Practice 1.5 Growth and evolution 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.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector. Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
Explain one way the company’s objective to increase market share could influence operational decisions.
BloomBites Ltd.
BloomBites Ltd. is a company specializing in healthy café food. After strong success in its home market, the company has recently begun franchising internationally. As part of its growth strategy, BloomBites is evaluating its financial performance and expansion model.
The management has set a strategic objective to achieve 100 outlets worldwide within five years, and tactical objectives focused on improving average customer spend.
Below are extracts from BloomBites Ltd.'s final accounts for 2024:
| Statement of Profit and Loss 2024 (in $'000) |
|---|
| Revenue |
| Cost of goods sold (COGS) |
| Gross profit |
| Expenses |
| Net profit before tax |
| Statement of Financial Position 2024 (in $'000) |
|---|
| Non-current assets |
| Current assets |
| Current liabilities |
| Net assets |
Additional data:
Answer all the questions.
Calculate the missing figures for: (i) Revenue (ii) Net profit before tax
Outline one internal growth method and one external growth method BloomBites Ltd. could pursue.
Identify one internal economy of scale and one external economy of scale relevant to BloomBites Ltd.
Explain one example of stakeholder conflict that may arise in BloomBites Ltd.’s franchising model.
Distinguish between a strategic objective and a tactical objective for BloomBites Ltd.
Question 14: ClearWave Ltd.
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024.
Show all your working.
Calculate the actual net profit for Q2 2024.
Show all your working.
Analyse how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
UrbanRide (UR)
UrbanRide (UR) is a ride-sharing company that operates in major cities. The company has grown rapidly through aggressive marketing and technology development. However, it now faces significant challenges in scaling further, as larger competitors dominate the market.
To continue its growth, UR is exploring different strategies, including forming strategic alliances with local governments to expand its services or acquiring smaller ride-sharing companies in niche markets.
Explain one external diseconomy of scale that UrbanRide might face as it continues to grow.
Analyze two reasons why UrbanRide might choose to pursue strategic alliances rather than mergers or acquisitions for its growth.
Discuss the potential impact of external growth through acquisitions on UrbanRide’s organizational culture and brand reputation.
FreshEats Ltd (FE)
FreshEats Ltd (FE) is a rapidly expanding healthy fast-food chain based in Australia. The company has recently experienced significant growth, opening numerous outlets nationwide. This expansion has led to changes in organizational culture, shifting from a family-oriented culture to a more profit-driven environment. Some employees feel alienated, resulting in tensions and declining morale.
FE’s expansion required significant investment, financed through debt, affecting the company's profitability and liquidity ratios. Recent financial analysis indicates decreasing liquidity, causing concern among stakeholders about FE’s short-term financial health.
FE management is considering franchising as an alternative growth strategy, believing it could improve both liquidity and operational efficiency. However, employees are worried franchising could negatively impact their job security and working conditions, increasing risks of industrial action.
FE currently faces uncertainty regarding how many units they need to sell to break even at the new locations. Accurate break-even analysis is critical for financial planning during the ongoing expansion.
Define the term ‘franchising’.
Explain two ways rapid growth may negatively affect FE’s organizational culture.
Explain two reasons why profitability ratios might improve while liquidity ratios worsen.
Calculate the break-even quantity for FE if fixed costs are USD 120,000, average selling price per unit is USD 8, and average variable cost per unit is USD 5. Show all working.
Recommend whether FE should pursue franchising as a growth strategy, considering industrial relations and financial factors.
EcoTech Solutions (ETS)
EcoTech Solutions (ETS) is a mid-sized company that specializes in developing sustainable energy solutions. The company has experienced rapid growth in recent years, largely through internal expansion.
ETS is now exploring external growth opportunities, including mergers and acquisitions (M&As) or forming strategic alliances with other companies in the renewable energy industry to accelerate its development.
Identify and explain one internal economy of scale that EcoTech Solutions might experience as it grows.
Analyze the potential advantages and disadvantages of EcoTech Solutions pursuing a merger with a competitor.
Discuss the reasons why EcoTech Solutions might choose external growth methods such as mergers, acquisitions, or strategic alliances instead of continuing to grow internally.
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 | — |
—
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.
Analyse how the company’s business purpose may influence strategic financial decisions as it grows.
FreshBites Bakery (FB)
FreshBites Bakery (FB) is a small, family-owned bakery that has operated in the local community for over 20 years. The bakery is known for its high-quality pastries and personalized service, which has attracted a loyal customer base.
As larger bakery chains begin to open nearby, FB is considering different growth options to remain competitive, including franchising its business model or forming a joint venture with a local coffee shop to expand its product offerings.
Explain the difference between internal and external growth, using FreshBites Bakery as an example.
Analyze two reasons why FreshBites Bakery might choose to stay small despite increased competition.
Discuss the potential benefits and drawbacks of franchising as a growth strategy for FreshBites Bakery.
PureGlow Ltd (PG)
PureGlow Ltd (PG) is a cosmetics company founded in France, specializing in natural skincare products. Due to steady success domestically, PG is planning significant international expansion into the markets of the United States and Japan, becoming a multinational company (MNC).
PG has historically relied on a centralized communication approach. However, the recent rapid growth and evolution of the company have caused communication breakdowns between senior management and regional teams, leading to employee frustration and signs of demotivation.
Management acknowledges that maintaining employee motivation is essential for successful expansion. They also recognize that detailed market research in the new markets is crucial to inform their product offerings and promotional strategies effectively.
Define the term ‘market research’.
Outline two advantages for PG of becoming a multinational company (MNC).
Explain two ways poor communication might demotivate PG’s employees during expansion.
Explain two reasons why PG should conduct market research before entering new markets.
Analyze whether PG should decentralize its communication approach to support international growth, considering employee motivation and effective market research.
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.
Practice 1.5 Growth and evolution 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.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector. Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
Explain one way the company’s objective to increase market share could influence operational decisions.
BloomBites Ltd.
BloomBites Ltd. is a company specializing in healthy café food. After strong success in its home market, the company has recently begun franchising internationally. As part of its growth strategy, BloomBites is evaluating its financial performance and expansion model.
The management has set a strategic objective to achieve 100 outlets worldwide within five years, and tactical objectives focused on improving average customer spend.
Below are extracts from BloomBites Ltd.'s final accounts for 2024:
| Statement of Profit and Loss 2024 (in $'000) |
|---|
| Revenue |
| Cost of goods sold (COGS) |
| Gross profit |
| Expenses |
| Net profit before tax |
| Statement of Financial Position 2024 (in $'000) |
|---|
| Non-current assets |
| Current assets |
| Current liabilities |
| Net assets |
Additional data:
Answer all the questions.
Calculate the missing figures for: (i) Revenue (ii) Net profit before tax
Outline one internal growth method and one external growth method BloomBites Ltd. could pursue.
Identify one internal economy of scale and one external economy of scale relevant to BloomBites Ltd.
Explain one example of stakeholder conflict that may arise in BloomBites Ltd.’s franchising model.
Distinguish between a strategic objective and a tactical objective for BloomBites Ltd.
Question 14: ClearWave Ltd.
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024.
Show all your working.
Calculate the actual net profit for Q2 2024.
Show all your working.
Analyse how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
UrbanRide (UR)
UrbanRide (UR) is a ride-sharing company that operates in major cities. The company has grown rapidly through aggressive marketing and technology development. However, it now faces significant challenges in scaling further, as larger competitors dominate the market.
To continue its growth, UR is exploring different strategies, including forming strategic alliances with local governments to expand its services or acquiring smaller ride-sharing companies in niche markets.
Explain one external diseconomy of scale that UrbanRide might face as it continues to grow.
Analyze two reasons why UrbanRide might choose to pursue strategic alliances rather than mergers or acquisitions for its growth.
Discuss the potential impact of external growth through acquisitions on UrbanRide’s organizational culture and brand reputation.
FreshEats Ltd (FE)
FreshEats Ltd (FE) is a rapidly expanding healthy fast-food chain based in Australia. The company has recently experienced significant growth, opening numerous outlets nationwide. This expansion has led to changes in organizational culture, shifting from a family-oriented culture to a more profit-driven environment. Some employees feel alienated, resulting in tensions and declining morale.
FE’s expansion required significant investment, financed through debt, affecting the company's profitability and liquidity ratios. Recent financial analysis indicates decreasing liquidity, causing concern among stakeholders about FE’s short-term financial health.
FE management is considering franchising as an alternative growth strategy, believing it could improve both liquidity and operational efficiency. However, employees are worried franchising could negatively impact their job security and working conditions, increasing risks of industrial action.
FE currently faces uncertainty regarding how many units they need to sell to break even at the new locations. Accurate break-even analysis is critical for financial planning during the ongoing expansion.
Define the term ‘franchising’.
Explain two ways rapid growth may negatively affect FE’s organizational culture.
Explain two reasons why profitability ratios might improve while liquidity ratios worsen.
Calculate the break-even quantity for FE if fixed costs are USD 120,000, average selling price per unit is USD 8, and average variable cost per unit is USD 5. Show all working.
Recommend whether FE should pursue franchising as a growth strategy, considering industrial relations and financial factors.
EcoTech Solutions (ETS)
EcoTech Solutions (ETS) is a mid-sized company that specializes in developing sustainable energy solutions. The company has experienced rapid growth in recent years, largely through internal expansion.
ETS is now exploring external growth opportunities, including mergers and acquisitions (M&As) or forming strategic alliances with other companies in the renewable energy industry to accelerate its development.
Identify and explain one internal economy of scale that EcoTech Solutions might experience as it grows.
Analyze the potential advantages and disadvantages of EcoTech Solutions pursuing a merger with a competitor.
Discuss the reasons why EcoTech Solutions might choose external growth methods such as mergers, acquisitions, or strategic alliances instead of continuing to grow internally.
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 | — |
—
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.
Analyse how the company’s business purpose may influence strategic financial decisions as it grows.
FreshBites Bakery (FB)
FreshBites Bakery (FB) is a small, family-owned bakery that has operated in the local community for over 20 years. The bakery is known for its high-quality pastries and personalized service, which has attracted a loyal customer base.
As larger bakery chains begin to open nearby, FB is considering different growth options to remain competitive, including franchising its business model or forming a joint venture with a local coffee shop to expand its product offerings.
Explain the difference between internal and external growth, using FreshBites Bakery as an example.
Analyze two reasons why FreshBites Bakery might choose to stay small despite increased competition.
Discuss the potential benefits and drawbacks of franchising as a growth strategy for FreshBites Bakery.
PureGlow Ltd (PG)
PureGlow Ltd (PG) is a cosmetics company founded in France, specializing in natural skincare products. Due to steady success domestically, PG is planning significant international expansion into the markets of the United States and Japan, becoming a multinational company (MNC).
PG has historically relied on a centralized communication approach. However, the recent rapid growth and evolution of the company have caused communication breakdowns between senior management and regional teams, leading to employee frustration and signs of demotivation.
Management acknowledges that maintaining employee motivation is essential for successful expansion. They also recognize that detailed market research in the new markets is crucial to inform their product offerings and promotional strategies effectively.
Define the term ‘market research’.
Outline two advantages for PG of becoming a multinational company (MNC).
Explain two ways poor communication might demotivate PG’s employees during expansion.
Explain two reasons why PG should conduct market research before entering new markets.
Analyze whether PG should decentralize its communication approach to support international growth, considering employee motivation and effective market research.
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.