Delloyd Endeavors Bhd is an motor vehicle part and component producer for car manufacturers and assemblers in Malaysia. This group principally has diversified its business by motor vehicle components manufacturing, distribution of both traveler and commercial vehicles, and oil hand plantation and miling (Appendix 1. 1).
This group starts off its incorporation in 1996 and in once, in addition they being shown in the Bursa Malaysia in November. Delloyd Projects Bhd is situated in Klang and it presently operates four processing plants which positioned in Malaysia (Klang, Tanjung Malim), Indonesia and Thailand.
Their corporate perspective is to become a world class automotive components company and the undisputed innovator in the industry. With the strong viewpoint of the company applied, they focus on invention and creation of quality product and services in order to meet requirements of the marketplace in both present and future. The corporate's goal is usually to be recognised as top notch components company and the undisputed leader in the industry.
1. 1 Automotive components manufacturer
It is several companies which is specialised in the original equipment company (OEM) for the major motor vehicle manufactures and assembles in Malaysia and overseas. Before this group has been formed, the creator who's Dato Sri Tee Boon Kee had made Delloyd Automobile Parts (M) Sdn Bhd to import and spread the automotive element parts and accessories in Malaysia. The developing is sectioned off into two areas which can be plastic parts and electronic digital components (Appendix 1. 2). Besides being a Tier-1 supplier to local automotive makers, which as Proton and Perodua, it also provides the vehicle parts to several foreign brands in Malaysia such as Nissan, Suzuki, Toyota, Ford, Honda, Hyundai and so forth. The greater important overseas customers are Toyota and Honda in Indonesia and General Motors in Thailand. Corresponding to annual article, top three customers of Delloyd Ventures Bhd are Proton, Perodua and Toyota which has made-up around 60% of total annual earnings in financial year-end 2012. For diversifying purpose, Delloyd has widened this section by venturing into Indonesia for vehicle distribution as a supplementation to auto parts and components making division in March 2008. Currently, the group is the distributor of Hyundai, Suzuki, Proton and Brilliance Car (Jinbei) vehicles. In addition, it jv with PT Asian Car International.
1. 2 Engine oil Palm Plantation
Another business segment of Delloyd Endeavors Bhd is plantation. In 1999, they start ventured in the plantation industry which is palm engine oil plantation and bought 1, 449 hectares in Batang Berjuntai, Sungai Rambai Property. To beyond its success in Malaysia, the Group went on a larger size by acquiring 60%- stake in PT Rebinmas Jaya which has 14, 422 hectares of engine oil palm plantation in Pulau Belitung, Indonesia. This brings Delloyd Endeavors Bhd possession of oil hand to total 15, 871 hectares. However, Indonesia currently planted around 80% of 14, 422 hectares and which only 61. 6% are matured essential oil palms. Thus, management measured that it targets to complete planting by season 2015. During year 2011, Delloyd Endeavors was considering additional land surrounding their current plantations in Pulau Belintung however they experienced hindrance in terms of public issues. They are actually considering Palembang as it is friendlier to international traders. The performance of plantation division is very reliant on the purchase price changes of hand essential oil products. Besides, plantation businesses also are damaged by rise in fertiliser and labor costs.
Before this, we decides to choose two main sections which are motor vehicle components creation and oil palm plantation as our main concerns in this whole assignments. We exclude distribution of vehicles due to it is actually a sub-segment of automotive segment based on the structure shown in appendix. In other expression, Delloyd diversify this vehicle circulation which is correlated with automotive parts segment. We choose engine oil palm plantation scheduled to it is unrelated to Delloyd first main main business. Thus, all the environmental factors and evaluation will be not similar since an example may be agriculture which is more reliant on natural issues whereas another is more on technological manufacturing. Out of this project, we will be able to know that how Delloyd Ventures operates these two unrelated segment, what are the issues management encounters, and our recommendation on improvement of Delloyd Projects business operations.
(Ps : Appendix 1. 3: corporate framework, App1. 4 & 1. 5: list of Subsidiaries
App1. 6 &1. 7: income contribution of motor vehicle segment)
2. 1 Infestation ANALYSIS
2. 1. 1 POLITICAL/LEGAL
New requirements on expectations are imposed by federal for automotive components by developed market. Compliance to home and global criteria increases prominence among the market players in the automotive parts and components in Malaysia against the liberalisation in automotive industry. New requirements on standards are enforced by authorities for automotive components by developed market such as ISO 9000 and ISO 14000. Besides, the RTD (Street Transport Department Malaysia) has geared to take up all 126 legislation from United Nations Economic Commission payment for European countries (UNECE) by season 2015. Malaysia administration had used 54 such legislation such as R7 (brake light performance), R40 (exhaust emission-motorcycle) etc (Appendix 2. 1 &2. 2).
Based on MIDA, processing companies with shareholders' account of at least RM2. 5 million or engaging more than 75 full-time paid staff need to use for a making license for agreement by MITI under Industrial Coordination Act 1975.
To promote competitive motor vehicle sector specifically for local motor vehicle manufacturers;
Facilitate the required change and integration of the neighborhood automotive industry into global industry sites within the progressively more liberalised and competitive global environment;
To enhance value-added and features in motor vehicle sector; and
To advertise export-oriented Malaysian manufacturers and components vendors.
The government got changed the nationwide automotive insurance plan which shifted to development of fuel-efficient vehicles to convert Malaysia into a hub that produces fuel-economy vehicles for the ASEAN region by 2020. Malaysia will gain competitive advantage since this approach had not been applied by ASEAN country such as Thailand and India, thus bolstering Malaysia's position as a car-making hub in this region. By put into practice the new insurance plan, it will have significant effect on Delloyd Ventures Bhd. If Malaysia able to position as a car-making hub in ASEAN.
National created automotive parts will face competition from brought in products from ASEAN countries result from execution of ASEAN Free Trade Area (AFTA) arrangement. The intra-regional tariffs or import duties for CKD and CBU vehicles are reduced between 0% and 5% through Common Effective Tariff (CEPT). Government's motivation design of 100% import and excise obligation exemption for CBU cross types vehicles below 2, 000 cc. hence, brought in vehicles from ASEAN countries are contending on the same platform with minimum or no transfer duties.
In order to safeguard the local motor vehicle industry, lots of import limitations were enforced on overseas vehicles. With an increase of than half a million sales per 12 months, Malaysia is the largest market for automobiles in South-East Asia.
Besides, Malaysia government has guarded local automotive industry from foreign competition by presenting an Asian Material Content policy, which included imposing high tariffs as well as non-tariff barriers. "National autos" such as Proton and Perodua experienced gained benefit from preferential treatment compared to "non-national" autos. It has brought a huge benefit to Delloyd which can increase its sales growth in segment of automobiles making due to increase of sales of its main customers which can be Proton and Perodua.
The announcement of National Minimum Wage Rates for the private sector under National Minimum Salary Consultative Action 2011 also becomes one of the factors have an impact on business environment of firm. It declare that minimum wages for Peninsular Malaysia is RM900 while Sabah, Sarawak and Federal Place of Labuan is RM800. This also be a highlight for all the private companies especially for large group of companies as their staff may more than 300 individuals, this may impact the corporate governance and company insurance plan in future.
Malaysia had declared to reduce its crude palm essential oil (CPO) export duty. The reduced rates will need impact in January 2013 because of the changes of CPO duty agreements in India Oct 2011. From January 2013, Malaysia's tax rate on CPO exports will be 4. 5% to 8. 5% of the purchase price, which decrease from current rate of 22% to 23% of the price. Malaysia does not have any tax on exports of refined palm oil. Malaysia government are extremely concern on this sector since the agriculture consider as a largest market. Furthermore, the government experienced determined exempt the export tax due to high competitive environment. These changes in tax rate may appeal to new competitors that they can enjoy taxes relief on olive oil palm plantation which will have an impact on future expansion of local market players.
2. 1. 2 ECONOMIC
In 2011, Delloyd Company sales possessed dropped significantly because of the major customer in international countries is facing natural devastation. Earthquake and Tsunami happen in Japan and Floods in Thailand. So, it will have adversely affected to the business because Japan and Thailand are consider major marketplaces of automotive sales in Asia. The company should always analyze the elements condition of international country to be able to mitigate risk or resolve threat. Other than that, the Malaysia inflation rate was 1. 3 % FY 2012 September. Before 5 years, the Malaysia inflation rate averaged 2. 67 %. The highest inflation rate was 8. 5 % in 2008. Inflation mirror the real of buying vitality of community. Due to the inflation rate was drop lately, this means that community have more purchasing capacity to buy certain goods. Hence, it may improve the sales of motor vehicle industry.
From the study, Indonesia is among the most largest palm olive oil producer whereas Malaysia is the largest exporter for palm petrol in global market. Despite continuously economic problems in European countries and United Talk about as well as related concerns over diminishing demand for palm petrol, the international take-up rate has been stimulating scheduled to world's top consumers purchasing lots of of edible essential oil. The palm essential oil price would be conditioning as development in Indonesia would decelerate start next calendar year and reach stability in 12 months 2016 as its trees has matured. Increasing in FFB development volume in conjunction with higher average crude palm oil price will enhance the profitability of plantation industry. scheduled to Indonesia's creation was a influenced in palm olive oil supply growth before five years, slower development growth provides negative global hand oil supply growth and therefore, palm petrol prices will be higher in next couple of years. (Appendix XXX)
2. 1. 3 SOCIAL
Social shifts such as buying personal preferences will have significant impact on motor vehicle industry. Nowadays, the world are encourages visitors to be environmental friendly hence improve the living style. For example, if the community have strong idea on this, some might won't buy car. So they might choose an alternative solution way alternatively than buying an automobile in order to safeguard the environment. If the sales of vehicle drops, it could influence the income of Delloyd Company because their product which are necessary associated product to car.
Differences in time structure of the populace have implications for the entire level of cutting down weighed against consumer spending. For example, most of the university students own a car as their necessary transport to school because of the domestic car are relatively cheap. Even though parking lot space in Malaysia always limited, but many young people still would prefer to have their own car to enjoy the self-reliance and independence. This got bring effect on income of Delloyd since federal government always give support and encourage local residents to purchase local vehicles such as Proton and Perodua with lower price and simple techniques equate to buying foreign cars.
The palm engine oil will maintain great demand for edible purposes to provide the growing needs of the world people such as huge people development in China and India. At exactly the same time, demand for non-food uses such as bio gasoline and biomass is likely to expand alternatively way to obtain energy, the outlook for palm olive oil is expected to maintain positivity. This favorable outlook shows the company able to perform well in following year.
2. 1. 4 TECHNOLOGICAL
Changes in technology can have a rapid and dramatic effect on the market. Technological refers to changes in development technique and development equipment. Delloyd Company got implemented high-tech systems and equipment to be able to ensure quality products in any way the times such as 20 set up lines, computer aided design and etc. 20 set up line can help the company improve the production volume of sales, improve quality of service hence reduce running costs and wastage.
Computer aided design are used to design products by using computer generated models and 3D drawings. Thus, the company you don't need to build a physical model as their prototypes to test certain conditions. For automotive company, it could add a huge cost in examining purpose hence improve the operating costs of the business enterprise. By adopting move forward technology, is an extremely effective way to help the company boost the sales and reduce costs.
Gene modification organism will develop superior planting material, mechanise the planting, harvesting process of oil hands, and identify new edible and professional uses for hand oils. Other than that, world- school R & D is major durability of Malaysia. The areas of research mostly concentrate on figuring out genes that will make oil palm trees and shrubs more resistant, revitalizing oil palms to create more female blossoms and building tools to ease the planting and harvesting functions. Although those research need take in lots of time and cost but it will help the business gain competitive edge than other since they know their own position and customer requirements hence improve the sales of plantation section.
2. 2 PORTER'S DIAMOND
As we've mentioned before, Delloyd Endeavors Bhd has several subsidiaries companies. Each section play very important role in producing the company's revenue and maintain its market shares. There are several segments brings global competitive advantages to Delloyd Endeavors Bhd within certain industries. Porter Diamond jewelry by Michael Porter could lead us to identify theses competitive benefit. Porter Diamond jewelry is sectioned off into 4 parts which are demand condition, factor condition, related and promoting company and firm composition, strategy and rivalry. These factors will show how Delloyd Ventures Bhd remarkable its challengers.
First of most, factor condition considered about the decision made by the business which relates to the resources found in the operating activities. Resources are one of the main element factors that lead the company to the very best of the industry. Without appropriate resources, a business could lose its market share and making deficits in future. Delloyd Ventures Bhd has planned and chosen its suppliers and resources properly. In Delloyd Ventures Bhd's automotive component manufacturing segment, the management team has turn out with several idea in lessening the cost of producing its product. The motor vehicle component manufacturing segment has its own facilities in Indonesia and Thailand. Both countries are abundant with human resources. The section could achieve low labour cost since there exists popular for job opportunity in both Indonesia and Thailand. Besides, Executive Director of Delloyd Ventures Bhd stated that the facilities in Indonesia and Thailand are appeared to be only operating at 30% of its capacity and they're going to improve it. This step could minimise the cost of its product by increasing its efficiency and increase its volume sales. Apart from that, Delloyd Ventures Bhd's automotive component manufacturing segment will serve several World-class customers, such as, Toyota, Honda and Oriental-Hyundai. Since Delloyd Ventures Bhd is the major suppliers of certain products of the companies. It is acceptable to think that these companies share information of designing and technology. Delloyd could use this information to turn out with some new design or technical products to create its customers. This could enhance the romance between Delloyd and its own customers.
Malaysia doesn't have enough land. With tight policies of preserving about 50 percent of the land as forest cover, it is difficult to increase the planting area within Malaysia. In order to maintain or improve its position on the market, Delloyd must take action to overcome this issue. Therefore, Delloyd has considered precaution step by growing its plantation industry to Pulau Belitung in Indonesia by acquiring 14, 422 hectares of land. In Indonesia, Delloyd would able to incurred low labour cost as compare to what have been spend in Malaysia for plantation goal. (Annual statement Pg 17)
Delloyd Ventures Bhd could achieve low cost production in automotive component manufacturing segment and plantation portion. This advantage could create potential opportunities for Delloyd in future.
Other than factor condition, demand condition is also one of the factors that could help a corporation to win against its competition by creating competitive benefits. Competitive benefit can be created when local customers presenting pressure to the firms to create better and much more advance products than its rivals.
Delloyd's automotive part segment generates the majority of the revenue among all the sections simply because most of the clients are world-class vehicles manufacturers. These businesses compete against one another in order to obtain more market shares. The most frequent way designed to use by these businesses is producing more advance technology, remarkable design and marvellous performance of these products. Since the first car have been introduced to the world, people imagine having one. In today's world, it is nearly a must to truly have a car in every home. Car manufacturers see this opportunity and continue placing new and ground breaking technology into autos. In order to obtain most of the market show, they require assistance from other industry to create certain area of the products, such as Delloyd Endeavors Bhd. This implies that Delloyd is one of the main element suppliers which car manufacturers could not afford to reduce and reasons for the demand for Delloyds's products is hardly consistent within Malaysia. The automotive component segment is being pressure by its customers for producing more ground breaking product. In the second paragraph, we've pointed out that Delloyd's motor vehicle component section acquire information from its customers to be able to create products that meet their requirement. Besides doing what require by the customers, Delloyd will come out with some impressive design or advance technology in helping to raise the market value of its customers' products. At the same time, Delloyd improve its reputation as well as maintain a permanent relationship using its customers.
The demand of the world for hand essential oil is increasing daily. The demand for palm oil maintains increasing may cause by the increase of population of people on earth. Palm oil is crucial in most home as for food purposes. Apart from refine palm oil for food uses, there's also demand for non-food uses such as biofuel and biomass. The demand for non-food uses is projected to extend as an alternative energy and coupled with the impact on inventory levels therefore of weather changes that perspective palm essential oil is likely to be positive.
Co-operation between companies could achieve competitive advantages in an industry. Companies could talk about their ideas alongside one another and diversify the chance of failure of a certain job. Beside co-operate in an existing project, companies may also turn out with something new which could create new income source for the company. This criteria fall season in one of the Porter's Diamond's factors, related and helping company.
Delloyd's automotive element segment has been one of the key suppliers for many car manufacturers. Delloyd has generated an extremely strong relationship with its customers with the prove that some of the car manufacturers only allowed Delloyd becoming the suppliers of some automotive components. In time 2008, Delloyd acquire 51% stake in PT Asian Automobile International (PT AAI) located in Indonesia. This is the first step which Delloyd ventured into commercial vehicle developing. Since then, Delloyd exports its products to more than 10 countries such as Latin America. Among all the export countries, Toyota Electric motor Indonesia and GM Thailand contribute almost all of the profit to the business. Before yr, Japan was hit by earthquake and causes the sales of Japan related car business dropped. However, Japan's market is recovering steadily from the impact and we think that the Japan related car establishments will go back to their regular performance or even better and at the same time Delloyd could make more income from the recovering.
As in Plantation, it is difficult to get a piece of land in international country minus the help of the local companies or administration. In July 2006, Delloyd received 60% equity stake in PT Rebinmas Jaya which own 3 oil-palm plantations in Pulau Belitung, Indonesia. By acquiring a local company, Delloyd does not have spent resources in learning the culture or geographical of Indonesia which could affect the plantation's procedure with the knowledge had by PT Rebinmas Jaya.
Lastly, a company framework, strategy and rivalry may possibly also create competitive advantages. The way what sort of company arranging its goal and strategy used is very important to success. Besides, the existing local rivalry also very important since it bring pressure to the business in innovate new products.
The plank of directors of Delloyd foreseen that the announcement of National Automotive Insurance policy (NAP) would bring a confident impact to the business in several ways. This will likely convert Malaysia into a local hub for cross types, electric and environmentally friendly vehicles. Therefore, the group has placing effort in accumulating relevance knowledge and experience in the industry and also focus on prudent cost management and improving vegetable efficiency as well as productivity to ensure that the sector's success is sustained.
In conclusion, the effect or annual report of Delloyd has shown it has potential growth in broadening its business into other countries. Delloyd will own several competitive advantages which exclude itself from its challengers.
2. 3 PORTER'S 5 FORCES
2. 3. 1 Risk of new entrance
The growing rate on motor vehicle industry in the world expected growing rate of 6 per cent based on International Business Times. The increase of the demand of the automobile production will improve the development rate of automotive component industry. Even though the automotive industry could keep on growing in the future, but the threat of new entry in automotive aspect section is low. In other term, there is relatively high hurdle for new potential manufacturers to get into this industry. Often the barriers to entrance can be low if the range of business businesses planned is small. It requires high capital necessity involving an incredible number of ringgit to acquire developing facilities, factories building, production equipment and machinery, technology licensing, raw material, manpower and so on. Thus, new entrants will need to have long-term investment horizon in order to recover such huge original cost which impossible in short term period. Besides that, new entrants need to have sufficient technical skills include specialists and up to date technology in order to join the forex market. Furthermore, any updating machinery used to produce the motor vehicle components incurs higher original cost because of scientific development. Set up market manufacturers usually have long-term relationships using their own customers and thus enjoy a more robust goodwill. It isn't possible for any new entrants to create a viable business relationship as it needs a substantial time to determine. Once the relationship is strong, when trust and self confidence are well-maintained, it would be hard to split up such partnership. Thus, potential entrants will see it very difficult to break up such existing business human relationships among market players in a nutshell period. This can affect the marketplace penetration and poses a high entry hurdle. Delloyd Projects Berhad has generated a strong brand in automotive industry and has generated solid distributor network and major retail chain in the parts of replacement market. This has help Delloyd to create a strong barrier of accessibility for new entrants.
There is high barrier for new company to enter this industry credited to high capital requirement in this industry. The actual entrants need huge capital requirements to acquire land for essential oil hand plantation and also employ the service of labor. Besides, potential entrants also need to get approval from administration for taking part in oil hand plantation which is one of the main sources for Malaysia's development. In addition, the new entrant may face challenging in the syndication stations for distribute their product. The new entrant might need to persuade the circulation channels to simply accept their products by providing extra incentives which may lower down their profits. This is because he distribution channels may not spread their products scheduled to do not have the confidence of their products.
Although the threat of new entrance in both market sectors is low, the success of the business will be affected if there is a company gets into to these companies. It is because it will reduce the market show of the company and the business sales will be lowered.
2. 3. 2 Bargaining Vitality of Buyers
Automotive element industry has a strong bargaining vitality of the clients. The potential buyers easily switch in order to get better charges and quality from suppliers. As we know, Delloyd is motor vehicle component supplier with long-standing relationship as Tier-1 supplier to local carmakers Proton and Perodua. If Proton and Perodua stop to keep agreement with Delloyd Projects Bhd, they will be facing bigger losses in the automotive revenue. For the reason that they can get substitute price quotation from other suppliers. And since main revenue from automotive segment is from Proton and Perodua, they may easily negotiate the charges with Delloyd. Proton and Perodua also have other suppliers besides Delloyd Endeavors such as APM Auto Berhad. Thus, customers will determine which company supplies the better quality of the components with affordable price. Additionally, product differentiation is low. The automotive much more likely is the same from the function even the utilization, therefore, the buyers might focus the quality and the costs.
The bargaining vitality of clients for the plantation is high. As we know there is large number of oil palm suppliers in Malaysia. It has given ample choice of suppliers for customers to choose. Buyers are enlightened about the market prices of crude hand essential oil through the global information. Although the switching cost from a firm switch to some other company may huge cost incur, the potential buyers willing to put in it if there will an improved keeping cost on the buying the palm oil in the foreseeable future time.
2. 3. 3 Bargaining Electricity of Suppliers
There is a need of wider selection of raw materials for automotive element company to produce automotive parts, such as iron, aluminum, plastic metallic, glass, rubber, petroleum products, copper, metal and others (Appendix 2. 3). The bargaining electricity of suppliers is consider low. This is because there are a great number of suppliers of uncooked material on the market and the both buyer and owner have the data on the price on the recycleables. If their suppliers increase the price on the raw materials, Delloyd Endeavors Bhd can find for new provider. Delloyd Endeavors Berhad can easily switch from existing company to the new dealer if there is short-term agreement. Besides that, the recycleables supply from the existing suppliers is identical to other suppliers. There will be the suppliers that Delloyd Endeavors can look for such as Malaysia Steel (KL) Bhd, Sutra Maya Organization, Kinsteel and etc. Although the bargaining electric power of the dealer is low, Delloyd Projects still need to consider the impact on changing suppliers since it could affect the relationship between suppliers. It requires times to establish a strong romantic relationship with new suppliers. Success of the business also will be damaged when changing suppliers. It incurs certain risk for operation of the creation if the suppliers not provide you with the raw materials to them.
Bargaining electricity of distributor for plantation is high. The company of Delloyd Projects Berhad is the land holder of both Malaysia and Indonesia. The lands used by Delloyd Endeavors Berhad in plantation are through leasing from the land holder and buy by the land holder. The land holder may sell their land in higher price to Delloyd Projects Berhad anticipated to understanding of land yearly and popular of palm oil in future. Besides that, the prevailing land holder may control the leasing fees on the land. The deal of the leasehold land in Indonesia is thirty years lease period and expired on 7 November 2029. Delloyd Ventures Berhad has to pay the leasing fees for the land holder because they haven't any other choices given that they want to safeguard the plantation. If they want to choose to find to rent or purchase a new land, they will made an enormous losses because of their trees and shrubs are in the owner's land. Furthermore, they need to spend a lot of cash on purchase the land or lease the land and purchase the young petrol palm trees.
Threat of Replacement Product
Delloyd Projects Bhd type in the plantation section in 1999 years due to the higher prices of fresh fruit bunches (FFB) development which is originates from the palm oil. The risk of alternative products is high. If there is no used palm oil as the choices, the company can used other materials, such as sunflower essential oil, soybean oil as well as others used as the biodiesel. Although there is few substitutes' occurrence, the palm petrol still maintains the best demand for in global market. For the motor vehicle component industry, there is low threat of the substitute's products. (Check properly whether got swap or nt. )
Automotive parts and components are fundamental products to support whole motor vehicle industry either for OEM market or substitution of existing motor vehicle parts within used automobiles such as bumper, gear knob, power home windows regulators yet others. Motor vehicles got gained prominence in modern Malaysian living as it becomes a necessary transport that provides freedom and self-reliance. The users normally would replace the broken components with the news headlines without locating the substitutes. On other hands, exiting automotive components are constantly being innovated from the development in technologies while new materials are also being explored because of their possible usages in the produce of motor vehicle components and parts to provide cost benefits and better performance. It is possible that certain motor vehicle parts may be rendered obsolete by latest automotive parts in short period. It also can affect the profitability of the business. The revenue for the automotive segments in 2012 compared to last year has lowered which impact from the strong competition performances. To be able to triumph over these problems, Delloyd Projects Bhd must ensure the merchandise produced are good in quality and other factors to gain customers devotion.
Rivalry among existing firms
The competition among existing businesses in the automotive component industry is very high anticipated to there are numerous competitors in motor vehicle element industry. The strong competitive rivalry brings motor vehicle industry more to the "perfect competition" theory. They'll remain competitive for the same customers and product resources in order to gain higher market talk about in automotive production industry. It is because the expansion rate of motor vehicle industry is low and gets to the maturity level of the industry lifecycle. The competitor may lower the price of their or improving the feature of their products to get market show. Furthermore, the high fixed costs or storage costs for motor vehicle industry will cause the existing firms compete to gain the bigger market share to repay their fixed costs. When a firm decide go into the automotive make industry, it must expect this will be permanent business and not easily to give up the market. Thus, lifestyle of high exit obstacles cause the companies will stay and compete in industry for longer term than they might. Demand from customers of the company will decrease credited to strong market competition in industry due to the products and services are equivalent which low product differentiation and low turning cost. The profitability and cash flow of Delloyd Ventures Berhad may be influenced since they need to incur high costs and market the merchandise hardly to entice or gain customers loyalty in such high competitive market.
For plantation industry, your competition among existing businesses is relatively medium although there are several rivals no matter small or big companies in the market. The merchandise produce are equivalent such as crude hand oil and fresh fruit bunches. Besides that, the bargaining power of the customer may be relatively low since hand oil created from Malaysia are providing for global market. If the expansion rate for oil hand plantation is high, the businesses have the ability to earn high earnings due to widening industry. Furthermore, the prevailing businesses may innovate some services produced by palm oil. This may affect the profitability of the company because decrease in the sales of their products.
ANALYSIS INTO PORTFOLIO
3. 1 Boston Consulting Group Matrix
Stars (high growth rate, high relative market show)
Question draw (high expansion rate, low relative market talk about)
Cash cow (low development rate, high relative market show)
Dog (low development rate, low comparative market smile)
This model assumes that an increase in relative market show will bring about a growth in era of cash. It implies that the company is continue on the experience curve compared with its opponents, thus exist a cost advantage. Market expansion rate requires investment in belongings to boost the productivity and therefore results in intake of cash. Thus, BCG matrix indicates its cash era and cash utilization.
As we realize Delloyd Projects Bhd is interesting its business into motor vehicle manufacturing, vehicle circulation and oil palm plantation. We'd selected some rivals which in same sectors with Delloyd Projects Bhd to perform benchmarking and BCG Matrix.
APM Automotive Holdings Berhad is one of the leading vehicle manufacturers in Malaysia. Its clients also include Proton, Perodua, Nissan yet others that happen to be same customers of Delloyd Projects Bhd. APM has been proven in Malaysia over 30 years and it also had extended its business procedure into international market such as Vietnam, Indonesia and Australia.
In palm oil plantation sector, IOI Group is a respected integrated palm essential oil player with a sizeable plantation positioning greater than 160, 000 hectares in Malaysia. The core business is engaging oil hand plantation activities comprising of upstream cultivation of petrol hand and downstream resource based manufacturing, which includes refinery, processing of oleo chemicals and niche oils and extra fat. Its yearly creation of CPO (crude palm olive oil) is in excess of 800, 000 tonnes. Beside in Malaysia, IOI Group steps over its plantation sector by relating in every levels of the hand oil value string on a worldwide scale. In addition they had built an integrated global palm engine oil supply chain and logistic support network in Netherlands, United states, Canada, and Egypt to provide the global market.
The following results are extracts from the twelve-monthly report and financial record of Delloyd Ventures Bhd for year finished 31 March 2012.
Based on the IMR survey, the market for automotive part companies during season 2011 had been positively growing at a level around 3. 9% compare to 12 months 2010. The market innovator which is APM with reported sales earnings from this sectors of RM722, 809, 000.
The market for plantation is known as to be growing in rate of 10. 8% each year. IOI Group can be classified as market innovator in this segment with annual turnover of RM2, 492, 499, 000.
Relative market share
Market development rate
Segment result (RM'000)
+ 3. 9%
3. 1. 1 Plantation
Plantation segment (PL) is currently be categorized as "question symbol" as it offers low market talk about within an attractive market. Based on BCG matrix, question make states that a business device which we aren't about the success or failure. It could be very successful in market or just being ruined of. It really is anticipated to large competition in this industry.
The cash needs for plantation are high but cash era ability is relatively lower for current situation. Predicated on the annual segment report, the portion liabilities of plantation for previous few years are the highest anticipated to incurs high capital expenditures especially the price incurred for plantation development expenses. Oil hand plantation is currently in growing stage as shown in Appendix XXX. From five years financial point out, income of plantation portion was volatile between years 2005 to yr 2008 it begins to earn higher gains from time 2009 constantly. This demonstrates plantation segment has inserted into growing level beginning calendar year 2009.
As comparability, Delloyd Ventures still at beginning point for balance equate to IOI Firm Bhd (market innovator) which has a lot more competitive advantages since its main business is petrol palm plantation starting from 12 months 1985 which is sooner than Delloyd Endeavors. As palm engine oil is becoming main source of information of production for major sectors in global overall economy, its development rate always be favorably increase and also reliant on global crude palm engine oil price. However, performance of plantation section is very dependent on the global price changes of palm olive oil products. The operations also are afflicted by go up in fertiliser and labor costs. During 12 months 2012, plantation portion profit have been decreased approximately 21% compared with previous year 2011. It is because of yield of palm petrol in Indonesia has contains 91% for overall income for plantation segment (Appendix 3. 2). In addition, Malaysian plantation produces higher go back than Indonesian plantation due to variations in the weather and dirt. Thus, lower come back in Indonesian plantation in addition has brought bring about lower revenue in financial time 2012.
Besides that, the existing firms will develop their business through purchase the land from oversea or within the country. Thus, plantation division definitely has probable in future progress and management should bolster this division by chasing an 'intense' strategy.
3. 1. 2 Automotive component
Based on BCG classification, motor vehicle parts (AP) which is main business of Delloyd Projects would be labeled as "dog" due to low comparative market share position a minimal development rate in market industry. In other expression, this business has only low market talk about in automotive components industry but eating the massive amount cash instead of generating the cash. The company may want to dissolve this business generally speaking way.
As we realize that performance of automotive components market always is favorably correlated with the entire performance of motor vehicle industry. Although motor vehicle components portion is categorised as "dog", it generally does not totally imply that automotive components segment would not have potential to increase in future and make more revenue for company.
Automotive components section of Delloyd Projects Bhd has low market talk about which annual earnings only occupy 44% of market head APM's turnover. It always be categorised as "cash cow" before this. Based on financial spotlight of earlier five years, automotive sections always constantly increase in profit before tax despite cut down during 31st March FY2012. As we realize the segment income has decreased in year 2011 anticipated to doubt in global market. From Bloomberg BusinessWeek Media, Malaysia Automotive Relationship reported that sales during January to Apr 2012 were harmed by strict funding rules and disruption to creation as parts materials were influenced by Thailand's overflow in year 2011. It has affected the revenue of Delloyd Endeavors in automotive segment but the deal has rebounded firmly in-may and June said by MAA. MAA reported that motor vehicle sales has increased 1. 4% for first six months to 301, 224 vehicles plus they expected that it might border up to usually 314, 000 vehicles in the next half of the year. This has disclosed 2012 sales up 2. 5% from 600, 123 vehicles sold last year.
Besides, automotive components segment is the anchor contributors for Delloyd Endeavors as it creates 56% of total world wide web profit and also 68% of total revevue for FY2012. It's been categorised under maturity phase in its PLC (Product Life Circuit). It is the first core business of Delloyd Projects Bhd and also has more than twenty years of expertise and complex skill in this field. It has experienced management who has steered Delloyd Endeavors through the peak and trough cycles while still remains profitable. Thus, it has a lasting and steady business development with strong business relationship in permanent period. Delloyd Endeavors had just as well as new deals for supply motor vehicle parts to Proton Persona replacement unit model. The chance for automotive segment may remain shiny. However, dependency on Proton is a highlight for investors of Delloyd Endeavors. Proton has historically been the most significant customer in the automotive section. Thus proton's sales performance will immediately have impact on Delloyd's bottom line. Recently, the changes in Proton's management and shareholders following a acquisition by DRB-Hicom Bhd also potentially have involvement on the Group's future sales to Proton.
3. 2 Benchmarking
Benchmarking allows a corporation to assemble information from comparators and choose the best practices among the comparators in to the company operational activities.
Automotive components manufacture
Although automotive components segment generates the majority of the income to Delloyd Ventures Bhd, the amount of market stocks which occupied by the groups is relatively small compare with the market head within the same industry. The main reason which Delloyd has such disadvantage is because Delloyd are mainly focusing on local market (Make reference to appendix 1). This plan causes Delloyd shedding opportunities to broaden its business into a wider market, to become global provider. Benchmarking allow us to compare our own company's procedure or strategy with other companies. The comparison provides us an improved view on the business's weaknesses and also guidelines for improvement.
We have chosen APM Automotive Holdings Berhad as the comparator for improving Delloyd's market talk about. APM is chosen as the benchmark since it is the marketplace head which acquires most of market talk about within the motor vehicle component industry. Predicated on the info provided by APM, we discovered that APM does not target only on local market but also market in foreign countries (Make reference to appendix 2). This strategy reduces the impact from the European countries financial meltdown and the overflow in Thailand. APM supplies its product to several well-known car manufacturers surrounding the world. Any sales decrease in each one of the automobile manufacturers won't impact much of APM's income because there are other sources of revenue to pay the loss. Unlike APM, almost all of the Delloyd's earnings generate from local market. Reduce in virtually any customers' sales will straight reflect on Delloyd's financial record.
Based on information collected from APM, Delloyd should put into action similar strategy which employed by APM. The effect on the flood happen in Thailand reduced Delloyd's income. Delloyd could carry out market development by bringing out its existing products to a fresh market. Market development is launched in Ansoff matrix which a firm introduce its existing product to new market. Launch of product to a new market could improve the chance that the prevailing product of Delloyd to be accepted higher as compare with market which already has similar products. However, concentrate on a new market means that Delloyd won't focus on its existing market as much as before. This step will cause Delloyd's income generate from local market reduce as Delloyd will focus more on new market. Delloyd has to ensure that they are in a position to face the short term losses arise if Delloyd decide to apply market development.
BCG matrix shows that plantation section is positioned in the category of "question symbol". Attention from Delloyd is needed in order to go the plantation portion into the "star" column. Alternatively, lack of attention may cause the plantation segment get into "dog" column. Benchmarking could assist us in directing out the weaknesses or any area within plantation portion that needed to improve. We've chosen Wilmar which are the main provider of China most popular cooking food oil, Arowana engine oil. The company happens to be run by Robert Kuok and three of his nephews, Kuok Khoon Hong, Kuok Khoon Chen and Kuok Khoon Ean.
Wilmar is chosen as the standard because the business is one of the most significant plantation owners in Indonesia and Malaysia. Other than Indonesia and Malaysia, Wilmar also is the owner of plantations in Uganda and Western Africa. Wilmar has approximately 247, 081 hectares of planted area within these countries. On the previous paragraph, we've mentioned Wilmar is the main supplier of Arowana engine oil, this implies that the company has a distributional channel which ensure that all the crude palm essential oil received from the plantation is sold to the clients periodically. This ensures that Wilmar has a constant income.
From the study of Wilmar, Delloyd could grow its plantation area. Because of the restriction from Malaysia Insurance policy, Delloyd might not exactly have the ability to develop its plantation in Malaysia. However, Delloyd may think of expand it in other countries. Currently, a whole lot of companies are concentrating on acquiring land in Africa, Myanmar and Vietnam for plantation goal. This may be chance of Delloyd to grow its plantation far away. Other than growing plantation area, Delloyd could seek out distribution stations which allow Delloyd to truly have a strong source of income.
As bottom line, Delloyd Endeavors has been
Cost Control Market Development Alliances
During recession stage, Delloyd Ventures Bhd had diversified their automotive industry into related business which is distributing vehicle to foreign country to be able to recover the automotive components part business. By diversify to new market it can help company to mitigate the losses. However, automotive industry continues to be facing a higher challenge nowadays because of the huge competitive rivalry.
The Delloyd Endeavors Bhd aims is to recognised as top notch components company and the undisputed leader in the industry which means the company has the purpose to be or maintain market innovator position. The business has a good financial position, so it enables the company to purchase large amount of uncooked materials with lower costs which funding by loan or credit debt. So, the company can increase competitive advantage over the opponents. Besides that, the expense of finish good can be lowering because of the low cost of raw materials.
The company is Tier- 1 Vendor for home car creators of Proton and Perodua. The business business is overdependent on local marketplaces. Likewise, the company should try to develop their current market to new market so that it would broaden customer bottom part. For example, a fresh Proton model - Preve won't corporate and business will Delloyd Endeavors Bhd. This means that the business position will be unpredictable in future because their major customer won't collaborate with them.
The company should bring in their existing product to new market somewhat firm up to its market. Taking care of of market development is to improve the customer's retention rate. Delloyd Ventures Bhd can be an OEM vendor to varied international brands in Malaysia such as Toyota, Basic Motors, Naza, Honda, Hyundai, Nissan, Daihatsu, Ford, Suzuki and Volkswagen. The company should not merely focus on the products and services the client currently buying. They are able to expose new launched product and services with their existing customer in order to satisfy different needs of customers. Other than that, the company also can offer campaign or discount to attract the competitor's customer. So, it could easily boost the turnover of company because the customers already have a relationship with our company.
Next, the customers who are not buying something or service from the company consider as a potential untapped market. Delloyd Endeavors Bhd brand become one of the technique to develop in new market. With major clientele from foreign country, it presents the company capacity to adopt new market. The company objective is to become world class manufacturers so the company should grow their business to potential market. By increase its market in new geographical areas to be able to boost sales. For example, Delloyd should enter the overseas market rather than just international brands in local market.
Other than that, Delloyd Endeavors Bhd is recognized as an experienced large motor vehicle components and parts supplier. When a company wish to develop to new market, interior marketing is an extremely significant factor of success in the business. Delloyd should ensure the marketing team for controlling global market is strong and effective. Management may consider employing professional or consultant to minimise the marketplace risk, functional and managerial risk. A strong marriage in marketing has been considered as an important factor for a business to endure and sustainable in long term. Delloyd Endeavors was required to build customer commitment by emphasis on product benefits those are important to the client. By building a good romantic relationship with customer, the customer ready to buy our products again and Delloyd able to become their reliable distributor thus enhance the competitive advantage. Provision of several trainings to employees will build a strong base of skill or knowledge on the merchandise and services that company offers, along with mission and policies. This can increase the quality of customer support, by ensuring that all staff have a regular vision with their role within the company and the sort of service they should be providing.
High competitive rivalry among automotive industry and sophisticated form of technology would unlikely for the business compete itself alone. From KPMG 2012 Global Executive Review (Appendix 3. 1), the majority of the company acknowledge a need for alliances and co- development with companions from other market sectors such as battery manufacturer, telecommunication and IT companies. Furthermore to accessing new technology, alliances or mergers and acquisitions will help them type in new markets, reflecting the new opportunities. It responds to the previous three global motor vehicle surveys (2009 - 2011) noticed joint endeavors and alliances as a way to minimize personal debt and risk of bankruptcy.
From the business current situation, alliance is the most practical method for the company to develop the marketplace. The company need to boost their existing product quality in order to retain their customer loyalty. By alliance to partner, the prevailing business risks have been talk about and increase opportunities in a new market. A tactical alliance can be take parts into many forms such as copy technology skills, collaborate in marketing and campaign, join product development and etc. With this strategy, the company objective would not be issue because each partner needs to maintain their freedom while donate to mutual shared goal. For instance HTC and Apple brand had become partner to be able to get more competitive advantage. They discuss their technology to the other person to come out with the very best quality product to be able to contend with their major customer- Samsung. Delloyd can imitate the strategy from Apple and HTC; cooperate with its competitors to become more competitive. By alliance with spouse, the company may be able to access new market that your partner had moved into. Other than that, it can also gain huge chance to growth due to the difference customer platform.
Overall, Delloyd budget is considers wealth, so it allows the company to obtain more funds because of their business. By sharing skills and experience from the companions will help the corporation able to produce high quality product hence lead the business are capable to develop in new market. So far as the company in a position to retain the loyalty or gain customer confidence, the company would be able to become top notch manufacturer.
After evaluation for oil palm plantation from interior and external aspect, it concludes that Delloyd Ventures has potential in development in plantation section. The problems the management facing now is limited land expansion and immaturity of palm oil trees and shrubs.
With a trim and healthy balance sheet, Delloyd Projects is able to raise account by selling shares and debentures for enlargement. In order to maximize shareholders' riches, an effective strategic management must be used and designed properly to achieve commercial goals. Management has to increase the comparative market show by increasing revenue of plantation segment in order to attain "superstar" in BCG matrix. Predicated on current position, Delloyd may consider use market development strategy on business product level which is plantation segment. Since Delloyd only own 15, 871 hectares of plantation area, it is main conditions that management need to concern about insufficient land. However, Malaysia is currently insufficient additional land for enlargement of oil palm plantation. Presently Delloyd possesses 90% land in Indonesia. Predicated on The Border(Oct 9), Indonesia and Malaysia which are the world's dominant hand oil companies were in talks to form a joint body that will find to aid prices by minimizing stocks and managing equipment of the crude hand engine oil said by authorities trade officials. However in real life, it could impossible to create a joint body scheduled to strong competition between Indonesia and Malaysia which aims to be the major producer on the globe.
In simple fact, South East Asia is experiencing an intensification and enlargement in the conversion of forest and swidden land to olive oil palm plantations. There are a great many other countries which now are expanding in plantation area besides Indonesia and Malaysia such as Thailand, Philippines, Cambodia and Vietnam. From the research, Philippines may emerge as an integral player in the palm essential oil industry of South East Asia. Vietnamese federal government also considers the strategies to build up bio-oils as part of the "Development of bio-fuels for year 2015". Currently many foreign buyers are concern of the developing countries to be able to get competitive advantages of future progress. Delloyd should consider this issue such that it can gain the international market sooner than other competition for future long-term.
Delloyd may choose to use the same method of market in those countries for Indonesia. For growth goal, the Group must ensure Delloyd Plantation Sdn Bhd adopts proper marketing planning for global expansion abroad. A detailed and proper proper planning will ensure the business to accomplish its goals. For example, Delloyd can do industry appraisal and development potential of this region. They have to evaluate the prosperity condition, government insurance plan, financial, financial such as tax-incentives, human resources, technology support and so forth to produce a final decision whether it is worth to invest in that particular country as this will incur high capital requirements and is also long-term business. To be able to gain higher market share, Delloyd also must measure the challengers' position at that one country so that can adopt more accurate strategy in growth. Nevertheless, Delloyd also have to continue look for extra land in Indonesia since it offers secure market at there. Delloyd may choose to enter into the country and get acceptance from government of that country to open up its market by open overseas offices and manufacturing at there. Before this, Delloyd must ensure there will do capital for growth and it may use 5-10 years to have the go back from it. If Delloy feels that the investment is dangerous, management can choose to do tests such as acquire a parcel by leasehold way. Once we do benchmarking
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