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Question 2
a. It is unwise for Salim not to invest in advertisements and promotional
campaign because his rivals are aggressively doing the opposite.
Salims competitors are going all out to take his market share while
Salim doing nothing to defend it. Losing the market means decrease in
turnover and profit. The consequences will be fatal to the business in
the long run. Even though Salim is convinced that his carpets are
already differentiated and of high quality. These competitive
advantage will not last for long because it can be easily imitated by its
b. Three benefits of backward integration strategy are:
Salim will have more control over the value chain. By integrating
preceding production process to the existing business, Salim will
more control over the source of the original raw materials. This
ensure only good quality raw materials are used to manufacture
handwoven carpet in order to maintain its high quality.


Increase the business competitive advantages by blocking competitors

from gaining access to scarce resources. By integrating the preceding
production process to the existing business, Salim has denied his
competitor access to the raw materials needed for carpet
Simplified procurement and administrative procedures. Since the
sourcing of raw materials are done in-house, the business will save on
transaction cost and the delay in the delivery of raw materials can be
minimised. At the same time, this will also enhance the efficiency of
the manufacturing process
c. The core competence must enhance competitive advantage by
creating superior customer value. Every value-chain activity has the
potential to provide a viable basis for building on a core competence.
Customers are willing to pay more for differentiated products.
Different businesses in the corporation must be similar in at least one
important way related to the core competence. It is not essential that
the products or services themselves be similar. Rather, at least one
element in the value chain must require similar skills in creating
competitive advantage if the corporation is to capitalize on its core
The core competencies must be difficult for competitors to imitate or
find substitutes for. Competitive advantages will not be sustainable if

the competitor can easily imitate or substitute them. Similarly, if the

skills associated with a firms core competencies are easily imitated or
replicated, they are not a sound basis for sustainable advantages.
JUNE 2015
Question 1
a. Upon entering the current year 2015, MySatchels was going through the the
growth stage.The growth stage is characterized by strong increases in sales.
Such potential attracts other rivals. In the growth stage, the primary key to
success is to build consumer preferences for specific brands. This requires
strong brand recognition, differentiated products and the financial resources
to support a variety of value-chain activities such as marketing and sales,
and research and development. Whereas marketing and sales initiatives were
mainly directed at spurring aggregate demandthat is, demand for all such
products in the introduction stageefforts in the growth stage are directed
toward stimulating selective demand, in which a firms product offerings are
chosen instead of a rivals.
b. MySatchels competitive advantage will not be sustainable for a long time
because. The product can be easily imitated by the competitor. Even though
MySatchel try to differentiate its product by instilling Malaysianess feel in
them, the strategy will not be long lasting as it can be easily imitated by its
MySatchel too focused on one type of product which is school satchel and
have a narrow target market. Once the competitor enter the market,
MySatchel will lose its market share and this will decrease its turnover and
profit. This will also affect its survival in the long run.
Over time, MySatchels competitor will gain experience on how to manage
their cost. Once this happen the competitor will be able to offer their product
at the affordable price and MySatchel will lose its cost leadership advantage
c. Erosion of cost advantages within the narrow segment. The advantages of a
cost focus strategy may be fleeting if the cost advantages are eroded over
time. The firm profit margins drop as competitors enter their product
segment and the margin will become smaller as the competitors learn to
optimise their cost.
Even product and service offerings that are highly focused are subject to
competition from new entrants and from imitation. Some firms adopting a
focus strategy may enjoy temporary advantages because they select a small
niche with few rivals. However, their advantages may be short-lived. The
entry barriers tend to be low, there is little buyer loyalty and competition
becomes intense. Since the marketing strategies and technologies employed
by most rivals are largely non-proprietary, imitation is easy. Over time,
revenues fall, profits margins are squeezed, and only the strongest players
survive the shakeout.

The firm can become too focused to satisfy buyer needs. Some firms
attempting to attain advantages through a focus strategy may have too
narrow a product or service. As a result the firm lost their market share to
rivals that offer more option and wider choice of products and services.

JUNE 2014
Question 1
a. Two competitive risk that Perubatan Tradisi faced is when it
implemented the cost leadership business strategy are :
i. Processes used by Perubatan Tradisi to produce and distribute its
products become obsolete because of competitor innovations.
Perubatan Tradisi sells its traditional medicine in its purest form
while its competitors produce their products in the form of pills,
capsules and liquid which are easier to consume.
ii. Competitors learn how to successfully imitate the cost leader
strategy. When this happens, the cost leaders must increase the
value of its products. Commonly the value is increased by selling
the products at an even lower price or by adding differentiated
features that create value for customers while maintaining price
b. Perubatan Tradisi is able to carve a market niche (traditional medicine
to cure diabetes) thus further insulating themselves from the attention
and efforts of larger, industry-wide players that cannot serve the
niche. Thus, defensibility and avoidance of direct, price-based
By serving a narrow market niche, Perubatan Tradisi can remain highly
profitable, even when the broader industry appears to be unattractive.
Concentration of resources and effort to serve and defend a niche
makes the focused/ specialized firm less vulnerable to major changes
in the industrys competitive environment.
Focus-differentiation strategy create entry barriers for potential
competitor. Highly distinctive or unique products make it difficult for
new entrants to compete with the reputation and skills that existing
firms already possess.

c. Intensity of rivalry is very low since there is only a small number of

competitors which serve the niche market. Furthermore it is very
difficult for the rivals to duplicate or imitate the highly differentiated
products and there is high entry barriers for potential competitors to
enter the niche market.

The bargaining powers of buyers are also very low due to the absence
of substitute for the product. Buyers are willing to accept a price
increase when a product satisfies the perceived unique needs better
than does a competitors offering.