B. Content of Case Study Analysis: Executive Summary Letter
This paper analyzes the IOI Properties Berhad. It consists of strategy formulating, implementing and evaluating. We identify the company’s strength, weaknesses, opportunities and threats. From the SWOT, the EFE Matrix and IFE Matrix have been constructed, and the result shows that, the IOI Properties Berhad’s EFE and IFE Matrix are above average with total weighted score of 3.12 and 3.20. From the financial ratio of the company, it shows that the revenue is continuously increasing. However, the growth of the company’s sales is decreasing from year 2005 to 2006.
We have developed several matrixes to analyze the company and generate strategies. The SWOT Matrix has generated several strategies for the company by using their strength, weaknesses, opportunities and threats. For SPACE (Strategic Position and Action Evaluation) Matrix, the IOI Properties Berhad has fall under aggressive quadrant of the SPACE Matrix. Therefore, it is an excellent position to use its internal strengths to take advantage of external opportunities, overcome internal weaknesses and avoid external threats. Therefore, market penetration, market development, product development, backward integration, forward integration, horizontal integration, conglomerate diversification, concentric diversification, horizontal diversification, or a combination strategy all can be feasible, depending on the specific circumstances that face the company.
For BCG Matrix, the IOI Properties Berhad is in quadrant I businesses (question marks) represent that the company has a low relative market share position, yet they compete in a high-growth industry. Market penetration, market development and product development are appropriate strategies for this company to consider. For Competitive Profile Matrix (CPM), and it shows that among the IOI Properties Berhad’s competitors (Boustead Holdings Berhad and E&O Prop), E&O Prop is the weakest competitor.
The last matrix is Grand Strategic Matrix, which shows that the IOI Properties Berhad is located in quadrant I of the Grand Strategy Matrix which is in an excellent strategic position. For this company continued concentration on current market (market penetration and market development) and products (product development) is an appropriate strategy. When IOI Properties Berhad has excessive resources, then backward, forward, or horizontal integration may be effective strategies. When IOI Properties Berhad is too heavily committed to a single product, then related diversification may reduce the risk associated with a narrow
product line. IOI Properties Berhad can afford to take advantage of external opportunity in several areas. It can take risks aggressively when necessary.
Beside all the matrixes, we have generated long term objectives and alternative strategies for IOI Properties Berhad. The long term objectives are to give better service to the customers and continuously improving their performance, to provide good locations, affordable prices, highly functional designs and the right amenities to the people and also to create a safe, green and pleasant environment. For the alternatives strategies, we have come out with strategy of market penetration.
For the McKinsey 7S Implementation Framework, we maintain the old and add new in certain aspects in 7S. For the strategy, overall the existing strategy can cope with the challenging market environment. We have also developed the company’s new mission statement which includes the 9 criteria of a good mission statement. For the structure, IOI Properties Berhad needs to do research in order to maintain its competitive advantage. For shared value, IOI Properties Berhad is always concern on its customer satisfaction and will try to become a fully customer-driven organization. For staffing, it is good for the company to provide training for the employees but it should not burden the company with the high cost.
1.0 Case Summary/Background
Publicly-listed in the property sector of the Kuala Lumpur Stock Exchange with a market capitalisation of over RM1.5 billion, IOI Properties Berhad is now one of the 3 highest capitalised property counters in the sector. With a track record of over 30 years in the property industry, IOI Properties Berhad has established itself as one of the most reliable developer of quality properties in Malaysia.
IOI Prop is one of the premier property developers in the Klang Valley and Johor. It has a strong presence in the Puchong area, anchored by its flagship Bandar Puteri and complemented by Bandar Puchong Jaya, which is approaching its tail- end. In Johor, the Group dominates the Senai-Kulai area through Bandar Putra Kulai that stretches over 5,000 acres.
RAM has reaffirmed IOI Properties Berhad's respective long- and short-term senior debt ratings of AA3 and P1.IOI Properties Berhad balance sheet appears superior to those of most other property developers and is comparable to the other AA-rated companies in RAM's rating portfolio.
Spearheaded by its Executive Chairman, Tan Sri Dato' Lee Shin Cheng, the Company is currently involved in the following developments which are located in strategic growth areas such as Bandar Puteri,Bandar Puchong Jaya which is in Puchong, Bandar Putra Senai,Bandar Putra Segamat which is in Johor, IOI Resort Putrajaya, Bandar Puteri Klang and Bandar Putera Klang.
Apart from property development, IOI Properties Bhd also holds various investment properties which include Amoda Building (an office tower in the heart of the Golden Triangle in Kuala Lumpur), IOI Mall (a 1,000,000 square feet shopping mall in Bandar Puchong Jaya, Puchong), Mayang Plaza (a commercial complex in Petaling Jaya), IOI Business Park (a 360,000 square feet office block in Bandar Puchong Jaya) and IOI Plaza in Singapore.
1.1 Identify the Organization’s Existing Mission
Our Mission is to be a leading property developer (7) by providing products and services (2) of superior value and by sustaining long-term growth in volume and profitability (5). We shall strive to achieve responsible commercial success by satisfying our customers’ needs (1), giving superior performance to our shareholders, providing rewarding careers to our people (9), cultivating mutually beneficial relationship with our business associates, caring for the society and the environment in which we operate, and contributing towards the progress of our nation (8).
1.2 Identify the Organization’s Existing Objectives
1.2.1 To enhance the environment in IOI Properties Berhad’s townships and helping to foster a better community care.
1.2.2 To design and build a township that creates a community where families can flourish in surroundings that are attractive, convenient and safe.
1.2.3 To contributes towards provision of educational facilities in the communities its business operates and providing direct support to the educational needs of needy children, especially in the estates.
1.3 Identify the Organization’s Existing Strategies
1.3.1 IOI Properties Berhad managed to cope with the challenging housing market environment of oversupply and lack-luster sentiments situation by fine-tuning product launches to offer more shop-offices for sale. 1.3.2 IOI Properties Berhad uses an online system for the ease of the
purchasers to make maintenance and payments.
1.3.3 IOI Properties Berhad adjusts its product mix by focusing on the commercial sector, namely shop-houses, to counter the slack in housing demand.
1.3.4 IOI Properties Berhad reviewing and updating the planning and design of its range of products in anticipation of changing demands and needs of the various targets and changing market environment.
1.4 Evaluation of Mission Statement on Nine Criteria
No Nine Criteria of a Good Mission Statement Stated Not Stated
1 Customers
2 Products or services
3 Markets
4 Technology
5 Concern for survival, growth and profitability
6 Philosophy
7 Self-concept
8 Concern for public image
9 Concern for employees
2. Develop New Mission Statement for the Organization 2.1 New Mission Statement for the Organization
Our Mission is to be a leading property developer (7) in Malaysia (3) by providing products and services (2) of superior value and by sustaining long-term growth in volume and profitability (5). We shall strive to achieve responsible commercial success by satisfying our customers’ needs (1), giving superior performance to our shareholders, providing rewarding careers to our people (9), and cultivating mutually beneficial relationship with our business associates, caring for the society and the environment in which we operate, and contributing towards the progress of our nation (8). We believe that our customers are always looking for a quality product at affordable price (6). We will continually provide online payment system (4) for the convenience of our purchasers to make maintenance and payments.
No Nine Criteria of a Good Mission Statement Stated Not Stated
1 Customers
3 Markets
4 Technology
5 Concern for survival, growth and profitability
6 Philosophy
7 Self-concept
8 Concern for public image
9 Concern for employees
3. Problem Identification
No Problem Identification Major Problem/ Minor Problem
Priorities Of The Problem
1 High cost in training employees
Minor 2
2 Oversupply of houses Major 1
3 Too much allocation of funds to subsidiary.
Minor 3
4. TOWS Framework
4.1 Identifying The Organization’s External Opportunities/Threats 4.1.1 Opportunities
4.1.1.1 Malaysia is one of the fastest growing economies in the region and last year the property market enjoyed capital growth figures of between 15% and 30%.
4.1.1.2 The government has introduced a number of tax and legal initiatives aimed at easing the process of foreign property investment into the country and attracting more investors.
4.1.1.3 The government’s “Ninth Plan” will have a positive impact on the Malaysian real estate market through further improvements to the infrastructure and economic policies.
4.1.1.4Low buying costs currently at between 3.4% to 6.75% of the property value.
4.1.1.5 Supply constraints and improving occupancy and rental rates helped to spur the demand for property.
4.1.1.6 The Government’s encouragement and successful listing of Real Estate Investment Trusts (REITs) further contributed
towards improved market sentiments in the commercial and retail sector.
4.1.1.7 Property prices per square meter in all major Malaysian towns and cities are at a fraction of the cost of similar investments in many other worldwide destinations.
4.1.1.8 60 percent of the population below the age of 30, Malaysia will experience a significant household transformation that will further expand the demand for properties.
4.1.1.9 Car import duties and some other taxes are waived for foreign residents and capital gains tax is not charged on property owned for more than 5 years.
4.1.1.10 Undeveloped nature of Sabah and Sarawak. 4.1.2 Threats
4.1.2.1 The external environment and global economic outlook is expected to register a slower growth rate amidst rising fuel prices and interest rates which cuts affordability and slows demand.
4.1.2.2 Property market activities had dropped by 5.3% in value and 5.7% in number of transactions respectively in Year 2006. 4.1.2.3 On the supply-side, there is oversupply.
4.1.2.4 Johor property market slowed significantly during the year 2006.
4.1.2.5 Consumer sentiments were subdued by increase in petrol prices and rising inflation.
4.1.2.6 E&O PROP has up market developments located in the heart of Kuala Lumpur’s Damansara Heights.
4.1.2.7 The joint venture between Selangor Properties Berhad and E&O PROP fully draws on the combined expertise and reputations of both companies in property development, particularly in Damansara Heights.
4.1.2.8 Boustead Holdings Berhad proposed acquisition of a 70% stake in BP Malaysia Sdn Bhd.
4.1.2.9 Boustead Holdings Berhad is the market leader in the property and development industry.
4.1.2.10 Changes in customer’s tastes and preferences will affect the design of house.
4.1.3 EFE Matrix (External Factor Evaluation Matrix)
NO OPPORTUNITIES WEIGHT RATING WEIGHTED
SCORE 1. Malaysia is one of the fastest growing
economies in the region and last year the property market enjoyed capital growth figures of between 15% and 30%
0.07 4 0.28
2. The government has introduced a number of tax and legal initiatives aimed at easing the process of foreign property investment into the country and attracting more investors.
0.06 3 0.18
3. The government’s “Ninth Plan” will have a positive impact on the Malaysian real estate market through further improvements to the infrastructure and economic policies.
0.06 4 0.24
4. Low buying costs currently at between 3.4% to 6.75% of the property value.
0.07 3 0.21
5. Supply constraints and improving occupancy and rental rates helped to spur the demand for property.
0.04 3 0.12
6. The Government’s encouragement and successful listing of Real Estate Investment Trusts (REITs) further contributed towards improved market sentiments in the commercial and retail sector.
0.06 3 0.18
7. Property prices per square meter in all major Malaysian towns and cities are at a fraction of the cost of similar investments in many other worldwide destinations.
0.05 2 0.10
8. 60 percent of the population below the age of 30, Malaysia will experience a significant household transformation that will further
9. Car import duties and some other taxes are waived for foreign residents and capital gains tax is not charged on property owned for more than 5 years.
0.04 3 0.12
10 .
Undeveloped nature of Sabah and Sarawak. 0.02 2 0.04
NO THREATS WEIGHT RATING WEIGHTED
SCORE 11. The external environment and global economic
outlook is expected to register a slower growth rate amidst rising fuel prices and interest rates which cuts affordability and slows demand.
0.07 4 0.28
12 .
Property market activities had dropped by 5.3% in value and 5.7% in number of transactions respectively in Year 2006.
0.05 3 0.15
13 .
On the supply-side, there is oversupply. 0.06 4 0.24
14 .
Johor property market slowed significantly during the year 2006.
0.02 2 0.04
15 .
Consumer sentiments were subdued by increase in petrol prices and rising inflation.
0.05 2 0.10
16 .
E&O PROP has up market developments located in the heart of Kuala Lumpur’s Damansara Heights.
0.04 2 0.08
17 .
The joint venture between Selengor Properties Berhad and E&O PROP fully draws on the combined expertise and reputations of both companies in property development, particularly in Damansara Heights.
0.04 2 0.08
18 .
Boustead Holdings Berhad proposed acquisition of a 70% stake in BP Malaysia Sdn Bhd.
0.02 1 0.02
19 .
Boustead Holdings Berhad is the market leader in the property and development industry.
0.06 3 0.18
20 .
Changes in customer’s tastes and preferences will affect the design of house.
0.06 3 0.18
TOTAL 1.00 3.12
The average total weighted score of 3.12 indicates that IOI Properties Berhad is responding to existing opportunity and threat in its industry. In other words, IOI Properties Berhad strategies can take advantage of existing opportunities and minimize the potential adverse effects of external threat.
4.2 Identifying The Organization’s Internal Strengths/Weaknesses 4.2.1 Strengths
4.2.1.1 Operating performance of IOI Properties Berhad is expected to be stable due to ability of the company to modify its product mix to meet changing demands and changing market environment.
4.2.1.2 IOI Properties Berhad is one of the premier property developers in the Klang Valley and Johor.
4.2.1.3 IOI Properties Berhad balance sheet appears superior to those of most other property developers and is comparable to the other AA-rated companies in RAM's rating portfolio.
4.2.1.4 Higher sales of commercial properties, namely shop offices in Bandar Puteri, Puchong and also higher contributions from property investment portfolio.
4.2.1.5 A united team of dedicated employees who are committed to the Company’s vision and to giving their best lead to consistency superior performances IOI Properties Berhad in the industries.
4.2.1.6 The gradual increase in occupancy and rental rate for most of IOI Properties Berhad’s investment properties.
4.2.1.7 IOI Resort is the one and only resort development within Putrajaya.
4.2.1.8 Availability of Smart Home options provided by IOI Properties Berhad at Bandar Puteri Puchong enables house owners to remotely manage and communicate with their homes appliances and alarm systems for added security.
4.2.1.9 IOI Properties Berhad emerged as the Edge Top Ten Property Developers for 4 years running.
4.2.1.10 IOI Properties Berhad has introduced an online system for the convenience of its condominium and apartment purchasers to make maintenance and other periodic payments. 4.2.2 Weaknesses
4.2.2.1 Greater focus on developing skilled and talented employees will lead to increase in cost.
4.2.2.2 The current ratio has been decreased dramatically in 2006. 4.2.2.3 The total liabilities has been increased drastically in 2006 because of amount due to subsidiaries has increased. 4.2.2.4 IOI Properties Berhad growth rate in sales is decreasing
drastically from year to year.
4.2.2.5 Create multi-unit facilities that are provided by IOI Properties Berhad creates more maintenance responsibilities for the landlord or tenants.
4.2.2.6 Certain material that has been used for housing developing is lack of material such as floor material.
4.2.2.7 The IOI Properties Berhad unable to maintain its customer service which lead to customer’s dissatisfaction
4.2.3 IFE Matrix (Internal Factor Evaluation Matrix)
NO STRENGTH WEIGHT RATING WEIGHTED
SCORE 1 Operating performance of IOI Properties Berhad
is expected to be stable due to ability of the company to modify its product mix to meet changing demands and changing market environment.
0.05 4 0.20
2 IOI Properties Berhad is one of the premier property developers in the Klang Valley and Johor.
0.03 4 0.12
3 IOI Properties Berhad balance sheet appears superior to those of most other property developers and is comparable to the other
rated companies in RAM's rating portfolio. 4 Higher sales of commercial properties, namely
shop offices in Bandar Puteri, Puchong and also higher contributions from property investment portfolio.
0.06 4 0.24
5 A united team of dedicated employees who are committed to the Company’s vision and to giving their best lead to consistency superior performances of IOI Properties Berhad in the industries.
0.09 4 0.36
6 The gradual increase in occupancy and rental rate for most of IOI Properties Berhad’s investment properties.
0.08 3 0.24
7 IOI Resort is the one and only resort development within Putrajaya.
0.05 3 0.15
8 Availability of Smart Home options provided by IOI Properties Berhad at Bandar Puteri Puchong enables house owners to remotely manage and communicate with their homes appliances and alarm systems for added security.
0.04 3 0.12
9 IOI Properties Berhad emerged as the Edge Top Ten Property Developers for 4 years running.
0.03 2 0.06
10 IOI Properties Berhad has introduced an online system for the convenience of its condominium and apartment purchasers to make maintenance and other periodic payments.
0.06 4 0.24
NO WEAKNESSES WEIGHT RATING WEIGHED
SCORE 12 Greater focus on developing skilled and talented
employees will lead to increase in cost.
0.06 4 0.24
13 The current ratio has been decreased dramatically in 2006.
0.04 4 0.08
14 The total liabilities has been increased drastically in 2006 because of amount due to subsidiaries has increased.
0.05 4 0.20
15 IOI Properties Berhad growth rate in sales is decreasing drastically from year to year.
0.05 4 0.20
maintained state overall. Changing a single unit dwelling to a multi-unit home creates more maintenance responsibilities for the landlord or tenants.
17 Certain material that has been used for housing developing is lack of material such as floor material.
0.1 2 0.2
18 The IOI Properties Berhad unable to maintain its customer service which lead to customer’s dissatisfaction. 0.1 2 0.2 TOTAL 1.00 3.20 Interpretation: As total weighted score of IOI Properties Berhad above 2.5, it indicates a strong internal position.
The Internal-External (IE) Matrix
THE IFE TOTAL WEIGHTED SCORES
Strong Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 3.0 2.0 1.0 4.0 High THE 3.0 to 4.0 EFE TOTAL 3.0 WEIGHTED Medium SCORES 2.0 to 2.99 2.0 I Grow and Build II III IV V VI VII VIII IX
Low 1.0 to 1.99 1.0
Interpretation:
The IE Matrix shows the IFE Total Weighted Scores which is 3.20 and the EFE Total Weighted Scores that is 3.12. This organization IE matrix fall into cell I which can be described as grow and build. The most appropriate strategies for this organization is intensive (market penetration, market development and product development) or integrative (backward integration, forward integration and horizontal integration).
4.2.4 Financial Ratios
RATIO CALCULATION MEANING
Liquidity Ratios 2004 2005 2006 Current Ratio Current asset____ Current liabilities = 465721 6964 = 66.88 = 422693 6245 = 67.69 = 693849 168373 = 4.12
The firm able to meet its short term obligation but the ratio decrease dramatically in year 2006.
Debt –to-Total-Assets-Ratio Total Debt
Total assets
Debt –to-Equity-Ratio Total Debt______ Total stockholders’ equity
Times-Interest-Earned Ratio Profits before interest and taxes________ Total interest charged
= 6964 747880 = 0.09 = 6964 740916 = 0.09 = 132693 7916 = 16.763 = 6245 19888 = 0.0087 = 6245 713643 = 0.0088 = 165033 8187 = 20.16 = 168373 941879 = 0.179 = 168373 773506 = 0.218 = 293374 8234 = 35.63
Total funds that are provided by creditors is increasing in year 2006 Total funds provided by creditors versus by owners is increasing in year 2006 This ratio is increase from year to year; it indicates that the firm is able to cover its interest payment from the annual operating earning.
Activity Ratios
Fixed Asset Turnover
Sales___ Fixed asset
Total Asset Turnover = 136990 282159 = 0.486 = 1 70167 297195 = 0.5726 = 221299 248030 = 0.892
It indicates that the firm is able in managing its fixed asset in relation to sales.
Sales____ Total Assets = 136990 747880 = 0.183 = 170167 719888 = 0.2363 = 221299 941879 = 0.235
The firm is able in utilizing the capacity of total asset in relation to sales.
Profitability Ratios
Operating Profit Margin Earning before interest and Tax(EBIT)________ Sales
Net Profit Margin Net Income Sales
Return on Total Assets(ROA) Net income Total assets Return on Shareholders’ Equity (ROE) Net income______ Total stockholders’ equity
= 132693 136990 = 0.969 = 100551 136990 = 0.734 = 100551 747880 = 0.134 = 100551 740916 = 0.136 = 165033 170167 = 0.97 = 121519 170167 = 0.714 = 121519 719888 = 0.169 = 121519 713643 = 0.170 = 293374 221299 = 1.326 = 236036 221299 = 1.067 = 236036 941879 = 0.251 = 236036 773506 = 0.305 The firm is effective in making its operating decision besides financing decision
After tax profits increased per ringgit of sales.
The firm’s after-tax profits per ringgit of asset arising but it still show that the firm has a poor control of overall expenditure
The firm has an arising rate of return on common
stockholders investment
Growth Ratios
Sales
Annual percentages growth in total sales
= 64.25% = 24% = 30% The firm’s growth rate in sale is decreasing from year 2004 to 2006 Net income
Annual percentages growth in profits
= 56.42% = 21% = 94.24% The firm’s growth rate in profits is decreasing from year 2004 to 2005 but start to increasing dramatically in 2004.
No Items S W O T
No Items S W O T
D P E C T D P E C T 1 Operating performance of IOI Properties
Berhad is expected to be stable due to ability of the company to modify its product mix to meet changing demands and changing market
environment. √
2 IOI Properties Berhad is one of the premier property developers in the Klang Valley and
Johor. √
3 IOI Properties Berhad balance sheet appears superior to those of most other property developers and is comparable to the other AA-rated companies in RAM's rating portfolio. √ 4 Higher sales of commercial properties, namely
shop offices in Bandar Puteri, Puchong and also higher contributions from property
investment portfolio. √
5 A united team of dedicated employees who are committed to the Company’s vision and to giving their best lead to consistency superior performances of IOI Properties Berhad in the
industries. √
6 The gradual increase in occupancy and rental rate for most of IOI Properties Berhad’s investment properties. √ 7 IOI Resort is the one and only resort
development within Putrajaya. √ 8 Availability of Smart Home options provided by
IOI Properties Berhad at Bandar Puteri Puchong enables house owners to remotely manage and communicate with their homes appliances and alarm systems for added
security. √
9 IOI Properties Berhad emerged as the Edge Top Ten Property Developers for 4 years
running. √
10 IOI Properties Berhad has introduced an online system for the convenience of its condominium and apartment purchasers to make maintenance and other periodic payments. √
D P E C T D P E C T 11 Greater focus on developing skilled and
talented employees will lead to increase in cost. √ 12 The current ratio has been decreased
dramatically in 2006. √
13 The total liabilities has been increased drastically in 2006 because of amount due to
subsidiaries has increased. √ 14 IOI Properties Berhad growth rate in sales is
decreasing drastically from year to year. √ 15 Multi-unit facilities that are provided by IOI
Properties Berhad creates more maintenance
responsibilities for the landlord or tenants. √ 16 Certain material that has been used for housing
developing is lack of material such as floor
material. √
17 The IOI Properties Berhad unable to maintain its customer service which lead to customer’s
dissatisfaction. √
18 Malaysia is one of the fastest growing
economies in the region and last year the property market enjoyed capital growth figures
of between 15% and 30%. √
19 The government has introduced a number of
tax and legal initiatives aimed at easing the process of foreign property investment into the
country and attracting more investors √
20 The government’s “Ninth Plan” will have a positive impact on the Malaysian real estate market through further improvements to the
infrastructure and economic policies. √
21 Low buying costs currently at between 3.4% to
6.75% of the property value. √
22 Supply constraints and improving occupancy and rental rates helped to spur the demand for
property. √
No Items S W O T
D P E C T D P E C T 25 60 percent of the population below the age of
30, Malaysia will experience a significant household transformation that will further
expand the demand for properties. √ 26 Car import duties and some other taxes are
waived for foreign residents and capital gains
tax is not charged on property owned for more than 5 years.
27 Undeveloped nature of Sabah and Sarawak. √ 28 The external environment and global economic
outlook is expected to register a slower growth rate amidst rising fuel prices and interest rates
which cuts affordability and slows demand. √ 29 Property market activities had dropped by 5.3%
in value and 5.7% in number of transactions
respectively in Year 2006. √
30 On the supply-side, there is oversupply. √ 31 Johor property market slowed significantly
during the year 2006. √
32 Consumer sentiments were subdued by
increase in petrol prices and rising inflation. √ 33 EOPROP has up market developments located
in the heart of Kuala Lumpur’s Damansara
Heights. √
34 The joint venture between Selangor Properties Berhad and E&OPROP fully draws on the combined expertise and reputations of both companies in property development, particularly
in Damansara Heights. √
35 Boustead Holdings Berhad proposed acquisition of a 70% stake in BP Malaysia Sdn
Bhd. √
36 Boustead Holdings Berhad is the market leader
in the property and development industry. √
Interpretation:
From the above table, it shows that IOI Properties Berhad has ten strengths. It indicates that IOI Properties Berhad can successfully compete with competitors and sustained in this industry. With seven weaknesses, the IOI Properties Berhad should improve their strategies as
No Items S W O T
D P E C T D P E C T 37 Changes in customer’s tastes and preferences
will affect the design of house. √
to eliminate their weaknesses. The IOI Properties Berhad has ten opportunities meaning that IOI Properties Berhad should take advantage of it. This table also shows that, IOI Properties Berhad has ten threats. It indicates that IOI Properties Berhad should minimize the potential adverse effects of external threats so that their organization will not be affected.
5.0 Matrixes 5.1 TOWS Matrix STRENGTH – S 1. Operating performance of IOI Properties Berhad is expected to be stable due to ability of the company to modify its product mix to meet changing demands and changing market environment.
2. IOI Properties Berhad is one of the premier property developers in the Klang Valley and Johor.
3. IOI Properties Berhad's balance sheet appears superior to those of most other property developers and is comparable to the other AA-rated companies in RAM's rating portfolio. 4. Higher sales of commercial properties, WEAKNESESS – W 1. Greater focus on developing skilled and talented employees will lead to increase in cost. 2. The current ratio has been
decreased dramatically in 2006.
3. The total liabilities has been increased drastically in 2006 because of amount due to subsidiaries has increased.
4. IOI Property’s growth rate in sales is decreasing drastically from year to year.
5. Multi-unit facilities that are provided by IOI Properties Berhad create more maintenance responsibilities for the landlord or tenants. 6. Certain material that has
namely shop offices in Bandar Puteri, Puchong and also higher
contributions from property investment portfolio.
5. A united team of
dedicated employees who are committed to the Company’s vision and to giving their best lead to consistency superior performances of IOI Properties Berhad in the industries.
6. The gradual increase in occupancy and rental rate for most of IOI
Properties Berhad’s investment properties. 7. IOI Resort is the one and
only resort development within Putrajaya.
8. Availability of Smart Home options provided by IOI Properties at Bandar Puteri Puchong enables house owners to remotely manage and communicate with their homes appliances and alarm systems for added security.
9. IOI Properties Berhad emerged as the Edge Top
developing is lack of quality such as floor material.
7. The IOI Properties Berhad unable to maintain its customer service which lead to customer’s dissatisfaction.
Ten Property Developers for 4 years running. 10. IOI Properties Berhad
has introduced an online system for the
convenience of its condominium and apartment purchasers to make maintenance and other periodic payments.
OPPORTUNITIES – O
1. Malaysia is one of the fastest growing economies in the region and last year the property market enjoyed capital growth figures of between 15% and 30%.
2. The government has introduced a number of tax and legal initiatives aimed at easing the process of foreign property investment into the country and attracting more investors
3. The government’s “Ninth Plan” will have a positive impact on the Malaysian real estate market through
SO STRATEGIES
1. Develop a new green and smart township at the undeveloped area with ‘Modern Forest’ concept. (S4, O10) – (Market Development)
2. Promoting greater sales via internet which enable buyers to make deposit payment through online system. (S10, O4, O5) – (Market
Penetration)
3. Develop medium- and high-cost housing to meet the increasing of property demand. (S1, O4, O8) –
WO STRATEGIES
1. Selling one to two
subsidiaries to reduce the total liabilities and concentrate more on foreign property
investment to cover the liabilities. (W3, O2) – (Divestiture)
2. Increase advertising via electronic channel to attract more buyers. (W4, O5) – (Market
Penetration)
3. Promote longer
maintenance period to the potential buyers. (W5, O8) – (Market Penetration)
further improvements to the infrastructure and economic policies. 4. Low buying costs
currently at between 3.4 to 6.75% of the property value.
5. Supply constraints and improving occupancy and rental rates helped to spur the demand for property. 6. The Government’s
encouragement and successful listing of Real Estate Investment Trusts (REITs) further
contributed towards improved market sentiments in the commercial and retail sector.
7. Property prices per square metre in all major
Malaysian towns and cities are at a fraction of the cost of similar
investments in many other worldwide destinations. 8. 60 percent of the
population below the age of 30, Malaysia will experience a significant household transformation that will further expand the demand for properties.
(Related Diversification)
4. Improve
infrastructure and facilities at the existing developed housing area such as at Bandar Puteri Klang and Bandar Putra Senai. (S2, O3) – (Product
9. Car import duties and some other taxes are waived for foreign
residents and capital gains tax is not charged on property owned for more than 5 years.
10.Undeveloped nature of Sabah and Sarawak. THREATS – T
1. The external environment and global economic outlook is expected to register a slower growth rate amidst rising fuel prices and interest rates which cuts affordability and slows demand.
2. Property market activities had dropped by 5.3% in value and 5.7% in number of transactions respectively in Year 2006.
3. On the supply-side, there is oversupply.
4. Johor property market slowed significantly during the year 2006. 5. Consumer sentiments
were subdued by increase in petrol prices and rising inflation.
ST STRATEGIES
1. Give more focus on advertising in commercial sector, namely shop-houses, to counter the slack in housing demand. (S1, T1) – (Market Penetration)
2. Co-ordination in planning for infrastructure
provision with the
competitors in developed housing area. (S2, T7, T9) – (Horizontal Integration)
3. Adding new features and architectural to the housing design which suite customer’s tastes and preferences. (S5, T10) – (Product
WT STRATEGIES
1. Use materials which will meet the quality standard that can satisfy the customer’s tastes and preferences. (W6, T10) – (Product Development)
2. Give discounts to housing buyers and include free maintenance service package up to five years or longer. (W5, W7, T1) – (Market Penetration)
3. Reduce number of unskilled workers by offering them early retirement scheme. (W1, T2, T3) – (Retrenchment)
6. EOPROP has up market developments located in the heart of Kuala Lumpur’s Damansara Heights.
7. The joint venture between Selangor Properties Berhad and E&OPROP fully draws on the combined
expertise and reputations of both companies in property development, particularly in Damansara Heights. 8. Boustead Holdings Berhad proposed acquisition of a 70% stake in BP Malaysia Sdn Bhd. 9. Boustead Holdings Berhad is the market leader in the property and development industry. 10. Changes in customer’s
tastes and preferences will affect the design of house.
Development)
Interpretation:
From the SWOT matrix, the internal factors of IOI Properties Berhad which are strengths and weaknesses can cope with the external factors which are opportunities and threats. Overall the
IOI Properties Berhad should pursue market penetration strategy. This is because the IOI Properties Berhad should seek to increase revenue in present market through greater marketing efforts.
5.2 SPACE (Strategic Position and Action Evaluation) Matrix
Ratings Financial Strength
• IOI Properties Berhad’s sales increase in year 2006 by RM 51132. • The percentage growth in profit of IOI Properties Berhad increase
by 73.24%.
• The leverage ratio is below than 1
• IOI Properties Berhad has an arising rate of return on common stockholders investment in 2006 by 13.5% Total +4 +6 +3 +5 ________ +18 Industry Strength
• Real estate in Malaysia is high quality and very low cost compared to other locations,
• The foreign investment into the property sector in Malaysia is firmly growing at unprecedented levels.
• The Malaysia’s ‘Ninth Plan’ will have a positive impact on the Malaysian real estate market.
• Malaysia has introduced a number of tax and legal initiatives aimed at easing the process of foreign property investment into the country and attracting more investors
Total +5 +4 +5 +3 ________ +17 Environmental Stability
• Malaysia is one of the fastest growing economies in the region. • Property prices per square meter in all major Malaysian towns and
cities are at a fraction of the cost of similar investments in many other worldwide destinations.
• Supply constraints and improving occupancy and rental rates helped to spur the demand for property.
• Low buying costs currently at between 3.4% to 6.75% of the property value.
-2 -3
-3 -3
• Oversupply of housing because of fluctuation in interest rate of borrowing. Total -2 ________ -13 Competitive Advantage
• IOI Properties Berhad has introduced an online system for the convenience of its customer.
• IOI Properties Berhad has been 30 years in property industry.
• IOI Properties Berhad is one of the most reliable developers of quality properties in Malaysia.
• IOI Properties Berhad holds various investment properties. Total -1 -3 -2 -2 ________ -8 Conclusion ES Average is -13/5 = -2.6 IS Average is +17/4 = +4.25 CA Average is -8/4 = -2 FS Average is +18/4 = +4.5 Directional Vector Coordinates: x-axis: -2+(+4.25) = +2.25
y-axis: -2.6+(+4.5)= +1.9
Therefore, IOI Properties Berhad should pursue Aggressive Strategies.
Aggressive FS 3 (2.25,1.9) 2 1 CA 1 2 3 IS
ES Interpretation:
IOI Properties Berhad’s directional vector is located in the aggressive quadrant of the SPACE Matrix. The IOI Properties Berhad is in an excellent position to use its internal strength to take advantage of external opportunities, overcome internal weaknesses and avoid external threat. Therefore, market penetration, market development, product development, backward integration, forward integration, horizontal integration, conglomerate, diversification, concentric diversification, horizontal diversification, or a combination strategy all can be feasible, depending on the specific circumstances that face the organization
5.3 BCG Matrix
RELATIVE MARKET SHARE POSITION (RMSP)
High Medium Low 1.0 0.5 0.0 High +20 INDUSTRY SALES GROWTH RATE Medium 0
Low -20
No Company Industry Growth Rate
1 IOI PROPERTIES BERHAD 24.22%
2 E&O PROPERTY 25.06%
3 BOUSTEAD PROPERTY 25.86%
Industry Growth Rate 25.05%
Relative Market Share Position 27.78%
Interpretation:
IOI Properties Berhad is in quadrant I businesses (Question Marks) represent the company’s needs higher cash and their cash generation is low. IOI Properties Berhad is fall in Question Marks quadrant indicates that they must decide whether to strengthen by pursuing and intensive strategy or to sell them. Market penetration; market development; or product development are appropriate strategies for this company to consider.
5.4 Grand Strategic Matrix
RAPID MARKET GROWTH Quadrant I 1. Market Development 2. Market Penetration 3. Product Development 4. Forward Integration 5. Backward Integration 6. Horizontal integration 7. Related Diversification WEAK STRONG COMPETITIVE COMPETITIVE
POSITION POSITION
SLOW MARKET GROWTH Interpretation
IOI Properties Berhad is located in quadrant I of the Grand Strategy Matrix which is in an excellent strategic position. For this company continued concentration on current market (market penetration and market development) and products (product development) is an appropriate strategy. When IOI Properties Berhad has excessive resources, then backward, forward, or horizontal integration may be effective strategies. When IOI Properties Berhad is too heavily committed to a single product, then related diversification may reduce the risk associated with a narrow product line. IOI Properties Berhad can afford to take advantage of external opportunity in several areas. It can take risks aggressively when necessary.
5.5 Competitive Profile Matrix
IOI PROPERTIES BHD E&O PROPERTY BOUSTEAD HOLDING BERHAD N o
Critical Success Factors W R WS R WS R WS
1 Financial Position 0.2 4 0.8 4 0.8 4 0.8 2 Advertising 0.07 3 0.21 3 0.21 3 0.21 3 Dividend 0.1 1 0.1 1 0.1 3 0.3 4 Global Expansion 0.13 4 0.52 3 0.39 4 0.52 5 Sales of property 0.2 2 0.4 3 0.6 2 0.4 6 Corporate Governance 0.2 4 0.8 3 0.6 3 0.6 7 Management 0.1 4 0.4 3 0.3 3 0.3 TOTAL 1.00 3.23 3.00 3.13 Interpretation
The rating values are as follows: 1= major weakness, 2= minor weakness, 3= minor strength, 4= major strength. As indicated by the total weighted score of 3.00, E&O Property is the weakest organization.
6.0 Matrix Analysis and TOWS Summary No Alternative Strategies IE Matrix TOWS Matrix SPACE Matrix Grand Strategy Matrix Total 1 Forward Integration √ √ √ 3 2 Backward Integration √ √ √ 3 3 Horizontal Integration √ √ √ √ 4 4 Market Penetration √ √ √ √ 4 5 Market Development √ √ √ √ 4 6 Product Development √ √ √ √ 4 7 Concentric Development 0 8 Conglomerate Diversification √ 1 9 Horizontal Diversification √ √ √ 3 10 Joint Venture 0 11 Retrenchment √ 1 12 Divestiture √ 1 13 Liquidation
7.0 Quantitative Strategic Planning (QSPM)
STRATEGIC ALTERNATIVES
Market Penetration
Product Development
Weight AS TAS AS TAS
OPPORTUNITIES
1. Malaysia is one of the fastest growing economies in the region and last year the property market enjoyed capital growth figures of between 15% and 30%.
2. The government has introduced a number of tax and legal initiatives aimed at easing the process of foreign property
0.07 0.06
-investment into the country and attracting more investors
3. The government’s “Ninth Plan” will have a positive impact on the Malaysian real estate market through further improvements to the infrastructure and economic policies.
4. Low buying costs currently at between 3.4 to 6.75% of the property value.
5. Supply constraints and improving occupancy and rental rates helped to spur the demand for property.
6. The Government’s encouragement and successful listing of Real Estate Investment Trusts (REITs) further contributed towards improved market sentiments in the commercial and retail sector.
7. Property prices per square metre in all major Malaysian towns and cities are at a fraction of the cost of similar investments in many other worldwide destinations.
8. 60 percent of the population below the age of 30, Malaysia will experience a significant household transformation that will further expand the demand for properties.
9. Car import duties and some other taxes are waived for foreign residents and capital gains tax is not charged on property owned for more than 5 years. 10. Undeveloped nature of Sabah and Sarawak. 0.06 0.07 0.04 0.06 0.05 0.06 0.04 0.02 -4 3 -4 -0.28 0.12 -0.24 -4 -0.24
-THREATS
1. The external environment and global economic outlook is expected to register a slower growth rate amidst rising fuel prices and interest rates which cuts affordability and slows demand.
2. Property market activities had dropped by 5.3% in value and 5.7% in number of transactions respectively in Year 2006.
3. On the supply-side, there is oversupply.
4. Johor property market slowed significantly during the year 2006.
5. Consumer sentiments were subdued by increase in petrol prices and rising inflation.
6. EOPROP has up market developments located in the heart of Kuala Lumpur’s Damansara Heights. 7. The joint venture between Selangor Properties Berhad and
E&OPROP fully draws on the combined expertise and reputations of both
companies in property development, particularly in Damansara Heights. 8. Boustead Holdings Berhad
proposed acquisition of a 70% stake in BP Malaysia Sdn Bhd.
9. Boustead Holdings Berhad is the market leader in the property and
development industry.
10. Changes in customer’s tastes and preferences will affect the design of
0.07 0.05 0.06 0.02 0.05 0.04 0.04 0.02 0.06 0.06 _____ 1.00 3 -0.21 -3 -0.18
house. STRENGTH
1. Operating performance of IOI Properties Berhad is expected to be stable due to ability of the company to modify its product mix to meet changing demands and changing market environment.
2. IOI Prop is one of the premier property developers in the Klang Valley and Johor.
3. IOI Prop's balance sheet appears superior to those of most other property developers and is comparable to the other AA-rated companies in RAM's rating portfolio.
4. Higher sales of commercial properties, namely shop offices in Bandar Puteri, Puchong and also higher contributions from property investment portfolio.
5. A united team of dedicated employees who are committed to the Company’s vision and to giving their best lead to consistency superior performances of IOI Properties Berhad in the industries.
6. The gradual increase in occupancy and rental rate for most of IOI Properties Berhad’s investment properties.
7. IOI Resort is the one and only resort development within Putrajaya.
8. Availability of Smart Home options provided by IOI Properties at Bandar Puteri Puchong enables house owners to remotely manage and communicate with
0.05 0.03 0.02 0.06 0.09 0.08 0.05 0.04 0.03 4 -0.2 -3 -2 -0.09 -0.18
-their homes appliances and alarm systems for added security.
9. IOI Properties Berhad emerged as the Edge Top Ten Property Developers for 4 years running.
10. IOI Properties Berhad has introduced an online system for the convenience of its condominium and apartment purchasers to make maintenance and other periodic payments.
WEAKNESSES
1. Greater focus on developing skilled and talented employees will lead to increase in cost.
2. The current ratio has been decreased dramatically in 2006.
3. The total liabilities has been increased drastically in 2006 because of amount due to subsidiaries has increased.
4. IOI Property’s growth rate in sales is decreasing drastically from year to year. 5. Multi-unit facilities that are provided by IOI Properties Berhad create more maintenance responsibilities for the landlord or tenants.
6. Certain material that has been used for housing developing is lack of material such as floor material.
7. The IOI Properties Berhad unable to maintain its customer service which lead to customer’s dissatisfaction. 0.06 0.06 0.04 0.05 0.05 0.09 0.1 0.1 _____ 1.00 4 -2 2 -3 0.24 -0.1 0.18 -0.3 -3 -0.3
-Sum Total Attractiveness Score 1.87 0.99 Interpretation:
The sum total attractiveness score of 1.87 indicates that market penetration is a more attractive strategy when compared to the product development strategy.
8.0 Long Term Objectives and Alternatives Strategy 8.1 Long Term Objectives
Market Penetration
8.1.1 To give better service to the customers and continuously improving their performance.
8.1.2 To provide good locations, affordable prices, highly functional designs and the right amenities to the people.
8.1.3 To create a safe, green and pleasant environment, and also build thriving, vibrant communities.
8.2 Alternative Strategies Market Penetration
8.2.1 Strategy 1
Give more focus on advertising in commercial sector, namely shop-houses, to counter the slack in housing demand.
8.2.1.1 Advantages
The company’s sales and revenue will maintain at the reasonable rate due to the product diversification.
8.2.1.2Disadvantages
If the demand for shop-houses decrease, it will affect the company’s sales and revenues.
.
8.2.2 Strategy 2
Give discounts to housing buyers and include free maintenance service package up to five years or longer.
8.2.2.2 Advantages
Can increase customer’s satisfaction and attract more buyers.
8.2.2.3 Disadvantages
Incurred higher cost because the company needs to hire professional personnel in providing the maintenance service.
9.0 Strategy Implementation (Policies & Allocate Resources) 9.1 McKinsey 7S Implementation Framework
9.1.1 Strategy
IOI Properties Berhad provides quality products by focusing on the housing and commercial sector. Overall the existing strategy can cope with the challenging market environment. Moreover, IOI Properties Berhad had introduced online system for the ease of the purchaser to make payments.
9.1.2 Structure
The organization chart of IOI Properties Berhad is acceptable but it needs to make some changes by adding one more department that is Research and Development. It is because IOI Properties Berhad needs to do research in order to overcome their problem. Moreover, this is to maintain its competitive advantage.
9.1.3 System
The existing system that been applied by the IOI Properties Berhad is good compared to the competitor. It is because IOI
Properties Berhad had introduced online system for the ease of the purchaser to make payments.
9.1.4 Style
IOI Properties Berhad is strongly focused in boosting its sales. The management of IOI Properties Berhad is updating the planning and design of its range of products in anticipation of changing demands and needs of the various targets and changing market environment.
9.1.5 Shared Value
IOI Properties Berhad is always concern on its customer satisfaction and will try to become a fully customer-driven organization.
9.1.6 Staffing/Skills
IOI Properties Berhad is always improving its employee’s performance by providing training as to improve their skills in marketing, management and customer service. This existing strategy should be maintained for the benefit in the future.
10.0 Conclusion
In a nutshell, IOI Properties Berhad is continuously improving their performance but they need to take some corrective action. Hopefully the new strategies that have been formulated that is market penetration. By using strategy 1 that is give more focus on advertising in commercial sector as to counter the slack in housing demand. This can also help IOI Properties Berhad to give better services to their customers and finally, they can be successful in the future.