Practice 1.1 What is a business? 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.
CleanCurrent Ltd.
CleanCurrent Ltd. is a renewable energy start-up that installs solar panels for residential and small business clients. Initially formed as a sole trader, the business recently transitioned into a private limited company (Ltd) to scale operations and attract investment. Its primary business objectives are to increase market share in suburban regions, reduce customer acquisition costs, and achieve positive monthly cash flow by the end of the fiscal year.
The business recently launched a referral programme and expanded into two new districts. While customer inquiries have increased, installation capacity has been strained, leading to delays in payments and project backlogs. This has created tension with certain stakeholders, including installers and suppliers, who are now facing late payments.
The finance manager has prepared a simple cash flow forecast for August 2024 to assess the immediate impact of CleanCurrent’s growth and financial decisions.
Table 1: Cash Flow Forecast – August 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 10,000 |
| Cash inflows | 82,000 |
| Cash outflows | 96,000 |
| Closing balance | — |
Explain one reason why CleanCurrent Ltd. may have changed from a sole trader to a private limited company.
Calculate the net cash flow and closing balance for August 2024. Show all your working.
Suggest one conflict that might arise between two stakeholder groups as a result of CleanCurrent’s recent expansion.
Analyse how cash flow challenges could affect CleanCurrent’s ability to meet its business objectives.
Suggest one short-term strategy CleanCurrent Ltd. could implement to manage cash flow more effectively.
Elevate Health Tech (EHT)
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for EHT over the next five years.
Green Haven Ltd. (GH)
Green Haven Ltd. (GH) is a small private limited company that produces indoor hydroponic garden kits. GH was started by two former biology teachers with the aim of promoting sustainable food production in urban homes.
Initially, GH was funded through personal savings and a bank loan. In its first year of operation, GH earned $240,000 in revenue and incurred $160,000 in total costs. GH now aims to expand and is considering applying for a government grant to help fund the purchase of new machinery.
Table 1 shows selected financial information for GH.
Table 1: Selected financial data for GH
| Item | Amount ($) |
|---|---|
| Revenue | 240,000 |
| Total costs | 160,000 |
| Net profit | ? |
| Loan interest (annual) | 5,000 |
| Owner investment | 40,000 |
Define the term business.
Identify two characteristics of a private limited company (Ltd).
Calculate GH’s net profit for its first year of operation.
Show all your working.
State one short-term and one long-term source of finance GH is using or considering.
Explain one benefit for GH of having a social objective, such as promoting sustainable food production.
FlexiFreeze Ltd.
FlexiFreeze Ltd. is a medium-sized business that manufactures portable solar-powered refrigeration units for off-grid medical and disaster relief use. It was originally set up as a partnership but restructured into a private limited company (Ltd) after receiving a contract from an international NGO. The company’s business purpose is to deliver low-cost, high-impact refrigeration solutions to underserved communities while achieving sustainable long-term growth.
In Q2 2024, the business launched a new production facility to meet rising demand. While this supported its growth and evolution, it also strained liquidity. Some stakeholders, including suppliers and staff, have expressed concerns about delayed payments and overtime demands.
The finance team has provided the final income statement for Q2 2024 and a comparison with budgeted figures, alongside a cash flow forecast to assess short-term financial pressures.
Table 1: Budgeted vs Actual Income Statement – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 950,000 | 900,000 |
| Cost of goods sold | 520,000 | 580,000 |
| Operating expenses | 310,000 | 330,000 |
| Net profit | 120,000 | — |
Table 2: Cash Flow Forecast – July 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 40,000 |
| Cash inflows | 250,000 |
| Cash outflows | 295,000 |
| Closing balance | — |
Explain one reason why FlexiFreeze Ltd. may have changed from a partnership to a private limited company.
Calculate the actual net profit for Q2 2024 Show all your working.
Comment on how the company’s cash flow and profit results might affect its relationship with stakeholders.
Suggest one risk FlexiFreeze Ltd. may face as it expands.
Outline how the company’s business purpose may influence strategic financial decisions as it grows.
GreenScape Interiors (GI)
GreenScape Interiors (GI) is a new start-up founded by Olivia, an entrepreneur with a vision to promote biophilic design in office spaces. GI specializes in designing and installing indoor plant arrangements and sustainable decor solutions to improve employee well-being and productivity. The business targets companies that prioritize sustainability and employee wellness.
To differentiate itself in the competitive market, GI offers unique services, such as using artificial intelligence (AI) to monitor the health of plants and automatically adjust lighting and irrigation. However, GI faces several challenges, including high initial investment costs for the AI technology and difficulties convincing some traditional companies to adopt biophilic design concepts.
Analyze two ways in which GI can address the challenges of high initial costs and market resistance to biophilic design.
Discuss how entrepreneurship and innovation could play a role in GI’s efforts to achieve sustainable growth.
TechyKids (TK)
TechyKids (TK) is a start-up that provides coding classes and STEM workshops for children aged 7 to 14. The company was founded by Samir, who saw a growing demand for tech skills in education. TK aims to prepare the younger generation for future careers by teaching coding in a fun, engaging way. Classes are held both online and in local community centers.
While TK has received positive feedback from parents, the start-up faces challenges such as keeping up with rapid changes in technology and competition from larger educational platforms. To remain competitive, TK is considering offering new programs in areas like robotics and virtual reality (VR). However, these expansions would require significant investments in equipment and staff training.
Explain the benefits and drawbacks of expanding into robotics and VR for TechyKids.
Analyze how keeping up with rapid technological changes could impact TK’s operations and business strategy.
Discuss the role of entrepreneurial leadership in helping TK navigate the challenges of expanding and staying competitive.
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.
EcoPulse Ltd (EP)
EcoPulse Ltd (EP) is an innovative company founded in Germany, specializing in sustainable electronic devices. After rapid domestic growth, EP aims to expand internationally, transforming into a multinational company (MNC) by establishing subsidiaries in Brazil and India.
EP's international growth strategy focuses heavily on acquiring local businesses to quickly achieve market presence. However, rapid expansion has generated concerns among key stakeholders, notably employees and environmental organizations. Employees worry about changes in organizational culture and job security, resulting in signs of demotivation. Environmental groups fear that EP's rapid growth may undermine its original commitment to sustainability.
To manage international expansion effectively, EP’s board is reconsidering its predominantly autocratic leadership and management style. The board believes adopting a more democratic leadership style may improve employee motivation and stakeholder relationships during this critical growth phase.
Define the term ‘stakeholder’.
Explain two benefits for EP of becoming a multinational company (MNC).
Explain two potential sources of employee demotivation resulting from EP’s rapid growth.
Explain two advantages for EP of adopting a democratic leadership style during international expansion.
Recommend whether EP should continue expanding internationally through acquisitions or pursue organic growth instead.
Sunrise Smoothies (SS)
Sunrise Smoothies (SS) is a new start-up established by Jacob, an entrepreneur who wants to promote healthy living. SS specializes in selling freshly blended smoothies using locally sourced organic fruits. Jacob plans to open his first shop in a busy urban area where many health-conscious consumers live. He aims to differentiate SS from existing competitors by offering personalized smoothie blends and providing nutrition consultation services to customers.
Jacob faces several challenges with his start-up. The smoothie market is highly competitive, with large, well-established brands dominating. Additionally, Jacob must comply with strict local regulations regarding food safety and sourcing organic ingredients. To overcome these challenges, he is considering using a mobile app to engage customers, offer loyalty rewards, and share health tips.
Identify and explain the primary and tertiary sectors in which SS operates.
Analyze two opportunities that Jacob could explore to grow Sunrise Smoothies.
Discuss how entrepreneurship could help Jacob overcome the challenges faced by Sunrise Smoothies.
Urban Rides (UR)
Urban Rides (UR) is a start-up established by Alex, an entrepreneur passionate about sustainable transport. UR offers electric bike rentals in a busy metropolitan area, targeting commuters and tourists who want an eco-friendly and convenient mode of transportation.
The bikes can be rented through a mobile app, which also provides information on bike availability, charging stations, and route suggestions. The electric bike market is growing rapidly, but UR faces stiff competition from established companies offering similar services.
Additionally, there are significant costs associated with purchasing and maintaining the bikes, as well as complying with local government regulations for operating rental services. To differentiate UR, Alex is considering offering subscription plans with discounted rates, as well as introducing guided city tours.
Identify and explain two sectors of the economy in which UR operates.
Analyze two challenges that Urban Rides might face as a start-up in the electric bike rental market.
Discuss how Alex’s entrepreneurial skills could contribute to overcoming the challenges faced by Urban Rides.