IB Business Management HL 4.5.6 Place Question Bank
Practise IB Business Management SL/HL 4.5.6 by applying place concepts to exam-style questions.
- Syllabus
- First assessment 2024
- Course
- Business management HL
- Level
- HL
Exam points
- identify the relevant model, concept or evidence
- apply the correct subject framework to the question
- evaluate the result using clear evidence and subject terminology
4.5.6—Place question 1
[Maximum number: 4]
Music Mania (MM)
Music Mania (MM) is an independent store selling new and used music compact discs (CDs), DVD films and music vinyl records. It is a sole trader business owned by André, who has 25 years of experience in the retail and music business. M M has loyal customers but its total revenue is falling. The store currently has a low market share in DVDs and vinyl records.
André decided to conduct some primary and secondary market research, as the entertainment industry is changing rapidly. He discovered that:
- the market for DVDs is in rapid decline
- CD sales are declining slowly but new releases still sell well
- MM has had to stock computer games, which are selling out very quickly, and the sales of new vinyl records are growing slowly.
André is accustomed to variations in sales but the current sales forecasts are, in his experience, the most worrying. He has decided to create an e-commerce website to increase his sales of new and used vinyl records and CDs. André is also aware that new free online music streaming and gaming sites are being launched.
André has only limited internal sources of finance to set up the website. Two new tactics to ensure future success for M M being considered are:
- to stop selling DVDs
- to increase below-the-line promotional spending on vinyl records.
Explain one cost and one benefit for M M of setting up an e-commerce website.
The benefits to M M from setting up an e-commerce website will be linked to increasing customer awareness and sales.
- CD and especially vinyl sales should increase, as the e-commerce site may allow for targeting more potential customers in different regions who are interested in vinyl records and possibly CD. There is a greater chance of success as relying on customers for such a retro segment to visit the physical store is rather limited.
More detailed product descriptions, customer feedback/reviews will be possible. The e-commerce website will deepen customer relationships, especially if M M can run a social media campaign alongside building brand and customer loyalty to the site.
- The e-commerce platform will also allow MM to generate much needed advertising revenue through increased loyalty in the future.
The costs are linked to the inevitable restructuring of the business that e-commerce will demand and could be considered to be both short term and long term.
- The e-commerce site will need to be built, managed and monitored by a new staff member. This will drain MM's cash reserves at a time when total revenue is falling.
- Existing staff will require training or newly employed staff hired such as technology experts to run and update the e-commerce facility and possibly create social media support. Costs are likely to rise in the short term and again, M M is facing fall in revenue and finance is limited.
If the e-commerce site is to be fully functional then new distribution channels around delivery of vinyl records and newly released CDs that are both growing in sales to the customer will need to be identified, researched and set up. This will also take time and André will have to find additional resources. The stimulus indicates that finance is limited.
An e-commerce website will add a new layer of complexity to M M 's operations and logistics and M M has not got the right experience therefore more finance will have to be raised for training, hiring people and so on.
Please note:
Whatever relevant costs that a candidate explains or describe needs to be applied specifically to MM's lack of finance / lack of experience.
Mark as 2+2.
Award [1] for identifying or describing the cost / benefit for MM of setting up e-commerce and a further [1] for a development with respect to MM. Award a maximum of [2].
[2] cannot be awarded per cost / benefit if the response lacks either explanation and/or application.
For example:
- For an identification or a description of a cost / benefit with or without application [1].
- For explanation of a cost / benefit with no application [1].
- For explanation of a cost / benefit and application [2].
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