IB Diploma Programme (DP) - SL & HL · Business management

1.5 Growth and evolution: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on 1.5 Growth and evolution.

10 questions20 marksFree, no account

Question 1

1 mark

What type of economy of scale arises when a large business can afford high-capacity, automated machinery that reduces the unit cost of production?

Question 2

1 mark

A national commercial bank acquires a prominent general insurance brokerage firm to cross-sell life, home, and auto insurance policies directly to its existing retail banking customer base.

Which form of external growth is represented in this acquisition?

Question 3

1 mark

A high-growth technology firm evaluates two methods for international expansion into a volatile foreign market:
- Option A: Form a 50/50 Joint Venture with a well-established local firm.
- Option B: Enter into a Strategic Alliance without creating a new legal entity.

Which of the following statements accurately evaluates the strategic trade-offs between these two external growth methods?

Question 4

1 mark

Which of the following is an example of an external economy of scale?

Question 5

1 mark

A commercial car manufacturer acquires a major steel rolling mill that supplies \(70\%\) of the flat steel panels used in its automotive assembly lines.

Which precise strategic integration direction does this acquisition represent?

Question 6

2 marks

Define the term organic (internal) growth.

Write your answer out first, then check it against the worked solution.

Question 7

3 marks

Explain one reason why cultural clashes often arise during a cross-border merger or acquisition.

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Question 8

5 marks

Company X is a premium brand considering international expansion. Management must decide between franchising and foreign direct investment (setting up wholly owned subsidiaries).
Explain one reason why franchising might expose Company X to severe brand dilution risk, and one financial reason why direct investment carries higher financial risk.

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Question 9

2 marks

Define the term strategic alliance and state one key characteristic that distinguishes it from a joint venture.

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Question 10

3 marks

A logistics company expands rapidly from a regional fleet of \(50\) trucks to a nationwide fleet of \(1,200\) trucks. As a result, the management notes rising average costs per delivery.
(a) State the economic term used to describe rising average costs of production as a business expands.
(b) Explain two internal causes of this phenomenon that can arise in large, complex organizations.

Write your answer out first, then check it against the worked solution.

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