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KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY, FINANCE AND BUSINESS


ACADEMIC YEAR 2015/2016
APRIL EXAMINATION
ABDM5174 INTERNATIONAL BUSINESS STRATEGY
THURSDAY, 14 APRIL 2016

TIME: 9.00 AM 12.15 PM


(3 HOURS 15 MINUTES)

ADVANCED DIPLOMA IN BUSINESS STUDIES


(INTERNATIONAL BUSINESS)

Instructions to Candidates:
Time allowed:
Reading and Planning : 15 minutes
Writing
: 3 hours
During reading and planning time, only the question paper may be annotated. You are not
allowed to write in your answer book until instructed to do so by the chief
invigilator/invigilator-in-charge.
This paper is divided into TWO (2) sections:
SECTION A: Answer ONE (1) compulsory case study question.

(40 marks)

SECTION B: Answer THREE (3) out of four (4) questions.

(60 marks)

This question paper consists of 5 questions on 4 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
SECTION A (40 marks)
Answer ONE (1) compulsory case study question.
Question 1
Felda Global Ventures sees immediate and long-term returns in China
Felda Global Ventures Bhd (FGV) will derive immediate returns on investment from its venture into a
Chinese edible oil firm as well as over the longer term as part of its business diversification plans, the
group says. In a Feb 26 announcement to the exchange, the group disclosed that it plans to purchase a
55 percent stake in Chinas Zhong Ling Nutril-Oil Holdings Ltd (NUH) for RM976.25mil from a
major shareholder as well as 14 other vendors via two separate agreements. NUH has been in business
for 20 years and are known for its Ostrich brand of edible oils. It is predominantly a manufacturer of
peanut oils which account for 70 percent of their sales.

Some have questioned the rationale of FGVs foray into China, particularly as it is diversifying into
the manufacturing, trading and distribution of non-palm oil products. Yes, distributing our palm oil
products has always been our core business. However, we also understand that there is a strong
demand of blended oil, which largely uses palm oil as its main component in China. It will be
opportunity loss for us not to introduce several other variants of edible palm oil-based cooking oil
products, says the group CEO. The investment in NUH offers FGV access to a sales network of
60,000 retail outlets covering five southeast coastal provinces in China. Additionally the group is also
able to consolidate NUHs earnings into its accounts by virtue of its 55 percent stake. A dividend
payout policy has also been agreed among the shareholders with a payout ratio at minimum of 50
percent of the companys profit, the group says. Despite Ostrichs modest market share of 1 percent
in Chinas edible oil segment, the revenue contribution is quite substantial.

The company reported revenues of nearly RMB$2.32bil (RM1.46bil) for the financial year ended
December 31, 2014 (FY14) despite holding just a sliver of the market share in Chinas edible oil
market, which underscores the growth potential available in the worlds second largest economy. The
purchase bodes well with FGVs ambition to become a vertically integrated agri-commodities firm on
par with the likes of Wilmar International Ltd, according to a senior executive when contacted. There
are numerous synergistic opportunities in China. The group may consider introducing its palm oil
products that is separate from NUHs existing brand, he says.
The executive also confirmed that any capex requirements going forward will be borne internally by
NUH, whose cash pile is said to have grown substantially in recent years. However, competing with
the major players will be a tall order for a new market entrant such as FGV. Wilmar and Chinese food
conglomerate Cofco Group hold more than half of the total market share in Chinas edible oils
segment. FGVs role is to provide vertical integration into NUHs business to take some of the
market share, says the senior executive. In terms of edible oil, soy oil based products has the
dominant market share. Palm oil consumption is less than 10 percent in China while peanut oil is
about 20 percent according to industry estimates. On the other hand, China is the largest importer of
palm oil, accounting for 20 percent of the worlds consumption.

This question paper consists of 5 questions on 5 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
Source: Adapted from The Star, 2016, Felda Global Ventures sees immediate and long-term returns
in China 12th, March, 2016.

Question 1 (Continued)
Required:
(a) As an International Marketing Manager for Felda Global Ventures Bhd., one of your
responsibility is to expand and market the companys products to China. Discuss the critical
factors that you should consider before investing in China.
(20 marks)
(b) Explain the reasons that attract Felda Global Ventures Bhd to venture into China. (20 marks)
[Total: 40 marks]

This question paper consists of 5 questions on 5 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
SECTION B (60 marks)
Answer THREE (3) out of four (4) questions.
Question 2
The degree to which an organisation in matching resources and capabilities with the opportunities in
the external environment is known strategic fit. The matching takes place through strategy and it is
therefore vital that the company has the actual resources and capabilities to execute and support the
strategy. Strategic fit can be used actively to evaluate the current strategic situation of a company as
well as opportunities such as merger and acquisition, and divestitures of organisational divisions.
Required:
Illustrate the process of developing the strategic fit.

[Total: 20 marks]

Question 3
ABC Berhad is celebrating its 30 th anniversary in 2016. The company is one of Asias best-managed
multinationals and is involved in hospitality business, entertainment, plantations, technology,
manufacturing and retailing across seven countries. In order to be effective and efficient, ABC Berhad
is currently adopting matrix organisational structures in managing its international business.
Required:
Discuss the advantages and disadvantages of matrix organisational structures.

[Total: 20 marks]

Question 4
(a) An organisation structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organisational aim. Some multinational
companies adopted international product division organisation structure with certain condition
to be able to set apart large sections of the companys business into semi-autonomous groups.
These semi-autonomous groups are mostly self-managed and focused upon a narrow aspect of
the companys products or services.
Required:
Discuss the pros and cons of having these self-managed semi-autonomous groups as part of
the company structure.
(10 marks)

This question paper consists of 5 questions on 5 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
Question 4 (Continued)
(b) A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a
partnership between foreign and host country investors and share profits, losses and
management of the JV.
Required:
Discuss the advantages and disadvantages of formation of an international joint venture
company.
(10 marks)
[Total: 20 marks]

Question 5
(a)

Porters theory of national competitive advantage is basically an evaluation of how


competitively a nation participates in international markets. With the aid of a diagram,
examine Porters theory of national competitive advantage.
(10 marks)

(b)

One of the purposes of direct investment in a foreign country by a company is to improve


their turnover. The business organisation requires certain competitive advantages to be
successful in their foreign country investment. Discuss the above statement with the use of
Eclectic Theory.
(10 marks)
[Total: 20 marks]

This question paper consists of 5 questions on 5 printed pages.