Varied Process Of Strategy Formulation Commerce Essay

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Abstract

In essence, strategic management refers as a varied process of strategy formulation, strategy implementation and strategy evaluation. This paper indicates the overview of strategic management processes and its implementation for OBYU Holdings Sdn Bhd. Internal strengths and weaknesses of this construction firm are stressed as well as the external opportunities and threats with the hope that OBYU Holdings Sdn Bhd will be able to maximize their business profits. Therefore, several strategies are included to strengthen the company's objective.

Keywords

OBYU Holdings Sdn Bhd, strategic management, construction firm

1.0 INTRODUCTION

This paper looks into the detail of strategic management processes in the real business or organization. The next step is to produce a workable strategic management for a company as part of the learning process. The study will try to present as much as possible information about the chosen company without disclosing any confidential information that may affect the business directly or indirectly. The information stated in this paper is entirely for the academic purpose and should not be used as an overall overview of the company. OBYU Holdings Sdn Bhd has been chosen for this purpose.

1.1 BACKGROUND TO THE CONSRUCTION FIRM IN SARAWAK

OBYU Holdings Sdn Bhd (OBYU), a Sarawak based entity, was incorporated in Malaysia under the Companies Act 1965 as a private limited company on 8th June 1983.

Its thrust into the corporate world was propelled by its successful ventures in the plantation industry. OBYU, through its subsidiary companies, pioneered the establishment of successful partnerships with key plantation giants such as Austral Enterprises Berhad, Perlis Plantation Berhad and Golden Hope Plantation Berhad to develop plantations in Sarawak.

1.1.1 Core competencies

Today, OBYU holds investments in companies involved in property development, construction and engineering, power and telecommunication, plantations, services and trading. Some of these companies have transcended the shores of Sarawak and making inroads into West Malaysia and Sabah.

1.1.2 Corporate Facts

OBYU Holdings Sdn Bhd also has an authorised share capital of RM5 million of which RM2 million is issued and fully paid up. OBYU is conscientious in developing entrepreneurs, particularly among Bumiputras, as evident by the strategic alliances with affiliates and partners to complement the core businesses of the Group. Some of the major affiliates and partners are shown below:

Property Investment & Development

Cascara Sdn Bhd

Construction And Engineering

KACC Construction Sdn Bhd

Power And Telecommunications

Transene Engineering Sdn Bhd

Plantation Investment

Imbok Enterprise Sdn Bhd

Services

BY Technologies Sdn Bhd (www.bytech.com.my)

Samasa Travel and Tours Sdn Bhd

Trading

Classic Sunrise Sdn Bhd

Manufacturing

Seteguh Resources Sdn Bhd

1.1.3 OBYU: The leadership

The OBYU Group is spearheaded by a competent and experienced team of true grit businessmen and corporate masterminds.The Board of Directors consists of:

Group Executive Chairman

Hj. Bustari Yusuf

Group Managing Director

Abg. Noordin D.A.H. Zainuddin

Group Executive Director

Mohd. Yaman Abd. Hamid

Directors

Ahadon Hj. Abd. Rahman

Fadillah Yusof

The Board is ably supported by a Management Committee which consists of qualified and experienced individuals drawn from various industries and having expertise in strategic management, financial management, legal affairs, engineering, trading, construction and project management.

1.1.4 The Group

OBYU holds direct investments in twelve companies which in turn have another twelve within their stables. The activities are wide ranging - property development, construction and engineering, power and telecommunication, plantations, services and trading. Below are the major companies within the Group:

Figure 1 - OBYU major companies within group

2.0 STRATEGY FORMULATION

According to David's (2003) model described before, the preliminary phase of the strategic management process is strategy formulation. During this phase, vision and mission statement of the company are reviewed, followed by analyzing the external and internal audits of the company. Regarding on information from this process, long-term objectives are placed and alternative strategies are developed, selected and prepared for the next stage, which is known as strategic implementation phase.

2.1 Review of the Vision statement

OBYU Group aspires to be the Premier Bumiputra Group in Sarawak and an Excellent Business Entity in Malaysia

2.2 Review of the Mission statement

The existing company's mission statement is stated below:

Organisation

To create an excellent organisation providing the state of art products and services

Business

To create innovative, value adding and professionally managed businesses within the group

Yield

To yield long term sustained returns for its shareholders, employees and the communities as a whole

Unique

To be unique in its approach which is environmentally friendly, flexible, pro-active, dynamic and totally customer focus.

David (2003) has outlined nine (9) important components that constitute a 'good' mission statement for any organization which is stated as below:

Customers

Product or services

Markets

Technology

Concern for survival, growth and profitability

Philosophy

Self-concept

Concern for public image

Concern for employee

The table below depicts the evaluation on the existing mission statement.

Table I : Evaluation of Existing Mission Statement

Components

Stated?

Comments

1. Customers

Yes

Suppliers, subcontractors and service providers

2. Products or services

Yes

providing the state of art products and services

3. Markets

No

Not mentioned

4. Technology

Yes

providing the state of art products and services

5. Concern for survival,

growth and profitability

Yes

To yield long term sustained returns for its shareholders, employees and the communities as a whole

6. Philosophy

No

Not mentioned

7. Self-concept

Yes

To be unique in its approach which is environmentally friendly, flexible, pro-active, dynamic and totally customer focus.

8. Concern for public image

Yes

approach which is environmentally friendly, flexible, pro-active, dynamic and totally customer focus.

9. Concern for employees

Yes

sustained returns for its shareholders, employees and the communities as a whole

Based on the above table, conclusion can be drawn that OBYU Holdings Sdn Bhd, only 7 statements were qualified out of 9 components. Thus, the existing mission statement does not clearly sufficient to be understood by intended target groups comprises the customers, own organization and the employees the most. Therefore, it is recommended for OBYU Holdings Sdn Bhd to revise their existing mission statement so that it includes all these essential nine components as suggested by David (2003).

The proposed new mission statement for OBYU Holdings Sdn Bhd is as follows:

Table II: Components of Proposed Mission Statement

Components

Inputs

1. Customers

To be unique in its approach which is environmentally friendly, flexible, pro-active, dynamic and totally customer focus.

2. Products or services

To create an excellent organisation providing the state of art products and services.

3. Markets

To seek more collaborative effort from global construction firms as to gain competitive advantages and opportunities through strategic local market segmentation.

4. Technology

To create an excellent organisation providing the state of art products and services.

5. Concern for survival,

growth and profitability

To yield long term sustained returns for its shareholders, employees and the communities as a whole.

6. Philosophy

To retain the level of customer satisfaction towards the quality of products and services provided

7. Self-concept

To be unique in its approach which is environmentally friendly, flexible, pro-active, dynamic and totally customer focus.

8. Concern for public image

To stress on the social responsibility which is environmentally friendly, flexible, pro-active, dynamic and totally customer focus.

9. Concern for employees

To yield long term sustained returns for its shareholders, employees and the communities as a whole.

David (2003) noted that the objective of an external audit is "to develop a finite list of opportunities that could benefit a firm and threats that should be avoided." As a result, the organization should become more elastic in order to respond either offensively or defensively to the external factors by formulating strategies that take counts of external opportunities and minimizing the impact of potential threats. One of the tools use to weight the external factors to a firm which introduced by David (2003) is the External Factor Evaluation (EFE) matrix.

David (2003) suggested that the organization should include as many managers and employees as possible in the EFE process to gain the employee involvement, understanding and commitment. Indeed, they would acknowledge this opportunity by sharing their knowledge, skills and opinions for their firm's survival. Among the external factors that must be taken into consideration are competitive intelligence and information awareness on the economic, social, cultural, demographic, environmental, political, governmental, legal and technological trends.

3.0 External and Internal Strategic Management Audit

Later than, the modified vision and mission have been finalized and identified, the next step is to undertake strategic management audits under external and internal environment of the company. According to David (2003) the main purpose of an external audit is to develop a finite list of opportunities that can bring benefit to a firm and treats that should be avoided. This is very important to firms or companies to respond either offensively to factors by formulating strategies that take advantages of external opportunities or decrease the impact of potential treats.

An external strategic management audit can be divided into five broad categories of external forces that includes economic forces; social, cultural, demographic and environmental forces; political, legal and governmental forces; technological forces and finally, competitive forces.

The changes in external forces will translate into the changes in customers demand for both industrial and consumer products and services in future industry. Moreover, by identifying and evaluating external opportunities and threats, these will enable the organization to design and develop a clear mission and develop organization policies to achieve annual objectives and long-term objectives.

3.1 External Opportunities and Threats

Based on the recent studies, it can be stated that there are several potential opportunities as well as threats that probably face by OBYU Holdings Sdn Bhd which determines by other external forces such as the economic forces; social, cultural, demographic and environmental forces; political, legal and governmental forces; technological forces and competitive forces. The opportunities identified are as follows:

3.1.1 Population Growth

Sarawak's young, ambitious and upwardly mobile population is growing at between 3% and 5% per annum in urban areas and 2.5% overall, fuelled not only by a high birth rate, but also by substantial urban-rural migration as the state develops and industrializes (sources: Population & Housing Census Report, 9th Malaysia Plan).

As a result, the state has the third highest level of overall housing requirements in Malaysia, at 65,000 units between 2006 and 2010. The only states with greater housing needs, namely Selangor and Johor, have far larger populations and thus Sarawak enjoys the highest per-capita demand of the three (sources: 9MP, Credit Suisse)

3.1.2 Rapid Development of the Major Projects

A number of major infrastructure projects - including the Bakun Hydro Dam and other proposed hydro projects, Malaysia's largest pulp and paper mill, and proposed aluminum's smelter should not merely provide secure and well-paying jobs for potential home buyers. Recently, federal government with the collaboration of the state of government of Sarawak also has proposed a mega national project plan which is Sarawak Corridor of Renewable Energy (SCORE) project which brings business opportunities for local construction firm to involve actively in providing basic infrastructure to the local people. Thus, huge capital will be injected into the state's economy, enriching local entrepreneurs across a wide range of categories and providing liquid cash for property and real estate investment.

3.1.3 Exclusion from Real Property Gains Tax (RPGT)

The Ministry of Finance has granted all property owners - both individuals and corporations - full exclusion from RPGT effective 1st April 2007. This measure has been warmly welcomed by the entire property and construction sector, and it is likely to have a powerful impact on buyer confidence.

Investors buying to let will only be taxed on their rental incomes, which can be offset against investment costs, and thus buy-to-let will become an increasingly attractive investment. Additionally, emigrants and Malaysia My Second Home participants, who usually prefer higher value accommodation, will find the prospect of buying rather than renting their homes increasingly attractive.

3.1.4 Introduction of SHEDA Code of Practice

The introduction of a mandatory Code of Practice (CoP) by SHEDA (the Sarawak Housing and Real Estate Developers Association) is a first business ethic mainly for housing developers for Malaysia and designed to promote the best practices in all stages of housing and real estate development and delivery, to the full satisfaction of house buyers and end users.

The CoP insists that developers are required to be more accountable and responsible by setting out standard guidelines in order to ensure a high standard of work is delivered, and includes mechanisms for mediation and settlement, the right to strike out the membership of sinful members, and recommendations to the Housing Ministry to withdraw the license of any sinful member.

3.1.5 To become the premier bumiputra group in Sarawak

To reflect the public confidence on the previous housing projects and to further capitalize on its position as a premier bumiputera group in Sarawak and an excellent business entity in Malaysia.

3.1.6 Maintaining good professional relationship

OBYU Holdings Sdn Bhd is seeking to maintain good professional relationships with all its respective major affiliates and partners as to compliments the core businesses of the group.

3.2 External threat

On the other hand, the threats faced by OBYU Holdings Sdn Bhd have been identified as follows:

3.2.1 Declining Quality of Construction Document

Architects who responsible in designing a house will experience work under price pressure from owners or developers. Hence, this pressure gradually forces intense cost and labor management. As a result, to increase a company's profit, time has to cut from oversight by experienced design people, thus plan details and clarity are not there. Frustration by the contractor is the result.

3.2.2 Product Characteristics

Building and construction industry encompasses a wide range of activities from the construction of residential dwellings and urban development to commercial and industrial building and the infrastructure associated with air, sea and road transportation, telecommunications, mining and energy.

In the non-residential building and non-building construction sectors, especially for large projects, high-technology and advanced management skills as well as substantial capital expenditure are needed, that cause service differentiation, which would create layers of insulation against competitive ware fare, because not all the firms can satisfy the customer needs.

3.2.3 New Multinational Construction Firms

As a result of the development in the current economic globalization, more and more foreign companies will invest their products and services in the local market especially in the construction field. Thus, this multinational construction firms will become a threat for local construction firms in Malaysia because some of them have their own competitive advantages in terms of technology used, management skill or capital as well as cost. This will constitute a serious threat to the local construction firms.

3.2.4 High cost of catching up with technology

These day, rapid technological advancements forces companies especially in construction industry to improve their productivity and efficiency. However, catching up with technology requires high costs and risks in order for the company to maintain its competitive advantage. The threat however lies not really in the spending, but in the competitor's ability to spend more to gain a competitive advantage.

3.2.5 High unemployment rates

It also evolve from a recession because more people are currently out of work which results in fewer people having the money to take on large investments such as building a new home. Indeed, this social issue will led to the decreasing demand for home due to the rising unemployment rates in the country.

3.2.6 Rise of price of land and building material

The rise of price and land and building material (cements) also affects the financial plan of the housing developers where they need to cut cost in developing house especially for low income buyers. Developer need to face difficulties in looking for landlord who willing to sell their land at the low price possible.

3.3 The External Factor Evaluation Matrix

Five (5) steps in developing EFE matrix:

List the key external factors as identified in the external audit process. It should consist of both Opportunities and Threats.

Assign each external factor with a weight that ranked from 0.0 (not important) to 1.0 (most important). The total weight for each external factor is 1.0.

Assign the rating from 1 to 4 for each external factor. [1 = the response is poor, 2 = the response is average, 3 = the response is above average, 4 = the response is superior].

Multiply each factor's weight by its rating to get the weighted score.

Sum the weighted score for each variable to determine the weighted score for the organization.

KEY EXTERNAL FACTORS

Weight

Rating

Weighted score

Opportunities

1.

Population Growth

0.10

3

0.30

2.

Rapid Development of the Major Projects

0.05

3

0.15

3.

Exclusion from Real Property Gains Tax (RPGT)

0.15

2

0.30

4.

Introduction of SHEDA Code of Practice

0.10

3

0.30

5.

To become the premier bumiputra group in Sarawak

0.10

2

0.20

6

Maintaining good professional relationship

0.10

2

0.20

Threats

1.

Declining Quality of Construction Document

0.05

4

0.20

2.

Product characteristics

0.05

3

0.30

3.

New Multinational Construction Firms

0.15

2

0.30

4.

High cost of catching up with technology

0.10

3

0.30

5.

High unemployment rates

0.10

3

0.30

6.

Rise of price of land and building material

0.10

3

0.30

Total

1.05

3.15

Table III - External Factor Evaluation Matrix of the OBYU Holdings Sdn Bhd

Note that the total weighted score of external factors to OBYU Holdings Sdn Bhd 3.15, which is above the average score (2.50). The weighted score of 3.15 indicates that OBYU Holdings Sdn Bhd is responding positively to existing opportunities and threats in the industry.

.

4.0 The Competitive Profile Matrix

In order to ensure that OBYU Holdings Sdn Bhd able to compete with other different construction firms, the Competitive Profile Matrix (CPM) will help us to identify firm's major competitors and its particular strengths and weaknesses in relation to the current competitor in the market. In addition to that, CPM also covers internal and external factors that may affect the organization. Therefore, this study will measure the level of competitiveness of the OBYU Holdings Sdn Bhd using the CPM by comparing it with other two major local construction firms in Sarawak: which are Advanced Synergy Sdn Bhd and Naim Cendera Sdn Bhd.

In general, CPM would have almost similar features like EFE except it does not limited to external factors only. CPM give more emphasize on critical success factor for a company. CPM still uses the similar rating system (1 to 4) as in EFE.

CRITICAL SUCCESS FACTORS

Weight

Naim Cendera Sdn Bhd

OBYU Holdings Sdn Bhd

Advanced Synergy Sdn Bhd

Rating

Score

Rating

Score

Rating

Score

Marketing strategy

0.15

4

0.60

1

0.15

2

0.30

Quality of end product

0.20

3

0.60

4

0.80

3

0.60

Price competitiveness

0.10

3

0.30

1

0.10

2

0.20

Financial status

0.15

3

0.45

3

0.60

2

0.30

Customer loyalty

0.05

2

0.10

2

0.10

1

0.05

Market share

0.10

3

0.30

1

0.10

2

0.20

Business segmentation

0.05

3

0.15

1

0.05

1

0.05

Table IV - The Competitive Profile Matrix of the OBYU Holdings Sdn BhdTotal

1.00

3.25

2.50

2.05

4.1 Strengths & Weaknesses

Based on research undergo, we were able to identify several strengths and weaknesses of OBYU Holdings Sdn Bhd in terms of several functional areas, such as management, marketing, finance/accounting, production/operations, research and development, and management information systems, as suggested by David (2003). The strengths are as follows:

4.1.1 A High Class Bumiputra Contractor

OBYU Holdings Sdn Bhd has an authorised share capital of RM5 million of which RM2 million is issued and fully paid up.

4.1.2 A Successful Bumiputra Group in Sarawak

OBYU Holdings Sdn Bhd can be considered as one of a Premier Bumiputra Group in Sarawak and possessed an Excellent Business Entity in Malaysia.

4.1.3 High Reputation with Strong Performances

OBYU was listed amongst top ranking Sarawak-based public listed companies the group already owns a great deal of success to excellent quality management and the successive delivery of top quality products and services.

4.1.4 Strong financial performance

The financial indicators of Construction Malaysia have been showing very positive results in recent years. Profits have steadily increased, and new business growth consistently each year. However, its other competitors are also seeing double-digit growth, although the new operators are yet to show profits.

On the other hand, the weaknesses faced by OBYU Holdings Sdn Bhd have been identified as follows:

4.1.5 Lack of Low Cost Housing projects

There is not much low cost housing project held by this company. Most of the houses built are main for those who from high income citizens (medium sized house for middle class). It is indicate that this company was not really concern in helping low income family to buy houses with high quality.

4.1.6 Lack of Professional Marketing Staff

Some of the marketing staff is not really have better communication skills in negotiating the prices to the customers. Besides that, some of them do not have educational background in marketing. Thus, it was very difficult for the customer to deal with them.

4.1.7 Marketing Segmentation

Most of the marketing segmentation only focuses in gaining interest of the people who lived at the main cities such as Kuching areas. There are actually less effort in marketing their product at other developing urban area throughout Sarawak such as Miri, Bintulu and Sibu. As a result, not many buyers who lived at the other develop areas interested to buy house at the main cities because of low marketing strategy even though they tends to move.

4.2 Internal Factors Evaluation (IFE) Matrix

Based on the identified strengths and weaknesses from the internal strategic management audit exercise, an Internal Factors Evaluation (IFE) Matrix is drawn up to identify the strength or weakness of the functional areas, and measure the degree of overall internal strength of the company. In the IFE Matrix, each factor is weighted according to level of comparative importance, regardless of whether a factor is an internal strength or weakness. Factors considered to have the greatest effect on organization performance should be assigned at the highest weights.

A rating from 1 to 4 is then determined for each factor. The rating of 1 means the factor is a major weakness, 2 refer as a minor weakness, 3 refer as a minor strength and 4 refer as a major strength. The total weighted score at the bottom of the IFE Matrix indicates how strong or weak the company is internally - a score well below the weighted average of 1.44 indicate general overall internal weakness, while scores significantly above 0.71 indicate general position of strength. The IFE Matrix for OBYU Holdings Sdn Bhd is shown in Figure VI. It can be seen that with a score of 2.15, OBYU Holdings Sdn Bhd still has some weaknesses that needs to be overcome in the organization,

Table V: Internal Factors Evaluation Matrix

1 = major weakness; 2 = minor weakness; 3 = minor strength; 4 = major strength

Key External Factors

Weight

Rating

Weighted Score

Strengths

1. A High Class Bumiputra Contractor

0.08

4

0.32

2. A Successful Bumiputra Group in Sarawak

0.08

4

0.32

3. High Reputation with Strong Performance

0.10

4

0.40

4. Strong Financial Performances

0.10

4

0.40

Weaknesses

1. Lack of Low Cost House project

0.05

3

0.15

2. Lack of Professional Marketing Staff

0.08

4

0.32

3. Limited Marketing Segmentation

0.08

3

0.24

Total

2.15

4.3 The Strategy Matching Techniques

Because strategy is sometimes defined as the match an organization makes between its internal resources and skills, with the opportunities and threats created by its external factors, the next step in the strategy formulation process is called the strategy matching stage. There are five techniques that can be used for this process:

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix

The Boston Consulting Group (BCG) Matrix

The Internal-External (IE) Matrix

The Grand Strategy Matrix (GSM)

However, we only choose to use only the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix and the Internal-External (IE) Matrix

4.3.1 Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix

The TOWS (or SWOT) Matrix allows for the development of four types of strategies:

Strengths-Opportunities (SO) strategies that use a company's internal strength to take advantage of external opportunities

Weaknesses-Opportunities (WO) strategies aim at improving internal weaknesses by capitalizing on external opportunities

Strengths-Threats (ST) strategies use a company's strengths to avoid or reduce threats

Weaknesses-Threats (WT) strategies are defensive tactics directed at reducing internal weaknesses and avoiding external threats.

Before we sat down to actually formulating the strategies, we went through the alternative strategy types as mentioned by David (2003), to familiarize ourselves with them. The strategy types are the integration strategies (forward integration, backward integration, and horizontal integration), intensive strategies (market penetration, market development, and product development), diversification strategies (concentric diversification, horizontal diversification, conglomerate diversification) and defensive strategies (retrenchment, divestiture and liquidation). Based on the inputs of the external and internal strategic management audits, the SWOT Matrix for Construction Malaysia is presented in Table VII.

Table VI: The SWOT Matrix for OBYU Holdings Sdn Bhd

Strengths (S)

A high-class Bumiputra Contractor

A Successful Bumiputra Group in Sarawak

High Reputation with Strong performances

Strong financial performance

Weaknesses (W)

Lack of Low Cost Housing projects

Lack of Professional Marketing Staff

Limited Marketing Segmentation

Opportunities (O)

Population Growth

Rapid Development of the Major Projects

Exclusion from Real Property Gains Tax (RPGT)

Introduction of SHEDA Code of Practice

To become the premier bumiputra group in Sarawak Construction Division

Maintaining good professional relationship

SO Strategies

With the high reputation with strong performances, it able to attract more and more buyers which growth in population (S4, O1)

With the strong financial performance, this company able to perform well in rapid development of the major projects. (S4, O2)

With high reputation and strong financial performances throughout the year, OBYU may be able to become the premier bumiputera group in Sarawak Construction Division. (S4, O5)

WO Strategies

With the exclusion of Real Property Gains Tax, OBYU can provide more low cost housing projects (O3, W1)

With the introduction of SHEDA Code of Practices, the problem of delays of time duration for project to be completed can be reduced. (O4, W4)

With maintaining good professional relationship with major affiliations, OBYU should be able to expand their market segmentation. (O6, W3)

Threats (T)

1. Declining Quality of Construction Document

2. Product Characteristics

3. New Multinational Construction Firms

4. High cost of catching up with technology

5. High unemployment rates

6. Rise of price of land and building material

ST Strategies

Even though new multinational construction firm leads to positive competition, OBYU still manage to become a successful Bumiputra construction in Sarawak. (T3, S2)

With the strong financial performance, OBYU able to invest their money to keep abreast with new technologies and able to reduce risks due to the rise of price of and building material (S4, T4, T6)

WT Strategies

OBYU able to defend them from being threat by new multinational construction firm by strengthening their public confidence and sustain the quality of product provided. (T3, O5)

In the long term, OBYU need to manufacture they own building material as to avoid the dependency of imported building material which rise on price. (T6)

OBYU need to encourage their workforce to relearn new state of art from developed nations so that it can be applied efficiently and economically in developing low cost housing projects in future. (T4, W1)

4.3.2 Internal-External (IE) Matrix

Internal-External (IE) Matrix can help to position an organization's various divisions in a nine-cell display. IE Matrix can produce three different approaches: (1) grow and build [Cell I, II & IV], (2) hold and maintain [Cell III, V & VII] and (3) Harvest or divest [Cell VI, VIII & IX].

4.0

3.0

THE IFE TOTAL WEIGHTED SCORE

2.0

1.0

3.0

I

II

III

THE EFE TOTAL WEIGHTED SCORE

2.0

IV

V

VI

1.0

VII

VIII

IX

Total EFE Weighted score : 3.15

Total IFE Weighted score : 2.15

Figure 2 - IE Matrix for OBYU Holdings Sdn Bhd

From the IE Matrix, it can be concluded that OBYU Holdings Sdn Bhd should choose strategy of hold and maintain of existing business as well as harvest or divest. Market penetration and product development are the two commonly employed strategies that OBYU could adopt to maintain their market in Sarawak.

4.3.3 The Quantitative Strategic Planning Matrix (QSPM)

Besides analysis and intuition, the relative attractiveness of feasible alternative actions could also be determined by using the Quantitative Strategic Planning Matrix (QSPM) which is considered as one of the analytical technique. The QSPM will objectively indicate which alternative strategies are best for implementation. The QSPM will use input from Stage 1 analyses and matching results from Stage 2 to decide objectively among alternative strategies. Table VII below indicate the best strategy for OBYU Holdings Sdn Bhd by using QSPM.

AS = Attractive Score; TAS = Total Attractive Score

As Score: 1 = Not attractive; 2 = Somewhat attractive; 3 = Reasonable attractive; 4 = Highly attractive

KEY FACTORS

Weight

Transcended the shores of Sarawak

Making inroads into West Malaysia and Sabah

AS

TAS

AS

TAS

OPPORTUNITIES

Population Growth

0.10

3

0.30

2

0.20

Rapid Development of the Major Projects

0.05

3

0.15

3

0.15

Exclusion from Real Property Gains Tax (RPGT)

0.15

2

0.30

-

-

Introduction of SHEDA Code of Practice

0.10

3

0.30

2

0.20

To become the premier bumiputra group in Sarawak

0.10

2

0.20

-

-

Maintaining good professional relationship with major affiliations

0.10

2

0.20

3

0.30

THREATS

Declining Quality of Construction Document

0.05

4

0.20

-

-

Product characteristics

0.05

3

0.15

3

0.15

New Multinational Construction Firms

0.15

2

0.30

4

0.24

High cost of catching up with technology

0.10

3

0.30

3

0.30

High unemployment rates

0.10

3

0.30

3

0.30

Rise of price of land and building material

0.10

3

0.30

4

0.40

1.15

3.00

2.24

STRENGTHS

1. A High Class Bumiputra Contractor

0.08

4

0.32

3

0.36

2. A Successful Bumiputra Group in Sarawak

0.08

4

0.32

3

0.36

3. High Reputation with Strong Performance

0.10

4

0.40

3

0.36

4. Strong Financial Performances

0.10

4

0.40

3

0.39

WEAKNESSES

1. Lack of Low Cost House project

0.05

3

0.15

-

-

2. Lack of Professional Marketing Staff

0.08

4

0.32

4

0.48

3. Limited Marketing Segmentation

0.08

3

0.24

3

0.39

TOTAL

0.57

2.15

2.34

Table VII: The Quantitative Strategic Planning Matrix (QSPM)

The Total Attractiveness Scores (TAS) indicates the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor. The higher number of Total Attractiveness Scores, the more attractive the strategic alternative. In this case, transcended the shores of Sarawak is more suitable for OBYU Holdings Sdn Bhd as compared to the strategy to making inroads into West Malaysia and Sabah.

5.0 Strategy Implementation

Based on the TOWS Matrix described earlier in the Strategy Formulation stage, one strategy that related to Human Resources issue has been chosen which are:

"To create innovative, value adding and professionally managed businesses within the group."

The strategy was chosen realizing on the following factors:

To encourage knowledge creation and knowledge management practices among professional in order to manage business and knowledge assets within the group.

To address the Management's concern regarding the development of skilled and competent executives.

The Company's aspiration of becoming the Learning Organization where knowledge is the most valuable asset after the human capital.

6.0 The SMART Test

The SMART test - which is an acronym for Specific, Measurable, Achievable, Realistic and Time-bound - is used for job targets so that they can be monitored and measured at regular intervals, to ensure there is progress towards meeting the target by the end of the evaluation period.

Test Criteria Explanation

Specific - Describe the specific outcome that needs to be achieved

Measurable - Can be measured from time to time - in terms of any combination of quantity, quality, time and cost.

Achievable - Can be achieved and is challenging

Realistic - Can be done if resources and support are enough and within control

Time-bound - Has a target date

6.1 Annual Objectives Recommendation

For OBYU Holdings Sdn Bhd's annual objectives, the SMART test was applied as follows:

6.1.1 Annual Objective

Test Criteria Test Results

Specific - Market share of OBYU Holdings Sdn Bhd especially with focus on construction industry.

Measurable - Increase 50% market share of BYU Holdings Sdn Bhd's major business over total industries.

Achievable - Past few years' performance have been more than 50% market share, but with rapidly increasing competition, maintaining a 50% market share is reasonable.

Realistic - There are sufficient resources in the Marketing Department to go out and promote OBYU's core businesses, complemented by the mobile sales team, with management support.

Time-bound - By end of 2011

7.0 Strategy Review and Evaluation

The third stage in strategic management is the Strategy Review and Evaluation. It is best viewed using the model below:

Figure 3 - Strategy Review and Evaluation for TM Net

Source: Fred R. Davis, "Strategic Management: Concepts and Cases", 9th Ed., (2003): 306.

For the strategy implementation that related to Human Resources issue, the "Wheel of HRM (human resources management)" suggested by Fombrun et al (1984) was used as the basic framework for managing human resource in OBYU Holdings Sdn Bhd. Among the steps that should be taken are:

Review the vision, mission and objectives of the company itself.

Restructure the department or create teams to implement the education program, perhaps based on region or class of population

Create a knowledge management team or unit in every department to manage valuable knowledge activities in a company.

Documenting important and valuable knowledge as for future reference.

Work with the Human Resource Management Department to determine the appropriate skill-set and competencies required for the new posts, and undertake a recruitment exercise to find the right candidates. For example, it should recruit the right people with background in marketing and/or communications, either by qualification or experience.

Assemble the Team and provide them with intensive training to equip them with skills and knowledge in marketing and sales techniques, on product knowledge (features & benefits), and other soft-skills.

Setting annual departmental goals that will contribute towards the long-term objectives and cascading them to individual goals appropriate with the job functions.

Monitoring everyone's performance against the set goals and regularly reviewing them to ensure performance targets will be met by the end of the evaluation period.

Developing a performance-based reward programmed (bonuses and other incentives) that differentiates the individual rewards as to how well the targets set are met.

Providing a clear career development path (promotion or succession) for everyone as a motivation tool.

8.0 Contingency Plan

Contingency plans are alternative plans that can be put into effect if certain key events do not occur as expected - both unfavorably and favorably (David, 2003). In order to minimize the impact of any foreseeable risks so that the original objective can still be met, it is recommended that OBYU to prepare themselves with such "Reminder queries" as part of the company's contingency plan:

Organizational scan

What are our future directions, SWOT analysis, what are we going to do? Where are we going?

Strategic planning

How to achieve our objectives? What are the strategies to pursue?

Competency profiling

Internal human resources available to take us to our objectives? Are the necessary competencies available?

Core competency gap analysis

Do we succeed in maintaining our core competencies? How far have we succeeded? If not then how to close the gap?

Knowledge management practices

Did the company knowledge assets were properly manage? Does the knowledge management team works?

9.0 CONCLUSION

Strategic management is the key driver for organizational success. The company needs to study the existing vision and mission statement. The next move is to realign the business direction wherever necessary because the way people doing business today are very dynamic and keep on changing. It would involve identifying the internal strengths and weaknesses, determining external opportunities and threats and generate strategies for company to pursue. Thus, it is important for OBYU Holdings Sdn Bhd to effectively apply and implement all the necessary initiatives in order to ensure all the company's mission and vision can be achieved in the near future.

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