Growth & Evolution (DP IB Business Management: SL): Exam Questions

GreenTech Solar Solutions (GSS) is a medium-sized company that makes solar panels. Over the last five years, it has grown quickly because of the increasing demand for renewable energy products. GSS has reduced its costs by buying raw materials in bulk and using advanced machines to speed up production. However, as the company has grown, it has faced problems. Managers say that communication between departments has become slower and less clear, and customers have complained about delays in their orders.

GSS is now thinking about merging with EcoVolt, a smaller company that makes innovative solar storage systems. This merger would help GSS diversify its product range and offer new products to its customers. It could also allow GSS to enter new markets by using EcoVolt’s reputation and technology. However, GSS is worried about possible cultural clashes. EcoVolt’s casual, start-up style may not fit well with GSS’s more formal, structured way of working. Integrating the two companies could also take time and increase costs.

GreenTech Solar Solutions (GSS) is a medium-sized company that makes solar panels. Over the last five years, it has grown quickly because of the increasing demand for renewable energy products. GSS has reduced its costs by buying raw materials in bulk and using advanced machines to speed up production. However, as the company has grown, it has faced problems. Managers say that communication between departments has become slower and less clear, and customers have complained about delays in their orders.

GSS is now thinking about merging with EcoVolt, a smaller company that makes innovative solar storage systems. This merger would help GSS diversify its product range and offer new products to its customers. It could also allow GSS to enter new markets by using EcoVolt’s reputation and technology. However, GSS is worried about possible cultural clashes. EcoVolt’s casual, start-up style may not fit well with GSS’s more formal, structured way of working. Integrating the two companies could also take time and increase costs.

Berry Bliss Bakery (BBB) is a small family-run business specialising in high-quality artisanal pastries and custom-made cakes. Located in a busy city centre, BBB has built a strong reputation for its personalised customer service and attention to detail. The business relies heavily on word-of-mouth recommendations, with most customers being loyal locals. Despite its success, BBB faces increasing competition from larger bakery chains offering similar products at lower prices. Emma and Raj, the owners, are considering how to grow their business.

One option is to open a second bakery in a nearby town, allowing them to serve new customers. However, this expansion would require significant investment in hiring staff and renting premises. The second option is to start selling their products online, enabling them to reach customers further afield. Selling online would involve costs for setting up a website and creating a delivery system. Emma favours opening a second location to grow their local brand, while Raj is cautious, worrying about potential cash flow problems and loss of quality control if they expand too quickly.

Berry Bliss Bakery (BBB) is a small family-run business specialising in high-quality artisanal pastries and custom-made cakes. Located in a busy city centre, BBB has built a strong reputation for its personalised customer service and attention to detail. The business relies heavily on word-of-mouth recommendations, with most customers being loyal locals. Despite its success, BBB faces increasing competition from larger bakery chains offering similar products at lower prices. Emma and Raj, the owners, are considering how to grow their business.

One option is to open a second bakery in a nearby town, allowing them to serve new customers. However, this expansion would require significant investment in hiring staff and renting premises. The second option is to start selling their products online, enabling them to reach customers further afield. Selling online would involve costs for setting up a website and creating a delivery system. Emma favours opening a second location to grow their local brand, while Raj is cautious, worrying about potential cash flow problems and loss of quality control if they expand too quickly.

TechTrek Innovations (TTI) is a fast-growing start-up that develops cutting-edge software for the healthcare industry. Its flagship product is a patient management system that helps hospitals track appointments, medical records, and billing. TTI has seen rapid success in its home market and is now looking for ways to expand globally. One option is a joint venture with MediCare Solutions, a large multinational healthcare provider. This partnership would give TTI access to MediCare’s extensive network of hospitals and knowledge of international healthcare systems.

However, there are risks. Some employees worry that working with a much larger company like MediCare could stifle TTI’s creativity and flexibility. Others are concerned about sharing TTI’s proprietary software code, fearing that MediCare might gain too much control. Despite these challenges, the founders of TTI see the partnership as a chance to scale up quickly and enter new markets without having to make a large upfront investment. MediCare, meanwhile, is keen to enhance its digital offerings by collaborating with TTI’s innovative team.

TechTrek Innovations (TTI) is a fast-growing start-up that develops cutting-edge software for the healthcare industry. Its flagship product is a patient management system that helps hospitals track appointments, medical records, and billing. TTI has seen rapid success in its home market and is now looking for ways to expand globally. One option is a joint venture with MediCare Solutions, a large multinational healthcare provider. This partnership would give TTI access to MediCare’s extensive network of hospitals and knowledge of international healthcare systems.

However, there are risks. Some employees worry that working with a much larger company like MediCare could stifle TTI’s creativity and flexibility. Others are concerned about sharing TTI’s proprietary software code, fearing that MediCare might gain too much control. Despite these challenges, the founders of TTI see the partnership as a chance to scale up quickly and enter new markets without having to make a large upfront investment. MediCare, meanwhile, is keen to enhance its digital offerings by collaborating with TTI’s innovative team.

SoleMate operates a successful chain of shoe shops specialising in affordable yet fashionable footwear for men, women and children. The company’s stores are currently located in suburban shopping centres known for their convenience, ample parking and appeal to family-orientated, budget-conscious shoppers. This location strategy has helped SoleMate grow steadily over the past decade, building strong brand loyalty among families

Recently, however, SoleMate has faced declining sales in its suburban locations due to increased competition from online retailers offering wider selections and discounts. To address this, the company’s management is considering expanding into urban high streets. This strategic move aims to attract younger, trend-conscious consumers, improve brand visibility and rejuvenate the SoleMate brand

The shift to urban areas comes with significant challenges. Urban high street rents are 50% higher than those in suburban shopping centres, adding financial pressure. Additionally, SoleMate must invest an estimated $65,000 per store to redesign interiors, improve aesthetics and tailor its product range to suit urban tastes. Despite these costs, management believes urban stores could bring long-term growth by positioning SoleMate as a more modern and dynamic brand

To evaluate this decision, the company conducted market research, including competitor analysis and customer surveys. The findings showed that 65% of urban shoppers prioritise affordability, but brand image and style are also critical factors. A competitor analysis revealed that rival urban shoe stores charge an average of $50–$70 per pair of shoes, a price point SoleMate could compete with by carefully managing production and overhead costs

Management forecasts that each new urban store could generate a monthly revenue of $25,000, with operating costs projected at $18,000. If successful, this strategy could offset the decline in suburban sales and enable SoleMate to reach a new, profitable market segment. However, there is a risk that the urban move may alienate SoleMate’s core family-orientated customers if brand messaging becomes too focused on younger demographics

The decision to expand will require careful consideration of the financial, operational and strategic implications to ensure the expansion aligns with SoleMate’s long-term goals

Table 1: Financial comparison – Suburban vs urban locations

Table 2: Competitor analysis – Urban shoe retailers

Graph 1: Customer priorities for urban shoe shopping

The following graph illustrates urban customers’ priorities when shopping for shoes, based on SoleMate’s market research.

Berry Bliss Bakery (BBB) is a small, family-run business specialising in high-quality, artisanal pastries and custom-made cakes. Located in a busy city centre, BBB is well-known for its personalised customer service and attention to detail. The bakery has built a loyal customer base over the past five years, relying heavily on word-of-mouth recommendations to attract new customers. However, competition from larger bakery chains offering similar products at lower prices has begun to put pressure on BBB’s market share

Emma and Raj, the co-owners, recognise the need to grow their business to remain competitive. They are currently exploring two options. The first option is to introduce a catering service for local events, such as weddings, corporate meetings and birthday parties. This service would allow BBB to diversify its revenue streams and target a broader customer base. However, it would require purchasing additional equipment and hiring specialised staff to manage the catering orders

The second option is to launch a subscription box service, where customers can sign up to receive a customised selection of BBB’s baked goods delivered to their homes each month. This option would enable BBB to reach customers beyond its city centre location. However, this option would involve setting up an e-commerce platform and investing in packaging and delivery logistics to ensure the freshness and quality of the products

Emma favours the catering service because it aligns with BBB’s reputation for high-quality, personalised offerings and builds on the bakery's existing strengths. Raj, on the other hand, prefers the subscription box service because it offers the potential for recurring revenue and expands BBB’s reach. Both options come with risks, including the potential for cash flow challenges and the difficulty of maintaining product quality as the business scales

To evaluate the feasibility of these options, Emma and Raj are closely reviewing BBB’s financial position. While revenue has grown steadily over the past five years, net profit margins have decreased due to rising operating costs. The bakery has limited cash reserves and relies on short-term loans to manage its working capital. Emma and Raj know they must carefully assess the financial and operational implications of each option before making a decision

Table 1: Cost and return analysis of growth options

Table 2: Statement of financial position
As of 31 December 2024

Graph 1: Gross and net profit margins (2020–2024)