Practice 2.7 Industrial/employee relations (HL only) 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
HLPaper 3
LuminaCare
Resource 1 – Company profile and financial context
LuminaCare is a Ghana-based, for-profit social enterprise that manufactures solar-powered medical devices for rural clinics and maternal health centers across Sub-Saharan Africa. Its flagship product is a solar fetal heart monitor, which allows midwives to detect complications during pregnancy without relying on grid electricity. The company raised seed capital from impact investors but has now reached an inflection point: demand has grown by 300%, and LuminaCare must decide whether to pursue a $2.5M Series A equity round or take on $1.2M in concessional debt from a development bank.
Resource 2 – CFO’s internal memo (Finance)
“Our burn rate is steady, but we’ve reached our credit limit with suppliers. We operate on 90-day payment terms with clinics, so cash flow is always tight. Series A equity gives us the scale to meet demand and build a second facility—but would dilute founder control and introduce board-level oversight. The concessional loan is low-interest and non-dilutive but comes with covenants: quarterly EBITDA targets, strict capex limits, and donor-style reporting. Any miss could trigger loan restructuring or early repayment.”
Resource 3 – HR performance dashboard (Q1–Q2 2025)
| Metric | Value |
|---|---|
| Staff turnover (last 6 months) | 22% |
| Time to fill technical roles | 49 days (↑ 24%) |
| % of roles with formal job descriptions | 58% |
| Managerial span of control | Avg. 12 direct reports |
| Avg. team engagement score | 67/100 (↓ from 78) |
| The head of HR notes that burnout and unclear career paths are leading to attrition, especially among product engineers and field deployment staff. |
Resource 4 – Marketing team proposal
“Clinics love our mission—but most have no idea who we are until we show up at trade shows. We need to invest in inbound marketing, including a multilingual website, CRM tools, and a referral rewards program for midwives. More crucially, we’re perceived as a donor-funded nonprofit, not a serious tech company. To attract hospital procurement officers and larger buyers, we must reposition the brand to emphasize product quality, not just affordability and ethics.”
Resource 5 – Email thread: CEO to CFO and Marketing Lead
Resource 6 – Feedback from key field partners
“We rely on LuminaCare’s devices, but their response time for repairs has worsened.” “Sometimes we get different pricing from different reps. There’s no standard process.” “I love the mission—but our procurement officer wants a brand that feels serious. A logo change isn’t enough.”
1.[2]
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
2.[6]
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for LuminaCare over the next five years.
Question 2
HLPaper 3
Global Solar Solutions (GSS)
Resource 1 – Background of the social enterprise
Three years ago, electrical engineer and entrepreneur Nadira Khan founded Global Solar Solutions (GSS) as a social enterprise in Morocco. Her goal was to provide affordable, modular solar lighting kits to off-grid rural communities. These kits, manufactured at GSS’s urban facility, include rechargeable LED lights and mobile charging ports. GSS reinvests 100% of profits into R&D and local hiring.
GSS operates in partnership with local NGOs and community councils. Its workforce includes 40 technicians and 20 community trainers who educate households about solar usage and maintenance. GSS applies lean production, Kaizen, and maintains a strong internal emphasis on quality control and after-sales support.
Resource 2 – Recent internal report on workforce issues
"High staff turnover and trainer burnout have increased over the past 12 months. Trainers, who work in remote villages for weeks at a time, report fatigue and a lack of recognition. Some have requested additional health support and clearer promotion opportunities."
The HR department suggested non-financial incentives such as increased job rotation and monthly feedback sessions but reported mixed engagement.
Resource 3 – Email from the Director of Rural Development (DRD)
To: nadira.khan@GSS.org
Subject: Expansion proposal
Dear Ms. Khan,
We are impressed by GSS’s impact. The Ministry would like to propose a contract to expand the solar program to 80,000 homes across North and West Africa over five years. Your team would need to train local technicians and build capacity in three new countries. Please note, the contract requires local sourcing of at least 60% of parts.
We will require an initial trial rollout in 5,000 homes and evidence of social impact.
Regards,
Director, DRD
Resource 4 – Extract from a marketing audit summary
GSS currently relies on word-of-mouth and NGO referrals. Its brand is associated with trust and affordability. However, a 2024 brand perception survey in new markets revealed low awareness and concerns about product durability compared to larger multinationals such as SolarX.
GSS’s marketing team is small (3 staff) and has no formal digital strategy. There is also no localized messaging for francophone West African markets.
Resource 5 – Operations update from the Head of Production
Our current facility is operating at 92% capacity. To meet a major scale-up, we would need to either expand production or outsource subassembly. We have identified two regional partners with experience in sustainable component manufacturing. However, we are concerned about quality assurance if we lose full process control.
Resource 6 – Excerpt from a local newspaper article
“Access to solar power has transformed daily life in remote villages. Children now study at night, families charge phones to access mobile banking, and kerosene usage has dropped. However, NGOs report that replacement parts for some GSS kits have been slow to arrive, creating frustrations in isolated regions.”
1.[2]
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
2.[6]
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for GSS over the next five years.
Question 3
HLPaper 3
Elevate Health Tech (EHT)
Resource 1 – Background of the organization
Elevate Health Tech (EHT) is a social enterprise based in Peru. Founded in 2021 by two biomedical engineers, it develops low-cost, portable diagnostic devices (such as digital stethoscopes and glucose meters) for use in rural and underserved communities across Latin America. EHT reinvests all profits into R&D and local employment programs.
EHT has grown quickly, scaling from 5 to 38 employees in two years. It operates as a private limited company, with both founders holding equal ownership and decision-making authority.
Resource 2 – Statement from the HR Director
"Our team is motivated by our mission, but we’re facing growing pains. We’ve recently hired 12 new staff, many with limited technical background. We have no formal training programme or organizational structure. Employees report confusion about job roles, and productivity varies significantly across teams. The co-founders are very hands-on, but this is becoming unsustainable."
Resource 3 – Loan proposal from the Development Impact Bank (DIB)
DIB is prepared to offer EHT a $750,000 low-interest loan to expand production and distribution across four Andean countries. The loan would cover machinery upgrades and recruitment but requires EHT to submit quarterly financial statements and maintain a current ratio of at least 1.5 throughout the term.
A grace period of 18 months will apply before repayments begin.
Resource 4 – Excerpt from EHT’s financial summary (unaudited, 2024)
Note: Fixed assets are fully depreciated and no longer productive.
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
Resource 5 – Email from the Head of R&D
"To remain competitive, we need to launch two new diagnostic products within the next 18 months. The current design lab is at capacity. We either need to lease a second lab or invest in automation. The team is overworked and we’ve lost two engineers to burnout. I’m also concerned about our lack of appraisal or performance review systems."
Resource 6 – Mission statement (from company website)
We believe affordable diagnostics are a human right. We exist to empower healthcare workers and communities with reliable tools, local jobs, and dignity-driven innovation.
1.[2]
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
2.[6]
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
3.[17]
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.
Question 4
SLPaper 2
FlexiFit Ltd.
FlexiFit Ltd. is a company that designs and sells adjustable home fitness equipment. The operations manager follows a democratic leadership style, encouraging employees to contribute ideas and participate in problem-solving discussions. Recently, the company introduced a non-financial motivation scheme, offering flexible work hours and job rotation to increase employee engagement.
FlexiFit is evaluating whether to invest in a new production machine that will increase output. The machine costs $30,000 and is expected to generate the following cash inflows over the next three years:
Table 1: Estimated cash inflows from new machine
| Year | Cash inflow ($) |
|---|---|
| 1 | 10,000 |
| 2 | 12,000 |
| 3 | 15,000 |
The finance team has also reviewed recent financial performance, as shown in Table 2.
Table 2: Financial data for FlexiFit Ltd.
| Item | Amount ($) |
|---|---|
| Net profit | 45,000 |
| Revenue | 300,000 |
| Current assets | 90,000 |
| Current liabilities | 60,000 |
| Selling price per unit | 100 |
| Variable cost per unit | 40 |
| Fixed costs per month | 9,000 |
1.[2]
Calculate the net profit margin for FlexiFit Ltd. Show all your working.
2.[2]
Calculate the current ratio. Show all your working.
3.[2]
Calculate the break-even output per month. Show all your working.
4.[2]
State the payback period for the new machine. Show all your working.
5.[2]
Explain one non-financial method of motivation used by FlexiFit Ltd. and how it could benefit the business.
Question 5
HLPaper 3
UrbanEats Ltd.
Resource 1 - Excerpt from Company Website
Resource 2 - Balance Sheet (2023)
UrbanEats Ltd.
Balance Sheet as of December 31, 2023
Assets
Current Assets
Non-Current Assets
Liabilities
Current Liabilities
Non-Current Liabilities
Total Assets | £5,800,000 |
Total Liabilities | £2,500,000 |
Equity
Despite recent revenue growth, UrbanEats’ increasing liabilities raise concerns about long-term financial sustainability.
| Item | Amount |
|---|---|
| Cash | £1,200,000 |
| Inventory | £600,000 |
| Accounts Receivable | £800,000 |
| Total Current Assets | £2,600,000 |
| Item | Amount |
|---|---|
| Property, Plant & Equipment | £3,000,000 |
| Intangible Assets | £200,000 |
| Total Non-Current Assets | £3,200,000 |
| Item | Amount |
|---|---|
| Accounts Payable | £700,000 |
| Short-term Debt | £300,000 |
| Total Current Liabilities | £1,000,000 |
| Item | Amount |
|---|---|
| Long-term Debt | £1,500,000 |
| Total Non-Current Liabilities | £1,500,000 |
| Item | Amount |
|---|---|
| Shareholder Equity | £3,300,000 |
| Total Liabilities & Equity | £5,800,000 |
Resource 3 - Email from CFO to CEO
Resource 4 - Interview Excerpt with the CEO
In a recent interview with Finance Today, CEO Maya Simmons shared her vision for UrbanEats. “We are excited about our growth but know we must be strategic to maintain profitability.
Our commitment to sustainability and affordability is essential, but we also recognize the importance of financial health. Exploring franchising is one option, though I want to ensure it aligns with our brand values.”
Resource 5 - Social Media Post by UrbanEats (Instagram)
1.[2]
Identify a human need that UrbanEats Ltd. fulfills through its mission of providing plant-based and sustainable meals. Explain how UrbanEats addresses this need through its products and initiatives.
2.[6]
Discuss two significant challenges UrbanEats Ltd. faces in maintaining profitability and competitive advantage in the fast-casual dining sector. Use relevant resources from the case study to support your answer.
3.[17]
Based on the resources provided and your knowledge of business management principles, outline a strategic plan for UrbanEats Ltd. to enhance its financial performance and market positioning over the next five years. Your plan should include recommendations on product differentiation, digital marketing strategies, consumer engagement initiatives, and adaptability to market trends.
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
HLPaper 3
Alpha Robotics – Optimizing HR and Operations for Growth
Resource 1 – News Article
Alpha Robotics Struggles with HR and Operational Efficiency
Alpha Robotics, a technology firm specializing in AI-powered industrial robots, is experiencing rapid expansion as demand for automation increases globally. The company was founded in 2015 and has since grown to 2,500 employees across four locations: the United States, Germany, Japan, and India.
Key Challenges:
(1) HR management issues – Employees complain about unclear leadership, poor communication, and lack of motivation due to a highly hierarchical structure.
(2) Production inefficiencies – The company’s batch production method is increasing lead times and reducing product quality.
(3) Location challenges – With rising costs in the US and Germany, Alpha Robotics must decide whether to expand in India (lower labor costs) or develop a new R&D facility in Singapore.
CEO Daniel Carter is considering the following strategic changes:
(1) Restructuring the organization to improve communication and motivation.
(2) Shifting to lean production and just-in-time (JIT) inventory management.
(3) Relocating part of production to India or Singapore while maintaining efficiency.
Resource 2 – Internal HR Survey Results
Key Insights:
(1) Employees feel disconnected from leadership, affecting productivity.
(2) A lack of career growth opportunities is reducing motivation and increasing turnover.
(3) Middle management struggles with effective communication due to a rigid hierarchical structure.
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
Resource 3 – Cost-Benefit Analysis for Production Relocation
Alpha Robotics – Cost Analysis for Facility Expansion
Key Considerations:
(1) India offers lower costs, but efficiency gains are lower compared to Singapore.
(2) Singapore provides greater efficiency but has significantly higher setup costs.
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
1.[2]
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
2.[6]
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
3.[17]
Using all the resources provided and your knowledge of business management, recommend a possible plan of action to improve both HR and operations management at Alpha Robotics.
Question 8
HLPaper 2
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:
- Raising finance to fund its international operations.
- Marketing strategies to attract customers in new markets. -** Industrial relations issues**, as AF’s UK workforce has threatened to go on strike due to concerns over job security with automation.
- Calculating break-even output to assess the financial feasibility of the 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.
1.[2]
Define the term ‘multinational company (MNC)’.
2.[4]
Explain two sources of finance AF could use to fund its international expansion.
3.[4]
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.
4.[4]
Explain two ways AF could manage industrial relations issues related to automation in its UK workforce.
5.[10]
Recommend whether AF should use a standardized or an adapted marketing strategy in its expansion into Germany and Mexico.
Question 9
HLPaper 3
Zenith Electronics – Balancing Growth, HR, and Finance
Resource 1 – News Article
Zenith Electronics faces growing financial strain amid rapid global expansion.
Zenith Electronics, a publicly traded multinational, specializes in manufacturing smart home technology. Over the past five years, the company has expanded operations across Europe and Asia, growing its workforce from 5,000 to 15,000 employees.
Despite its success, Zenith faces serious financial and HR challenges:
Declining profit margins due to rising costs of production and supply chain disruptions.
High employee turnover as workers feel undervalued and disengaged.
Managers struggle with organizational communication and workplace motivation, impacting productivity.
To address these issues, Zenith’s CEO, Lisa Wong, is considering two strategies:
(1) Restructuring the organization to improve efficiency and motivation.
(2) Securing external funding to support ongoing expansion and cash flow stability.
Investors remain divided on the best course of action.
Resource 2 – Internal Employee Survey Results
Recent HR data from Zenith Electronics employees:
Employees feel disconnected from leadership and lack incentives to stay engaged.
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of motivation at work | 45% |
| Weak communication from managers | 38% |
| High workload and job stress | 50% |
| Poor work-life balance | 42% |
Resource 3 – Financial Report Summary
Zenith Electronics – Key Financial Data (Last Fiscal Year)
Key Concerns:
(1) Low liquidity (current ratio < 1) may threaten short-term financial stability.
(2) High gearing (55%) suggests heavy reliance on external finance.
| Financial Indicator | Value |
|---|---|
| Revenue | $800 million |
| Net Profit | $50 million |
| Gross Profit Margin | 38% |
| Current Ratio | 0.8 |
| Gearing Ratio | 55% |
1.[2]
Using an appropriate business management theory, describe a human resources issue affecting Zenith Electronics.
2.[6]
Explain two financial challenges Zenith Electronics faces in maintaining both profitability and liquidity.
3.[17]
Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure both financial stability and employee motivation at Zenith Electronics.
Question 10
HLPaper 2
EcoFood Ltd.
EcoFood Ltd. is a company that specializes in producing organic food products. The company is committed to sustainable agriculture practices and aims to provide healthy and environmentally friendly food options to consumers.
EcoFood Ltd. is currently in the growth phase and is focused on expanding its market presence by strengthening relationships with various stakeholders, including farmers, consumers, and environmental organizations.
1.[2]
Define the term 'stakeholder'.
2.[4]
Explain one strategy EcoFood Ltd. could use to address potential conflicts with stakeholders.
3.[4]
Explain two ways EcoFood Ltd. can engage with its stakeholders to enhance its market presence.