IOI

IOI PROPERTIES BERHAD

B. Content of Case Study Analysis:

Executive Summary Letter

This paper analyzes the IOI Properties Berhad. It consists of strategy formulating,

implementing and evaluating. We identify the company’s strength, weaknesses, opportunities

and threats. From the SWOT, the EFE Matrix and IFE Matrix have been constructed, and the

result shows that, the IOI Properties Berhad’s EFE and IFE Matrix are above average with

total weighted score of 3.12 and 3.20. From the financial ratio of the company, it shows that

the revenue is continuously increasing. However, the growth of the company’s sales is

decreasing from year 2005 to 2006.

We have developed several matrixes to analyze the company and generate strategies.

The SWOT Matrix has generated several strategies for the company by using their strength,

weaknesses, opportunities and threats. For SPACE (Strategic Position and Action Evaluation)

Matrix, the IOI Properties Berhad has fall under aggressive quadrant of the SPACE Matrix.

Therefore, it is an excellent position to use its internal strengths to take advantage of external

opportunities, overcome internal weaknesses and avoid external threats. Therefore, market

penetration, market development, product development, backward integration, forward

integration, horizontal integration, conglomerate diversification, concentric diversification,

horizontal diversification, or a combination strategy all can be feasible, depending on the

specific circumstances that face the company.

For BCG Matrix, the IOI Properties Berhad is in quadrant I businesses (question

marks) represent that the company has a low relative market share position, yet they compete

in a high-growth industry. Market penetration, market development and product development

are appropriate strategies for this company to consider. For Competitive Profile Matrix

(CPM), and it shows that among the IOI Properties Berhad’s competitors (Boustead Holdings

Berhad and E&O Prop), E&O Prop is the weakest competitor.

The last matrix is Grand Strategic Matrix, which shows that the IOI Properties Berhad

is located in quadrant I of the Grand Strategy Matrix which is in an excellent strategic

position. For this company continued concentration on current market (market penetration and

market development) and products (product development) is an appropriate strategy. When

IOI Properties Berhad has excessive resources, then backward, forward, or horizontal

integration may be effective strategies. When IOI Properties Berhad is too heavily committed

to a single product, then related diversification may reduce the risk associated with a narrow

1


product line. IOI Properties Berhad can afford to take advantage of external opportunity in

several areas. It can take risks aggressively when necessary.

Beside all the matrixes, we have generated long term objectives and alternative

strategies for IOI Properties Berhad. The long term objectives are to give better service to the

customers and continuously improving their performance, to provide good locations,

affordable prices, highly functional designs and the right amenities to the people and also to

create a safe, green and pleasant environment. For the alternatives strategies, we have come

out with strategy of market penetration.

For the McKinsey 7S Implementation Framework, we maintain the old and add new in

certain aspects in 7S. For the strategy, overall the existing strategy can cope with the

challenging market environment. We have also developed the company’s new mission

statement which includes the 9 criteria of a good mission statement. For the structure, IOI

Properties Berhad needs to do research in order to maintain its competitive advantage. For

shared value, IOI Properties Berhad is always concern on its customer satisfaction and will try

to become a fully customer-driven organization. For staffing, it is good for the company to

provide training for the employees but it should not burden the company with the high cost.

2


1.0 Case Summary/Background

Publicly-listed in the property sector of the Kuala Lumpur Stock Exchange with a market

capitalisation of over RM1.5 billion, IOI Properties Berhad is now one of the 3 highest

capitalised property counters in the sector. With a track record of over 30 years in the property

industry, IOI Properties Berhad has established itself as one of the most reliable developer of

quality properties in Malaysia.

IOI Prop is one of the premier property developers in the Klang Valley and Johor. It has a

strong presence in the Puchong area, anchored by its flagship Bandar Puteri and

complemented by Bandar Puchong Jaya, which is approaching its tail- end. In Johor, the

Group dominates the Senai-Kulai area through Bandar Putra Kulai that stretches over 5,000

acres.

RAM has reaffirmed IOI Properties Berhad's respective long- and short-term senior debt

ratings of AA3 and P1.IOI Properties Berhad balance sheet appears superior to those of most

other property developers and is comparable to the other AA-rated companies in RAM's

rating portfolio.

Spearheaded by its Executive Chairman, Tan Sri Dato' Lee Shin Cheng, the Company is

currently involved in the following developments which are located in strategic growth areas

such as Bandar Puteri,Bandar Puchong Jaya which is in Puchong, Bandar Putra Senai,Bandar

Putra Segamat which is in Johor, IOI Resort Putrajaya, Bandar Puteri Klang and Bandar

Putera Klang.

Apart from property development, IOI Properties Bhd also holds various investment

properties which include Amoda Building (an office tower in the heart of the Golden Triangle

in Kuala Lumpur), IOI Mall (a 1,000,000 square feet shopping mall in Bandar Puchong Jaya,

Puchong), Mayang Plaza (a commercial complex in Petaling Jaya), IOI Business Park (a

360,000 square feet office block in Bandar Puchong Jaya) and IOI Plaza in Singapore.

3


1.1 Identify the Organization’s Existing Mission

Our Mission is to be a leading property developer (7) by providing products

and services (2) of superior value and by sustaining long-term growth in

volume and profitability (5). We shall strive to achieve responsible commercial

success by satisfying our customers’ needs (1), giving superior performance to

our shareholders, providing rewarding careers to our people (9), cultivating

mutually beneficial relationship with our business associates, caring for the

society and the environment in which we operate, and contributing towards the

progress of our nation (8).

1.2 Identify the Organization’s Existing Objectives

1.2.1 To enhance the environment in IOI Properties Berhad’s townships and

helping to foster a better community care.

1.2.2 To design and build a township that creates a community where

families can flourish in surroundings that are attractive, convenient and

safe.

1.2.3 To contributes towards provision of educational facilities in the

communities its business operates and providing direct support to the

educational needs of needy children, especially in the estates.

1.3 Identify the Organization’s Existing Strategies

1.3.1 IOI Properties Berhad managed to cope with the challenging housing

market environment of oversupply and lack-luster sentiments situation

by fine-tuning product launches to offer more shop-offices for sale.

1.3.2 IOI Properties Berhad uses an online system for the ease of the

purchasers to make maintenance and payments.

1.3.3 IOI Properties Berhad adjusts its product mix by focusing on the

commercial sector, namely shop-houses, to counter the slack in housing

demand.

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1.3.4 IOI Properties Berhad reviewing and updating the planning and design

of its range of products in anticipation of changing demands and needs

of the various targets and changing market environment.

1.4 Evaluation of Mission Statement on Nine Criteria

No Nine Criteria of a Good Mission Statement Stated Not Stated

1 Customers

2 Products or services

3 Markets

4 Technology

5 Concern for survival, growth and profitability

6 Philosophy

7 Self-concept

8 Concern for public image

9 Concern for employees

2. Develop New Mission Statement for the Organization

2.1 New Mission Statement for the Organization

Our Mission is to be a leading property developer (7) in Malaysia (3)

by providing products and services (2) of superior value and by sustaining

long-term growth in volume and profitability (5). We shall strive to achieve

responsible commercial success by satisfying our customers’ needs (1), giving

superior performance to our shareholders, providing rewarding careers to our

people (9), and cultivating mutually beneficial relationship with our business

associates, caring for the society and the environment in which we operate, and

contributing towards the progress of our nation (8). We believe that our

customers are always looking for a quality product at affordable price (6). We

will continually provide online payment system (4) for the convenience of our

purchasers to make maintenance and payments.

5


No Nine Criteria of a Good Mission Statement Stated Not Stated

1 Customers

2 Products or services

3 Markets

4 Technology

5 Concern for survival, growth and profitability

6 Philosophy

7 Self-concept

8 Concern for public image

9 Concern for employees

3. Problem Identification

No Problem Identification Major Problem/

Minor Problem

Priorities Of The

Problem

1 High cost in training

employees

Minor 2

2 Oversupply of houses Major 1

3 Too much allocation of funds

to subsidiary.

Minor 3

4. TOWS Framework

4.1 Identifying The Organization’s External Opportunities/Threats

4.1.1 Opportunities

4.1.1.1 Malaysia is one of the fastest growing economies in the region

and last year the property market enjoyed capital growth

figures of between 15% and 30%.

4.1.1.2 The government has introduced a number of tax and legal

initiatives aimed at easing the process of foreign property

investment into the country and attracting more investors.

4.1.1.3 The government’s “Ninth Plan” will have a positive impact on

the Malaysian real estate market through further

improvements to the infrastructure and economic policies.

6


4.1.1.4 Low buying costs currently at between 3.4% to 6.75% of the

property value.

4.1.1.5 Supply constraints and improving occupancy and rental rates

helped to spur the demand for property.

4.1.1.6 The Government’s encouragement and successful listing of

Real Estate Investment Trusts (REITs) further contributed

towards improved market sentiments in the commercial and

retail sector.

4.1.1.7 Property prices per square meter in all major Malaysian towns

and cities are at a fraction of the cost of similar investments in

many other worldwide destinations.

4.1.1.8 60 percent of the population below the age of 30, Malaysia will

experience a significant household transformation that will

further expand the demand for properties.

4.1.1.9 Car import duties and some other taxes are waived for foreign

residents and capital gains tax is not charged on property

owned for more than 5 years.

4.1.1.10 Undeveloped nature of Sabah and Sarawak.

4.1.2 Threats

4.1.2.1 The external environment and global economic outlook is

expected to register a slower growth rate amidst rising fuel

prices and interest rates which cuts affordability and slows

demand.

4.1.2.2 Property market activities had dropped by 5.3% in value and

5.7% in number of transactions respectively in Year 2006.

4.1.2.3 On the supply-side, there is oversupply.

4.1.2.4 Johor property market slowed significantly during the year

2006.

4.1.2.5 Consumer sentiments were subdued by increase in petrol prices

and rising inflation.

4.1.2.6 E&O PROP has up market developments located in the heart of

Kuala Lumpur’s Damansara Heights.

7


4.1.2.7 The joint venture between Selangor Properties Berhad and E&O

PROP fully draws on the combined expertise and reputations

of both companies in property development, particularly in

Damansara Heights.

4.1.2.8 Boustead Holdings Berhad proposed acquisition of a 70% stake

in BP Malaysia Sdn Bhd.

4.1.2.9 Boustead Holdings Berhad is the market leader in the property

and development industry.

4.1.2.10 Changes in customer’s tastes and preferences will affect the

design of house.

4.1.3 EFE Matrix (External Factor Evaluation Matrix)

NO OPPORTUNITIES WEIGHT RATING WEIGHTED

SCORE

1. Malaysia is one of the fastest growing

economies in the region and last year the

property market enjoyed capital growth figures

of between 15% and 30%

0.07 4 0.28

2. The government has introduced a number of tax

and legal initiatives aimed at easing the process

of foreign property investment into the country

and attracting more investors.

0.06 3 0.18

3. The government’s “Ninth Plan” will have a

positive impact on the Malaysian real estate

market through further improvements to the

infrastructure and economic policies.

0.06 4 0.24

4. Low buying costs currently at between 3.4% to

6.75% of the property value.

0.07 3 0.21

5. Supply constraints and improving occupancy

and rental rates helped to spur the demand for

property.

0.04 3 0.12

6. The Government’s encouragement and

successful listing of Real Estate Investment

Trusts (REITs) further contributed towards

improved market sentiments in the commercial

0.06 3 0.18

8


and retail sector.

7. Property prices per square meter in all major

Malaysian towns and cities are at a fraction of

the cost of similar investments in many other

worldwide destinations.

0.05 2 0.10

8. 60 percent of the population below the age of

30, Malaysia will experience a significant

household transformation that will further

expand the demand for properties.

0.06 4 0.24

9. Car import duties and some other taxes are

waived for foreign residents and capital gains

tax is not charged on property owned for more

than 5 years.

0.04 3 0.12

10. Undeveloped nature of Sabah and Sarawak. 0.02 2 0.04

NO THREATS WEIGHT RATING WEIGHTED

SCORE

11. The external environment and global economic

outlook is expected to register a slower growth

rate amidst rising fuel prices and interest rates

which cuts affordability and slows demand.

0.07 4 0.28

12. Property market activities had dropped by 5.3%

in value and 5.7% in number of transactions

respectively in Year 2006.

0.05 3 0.15

13. On the supply-side, there is oversupply. 0.06 4 0.24

14. Johor property market slowed significantly

during the year 2006.

0.02 2 0.04

15. Consumer sentiments were subdued by increase

in petrol prices and rising inflation.

0.05 2 0.10

16. E&O PROP has up market developments

located in the heart of Kuala Lumpur’s

Damansara Heights.

0.04 2 0.08

17. The joint venture between Selengor Properties

Berhad and E&O PROP fully draws on the

0.04 2 0.08

9


combined expertise and reputations of both

companies in property development, particularly

in Damansara Heights.

18. Boustead Holdings Berhad proposed acquisition

of a 70% stake in BP Malaysia Sdn Bhd.

0.02 1 0.02

19. Boustead Holdings Berhad is the market leader

in the property and development industry.

0.06 3 0.18

20. Changes in customer’s tastes and preferences

will affect the design of house.

0.06 3 0.18

TOTAL 1.00 3.12

Interpretation:

The average total weighted score of 3.12 indicates that IOI Properties Berhad is responding to

existing opportunity and threat in its industry. In other words, IOI Properties Berhad strategies

can take advantage of existing opportunities and minimize the potential adverse effects of

external threat.

4.2 Identifying The Organization’s Internal Strengths/Weaknesses

4.2.1 Strengths

4.2.1.1 Operating performance of IOI Properties Berhad is expected to

be stable due to ability of the company to modify its product

mix to meet changing demands and changing market

environment.

4.2.1.2 IOI Properties Berhad is one of the premier property

developers in the Klang Valley and Johor.

4.2.1.3 IOI Properties Berhad balance sheet appears superior to those

of most other property developers and is comparable to the

other AA-rated companies in RAM's rating portfolio.

4.2.1.4 Higher sales of commercial properties, namely shop offices in

Bandar Puteri, Puchong and also higher contributions from

property investment portfolio.

4.2.1.5 A united team of dedicated employees who are committed to

the Company’s vision and to giving their best lead to

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consistency superior performances IOI Properties Berhad in the

industries.

4.2.1.6 The gradual increase in occupancy and rental rate for most of

IOI Properties Berhad’s investment properties.

4.2.1.7 IOI Resort is the one and only resort development within

Putrajaya.

4.2.1.8 Availability of Smart Home options provided by IOI Properties

Berhad at Bandar Puteri Puchong enables house owners to

remotely manage and communicate with their homes

appliances and alarm systems for added security.

4.2.1.9 IOI Properties Berhad emerged as the Edge Top Ten Property

Developers for 4 years running.

4.2.1.10 IOI Properties Berhad has introduced an online system

for the convenience of its condominium and apartment

purchasers to make maintenance and other periodic payments.

4.2.2 Weaknesses

4.2.2.1 Greater focus on developing skilled and talented employees

will lead to increase in cost.

4.2.2.2 The current ratio has been decreased dramatically in 2006.

4.2.2.3 The total liabilities has been increased drastically in 2006

because of amount due to subsidiaries has increased.

4.2.2.4 IOI Properties Berhad growth rate in sales is decreasing

drastically from year to year.

4.2.2.5 Create multi-unit facilities that are provided by IOI Properties

Berhad creates more maintenance responsibilities for the

landlord or tenants.

4.2.2.6 Certain material that has been used for housing developing is

lack of material such as floor material.

4.2.2.7 The IOI Properties Berhad unable to maintain its customer

service which lead to customer’s dissatisfaction

4.2.3 IFE Matrix (Internal Factor Evaluation Matrix)

11


NO STRENGTH WEIGHT RATING WEIGHTED

SCORE

1 Operating performance of IOI Properties Berhad

is expected to be stable due to ability of the

company to modify its product mix to meet

changing demands and changing market

environment.

0.05 4 0.20

2 IOI Properties Berhad is one of the premier

property developers in the Klang Valley and

Johor.

0.03 4 0.12

3 IOI Properties Berhad balance sheet appears

superior to those of most other property

developers and is comparable to the other AA-

rated companies in RAM's rating portfolio.

0.02 4 0.08

4 Higher sales of commercial properties, namely

shop offices in Bandar Puteri, Puchong and also

higher contributions from property investment

portfolio.

0.06 4 0.24

5 A united team of dedicated employees who are

committed to the Company’s vision and to

giving their best lead to consistency superior

performances of IOI Properties Berhad in the

industries.

0.09 4 0.36

6 The gradual increase in occupancy and rental

rate for most of IOI Properties Berhad’s

investment properties.

0.08 3 0.24

7 IOI Resort is the one and only resort

development within Putrajaya.

0.05 3 0.15

8 Availability of Smart Home options provided by

IOI Properties Berhad at Bandar Puteri Puchong

enables house owners to remotely manage and

communicate with their homes appliances and

alarm systems for added security.

0.04 3 0.12

9 IOI Properties Berhad emerged as the Edge Top 0.03 2 0.06

12


Ten Property Developers for 4 years running.

10 IOI Properties Berhad has introduced an online

system for the convenience of its condominium

and apartment purchasers to make maintenance

and other periodic payments.

0.06 4 0.24

NO WEAKNESSES WEIGHT RATING WEIGHED

SCORE

12 Greater focus on developing skilled and talented

employees will lead to increase in cost.

0.06 4 0.24

13 The current ratio has been decreased

dramatically in 2006.

0.04 4 0.08

14 The total liabilities has been increased

drastically in 2006 because of amount due to

subsidiaries has increased.

0.05 4 0.20

15 IOI Properties Berhad growth rate in sales is

decreasing drastically from year to year.

0.05 4 0.20

16 Create multi-unit facilities are in poorly

maintained state overall. Changing a single unit

dwelling to a multi-unit home creates more

maintenance responsibilities for the landlord or

tenants.

0.09 3 0.27

17 Certain material that has been used for housing

developing is lack of material such as floor

material.

0.1 2 0.2

18 The IOI Properties Berhad unable to maintain its

customer service which lead to customer’s

dissatisfaction.

0.1 2 0.2

TOTAL 1.00 3.20

Interpretation:

As total weighted score of IOI Properties Berhad above 2.5, it indicates a strong internal

position.

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The Internal-External (IE) Matrix

THE IFE TOTAL WEIGHTED SCORES

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

3.0 2.0 1.0

4.0

High

THE 3.0 to

4.0

EFE

TOTAL

3.0

WEIGHTED

Medium

SCORES 2.0 to

2.99

2.0

Low

1.0 to 1.99

1.0

Interpretation:

The IE Matrix shows the IFE Total Weighted Scores which is 3.20 and the EFE Total

Weighted Scores that is 3.12. This organization IE matrix fall into cell I which can be

described as grow and build. The most appropriate strategies for this organization is intensive

(market penetration, market development and product development) or integrative (backward

integration, forward integration and horizontal integration).

I

Grow

and Build

II III

IV V VI

VII VIII IX

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4.2.4 Financial Ratios

RATIO CALCULATION MEANING

Liquidity Ratios 2004 2005 2006

Current Ratio

Current asset____ Current liabilities

= 465721 6964

= 66.88

= 422693 6245

= 67.69

= 693849 168373

= 4.12

The firm able to

meet its short term

obligation but the

ratio decrease

dramatically in

year 2006.

Leverage Ratios

Debt –to-Total-Assets-Ratio

Total DebtTotal assets

Debt –to-Equity-Ratio

Total Debt______Total stockholders’ equity

Times-Interest-Earned Ratio

Profits before interest and

= 6964 747880

= 0.09

= 6964 740916

= 0.09

= 6245 19888

= 0.0087

= 6245 713643

= 0.0088

= 168373 941879

= 0.179

= 168373 773506

= 0.218

Total funds that are

provided by

creditors is

increasing in year

2006

Total funds

provided by

creditors versus by

owners is

increasing in year

2006

15


taxes________ Total interest charged

= 132693 7916

= 16.763

= 165033 8187

= 20.16

= 293374 8234

= 35.63

This ratio is

increase from year

to year; it indicates

that the firm is able

to cover its interest

payment from the

annual operating

earning.

Activity Ratios

Fixed Asset Turnover Sales___Fixed asset

Total Asset Turnover Sales____Total Assets

= 136990 282159

= 0.486

= 136990 747880

= 0.183

= 1 70167 297195

= 0.5726

= 170167 719888

= 0.2363

= 221299 248030

= 0.892

= 221299 941879

= 0.235

It indicates that the

firm is able in

managing its fixed

asset in relation to

sales.

The firm is able in

utilizing the

capacity of total

asset in relation to

sales.

Profitability Ratios

Operating Profit Margin

Earning before interest and Tax(EBIT)________ Sales

Net Profit Margin

= 132693 136990

= 0.969

= 165033 170167

= 0.97

= 293374 221299

= 1.326

The firm is

effective in making

its operating

decision besides

financing decision

16


Net Income Sales

Return on Total Assets(ROA)

Net incomeTotal assets

Return on Shareholders’ Equity (ROE) Net income______Total stockholders’ equity

= 100551 136990

= 0.734

= 100551 747880

= 0.134

= 100551 740916

= 0.136

= 121519 170167

= 0.714

= 121519 719888

= 0.169

= 121519 713643

= 0.170

= 236036 221299

= 1.067

= 236036 941879

= 0.251

= 236036 773506

= 0.305

After tax profits

increased per

ringgit of sales.

The firm’s after-tax

profits per ringgit

of asset arising but

it still show that the

firm has a poor

control of overall

expenditure

The firm has an

arising rate of

return on common

stockholders

investment

Growth Ratios

Sales

Annual percentages growth in

total sales

= 64.25% = 24% = 30% The firm’s growth

rate in sale is

decreasing from

year 2004 to 2006

Net income

Annual percentages growth in

profits

= 56.42% = 21% = 94.24% The firm’s growth

rate in profits is

17


decreasing from

year 2004 to 2005

but start to

increasing

dramatically in

2004.

No Items S W O T

D P E C T D P E C T

1 Operating performance of IOI Properties

Berhad is expected to be stable due to ability of

the company to modify its product mix to meet

changing demands and changing market

environment. √

2 IOI Properties Berhad is one of the premier

property developers in the Klang Valley and

Johor. √

3 IOI Properties Berhad balance sheet appears

superior to those of most other property

developers and is comparable to the other AA-

rated companies in RAM's rating portfolio. √

4 Higher sales of commercial properties, namely

shop offices in Bandar Puteri, Puchong and

also higher contributions from property

investment portfolio. √

5 A united team of dedicated employees who are

committed to the Company’s vision and to

giving their best lead to consistency superior

performances of IOI Properties Berhad in the

industries. √

6 The gradual increase in occupancy and rental

rate for most of IOI Properties Berhad’s

investment properties. √

7 IOI Resort is the one and only resort

development within Putrajaya. √

8 Availability of Smart Home options provided by

IOI Properties Berhad at Bandar Puteri

Puchong enables house owners to remotely

manage and communicate with their homes

√

18


appliances and alarm systems for added

security.

9 IOI Properties Berhad emerged as the Edge

Top Ten Property Developers for 4 years

running. √

10 IOI Properties Berhad has introduced an online

system for the convenience of its condominium

and apartment purchasers to make

maintenance and other periodic payments. √

No Items S W O T

D P E C T D P E C T

11 Greater focus on developing skilled and

talented employees will lead to increase in cost. √

12 The current ratio has been decreased

dramatically in 2006. √

13 The total liabilities has been increased

drastically in 2006 because of amount due to

subsidiaries has increased. √

14 IOI Properties Berhad growth rate in sales is

decreasing drastically from year to year. √

15 Multi-unit facilities that are provided by IOI

Properties Berhad creates more maintenance

responsibilities for the landlord or tenants. √

16 Certain material that has been used for housing

developing is lack of material such as floor

material. √

17 The IOI Properties Berhad unable to maintain

its customer service which lead to customer’s

dissatisfaction. √

18 Malaysia is one of the fastest growing


property market enjoyed capital growth figures

of between 15% and 30%. √

19 The government has introduced a number of

tax and legal initiatives aimed at easing the

process of foreign property investment into the

country and attracting more investors√

20 The government’s “Ninth Plan” will have a

positive impact on the Malaysian real estate

√

19


market through further improvements to the

infrastructure and economic policies.

21 Low buying costs currently at between 3.4% to

6.75% of the property value. √

22 Supply constraints and improving occupancy

and rental rates helped to spur the demand for

property. √

No Items S W O T

D P E C T D P E C T

25 60 percent of the population below the age of

30, Malaysia will experience a significant

household transformation that will further

expand the demand for properties. √

26 Car import duties and some other taxes are

waived for foreign residents and capital gains

tax is not charged on property owned for more

than 5 years.√

27 Undeveloped nature of Sabah and Sarawak. √

28 The external environment and global economic

outlook is expected to register a slower growth

rate amidst rising fuel prices and interest rates

which cuts affordability and slows demand. √

29 Property market activities had dropped by 5.3%

in value and 5.7% in number of transactions

respectively in Year 2006. √

30 On the supply-side, there is oversupply. √

31 Johor property market slowed significantly

during the year 2006. √

32 Consumer sentiments were subdued by

increase in petrol prices and rising inflation. √

33 EOPROP has up market developments located

in the heart of Kuala Lumpur’s Damansara

Heights. √

34 The joint venture between Selangor Properties

Berhad and E&OPROP fully draws on the

combined expertise and reputations of both

companies in property development, particularly

in Damansara Heights. √

35 Boustead Holdings Berhad proposed

acquisition of a 70% stake in BP Malaysia Sdn

√

20


Bhd.

36 Boustead Holdings Berhad is the market leader

in the property and development industry. √

No Items S W O T

D P E C T D P E C T

37 Changes in customer’s tastes and preferences

will affect the design of house. √

TOTAL 10 7 5 3 2 0 0 4 0 2 4 0

Interpretation:

From the above table, it shows that IOI Properties Berhad has ten strengths. It indicates that

IOI Properties Berhad can successfully compete with competitors and sustained in this

industry. With seven weaknesses, the IOI Properties Berhad should improve their strategies as

to eliminate their weaknesses. The IOI Properties Berhad has ten opportunities meaning that

IOI Properties Berhad should take advantage of it. This table also shows that, IOI Properties

Berhad has ten threats. It indicates that IOI Properties Berhad should minimize the potential

adverse effects of external threats so that their organization will not be affected.

Matrixes

TOWS Matrix

STRENGTH – S

1. Operating performance

of IOI Properties

Berhad is expected to be

stable due to ability of

the company to modify

its product mix to meet

changing demands and

changing market

environment.

2. IOI Properties Berhad is

WEAKNESESS – W

1. Greater focus on

developing skilled and

talented employees will

lead to increase in cost.

2. The current ratio has been

decreased dramatically in

2006.

3. The total liabilities has

been increased drastically

in 2006 because of amount

21


one of the premier

property developers in

the Klang Valley and

Johor.

3. IOI Properties Berhad's

balance sheet appears

superior to those of most

other property developers

and is comparable to the

other AA-rated

companies in RAM's

rating portfolio.

4. Higher sales of

commercial properties,

namely shop offices in

Bandar Puteri, Puchong

and also higher

contributions from

property investment

portfolio.

5. A united team of

dedicated employees who

are committed to the

Company’s vision and to

giving their best lead to

consistency superior

performances of IOI

Properties Berhad in the

industries.

6. The gradual increase in

occupancy and rental rate

for most of IOI

Properties Berhad’s

investment properties.

7. IOI Resort is the one and

due to subsidiaries has

increased.

4. IOI Property’s growth rate

in sales is decreasing

drastically from year to

year.

5. Multi-unit facilities that

are provided by IOI

Properties Berhad create

more maintenance

responsibilities for the


6. Certain material that has

been used for housing

developing is lack of

quality such as floor

material.

7. The IOI Properties Berhad

unable to maintain its

customer service which

lead to customer’s

dissatisfaction.

22


only resort development

within Putrajaya.

8. Availability of Smart

Home options provided

by IOI Properties at

Bandar Puteri Puchong

enables house owners to

remotely manage and

communicate with their

homes appliances and

alarm systems for added

security.

9. IOI Properties Berhad

emerged as the Edge Top

Ten Property Developers

for 4 years running.

10. IOI Properties Berhad

has introduced an online

system for the

convenience of its

condominium and

apartment purchasers to

make maintenance and

other periodic payments.

OPPORTUNITIES – O

1. Malaysia is one of the

fastest growing economies

in the region and last year

the property market

enjoyed capital growth

SO STRATEGIES

1. Develop a new green and

smart township at the

undeveloped area with

‘Modern Forest’ concept.

(S4, O10) – (Market

WO STRATEGIES

1. Selling one to two

subsidiaries to reduce the

total liabilities and

concentrate more on

foreign property

23


figures of between 15%

and 30%.

2. The government has

introduced a number of

tax and legal initiatives

aimed at easing the

process of foreign

property investment into

the country and attracting

more investors

3. The government’s “Ninth

Plan” will have a positive

impact on the Malaysian

real estate market through

further improvements to

the infrastructure and

economic policies.

4. Low buying costs

currently at between 3.4 to

6.75% of the property

value.

5. Supply constraints and

improving occupancy and

rental rates helped to spur

the demand for property.

6. The Government’s

encouragement and

successful listing of Real

Estate Investment Trusts

(REITs) further

contributed towards

improved market

sentiments in the

commercial and retail

sector.

Development)

2. Promoting greater sales

via internet which enable

buyers to make deposit

payment through online

system. (S10, O4, O5) –

(Market Penetration)

3. Develop medium- and

high-cost housing to meet

the increasing of property

demand. (S1, O4, O8) –

(Related Diversification)

4. Improve infrastructure and

facilities at the existing

developed housing area

such as at Bandar Puteri

Klang and Bandar Putra

Senai. (S2, O3) –

(Product Developmet)

investment to cover the

liabilities. (W3, O2) –

(Divestiture)

2. Increase advertising via

electronic channel to

attract more buyers. (W4,

O5) – (Market

Penetration)

3. Promote longer

maintenance period to the

potential buyers. (W5, O8)

– (Market Penetration)

24


7. Property prices per square

metre in all major

Malaysian towns and

cities are at a fraction of

the cost of similar

investments in many other

worldwide destinations.

8. 60 percent of the

population below the age

of 30, Malaysia will

experience a significant

household transformation

that will further expand

the demand for properties.

9. Car import duties and

some other taxes are

waived for foreign

residents and capital gains

tax is not charged on

property owned for more

than 5 years.

10.Undeveloped nature of

Sabah and Sarawak.

THREATS – T

1. The external environment

and global economic

outlook is expected to

register a slower growth

rate amidst rising fuel

prices and interest rates

which cuts affordability

and slows demand.

2. Property market activities

ST STRATEGIES

1. Give more focus on

advertising in

commercial sector,

namely shop-houses, to

counter the slack in

housing demand. (S1,

T1) – (Market

Penetration)

WT STRATEGIES

1. Use materials which will

meet the quality standard

that can satisfy the

customer’s tastes and

preferences. (W6, T10) –

(Product Development)

2. Give discounts to housing

buyers and include free

25


had dropped by 5.3% in

value and 5.7% in

number of transactions

respectively in Year

2006.

3. On the supply-side, there

is oversupply.

4. Johor property market

slowed significantly

during the year 2006.

5. Consumer sentiments

were subdued by increase

in petrol prices and rising

inflation.

6. EOPROP has up market

developments located in

the heart of Kuala

Lumpur’s Damansara

Heights.

7. The joint venture

between Selangor

Properties Berhad and

E&OPROP fully draws

on the combined

expertise and reputations

of both companies in

property development,

particularly in

Damansara Heights.

8. Boustead Holdings

Berhad proposed

acquisition of a 70%

stake in BP Malaysia Sdn

Bhd.

9. Boustead Holdings

2. Co-ordination in planning

for infrastructure

provision with the

competitors in developed

housing area. (S2, T7,

T9) – (Horizontal

Integration)

3. Adding new features and

architectural to the

housing design which

suite customer’s tastes

and preferences. (S5,

T10) – (Product

Development)

maintenance service

package up to five years

or longer. (W5, W7, T1) –

(Market Penetration)

3. Reduce number of

unskilled workers by

offering them early

retirement scheme. (W1,

T2, T3) –

(Retrenchment)

26


Berhad is the market

leader in the property and

development industry.

10. Changes in customer’s

tastes and preferences

will affect the design of

house.

Interpretation:

From the SWOT matrix, the internal factors of IOI Properties Berhad which are strengths and

weaknesses can cope with the external factors which are opportunities and threats. Overall the

IOI Properties Berhad should pursue market penetration strategy. This is because the IOI

Properties Berhad should seek to increase revenue in present market through greater

marketing efforts.

5.2 SPACE (Strategic Position and Action Evaluation) Matrix

Ratings

Financial Strength

SP Setia sales increase in year 2006 by RM 51132.

The percentage growth in profit of SP Setia increase by 73.24%.

The leverage ratio is below than 1

SP Setia has an arising rate of return on common stockholders

investment in 2006 by 13.5%

Total

+4

+6

+3

+5

________

+18

Industry Strength

Real estate in Malaysia is high quality and very low cost compared

to other locations,

The foreign investment into the property sector in Malaysia is

firmly growing at unprecedented levels.

The Malaysia’s ‘Ninth Plan’ will have a positive impact on the

+5

+4

+5

27


Malaysian real estate market.

Malaysia has introduced a number of tax and legal initiatives aimed

at easing the process of foreign property investment into the country

and attracting more investors

Total

+3

________

+17

Environmental Stability

Malaysia is one of the fastest growing economies in the region.

Property prices per square meter in all major Malaysian towns and

cities are at a fraction of the cost of similar investments in many

other worldwide destinations.

Supply constraints and improving occupancy and rental rates helped

to spur the demand for property.

Low buying costs currently at between 3.4% to 6.75% of the

property value.

Oversupply of housing because of fluctuation in interest rate of

borrowing.

Total

-2

-3

-3

-3

-2

________

-13

Competitive Advantage

SP Setia has introduced an online system for the convenience of its

SP Setia has been 30 years in property industry.

SP Setia is one of the most reliable developers of quality properties

in Malaysia.

SP Setia holds various investment properties.

Total

-1

-3

-2

-2

________

-8

Conclusion

ES Average is -13/5 = -2.6 IS Average is +17/4 = +4.25

CA Average is -8/4 = -2 FS Average is +18/4 = +4.5

Directional Vector Coordinates: x-axis: -2+(+4.25) = +2.25

y-axis: -2.6+(+4.5)= +1.9

Therefore, SP Setia should pursue Aggressive Strategies.

28


Aggressive

FS

3

(2.25,1.9)

2

1

CA 1 2 3 IS

ES

Interpretation:

SP Setia directional vector is located in the aggressive quadrant of the SPACE Matrix. The SP

Setia is in an excellent position to use its internal strength to take advantage of external

opportunities, overcome internal weaknesses and avoid external threat. Therefore, market

penetration, market development, product development, backward integration, forward

integration, horizontal integration, conglomerate, diversification, concentric diversification,

horizontal diversification, or a combination strategy all can be feasible, depending on the

specific circumstances that face the organization

29


5.3 BCG Matrix

RELATIVE MARKET SHARE POSITION (RMSP)

High Medium Low

1.0 0.5 0.0

High +20

INDUSTRY

SALES

GROWTH

RATE Medium 0

Low -20

No Company Industry Growth Rate

1 IOI PROPERTIES BERHAD 24.22%

2 E&O PROPERTY 25.06%

3 BOUSTEAD PROPERTY 25.86%

Industry Growth Rate 25.05%

Relative Market Share Position 27.78%

Interpretation:

IOI Properties Berhad is in quadrant I businesses (Question Marks) represent the company’s

needs higher cash and their cash generation is low. IOI Properties Berhad is fall in Question

Marks quadrant indicates that they must decide whether to strengthen by pursuing and

intensive strategy or to sell them. Market penetration; market development; or product

development are appropriate strategies for this company to consider.

30


5.4 Grand Strategic Matrix

RAPID MARKET GROWTH

Quadrant I

1. Market Development

2. Market Penetration

3. Product Development

4. Forward Integration

5. Backward Integration

6. Horizontal integration

7. Related Diversification

WEAK

STRONG

COMPETITIVE COMPETITIVE

POSITION POSITION

SLOW MARKET GROWTH

Interpretation

IOI Properties Berhad is located in quadrant I of the Grand Strategy Matrix which is in an

excellent strategic position. For this company continued concentration on current market

(market penetration and market development) and products (product development) is an

appropriate strategy. When IOI Properties Berhad has excessive resources, then backward,

forward, or horizontal integration may be effective strategies. When IOI Properties Berhad is

too heavily committed to a single product, then related diversification may reduce the risk

associated with a narrow product line. IOI Properties Berhad can afford to take advantage of

external opportunity in several areas. It can take risks aggressively when necessary.

31


5.5 Competitive Profile Matrix

IOI

PROPERTIES

BHD

E&O PROPERTY

BOUSTEAD

HOLDING BERHAD

N

o

Critical Success Factors W R WS R WS R WS

1 Financial Position 0.2 4 0.8 4 0.8 4 0.8

2 Advertising 0.07 3 0.21 3 0.21 3 0.21

3 Dividend 0.1 1 0.1 1 0.1 3 0.3

4 Global Expansion 0.13 4 0.52 3 0.39 4 0.52

5 Sales of property 0.2 2 0.4 3 0.6 2 0.4

6 Corporate Governance 0.2 4 0.8 3 0.6 3 0.6

7 Management 0.1 4 0.4 3 0.3 3 0.3

TOTAL 1.00 3.23 3.00 3.13

Interpretation

The rating values are as follows: 1= major weakness, 2= minor weakness, 3= minor

strength, 4= major strength. As indicated by the total weighted score of 3.00, E&O Property is

the weakest organization.

6.0 Matrix Analysis and TOWS Summary

No Alternative Strategies IE

Matrix

TOWS

Matrix

SPACE

Matrix

Grand

Strategy

Matrix

Total

1 Forward Integration √ √ √ 3

2 Backward Integration √ √ √ 3

3 Horizontal Integration √ √ √ √ 4

4 Market Penetration √ √ √ √ 4

32


5 Market Development √ √ √ √ 4

6 Product Development √ √ √ √ 4

7 Concentric Development 0

8 Conglomerate

Diversification

√ 1

9 Horizontal Diversification √ √ √ 3

10 Joint Venture 0

11 Retrenchment √ 1

12 Divestiture √ 1

13 Liquidation

Quantitative Strategic Planning (QSPM)

STRATEGIC ALTERNATIVES

Market

Penetration

Product

Development

Weight AS TAS AS TAS

OPPORTUNITIES

1. Malaysia is one of the fastest growing


property market enjoyed capital growth

figures of between 15% and 30%.

2. The government has introduced a number

of tax and legal initiatives aimed at easing

the process of foreign property investment

into the country and attracting more

investors

3. The government’s “Ninth Plan” will have

a positive impact on the Malaysian real

estate market through further

improvements to the infrastructure and

economic policies.

4. Low buying costs currently at between 3.4

to 6.75% of the property value.

0.07

0.06

0.06

0.07

-

-

-

4

-

-

-

0.28

-

-

4

-

-

-

0.24

-

33


5. Supply constraints and improving

occupancy and rental rates helped to spur

the demand for property.

6. The Government’s encouragement and

successful listing of Real Estate

Investment Trusts (REITs) further

contributed towards improved market

sentiments in the commercial and retail

sector.

7. Property prices per square metre in all

major Malaysian towns and cities are at a

fraction of the cost of similar investments

in many other worldwide destinations.

8. 60 percent of the population below the

age of 30, Malaysia will experience a

significant household transformation that

will further expand the demand for

properties.

9. Car import duties and some other taxes

are waived for foreign residents and

capital gains tax is not charged on

property owned for more than 5 years.

10. Undeveloped nature of Sabah and

Sarawak.

THREATS

1. The external environment and global

economic outlook is expected to register a

slower growth rate amidst rising fuel

prices and interest rates which cuts

affordability and slows demand.

2. Property market activities had dropped by

5.3% in value and 5.7% in number of

0.04

0.06

0.05

0.06

0.04

0.02

0.07

0.05

3

-

-

4

-

-

3

-

0.12

-

-

0.24

-

-

0.21

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

34


transactions respectively in Year 2006.

3. On the supply-side, there is oversupply.

4. Johor property market slowed

significantly during the year 2006.

5. Consumer sentiments were subdued by

increase in petrol prices and rising

inflation.

6. EOPROP has up market developments

located in the heart of Kuala Lumpur’s

Damansara Heights.

7. The joint venture between Selangor

Properties Berhad and E&OPROP fully

draws on the combined expertise and

reputations of both companies in property

development, particularly in Damansara

Heights.

8. Boustead Holdings Berhad proposed

acquisition of a 70% stake in BP Malaysia

Sdn Bhd.

9. Boustead Holdings Berhad is the market

leader in the property and development

industry.

10. Changes in customer’s tastes and

preferences will affect the design of

house.

STRENGTH

1. Operating performance of IOI Properties

Berhad is expected to be stable due to

ability of the company to modify its

product mix to meet changing demands

and changing market environment.

2. IOI Prop is one of the premier property

developers in the Klang Valley and Johor.

0.06

0.02

0.05

0.04

0.04

0.02

0.06

0.06

_____

1.00

0.05

0.03

-

-

-

-

-

-

-

-

4

-

-

-

-

-

-

-

-

-

0.2

-

-

-

-

-

-

-

-

3

-

3

-

-

-

-

-

-

-

0.18

-

0.09

35


3. IOI Prop's balance sheet appears superior

to those of most other property developers

and is comparable to the other AA-rated

companies in RAM's rating portfolio.

4. Higher sales of commercial properties,

namely shop offices in Bandar Puteri,

Puchong and also higher contributions

from property investment portfolio.

5. A united team of dedicated employees

who are committed to the Company’s

vision and to giving their best lead to

consistency superior performances of IOI

Properties Berhad in the industries.

6. The gradual increase in occupancy and

rental rate for most of IOI Properties

Berhad’s investment properties.

7. IOI Resort is the one and only resort

development within Putrajaya.

8. Availability of Smart Home options

provided by IOI Properties at Bandar

Puteri Puchong enables house owners to

remotely manage and communicate with

their homes appliances and alarm systems

for added security.

9. IOI Properties Berhad emerged as the

Edge Top Ten Property Developers for 4

years running.

10. IOI Properties Berhad has introduced an

online system for the convenience of its

condominium and apartment purchasers to

make maintenance and other periodic

payments.

WEAKNESSES

0.02

0.06

0.09

0.08

0.05

0.04

0.03

0.06

-

-

-

-

-

-

-

4

-

-

-

-

-

-

-

0.24

-

-

2

-

-

-

-

-

-

-

0.18

-

-

-

-

-

36


1. Greater focus on developing skilled and

talented employees will lead to increase in

cost.

2. The current ratio has been decreased

dramatically in 2006.

3. The total liabilities has been increased

drastically in 2006 because of amount due

to subsidiaries has increased.

4. IOI Property’s growth rate in sales is

decreasing drastically from year to year.

5. Multi-unit facilities that are provided by

IOI Properties Berhad create more

maintenance responsibilities for the


6. Certain material that has been used for

housing developing is lack of material

such as floor material.

7. The IOI Properties Berhad unable to

maintain its customer service which lead

to customer’s dissatisfaction.

0.06

0.04

0.05

0.05

0.09

0.1

0.1

_____

1.00

-

-

-

2

2

-

3

-

-

-

0.1

0.18

-

0.3

-

-

-

-

-

3

-

-

-

-

-

-

0.3

-

Sum Total Attractiveness Score 1.87 0.99

Interpretation:

The sum total attractiveness score of 1.87 indicates that market penetration is a more

attractive strategy when compared to the product development strategy.

8.0 Long Term Objectives and Alternatives Strategy

8.1 Long Term Objectives

Market Penetration

8.1.1 To give better service to the customers and continuously

improving their performance.

8.1.2 To provide good locations, affordable prices, highly functional

37


designs and the right amenities to the people.

8.1.3 To create a safe, green and pleasant environment, and also build

thriving, vibrant communities.

8.2 Alternative Strategies

Market Penetration

8.2.1 Strategy 1

Give more focus on advertising in commercial sector, namely

shop-houses, to counter the slack in housing demand.

8.2.1.1 Advantages

The company’s sales and revenue will maintain at the

reasonable rate due to the product diversification.

8.2.1.2Disadvantages

If the demand for shop-houses decrease, it will affect

the company’s sales and revenues.

.

8.2.2 Strategy 2

Give discounts to housing buyers and include free maintenance

service package up to five years or longer.

8.2.2.2 Advantages

Can increase customer’s satisfaction and attract more

buyers.

8.2.2.3 Disadvantages

Incurred higher cost because the company needs to hire

professional personnel in providing the maintenance

service.

38


9.0 Strategy Implementation (Policies & Allocate Resources)

9.1 McKinsey 7S Implementation Framework

9.1.1 Strategy

IOI Properties Berhad provides quality products by focusing on

the housing and commercial sector. Overall the existing strategy

can cope with the challenging market environment. Moreover,

IOI Properties Berhad had introduced online system for the ease

of the purchaser to make payments.

9.1.2 Structure

The organization chart of IOI Properties Berhad is acceptable

but it needs to make some changes by adding one more

department that is Research and Development. It is because IOI

Properties Berhad needs to do research in order to overcome

their problem. Moreover, this is to maintain its competitive

advantage.

9.1.3 System

The existing system that been applied by the IOI Properties

Berhad is good compared to the competitor. It is because IOI

Properties Berhad had introduced online system for the ease of

the purchaser to make payments.

9.1.4 Style

IOI Properties Berhad is strongly focused in boosting its sales.

The management of IOI Properties Berhad is updating the

planning and design of its range of products in anticipation of

changing demands and needs of the various targets and

changing market environment.

9.1.5 Shared Value

39


IOI Properties Berhad is always concern on its customer

satisfaction and will try to become a fully customer-driven

organization.

9.1.6 Staffing/Skills

IOI Properties Berhad is always improving its employee’s

performance by providing training as to improve their skills in

marketing, management and customer service. This existing

strategy should be maintained for the benefit in the future.

Conclusion

In a nutshell, IOI Properties Berhad is continuously improving their performance

but they need to take some corrective action. Hopefully the new strategies that

have been formulated that is market penetration. By using strategy 1 that is give

more focus on advertising in commercial sector as to counter the slack in housing

demand. This can also help IOI Properties Berhad to give better services to their

customers and finally, they can be successful in the future.

40

Documents

IOI