GRADUATE BUSINESS SCHOOL

FINAL EXAMINATION

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Course Code & Name : GM512/MBG1063 Business Policy & Strategic Management
Semester : Jan - Apr 2022
Lecturer : Dr Lim Yet Mee
Duration : April 17, 2022 2:30 to 5:30 pm (3 hours)

INSTRUCTIONS TO CANDIDATES:
Answer ALL Questions (Total 100 marks)

This question paper consists of 4 pages, excluding the cover page. Candidates are
required to answer all questions in the answer booklet provided. Candidates are not
allowed to bring into the examination hall textbooks, lecture notes or any unauthorized
materials except writing equipment. Electronic dictionaries are strictly prohibited.

This question paper must be submitted along with all used and/or unused rough papers and/or
graph papers (if any). Candidates are NOT allowed to take any examination materials out of
the examination hall.

Warning:
The University Examination Board of UCSI University regards cheating as a most serious
offence and will not hesitate to mete out the appropriate punitive actions according to the
severity of the offence committed, and in accordance with the clauses stipulated in the
Students’ Handbook, up to and including expulsion from UCSI University.
Jan – Apr 2022 Final Exam GM512/MBG1063 Business Policy & Strategic
Management

Case Study

Pensonic Holdings Bhd

Japanese made electrical products have been around for so long that most Malaysians embrace
them and think of them as reliable. Few would think to build a local brand to compete against
them. But this was precisely what Datuk Seri Chew Weng Khak did in 1982 when he founded
Pensonic in Penang – a company that today posts annual revenue close to RM400mil. Vincent
Chew, Weng Khak’s son and now managing director of Pensonic Holdings Bhd, remembers
how his father came to found the company. While the brand stands proud with many other
international electrical brands today, Pensonic was not built overnight. It started as a small
shop in Balik Pulau, Penang, under the name Keat Radio & Electrical Co, selling electrical
goods from Japanese brands.

In the early 1980s, Chew Weng Khak noticed that Japanese producers were gradually pulling
back their distributorship, which put the future of his business in jeopardy. So, he decided to
build his own brand of electrical appliances, which he named Pensonic. Many mistakenly
think that Pensonic was named after a similar-sounding Japanese brand, but Vincent says this
was not the case at all. According to him, “Pen’ in the name stands for Penang, while “sonic”
refers to the fact that Keat Radio distributed car stereo products.

In the early days, Pensonic did not manufacture but mainly sold OEM products under its
brand. It was difficult to produce their own appliances as there was a lack of supporting
industry to go into manufacturing. Vincent Chew says his father used to take appliances apart
to see how they were put together. Eventually, the senior Chew brought in parts from Taiwan
and hired technicians to put them together to make his own products. The family’s backyard
soon became home to Weng Khak’s manual assembly line. The first product that Pensonic
successfully produced was the slow cooker. Since that breakthrough, Pensonic has gone on to
produce myriad other electrical products such as refrigerator, lamps, vacuum cleaner and
television.

Business grew quickly for the company over the years with the support of a good
distributorship network. In the late 1990s, hypermarkets started to mushroom, particularly
within the Klang Valley, and the group made a decision to move its headquarters out of
Penang to Kuala Lumpur to tap into the growing hypermarket trend. The move has been
beneficial to Pensonic as sales grew significantly after the brand started retailing its products
through hypermarkets. Vincent notes that revenue has grown from RM60-70mil in 1997 to
RM385.5mil for the year ended May 31, 2015, thanks to its strong presence in hypermarkets.
He adds that the group’s brand-building efforts over the years has helped to grow the
company by leaps and bounds in the local market. Pensonic’s products appealed to the wide
range of Malaysian customers as their products are perceived to be of quality and reasonably
priced.

While Pensonic’s aggressive approach paid off and it seemed to be headed for continued
strong growth, Vincent decided to take things down a notch a few years ago and concentrate
on improving margins. Three years back in 2012, the group went through a consolidation
exercise to boost efficiency. Pensonic focused on operational efficiency, closed down non-
profitable units, imposed inventory controls and decentralised a lot of its operations.
Efficiency and cost cutting measures were crucial for the company to be able to compete with
other more established brand and competitors.
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“We have tried many things over the years. There have been success stories and, of course,
failures as well. But I thought we had been moving too fast for so many years. A lot of people
wanted to remain aggressive but I slowed things down. We were so used to chasing top-line
numbers and strong sales growth. But along the way, we sacrificed the bottom-line. There was
no point making big sales if your profit was going to be small,” he explains. Vincent’s efforts
have borne fruits as the group’s profit grew to RM17.4mil for the financial year ended May
31, 2015 from RM2.7mil a year ago.

Pensonic plans new business model

Pensonic also plans to adopt a new business model to market its latest smart power bank
device under the fonebud brand, which had received positive reviews and response from the
recent Consumer Electronic Show (CES) held in Las Vegas, USA in July 2015. The strategy
was to offer the ownership of the fonebud brand to distributors, who had hit a consistent sales
target over a two-year period. Pensonic was the only Malaysian exhibitor among the 3,000
international exhibitors with a display booth at the CES.

“Other major brands don’t make such an offer to their distributors. Once they are the brand
name owners, the distributors can co-develop the future range of fonebud smart device
products with us. They can give us their inputs, based on customers’ feedback in their
respective countries, so that the smart device can be designed with features to suit the needs of
the customers. In this business model, Pensonic becomes the product developer and supply
chain manager,” said Vincent.

The fonebud smart power bank has also received good reviews from the US-based online IT
magazine. “What caught their attention was the colour, the user-friendly features and the
functions,” he added. Vincent said Pensonic was targeting for 100,000 units of fonebud to be
sold worldwide in 2015. “Based on the response at the CES, we are confident such a sale
target is achievable. About 70% of the fonebud will be sold in Malaysia, while the remaining
is targeted at overseas market”. Vincent also said the group planned to appoint 40 distributors
worldwide.

Pensonic already establish a name that is well known in the local market due to their effective
marketing method. This year is their 33th anniversary and they already set up RM7million on
25 weeks nationwide campaign through advertising on billboards and print, road shows,
contest, television commercial. With the innovation and creative ways, the company is
building stronger brand in Malaysia that eventually will establish their brand globally.
Currently, Pensonic export to other Asian countries such as Singapore, Brunei, China, Hong
Kong, Thailand, Myanmar, India, Sri Lanka, Vietnam, Iran, Yemen, Kuwait, Lebanon and
Indonesia. With the experience of handling the business in the Asian countries, eventually the
company is capable to handle international business and better equip for expansion.

Competition and growth

On its prospects, Vincent mentioned that the company anticipated that competition would
remain intense. This is in addition to the current slowing down of the world economy and the
imposition of GST in Malaysia. The domestic market has become challenging, making it
necessary for us to be mindful of our strategy,” Vincent said. For example, the group’s
Cornell brand recorded a 3.7% drop in sales from June to November 2014, compared with the

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Jan – Apr 2022 Final Exam GM512/MBG1063 Business Policy & Strategic
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same period a year ago. The reason has to do with the cautious mood consumer is adopting
prior to the introduction of goods and services tax (GST).

“Pensonic will continue explore new market, product innovation, maintaining excellent
customer relationship, placing emphasis in cost control, inventory management and overhead
cost rationalisation. In line with Pensonic’s effort in expanding to emerging markets, the
company will carry on to promote and distribute its products to overseas customers through
engaging more overseas distributors and business partners”. The company will also continue
to devote efforts in research and development of new products in order to keep up with the
ever-changing needs of the electrical appliances’ markets. Given the Pensonic’s extensive
experience in the industry, Vincent believes that the group can overcome the temporary
challenges in the market and remain competitive for the coming period.

In addition to this, the current slow-down in the economy has come at the “right time” as the
group now has stronger fundamentals and is in a good position to ride a recovery in the
economy when the time comes. Vincent also hopes to take some time to build other brands
under the group’s umbrella, such as Cornell and the Lebensstil Kollektion which cater higher-
end markets compared to the mass appeal of Pensonic.

Vincent is happy with how the group has progressed and notes that his father is proud of the
growth in the company. Weng Khak, who is currently the executive chairman of the group,
still takes an active interest in Pensonic. “He has come very far. He studied till Standard Five
and did not speak English. He has been learning all his life, and he is very experienced, which
is better than a lot of ‘head knowledge’ that people have. We often come back with
sophisticated theories but he has proven to be right because of his experience in a lot of
cases,” says Vincent.

The Chew family still holds about 40-50% of Pensonic, following the group’s listing exercise
in 1995. But Vincent says it’s not necessary for the family to keep running the show. “It can
be run professionally as a corporate entity. At the end of the day, (what’s important is) the
brand remains,” he says.

Answer all of the FOUR (4) questions given below. Please write your answer in this
template and submit.

1. Conduct a SWOT analysis for Pensonic Holdings Bhd. [20 marks]

Answer:

2. Discuss the type of business level strategy that Pensonic has implemented to be
competitive. Justify your answer. [10 marks]

Answer:

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Jan – Apr 2022 Final Exam GM512/MBG1063 Business Policy & Strategic
Management
3. If Pensonic decides to expand to another country, suggest the analysis that Pensonic
should do to understand the country before entry. [40 marks]

Answer:

4. Suggest how Pensonic can generate strategic options when expanding overseas.
[30 marks]

Answer:

[Total: 100 marks]

END OF QUESTION PAPER