IB Business Management HL 1.2 Types of Business Entities Question Bank

Healthy Nation (HN)


Healthy Nation (HN) is a pharmaceutical organization that used to operate in the public sector, selling its medicines (drugs) to hospitals at very low prices.
With increasing government funding over several years, H N increased the number of employees in its Research and Development Department, which was staffed by scientists, and in the Manufacturing Department. However, both departments were inflexible and inefficient. Resources were significantly under-utilized, and innovation limited.
HN's structure used to be hierarchical, with a very long chain of command and channels of communication. Senior management made the decisions and set the production levels. Consequently, the scientists in the Research and Development Department never developed decision-making skills, and development of new medicines was slow. In 2021, after many years of losses, the government sold H N to a profit-maximizing global pharmaceutical manufacturer, Global Pharma (GP).
To improve productivity, efficiency and flexibility, the management of GP reorganized HN as a shamrock organization by:
- outsourcing the production function to a well-known manufacturer
- retaining the Research and Development Department, along with its scientists and support staff, and employing additional staff when required.
In addition, two major changes were announced:
- Establishing performance-related pay for the scientists based on a new appraisal system to increase productivity levels.
- Using an expensive external company to provide cognitive training to the scientists to develop innovative decision-making and improve teamwork.
These changes have proved to be very unpopular, and the scientists in particular are resisting the changes and the short time frame in which they will be implemented.

Define the term public sector.

Bip

Bip (BB)
Nicolás and Loura want to start up a vehicle rental business in Punta del Este, a seaside resort in the Southern Hemisphere. The business will operate as a partnership and be called Bip Bip (BB). Tourist numbers are very high during the summer (December to February months in the Southern Hemisphere); the beach and water sports attract many tourists. B B will rent out convertible cars, electric cars and minivans. BB will purchase these vehicles through a leasing scheme.
"Because most rental income will occur in a few months of the year, we must forecast our cash position during the slow months and we must follow a budget," says Loura. She has forecasted the following figures for the first six months of operation, beginning in December 2015. All revenues received and costs paid will be in cash. All cash sales are paid at the time of the vehicle rental.

Due to the increasing importance of e-commerce, B B would like to offer an online booking service in addition to their website. Nicolás believes that an online booking service will allow B B to reach a wider national and international market, and will also reduce marketing costs. However, Loura argued that e-commerce also has some limitations.

After further discussion, Nicolás and Loura decided not to set up an online booking service. However, after May 2016, they will examine the budget and variances with care to determine if B B should offer an online booking service the following year.

Identify two features of a partnership.

JP


JP produces electric guitars. It is a cooperative owned by a committed workforce who share in the management and success (or failure) of the company and its profits. Workers enjoy having control over the workplace and are productive. However, JP's continued success is threatened by insufficient finance, which prevents them from spending more on traditional promotional methods.
J P 's guitars are expensive relative to the competition but are known for their quality. Its customers are very brand loyal. The use of social media marketing by many famous musicians influences JP's brand loyalty and awareness. Unfortunately for J P, one especially famous musician using a JP guitar on social media recently received negative publicity about his private life.
JP follows strict quality procedures that include quality circles. JP's management believe that teams of workers employed on the production line know the production process best and are in the best position to make any necessary improvements. Staff turnover at JP is very low.
XYZ, a large company known for its kitchen appliances, is considering moving into the musical instrument market as part of a growth strategy - they want the high gross profit margins on guitars (compared to the low profit margins on kitchen appliances). X Y Z wants to take over JP. XYZ has a strong balance sheet and large cash reserves and is an expert at marketing.
The cooperative has refused to consider the takeover bid from X Y Z. The cooperative has argued that the culture of X Y Z is too different to JP's. XYZ's management are viewed as too controlling. However, increased price competition has led to falling sales, forcing JP to make redundancies. Some cooperative members argue that unless JP accepts XYZ's bid, additional jobs will be lost.

Define the term cooperative.