Assignment 1:Problem analysis report

Name:Faaiq Husnul Wafeeq

ID:101213799

Group:122JTM
CCK Group refers to CCK and its subsidiaries, which are mostly involved in the poultry and
retailing industries. The operations are mostly carried out in Sarawak, Sabah, and Indonesia
(Jakarta and Pontianak). With a tagline of “Your Family Grocer”,CCK Local is a grocery
store that provides various grocery items mainly fresh chickens,vegetables and other grocery
items that caters the need of families.

Main Issue

The main issue that revolves around our clients,which is CCK for one of their retail
stores,namely CCK Local is an urgent need to significantly boost their sales by 50%. As per
the financial report,in relation to shareholders,the key area of focus are profitability,dividends
and return on investnment (CCK 2020).As these are interconnected to revenue,it is
imperative for CCK to be able to ensure that there is growth in revenue every year. It is
because sales growth is a critical metric for a company's survival and financial progress.
Growth in sales is a sign that the policies being implemented are correct and effective.
Positive sales growth is a green signal, indicating that things are going well, whereas negative
sales growth is a red signal, indicating that it is time to pause and reconsider. It is a
company's goal is to achieve good sales growth because it equals more earnings. Positive
sales growth also indicates that market circumstances are favourable and that the company's
present strategy or technique is working in their favour. While achieving positive sales
growth is simple, maintaining it is a difficult endeavour (Bhasin 2018).Further, it is vital to
have a positive sales growth as it can be used for the benefit of employees and the company,
such as wage increases, the acquisition of new assets, or the expansion of the company or
product line. Negative growth is an unfavourable result that may indicate poor strategy or
actions (Bhasin 2018).

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Drivers

Political
Ever since the widespread of Covid-19 virus to the community,the government imposing
lockdowns have been causing majority of businesses to suffer in many ways.Movement
control order(MCO) which was introduced by the government in an effort to combat the
pandemic is a contributing factor in the decline in sales in majority of the
businesses,including CCK Group. Since then, every MCO has been linked to a detrimental
impact on people's mental health, decreased household income, and poverty, among other
things (Arfa,Low 2021).The inconsistent restrictions and rules that were enforced acted as a
stumbling block for consumers to go out and do their grocery shopping like they used to.For
instance,the limit in number of customers allowed per store makes it difficult for both the
consumers and the grocery store as consumers get frustrated easily when CCK is fully
occupied and also fueled by the fear of virus transmission as well as the store gets too
crowded.Besides,the decision made by the government of allowing dine-ins at restaurants
also can stunt revenue growth.As more consumers are going out to eat outside,it would mean
less people would go grocery shopping as the urgency of having to cook dissipates.Apart
from that,the minimum wage of RM1,200 leads to reduced consumer spending and also
narrow focus towards the spending only on products of necessity such as meat and
eggs.Further,the rule of making COVID-19 vaccinations mandatory for all shoppers could
contribute to disruption of revenue.This restricts those who are not vaccinated by choice to go
shopping at CCK at which equates to less revenue for CCK.

Economics
Every country through inflation year in year out and Malaysia is no exception. It is as an
increase in the cost of a wide range of consumer products and services across a variety of
industries, such as gas, food, and housing. Inflation reduces the purchasing power of your
money, requiring you to spend more for the same goods and services. In other words, as
inflation rises, your purchasing power declines (Hayes 2021).Inflation in Malaysia is ever
increasing and it is expected by the majority of experts grow this year as commodity prices
and salaries rise.This is backed by the indication provided by the Consumer Price Index (CPI)
as it increased by 2.2 percent to 125.2 in February 2022 from 122.5 in the same month of the
previous year (New Straits Times 2022).Further, According to the Malaysian Department of
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Statistics, the purchasing power of Malaysian households has dropped 16.7% over the last
decade to a record 83.3 percent (DoSM) (Kamel 2021). With a minimum wage of RM1,200
at which most consumers are living on and with the proposed minimum wage of RM1,500 is
still up in the air,it is almost certain that most consumers are struggling to make ends’ meet as
their purchasing power is kept at a bare minimum,grocery shopping is becoming expensive
for them.Hence,their spendings are only limited to products of necessity with the likes of
clothing,food and utilities.As they spend on food,their focus are solely towards staple
products like eggs,chicken and rice and with a limited budget,it is highly unlikely that they
would have enough money and willingness left to spend on products other than that,like
imported products,which CCK Local have abundance of on their shelves.Due to that,it would
greatly affect their sales as not many consumers can afford to buy their imported products.

Socials

If there is one thing that this pandemic has instilled in the community is cautious and fear of
going out.Due to the significant rising of Covid-19 cases which is aggravated by the
emergence of numerous variants,especially the Omicron variant,which is much more
infectious than any of the previous variants,has caused a lot of consumers to stop going out to
get their grocery items in the fear of getting contracted by the virus and resorting to other
online retail alternatives like Grab Supermarket to get all the stuffs instead.In turn,this
disrupts the revenue for CCK as walk-in customers are diminishing due to that,
sales will certainly plummet so long as the covid-19 variants are mutating and continuously
spreading.

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Affected Parties
There are several parties who are affected by this problem both internally and externally.

Directly Affected
Among the stakeholders who are significantly and directly affected are the board of directors
and employees.

Board of Directors
Board of directors of CCK consists of several individuals ranging from the age of 50-80 years
old male,which most of them can be categorised as “baby boomers” and majority of the board
of directors are shareholders themselves holding significant amount of ordinary shares and
most of them are Chinese.Besides,it can be assumed and observed that they are well-educated
and competent group of individuals with the necessary qualifications in business to govern
the company with the highest qualification of at least degree in business mostly.Being among
the most best paid individuals in the company,their earnings are highly lucrative as
significant as their responsibilities in governing the company,with executive directors’
median salaries are expected at RM181,639 annually (Payscale 2022) and with those who are
shareholders expected to receive more in terms of dividends.Therefore,it is safe to assume
that the directors’ earnings are not less than RM10,000 per month.This implies that the
directors have high purchasing powers.

Employees
CCK Local has in place a huge number of employees in ensuring the operations of the store
run accordingly with the likes of managers,cashiers,shop assistants,store keepers and security
guards are at the top of the list.Employees of CCK comprises of individuals aged between 18-
50 years old male and female,at which mostly are millennials,comprising various races like
Malay,Chinese and Iban and most of them are equipped with minimum qualification of
SPM,with managers and clerks as an exception at which they possess qualifications of
diploma or higher and relevant experiences in their fields.For the managers,the median salary
is thought to be around RM 95,865 annually,while the rest of the employees have an income
of between RM 1,200 – RM 3,000.Therefore,there are discrepancies in terms of purchasing
powers of the managers and the other employees,with the managers having much more
superior purchasing power as compared to other employees.
Indirectly Affected
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There are a few stakeholders who are indirectly affected by this issue namely the
shareholders,customers and suppliers.

Shareholders
Apart from the fact that some of the directors are shareholders as well,as the company is a
public listed company under Bursa Malaysia,there are other shareholders that own the shares
by buying the stocks through investment banks and brokers in Malaysia.While it is still
ambiguous about who these investors are,it is safe to assume that they are millennials of
different races like Malay,Chinese and Indian and mostly male aged 26 to 40 years old with a
steady income who wish to grow their wealth over time by investing in stocks and do not
mind in taking risks in doing so.It is also expected that they are of middle-to-high income
group.Therefore,it is of relevance to assume that they have high purchasing power.

Customers
From my observation,walk-in customers who shop there are mostly middle aged both male
and female at which they do grocery shopping on behalf of their families.It is also
recognizable that most of them live in the area,which is located at Desa Wira and most of
them are Malay,Chinese and Iban.In this area,I also managed to observe that there are a lot of
squatters and low-cost houses on my way to CCK Local,which leads me to believe that the
families who reside the area are majority from middle-to-low income groups.Hence,they have
low purchasing power as it can be observed from items that they have put in their carts which
are mostly local staple products like onions,cooking ingredients and meat to name a few.

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Community and Government
Just like the customers,community represents those who live in the area who are both male
and female aged 18-60 with multiple races namely Malay,Chinese and Iban.Most of them are
also middle-to-low income groups at which the majority is struggling to make ends meet as
they reside squatters and low-cost houses.Therefore,they have low purchasing
power.Government,on the other hand,is a large organization that is responsible for making
and enforcing various policies for the public goods.As a way of generating revenue for the
country,they collect taxes from businesses to be later used to fund public services like as
schools, emergency services, and social programmes, as well as to repair and maintain public
infrastructure, such as the roads we commute on (Kagan 2021).

Implications

Board of Directors
Board of directors are the key individuals in an organization and for CCK is not any
different.There are huge shoes to fill as they are serving the interest of the owners of the
company,namely the shareholders.The main interest of the shareholders is always about
making profit that they are making.The performance of the board of directors is measured in
terms of ROI.Higher ROI will keep the shareholders feeling content and it requires CCK to
obtain higher revenue as well.If revenue declines or shareholders’ targets are not being
fulfilled,questions will certainly be raised regarding the competence of the directors by the
major shareholders and they might miss out on bonuses and also even might risk losing their
jobs and getting replaced.

Employees
Investors' perceptions of a company's ability to earn and grow profits in the future are
reflected in its stock price. If shareholders are pleased and the firm is performing well, as
evidenced by its stock price, management is likely to stay on and receive raises in
remuneration (Murphy 2021).As this concerns the managers,they might risk missing out on
their bonuses should they fail to achieve the desired target and even to an extent that they
might risk getting fired.Consequently,the sales teams of CCK will be instructed by the
managers to work around the clocks in order to increase sales through all possible
methods.And if all the effort made are to no avail,the managers might come to a decision of
laying off staffs in order to cut cost.As a result,a number of staffs will not only lose their
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jobs,but also the work benefits like EPF and SOCSO due to that action and in turn are likely
to struggle to make ends meet.

Shareholders
Though the fact that shareholders belong to high income group,they are the ones who have
the most to lose.It is due to their dependence towards the dividend payoff that has been
promised to them and generated in the previous years.Hence,should CCK fail to increase
revenue,the board of directors would be unable to declare higher dividend,resulting in most
shareholders being unhappy as their income is hugely affected.In the event that there is no
further growth in the company’s performance,the odds are that the investors might sell off
their shares and invest in other companies that has much more potential than CCK.

Customers
Normally, customers purchase goods and services and provide comments on how to improve
them to businesses. Customers can also influence others by endorsing the firm to their friends
or warning them not to use it.Therefore,should boosting sales persist to be a problem for
CCK,chances are customers,especially those reside the area, will be frustrated by lack of
products and services that CCK is offering and might then switch to nearby competitors
which is located a little bit further then where they are,who,offer much better products and
services.Consequently,this costs time and effort for customers just to fulfil their needs.

Community
Community is greatly affected in a way that CCK may employ people and donate money to
schools and community organisations in the area.Revenue growth enables them CCK to give
back to the community in order to get support and benefit the community.The opposite of this
would be detrimental for community as they are dependent on CCK to support them through
various initiatives that CCK would be able to organize should their sales exceed
expectations.Government,however,would hope CCK’s revenue to thrive as it enables them to
collect more taxes in return.Lower revenue would mean less taxes to be collected therefore
less revenue for the government.

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Additional Information

There are several additional informations that can come in handy.First,is the disclosure of
financial statements of CCK Local itself. Financial statements have the advantage of being
decision-making tools because they provide an insight of your company's financial status and
also business trends can be seen in financial accounts as well. Business trends are important
for CCK as they would want to make sure that their products and services are always in line
with what the customers want and need, because they are what drives a company's success
(Skevofilax n.d.) and it can also utilized to find out what products that sell the most and the
products that are proven hard to sell.Thus,this enables the management to focus on the
products that have high demand and omit the products that are not.

2190 words

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List of References:

Arfa, A 2021, How Has MCO Affected The Malaysian Economy?, Taylor’s University,
viewed 28 March 2022, <https://university.taylors.edu.my/en/campus-life/news-and-events/
news/how-has-mco-affected-the-malaysian-economy.html>

Bhasin, H 2018, What is Sales Growth? Sales growth Explained in Detail, Marketing91,
viewed 27 March 2022, <https://www.marketing91.com/sales-growth/#:~:text=Sales
%20growth%20is%20an%20essential,company%20or%20the%20product%20line. >

CCK 2022, Annual Report 2020, CCK, viewed 26 March 2022,

<http://www.cck.com.my/source/annual_report/1619419983_AR-2020.pdf>

Hayes, A 2021, Purchasing Power, Investopedia, viewed 27 March 2022,

<https://www.investopedia.com/terms/p/purchasingpower.asp>

Kamel, H 2021, Purchasing power slips by 16.7% , The Malaysian Reserve, viewed 27
March 2022, <https://themalaysianreserve.com/2021/05/26/purchasing-power-slips-by-16-
7/>

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Murphy, C 2021, How Can a Company Have a Negative Gross Profit Margin?

, Investopedia, viewed 27 March 2022,

< https://www.investopedia.com/ask/answers/101314/what-are-main-reasons-why-there-
could-be-negative-gross-profit-margin-and-what-does-it-mean.asp#:~:text=Declining
%20sales%20could%20lead%20to,declining%20revenues%20and%20a%20loss>

Murphy, C 2021, Why Do Companies Care About Their Stock Prices?, Investopedia, viewed
27 March 2022, <https://www.investopedia.com/investing/why-do-companies-care-about-
their-stock-prices/#:~:text=Key%20Takeaways,and%20receive%20increases%20in
%20compensation. >
Kagan, J 2021, Taxes Definition, Investopedia, viewed 27 March 2022,
<https://www.investopedia.com/terms/t/taxes.asp#:~:text=27-,Why%20Do%20We%20Pay
%20Taxes%3F,emergency%20services%2C%20and%20welfare%20programs.>

New Straits Time 2022, Malaysia's inflation up 2.2 pc in Feb 2022, New Straits Times,
viewed 27 March 2022, <https://www.nst.com.my/news/nation/2022/03/783129/malaysias-
inflation-22-pc-feb-2022>

Oxford College of Marketing n.d., The Important Role of Sales In An Organisation

, Oxford College of Marketing, viewed 27 March 2022,
<https://blog.oxfordcollegeofmarketing.com/2014/10/17/the-important-role-of-sales-in-an-
organisation/#:~:text=Business%20Growth,your%20product%20or%20service%20online.>

Payscale n.d., Average Executive Director Salary in Malaysia, Payscale, viewed 27 March
2022, <https://www.payscale.com/research/MY/Job=Executive_Director/Salary>
Skevofilax, M n.d., Identifying Business Trends Why It Matters and What You Can Do,
Portal CFO, viewed 27 March 2022, <https://portalcfo.com/identifying-business-trends-why-
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