IJM Corporation Bhd is one of the large listed companies in Malaysia and it is a heterogeneous conglomerate. Its core business activities encompass construction, property development, manufacturing and quarrying, infrastructure concessions and plantations. However, our report focus on its construction area only.
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The objective of the assignment is to practice the students to apply and relate the strategy knowledge learned. They can understanding better on the subject learned. Furthermore, they will have clearer picture on the subject as the group members share their knowledge while doing the assignment.
At the end of the assignment, their communication skill, teamwork and leadership will be improved. A good teamwork and leadership can guide members to cooperate with each other and ensure the assignment progress running smoothly.
This assignment will cover the strategies applied by IJM in their business. It is important to have a better understanding on the organization’s background initially while doing assignment because it helps the members to perform better in their next tasks.
Next, situation analysis will be discussed. It encompasses general environment analysis, industry conditions and SWOT analysis. General environment consists of seven elements which is useful when analyzing IJM. Then, the industry conditions are analyzed with Porter’s Five Forces Analysis. It analyze the competitiveness of IJM. Meanwhile, the SWOT analysis identifies the strengths, weaknesses, opportunities and threats to IJM.
Strategic options analyze of IJM is the next step and followed by recommendations. Lastly, the conclusion will be made for the assignment.
However, there are some limitation we face while doing the assignment. We are lack of information as the information of IJM such as its strategies and policies are private and confidential. We are hard to get these information by searching through online and we cannot analyze deeper on IJM, just depends on the basic information. Furthermore, as we are students, we are still fresh and unconfirmed in analyzing company’s strategic management. Besides, we were lack of time as we need to finish our tasks with limited information and time.
2.0 Organization’s Background
IJM  is formed in year 1983 by merging three medium-sized local construction companies which were IGB Construction Sdn Bhd, Jurutama Sdn Bhd and Mudajaya Sdn Bhd. As a result, IJM established as a professionally managed construction group that gained immediate market acceptance and sufficient financial capacity to compete effectively against rivalries in the market.
IJM’s core competencies grew expotentially and nowadays it is diversifying into other related businesses and expanding into new markets. IJM began its business in the construction field and become the largest property developer or builder in Malaysia presently. Numbers of large constructions such as highways and KLIA were being constructed by IJM. Besides, IJM involved in the construction of townships, commercial buildings and high-rise condominiums under the development of key growth areas in the country as well.
Recently, IJM starts globalizing its business and it also successfully undertook ventures overseas in the past time such as in Orlando USA, Singapore and Australia. Presently, it primarily focuses in Malaysia, India, United Arab Emirates, China and Indonesia and establishes a growing presence in those market.
Vision and mission statement  are created by successful leaders to clearly and concisely convey the direction of the organization. It is beneficial to the organization to achieve its goals. IJM’s vision  is to be an internationally competitive Malaysian builder of world-class infrastructure and buildings. Meanwhile, its mission is to deliver the highest performance standards in all the ventures.
3.0 Situation Analysis
3.1 General Environment Analysis
IJM’s contruction business focuses on the countries such as Malaysia, Singapore  , India, United Arab Emirates  . IJM has many construction projects in most of the working and tourism areas which are population intensive. For example, in Malaysia, IJM had constructed hospital, condominium and resorts in Kuala Lumpur  . In those areas, there are high demand on basic needs of facilities such as shopping mall, expressway and bridge and thus IJM can gain the advantages throughout there.
The global economy starts recovering  slowly in year 2010 after the financial crisis in year 2008 and the housing market  in US is expected to be risen. Malaysian construction sector  0 is expected to grow in year 2012 due to the government projects under Tenth Malaysia Plan (10MP) and Economic Transformation Programme (ETP). Meanwhile, there is great opportunities in overseas such as India and China as there is growth in global construction  1. IJM has opportunities to increase revenue and expand their business to overseas. However, there are some difficulties like rise of interest rate  2, rising cost of construction materials  3 and inflation  4 will decrease the revenue and increase the cost of IJM projects.
Malaysian government concentrates on infrastructure development and 10MP and ETP had been implemented to benefit the construction  5. However, the government regulates a minimum wage of RM 900  6 for private sector workers to improve their life standard in order to become a developed nation. The labor costs for IJM will be increased even it hires foreign workers due to the policy. Besides, due to increase of public awareness towards environmental issues  7, IJM increases its social responsibility and R&D costs to imposes eco-friendly technology like Green Technology  8.
The development of technologies such as Green Technology  9 and Energy Efficiency Technology  0 can improve the efficiency and effectiveness of construction performance, save constructing time and create environmental friendly constructions. IJM had put effort on innovation of new technology as it had developed R&D division for innovation.
Sociocultural indicates social’s attitude and culture values while doing business. In Malaysia, the success of construction mainly depend on good relationship with customers and thus personal skill and communication skill  1 are very important while dealing with them. The IJM’s employees should try to improve their communication skill and encourage “saving face” culture which is using laughing to hide nervousness and disagreement in business dealing. Besides, Malaysia is a multi-racial nation where each race holds different values, cultures and religion. IJM’s employees need to understand and respect each other culture and religion to avoid any disagreement and misunderstanding.
There are always chances for companies to exploit new market or change the current markets, cultural or characteristics. For example, there was news showing that Malaysian construction companies have big opportunities  2 in China. Thus, IJM has tried to expand its businesses in other countries such as India and China.
This segment relates to the potential  3 or actual changes in the physical environment and any positively response against those changes on the business practices. IJM should concern and identify the trends of changes such as global warming and energy saving issues. Thus, it can respond to the trends efficiently. For example, IJM had established an Environmental Management System  4 which complies with ISO 14001 due to the increase of awareness towards environment protection.
3.2 Porter’s Five Forces Analysis
Porter’s Five-Forces Model is a model created for analyzing the competitiveness of the industry. The nature of competitiveness is made up of five different forces and we use them to analyze IJM’s competitiveness.
Rivalry among competing firms
The rivalry among competing firms is the most significant force because the competitive advantage provided by the leading firm can be easily counteracted by the competitors. In the case of IJM  , the two most notable competitors are Gamuda  5 and Mudajaya  6. In my opinion, the competition is fierce within the construction industry as many projects available are given on a tender basis or contract basis. Only company with the best offer will get the project and once the project is awarded, the terms of the contract may include further cooperation. Therefore, the company need to offer high quality work with lower fee. To overcome this issue, all three companies mentioned have widened their construction services to other parts of the world such as India and UAE.
Potential entry of new competitors
For the construction industry, it is quite hard for new competitors to enter because many technological machinery and expertise are required to effectively compete with the other firms. Besides, a new company would have lesser certifications awarded by the various ISO organizations such as MS (Malaysian Standards) and BS (British Standards). This would definitely affect the company’s chances of winning the tender for a project. A new company may hard to gain the buyers’ trust. For example, a condominium constructed by IJM will definitely gather greater buyer confidence as compared to a new company.
Potential development of substitute products
The industry is highly competitive if the products are easily substituted by other alternatives. However, this is not the situation within the construction industry. Buildings, roads, tunnels and bridges cannot be substituted easily by other products. Therefore, the development of substitute products is not a problem for IJM.
The bargaining power of suppliers
Suppliers’ power is weak as IJM does not facing any trouble when acquiring raw material such as concrete products, steel welded mesh and building materials. This is because IJM have many sources of material supplied by its subsidiaries such as Malaysia Rock Products Sdn Bhd  7 and it might able to obtain the lower material cost than market. IJM’s suppliers are under its control and it does not depend on other suppliers and thus material price is hard to be increased.
The bargain power of buyers
The customers’ power is strong because IJM offer the construction project with reasonable price and quality work to suit their needs. Moreover, IJM have loyalty customer due to the sustainable reputation in this industry. For example, IJM had built high-rise buildings and landmark  , such as World-class Mid Valley Megamall, Berjaya Hotel and Beach Resorts in Mauritius and Port Klang Power Station.
3.3 SWOT Analysis
Ethical business culture
Quality, product and services
Trusted client relationship
Health, safety and environment
Adopt innovation, research and developments
Maximizing stakeholders interest
Lack of construction planning
Inefficient management in operation
Global construction industry growth
New construction technology
Policies and regulations
Increase of material cost
Limited land for construction
Foreign exchange risk
Slowdown and inflation (Western countries)
Rising of interest rate
SWOT analysis is used in analyzing how IJM formulating strategies to accomplish its goals. Strengths and weaknesses (Appendix I) are key internal factors which are related to the operational performance and internal control. Meanwhile, opportunities and threats (Appendix II) are the key external factors which will affect the organization’s businesses.
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Ethical business culture  8
IJM provides ethical leadership from top management as a role model to promote ethical culture within the organization. Training and improvement courses are used to educate the staffs on the ethical behavior and thought.
Quality, product and services  8
IJM’s policies, procedures and practices are in line with ISO quality certification to provide good quality of products and services. They will make regular reviews on the production process to assess and improve the quality control. They also will seek customers feedback to understand their need.
Trusted client relationship  7
IJM contains good public image as it is the leader in construction industry and it obtains many public infrastructure projects from government such as roads, bridge and linkage. Besides, a news showed that there is overnight queue  8 for the Penang condominium built.
Health, safety and environment  7
IJM set a comprehensive framework and management system on health, safety and environment. It is to meet the related regulations. Besides, safety committee was formed to monitor and assess the management systems which is used to prevent pollution from construction waste.
Social responsibility  9
IJM thinks that they should contribute some efforts to the society as the feedback and thus they have been developing sports (rugby and gymnastic), sponsoring students and charity programme.
Employee welfare  0
IJM ensures healthy and safety workplace are provided for its staffs. They provide fair remunerations and benefits to increase their performance and loyalty. Besides, training and development programmes are provided to train and promote them with professional growth opportunities.
Adopt innovation, research and developments  8
With the rapid change of technology, IJM invests in R&D activities to innovates and improves the quality of products and services and eliminate inefficient processes. To maintain competitive advantages, IJM uses regular reengineering and reinvention to produce higher quality of products with lower cost and shorter time.
Maximizing stakeholders interest  7
To maximize the revenue and stakeholders’ interest, IJM had obtained many projects in Malaysia as well as in overseas. It also maintains good corporate governance  8 on its operation and performance with adequate internal control, true and fair financial information and efficient operation. Besides, it creates “Investor Relations Programme”  8 to involve the stakeholders in its development and operation. They can provide any feedback to IJM for improvement purposes.
Lack of construction planning
Annual report had shown that there was delays on construction in oversea due to the difficulties of land acquisition  1. This had shown that the company lack of proper planning in construction project and thus revenue had declined.
Inefficient management in operation
IJM does not manage the operation efficiently as there is huge loss (RM 79millions) in construction segment in year 2011. This might be due to the provision of contractual claims, debt recovery, debtor balance build-up and higher fixed overhead costs  1.
Global construction industry growth and International expansion
From the research of PWC  1, the global construction will exceed GDP growth in the next 10 years. There are 7 countries such as China, India, Indonesia and US will contribute 65% in the growth. Meanwhile, a news  2 showed that the India construction industry is growing about 10% currently and its government plans to invest 150billion for infrastructure in future. IJM can gain this opportunities to put more efforts in global expansion.
New construction technology
Adaption of new construction technology can shorten the construction duration and save costs. In India, new advanced technology and modern crane are used to build huge bridge  3 without taking years. Thus, with new technology, IJM can start other projects earlier.
Policies and regulations
6P programme  4 organized by the government had resulted workers shortage in the construction. Thus, the Master Builders Association of Malaysia had appealed to the Government to relax the current policy against the new entry of foreign workers. Thus, IJM won’t have workers shortage problem.
Natural disasters such as earthquakes and flood happen in India and China. They will delay the construction progress and company needs to bear the rebuilding cost and even the cost of breaches of contracts.
Increase of material cost
The increase of materials price  3 such as steel bar and cement had resulted the local suppliers prefer to export rather than selling to local market. Thus, shortage of materials happened. Meanwhile, the import controls on materials do not allow to import cheaper alternatives and therefore forcing the builders to buy expensive materials.
Limited land for construction
There is a study about the demand of refurbishment projects  5 in Malaysia will be increased as the number of deteriorating building are increased with the limited land for new development.
Foreign exchange risk
As IJM engaged its business in other countries such as USA, China and India, the company will expose to the risk of foreign exchange. It will lead to a loss on foreign exchange due to the volatile movement of exchange rate.
Economic slowdown (Western countries)
There was a survey from The Construction Products Association  6 showing that UK have economic slowdown even though the financial crisis happened in a few years ago. Moreover, the rise of price of global energy and raw material also threaten the further economic recovery in UK construction.
Rising of interest rate
High interest rate in saving or loan will affect the consumers’ perspective to buy houses As the loan interest is high, the consumers do not able to pay the mortgage; meanwhile, high saving interest rate will attract the consumers to save more money.
4.0 Strategic options
SWOT analysis helps IJM to create strategies which provide right direction towards goals. Currently, IJM has implemented horizontal integration strategies under vertical integration strategy. IJM had seek ownership and acquired 50% of ownership of Nasa Land  7 who is subsidiary of Aspirasi Ratna Sdn Bhd, one of the competitors. IJM uses internally generated fund to implement acquisition on the loss making company after taking considerations on the potential development for undeveloped land owned by Nasa Land. After Nasa Land had developed a mixed development project in Mukim Terbau, there still has undeveloped land. This acquisition will help to increases revenues as Nasa Land project is an excellent opportunity for IJM to strengthen its presence and further business expansion in Malaysia.
IJM had used market development strategies under intensive strategy. It expands its market to overseas  8 such as China, India and UAE. In India, it made significant inroads into the construction of major highways. IJM has to date, secured 5 toll concessions on a build-operate-transfer (“BOT”) basis such as Swarna Tollway in Andra Pradesh and Trichy Tollway in Tamil Nadu. In China, IJM which have been profitably disposed of in recent years include significant stake in the Guangdong Provincial Expressway Development Co Ltd, which operates two expressway that form a national trunk road plus a major bridge across the Jiujiang River.
IJM is also using market penetration to seek increased market share for current development and services. For example, IJM Land, its subsidiary acquired 20% stake in WCESB  9 hrough its wholly-owned subsidiary Road Builder (M) Holdings Bhd for a total cash consideration of RM6.75mil from Prominent Xtreme Sdn Bhd. In this situation, IJM acquired WCESB for long term planning and objective such as its proposed acquisition into WCESB with not expected to have any significant effect on its earnings or net assets per share for this financial year and would contribute positively to its future earnings.
IJM is using product development strategies is to increase sales by developing new lands or houses. For example IJM developed Canal city and design as green city concepts and Canal City will be one of the first green townships in Malaysia, with a water and canal feature running through the entire project. The project with a gross development value of more than RM10 billion will be sprawled over 800 hectares at the back of the Kota Kemuning and Kota Permai Golf Course in Shah Alam, Selangor. With this project it will attract lot of investors to invest projects.
IJM is currently using product differentiation of business level strategies and IJM are flexibility in product offerings to suit the current market demand. IJM which has competitive advantages in differentiation which is not only focusing on constructing the houses or building construction and other project like civil engineering  7 for example highways, roads, bridges, airports, railway, monorails. IJM also based on customized products plan by client and construct a building such as Mid Valley Megamall in Kuala Lumpur, Ministry of Works Office Complex, National Theatre in Kuala Lumpur, Putrajaya Clinic and Hospital and much more. Relationship to the 5 portal forces in rivalry against existing competitors, IJM which has experience and impressive operating history spanning over 30 years, IJM have established a strong foothold in prominent locations in Penang, Klang Valley, Negeri Sembilan, Johor, Sabah and Sarawak and is furthering overseas ventures in the area of property development in China. So the clients for example like government, citizen and local and foreign investors are the loyal purchasers of differentiated product.
The global construction will exceed GDP growth in the next 10 years, especially China and India will contribute 65% in the growth. Therefore, IJM should seize this opportunity to focus its business in India and China. In India, around Rs 200 billion worth of work are handled by both local and foreign consultants and contracting organizations per year and 65% out of the work is handled by overseas companies. This shows great opportunities to increase investment of construction industry. India and China have large and cheap amount of labor compared with Malaysia. This completes construction faster with lower budget. Besides, exchange rate of India and China is lower than Malaysia which allows more financial capabilities to invest large amount of construction works in India and China. China and India are two of the highest populated countries in the world. This condition brings a lot of construction opportunities to the global construction companies. IJM can also expand its business to Philippine, Thailand and Vietnam. These countries have potential growth in construction industry and fewer competitors compared with China and India.
The recommendation for the threat of increasing material cost is to remove import controls on materials such as steel bars and cement. The association for construction companies could discuss with government to review the import controls and allow free market to determine materials’ prices and supply. This is necessary until their shortages and pricing has stabilized. Therefore, removing import controls can allow more competitive price in the local market. Besides, using cooperative purchase agreements to gain buying muscle is another way to reduce cost. IJM can combine orders with other companies for 1 supplier. Buying in bulk can reduce the prices of material.
Besides, land for urban construction should be used efficiently to alleviate limited land problem. The technological efficiency (TE), pure technological efficiency (PTE) and scale efficiency (SE) of intensive use of construction land are important to evaluate and manage the usage of urban land efficiently.
If a currency’s spot rate market is illiquid, its exchange rate is likely to be highly sensitive to a single large purchase or sale transaction. So, IJM should try to avoid to illiquid currency’s spot rate market. Another recommendation for foreign exchange risk is that conduct all business in Malaysia currency. This puts the burden of currency fluctuations on the customer’s shoulders and completely insulates the selling company from any shrinkage of profits from exchange rate differences.
IJM is one of the large listed companies in Malaysia and its core business activities encompass construction, property development, manufacturing and quarrying, infrastructure concessions and plantations. Recently, IJM starts globalizing its business and it also successfully undertook ventures overseas in the past time such as in Orlando USA, Singapore and Australia. Presently, it primarily focuses in Malaysia, India, United Arab Emirates, China and Indonesia and establishes a growing presence in those market.
We had made analysis on general environment, industry and SWOT of the organization on IJM. Under general environment analysis, there are 7 segments which are demographic, economic, global, political, physical
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