KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY, FINANCE AND BUSINESS

ACADEMIC YEAR 2015/2016
APRIL EXAMINATION
ABDM5174 INTERNATIONAL BUSINESS STRATEGY
XX, 2016

TIME: 2.00 PM 5.15 PM

(3 HOURS 15 MINUTES)
ADVANCED DIPLOMA IN BUSINESS STUDIES
(INTERNATIONAL BUSINESS)

Instructions to Candidates:
Time allowed:
Reading and Planning : 15 minutes
Writing
: 3 hours
During reading and planning time, only the question paper may be annotated. You are not
allowed to write in your answer book until instructed to do so by the chief
invigilator/invigilator-in-charge.
This paper is divided into TWO (2) sections:
SECTION A: Answer ONE (1) compulsory case study question.

(40 marks)

SECTION B: Answer THREE (3) out of four (4) questions.

(60 marks)

This question paper consists of 5 questions on 4 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
SECTION A (40 marks)
Answer ONE (1) compulsory case study question.
Question 1
Felda Global Ventures sees immediate and long-term returns in China

Felda Global Ventures Bhd (FGV) will derive immediate returns on investment from its venture into a
Chinese edible oil firm as well as over the longer term as part of its business diversification plans, the
group says. In a Feb 26 announcement to the exchange, the group disclosed that it plans to purchase a
55% stake in Chinas Zhong Ling Nutril-Oil Holdings Ltd (NUH) for RM976.25mil from a major
shareholder as well as 14 other vendors via two separate agreements.

NUH has been in business for 20 years and are known for its Ostrich brand of edible oils. It is
predominantly a manufacturer of peanut oils which account for 70% of their sales. Some have
questioned the rationale of FGVs foray into China, particularly as it is diversifying into the
manufacturing, trading and distribution of non-palm oil products. Yes, distributing our palm oil
products has always been our core business. However, we also understand that there is a strong
demand of blended oil, which largely uses palm oil as its main component in China. It will be
opportunity loss for us not to introduce several other variants of edible palm oil-based cooking oil
products, they says.
The investment in NUH offers FGV access to a sales network of 60,000 retail outlets covering five
southeast coastal provinces in China. Additionally the group is also able to consolidate NUHs
earnings into its accounts by virtue of its 55% stake. A dividend payout policy has also been agreed
among the shareholders with a payout ratio at minimum of 50% of the companys profit, the group
says. Despite Ostrichs modest market share of 1% in Chinas edible oil segment, the revenue
contribution is quite substantial.
The company reported revenues of nearly RMB$2.32bil (RM1.46bil) for the financial year ended Dec
31, 2014 (FY14) despite holding just a sliver of the market share in Chinas edible oil market, which
underscores the growth potential available in the worlds second largest economy. The purchase bodes
well with FGVs ambition to become a vertically integrated agri-commodities firm on par with the
likes of Wilmar International Ltd, according to a senior executive when contacted.
There are numerous synergistic opportunities in China. The group may consider introducing its palm
oil products that is separate from NUHs existing brand, he says. The executive also confirmed that
any capex requirements going forward will be borne internally by NUH, whose cash pile is said to
have grown substantially in recent years. However, competing with the major players will be a tall
order for a new market entrant such as FGV. Wilmar and Chinese food conglomerate Cofco Group
This question paper consists of 5 questions on 4 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
hold more than half of the total market share in Chinas edible oils segment. FGVs role is to provide
vertical integration into NUHs business to take some of the market share, says the senior executive.

Question 1 (Continued)
In terms of edible oil, soy oil based products has the dominant market share. Palm oil consumption is
less than 10% in China while peanut oil is about 20% according to industry estimates. On the other
hand, China is the largest importer of palm oil, accounting for 20% of the worlds consumption.
Source: Adapted from The Star, 2016. 12th, March.
Required:
(a) As an International Marketing Manager for Felda Global Ventures Bhd., one of your
responsibility is to expand and market the companys products to China. Discuss the critical
factors that you should consider before investing in China.
(20 marks)
(b) Explain the possible reasons that attract Felda Global Ventures Bhd to venture into China.
(20 marks)
[Total: 40 marks]

This question paper consists of 5 questions on 4 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
SECTION B (60 marks)
Answer THREE (3) out of four (4) questions.
Question 2
The degree to which an organisation in matching resources and capabilities with the opportunities in
the external environment is known strategic fit. The matching takes place through strategy and it is
therefore vital that the company has the actual resources and capabilities to execute and support the
strategy. Strategic fit can be used actively to evaluate the current strategic situation of a company as
well as opportunities such as merger and acquisition, and divestitures of organisational divisions.
Illustrate the process of developing the strategic fit.
[Total: 20 marks]

Question 3
ABC Berhad is celebrating its 30 th anniversary in 2016. The company is one of Asias best-managed
multinationals and is involve in hospitality business, entertainment, plantations, technology,
manufacturing and retailing across seven countries. In order to be effective and efficient, ABC Berhad
is currently adopting matrix organisational structures in managing its international business. Discuss
the advantages and disadvantages of matrix organisational structures.
[Total: 20 marks]

Question 4
(a) An organisation structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organisational aim. Some multinational
company adopted international product division organisation structure with certain condition for
the reason of the ability to segregate large sections of the companys business into semiautonomous groups. These semi-autonomous groups are mostly self-managed and focused upon a
narrow aspect of the companys products or services. Discuss.
(10 marks)
(b) A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a
partnership between foreign and host country investors and share profits, losses and management
of the JV. Discuss the advantages and disadvantages of formation of an international joint venture
company.
(10 marks)
[Total: 20 marks]

Question 5
(a) Porters theory of national competitive advantage is basically an evaluation of how competitively
a nation participates in international markets. With the aid of a diagram, examine Porters theory
of national competitive advantage.
(10 marks)
(b)

One of the purposes of direct investment in a foreign country by a company is to improve

their turnover. The business organisation requires certain competitive advantages to be
successful in their foreign country investment. Discuss the above statement with the use of
Eclectic Theory.
(10 marks)
This question paper consists of 5 questions on 4 printed pages.

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ABDM5174 INTERNATIONAL BUSINESS STRATEGY
[Total: 20 marks]

This question paper consists of 5 questions on 4 printed pages.