Practice IB Business Management Topic 2.7 Industrial/employee Relations with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 2.7 Industrial/employee Relations and mirrors Paper 1, 2, 3 style where relevant.
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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.
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
Using the resources and relevant business management tools and theories, recommend a plan of action for LuminaCare over the next five years. Your plan must make a clear recommendation on financing (choose Series A now, choose the concessional loan now, or propose a staged sequence using both at different times) and justify your choice.
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:
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.
Identify the stock control method currently used by NexaHealth.
Explain how NexaHealth’s proposed JIC-based contingency plan could affect the business in terms of cost and risk.
Analyse how NexaHealth’s proposed strategies (automation and adopting lean production and TQM practices) could help improve operational performance.
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness. You may recommend one primary strategy or justify a phased approach, but you must make a clear first priority.
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.
TerraNova Ltd.
TerraNova Ltd. is an agricultural technology company based in New Zealand that develops vertical farming systems for urban food production. The company has a strong innovative corporate culture that values experimentation, sustainability, and cross-functional collaboration. However, as TerraNova scaled operations to meet increasing demand, it introduced stricter performance targets across departments.
These changes, including the removal of flexible working arrangements in the production team, led to a deterioration in industrial relations. Employee representatives submitted a formal grievance to management, citing the lack of consultation and increased stress levels among staff. Senior leaders are now reviewing TerraNova's budget and financial performance for Q2 2024 to assess whether further cost-cutting is needed.
The company is also exploring external sources of finance to fund a new training and automation programme aimed at improving long-term efficiency and reducing employee workload.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (NZD) | Actual (NZD) |
|---|---|---|
| Sales revenue | 2,400,000 | 2,200,000 |
| Cost of sales | 1,050,000 | 1,160,000 |
| Operating expenses | 920,000 | 980,000 |
| Net profit | 430,000 | 60,000 |
Calculate the sales variance and total cost variance for TerraNova Ltd. in Q2 2024.
Show all your working.
Comment on how the variances and final accounts reflect the financial impact of TerraNova's internal changes.
Explain how TerraNova’s corporate culture may have clashed with recent changes to working conditions.
Suggest one internal and one external source of finance TerraNova Ltd. could consider to fund its employee training and automation programme.
Analyse how improved industrial relations could contribute to TerraNova’s long-term financial performance.
EcoStruct Ltd. is a Scandinavian firm that designs and manufactures modular eco-housing units. The company has a strong person-oriented corporate culture, emphasising collaboration, open communication, and sustainability. However, after expanding into Eastern Europe, the firm experienced growing tensions between senior managers and factory workers over wage structures and shift allocations.
The operations director believes that poor communication across sites and a lack of clarity in decision-making have worsened the situation. Local labour unions have begun to raise concerns, and there are early signs of deteriorating industrial relations, with threats of formal disputes if pay equity issues are not addressed.
The board is evaluating a proposed investment in a new automated timber-cutting line to improve production efficiency. The finance team has provided the following data to assist in evaluating performance and decision-making.
Table 1: Financial Data – EcoStruct Ltd (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 9,000,000 |
| Cost of sales | 5,400,000 |
| Operating expenses | 2,900,000 |
| Net profit | 700,000 |
| Capital employed | 5,600,000 |
| Average stock | 1,100,000 |
| Initial investment (machinery) | 2,200,000 |
| Net cash inflow (Years 1–4) | 700,000 p.a. |
Explain one way organizational culture can influence employee response during periods of industrial tension.
Calculate the return on capital employed (ROCE). Use net profit as the numerator. Show all your working.
Calculate the payback period for the proposed investment in the timber-cutting line. Show all your working.
Analyse how internal communication and employee relations could impact the implementation of the new machinery.
Suggest one action EcoStruct’s leadership could take to uphold its culture and improve operational efficiency simultaneously.