EPPA4716 INTEGRATED CASE STUDY

SEMESTER 2 SESI 2015/2016

SET 1

REPORT OF CASE STUDY 1 :

MERBATTY BOAT CASE (CIMA)

PREPARED FOR:
PROF. MADYA DR. RUHANITA BT. MAELAH

GROUP MEMBERS:
WAH JUN YEW

A142341

LAU KAR LING

A139789

KOO YUH JYE

A139477

TAN BEE KUN

A140209

NUR HALIZA AMIRAH BINTI HALEMI

A140099

TABLE OF CONTENT
Content

Page

1.0 Introduction
2.0 Prioritization of Issues
3.0 Discussion of Issues
3.1 Late Delivery of A Hull from Topcrest
3.1.1 Issues
3.1.2 Impacts
3.1.3 Solutions
3.1.4 Recommendations

1
2-3
4
4
4-5
5
5-6
6

3.2 Accident at Work & JKL

3.2.1 Issues (Accident at work)
3.3.2 Impacts (Accident at work)
3.2.3 Solutions (Accident at work)
3.2.4 Issues (JKL)
3.2.5 Impacts (JKL)
3.2.6 Solutions (JKL)

7
7
7-8
8-9
9
10
10-11

3.3 Racing Boat

3.3.1 Issues
3.3.2 Breakeven Point
3.3.3 Risk Assessment
3.3.4 Benefit
3.3.5 Factor Analysis
3.3.6 Feasibility Study
3.3.7 Recommendations

12
12
12
13
13
13
13-14
14

3.4 Sales Staff

3.4.1 Endorsement of Stefan Gils Opinion
3.4.2 Endorsement of Marie Lopps Opinion
3.4.3 Recommendations

15
15-16
16-17
17

3.5 New Design Supplier for Surania

3.5.1 Issues
3.5.2 Major factor in choosing between two suppliers
3.5.3 Recommendations

18
18
18-19
20

4.0 Conclusions

20

1.0

INTRODUCTION

This report is about the study of the issues that facing by the board of Merbatty. As
the management consultant of Merbatty, we have to giving advice on the priorities of
the issues by analyses and evaluate the issues and give the appropriate
recommendations to the board.

Merbatty is a luxury boat building company that has been formed 33 years ago and
became listed company by year 2012 in European stock exchange market. Merbatty
currently have only two boat building facilities which located in Europe and in West
Coast of the USA. Merbattys price list is in Euro and US dollars. In its five years
expansion planning, Merbatty will be set up its third boat building facilities which
will be located in Suranian, Middle East.

Customers of Merbatty are from worldwide. Merbatty implemented the sales agent
system to generate sales since it was formed. Merbatty will be appointed sales agent
in worldwide as a middle person to interact with their customers and join whole
process of the sell & buy transaction till the boat is delivery to the customers.
Commission will be given to the agents.

Issues that faced by the board of Merbatty are firstly is in deciding on which new
design supplier to be choose for new boat building facilities in Surania. Second, is
knowing the impacts and solution for an accident at work that have been happened
recently which also involved of a key personnel. Third, Merbatty have been actively
involved in charity program, where one of it is racing boat. The board would like to
know the sales of P-3000s Merbatty that need to meet for breakeven over the two
years. Fourth, in deciding the implementation of sales staff system to generate sales.
Fifth, issues raise by JKL, who is the major investor of Merbatty, about the spending
in charity program and ways of Chairman, Alberto, in managing the Merbatty. Lastly,
is about the late delivery of hull from Topcrest, a supplier where have business
cooperation with Merbatty more than 20 years.

2.0 PRIORITIZATION OF ISSUES

The 5 Main Issues in Prioritization

The above arrangement of prioritization of issues is given consideration of threat to

business profitability, expansion of business and marketing plans.
The highest priority among all the issues is late delivery of hull from Topcrest.
This issue threatens the core business and profitability whereby a two month state
delivery to its customers which might result to financial loss.
The second important issue is the misunderstanding between JKL and
Merbatty. Simone Lellet (Investment Director of JKL) has growing belief that Alberto
Blanc (Chairman of Merbatty) viewed Merbatty as his personal property to do with as
he wished. This might result to investment pull out from Merbatty and influence the
share price of Merbatty as JKL holds 28% of total shareholdings in Merbatty. The
issue accident at work might impact Merbatty reputation.
The third issue to be concern is racing boat. Jesper Blanc wants to build and
race a speedboat in a global speedboat race series competition. This race might affect
the brand Merbatty. If it was to success, this will enhance Merbatty brand
awareness and give Merbatty a strong position in boat industry. However if was to fail,
this will cost reputation of Merbatty to drop and high development cost to bear.
2

The fourth issue to be focus is sales staff. Stefan Gil (Sales Director) and
Marie Lopp (HR Director) were discussing the proposal to employ sales staff as
oppose to sales agents. Before reaching a final decision to this proposal, factors such
as cost efficiency, strong bonding relationship between customer, understanding of
local demographic or controllability must be considered.
Lastly, the issue to be look upon is new design supplier for Surania. Copper
Designs and Arabian Interiors are two potential design companies that willing to carry
out design work for boats produced in Surania. This issue placed as last in
prioritization among all issues as both option has their own benefit that balanced out
each other. Factors to be concern before reaching to decision are cost, technology
capability, communication between supplier and customer, distance factor and market
needs.

3.0 DISCUSSION OF ISSUES

3.1 Late Delivery of a Hull from Topcrest

3.1.1 Issues
The hull supplier Topcrest is expected to fail to deliver the hull to Merbatty for two
months late where Merbatty supposed to receive it on 1 December 2013. This is due
to Topcrest has recently won a new major client but in doing so had to agree to some
work jumping the normal queue. Paul felt that Topcrest should not do as they wish as
Merbatty has been a customer of theirs for 20 years. Paul is furious about this
development and thinks that Merbatty should just not stand for it. He has found
another hull supplier who willing to supply the hull on 15 January 2014 but it will
cost an extra 50K. Besides, if Merbatty cancel the contract and source the hull
elsewhere, Merbatty will not receive any compensations that offered by Topcrest.

3.1.2 Impacts
i.

Financial impacts

The late delivery might affect Merbattys operating schedule which mean the finished
boat not being delivered to its Mediterranean mooring until 31 May 2014 which is
also two months late. This will cause the Merbattys customers to think that Merbatty
has no punctuality in delivering orders and the customers might go for other boat
builder companies. According to the financial data given, Merbatty is expected to face
losses which are the idle time created by the delay, 53,078 (5% x 1,940 boat builder
employees including supervisors x 10% x 152 hours per month x 2 months late x 18)
and 25K discount for late delivery to its boats customer. These losses will be paid
by Topcrest in compensations. In addition, Topcrest will also pay Merbatty an exgratia payment of 30K by way of an apology which mean if Merbatty accept this exgratia payment, any other losses faced by Merbatty are no longer under responsibility
of Topcrest. Merbatty might lose customers due to the late delivery where the figure
of loss is unknown which it could be more than 30K. Which means Merbatty might
face financial loss and these will still reduce the profit in 2014. Besides, it will reduce
employees efficiency as well. Consequently, Merbatty will lost customers and will
affect its financial position and waste a lot of time as well.

On the other hand, if Merbatty cancel the contract with Topcrest, Merbatty will not
receive any of the compensations that offered by Topcrest. Besides, if Merbatty chose
the other hull supplier, it will cost an extra 50K although the hull can be delivered
half month earlier than Topcrest. Consequently, Merbatty will spend another 50K
and will not receive any compensation from Topcrest.

ii.

Reputational impacts

The loss of customers will then affect the reputation of Merbatty where customers
will doubt Merbattys ability of taking orders. Consequently, the customers will find
other boat builder companies and this could reduce the revenue of Merbatty and
slowly Merbatty will face the threats in the financial position. If Merbatty is facing
lost rather than profit, then its share price will definitely drop and its reputation will
surely affected as well.

If Merbatty stop to cooperate with Topcrest and choose another supplier that Paul has
already found, half month earlier is not guaranteed. In addition, it would be the first
time they cooperate, and the quality of the hull produced by the new supplier is
unknown. These may also affect the reputation of Merbatty and causing Merbatty to
lose customers and money.

3.1.3 Solutions
i.

Continue the contract with Topcrest

By continuing the contract, Topcrest has given Merbatty an assurance that this will
not happen again and has offered three compensations. First, Topcrest will pay a
payment of 30 per hour for any idle time created by the delay. Other than that,
Topcrest also promise to refund on behalf of Merbatty the expected 25K discount for
late delivery to Merbattys customer. Besides, Topcrest will also pay an ex-gratia
payment of 30K to Merbatty as an apology from them for the late delivery. Although
Merbatty might lose customers, Merbatty still will get extra money from the
compensation which is 65,386 ((5% x 1,940 boat builder employees including
supervisors x 10% x 152 hours per month x 2 months late x (30-18)) + 30K). Thus,
it will reduce Merbattys cost even though customers cancel their order.

ii.

Cancel the contract with Topcrest and find another supplier

Finding another hull supplier to supply the hull at short notice, it will reduce the
possibility of customer cancelling the order due to customers value the service quality
and efficiency. Besides, it can also remain the reputation of Merbatty which will
prevent Merbatty from losing customers.

iii.

Amend the contract with Topcrest and find another supplier

Merbatty should reduce the risks. Merbatty should not cancel the contract
immediately by considering its close relationship with Topcrest and its compensations.
Since Topcrest did not see Merbatty as its important customer, Merbatty should not
take Topcrest as a main supplier. Merbatty may reduce the hulls order with Topcrest
in future and find another hull supplier to complete the rest of the orders. Therefore,
Merbatty can reduce the risk of losing money and customers.

3.1.4 Recommendations
i. Short-term planning
In my point of view, Merbatty should continue the contract with Topcrest and accept
the fact of late delivery of the hull. By receiving the compensations offered by
Topcrest, Merbatty has extra money to hire temporary workers in order to finish the
boat on time. Merbatty can push the boat builder employees to work overtime and pay
them with the extra money. Thus, the boat can be finished on time, their reputation
can be remained, the target plan can still be achieved and the risk of loss of customers
can be avoided and finally it will not affect its financial position.

ii. Long-term planning

Merbatty should find new hull suppliers for long-term planning. Merbatty should not
only cooperate with one single supplier but a few in order to reduce the risks. Besides,
Merbatty should consider having inventory of the popular models in case the same
thing happens again. Other than that, in the contract with all suppliers, Merbatty may
negotiate the amount of compensations in order to protect itself from any losses.

3.2

Accident at Work & JKL

3.2.1 Issues (Accident at Work)

i.

Management issue

It has been more than 30 years Merbatty involved in production of luxury boat.
However, Merbatty have no implement a good Workplace Health and Safety
Management. Merbatty have good record of health and safety since it was formed, but
it is more by luck than by good management.

ii.

Ethical issue

An accident happened where an employee, Paulo, attended to workplace with high on

drugs was falling off and breaking his leg. Paulo is an irresponsible employee where
he breaks the rules of health and safety in workplace and ignored of his own safety
and endanger safety of other colleagues in the workplace.

Jesper, as one key personnel involved in top management, has a close friendship with
Paulo. He was aware of Paulos occasional recreational drug taking habit. However,
Jesper choose to ignore Paulo behavior as believe Paulo will not let the habit interfere
with work. Decision made by Jesper choose to ignore of the Paulo bad habit whether
it is bias and influenced by the close relationship between them.

3.2.2 Impacts (Accident at Work)

i.

Reputational Impact

Reputation of Merbatty with zero accident record since it was formed will be
destroyed. A detail inspection will be conduct by third parties like police man and
insurance agent. The public and shareholders will know Merbatty, as a listed company
with more than 30 years of operation experiences, is doing less in the chapter of
Health and Safety Management in its workplace even though this accident is due to
employees personal mistake. They will also suspicious towards decision of Merbatty
in hiring employee based on close relationship with the key personnel of the company
rather than the ability and qualification of the employee. Besides, the trust of other
employees towards Merbatty in protecting their right of having a healthy and safety
workplace is influenced by the case. Work efficiency and productivity of the
employees will be influenced. By budgeting for safety improvements and making

safety part of companys operational plan, the company will engendering trust from
their employees.

ii.

Financial Impact

There will be delaying or interruption in production line due to the case happened.
The idle time cause by the case is a cost that need to borne by Merbatty. The medical
cost involved for Paulo and compensation that might need to pay by Merbatty is also
non-productivity cost that need to borne by Merbatty.

Based on 1-10-100 rule, the cost borne by Merbatty will be getting bigger and bigger
if the impact of the case is not solve as soon as possible. Besides paying for the
medical cost and compensation, Merbatty will need to pay for cost of rehiring a
employee, cost of improving health and safety management, cost of getting trust of
other employees and so on.

3.2.3 Solutions (Accident at Work)

i.

Develop a better health and safety guidance in workplace

The proactive management of safety and health in the workplace can prevent injuries
and ill-health at work. Companies that put safety first turn out higher quality products.
This is because a safe workplace tends to be a more efficient. Merbatty should
budgeting in improving their health and safety management rather than depending on
luck. The better health and safety guidance is aim to produce a safety working culture
where employee have self-discipline in take care of self-safety and company is also
treat employee as a valuable asset and care about their safety. Merbatty might create
the Total Safety Culture within the company. From the article by Dominic Cooper

(Safety Culture, June 2002), total safety culture is where the company and employee
contribute together in create safety awareness and safety culture in workplace.
Employee should have self-awareness and avoid from any dangerous behaviour that
will affect their own safety. While the management level have the responsibility in
providing a healthy and safety working environment.

ii.

Develop a stronger internal control

Prevention is always better than cure. Bad habit of Paulo is do not know by the
management level and Paulo able avoid from all the colleagues and attend to
workplace show the internal control of Merbatty is weak. Inspection by Human
Resource department on employee background and lifestyle can be implemented.
Besides, a hotline might be set up for privacy complaint make by employee towards
the misbehavior of other employees so that action can be taken towards the
misbehavior employee.

iii. Independent issue

The key personnel of Merbatty should avoid having a too close relation with their
own employee to protect the right and benefit of the company and shareholders.

3.2.4 Issues (JKL)

The first issue in this case is the relationship between Alberto Blanc and Jesper Blanc.
Jesper is planning to build and race a speedboat in the competition but he has not get
the approval from his father, Alberto. The investment director of JKL, Simone Lellet
might think that since Jesper is Albertos son, the decisions made by Alberto might
bias or influenced by the relationship between Alberto and Jesper.

Whereas the second issue in this case is the behaviour of the chairman, Alberto, who
still views or treats the Company as his personal property, but in fact, the Company is
owned by other directors, investors and shareholders as well. Simone might think that
Andreas might misuse the Companys money while he is doing the charitable work.
Besides, Simone does not know about the charitable work and the benefits of it. She
might think that it is absolutely a cost. She has calculated that charitable works has
cost the business five man-years of time in 2012 alone but in the statistics, it showed
only three man-years of time.
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3.2.5 Impacts (JKL)

i.

Financial impact

Shareholders satisfaction is the duty of a listed company. The decisions made by

Alberto will cause Simones suspicion due to the relationship between Alberto and
Jesper. Besides, the disclosure of three man-years of time, in fact it is actually five
man-years of time, will cause Simone to think that there might be some frauds of
revealing the actual amount of man-years on secondment for charity work. These
might cause JKLs trust affected and JKL might break up with the Company.
Consequently, it will affect the share price of the Company since JKL is holding 28%
of the shares and the Company might face financial issues.

ii.

Reputational impact

If JKL break up with the Company, other investors and shareholders will question
why did JKL pull-out since the financial results of the Company are good. These will
cause the other investors and shareholders starts to doubt the activities done by the
Company and it will influence the future plans for expansion as well. Consequently, it
will affect the reputation of the Company and the share price will continuously drop
and will affect the financial position of the Company.

3.2.6 Solutions (JKL)

i.

Communication between shareholders

Since some of the shares of the Company are hold by other investors and shareholders,
any planning or decision making process must involve or communicate with other
investors and shareholders because they have the right to know what the Company is
doing. In this case, the Company should inform the investors and shareholders about
the charitable work as well as the benefits of it to the Company in order to convince
them of the fairness of the decision making process.

ii.

Creditability

Communication between shareholders is essential in order to get the trust from

investors and shareholders and for their understanding as well. In this case, before
Alberto make the decisions whether to approve Jespers plans about the racing boat,
10

Alberto should get the support from the investors and shareholders in order to
implement the plan successfully. Trust from investors can be won back through clear
and sound communication. They can demonstrate the fairness of the past decision
making process and promise a fairer one in the future to JKL and the public. The
charity work can also be re-evaluated.

iii.

Authorization or transparency of charitable work

The charitable work should get the approval from other investors and shareholders as
well before the Company implement it. Besides, transparent procedure is needed. A
more detailed charity plan including budget, operational process and expected results
should go public for other shareholders information. In this case, the Company
should reveal that the charitable work cost the business five man-years of time in
2012 instead of three man-years of time.

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3.3

Racing Boat

3.3.1 Issues
Jesper Blanc (Marketing Director) wants to build and race a speedboat in the
competition. This step will lead to more sales of Merbattys performance motorboats,
the P-3000 specifically. However his father, Alberto Blanc (Chairman) thinks this
racing boat will have high cost and racing itself is a high risk.

3.3.2 Breakeven Point

Design, development and build cost is 12 millions

Travel, accommodation and direct engineer is 8 millions/year

Fixed Cost= 12+8+8= 28 millions

Selling Price= 4.4 millions

Cost per unit= 3.6 millions

= units of boats need to sell to

28m = (4.4m 3.6m)
28m= 0.8
= 35 motorboats (P-3000)

12

3.3.3 Risk Assessment

The breakeven point is 35 motorboats of P-3000. If the sales of P-3000 motorboats
are less than 35, this may not reach the breakeven point. Besides, the fixed cost of 28
million incurred is a large number. So if demand and economy of the market is not as
good as the expectation, it will make a huge loss to Merbatty.

3.3.4 Benefit
By September 2013, Merbatty will be opening third building facility in the Middle
East. If the sales of the third building facility are as good as planned, as this is in a
great possibility and there will be great beginning for large boat market and Merbatty
will be much stronger position in the boat industry.

3.3.5 Factor Analysis

Merbatty has the plan to produce a wider range of new models to offer
customer wider selection of boat sizes and engine capabilities.

Maximise staff cost as this would all be existing of staff working in normal
time.

Maximise office overheads as these are head office overheads allocated on a

per unit basis.

Lukas Dion (Technical Director Design) believes Middle East will have a
good market for larger boats in range of 35 to 40 metres in length.

The press launch of Merbatty first 38 metre boat in May 2013 receive good
response

Third boat facility opens on September 2013 at the Middle East.

The increasing demand for larger boats.

3.3.6 Feasibility Study

Third boat facility in Surania in September 2013, this would allow Merbatty to
have approximately 180 additional boat operating capacity and fourth boat
facitity was to open in year 2017.

Merbatty has a good sales agent in Surania who has been selling Merbatty
boats for 15years and four additional sales agents newly appointed in other
countries in the Middle East Region.

13

Merbattys research shows that skilled labour is available in Surania and also
there are sufficient skilled employees at Mebattys exiting boat building
facilities who are willing to be seconded to the new facility.

3.3.7 Recommendations
In my opinion, this proposal should be accepted. The above assessments have shown
that Merbatty has capability and feasible go along with this racing boat suggestion.
The racing will enhance the brand awareness although racing is a risk but not taking
risk is the biggest risk in life. Besides, it is also due to the increasing demand for large
boat in Middle East. This will give Merbatty to stand at a strong position in the boat
industry.

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3.4

Sales Staff

3.4.1 Endorsement of Stefan Gils Opinion

Merbatty using agents system in promoting and selling their luxury boat since it was
formed. Majority worldwide sales are secure by the sale agents from worldwide. Most
of the agents work exclusively for Merbatty except for few locations where agents
also service for other boat building companies. Agents will join the selling process
from getting a customer, signing contract, building boat and delivery of boat to
customer.

i.

Cost Efficiency

Agents will be pay commission 4% of final revenue of the boat. Agents get pay on the
hard work that they gave. More proactive agents will be get more sales and get more
commission. Merbatty do not need to pay fix salary for the agents that being
appointed in worldwide.

ii.

Well understanding of local demographic

Most of the agents are local resident of the country. They have strong networking in
the country. They know the target market for Merbattys luxury boat in their country.
They have well understanding on the local demographic, they know the customers
needs, local culture, spending ability and so on. They master their own local language
which will not face any problem in communicate with the customer. Due to product
of Merbatty is only suitable for special group of customer with high spending ability.
Agents have a well know about the way of looking customer for Merbatty.

iii.

Strong cooperation bonding & well known of Merbatty system & the customer

Merbatty used agents systems since it formed. Strong bonding between Merbatty and
the sale agents is formed. Cooperation between Merbatty and sale agents is well
managed. This can prove by the consistent grow of Merbattys sales and business
operation. Besides, the sales agents system has been implemented for more than 30
years. The sale agents have a strong understanding about the selling process, products
and customers of Merbatty. This is beneficial for the agents in promoting the
Merbatty boat to targeted customers.

15

iv.

Limitation in reach to worldwide customer

Merbatty only have two building facilities which located in Europe and West Coast of
USA. The third building facilities will be open in Surania, Middle East. Due to the
high costly in open up a new building facilities, Merbatty is not able to open the
facilities in worldwide. However, Merbattys customers are from worldwide. Agents
play an important role as a middle person to make a deal between Merbatty and their
customer.

v.

Friends today, Enemies tomorrow

The consistent grow of Merbatty prove that the sale agents have high ability in
generate sales. Well understanding of Merbatty sell process, product and customer by
sales agent is beneficial to Merbatty when they are serve for Merbatty. However, it
will be a competition if the sale agents no longer serve for Merbatty but is serve for
other building companies.

3.4.2 Endorsement of Marie Lopps Opinion

Merbatty aimed to increase 99% [(1000-502)/502] of its total revenue in year 2017.
Its means that in the nearly five years Merbatty need more marketing planning to
boots up their sales in order to meet the target total revenue.

i.

Controllable

Sales staffs are the staffs that hired and owned by Merbatty. It is different with sales
agents where sales staffs daily route is controllable by Merbatty. Merbatty can
develop a marketing planning for the coming five years as guidance to be followed by
sales staffs. Merbatty can decide the whole selling process that need to be follow by
the sales staff. Merbatty can also set a sales target monthly, quarterly or semi-annually
to be meet by the sales staffs.

ii.

Asset of company

Sales staffs are valuable asset for Merbatty. Sales staffs is belong to Merbatty where
compare to agents which is more independent. Customers information that directly
handle by sales staffs is all belong to asset of Merbatty. However, customers
information that handle by agents is not necessary belong to Merbatty. It can be
16

treated as personal asset of the agents. The customer networking build up by sales
staffs belong to Merbatty while by sales agents is belonging to the agents.

iii.

Directly contact to customers

In sales agents system, whole selling process is agents in charge of handling and
dealing with customers. However, in sales staffs system, Merbatty can have directly
dealing with customers. Sales staffs can communicate with customers directly and
understand the customers needs and able to get the market demand quickly. Sales
staffs help Merbatty in building up a close relationship with customer. Therefore,
Merbatty can get more information about the market demand and customers needs to
improve its competitive.

3.4.3 Recommendations
In my view, Merbatty should take up both Stefan Gil and Marie Lopp opinion. Based
on the five years business expansion plan, Merbatty need both opinions in reaching
their set target. Sales agents system still continues be used for secure the sales and
market share in worldwide due to the limitation of the Merbatty building facilities in
worldwide. However, Merbatty might use sales staffs to in charge of post sell service
for customer from worldwide. The purpose is to create a bonding with the customers
that handle by sales agents before so that in future sales staffs can handle the
customers. While sales staffs can be in charge of customers that stay in the area that
near to the three building facilities to generate sales. Besides, sales staffs can be in
charge of the marketing strategy of Merbatty which will be implemented worldwide
to boots up the sales of Merbattys luxury boat. The role of sales agents and sales staff
have to be clearly classify and separate so that both roles can be play effectively in
helping of generation of sales for Merbatty.

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3.5

New Design Supplier for Surania

3.5.1 Issues
The main issue for this case is to identify the major factors in choosing between two
interior design suppliers as new boat building facility nearing completion. Therefore,
Cooper Designs or Arabian Interior businesses are two potential design companies
that are willing to carry out the design work for the boats produced in Suranian.
However, these two interior design supplier remain unresolved due to different
company background.

Lukas Dian as a technical director in design department stated that Cooper design had
a long history of delivering traditional designs of high quality and even modernised
their design. Cooper not only made full use of computer assisted design technique
(CAD) but also provides an extranet service allowing customers to remotely view the
current design for their boat at any time. Without any changes from customers in their
system, this will have more interaction between designer and customers.

On the other hand, Lukas stated that Arabian Interiors business will be well expansion
in their industry due to limitless of fund. Besides that, it also employs only local
people where they were well educated and fully trained in the use of the latest CAD
systems. Because of Sheik owner is ambitious and entrepreneurial, he believes that
local market will expect to growth aggressively in Merbattys Suranian production
where Sheik owner has recognised the potential growth for luxury boat. As the
management consultant for Merbatty, major factors should be analyses and evaluateso
that to choose between these two suppliers.

3.5.2 Major factor in choosing between two supplier

i. Cost criteria
Cost of a product and services can determine the value itself. The lower the unit
cost of product will help to increase the competition power of the product and also
the profit of the company. A mid-sized of Merbattys boat will be cost 100K
from Cooper Design while will be cost 90K from Arabian Interiors.

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ii. Technology capability

Influence of technology bring much effect in operating a particular activity.
Technology will contribute to efficiency which will result in cost reducing.
Merbatty should take into consideration both design supplier about their current
technology.Both suppliers are using latest CAD system, but Cooper is doing better
than Arabian Interior where Cooper provide extranet service where customers
allow remotely view the current design for boat at any time to ensure their
customer always updated with boat building at their convenience. This will end up
with a better interaction and relationship with customer.

However, Arabian

Interior have a well financial position as is well connected with Sheik, and Sheik
have made a very good prediction about the sales of Arabian Interior in future.

iii. Communication between supplier and customer

Well communication between supplier and customer is essential as we can get
what we want from buyers point of view. Cooper designs more focus on
continuously interaction between designer and customer that can lead to more
reliable result. However, Arabian Interiors only focus on aggressive market
expansion without taking customers opinion into consideration. Consequently,
the ease of communication between supplier and customer can maintain a long
term relationship to have more customer loyalty.

iv. Distance factor

Distance will be a critical factor in choosing supplier as longer distance to get the
service design will increase the cost of goods sold. Cooper designs business
located in Dubaria, a city about 200 miles from Suranian boat building facility
will be more costly as compare to Arabian Interiors. This is due to strategic
location of Cooper designs to achieve their multinational boat interior design
business based in Western Europe where they can attract more customer from
different country to buy their design. While, Arabian Interiors is located near to
Suranian this will end up with cost delivery will be much cheaper.

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v. Market needs
Market needs is another major factor in choosing the suitable supplier. Cooper
designs can fulfill the market needs where they used the local and traditional
design to achieve Suranians people satisfaction. Design based on market needs
were easy acceptable by customers as they can provide feedback and variety of
choices based on the design they desire. On another hand, Arabian Interiors will
be mainly on Arabian flavoured design. More close to local culture needs,
however, is limited choice to customers.
3.5.3 Recommendation
In my opinion, Merbatty should choose Cooper Design as compare to Arabian
Interiors. Having well reputation with high quality of service design provided in
Cooper designs, it definitely can help to achieve and sustain competitive advantage in
this rapid changing business environment. Besides, by providing advanced technology
in Cooper designs and maintaining a well communication between supplier and
customer, it surely will boost more opportunity for Merbatty to attract future
purchaser. Furthermore, distance factor and market needs from customer also play a
critical role in choosing the best supplier as Merbatty will use it as a strategic to
become more competitive in industry boat.

4.0

CONCLUSIONS

In conclusion, Merbatty have to consider all the possible impacts that caused by the
issues and decide for the most appropriate solution to overcome these issues. Decision
making by Merbatty will be directly affect their current position and also the future
planning for expansion. The issues have to be overcome as soon as possible so that
the expectation of future grows for Merbatty is able to be achieved. Merbatty are
advised to solve the issues according to the prioritisation that we suggested so that
Merbatty able to minimise all the possible impacts and losses that might be caused. It
is important in order to protect the benefits of Merbatty and also its shareholders.

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