GOOD SHEPHERD INTERNATIONAL SCHOOL, OOTY

Mid Term Examination – September 2022

IB 2
Business management
Higher level – Paper 1
2 hour 15 minutes

Instruction to candidates:
● Do not open this examination paper until instructed to do so
● A clean copy of the business management formula sheet is required for this
examination paper.
● Answer all questions
● A calculator is required for this examination paper.
● The maximum mark for this examination paper is [60 marks]
Q.1. Four Seasons Resorts

After a period of consolidation in 2011-2012, when the Four Seasons Leisure group saw a
big contraction in demand due to the world economic slowdown, the company is looking to
increase its share of the upmarket, all-inclusive holiday resort market. Thirty years of
providing holidays to high income European and North American consumers make Four
Seasons Leisure one of the most prestigious brands in the Caribbean. Despite the
recession, the company performed fairly well in 2012. Profits fell 5%, but this compared
favorably with the industry average profit decline of 9%. However, the chief executive
officer, Renee Sternway, thinks the company’s concentration in the Caribbean is a
weakness because of competition from new holiday destinations in Dubai. Renee believes
that the company needs to expand into some of the new destinations that its customers are
interested in visiting. The directors are considering three options for 2015.

The consultancy that produced the projected costs and profit data believe that there is a
20% chance of fast economic growth, 50% chance of normal economic growth and `
a. Construct a fully labelled decision tree showing Four Seasons’ options. Also calculate the
expected values for each option and identify which option Four Seasons should choose.
[6 marks]

b. Discuss the use of decision trees as a decision-making tool for Four Seasons when
making strategic decisions such as that outlined in the case study material above. [4 marks]

c. Evaluate the three options available to Four seasons Resort and which of these will be the
best option for expansion. [10 marks]

Q.2. Gemel Ltd

George Melly started a new business in January 2008. He set the firm up as a private limited

company, Gemel Ltd. George took a majority 80% shareholding in the business and

appointed himself as Chief Executive Officer. His accountant, Peter Mears, joined George

buying the remaining shares.

To finance the launch, George estimated a figure of $300000. He produced a business plan

and forecast financial information as part of the process of obtaining most of the required

finance (see table below). George presented this financial information to Peter Mears.

Peter examined the figures and pointed out that George had omitted a provision for

depreciation of the firm’s fixed assets, which were valued at $200 000 on start-up. He

suggested that George work on the basis of a four-year life for the assets and estimate a

scrap value of $40000.

 Forecast financial information for Gemel Ltd for the years 2008 and 2009.

(a) Define Private Limited Company. [2 marks]

b) Using straight-line depreciation, calculate the annual provision for depreciation that George
had omitted. (Show all your working) [2 marks]

(c) Using the financial information provided for 2008 and 2009, prepare profit and loss
accounts for the two years, adjusting the figures in the table above to include the provision for
depreciation and re-calculating the tax payment to equal 25% of net profit before tax.
[6 marks]

(c) Evaluate potential sources of finance for a small business like Gemel Ltd to fund the
purchase of the following:

(i) Stocks of finished goods for resale

(ii) Delivery vans

(iii) Land and buildings. [10 marks]

Q.3. Cyber Coolies

Vinita Rawat is a post-graduate student in English literature who works in a call centre in
India which handles claims enquiries for a British insurance firm. According to a study
into conditions inside call centers conducted by a government-funded research institute,
Vinita is a prime example of an Indian “cyber coolie” – an expensively educated, highly
intelligent graduate, who is, arguably, wasting her talents performing exhausting,
mindlessly repetitive tasks for the call center industry.

The report has triggered a debate on the ethics of the offshoring industry. Over the past
few years offshoring has been cited as a positive aspect of globalization – providing good
salaries and new career opportunities in the developing world. However, some people
argue that traditional forms of labor exploitation continue. The study claims that the
emerging offshoring industry has developed a system for hiring workers with limited
labour rights and little job security. Despite the relatively high salaries, and modern
working environments, the study concludes that “most of these youngsters are in fact
burning out” doing low-end jobs.

The true monotony of the work is disguised by “camouflaging work as fun” – for example,
introducing cafes, popcorn machines and leisure facilities. Meanwhile, quotas for calls or
e-mails are fixed at such a high level “that the agent has to burn out to fulfill it”, the report
claims.

Trade union* activists have welcomed the study. Gautam Mody, a labour activist working
to introduce call centre unions, said “call centres are looking for people who simply
accept commands and carry them out without question”.

(a) Explain one advantage and one disadvantage to British firms of offshoring. [4 marks]

(b) (i) Describe one objective of a trade union. [2 marks]

(ii) Analyze how a call centre trade union could affect the employees. [4 marks]

(c) Using appropriate motivational theories, evaluate the methods used by

call centres to get the best performance from their employees. [10 marks]