CASE 1

STARTUP TO EXPANSION:
ACCESSING SUGAR &
SPICE AOR OPPORTUNITY
UNIVERSITI UTARA MALAYSIA

BKAL3063 INTEGRATED CASE STUDY

GROUP 2

LECTURER

PROF. MADYA DR.

NORHANI BINTI ARIPIN

GROUP MEMBERS

249873 MOHAMED FARDOWSO SALAD

267888 NURIN ELVINA FIRDAUS BT SHAHARUDDIN
272980 NURUL 'IZZAH BINTI MUHAMAD PAZAIL
273469 HANIS ANATI BT MUHAMAD FARHAN
273482 NUR HANIS BT MD RANZI
273812 TAN PEI MING

DUE DATE

11 APRIL 2022
 Executive Summary
The case's key characters, Yati and Shukri, ran a company called Sugar &
Spice AOR. When the Covid-19 outbreak came, Yati was in a dilemma,
unable to expand her confectionery business due to the economic
crisis. Sugar and Spice AOR is now suffering financial challenges and is
unable to expand its operations as a result. Yati meets with Mr. Sabr
Muthalib, an accountant, to seek expert guidance on a problem she is
having.

The decision criteria are analysed using a SWOT analysis, and various
alternative solutions are suggested for her. We recommend that the
company maintain its current business operations while improving internal
flaws such as the financial system, internal control, and technologically
modernising the bookkeeping system to remain sustainable and
increasing the customers' value.

Statement of
Problem
Yati has faced a dilemma whether she
should expand her business.
The factors that lead to the situation happens:-
The financial management of the company
is very weak.
Weak internal control.
Lack of technology knowledge in the
business.
1
 Causes of Problem

Weak Financial Management

The bookkeeping process does not exist.
> It is costly to hire an accounting intern to handle the accounts.
Do not have a business bank account and use their personal bank accounts to lodge the cash.
> All business related entities should be accounted for separately.
The cash transactions are not documented means no evidence.
> Leads to delayed reporting and analysis, statutory obligations become difficult to settle.
Overhead cost does not include in the total production cost.
> Information is not reliable and accurate because they miss important elements when they
prepare income statements.

Weak Internal Control

The safety requirements remain undocumented and not presently displayed
within the premises for the staff members or visitors.

Does not have a business bank account, and they still use their personal
bank accounts to lodge the cash. Shukri might keep the sales to himself.

Recipes does not cover under a patent right or trademarked.

Lack of Technology Knowledge

Not using the updated bookkeeping system.
> Using an accounting system to key-in data.
The business did not fully utilise the technology.
> The use of company websites to promote their product to compete in the confectionary
industry.

Not using the cash register machine.

> Issue receipts for all transactions by using the machine.

2
 Decision Criteria,
Alternative Solutions
Strengths Weaknesses

Able to sell products at a higher price as they

No bookkeeping and separate business
are the only seller.
entity concept are not adhered resulting in
poor financial management.
Having lower cost of sales as the cost of
ingredients are cheaper in Alor Setar compared
Poor costing and inaccurate product costing
to big cities.
lead to poor pricing of the products.

Opportunities Threats
Intense competition in the industry and
SMEs like Sugar & Spice AOR are industry's competitors selling identical confectionery items.
leading players.
High power of customer and promptly switch to
competing products.
Grants are provided to SMEs by government
agencies
Significantly affected by the economic downturn
and Covid-19 pandemic.

Alternative Solution 1: The business remain the same

While maintaining the current size of business, Sugar & AOR could improve its
Spice in
weaknesses and solve problems as identified in the previous section.

Pros
Have more funds to improve the current
business operations.
Low business risk and less uncertainty when
operating in times of pandemic, prioritizing
the sustainability of business.
Cons
Sales would probably remain the same unless
better and more effective advertising
strategies are adopted.
Business growth at minimum level or none
and may not sustainable in long-term.

Able to bring the best out of the best to the

current customers in the market and improve
brand reputation before
3
 Alternative Solution 2: Expand the business
There are two operational of expansion which are to establish a single
plans
distribution centre to service all the selling outlets to two new outlets to
and establish
be independent in Jitra and Sungai Petani district.
Attract new customers in the new market. Generate more sales and profits.
Pros
Increase market influence, which allows the Cons
Shortage of cash to fulfil the expansion costs.

business to affect market pricing by Loss of control due to the need to delegate
increasing the amount of the influence. managerial responsibilities or divide tasks
across several places.
Creating scale economies that distribute the risk of doing business and mitigate the negative consequences of poor decision
Increased staff turnover as a result of extra
work being assigned to them, resulting in
worse morale and lower productivity.

Alternative Solution 3: Change to a home-based

business
A home-based business is one in which the primary office is located in the home of
the founder, which in this case is
Yati.
Pros Cons
The lack of a commute, which saves time and Interferes with family life that the blurring of
transportation expenses. the lines between home and work.

Overhead costs are reduced because there is Workplace space is limited for preparing
no separate workplaces or utilities to products and services.
maintain.
Staff members may feel isolated and out of
Flexible working hours. the loop as a result of less social interactions.

Better quality control and product operation

monitoring.
4
 Recommended
Solution
Maintain the current business
operation while improve business
performance is the best solution
Implementation and Justification
#1
Adopts appropriate accounting and documentation
policies to strengthen their financial position
Sugar and Spice AOR does not practice separate entity
concept which is personal and business financial are not
separated and there is no record and evidence for each sales.
Adopting appropriate accounting and documentation policy is a
must because the financial position and performance will be
clearer without personal interest interference and the financial
information will be more organised and reliable.
As a result of their integrity in handling the business's funds, Sugar
and Spice AOR will obtain trust from its shareholders.
#3
Tighten the company's internal legal policy for the safety and
interest of the company
Sugar and Spice AOR does not emphasize their safety
measures and regulation while conducting their
business.
Improving their legal policy by showcasing employee
safety guidelines to avoid any unwanted accidents
throughout the manufacturing process.
As a result, employees will be aware of the standards
presented, demonstrating that the workplace is safe.
#2
Hires expert financial advisor to manage the
company's finances
Sugar and Spice cannot expect someone to do more than
one task including marketing and managing finances at a time.
They can apply for a financial grants since Sugar and Spice
AOR is a SME business for them to outsource and can be used
to buy a crucial item such as cash register machine and
accounting system or hire an external accountant for more
systematic and effective financial management.
As a result, the accounting system would simplify the
company's transactions because it would be automatically
updated after financial data was entered.
#4
Request the pattern rights to protect the recipe created by
Yati
The purpose of trademark registration is to avoid any
issues that could allow competitors to seize the recipe.
This action can be done by applying the trademarks at
Intellectual Property Corporation of Malaysia (MyIPO).
As a result, Sugar and Spice able to safeguard the taste
quality of products in order to keep being relevant in
F&B industry.
5
 References
Abdul Qadeem. (2017). Business Entity Concept Definition Explanation
Examples & Importance - Accounting Sheet. Retrieved from
http://www.accountingsheet.com/accounting-principles/business-entity-
concept-definition-explanation-examples-importance/

Bernama. (2021, June). RM147.1 billion allocated to assist SMEs since

2020, says Muhyiddin. New Straits Times. Retrieved from
https://www.nst.com.my/news/nation/2021/06/703858/rm1471-billion-
allocated-assist-smes-2020-says-muhyiddin

Ganesan, V. (2021, June). Amid the pandemic, F&B firms try to spice
things up. The Edge Markets. Retrieved from
https://www.theedgemarkets.com/article/amid-pandemic-fb-firms-try-
spice-things

Them You & Me (April, 2020). Importance of Technology in Business -

Digital Marketing - Them You & Me. Retrieved from,
https://themyouandme.com/blog/top-5-reasons-why-technology-is-
important-in-business

Twin, A. (2022). Outsourcing. Retrieved April 9, 2022, from Investopedia

website: https://www.investopedia.com/terms/o/outsourcing.asp