BKAM3073 – ENTERPRISE STRATEGY

ASSIGNMENT 1 (INDIVIDUAL) – 10%

QUESTION 1
U-KNOW Company (UKC) is a public listed company that manufactures mattresses. The
company recently, held a board meeting to discuss company’s strategic planning for the coming
year. In the meeting, the Chairman’s of Board of Directors (BOD) stated that he was not
concerned with the level of profitability generated by each customer as, overall, UKC has
achieved a high profit to sales ratio for a number of years. The Chairman suggests the company
to continue formulating its corporate strategy using a traditional rational approach.

However, the Finance Director believes that a more detailed understanding of UKC’s customer
profitability should be carried out by UKC before making any decision about future market
expansion. Also, at this Board meeting, the BOD’s Chairman stated that UKC should focus on
the increasing demand from the large retailer segment and this is based upon the large volume
sold to them. The Finance Director opposed this idea and asked to give him time to prepare a
customer profitability analysis.

The meeting also discussed the marketing strategy. Currently, UKC does not consider
marketing to be a primary activity, as historically much of its business has come from word-
of-mouth recommendations and repeat business. The Chief Executive Officer is confident that
word-of-mouth recommendations have been successful in the past and will continue to be
successful and that the high level of customer service offered by UKC is a key factor in this.
The Operations Director who is in charge of the marketing asked the company to increase the
marketing budget and also suggest that the company should invest more into technology that
enables the company to expand to e-business. The reason for this is due to the competitive
forces that have made customer retention more difficult in future. The Operations Director said
that the customers now have many choices and can easily buy from other competitors many of
which make use of sophisticated information systems to communicate with their customers.
The Operations Director believed that customer retention and loyalty could be improved by
developing customer relationship marketing and by focusing more on ‘e-business’.

Following this board meeting, the Finance Director asked the Management Accountant to
perform a customer profitability analysis for UKC. Here is the information that the
Management Accountant had gathered:

1. The company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are
small, separately owned furniture stores and one is a retail chain. The retail chain buys
60% of the mattresses produced. The 19 smaller customers purchase mattresses in
approximately equal quantities, where the orders are about the same size.

2. Data concerning UKC’s customer activity are as follows:

1
 Large retailers Small retailers

Unit purchased 108,000 72,000

Orders placed 36 3,600

Number of sales calls 18 882

Manufacturing costs RM43,200,000 RM28,800,000

Order filling costs allocated* RM1,455,127 RM970,085

Sales force costs allocated* RM719,820 RM479,880

Sales revenue RM54,000,000 RM43,200,000

Operating profit contribution^ RM9,800,000 RM13,400,000

Notes:
*Currently allocated on sales volume (units sold)
^After taking consideration of product costs and overhead costs (excluding customer
costs)

REQUIRED:

(a) Discuss TWO (2) benefits to UKC in following a long-term planning approach
to strategy development.
(4 Marks)

(b) Analyze THREE (3) important information to UKC for its strategic analysis.
(6 Marks)

(c) Calculate customer profitability for each group of UKCs’ customers.

(d) Based on your answer in (c), analyze the customer profitability and prepare a
report to the Finance Director to explain your analysis.
(7 Marks)

(e) Evaluate the UKC’s strategic and competitive impact on customer relationship
marketing approach that could retain the customers.
(8 Marks)

2
QUESTION 2
A. Jom Travel Sdn Bhd (JTSB) is a tour operator based in Kuala Lumpur. The company
runs weekly trips to Malaysia’s neighbouring countries such as Indonesia, Singapore and
Thailand. The tour packages provided by JTSB are very popular among Malaysians. The
tourists come from middle class income group and their age ranges from young adult with age
30 and above to pensioners. In providing its service, JTSB arranges its travel packages with
local transportation, hotels, restaurants and tour guides.

In July 2019, the management of JTSB realized that the company is losing its pensioner
customers. A quick survey done by the management revealed that the pensioners feel that
JTSB’s travel itinerary is full and hectic, with so many activities to be caught up, improper
accomodation and transportation and providing instant meals which are not suitable for the
elderly.

JTSB’s management realizes that something needs to be done to its supply chain management.

REQUIRED:

(a) Discuss THREE (3) elements in the upstream supply chain management that needs to
be improved by JTSB in retaining its pensioner customers. Provide ONE (1) example
for each element.
(6 Marks)

(b) Besides its customer’s market, explain TWO (2) other markets recommended by Payne
(1997) that need to be addressed by JTSB.
(5 Marks)