5.3 Lean production and quality management (HL only) Questionbank

Practice 5.3 Lean production and quality management (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

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

HLPaper 2

ZenMoto Ltd.

ZenMoto Ltd. is a Japanese company that manufactures electric scooters designed for city commuting. To improve operational efficiency, ZenMoto has implemented lean production techniques such as just-in-time (JIT) inventory management, kaizen (continuous improvement), and quality circles across its factories. It is also reviewing its production planning processes to better match seasonal demand fluctuations.

The company plans to expand into new Southeast Asian markets and needs funding for a new manufacturing plant. The finance department has provided key efficiency data and is evaluating whether internal cash flows are sufficient or if external sources of finance are needed.

Table 1: Selected Financial Data – ZenMoto Ltd. (2024)

Item	Amount (¥)
Revenue	8,500,000,000
Cost of goods sold	5,200,000,000
Operating expenses	2,700,000,000
Net profit	600,000,000
Capital employed	5,000,000,000

Explain one way lean production techniques could improve ZenMoto Ltd.'s operational efficiency.

[2]

Calculate the return on capital employed (ROCE) for ZenMoto Ltd. Show all your working.

[2]

Comment on how ZenMoto Ltd.’s ROCE result might influence its decision to use internal or external finance for expansion.

[2]

Suggest one internal and one external source of finance ZenMoto Ltd. could consider for the new manufacturing plant.

[2]

Suggest how improvements in production planning could contribute to better financial performance at ZenMoto Ltd.

[2]

Question 3

HLPaper 2

EcoBlade Ltd.

EcoBlade Ltd. produces biodegradable razors aimed at environmentally conscious consumers. The company is deciding whether to invest in a second production site closer to its largest market.

Management is considering two investment projects and recently reviewed its operational performance.

Table 1: Income and Expenses for EcoBlade Ltd. – Year Ended 2024
(All figures in $m)

Statement of Profit and Loss (excerpt)
Revenue	14.0
Cost of goods sold	(9.0)
Gross profit	5.0
Operating expenses	(3.0)
Net profit before tax	2.0

Statement of Financial Position (excerpt)
Current assets	4.0
Current liabilities	2.0
Current ratio	2:1

Table 2: Investment Appraisal Data – Project A and Project B
(All figures in $m)

Project	A	B
Initial investment	5.0	5.0
Net cash inflows: Y1	2.0	1.0
Net cash inflows: Y2	2.0	2.0
Net cash inflows: Y3	1.5	2.5
ARR (over 3 years)	___	___
NPV (@10% discount)	$0.7	$0.5

Additional context:

EcoBlade currently uses quality control to catch faulty razors at the packaging stage, but rejects remain high.
The proposed new site would reduce delivery times by 50% and is near suppliers of plant-based plastic.

Calculate EcoBlade Ltd.'s net profit before tax

[2]

Calculate the ARR for both Project A and Project B.

[2]

Explain one advantage of using NPV instead of payback period alone for investment decision-making.

[2]

Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.

[2]

Outline one operational reason why EcoBlade Ltd. is considering locating its second factory near suppliers.

[2]

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

HLPaper 2

SwiftTech Ltd (ST)

SwiftTech Ltd (ST) is a UK-based technology manufacturer specializing in smart home devices. The company recently experienced a product defect crisis, where a software bug in its flagship security system led to customer complaints and negative media coverage. As a result, ST had to issue refunds and recalls, leading to financial strain and reputational damage.

To improve efficiency and reduce future risks, ST is considering adopting lean production methods, such as Just-in-Time (JIT) and Kaizen, to minimize waste and improve product quality. However, some managers worry that JIT may leave the company vulnerable to supply chain disruptions.

ST is also evaluating the implementation of a management information system (MIS) to enhance decision-making and financial planning. Currently, ST’s finance department struggles with budgeting inconsistencies and poor forecasting, affecting investment decisions.

To recover from the crisis and regain financial stability, ST's senior management is reviewing its budgeting process, ensuring tighter cost control and improved financial planning.

Define the term ‘budget’.

[2]

Explain two reasons why crisis management is important for ST following the product defect crisis.

[4]

Explain two benefits for ST of using lean production methods.

[4]

Explain two advantages for ST of implementing a management information system (MIS).

[4]

Examine how ST should improve its budgeting process to strengthen financial planning.

[10]

Question 6

HLPaper 2

EcoHome Ltd (EH)

EcoHome Ltd (EH) manufactures environmentally friendly household cleaning products in Canada. Due to increasing competition, EH heavily invested in research and development (R&D) to create innovative products. The R&D expenditure significantly increased costs, negatively affecting profitability in the company's recent final accounts.

EH has recently faced a significant product recall crisis due to contamination discovered in one of its cleaning products. This crisis damaged EH's reputation, caused a substantial drop in sales, and negatively impacted liquidity.

Management is considering adopting lean production techniques to reduce production costs and enhance efficiency. Some stakeholders argue this could prevent future crises and restore consumer confidence. However, employees are concerned that lean production may lead to job losses and lower job security.

EH's marketing strategy historically emphasized its environmental values. Given the recent crisis, the management team is debating whether to continue highlighting environmental benefits or shift toward emphasizing product safety and quality.

Define the term ‘lean production’.

[2]

Explain two reasons why EH invests heavily in research and development (R&D).

[4]

Explain two impacts the product recall crisis may have on EH’s final accounts.

[4]

Explain two ways lean production methods could help EH manage or avoid future crises.

[4]

Recommend whether EH should continue emphasizing environmental benefits in its marketing strategy or shift its focus to product safety and quality following the crisis.

[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

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 9

HLPaper 2

VR-Furniture Ltd (VRF)

VR-Furniture Ltd (VRF) is a Norwegian company manufacturing sustainable furniture. Recently, VRF acquired a mass-market furniture manufacturer based in Vietnam to expand production and enter larger international markets. This acquisition caused significant cultural clashes between the management teams of Norway and Vietnam, and increased barriers to communication across the merged organization.

VRF traditionally focused on a small, premium niche market, emphasizing high-quality, sustainable designs, including cradle-to-cradle production methods. However, after acquiring the Vietnamese business, VRF must decide whether to maintain its niche market approach or shift towards a broader mass market strategy.

To enhance customer experience, VRF recently introduced virtual reality (VR) showrooms, allowing customers to visualize products at home. However, integration difficulties emerged due to operational differences between the high-tech Norwegian headquarters and more traditional production methods in Vietnam.

Management is also reviewing internal productivity metrics to evaluate the effectiveness of the current operations methods, particularly job production versus mass production.

Distinguish between a niche market and a mass market.

[2]

Explain two potential barriers to communication resulting from VRF’s international acquisition.

[4]

Explain two reasons why cultural clashes might negatively impact VRF’s performance.

[4]

Explain two advantages of VRF using cradle-to-cradle design principles.

[4]

Recommend whether VRF should adopt mass production or continue with job production to optimize productivity, given its recent acquisition and market strategy.

[10]

Question 10

HLPaper 2

SmartHome Solutions Ltd (SHS)

SmartHome Solutions Ltd (SHS) is a technology company based in Germany, specializing in innovative smart home appliances that utilize the Internet of Things (IoT). SHS has seen rapid growth due to its advanced technology protected by strong intellectual property (IP) rights, such as patents and trademarks.

Recently, SHS faced increasing competition, which affected its efficiency ratios, especially inventory turnover and debtor days. The management is considering several strategies to improve these efficiency ratios.

To maintain its competitive edge, SHS emphasizes superior quality products. However, ensuring quality has become challenging during expansion, prompting management to review current methods of managing quality, such as quality control and quality assurance.

Additionally, SHS’s sales department recently struggled with sales forecasting, resulting in inaccurate inventory levels and production schedules.

Internal tensions have arisen due to rapid expansion, causing conflicts between management and production staff. SHS management is now evaluating various approaches to conflict resolution, including conciliation, arbitration, and worker participation.

Define the term ‘intellectual property protection’.

[2]

Explain two methods SHS could use to manage quality effectively.

[4]

Explain two strategies SHS could implement to improve efficiency ratios.

[4]

Explain two reasons why accurate sales forecasting is particularly important for SHS.

[4]

Recommend two suitable approaches SHS could adopt to resolve internal workplace conflicts effectively.

[10]

Global Solar Solutions (GSS)