IB Business Management SL 1.1 What is a business? Question Bank

1. Suparman Fish ( SF )
Gepa Suparman owns and operates four fishing boats in Indonesia. There is a growing demand for canned (tinned) food, including cans of fish. Gepa wants to enter the secondary sector by opening a small factory producing cans of fish.
Gepa's business will be called Suparman Fish ( S F ) and will be a private limited company. Gepa will own all of the shares. The factory will be located in a village three miles from the harbour. Because unemployment is high in the village, Gepa should easily find workers for the new factory. In addition to the manager's salary, workers' wages, and the cost of fish, supplies, and cans, S F will have the semi-variable cost of electricity.
Gepa has prepared a four-month cash-flow forecast based on the following information:
- opening balance month 1: $ 15000.
- month 1 : sales revenue of $ 1000, increasing by 20 % per month.
- manager's salary: $ 300 per month.
- workers' wages: $ 175 per worker per month.

- variable costs (fish, supplies, and cans) are equal to 40 % of sales revenue.
- semi-variable cost of electricity: fixed cost of $ 100 per month, plus a variable cost of $ 0.10 per kilowatt hour (kwh). Month 1 usage: 100 kwh , increasing by 10 % each month.

Although S F would create several jobs in the village, many residents are not happy about the new factory. The new factory would use chemicals, which cause pollution. Residents are concerned about the unpleasant smells from the factory. A representative from the local employment office is concerned whether Gepa's factory will provide a safe working environment.

1. Office Cleaners (OC)
Sayaka Toguchi operates an office cleaning service, which is in the tertiary sector. When office workers are going home, she arrives at their offices to clean them. At present, she has four clients, with commercial offices all located in the same building. She operates as a sole trader and has no employees. Her business name is Office Cleaners (OC).
Sayaka has always liked the small size of her business. However, when a large bank on the ground floor of the same building where her current clients are located offered her a contract to clean its offices, she decided to reconsider the size of her business. The bank would loan her $ 2500 to purchase new cleaning equipment. The bank would also offer her a two-year contract paying her $ 6000 every second month. Sayaka would need to employ one new worker to clean the bank.
For the bank contract, Sayaka forecasted the following monthly cash outflows:
- salary for one new employee: $ 2000
- cleaning products (soap, detergent): $200
- payment on equipment loan: $ 150 payable from the second month
- business taxes and overheads: $ 300.
Before the bank loan she currently has personal savings of $ 1600 in the bank.
Employee absence also worries Sayaka. How will she get all the offices clean if her new employee is absent from work due to illness? Agencies can provide temporary employees but they cost $ 300 a day per worker.

1. Make-Up (MU)
Lana Lane is an image coach and plans to open Make-Up (MU), a shop where she can sell her own brand of beauty products. Because Lana is a female entrepreneur, her local government will pay 50 % of the rent for the space in which M U will operate.
Lana has forecasted the following figures for M U for the first six months of operation, beginning on 1 July 2023 (see Table 1). The opening balance will be $ 0.

Lana has learned that a new competitor with lower prices will enter the market before the end of 2023.

1. Las Migas
Carolina plans to set up a bakery, Las Migas, in a small town. Competition from established bakeries is strong. Carolina has asked for a bank loan because her personal savings are insufficient. The bank manager requested the following information:
- a business plan
- a cash flow forecast for the first four months of operations.
Carolina has no experience with financial forecasts but she estimated the figures for Las Migas for the first four months of operations. These figures are shown in Table 1.

Paul's idea for 3D printing takes Utopia into a secondary sector activity that contrasts with its usual tertiary sector activities. In order to produce a sufficient number of souvenirs, Utopia would need to buy ten 3D printers at $ 1000 each. There would be material costs and significant operating costs, as well as time and additional labour. Paul has produced a net cash flow forecast for the project (Table 1) assuming a five year life for the printers. He likes the idea that each souvenir produced could be of a unique design and personalized. Some of the materials would be from recycled plastics obtained from waste at the resort. Recycling would reduce variable costs and it would be good for the resort's environment and for Utopia's caring image.

Liza does not like the idea of 3D printing. She is concerned that the souvenirs may damage Utopia's exclusive brand. She can see difficulties with recruiting someone with both the necessary IT skills and the ability to make decisions about which types of souvenirs to produce. She is particularly concerned about the impact on Utopia's current suppliers of souvenirs. She thinks that 3D printing is more suited to larger organizations.

John believes that the 3D printing technology will bring other benefits to his businesses. He can imagine decorations and other useful items being produced for the resort and its offices.