ics-merbatty boat case report example

8/18/2019 ICS-Merbatty Boat Case report example

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EPPA4716 INTEGRATED CASE STUDY

SEMESTER 2 SESI 2015/2016SET 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


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TABLE OF CONTENT

Content Page

1.0 Introduction 1

2.0 Prioritization of Issues 2-33.0 Discussion of Issues

3.1 Late Delivery of A Hull from Topcrest3.1.1 Issues3.1.2 Impacts3.1.3 Solutions3.1.4 Recommendations

3.2 Accident at Work & JKL3.2.1 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)

3.3 Racing Boat3.3.1 Issues3.3.2 Breakeven Point3.3.3 Risk Assessment3.3.4 Benefit3.3.5 Factor Analysis3.3.6 Feasibility Study3.3.7 Recommendations

3.4 Sales Staff3.4.1 Endorsement of Stefan Gil’s Opinion 3.4.2 Endorsement of Marie Lopp’s Opinion 3.4.3 Recommendations

3.5 New Design Supplier for Surania3.5.1 Issues

3.5.2 Major factor in choosing between two suppliers3.5.3 Recommendations

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18-1920

4.0 Conclusions 20


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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. Merbatty’s 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.


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2.0 PRIORITIZATION OF ISSUES

The 5 M ain I ssues in Pri ori tization

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 theshare 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.


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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 marketneeds.


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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 willcost 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 Merbatty’s operating schedule which mean the finished

boat not being delivered to its Mediterranean mooring until 31 May 2014 which isalso two months late. This will cause the Merbatty’s 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 sup ervisors x 10% x 152 hours per month x 2 months late x €18)

and €25K discount for late delivery to its boat’s customer. These losses will be paid

by Topcrest in compensations. In addition, Topcrest will also pay Merbatty an ex-

gratia payment of €30K by way of an apology which mean if Merbatty accept this ex-

gratia 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 coul d 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.


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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 alt hough 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 Merbatty’s 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 de lay. Other than that,

Topcrest also promise to refund on behalf of Merbatty the expected €25K discount for

late delivery to Merbatty’s customer. Besides, Topcrest will also pay an ex -gratia

payment of €30K to Merbatty as an apology from them for the late d elivery. 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 Merbatty’s cost even though customers cancel their order.


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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.


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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 wa s aware of Paulo’s 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


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safety part of company’s 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


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(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 Alberto’s 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 Company’s 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 showedonly 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 Simone’s 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 JKL’s trust affected and JKL might br eak 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, beforeAlberto make the decisions whether to approve Jesper’s plans about the racing boat,


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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 Merbatty’s 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)


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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.


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• Merbatty’s research shows that skilled labour is available in Surania and also

there are sufficient skilled employees at Mebatty’s exiting boat building

facilities who are willing to be seconded to the new facility.


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 Gil’s 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 marke t for Merbatty’s 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 customerMerbatty 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 Merbatty’s sales and busine ss

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

Merbat ty’ boat to targeted customers.


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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, Merbatty’s 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 Lopp’s 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, customersinformation that handle by agents is not necessary belong to Merbatty. It can be


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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.


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 t he sales of Merbatty’s 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 Merbatty’s 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 Merbatty’s 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 buyer’s 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 customer’s 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 Suranian’s people satisfaction. Design based on market needswere 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 ArabianInteriors. 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.

ics-merbatty boat case report example

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