Practice 1.6 Multinational companies 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.
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.
Identify two stakeholder groups affected by GBL’s growth.
Calculate GBL’s gross profit margin and net profit margin. Show all your working.
Outline one reason why GBL’s investors might be concerned about its net profit margin.
State one advantage and one disadvantage of using franchising as a method of growth for GBL.
Explain one ethical conflict that may arise when a multinational company like GBL tries to cut costs in developing countries.
Elevate Health Tech (EHT)
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for EHT over the next five years.
WKM
WKM is a fast-growing agritech company that produces modular irrigation systems for small-scale farms. The company is exploring international expansion through partnerships with cooperatives in developing countries.
As part of this move, the board is reviewing WKM’s current vision and mission statements to ensure they reflect its long-term goals and social impact values. Some directors have raised concerns about how operations in lower-income regions could affect the brand’s reputation and stakeholder expectations.
WKM is also considering changing its accounting method for depreciation—from straight-line to units of production—to better reflect asset usage across regions. This change could impact financial statements, employee bonuses, and decision-making around asset replacement.
Management is evaluating whether the shift aligns with its strategic goals and provides more accurate cost control as the company scales globally.
Define the term mission statement.
Outline one feature of a cooperative as a for-profit social enterprise.
Suggest one impact on a host country if WKM expands as a multinational company (MNC).
Explain how the units of production method of depreciation would apply to WKM's vacuum cleaners.
Apply your knowledge of depreciation methods to suggest why the units of production method might be more appropriate for WKM than the straight-line method.
TechPlus Corporation (TPC)
TechPlus Corporation (TPC) is a multinational company specializing in consumer electronics. The company recently set up a large manufacturing plant in a developing country, creating thousands of jobs.
While the new plant has contributed to local economic growth, there have been concerns about environmental pollution and the displacement of local businesses due to TPC's presence. Additionally, some workers have reported low wages and poor working conditions.
Explain two potential economic benefits that TechPlus Corporation's presence could bring to the host country.
Analyze two potential negative social impacts of TechPlus Corporation's operations on the host country.
Discuss the potential trade-offs the host country might face when deciding whether to continue attracting multinational companies like TechPlus Corporation.
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.
Define the term ‘market research’.
Outline two advantages for PG of becoming a multinational company (MNC).
Explain two ways poor communication might demotivate PG’s employees during expansion.
Explain two reasons why PG should conduct market research before entering new markets.
Analyze whether PG should decentralize its communication approach to support international growth, considering employee motivation and effective market research.
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.
Define the term ‘stakeholder’.
Explain two benefits for EP of becoming a multinational company (MNC).
Explain two potential sources of employee demotivation resulting from EP’s rapid growth.
Explain two advantages for EP of adopting a democratic leadership style during international expansion.
Recommend whether EP should continue expanding internationally through acquisitions or pursue organic growth instead.
AutoFlex Ltd (AF)
AutoFlex Ltd (AF) is a UK-based car manufacturing company specializing in electric vehicles (EVs). The company has seen strong domestic growth and is now planning to expand into Germany and Mexico, where demand for EVs is increasing.
AF faces multiple challenges in this expansion:
AF is also considering whether to standardize or adapt its marketing strategy for Germany and Mexico. Some managers argue that a global brand image is essential, while others believe that local adaptation will be more effective.
Define the term ‘multinational company (MNC)’.
Explain two sources of finance AF could use to fund its international expansion.
Calculate the break-even output for AF’s expansion if the company’s fixed costs are USD 10 million, the selling price per unit is USD 50,000, and the variable cost per unit is USD 30,000. Show all working.
Explain two ways AF could manage industrial relations issues related to automation in its UK workforce.
Recommend whether AF should use a standardized or an adapted marketing strategy in its expansion into Germany and Mexico.
AgroWorld Ltd. (AWL)
AgroWorld Ltd. (AWL) is an agricultural multinational corporation that recently expanded its operations to a developing country in South America. The company has introduced advanced farming techniques and equipment to boost agricultural productivity.
While AWL's presence has increased food production and export revenues, there are concerns about the displacement of small-scale farmers, soil degradation due to intensive farming practices, and the potential loss of biodiversity.
Explain two environmental concerns associated with AgroWorld Ltd.’s operations in the host country.
Explain two ways in which AgroWorld Ltd.'s presence could impact the host country's local farmers.
Discuss the potential long-term effects of AgroWorld Ltd.'s operations on the host country's economy and environment.
FrioAire Appliances (FA)
FrioAire Appliances (FA) manufactures medium-priced and medium-quality refrigerators. It is a multinational public limited company. Its factory is located in a less economically developed country that has high unemployment, a tradition of autocratic leadership and labour costs lower than FA's home country.
The factory is profitable, and FA pays consistently good dividends. Market growth for medium-priced and medium-quality refrigerators is limited. As part of a strategic objective to increase productivity and to enter a fast-growing market for high-priced and high-quality refrigerators, FA is considering building a new factory in and relocating production to Germany.
This would require closing the factory in the less economically developed country. The new factory will:
Germany has a highly skilled, qualified and productive workforce. The new factory would allow FA to reposition its products. However, FA would need to raise significant finance to build and equip the new factory. FA's leadership style at the factory in the less economically developed country is autocratic. Members of FA's board wonder whether this style would be suitable for the new factory in Germany, where workers have more bargaining power because of their high skill level and the labour-friendly cultural traditions.
In Germany, FA would have to follow more regulations regarding the environment, health and safety, and employee rights. FA workers in the less economically developed country are very loyal to FA, which has continued operation through a civil war at significant cost to itself (for security). If FA were to close in the less economically developed country, the workers would not find such good jobs.
Describe one disadvantage of operating as a public limited company.
Explain one benefit and one cost to FA of using an autocratic leadership style.
Explain one positive and one negative impact of FA on the developing country.
Evaluate the option of building a factory in, and relocating, to Germany.
EcoCharge Ltd (EC)
EcoCharge Ltd (EC) is a private limited company that manufactures and sells electric vehicle (EV) charging stations. The company was founded in the UK in 2016 and has since expanded to France and Germany. EC is now considering further international expansion into the United States (US) and China, where demand for EV infrastructure is rapidly growing.
To finance this expansion, EC is debating whether to convert into a public limited company (PLC) and raise capital through an initial public offering (IPO) or secure a large bank loan. Some managers believe an IPO would provide long-term financial security, while others argue that EC would lose control over decision-making.
EC has relied on a standardized marketing strategy in Europe, promoting its products through digital ads and partnerships with local governments. However, the US and Chinese markets have different consumer behaviors, regulations, and competition levels. Some managers believe EC should adapt its marketing strategy to each market, while others argue that maintaining a standardized approach will help reduce costs and maintain brand consistency.
Additionally, EC is concerned about competition from large multinational companies (MNCs) such as Tesla and BYD, which already dominate EV charging networks in these regions.
Define the term ‘private limited company (Ltd)’.
Explain two benefits for EC of becoming a public limited company (PLC).
Explain two challenges EC may face when competing against large MNCs in the EV industry.
Recommend whether EC should standardize or adapt its marketing strategy for international expansion.