SIME DARBY DRAFT II.pdf

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Transcript of SIME DARBY DRAFT II.pdf

  • 1.0 Abstract

    This paper intends to create a strategic management plan for Sime Darby Plantation. The

    management plan also assesses the factors of profit declining in the company and set a few goals

    to achieve. The management plan addresses the constantly changing business environment, the

    financial crisis, price fluctuation, weather condition and government intervention into

    consideration. The tools used to assess the internal and external environment are SWOT, PEST,

    Porter 5 forces, EFE Matrix, VRIO Framework, IFE Matrix. The result from analysis will reveal

    how attractive the alternative strategies and enhance the quality of strategic decision of top

    management before making any decision which strategy that suit best to Sime Darby.

    Keywords: Palm Oil, Profit decline, Plantation, Environment

    2.0 Introduction

    Demand for palm oil is growing up now. At the moment, many company need palm oil as

    material for their products, Malaysia and Indonesia addressed as the largest palm oil users in

    Asia region. Palm oil plantation cannot planted in any place, it must have appropriate climate.

    Tropical rain forest and peat lands in South East Asia become suitable area for palm oil

    plantation. Sime Darby Berhad was created in 2007 through a merger of Sime Darby Berhad,

    Golden Hope Plantations, and Kumpulan Guthrie Berhad Group of Companies. William Sime

    and Henry Darby was founder of Sime Darby in 1910. In 1981, In November 30th, 2007 synergy

    drive re-entered the stock market under the name of Sime Darby with a market capitalization of

    RM 59.5 Billion at the start of the merger process (Sime Darby History, 2013).

  • Sime Darby Berhad is a multinational company conglomerate involve in 5 core of business such

    as Plantations, Property, Industrial, Motors, and Energy & Utilities. Sime Darby Plantation (SDP)

    is plantations and agri-business arm of the Sime Darby Berhad which the division areas spread in

    3 countries which are Malaysia, Indonesia, and Liberia. Tan Sri Dato Abdul Ghani Othman as a

    chairman of SDP. The plantations involve the full spectrum of palm oil value chain, which

    divided in two operations. Its upstream operation, which consist of oil plantation & mills, rubber

    plantation & factories, and pink guava with the total 534,245 hectares spread over. Further,

    midstream & downstream operation, which consist of palm oil refineries, kernel crushing plants,

    production of edible oil and fats products, biodiesel production, oleochemicals production, pink

    guava juices, production of value added products from renewable based feed stocks,

    Phytonutrient Tocotrienol vitamin E, composting plants, and biogas plants with the total area

    860,454 hectares spread over. (Sime Darby Plantation, 2013)

    SDP is the largest Certified Sustainable Palm Oil (CSPO) in the world which noted 93%

    produced annual crude palm oil and 94% annual palm kernel production. The highest production

    CSPO in FY 2014 at 2.14 Million MT and followed by palm kernel at 0.49 million MT. In year

    2014 the amount of employed Sime Darby Plantation nearly 80,000 people with separated in

    many areas (Ernst &Young, 2014).

    3.0 Company Profile

    3.1 History

    The company brand has been around for over 100 years and was started in Malacca in 1910. The

    founders of the Sime Darby are Alexander Guthrie, Daniel and Smith Harrison, Joseph Crosfield,

  • William Sime and Henry dEsterre and Herbert Mitford Darby. In year 2007, the three big

    companies such as Sime Darby, Guthrie and Golden Hope are merged and were named Synergy

    Drive. Later, Synergy Drive was renamed as Sime Darby Berhad (Sime Darby Berhad, 2013a).

    From the information in Sime Darby 2014 annual report, Sime Darbys core businesses are

    plantations, property, motor, heavy equipment and energy & utilities. Thats why this company

    is being known as an international conglomerate. The number of employees in year 2014 was

    103,507 people. Sime Darby runs their operation in 26 countries and territories including Taiwan,

    Thailand, Germany, Liberia and many more. Total market capitalization of Sime Darby in year

    2014 is RM58.6 billion. The largest shareholder of Sime Darby is Permodalan Nasional Berhad

    followed by the Employees Provident Fund or EPF and others.

    3.2 Vision

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

    3.3 Mission

    Sime Darby is committed to developing a winning portfolio of sustainable business

    We subscribe good corporate governance and high ethical values

    We continuously strive to deliver superior financial returns through operational

    excellence and high performance standards

    We provide the environment for our people to realize their full potential

  • 3.4 Company structure

    Source from : http://m.kinibiz.com/tag/sime-darby

    4.0 Industry profile

    Local competitors for Sime Darby are Felda Global Ventures and IOI Corporation

    Felda Global Ventures Holding Berhad is a private limited company and operating under

    Federal Land Development Authority. They are engage in 6 main business such as palm

    upstream, palm downstream, sugar, rubber, R&D and agribusiness services and transport,

    Logistics, Marketing and Others. IOI was located in Malaysia and they are committed to

    have a good palm oil practices. IOI was involved in 3 core business which is the plantation

  • that includes the cultivation of palm oil and palm oil extraction, resource-based

    manufacturing and property.

    International competitors of Sime Darby are Wilmar International Limited, Golden Agri-

    Resources Limited

    Wilmar International Limited was located in Singapore and one of the Asia's leading

    agribusiness groups. Business activities almost similar to Sime Darby such as oil palm

    cultivation, biodiesel and production of fertilizer. It was known as a company who provide

    high quality processed agriculture product for food industry. Golden Agri-Resources Ltd is

    the world's second largest palm oil plantation company and it was located in Indonesia.

    Primary activities include palm oil cultivation, palm kernel, palm oil and also involved in

    food industry.

    5.0 Analysis on vision and mission statement

    Vision statement :

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

    Based on the analysis of vision statement of Sime Darby, the vision is a good statement. It

    can answer the basic question of what do we want to become. The readability of the vision

    statement is also good.

  • Mission statement :

    Sime Darby is committed to developing a winning portfolio of sustainable business

    We subscribe good corporate governance and high ethical values

    We continuously strive to deliver superior financial returns through operational

    excellence and high performance standards

    We provide the environment for our people to realize their full potential

    Checklist for Nine (9) Mission Statement Components

    No Component Statement

    1. Customer NIL

    2. Product or Services NIL

    3. Market NIL

    4. Technology NIL

    5. Concern for survival,

    growth and profitability

    We continuously strive to deliver superior financial

    returns through operational excellence and high

    performance standards

    6. Philosophy We subscribe good corporate governance and high

    ethical values

    7. Self-concept We continuously strive to deliver superior financial returns

    through operational excellence and high performance

    standards

    8. Concern for public image Sime Darby is committed to developing a winning

    portfolio of sustainable business

    9. Concern for employees We provide the environment for our people to realize

    their full potential

    Table 5.1 : Checklist on nine components in mission statement

  • From the analysis of mission statement, Sime Darby meets five out of nine elements. The

    statement is lack of four components which are customer, product or services, market and

    technology. Sime Darbys mission doesnt mention about who are their customers, what type

    of product or service they want to offer to customer, where does Sime Darby compete in

    market and the current technology. Therefore, Sime Darby should revise and reexamine back

    their mission statement.

    6.0 External environment

    6.1 PESTEL

    PESTEL analysis focuses on the factors at the macro level (the external environment) include

    political, environment, social, technological, economic and legal. In general, all these factors

    have their own sub-factors and its own influence in the business world. According to Haim

    Hilman, basically companies need a good macro environment, like political stability, a growing

    economy, good socio-cultural, technological support the growth of industry, environmental

    issues that support the development of industry and industry-friendly legal. So that, important for

    Sime Darby Plantation to understanding PESTEL analysis.

    Politic

    The first factor of PESTEL is political. Political issues related to the SDP got a charge that the

    industrial oil palm plantations result in deforestation that are not healthy. Development Program

    of the United Nations guidelines also regulates the field. Satellite image of defore