Practice 2.3 Leadership and management 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.
Paper
Level
Question 1
HLPaper 3
LuminaCare
Resource 1 – Company profile and financial context
LuminaCare is a Ghana-based, for-profit social enterprise that manufactures solar-powered medical devices for rural clinics and maternal health centers across Sub-Saharan Africa. Its flagship product is a solar fetal heart monitor, which allows midwives to detect complications during pregnancy without relying on grid electricity. The company raised seed capital from impact investors but has now reached an inflection point: demand has grown by 300%, and LuminaCare must decide whether to pursue a $2.5M Series A equity round or take on $1.2M in concessional debt from a development bank.
Resource 2 – CFO’s internal memo (Finance)
“Our burn rate is steady, but we’ve reached our credit limit with suppliers. We operate on 90-day payment terms with clinics, so cash flow is always tight. Series A equity gives us the scale to meet demand and build a second facility—but would dilute founder control and introduce board-level oversight. The concessional loan is low-interest and non-dilutive but comes with covenants: quarterly EBITDA targets, strict capex limits, and donor-style reporting. Any miss could trigger loan restructuring or early repayment.”
Resource 3 – HR performance dashboard (Q1–Q2 2025)
| Metric | Value |
|---|---|
| Staff turnover (last 6 months) | 22% |
| Time to fill technical roles | 49 days (↑ 24%) |
| % of roles with formal job descriptions | 58% |
| Managerial span of control | Avg. 12 direct reports |
| Avg. team engagement score | 67/100 (↓ from 78) |
| The head of HR notes that burnout and unclear career paths are leading to attrition, especially among product engineers and field deployment staff. |
Resource 4 – Marketing team proposal
“Clinics love our mission—but most have no idea who we are until we show up at trade shows. We need to invest in inbound marketing, including a multilingual website, CRM tools, and a referral rewards program for midwives. More crucially, we’re perceived as a donor-funded nonprofit, not a serious tech company. To attract hospital procurement officers and larger buyers, we must reposition the brand to emphasize product quality, not just affordability and ethics.”
Resource 5 – Email thread: CEO to CFO and Marketing Lead
Resource 6 – Feedback from key field partners
“We rely on LuminaCare’s devices, but their response time for repairs has worsened.” “Sometimes we get different pricing from different reps. There’s no standard process.” “I love the mission—but our procurement officer wants a brand that feels serious. A logo change isn’t enough.”
1.[2]
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
2.[6]
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for LuminaCare over the next five years.
Question 2
HLPaper 2
NexaHealth Equipment Ltd.
NexaHealth manufactures advanced diagnostic scanners for hospitals. Each scanner requires 72 imported components sourced using a just-in-time (JIT) model. NexaHealth spends £7.2 million annually on R&D, equal to 12% of its £60 million annual revenue, to maintain its innovation lead.
Last quarter, a global semiconductor shortage caused a six-week production delay, resulting in:
- £3.4 million in lost hospital contracts
- £620,000 in labour downtime costs
- A drop in customer satisfaction from 92% to 77%
To manage this risk, the COO has proposed switching to a just-in-case (JIC) model for critical components, which would increase annual inventory holding costs by £1.5 million but reduce delay risk to below 1%. The operations team instead suggests investing £4.2 million in automation and adopting lean production and TQM practices to reduce dependency on external suppliers.
1.[2]
Identify the stock control method currently used by NexaHealth.
2.[4]
Explain how NexaHealth’s proposed JIC-based contingency plan could affect the business in terms of cost and risk.
3.[4]
Analyse how NexaHealth’s proposed conflict resolution and recruitment strategies could help reduce labour turnover.
4.[10]
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness.
Question 3
SLPaper 2
LynxJet PLC (LJ)
LynxJet PLC (LJ) is a public limited company operating short-haul domestic flights in East Africa. LJ was founded by former military pilots and is known for its punctuality, strict safety protocols, and no-frills service.
Its low prices and reliable schedule make it especially popular with commuters and small business owners. LJ is listed on the Nairobi Securities Exchange and is majority-owned by institutional investors.
1.[2]
Define the term public limited company.
Question 4
SLPaper 2
LJ’s current CEO, Colonel Rehema Mwangi, runs the company with a highly centralized and autocratic leadership style. She makes all strategic decisions herself, relying on a close circle of advisors. Staff turnover among flight crew has increased, and recent employee surveys show that staff feel “undervalued and unheard.”
1.[4]
Explain one effect of LJ’s autocratic leadership style on employee motivation.
Question 5
SLPaper 2
EcoHeat Ltd. is a company that manufactures solar-powered water heating systems. The business is currently planning to open a second production facility and is considering two possible locations:
- Location A: Near a port, with high rent but excellent access to suppliers and export markets
- Location B: In a rural area, with lower rent but limited transport infrastructure and fewer skilled workers
The operations director, who follows a democratic leadership style, has asked team leaders to involve employees in the decision-making process. However, recent internal reports show declining employee motivation, and communication between departments has been inconsistent.
To support the location decision, the finance team produced a break-even chart for the new facility.
Figure 1: Break-even chart for proposed facility
1.[2]
Using Figure 1, identify the break-even level of output for EcoHeat Ltd.
2.[2]
Explain one advantage of involving employees in location decisions through democratic leadership.
3.[2]
Outline one way that poor communication between departments could impact the success of the new facility.
4.[2]
Explain one non-financial method EcoHeat Ltd. could use to improve employee motivation during the expansion process.
5.[2]
Using Figure 1, calculate the profit or loss if EcoHeat Ltd. produces and sells 7,000 units.
Show all your working.
Question 6
HLPaper 2
AlpineWare Ltd.
AlpineWare Ltd. is a manufacturer of high-quality outdoor cookware and portable kitchen gear, operating primarily in the European market. After a successful five-year period of growth, the company has seen a decline in staff productivity and an increase in employee turnover. The HR department attributes this to a lack of staff recognition and clarity in day-to-day operations.
To address these issues, AlpineWare appointed a new operations manager with a democratic leadership style, who introduced team-based decision-making and revised performance appraisal systems to enhance employee motivation. The finance director, however, has raised concerns that productivity remains below target and the business may need to raise additional funds for a planned investment in automation.
The finance department has compiled final accounts and key data for 2024 to assess AlpineWare’s operational performance and evaluate its financial options.
Table 1: Selected Financial Data – AlpineWare Ltd. (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 3,600,000 |
| Cost of goods sold | 1,950,000 |
| Operating expenses | 1,380,000 |
| Net profit | 270,000 |
| Capital employed | 2,400,000 |
| Average stock | 325,000 |
1.[2]
Explain how democratic leadership may help address motivation issues at AlpineWare Ltd.
2.[2]
Calculate the return on capital employed (ROCE) Show all your working.
3.[2]
Comment on what this figure suggests about AlpineWare’s financial performance.
4.[2]
Suggest one internal and one external source of finance that AlpineWare Ltd. could use to fund automation investments.
5.[2]
Analyse how motivation and financial efficiency could work together to support AlpineWare’s long-term success.
Question 7
SLPaper 2
FlexBottle Ltd.
FlexBottle Ltd. is a sustainable consumer goods company that produces reusable, collapsible water bottles aimed at eco-conscious travellers and students. As the company scaled, it shifted from a flat to a functional organisational structure, appointing department heads to oversee operations, marketing, and finance. However, recent employee feedback from the production department suggests growing dissatisfaction due to a lack of communication and involvement in company-wide decisions.
To prepare for the launch of its latest product — a customisable bottle with modular parts — the marketing team developed a new marketing plan, changing several elements of the marketing mix, including pricing, packaging, and point-of-sale materials. The CEO, known for a laissez-faire leadership style, believes teams work best with minimal interference, though motivation among junior staff appears to be declining.
The finance department has prepared a draft statement of profit or loss for Q1 2024, and tasked the marketing and operations interns with completing the missing values using the available data.
Table 1: Financial data for FlexBottle Ltd. (Q1 2024)
| Item | Amount ($) |
|---|---|
| Units sold | 6,000 |
| Selling price per unit | 8.00 |
| Variable cost per unit | 3.00 |
| Salaries (operations + marketing) | 45,000 |
| Advertising and promotion | 30,000 |
| Logistics and warehousing | 12,000 |
| Office rent and utilities | 18,000 |
| Tax rate | 20% |
| Dividends paid | 8,000 |
Figure 1: Statement of profit or loss (partially completed)
FlexBottle Ltd . Statement of profit or loss for the quarter ended 31 March 2024
| Item | $ |
|---|---|
| Sales revenue | __________ |
| Cost of sales | __________ |
| Gross profit | __________ |
| Expenses: | |
| - Salaries | (45,000) |
| - Advertising and promotion | (30,000) |
| - Logistics and warehousing | (12,000) |
| - Office rent and utilities | (18,000) |
| Profit before tax | __________ |
| Tax (20%) | __________ |
| Profit for period | __________ |
| Dividends | (8,000) |
| Retained profit | __________ |
1.[2]
Explain how the current organisational structure might affect internal communication at FlexBottle Ltd.
2.[2]
Suggest one way the leadership style at FlexBottle Ltd. could affect employee motivation.
3.[2]
Using Table 1, calculate the missing fields of the statement of profit or loss in Figure 1. Show all your working.
4.[2]
Comment on what the completed profit and loss account reveals about FlexBottle Ltd.'s cost and revenue structure.
5.[2]
Outline one element of the marketing mix that FlexBottle Ltd. has changed, and how this change may support the product launch.
Question 8
HLPaper 3
FreshFusion Ltd
Resource 1 - Industry Article
“FreshFusion Tackles High Turnover in the Health Food Sector”
Resource 2 - Balance Sheet (2023)
FreshFusion Ltd. Balance Sheet - As of December 31, 2023
| Item | Amount |
|---|---|
| Cash | £500,000 |
| Inventory | £250,000 |
| Property, Plant & Equipment | £3,000,000 |
| Other Current Assets | £100,000 |
| Total Assets | £3,850,000 |
| Item | Amount |
|---|---|
| Accounts Payable | £1,000,000 |
| Accrued Salaries | £200,000 |
| Long-Term Debt | £2,500,000 |
| Shareholders’ Equity | £1,150,000 |
| Total Liabilities & Equity | £3,850,000 |
FreshFusion’s equity has steadily increased, thanks to its brand appeal and expanding customer base. However, accrued salary expenses reveal the strain on payroll, and accounts payable remains high, indicating potential cash flow challenges in meeting obligations.
Resource 3 - Excerpt from Employee Satisfaction Survey (2023)
Summary of Employee Feedback:
Positive Comments: Employees appreciate FreshFusion’s commitment to sustainability, especially through using local suppliers and eco-friendly packaging. They feel aligned with the company’s values and are proud of their work.
Negative Comments: Concerns were raised about long hours, inconsistent scheduling, and lack of growth opportunities. Employees express a need for career progression and better work-life balance.
Resource 4 - Social Media Post (Instagram) @FreshFusionUK:
Resource 5 - Market Report Excerpt
"Health Food Retailers Face Staffing Struggles in Competitive Market"
Health food retail is a high-turnover sector, with 35% of employees leaving within their first year. Companies like FreshFusion are encouraged to adopt new employee-centric strategies, such as internal promotions, career development programs, and employee wellness initiatives, to remain competitive.
The report highlights that companies with lower turnover rates have successfully implemented flexible scheduling and robust training programs to build a committed workforce.
1.[2]
Using an appropriate business management theory, describe a human need that FreshFusion fulfills for its employees.
2.[6]
Explain two challenges FreshFusion faces in managing its human resources effectively. Support your answer using information from the case study and resources provided.
3.[17]
Using all the resources provided and your knowledge of business management, recommend a strategic plan to improve employee retention at FreshFusion over the next three years. Your response should consider employee development, scheduling flexibility, wellness initiatives, and compensation.
Question 9
HLPaper 3
UrbanEats Ltd.
Resource 1 - Excerpt from Company Website
Resource 2 - Balance Sheet (2023)
UrbanEats Ltd.
Balance Sheet as of December 31, 2023
Assets
Current Assets
Non-Current Assets
Liabilities
Current Liabilities
Non-Current Liabilities
Total Assets | £5,800,000 |
Total Liabilities | £2,500,000 |
Equity
Despite recent revenue growth, UrbanEats’ increasing liabilities raise concerns about long-term financial sustainability.
| Item | Amount |
|---|---|
| Cash | £1,200,000 |
| Inventory | £600,000 |
| Accounts Receivable | £800,000 |
| Total Current Assets | £2,600,000 |
| Item | Amount |
|---|---|
| Property, Plant & Equipment | £3,000,000 |
| Intangible Assets | £200,000 |
| Total Non-Current Assets | £3,200,000 |
| Item | Amount |
|---|---|
| Accounts Payable | £700,000 |
| Short-term Debt | £300,000 |
| Total Current Liabilities | £1,000,000 |
| Item | Amount |
|---|---|
| Long-term Debt | £1,500,000 |
| Total Non-Current Liabilities | £1,500,000 |
| Item | Amount |
|---|---|
| Shareholder Equity | £3,300,000 |
| Total Liabilities & Equity | £5,800,000 |
Resource 3 - Email from CFO to CEO
Resource 4 - Interview Excerpt with the CEO
In a recent interview with Finance Today, CEO Maya Simmons shared her vision for UrbanEats. “We are excited about our growth but know we must be strategic to maintain profitability.
Our commitment to sustainability and affordability is essential, but we also recognize the importance of financial health. Exploring franchising is one option, though I want to ensure it aligns with our brand values.”
Resource 5 - Social Media Post by UrbanEats (Instagram)
1.[2]
Identify a human need that UrbanEats Ltd. fulfills through its mission of providing plant-based and sustainable meals. Explain how UrbanEats addresses this need through its products and initiatives.
2.[6]
Discuss two significant challenges UrbanEats Ltd. faces in maintaining profitability and competitive advantage in the fast-casual dining sector. Use relevant resources from the case study to support your answer.
3.[17]
Based on the resources provided and your knowledge of business management principles, outline a strategic plan for UrbanEats Ltd. to enhance its financial performance and market positioning over the next five years. Your plan should include recommendations on product differentiation, digital marketing strategies, consumer engagement initiatives, and adaptability to market trends.
Question 10
HLPaper 3
Alpha Robotics – Optimizing HR and Operations for Growth
Resource 1 – News Article
Alpha Robotics Struggles with HR and Operational Efficiency
Alpha Robotics, a technology firm specializing in AI-powered industrial robots, is experiencing rapid expansion as demand for automation increases globally. The company was founded in 2015 and has since grown to 2,500 employees across four locations: the United States, Germany, Japan, and India.
Key Challenges:
(1) HR management issues – Employees complain about unclear leadership, poor communication, and lack of motivation due to a highly hierarchical structure.
(2) Production inefficiencies – The company’s batch production method is increasing lead times and reducing product quality.
(3) Location challenges – With rising costs in the US and Germany, Alpha Robotics must decide whether to expand in India (lower labor costs) or develop a new R&D facility in Singapore.
CEO Daniel Carter is considering the following strategic changes:
(1) Restructuring the organization to improve communication and motivation.
(2) Shifting to lean production and just-in-time (JIT) inventory management.
(3) Relocating part of production to India or Singapore while maintaining efficiency.
Resource 2 – Internal HR Survey Results
Key Insights:
(1) Employees feel disconnected from leadership, affecting productivity.
(2) A lack of career growth opportunities is reducing motivation and increasing turnover.
(3) Middle management struggles with effective communication due to a rigid hierarchical structure.
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
Resource 3 – Cost-Benefit Analysis for Production Relocation
Alpha Robotics – Cost Analysis for Facility Expansion
Key Considerations:
(1) India offers lower costs, but efficiency gains are lower compared to Singapore.
(2) Singapore provides greater efficiency but has significantly higher setup costs.
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
1.[2]
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
2.[6]
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
3.[17]
Using all the resources provided and your knowledge of business management, recommend a possible plan of action to improve both HR and operations management at Alpha Robotics.