Source: TradeKindness

Paper 3 (1 hour and 15 minutes)

Paper 3 (HL only) is based on unseen stimulus material about a social enterprise. The purpose is to assess important business management knowledge and skills (such as strategic analysis and evaluation) within the context of a social enterprise as a business entity. Paper 3 is forward-looking, providing students the opportunity to develop and demonstrate their problem solving abilities and decision making skills.

The rationale for the specific focus on social enterprises is in line with the objectives of the new course (to enable students to develop as confident, creative and compassionate business leaders, entrepreneurs, social entrepreneurs and as change agents, page 17 of the guide). It also aligns well with the CAS programme as well as the IB mission statement.

Social enterprises are an example of social purpose organizations (SPOs). Essentially, they aim to primarily provide a solution to important social or environmental issues. They exist to to create a better world due to the role they play to improve society overall. As they are not always revenue-generating, SPOs often need financial funding and suitable human resources. Other SPOs include charities, cooperatives, and non-governmental organizations (NGOs).

Definitions of social enterprises include the following:

• "a business entity that aims to achieve a social or environmental mission while also generating revenue. It combines the principles of traditional business with a focus on addressing social or environmental issues." (Social Enterprise UK)

• "businesses that put the interests of people and planet ahead of shareholder gain. These businesses are driven by a social/environmental mission and reinvest profits into creating positive social change." (Social Enterprise Mark)

• "combine societal goals with an entrepreneurial spirit (and) focus on achieving wider social, environmental, or community objectives." (European Commission)

• "a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners." (Gov.uk)

Types of social enterprise explicitly featured in the IB Business Management syllabus:

• For-profit social enterprises (AO3): (i) Private sector companies, (ii) Public sector companies, and (iii) Cooperatives.

• Non-profit social enterprises (AO3): (iv) Non-governmental organizations (NGOs)

 Take the example of Change Please, founded in 2015. The company sells coffee but uses 100% of its profits to tackle to social and economic problems associated with homelessness.

 A second example is The Big Issue, which helps the homeless and people in vulnerable housing to restart their lives. Established in 1991, The Big Issue is the UK's largest street newspaper and is now published in four continents.

Some differences between social enterprise, traditional commercial (for-profit business entities), and charitable organizations are outlined in Table 1 below.

Table 1 - Differences between charities, social enterprises, and traditional (for-profit) businesses

* According to Social Enterprise UK, social enterprises reinvest or donate at least half of any profits they earn to further their social or environmental mission.

Social enterprises have three main sustainable business objectives, commonly referred to as ‘the triple bottom line’. The triple bottom line, a business management model developed by John Elkington (b.1949), comprises of the following:

• Economic sustainability (profit) - to earn a profit to fund its activities and growth in a sustainable way.

• Social or cultural sustainability (people) - to provide social gains for members of local communities, such as providing job opportunities and support for less-privileged members of society.

• Environmental sustainability (planet) - to manage and operate the business in such a way as to protect the ecological (natural) environment, i.e., behaving in an environmentally sustainable and responsible manner.

So, in addition to striving to earn a profit or financial surplus, social enterprises are driven foremost by social and/or environmental objectives and socially responsible practices. Some examples of these are outlined in Table 2 below.

Table 2 - Examples of social and environmental sustainable practices

The stimulus material in Paper 3 will typically consist of:

• a short introduction to the social enterprise.

• a visual representation of a product.

• about 5 or 6 excerpts from various documents (such as emails, social media feeds, infographics, and newspaper articles).

Students need to answer the one compulsory structured set of questions based on the unseen stimulus material. This paper is worth 25 mark in in total.

Note that a calculator is permitted for this examination paper. This is because there may be quantitative data included in stimulus material, such as in the May 2024 Paper 3 examination (gearing ratio and debtor days ratio for MF Future Housing). All calculations in Business Management exams can be completed using a 4-function calculator.

Candidates are provided with 2 four-page booklets to write their answers for this examination.

An example is shown below:

• Note that all five units of the syllabus can be assessed (Units 1 - 5), including HL extension topics.

• This also applies to the Business Management Toolkit (BMT).

• The overall weighting of Paper 3 (HL only) is 25%.

• Paper 3 (HL only) answers are to be written on separate answer sheets (as with Paper 1, but unlike Paper 2).

Question 1 - Human needs (2 marks)

For part (a) of Paper 3, students need to be able to identify and describe an example of a human need. This can include consideration of:

• Maslow’s hierarchy of needs

• Herzberg's two factor theory (hygiene and motivators)

• McClelland’s theory of needs

• Sustainable Development Goals and human needs

• Ecological, Economic, and Social (Cultural) sustainability needs

• Stakeholder needs.

Question 2 - Organizational challenges (6 marks)

For part (b) of Paper 3, students must also be able to explain the potential organizational challenges facing the social entrepreneur wanting to meet the human need that is identified and described in part (a). Examples of organizational challenges include:

Question 3 - The plan of action (17 marks)

For part (c), the final section of Paper 3, students are required to write a decision-making document that includes business recommendations or a plan of action. This extended response question is worth 17 marks (that's not a typo!)

There are four assessment criteria for the extended response question in part (c):

1. Criterion A - Use of resource materials (worth 4 marks)

2. Criterion B - Business management tools and theories (worth 4 marks)

3. Criterion C - Evaluation (worth 6 marks)

4. Criterion D - Sequencing of ideas and plan of action (worth 3 marks).

Paper 3 extended response question (17-mark essay) - Understanding the assessment criteria

Criterion A – Use of resource materials (Application)

This assessment criterion assesses the extent to which the candidate uses the stimulus materials to effectively support the recommended plan of action. It is worth up to 4 marks.

So, to score top marks, the student must show evidence of the following throughout their written response:

• reference to all stimulus materials provided in the exam, namely all 5 or 6 excerpts from various documents (such as emails, spcial media feeds, and newspaper articles).

• use of the stimulus materials from the excerpts in an effective way to support the recommendations (plan of action), i.e., application of how the evidence provided will streghthen the recommended business strategy.

Criterion B – Business Management tools and theories (Tools and theories)

This assessment criterion assesses the extent to which a candidate’s plan of action (recommendations) effectively apply appropriate business management tools and theories. It is also worth up to 4 marks.

As this is an academic piece of work, the response must demonstrate clear, appropriate, and effective use of relevant business management tools and theories, throughout the extended response question.

Remember that any of the 15 tools from the Business Management Toolkit (BMT) can be used, where appropriate, for this purpose. However, any relevant tools or theories beyond the BMT (but within the syllabus) can be used.

Criterion C – Evaluation (Evaluation)

This assessment criterion assesses the extent to which the candidate effectively evaluates the expected impact of their plan of action on the relevant areas of the social enterprise. It is worth up to 6 marks (about 35% of the marks for the extended response question in Paper 3).

So, to score top marks, students must demonstrate evidence of evaluation in terms of:

• the realistically expected impacts of their recommendations (plan of action).

• reference to the relevant areas of the business that are likely to be impacted, such as human resource, finance and accounts, operations management, and/or marketing functions of the social enterprise.

• the probable opportunity costs (sacrifices or trade-offs) due to the recommendations (plan of action) - see Top tip 10 below.

Criterion D – Sequencing of ideas and plan of action (Structure)

This final assessment criterion for Question 3 assesses the extent to which the candidate’s ideas and plan of action are sequenced in a clear and coherent manner. This assessment criterion is worth up to 3 marks.

Therefore, to score top marks, candidates must:

• Use fit for purpose paragraphs (use the PEEL framework for this - see Top tip 5 above).

• Have an introduction, body (analysis and evaluation), and conclusion.

• Ensure the ideas and the plan of action in the essay flow in a clear, logical, and well-organized way.

• The conclusion must answer the question in its entirety.