Practice IB Business Management Topic 1.6 Multinational Companies with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 1.6 Multinational Companies and mirrors Paper 1, 2, 3 style where relevant.
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EcoCrate Ltd.
EcoCrate Ltd. manufactures eco-friendly modular furniture. Management is considering two options: buying prefabricated parts from a supplier (CTB) or making parts internally (CTM). They are also assessing lean production methods and ways to reorganize production internationally.
Table 1: Financial and Production Data for EcoCrate Ltd.
| Item | Amount |
|---|---|
| Fixed costs (in-house production) | $300,000 |
| Variable cost per unit (in-house) | $120 |
| Cost to buy (CTB) per unit from supplier | $160 |
| Selling price per unit | $250 |
| Expected sales volume | 5,000 units |
Additional notes:
Calculate EcoCrate Ltd.’s break-even quantity based on current in-house production costs.
Calculate the margin of safety in units based on expected sales.
Calculate the cost difference between Cost to Buy (CTB) and Cost to Make (CTM) at the expected sales volume.
Explain one effect of outsourcing production compared to insourcing.
Suggest one reason why labour turnover may have increased at EcoCrate Ltd.
Elevate Health Tech (EHT)
Elevate Health Tech (EHT) is a social enterprise based in Peru. Founded in 2021 by two biomedical engineers, it develops low-cost, portable diagnostic devices (such as digital stethoscopes and glucose meters) for use in rural and underserved communities across Latin America. EHT reinvests all profits into R&D and local employment programs.
EHT has grown quickly, scaling from 5 to 38 employees in two years. It operates as a private limited company, with both founders holding equal ownership and decision-making authority.
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.
WKM
WKM is a fast-growing agritech company that produces modular irrigation systems for small-scale farms. The company is exploring international expansion through partnerships with cooperatives in developing countries.
As part of this move, the board is reviewing WKM’s current vision and mission statements to ensure they reflect its long-term goals and social impact values. Some directors have raised concerns about how operations in lower-income regions could affect the brand’s reputation and stakeholder expectations.
WKM is also considering changing its accounting method for depreciation—from straight-line to units of production—to better reflect asset usage across regions. This change could impact financial statements, employee bonuses, and decision-making around asset replacement.
Management is evaluating whether the shift aligns with its strategic goals and provides more accurate cost control as the company scales globally.
Define the term mission statement.
Outline one feature of a cooperative as a for-profit social enterprise.
Suggest one impact on a host country if WKM expands as a multinational company (MNC).
Explain how the units of production method of depreciation would apply to WKM's modular irrigation systems.
Apply your knowledge of depreciation methods to suggest why the units of production method might be more appropriate for WKM than the straight-line method.
HydroGlow Ltd.
HydroGlow Ltd. is a fast-growing manufacturer of smart hydration devices. Founded by two engineers, it recently expanded into Southeast Asia and North America, marking its transition into a multinational company (MNC). Its business objective is to grow sustainably while maintaining high product innovation and employee well-being.
Due to expansion, the company adopted a divisional organisational structure, with separate regional heads managing operations. However, concerns have emerged about inconsistent leadership styles and uneven motivation levels across regional teams. Some managers use autocratic approaches to meet targets, while others encourage more inclusive practices.
HydroGlow Ltd. secured venture capital and a long-term loan to finance its growth, but now faces rising fixed costs and pressure to deliver strong returns. The finance team has compiled the following performance data from one of its new regional divisions.
Table 1: Financial data for HydroGlow Ltd. – Q1 2024 (North American Division)
| Item | Amount ($) |
|---|---|
| Units sold | 2,500 |
| Selling price per unit | 110.00 |
| Variable cost per unit | 45.00 |
| Salaries (admin, regional management) | 60,000 |
| Marketing and advertising | 35,000 |
| Logistics and warehousing | 20,000 |
| Office rent and utilities | 25,000 |
| Loan interest | 6,500 |
| Tax rate | 20% |
| Dividends paid | 15,000 |
Suggest one stakeholder group that may be most concerned about inconsistent leadership styles across HydroGlow’s divisions
Explain one way HydroGlow’s current organisational structure may help or hinder motivation across its international teams.
Construct a statement of profit or loss for HydroGlow Ltd.'s North American Division for Q1 2024 using the data in Table 1.
Suggest, using your statement of profit or loss, whether this regional division appears financially strong enough to support further growth.
HydroGlow is considering investing $120,000 in automated production to reduce labour costs. The project is expected to generate net cash inflows of $40,000 per year for four years.
Calculate the payback period for this investment. Show all your working.
Global Beans Ltd. (GBL)
Global Beans Ltd. (GBL) is a multinational company (MNC) that sources, roasts, and sells premium coffee in over 30 countries. The company started as a family-run business and experienced rapid internal growth before expanding overseas through joint ventures and franchising.
GBL recently released its final accounts. Table 1 shows selected financial data.
Table 1: Selected financial data for GBL
| Item | Amount ($ million) |
|---|---|
| Revenue | 300 |
| Gross profit | 120 |
| Net profit | 30 |
| Current assets | 90 |
| Current liabilities | 60 |
GBL’s plans for further growth have sparked concerns from local stakeholders in some developing countries where it operates. Local farmers fear that expansion could shift sourcing to cheaper markets, reducing their income. Meanwhile, GBL’s investors are pressuring the company to boost profitability.
Identify two stakeholder groups affected by GBL’s growth.
Calculate GBL’s gross profit margin and net profit margin. Show all your working.
Outline one reason why GBL’s investors might be concerned about its net profit margin.
State one advantage and one disadvantage of franchising as a method of growth for GBL.
Explain one ethical conflict that may arise when a multinational company like GBL tries to cut costs in developing countries.