Business Strategy Analysis: FGV Holding Bhd Report - Task 1 Evaluation

This report provides a comprehensive analysis of FGV Holding Bhd's business strategies. It begins with an introduction to Rumelt's principles of strategy evaluation and Porter's generic competitive strategies. The report then delves into FGV's strategies in 2019, focusing on their upstream business and cost reduction initiatives. The analysis includes an evaluation of FGV's financial performance, particularly in light of significant losses in 2018. The report examines the application of Porter's generic strategies, including value leadership, differentiation, and focus, within the context of FGV's operations. Furthermore, it discusses the company's strategic position, action evaluation, and recommendations for improvement. The report explores the challenges faced by FGV, including issues of integrity and financial performance, and assesses the potential for the company to turn around its negative financial results, as well as the strategies employed by the new CEO to address these challenges.

Running head: BUSINESS STRATEGY
Business Strategy
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Author’s Note

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Table of Contents
Task 1.............................................................................................................................4
Introduction....................................................................................................................4
Discussion......................................................................................................................5
Part I...............................................................................................................................6
Principles of Strategy Evaluation...............................................................................6
Consistency................................................................................................................7
· Consonance..............................................................................................................7
Feasibility...................................................................................................................7
Porter’s Generic Competitive Strategy..........................................................................8
1. Value leadership.....................................................................................................8
2. Differentiation........................................................................................................8
3. Focus......................................................................................................................9
Part II..............................................................................................................................9
Strategy 1...................................................................................................................9
Strategy 2.................................................................................................................10
Part III..........................................................................................................................11
Strategy 1.................................................................................................................11
Strategy II.................................................................................................................13
Task 2...........................................................................................................................15
Introduction..............................................................................................................15
Part 1: Industry Analysis..........................................................................................15

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Part 2: Internal Analysis...........................................................................................27
Financial Performance of Toyota and Perodua........................................................29
Current Strategy of the Organizations......................................................................33
Part III..........................................................................................................................33
Strategic position Action Evaluation Matrix For Perodua.......................................33
Product quality.........................................................................................................35
Market share.............................................................................................................35
Brand and image......................................................................................................35
Product life cycle......................................................................................................35
Barriers to entry........................................................................................................36
Growth potential.......................................................................................................36
Access to financing..................................................................................................36
ROA.........................................................................................................................36
Leverage...................................................................................................................36
Liquidity...................................................................................................................36
Cash flow.................................................................................................................36
Inflation....................................................................................................................36
Technology...............................................................................................................36
Strategic position action evaluation matrix for Toyota................................................36
Market share.............................................................................................................37
Product quality-........................................................................................................37

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Technology know how.............................................................................................37
Product life cycle......................................................................................................37
Barriers to entry........................................................................................................37
Growth potential.......................................................................................................38
Profit potential..........................................................................................................38
Financial stability.....................................................................................................38
Cash flow.................................................................................................................38
Liquidity...................................................................................................................38
ROE..........................................................................................................................38
Leverage...................................................................................................................38
Competitive pressure................................................................................................38
Demand variability...................................................................................................38
Recommendation..........................................................................................................39
For Perodua..............................................................................................................39
For Toyota................................................................................................................39
Reference......................................................................................................................42

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Task 1
Introduction
In his interview with The Edge, Datuk Haris Fadzilah Hassan who has appointed the
CEO of the FGV holdings Bhd which has been previously known as the Felda Global
Ventures Holdings Bhd. He had a talk related to the FGV financial conditions who have
faced a loss in the financial year 2018 with over RM 1.08 million on the revenue of the RM
13.48 million (Favaretto, 2019). However, this company have seemed to earning a profit of
RM 130.94milliom on revenue of RM 16.92 billion. Over the current situation Haris has
replied just one thing that all he knows that the company should follow these five values,
which is partnership, respect, integrity, dynamism and enthusiasm. All of these words
together forms the word ‘PRIDE’ and if any of them falls of it hit the pride of the company.
Haris have claimed that they have reached this position due to the integrity issues. In his
words if the integrity has been there in the place then people must have taken their integrity
seriously then before doing anything there must be serious diligence involved.
Discussion
It has been noted that much of the losses in the FY2018 has occurred due to the
impairments and the total of provisions which equaled to the RM 1.04billion. Maximum
amount of the impairments has been a result of the acquisition that has happened of the Asian
Plantations Ltd which almost totaled to RM 1million which contributed from the cash reserve
and the rest RM 628 million in terms of the liabilities. Therefore at the end of the financial
year FGV has deposited bank and cash balances amounted to RM 1.22 billion and they also
included their long and short term debt commitments of amount RM 3.3 billion and RM
991.51 respectively. They have also forged their finance cost for the upcoming year which
amounted to RM 187.38 million. Therefore, Haris who have been hired for merely a hundred

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days ago have a pile of tasks that are to be done in order to bring the company out of the
current situation.
Haris has shared the key performance indicators which included strengthening of the
share prices which will further lead to the improved market capitalization and also lead to the
reduction of the plantation gearing ratio. Apart from these the other factors that has been takn
care of are the regular ones like reduction of costs, having a watch at the manpower costs, the
disinvestment of the not so core assets and also he has put up the system of anti-bribery
managing system.
Part I
Strategy are never supposed to be adjusted or modified without any kind of strategy
evaluation, either performed via person or as a part of an organizational evaluation technique,
strategy evaluation forms an important step within the method of guiding an agency. For
plenty of executives strategy evaluation is truly an appraisal of how well an enterprise
performs. Has it grown? Is the earnings charge ordinary or higher? If the answers which are
associated with the question correct, it’s argued that the entity’s approach ought to be sound.
The strategies which are used by the business are in accordance with the nature of the
services which is provided by the company and the same should also abide by the regulations
which are applicable in the country. Therefore, strategy evaluation is an attempt to appear
past the apparent information related to the briefing of the timely health of a commercial
enterprise and appraise rather the ones greater essential elements and tendencies that govern
success in the selected area of enterprise.
Principles of Strategy Evaluation
With respect to the Richard Rumelt for the purpose of the strategy evaluation, the
major definition of the strategy is to form a set of principles, objectives and the plans that are

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made in accordance with the scope of the business organization and the situation that they are
currently facing and therefore these strategies will lead to the approach that will lead to the
survival and success of the organization. Similarly the FGV organization here has to finalize
the strategies that will be able to take them out of the current situation that they are facing and
that they need to get over their losses and bring the company into the position that will be
able to bear profits again. Therefore it can be said that the strategies are expressed by the
companies that will be benefitted to them to survive in the competitive environment.
One of the essential tenets of technological know-how is that a theory can by no
means be verified to be truly real (Burrus, 2019). A theory might be declared truly false if it
fails to stand up to testing. Further, it's far not possible to demonstrate conclusively that a
specific commercial enterprise strategy is top-rated or maybe to assure that it'll work. One
could, nonetheless, check it for important flaws. Of the numerous exams which might be
justifiably implemented to a enterprise strategy, Most of them will fit inside this kind of large
standards:
Consistency: The strategy must not show inconsistent policies and goal they have to be
specific
· Consonance: The strategy must have an adaptive nature that can bend as per the external
environment which is quite unpredictable
· Benefit: The strategy must specify their competitive advantages, it must consist the
planning of the perseverance of the competitive advantages.
Feasibility: The strategy are not supposed overuse the available resources neither they are
supposed to create any problems that will be difficult to solve. Therefore, it is expected by the
strategies to meet all the requirement present. Strategies failing to meet any of the mentioned

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criteria are suspected strongly to fail to perform key functions that are needed for the survival
of the business.
Porter’s Generic Competitive Strategy
A company's relative role within its industry determines whether or not a firm's
profitability is above or under the enterprise average. The essential foundation of above
strategies is to ensure that the business is able to achieve long term sustainability and at the
same time focus on enhancing the profits of the entity. There are fundamental forms of
competitive gain a company can own: low cost or differentiation. Primarily two primary
forms of competitive gain mixed with the scope of activities for which a company seeks to
reap them, lead to three familiar strategies for reaching above average performance in an
industry: cost management, differentiation, and attention. The focus approach has two
variants, value recognition and differentiation attention.
1. Value leadership
In cost management, a company aims to ensure that the cost of production can be
managed in an effective manner so that the profitability can be boasted . The resources of
cost advantage are numerous and rely upon the shape of the enterprise. The business would
able to effectively enhance the sales of the business and achieve economies of sales in their
operational process and thereby also male more profits. A low cost producer ought to bed
located and make the most all resources of fee gain. If a firm can acquire and preserve typical
price leadership, then it'll be an above average performer in its enterprise, supplied it is able
to command prices at or close to the enterprise average.

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2. Differentiation
In case of differentiation strategy, a firm pursues to be specific in its industry
alongside some scopes which can be valued appropriately via buyers. It selects one or extra
attributes that many consumers in an industry perceive as vital, and distinctively points itself
to fulfil the ones needs.
3. Focus
The normal strategy of recognition rests on the choice of a narrow aggressive scope
within an industry. The focuser selects a section or organization of segments within the
industry and tailors its approach to serving them to the exclusion of others. The focal point
strategy has two versions
(a) In cost cognizance a company seeks a cost benefit in its goal section, at the same time as
in
(b) Differentiation recognition a company seeks differentiation in its goal phase.
Each variations of the focal point strategy rest on differences among a focuser's goal
section and other segments within the enterprise. The target segments should both have
consumers with unusual wishes or else the manufacturing and transport device that
exceptionally serves the target section have to vary from that of other enterprise segments.
Cost focus exploits variations in cost behavior in a few segments, even as differentiation
recognition exploits the special wishes of consumers in some segments.
Part II
As per the generic porter’s competitive strategy the company basically is tries to have
two strategies set for managing the current chaos created in FGV and to get hold of their
competitive advantages. Therefore the two strategy that are implemented by the FGV

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company are to have a strict focus on their upstream business and secondly to reduce the cost
of manufacturing. As below :-
Strategy 1
Haris at present want to focus on their current FGV’s upstream line of business and
actually, 60% of FGV’s crude palm oil (CPO) are sold as CPO while just forty% are
processed into different products, which means the organization may additionally ought to
provide out reductions, which includes whilst the tanks on the mill are full and extra fruits are
coming from of the palm. Palm oil remains for effective only for 3 to 4 months earlier than
the loose fatty acid content begins to increase, so customers realize that they are able to
squeeze organizations such as FGV for better discounts as they might require making a quick
sale.
In comparison, if FGV converts the CPO into cooking oil, its shelf life would boom to
be greater than a year, or probable even more. Therefore if the CPO is converted into other
products then the chances are there that they will not be in hurry to sell off their products and
therefore they can retain their products and also the value and in this way they have to move
towards their downstream business. In this regard they mean to get in the depth of their
oleochemicals and oils along with the joint ventures that they are already in (Chan et al,
2019).
Strategy 2
The second strategy for the FGV Company is to reduce the cost which relates to the
value leadership of the porter generic competitive strategy. Haris is searching to have the
efficiency in cost by effectively utilizing their mills. Since it has been noted that the costs are
comparatively higher than the utilization. Therefore, FGV has made a decision to put down
some of their mills in order to utilize them for the centers of fruit collection and therefore it

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will help in reducing the cost. However, the company has a major issue in front of them and
this are their oil extraction rate. Their oil extraction rate is destroyed due to the fact that only
thirty percent of the fresh fruit come from their own plantation for the attraction of oil.
However, they have very little control over the rest fresh fruit bunches which is going to the
mills. It has been noted that crude pam oil cannot be controlled and therefore FGV has tried
to control those things that were in their hands and this was their costs. It has been observed
by the CEO Haris that if they will be able to maintain their cost into the competitive
parameters, then when their company will have a favorable conditions they will be able to
hold a strong position in the market. Therefore they are maintaining their focus to keep the
costs down as far as possible.
As a result it could be seen that the efforts have shown their consequences which lead
to the reduction of cost of FGV. Initially the cost for one metric ton of crude palm oil has
been RM1800 and after the addition to that of the lease land charges that were somewhere
around RM 350 – 400, together it added up to be RM 2200 for one metric ton of crude palm
oil. Therefore, Haris has been able to bring down the cost of the crude palm oil to around RM
1500 for a single metric ton which means that they have already saved around RM 300 per
metric tons. This seems to be a very big achievement for FGV since they almost produce
3million tons of the crude palm oil every year and therefore they will be able to save RM 300
million directly to the savings after deducting all the costs. They have reduced their cost per
metric ton along with that they have also reduced their processing costs, their excessive costs
at the mills. Their manpower were sufficient to be able to harvest the fruits and clear them so
that they can be able to get the good oil extraction rate and therefore in this way they have
made use of the generic porters theory of competitiveness to make a close parity with their
competitors and in this way they surely become as good as the rest of their competitors
(Reynaert, 2019).

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Part III
Strategy 1
Strategy 1 for the FGV Company is to maintain focus on their current competitive
advantages and as per the rumelt theory it is stated that each of the strategy should have four
values attach to them. Even if one value is not present within the strategy of the organization,
it shows some serious issues with the strategy which hits the survival of the business. The
values includes the following consistency, consonance, advantages and feasibility. Here if we
see, if senior management does not enunciate a clear regular sense of wherein the
organization stands on the issues, there can be continuation of struggle among sales, layout,
engineering, and manufacturing people. A clear regular strategy, by using comparison,
permits a sales engineer to barter a settlement with at the very least coordination-the trade-
offs are an express part of the company’s posture (O'Byrne, 2019).
Organizational battle and interdepartmental arguing are often symptoms of a
managerial sickness however may imply troubles of strategic inconsistency. Here are a few
indicators that can assist sort out these unique problems:
• If issues in coordination and planning remain regardless of modifications in
employees
• If achievement for one organizational department means, or is interpreted to mean,
failure for another department, the simple objective shape is inconsistent.
• If, no matter how much one tries to delegate authority, operating problems stay
away from the top management and they don’t listen to them which shows inconsistency
A final form of consistency is when the objectives of the organization and the value of
the management group does not meet. This is more problematic area which hits the strategy