IB Business Management 2.7 Industrial/employee Relations Questionbank

(c) Analyse how NexaHealth’s proposed strategies (automation and adopting lean production and TQM practices) could help improve operational performance.

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.

Additional notes:

• Moving production offshore would reduce variable costs by 20%.
• Labour turnover after recent changes has risen to 20%.

(a) Calculate EcoCrate Ltd.’s break-even quantity based on current in-house production costs.

(b) Calculate the margin of safety in units based on expected sales.

(c) Calculate the cost difference between Cost to Buy (CTB) and Cost to Make (CTM) at the expected sales volume.

(d) Explain one effect of outsourcing production compared to insourcing.

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

(a) Calculate the sales variance and total cost variance for TerraNova Ltd. in Q2 2024.

Show all your working.

(b) Comment on how the variances and final accounts reflect the financial impact of TerraNova's internal changes.

(c) Explain how TerraNova’s corporate culture may have clashed with recent changes to working conditions.

(d) Suggest one internal and one external source of finance TerraNova Ltd. could consider to fund its employee training and automation programme.

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.\n\nThe 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.\n\nThe 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.\n\n---\n\nTable 1: Financial Data – EcoStruct Ltd (2024)\n\n| Item | Amount (€) |\n|-----------------------------------|------------|\n| Revenue | 9,000,000 |\n| Cost of sales | 5,400,000 |\n| Operating expenses | 2,900,000 |\n| Net profit | 700,000 |\n| Capital employed | 5,600,000 |\n| Average stock | 1,100,000 |\n| Initial investment (machinery) | 2,200,000 |\n| Net cash inflow (Years 1–4) | 700,000 p.a. |

(a) Explain one way organizational culture can influence employee response during periods of industrial tension.

(b) Calculate the return on capital employed (ROCE). Use net profit as the numerator. Show all your working.

(c) Calculate the payback period for the proposed investment in the timber-cutting line. Show all your working.

(d) Analyse how internal communication and employee relations could impact the implementation of the new machinery.

Global Solar Solutions (GSS)

(a) With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.

(b) Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.

(c) Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for GSS over the next five years.

(d) 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.