BUSINESS STRATEGY

Time allowed 3 hours

Total marks 100

[N.B. The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take
account of the quality of language and the manner in which the answers are presented. Different parts, if any, of
the same question must be answered in one place in order of sequence.]
Marks
1. (a) The ethical code of the Institute of Chartered Accountants of Bangladesh (ICAB) seeks to regulate
the behaviour of its members. Why does ICAB have this? 4
(b) The Pick n Pay, a chain of medium size supermarkets, operating in Bangladesh concentrated mainly in
Dhaka, is considering strategies for improving its KPIs such as business turnover, customer count,
average sales per customer, average sales per employee, profit per store, profit margin, after tax profits
and EPS. One of the main proposals on the table is expanding its business across the country.
In planning its future, Pick n Pay was advised to look carefully at a number of external factors
which may affect the business including government economic policy, and in recent months the
following information have been available in respect of key economic data:
1. Bangladesh Bank base rates (Repo and Reverse Repo) have gone up by 1 percent during first 10
months and the forecast is for further 1 percent increase within next 6 to 9 months.
2. The annual rate of inflation is now 8%, up from 2% in the previous quarter and from 4% in 12
months ago. The rate is now at its highest for the last 10 years, and further increases in the rate
over medium to long term are expected.
3. Personal and corporate tax rates are expected to remain unchanged for at least the next 12 months.
4. It has been proposed by the 2016 budget presented in Parliament last May to introduce uniform
VAT to supermarkets and trading operations which earn a quarterly turnover of Tk.500 million.
5. The government has initiated an investigation into the processed food retail sector, focusing on
the problem of excessive profit on certain foodstuffs due to high prices charged for these
goods by the large retail food stores.
Required:
(i) Explain the relevance of each of the items of information data listed (1-5) above to Pick n Pay. 10
(ii) Assume the company faces constraints in raising the required capital and utilization thereof.
Explain how: scenario analysis, linear programming and real options would be useful in a
capital rationing decision of the company. 6
(c) Residence is one of the basic needs of human beings. The right to live in ones own residence is a
fundamental right of the people and it is universally recognised. Bangladesh, being one of the most
densely populated countries in the world, faces numerous problems in mitigating the basic needs of
its population. Housing is one of them.
The concept of real estate in Bangladesh emerged after liberation. Over time, real estate has become
a subject of keen interest for the general public, businessmen and other stakeholders. The housing
and real estate sector is one of the main drivers of any nations economic development and
industrialisation and has already become a crucial sector of our economy. It has a huge multiplier
effect on economic activities and therefore is a big driver of economic growth. It is one of the
largest employment-generation sectors after agriculture and garments. It also stimulates demand for
ancillary industries, for example, steel, cement, tiles and sanitary ware, cable and electrical ware,
paint, brick and building materials etc.
Bangladesh real estate sector grew in a moderate pace since 2006, The sector grew exponentially
between 2006 to 2011. Since 2012 the real estate sector of the country has been battling many
tribulations. A few of the factors attributed to the dire state of real estate sector are high land price,
unsold flats in completed projects, process of getting project approval, limitation of loan
availability, political instability and many others.
The slump in the housing market continues, despite having enough liquidity in the money market
and falling housing loan interest rates, house prices are now on average around 20% lower than their
2011 levels, and about 2,000 real estate development companies were forced to close the business,
which constitutes around 20% of Bangladesh real estate industry.

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 Increase of Iron and steel price is another concern for real estate sector in Bangladesh. However,
technological improvements have helped to reduce construction costs to some extent and is expected to
be one of the major contributors in cost reducing and reshaping the real estate sector in the coming days.
There are however some reasons for future optimism, government is committed to support towards
a vibrant real estate sector and are engaged with industry leaders accordingly. Bangladesh
population is growing by about 1.20% per year and middle income families, who are the most
potential real estate customer segment, are emerging fast.
Government legislation on registration of lands and residential apartments are expected to improve.
There is further government legislation in the process, giving incentives for energy efficient housing,
including the requirement for all sellers to provide an energy performance certificate.
Required:
Discuss the environmental factors that have affected the real estate and housing sector of
Bangladesh, using PESTEL framework. 15

2. (a) Jiban Private Limited (Jiban) is a company that manufactures and distributes soft drinks in
Bangladesh.
The soft drinks industry is divided into three main areas. Carbonated and non-carbonated flavoured
drinks, fruit juices and bottled mineral water. Overall sales of such products increased by 50% between
2006 and 2016, because of increased consumption of bottled water and fruit juices. However, flavoured
drinks sales have been falling since 2012. This is mainly due to increased consumer awareness of the
health risks associated with products high in sugars. Many companies in the industry introduced No
Added Sugar (NAS) products to sit alongside their original drinks. This has halted the decline in
flavoured drinks, as consumers switched from sugar to NAS products.
The industry is dominated by two large American companies Global Cola (Global) and Bepsi
Cola (Bepsi). Both these companies have products across the whole range of soft drinks, but are
best known for their Cola-based products which are global brands supported by marketing budgets
of around BDT 400 billion each around the world. A lot of this marketing is in the form of
television advertising, and sponsorship of national sports competitions.
These companies also control most of the vending machines market of Bangladesh which are used to sell
soft drinks. Vending machines were originally introduced into workplaces, but since 2010 Global and
Bepsi started to market their machines to colleges. A college makes on average BDT 100,000 per year
commission from allowing these machines on their premises, with Global and Bepsi making profits on
each unit sold. Over 90% of sales from vending machines are carbonated flavoured deinks. Both
companies have been reluctant for third party products to be sold in their vending machines.
Global and Bepsi have both been criticised for their attitudes towards the environment and staff.
Both companies have a reputation for transferring production to least cost countries in order to
maximise profits.
In January 2017, a government sponsored report on health and safety reported that one of the main
reasons of obesity is consumption flavoured drinks. The report recommended that sales of flavoured
drinks, confectionery and other products high in sugar and salt content be banned from college
premises. These should be replaced by yoghurt drinks, fruit juices and water.
The bottled water industry has been criticised for the environmental cost of large number of plastic
bottles that are used to sell the product and for merely selling tap water which had been purified,
rather than mineral water from a natural source.
Jiban was formed in 1980, in Srimangal, Moulvibazar under Sylhet Division, selling a pineapple
juice, Pineapple Healthline to consumers, before introducing a mixed fruit carbonated drink,
Sestiva, in 2001. The recipe of Sestiva is only known by two people at Jiban, Ashek and Arif, who
are both related to the original founders of the company. Ashek and Arif own 75% of the share
capital of Jiban, and are board members. Sestiva consumers tend to be older than other carbonated
drinks, as the less sweet taste and the student focused marketing of rivals have resulted in younger
consumers preferring different brands.
Sales of Sestiva have been slowly falling for some time and the company has 3% of the total
Bangladesh soft drinks market in 2016, although the share is about 6% in Sylhet Division, as it is
seen as a local product. The company has followed industry trends in introducing new versions of
the product, such as a NAS and non-carbonated, in an attempt to maintain market share. These
efforts have slowed down the decline in sales, but the overall trend is still negative. The NAS
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 version of Sestiva now accounts for over 40% of sales. Sestiva is currently only sold in Bangladesh
as Jiban has no experience of foreign markets.
Jiban has not tried to compete with the huge marketing budgets of Global and Bepsi, but has always
aimed to sell their product at about 5 - 10% below the price of larger companies. Most sales are
made through small retailers and supermarkets.
In 2015 Jiban has entered the bottled water market with a brand called Jiban Pani, produced from a
natural spring which has a high mineral content, on land that has been own by sponsors of Jiban for
many years. Srimangal has the highest rainfall in the country and there is no evidence that supplies will
diminish, even if production is increased. Water from the spring is currently used as a component in
Sestiva, and contributes towards the unique and slightly bitter taste of the product. The spring water also
contains natural, but legal, stimulants that help maintain alertness and concentration. This has resulted in
Sestiva being popular with students and late night revellers.
Jibans production facilities are based in a part of Sylhet Division that suffers from high
unemployment. Many employees have been with the company for long periods of time, and the
company has always prided itself on good staff relations.
At a board meeting in March 2017, Ashek and Arif advised the other directors that they wanted to
change the business as they feel that it could not continue in its present form in the long term. They
were uncertain whether there is a future in the industry for a small company such as Jiban.
They have appointed consultants who have recommended to enter into an arrangement with Global,
which has expressed interest in Sestiva so that Sestiva can be sold overseas. This deal could include
Sestiva being included within the Global product range for vending purposes. Ashek is however,
concerned about losing the independence of the company.
Required:
(i) Prepare a Porters Five Forces model for Bangladesh soft drinks industry. 10
(ii) Identify and explain Jibans competitive position using Porters Generic Strategy Model. 4
(iii) Advise the board on the advantages and disadvantages of an arrangement with Global. 4
(b) Skill Bangladesh Limited (SBL) is an industry leader that provides training on human resources
management (HRM). SBLs clients are top local corporates, multinational companies, donor
agencies, government and non-government organisations and some small and medium enterprises
(SMEs) across the country. SBL offers comprehensive training on team building, professional
communication skills, project and time management, leadership etc.
SBL has 10 branches nationwide with individual branch managers. Head of SBL is in Dhaka and has
responsibility for company accounting, payroll and inventory ordering services. Individual branch
managers have responsibility for all other areas of business, such as pricing, product mix and staffing.
Each branch rents its premises; and staff members range from 5 in Noakhali to 25 in Dhaka. Staff are
generally retired professional human resource trainers, retired government and senior human resource
executives and human resource graduates with over five years of experience. Some private university
teachers and civil society members are also involved as some part-time trainers.
To date managers have always been appraised by return on investment (ROI) with a target return of 35%.
Branches have regularly exceeded this target and branch mangers seem happy to be appraised in this manner.
Anwar Hossain, the companys main shareholder and managing director, recently visited all
branches in order to promote corporate identity and inspect performance at a local level. He returned
dismayed at the condition of some branch premises and feels overall that, although recent financial
performance has been consistent with previous years, the company does not seem to have changed
or developed since he last visited branches five years ago.
Anwar believes that he needs to change appraisal method for branches so that they fit more closely
with what he expects from the company. He wants the business to develop and grow and become
the leading provider of business training in Bangladesh.
Required:
(i) Outline the problems the business is likely to have from its use of ROI as its sole performance indicator. 3
(ii) Describe the balance scorecard approach to performance measurement and how it might rectify
these problems. 7
(iii) Outline possible performance measures which might be used in each area of the balance
scorecard for SBL. 7
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3. Parisco is a leading biscuit manufacturer which has a proven track record for its quality and innovative
product line in the country. The company, established in 1960 as a private company, and a small time
biscuit manufacturer, grew into a big timer with the passage of time. Since of recent times they lead the
industry as the number one player in the country and many Business Chambers have accredited them for
those remarkable achievements. They now operate as a group of companies and most of those
subsidiaries are the market leaders in their own segment.
Touch is the renowned brand name created by the company which is known in many countries in the
world. 15% of their revenue, which runs to BDT billions comes from export. The company promotes all
of group products under the brand name Touch. Some of the key attributes that has supported the
success story include:
a. Identifying and acquiring financially sick businesses that have business potential
b. Great commitment towards sustainable product quality
c. Constant and continuous product improvement and innovation
d. Investment in production infrastructure with latest technology
e. Continuous process improvement focused towards process and cost efficiency
f. Continuous climate surveys carried out focusing on the satisfied employees at work
g. Sound cash flow
Above all the attributes, the family that owns the business and their total commitment to drive the
business to lead the industry is noteworthy.
Year 2016 is another year of change where they plan to sustain the achieved excellence by way of re-
structuring the entire group. Through the proposed re-structuring, the family plans to withdraw from
operations and remain as a supervisory board and appoint a CEO to take the responsibility for each
company. This also includes appointing a Group Finance Director and shared service units such as
Finance, IT and HR.

Required:
(i) Business acquisition has been a successful strategy for market consolidation for Parisco. Evaluate
the reasons for Parisco to pursue an acquisition strategy and explain the likely problems that are
associated with pursuing such strategy. 8
(ii) The main goal of a corporate restructuring in most cases is to gain or regain strategic control of the firm.
This generally produces higher performance and achieves strategic competitiveness over the long term.
Examine alternative approaches that were available to Parisco for restructuring and their short term
and long-term outcomes. 10

4. In the 1980s the dramatic success of Japanese firms and products such as Toyota and Sony in the United
States and other international markets provided a powerful jolt to US managers and awakened them to
the importance of international and global markets. In the 1990s, Russia and China represented potential
major international market opportunities for firms from countries including the United States, Japan,
Korea and the European Union. They also represented formidable competitors, particularly China in
low-technology manufacturing industries. Accordingly, international arena features both opportunities
and threats for firms seeking strategic competitiveness in global markets.
Bangladesh, during the recent past has caught the eyes of the businesses world over due to its immense
potential to grow as a business hub in the region. Increase in infrastructure development is a constant
phase does provide the business community a sense of confidence. Adding to that, certain recent media
surveys attribute that Bangladesh has progresses as a country in the Doing Business Index.

Required:
You are required to advise, using Porters Theory of Competitive Advantage, how Bangladesh could
achieve strategic competitiveness in the global market. Your reasoning need to be in point form. 12

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