M21/3/BUSMT/HP1/ENG/TZ0/XX

BUSINESS MANAGEMENT
HIGHER LEVEL
PAPER 1

Practice examination 2021 – Multi Marketing

2 hours 15 minutes

INSTRUCTIONS TO CANDIDATES
▪ Do not open this examination paper until instructed to do so.
▪ A clean copy of the IB Business Management case study – Multi Marketing is required for
this examination paper.
▪ Read the case study carefully.
▪ A clean copy of the IB Business Management formulae sheet is required for this examination
paper.
▪ Section A: answer two questions.
▪ Section B: answer question 4.
▪ Section C: answer question 5.
▪ A calculator is required for this examination paper.
▪ The maximum mark for this examination paper is [60 marks].
 IB Business Management Higher Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com

SECTION A

Answer two questions from this section.

QUESTION ONE

a. Outline why reducing expenditure on the marketing of Multi Marketing ’s services may
have a negative impact on the company’s profitability (line 111). [4 marks]

b. With reference to Multi Marketing, analyse one political issue and one cultural issue
associated with entering international markets. [6 marks]

QUESTION TWO

a. Outline one advantage and one disadvantage of offering comparatively high salaries
and generous benefits to recruit highly qualified employees (lines 83 and 84).
[4 marks]

b. With reference to Multi Marketing, analyse why businesses choose to outsource

production (line 22). [6 marks]

QUESTION THREE

a. Analyse the type of organisational structure shown in Figure 1. [4 marks]

b. Explain two reasons why Multi Marketing may have changed its legal structure from a
partnership (line 14) to a private limited company (line 30). [6 marks]

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 IB Business Management Higher Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com

SECTION B

Answer the compulsory question from this section.

QUESTION FOUR

Rachel requested that the Finance Department supply forecasted financial information which
would help her, and her directors, analyse the impact of moving all Multi Marketing’s
operations to Bengaluru (line 130). The accountants prepared the cash flow forecast shown in
Table 1 below covering a three-year period.

Table 1: Six-monthly cash-flow forecast for MM for the first three years of operation (figures in US$000s)

2021 2022 2023 2024

Second half First half Second half First half Second half First half

Opening 1,500 B D 10,000 31,600 32,200

balance

Bank loan 15,000 – – – – –

Dividends – – – – 20,000 20,000

Sales 45,000 35,000 30,000 40,000 44,000 48,000

Cost of 12,000 10,000 9,000 11,000 16,000 17,000

sales

Capital 24,000 12,000 800 500 500 500

expenditure

Salaries 4,500 4,000 3,500 3,500 4,000 4,500

Rent 900 900 900 900 900 900

Other costs 25,000 6,000 3,000 2,500 2,000 2,000

Closing A C 10,000 31,600 32,200 37,910

balance

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 IB Business Management Higher Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com

The Finance Division is confident forecasted costs are accurate given the quality of the
research and available data, but less certain about the forecasted revenues as revenues will
be dependent on Multi Marketing’s ability to retain existing customers in the UK and the
European Union when based in Bengaluru. Further, sales revenues will be dependent on how
the company’s new location would affect its marketing mix and the effectiveness of its unique
selling proposition.

a. Define unique selling proposition. [2 marks]

b. Analysing selected financial data presented in Table 1 above:

i. Determine the missing data values A-D. [2 marks]

ii. Calculate forecasted gross profit in 2022 and net profit (before tax) in 2023.
[2 marks]

c. Comment on the liquidity position of Multi Marketing across the forecasted three-year
period and suggest one method the company could use to improve its liquidity position.
[4 marks]

d. Evaluate the effectiveness of Clare’s type of leadership style if Multi Marketing were to
transfer its operations to Bengaluru. [10 marks]

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 IB Business Management Higher Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com

SECTION C

Answer the compulsory question from this section.

QUESTION FIVE

The owners of Multi Marketing are interested in acquiring a film company, Satvi Films. There are
both driving and restraining forces relating to this change, and a force field analysis has been
prepared to assist the analytic process (Figure 1 below).

Driving forces
Change: Acquisition of a film making studio
Restraining forces
Forces for change Forces against change

8 Outsourcing costs reduced Cost of acquisition 10

8 Control over production quality Not core to operations 8

7 Additional revenue stream Inexperience in industry 8

6 Provides a new USP for MM Other options for expansion 4

8 Strengthens Indian operations Could prove distracting 2

Figure 1: Force-field analysis

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IB Business Management: www.BusinessManagementIB.com

Satvi Films is generally considered to have a good reputation in the Indian film industry, and
they have made their independently audited accounts available to Multi Marketing. The latest
balance sheet and profit and loss statement for the film company is shown below.

Satvi Films Ltd

Balance Sheet as of 30 April 2021
US$m US$m
Fixed assets
Fixed assets 22
Accumulated depreciation 2
Net fixed assets 20
Current assets
Cash 1.5
Debtors 1.2
Stock 1.5
Total current assets 4.2
Current liabilities
Overdraft 0.5
Creditors 1.5
Short-term loans 2.2
Total current liabilities 4.2
Net current assets (Working capital) 0
Total assets less current liabilities 20
Long-term liabilities (debt) 10.5
Net assets 9.5
Financed by:
▪ Share capital 8
▪ Retained profit 1.5
Equity 9.5

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 IB Business Management Higher Level Paper 1 Examination
IB Business Management: www.BusinessManagementIB.com

Profit and Loss Account for Satvi Films Ltd. for year ended 31
December 2020
2019 2020
(US$’000) (US$’000)
87,000 48,500
Sales Turnover
4,500 24,500
Costs of sales
42,000 24,000
Gross Profit

13,800 9,100
Less Expenses
4,000 1,000
Less Depreciation
1,300 1,100
Plus Non-operating income ţ
25,500 15,000
Net profit before interest
and tax
5,500 2,000
Less Interest
20,000 13,000
Net profit before tax

5,000 3500
Less Tax
15,000 9,500
Net profit after interest and
tax
7,500 4,000
Dividends
7,500 5,500
Retained profit
ţ Non-operating income include government grants and subsidies

Additionally, the accountants at Satvi Films have provided information showing that the
company’s annual net cash flows have averaged US$12 million across the last ten years.
The owners of Multi Marketing agree that the company needs to focus on only one strategic
option – transfer operations to Bengaluru or acquire Satvi Films. It does not have the
management resources to pursue both options, at least in the short term.
Using the case study and the additional information on pages 3 - 8, recommend what you
believe to be the best option for Multi Marketing to achieve its strategic objectives.
You will find it useful to use Business Management tools to analyse the data provided,
including, but not limited to, force field analysis, ratio analysis and investment appraisal.
[20 marks]

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