Practice 5.8 Research and development (HL only) 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.
NeuroTech Ltd. is a European health technology company that develops wearable brain-monitoring devices for medical research institutions. The firm has invested heavily in research and development (R&D) to remain at the forefront of innovation, allocating nearly 18% of annual revenue toward new product development.
Recently, NeuroTech faced a major crisis after a software malfunction in one of its products caused data losses at several hospitals. Although no patients were harmed, the incident received significant media coverage. The firm initiated its crisis management plan, issuing public statements, recalling affected devices, and offering free replacements. Internally, the board has asked for a review of the company’s contingency planning and operational risk mitigation procedures.
Despite the crisis, NeuroTech is evaluating a new R&D investment in a second-generation neural interface. The project is expected to generate significant returns if successful. The finance department has prepared the following data to assist the board in evaluating its financial health and the viability of the investment.
Table 1: Financial Data – NeuroTech Ltd (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 12,000,000 |
| Cost of goods sold | 6,800,000 |
| Operating expenses | 4,400,000 |
| Net profit | 800,000 |
| Capital employed | 6,000,000 |
| Average stock | 1,200,000 |
| Initial investment (R&D project) | 2,500,000 |
| Net cash inflow (Years 1–4) | 850,000 p.a. |
Explain one way contingency planning may have helped NeuroTech Ltd. manage the product failure crisis.
Calculate the return on capital employed (ROCE)
Show all your working.
Calculate the payback period for the proposed R&D project.
Show all your working.
Analyse how NeuroTech’s current financial efficiency may influence its ability to manage R&D risk.
Suggest one way NeuroTech can ensure its future R&D strategy balances innovation with operational risk management.
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 conflict resolution and recruitment strategies could help reduce labour turnover.
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness.
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
FlexFrame
FlexFrame is a European company that designs and assembles modular office furniture for B2B clients. Most of its production is done in-house at its central factory in Austria. FlexFrame promotes its use of lean production to reduce excess materials and shorten delivery times.
To support continuous improvement, FlexFrame recently introduced quality circles in its manufacturing division and is considering whether to implement total quality management (TQM) across the whole organization.
Identify one feature of lean production used by FlexFrame.
Explain one benefit and one risk of investing in R&D for FlexFrame.
Explain the impact of outsourcing production on FlexFrame’s operations.
Using the stimulus and your knowledge of business management, evaluate whether FlexFrame should implement the proposed contingency plan.
Global Solar Solutions (GSS)
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
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.
VisionWare Ltd.
VisionWare Ltd. specializes in AI-powered smart home devices. The company is planning to launch a new product and must choose between two investment projects: Project Alpha and Project Beta.
| Investment Data for VisionWare Ltd. |
|---|
| Initial investment (both projects) |
| Project Alpha: total net cash inflows (4 years) |
| Project Beta: total net cash inflows (3 years) |
| Project Alpha: Yearly inflows: Y1 180,000, Y3 180,000 |
| Project Beta: Yearly inflows: Y1 200,000, Y3 $100,000 |
| Discount rate for NPV |
VisionWare Ltd. is also reorganizing internal reporting, assigning responsibility for controlling spending in different departments.
In addition, management is focused on protecting their proprietary AI algorithms from competitors and using customer data to identify emerging needs before competitors do.
Calculate the payback period for Project Beta.
Calculate the average rate of return (ARR) for Project Alpha.
Calculate the Net Present Value (NPV) for Project Beta, assuming a 10% discount rate and using approximate NPV factors:
Identify the difference between cost centres and profit centres within an organization like VisionWare Ltd.
Suggest one reason why protecting intellectual property is important for VisionWare Ltd.
Alpha Robotics – Optimizing HR and Operations for Growth
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
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.
CleanWave Ltd (CW)
CleanWave Ltd (CW) is a successful manufacturer of sustainable clothing based in Sweden. CW has grown significantly and now plans to expand internationally, entering markets in the United States and South Korea.
To support its international expansion, CW recently adopted a matrix organizational structure, combining functional and geographical divisions. This structure aims to enhance responsiveness to local market conditions. However, employees have reported increased confusion about their roles and responsibilities, creating challenges for communication across departments and geographical locations.
CW invests significantly in research and development (R&D) to maintain a competitive advantage through innovative, eco-friendly materials. The company's current marketing strategy focuses on environmental sustainability and quality. CW's marketing team debates whether to adopt a standardized international marketing approach or adapt specifically to consumer preferences in the US and South Korean markets.
Define the term ‘business’.
Explain two features of a matrix organizational structure at CW.
Explain two benefits for CW of effective communication within its matrix structure.
Explain two reasons why CW invests in research and development (R&D).
Evaluate whether CW should adopt a standardized or adapted international marketing strategy for the US and South Korea markets.
EcoHome Ltd (EH)
EcoHome Ltd (EH) manufactures environmentally friendly household cleaning products in Canada. Due to increasing competition, EH heavily invested in research and development (R&D) to create innovative products. The R&D expenditure significantly increased costs, negatively affecting profitability in the company's recent final accounts.
EH has recently faced a significant product recall crisis due to contamination discovered in one of its cleaning products. This crisis damaged EH's reputation, caused a substantial drop in sales, and negatively impacted liquidity.
Management is considering adopting lean production techniques to reduce production costs and enhance efficiency. Some stakeholders argue this could prevent future crises and restore consumer confidence. However, employees are concerned that lean production may lead to job losses and lower job security.
EH's marketing strategy historically emphasized its environmental values. Given the recent crisis, the management team is debating whether to continue highlighting environmental benefits or shift toward emphasizing product safety and quality.
Define the term ‘lean production’.
Explain two reasons why EH invests heavily in research and development (R&D).
Explain two impacts the product recall crisis may have on EH’s final accounts.
Explain two ways lean production methods could help EH manage or avoid future crises.
Recommend whether EH should continue emphasizing environmental benefits in its marketing strategy or shift its focus to product safety and quality following the crisis.
| Challenge | Details |
|---|---|
| Production Bottlenecks | Increasing delays in assembly and quality checks |
| Supply Chain Issues | Limited access to sustainable materials due to rising costs |
| Logistics Constraints | High shipping costs and customs delays affecting donations |
Using an appropriate business management theory, describe a human need that ECS meets through its business model.
Explain two possible challenges ECS faces in balancing its ethical objectives with its operational growth.
Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure the sustainability of ECS for the next five years.
Practice 5.8 Research and development (HL only) 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.
NeuroTech Ltd. is a European health technology company that develops wearable brain-monitoring devices for medical research institutions. The firm has invested heavily in research and development (R&D) to remain at the forefront of innovation, allocating nearly 18% of annual revenue toward new product development.
Recently, NeuroTech faced a major crisis after a software malfunction in one of its products caused data losses at several hospitals. Although no patients were harmed, the incident received significant media coverage. The firm initiated its crisis management plan, issuing public statements, recalling affected devices, and offering free replacements. Internally, the board has asked for a review of the company’s contingency planning and operational risk mitigation procedures.
Despite the crisis, NeuroTech is evaluating a new R&D investment in a second-generation neural interface. The project is expected to generate significant returns if successful. The finance department has prepared the following data to assist the board in evaluating its financial health and the viability of the investment.
Table 1: Financial Data – NeuroTech Ltd (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 12,000,000 |
| Cost of goods sold | 6,800,000 |
| Operating expenses | 4,400,000 |
| Net profit | 800,000 |
| Capital employed | 6,000,000 |
| Average stock | 1,200,000 |
| Initial investment (R&D project) | 2,500,000 |
| Net cash inflow (Years 1–4) | 850,000 p.a. |
Explain one way contingency planning may have helped NeuroTech Ltd. manage the product failure crisis.
Calculate the return on capital employed (ROCE)
Show all your working.
Calculate the payback period for the proposed R&D project.
Show all your working.
Analyse how NeuroTech’s current financial efficiency may influence its ability to manage R&D risk.
Suggest one way NeuroTech can ensure its future R&D strategy balances innovation with operational risk management.
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 conflict resolution and recruitment strategies could help reduce labour turnover.
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness.
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
FlexFrame
FlexFrame is a European company that designs and assembles modular office furniture for B2B clients. Most of its production is done in-house at its central factory in Austria. FlexFrame promotes its use of lean production to reduce excess materials and shorten delivery times.
To support continuous improvement, FlexFrame recently introduced quality circles in its manufacturing division and is considering whether to implement total quality management (TQM) across the whole organization.
Identify one feature of lean production used by FlexFrame.
Explain one benefit and one risk of investing in R&D for FlexFrame.
Explain the impact of outsourcing production on FlexFrame’s operations.
Using the stimulus and your knowledge of business management, evaluate whether FlexFrame should implement the proposed contingency plan.
Global Solar Solutions (GSS)
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
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.
VisionWare Ltd.
VisionWare Ltd. specializes in AI-powered smart home devices. The company is planning to launch a new product and must choose between two investment projects: Project Alpha and Project Beta.
| Investment Data for VisionWare Ltd. |
|---|
| Initial investment (both projects) |
| Project Alpha: total net cash inflows (4 years) |
| Project Beta: total net cash inflows (3 years) |
| Project Alpha: Yearly inflows: Y1 180,000, Y3 180,000 |
| Project Beta: Yearly inflows: Y1 200,000, Y3 $100,000 |
| Discount rate for NPV |
VisionWare Ltd. is also reorganizing internal reporting, assigning responsibility for controlling spending in different departments.
In addition, management is focused on protecting their proprietary AI algorithms from competitors and using customer data to identify emerging needs before competitors do.
Calculate the payback period for Project Beta.
Calculate the average rate of return (ARR) for Project Alpha.
Calculate the Net Present Value (NPV) for Project Beta, assuming a 10% discount rate and using approximate NPV factors:
Identify the difference between cost centres and profit centres within an organization like VisionWare Ltd.
Suggest one reason why protecting intellectual property is important for VisionWare Ltd.
Alpha Robotics – Optimizing HR and Operations for Growth
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
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.
CleanWave Ltd (CW)
CleanWave Ltd (CW) is a successful manufacturer of sustainable clothing based in Sweden. CW has grown significantly and now plans to expand internationally, entering markets in the United States and South Korea.
To support its international expansion, CW recently adopted a matrix organizational structure, combining functional and geographical divisions. This structure aims to enhance responsiveness to local market conditions. However, employees have reported increased confusion about their roles and responsibilities, creating challenges for communication across departments and geographical locations.
CW invests significantly in research and development (R&D) to maintain a competitive advantage through innovative, eco-friendly materials. The company's current marketing strategy focuses on environmental sustainability and quality. CW's marketing team debates whether to adopt a standardized international marketing approach or adapt specifically to consumer preferences in the US and South Korean markets.
Define the term ‘business’.
Explain two features of a matrix organizational structure at CW.
Explain two benefits for CW of effective communication within its matrix structure.
Explain two reasons why CW invests in research and development (R&D).
Evaluate whether CW should adopt a standardized or adapted international marketing strategy for the US and South Korea markets.
EcoHome Ltd (EH)
EcoHome Ltd (EH) manufactures environmentally friendly household cleaning products in Canada. Due to increasing competition, EH heavily invested in research and development (R&D) to create innovative products. The R&D expenditure significantly increased costs, negatively affecting profitability in the company's recent final accounts.
EH has recently faced a significant product recall crisis due to contamination discovered in one of its cleaning products. This crisis damaged EH's reputation, caused a substantial drop in sales, and negatively impacted liquidity.
Management is considering adopting lean production techniques to reduce production costs and enhance efficiency. Some stakeholders argue this could prevent future crises and restore consumer confidence. However, employees are concerned that lean production may lead to job losses and lower job security.
EH's marketing strategy historically emphasized its environmental values. Given the recent crisis, the management team is debating whether to continue highlighting environmental benefits or shift toward emphasizing product safety and quality.
Define the term ‘lean production’.
Explain two reasons why EH invests heavily in research and development (R&D).
Explain two impacts the product recall crisis may have on EH’s final accounts.
Explain two ways lean production methods could help EH manage or avoid future crises.
Recommend whether EH should continue emphasizing environmental benefits in its marketing strategy or shift its focus to product safety and quality following the crisis.
| Challenge | Details |
|---|---|
| Production Bottlenecks | Increasing delays in assembly and quality checks |
| Supply Chain Issues | Limited access to sustainable materials due to rising costs |
| Logistics Constraints | High shipping costs and customs delays affecting donations |
Using an appropriate business management theory, describe a human need that ECS meets through its business model.
Explain two possible challenges ECS faces in balancing its ethical objectives with its operational growth.
Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure the sustainability of ECS for the next five years.