Business management · 2011 · November · Paper 2 · HL · Question paper

N11/3/BUSMT/HP2/ENG/TZ0/XX BUSINESS AND MANAGEMENT HIGHER LEVEL PAPER 2 Friday 18 November 2011 (morning) INSTRUCTIONS TO CANDIDATES  Do not open this examination paper until instructed to do so.  Section A: answer one question.  Section B: answer two questions. 2 hours 15 minutes 8811-5012 9 pages © International Baccalaureate Organization 2011 8 8 1 1 5 0 12 N11/3/BUSMT/HP2/ENG/TZ0/XX 8811-5012 – 2 – SECTION A Answer one question from this section. 1. Revive Livre (RL) Revive Livre (RL), a bookshop located in central London, has one of the largest collections of second-hand books in Europe. RL operates as a partnership of two brothers, James and Nick Cusack. The bookshop is known for its untidy store layout and lack of space. These features have given the bookshop its memorable promotional catchphrase, “Hard to find but worth the time”, which has generated substantial brand value through word-of-mouth promotion. RL claims that it can find and order any second-hand book. Changes in reading habits and technology have impacted on RL. The availability of second-hand books from online competitors such as Amazon has become a real concern. Despite the popularity of RL, there has been new negative feedback on customer service and the size of the bookshop. Customers have complained that it is too time-consuming to find a specific book. A liquidity problem has also emerged. RL is holding too much working capital in unsold second-hand books. James has identified three options of physical expansion for RL. He argues that all options would provide a better service to customers and help with the liquidity problem if they proved successful. The estimated cost and financial return for each option is given below (for all options the probability of being successful is 0.6 and the probability of not being successful is 0.4): Option Cost (UK£) Financial return if successful (UK£) Financial return if not