STRATEGIC BUSINESS MANAGEMENT

Nov-Dec 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 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. (a) RSBC a global banking and financial services organisation, offers a full range of wholesale and
retail banking services worldwide across all segments. RSBC network covers 75 countries and
territories in Europe, Asia, the Middle East and Africa, North America and Latin America.
RSBC makes most of its profit in Asia, the bank reported in the last week of February 2021,
that it is “moving the heart of the business to Asia, including leadership”. RSBC is considering
selling its unprofitable U.S. retail operations and pouring about USD 6 billion of investment
into Asia in the next five years. The announcement came as the bank said, net profit fell by
35% last year as the coronavirus pandemic roiled the global economy.
RSBC opened its first branch in Bangladesh in 1996. It offers a range of financial services in
Bangladesh including wholesale banking and limited retail banking services. RSBC has
initially invested USD 100 million in Bangladesh, established a network of its branches and is
keen to increase its investment significantly. RSCB considers, there are good retail banking
opportunities in Bangladesh, as only 48% Bangladeshi adults have bank account. It is also
evaluating the feasibility of acquiring 100% of a midsize foreign bank operating in Bangladesh.
Bangladesh economy has undergone profound transformation since the onset of economic
liberalisation which started in the late 1980s, the liberalisation process has become more
vigorous since the second half of the 1990s, the capital flow into and out of the country has
been significantly liberalised. Bangladesh’s state-owned banks have large deposit base, huge
number of branches country wide and have a dominance position in retail banking. The state-
owned commercial banks compete strongly for retail banking business against private sector
rivals and have half of the retail business of Bangladesh. State-owned banks have further
strengthened their position in retail banking and have launched number of new retail banking
products, which have proved to be immensely popular with customers and are very profitable.
Finance Ministry of Bangladesh and the management of state-owned banks share the same view
that there is plenty of growth left in the retail banking and margins in retail banking are
excellent. Moreover, traditionally, general people of Bangladesh are more comfortable in
banking with state-owned bank.
A recent survey shows, mortgage and consumer lending in Bangladesh has grown at 22% per
year compounded from 2015. According to a recent RSCB study, this growth will continue for
the foreseeable future.
All foreign commercial banks operating in Bangladesh are profitable. Together, they account
for 30% of retail banking business in Bangladesh. One foreign bank has sold its Bangladesh
operation to a local commercial bank, stating its reason for withdrawal as being, the Bangladesh
operation have reduced group profitability.
Requirements:
i) Using Porter’s Five Forces model, evaluate RSCB’s future potential for a profitable retail
banking business in Bangladesh. 8
ii) Using your analysis from part (i), advise RSCB on whether it should continue its retail
banking business in Bangladesh. 4
(b) CL a top Bangladeshi coffee chain, operates 50 coffee shops across the country.
CL was established five years ago in Bangladesh by Sartaj Islam, a Bangladeshi with over 10 years’
working experience with a leading coffee chain in Australia as manager and head of business
development for Australia operation. A good number of coffee shops are run by internationally
recognised and popular brands. CL of course is a local brand and only operates in Bangladesh.
Bangladesh has no shortage of outstanding coffee shops. The range of products offered by
coffee shops are increasing too, responding customer demand for a larger range of better-
quality foods. The international brands have been able to command higher than average prices
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 for their products by using quality ad service as differentiators. Price appears not to be a
particularly sensitive factor, although, CL prices are largely as same as those charged by the
branded shops run by the multinational brands in Bangladesh.
CL serves a range of freshly made sandwiches, range of snacks & cakes and other food items,
in addition of high-quality coffee, hot and cold drinks, all made from high quality ingredients.
All CL shops operate from rented premises, but before opening, they are fitted out to ensure
they have the same high standard of shop design and fittings.
CL shops generate a high turnover. Though, profitability has been lower than some of its
competitors. Reasons for this include high rental costs for some of its metropolitan shops; high
staff costs (as high-quality customer service remains a priority for CL, it pays above the
industry average); and lower than average gross margins on some products (due to the high
procurement cost of the quality ingredients chosen).
CL also earns lower margins than some of its rivals on its coffee products because of 75% of
its coffee beans are procured from suppliers who only with ‘Fair Trade’ coffee produces. Some
of the CL key team members have argued that their shops would be more profitable if they
stopped using ‘Fair Trade’ coffee, but CL directors remain adamant that the company will
continue to buy coffee from Fair Trade suppliers wherever possible, because it is a socially
responsible company.
At the recent board meeting, the marketing director said he thought CL should introduce a
loyalty card scheme, and for every five hot drinks loyalty card holders buy, they get their next
one free. The marketing director argued, the card scheme will help CL’s profitability by
improving customer loyalty and strengthening the brand.
The finance director said that CL should also consider whether it could increase the price of its
coffee products to increase the margins it earns on them.
A summary of CL’s business results for the last year is shown below:
BDT '000
Coffee Other Drinks Food & Snack Total
Revenue (Net of VAT) 30,000 10,000 40,000 80,000
Cost of sales 8,000 6,000 17,000 31,000
Gross margin 22,000 4,000 23,000 49,000
Operating profit 10,000
Some information on the largest banded coffee shop in Bangladesh are as under:
Total number of shops 200
Total revenue for last year 300,000
(BDT’000, Net of VAT)
Cost of sales 97,000
Gross margin 203,000
Total Operating Profit 50,000
Requirements:
i) With reference to the marketing director’s proposal to introduce a loyalty card scheme,
review CL’s market competitiveness, customer loyalty, business performance and evaluate
the importance of brand awareness on CL’s business performance. 7
ii) Discuss the importance of external information in relation to the finance director’s
suggestion for CL to increase the prices of its coffee products. 4
(c) Brovita Limited a family-owned business based in Chattogram, started its journey in 2004 as
Agro product trading organisation. Brovita expended its operation into fish and poultry feed in
2010 with a state-of-the-art production facility in Baro Aulia, Chattogram and within a short
period could establish itself, a market leader in both quality and volume.
Chairman of Brovita now considering the possibility to expand countrywide supermarket
business to capitalize positive country economic outlook and growing demand in this sector. A
feasibility study conducted by Brovita Business Planning Division endorse Chairman’s view,
however, recommended to analyse risks before taking the final decision. Brovita has appointed
you, as consultant to analyse and assess risks in Brovita’s entering supermarket business.
Requirement: Prepare a report for Brovita Limited identifying major risks for Brovita entering
supermarket business. 6
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2. The ready-made garment industry (RMG) is critical to Bangladesh economically.
The unprecedented effects of Covid-19 have shaken worldwide economies and supply chains. All
key textile-garment producing nations faced supply chain disruptions, factory closures, order
cancellation/suspension and export losses. Bangladesh as a major player in the garments sector has
been severely affected by the pandemic. Primarily, the supply of raw materials to local garment
factories was disrupted when China—Bangladesh’s main source for raw materials —paused all
shipments between March and April 2020, due to the coronavirus outbreak.

The RMG sector met great trouble when several international buyers offered lower prices and
deferred their payments at a time when restrictions on movement caused delays in shipment. These
factors led to job losses for many workers as the millers were forced to close their factories
following a drastic fall in production.

“The challenge is now to offer high-quality, low-cost products within a short lead time; and to meet
health, social and environmental compliances in the face of increasingly stiff competition”, said
Alvi Islam, Managing Director of Demas Fashion Ltd a leading RMG facility in Bangladesh. “To
face the challenges, the apparel makers should focus on effective supply chain management as it
will ensure delivering the right product to the right place at the right time at the right price. Effective
supply chain management is the way to offer high-quality, low-cost products within the shortest
possible lead time as it integrates the whole apparel supply chain as one. The RMG manufacturers
need to start working together with all the supply chain partners, as the landscape of low-cost
sourcing countries is about to change. Buyers in the future would be more interested in TCO (total
cost of ownership) rather than just the unit price. So now need to understand who the supply chain
partners/stages are. In short – Supply Chain Management (SCM) includes all stages that are
involved directly or indirectly in fulfilling customer request. This includes manufacturers,
suppliers, transporters, warehouses, retailers, and customers. Within each company, the supply
chain includes all functions involved in fulfilling a customer request (product development,
marketing, operations, distribution, finance, custom-er service). So, in a nutshell it we can tell that
Supply Chain is becoming the senses and organs for the organization”, according to Alvi Islam.

2021 is going to be a significant year for Bangladesh as it will celebrate its 50th year of
independence and graduate from a least developed country (LDC). 2021 should be a year where
promoting the country’s export competitiveness will be a top priority.

Industry people are hoping that business will be more stable by end of 2021 if no major side effects
of the vaccine and new COVID wave are exposed. Demand for more sustainable products, value-
added products will be accelerated as well as functional products will lead to future business.
According to BGMEA data, more than 33 companies are making and preparing PPE for export,
where the largest shipment was by the Beximco Group a leading Bangladesh conglomerate, which
exported 6.5 million medical gowns to a top US brand.

Digital platforms have emerged as amazingly effective tools to marketing. some Bangladeshi
apparel millers are taking this advantage, also they are becoming more aware on using latest
technologies to cope with the recent trends and challenges. The apparel industry should come up to
utilize such digital platform and latest technologies.

Finally, the industry needs to remember that several risk factors may hit the industry as risk is a part
of business. So, it is crucially important to be continually alert in how the crisis is affecting, and how
brands are behaving and maintaining legitimacy in these uncertain times. An organization where
leadership, management and workforce are not preparing for the extraordinary risk will eventually
suffer the consequences. RMG units should have effective practices for risk management.

Requirements:
(a) What are the scope and different components of supply chain management? 6
(b) How supply chain management is important for Bangladesh Apparel Industry? 4

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3. (a) Dhaka Property Management Ltd. is a long-established and successful business in Dhaka, owned
and managed by Deeder Khan. The firm has 17 full-time employees and provides a wide range of
property management services directly to landlords. In addition, the firm is also used by real estate
agents as an outsourced service provider. Dhaka Property Management Ltd.’s services include:
• Rent collection, tenant management and communication.
• Planned and reactive maintenance; and
• Health and safety compliance services.
Deeder is now semi-retired, and his son Arif has effectively become the managing director,
although Deeder remains ‘the boss’. They have decided that there is now a real opportunity to
expand the business outside Dhaka for the first time. They consider Chittagong and Sylhet to
be potentially suitable locations. While supporting the expansion plan, Deeder thinks that the
firm should move slowly. He wants Dhaka Property Management Ltd. to use an organic growth
strategy to establish a branch in the target city. In contrast, Arif wants to be more aggressive,
and use an acquisition of an existing property management firm to enter the new market
quickly. Arif argues that the firm must ‘grab the opportunity while it is there’. Unfortunately,
neither Deeder nor Arif has any experience of either growth strategy, and they have turned to
you, their accountant, to provide analysis and advice.
Requirement: Prepare a report for Dhaka Property Management Ltd. that critically evaluates
both alternative growth strategies which the firm is considering organic and
acquisition. The report should also recommend and justify the growth strategy
which Dhaka Property Management Ltd. should pursue in the circumstances. 9
(b) Damen Limited is a UK company involved in import and export trade with the USA. The
Following transactions are due within next six months. Transactions are in the currency specified.
Purchase of components, cash payments due in three months: GBP 116,000
Sale of finished goods, cash receipt due in three months: USD 197,000
Purchase of finished goods for resale, cash payment due in six months: USD 447,000
Sale of finished goods, cash receipt due in six months: USD 154,000
Exchange rates (London Market)
USD/GBP
Spot 1.7106 – 1.7140
Three months forward 0.82 – 0.77 cents premium
Six months forward 1.39 – 1.34 cents premium
Interest rates:
Three months or six months Borrowing Lending
GBP (Pound Sterling) 12.50% 9.50%
US Dollar 9.00% 6.00%
Foreign currency option prices (New York market
Prices are cents per GBP, contract size GBP 12,500
Calls Puts
Exercise price (USD) March June September March June September
1.60 - 15.20 - - - 2.75
1.70 5.65 7.75 - - 3.45 6.40
1.80 1.70 3.60 7.90 - 9.32 15.35
Assume that it is now December with three months to the expiry of March contracts and that
the option price is not payable until the end of the option period, or when the option is exercised.
Requirements:
i) Calculate the net GBP receipts and payments that Damen Limited might expect for both
three and six month transactions if the company hedges foreign exchange risk on: 6
• The forward foreign exchange market
• The money market
ii) If the actual spot rate in six months’ time turned out to be exactly the present six-month
forward rate, calculate whether Damen Limited would have done better to have hedged
through foreign currency options rather than the forward market or the money market. 7

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4. For several years, the TBU has operated a website which provides users with online access to
professional training videos in areas such as law, accounting, and computer systems maintenance.
The business unit does not make or provide any original content; instead, the website simply contains
links to videos which are publicly available free of charge elsewhere on the internet. Until quite
recently, the website has enjoyed very heavy site traffic as users have found it to be well organised
and comprehensive. All areas of the site have been available to users for free. The benefits to
interactive plc have come in the form of (1) advertising revenues from the site and (2) the use of the
site to promote interactive’s other business units and drive traffic to their websites.
There has been a reduction of about 10% in the number of visitors to the website in the past year,
and this pattern of decline seems likely to continue. Tomal Khan takes the view that while this
reduction is disappointing, the existing business model is fundamentally sound and should be
continued. By contrast, the manager of the TBU believes that the existing business model is coming
to the end of its useful life and that Tomal should plan for its replacement. he proposes that within
the next year, the existing website should be discontinued and replaced with a completely new one
which would have the following characteristics:
• Users would pay a fixed monthly fee for use of the website.
• Unlike the previous website, the content would not consist of links to publicly available
material. instead, Tomal would purchase the rights to copyright-protected professional training
videos and webinars. Tomal would also commission material if none is available for purchase.
All this content would be made available to users in return for their fixed monthly fee.
• No advertising or links to other websites outside of Tomal would be provided. Tomal Khan has
stated that he does not see the need to replace the old website with the new one, and that the
new website would require much more complex and comprehensive managerial controls than
are necessary with the existing website.
Requirements: The manager of TBU has asked you, the CFO, for a report in which you:
(a) critically assess Tomal’s view that there is no need to replace the website, referred to above. 4
(b) on the assumption that the decision is taken to replace the existing website with the new one,
appraise the usefulness and feasibility of the following in implementing and managing the new
website: • internal benchmarking • competitive benchmarking • functional benchmarking. 9
5. (a) CVAS Bangladesh Limited (CVAS) is a Private Limited company incorporated in Bangladesh.
CVAS very strongly emphasises both ethics and compliance in its business. However, despite,
the company has a code of ethics, the board is not fully confident that CVAS, more specifically,
the company staff are adhering the company’s ethical values and commitments.
In this context, CVAS board deiced to conduct an ethical assurance to have confidence that,
their company does act ethically, and as a result, the integrity, reputation and sustainability of
the company can be safeguarded.
However, the CFO of CVAS, a Chartered Accountant, reported the board that, there is no
generally agreed framework for ethical assurance and there may be some challenges n
conducting an ethical assurance.
Requirement: Identify key challenges in conducting an ethical assurance. 6
(b) You are an audit senior with Zaheer Humayun Kamrul & Co, Chartered Accountants and
nearing at the end of the audit of NUVISTA Limited (NUVISTA) for the year ended June 30,
2021. The financial statements show a profit before tax of BDT 1,400 million (profit before tax
for the year ended on June 30, 2020, was BDT 600 million) and a statement of financial position
total of BDT 4,600 million (BDT 3,000 million on June 30, 2020). The following points have
arisen on the audit.
NUVISTA makes approximately 25% of its sales via an internet site from which it sells the
products of Padma Limited. NUVISTA earns commission of 17.50% on sales. Customers place
their orders on the internet site and pay for goods by providing their credit cards details. Once
NUVISTA has received authorisation from the credit card company the order is passed to
Padma Limited. The product is then shipped directly to the customer and all product returns,
credit card related issues are dealt with by Padma Limited. The total product sales achieved
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 through the internet site and despatched to customers in the year were BDT 600,000,000. This
amount has been recognised as revenue for the year ended June 30, 2021.
Requirement: Comment on the matters you will consider in relation to the implications of the
above points on the report of NUVISTA Limited. 7
(c) Concord BD is a large Bangladeshi civil engineering firm that has been in business for over 30
years and has grown to have over 2,500 employees. It has developed considerable experience,
particularly in the areas of major road construction and airport runway and terminal
construction. While the firm always had some international activities, since 2010 it has
aggressively expanded internationally. The international focus has primarily been on ME
countries like UAE, Kuwait, Oman, Qatar. In 2015, over 90% of Concord BD’s revenues
derived from its international operations.
In the past number of years, rumors have circulated about the possibility that Concord BD may
have used ‘facilitation payments’ to win contracts and influence government officials and union
representatives in these countries. these rumors culminated in a business magazine
investigation and ‘exposé’ last year. There has been no criminal investigation, either in
Bangladesh or in the countries where the payments were allegedly made. Concord BD
completely denies any wrongdoing, stating that there was no evidence of such payments and
that the firm won contracts based only on their contract tender and reputation. in spite of this,
the share price of Concord BD has fallen by 20% in the past year, although the firm posted
good financial results.
While there was no suggestion of the then CEO being involved directly, he resigned “in the
interests of the reputation of the company”. In fact, privately, the chairman of Concord BD is
surprised at the share price fall. He has commented in board meetings that people need to be
realistic and that these types of payments are “merely the cost of doing business in some
countries”. the comments were not minuted.
After a lengthy search process, Mr. Ali Imam has been appointed as the new CEO of Concord
BD. Imam is originally from the Egypt but has worked for several large Arabian civil
engineering firms. Immediately prior to his appointment, he was employed by a major Saudi
Arabian civil engineering firm, SaudiCon, which enjoys an excellent reputation generally,
including for its ethical practices. Imam recognizes that this was probably a factor in his
obtaining the position as CEO of Concord BD.
Concord BD has a written ethical policy that explicitly prohibits the use of bribes to obtain new
business or facilitate ongoing operations. however, there has been no attempt to build an ethical
framework and culture within the organisation to ensure the day-to-day implementation of its
ethical policy.
Requirements:
i) Prepare a report for Mr. Ali Imam that advises him on how to develop an effective ethical
framework and culture within Concord BD 10
ii) Critically assess Mr. Imam’s own role, as the CEO and strategic leader of Concord BD, in
creating the desired ethical framework and culture for the company. 3

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