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Business Level
Business Value Creation

K
Instructions to candidates

(1) Time allowed: Reading and planning – 15 minutes

Writing – 3 hours

B
(2) Total: 100 marks

(3) Answer all questions.

(4) This paper consists of two sections.

Section 1: 5 questions

5
Section 2: 2 questions

(5) Answers should be in the English Language, in the answer

booklet/s given to you.

(6) Begin each answer on a separate page in the answer booklet. Submit
all workings.

JUNE 2015
 SECTION 1
All five questions are compulsory.
Total marks for Section 1 is 50 marks.
Recommended time for the section is 90 minutes.

Question 01

Comnet Bank (Pvt) Limited is a leading private bank in Sri Lanka. Like many other Sri
Lankan banks, Comnet is also facing severe competition from foreign banks that have
established their operations in Sri Lanka. Foreign banks have access to low cost funds from
their foreign parents and hence able to provide loans at much lower interest rates. They
also have superior customer service and can provide loans within 48 hours of receiving an
application. The local banks typically take more than one week due to red tape and
protocol. Foreign banks also provide a much more convenient service on their internet
banking platforms. Comnet has been recently experiencing a deterioration in its net profit.
The newly appointed CEO of Comnet called for a senior management team meeting and
said that he would like to understand how the bank is creating value by analysing its value
chain.

Required:

(a) Explain two (02) primary activities and two (02) supporting activities of the value
chain with reference to Comnet.
(4 marks)

(b) Discuss how Comnet could use the value chain model to enhance business
performance. (6 marks)

(Total: 10 marks)

KB5 – June 2015 Page 2 of 7

Question 02

Trade Star (Pvt) Limited (TSPL) is a leading trading company in Sri Lanka. TSPL acts as the
agent for many leading foreign brands of automobile tyres and automobile batteries. They
also sell smaller spare parts such as filters, plugs and bearings. They operate mainly as a
wholesaler but also maintain an outlet at the location of their main warehouse for retail
customers. The retail operation has a mini store separate from the main warehouse in
order to provide customers with a faster service. They maintain only a minimum level of
stock at the mini store of the retail operation as the larger warehouse is at the same
premises. However, TSPL frequently finds that the stocks are not replenished properly at
the mini store and hence the main warehouse is accessed causing significant delays for the
customers.

Required:

(a) Outline the main functionalities of a warehouse management system in creating

value to TSPL.
(4 marks)

(b) Analyse how a warehouse management system would enable TSPL to improve
their operations.
(6 marks)

(Total: 10 marks)

Question 03

Lean manufacturing is derived from the Japanese manufacturing industry and has now
spread across the globe in both manufacturing and service industries. Lean manufacturing
is a systematic way of eliminating waste in the manufacturing process. It attempts to
maintain and enhance what adds value, and reduce everything else. In today’s competitive
environment, businesses’ goals are to minimise costs, improve liquidity and reduce cycle
time to enhance the value of the operations of the businesses.

Required:

(a) Explain two (02) principles of lean manufacturing.

(4 marks)

(b) Demonstrate how lean manufacturing would enable businesses to address each
of the above mentioned goals.
(6 marks)
(Total: 10 marks)

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Question 04

Savari.lk is an e-commerce platform that provides users with access to hotel bookings in Sri
Lanka. They allow the users to make bookings and payments online. Savari.lk is directly
linked with the websites of the partner hotels. Once a booking is done and the payment is
made, the partner hotel receives the reservation and provides the online confirmation to
the users of Savari.lk. The transactions happen on the Savari.lk website and users do not
have to visit the website of the partner hotel.

E-commerce sites such as Savari.lk are slowly replacing the more traditional brick and
motor business platforms. The convenience provided by e-commerce attracts many busy
individuals to make their purchases on the internet without visiting the physical store.

Required:

(a) Differentiate B2B and B2C e-commerce.

(2 marks)

(b) Analyse how the internet has changed the B2C business operations in a radical
way in relation to Savari.lk.
(8 marks)

(Total: 10 marks)

Question 05
MobCom is a global mobile network operator. They are planning to enter the emerging Sri
Lankan market that is already dominated by two leading operators who together control
80% of the market. At the initial investigation of the Sri Lankan market, the research team
of MobCom noted that critical success factors (CSFs) of the Sri Lankan market are slightly
different to the CSFs of other markets in which MobCom is currently operating. Therefore
the management of MobCom has decided to analyse CSFs of the respective markets and
develop key performance indicators (KPIs) for the initial stage based on them.

Required:

(a) Demonstrate three (03) critical success factors (CSFs) that would be important to
MobCom when developing the plan for the first five years of operation by
considering the mobile telecommunications industry in Sri Lanka.
(7 marks)

(b) Outline one (01) KPI for each of the above CSFs which would be applicable to
MobCom in the Sri Lankan market.
(3 marks)

(Total: 10 marks)

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 SECTION 2
Both questions are compulsory.
Total marks for Section 2 is 50 marks.
Recommended time for the section is 90 minutes.

Question 06

There is an age-old belief in Sri Lankan society, particularly amongst women, that fair skin
is linked with beauty. Many multinational as well as local cosmetic product companies have
capitalised on this belief and have targeted a variety of products to cater to the demands of
this customer segment. Products for skin whitening have been particularly successful in
villages. Rural markets have contributed to a significant share of this market and are an
important factor of driving growth.

Beauty Pharma PLC (BPP) is a multi-national company in the cosmetic industry which is
considering the launch of a new fairness cream called ‘Soft Petal’ in the Sri Lankan market.
An independent research firm has conducted a consumer survey and suggested that the
new product should be targeted to young females in rural areas of the country. Further,
they have suggested that potential customers should display special behavioural
characteristics. Accordingly, they have suggested a profile for the ideal target consumer of
‘Soft Petal’ as follows.

“ The ideal target customer for ‘Soft Petal’ is a young female, who is between 16 years to 36
years of age and associates fairness with beauty. She spends most of her income on mobile
prepaid cards and cosmetic products that would make her look beautiful and confident. She
likes romantic songs and Hindi movies. She earns between Rs. 10,000 to Rs. 20,000 a
month.”

However, top management of the company believes that a systematic marketing process
should be applied to successfully compete with the intense competition in the beauty care
market in the country. According to market statistics, close to 70% of the current fairness
cream market is dominated by one single multinational brand and the rest of the market is
fragmented between many small local brands and some Ayurveda products. Further, some
multinational brands are aggressively competing with the market leader to acquire
substantial market share.

The management of BPP is in the process of developing a marketing strategy for ‘Soft Petal’.
They consult you to support them with their marketing strategy.

KB5 – June 2015 Page 5 of 7

 Required:

(a) Analyse the competitiveness of the fairness cream industry in Sri Lanka by using
the Porter’s Five Forces model, with the purpose of developing strategies for ‘Soft
Petal’ fairness cream.
(5 marks)

(b) Analyse the possible market segments under the appropriate segmentation
variables for selecting the target market for ‘Soft Petal’ fairness cream.
(6 marks)

(c) Recommend an appropriate target market to match the proposed profile of the
ideal target customers for the new product.
(4 marks)

(d) Discuss how to design the marketing mix for ‘Soft Petal’ in developing the
marketing strategy for the selected target market.
(10 marks)

(Total: 25 marks)

Question 07

JH Holding (Pvt) Limited (JHH) is a medium scale electrical component manufacturing firm
established in 1998. It was initially started by Jagath Rathnayake as a small electrical items
shop but achieved remarkable growth during the last few years due to his effort and
dedication in developing the business. Currently, the company produces several electric
items for both the industrial and consumer markets. JHH markets the electric items under
several brand names and each brand is popular among customers as high quality and
reliable brands in their respective industry.

At present around 150 employees work at JHH and a majority of these employees work in
the factory. Jagath is the chief executive officer (CEO) of the company and Hemalee, Jagath’s
wife, serves as the administrative manager. In addition to those key positions, well
experienced and qualified professionals work as the factory manager and sales manager.
Even though JHH has high growth potential, it has several issues deteriorating its growth
and profits.

According to the internal set-up of the company, the administrative manager handles most
of the company operations. She issues work orders to employees in the administrative
department and other departments, but sometimes the assigned tasks do not directly relate
to the respective departments or the job roles of the employees. The employee turnover
rate of the company is very high compared to the industry. Most of the resigned employees
blamed that their positions and job roles at JHH were unclear and did not provide any

KB5 – June 2015 Page 6 of 7

career advancement. Recently the CEO had to get personally involved to solve some
conflicts among employees caused by overlapping of their duties.

Furthermore, vacant positions are filled by the administrative manager based on the
recommendations of existing employees. For special vacancies such as technical officers,
the company publishes paper advertisements. The applications received through internal
and external sources are shortlisted by the administrative manager and forwarded to the
CEO for the final selection. The CEO takes the responsibility to identify the most suitable
candidate for each position, and personal discussions are conducted to decide the
employees’ expected benefits and salary. It takes considerable time for new employees to
get adapted to the prevailing culture of the organisation, and most of these employees tend
to leave the company before completing their probationary period. Salary increments are
decided by the CEO and he does not disclose the mechanism of evaluating employees.

Currently three executive officers directly report to the administrative manager. Handling
personnel files, preparing salaries and other payments to employees are handled by one
executive officer while the other two are responsible for maintaining accounting
information. All transactions are reported through an integrated software developed by a
local software development firm. Even though the company faces several internal issues, it
is popular among customers for the high quality of electric items they market. Recently JHH
was able to obtain a monthly export order from a reputed foreign retail company.

In last management meeting, Jagath emphasised that this is the right time to change the
management philosophy by identifying the importance of value creation for the business
through people, and decided to establish a separate department for human resource
management (HRM). Further, he decided to recruit a chartered accountant as the head of a
separate Accounts Division.

Assume that you have been appointed as the new human resource (HR) manager of JHH.

Required:

(a) Analyse the prevailing HR issues of JHH.

(7 marks)

(b) Recommend possible actions and solutions to overcome the above issues.
(10 marks)

(c) Discuss the steps to be followed by the new HR manager in order to hire a new
chartered accountant for the company.
(8 marks)

(Total: 25 marks)

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