SPEC/3/BUSMT/HP3/ENG/TZ0/XX

Business management
Higher level
Paper 3

Specimen paper

1 hour 15 minutes

Instructions to candidates
y Do not open this examination paper until instructed to do so.
y Read the case study carefully.
y Answer all questions.
y A calculator is required for this examination paper.
y The maximum mark for this examination paper is [25 marks].

0000 – XXXX
4 pages © International Baccalaureate Organization 2021
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Share My Lunch (SML)

Read the resources and answer the questions that follow.

Resource 1 – News article

Share My Lunch claims it has served 100 000 free school meals over
the last four years, but is everything okay?

buy one

give on
e
SML’s promise: you buy one meal, they’ll donate another!

Share My Lunch (SML), a privately owned social enterprise, has just shared its 100 000 th healthy free
meal with local school children.

SML’s vision statement is, “To ensure that no child goes hungry at school by providing healthy free meals
to those in need”. The Global Health Organization’s recent data (Table 1), which is based on schools in
42 countries, provides evidence of the positive impact of healthy meals.

Table 1: The impact on schools of introducing healthy meals

Percentage (%) of schools Impact on schools

62 Improved student attendance

69 Improved student behavior

89 Improved student wellbeing

SML was created by a group of students who were volunteering at a shelter providing free breakfasts to
homeless people, during which they realized that many recipients were school-aged children. The central
idea of the enterprise is that, for each lunch produced by SML and purchased by a customer, a free
healthy lunch is donated to a school child in a lower-than-average income area in that community. The
free lunches are delivered to the schools on a daily basis.
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As a start-up, SML was financed in 2018 through donations and staffed mostly by volunteers. Today,
it has 10 paid managers and a chief executive officer (CEO). The launch of SML was accompanied by
a significant media event supported by the government and a number of well-known sport and media
celebrities. Now, SML generates 80 % of its revenue through sales of its lunches.

Despite its enormous success, SML has recently had some issues with negative publicity and
uncertainty over its new strategic direction. A number of dissatisfied volunteers have collectively and
anonymously written several negative posts on social media referring to:
y the very high salaries of the CEO, while volunteers receive no pay
y the reduction of the budget for providing healthy free meals to school children, which comes at a
time when the prices for SML’s paid-for lunches have increased and concerns over food quality
have arisen
y the poor working conditions and declining motivation of SML’s volunteers.

The management of SML have not replied to media requests to confirm or deny these accusations.

Resource 2 – Social media posts from a dissatisfied volunteer

SML is lying. What happened to their ethical objectives and business transparency*?
I have just finished a four-hour shift making lunches for school kids and had to eat
some of the food because I cannot afford to buy my own lunch. Today, I found out
that the CEO is paid a very high salary. The food I am preparing is increasingly poor
quality because food costs are rising. I will share some figures in my next post.
SML’s management do not want you to see these.
[1/2]

Financial figures from 2022

Price of lunch to paying customer: $20
Cost of providing free lunch to school children: $6 including delivery
Average number of meals sold
to paying customers per year since 2018: 80 000
CEO salary: $400 000 per year
Donations to SML: Approximately $1 million
per year
Number of volunteers: 80–100
SML’s profit for 2021: Unavailable because
SML is a private
limited company
[2/2]

* business transparency: the open sharing of information

from a business to its consumers

Turn over
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Resource 3 – Internal email from SML’s CEO to all managers regarding the enterprise’s
new strategic direction

• CEO@sharemylunch.com
To: volunteers@sharemylunch.com

Dear all,

Please note that it is against our company policy for volunteers to post about
SML on social media, and we will find those responsible for the recent posts.

Now we must focus on our next strategic direction. It was noted in our last
meeting that:
y our food costs are rising and, given our growth, we will have to pay our volunteers
a wage if we want to increase production
y if we want to continue to be sustainable and ethical and remain true to our vision,
we will need to find new sources of finance
y we have been approached by one of our fast-food competitors, a large publicly
owned multinational company (MNC), about a possible joint venture. We would
benefit from significant internal and external economies of scale if we partnered
with this company.

A possible way forward is to use Porter’s generic strategies, adopting either a cost
focus strategy (if we stay in our narrow market) or a differentiation strategy (if we
decide to try and increase market growth). Other strategies could also be used.
However, we need to make a quick decision, as this will affect SML for the next five
years at least.

CEO, Share My Lunch

CONFIDENTIAL: This email and any files transmitted with it are confidential and
intended solely for the use of the individual or entity to whom they are addressed.

1. Using an appropriate business management theory, describe a human need that SML meets
by donating free healthy lunches to school children. [2]

2. Explain two possible challenges facing SML.[6]

3. Using all the resources provided and your knowledge of business management, recommend
a possible plan of action to ensure the sustainability of SML for the next five years. [17]

References:

Resource 1. [left] Daderot, 2016. Lunch - Hessisches Landesmuseum Darmstadt [online] Available at: https://commons.
wikimedia.org/wiki/File:Lunch_-_Hessisches_Landesmuseum_Darmstadt_-_Darmstadt,_Germany_-_DSC00671.
jpg [Accessed 10 May 2021]. source adapted.
[right] Steffen, 2006. Meal in Taizé with the new cup [image online] Available at: https://commons.wikimedia.org/
wiki/File:Taize-meal-new_cup.jpg [Accessed July 9, 2021]. source adapted.
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Markscheme

Specimen paper

Business management

Higher level

Paper 3

8 pages
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1. Using an appropriate business management theory, describe a human need that SML
meets by donating free healthy lunches to school children. [2]

The human needs that SML meets by donating free healthy lunches to school children
include:
• physiological needs being met from feeding the children
• security/safety needs being met as children’s behaviour improves
• cognitive needs due to improved opportunities for learning for the children.

Reference to the impact on other stakeholders should be rewarded.

Mark as [1+1].

Award [1] for using an appropriate business management theory, eg Maslow’s hierarchy
of needs, and [1] for describing a human need.

2. Explain two possible challenges facing SML. [6]

SML faces a number of challenges:

• The volunteer workforce – if the social media post is representative of a wider human-
resource issue, the volunteers are finding that their goodwill is being undermined due
to some confusion over ethical objectives and poor working conditions. An internal
email has indicated that volunteers will need to be paid if the growth of SML’s
business operations is to be sustained. This will raise costs. In the case study, it is
implied that there may be motivation challenges also.
• SML’s ethical objectives are under threat due to a perceived high management salary
when volunteers are not being paid. The perceived high price for meals is not being
transferred into high-quality free meals for the school children who receive a donated
meal. The lack of transparency that is vital for social enterprises needs to be explored
to illustrate the impact SML is having on its communities.
• The long-term sustainability of the business is under threat from new competition and
the internal problems being experienced. There is a clear need to redefine SML’s
strategic direction. The tempting offer from the fast-food competitor of a possible joint
venture could allow for some new innovations in terms of service or products.
However, whilst positive in financial terms, this offer may undermine SML’s ethical
USP.

Mark as [3+3].

Award [1] for identification of a challenge, [1] for explanation and [1] for application to
SML.
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3. Using all the resources provided and your knowledge of business management,
recommend a possible plan of action to ensure the sustainability of SML for the next five
years. [17]

SML has clearly had a very significant impact on its community, with 100 000 free meals
donated. The impact on external stakeholders has been very positive (Resource 1) and
the enterprise has created a USP in an increasingly competitive fast-food market by using
a premium pricing model. The positive word-of-mouth promotion from celebrities and
support from the government has created great publicity. The offer from the fast-food
company for a possible joint venture will bring capital and fresh thinking into their business
decision making and could be part of a cost focus strategy if SML remains in its current
narrow market.

The joint venture could also lead to a differentiation strategy, as the joint venture will lead
to SML being able to compete in a broader marketplace. A new potential range of
products or services could be created.

However, the long-term sustainability of SML is being challenged unless greater

transparency around costs and ethical objectives is addressed. SML could easily undo all
of the positive word-of-mouth promotion and goodwill it has generated. Resource 2(a) and
2(b) represent one of the several dissatisfied volunteers, but there could be many more.
SML will have to pay particular attention to its human-resource issues regarding its
volunteers. The offer from the competitor, whilst tempting, will be viewed by some as a
possible betrayal of the enterprise’s ethical objectives. Will SML cut costs further by using
the materials from the fast-food company? The success of the business has been based
on people coming forward to support SML’s vision (Resource 1).

What will happen to the culture when paid volunteers become the norm (Resource 3)?
How will SML be able to motivate volunteers if they perceive that managers are being paid
very high salaries? SML will need to consider motivation theories, such as Herzberg’s
two-factor theory or Adams’ equity theory.

SML may have to introduce a piece-rate system or look at motivating volunteers beyond
working for a social enterprise with a strong ethical vision. Issues of fairness abound in
this social enterprise. Resource 3 points to a number of financial issues around financing
increased capacity. The offer of a joint venture from the fast-food competitor may further
damage SML’s brand image.

Either strategy carries risks in terms of undermining SML’s social enterprise vision and
goodwill on the part of the volunteers.

SML is at a critical point in its development. Its business model and ethical objectives
have been brought into question. Its expansion plans may be thwarted by human-
resource challenges and a lack of finance. Long-term sustainability is under threat. An
important feature of a social enterprise is to be open and transparent with its operations
so that stakeholders can regard the impact and vision of the organization as being
credible. SML will need to address its short-term concerns, and quickly, before planning
for future growth.

Marks should be allocated according to the assessment criteria on pages 7–8.

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The following assessment criteria will be used for question 3.

Criterion A: Use of resource materials

To what extent does the student use the resource materials provided to effectively support the
recommended plan of action?

Marks Level descriptor

The response does not reach a standard described by the descriptors
0
below.
The response makes limited reference to the resource materials
1 provided or the resources identified have been used ineffectively to
support the recommended plan of action.
The response makes some reference to the resource materials provided
2 or the resources identified have been used in a superficial way to
support the recommended plan of action.
The response makes reference to most of the resource materials
3
provided to support the recommended plan of action.
The response makes reference to all resource materials provided to
4
effectively support the recommended plan of action.

Criterion B: Business management tools and theories

To what extent does the student’s plan of action effectively apply appropriate business management
tools and theories?

Marks Level descriptor

0 The work does not reach a standard described by the descriptors below.
The response demonstrates limited application of appropriate business
1
management tools and theories.
The response superficially applies appropriate business management
2
tools and theories.
The response satisfactorily applies appropriate business management
3
tools and theories.
The response effectively applies appropriate business management
4
tools and theories.