Practice 5.8 Research and development (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.
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
Global Solar Solutions (GSS)
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
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.
VisionWare Ltd.
VisionWare Ltd. specializes in AI-powered smart home devices. The company is planning to launch a new product and must choose between two investment projects: Project Alpha and Project Beta.
| Investment Data for VisionWare Ltd. |
|---|
| Initial investment (both projects) |
| Project Alpha: total net cash inflows (4 years) |
| Project Beta: total net cash inflows (3 years) |
| Project Alpha: Yearly inflows: Y1 180,000, Y3 180,000 |
| Project Beta: Yearly inflows: Y1 200,000, Y3 $100,000 |
| Discount rate for NPV |
VisionWare Ltd. is also reorganizing internal reporting, assigning responsibility for controlling spending in different departments.
In addition, management is focused on protecting their proprietary AI algorithms from competitors and using customer data to identify emerging needs before competitors do.
Calculate the payback period for Project Beta.
Calculate the average rate of return (ARR) for Project Alpha.
Calculate the Net Present Value (NPV) for Project Beta, assuming a 10% discount rate and using approximate NPV factors:
Identify the difference between cost centres and profit centres within an organization like VisionWare Ltd.
Suggest one reason why protecting intellectual property is important for VisionWare Ltd.
Alpha Robotics – Optimizing HR and Operations for Growth
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
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.
CleanWave Ltd (CW)
CleanWave Ltd (CW) is a successful manufacturer of sustainable clothing based in Sweden. CW has grown significantly and now plans to expand internationally, entering markets in the United States and South Korea.
To support its international expansion, CW recently adopted a matrix organizational structure, combining functional and geographical divisions. This structure aims to enhance responsiveness to local market conditions. However, employees have reported increased confusion about their roles and responsibilities, creating challenges for communication across departments and geographical locations.
CW invests significantly in research and development (R&D) to maintain a competitive advantage through innovative, eco-friendly materials. The company's current marketing strategy focuses on environmental sustainability and quality. CW's marketing team debates whether to adopt a standardized international marketing approach or adapt specifically to consumer preferences in the US and South Korean markets.
Define the term ‘business’.
Explain two features of a matrix organizational structure at CW.
Explain two benefits for CW of effective communication within its matrix structure.
Explain two reasons why CW invests in research and development (R&D).
Evaluate whether CW should adopt a standardized or adapted international marketing strategy for the US and South Korea markets.
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’.
Explain two reasons why EH invests heavily in research and development (R&D).
Explain two impacts the product recall crisis may have on EH’s final accounts.
Explain two ways lean production methods could help EH manage or avoid future crises.
Recommend whether EH should continue emphasizing environmental benefits in its marketing strategy or shift its focus to product safety and quality following the crisis.
| 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 |
Using an appropriate business management theory, describe a human need that ECS meets through its business model.
Explain two possible challenges ECS faces in balancing its ethical objectives with its operational growth.
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.
AeroTech Drones – Scaling Production While Maintaining Financial Stability
| Financial Indicator | Value |
|---|---|
| Revenue | $200 million |
| Gross Profit Margin | 40% |
| Net Profit Margin | 8% |
| Current Ratio | 0.9 |
| Gearing Ratio | 62% |
| Option | Fixed Costs ($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 |
Using an appropriate business management theory, describe a financial challenge AeroTech Drones is facing.
Explain two operational challenges AeroTech Drones faces in scaling its production efficiently.
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.
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’.
Explain two methods SHS could use to manage quality effectively.
Explain two strategies SHS could implement to improve efficiency ratios.
Explain two reasons why accurate sales forecasting is particularly important for SHS.
Recommend two suitable approaches SHS could adopt to resolve internal workplace conflicts effectively.
VivaSport Ltd (VS)
VivaSport Ltd (VS) is a well-established sportswear brand headquartered in Spain. VS has recently expanded internationally into the United States and Australia. Its growth relies heavily on strong brand recognition, a significant intangible asset.
VS’s recent investments in international expansion have led to high recorded profits, yet management has become increasingly concerned about poor cash flow. Management notes a complex relationship between their recent investments, profits, and cash flow, highlighting growing liquidity pressures despite profitability.
To better manage these international markets, VS relies on rigorous sales forecasting. However, recent forecasts have proven unreliable, causing inventory management issues. Additionally, VS faces multiple threats in international marketing, including strong competition, cultural differences, and currency fluctuations.
To stay competitive, VS continually seeks to address customers’ unmet needs through product innovations, recently introducing new moisture-wicking technology. However, its current marketing planning processes have struggled to effectively leverage this innovation internationally.
Define the term ‘intangible asset’.
Explain the relationship between investment, profit, and cash flow at VS.
Explain two potential reasons why sales forecasting at VS might be inaccurate.
Explain two threats VS faces in international marketing.
Recommend two ways VS could improve its marketing planning to more effectively address customers’ unmet needs internationally.
Practice 5.8 Research and development (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.
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
Global Solar Solutions (GSS)
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
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.
VisionWare Ltd.
VisionWare Ltd. specializes in AI-powered smart home devices. The company is planning to launch a new product and must choose between two investment projects: Project Alpha and Project Beta.
| Investment Data for VisionWare Ltd. |
|---|
| Initial investment (both projects) |
| Project Alpha: total net cash inflows (4 years) |
| Project Beta: total net cash inflows (3 years) |
| Project Alpha: Yearly inflows: Y1 180,000, Y3 180,000 |
| Project Beta: Yearly inflows: Y1 200,000, Y3 $100,000 |
| Discount rate for NPV |
VisionWare Ltd. is also reorganizing internal reporting, assigning responsibility for controlling spending in different departments.
In addition, management is focused on protecting their proprietary AI algorithms from competitors and using customer data to identify emerging needs before competitors do.
Calculate the payback period for Project Beta.
Calculate the average rate of return (ARR) for Project Alpha.
Calculate the Net Present Value (NPV) for Project Beta, assuming a 10% discount rate and using approximate NPV factors:
Identify the difference between cost centres and profit centres within an organization like VisionWare Ltd.
Suggest one reason why protecting intellectual property is important for VisionWare Ltd.
Alpha Robotics – Optimizing HR and Operations for Growth
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
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.
CleanWave Ltd (CW)
CleanWave Ltd (CW) is a successful manufacturer of sustainable clothing based in Sweden. CW has grown significantly and now plans to expand internationally, entering markets in the United States and South Korea.
To support its international expansion, CW recently adopted a matrix organizational structure, combining functional and geographical divisions. This structure aims to enhance responsiveness to local market conditions. However, employees have reported increased confusion about their roles and responsibilities, creating challenges for communication across departments and geographical locations.
CW invests significantly in research and development (R&D) to maintain a competitive advantage through innovative, eco-friendly materials. The company's current marketing strategy focuses on environmental sustainability and quality. CW's marketing team debates whether to adopt a standardized international marketing approach or adapt specifically to consumer preferences in the US and South Korean markets.
Define the term ‘business’.
Explain two features of a matrix organizational structure at CW.
Explain two benefits for CW of effective communication within its matrix structure.
Explain two reasons why CW invests in research and development (R&D).
Evaluate whether CW should adopt a standardized or adapted international marketing strategy for the US and South Korea markets.
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’.
Explain two reasons why EH invests heavily in research and development (R&D).
Explain two impacts the product recall crisis may have on EH’s final accounts.
Explain two ways lean production methods could help EH manage or avoid future crises.
Recommend whether EH should continue emphasizing environmental benefits in its marketing strategy or shift its focus to product safety and quality following the crisis.
| 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 |
Using an appropriate business management theory, describe a human need that ECS meets through its business model.
Explain two possible challenges ECS faces in balancing its ethical objectives with its operational growth.
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.
AeroTech Drones – Scaling Production While Maintaining Financial Stability
| Financial Indicator | Value |
|---|---|
| Revenue | $200 million |
| Gross Profit Margin | 40% |
| Net Profit Margin | 8% |
| Current Ratio | 0.9 |
| Gearing Ratio | 62% |
| Option | Fixed Costs ($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 |
Using an appropriate business management theory, describe a financial challenge AeroTech Drones is facing.
Explain two operational challenges AeroTech Drones faces in scaling its production efficiently.
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.
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’.
Explain two methods SHS could use to manage quality effectively.
Explain two strategies SHS could implement to improve efficiency ratios.
Explain two reasons why accurate sales forecasting is particularly important for SHS.
Recommend two suitable approaches SHS could adopt to resolve internal workplace conflicts effectively.
VivaSport Ltd (VS)
VivaSport Ltd (VS) is a well-established sportswear brand headquartered in Spain. VS has recently expanded internationally into the United States and Australia. Its growth relies heavily on strong brand recognition, a significant intangible asset.
VS’s recent investments in international expansion have led to high recorded profits, yet management has become increasingly concerned about poor cash flow. Management notes a complex relationship between their recent investments, profits, and cash flow, highlighting growing liquidity pressures despite profitability.
To better manage these international markets, VS relies on rigorous sales forecasting. However, recent forecasts have proven unreliable, causing inventory management issues. Additionally, VS faces multiple threats in international marketing, including strong competition, cultural differences, and currency fluctuations.
To stay competitive, VS continually seeks to address customers’ unmet needs through product innovations, recently introducing new moisture-wicking technology. However, its current marketing planning processes have struggled to effectively leverage this innovation internationally.
Define the term ‘intangible asset’.
Explain the relationship between investment, profit, and cash flow at VS.
Explain two potential reasons why sales forecasting at VS might be inaccurate.
Explain two threats VS faces in international marketing.
Recommend two ways VS could improve its marketing planning to more effectively address customers’ unmet needs internationally.