CONFIDENTIAL 1 AC/FEB 2023/MAF661

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : STRATEGIC MANAGEMENT

COURSE CODE : MAF661
ASSESSMENT : FEBRUARY 2023
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

Luvable Sdn. Bhd. (LSB) is a company that specializes in selling premium and high-quality
baby food products. The health and nourishment of babies are at the heart of the company,
thus their nutrition science experts carefully curate premium quality organic baby food and
formulas for infants and toddlers. Recently, the company appointed a new Chief Executive
Officer, Mike Thompson, to strengthen the management and operation of the company. In his
first meeting with the subordinates, he brought up the idea of expanding the products and
target market of the company. Even though there are many health-conscious consumers who
gravitate toward organic over conventional products, the market is still very limited as organic
food is quite pricey. Therefore, the CEO is planning to introduce cheaper variants of baby food
products that could attract a wider market. He is confident that the new business strategy will
benefit LSB to sustain its competitive advantage. The proposal for the transformation will be
presented during the next board of directors meeting.

Required:

a) Explain how LSB can gain its competitive advantage from the strategic target market
through the implementation of the current business-level strategy.
(10 marks)

b) Discuss three (3) reasons to support the new business-level strategy proposal to be
presented by the CEO in the next board of directors meeting.
(10 marks)
(Total: 20 marks)

QUESTION 2

KarpetKu Berhad (KKB) is a leading manufacturer of textile floor coverings for commercial and
residential applications in Malaysia. The company has a diverse product portfolio comprising
woven rugs, wall-to-wall carpets, tufted polyamide carpets, laminate floorings, and carpet tiles.
Currently, it has two manufacturing sites that are in Kelantan and Johor. The products of KKB
are sold in various outlets all over Malaysia. However, there is a company, Nice Home
Furnishing (NHF) which seems to contribute significantly to KKB’s total sales. KKB’s top
management, in their attempt to diversify the company’s business, is contemplating a plan to
acquire NHF and subsequently control the distribution channel of their products. The potential
expansion is perceived to create more benefits and challenges for NHF at the same time.

Required:

a) Justify three (3) reasons the top management of KKB should proceed with the plan to
acquire NHF.
(10 marks)

b) Discuss three (3) other diversification initiatives that can be implemented by KKB to
create value for its shareholders.
(10 marks)
(Total: 20 marks)

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QUESTION 3

Arifa Batik Art Bhd (Arifa Batik) is well-known for its unique products, hand-printed batik art on
silk and other surfaces, as well as original paintings. The Arifa Batik Art Village was
established twelve years ago. Its goal is to promote the art of Batik to both local and foreign
markets. Arifa Batik's success is due to its well-known reputation due to its high quality and
great customer service. Furthermore, their fine touch of art is intended for visual and creative
enjoyment rather than physical adornment. When Arfiah, the owner and her team of young
urban professionals made strong and daring efforts toward diversification into other sectors
and markets, Arifa Batik began to experience rapid growth and expansion. Arifa Batik
expanded into cafes, tourism, and real estate development although there were a few directors
that expressed their disagreement with the expansion initiatives.

Arifa Batik has been implementing a functional structure to support its organizational activities,
in which the firm's major functions are organized internally. Arfiah's primary responsibility as
Chief Executive Officer (CEO) of Arifa Batik is the coordination and integration of functional
areas. She organized specialists into functional departments to improve coordination and
control within each functional area. Currently, there is a limited pool of skilled marketing
employees, and they are struggling to keep up with the expanding tactics. They were
previously responsible for the sales of traditional batik fabric, thus having lack of experience
in the new business areas ventured by Arifa Batik. Arfiah is thinking about outsourcing the
marketing activities to a reputed marketer with exceptional talent so that she and her team
would be able to focus on the business's core strengths.

However, Arfiah is skeptical of the ability to sustain quality and competitive prices through
outsourcing the value-creating jobs that were formerly conducted in-house. Consequently,
Arifa Batik's performance fell during the two preceding’s fiscal years. Arfiah is at a loss for
ideas on how to improve the company's success. She is unwilling to abandon any of her non-
core businesses and exit the market. After considerable analysis with her team, Arfiah
pinpoints the primary reasons for the poor company performance are related to the functional
organizational structure that does not completely support the ambitious unrelated
diversification strategy. Thus, she plans to switch to a divisional organizational structure, which
she believes is more suited.

Nevertheless, at the same time, the performance fall caused considerable anguish and
investor groups pressure on Arifa Batik’s Board of Directors to change the CEO. They indict
that Arfiah is incapable of performing her role as a CEO. The Board of Directors is now facing
with the dilemma of whether to appoint a new CEO from the internal or external of the
organisation. As Arifa Batik has been riding the waves of success for many years, the Board
would like to maintain the existing momentum. As such, three out of ten members of the Board
are of the opinion that the selection should be from the internal, whereas the remaining seven
directors are unsure about it. The three directors feel that the selection of a CEO is a critical
organization decision that is significant for Arifa Batik’s future performance.

Required:

a. Explain three (3) weaknesses of the functional organizational structure that impede the
successful implementation of the unrelated diversification strategies in Arifa Batik.
(10 marks)

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b. Discuss three (3) relevant effective leader criteria in selecting the new CEO for Arifa
Batik.
(10 marks)

c. Advise Arfiah on three (3) relevant strengths of the divisional structure that would
support Arifa Batik’s unrelated diversification strategy.
(10 marks)
(Total: 30 marks)

QUESTION 4

Mr. Muaz is an independent stock trader by profession who works anytime and anywhere so
long as internet coverage is available. He was interested in stock trading from an early age
whereby losses and gains from stock trading have become part of his life. His flexible job
coupled with the availability of money has made him an avid traveler which he had developed
an interest in since he was young. When he was older, with his own money and flexible
working style, Muaz traveled to many continents and flew across the seven oceans. Travelling
has also turned him into a more open-minded person, always alert to his surroundings, and
opens a wider opportunity to know more people while indulging in their culture.

Muaz has a high attentiveness to recreational vehicles (RV) such as motorhomes and
campervans particularly beginning of 2012. Initially, he imported a motorhome from the United
Kingdom (UK) and started his frequent traveling with the vehicle. In no time at all, many were
interested in his motorhome and some even offered to purchase it from him at a special price
given the potential for high profit. Muaz saw this as an opportunity not to be missed. Muaz
began to import motorhomes and campervans from the UK for his ready buyers, with his
acquaintances acting as his agents in the UK. Words traveled fast, and instantaneously, more
people are attracted to the vehicles and came to him. In his first month, he could sell up to five
motorhomes which took him by surprise. This forced him to open up JomCamper Sdn Bhd
(JCSB) in 2015 to make it an official business.

He rented a 500 square meter showroom located in Dungun, Terengganu. Since then, there
has been no turning back. Muaz then began to explore potential supply from Japan to acquire
more RVs which had been made easier with the removal of the import license, or Approved
Permit (AP), by the Malaysian government starting in 2018. After the outbreak of Covid-19
and the end of the Movement Control Order (MCO), people’s choice of holidays and vacations
began to change. There was a surge of interest in traveling and vacationing in RVs or merely
outdoor camping as compared to staying in hotels. This sudden change of preference has
positively affected JCSB as more people began to patronize its showroom. Bookings of
motorhomes or campervans have increased tremendously so Muaz felt he could not solely
rely on imported motorhomes to cater to his customers’ needs.

Muaz has decided to produce his own version of campervan, the first Malaysian made
campervan, or rather a converted campervan that he proudly called the LandRoamer. With
his vast networking, Muaz managed to set-up a crew for this purpose. As a result, anyone who
owns a Four-Wheel-Drive (4-WD) could go to Muaz to have him convert their vehicle to
become a LandRoamer. The LandRoamer can be sold at a much cheaper price, being more
durable as it uses a 4-WD besides allowing customers to customize it to their preference.
JCSB can modify the vehicle and install fittings and equipment to turn it into a campervan that
one could comfortably live and travel in.

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To cater to this bigger challenge, on 1st August 2020, he purchased a piece of one-acre land
in Dungun and constructed a workshop where all fabrication and conversion work is to be
carried out. He began to recruit people to assist him in taking JCSB a step further. Muaz
believes that the strong team would lead to the success of JCSB to become the market leader
in the RV industry. Customers may choose to buy the imported RVs or to order the
LandRoamer and customize it to their tastes and preferences. Besides selling, JCSB would
also provide after sales service, and sell necessary RV-related accessories. Additionally,
JCSB would also rent out the RVs to those interested, thus, making it a one-stop center for
such recreational activities. With the new team, JCSB hopes that it could soar higher in the
industry.

Required:

a. Discuss four (4) entrepreneurial resources that a business should have as essential
resources in achieving entrepreneurial success.

(10 marks)

b. Discuss any three (3) characteristics that depict the commitment to excellence that may
be practiced by Mr. Muaz as an entrepreneurial leader which may contribute to the success
of JCSB.
(10 marks)

c. Discuss three (3) advantages of embedding entrepreneurial culture in JCSB that may help
its employees to identify opportunities and launch new ventures.
(10 marks)
(Total: 30 marks)

END OF QUESTION PAPER

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