CONFIDENTIAL 1 AC/JUL 2022/MAF661/640

UNIVERSITI TEKNOLOGI MARA

FINAL ASSESSMENT

COURSE : STRATEGIC MANAGEMENT

COURSE CODE : MAF661/640
ASSESSMENT : JULY 2022
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of four (4) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 5 printed pages
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QUESTION 1

IBA Sdn Bhd is a company that produces and sells instant coffee. The company employs a
traditional method in the production process to preserve the original aroma of the high-
quality coffee beans. Since its establishment, the company has been successful in the
market through its ability to offer products at rather low prices. However, the continuous
reduction in total sales figures for the past two years urged Encik Iqbal, the owner, to revisit
its business strategy. The marketing team reported changes in the customers behaviour
based on the recent market analysis. Most IBA loyal customers have switched their interest
and to purchase imported instant coffee from Barcaffe Sdn Bhd (BSB). The imported
products are made from high quality ingredients. They are packed in modern and more
attractive and convenient packaging which uses sustainable zipper coffee packaging
materials to ensure product stay fresh until the very end. The packaging also provides
detailed information about the ingredients, expiry date, and preparation instructions.

After extensive discussion among the top management team, Encik Iqbal decided that IBA
Sdn Bhd will only focus on producing instant coffee added with Sabah Snake Grass extract.
The high content of flavonoids, minerals, and amino acids in Sabah Snake Grass is claimed
to have anticancer properties and thus would really be helpful for cancer patients. Due to a
narrow target market segment and the increase in production costs, IBA Sdn Bhd will
introduce the product to the market at a premium price.

Required:

a. Explain three (3) benefits IBA Sdn Bhd may have enjoyed when operating on the
current business-level strategy.
(10 marks)

b. Discuss three (3) competitive risks that IBA Sdn Bhd would face when employing the
new business-level strategy to market its new instant coffee.
(10 marks)
(Total: 20 marks)

QUESTION 2

AA Sdn Bhd (AASB) is a medium-sized travel agency that has been in operation for a
decade. The company is well known for its solid track record of success since its
establishment. AA provides premium tailor-made business trips as well as providing
customers with comfortable, affordable, and practical packages. Thus, AA has a strong
brand name to create many loyal customers as compared to other competitors. However,
during the COVID-19 pandemic, AA's business operations were severely impacted, with
almost no sales and thus, a drastic decrease in revenue. Another travel agency, MM Sdn
Bhd, is in the same situation that its cash position has dwindled dramatically. Nevertheless,
MM has the ability to get bulk deals for any travel package with local and international
airlines and other suppliers.

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MM also could access almost everything available for the traveler using an e-traveler
business application. As a result, the CEOs of both companies have met to discuss and plan
to merge with the goal of gaining synergies. The CEOs of both companies believe that by
taking these initiatives, they will be able to survive in the industry for a longer period. Anyhow
one of AAs’ board directors, En Ahmad, feels insecure about the planning of a merger
between the two (2) companies which is due to his personal interest. Therefore, he proposed
for a strategic alliance to be developed between the two (2) companies, believing that the
strategy would be a better option.

Required:

a. Discuss three (3) reasons why En Ahmad feels insecure if the top management
decides to merge with MM Sdn Bhd.
(10 marks)

b. Justify with three (3) relevant reasons that strategic alliances could be a preferable
strategy as suggested by En Ahmad.
(10 marks)
(Total: 20 marks)

QUESTION 3

Damai Motor Company (DMC), which had previously been one of Malaysia's most lucrative
companies, was striving to stay afloat and faced its greatest loss in 2020. Some of the
reasons for the decline in profit were internal problems such as frequent leadership changes,
poor leadership, loss of touch with customers, and failure in the diversification plan. DMC's
product development and manufacturing procedures, previously strong suits, had
deteriorated over time. Communication was also impeded, and the very bureaucratic
organisational culture impacted the firm's effectiveness. As a result, to restore the company's
glory, the DMC's leadership must focus on restoring specific competencies and fostering a
culture of excellence and ethical behavior.

In March 2021, the Board of Directors (BOD) chose to add a new dynamic group member.
Tan Sri Simon Chia was appointed to be the new Chief Executive Officer (CEO). As a former
executive vice-president of a large telecommunications firm, he was expected to use his
experience and leadership skills to restore customer satisfaction and develop a strong
corporate culture in DMC. Simon was committed to breaking DMC's dysfunctional culture in
achieving the set of company goals. Simon started by closing plants, cutting jobs, laying off
employees, increasing plant utilisation and production levels, and refocusing on DMC
branding. He also made structural and procedural changes, especially in top management.
Simon had full support from the top management of DMC, including the chairman and the
new board members. To enhance the organisation’s long-term viability, Simon needs to build
a learning organisation that can adapt to change, foster creativity, and succeed in highly
competitive markets. Simon recognizes the importance of having everyone involved in active
learning and adapting.

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In addition, Simon did some senior executive reorganisation. Simon changed the functional
organisation structure to Strategic Business Unit (SBU) structure. Divisions with similar
products, markets, and technologies are grouped into homogeneous units that are under the
SBU structure to achieve some synergies. Diversification includes the objectives to leverage
core competencies, share infrastructure, and enhance market power. Each of the
corporation's SBUs operates as a profit centre. All these divisional heads reported directly to
him. It meant Simon could coordinate & control key functions while implementing his
strategy. Given the industry's high level of competition, Simon believes that achieving the
sales target and profit will be difficult unless a strong sales team rewarding, and loyalty
strategy are developed.

Apart from the high commission given to the highest sales for individual and team, other
rewards such as non-cash awards such as luxury travel, mobile phone, and iPad are
awarded to the top sales individual and team each year. The sales team says that the trip
and other valuable products will be remembered longer than the cash reward. Although
Simon implemented changes in the culture, his methods created conflict with certain
management members, and some experienced employees quit the company.

Required:

a. Discuss three (3) benefits of implementing the Strategic Business Unit (SBU) structure
in DMC.
(10 marks)

b. Criticise any three (3) downsides of the reward and incentive system developed by
Tan Sri Simon Chia as the systems can be powerful motivators and sometimes may
result in undesirable outcomes.
(10 marks)

c. Propose to Tan Sri Simon Chia the three (3) key elements of building a learning
organisation to enhance the long-term viability of DMC.
(10 marks)
(Total: 30 marks)

QUESTION 4

Wear & Care Sdn Bhd (Wear & Care) is an apparel company that designs adaptive clothing.
Adaptive clothing is explicitly made for people with difficulties in dressing themselves due to
age, disability, or general lack of mobility. The company was founded by Encik Yahya in
2007 with a shoestring budget. The business started small by providing comfortable adaptive
clothing for the elderly, using deadstock fabrics that would otherwise go to waste.
Encouraged by the success of its existing garment, the adaptive clothing is extended to
people of any age with a temporary or permanent disability. Over the years, Wear & Care
has expanded its operation by offering a wider range of adaptive apparel such as tops,
dresses, pants, shirts, socks and patches, swimwear, and health wear. In 2019, Wear &
Care’s garments were regarded as the country’s best adaptive apparel.

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Encik Yahya is considering a new business venture. He is keen on embarking upon a

venture in a lightweight airbag jacket, catered for any individuals susceptible to fall-related
injuries. The jacket offers comfort to the elderly and people with disability. It tracks the user’s
centre of gravity by using microscopic sensors. When the sensor detects a devastating fall,
the airbag will inflate in less than a half-second, which ultimately reduces the chance of
serious injury. Clients and carers have constantly requested a similar jacket from Encik
Yahya. Based on his previous engagement with local hospitals, he noticed that hip and
spinal injuries are common among the elderly and contributed to the highest costs of all the
fall-induced fractures. The Wear & Care research team also discovered that falls are the
second leading cause of unintentional deaths worldwide and adults older than 60 years of
age suffer the greatest number of fatal falls. The statistic for senior citizens is gradually
increasing in Malaysia. There are 2.9 million people aged 60 and above with one in six
people experiencing at least one fall over a 12-month period.

The current airbag jackets are well accepted in Japan. Even though these jackets have been
commercialised by the Japanese company in some Malaysian pharmacies, Encik Yahya
discovered that the existing jackets were sold with extremely high markups and limited sizes.
Since customers expected that such merchandise should be tried-on and tested in stores, it
is difficult for retailers to use an online ordering system. Encik Yahya saw this as an
opportunity and quickly developed a simple business model. It aims to develop a similar
lightweight airbag jacket using heat-resistant materials, provides size charts for online
orders, and offers products at an attractive price with free delivery. Wear & Care also
lessens the customers’ concerns about ordering online by offering a 90-day guarantee and
free returns. Similarly, an in-store appointment can be scheduled for those who prefer an in-
store experience. Encik Yahya strongly believes that the new project is attainable and
realistically achievable since the company has skillful manpower and the required resources.

Required:

a. Discuss how Encik Yahya can recognize any business opportunity in determining
whether the idea is strong enough to become a new business venture.
(10 marks)

b. Elaborate on the three (3) strengths and three (3) weaknesses of the entry strategy
chosen by Wear & Care for its new business venture.
(10 marks)

c. Suggest four (4) human resource management practices that Wear & Care can use to
capture value from innovation.
(10 marks)
(Total: 30 marks)

END OF QUESTION PAPER

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