CIE IGCSE Topical Past Paper 1

6.3 Business and the international economy

0450/13/M/J/2025

GAE is a multinational company. It manufactures steel. GAE has 2400 employees and has factories in 4 countries. The business regularly introduces new technology. Holding inventory is important. GAE’s directors are planning to build a new factory and want to know how legal controls over location might affect this decision. The Managing Director said, ‘The new factory will create many external benefits.’

(e) Explain two benefits to a business of being a multinational company. Which benefit is likely to be the most important? Justify your answer.

0450/11/M/J/2025

PKN manufactures glass. Contributing to sustainable development is important to the business. PKN has factories in 30 countries. It has 27 000 employees. The Managing Director knows PKN has benefited from globalisation. She plans to expand the business using external growth. Retained profit is one source of finance a business could use to fund expansion. Some of PKN’s directors are concerned about possible diseconomies of scale as the business grows.

(b) Identify two reasons for globalisation.
Reason 1:
Reason 2:

0450/11/M/J/2025

NSL is a business based in country X. It manufactures food products including bread and breakfast cereals. NSL uses lean production in its factory. Maintaining quality is important. NSL imports 15% of its raw materials. Changes in country X’s exchange rate can affect businesses which import raw materials. NSL’s Marketing Manager knows the business should respond to changes in consumer spending patterns. She is aware that market research can be used to help make business decisions.

(a) Identify one way each of the following changes in country X’s exchange rate might affect businesses which import raw materials. [2]
Depreciation:
Appreciation:

0450/12/F/M/2025

TJK manufactures candles. Contributing to sustainable development is important to TJK. The business uses batch production in its factory in country X. The target market for TJK’s products is females between 20 and 50 years of age. The Managing Director is reviewing TJK’s financial data. An extract is shown in Table 3.1. He is also considering the benefits to a business of becoming multination company.

Extract from TJK’s financial data for 2024 $000

Working capital	900
Profit	400
Revenue	1000

Table 3.1

0450/13/O/N/2024

BPT manufactures bicycles in country A. It uses batch production. The Operations Director is preparing a break-even chart for one of BPT’s bicycles, as shown in Fig. 1.1. The directors are considering ways to lower BPT’s break-even level of output. BPT imports 60% of its raw materials and exports its bicycles to 8 countries. The Managing Director wants to know how a depreciation in country A’s exchange rate and the introduction of import tariffs might affect BPT.

(b) Define ‘import tariff’.[2]

(d) Explain two ways a depreciation in country A’s exchange rate might affect BPT.{4}
Way 1:
Explanation:

Way 2:
Explanation:

0450/11/M/J/2022

CTF is a public limited company. It manufactures beds using batch production. The Operations Director is using break-even analysis to calculate the margin of safety for children’s beds. An extract from CTF’s output data is shown in Table 2.1. The Operations Director wants to know how an increase in inflation might affect CTF. She knows there are many environmental pressures that a manufacturing business could respond to.

Table 2.1 Extract from CTF’s output data (children’s beds per month)
Break-even output	14 000
Current level of output	18 000
Maximum factory output	25 000

(b) Calculate the margin of safety for CTF’s children’s beds. Show your working. [2]

0450/11/O/N/2024

FSW is a multinational company with operations in 6 countries. It manufactures steel for use in the construction industry. Quality assurance is used to ensure quality production. FSW has many stakeholder groups who are interested in its activities. The Managing Director knows FSW’s business creates external costs. She is aware that pressure groups try to influence business decisions.

(d) Explain one possible benefit and one possible drawback to a country of having FSW (a multinational company) operating there. [6]
Benefit:
Explanation:

Drawback:
Explanation:

0450/12/M/J/2024

DLT manufactures cups and plates in country X. Its factory uses flow production and has 75 employees. The Human Resources Director is aware that there are many legal controls over employment. DLT exports 30% of its products to country Y where it benefits from lower rates of taxation and no import quotas. DLT’s Managing Director is considering relocating its factory to another part of country X to meet the increased demand for its exports.

(a) Define ‘import quota’.[2]

0450/12/M/J/2024

IDT manufactures clothes for the mass market. It is a multinational company with factories in 4 countries. IDT has short-term and long-term financial needs. The Finance Director is analysing IDT’s statement of financial position. An extract is shown in Table 3.1. He has been asked to calculate working capital and to explain how an increase in non-current liabilities might affect IDT.

Extract from IDT’s statement of financial position ($ million)
	2022	2023
Current assets	380	420
Current liabilities	250	280
Non-current liabilities	300	400

Table 3.1

(e) Explain two advantages to a business of being a multinational company. Which advantage do you think is likely to be the most important? Justify your answer. [6]

0450/12/F/M/2024

FR is a multinational company. It has hotels in 18 countries. FR wants to expand into a new market and is planning to build another hotel. FR’s Marketing Director is considering how the market can be segmented. FR’s Financial Director is considering which source of finance to use to fund the expansion. He is also constructing a cash-flow forecast for the new hotel’s first year of trading.

(d) Explain two advantages to FR of being a multinational company. [6]
Advantage 1:
Explanation:

Advantage 2:
Explanation:

0450/12/F/M/2023

HCB manufactures cars in country X. It has 200 employees working in its factory. The business has changed its method of production due to new technology. HCB’s Managing Director is considering ways to become more ethical. She is aware that other businesses in country X have started to import cars. The interest rate in country X has increased due to rising inflation.

(e) Do you think manufacturing businesses will always benefit from the introduction of import tariffs? Justify your answer. [6]