BUSINESS STRATEGY

Time allowed – 3:30 hours

[N.B. – Questions must be answered in English. Figures in the margin indicate full marks. All workings are to be submitted.
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 questions must be answered in one place in order of sequence.]

Marks
1. (a) “Advertising is used to build brand loyalty and sales promotion is used to break brand loyalty.” Explain. 4
(b) Explain why a direct relationship between the cost of production and selling price may be inappropriate
as a pricing strategy. 4
(c) “Contributing to sustainable development is not only the right thing to do, it makes good business
sense”. Explain how sustainable development helps to be a more competitive company and create
value for shareholders. 4
(d) NAM Limited a leading car manufacturer in Bangladesh produces small, family, sports and executive
cars. In a recent move to increase profits, the company initiated an analysis of its portfolio. The
company is concerned about the sports cars division. According to a recent analysis, it is a drain of
profits and cash, making losses in the last two years.

In the process of the analysis of portfolio, the company has decided to conduct ‘BCG Matrix’ analysis.
The initial findings are as follows:

Market Growth
Total number of cars sold per year – all suppliers
2017 2018
(i) Small cars 200,000 210,000
(ii) Family cars 150,000 172,500
(iii) Sports cars 100,000 101,000
(iv) Executive cars 50,000 60,000

Rate of growth of markets (measured as a %)

Market Share
Number of cars sold in 2018
NAM Limited Largest competitor
(i) Small cars 40,000 30,000
(ii) Family cars 30,000 20,000
(iii) Sports cars 10,000 30,000
(iv) Executive cars 5,000 10,000

Required:
As a recently appointed independent consultant for NAM Limited complete the BCG product analysis
with discussion of the results. 8

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2. SOCAR Sports Limited is an independent sports goods retailer owned and operated by two partners, Alam and
Rob in Bangladesh. The sport retailing business has undergone a major change over past ten years. First of all
the supply side has been transformed by the emergence of a few global manufacturers of the core sports
products such as training shoes and cricket gears. This consolidation has made them increasingly unwilling to
provide good service to the independent sportswear retailers too small to buy in sufficient large quantities.
These independent retailers can stock popular global brands but have to order using the internet and no
opportunity to meet the manufacturer’s sales representatives. Secondly Bangladesh sportswear retaining has
undergone significant structural change with the rapid growth of a small number of national retail chains with
the buying power to offset the power of global manufacturers. The retail chains stock a limited range of high
volume branded products and charge low prices the independent retailer cannot cope to match.

SOCAR Sports has survived by becoming a specialist niche retailer catering for less popular sports like
football, hockey and basketball. They are able to offer the specialist advice and stock the goods that their
customers want. In recent years SOCAR Sports has become aware of the growing impact of e-business in
general and e-retailing in particular. They employed a specialist website designer and created on-line
purchasing facilities for the customers. The results were less than impressive, with the internet search
engines not picking up the company website. The seasonal nature of SOCAR Sports business, together
with the variations in sizes and colours needed to meet the individual customers’ needs, meant that sales
volume were insufficient to justify the cost of running the site.

Rob however, convinced that developing an e-business strategy suited to the needs of the independent sports
retailer such as SOCAR Sports will be key to business survival. He has been encouraged by the growing
interest of customers in other countries to the service and product range they offer. He is also aware of the
need to integrate an e- business strategy with their current marketing, which to date has been limited to the
sponsorship of local sports teams and advertisement taken in specialist sports magazines. Above all he wants
to avoid head-on competition with the national retailers and their emphasis on popular branded sportswear
sold at retail prices that are below the cost price at with SOCAR Sports can buy the goods.
Required:
(i) Provide the partners a short report on the advantages and disadvantages to SOCAR Sports of
developing an e-business strategy and the processes most likely to be affected by such a strategy. 9
(ii) SOCAR Sports Limited has successfully followed a niche strategy to date. Assess the extent to
which an appropriate e-business strategy could help support such a niche. 6

3. (a) Coffee is one of the most popular beverages in the world. In fact, coffee is the most popular drink next
to water, with more than 400 billion cups consumed every year, after oil, coffee is the world’s second
most valuable commodity exported by developing countries. The global coffee industry earns an
estimated USD 60 billion annually. Coffee has taken an important part in human society, the
coffeehouse, often called a third space between the home and the office. From small independent spots
to mega chains – offer a place to meet friends, conduct meetings, work on the computer or read.
Coffee culture is a very recent phenomenon in Bangladesh. In fact, food industry of Bangladesh has
changed significantly since 2005, with rapidly increasing per capita income, changing of lifestyle and
consumer taste, the industry is going through a transformation. More and more international
restaurants and chains are opening outlets in Bangladesh. Government’s policy to encourage foreign
business and investment also inspiring foreign investors and entrepreneurs. As a result, Bangladesh is
becoming an attractive destination for foreign investment.
In this context, “Platinum Coffee” (Platinum) one of the world’s leading and well established coffee and
beverages brands and a pioneer in coffeehouse chain industry, which has rapidly made strides into all major
markets of the world is actively considering entering Bangladesh market. Platinum is known for its
pioneering people management in coffeehouse industry where people skills and soft skills make the
difference between success and failure, in other words, Platinum has actualised a positive and welcoming
workplace for its employees, which translates into happier associates serving customers in a superior way
leading to al round benefits for the company. Their initial analysis demonstrates, Bangladesh a potential
market for up market coffeehouse chains. Opening of number of international coffee and food chains in last
few years and their reasonable business performance encourages their view. They are confident to liquidate
their well-established brand through customer awareness and positive business environment in Bangladesh.

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 A recent market study by Platinum, demonstrates, Bangladesh will be one of the fastest growing
countries for hot drink sale over 2020 – 2030 forecast period. While tea is the traditional choice of
drink in Bangladesh like many emerging markets, it is believed, coffee will be the predominant growth
driver in the hot drinks industry over the coming years. Aggressive expansion by global and regional
coffee shop, fast food outlets and some local players, generating a growing cafe culture in Bangladesh
and across emerging markets. This, combined with the rise of young, affluent middle classes keen to
embrace modern western lifestyles, will drive coffee consumption over the coming years. As incomes
rise further and tastes become more sophisticated, it is expected, premium coffee brands to increasingly
penetrate Bangladesh market.
However, there will be some challenges for Platinum to enter Bangladesh market successfully. Large
number of global, regional and small local chains are already operating in Bangladesh coffee shop
market for last few years with variety of products and therefore switching costs will be very low. Some
of the global brands had to exit from Bangladesh market due to intense competition and continues poor
performance as everyone were chasing for relatively small customer base. But a number of regional
brands and local players are actively considering to open outlets as they are able to supply at a very
low price with a diversified product lines and as their initial investment on advance rent for space,
interior design and operational costs are relatively low, which Platinum will not be able to match.

The coffee shops are heavily dependent on their main and key inputs, the coffee beans, and hence, is
acutely dependent on the price of coffee beans as a determinant of profitability, which means they are
overly price sensitive to the fluctuation of the price of coffee beans. To mitigate this challenge,
Platinum has developed a strong supply base globally, with large number of individual and institutional
suppliers who are very much interested to supply to Platinum. However, Platinum has come under fire
in recent times, for its procurement practices with many social and environmental activists pointing to
the unethical procurement practices of coffee beans from impoverished third world farmers. Platinum
prices its products in the premium to the middle tiers of the market segment which places its products
outsides of the budgets of many working consumers who prefer to various fast food and small outlets
for their coffee instead of Platinum.

Platinum’s expansion plan in Bangladesh market was discussed in last board meeting of the company
and the board resolved to conduct a further study of Bangladesh coffee market. You are appointed by
Platinum to conduct the study.

Required:
(i) Assess the nature of the competitive forces (using Porter’s Five Forces model) which Platinum
would face if it were to expand into the Bangladesh coffee market. 15
(ii) Recommend Platinum a strategic way forward for Bangladesh expansion issue. 3

(b) Daxter Drenton BD Clothing Manufacturing Limited (Daxter) a member of Deka group started its
commercial operation in 2007. Daxter is a 100% export oriented garment manufacturing facility, located
at Dhaka Export Processing Zones (Dhaka EPZ) at Savar, Dhaka. Daxter produces over 5 million pcs of
high quality dress/casual shirts and pants for reputed brands and retails in USA, Canada and Europe.
Daxter is managed by a team of 1,000 members which includes 50 administration staff, 150 sales staff
and 800 production workers. Although the company was profitable during its first 10 years of
operations, making losses during last two and half years. The Board of Daxter asked the senior
management team to analyse reasons for such unexpected performance in recent years. The senior
management team reported following reasons for such disappointing performance in the recent years:

 Daxter does not always appear to obtain the best prices for raw materials, which has decreased gross
margin in the recent years;
 Production capacity are being underutilized as the sales team frequently fail book optimum orders
for the factory due to lack of required information on garments on production and finished stocks;
 Limited use of Computer-Aided Design (CAD) and Computer-Aided Manufacturing (CAM) by
design and production team. Daxter purchased CAD and CAM in 2016 in view of keeping up with
competitors who had also purchased similar systems.

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 Daxter Board reviewed the report prepared by the senior management team and resolved to introduce
state of the art Management Information Systems across the company. Analysing the weaknesses in
the current systems mentioned in the report, the board in particular interested in the following areas:
 Inbound logistics
 Marketing and Sales
 Technology Development
Mr. Dicky Diaz, Chairman and Managing Director of Daxter met managing director of your firm last
week and appointed your firm independent consultant of Daxter as desired by the board. You are
assigned by your firm to complete the assignment by end of next month.

Required:
(i) Identify what inputs will be needed for the information systems designed to support the
operations of Daxter in the three areas mentioned above (you are not asked to describe Porter’s
Value Chain model). 9
(ii) Explain what outputs will be required from those information systems. 4
(iii) Why Daxter should implement the new information system? 2

4. (a) Cox Supermarket Ltd. is a large supermarket chain operating in six divisions in Bangladesh. It is the
vision of management to make Cox Supermarket a household name in Bangladesh within the next ten
years. In its last management meeting, the following objectives were set in pursuant to its vision:
 To ensure the loyalty of its customers –i.e. to generate lifetime loyalty.
 To ensure its prices are at least 2 percent cheaper than the average of rival supermarkets –i.e. to
create value for customers.
Required:
(i) Identify TWO critical success factors (CSFs) for each of the above objectives set by Cox
Supermarket management. 4
(ii) In order to measure how well it is performing against the CSFs, the supermarket needs to set key
performance indicators (KPIs). For each of the CSFs identified above, identify TWO KPIs to aid
management in tracking the delivery of the CSFs. 4
(b) Effective implementation of corporate strategies in an organization is largely dependent on how well
organizational members understand the chosen strategies. However, the desirability of the direct
announcement of a strategy depends on several factors.
Required:
Identify and explain FOUR factors that should be considered before choosing an approach to
communicate corporate strategy in an organization. 4
(c) Rupsha Life Insurance Company Limited (Rupsha) a Bangladeshi life insurance company incorporated
in 2006 and was listed with Dhaka and Chittagong stock exchanges in 2010. Rupsha, though started with
enormous high hopes and wanted to be a leading life insurance company in the country could not keep
the pace of progress after listing with bourses, mainly due change in the board as well as in the senior
and mid-level management team of the insurer, immediately after listing. Profitability reduced
substantially and the life fund of Rusha was declining fast. Insurance Development and Regulatory
Authority (IDRA) of Bangladesh issued ultimatum to Rupsha to clear pending claims of policyholders
without delay, as many policyholders complained to IDRA of not getting their payments on maturity of
their policies. Board and management of Rupsha tried their best to improve the performance of the
company but without success. Ultimately, majority shares of Rupsha was sold to C Alam Group in March
this year.
C Alam Group a successful Bangladeshi business conglomerate, immediately after the acquisition
appointed a professional and diversified board to run the insurer. The new board at the first board meeting
appointed a team of experienced professionals to find out reasons of poor performance of Rupsha. The team
submitted their report recently after one month of review and the main finding were as follows:

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  The company did not introduce any new product/insurance scheme during last eight years even
though there is a product development division in the company;
 The field officers have fixed salary as well as they receive commission on new and renewal
business. In some cases, the development officers receive 90% of the premium of new businesses
in addition to their fixed salary;
 The Chief Executive Officer of Rupsha is not responsible for business performance of the company
and is mostly performing day to day administrative functions;
 Customer service department of Rupsha is not functioning properly. Most of the officers of this
department are transferred from other departments of the company who were not performing up to
expectation, as departmental heads were reluctant to release good officers from their respective
departments;
 There is no effective internal control in place in the company. The field officers do not deposit the
collected premiums timely. In many cases, the filed officers didn’t deposit the premiums to the
company’s accounts deportment even two to three years after collection. There is no reconciliation
process in place between premium collection and depositing the same with bankers of the company;
 In most of the cases, the field officers collect the premium in cash and deposit the money to the
accounts department after deducting their respective commission;
The new board of Rupsha Insurance after reviewing the report carefully resolved that, Rupsah
Insurance should work to embed change management strategy and build organisational capabilities
and competence to be a successful and sustainable organisation. The board at the same time
emphasised, there may be resistant from people inside and outside the business who might try to derail
the changes. 8
Required:
Discuss the factors Rupsha need to consider when dealing with resistance to change.
5. BTV is the Bangladesh’s public service television channel with more than 200 transmitters covering 90%
of the country’s population across an estimated 20 million homes. It has more than 5000 employees
managing the metro and regional stations. Recent years have seen growing competition from many private
channels numbering more than 20, and the cable and satellite operations (C&S). C&S network reaches
nearly 1 million homes and is growing very fast rate.

BTV’s business model is based on selling half-hour slots of commercial time to the programme producers
and charging them a minimum guarantee. For instance, the present tariff for the first 20 episodes of a
programme is Taka 20 lacs plus the cost of production of the programme. In exchange the producers get
780 seconds of commercial time that he can sell to advertisers and can generate revenue. Break-even point
for producers, at the present rates, thus is Taka 50000 for a 10 second advertising spot. Beyond 20 episodes,
the minimum guarantee is Taka 35 lacs for which the producer has to charge Taka 85,000 for a ten second
spot in order to break-even. It is at this point the advertisers face a problem – the competitive rate for a 10
second spot is Taka 30,000. Producers are possessive about buying commercial time on BTV. As a result
the BTV’s growth is only 5-10% as against 50-60% for the private sector channels. Software suppliers’,
advertisers and audiences are deserting BTV owing to its unrealistic pricing policy.

BTV has three options before it. First, it should privatize, secondly, it should remain purely public service
broadcaster and third, a middle path.

The challenge seems to be to exploit BTV’s immense potential and emerge as a formidable player in the
mass media.
Required:
(i) What is best option, in your view, for BTV? Why? 4
(ii) Analyse the SWOT factors the BTV has. 8

-The end-

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