MBC 3823 INTEGRATED CASE STUDY UCTS

CASE STUDY ERA PAPAN

Era Papan & Perabut (EPPSB) was incorporated on 2 June 1998 in Malaysia as a private
limited company under the Companies Act 1965. It is 100% owned by Bumiputera. The
incorporation of EPPSB was a tap the booming furniture market then, especially for market sector.
Though initially being a vendor, it finally went into export market in early 2000. At a time when the
potential for furniture sales was at a very high level, EPPSB was experiencing lackluster
performance.
Based on the current financial standing, it has been observed that the company is not
performing well. It experienced an accumulated loss of RM512,746 for the financial year ended
2010. The questions that need to be addressed are why this is happening and what can be done
to correct it.
The existing authorized share capital is RM2.0 Million comprising of 2 million ordinary
shares of RM1.00 each of which 1.2 million have been issued and fully paid. The current
shareholders and the chairperson, En. Zahazan, holds 90% of the shares and his wide Puan
Zafarina (a member of the Board). Holds the rest of the shares. En. Zahazan has more than 15
years of experience in the furniture industry and he is the force behind EPPSB. He has been
acting the same, since his earlier business of sole proprietorship, Perabut Z Enterprise. He always
keeps himself updated about the industry to keep abreast with its challenging environment.
As a Managing Directors of EPPSB, En. Zahazan is actively involved in the daily operation
of the business. He heads the Marketing cum Business Development and Finance cum
Administration departments of the company. He is assisted by an accounts assistant, an
administrative assistant, and two (2) clerks. For Production/ Project department, he has his
brother, En. Esadin as the Manager, in charged of the Production department, with a supervisor,
two (2) clerks and a group of four (4) production workers.
The factory is maintained and profiled for the production of wood furniture of different
shapes and sizes. The technology used is specific for the wood processing industry, a mixture of
technologies from Taiwan, Japan and Germany. Currently, the factory is not running on full
capacity. Most of the production is done using semi-automated machines. This is because of lack
of capital to acquire machineries.
EPPSB started as a vendor of Hamra Wood Industries Sdn Bhd (HWI) under the
government vendor scheme project. The Ministry of International Trade certified HWI to export
the wood based furniture to the world market, especially to the European countries. Under this
arrangement, HWI will act as an anchor company and EPPSB as the vendor to supply semi-
finished furniture components to HWI factory to be processed as finished products. The
arrangement however did not work out as EPPSB is eager to penetrate the market themselves.
Furthermore, HWI is very strict in its requirement over quality control and the production
operations need to be tailored to their specifications.
Initially, EPPSB was concentrating on producing two major items for export market that is
children bunk bod and dual function chair. The production however, has slowed down. The
company also produces other types of furniture ranging from tables and chairs for schools, bed
and window frames, mostly for local market and upon special orders from customers.

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MBC 3823 INTEGRATED CASE STUDY UCTS

EPPSB does not have any promotional activities to introduce its products to the market
either locally or internationally. Most of its promotional activities are through word of mouth by En.
Zahazan, his staff and from satisfied customers who have previously bought furniture from the
company. Just recently, EPPSB was involve in a furniture trade fair, which was organized by
Malaysian Furniture Trade Association and SEDC in Ipoh. The company also took part in a trade
mission with Ministry to the Middle East to market their products in Dubai and Jeddah.
En. Zahazan handles all EPPSB financial matters himself. He takes charge of all the
financial management, from ordering of material to payment of bills to suppliers. Currently, there
is no qualified personnel to take charge of the financial and accounting function in the company.
His account assistant does not have much experience in a manufacturing business. The company
does not have a proper mechanism to calculate the product cost before it is charged or quoted to
the clients.
Due to improper system of documenting financial transactions, accounts are being
prepared based on available documents only. This has been the major concern of En. Zahazan
since he needs to produce audited financial statements to the bankers. From the recent trade
mission in Dubai and Jeddah, he managed to secure RM2 million contract to supply school
furniture. To execute this contract, En. Zahazan is applying for RM1 million financing from the
bank.
Required:
a. Identify five (5) main issues/challenges that En. Zahazan is facing for the company to be
experiencing losses.

b. Suggest how he could overcome those issues identified in part (b) above.

c. Elaborate five (5) most critical success factors in order to sustain business in furniture
industry

d. In your opinion, should EPPSB remain in the government vendor scheme project? Provide
justification for your answer.