Business Management SL
IB Questions
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Question 1 of 10
Chris and Joanna founded Coastal Retreats (CR), a company owning a chain of eco-friendly resorts on various islands. These resorts offer sustainable luxury accommodations and activities like snorkeling, hiking, and organic farming workshops. CR targets environmentally conscious travelers.
CR focuses on market skimming to maximize initial revenues from niche customers willing to pay a premium for exclusive eco-experiences. However, increased competition and changing customer preferences toward more budget-friendly options are challenging CR's profitability.
Define the term niche market.
Explain two roles of CR's market skimming strategy.
Explain one advantage and one disadvantage for CR of its market skimming strategy.
Using the Ansoff matrix, evaluate the two possible growth strategies for CR.
Question 2 of 10
SoundWise Ltd. (SW) specializes in producing high-end audio equipment. The company has been exploring various opportunities to leverage economies of scale due to its expanding production capabilities. In recent years, SW has been facing increased competition from online retailers and boutique audio shops. To maintain its market position, SW implemented a new digital marketing strategy and revamped its product line.
| $ | |
|---|---|
| Gross profit | 7400000 |
| Net profit margin | 5% |
| Sales revenue | 30000000 |
Key financial figures for SoundWise Ltd. in 2021.
SW is contemplating launching a subscription model for its products, offering regular upgrades and exclusive content packages to its customers. It also considers enhancing its online presence to boost sales directly to consumers, reducing reliance on traditional retail partners.
State two factors that contribute to economies of scale in the production sector.
Explain two elements of SoundWise Ltd.'s marketing mix other than price.
Calculate for 2021:
SW's gross profit margin (no working required);
SW's net profit before interest and tax (no working required).
Evaluate the potential impact of launching a subscription model for SW's products.
Discuss two strategic initiatives SW could undertake to bolster its competitive position amidst rising competition.
Question 3 of 10
Cloud Innovations (CI) is a technology start-up that specializes in providing cloud-based solutions for small and medium-sized enterprises (SMEs). Founded five years ago, CI has rapidly gained a foothold in the market by offering competitive pricing and flexible service packages. CI’s primary objectives for this year are to expand its market share and enhance brand recognition. However, CI faces increasing competition from both well-established firms and other start-ups. The company is considering going public to raise additional capital for expansion but is weighing the advantages and disadvantages of this move.
| 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|
| Sales Revenue ($000) | 2000 | 2800 | 3500 | 3900 |
| Net Profit ($000) | 300 | 450 | 700 | 750 |
CI's financial performance over the past four years.
Identify two financial objectives that a company like CI might aim to achieve.
Explain one advantage and one disadvantage for CI if it decides to go public.
Discuss the importance of brand recognition for CI in achieving its business objectives.
Evaluate CI's potential strategies to enhance its competitive advantage in the cloud computing market.
Question 4 of 10
Essential Cosmetics Corp. (ECC) produces beauty products and distributes them globally. ECC is facing competition and aims to improve its brand image to increase profitability. The financial forecasts for ECC in 2023 are shown below.
| Amount (\$ 000's) | |
|---|---|
| Cost of sales | \(\$ 45000\) |
| Debtors | \(\$ 5000\) |
| Operating expenses | \(\$ 15000\) |
| Gross profit | \(\mathbf{A}\) |
| Sales revenue | \(\$ 80000\) |
| Interest | \(\$ 2500\) |
| Net profit before interest and tax | \(\$ 12000\) |
| Net profit before tax | \(\$ 9500\) |
| Net profit after tax | \(\mathbf{B}\) |
| Tax | 25% |
Projected financial data for ECC in 2023
Define the term brand image and state one reason why it is important for ECC's profitability.
Calculate:
ECC's gross profit (\(\mathbf{A}\)) for 2023; (show all your working).
Net profit after tax (\(\mathbf{B}\)) for 2023; (show all your working).
Explain two strategies ECC could use to improve its brand image and attract more customers.
Compare ECC's profit and its cash flow by explaining one key difference.
Question 5 of 10
Artisan Bakery Ltd. (ABL) is a family-owned business operating in the UK. Established in 1995, ABL specializes in organic bread and bakery products. The company started as a small partnership but transformed into a private limited company in 2010 to access more financing and share growth with family members.
| 2020 | 2021 | |
|---|---|---|
| Revenue (£) | 500,000 | 650,000 |
| Cost of Goods Sold (£) | 300,000 | 360,000 |
| Operating Expenses (£) | 150,000 | 180,000 |
| Net Profit (£) | 50,000 | 110,000 |
Financial performance of ABL for 2020 and 2021.
Identify two characteristics of a private limited company.
Compare the financial performance of ABL in 2020 and 2021.
Explain two potential impacts of ABL's growth strategy on its stakeholders.
Evaluate whether ABL should consider expanding its product line to include gluten-free products based on current market trends.
Question 6 of 10
CleanWind Turbines Co. (CWTC) manufactures and sells wind turbines across several regions, focusing on sustainable energy solutions. The company operates in a region where the infrastructure is modern, but political stability is uncertain due to frequent policy changes. Economic growth in the region is robust, but income inequality is high, impacting consumer spending patterns. Social movements advocating for environmental responsibility are gaining momentum, influencing consumer preferences towards eco-friendly products.
| 2020 | 2021 | |
|---|---|---|
| Sales Revenue ($) | 5,000,000 | 6,500,000 |
| Cost of Goods Sold ($) | 3,000,000 | 3,600,000 |
| Gross Profit ($) | 2,000,000 | 2,900,000 |
| Expenses ($) | 1,200,000 | 1,500,000 |
| Net Profit Before Interest and Tax ($) | 800,000 | 1,400,000 |
Financial summary of CWTC for 2020 and 2021.
Using a PEST framework, describe two external factors that may affect CWTC.
Calculate:
the gross profit margin for CWTC in 2021 (no working required);
the net profit before interest and tax (NPBIT) margin for 2020 (show all your working);
the forecasted net profit before interest and tax (NPBIT) for 2022, assuming a 10% increase from 2021 (show all your working).
Discuss the implications of income inequality on CWTC’s business strategy.