STRATEGIC BUSINESS LEADER

PRE-SEEN INFORMATION
MOCK EXAM 2
UNIVERSITI POLY-TECH MALAYSIA (UPTM)
Contents
1. Introduction..................................................................................................................... 2
2. Leisure boat industry information – Neoland .............................................................. 2
Overview ............................................................................................................................... 2
Cruising yachts...................................................................................................................... 3
Industry challenges and developments ................................................................................. 4
Risks ..................................................................................................................................... 4
Innovation and sustainability ................................................................................................. 4
Key performance indicator (KPI) ........................................................................................... 5
Industry body......................................................................................................................... 5
3. Vexmarine overview ............................................................................................................ 5
Background ........................................................................................................................... 5
Ownership ............................................................................................................................. 5
Board structure...................................................................................................................... 6
Information systems .............................................................................................................. 6
Operations............................................................................................................................. 6
Departments.......................................................................................................................... 7
Distribution ............................................................................................................................ 7
4. Vexmarine website extracts .......................................................................................... 8
5. Vexmarine financial information – selected summary................................................ 9

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1. Introduction
Vexmarine is a leisure boat manufacturer based in Neoland. Vexmarine builds cruising yachts
and offers a boat repair and maintenance service.
Vexmarine has a financial year end of 30 June.
It is currently August 20X3.

2. Leisure boat industry information – Neoland

Overview
The use of boats in Neoland for leisure and recreational purposes can be traced back three
hundred years when the first Neoland yacht club was established. The first boats were reliant on
wind power and had sails or were rowed. This changed with the invention of engines which were
incorporated into motorboats. Since then, boats in Neoland have continued to evolve to operate
safely and more efficiently.
Today there are over 300 yacht clubs and 43 marinas in Neoland. In 20X2, revenue in the Neoland
leisure boat industry was $850m across 468 different business which employed over 10,600
people.
Most leisure boats are made of fibreglass and benefit from electronic safety equipment. There
is a wide range of leisure boats available to purchase in Neoland, but the most popular types
of boats for recreation and leisure activities are cruising yachts, sailing dinghies, sport fishing
yachts and luxury yachts.
Table 1: Boat type descriptions

Boat type Image Description

Sailing Sailing dinghies are small boats with a simple design, few
dinghies controls and less technology. They are designed to be
sailed in calm waters.

Cruising Cruising yachts are powered by wind in their sails, with an

yachts engine for use if required. They are designed for use near
the seashore and have facilities on board for overnight
accommodation.

Sport fishing Sport fishing yachts are larger than cruising yachts and
yachts have more powerful engines. They are designed for deep
water conditions and can go a long distance from land.
Facilities on board are often luxurious.

Luxury yachts Luxury yachts are built on an individual basis and reflect
the owner’s tastes. They are finished to a high standard of
luxury and comfort.

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Although all four types of boats are used for leisure and recreational purposes in Neoland,
currently only cruising yachts and sailing dinghies are manufactured in Neoland.
Table 2: Boat type market information

Customers Competition Average Industry Industry

price average average
gross operating
profit profit
margin margin
Cruising Individuals in Neoland Dominated by $60,000 40% 15%
yachts and other countries three companies in
with a keen interest in Neoland, but there are
weekend sailing. also several smaller
manufacturers.

Sailing Neoland families 15 manufacturers in $5,000 35% 12%

dinghies looking for a simple, Neoland.
relatively cheap boat
for day sailing.

Sport Wealthy individuals Foreign $250,000 48% 22%

fishing with a strong interest manufacturers, some
yachts in fishing, located in only specialising in
Neoland and other this type of yacht.
countries.

Luxury Very wealthy Foreign $400,000+ 62% 28%

yachts individuals in Neoland manufacturers.
and other countries.

Cruising yachts
The market for the manufacture of cruising yachts in Neoland is dominated by three companies:
Janrom, Kelabby and Vexmarine. Although there are other smaller companies operating in the
same market, these smaller companies generally lack resources. Foreign companies have not,
as yet made a big impact in the Neoland cruising yacht market.
These three companies are different and focus on their own strengths:
– Janrom is well known for its design innovations, which mean its yachts reach their destinations
quicker and more smoothly than its competitors’ yachts. It regularly introduces new engine
and power developments.
– Kelabby’s cruising yachts are known for their comfort and style, even though they are not
luxury yachts. It offers customers the ability to customise their cruising yachts by offering a
selection of additional features which are updated regularly to keep up to date with current
trends.
– Vexmarine benefits from a loyal customer base (most of its customers are over 50 years of
age) due to its high levels of customer service even though the performance of Vexmarine
yachts is inferior to Janrom’s yachts, and Vexmarine’s range of additional features is more
limited than Kelabby’s.

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Industry challenges and developments
Shortages of skilled employees in the general leisure boat manufacturing industry is a problem
across Neoland. This has led to increases in staffing costs and reductions in margins for
manufacturers of all types of boats. A number of leisure boat manufacturers are actively exploring
ways of automating the production process in order to reduce the reliance on skilled employees.
Some manufacturers have also introduced strict efficiency targets into their production process
to reduce costs and improve financial results.
Although most leisure boatbuilders now market their companies and products through their
websites, there is still limited use across the Neoland leisure boat industry of e-marketing and
social media activity.
Demand for cruising yachts has increased over the last few years. New buyers have entered the
market due to extensive social media coverage of the annual Neoland regatta, a week of boat
and yacht races, which is now one of the most popular sporting events held in Neoland. There
are also international customers who have an interest in weekend sailing and order cruising
yachts which are manufactured in Neoland. The cruising yacht industry remains competitive,
and companies are under pressure to keep prices at a steady level to maintain their market
share.
Last year, stricter environmental regulations came into force in Neoland. These regulations
included limits on fishing in many sea areas off the shores of Neoland. This has resulted in a fall
in the demand for sport fishing yachts.
Risks
The most common risks which cruising yacht manufacturers in Neoland face are:

Potential risk Potential impacts

– Flooding (in certain areas of Neoland) – Interruption of business
– Damage to premises, assets,
infrastructure and yachts
– Compensation to customers
– Product obsolescence (current and new – Loss of income and market share
products) – Poor perception of brand

– Data security – Loss of customer data

– Interruption to operations
– Unauthorised access to data
– Legal penalties and compensation to
customers
– Reputation risk relating to products and – Loss of income and market share
services – Dissatisfied customers

Innovation and sustainability

The leisure boat manufacturing industry within Neoland is becoming more innovative due to
the pressure to reduce the use of fiberglass in the production process. Although fiberglass is
relatively environmentally friendly to produce, it cannot be recycled easily or cheaply. This has
meant that leisure boats which have reached the end of their useful life are often taken to landfill.

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An increasing number of leisure boats are now being constructed from recyclable materials so
that they can be deconstructed and separated when they reach the end of their useful life.
Innovation in relation to the power sources used in leisure boat engines is high. Some leisure
boat manufacturers are partnering with motor vehicle engine manufacturers to research and test
the use of electric or hydrogen power in leisure boats. Yacht clubs and marinas are investigating
the installation of solar powered boat charging stations.
Key performance indicator (KPI)
The key performance indicators in the leisure boat manufacturing industry are gross profit margin
and operating profit margin. The average of these indicators varies across the different types of
boats and is illustrated in Table 2 on page 3.
Industry body
Companies in the leisure boat building and repair industry are eligible to join the Neoland Marine
Boatbuilders Association (NMBA). Quarterly meetings are held to discuss matters which affect
leisure boatbuilders, for example, health and safety, environmental legislation, competitiveness
and training.

3. Vexmarine overview
Background
Vexmarine is a cruising yacht manufacturer based on the east coast of Neoland. It was established
50 years ago. It specialises in the manufacture of cruising yachts made of fibreglass which it
sells direct to customers. Vexmarine’s cruising yachts are made in standard moulds, with limited
additional optional features available to customers.
Vexmarine also carries out maintenance and repair work on yachts it has constructed and on
yachts constructed by other companies and this currently contributes to around 15% of its
annual revenue.
Vexmarine has struggled to maintain its cruising yacht market share over the last few years.
Recognising these problems, Vexmarine acquired a smaller cruising yacht manufacturer,
Bursham Co (Bursham), a year ago, in order to have access to more skilled employees and
increase market share.
Ownership
After the acquisition of Bursham was completed, Tony Bursham, Bursham’s founder and sole
shareholder, became Vexmarine’s chief executive, in place of Vexmarine’s founder who retired
from the business.
The board of Vexmarine has five executive directors, including the chief executive, each with
a 20% shareholding in Vexmarine. Vexmarine is currently unlisted but may seek a listing in the
future.

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Board structure
Alongside Vexmarine’s five executive directors there are three non-executive directors.

Chair

Chief
Non-executive Non-executive Non-executive
executive
director director director
officer

Human
Operations Finance Technology
resources
director director director
director

The role of technology director was created three months ago. There are currently plans to
recruit a marketing director, but no appointment has been made yet.
Information systems
Vexmarine has a website which focuses on highlighting its heritage, reliability and craftsmanship.
Emphasis is placed on the high levels of customer service which Vexmarine prides itself on.
The website also contains an ‘initial enquiry form’ which can be completed and submitted by
prospective customers. Once the form has been submitted, it is picked up by the customer
service team and allocated to a customer liaison officer. The customer liaison officer then initiates
further contact with the prospective customer and becomes the personal contact for the customer
throughout the buying process.
The website also contains the contact telephone number for the repairs department. Repairs are
booked over the telephone directly with the repairs department.
Vexmarine collects data and tracks the activity of its website visitors through its website. Its
social media presence is limited.
Operations
Vexmarine currently operates from two different sites, both located in the town of Hameldon.
These two sites are the locations from which Vexmarine and Bursham operated before the
acquisition.
Vexmarine’s board has recently agreed terms for the purchase of a single large site on the coast
at Lympool, the principal yachting centre in Neoland. This will replace both the current sites and
will be financed by their sale. The move to the new site in Lympool will take place over the next
few months despite forecasts that flooding in the area will become more frequent and severe
with global warming.
Tony Bursham wishes to use the move to the new site as an opportunity to transform Vexmarine’s
business. He wants to introduce more automation in production and improve the standardisation
of products and introduce efficiency targets. He has recently announced his plans at a staff
briefing to all Vexmarine employees.
Over the next five years, Tony Bursham wants Vexmarine’s gross profit margin to increase from
40% to 45% and its operating profit margin to increase from 15% to 20%.

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Departments

Moulding create
Repairs provide the boat hulls
annual services from fibreglass
and ad hoc Moulding
repairs

Repairs Joinery

Customer service Joinery create

is at the centre of Customer the decks
Vexmarine service and masts

Finance Fitting
Finance manage Fitting complete
the liquidity of the the interior of the
business boat and install
Finishing the sails

Finishing install the

electrics and the
engines

Distribution
All Vexmarine cruising yachts can be delivered in the following ways:
– Customer collection from either of the Vexmarine sites in Hameldon. When these sites are
sold, customer collection will be available from the new Lympool site.
– By a qualified Vexmarine crew to a location specified by the customer.
– Shipped to a number of yacht clubs and marinas across Neoland.

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4. Vexmarine website extracts

VEXMARINE
Our values are the centre of our business.

We are passionate about the yachts we build, and we know

that this passion is shared by our customers. Each Vexmarine
customer enjoys a one-to-one relationship with the team
Service which builds their boat, beginning with the initial enquiry to
final collection or delivery and maintenance throughout their
ownership.

We care about the cruising yachts we build and the methods and
Quality materials we use to build them. We create hand-built cruising
yachts using high quality materials and traditional methods.

We do not outsource any activity. Every piece of moulding, joinery,

Value for money all fittings and finishing is carried out by our own staff, on our own
site to ensure that customers receive true value for money.

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5. Vexmarine financial information – selected summary
Gross profit (%) Operating profit (%)

44 25
43 20
42
15
41
10
40
39 5
38 0
20W9 20X0 20X1 20X2 20X3 20W9 20X0 20X1 20X2 20X3

ROCE (%) Number of new cruising

yacht sales per employee
15
15·5
10
15
14·5
5
14
0 13·5
20W9 20X0 20X1 20X2 20X3 20W9 20X0 20X1 20X2 20X3

Customer satisfaction (%) Employee turnover (%)

97·5 15

97
10
96·5
5
96

95·5 0
20W9 20X0 20X1 20X2 20X3 20W9 20X0 20X1 20X2 20X3