IB BUSINESS MANAGEMENT HL, Paper 2, May, 2013, TZ0, Solved Past Paper

Las Rosas (LR) is a large commercial dairy farm that has been owned and managed by the D'Aremberg family since 1986. The farm is known for its organic dairy products, which include milk, cheese, and yoghurts. With 3800 cows, LR has established a reputation for quality by ensuring that its products are free from chemical additives, and the cows are fed a diet without hormones and supplements. This commitment to quality has allowed LR to meet both national and international standards, enhancing its marketability and customer trust.

LR's corporate culture is centered around innovation and the use of cell production, which encourages employees to be creative and take ownership of the production process. This approach has led to continuous improvements in profits and cash flow, with no outstanding loans, resulting in a zero gearing ratio. However, LR's financial manager is concerned about the high R&D budget and legal constraints, suggesting that these factors may limit the development of new products.

LR is considering acquiring El Remanzo, a nearby sheep farm, for $24 million. This acquisition would require LR to cut its R&D budget to zero and take out a new loan, leading to significant restructuring. Despite these challenges, the potential economies of scale could be substantial, enhancing LR's competitive edge.