FINAL EXAMINATION

ONLINE EXAMINATION
APRIL 2021 SEMESTER

COURSE : STRATEGIC MANAGEMENT

COURSE CODE : PMS3393
DURATION : 3 HOURS
DATE : 9 AUGUST 2021
TIME : 9.00 AM – 12.00 PM
FACULTY : BUSINESS AND ACCOUNTANCY
PROGRAMME : BACHELOR OF ACCOUNTANCY (HONS)
BACHELOR OF BUSINESS MANAGEMENT (HONS)
BACHELOR OF FINANCE (HONS)
BACHELOR OF HUMAN RESOURCE MGMT (HONS)
BACHELOR OF BUSINESS ADMINTRATION (HONS)
LECTURER & : MDM. SHARIFAH HILMI SYED ABDULLAH (0199508980)
PHONE NO : MDM NORJIAH MUSLIM (0173501967)
: MDM. KHAIRUN NATASHA MOHD FAZMI (01110978339)
: MDM. NOOR MALINDA MOHAN (0123311970)

INSTRUCTIONS TO CANDIDATES.

This paper consists of TWO sections.

Section A – ... structured questions

Section B – ... case study questions

Answer all questions in Section A and B.

Read CAREFULLY the instructions for each section.

Students must ensure that they have stable internet connectivity during the examination
period.
Students must ensure that they include their full name and student identification number at
the top of the first page of the answer document.
Student must submit the answers via the quiz activity or file submission in Words
/PDF/JPEG format via assigment activity allocated to the exam, before the published
submission deadline for the exam.
Students must ensure that they have stable internet connectivity during downloading the question
paper and uploading the answer.

DECLARATION:

I hereby declare that all the answers I have submitted are entirely my own work, and I
understand that there are disciplinary penalties for cheating, plagiarism, and inappropriate
collusion.
This Question Paper consists of 7 PAGES.

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SECTION A. STRUCTURED QUESTIONS (60 MARKS)

ANSWER ALL QUESTIONS

QUESTION 1 (20 Marks)

STORY ABOUT PETRONAS (PGAS-KL)

Established in 1974, Petroliam Nasional Berhad (PETRONAS), headquartered in

Kuala Lumpur, Malaysia, is an integrated oil and gas multinational company.
Responsible for the national oil and gas resources, PETRONAS explores develops and
produces these resources and deliver anergy to meet the country’s growing demands.
The only Malaysian company feature in Fortune Global lists, it operates in over 35
countries and is engaged in a wide spectrum of petroleum activities. Its Upstream
business explores, produce, and monetizes oil and gas resources, and its Downstream
business focuses on marketing and distribution strategies to enhance the value of
resources. Its successful management of legal and maintenance activities in 2014
enabled PETRONAS to shift its focus to raising utilization rate by 5 percent in 2015.
In 2014, while profit decreased by 27 percent, the group saw a 4 percent growth in
revenue, which was driven by higher production, higher liquefied natural gas (LNG)
sales volume and favorable U.S Dollar exchange rate movement. Revenue derived
from PETRONAS provides roughly 45 percent of Malaysia governments annual
budget. Taking advantage of being an integrated chain and its strategic location in
Sout East Asia, a region with fast growing chemical consumers, it is focusing three
long term objectives-operational excellence, marketing and sales excellence and
innovation excellence. As parts of strategies, PETRONAS is pursuing backward
integration by purchasing its ships to transport its oil and gas, especially its LNG. This
will provide low cost, direct access to LNG shipping capacity. PETRONAS, operating
the world’s first floating LNG facility, is also in process of constructing one of the
largest LNG facilities in British Columbia.

Sources: Fred R. Davis & Forest R. David 6th Edition.

a. Based on the above article, explain the critical success factors of Petronas.
(5 Marks)

b. Based on the information given for Petronas, discuss any THREE (3) strategies
that the firm has pursued.
(15 Marks)

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QUESTION 2 (20 MARKS)

For the financial year ended Feb 28, 2019 (FY19), Tesco Malaysia posted a net loss
of RM44.29 million on revenue of RM4.38 billion. In the financial year ended Feb
28, 2018 (FY18), it saw a net profit of RM22.81 million on revenue of RM4.37
billion. The hypermarket chain bled a net loss of RM136.71 million on revenue of
RM4.45 billion in FY17. Tesco Stores (Malaysia) Bhd’s loss-making business
could be one of the main reasons why its parent Tesco PLC of the UK is
considering a sale of its Malaysian operations.

Source: https://www.thesundaily.my, 12 Dec 2019

a. Evaluate Tesco Malaysia’s major external forces that have resulted in the
business performance for the year 2019. Support your answer with a suitable
example that relates to the hypermarket retailing industry in Malaysia.
(15 marks)

b. Suggest any TWO (2) defensive strategies that you think should be done by
Tesco to improve its future business performance.
(5 marks)

QUESTION 3 (20 MARKS)

Purple Jewel Company is looking into a method to secure additional capital for their
next project investment. They were given three options: either to pursue 100% debt,
100% stock or to pursue an alternative with ratio of 50% Debt : 50% stock combo.

By conducting EPS/EBIT Analysis for the Purple Jewel Company, which option will
you as an advisor encourage them to pursue? Justify your answer. Show your EPS/EBIT
analysis calculation based on the information (Input data) provided as below.

No Input Data Details

1 $ Amount of capital needed $100 million
2 EBIT Range $40 to 60 million
3 Interest rate 5 percent
4 Tax rate 30%
5 Stock Price $50
6 Number of Shares 500 million
Outstanding

(20 marks)

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SECTION B: CASE STUDY (40 MARKS)

READ THE FOLLOWING CASE STUDY AND ANSWER ALL QUESTIONS.

AHMAD SUPERMARKET

History of the Business

In February 1978, Ahmad moved to a town with a population of 25,000 and opened a
supermarket called Ahmad Supermarket. Previously, he had operated grocery stores in
two other different towns. He owned and managed his first mini market store ten years
earlier, at the age of 30. The supermarket was heavily involved in selling on credit, and
Ahmad’s first move was to go into a strict cash sales operation – the first of its kind in
the town.
Ahmad’s motto was “Value For Your Money Every Day.” He emphasized friendly,
efficient service, high-quality merchandise, and reasonable prices. His competitors were
old-line stores that did not welcome the intense competition. Several innovations helped
him to get established and increase sales volume. For example, Ahmad Supermarket was
the first store in the town to feature advertised weekend and holiday specials. Ahmad
was also one of the first stores in that area of the state to give trading coupons. By 1998,
his store had become the number one supermarket in the town.
By the end of 1998, the store had also outgrown the original downtown location. A
modern, 10,000 square-foot store was erected at the east age of the town – the direction
of the town’s growth. Shortly after this move, Ocean, a regional supermarket chain,
opened the first real chain store in the town. This competition was of great concern to
Ahmad, but he continued to follow his basic business philosophy and to operate even
more efficiently. As a result, Ahmad Supermarket continued to show steady yearly
growth in sales and profits.

Recent Developments in Ahmad Supermarket

In January 2000, Ahmad decided to sell a 30 percent interest in the business to his older
brother, Ismail, and another 20 percent interest to his younger brother, Adam. Adam had
recently been graduated from a local university, and he became an active partner in the
business. For many years the store had been recognised as one of the leading
independent supermarket operations in the state.
Due to rapid economic and social developments in the area, the town’s population of
25,000 had grown to 200,000 by the year 2000. Ahmad Supermarket was located in the
newest section of the growing town. Residents in the area predominantly in the middle
to high-income brackets. However, there was also a substantial amount of lower-income
trade from customers living in the nearby villages.
Ahmad affiliated with one of the nation’s largest independent wholesalers in 2000. This
affiliation provided Ahmad the opportunity to use many of the private labels as well as
help to strengthen his company’s competitive edge in the local retailing industry. The
wholesaler also provided advertising themes and promotions to member stores.
Examples were promotions featuring calendars, diaries, bags, umbrellas, pens, cutleries,
towels, and T-shirts. These promotions served as good stimulants for increasing sales of
the company and made Ahmad Supermarket more popular among the local retailers.
Customers were inclined to say, “Something is always happening at Ahmad’s!”
Local Market Structure in 2000
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The Ocean chain store was located at the edge of the downtown section. Initially, Ocean
mainly focused on selling its goods to customers in the middle to lower-income
brackets. However, more recently, they have also added merchandise that caters to
upper-income customers' growing needs in the area. Ocean then became one of Ahmad’s
competitors.
Presently, JIMAT Food Store remained Ahmad’s major independent competitor since he
opened his supermarket in 1978. JIMAT Food Store had also moved to the east edge of
the town and was still facing limited parking space. The food store’s primary appeal was
credit offered to regular customers and goodwill built up through years of quality
service. However, the company’s business has slowly dwindled in recent years.
The pricing structure in retailing market could still be described as healthy. Although
there was a couple of large food chain store operating in the town, the smaller retailers
were still able to mark up their products at reasonable prices. Though there was some
competition among the existing companies, the rivalry among the retailers was not
intense.

Beginning of Discount Store Competition

In the middle of 2001, a discount store came to the town and opened its doors to the
public. With the new player came a new type of competition in the local retailing
market. C-Mart Discount Center, a 20,000 square-foot operation, carried a complete line
of non-food items and comprehensive grocery items such as dry groceries, fresh meats,
dairy products, fresh fruits and vegetables, and frozen foods. The store was franchised,
and the owner operated two other C-Mart Discount Centers in a larger town some 25
kilometers away.
When C-Mart Discount Center opened for business, they immediately dropped prices
drastically, especially prices of staple items such as rice, cooking oil, and flour. They
featured and offered various staple items and branded products priced at 15% to 20%
lower than the other retailing stores in the area. C-Mart Discount Center is seemingly
using its food operation as a drawing card for its more profitable lines.

Increasing Competition
Ocean made it apparent immediately that it did not intend to be undersold by the
discount store that gave no free coupons and provided no carryout service. Ocean began
to offer weeklong specials to its customers. Eventually, the weeklong specials became
one of the new rules in the local retailing business. At the same time, competition
increasingly became intense among the retailers in the town. The retailers began to
compete with each other by lowering their everyday items to near cost or below.
K.C. Lim, the owner of JIMAT Food Store, passed away in 2001, shortly after the
discount store opening. Without wasting any time, a successful young businessman with
international chain store management experience quickly purchased the JIMAT Food
Store from the deceased family. The young businessman immediately eliminated credit
and free coupons and attempted to start a discount-type operation himself. He bought
most of his products directly from the local producers and international manufacturers
and sold them at discounted prices.
Loss leaders became more prevalent in the local retailing industry. The Ocean chain did
not only meet the discount prices but even tried to undersell some of its merchandise.
Meanwhile, they further increased their advertising; more newspaper advertising,
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handbills, radio, and some television commercials. JIMAT likewise stayed in the thick
of price competition.

Ahmad’s Dilemma
The arrival of the discounter marked the beginning of a disturbing period for Ahmad
Supermarket. The relatively calm situation that had prevailed for many years was
suddenly shattered. For the past three years, Ahmad Supermarket has been experiencing
declining sales of about 20 percent a year. As one might expect, Ahmad joined the group
by lowering prices. Nevertheless, as he saw prices cut to profitless levels, he questioned
the wisdom of such extreme competition. Part of the question was the type of store
Ahmad Supermarket should try to be. He began to ask himself whether Ahmad
Supermarket could survive if the company projected an image that distinguished it from
the discounter. At times, it appears to Ahmad that price competition may be the most
effective way to attract customers and necessary in such business.
(Source: Strategic Management Text & Cases by Mohd Khairuddin Hashim, 2004)

QUESTION 1 (6 MARKS)

At the moment, Ahmad Supermarket does not have a mission statement. One strategist
proposed this mission statement for Ahmad Supermarket: “Our mission is to provide the
biggest on savings and value across fresh, groceries and general merchandise along
with the right shopping experience to our customers every time.”

Evaluate the mission statement according to the major characteristics of a good mission
statement given by a textbook. Is this mission statement a good one? Justify your
answer.
(6 marks)

QUESTION 2 (20 MARKS)

a. Assess the external environment and explain THREE (3) factors contributing to
Ahmad’s successful operation and growth in the past.
(12 marks)

b. Elaborate TWO (2) sources of Ahmad’s strengths in the current period of intense
competition?
(8 marks)

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QUESTION 3 (14 MARKS)

a. Suggest ONE (1) most suitable Business Level strategy for Ahmad Supermarket to
face current competition. Explain briefly why Ahmad should choose that strategy
and how he should implement the strategy.
(6 marks)

b. Ahmad Supermarket needs to grow in the future. Suggest Ahmad ONE (1)
Corporate Level Intensive strategy and ONE (1) Corporate Level Integration
Strategy.

Explain briefly what Ahmad should do to implement the strategy.

(8 marks)

END OF QUESTION PAPER

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