capacity has been strained, leading to delays in payments and project backlogs. This has created tension with certain stakeholders, including installers and suppliers, who are now facing late payments.
The finance manager has prepared a simple cash flow forecast for August 2024 to assess the immediate impact of CleanCurrent’s growth and financial decisions.
Table 1: Cash Flow Forecast – August 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 10,000 |
| Cash inflows | 82,000 |
| Cash outflows | 96,000 |
| Closing balance | — |
1.[2]
Explain one reason why CleanCurrent Ltd. may have changed from a sole trader to a private limited company.
2.[2]
Calculate the net cash flow and closing balance for August 2024. Show all your working.
3.[2]
Suggest one conflict that might arise between two stakeholder groups as a result of CleanCurrent’s recent expansion.
4.[2]
Analyse how cash flow challenges could affect CleanCurrent’s ability to meet its business objectives.
5.[2]
Suggest one short-term strategy CleanCurrent Ltd. could implement to manage cash flow more effectively.
Question 4
SLPaper 2
FreshBurst Ltd.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector.
Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
1.[2]
Using Figure 1, identify the break-even level of output for FreshBurst Ltd.’s new product.
2.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
3.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
4.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
5.[2]
Using Figure 1, calculate the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
Question 5
HLPaper 2
UrbanRide (UR)
UrbanRide (UR) is a ride-sharing company that operates in major cities. The company has grown rapidly through aggressive marketing and technology development. However, it now faces significant challenges in scaling further, as larger competitors dominate the market.
To continue its growth, UR is exploring different strategies, including forming strategic alliances with local governments to expand its services or acquiring smaller ride-sharing companies in niche markets.
1.[4]
Explain one external diseconomy of scale that UrbanRide might face as it continues to grow.
2.[6]
Analyze two reasons why UrbanRide might choose to pursue strategic alliances rather than mergers or acquisitions for its growth.
3.[10]
Discuss the potential impact of external growth through acquisitions on UrbanRide’s organizational culture and brand reputation.
Question 6
HLPaper 2
FreshEats Ltd (FE)
FreshEats Ltd (FE) is a rapidly expanding healthy fast-food chain based in Australia. The company has recently experienced significant growth, opening numerous outlets nationwide. This expansion has led to changes in organizational culture, shifting from a family-oriented culture to a more profit-driven environment. Some employees feel alienated, resulting in tensions and declining morale.
FE’s expansion required significant investment, financed through debt, affecting the company's profitability and liquidity ratios. Recent financial analysis indicates decreasing liquidity, causing concern among stakeholders about FE’s short-term financial health.
FE management is considering franchising as an alternative growth strategy, believing it could improve both liquidity and operational efficiency. However, employees are worried franchising could negatively impact their job security and working conditions, increasing risks of industrial action.
FE currently faces uncertainty regarding how many units they need to sell to break even at the new locations. Accurate break-even analysis is critical for financial planning during the ongoing expansion.
1.[2]
Define the term ‘franchising’.
2.[4]
Explain two ways rapid growth may negatively affect FE’s organizational culture.
3.[4]
Explain two reasons why profitability ratios might improve while liquidity ratios worsen.
4.[4]
Calculate the break-even quantity for FE if fixed costs are USD 120,000, average selling price per unit is USD 8, and average variable cost per unit is USD 5. Show all working.
5.[10]
Recommend whether FE should pursue franchising as a growth strategy, considering industrial relations and financial factors.
Question 7
SLPaper 2
EcoTech Solutions (ETS)
EcoTech Solutions (ETS) is a mid-sized company that specializes in developing sustainable energy solutions. The company has experienced rapid growth in recent years, largely through internal expansion.
ETS is now exploring external growth opportunities, including mergers and acquisitions (M&As) or forming strategic alliances with other companies in the renewable energy industry to accelerate its development.
1.[4]
Identify and explain one internal economy of scale that EcoTech Solutions might experience as it grows.
2.[6]
Analyze the potential advantages and disadvantages of EcoTech Solutions pursuing a merger with a competitor.
3.[8]
Discuss the reasons why EcoTech Solutions might choose external growth methods such as mergers, acquisitions, or strategic alliances instead of continuing to grow internally.
Question 8
SLPaper 2
FreshBites Bakery (FB)
FreshBites Bakery (FB) is a small, family-owned bakery that has operated in the local community for over 20 years. The bakery is known for its high-quality pastries and personalized service, which has attracted a loyal customer base.
As larger bakery chains begin to open nearby, FB is considering different growth options to remain competitive, including franchising its business model or forming a joint venture with a local coffee shop to expand its product offerings.
1.[4]
Explain the difference between internal and external growth, using FreshBites Bakery as an example.
2.[6]
Analyze two reasons why FreshBites Bakery might choose to stay small despite increased competition.
3.[10]
Discuss the potential benefits and drawbacks of franchising as a growth strategy for FreshBites Bakery.
Question 9
SLPaper 2
PureGlow Ltd (PG)
PureGlow Ltd (PG) is a cosmetics company founded in France, specializing in natural skincare products. Due to steady success domestically, PG is planning significant international expansion into the markets of the United States and Japan, becoming a multinational company (MNC).
PG has historically relied on a centralized communication approach. However, the recent rapid growth and evolution of the company have caused communication breakdowns between senior management and regional teams, leading to employee frustration and signs of demotivation.
Management acknowledges that maintaining employee motivation is essential for successful expansion. They also recognize that detailed market research in the new markets is crucial to inform their product offerings and promotional strategies effectively.
1.[2]
Define the term ‘market research’.
2.[4]
Outline two advantages for PG of becoming a multinational company (MNC).
3.[4]
Explain two ways poor communication might demotivate PG’s employees during expansion.
4.[4]
Explain two reasons why PG should conduct market research before entering new markets.
5.[10]
Analyze whether PG should decentralize its communication approach to support international growth, considering employee motivation and effective market research.
Question 10
SLPaper 2
EcoPulse Ltd (EP)
EcoPulse Ltd (EP) is an innovative company founded in Germany, specializing in sustainable electronic devices. After rapid domestic growth, EP aims to expand internationally, transforming into a multinational company (MNC) by establishing subsidiaries in Brazil and India.
EP's international growth strategy focuses heavily on acquiring local businesses to quickly achieve market presence. However, rapid expansion has generated concerns among key stakeholders, notably employees and environmental organizations. Employees worry about changes in organizational culture and job security, resulting in signs of demotivation. Environmental groups fear that EP's rapid growth may undermine its original commitment to sustainability.
To manage international expansion effectively, EP’s board is reconsidering its predominantly autocratic leadership and management style. The board believes adopting a more democratic leadership style may improve employee motivation and stakeholder relationships during this critical growth phase.
1.[2]
Define the term ‘stakeholder’.
2.[4]
Explain two benefits for EP of becoming a multinational company (MNC).
3.[4]
Explain two potential sources of employee demotivation resulting from EP’s rapid growth.
4.[4]
Explain two advantages for EP of adopting a democratic leadership style during international expansion.
5.[10]
Recommend whether EP should continue expanding internationally through acquisitions or pursue organic growth instead.