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WeDive WeDive Bhd (WeDive) is a company which produces and sells high-performance drysuits for divers

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WeDive

WeDive Bhd (WeDive) is a company which produces and sells high-performance drysuits for divers. It was set up some years ago, by a group of friends, after they experienced severe discomfort whilst scuba diving in warm waters because of leaks in their hired drysuits, which are supposed to work by keeping water out. The friends sourced a single supplier that was able to provide a special thermal fabric and designed a very tight-fitting durable suit with a unique neck seal, to offer maximum protection.  WeDive's drysuits are very expensive (up to RM8,000 each) and are typically bought by professional divers (police, armed forces, oil companies, rescue organisations and salvage businesses). To achieve optimum fit the company produces a wide range of different sizes for both men and women. Each drysuit has a three-year warranty and any repairs are undertaken at WeDive's production facility, located in Sabah.

 

WeDive has grown successfully. It now has a number of major contracts with professional divers’ associations and governmental bodies. The company also distributes its drysuits to diving retailers for recreational users who want a high quality product. Total sales last year were approximately RM13 million, comprising 65% professional divers and 35% recreational users. All sales were in South East Asia.

 

Drysuit production is very labour intensive. The market for recreational drysuits is dominated by several large manufacturers in China and South East Asia which benefit from economies of scale, although there are a significant number of smaller producers, like WeDive, which sell in niche markets. WeDive's directors are keen to expand the business and are considering the following two mutually exclusive strategies:

 

Option 1: Expand the range of products for the South East Asia market

WeDive would source supplies of lifestyle clothing (t-shirts, jackets and accessories) and sell them under its own brand. The products would be aimed at consumers in the South East Asia local and tourist market and distributed and sold through existing channels (diving retailers). This option would require marketing but, because of limited funds, WeDive primarily intends to use social media.

 

Option 2: Produce drysuits for export markets

Entering export markets would involve finding and partnering with new distributors, which WeDive hopes would promote the product on its behalf. A key aspect of WeDive's high-performance drysuit is the fit, so the product may need some redesigning or additional tailoring depending on the height and weight of the local population in each export market.

 

If Option 2 is pursued, a possible key market is Australia. If WeDive enters this market, there is a 90% chance that Australian market conditions will be favourable and it will generate a profit of RM500,000. However, if market conditions are unfavourable, a loss of RM200,000 is expected. Alternatively, WeDive could delay its decision until it has undertaken market research, at a cost of RM15,000, which would accurately predict the expected market conditions in Australia

 

The local City Council has recently made grants available to help revive the area’s manufacturing industries. Grants will be awarded to businesses which provide local employment and also have an entirely local supply chain. WeDive’s Managing Director (MD) has told the Financial Controller to apply for a grant and to certify on the form that WeDive fulfils all the application criteria. The MD’s justification is that all WeDive’s drysuit are manufactured locally. The Financial Controller, is concerned that WeDive does not meet the grant conditions because it buys components from China.

 

 

CASE REQUIREMENTS

 

Part I

1. Provide a summary of the case and highlight the important information.

(2 marks)

2. Discuss the business risks that WeDive should be aware of.

(1 mark)

 

3. What are the advantages and disadvantages of Option 1? Discuss.

(4 marks)

 

4. What are the advantages and disadvantages of Option 2? Discuss.

(4 marks)

Part II

 

5. What type of strategies would Option1 and Option 2 according to the Ansoff Matrix? Explain.

(5 marks)

 

6. Write a report which provide an analysis of Option 1, in terms of its suitability, feasibility, and acceptability. Present the report to the class.

(8 marks)

 

7. Write a report which provide an analysis of Option 2, in terms of its suitability, feasibility, and acceptability. Present the report to the class.

(8 marks)

 

8. Using a decision tree, calculate whether it would be worth WeDive paying for market research on the Australian market. Present your recommendation.

(8 marks)

 

9. Discuss the ethical issues arising for WeDive and the Financial Controller as a result of the grant application, and recommend appropriate actions.

(5 marks)