THE HANG SENG UNIVERSITY OF HONG KONG

Bachelor Degree Programmes

2020-2021 Semester 1 Examination

Module Code : MGT4001

Module Title : Business Policy and Strategy
Date : December 8th, 10:00 a.m. – December 10th, 10:00 a.m.
Time Allowed : 48 hours

Notes to Candidates:

1. This question paper has 4 pages (including this cover sheet).

2. There are THREE questions in this paper:

Section A Case Study : Answer ALL 3 questions. Marks allocated to parts of

(100 marks) questions are indicated in brackets.

3. The examination will be marked out of 100.

3. This is an open-book examination. You may use textbooks, notes or other reading and
learning materials.

4. To support the quality and strength of your arguments, you are welcome to use the
internet/alternative sources to find additional information on the company described
in the case.

5. Questions 1 and 2 may be answered using a maximum of 500 words. Question 3 may be
answered using a maximum of 1000 words.

Student
Programme Venue
Name
Student Year of
Seat No.
ID No. Study

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Section A: Case Study – Answer ALL questions based on the case below (100 marks)

Remark: Of its nature, the case questions don’t lend themselves to “model answers”. What
we are looking for in the answers to these questions is a level of maturity, and the concepts,
theories, and logic that they present to support your discussion. Classification of marks is
based largely on how a student shows evidence of critical or evaluative thinking, evidence of
synthesis, etc.

*You are welcome to find additional information on the company to aid the strength of
your arguments.

In December of 2013, two brothers – Yeshwanth Nag Mocherla and Ashwin

Mocherla – founded Thickshake Factory (TSF), a grab-and-go beverage company. By 2017,
TSF’s revenues had grown by over 180%. The TSF brand had become so popular that the
company had grown to 45 (40 franchised and 5 owned) outlets in South India. It was
projected that the company would have annual revenue of USD 5 million by the end of 2017.

In order to sustain business popularity, profit, and longevity, the Mocherla brothers
felt that they needed to explore other locations for expansion. After the success of the product
in South India, the brothers tested other geographical Indian markets and found promising
results. However, the brothers could not help wondering whether it was viable to go global
and explore the international market. And, if they did, which country should be first on their
list for expansion? Should they extend operations to other developing countries in Asia, or
should they set out to enter developed and powerful markets, like the United States?

How The Idea Became a Business

While traveling across Europe, Yeshwanth and Ashwin noticed that a lot of people walked
the streets with a thick shake in their hand. This drink consisted of milk, nuts, fruits, ice
cream, and other ingredients. Thick shakes could be used to quench thirst and satisfy hunger.
The brothers bought a shake and ate the fruits and nuts in it with a spoon. When asked about
the experience, Yeshwanth stated: “About five to six years ago, I don’t think people in India
knew what an actual milkshake was. When you go to a typical multi-cuisine restaurant in
India, somewhere on the menu, there is a milkshake, which is always more like flavored
milk.”

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Yeshwanth envisioned a great business idea in selling authentic, high-quality milkshakes, or
thick shakes, in India. His hypothesis was that in a country like India, where people love
sweets, the product would easily gain acceptance. Yeshwanth explained that: “The idea
behind calling it a thick shake is to change the perception people in India have about
milkshakes.” Thus, the Thickshake Factory (TSF) was born. It was determined that a thick
shake had to consist of milk, ice cream, and other ingredients like fruits, nuts, syrup,
chocolate, cookies, etc. Upon further contemplation, it was also determined that a medium-
sized drink would be 16 fluid ounces, and consist of roughly 700 calories, depending on mix-
ins selected, and the starting price would be USD 2.10.

While TSF initially bought ice cream from a high-quality supplier, the brothers quickly
realized that if they produced their own ice cream they would get a competitive advantage in
the market. Additionally, Ashwin had a fair idea about how ice cream was manufactured,
based on his internship in the ice cream department at Amul, one of the largest producers of
milk and milk-based products in India. The brothers spent six to seven months manufacturing
the perfect ice cream for their thick shake. All ingredients were sourced through local
suppliers. Ravi Kumar (the brothers’ father) headed ice-cream production, while Yeshwanth
Nag Mocherla and Ashwin Mocherla managed the major functions of the Thickshake
Factory.

Milking Growth

In December 2013, the first TSF store opened in Hyderabad, India. It was founded on the
concepts of a milkshake and smoothie shop that focused on the use of local ingredients. The
menu had more than 40 drink options, with the additional option to customize one’s own
drink. The brothers’ ultimate goal was to bring about a change in lifestyle and drink
presentation in India. Yeshwanth recalled, “I used to be at the counter every single day
talking to customers, understanding what they liked and what could be made better. This
really helped us understand how the customers thought and what mattered to them.” Initially,
and to their delight, they were able to generate sales of nearly USD 400 daily. The hard work
had paid off. With a large consumer market across all age groups, TSF did daily sales of USD
385–460 in the first two months. Additionally, TSF was witnessing 200% growth year-on-
year, with no external funds being raised. In comparison to other western fast food restaurants
in India, such as McDonald’s, Subway, and Burger King, TSF sold no other product besides
shakes. Furthermore, they were the only premium milkshake chain in India that managed its
entire value chain end-to-end. Subway and other restaurants sold thick shakes, but due to the
vast food range they could not offer many thick shake varieties. Due to economies of scale,
western restaurants claim higher buying power over the distribution channels, hence their
shakes have lower prices.

Growth Considerations
The family agreed that, since the product was so successful, exploring new markets was
viable. There were several options to consider, but they felt strongly about the opportunities
that presented themselves in the United States, where the Mocherla family had family friends
in California. The Mocherla brothers were excited about the prospect of entering a
challenging, yet fascinating, market such as the United States. Smoothies and milkshakes
were already popular there, and Ashwin felt that, like in India, they would not have to work
towards introducing new concepts. They knew, however, that there would be other
challenges, like competing with well-established companies already selling good quality
milkshakes in America.

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Competing with those companies would require significant resources. Ashwin thought that
instead of investing a lot of time, money, and resources in setting up several stores at once in
the United States, TSF could adopt a less aggressive strategy. They could test the market with
one store by investing USD 45,000. Depending on the performance of that store, the family
could think about investing further. By establishing one international store the TSF brand
would become global and the company could use it during promotions to create higher
customer engagement levels in India.

Ashwin felt that the United States was a far superior market and would have greater
consumer interest for their thick shake product. It was the world’s biggest economy and was
considered the “land of opportunities.” It also had the largest economy and boasted plentiful
opportunities for the expansion of TSF. Again, the question that TSF leaders had to answer
was whether the United States was the right move for growing the company globally. A lot of
businesses were looking at emerging markets like India to increase the sale of their products
or services; very few companies were thinking the other way around. Furthermore, the thick
shake product was not unique in a market like the United States, as it was a product that was
inspired by U.S.-based companies like Subway, Starbucks, and Wendy’s. These restaurants
were present in most suburbs all over the United States. The cost of a medium thick shake or
smoothie in the United States was roughly USD 2.5–3. Many small restaurants and large
chain diners offered good-quality thick shakes and the market was highly saturated.
Substitute products like iced coffee, smoothies, and juices were also easily available.

Questions:

1. Identify Thickshake’s business-level strategy and evaluate how this strategy has created
value for the company. Do you think the chosen business-level strategy is effective? Why
or why not? (30 marks) (Maximum: 500 words)

2. Thickshake is considering further expansion into the United States as a potential avenue
for company growth. First, discuss and explain Thickshake’s potential for success in the
new international market. Based on your analysis, which entry mode (if any) should
Thickshake use to enter the United States market to increase their strategic
competitiveness? Support your reasoning with well-developed arguments using concepts
from the course. (30 marks) (Maximum: 500 words)

3. Imagine that the CEO of Thickshake has hired you to be a consultant for the firm. Using
your knowledge gained from the course, provide 3 strategic recommendations as to how
Thickshake can create more value for the company and increase its strategic
competitiveness. Support your recommendations with well developed arguments and
appropriate examples. (40 marks) (Maximum: 1000 words)
*Answers cannot be the same as previous questions.

END