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These are explanations and solutions for IB past papers, not the official version. For official papers, you can go to IB Follet or access them through your school.

02 Hours 30 Minutes

100 Marks

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IB BUSINESS MANAGEMENT HL, Paper 2, May, 2004, TZ0, Solved Past Paper

Master the 2004 IB May for Paper 2 Business Management HL with examiner tailored solutions and comments for TZ0

Question 1 [Explained]

The case study of IBM in the 1990s provides a fascinating example of corporate culture and its impact on a company's ability to adapt and thrive in a changing business environment. Corporate culture refers to the shared values, beliefs, norms, and practices that shape the behavior and attitudes of employees within an organization. It is often seen as the "personality" of a company, influencing how employees interact with each other and with external stakeholders. In the context of IBM, the culture was described as traditional, formal, and regimented, with employees wearing dark suits and white shirts. This culture was deeply ingrained and reflected a conservative approach that prioritized reliability and control.

However, as the business landscape evolved, IBM's culture began to hinder its growth and adaptability. The company's internal environment was characterized by bureaucracy and a lack of trust, with departments competing against each other rather than collaborating. This internal competition and rigidity were at odds with the fast-paced, innovative nature of the high-tech industry in which IBM operated. Louis Gerstner, the CEO at the time, recognized the need for cultural change to align the company's internal dynamics with its strategic goals and the demands of the external market.

Gerstner understood that changing a deeply entrenched corporate culture could not be imposed from the top down. Instead, he focused on creating conditions and incentives that would empower employees to take responsibility for change. By fostering an environment where employees could manage and benefit from conflict, IBM aimed to develop a culture that embraced change and innovation. This approach highlights the importance of aligning corporate culture with a company's strategic objectives and the external environment to ensure long-term success.

Question 1 [a] [Explanation]

This part of the question asks you to explain the concept of corporate culture, specifically in the context of IBM. Corporate culture encompasses the shared values, beliefs, and practices that shape how employees behave and interact within an organization. It is often considered the "personality" of a company and can influence its strategy, operations, and public image. For IBM, the corporate culture in the 1990s was seen as traditional and conservative, characterized by formal attire and a regimented approach. This culture was reliable but also potentially outdated in the context of a rapidly changing high-tech industry.

Question 1 [a] [ii] [Explanation]

This part of the question requires you to examine the reasons why Louis Gerstner felt it was necessary to change IBM's corporate culture. Gerstner recognized that the existing culture was hindering IBM's growth and affecting its image as a high-tech company. The culture was bureaucratic, with internal competition and a lack of trust, which were not conducive to adapting to changes in the external environment. Gerstner understood that for IBM to succeed in the long run, it needed to align its culture with its strategic goals and the demands of the market.

Question 1 [b] [Explanation]

This part of the question asks you to evaluate the conditions and incentives that could be introduced to reduce employees' resistance to change. In the context of IBM, creating conditions that empower employees and provide incentives for change is crucial to overcoming resistance. Conditions may include better training, more participation in decision-making, and improved communication channels. Incentives could involve linking performance to pay, offering bonuses, and recognizing achievements. The goal is to create an environment where employees feel motivated and supported in embracing change.

Question 1 [c] [Explanation]

This part of the question asks you to analyze the factors that influence the degree of centralization and decentralization in multinational companies like IBM. Centralization involves decision-making at the top levels of the organization, while decentralization allows for delegation and autonomy at lower levels. Factors influencing the degree of centralization include cost and risk, the desire for uniformity, the firm's culture and history, and the quality of management. In the context of IBM, the need for coordination and compatibility in standards and products worldwide may necessitate a certain level of centralization, while the fast-moving environment may require some degree of decentralization to remain competitive.