JULY 2022

QUESTION 2

a) Discuss 3 reasons why En Ahmad feels insecure if the top management

decides to merge with MM Sdn Bhd
- Mergers involve a combination or consolidation of two firms to form a new legal entity

1. Competing firms can imitate advantages

- If top management decides to merge with MM Sdn Bhd, the AA Sdn Bhd may face
some difficulties that will lead to failure to compete and maintain in the market. MM
Sdn Bhd may try to take over AA Sdn Bhd after they recognize the strength and
weaknesses of the AA Sdn Bhd and take a chance to fire the management team
easily. Due to that case, Encik Ahmad would be worried about their wealth such as
salary, bonus and benefit that will be affected. Thus, Encik Ahmad should ensure his
company maintains high quality services and uniqueness to secure their customers.

2. Conflict of culture
- Cultural conflict is probably the most significant challenge faced by businesses
mergers experience today. When mergers happen, conflict may arise when the
employee needs to adapt to the new working culture. In this case, AA Sdn Bhd might
be highly flexible about working hours but MM Sdn Bhd might be very strict with
working punctuality. Thus, when mergers happen, this firm tries to standardize these
benefits and working conditions to demotivate the employees.

3. Employees job losses

- As AA and MM decide to merge, the management structure and working atmosphere
will be different as two companies doing the same activities will combine together. En
Ahmad worried that the employees will lose their job as the job responsibilities might
be divided into fewer individuals. Thus, it might lead to retrenchments.

b) Justify with three (3) relevant reasons that strategic alliances could be a
preferable strategy as suggested by En Ahmad.

1. Ability to enter new markets

If AASB proposes a strategic alliance to be developed between the two companies,
they can enter the new market with greater marketing expertise. As we can see,
MMSB could access almost everything available for the traveller using an e-traveler
business application. By using these opportunities, it gives chances for them to
increase their new customers and indirectly it will increase both company revenues.
2. Ability to reduce operating or other costs in the value chain
It is common for businesses to be able to reduce costs by pooling capital,
value-creating activities, or facilities through the use of strategic alliance. The fact
that AA provides its clients with premium individualised business trips in addition to
pleasurable, cost-effective, and convenient vacation packages has helped the
company build a stronger brand identity and cultivate loyal support among its clients.
The ability of MMs’ to acquire bulk discounts from local and international airlines and
other suppliers, especially for a trip, as well as the usage of an e-traveler business
application to aid them in their commercial operations, is their primary source of
competitive advantage. Every single organisation has their own one-of-a-kind
advantage over their rivals. As a direct consequence of this, AA and MM can decide
to combine their resources and their abilities.

3. Ability to develop & diffuse new technologies

MM Sdn Bhd already using an e-traveler business applications to support their
commercial activities which can benefit the business as everyone has already used
the technology for their daily use. While AA Sdn Bhd has stronger brand identity and
loyal customers. Each business has a core competencies. They can develop the any
latest technology. Thus, MM and AA might combine their resources and expertise
that can benefit them