SIME DARBY

Group member:

•Mohamad Shafiq Bin Asri•Siti Nur Jannatul Ma’wa Bt Sheh Suhaimi•Siti Madihah Hanim Binti Abdullah

Table of content• Introduction• Company background• Vision and Mission• Board of director• Share holder of the company• PEST analysis• Porter’s 5 forces• SWOT analysis• External summary matrix• Internal summary matrix• Tows matrix• Recommended strategy• conclusion

introduction

• Sime Darby was incorporated in 1910 by businessmen William Sime, Henry d’Esterre Darby and Herbert Mitford Darby to manage 500 acres of rubber estates in Malacca, Malaysia.

• Today, Sime Darby is a key player in the Malaysian economy as well as a diversified multinational,

• with businesses in key growth sectors namely, plantations, industrial equipment, motors, property and energy & utilities with operations in 26 countries and 4 territories.

• Sime Darby is one of the largest companies listed on Bursa Malaysia and has a market capitalisation of RM47.89 billion (USD11.32 billion) as of 1 December 2015.

Company background

• SDP is one of the world’s largest palm oil producers with 2.4 million tonnes of Crude Palm Oil (CPO) annual output.

• Besides planting and cultivating palm oil, SDP also manufactures oil and fats products

• SDP supplies 6% of world palm oil demand with 878,797 hectares of land in 3 countries for its downstream activities, namely Malaysia with 359,534 hectares, Indonesia with 299,263 hectares and Liberia with 220,000 hectares.

• SDP has a total of 201 estates with 62 oil mills.

Vision and Mission

•To be a leading multinational corporation delivering sustainable value to all stakeholders

vision

•We are committed to developing a winning portfolio of sustainable businesses

•We subscribe to good corporate governance and high ethical values

mission

Board of director

• YBhg Tan Sri Dato’ Abdul Ghani Othman was Deputy Minister of Energy,

Telecommunication and Post, Malaysia from May 1987 to November 1990, Deputy Minister of Finance from November 1990 to November 1993, Minister of Youth and Sports from December 1993 to March 1995 and Chief Minister of Johor from March 1995 to May 2013. He has been the Chairman of Sime Darby Berhad since July 1, 2013. He served as the Chairman of Johor Corporation from May 1995 to May 2013. He serves as a Director of Sime Darby Plantation Sdn Bhd.

TAN SRI DATO’ ABDUL GHANI OTHAMAN

·Chairman, Independent Non-Executive Director

• YBhg Tan Sri Datuk Dr. Yusof Bin Basiran has been Chief Executive Officer of Malaysian Palm Oil Promotional Council (MPOPC) since January 19, 2006. He serves as a Director of Sime Darby Plantation Sdn Bhd. He has been a Non-Independent Non-Executive Director of Sime Darby Berhad & Sime Darby Global since November 16, 2010.

• YBhg Dato’ Henry Sackville Barlow, OBE, MA, FCA served as a Joint Managing Director of Highlands & Lowlands Berhad. YBhg Dato’ Barlow has over 35 years of experience in the plantation industry. He has been Senior Independent Non-Executive Director of Sime Darby Global Berhad since September 29, 2007. He served as Senior Independent Non-Executive Director of Sime Darby Berhad from November 16, 2010 to November 23, 2015 and its Director from September 29, 2007 to November 23, 2015.

Dato’ Henry Sackville Barlow

·Senior Independent Non-Executive Director

TAN SRI DATUK DR YUSOF BASIRAN Non-Independent Non-Executive Director

TAN SRI DATUK DR YUSOF BASIRAN Non-Independent Non-Executive Director

• Tan Sri Dato’ Seri Mohd Bakke Salleh has been Group Chief Executive and President at Sime Darby Berhad since November 2010. He serves as a Director of New Britain Palm Oil Limited, Southern Acids Bhd, Sime

Darby Engineering Sdn Bhd, Felda Palm Industries Sdn Bhd, Sime Darby Property Berhad and Felda Engineering Services Sdn Bhd. He is a Member of the Malaysian Institute of Accountants (MIA). He is a Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW).

• Dato' Seri Abdul Wahab Bin Maskan has been the Group Chief Operating Officer of Sime Darby Berhad since June 24, 2008 and serves as its Managing Director, Property Division. Dato' Seri Maskan has 28 years working experience in property development, construction, assets, estate management, trading, retailing and manufacturing companies (public and private sectors). He has held various management and Board positions in companies in Malaysia, Europe and Asia, covering plantation, property, construction, manufacturing and services

TAN SRI DATO’ SERI MOHD BAKKE SALLEH

·President & Group Chief Executive

TAN SRI DATO’ SERI ABD WAHAB MASKAN

·Group Chief Executive

DATUK FRANKI ANTHONY DASS

· Vice President & Group Chief Executive

•Datuk Franki started his career in Kumpulan Guthrie Berhad in 1980 as an Assistant Manager and has over 30 years of plantation experience. He was appointed as the Acting Executive Vice President–Plantation Division in May 2010 prior to his appointment as the Executive Vice President-Plantation Division on 1 December 2010. Datuk Franki was designated as Managing Director, Plantation Division in September 2015. He leads and oversees the Plantation Division of Sime Darby Berhad, the world’s largest listed plantation company and the largest producer of certified and traceable palm oil.

DATO’ CHE ABDULLAH @ RASHIDI CHE OMAR• Executive Director

•Dato. Che Abdullah @ Rashidi Bin Che Omar, also known as Rashidi, has been an Executive Director of Plantation at Wijaya Baru Global Bhd since February 28, 2012. Dato. Bin Che Omar has been an Executive Director of Plantation at Tadmax Resources Berhad since February 28, 2012. Dato. Bin Che Omar served as Managing Director of TH Plantations Berhad from 2003 to July 1, 2009

• Rosely Kusip commenced his career with Kumpulan Guthrie by joining Highlands & Lowlands in 1972. In 1994, he was appointed as the Regional Controller where he was responsible for the overall performance of estates in Selangor and Sabah, totalling approximately 10,000 hectares. In 1996, he was promoted as the General Manager of Plantation Division in Kumpulan Guthri

ROSELY KUSIP

· Executive Director

Company shareholder

Authorised Share Capital RM4,072,500,000.00 divided into 8,000,000,000 ordinary shares of RM0.50 each, 7,000,000,000 Series A redeemable convertible preference shares of RM0.01 each and 25,000,000 Series B redeemable convertible preference shares of RM0.01 each

Issued and Paid-up Share Capital RM3,105,579,143.00 comprising 6,211,158,286 ordinary shares of RM0.50 each

Class of Shares Ordinary shares of RM0.50 each

Voting Rights One vote per ordinary share in the case of a poll and one vote per person on a show of hand

Company shareholderSize of

Shareholdings

No. of

Shareholders

% of

Shareholders

No. of Shares

Held

% of Issued

Capital

Less than 100 2,289 8.41 66,589 0.00

100 to 1,000 6,409 23.54 4,038,230 0.06

1,001 to 10,000 13,684 50.27 44,212,747 0.73

10,001 to 100,000 3,886 14.28 107,542,408 1.73

100,001 to less

than 5% of

issued capital

951 3.49 2,251,352,500 36.25

5% and above of

issued capital

3 0.01 3,802,945,812 61.23

Total 27,222 100.00 6,211,158,286 100.00

Name of Shareholder No. of Shares Held % of Issued Capital

1 AmanahRaya Trustees Berhad

Qualifier: Skim Amanah Saham

Bumiputera

2,465,625,500 39.70

2 Citigroup Nominees (Tempatan) Sdn

Bhd

Qualifier: Employees Provident Fund

Board

812,407,958 13.08

3 Permodalan Nasional Berhad 524,912,235 8.45

4 Kumpulan Wang Persaraan

(DIPERBADANKAN)

209,443,061 3.37

Largest Shareholders as per the Register of Members and the Record of Depositors

TECHNOLOGICAL

ECONOMIC

POLITICAL

SOCIOCULTURAL

PESTEL

• Political- A political factor is an activity having to do with government policy and its administration that has the potential to change and influence a business.- Trends in the political-legal part have a significant impact not only on the level of competition within an industry but also on which strategies might be successful.- Like all other business entities, political as well as regulatory developments in Malaysia or foreign countries could have material effect on the financial performance of Sime Darby.- Amongst the political uncertainties are changes in political leadership and environment, expropriation, nationalization, unfavorable government policies such as import and export quotas, currency exchange rates, and methods of taxation and repatriation of funds. All these uncertainties are beyond the control of Sime Darby.

• Economics- Economic factor is set of fundamental information that affects a business or an investment’s value. Various economic factors need to be taken into account when determining the current and expected future value of a business or investment portfolio.- Economic factors include economic growth, interest rates, exchange rates and the inflation rates.- In Sime Darby, the main economic factors that influence the operation are the oil price and fluctuation in price of raw materials. These factors have major impacts on how businesses operate and make decisions.

• Sociocultural.- Sime Darby has always considered good Health, Safety and Environment (“HSE”) practices to be an integral part of its business objectives in the palm oil industry.- Achieving a healthy and safe work environment is of utmost importance in striving for operational excellence. - Sime Darby consider it a responsibility that their owe to the employees, clients, stakeholders and society at large.

• Technological- Technological factors include ecological and environmental aspects such as Research and Development (R&D) activity, automation, technology incentives and the rate of technological change. - They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect cost, quality and lead to innovation.- In term of service related to the offshore services, advancement of technology in palm oil industry led to the improvement of quality services. - For example, Sime Darby is well equipped with advance software for its design and structure testing for its technology knowledge such as welding technology, non-destructive testing technology.

Porter’s 5 forces

Threat of new entrants

Bargaining power of

buyers

Threat of substitute

products or services

Bargaining power of suppliers

Rivalry among competing firms

Low Threat of New Entrants• Threat of new entrants is fairly low as start-up capital for a palm oil plantation of

palm oil processing mill is very high. For a firm to enter a market, besides registering an entity in a local country, the organization will need to obtain a series of approval and onsite inspection to ensure that the organization follow the regulation of health, safety and environment. The regulation is also subject to the individual country that the organization wishes to operate.

Low Bargaining Power of Buyers

• As the demand for palm oil increases, and price being pre-determine, the buyer does not have much bargaining power to demand for lower price. The major buyers are from European Union, China and India and with little control over price so the bargaining power of buyer is low.

High Threat of Substitute

• The threat of substitute is high for palm oil, as 80% of the palm oil is used for edible use as oil, fats and shortening (World Growth, 2011). Though palm oil yields four times production compared the closest yield which is rapeseed, there are many substitute in the market such as soybean oil, sunflower oil, rapeseed oil, corn oil, peanut oil and olive oil. Among the substitute product, olive oil poses the highest as it is recognized as the healthiest of all and touted and the best of all edible oil.

Low Bargaining Power of Supplier• The raw materials needed for the cultivation are high quality seed, land and

fertilizers. • Seeds for plantation could be taken from current plantation. Land for cultivation

is available in Borneo however there are certain issue’s on land ownership. • Sime Darby and only bought from supplier at rare occasion of shortages, the

bargaining power of supplier here is low. • Most players in the market are involved in both upstream and downstream

activity and grow their own seedling in their nurseries.

High Rivalry among Competitors• The market production size is limited to the geographical location but this does

not limit the market player.• The market is very challenging and stiff with fellow giant public listed

companies. Even though Sime Darby seems to be leading the competition, the market followers are very close behind.

• Beside major players, there are many individual estate owners in the market, these estates or land are of inheritance and the current owners either cultivates palm oil or the land for palm oil cultivation

SWOT analysisStrength

• SDP practises environmental friendly operation and sustainable plantation process. Besides certifying it’s mill to be environment friendly, it also focuses on waste to wealth programme whereby, the mill wastes is turned into organic fertilisers. It also has a Biogas plant in Carey Island turning methane gas into electricity. SDP has a very strong presence both in the region and in the industry as it a part of a huge conglomerate. It is also the world’s largest listed plantation company by planted area.

Weakness• SDP is facing challenges on the development of palm oil industry and this is due to

poor road infrastructure in plantation plot to transport the CPO to the . Currently SDP is not utilizing the wastes cakes form the milling process and the waste from unproductive palm oil trees. These wastes are often being disposed to a waste management companies. The industry is also vulnerable to unpredictable weather condition and the changes in weather pattern could lead to lower yield of fresh fruit bunch. This a waste resulting from milling process and usually trapped outside the mill to be specially disposed later on, but at times it over flows and pollutes the land where the mill is due to either over production of heavy rain .

Opportunity• Increasing demand for CPO in European countries as well as China, India, South Korea and

Turkey proves the inevitable demand growth for palm oil .• Rising health issue in the world also promotes the usage of palm oil as it has the least

amount of cholesterol traces, contains crotenoids, an effective antioxidant to boost immune system, and is trans-fatty acid free.

• Besides having the perfect climate for growth and cultivation of palm oil and the surplus of land the availability of low cost workers also do contribute the potential of business growth in this region.

• Subsidies by both governments are also favourable towards the expansion of business foe Sime Darby. Indonesian government provides a tax exemption up to 30% for palm oil plantation and cultivation where else Malaysian government provides subsidy in re-plantation of palm oil trees.

Threat• Price of CPO could lead to lower demand of palm oil and at times even result to cancellation

of orders. 2008 also saw a huge financial meltdown, and this poses a huge threat to the industry. Limited supply of high quality seeds also could disrupt the re-plantation process and establishing new plantation estates. Land ownership issues is also seen as a huge risk when obtaining a new plantation estates, lack of clarity on land status and legal ownership of the land leads to loss of revenue due to inactivity of purchased land. Recently in Borneo, palm oil industry has faced Ganoderma basal stem rot (GBSR) disease which is caused by the wood-rotting fungus

External factor analysis summary(EFAS)External Factors Weight Rating Weighted Score Comments

Opportunities

O1 low cost workers also do contribute the potential of business growth

0.20 3.5 0.70 Stability in economy

O2 Increasing demand for CPO in European countries

0.20 4.0 0.80 Expending in market

O3 Rising health issue in the world

0.05 2.0 0.10 Promote usage of healthy palm oil

Threats

T1 Dependence on major clients

0.10 3.5 0.35 Well position

T2 Price of CPO could lead to lower demand of palm oil

0.20 3.5 0.70 Low in market demand

T3 Limited supply of high quality seeds

0.15 4.0 0.60 Supply problem

T4 faced Ganoderma basal stem rot (GBSR) disease

0.10 2.0 0.20 Plant disease cause problem

Total Scores 1.00 3.45

Internal factor analysis summary(IFAS)Internal Factors Weight Rating Weighted

Score

Comments

Strengths

S1 Experienced Top Management 0.05 4.0 0.20 Know appliances

S2 Stable oil prices 0.10 3.5 0.35 Demanding

S3 New growth with prudence and

restructure

0.10 2.0 0.20 R&D Activities

S4 Environmental friendly operation

and sustainable plantation

process

0.20 4.2 0.84 Sustain its operation in market

S5 Employees with the requisite

knowledge and experience

0.05 4.0 0.20 Skilled personnel

S6 Technology in sequence,

assemble and annotate the oil

palm genome

0.20 3.0 0.60 Increase product quality

Weaknesses

W1 Poor infrastructure 0.20 2.0 0.40 Unstable financial position

W2 Palm Oil markets have

sometime shows supply

disruptions

0.10 2.5 0.25 Unsmooth operations

Total Scores 1.00 2.84

Tows matrix

Internal

Factors

External Factors

Strengths

S4 – Environmental

friendly operation and

sustainable plantation

process

Weaknesses

W1 – Poor infrastructure

Opportunities

O1 – Increasing demand

for CPO in European

Countries

SO Strategies

S4O1 – Support from

European countries to

practices environmental

friendly

WO Strategies

W1O1 – Demand can help

restore infrastructure

Threats

T2 – Price of CPO could

lead to lower demand of

palm oil

ST Strategies

S4T2 – As an oligopoly

market with huge company

WT Strategies

W1T2 – Networking with

global supplier to attain good

stock management

RECOMMENDED STRATEGY

• Based on strategy alternatives, to achieve cooperative strategies suit with its mission and objectives, we have some recommendation that can be used in order to realize it for Sime Darby.

• Build A Good Business Relationship

Be honest

To get long-term relationship survives two parties are need to honest with each other. In addition to get a support from other company needs, our chief responsibility is to be open and honest in all of dealings.

They are smart, they know when they are being conned or manipulated. Without a reputation for integrity we will never be able to cultivate the kind of long-term relationships your business depends on.

• Learn What They Need From Our Company

Normally suppliers have many customers and a number of relationships to maintain, it can be helpful to learn what they need from our company. Some suppliers will need specific documentation.

So we need to ensuring that suppliers have the proper documents, delivered in a preferred channel, can speed up order processing.

And to improve the supplier relationship, be patient and understand that from time-to-time your representative will be busy. And don’t act is as you own the supplier.

• Build Company CapacityBuild company capacity within companies and government agencies. It will help 'reorganize and speed up administrative procedures, increase the volume and speed of information and permit greater collaboration and sharing of experience. These functions are critical in the context of expanding opportunity because there is increasing evidence that a dense and complex layer of networks it good for economy.

• Expanding Used Of TechnologyTo get more information and get along to other country we suggest company need to expanding its use of technology. It will help them to reduce transaction costs and improve productivity. They will offer immediate connectivity in improving efficiency, transparency and accuracy. It also channel of knowledge and information of all kind at the same time will knows by other outside company about Sime Darby.

CONCLUSION• During our project, we are able to gain a better understanding and a big

picture about the strategic audit for Sime Darby. We are able to identify all aspects such as the current situation, corporate governance, external environment, internal environment, analysis of strategic factors (SWOT), strategy alternatives and recommended strategy, implementation and evaluation control for Sime Darby . Each of the aspects were explained in details, prioritized and lastly been discussed about the impact of those to Sime Darby.

• It is the duty of the management to give assurance to Sime Darby on the possibilities to make it successfully. The management also should always review their corporation based on all aspects mentioned before. It is to provide the maximum efficiency and effectiveness of the corporation.

• In conclusion, strategic audit for a corporation is a good process to maintain the strategy of the economic growth in order to strive for more success in the industry.