M16/3/BUSMT/HP1/ENG/TZ0/XX
BUSINESS MANAGEMENT
HIGHER LEVEL
PAPER 1
Practice examination 2016 – Todos os Mercados
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 – Todos os Mercados 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].
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SECTION A
Answer two questions from this section.
QUESTION ONE
a. With reference to Todos os Mercados, describe two ways corporate social responsibility
(CSR; line 46) could be important. [4 marks]
b. Apply Pink’s Drive Theory (line 61) to Henri Trouvé’s motivation to work in his job at Todos
os Mercados. [6 marks]
QUESTION TWO
a. Explain the importance to Todos os Mercados of having a unique selling point (USP; line
6). [4 marks]
b. With reference to Todos os Mercados, distinguish between autocratic leadership (line
34) and paternalistic leadership (line 65) styles. [6 marks]
QUESTION THREE
a. With reference to Todos os Mercados, outline two key features of operating as a public
limited company (line 11). [4 marks]
b. Analyse the impact of two external environmental factors on the business objectives of
Todos os Mercados. [6 marks]
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SECTION B
Answer the compulsory question from this section.
QUESTION FOUR
Henri Trouvé was presented with the following financial information for Todos os Mercados in
his MBA case study on the firm.
Table 1: Selected financial information for Todos os Mercados
Selected financial information for Todos os Mercados
Year ending 31st March 2016 Year ending 31st March 2015
Cash $200m $600m
Creditors $8 500m $7 500m
Debtors $3 100m $3 100m
Short-term loans $900m $400m
Stock $3 750m $3 050m
Sales revenue $201 050 000m $175 405 000m
Cost of goods sold $152 112 000 $136 054 000m
Expenses $42 021 000 $30 904 000
a. Explain how Todos os Mercados can have, at the same time, increasing sales and
decreasing market share in its US market. [4 marks]
b. Using information in Table 1 above calculate
i. Gross profit margins for the years ending 2016 and 2015 [2 marks]
ii. Net profit margins for the years ending 2016 and 2015 [2 marks]
iii. The current ratios for the years ending 2016 and 2015 [2 marks]
iv. The acid test/quick ratios for the years ending 2016 and 2015 [2 marks]
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IB Business Management Higher Level Paper 1 Examination
c. Using the financial information in Table 1, discuss two strategies to improve liquidity at
Todos os Mercados. [8 marks]
Additional information
There is no additional information in this paper for Sections A and B.
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IB Business Management Higher Level Paper 1 Examination
SECTION C
Answer the compulsory question from this section.
QUESTION FIVE
5. The board of directors at Todos os Mercados are exploring long-term strategic options
in line with market share, market leadership and profit maximisation objectives. They
have been considering the four strategic options for growth laid out in the Ansoff matrix.
The board has asked you to prepare an independent report for their consideration.
By applying the Ansoff matrix and using quantitative and qualitative data from the case
study and the additional stimulus material in table 1 above and items 1-6 below,
evaluate what you believe to be the two best options for Todos os Mercados to achieve
its strategic objectives. [20 marks]
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Additional information
ITEM 1: RETAILERS’ MARKET SHARE
Global market share of multi-national food retailers.
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ITEM 2: SUPERMARKET SALES OF ORGANIC PRODUCTS ARE A BIG GROWTH AREA
Relatively, Todos os Mercados has a very low market share of organic food products which is the fastest
growing category of food products, with compound average growth rates of 12% from 2010-2015.
ITEM 3: FORCASTED GROWTH RATES FOR SELECTED REGIONS
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ITEM 4: TOP 10 MULTINATIONAL FOOD RETAILERS BY TOTAL GLOBAL SALES, 2015
Top 10 multinational food retailers by total global sales, 2015
Top
250
rank
Name of
company
Country
of origin
2015 Retail
revenue
(US$ mil)
2015
Retail
revenue
growth
2015
Net
profit
margin
2015
Return
on
assets
CAGR*
Retail
revenue
2010-2015
# countries
of
operation
% retail
revenue
from foreign
operations
1 Todos os
Mercados,
PLC
Argentina 136 054 000 1.5% 3.5% 8.2% 3.3% 28 28.9%
2 Costco
Wholesale
US 42 150 000 6.1% 2.0% 6.8% 7.7% 9 28.2%
3 Carrefour France 38 066 000 -2.4% 1.8% 3.1% -3.0% 33 52.7%
4 SUT KG Germany 35 301 000 9.5% 2.2% 4.3% 6.5% 26 58.2%
5 Tesco UK 29 855 000 -2.0% 1.5% 1.9% 2.9% 13 32.3%
6 The Kroger
Co
US 29 553 000 1.7% 1.6% 5.2% 5.3% 2 0.55%
7 Metro Ag Germany 29 499 000 -2.5% 0.7% 1.4% -0.9% 32 62.50%
8 Aldi EG Germany 26 005 000 4.7% 2.1% 3.5% 5.5% 17 59.25%
9 The Home
Depot
US 21 225 000 5.4% 6.8% 13.3% 2.0% 4 10.17%
10 Target US 17 112 000 0.9% 2.7% 4.4% 2.9% 2 1.8%
Top 10 404 820 000 2.0% 2.8% 6.0% 3.0% 16.5† 32.5%
Top 250 431 355 000 4.1% 3.4% 5.3% 4.2% 10.2† 24.2%
Top 10 share of Top 250 retail
value
93.8%
*CAGR = compound annual growth rate †Average
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ITEM 5: TODOS OS MERCADOS – SUMMARY SWOT ANALYSIS
Strengths:
Investment capabilities. During fiscal year 2015 the
company generated total revenues of $136 billion
Well recognised brand. Todos os Mercados is the
world’s fourth largest public company by revenue
and the largest retailer in the world.
Innovative technologies. The company has a
technologically advanced information system to
support its supply chain management – real time
order, inventory tracking for better decision-making
and more efficient supply chain management.
Loyalty of customers.
Prices lower than competitors. Large volume allows
the company to receive huge discounts from
suppliers.
The widest selection of products amongst retailers –
a better chance of keeping customers in one place
and increasing the average customer spend.
Weaknesses:
The company tends to hire more part-time
employees than they do full time.
Hostility in some communities due to the fact that the
company has put many small stores out of business.
Reduced profit margins in order to keep prices lower
than competitors. Liquidity problems from expansion.
Some of the products sold have poor quality, which
reflects on the brand in a bad way.
Poorly prepared investment decisions. The company
has already retreated from the South Korean and
German markets.
Involved in multiple law suits, including questionable
business practices, unpaid wages and community
activists trying block new stores opening.
Due it its large number of employees, Todos os
Mercados is an object of constant media and
government attention.
Due to the size of the company, keeping consistency
in management quality and local business decisions is
difficult.
High operational costs connected with largest
employment level. The company faces one of the
highest staff turnover levels and needs to raise wages
in order to attract new employees.
Opportunities:
Expanding in and focussing on previously
unexploited consumer markets such as Latin
America and Asia (especially India and China).
Increasing sales of groceries and food items will
encourage people to eat at home as health and
wellness trends continue to develop.
Growth in the internet, backed by technological
capabilities will allow retailing to serve an even
larger market.
Depressed global economic growth, especially in
Europe and China. Customers with lower incomes
will demand lower prices.
Taking advantage of efficient supply chain
supported by innovative technologies that might
result in further expansion and reduced costs.
Partnerships with large companies providing various
services; e.g., healthcare, insurance, travel agencies
and coffee houses.
Takeovers of smaller competitors and mergers with
various retailers will strengthen market share for TS.
Threats:
Two million employees increases exposure to rising
wages and high health insurance costs.
Increasing resistance to further expansion from local
organisations and communities.
Growing US economy can change customer
motivation from one driven by low cost to one driven
by quality and convenience.
The competition. Retailers such as Costco can attract
customers with a better offer and a positive company
image. In Europe, the fast expansion of the German
discount retailers Aldi and Lidi.
Increasing community concern about the company’s
ethical position; e.g., low wages and work conditions.
Danger of recurring recession.
A possibility of aggressive German-style discounting of
prices in American markets.
Growing competition from internet-based retailers
such as Amazon and eBay.
Retreat from shopping in large retail stores in favour of
small local markets and grocery stores.
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ITEM 6: BREAKING BUSINESS NEWS
News item appearing in all major newspapers and global media with a business focus.
American antitrust regulators rule that the Ford and Hyundai merger can proceed NEW YORK
In a surprise move, both US and European antitrust regulators have indicated
that the two supermarket giants Carrefour and the Kroger can proceed with
their proposed merger. The announcement was largely unanticipated and
seems to have the approval of investors as the shares of both companies rose
sharply immediately after the announcement was made.
Carrefour CEO, Georges Plassat stated that he was “thrilled the last regulatory
obstacle to the deal had been overcome”, and that he and his executive team
could now finalise the terms of the agreement with Kroger.
Industry analysts said that the merger made a lot of sense for both companies
as Kroger was established and profitable in its US market and Carrefour had a
worldwide reach. Significant cost savings would likely emerge from the newly
restructured company allowing the new firm to be more price competitive.
Carrefour CEO Georges Plassat ready to announce the news that Carrefour and the Kroger are about to merge, at the Carrefour headquarters, Boulogne-Billancourt, France. April 15, 2016. REUTERS/MILENA BAENSCH
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