Tutor2u Todos os Mercados May 2016 Practice

M16/3/BUSMT/HP1/ENG/TZ0/XX

BUSINESS MANAGEMENT

HIGHER LEVEL

PAPER 1

Practice examination 2016 – Todos os Mercados

2 hours 15 minutes

INSTRUCTIONS TO CANDIDATES

Do not open this examination paper until instructed to do so.

A clean copy of the IB Business Management case study – Todos os Mercados is required

for this examination paper.

Read the case study carefully.

A clean copy of the IB Business Management formulae sheet is required for this examination

paper.

Section A: answer two questions.

Section B: answer question 4.

Section C: answer question 5.

A calculator is required for this examination paper.

The maximum mark for this examination paper is [60 marks].

IB Business Management: www.BusinessManagementIB.com

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IB Business Management Higher Level Paper 1 Examination

SECTION A

Answer two questions from this section.

QUESTION ONE

a. With reference to Todos os Mercados, describe two ways corporate social responsibility

(CSR; line 46) could be important. [4 marks]

b. Apply Pink’s Drive Theory (line 61) to Henri Trouvé’s motivation to work in his job at Todos

os Mercados. [6 marks]

QUESTION TWO

a. Explain the importance to Todos os Mercados of having a unique selling point (USP; line

6). [4 marks]

b. With reference to Todos os Mercados, distinguish between autocratic leadership (line

34) and paternalistic leadership (line 65) styles. [6 marks]

QUESTION THREE

a. With reference to Todos os Mercados, outline two key features of operating as a public

limited company (line 11). [4 marks]

b. Analyse the impact of two external environmental factors on the business objectives of

Todos os Mercados. [6 marks]

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SECTION B

Answer the compulsory question from this section.

QUESTION FOUR

Henri Trouvé was presented with the following financial information for Todos os Mercados in

his MBA case study on the firm.

Table 1: Selected financial information for Todos os Mercados

Selected financial information for Todos os Mercados

Year ending 31st March 2016 Year ending 31st March 2015

Cash $200m $600m

Creditors $8 500m $7 500m

Debtors $3 100m $3 100m

Short-term loans $900m $400m

Stock $3 750m $3 050m

Sales revenue $201 050 000m $175 405 000m

Cost of goods sold $152 112 000 $136 054 000m

Expenses $42 021 000 $30 904 000

a. Explain how Todos os Mercados can have, at the same time, increasing sales and

decreasing market share in its US market. [4 marks]

b. Using information in Table 1 above calculate

i. Gross profit margins for the years ending 2016 and 2015 [2 marks]

ii. Net profit margins for the years ending 2016 and 2015 [2 marks]

iii. The current ratios for the years ending 2016 and 2015 [2 marks]

iv. The acid test/quick ratios for the years ending 2016 and 2015 [2 marks]



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c. Using the financial information in Table 1, discuss two strategies to improve liquidity at

Todos os Mercados. [8 marks]

Additional information

There is no additional information in this paper for Sections A and B.



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SECTION C

Answer the compulsory question from this section.

QUESTION FIVE

5. The board of directors at Todos os Mercados are exploring long-term strategic options

in line with market share, market leadership and profit maximisation objectives. They

have been considering the four strategic options for growth laid out in the Ansoff matrix.

The board has asked you to prepare an independent report for their consideration.

By applying the Ansoff matrix and using quantitative and qualitative data from the case

study and the additional stimulus material in table 1 above and items 1-6 below,

evaluate what you believe to be the two best options for Todos os Mercados to achieve

its strategic objectives. [20 marks]



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Additional information

ITEM 1: RETAILERS’ MARKET SHARE

Global market share of multi-national food retailers.



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ITEM 2: SUPERMARKET SALES OF ORGANIC PRODUCTS ARE A BIG GROWTH AREA

Relatively, Todos os Mercados has a very low market share of organic food products which is the fastest

growing category of food products, with compound average growth rates of 12% from 2010-2015.

ITEM 3: FORCASTED GROWTH RATES FOR SELECTED REGIONS



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ITEM 4: TOP 10 MULTINATIONAL FOOD RETAILERS BY TOTAL GLOBAL SALES, 2015

Top 10 multinational food retailers by total global sales, 2015

Top

250

rank

Name of

company

Country

of origin

2015 Retail

revenue

(US$ mil)

2015

Retail

revenue

growth

2015

Net

profit

margin

2015

Return

on

assets

CAGR*

Retail

revenue

2010-2015

# countries

of

operation

% retail

revenue

from foreign

operations

1 Todos os

Mercados,

PLC

Argentina 136 054 000 1.5% 3.5% 8.2% 3.3% 28 28.9%

2 Costco

Wholesale

US 42 150 000 6.1% 2.0% 6.8% 7.7% 9 28.2%

3 Carrefour France 38 066 000 -2.4% 1.8% 3.1% -3.0% 33 52.7%

4 SUT KG Germany 35 301 000 9.5% 2.2% 4.3% 6.5% 26 58.2%

5 Tesco UK 29 855 000 -2.0% 1.5% 1.9% 2.9% 13 32.3%

6 The Kroger

Co

US 29 553 000 1.7% 1.6% 5.2% 5.3% 2 0.55%

7 Metro Ag Germany 29 499 000 -2.5% 0.7% 1.4% -0.9% 32 62.50%

8 Aldi EG Germany 26 005 000 4.7% 2.1% 3.5% 5.5% 17 59.25%

9 The Home

Depot

US 21 225 000 5.4% 6.8% 13.3% 2.0% 4 10.17%

10 Target US 17 112 000 0.9% 2.7% 4.4% 2.9% 2 1.8%

Top 10 404 820 000 2.0% 2.8% 6.0% 3.0% 16.5† 32.5%

Top 250 431 355 000 4.1% 3.4% 5.3% 4.2% 10.2† 24.2%

Top 10 share of Top 250 retail

value

93.8%

*CAGR = compound annual growth rate †Average



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ITEM 5: TODOS OS MERCADOS – SUMMARY SWOT ANALYSIS

Strengths:

Investment capabilities. During fiscal year 2015 the

company generated total revenues of $136 billion

Well recognised brand. Todos os Mercados is the

world’s fourth largest public company by revenue

and the largest retailer in the world.

Innovative technologies. The company has a

technologically advanced information system to

support its supply chain management – real time

order, inventory tracking for better decision-making

and more efficient supply chain management.

Loyalty of customers.

Prices lower than competitors. Large volume allows

the company to receive huge discounts from

suppliers.

The widest selection of products amongst retailers –

a better chance of keeping customers in one place

and increasing the average customer spend.

Weaknesses:

The company tends to hire more part-time

employees than they do full time.

Hostility in some communities due to the fact that the

company has put many small stores out of business.

Reduced profit margins in order to keep prices lower

than competitors. Liquidity problems from expansion.

Some of the products sold have poor quality, which

reflects on the brand in a bad way.

Poorly prepared investment decisions. The company

has already retreated from the South Korean and

German markets.

Involved in multiple law suits, including questionable

business practices, unpaid wages and community

activists trying block new stores opening.

Due it its large number of employees, Todos os

Mercados is an object of constant media and

government attention.

Due to the size of the company, keeping consistency

in management quality and local business decisions is

difficult.

High operational costs connected with largest

employment level. The company faces one of the

highest staff turnover levels and needs to raise wages

in order to attract new employees.

Opportunities:

Expanding in and focussing on previously

unexploited consumer markets such as Latin

America and Asia (especially India and China).

Increasing sales of groceries and food items will

encourage people to eat at home as health and

wellness trends continue to develop.

Growth in the internet, backed by technological

capabilities will allow retailing to serve an even

larger market.

Depressed global economic growth, especially in

Europe and China. Customers with lower incomes

will demand lower prices.

Taking advantage of efficient supply chain

supported by innovative technologies that might

result in further expansion and reduced costs.

Partnerships with large companies providing various

services; e.g., healthcare, insurance, travel agencies

and coffee houses.

Takeovers of smaller competitors and mergers with

various retailers will strengthen market share for TS.

Threats:

Two million employees increases exposure to rising

wages and high health insurance costs.

Increasing resistance to further expansion from local

organisations and communities.

Growing US economy can change customer

motivation from one driven by low cost to one driven

by quality and convenience.

The competition. Retailers such as Costco can attract

customers with a better offer and a positive company

image. In Europe, the fast expansion of the German

discount retailers Aldi and Lidi.

Increasing community concern about the company’s

ethical position; e.g., low wages and work conditions.

Danger of recurring recession.

A possibility of aggressive German-style discounting of

prices in American markets.

Growing competition from internet-based retailers

such as Amazon and eBay.

Retreat from shopping in large retail stores in favour of

small local markets and grocery stores.



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ITEM 6: BREAKING BUSINESS NEWS

News item appearing in all major newspapers and global media with a business focus.

American antitrust regulators rule that the Ford and Hyundai merger can proceed NEW YORK

In a surprise move, both US and European antitrust regulators have indicated

that the two supermarket giants Carrefour and the Kroger can proceed with

their proposed merger. The announcement was largely unanticipated and

seems to have the approval of investors as the shares of both companies rose

sharply immediately after the announcement was made.

Carrefour CEO, Georges Plassat stated that he was “thrilled the last regulatory

obstacle to the deal had been overcome”, and that he and his executive team

could now finalise the terms of the agreement with Kroger.

Industry analysts said that the merger made a lot of sense for both companies

as Kroger was established and profitable in its US market and Carrefour had a

worldwide reach. Significant cost savings would likely emerge from the newly

restructured company allowing the new firm to be more price competitive.

Carrefour CEO Georges Plassat ready to announce the news that Carrefour and the Kroger are about to merge, at the Carrefour headquarters, Boulogne-Billancourt, France. April 15, 2016. REUTERS/MILENA BAENSCH


Tutor2u Todos os Mercados May 2016 Practice

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