IB Business Management HL 1.3 Business Objectives Question Bank

Healthy Start (HS)
Tom Donat started Healthy Start (HS), a national chain of stores preparing and selling healthy snacks, which are produced in batches. HS's target market is teenagers and young adults. Tom was concerned about high levels of fast food consumption and youth unemployment. His vision statement for HS is: "To encourage life-long healthy eating habits and to train school leavers (drop outs) in acquiring work skills".
HS hires many school leavers without qualifications. Because of the valuable social service that HS provides, an independent online media provider will feature HS in a new online reality TV show.
All employees, including managers, start at the lowest level of the organizational hierarchy and train on the job. Job enlargement, job enrichment and intrapreneurship opportunities are available. 20 % of all profits earned are put back into HS to finance these opportunities. Staff turnover is lower than the industry average.
Competition from global fast food restaurants has intensified. Their economies of scale mean that HS struggles to increase its market share. Online reviews indicate that some customers perceive HS's snacks as healthy but overpriced and with small-sized portions.
Tom is considering two options:
- Option 1: Implement flow production. HS will buy new technology and assign each employee to a specific job on the production line. HS will increase portion sizes and keep prices the same.
- Option 2: Implement a new social media marketing campaign linked to the new online TV show. The campaign will focus on the health benefits of HS's snacks.

Describe one role of a vision statement for H S.

fashionable neighbourhood, recruiting household employees, getting agencies to establish concert tours, producing more CD albums, and, more importantly, promoting her. Ruth explained to Alejandra that unless the product life cycle of music stars is carefully managed, it is often short. Alejandra needed a brand identity. Her revenue streams would be based on that brand. She would also develop strategies to extend the life of the product, which was Alejandra herself. Alejandra had an identity partly based upon her youthful and innocent look, her powerful voice and her Hispanic heritage. Ruth said that now that Alejandra was an adult, she needed to dress more like a young woman and less like a child. Nervous about this transition, Alejandra agreed to a more glamorous image. She began going to a famous hairdresser and style expert, Gavin Pratt. Soon, she had another revenue stream: appearing on the cover of high-profile fashion magazines. Ruth also argued that Alejandra needed to be "less ethnic". The US was rapidly changing demographically. The percentage of the American population that was Hispanic was small, but it was rapidly growing, thus expanding the Spanish-speaking American market. However, this demographic shift was creating a negative political reaction in the US. Focus groups showed that some English-speakers did not like the name "Lady Alejandra". Ruth recommended a new name: just "LadyA" as one word, pronounced "lay-dee-ay", with equally strong emphasis on the first and last syllables. It worked. By the year 2000, LadyA was one of the most successful musicians in the US. Popular with English-speakers, especially teenage girls and young women, she also appealed to many Hispanics. Even though all her songs were now in English and were popular in the mainstream music charts, Spanish-speaking Americans were still fans. They saw LadyA as a shining success story of a Hispanic American. As LadyA grew more popular, both her revenue and expenses increased. By 2001, she was earning millions of dollars a year from CD album sales, concerts, magazine covers, and music videos. She employed a full-time accountant to help manage her revenue and all the many expenses of her new life. For her work, she employed a band, a group of dancers, and a variety of musical and video technicians. She asked Gavin to join her full time in order to plan all aspects of her clothing, make-up, and hairstyle. For her concerts she also had an events manager who arranged bookings of venues and hotels, and who hired a company specializing in logistics, who transported equipment and set up the stage at each concert location. These were her core employees. Temporary employees were needed at each venue to help set up the venue and stage. She had many peripheral employees for her increasingly extravagant personal life: two personal assistants, two housekeepers, one chef, one personal trainer, one driver, and one chief bodyguard, who supervised six bodyguards. She was very inconsistent in her style of leadership with her employees. Sometimes she was very direct, giving detailed instructions and getting angry if they were not followed exactly. At other times, she adopted a more laissez-faire leadership style. The employees never knew what to expect. Communication was poor. Although working for a superstar had exciting moments, the employees frequently complained behind her back, mockingly calling her "la princesa". Alejandra originally operated as a sole trader. However, as the business grew it became clear that she needed the protection of limited liability and so she changed the business to a private limited company, LadyA Management Limited (LAM). Alejandra herself owned 98\% of the shares in LAM. Her parents and Ruth Liebermann owned the remaining $2 \%$. Technology was changing the music industry. In 2000, online file sharing software became widely available. Though the file sharing of copyrighted material was usually illegal, many people did it anyway, especially young people. The sales of CD albums began to fall. This trend continued with the emergence of other new technologies such as MP3 players and smartphones. Another important technological change was video hosting websites, which effectively ended the direct profitability of music videos. Before video hosting websites, musicians received royalties for videos that appeared on television. Now, artists such as LadyA had to produce their own videos and upload them to video hosting websites. These productions were expensive, but did not generate any direct revenue. The definition of a successful musician was also changing. With falling sales revenue from music (a problem made worse by the economic downturn that began in 2008), artists had to transform themselves into "media personalities" and find ways to generate revenue from these branded identities, just as Ruth had predicted. In 2009, LadyA started appearing in many above the line and below the line promotions of various types of products. LadyA was always very careful about which products she endorsed. Each one had to strengthen her brand identity as a beautiful, mainstream American, yet one with Hispanic passion and intensity. She also began communicating with her fans through various social networking websites. In 2010, LadyA started offering her own product line of perfume and cosmetics, promoted under the name LadyA. Primary and secondary market research had showed that perfume and cosmetics would best connect with LadyA's established brand and help her reach her main target market: teenage girls and young women. The production of LadyA perfume and cosmetics was outsourced, to an established manufacturer in Malaysia, where costs were much lower. Quality control could, however, be a problem. The Malaysian manufacturer would produce LadyA perfume and cosmetics using batch production which would enable a variety of products to be made; LadyA would have to pay $60 \%$ of the costs in advance. The wholesaling and distribution was also outsourced, to a company in Minnesota. By 2011, LadyA perfume and cosmetics were sold in a nation-wide chain of department stores in the US. At the same time, Alejandra decided to reorganize the business. She continued to manage all of her household employees personally. She appointed a Managing Director, and a Human Resources Manager to assist in workforce planning and manage the rest of the business. She delegated some business functions, but kept a very close interest in all decisions through her meetings with the Managing Director. One benefit of this reorganization was that, with clear roles, systems and procedures in place, Alejandra's employees complained less. On a personal level, 2012 was a big year for Alejandra. She married Rafaele Eco, an Italian investment banker, and they purchased a large mansion in Hollywood, requiring an even greater number of peripheral employees. Over the next few years, LadyA was at the peak of her media power, wealth, and fame. She was more mature and business-oriented than when she was in her twenties. Her leadership style had matured as well. She became more consistent and paternalistic. Now she began to think about the next phase of her career and her life. She was approaching her late thirties. In the US, many female musicians and film stars struggle to remain popular in their forties: modelling jobs are harder to get; girls and younger women typically prefer younger musicians and stars; and the idea of selling youthfulness becomes more difficult as women grow older. LadyA hired business consultants, Kersey \& Joyce (K\&J), who specialized in the strategic direction of brands, to help her consider her options. K\&J identified three strategic options in their report to LadyA. Option 1: Move into South American markets, which generally accept older female musicians and film stars. Ever since Lady Alejandra became LadyA, she had focused on the English-speaking market in the US. Though she had some fans in Spanish-speaking markets, she had never made them a priority. For those markets, LadyA would start using the name Lady Alejandra again, conduct a major concert tour in South America, and try to repeat her North American career, building an increasingly powerful name through music downloads (such as MP3s), concerts, films, product endorsements, magazine covers, and also perfume and cosmetics. Option 2: Develop more products under the LadyA brand and develop a global market. A possibility is a clothing range. Other possible products include accessories such as LadyA shoes, LadyA handbags, and LadyA lingerie. These products could be distributed in the US through the same department stores selling her perfume and cosmetics. Other distribution

Matchpoint Tennis Club (MTC)


Matchpoint Tennis Club (MTC) is a famous members-only club. MTC owns tennis courts, changing rooms and a restaurant. The majority of members are between 30 and 50 years old. Most members have high incomes and successful careers. However, MTC faces increasing competition from Best Sports, a multinational provider of sports centres. An economic downturn has also reduced MTC 's profits. Until recently, the restaurant made a valuable contribution to fixed costs but this has fallen significantly in the last 12 months.
Last year, Seb, a former successful tennis player, became the new Managing Director of MTC. With the objective to increase revenue, he wrote a five-year plan with the following strategies:
- double membership of MTC
- open the restaurant to the general public
- open a sports equipment and clothes shop under the family brand "Matchpoint"
- employ professional tennis coaches (teachers).
Tina, the Marketing Director, agreed with Seb about the strategies. In order to achieve the first strategic objective (double membership), she prepared a marketing budget and proposed the following tactics:
- overall reduction in membership fees of 10 %
- discounts for people aged below 18 and over 60 years old
- advertisements in local newspapers and on social networking sites
- a new range of club branded merchandise such as T-shirts and coffee mugs.
Alex, the Human Resources (HR) Manager is concerned about the impact the five-year plan will have on employees. Employees already argue that they work too hard for low pay. An increase in the number of members would increase their workload and responsibilities further. Alex tried to convince Seb that membership of MTC was already at saturation point on the product life cycle and that existing members would not like some of the proposed changes to the club.
Alex also stated that since Seb joined the business last year, the friendly atmosphere at the tennis club has disappeared. That atmosphere has been replaced with a focus solely on profit making. Alex would prefer a focus on providing a good quality service for existing members.