BM/APR2007/MGT658/649/650/HRM580

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UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

STRATEGIC MANAGEMENT

COURSE CODE

MGT658/649/650/HRM580

EXAMINATION

APRIL 2007

TIME

3 HOURS

INSTRUCTIONS TO CANDIDATES
1.

This question paper consists of two (2) parts :

2.

Answer ALL questions from PART A and three (3) questions from PART B 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)
ii)

PART A (4 Questions)
PART B (6 Questions)

the Question Paper

an Answer Booklet - provided by the Faculty

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

This examination paper consists of 5 printed pages
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BM/APR 2007/MGT658/649/650/HRM580

PART A

CASE STUDY
KBB, THE BIHUN KING
A monopoly is emerging in the wholesale market for vermicelli or better known locally as
bihun. Penang-based KBB Resources Bhd. is winning favour from investment analysts for its
growing dominance as a bihun producer. Earning itself the title "King of Bihun" since buying
its closest competitor, Rasayang Food Industries, it appears KBB won't stop at gobbling up
other bihun makers to kill the competition.
"Since buying Rasayang we've increased our market share to over 50%. We want to
dominate the market. I think we'll stop at 70%. We will target those that 'disturb' us with
pricing" said the executive director Kenny Ang.
He must be lucky there isn't such thing as antitrust laws in this country. Of course it is every
firm's aim to dominate. Dominance gives market control and that means certainty at a time
where producer costs are rising from inflationary pressures.
The RM11.6 million purchase of Rasayang was crucial because Rasayang, it seemed, was
the biggest price threat to KBB fortunes. After completing the buyout in the first quarter of
this year, bihun prices have gradually moved up.
A report estimates that average industry prices of bihun and laksa (ranging between
RM1500 and RM2200 per tonne) improved by close to 50% between the first half of this year
and last year. For this reason, revenue will grow by 66.5% to RM131.2 million in the current
financial to December. Net earning will jump by 39.5% to RM15.1 million.
Ang says about 10 other bihun producers remain in the market. He did not identify who KBB
was eyeing nor how it would execute the takeover. According to some analysts, some
competitors are keen to sell out. One in Kedah and another in Penang reportedly generate
RM5 million to RM8 million annually from selling bihun and laksa. Others reportedly sell less
than RM5million of those noodles annually.
KBB doesn't seem to be threatened by imports. Higher cost of production and transport are
pricing the imported brands out of the market. On the other hand, the higher freight charges
prevent KBB from exporting its bihun to other markets as well.
But KBB has made investments in Indonesia, venturing upstream into rice flour milling. It
formed PT Bersatu International Food Industries (BIFI) in 2004, which commenced milling
late last year. As a new entrant, BIFI hasn't yet achieved full capacity utilization. It has to
contend with price competition as the market leader, PT Budi Makmur, seeks to restrain
BIFI.
Besides rice flour, sago is the other key ingredient in making bihun. A few months back, KBB
acquired a sago supplier in Sibu, which will help lower the cost of manufacturing bihun in
Sabah and Sarawak. This gives it a price advantage over higher quality Chinese imports.

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Ang says KBB may consider venturing into sago production in Indonesia if the market there
matures.
With very low debt and comfortable cash flow from operations, some wonder if KBB really
needs to execute its proposed private placement. The exercise is expected to raise some
RM20 million for the company, which it says will help with working capital and debt
repayment.
It hasn't had much luck with the proposal to place out 24 million new shares (it has a base of
120 million shares), which recently gained approval from the Securities Commission to
extend the time frame to February next year. Perhaps it will give KBB the financial muscle to
achieve its bigger goals as spelt out by Ang.
"We understand that bihun is the fast food of Malaysia and Southeast Asia. It is our vision to
become a brand name like Nestle."
Adapted from The Edge Malaysia July 31, 2006

Answer ALL questions.

QUESTION 1
What are the three (3) strategies adopted by KBB. Explain and give one example for each
strategy mentioned.
(14 marks)
QUESTION 2
Explain the components of Michael Porter's competitive forces model. Using the model
illustrate the competitiveness of KBB.
(12 marks)
QUESTION 3
Explain briefly one (1) advantage and one (1) disadvantage of low debt ratio to KBB?
(6 marks)
QUESTION 4
How long do you think, it will take for KBB to realize its vision? Why?
(8 marks)

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BM/APR 2007/MGT658/649/650/HRM580

PARTB

QUESTION 1
a)

Define and give an example for each of the three intensive strategies.
(9 marks)

b)

List five (5) guidelines as to when market development would be a particularly good
strategy to pursue.
(11 marks)

QUESTION 2
a)

Using a Grand Strategy Matrix approach, identify what are the strategies to be
recommended to a firm that is a weak competitor in a slow-growing market?
(10 marks)

b)

Describe the positive features and limitations of the Quantitative Strategic Planning
Matrix (QSPM).
(10 marks)

QUESTION 3
a)

There are three (3) major approaches for minimizing and resolving conflict in an
organization. Define these three approaches and give an example of each.
(10 marks)

b)

Compare and contrast between "restructuring" and "reengineering".

(10 marks)

QUESTION 4
a)

Identify five (5) key external forces that could represent major opportunities or threats to
a bank in your town or city.
(10 marks)

b)

Do you agree with the following statement: "Corporate intelligence is not corporate
espionage because 95 percent of the information a company needs to make strategic
decisions is available and accessible to the public." Why?
(10 marks)

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QUESTION 5
a)

Describe why a mission statement is so important in the strategic-management

process.
(6 marks)

b)

Explain the process of developing a mission statement.

(8 marks)

c)

Describe the characteristics of an effective mission statement.

(6 marks)

QUESTION 6
a)

Explain what Drucker means when he says "Trees die from the top."
(10 marks)

b)

Compare and contrast business and military strategy.

(10 marks)

END OF QUESTION PAPER

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