Practice 1.6 Multinational companies 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.
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 using 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.
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.
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 vacuum cleaners.
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 profit and loss account, 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.
TechPlus Corporation (TPC)
TechPlus Corporation (TPC) is a multinational company specializing in consumer electronics. The company recently set up a large manufacturing plant in a developing country, creating thousands of jobs.
While the new plant has contributed to local economic growth, there have been concerns about environmental pollution and the displacement of local businesses due to TPC's presence. Additionally, some workers have reported low wages and poor working conditions.
Explain two potential economic benefits that TechPlus Corporation's presence could bring to the host country.
Analyze two potential negative social impacts of TechPlus Corporation's operations on the host country.
Discuss the potential trade-offs the host country might face when deciding whether to continue attracting multinational companies like TechPlus Corporation.
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.
AutoFlex Ltd (AF)
AutoFlex Ltd (AF) is a UK-based car manufacturing company specializing in electric vehicles (EVs). The company has seen strong domestic growth and is now planning to expand into Germany and Mexico, where demand for EVs is increasing.
AF faces multiple challenges in this expansion:
AF is also considering whether to standardize or adapt its marketing strategy for Germany and Mexico. Some managers argue that a global brand image is essential, while others believe that local adaptation will be more effective.
Define the term ‘multinational company (MNC)’.
Explain two sources of finance AF could use to fund its international expansion.
Calculate the break-even output for AF’s expansion if the company’s fixed costs are USD 10 million, the selling price per unit is USD 50,000, and the variable cost per unit is USD 30,000. Show all working.
Explain two ways AF could manage industrial relations issues related to automation in its UK workforce.
Recommend whether AF should use a standardized or an adapted marketing strategy in its expansion into Germany and Mexico.
AgroWorld Ltd. (AWL)
AgroWorld Ltd. (AWL) is an agricultural multinational corporation that recently expanded its operations to a developing country in South America. The company has introduced advanced farming techniques and equipment to boost agricultural productivity.
While AWL's presence has increased food production and export revenues, there are concerns about the displacement of small-scale farmers, soil degradation due to intensive farming practices, and the potential loss of biodiversity.
Explain two environmental concerns associated with AgroWorld Ltd.’s operations in the host country.
Explain two ways in which AgroWorld Ltd.'s presence could impact the host country's local farmers.
Discuss the potential long-term effects of AgroWorld Ltd.'s operations on the host country's economy and environment.