CONFIDENTIAL BM/JUN 2015/MGT657/658/650/649/HRM580 UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE : STRATEGIC MANAGEMENT/BUSINESS POLICY AND STRATEGIC MANAGEMENT/BUSINESS POLICY AND DECISION MAKING COURSE CODE : MGT657/658/650/649/HRM580 EXAMINATION : JUNE 2015 TIME : 3HOURS INSTRUCTIONS TO CANDIDATES 1. This question paper consists of two (2) parts: PART A (4 Questions) PART B (5 Questions) 2. Answer ALL questions from PART A and any three (3) questions from PART B in the Answer Booklet. Start each answer on a new page. 3. Do not bring any material into the examination room unless permission is given by the invigilator. 4. Please check to make sure that this examination pack consists of i) the Question Paper ji) an Answer Booklet ~ provided by the Faculty 5. Answer ALL questions in English. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of printed pages, © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,CONFIDENTIAL 2 BMIJUN 2015/MGT657/658/650/649/HRM580 PARTA Reviving Malaysia Airlines The long-awaited restructuring of Malaysian Airlines (MAS) has finally taken off. Khazanah Nasional Bhd the investment arm of the Malaysia government, has embarked to turnaround the already ailing airline that has unfortunately undergone two unprecedented disasters in aviation history which saw it lost two aircrafts in 2014. The first was on March 8 when MH370 en route to Beijing, disappeared. The second was on July 17 when MH 17, which departed from Amsterdam was shot down while flying over Ukraine. MAS group chief executive officer Anmad Jauhari Yahya announced that 537 people lost their lives, including 27 MAS crew members. As a result of both tragedies Jauhari admitted, “Despite our best efforts, we did not do very well to manage the rapid erosion of our reputation. Not at airline, not at country level” Even before the tragedies, MAS had been losing money repeatedly as it operates in a tough environment where low-cost carriers are cutting into its market share, while rising jet fuel prices compound its cost. In the last 10 financial years, MAS lost money five times, with the biggest loss of RM2.5 bil in 2011. For the financial year ended Dec 31, 2013, Air Asia made a net profit of RM364.07 mil while MAS reported a net loss of RM1.17 bil. For the first three months of 2014, MAS reported RM279 mil net loss, its biggest net loss in over two years. MAS is burning cash at an astonishing rate of RMS mil a day and the RM3 bil of its reserves will drastically reduce sooner than many may think. The airline also has debts of over RM11.5 bil MAS corporate restructuring exercise involved a cash injection of RMG bil, and taking MAS private would pave the way for a complete overhaul and revive its loss-making operations. It would appear that there is a political will to resolve the problem plaguing MAS with the Malaysian government wanting the takeover to be a success. Also Khazanah’s delisting of MAS is to enable it to restructure the airline to make a comeback to the stock market in a few years’ time, as seen with previous privatization exercises involving Astro Malaysia Holdings Bhd, Maxis Bhd, Bumi Armada Bhd and even 7-Eleven. Khazanah took MAS private via a selective capital reduction and repayment exercise. It had 69.37% stake in MAS, while Minister of Finance Incorporated holds the golden share. It paid 27 sen a share, totaling RM1.4 bil for the remaining 30.63% shares owned by Employee Provident Fund, ‘Skim Amanah Saham Bumiputera, and few others in MAS. Thus the current MAS will cease to operate by June 30, 2015 and its operations will migrate to a new airline, Malaysia Airlines Bhd (MAB) beginning July 1 MAS's human resources of 19,755-strong, currently make up about 14% to 15% of its total cost. Thus shaving 6,000 jobs (or 30%) is part of its recovery plan. The employees will be issued termination letters from MAS and appointment under new terms and conditions for the new MAB. However a separation package for the terminated employees has yet to be set. Meanwhile MAS has mobilized some employees from departments with surplus staff to other departments which are in a deficit. MAS may also move towards performance-based compensation. Its current compensation which is structured based on seniority limits the company's appeal to attract good talent, and also in retaining its current talent Pool. © Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, 3 BM/JUN 2015/MGT657/658/650/649/HRMS80 MAS has also appointed a new CEO, Christopher Mueller. The former CEO of Aer Lingus has started work at MAS on March 3, 2015. He came in early to MAS and had been busy attending several meetings with the restructuring team and the management team. Begining February this year about 4,000 contracts previously awarded to suppliers were reviewed by MAS to identify contracts that meet market-based requirements for the new airline. For instance, Brahim’s Holdings Bhd, which sources up to 75% of its sales with a 25- year contract from MAS inflight meals, has agreed to reduce its monthly bills by 25%. To mitigate the risks associated with its dependence on MAS, Brahim's now has agreements with other foreign airlines, and now caters inflight meals to more than 30 airlines. However MAS also agreed to pay RM37.95 mil of the disputed amount of RMS4 mil owing to Brahim’s and both parties are in negotiations for a new catering agreement. Cuts in the number of flights by MAS will also impact Petronas Dagangan Bhd. The fuel retailer currently controls about 77.6% of Malaysia's jet fuel market, with the KL International Airport (KLIA) as its main customer and MAS, arguably, its biggest customer. However Petronas Dagangan could make up the drop in demand for jet fuel from the reduction in flights operated by MAS by supplying fuel to airlines that could increase fights. Reduction of flights could also see Malaysia Airports Holdings Bhd (MAHB) getting hit, as the consequence would be a reduction in revenue and the passengers it carries. As it stands, passenger movement at KLIA was down 4.5% in June 2014 compared with the same period in 2013. The bigger decline of 5.4% is seen in international traffic compared with a drop of 1.5% for domestic travel. The prime beneficiary of any cuts in flight routes by MAS will be AirAsia Bhd and AirAsia X Bhd. Analysts say that previous cuts that saw a drop in passengers carried by MAS have seen a correlation with an increase in the number of people flying on AirAsia. AirAsia too is increasing its capacity with the delivery of new planes. Thus period of turmoil within MAS linked to its turnaround will be capitalized by the low-cost carrier. MAS js not alone in its restructuring efforts. Many airlines which include American Airlines, Swissair Group and Air New Zealand have undergone massive restructuring and emerged stronger as a result. It is hoped that the Malaysia national flag carrier will go through the same path towards recovery soon. (Adapted from The Star, 9 & 30 August 2014; 3 & 6 March 2015) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,CONFIDENTIAL 4 BMIJUN 2015/MGT657/658/650/649/HRM580 QUESTION 1 ‘Analyze four (4) major problems faced by MAS. (10 marks) QUESTION 2 Explain four (4) external factors that have affected the performance of MAS. (10 marks) QUESTION 3 Discuss four (4) strategies implemented to revive MAS. (10 marks) QUESTION 4 Define and explain with appropriate rationale, strategies adopted by Brahim's and Petronas Dagangan in response to the cuts in the number of fights by MAS. (10 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, 5 BM/JUN 2015/MGT657/658/650/649/HRMS580 PARTB QUESTION 1 a) Define market segmentation and product positioning. (4 marks) b) There are many reasons for implementing market segmentation and product Positioning. Discuss two (2) reasons for each (16 marks) QUESTION 2 Differentiate three (3) approaches in determining a business’s worth when selling or acquiring other company. (20 marks) QUESTION 3 With the aid of a diagram, discuss the Boston Consulting Group (BCG) Matrix (20 marks) QUESTION 4 a) _ Define Board of Directors (BOD). (2 marks) b) Describe four (4) major duties and responsibilities of BOD. (18 marks) QUESTION 5 a) _ Discuss the common forms of resistance to change and three (3) common change strategies. (10 marks) b) Explain five (5) reasons why many mergers and acquisitions failed. (10 marks) END OF QUESTION PAPER © Hak Cipta Universiti Teknologi MARA, CONFIDENTIAL,