BUSINESS STRATEGY

Time allowed - 3:30 hours

Total marks - 100
[N.B.- The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account of
the quality of language and of the manner in which the answers are presented. Different parts, if any, of the same
question must be answered in one place in order of sequence.]
Marks
1. Khan Construction Company Ltd. (KCC) is a renowned construction company and builders in
Bangladesh having considerable knowledge and experience in construction, as well as owning and
managing modern buildings in Dhaka. It has been engaged in the business for the last 25 years with
reputation. It takes different categories of construction projects depending on the arrangement with the
land owners as developer, construction contractor, or on own and built basis.
Mr. Faruk Chowdhury owns a plot of land measuring 30 decimal at the Commercial Area of Banani,
Kemal Ataturk Avenue, Dhaka. Mr. Chowdhury is now residing in USA permanently. He was looking
for a good buyer to sell the land. Director (Engineering) and Director (Marketing) of KCC discussed
with Mr. Chowdhury about a purchase proposal for Tk 100 million which seemed positive. Director
(Eng) and director (Marketing) prepared an initial proposal and discussed with features of the project
with the KCC Chairman, Mr. A. K. Khan. Main features of their project proposal were as follows:
i. They will pay total price Tk.100 million to Mr. Chowdhury; 50% as down payment and remaining
50% one year after partial sale of building space. Total construction cost will be Tk. 500 million;
50% of that amount will be taken as loan from a local Bank.
ii. The building will be a 10 storeyed commercial building with car park in the basement. As RAJUK does
not give permission for construction above 10 floors, they will approve the building plan for 10 floors.
iii. As KCC will sell the space to the customers, they planned that the construction cost should be kept
minimum to earn maximum amount of profit.
iv. They will compromise with the quality of construction material. Materials will be used with average
standard, and cost saving measure will be taken compromising the quality of other materials.
v. There will be limited open space for ventilation and movement.
vi. They will also construct another two floors by vertical expansion managing the Rajuk officials.
These two floors are to be used by KCC as office or for rental purpose.
vii. Dhaka is an earth- quake prone city and there is a high risk of fire.
The Chairman listened to their proposal, but was concerned about the ethical issues of the project. You
are a Chartered Accountant and recently joined KCC as the finance director of the company. The
Chairman of the company explained you the above proposal, sought your suggestion on the proposal and
asked you to answer the following:
Requirements:
a. Outline the implications of the project proposal prepared by the two directors on the ethical issues of
the KCC Ltd. 7
b. What are the main issues concerned with the corporate responsibility and why might KCC choose to
act, or at least claim to act, in a socially responsive way? 4
c. Explain, with reference to KCC as appropriate, the ethical responsibilities of a Chartered Accountant
both as an employee and as a professional in this situation. 4
2. Jute mill worker Bilkis Ara wipes away her tears as she lies down on the road and rests her head on a
piece of bamboo at Notun Rasta intersection in Khulna on April 3, 2019. She, along with several
hundred others, has been demonstrating to press home a set of demands, including payment of arrears (a
report was published in The Daily Star).
After the independence of Bangladesh in 1972 government nationalized all the jute mills of the country forming
Bangladesh Jute mills Corporation (BJMC) and management responsibility was vested with the corporation.
For the last few decades the corporation miserably failed to run the jute mills. Most of the Jute mills are located
in the Khulna area and they remained close as they have become loss making organizations and even can not
pay the wages to the labour. They have huge outstanding loan with the Banks and government. Government has
taken many projects and programs to rescue the jute mills, but all the efforts have failed.
Recently government has allocated Tk. 169.14 crore to Bangladesh Jute Mills Corporation to pay state-
owned jute mills workers their outstanding dues. This may placate the workers for the time being, but as
their other demands, including implementing the new wage scale, cannot be met with this money, there

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 are chances of further unrest. And unless steps are taken to completely restructure the sector, the
problems the sector is currently facing will persist.
After the government allocated funds for the BJMC, one of the workers told The Daily Star: “We have been
promised (of arrears) on several occasions in the last two months. How can I believe until I get the money?”
There are valid reasons for the workers’ mistrust. During the last two months, the workers got assurances
from the authorities several times that their due salaries would be cleared and other demands met. On May
21, the workers of nine state-owned jute mills in Khulna region suspended their indefinite strike on
assurances by the BJMC that a portion of their due salaries would be paid by May 23. But they did not live up
to that promise. Similar promises were made in April.
While the BJMC needs Tk 337 crore to pay the dues, the government contributed only Tk 169 crore. So
there remains a deficit of Tk 168 crore. This means that the BJMC will not be able to meet the other
demands of the workers because of a lack of fund: the implementation of the National Wage
Commission of 2015, payment of gratuities and provident funds of retired workers, and appointment of
workers and making their jobs permanent as per the law.
Apart from the above mentioned amount, the BJMC needs another Tk 1,600 crore for the
implementation of the new wage scale. Currently, the average jute worker’s salary is Tk 4,150 and if the
new pay scale is implemented, the amount would rise to Tk 8,300. How will the BJMC pay the workers
this increased amount if the mills run at a loss?
The government cannot just continuously inject money into the sector without having a proper plan to
revive the sector. Reportedly, during the last decade, the government handed Tk 7,477 crore to the
BJMC to bail it out of financial troubles. But sadly, the sector could not stand on its own feet because of
corruption, bad management, outdated technology, poor planning and a lack of government initiatives.
Reportedly, the efficiency of the BJMC mills is now below 50 percent. This is because the mills are being run
with old machinery bought before the liberation of Bangladesh. Replacing the old machinery with modern
ones is the need of the time, but it needs a lot of investment. How will the BJMC manage this money?
And in order to increase the export of jute goods to international markets, diversification of products is
of utmost importance. We undoubtedly have a pool of talent who can innovate and create. For example,
scientists have invented a jute-made biodegradable poly bag called “Sonali Bag”. But to stir innovation,
we need to invest in research.
You have been appointed by the government for BJMC as financial advisor of BJMC. You are required
to advise on the following issues:
Requirements:
a. Discuss the Industry life cycle in the context of jute industry in Bangladesh? How the product life
cycle can be extended? 5
b. Identify the potential strategies to restore profitability of the jute industries in Bangladesh. 6
c. What would be the strategy for the Government to come out of the problem? 4

3. Export earnings from Bangladesh leather sector, the second largest earner of foreign currencies after
RMG sector, witnessed a 6.06% fall to $1.01 billion in the just concluded fiscal year, as non-compliance
in environmental issues holds back foreign buyers. However, the negative growth in the year was less if
compared with 12% in the fiscal year 2017-18. According to the Export Promotion Bureau (EPB) data,
Bangladesh earned $1.01 billion exporting leather, leather goods and leather footwear, the only billion
dollar export earner after the apparel goods, in the fiscal year 2018-19.

In the FY18, the export earnings from the leather sector was $1.08 billion and the sector saw 12%
decline in export earnings. Of the total earnings from leather sector in FY19, leather products earned
$247.28 million, down by 26.58%. The earning was $336.8 million in the previous year. Processed
leather exports also declined by 10% to $164.62 million against $183.1 million in the same period a year
ago. However, exports earning from the leather footwear posted a 7.48% growth to $607.88 million,
which was $565.6 million in the FY18.

As per a High Court order, the government cut power and gas connections to the tanneries to compel the
owners to relocate to the purpose-built Savar Leather Industrial Park to the north of the capital in April
2017.The Industries Ministry allocated plots to 155 tannery owners through the Bangladesh Small and
Cottage Industries Corporation (BSCIC) in the Leather Industrial Park established on 200 acres of land in
Savar. As per the agreement, the government was supposed to establish a CETP at the industrial park to
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ensure that the liquid wastes discharged by the tanners are treated before flowing into the nearby river. The
government decided to transfer the tanneries from Hazaribagh amid pressure from local and international
rights groups, environmental activists and buyers because of their hazardous effects on public health and
environment, especially the Buriganga River.
SUEZ Tanneries, one of the leading leather processing and exporting industries was also suffering huge loss of
exports for the last two years. Talking to The Dhaka Tribune, Chairman of SUEZ Tannery Chairman blamed
for moving the plant from Hajaribag to Savar in an unplanned way. There is non-compliance in the sector
through delayed establishment of central effluent treatment plant (CETP) at Savar Leather Industrial Park. In a
move to make the sector compliant and environment-friendly, the government has forcibly moved the tanneries
from Hazaribagh to Savar but construction of the new site is yet to be completed, especially the CETP.
Chairman also reiterated that:
“We are not environmentally compliant. This is because of the absence of full-fledged operation of CETP.
Moreover, the Leather Working Group (LWG) certification, which makes it easier to sell goods to the
global buyers, is hard to come by for us due to the absence of a fully operational CETP,” he also mentioned.
For lack of proper compliance, especially in environmental issues, Bangladeshi manufacturers are not getting
the certificate from the LWG, which assesses environmental compliance and performance capabilities of
leather manufacturers. "As a result, export earnings from the sector saw downtrend," he explains. On top of
that, consumers were shifting to non-leather shoes — another reason for the negative growth in earnings of
overall export from leather sector, he mentions. He mentioned that existing employees and workers are
reluctant to move from Hajaribag as most of them has got their own house in this area. They don’t want to
live away from their houses apart from their family.
Meanwhile, tanners, the suppliers of the raw materials to the footwear industry, have observed that
earnings from the processed leather and leather goods fell as the production fell due to relocation to
Savar.“Manufacturers perform better when there is enough supply of raw materials. But the tanneries are
suffering as the relocation hit the production of leather processing,” Md. Shakawat Ullah, general
secretary of Bangladesh Tanners Association (BTA), tells The Dhaka Tribune.
“Besides, some tanneries are not yet in operation as they have not yet completed construction of building
in the Savar park and it affected production capacity,” he says. The export earnings from the leather
industry were in good shape before the inception of tannery relocation, he says, adding that buyers are not
making orders over compliance issues, which is largely dependent on the completion of CETP, points out
Shakawat, also owner of Salma Tannery Ltd. "However, we are hoping for a better come back as the
authorities are expecting to complete the CETP by August this year," he says.
“Leather is the only sector, which earns over a billion dollar and is the second largest earners of foreign
currencies after the apparel sector. It contributes 2.51% to the national exports. And the downtrend is a great
concern for the economy,” former adviser to a caretaker government AB Mirza Azizul Islam tells The Dhaka
Tribune. In restoring the global buyers' confidence and ensuring compliance, he suggests, the government has
to complete the CETP as well as the whole process of the relocation. Beyond this, he adds, the government
has to start branding of the sector to rebuild the image already tarnished by non-compliances.
Meanwhile, manufacturers urged the government to comply with the recommendations of the LWG in
completing the CETP and total waste management.
SUEZ Chairman is of opinion that to recover back the international market switching over the new factories
to the new location at Savar Leather Industrial Zone should be completed smoothly as soon as possible. All
the infrastructure in the industrial park should be completed to gain confidence of the foreign buyers.

Requirements:
a. Analyse and discuss the forces for change in the leather industry. 4
b. What is change management and how to manage change? 4
c. What are the problems for exporting leather and leather goods from Bangladesh? Discuss the issues
to be resolved in the context of international market conditions. 5

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4. Fifty-nine garment factories have been shut and 25,900 workers have lost jobs in the last seven months,
BGMEA President Rubana Huq said.
“Most of them were small and medium enterprises and they failed to maintain compliance strictly and pay
their workers under the new wage structure,” the leader of the Bangladesh Garment Manufacturers and
Exporters Association said on Thursday. Rubana shared the information with a group of journalists at her
office in Dhaka while shedding light on the present situation of the garment sector. Bangladesh’s apparel
export has declined in recent months whereas its competitors have seen a rise in the field, she said.
In the first quarter of the current fiscal year, garment export from Bangladesh dropped 1.64 percent year-
on-year to $8.05 billion when earnings from the sector fell 11.52 percent short of the quarter’s target of
$9.10 billion. On the other hand, garment shipment from Vietnam increased by 10.54 percent between July
and September. It was 2.2 percent for India and 4.74 percent for Pakistan.“The inflow of investment in the
garment sector is also slow both in terms of new entrepreneurship and expansion as the buyers are not
paying good prices,” Rubana said. Buyers are now trying to cash in on the presence of an unhealthy price
competition among the local garment makers and less production of value-added items in Bangladesh, she
said. “We think the sector will continue to show negative growth in the coming months. At the end of this
fiscal year, we may lose our second position to Vietnam in the global apparel market, if we cannot turn
around soon from this declining trend.”
Currently, Bangladesh’s share in the global garment market is 6.40 percent and Vietnam’s 6.2 percent,
according to the latest report of the World Trade Organization (WTO).Poor product diversification, rising
online businesses, closure of retail outlets in the western world, and a 1.2 percent fall in global apparel
consumption as predicted by the WTO are mainly responsible for the declining trend in Bangladesh, Rubana
said. For instance, the value of per piece knitted cotton t-shirt—the top selling item of last year—fell by
26.84 percent and the quantity by 24 percent, according to the BGMEA’s analysis released in the third week
of October. At the same time, the prices of non-cotton knitted items rose 10.2 percent, but Bangladesh does
not produce much in this category.
“So, Bangladesh needs to diversify its products to become more competitive in the global fashion
market,” Rubana said.
Moreover, Bangladesh is more dependent on cotton fiber whereas the demand for the garment items
made from the manmade fiber is increasing worldwide. The BGMEA chief said small and medium-sized
factories are getting closed due to a lack of assistance from banks. They are not considered to be viable
clients by banks because of low competitiveness.
The BGMEA’s analysis showed that garment export declined 17.68 percent year-on-year to $572 million in
the first quarter while prices increased only by 2.54 percent. On the US-China trade war, Rubana said
Bangladesh is yet to benefit from the global dispute, while others are using it on the back of their diversified
products. On the other hand, Bangladesh is losing its basic garment business and Vietnam, Myanmar, and
Ethiopia are getting those work orders now. For example, Myanmar exports nearly $5 billion worth of
garment items every year and it has a target to export $10 billion worth of products by 2024. “Even a decade
ago, it was below $500 million a year,” she said. Rubana said they have already submitted a set of proposals
with the Bangladesh Bank for the revival of the garment sector. The BGMEA demanded the
government devalue the local currency by Tk 2, implementation of which will cost the country nearly Tk
1,850 crore. It also called for 1 percent incentive on exports with immediate effect, retrospective effect of
0.25 percent source tax from July, doubling the loan rescheduling period for the existing 133 sick garment
factories, and fund allocation for modernisation and tech upgrade of factories.
Requirements:
a. Discuss the issues which are affecting the apparel exports of Bangladesh. 3
b. What is product diversification and how the product diversification can salvage the apparel industry? 3
c. Price of the garments products has become one of the major concerns. How this problem can be resolved? 3
d. What are the steps to be taken by the government of Bangladesh to help the sector? 3
5. AK manufactures high quality power bank using just-in-time (JIT) production methods. The market has
grown significantly over the past few years with increase in mobile phones and is expected to continue to
grow. AK is planning to launch a new model the ‘SolidPower’. The introduction of the SolidPower will
have no impact on sales of existing models as it is expected to appeal to a different segment of the market.
The company has already spent BDT 2 million in marketing the new model, but will require a further
investment of BDT 20 million in production equipment. The project has a life of five years at the end of
which the equipment will have a residual value of BDT 5 million. Depreciation is calculated using the
straight line method. It is expected that the total capital investment will be eligible for tax depreciation.
Sales and production of the SolidPower over its lifecycle are expected to be:

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 Year 1 50,000 units
Year 2 60,000 units
Year 3 75,000 units
Year 4 30,000 units
Year 5 30,000 units
The selling price in Year 1 and Year 2 will be BDT 500 per unit. The selling price will be reduced to BDT
400 in Year 3 and will remain at this level for the remainder of the project. The total variable cost of the
SolidPower, including labour, materials and variable overhead costs is estimated to be BDT 200 per unit and
this is expected to remain constant throughout the life of the project. Each unit is estimated to take 1.25
machine hours to produce. Fixed overheads are charged to products using an absorption rate of BDT 120
per machine hour. The additional fixed overheads expected to be incurred directly as a result of increasing
the production capacity is BDT 8 million per annum including depreciation charges. Additional working
capital of BDT 6 million will be required at the start of the project. AK’s Financial Director has provided the
following taxation information:
• Tax depreciation: 25% per annum of the reducing balance, with a balancing adjustment in the year of disposal.
• Taxation rate: 30% of taxable profits. Half of the tax is payable in the year in which it arises, the balance
is paid in the following year.
• AK has sufficient taxable profits from other parts of its business to enable the offset of any pre-tax losses
on this project.
Other information
A cost of capital of 12% per annum is used to evaluate projects of this type. Ignore inflation.
Requirements:
(a) Evaluate whether JK should introduce the new model. You should use net present value (NPV) as the
basis of your evaluation. Workings should be rounded to the nearest BDT. 12
b) Calculate for the SolidPower project:
(i) the internal rate of return (IRR) 3
(ii) the discounted payback period 2
c) AK could outsource the production of the SolidPower to an overseas manufacturer. The accountant has
presented figures to show that the NPV of the project based on outsourcing the production is BDT 0.3 million
higher than the NPV of in-house production. Explain THREE non-financial factors that AK would need to
consider before deciding whether to outsource production. 3
6. Kings Pie Ltd is a chain pie store and has branches in Dhaka and Chittagong. The basic foundation of its
business is to maintain quality of raw materials and products in terms of food quality and safety up to the
international standard. It must have to employ a total quality management program and manufactures 12
different types of pie from chicken and vegetables for the vegetarians. The directors / partners are proud of
their products, and always attempt to maintain a high quality of input at a reasonable price.
Each pie has four elements of materials:
- Aluminium foil case
- Pastry shell made mainly from flour and water
- Meat and/or vegetable filling
- Thin plastic wrapping
The products are obtained as follows:
The aluminium is obtained from a single supplier of metal related products. There are few suppliers in the
industry resulting from fall in demand for aluminium related products following increased use of plastics.
The flour for the pastry is sourced from flour millers in four different areas- one source of supply is not
feasible because harvest occur at different times and Kings Pie can not store sufficient flour from one harvest
for a year’s production.
Obtaining meat and vegetable is difficult due to the large number of suppliers located in many different
countries. Recently, Kings Pie obtained significant cost savings by delegating sourcing of these items to a
specialist third party.
Plastic wrapping is obtained either directly from the manufacturer or via an internet site specializing in selling
surplus wrapping from government and other sources.
Requirements:
a. Explain the main characteristics of a Total Quality Management Program of Kings Pie Ltd. 5
b. Identify the sourcing strategies adopted by Kings Pie and evaluate the effectiveness of those strategies
for maintaining a constant and high quality supply of input. Put your recommendations as well. 5

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7. Bangladesh has made remarkable progress towards providing pre-school (pre-primary) education for all
young children. In 2010, the government announced a new National Education Policy which for the first
time formally recognised pre-school as the first stage of the education system.
Demand for pre-school nurseries has grown substantially in Bangladesh since 2010 for number of
reasons. Bangladesh, one of the world’s fastest growing economy, continues to make progress in
reducing poverty, improving education opportunity. Changes in the job market have resulted in a
significant rise of working women with dependent children. In 2018, 52% of women whose youngest
dependent child was under 5 years of age were working, compared to only 31%, 10 years earlier. During
this period unemployment in Bangladesh fell significantly.
There has been an increased emphasis by the Government on the role of childcare and education in
raising educational standards and enhancing children’s social development.
Sunrise School (Sunrise) runs five pre-schools in different locations of Dhaka for children aged two to
four years old and is planning to expand the initiative.
Sunrise was formed in 2012 by Kamrul Islam, a former IT engineer and his wife Shayla Islam, who
previously worked as a Vice Principal for a nursery school at Dhaka for seven years. Both Kamrul and
Shayla have a close involvement in the day to day running of the nurseries, which have around 300
children each.
Sunrise School has utilised modern technology to help address concerns of parents. All the children at the
nurseries are given GPS (global positioning satellite) wristbands that are linked wirelessly to a series of
webcams. Parents can call up the webcams from their workplaces to see activities of their children.
Parents who have busy work commitments can also utilise a collect and return service whereby Sunrise
will pick up children and return them to their homes outside the normal nursery hours of 9.00am-
6.00pm. This service, although popular with some parents, has attracted criticism from some
commentators, who believe it results in disruption to the lives of children.
Sunrise has a far greater emphasis on learning, especially via computer, than children of the same age-
groups at other nurseries, and this has proved to be very popular with some parents. Parents can review
the computer-based games and work undertaken by their children remotely via the internet. These
innovations have been praised in the government inspector reports on Sunrise.
Sunrise operates on a staff-to-child ratio that is far higher than the industry average, to ensure the children
are given a more structured environment and personal attention. Staff are paid a premium over the salaries
of other nurseries. They are expected to have an understanding of the technology that is used within the
nurseries and are given a list of tasks each day that they are expected to carry out.
Fees of Sunrise are about 25% higher than other nurseries, to reflect the extra services provided, but this
has not prevented the nurseries being permanently full with a waiting list. Despite extra cost being
incurred, Sunrise has a higher profit margin than most other nurseries.
Sunrise is now considering an expansion of the operation and opening four more nurseries, with a view
to opening additional nurseries if this proves to be a success. Kamrul and Shayla have previously
controlled the individual nurseries themselves. They now want to hire administrators to run the nurseries
and to set budgets to ensure that they generate a return on the initial investment made, without
compromising the standards of care and education offered to children. They are uncertain as to how to
assess the administrators in terms of how well they are running the individual nurseries.
Kamrul and Shayla will dictate the initial layout of the individual nurseries in terms of building sizes and
fixtures and fittings. The nursery administrators would be responsible for advertisement, bookings, staff,
communication with parents and day-to-day running expenses.
Requirements
(a) Prepare a Porter’s Five Forces model for the nursery industry as a whole. 5
(b) Identify and explain the critical success factors that operate within the business of Sunrise. Discuss how
Sunrise has used information systems and technology to add value and give competitive advantage. 5
(c) Explain the strategic, tactical and operational information that Kamrul and Shayla will need to assist
in decision making and control. 5

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