BUSINESS STRATEGY

March-April 2021
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 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. Nairtime Consumer Products Ltd. started its journey in 2000 as a member of Nairtime
Group, the leading corporate house in Bangladesh. Within a short span of time, it has been
able to create a strong foothold in the market through its quality products and customer
services. For its obsession with quality management, the company had obtained the
international quality standard ISO 9001 in 2005. Strong commitment to quality, adoption of
advanced technology, stress on human resource development, focus on continuous
improvement and introduction of new products for the growing markets have given the
company a decisive position in the industry. More than a decade later, in 1st September
2014 it reinvented as Nairtime Food & Beverage Ltd. Nairtime Food & Beverage Ltd.
(NFB) has introduced four popular brands in the market in different phases. Initially it
started with Cooker, the product range of Cooker is enriched with basic spices, ready mixes,
cereals & pulses based products and edible oil. Cooker drew the attention of housewives
who demanded convenience and time saving cooking.

Subsequently it ventured Tasty that produces ready-to-eat snacks like Chanachur, Fried Dal,
Potato Crackers, Muri, Jhalmuri, Sauce, Ketchup, Jhuribhaja, Chutney and Pickles.

Krishak is the landmark of those products which are collected directly from the farmers
having the indigenous essence and freshness for its healthy, tasty & innovative ground
breaking quality.

The latest addition in the brand portfolio is Topnoodles, which has been launched with a
promise of providing tasty, nutritious and quality instant noodles in the market. Topnoodles
Instant Noodles is making a difference in the market as the only tasting salt free noodles in
the category which is specially developed with the health concern of children.

Cooker and Tasty are the flagship brands of the company. Just after its introduction they
have won the hearts of the consumers. The company assures to meet the increasing demand
for quality products both at home and abroad. The products with international standards are
being exported to 30 countries. Dedication to quality, innovative products, customer service
and reasonable price has given the company a unique position in the food business.

Over the past ten years the nature of the food and consumer products industry has changed
significantly. Profits are lower than they have been for many years and competition is fierce,
especially among the larger industries. Now the big groups of companies have started their
food section. More is being asked of quality of food items and their image has taken
battering quality of products.

A board of directors meeting has been called to discuss the future strategy of the industry,
and make a portfolio analysis of their products. Marketing manager was asked to submit a
report on the market conditions of the products with the present market demand, market
share, profit share and future of the products. The report is as under:
Nairtime brand product is still demanding and has high growth and high market share. But it
is losing market share due to newcomers in the market. To explore new market, it needs
capital investments. To retain the existing market, it needs huge marketing cost.
On the other hand, Krishak brand products have very low demand in the market and has
very low share in the market. Though consumers were attracted initially with the packet
products now they are discouraged. Tasty brand products have a reasonable market share
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 and reasonable profit. However, there is no need for capital investment. Future of the
product is uncertain.

Meanwhile new product, Topnoodles after introduction has attracted market. It has created
demand amongst the young stars. At the beginning payback is attractive as they have won
huge orders from the market. Margin on Krishak products are slim. It takes lot of hazards to
selecting good quality products from field, procurement, carrying, and processing and
packaging. Still consumers are concern about the price and compare with the open market
price. However, there is still demand in the overseas market.

Topnoodles has negligible capital investment and came into market in 2019. It has very low
growth but very high profit and cash returns.
The Board of directors has given you the responsibility to write a report of the future
product portfolio strategy covering the following issues:
Requirements:
a) How portfolio analysis of products is made through the BCG Matrix?
b) Analyze the product portfolio of NFB using the BCG Matrix. 7
c) Discuss the shortcomings of the BCG Matrix. 7
5
2. Islamic banking in the finance sector has created a revolution in the banking industry in
Bangladesh and in most of the Muslim majority countries. Main principle of the banking is
to follow the Sariah based banking policy. Concept of this banking is to collect money from
the public as an investment, invest the money in business, and give share of profit to the
investors following the Islamic principles of doing business to avoid interest principle. Most
of the commercial banks in Bangladesh have either fully converted to an Islamic Bank or
opened a wing for Islamic banking.

Sukuk, a sharia-compliant bond-like instrument used in Islamic finance, can play a vital role
in financing infrastructure projects in Bangladesh, speakers told a webinar recently. Islamic
banks have excess liquidity for lesser options to invest for sharia compliance investment
options. Sukuk can open a new horizon of investment under sharia finance, they added.

Central Sharia Board for Islamic Banks of Bangladesh (CSBIB) and International Shari'ah
Research Academy for Islamic Finance (ISRA), Malaysia, co-hosted the event. Speaking as
the chief guest, finance secretary, Government of Bangladesh said our country needs huge
investment in infrastructure and Sukuk may be a very good infrastructural finance
alternative.

Speakers also said, it needs to formulate a comprehensive legal and regulatory framework
for getting optimum benefit from the instrument. The speakers said there must be a market
ready and trust-building among people for Sukuk before launching the product and regulator
should work on that. They made the observations during the inaugural session of a four-day
international workshop styled ‘The Issuance and Management of Sukuk in Bangladesh’.

The market share of Islamic banks in the country is 35 per cent and it is expanding., Neither
the government can borrow much from Islamic banks nor the banks can participate in the
government's development agenda due to sharia constraints. A delegation comprising
representatives from finance ministry, central bank, securities commission and sharia board
visited Malaysia for hands-on knowledge in the bond.

Islamic banks may use Sukuk as statutory liquidity ratio (SLR) to meet regulatory
requirements. A Bangladesh Bank official said they are working with the ministry
concerned to launch Sukuk as soon as possible. The central bank has already drafted the
Sukuk policy and sent it to the ministry for gazette notification. The global capital market
has recognized Sukuk as an important alternative to asset management.

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 According to a central bank study, 28 per cent of the country's investors are reluctant to
invest in the interest-bearing T-bills, bonds and other government securities. Against the
backdrop, both conventional and Shariah-based banks heavily invested their fund in the
tool, another central banker said. The yield on both T-bills and bonds has decreased as the
government is issuing securities to manage the budget deficit. So, banks prefer the Sukuk,
which offers a higher fixed profit rate, as a safe haven for their investment, a central banker
said. Banks are now sitting on excess liquidity because of lower credit demand due to the
business slowdown. The excess liquidity in the banking sector stood at Tk. 169,650 crore in
September, 2020.

Government and its agencies have been working on this for the past one year and a half. The
first Sukuk bond was launched. Considering all the facts, the Government consulted sharia
experts and Islamic bankers, and is keen to raise Taka 8,000 crore fund through the issuance
of the Sukuk to implement a safe water supply project. Features of the bond will be as
follows:

i. The central bank will raise Tk. 8,000 crore

ii. Investors will receive a profit of 4.69 per cent on their investment in the Islamic
bond.
iii. The central bank has fixed the rate based on the Bangladesh Government
Islamic Investment Bond (BGIIB). The last declared profit-sharing ratio of the
six-month BGIIB is 3.69 per cent, and the central bank has added one
percentage point to decide the rate for the Sukuk.
iv. Profits will be paid on a half-yearly basis.

Many banks have applied for purchasing this Sukuk. Thirty-seven banks, including eight
Islamic lenders, and two individual investors took part in the auction. worth Taka 15,153
crore against the targeted amount of Tata 8,000 crore. The auction committee of the central
bank allocated the fund proportionately among the bidders. As a result, every bidder
received Sukuks equal to 26.4 per cent of their applied amount. Government is planning to
issue more Sukuk bonds for financing infrastructure projects.

Requirements:
a) Make a critical analysis why Islamic Sariah based banking is becoming more 5
popular day by day in Bangladesh?
b) How Sukuk bond can help government of Bangladesh as a strategy for financing 5
infrastructure project?
c) How Sukuk bond can help Bangladesh in its sustainable economic growth? 5

3. BCC is a technological company based in Dhaka having presence in few Asia Pacific
countries. It has recently disposed a foreign subsidiary as a strategic move with the view of
entering consumable products market. Sales proceeds raised from the disposal were Tk. 1.5
billion in cash. A recent meeting held in respect of reinvestment activity has opened certain
areas for discussion.

The chairman pointed out that BCC is highly geared compared to peer companies hence,
ruled out any further borrowings. Further, he is wondering whether sale proceeds should be
enough to repay the company’s outstanding debts.

However, the finance director’s view was that BCC should be interested in acquiring three
undervalued companies. The market risk premium is estimated to be 3% and the investment
will be limited to the sale proceeds from disposal of the subsidiary. Given below are the
after-tax cash flows:

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 Taka Million
Company Year1 Year2 Year3 Terminal value at Acquisition Beta (β)
end of Year 4 price factor
PQR -20 150 220 1400 -1360 1.4
RST 410 330 255 900 -1190 1
XYZ 90 300 580 1100 -1230 0.8

Partial acquisition is not possible, and ABC currently reports a weighted average cost of
capital (WACC) of 12%.
The director-treasury has come up with an idea to look at the stock market as the preferred
investment option as it could diversify the risk to a greater extent or alternatively look at the
money market. Given below are money market and Dhaka stock market statistics extracted
from the previous year.
At the beginning of the year Mid-year At the end of the year
Treasury bills
90 days 9.0% 9.6% 8.7%
182 days 10% 10.2% 9.1%
365 days 11.0% 10.5% 9.5%
All share price index
DSEX 6164 6747 6612
DS30 3492 3933 3872
However, the board is yet to arrive at a conclusion. The board paper has the following areas
for further consultation.
1. From the perspective of BCC, as an investor, the company selection sequence (PQR,
RST and XYZ) on both net present value (NPV) based on each company’s risk profile
and profitability index and the amount of balance capital available.

2. Whether the investment should be made in undervalued companies, stock market or

money market. (Your discussion should include the use of money market and stock
market investments supported with necessary calculations and the acceptability of it in
shareholder value and risk diversification).

3. Looking for debt capital or extra capital in accepting both RST and XYZ from a
financial management perspective.

4. The chairman’s attempt to repay debts at the cost of foregoing any profitable projects,
equity market returns or money market returns.

Requirement:
You have been appointed as a consultant of BCC recently. Write a formal memo to the 20
board of directors of BCC addressing the points 1 to 4 above (Support your
recommendations with calculations and justifications together with any assumptions made).

4. Lakeside Hotel is a five-star hotel in Cox’sbazar. It has been in operation for nearly 10
years. It currently has 5 suites, 10 luxury rooms, and 50 deluxe rooms, and can
accommodate up to 150 guests at one time. They also have two restaurants which provide
the meal requirements. The facilities provided include a swimming pool, gymnasium, which
are available to all resident guests, and a business center, spa, and an ayurvedic center which
are available at a payment. The hotel currently also has 2 banquet halls which can be
booked for various functions such as weddings.

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 Current rates of the hotel are shown below (per room per day):
Amount in Taka
Room type Full board (room plus Half board (room
three meals) plus two meals)
Deluxe single 10,000 8,000
Deluxe double 20,000 15,000
Luxury single 15,000 12,000
Luxury double 28,000 24,000
Suite (maximum three guests per room) 40,000 35,000

Currently the difference between the deluxe rooms and luxury rooms is that the latter has a
larger bed, and the size of the room is also a bit bigger. The suites on the other hand have a
very small living room with a bedroom like the luxury rooms. All rooms are air conditioned,
and have Wi-Fi facilities, satellite television, mini-bar, and an electric kettle. Each room
also has an attached bathroom with hot/cold water.

In the past few years, the hotel experienced a rapid growth in the number of guests.
However, this growth now appears to have slowed down. Further it was noted that market
share and profits have also faced a declining trend. However, the hotel is still generating
positive cash flows.

The hotel collects feedback from customers when they check out of the hotel. Many guests
who occupied the luxury rooms and suites stated in their survey forms that there is nothing
special about the rooms even though the rates are substantially higher than the deluxe
rooms. The hotel management is thinking of revising the offerings given by both luxury
rooms and suites.

The hotel also does not maintain a database of the customers that visit the hotel. The
management of the hotel is now considering developing a database for customers.

Requirements:
(a) Recognize which stage the hotel currently belongs to in the product life cycle. 3
(b) Explain the extended marketing mix (7Ps) with reference to Lakeside Hotel. 6
(c) Recommend at least one (01) modification to each element of the marketing mix with
the purpose of increasing sales of the hotel. 6
(d) Explain the benefits to Lakeside Hotel of having good customer relationship strategy. 5

5. Government has approved a project to build an industrial park at Mirsarai, Chattagram

named “Bangabandhu Industrial City” with an investment of Taka 2500 billion, through
Bangladesh Economic Zones Authority (BEZA). According to the project report, factories
will be built on 3000 acres of land covering three upa-zillas of Chattogram and Noakhali
districts. Out of that, 500 acres of land has been allotted to Bangladesh Garments
Manufacturer and Exporters' Association (BGMEA) to establish an industrial hub for export
oriented garments and related industries at Bangabandhu Industrial City.

In the first phase, land allotted to the garments industries has been developed as Garments
City. In a meeting of BGMEA, most of the members have decided to relocate their
industries as soon as possible. Some 37 companies are set to relocate and 59 companies will
relocate in phases. These companies are supposed to sign separate contracts on leasing lands
with Bangladesh Economic Zones Authority (BEZA) this month. The remaining land will
be used for different services including waste treatment, internal roads and lakes. Some $3
billion (Tk 2500 billion) are supposed to be invested in this garment city. Garment factories
owner’s association BGMEA had been trying to establish a garment city at Baushia area of
Munshiganj. But a section of owners did not show interest in relocating their factories there.
The government is supposed to provide necessary facilities, but did not do. So the proposal
remained on paper.

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 But it is a matter of hope that almost all garments owners have agreed to relocate their
factories to the Bangabandhu Industrial City in Mirsarai of Chattogram. One of the reasons
is that the location is near the Chattogram port. There is a plan to build a deep sea port in
Mirsarai. Secondly, being the country's biggest economic zone, there are all sorts of
facilities including gas, power and water. Residential buildings will also be built for the
workers.
BEZA executive director said Bangabandhu Industrial City is divided into 30 zones.
BGMEA garments factories are located between Zone 2-A and Zone-2 B. These two zones
will be turned into a complete green economic zone. A plan to establish a garment city was
taken much earlier, which is delayed due to the outbreak of coronavirus. It is hoped the
work for the industrial park will go on in full swing once the coronavirus is contained fully.

There are over 4,000 garments factories in the country, most of which are located in Dhaka,
Narayanganj and Gazipur. Owners have to struggle to transport raw materials and products
and local people have to suffer a lot as the areas are densely populated. Whereas 90 per cent
of readymade garments are exported through the Chattogram port, there is no reason to
locate most of the factories in Dhaka and its adjacent areas.
A number of garments cities have to be built in a bid for sustainable development of the
industries and to relocate the factories from the residential areas. The government must be
aware that the condition of garment city does not take the similar fate of tannery industry
city in Savar. Garments factories have to be located there after ensuring all facilities
including communications, services and infrastructure. Garments factory owners must not
oppose the move.

You are the business development manager of Beka Garments Ltd., an established group of
companies having six garments and textile related plants/industries surrounding Gazipur and
Savar. Board of directors had a meeting on the relocation of the industries to the
Bangabandhu Industrial City. They want to conduct a detail study on relocation of
industries. They advised you conduct a study and write a report to the board covering the
following issues:
Requirements:
a) What are the merits of industrial relocation? 5
b) Do you think Beka Garments Ltd should relocate its industries to new industrial
park? Answer with your detailed justifications 5
c) If it is decided to relocate the factories how it can manage change and motivate
employees? 3
d) What are to be ensured by the government to make relocation successful? 3

6. Suez Pharma Limited (Suez) is a highly successful pharmaceutical company in Bangladesh.

Suez’s board has recently received advance warning of the likely results of a study which is
not due to be completed for another 12 months. The study is being conducted by Suez as
part of on-going product testing for its drugs that are already available in the marketplace.
Although the study is only 25% complete, the initial indications are that one of Suez’s
leading drugs, which significantly improves the quality of life for sufferers of a long-term
chronic illness, may cause harmful side-effects if taken at the same time as a newly
available over-the-counter medicine that can be self-prescribed for pain relief. The board,
mindful of the company’s social responsibilities and the potential for bad publicity, is
currently discussing what action to take in response to this discovery but is concerned about
the harmful impact of any premature announcement on its share price.
Requirement:
Discuss the ethical implications of this situation for Suez Pharma and any potential for
stakeholder conflict that arises as a result. 10

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