TABLE OF CONTENT
PAGE NUMBER
1.0 Executive Summary
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2.0 Company Background
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2.1 Mission
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2.2 Vision
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3.0 Environmental Analysis
2
3.1 PEST analyses
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3.1.1 Political
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3.1.2 Economical
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3.1.3 Social
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3.1.4Technological
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3.2 Porter’s five forces
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3.2.1The Bargaining Power of Customer
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3.2.2 The Bargaining Power of Suppliers
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3.2.3 The Threat of New Entrants
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3.2.4 The Threat of Substitute Products
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3.2.5 The Intensity of Competitive Rivalry
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4.0 Strategic Competitive Advantage and Major Weakness
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4.1 Strengths
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4.2 Weakness
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4.3 Opportunities
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4.4 Threats
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5.0 Recommendations
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5.1 Stability Strategy
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5.2 Defensive Strategy
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6.0 Justification of Strategy
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7.0 Conclusions
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8.0 References
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1.0
Executive Summary
IOI Group is a company listed in Bursa Malaysia that business include palm oil plantation, properties and investment. mainly focusing IOI Group organization strategy is towards entering into globalization as every business is aiming to expanding. Certain corporate strategy components to be looked into which include mission, SWOT analysis of organization, Porter’s five forces as implementation of corporate strategies to justify the implemented strategies.
2.0
Company Background
This is group of companies calling it or themselves IOI Group they are leaders when it comes to palm oil and also matters regarding properties in Malaysia. Their main focus is mainly only palm oil business that is the palm oil plantations which it does its own refineries, and also manufacturing chemical like oleo chemical and also refining things like cooking oils and fat (IOI Annual Report 2012). On the other it concentrates well on matters regarding properties, these main part of focus is also based in other countries like Egypt, new Zealand, USA and in china (Roger Bennett 1998).
2.1 Mission
Its main and most definite plan on its mission strategy has been to gain high profit margins through offering products of best quality and v alues (IOI Group Oleochemical, 2013).
2.2 Vision
To be a leader on its area and to be a leader in the market where by the mode of practice would be through value creation to each every stakeholder, talking of the shareholders here are the, customer’s needs, providing good working environment to the staff and also having a care on communities and societies to sustain a long term growth ( IOI Group Oleochemical, 2013).
3.0
Environmental Analysis
3.1 PEST analyses.
The PEST analyses is a tool in marketing helps to see how is the business learning under, political, economic, social and technological factors 2
3.1.1 Political
Political environment is very important for any existing business. Malaysia is a political stability country in the world. Whereby, Malaysian government very much encourages any company or organization to involve in the business transaction, not just for local but foreign company as well to invest in our country. Now days, Malaysian government is trying to make Malaysia as a core business center around the world. Hence, allowing local or foreign investor to invest in any field of business in Malaysia by giving them the freedom ad press and rule of law. Besides that, the Malaysia government also gives incentive to the business organization if their project is for social purpose. Furthermore, Malaysian government focuses more on social and employment legislation for the purpose to create a peaceful country for an y business investor. Therefore, IOI Group has always kept a good relationship with the Malaysian Government, as this will ensure their safety and stability development while conducting business locally, and at the same time, attracting more local and foreign investor to invest in their business (Nikoloyuk, Burns and Reinier, 2010).
3.1.2 Economical
Economic environment refer to the stage of business cycle, current and project economic growth, unemployment and labor supply, labor cost, impact of globalization, impact of technology and likely changes in economic environment. Based on the latest News, Malaysian government will provide more capital for the company to do the first business in Malaysia. That is a good way to build Malaysia as a develop country at year 2020, In short, it has shown a bright future for IOI Group in operating in its construction field, whether locally or in foreign market place (Nikoloyuk, Burns and Reinier, 2010).
3.1.3 Social
Social refer to the population growth rate and age profile, population employment pattern, job market freedom and attitude to work. Besides that, it also includes press attitude, public opinion, social attitude and social taboos. This factor will impact the development of the company or 3
business organizations. Such as the population growth will make the demand of the house building increase, and that the growing phenomena of the educational level may cause the increasing demand for skillful employees. (Roger Bennett 1998). IOI Group strongly believes that the business community should reinvest a portion of its earning in social development. As a responsible corporation will always seeks revenue in which it can contribute to the community through the four areas such as social responsibility program, nation building activities, environment conversation and community lifestyle enhancement (Midttun, 2008).
3.1.4Technological
This factor is very important to contribute for development a nd improvement for any company or organization. Nowadays, the trends of technology are more improve and develop such as the introduction of E-commerce and E-business. The world without border makes business transaction very easy to be done. Besides that, the exiting of Internet tool may help the company to build up their close relationship with other parties, such as the supplier, consumers, competitors and government. Thus, IOI continuously improving and upgrading it with the aim to compete and stay ahead of its competitors.
3.2 Porter’s five forces
Porter’s five forces is a strategy to have a better understanding about the consumer buying power, supplier bargaining power, competitive rivalry, threats of substitution and threats of new entry in certain regions which relevant to organization’s project .
3.2.1 The Bargaining Power of Customer
Generally, the buyer is identified as an individual or a group of individual who has the greatest power in affecting the business world, as without them there would not be any business transactions accruing.
The good image and strong brand name of IOI Group in the local market, has enable them to gain greater bargaining power with its buyer. Whereby, its good reputation in providing low cost and high quality services has ensure IOI Group in gaining more profitable tender compared to its
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competitors, due to the fact that buyers are more trusted and confidence to IOI Group reliable performance (De Man and Burn, 2006). 3.2.2 The Bargaining Power of Suppliers
This means that the suppliers have effect on prices and since most of IOI products have been based on low prices, meaning that the suppliers are so man y, if there were very less suppliers, we expect the IOI products prices to rise.
3.2.3 The Threat of New Entrants
New entrants mean new competitors in the particular industry. New entrants to an industry typically bring to new capacity; a desire to gain market share; and substantial resources. The extent of threats as a result of new entrants depends on:Generally, it is quite difficult for new company to enter into the construction industry to compete with IOI Group. This is because; IOI Group has long before established a strong brand name and good reputation in the local market, whereby customers have high brand loyalty towards IOI Group’s products and services. Besides that, IOI Group enjoys the economies of scale; easy access of capital gaining from banks to finance its investment; close relationship with local government; and effective distribution channels in promoting the Group’s products and services. (Philip K. and Gary A. 1987).
3.2.4 The Threat of Substitute Products
Can be said to be products that appear to be different but they have capability to satisfy the similar needs in product or service. It limits the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge. These deserve the most attention and they should be those that are subjected to trends improving their price or performance value relative to an industry’s products; or are produced by industries earning high profits. Differentiating a product along the dimensions of the customer’s value price, quality or services is basically to reduce the substitute’s attractiveness.
3.2.5 The Intensity of Competitive Rivalry
Rivalry occurs when competitions sense the pressure or act on an opportunity to improve their position, thus it is often based on price, quality, and innovation. 5
The intensity of competitive rivalry is high when there a re:In the upcoming future, there will be more potential competitors running within the construction field. As in the nearby future, the potential growth of construction industry is a must, not only in local market but in foreign market as well. Therefore, IOI Group has to continuously upgrade itself in the sense of management, systems and techno logy to stay ahead of its competitors.
4.0 Strategic Competitive Advantage and Major Weakness
SWOT analysis provides a simple way to summarise most analysis. It simply sets out the Strengths, Weaknesses, O pportunities, and Threats face by the organization and helps them to
focus on the key issues.
4.1 Strengths High Tech State-Of-The-Art System
IOI Group has implemented a various wide range of latest technologies in running its daily business operation; this includes the Management Information System and One Box One ERP. Shared Service Center (SSC)
It has helps lowering total time spent on non-core activities and eliminating the redundancies to technology enhancements. Experienced Top Management
The board of Directors consists of highly educated and fully experienced committees in various professional field of business management. Corporate Culture
All the staff in IOI Group shared the same corporate vision and practices a strong corporate culture – team work from different ethnic. Skillful Employees
All employees are fully trained and have the skills needed to carry out their everyday job. They are frequently being upgraded to improve their skills and knowledge. Profitability Ratio Of Company Is High
The company is facing the decreasing rate of the net income, but the company ability to make the net income increased from the net loss. So, the profitability of this company is quick strong.
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Based on this high profitability ratio, the business of a company can be develop quickly compare with other company are low rate of profitability. Strong Brand Name Image And reputation
As a stable, matured with many years experience in this industry, IOI Group has already earned its strong reputation in this field, especially when IOI Group is being listed in the KLSE Main Board.
4.2 Weakness Conglomerate Structure
IOI Group is form from a conglomerate structure. Rather than focusing on its core business, IOI Group diversified its business to different filed. Therefore, the cost incremented in performing it will increase same goes for its operating risks. Growth Ratio Is Too Floating
The growth rate is quick flexible, so that investors are difficult to estimate the in coming year’s growing rate. In this condition, the investors are not interest to making new invest in this company. Thus, the company will very difficult to attract other member to add-in the new investment. Global Positioning
IOI Group can be considered as a non risk taker, as its business is mainly focuses in Malaysia and a few subsidiaries in Asian countries. As a well established organization, IOI Group still employ a precaution action in enlarging its business.
4.3 Opportunities Relationship with Government Sectors
IOI group has always maintain a good relationship with Malaysian Government, as this will ensure that the government would not interfere with its business development, hence ease the procurement of tender-Putrajaya. Community Services
IOI Group has performed many social work and contribution to the society-education, humanitarian and recycling. The good image of IOI Group has enabled the Group in marketing its services. 7
Government Integration
Government integration is referring to the bargaining power of customer. This is because IOI Group was getting many contract which links to the governments. This shows that the government has looking forward to the company and also gives an advantage to the company in doing their business (Economic Planning Unit, 201 0).
4.4 Treats Economic Recession
The Economic Recession has consequences on an economy break-down in many Asian countries, including Malaysia. Never the less, has also trigger the e conomy growth of IOI Group as well. Strong Competition
Now days, there are a lot of companies entering into the construction field. This has result of a large pool of local and foreign competitors in the local market, especially in this business field. (Philip K. and Gary A. 1987) Petrol Prices Increases
Recently, the price of petrol has increased. Thus, has indirectly affected the economic growth of IOI Group as well. Changing Governmental Regulation
The unstable changes of host governmental regulations have also caused a big problem for IOI Group in its further development in the host country.
5.0 Recommendations
There are the corporate strategies and business strategies that I would recommend to IOI Group in improving the Group’s overall business development in the nearby futur e.
5.1 Stability Strategy
The main focus of this strategy is to consolidate close relationship with different players in this business field. (Philip K. and Gary A. 1987) The strong relationship built by IOI Group with the local government and its outside suppliers, can ensure the stability of its business development in 8
the nearby future. The close relationship of IOI Group’s top management with the local and host government can help IOI Group to be more sensitive and alert to any changes of the government regulation (Bursa Malaysia, 2011). 5.2 Defensive Strategy
The defensive strategy is normally adopted by company that faces unstable situation therefore, IOI Group should use its high technology and experience committee as its core competency to compete and stay ahead of its competitors, As a result of many unpredictable environmental threats, plus diversified focus and lack of management control and planning, therefore it is best for IOI Group to close down its unprofitable subsidiaries and focus more on profitable industryquarrying business. (Philip K. and Gary A. 1987 )
6.0 Justification of Strategy
In terms of feasibility in strategies suggested, since IOI has sufficient resources in terms of able to gain support from shareholders, society and community and having a team of efficient workers. The reason for strategies are workable as IOI's business activities are very environmental oriented, which consolidate close relationship with different players in this business field. IOI has done this very well through engaging cooperate social responsibility (CSR) whereby they take initiative to approach the communities and other societies to better the way of living and also through environmental care, some of the major key areas it concentrates on education, community based projects and so many others (Roger Bennett 1998; Yam, 2012).
IOI has successfully sustained experienced employees in the company and these employees are faithful and ready to bring IOI to higher heights of success, being compatible with competitor. IOI has always taken the welfare of its staff through rewards and promotions and they always welcome and respect people no matter their religion, background, religion, they make sure that they stick to the code of ethics whereby they provide a very healthy working environment and it always regards it employee as most valued stakeholder (Roger Bennett 1998). IOI department introduced the share save schemes which employees are able to purchase IOI shares, this is a beneficial both to the organization and to the employees since it assures of maximum output since everyone got the part of the organization (Abidin, 2010). 9
Shareholders would normally invest in low risk and high return company. It is through diversification strategy that IOI is committed to establishing mutually beneficial relations and growth with suppliers, service providers, and business partners (Roger Bennett 1998) (i.e. agents, distributors, and venture and alliance partners). In return, expect their partners to adhere to business principles and conducts consistent if not better than their own.
7.0 Conclusions
IOI Group has place an on-going strategy in identifying, evaluating, monitoring, and managing the key risks affecting the achievement of its business objectives throughout the period. The Group has also committed to maintain a sound system of internal control and effective risk management practices to ensure good corporate governance. (2500 words) exclude referencing, table of content and executive
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