5.1 Introduction to operations management Questionbank

Practice 5.1 Introduction to operations management 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

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.”

With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.

[2]

Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.

[6]

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.

[17]

Question 2

SLPaper 2

AquaSphere Ltd.

AquaSphere Ltd. designs and manufactures compact water purification systems for use in developing countries. The company began as a small domestic manufacturer but has recently opened two international distribution centres in Southeast Asia and South America. Its long-term business objective is to increase access to clean water globally while maintaining financial sustainability.

To support this growth, AquaSphere Ltd. obtained a low-interest development loan and used a sale and leaseback arrangement to improve liquidity. The finance team is evaluating the financial viability of producing a new portable filter model at a new facility. Two location options are being considered:

Location A: Near a port in an urban area with high rent and labour costs
Location B: Inland rural zone with lower costs but poor access to infrastructure

AquaSphere's expansion into multiple markets has also introduced exchange rate risks, legal complexity, and new staffing challenges. The board is reviewing how well the company’s financial structure, operations decisions, and growth strategy align with its social mission and long-term objectives.

Table 1: Financial data for the new portable filter (per month)

Item	Amount ($)
Fixed costs	22,000
Variable cost per unit	8.00
Selling price per unit	18.00
Maximum expected output	5,000 units

Explain how AquaSphere Ltd.’s choice of financing methods might influence its financial flexibility during international expansion.

[2]

Suggest one operational consideration and one financial consideration AquaSphere Ltd. should evaluate when choosing between Location A and Location B.

[2]

Draw a fully labelled break-even chart using the data in Table 1. Include the total cost line, total revenue line, and mark the break-even point.

[2]

Based on the chart, calculate the margin of safety if the company sells 4,500 units per month. Show all your working.

[2]

Explain how AquaSphere Ltd.'s growth might create tension between its social mission and business objectives.

[2]

Question 3

SLPaper 2

GreenBites Ltd (GB)

GreenBites Ltd (GB) is a fast-growing organic food manufacturer based in Canada. The company produces organic snacks and beverages, which it sells through major supermarket chains and online platforms. Due to increasing demand, GB is planning to open a new production facility to expand its manufacturing capacity.

GB is considering three possible locations for its new factory:

Toronto, Canada – Close to GB’s headquarters, with high labor costs but good infrastructure. Guadalajara, Mexico – Lower labor costs but more complex supply chain logistics. Rotterdam, Netherlands – Provides easy access to European markets but has higher taxes and environmental regulations. GB currently uses batch production, which allows it to produce a variety of organic snacks efficiently. However, some managers believe that switching to flow production could reduce costs and improve efficiency. Others worry that flow production would reduce product variety and increase waste.

Additionally, GB’s internal communication has become more difficult as the company grows. Employees complain about unclear instructions and slow decision-making, especially between the production and sales teams. Some managers suggest introducing a digital communication platform, while others believe regular face-to-face meetings would be more effective.

Define the term ‘batch production’.

[2]

Explain two factors GB should consider when choosing the location for its new production facility.

[4]

Explain two advantages for GB of using flow production instead of batch production.

[4]

Recommend how GB can improve internal communication to enhance operational efficiency.

[10]

Question 4

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

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%

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.

Resource 3 – Cost-Benefit Analysis for Production Relocation Alpha Robotics – Cost Analysis for Facility Expansion

Location	Labor Costs per Hour ($)	Setup Costs ($M)	Expected Efficiency Gains
India	12	30	10% increase
Singapore	22	50	18% increase

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.

Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.

[2]

Explain two operational challenges Alpha Robotics faces in improving production efficiency.

[6]

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.

[17]

Question 5

SLPaper 2

FreshFields Organic Farm

FreshFields Organic Farm (FreshFields) is a family-owned business that produces and sells organic fruits and vegetables to local supermarkets and farmers' markets. The business has experienced steady growth in recent years due to increasing consumer demand for organic products.

FreshFields is considering expanding its operations by opening a new production site to meet the growing demand. However, the owners must decide between two potential locations: (1) a rural area with lower costs but farther from key markets, or (2) an urban location closer to customers but with higher rent and labor expenses.

Additionally, FreshFields is evaluating its current operations methods, which are highly labor-intensive, and exploring whether switching to a more mechanized process could improve efficiency and reduce costs. However, the family is concerned about maintaining the farm’s reputation for high-quality, hand-harvested produce.

Outline two key objectives of operations management that FreshFields should focus on as it considers expanding its production capacity.

[2]

Discuss the factors FreshFields should consider when deciding between the two potential locations for its new production site.

[4]

Suggest the advantages and disadvantages of FreshFields transitioning from a labor-intensive production method to a more mechanized process.

[4]

To what extent should FreshFields prioritize customer proximity over cost savings when selecting the location for its new production site?

[10]

Question 6

HLPaper 2

TerraCraft Ltd (TC)

TerraCraft Ltd (TC) manufactures sustainable furniture products in Sweden. Due to increasing demand, TC is considering investing in a new production facility. To determine the viability of this investment, TC’s finance team has performed an investment appraisal, calculating payback periods and net present value (NPV).

To enhance efficiency and productivity, TC is also evaluating its current operations methods, debating a shift from job production to batch or flow production. The company recently analyzed its operational performance using efficiency ratio analysis, revealing lower-than-expected inventory turnover and declining productivity ratios.

TC has a strong, environmentally-driven organizational culture valued by its stakeholders. However, stakeholders, including employees and environmental activists, are concerned that rapid operational expansion and changes in production methods could negatively affect this culture and TC’s sustainability commitments.

Define the term ‘investment appraisal’.

[2]

Explain two potential stakeholder conflicts that might result from TC changing its operations methods.

[4]

Explain two benefits for TC of using efficiency ratio analysis.

[4]

Outline two ways TC’s strong organizational culture contributes to its business success.

[4]

Examine whether TC should switch from job production to flow production to improve efficiency, considering stakeholder concerns, organizational culture, and investment appraisal results.

[10]

Question 7

HLPaper 3

Resource 1 – News Article EcoCharge Solutions (ECS) revolutionizes sustainable energy storage! EcoCharge Solutions (ECS), a privately owned social enterprise, specializes in affordable, sustainable power banks made from recycled materials. The company’s mission is “to provide sustainable energy solutions to reduce electronic waste and bridge the energy gap in rural areas.” ECS has developed an innovative buy-one-give-one model: for every solar-powered power bank purchased, a second one is donated to a rural community where access to electricity is unreliable. ECS started as a student-run initiative at a university in 2019. In four years, it has grown into a medium-sized business with manufacturing facilities in Vietnam and Kenya. Table 1: ECS’s Key Operational Challenges

Challenge	Details
Production Bottlenecks	Increasing delays in assembly and quality checks
Supply Chain Issues	Limited access to sustainable materials due to rising costs
Logistics Constraints	High shipping costs and customs delays affecting donations

Resource 2 – Social Media Post from an Employee 💬 Anonymous Employee on LinkedIn: "I love ECS’s mission, but our production process is falling apart! We’re constantly running out of recycled materials, causing delays. Some donated power banks are reaching communities late or not at all. Management needs to fix this before we lose our credibility!"

Resource 3 – Internal Email from ECS CEO 📩 Subject: Scaling ECS Operations Dear Team, We are growing rapidly, but our supply chain and production inefficiencies are threatening our ability to meet demand. I propose two options: (1) Automating part of our assembly line to reduce bottlenecks. (2) Forming a joint venture with a large electronics manufacturer. Both options have risks. Automation is expensive, and a joint venture might compromise our social enterprise values. We need a decision soon. Best, CEO, EcoCharge Solutions

Using an appropriate business management theory, describe a human need that ECS meets through its business model.

[2]

Explain two possible challenges ECS faces in balancing its ethical objectives with its operational growth.

[6]

Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure the sustainability of ECS for the next five years.

[17]

Question 8

SLPaper 2

PureTaste Ltd (PT)

PureTaste Ltd (PT) produces premium organic ice creams and desserts, catering primarily to health-conscious consumers. Based in Italy, PT recently decided to expand production internationally, planning to open a new production facility in California, USA.

The choice of California as a new location of production is due to proximity to key raw material suppliers and a large customer base that aligns with PT’s health-conscious consumer segment.

As part of its marketing strategy, PT focuses on clearly defined market segments based on lifestyle and dietary preferences. PT’s management team regularly conducts break-even analysis to determine appropriate pricing and forecast profitability, especially when launching new products internationally.

Define the term ‘operations management’.

[2]

Explain two reasons why PT chose California as the location for its new production facility.

[4]

Explain two benefits for PT of using break-even analysis.

[4]

Explain two advantages of market segmentation for PT.

[4]

Recommend two marketing strategies PT should adopt to successfully enter and establish itself in the US market.

[10]

Question 9

HLPaper 3

AeroTech Drones – Scaling Production While Maintaining Financial Stability

Resource 1 – News Article AeroTech Drones Faces Challenges Scaling Its Production Line AeroTech Drones, a technology start-up specializing in high-performance drones for commercial use, has seen rapid demand growth in the last two years. The company was founded in 2018 as a private limited company, but it is now considering an IPO (initial public offering) to raise additional capital for expansion. Despite strong revenue growth, AeroTech is facing operational bottlenecks and financial pressures. Key Challenges: (1) High production costs due to inefficiencies in manufacturing and inconsistent supplier lead times. (2) Limited cash flow despite strong revenues, causing delays in R&D investments for next-generation drones. (3) Difficulty in deciding whether to expand the current factory or relocate to a larger facility to accommodate increasing orders. The CEO, Jake Mitchell, is considering three key strategies: (1) Raising capital through an IPO or alternative external funding sources. (2) Optimizing production efficiency through lean production techniques to reduce costs. (3) Expanding into a new location with greater production capacity while balancing cost and operational feasibility.

Resource 2 – Financial Report Summary AeroTech Drones – Financial Data (Last Fiscal Year)

Financial Indicator	Value
Revenue	$200 million
Gross Profit Margin	40%
Net Profit Margin	8%
Current Ratio	0.9
Gearing Ratio	62%

Key Insights: (1) The low current ratio (0.9) suggests short-term liquidity risks, meaning the company may struggle to meet immediate obligations. (2) The high gearing ratio (62%) indicates heavy reliance on debt financing, increasing financial risk if interest rates rise. (3) Profit margins remain solid, but production inefficiencies are increasing costs, reducing overall profitability.

Resource 3 – Break-even Analysis for Factory Expansion

Option	Fixed Costs ($M)	Variable Cost per Unit ($)	Selling Price per Unit ($)	Break-even Output (Units)
Expand Current Facility	20M	200	400	100,000
Relocate to New Facility	35M	180	400	116,667

Key Takeaways: (1) Expanding the current factory has lower fixed costs, but it may not support long-term growth. (2) A new facility reduces variable costs, but has higher fixed costs and a higher break-even point.

Using an appropriate business management theory, describe a financial challenge AeroTech Drones is facing.

[2]

Explain two operational challenges AeroTech Drones faces in scaling its production efficiently.

[6]

Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure AeroTech Drones achieves both financial stability and operational efficiency.

[17]

Question 10

SLPaper 2

Nature's Cup Ltd (NC)

Nature's Cup Ltd (NC) is a specialty coffee shop chain based in Canada. NC has recently experienced rapid growth, opening multiple new outlets. To finance this expansion, NC used a combination of retained profits and bank loans.

The recent expansion significantly increased NC’s fixed costs, including rent and salaries. Despite rising revenues from new locations, management is concerned about profitability and liquidity. Recent analysis using profitability and liquidity ratios indicated declining net profit margins and weaker liquidity.

NC’s management team is reviewing its operations management strategies to improve efficiency and financial performance. However, decisions taken to reduce costs and boost profitability may affect various stakeholders, including employees, customers, suppliers, and lenders.

Define the term ‘liquidity’.

[2]

Explain two sources of finance NC could consider for future expansions.

[4]

Explain two ways NC could increase its profitability.

[4]

Explain two stakeholder conflicts that could arise from NC’s efforts to reduce costs.

[4]

Recommend two operational management strategies NC could implement to improve its liquidity position.

[10]

Global Solar Solutions (GSS)

Item

Amount ($)

Fixed costs

22,000

Variable cost per unit

8.00

Selling price per unit

18.00

Maximum expected output

5,000 units

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%

Location

Labor Costs per Hour ($)

Setup Costs ($M)

Expected Efficiency Gains

India

10% increase

Singapore

18% increase

Challenge

Details

Production Bottlenecks

Increasing delays in assembly and quality checks

Supply Chain Issues

Limited access to sustainable materials due to rising costs

Logistics Constraints

High shipping costs and customs delays affecting donations

Financial Indicator

Value

Revenue

$200 million

Gross Profit Margin

40%

Net Profit Margin

Current Ratio

0.9

Gearing Ratio

62%

Option

Fixed Costs ($M)

Variable Cost per Unit ($)

Selling Price per Unit ($)

Break-even Output (Units)

Expand Current Facility

20M

200

400

100,000

Relocate to New Facility

35M

180

400

116,667