Unit Test: 1

Subject: Business Management Class: DP 1

Level: HL Block: A and B

Duration: 60 Minutes Max. Marks: 25 (20%)

Name of the Student: ________________________________________________________________________

Instructions to candidates:
1.Do not open this examination paper until instructed to do so.
2. Section A: answer all questions.
3. Section B: answer one question.
4.The maximum mark for this examination paper is 25 marks.

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 SECTION-A (Answer all the questions)

1. Gan and Arisa plan to set up their own business making printed T-shirts. They know
that they will need resources before they can start production. Gan has savings of
$3,000 and Arisa, who is an experienced shirtmaker, has $1,000 to invest in the
business.

(a) List two resources that Gan and Arisa will need to start the business [1]

(b) Explain why Gan and Arisa can be termed ‘entrepreneurs? [2]

(c) A friend has offered them an old cloth-printing machine for $500. If Gan and Arisa
decide to buy this, explain to them what the opportunity cost might be. [2]

2. Gan and Arisa’s business had a successful first six months. They now buy in ready-
made T-shirts and print them in a variety of colours and designs. They have just
opened their own small shop and sell their products through this outlet. Originally, they
had a partnership, but Gan wants to set up a limited company.

(a) Explain the term ‘limited liability’. [1]

(b) Do you think a private limited company is the best form of legal structure for Gan
and Arisa’s business? Justify your answer. [4]

3. After six years of owning their business, Gan and Arisa decided to discuss ‘where the
business goes now’. It was now a limited company called G and A Clothing Co. They
had both worked very hard to make sure the business survived its first years of
operation. Now they wanted to plan for the future.

(a) Why is business survival an important objective for new businesses? [1]

(b) Explain two objectives Gan and Arisa could now set for G and A Clothing. [4]

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 SECTION-B (Answer any one question)

4. G and A Clothing Co currently owns one factory and three shops. Gan and Arisa
agreed to borrow capital to finance expansion. Customers want clear labels on all
clothing products – care instructions, source of materials, materials used.

(a) Explain two other responsibilities, other than clear labelling, that G and A Clothing
has to its customers. [2]

(b) G and A Clothing plan to develop a new factory near parkland and a school. The
factory will produce high quality clothing using the latest technology at prices no
higher than clothing is currently sold for.
Examine two possible conflicts between stakeholder groups as a result of this
decision. [4]

(c) If G and A Clothing changed its objectives and based them on a more ethical code
of conduct, explain the possible impact on two stakeholder groups. [4]

OR

5. Community-based development projects:

The Shell Foundation is a charity set up and financed by the Shell Oil Group. One of its
aims is to support entrepreneurs in poor countries. The Flower Valley project is a
typical success story. The Shell Foundation decided to support the flower growers of
the Agulhas Plain in South Africa. This is a region with some of the world’s richest
biodiversity, but much of the natural vegetation has been replaced by farming and
commercial vineyards. It also has an unemployment rate of 80%. The Flower Valley
Conservation Trust (FVCT) aims to protect the fragile natural environment and create
more jobs. It does this by encouraging local people to sustainably harvest the fynbos
flower that grows naturally. The bouquets of fynbos flowers are all purchased by the
UK retailer Marks & Spencer as part of its fairtrading scheme – paying local producers,
fair prices and cutting out ‘middlemen’ in the distribution chain. Shell Foundation
subsidised the FVCT, helped it write a business plan and paid for a professional
manager. The scheme now employs 80 workers, and 850,000 bouquets of fynbos are
sold through Marks & Spencer shops each year. The Shell Foundation also paid for an
Early Learning Centre in the valley to help educate local children as well as develop
new skills for adults.

Evaluate the likely impact on Shell’s other stakeholders of the company’s

corporate social responsibility policy. [10]

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