SIME DARBY BERHAD (A):

1995 CASE STUDY

Company’s profile One of leading Multinational

Conglomerates in South East Asia

Scope of Business

Controlled over 300 Companies with 36,000 Employees

Manufacturing

PLANTATION

GENERAL TRADING

PROPERTY

COMPANY’s HISTORY

COMPANY’S HISTORY

1910

1960

1981

Started with Rubber Plantation

Diversified to Palm Oil and Cocoa

Plantation

1995

Acquired BF Goodrich and

Other Companies

More than 70% of Shares is Owned by

Public

CASE OVERVIEW

Great record in overall leadership and long term vision.

Sime Derby became a company that doing so many acquisition and diversification of their business.

It makes a Sime Derby a Giant conglomerates with so many diversified business.

When there is no diversified business, Sime Derby became a slow moving conglomerates

PROBLEM: DILEMMA OF UMBC

ACQUIRE OR NOT?

Acquisition of UMBC is predicted to bring many benefits.

As a slow-moving conglomerates, there is no need to acquire more companies.

Short-term opportunities are available.

PROBLEM: DILEMMA OF UMBC

ACQUIRE OR NOT?

DIVERSIFICATION STRATEGY

Reason of Diversification

1960s

1970s

Diversification to Cocoa and Palm Oil Industry: because the demand for rubber had abated.

Continuing Diversification: to keep up with Malaysian economic activities.

DIVERSIFICATION STRATEGY

OPPORTUNITIES OF MALAYSIAN ENVIRONMENT

FINANCIAL SECTOR HEAVY EQUIPMENT AND PROPERTY

High Saving Rates

Young Population

Low Penetration of Policy

DIVERSIFICATION STRATEGY

OPPORTUNITIES OF MALAYSIAN ENVIRONMENT

FINANCIAL SECTOR HEAVY EQUIPMENT AND PROPERTY

The development of infrastructure

and administrative system in Malaysia.

DIVERSIFICATION STRATEGY

FORWARD INTEGRATION

Rubber Plantation (1960)

Tires (1981)

GEOGRAPHIC DIVISION

Sime Darby has extensive trading and manufacturing interests in Hong Kong, Singapore, Philippines, and Australia.

It also operated in several countries such as Thailand, Indonesia, Egypt, United States, etc.

GEOGRAPHIC DIVISION

There are variety of functions in Sime Darby such as annual management plan which is initiated at grass–roots level, productivity reviews, and management committee meetings that handled at the corporate level. The annual planning cycle and productivity reviews were

supplemented by other procedures called the Group Procedures and Authorities System (GPA), and the Internal Audit process.

There’re problems in human resources of Sime Darby, the company are started to losing people to their competitor. The core international operations had traditionally been in

trading and motor vehicle dealership.

GEOGRAPHIC DIVISION

MALAYSIA OPERATIONS

Head Office Investment Hotels, manufacturing, hospitals, insurance broking, and independent power production.

Malaysia Region Investment company (PSD holdings): 26 subsidiaries and 3 associated companies.

Oil and Gas Engineering, fabrication, and project management.

GEOGRAPHIC DIVISION

HONG KONG OPERATIONS

Headed by Sime Darby Hongkong, Plc.

Motor vehicle as the largest sectors (60%): Principal represented BMW, Mitsubishi, Ford, Suzuki, Alfa Romeo.

Caterpillar construction equipment as second largest division.

GEOGRAPHIC DIVISION SINGAPORE OPERATIONS

Headed by Sime Darby Singapore, Plc. To generate operations in Singapore and Brunei Operations activities (profit volume order):

Heavy Equipment

Motor Dealership

Packaging

Consumer Trading

Property

Insurance (had joint ventures with AXA France)

GEOGRAPHIC DIVISION

AUSTRALIA OPERATIONS

Headed by Sime Darby Australia. Has two major activities:

Distribution and Servicing Suzuki Vehicles

Provision of Travel and Related Services

GEOGRAPHIC DIVISION

PHILIPPINES OPERATIONS

Headed by Sime Darby Phillipines Plc.

Major problem is on unions (wage demand)

Existing business dealt with distribution of agricultural equipment and plantations management.

GEOGRAPHIC DIVISION

POLITICAL RISK IN REGIONS

Turmoil: General Strikes, Riots, Terrorism.

Financial Transfer: Currency between local and foreign, fiscal and monetary policy, payment of exports

Direct Investment: Risk of foreign investment in subsidiaries, taxation discrimination, labor cost.

Export Market: Barriers to import, market condition, difficulties in receiving payments.

POLITICAL RISK IN REGIONS

GEOGRAPHIC DIVISION

Efficiency Judicial System: Efficiency and integrity of legal environment

Rule of Law: Law and traditions in country

Corruption: Level of government corruption, likeliness of official receive bribes

Risk of Expropriation: Risk of forced nationalism

Repudiation of contracts by Government: Risk of contract modification by Government

UMBC ACQUISITION

WHY

RISK

Allows Sime Darby to play a significant role in Malaysia’s fast expanding financial services sector.

UMBC has an extensive branch network within Malaysia and overseas.

It also has a merchant bank, a finance company and a stockbroker.

Malaysia’s fourth largest bank in term of assets.

UMBC ACQUISITION

WHY

RISK

Malaysia’s fourth largest bank in term of assets.

Unhealthy return on investment.

Lack of experience in service sector, especially financial industry.

Lack of skilled employees.

THANK YOU FOR YOUR

ATTENTION. Question?