IJM Firm Bhd is one of the top outlined companies in Malaysia and it is a heterogeneous conglomerate. Its central business activities encompass construction, property development, processing and quarrying, infrastructure concessions and plantations. However, our survey concentrate on its development area only.
1. 10 Objectives
The target of the task is to practice the students to apply and relate the strategy knowledge discovered. They can understanding better about them learned. Furthermore, they have clearer picture about them as the group participants discuss their knowledge while doing the assignment.
At the end of the task, their communication skill, teamwork and control will be improved. A good teamwork and control can guide associates to cooperate with one another and ensure the assignment progress running well.
1. 20 Scope
This assignment covers the strategies applied by IJM in their business. It is important to have a better understanding on the organization's qualifications primarily while doing assignment because it helps the participants to perform better in their next responsibilities.
Next, situation research will be mentioned. It encompasses basic environment examination, industry conditions and SWOT examination. General environment consists of seven elements which pays to when analyzing IJM. Then, the industry conditions are analyzed with Porter's Five Makes Analysis. It evaluate the competitiveness of IJM. On the other hand, the SWOT analysis identifies the strengths, weaknesses, opportunities and threats to IJM.
Strategic options analyze of IJM is the next phase and followed by recommendations. Lastly, the conclusion will be made for the assignment.
1. 30 Limitation
However, there are some limitation we face while doing the assignment. We are lack of information as the info of IJM such as its strategies and guidelines are private and private. Our company is hard to get these information by searching through online and we can not analyze deeper on IJM, just is determined by the basic information. Furthermore, even as are students, we remain fresh and unconfirmed in studying company's tactical management. Besides, we were lack of time as we have to finish our jobs with limited information and time.
2. 0 Organization's Background
IJM is made in season 1983 by merging three medium-sized local engineering companies which were IGB Structure Sdn Bhd, Jurutama Sdn Bhd and Mudajaya Sdn Bhd. Because of this, IJM set up as a professionally managed development group that gained immediate market approval and sufficient financial capacity to remain competitive effectively against rivalries on the market.
IJM's key competencies grew expotentially and nowadays it is diversifying into other related businesses and broadening into new market segments. IJM started its business in the structure field and be the largest property creator or contractor in Malaysia presently. Numbers of large constructions such as highways and KLIA were being built by IJM. Besides, IJM involved in the building of townships, commercial buildings and high-rise real estate under the development of key expansion areas in the country as well.
Recently, IJM starts off globalizing its business looked after successfully undertook endeavors overseas before time such such as Orlando USA, Singapore and Australia. Presently, it primarily concentrates in Malaysia, India, United Arab Emirates, China and Indonesia and establishes an evergrowing existence in those market.
Vision and mission statement are created by successful leaders to evidently and concisely present the way of the organization. It is beneficial to the organization to achieve its goals. IJM's eye-sight is to be an internationally competitive Malaysian contractor of world-class infrastructure and structures. Meanwhile, its objective is to deliver the highest performance standards in all the endeavors.
3. 0 Situation Analysis
3. 1 Basic Environment Analysis
Demographic segment
IJM's contruction business targets the countries such as Malaysia, Singapore, India, United Arab Emirates. IJM has many construction projects in the majority of the working and tourism areas that are population intensive. For instance, in Malaysia, IJM experienced constructed hospital, condominium and resorts in Kuala Lumpur. In those areas, there are high demand on basic needs of facilities such as retail center, expressway and bridge and so IJM can gain advantages throughout there.
Economic Segment
The global market starts recovering slowly and gradually in 12 months 2010 following the financial meltdown in yr 2008 and the housing marketplace in US is expected to be increased. Malaysian engineering sector 0 is likely to grow in season 2012 due to the government assignments under Tenth Malaysia Plan (10MP) and Economic Transformation Programme (ETP). On the other hand, there is great opportunities in international such as India and China as there may be growth in global building 1. IJM has opportunities to increase revenue and extend their business to abroad. However, there are some difficulties like rise of interest rate 2, increasing cost of development materials 3 and inflation 4 will reduce the revenue and boost the cost of IJM assignments.
Political/Legal
Malaysian government specializes in infrastructure development and 10MP and ETP have been implemented to advantage the development 5. However, the federal government regulates the very least income of RM 900 6 for private sector workers to boost their life standard in order to become a developed nation. The labor costs for IJM will be increased even it hires overseas workers because of the policy. Besides, scheduled to increase of general public awareness towards environmental issues 7, IJM enhances its cultural responsibility and R&D costs to imposes eco-friendly technology like Green Technology 8.
Technological segment
The development of technology such as Green Technology 9 and Energy Efficiency Technology 0 can improve the efficiency and effectiveness of development performance, save building time and create environmental friendly constructions. IJM acquired put effort on innovation of new technology as it had developed R&D division for advancement.
Sociocultural segment
Sociocultural suggests social's frame of mind and culture principles while doing business. In Malaysia, the success of construction mainly rely upon good romance with customers and therefore personal skill and communication skill 1 are incredibly important while coping with them. The IJM's employees should try to improve their communication skill and encourage "saving face" culture which is using laughing to cover up nervousness and disagreement running a business working. Besides, Malaysia is a multi-racial country where each competition holds different principles, cultures and faith. IJM's employees need to comprehend and respect one another culture and religious beliefs to avoid any disagreement and misunderstanding.
Global Segment
There are always chances for companies to exploit new market or change the existing markets, ethnical or characteristics. For instance, there was information displaying that Malaysian development companies have big opportunities 2 in China. Thus, IJM has tried to broaden its businesses in other countries such as India and China.
Physical segment
This segment pertains to the actual 3 or actual changes in the physical environment and any positively response against those changes on the business techniques. IJM should concern and identify the trends of changes such as global warming and energy saving issues. Thus, it can react to the trends effectively. For instance, IJM had established an Environmental Management System 4 which complies with ISO 14001 because of the increase of consciousness towards environment safety.
3. 2 Porter's Five Makes Analysis
Porter's Five-Forces Model is a model designed for analyzing the competitiveness of the industry. The nature of competitiveness comprises of five different pushes and we use them to investigate IJM's competitiveness.
Rivalry among competing firms
The rivalry among contending firms is the most significant force because the competitive advantage provided by the leading company can be easily counteracted by the challengers. Regarding IJM, the two most notable rivals are Gamuda 5 and Mudajaya 6. In my opinion, the competition is brutal within the development industry as many projects available receive on a sensitive basis or agreement basis. Only company with the best offer will get the project and once the project is awarded, the terms of the deal may include further co-operation. Therefore, the business need to offer high quality work with lower price. To overcome this problem, all three companies brought up have widened their construction services to other areas of the world such as India and UAE.
Potential admittance of new competitors
For the engineering industry, it is quite hard for new competition to enter into because many technological machinery and expertise must effectively compete with the other companies. Besides, a new company could have lesser certifications given by the various ISO organizations such as MS (Malaysian Standards) and BS (United kingdom Standards). This might definitely affect the business's chances of receiving the sensitive for a job. A fresh company may hard to get the buyers' trust. For instance, a condominium built by IJM will definitely accumulate greater buyer self confidence as compared to a new company.
Potential development of replacement products
The industry is highly competitive if the merchandise are easily substituted by other alternatives. However, this is not the problem within the development industry. Buildings, roads, tunnels and bridges cannot be substituted easily by other products. Therefore, the introduction of swap products is no problem for IJM.
The bargaining power of suppliers
Suppliers' electric power is poor as IJM does not facing any trouble when acquiring natural materials such as concrete products, material welded mesh and building materials. This is because IJM have many sources of material supplied by its subsidiaries such as Malaysia Rock Products Sdn Bhd 7 and it might able to have the lower materials cost than market. IJM's suppliers are under its control and it does not rely upon other suppliers and thus materials price is hard to be increased.
The bargain vitality of buyers
The customers' power is strong because IJM offer the construction job with reasonable price and quality work to match their needs. In addition, IJM have loyalty customer due to the ecological reputation in this industry. For example, IJM possessed built high-rise properties and landmark, such as World-class Mid Valley Megamall, Berjaya Hotel and Beach Resorts in Mauritius and Dock Klang Power Stop.
3. 3 SWOT Analysis
Strengths
Ethical business culture
Quality, product and services
Trusted customer relationship
Health, safe practices and environment
Social responsibility
Employee welfare
Adopt invention, research and developments
Maximizing stakeholders interest
Weaknesses
Lack of engineering planning
Inefficient management in operation
Opportunities
Global development industry growth
International expansion
Threats
Increase of materials cost
Slowdown and inflation (Traditional western countries)
Rising appealing rate
SWOT analysis is utilized in analyzing how IJM formulating ways of complete its goals. Advantages and weaknesses (Appendix I) are fundamental internal factors that happen to be related to the operational performance and inner control. In the meantime, opportunities and hazards (Appendix II) are the key external factors that may have an effect on the organization's businesses.
Strengths
Ethical business culture 8
IJM provides ethical command from top management as a job model to market honest culture within the business. Training and improvement programs are used to educate the staffs on the moral habit and thought.
Quality, product and services 8
IJM's policies, methods and methods are consistent with ISO quality documentation to provide good quality of products and services. They will make regular reviews on the development process to assess and increase the quality control. In addition they will seek customers feedback to understand their need.
Trusted client romance 7
IJM includes good general population image as it's the leader in structure industry and it obtains many general population infrastructure projects from federal such as streets, bridge and linkage. Besides, a news showed that there surely is right away queue 8 for the Penang condo built.
Health, safe practices and environment 7
IJM set a comprehensive construction and management system on health, protection and environment. It really is to meet up with the related laws. Besides, protection committee was created to screen and assess the management systems which is utilized to avoid pollution from development waste.
Social responsibility 9
IJM thinks that they should contribute some attempts to the contemporary society as the responses and thus they have been developing athletics (rugby and gymnastic), sponsoring students and charity programme.
Employee welfare 0
IJM ensures healthy and security workplace are given for its staffs. They offer good remunerations and benefits to increase their performance and commitment. Besides, training and development programs are provided to teach and promote them with professional expansion opportunities.
Adopt advancement, research and developments 8
With the immediate change of technology, IJM invests in R&D activities to innovates and improves the grade of products and services and eliminate inefficient operations. To maintain competitive advantages, IJM uses regular reengineering and reinvention to produce higher quality of products with less expensive and shorter time.
Maximizing stakeholders interest 7
To take full advantage of the income and stakeholders' interest, IJM got obtained many tasks in Malaysia as well as in international. It also maintains good corporate and business governance 8 on its procedure and performance with adequate inner control, true and fair financial information and successful operation. Besides, it generates "Investor Relations Program" 8 to require the stakeholders in its development and operation. They can offer any responses to IJM for improvement purposes.
Weaknesses
Lack of structure planning
Annual report acquired shown that there is delays on engineering in oversea because of the challenges of land acquisition 1. This acquired shown that the business lack of proper planning in building project and therefore revenue had declined.
Inefficient management in operation
IJM does not manage the procedure efficiently as there is certainly huge reduction (RM 79millions) in development segment in calendar year 2011. This may be due to the provision of contractual cases, debt recovery, debtor balance build-up and higher fixed over head costs 1.
Opportunities
Global development industry growth and International expansion
From the study of PWC 1, the global building will surpass GDP growth in the next 10 years. A couple of 7 countries such as China, India, Indonesia and US will contribute 65% in the development. Meanwhile, a reports 2 showed that the India engineering industry is growing about 10% presently and its administration plans to get 150billion for infrastructure in future. IJM can gain this opportunities to put more initiatives in global growth.
New development technology
Adaption of new structure technology can shorten the construction length and save costs. In India, new advanced technology and modern crane are used to make huge bridge 3 without taking years. Thus, with new technology, IJM can begin other projects earlier.
Policies and regulations
6P programme 4 organized by the federal government had resulted staff shortage in the construction. Thus, the Get better at Builders Relationship of Malaysia experienced appealed to the federal government to relax the existing policy resistant to the new accessibility of foreign staff. Thus, IJM won't have employees lack problem.
Threats
Natural disasters
Natural disasters such as earthquakes and overflow happen in India and China. They will delay the development improvement and company needs to tolerate the rebuilding cost and even the price of breaches of contracts.
Increase of material cost
The increase of materials price 3 such as steel bar and concrete had resulted the neighborhood suppliers opt to export alternatively than offering to local market. Thus, lack of materials took place. Meanwhile, the import control buttons on materials do not allow to transfer cheaper alternatives and therefore forcing the builders to buy expensive materials.
Limited land for construction
There is a report about the demand of refurbishment jobs 5 in Malaysia will be increased as the amount of deteriorating building are increased with the limited land for new development.
Foreign exchange risk
As IJM involved its business far away such as USA, China and India, the company will expose to the risk of forex. It will lead to a damage on foreign exchange because of the volatile activity of exchange rate.
Economic slowdown (Western countries)
There was a survey from The Structure Products Relationship 6 displaying that UK have economical slowdown even though the financial crisis occurred in a few years ago. Furthermore, the go up of price of global energy and natural material also threaten the further economic recovery in UK construction.
Rising of interest rate
High interest rate in saving or loan will impact the consumers' point of view to buy residences As the loan interest is high, the consumers do unable to pay the home loan; meanwhile, high keeping interest will draw in the consumers to save lots of more income.
4. 0 Strategic options
SWOT analysis helps IJM to build strategies which provide right course towards goals. Currently, IJM has carried out horizontal integration strategies under vertical integration strategy. IJM got seek possession and received 50% of ownership of Nasa Land 7 who is subsidiary of Aspirasi Ratna Sdn Bhd, one of the competition. IJM uses internally produced fund to apply acquisition on losing making company after taking considerations on the actual development for undeveloped land managed by Nasa Land. After Nasa Land experienced developed a merged development task in Mukim Terbau, there still has undeveloped land. This acquisition will increases profits as Nasa Land job is a fantastic opportunity for IJM to bolster its presence and further business extension in Malaysia.
IJM had used market development strategies under intensive strategy. It expands its market to abroad 8 such as China, India and UAE. In India, it made significant inroads into the structure of major highways. IJM must date, anchored 5 toll concessions on a build-operate-transfer ("BOT") basis such as Swarna Tollway in Andra Pradesh and Trichy Tollway in Tamil Nadu. In China, IJM which have been profitably disposed of in recent years include significant stake in the Guangdong Provincial Expressway Development Co Ltd, which operates two expressway that form a nationwide trunk road and also a major bridge across the Jiujiang River.
IJM is also using market penetration to get increased market share for current development and services. For instance, IJM Land, its subsidiary acquired 20% stake in WCESB 9 hrough its wholly-owned subsidiary Street Contractor (M) Holdings Bhd for a complete cash awareness of RM6. 75mil from Prominent Xtreme Sdn Bhd. In this example, IJM received WCESB for long-term planning and objective such as its proposed acquisition into WCESB with not expected to have any significant influence on its earnings or net assets per share for this financial year and would contribute positively to its future cash flow.
IJM is using product development strategies is to increase sales by producing new lands or houses. For instance IJM developed Canal city and design as renewable city concepts and Canal City will be one of the first inexperienced townships in Malaysia, with a drinking water and canal feature running through the entire job. The project with a gross development value greater than RM10 billion will be sprawled over 800 hectares behind the Kota Kemuning and Kota Permai COURSE in Shah Alam, Selangor. With this project it will attract lot of buyers to invest assignments.
IJM is currently using product differentiation of business level strategies and IJM are flexibility in product offerings to match the existing market demand. IJM which has competitive advantages in differentiation which is not only focusing on building the houses or building engineering and other task like civil engineering 7 for example highways, streets, bridges, international airports, railway, monorails. IJM also predicated on custom-made products plan by client and construct a building such as Mid Valley Megamall in Kuala Lumpur, Ministry of Works Office Complex, National Theatre in Kuala Lumpur, Putrajaya Medical clinic and Hospital plus much more. Marriage to the 5 portal forces in rivalry against existing competition, IJM which includes experience and impressive operating history spanning over 30 years, IJM established a solid foothold in visible locations in Penang, Klang Valley, Negeri Sembilan, Johor, Sabah and Sarawak and is also furthering overseas ventures in the area of property development in China. Therefore the clients for example like authorities, citizen and local and international investors will be the loyal customers of differentiated product.
5. 0 Recommendation
The global engineering will go beyond GDP growth within the next a decade, especially China and India will contribute 65% in the development. Therefore, IJM should seize this chance to focus its business in India and China. In India, around Rs 200 billion price of work are taken care of by both local and international consultants and contracting organizations per calendar year and 65% out of the work is dealt with by overseas companies. This shows great opportunities to increase investment of development industry. India and China have large and cheap amount of labor weighed against Malaysia. This completes building faster with lower budget. Besides, exchange rate of India and China is lower than Malaysia that allows more financial capabilities to invest large amount of development works in India and China. China and India are two of the highest populated countries on the globe. This condition brings a lot of development opportunities to the global construction companies. IJM can also expand its business to Philippine, Thailand and Vietnam. These countries have potential expansion in structure industry and fewer competitors compared with China and India.
The suggestion for the threat of increasing materials cost is to eliminate import controls on materials such as metallic bars and cement. The connection for engineering companies could consult with government to examine the import handles and invite free market to determine materials' prices and offer. This is necessary until their shortages and pricing has stabilized. Therefore, eliminating import controls makes it possible for more competitive price in the local market. Besides, using cooperative purchase contracts to gain buying muscle is another way to lessen cost. IJM can incorporate orders with others for 1 provider. Buying in large can decrease the prices of materials.
Besides, land for urban construction should be used efficiently to ease limited land problem. The technological efficiency (TE), natural technical efficiency (PTE) and scale efficiency (SE) of extensive use of engineering land are important to judge and deal with the consumption of urban land efficiently.
If a currency's spot rate market is illiquid, its exchange rate is likely to be highly very sensitive to a single large purchase or deal deal. So, IJM should stay away from to illiquid currency's location rate market. Another suggestion for forex risk is that do all business in Malaysia currency. This puts the responsibility of money fluctuations on the customer's shoulders and completely insulates the selling company from any shrinkage of revenue from exchange rate variations.
6. 0 Conclusion
IJM is one of the top posted companies in Malaysia and its center business activities encompass development, property development, manufacturing and quarrying, infrastructure concessions and plantations. Just lately, IJM starts off globalizing its business and it also successfully undertook ventures overseas before time such as with Orlando USA, Singapore and Australia. Presently, it primarily concentrates in Malaysia, India, United Arab Emirates, China and Indonesia and establishes a growing occurrence in those market.
We acquired made research on standard environment, industry and SWOT of the business on IJM. Under general environment analysis, there are 7 sections which can be demographic, economic, global, political, physical, technical and sociocultural. For example, under demographic section, IJM concentrate on the population intense areas such as working and tourism states in Malaysia. In the meantime, under technological section, IJM had integrated R&D department to innovate new technology for constructions.
Industry research which is Porter's five pushes analysis includes rivalry of contending firms, potential entry of new competitors, potential development of swap products, bargaining of suppliers power and bargaining of purchasers powers. For instance, under rivalry of rivalling firms, the key rivals are Mudajaya and Gamuda. The competition is great in the industry. Meanwhile, potential accessibility of new competition is very low as the competition on the market is high and the new companies need to spend high assembly costs.
Under SWOT research, IJM's strengths are honest business culture, quality, product and services, respected client marriage, health, basic safety and environment, interpersonal responsibility, employee welfare, adopting advancement, research and developments and making the most of stakeholders interest. In the meantime, IJM's weaknesses are poor development planning and inefficient operational management. The opportunities such as international extension and policy and regulations; hazards such as natural disasters and inflation rates are facing by IJM. Proper options utilized by IJM are market and product development strategies, market penetration strategies and horizontal integration strategy to achieve goals of IJM.
In final result, as the global engineering growth rises, IJM can increase its businesses globally. Besides, government might remove the import control on the engineering materials from overseas, the price of materials will be fluctuated too high.
