CASE 2:

THE PRICE IS RIGHT

PRESENTED BY:
1) SITI NAQUYAH BINTI JAMALUDIN 2016263106
2) NURUL AIZA IZZATIE BINTI ADI 2016263018
3) NURUL SYAZWANI BINTI MOHD NAZRI 2016259492
4) NUR HAZIRAH BINTI ZURAINI 2016263094
5) NUR ARAFAH BINTI ABDULLAH 2016263086
 Sri Maju Resources started it business with snack products and build
the brand from there. Then, it diversified it business into consumer
INTROD
goods and health product.
 In 2008, Sri Suria Hotel was introduced. It is located in Ipoh, Perak
UCTION
and been in operation for 10 years now.

 Sri Suria Hotel provides three types of services:

 On-site event management services
 Dining outlets
 Hotel accommodation
 Sri Suria Hotel affords its good connectivity with guest through
INTROD
strategic location and well connected by transportation network that
attracting inbound traveller within Malaysia and Asia. UCTION
 Sri Suria Hotel consists of more than 300 units of rooms with various
capacity.
 Sri Suria Hotel provided specially hand picked and designed bedding,
room furnishing and fittings to offer immense comfort for its guest.
 Moreover, Sri Suria Hotel has varied facilities such as gymnasium, spa,
pool, convenience store and dining outlet.
Event facilities
 Meeting rooms
 For business meetings, presentations and one-to-one that do not need
large room, offer meeting room to work in the utmost privacy.
 Conference centre
 Wide and flexible space that can be transformed to create a singular
space or be divided to suit a multi-concept event.
 Private rooms
 Flexible event venues equipped with latest audio visual gears.
 Ballroom
 Ideal venue for exclusive corporate events or once in a life time
personal events. It has stylish furnishing and well equipped with latest
audio visual equipment.
 Service procedures
Hotel Sri Suria has established a set of service procedures as guidelines in dealing with potential guests.
The services procedures covers:

Deposit
Deposit and
and Cancellation
Cancellation Appointment
Appointment
How
How to
to book
book Availability
Availability Entertainment
Entertainment
payment
payment terms
terms procedures
procedures

Despite providing various type of services, Sri Suria Hotel has

minimum profit margin through the event management activities.
The current strategy used by the company is not effective. This raise
a concern to the Board of Directors.
 SWOT
ANALYSI
S
 Strategic location and well-connected
• Located in Ipoh, Perak – a transit hub where local and international
tourists or business travellers may stop at while travelling up north, east-
west or down south.
• It is well-connected by transportation network including North-South

•
highway and railways. Therefore, it attracting inbound traveller within
Malaysia and Asia.
Having strategic location, make Sri Suria Hotel more accessible for the
customers to get to the Hotel. Customers did not have to struggle to find
strength
the location by their own or using public transportation. This gives a big
advantages to Sri Suria Hotel than other hotel which located at rural
area.
• The Hotel is surrounded with beautiful landscape and iconic limestone
hills that Perak known of. Nature environment give extra value added to
Sri Suria Hotel. The customers can have precious enjoyable moment
while staying at the Hotel.
 weaknesses
Weaknesses are negative factors that detract from your strengths. These are things that you might
need to improve on to be competitive.

Weak Cost structure

● Sri Suria Hotel’s cost structure is quite weak because of their strategy in allocating prices for
the event management activities.
● Sri Suria hotel does not have a proper costing basis. Most of the cost allocated based on the
price or total revenue which resulting low profit.
● This show that Sri Suria hotel lack of planning and analysing the data and focus more on
counting cost.
opportunities
Opportunities are external factors in your business environment that are likely to contribute to
your success.

Technologies development

● The rapid growth of the internet has had a massive impact on the hotel industry.
● Internet encourages guests to perform greater price scrutiny since the relevant information is
both easier to obtain and transparent.
● The management of Sri Suria Hotel understands the phenomena and has been supporting
plans to utilize social media and internet marketing to reach the guests.
● This would be on of the opportunities for Sri Suria Hotel because online hotel booking has
smoothened the process of hotel booking.
● It has improved ease and convenience for travellers. Besides, it also show the detail location of
the hotel which it will become easier for the customer to find the availability.
threats
Threats are external factors that you have no control over. You may want to consider putting in
place contingency plans for dealing them if they occur.

Heavy competition from similar competitors

● Even though Sri Suria Hotel provide best services ,because of the rapid growth of the internet
also anyone can compare the prices of Sri Suria Hotel with other hotel easily.
● This could be a threats to Sri Suria Hotel to compete with other hotel which Sri Suria Hotel
need to create more specialities compares to other hotels.
● People are more price conscious and are looking for cheap alternatives. This will make the
competition amongst hotel industries became fierce. Organisations must stay innovative and
think about new ideas how to attract the customer.
● Through online also, people could view all the review or comments by others about Sri Suria
Hotel.
● In this case, Sri Suria Hotel need to make sure all customers satisfied with the services
provided so that they will not choose other hotels in future.
ISSUES
1) Cost management
✘ Cost Management –
The process management uses to analyze its production and streamline its operations to keep
costs low and manage expenses in the future.
✘ Sri Suria Hotel having weak cost management –
The event costs are too high, resulting in low profit

Manjong Community Ruby Care Sdn. Bhd.

(Annual Dinner) (Seminar)

Revenue RM47,280.00 RM1,000.00

Cost / Expenses (RM41,656,80) (RM765.00)
Profit RM5,623.20 RM235.00
11.89% of revenue 23.5% of revenue

*The table above show Sri Suria Hotel only gain RM5,623.30 or 11.89% of revenue for Manjong
Community and RM235.00 or 23.5% of revenue for Ruby Care Sdn. Bhd.
✗ The market indicated that the average profit margin of event business management is
30% and it is considered low in terms of profit.
Item Cost Price
Per Unit % of Cost Total (RM) Per Unit Total (RM)
(RM) Price (RM)
Food 18.72 40% 11232.00 46.80 28080.00

Beverage 1.30 26% 780.00 5.00 3000.00

Hall Rental 5.00 50% 3000.00 10.00 6000.00
AV & Equipment 4.00 50% 2400.00 8.00 4800.00

Carpark 2.10 70% 1260.00 3.00 1800.00

Decorations 6.00 100% 3600.00 6.00 3600.00
*The table above show cost that are 50% or below for Manjong Community

High cost per unit

✘ Food and beverage are to costly where the total cost is
66% (40%+26%).
✘ Hall rental and AV & equipment both is 50% of cost price.
✘ Carpark cost is 70% of the total price.
✘ The decoration is fully using high cost outsourcing which
is 100% of cost price.
 What can we see –
1. Sri Suria Hotel have weak cost structure and cost mechanism. Thus, cost management
requires a deep understanding of a firm’s cost structure.
2. Lack of planning and analyzing data. Managers must be able to determine the long- and
short-run costs of activities and processes as well as the costs of goods, services,
customers, suppliers, and other objects of interest.
3. They focuses more on measuring the cost. Nowadays only financial information are
inadequate for decision making. It also need non-financial information.
4. Nowadays, with the rapid changing environment, hotel companies should be more
dynamic, customer and market oriented. Therefore, Sri Suria Hotel should improve their
cost management systems in order to facilitate strategic management.
Related Article

✘ Activity Based costing (ABC)

✘ Activity Based Budgeting
✘ Life Cycle Costing (LCC)
✘ Target Costing
✘ Benchmarking
✘ Balance Scorecard
✘ Value Chain Analysis (VCA)
✘ Transfer Pricing
✘ Kaizen Costing
Related Article
 2) Pricing Strategies
✘ Pricing Strategies –
Refers to the method companies use to price their products or services.

✘ Sri Suria Hotel having weak pricing strategies –

They want to compete with other hotels.
The price charge to customer is at lower price as compare to their competitors.

✘ Eventhough the price is already at the lower, the price is still negotiable. As the
negotiable is good to attract customer. However, it will result further lower in
selling price margin.
 Item Cost Price
Per Unit (RM) % of Cost Total (RM) Per Unit (RM) Total (RM)
Price
Hall Rental 5.00 50% 3000.00 10.00 6000.00
AV & 4.00 50% 2400.00 8.00 4800.00
Equipment
Carpark 2.10 70% 1260.00 3.00 1800.00
Decorations 6.00 100% 3600.00 6.00 3600.00

*The table above show revenue that are 50% or below for Manjong Community

Manjong Community (Annual Dinner)

Revenue RM47,280.00
Cost / Expenses (RM41,656,80)
Profit RM5,623.20

11.89% of revenue

*The table above show Sri Suria Hotel only gain RM5,623.30 or 11.89% of revenue
for Manjong Community
 Highlight (Manjong
Community)
1) Hall Rental – Eventhough the rental cost is 50% of the selling price, this can be negotiated
depending upon food and beverage and audio-visual. The space utilized for the ceremony and
wedding dinner may be discounted or provided complimentary depending upon the amount of food
and beverage contracted.

2) AV & Equipment – Specific AV needs for some events needing similar equipment
may be booked concurrently by different guest, thus adding cost by having to rent
extra equipment from the market.

3) Car Park – The park charges is charge per person which is RM3.00 and the cost is 70% of
it. Usually, the cark park charges is charge based on how long the car was park instead per
person/entry.

4) Decoration Cost – The decoration is fully using outsourcing services. The charges will be
imposed on clients according to the quotation given by supplier. So, 100% of the total revenue
from decoration services that hotel charged to guest will be used to pay contracted supplier.
 What can we see –
1. Company does not use markup pricing or impose
charges for decoration to guest.
2. The customers have alternative to compare the hotel
price for services with the other hotels. Competing to be
preferred hotel by guest. – When customer have
chances to choose other hotel, thus it lower the chances
to Sri Suria Hotel to get customer.
3. They get profit below half of the price charge.

-
 Related Article

Wangui, W. L., Kiragu, D., Wachira, A. (2018). Effect of Pricing Strategy and Growth of Selected
Hotels in Nyeri County, Kenya, International Journal of Academic Research in Accounting,
Finance and Management Sciences, 8 (1): 205-214
Related Article
 Related Article
✘ According to Hung et al., (2010) pricing strategies can be suppler compared
with other marketing strategies because of the ability to adapt easily in case of
changed surrounding conditions, e.g. seasonality that involves weather
changes.
✘ Horngren (2006) argues, that customers have direct impact on the demand for
a product or service and basically it depends on characteristics of a products
and their quality. In the business area the company should have information
about competitors in order to set up its own price and being aware how to
manage products and sell at higher prices.

Falalieiev A.(2014) Exploration of Pricing Strategies in North Cyprus Hotels.

https://pdfs.semanticscholar.org/2eb2/2c36adfcbcd4bf84c6c9e9862016b63eb36c.pdf

23
Related Article
✘ Kimes (2002) stated that price should be responded to product value and customer value that are
going to give money for it. If the price is too high for good or service then the customer will consider
that price as unfair versus if the price is too low, then customers will think about quality of good or
service. The main point of customer fairness perceptions is being aware about revenue management
price (Kimes and Wirtz, 2007).

✘ The prices are generated in line with each hotel's competitive position in the market aiming
to achieve high profitability among other hotels. That’s why, accounting, sales & marketing
managers gather information and provide deep analyses of the important market segments
by using economic tools, such as elasticity of demand and supply, total cost, marginal
cost and revenue, in order to evaluate the current or future situation of the hotel.

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RECOMMEN
DATION

25
 COSTING METHOD

Activity Based Costing (ABC)

01 • Costing method that identifies activities in an organization and assigns
the cost of each activity to all products and services according to the
actual consumption by each.
• Eliminate low-value-added activities and reduce unnecessary service
delays which caused extra cost to be incurred.
• Helps management to achieve profit maximization, improve customer
service quality and market share

Target costing
02 • An estimate of product cost reached by deducting a
desired profit margin from the competitive market price.
• Increase in effectiveness of management ability to attract
more customers and increase profitability of company by
reducing the overall cost of the services.
 PRICING STRATEGY
DYNAMIC PRICING

● A pricing strategy in which businesses set flexible prices for

products or services based on current market demands.
● Also referred as surge pricing, demand or time-based pricing.
● Adjust the cost of rooms and packages based on the supply and
demand needs at a particular moment.
● Can generate more revenues if have variety of prices based on
the demand at each point in the day.
● Sri Suria Hotel can use time-based pricing method.
● Higher prices are charged during the peak season, or during
special-event periods.
● In the off-season, Sri Suria Hotel can charge only the operating
costs of the establishment of the hotel.

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Thank you