Business Management – Paper 2
Date: 10th February 2025
Time: 1 hour 20 minutes
Total Marks: 50
Deadline: 10 February, 10 PM
Start time: 20:42
Paused: 21.22 (too tired hehe)
End time:
Section A (10 marks)
Question 1 – Crafty Candles
Crafty Candles is a small business run by two friends, Sarah and Tom, who produce handmade
scented candles. They sell their candles at local markets, online through their website, and to a
few boutique stores on credit. The business has been struggling with cash flow due to high
production costs and fluctuating sales.
For the financial year ending 28th February 2023, Crafty Candles has provided the following
financial data:
Forecasted Income:
● Selling price per candle: $15
● Units sold: 200 candles in March and 300 candles per month from April
● 50% of sales are made online with immediate payment
● 50% of sales are made on a 30-day credit term to boutique stores
Forecasted Expenses:
● Rent: $5,000 (paid quarterly)
● Indirect costs: $1,200 per month
● Raw materials: 60% of sales revenue per month
● Social media marketing (SMM) expenses: $500 per month
● Office expenses: $300 per month
1.1 State two advantages of selling online to Crafty Candles Ltd. (2 marks)
1.2 Prepare a fully labeled cash flow forecast for Crafty Candles Ltd for the first six months of
operation. (6 marks)
Crafty Candle Ltd.’s Cash Flow Forecast in March 2023 to August 2023 ($00)
Details of Cash Flow Mar Apr May June July Aug
Opening balance 0 -73 -82.5
Cash inflows
Cash sales revenue 15 37.5 45
Tax Refund - - -
Total cash inflows 15 37.5 45
Cash outflows
Rent 50 0 0 0 50 0
Raw materials 18 27
Social media marketing 5 5 5 5 5 5
Indirect cost 12 12 12 12 12 12
Office expenses 3 3 3 3 3 3
Total cash outflows 88 47
Net cash flow -73 -9.5
Closing balance -73 -82.5
1.3 Suggest one strategy to improve Crafty Candles Ltd's cash flow situation. (2 marks)
One strategy that hike b
Section B (40 marks)
Question 2 – Panorama and Lumina Acquisition
Panorama is a large entertainment conglomerate known for its diversified portfolio, including film
production, television networks, streaming services, and music labels. The company is
structured by products and services, with departments such as marketing, finance, and
operations under each division. Despite its strong brand image, Panorama’s streaming service
has been underperforming due to a lack of innovative content and user engagement.
To address this issue, Panorama plans to acquire Lumina, a smaller but highly successful
streaming platform known for its cutting-edge content and strong user base.
Panorama’s Portfolio Market Share Data:
● Film production: 5% market growth potential
● Television networks: 4% market growth potential
● Streaming services: 15% market growth potential
● Music labels: 20% market growth potential
Lumina’s Organizational Structure:
Lumina operates with a project-based structure that encourages creativity and cross-functional
collaboration. Employees work on multiple projects simultaneously, with a situational leadership
style that adapts to employee needs. Benefits include flexible working hours, unlimited holidays,
and quarterly performance reviews.
Employee Turnover Rate:
● 2021: 5%
● 2022: 4%
● 2023: 3%
● Industry Average: 10%
Potential Benefits and Challenges of Acquisition:
● Opportunities:
○ Access to Lumina’s innovative content and strong user engagement
○ Increased financial stability and growth opportunities for Lumina
○ Improved market position for Panorama’s streaming service
● Challenges:
○ Differences in organizational culture and leadership styles
○ Potential loss of Lumina’s flexibility due to Panorama’s bureaucratic structure
○ Risk of reduced employee morale and job satisfaction
2.1 Define the term "acquisition." (2 marks)
Acquisition means when a company, let's say company A, is taking over company B by buying
all of the company's stock from the market. When most of the ownership (within the stock) is
owned by company A, then it leads to a shift of leaders, as the acquired company will be a part
of the other company.
2.2 Apply the BCG matrix to Panorama’s portfolio. (4 marks)
← Relative Market Share
←
M
ar
ke
t
Gr
o
wt
h
2.3 Explain one advantage and one disadvantage of Lumina’s leadership style. (4 marks)
2.4 Discuss the appropriateness of Panorama’s organizational structure for the newly acquired
business, Lumina. (10 marks)
Question 3 – EcoGrow Systems
EcoGrow Systems is a start-up that designs and builds innovative, sustainable greenhouses for
urban and rural environments. The company operates with a hierarchical structure, with James
Anderson, the founder, overseeing several departments including R&D, Sales and Marketing,
Operations, and Customer Support.
Despite its innovative products, the company faces significant communication problems, such
as:
● Conflict between R&D and Sales regarding product design
● Language barriers in the international workforce, leading to misunderstandings and
errors
New Product Launch:
EcoGrow Systems is launching a new smart greenhouse designed for urban gardeners,
featuring automated watering, climate control, and a mobile app for remote monitoring.
● Target Profit: $200,000
● Fixed Costs: $250,000
● Variable Cost per Unit: $300
● Selling Price per Unit: $500
3.1 Define the term "chain of command." (2 marks)
3.2 Describe two barriers to communication in EcoGrow Systems. (4 marks)
3.3 Calculate the break-even point for the new smart greenhouse. (2 marks)
3.4 Calculate the target profit output for the new smart greenhouse. (2 marks)
3.5 Using appropriate ratios, analyze two strategies for improving EcoGrow Systems’ final
accounts. (10 marks)
