Strategic Analysis of FELDA BHD: Challenges and Recommendations

This report presents a comprehensive strategic analysis of FELDA BHD, a major Malaysian government agency and plantation operator. It identifies key problems such as mismanagement, financial losses, and organizational culture issues. The analysis includes a detailed examination of FELDA's internal environment using value chain analysis, a milestone table tracing the company's history, and a financial analysis. Tangible and intangible resources are assessed, and a SWOT analysis is conducted. The external environment is evaluated through PESTLE and Porter's Five Forces analyses. A competitor matrix is presented, followed by recommendations to address the identified challenges. The report concludes with a discussion of planned strategies, their formulation, and implementation, supported by a list of references.

STRATEGIC
MANAGEMENT

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Contents
Introduction...........................................................................................................................................1
Identification and elaboration of problems............................................................................................1
Internal analysis.....................................................................................................................................2
Value Chain Analysis........................................................................................................................2
Milestone Table.................................................................................................................................4
Financial Analysis.............................................................................................................................5
Tangible resources.............................................................................................................................8
Intangible resources...........................................................................................................................8
SWOT...............................................................................................................................................8
External analysis....................................................................................................................................9
PESTLE analysis...............................................................................................................................9
Porter’s five force analysis..............................................................................................................10
Competitor Matrix Table and Summary..............................................................................................12
Recommendation.................................................................................................................................13
Conclusion...........................................................................................................................................15
References...........................................................................................................................................16

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Introduction
The global environment for business has become highly complex. This increase in the
complexity of the business environment has created many kinds of challenges for the firms.
Both strategic and functional issues are faced by the firms in Malaysia. Even the public
limited firms are under serious pressure to improve their business model in order to ensure
that their growth remains on the higher side. It is mandatory that firms look at the factors
present in the internal and external environment that would allow them to design their
strategies accordingly so that the challenges that they are facing can be reduced (Alwee,
Roowi, Teng & Othman, 2010). The strategies must also be designed on the basis of the
strategies that are made by the competitors. The Federal Land Development Authority or
FELDA BHD is a government agency from Malaysia. It operates to manage the resettlement
of the rural poor into the new developed areas and also organise smallholder farms growing
cash crops. However now it has expanded its activities. It is now the world’s largest
plantation operator. This company came into existence on 1 July 1956. This report identifies
the problems faced by Felda BHD. The internal and external analysis of the company has also
been provided in the report. This report will also provide competitor’s matrix. In the later
section of the report recommendation for overcoming these challenges will be illustrated. In
the last section of the report there will be illustration of planned strategies, its formulation and
implementation.
Identification and elaboration of problems
Organisations in Malaysia are facing many kinds of challenges. Same is the case with
FELDA BHD. Some of the challenges faced by the company include:
 Improving the life of settlers: It is seen that FELDA BHD is facing challenges in
improving the livelihood of the people due to failure in policies and the role of the
parent agency. The income of the FELDA BHD is reducing hence some of the people
have again gone into the clutches of poverty. In the last 50 years very few have been
able to move from their status (Arshad, 2019). Even when FELDA succeeded in its
business very little amount of horizontal and upward mobility of people can be seen.

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 Mismanagement: The biggest problem that FELDA is facing is related to the
mismanagement. FELDA officials claimed many a time the company did not invested
in the projects effectively or properly. There was no financial reporting in an effective
manner. They have also not been able to use their resources effectively for caring of
the people (Barrock, 2019). Even the acquisition that was made by the company has
not been able to provide desired benefits to the people. Some of the joint ventures are
also underperforming and the management has not been able to rectify it.
 Financial loses after listing on FGV: It can be seen that FELDA BHD had faced large
financial problems especially in terms of mounting debts once it got listed on the FGV
Holdings Berhad in the year 2012 and investing on the non-financial sector. The
conflict of interest between the operations and management after the Chairman Tan
Sri Mohd Isa Abdul Samad sat on the chair of board of directors. This resulted in the
lack of check and balance for the investment decision of the firm (The sun daily,
2019). It is seen that lack of accountability in the company has resulted in huge loses
to the company at many times. This is the major reason why they have been failing to
provide the benefits to the stakeholders that they could have.
 Organisational culture: It is seen that culture of the firm is not consistent that can help
the firm in progressing in the right direction. They have not been able to develop a
culture that is consumer centric and finding resource gaps and prioritising the
workforce development program within the organisation (New Straight Times, 2019).
The market perception about the firm is not going good.
Internal analysis
For dealing with the challenges that they are facing, it is critical that firm does internal
analysis in an effective manner.
Value Chain Analysis
Primary activities
 Inbound logistics: This Company has accumulated a good suppliers group that helps
them in obtaining high quality materials which is necessary for producing effective
end products. From housing to development of poor people they are acquiring raw
materials from all the good suppliers.

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 Outbound logistics: They know that their end consumers are the people that are not so
wealthy hence they ensure that products are being delivered for making improvement
in their livelihood. However they have not been able to deliver as per the
requirements of the people.
 Operations: In the last few years the mismanagement has been the biggest challenge
that has not allowed their operations to become effective. In spite of the fact that they
have got support of the government, there has been laziness from the management for
reacting towards the challenges that they are facing (Rasidi, Ngah & Ramli, 2014).
 Marketing and sales: They have not been able to improve the image of the firm in the
last few years especially in terms of the fact that the objective that they have made.
Continuous reporting of the mismanagement has been reported which has taken down
the image of the company and the most critical impact of it can be seen on benefits
that they could provide to their stakeholders (Junaidah, Rafii, Chin & Saleh, 2011).
 Services: The Services that is provided by the firm has not been so effective
especially in the time when it comes to continuously handling the resources that they
have. They have been training their employees but due to lack of management’s
support they have not been able to deliver it as expected.
Support activities
 Firm’s infrastructure: There has been continuous change that has been made by the
company in its infrastructure so as to be ready for the operations that they are
performing. Their infrastructures have helped them in utilisation of the resources in
the long term.
 Human Resource Management: They have been continuously improving the skills of
the individuals so that they are ready for all the challenges that are confronting their
business. It is their efforts towards improving HRM that has helped them in winning
the “50 Best Global Employer Brand Award 2015” at the 23rd edition of the World
HRD congress (FGVholdings, 2020).
 Technology development: The technology development at FELDA has been slow and
it is due to this that they have failed to do operations as per their objectives. Their
technology development has been slow and hence they have not been able to provide
benefits to their stakeholders as they have expected.
 Procurement: They have managed their suppliers in a manner where they are
procuring things from the best suppliers from all across the globe. Regular analysis of

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the supplier’s quality is being done so as to ensure that procurements are done
effectively.
Milestone Table
Year Milestone
1956 The land development ordinance came into existence and FELDA
was established with a starting capital of RM10 million.
1971 FELDA made his first joint venture with Perlis Plantation Berhad to
start Kilang Gula Felda Gula Felda Perlis Sendirian Berhad, a
milling and refining sugar facility.
1978 Establishment of Agricultural Services Corporation that produces
planting stock for oil palm.
1980 FELDA established an investment cooperative that gave the
opportunity to the workers of the FELDA company to invest in the
firm.
1985 FELDA Rubber Corporation Industries was established to operate
rubber processing factories.
1992 Commercial planting operations started under the name FELDA
PLANTATIONS SDN BHD.
1995 FELDA PLANTATIONS SDN BHD was established as FELDA
commercial arm.
2004 FELDA commissioned the Sahabat biomass power plant in Lahad
Datu.
2007 FELDA incorporated Felda Global Ventures Holdings Sdn Bhd to
operate as a commercial arm for their investments in downstream
and upstream palm oil businesses.
2008 FGV acquired FELDA’s investments in North America which
includes Twin Rivers Technologies Holdings Inc.
2009 FGV have acquired 50% equity interest in FELDA IFFCO SDN
BHD as well as TRURICH RESOURCES SDN BHD (Alwee,
Roowi, Teng & Othman, 2010).
2010 This group became the world’s first smallholder firm to achieve the
Roundtable on sustainable palm oil certification (FGVholdings,

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2020).
2011 A subsidiary of MSM Malaysia Holdings Berhad got listed on the
Main Market of Bursa Malaysia Securities Bhd.
2012 The initial public offering of the company is the third largest in the
year 2012.
2013 FGV CNS started producing the high grade carbon Nanotube and
Graphene.
2015 They entered in The Brand Finance TOP 100 Malaysia Brands
2015.
2018 Felda Global Ventures Holdings Berhad got incorporated under the
Companies Act 1965 as a public company.
Financial Analysis
Figure 1: Market value ratios
The market value ratios suggest that that the company’s performance when compared with
industry is not at all good. This depicts that in the long term company will not be able to
achieve which it could have.

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Figure 2: Profitability ratios
Again on these parameters of financials the firm is not performing when compared with
industry standards. It is also showing that the company is doing its sales but still it is going
into losses. Some factors even go on the negative side which illustrates the fact that the way
in which company is performing is not so well.
Figure 3: Cash flow ratios
Cash flow ratios within the firm illustrates that the firm is unable to provide desired benefits
to the stakeholders that they could have. This is not a good sign for the company and their
future investment programs (Investing, 2020).
Figure 4: Profitability ratios

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All the returns that are getting on the investment done by the company is on the negative side
and hence no new investors will be adding to the company as they will get nothing.
Figure 5: Liquidity Ratios
The liquidity ratios suggests that the company’s debts are increasing day by day and it has
gone much higher than equity. The debts of the company are on the increasing side i.e. the
company is investing on the debts only which is not giving them significant benefits.
Figure 6: Efficiency
(Source: Investing, 2020)
The turnover ratios illustrates that the company has generated higher sales but they are unable
to generate as much profit as they demand. Even the net income is on the negative side which
illustrates that firm is unable to provide incomes to the employees (Investing, 2020). This will
lead to greater dissatisfaction in the employees which will have long term impact on the
company.
All the financials illustrates that the firm is unable to do well and it is not worthy to invest in
such firms because it is having no scope to do progress unless significant amount of changes
are brought into the strategies and the operational mechanism in the country. This has long
term impact on the firm’s performance and will also hamper the sustainability of the firm
(Investing, 2020).

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Figure 7: Revenue of FGV
Tangible resources
 Cash: This firm has higher value of cash reserve.
 Inventory: The inventory of this company is of higher quality and the inventory
turnover is 7.67 (Comin, Kuykendoll & Williams, 2016).
 Investments: Their investments have been in large but there are many investments
made in the last few years which have not been so worthy (Barau & Said, 2016).
Intangible resources
 Account receivable: It is seen that account receivables of the Felda for September
quarter 2019 is around 1256.98 MYR (Noor Hisham & Cik Mohd Rizuan, 2013).
 Good-will: The good will of the company is on the higher side as they are working for
the benefits of the people.
SWOT
Strengths
 This company has huge amount of cash reserves and investment capacity that could
help the firm in their future endeavours.
 They have human resource that is highly skilled and is able to fulfil the needs of the
company.

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 They have the support of the government which helps them in terms of resources they
have (Rasidi, Ngah & Ramli, 2014).
Weaknesses
 Company has been failing to address the mismanagement happening in the firm.
 They have been unable to maintain the life standards of the people that have been
once up lifted the company (Kushairi, et al 2019).
 The growth of financials in the company has been poor.
Opportunities
 This Company has opportunities in many new areas especially the ones that are
related to people development in Malaysia.
 They can work in public private partnership so as to ensure that they have been able to
enhance the base of their firm (Manaf & Ibrahim, 2017).
 They have opportunities in going into new kinds of joint ventures that will allow them
to enhance their synergy.
 They will also look for the opportunities in other developing nation where they could
do the same operations so as to generate the adequate capital for the company.
Threats
 The global market is facing economic slowdown hence the impact on the global
investments have been poor.
 Threats related to the sustainability also lies in front of the company where it is seen
that due to mismanagement of resources an organisation will not be able to ensure its
sustainability in the long term (Joshi, 2018).
External analysis
In order to excel in the development of strategies, it is critical for the organisations to reduce
the impact of the external factors on the business.
PESTLE analysis
 Political: This Company has the support of the government especially in the areas like
tax exemptions and policy making. Government’s expenditure on the welfare
programs has been reduced and this has impact on the development of the programs

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by the FELDA BHD also. However Malaysian government has good relations with
other nations and hence the development of the company in other parts of the world
will be easier (Keong & Keng, 2012).
 Economic: The economic condition of world is not so healthy and this is producing a
condition where finding global investors will be easier. This gets worse with the fact
that the internal financial management of the organisation is not so effective and they
are incurring many kinds of loses. However the support of the government will help
FELDA in improving their financial condition. The reduction in the price of palm oil
has also affected the economic condition of FELDA.
 Social: The society of Malaysia has changed and there are large numbers of people
that requires welfare programs to come out of poverty. Affordable housing and
cleaner and greener environment is something that is needed by the people and failing
to do so has long term impact on the development of the organisations (Junaidah,
Rafii, Chin & Saleh, 2011).
 Technological: Technological infrastructure in Malaysia is still growing and it is seen
that companies in Malaysia like FELDA BHD have still not invested heavily on
utilisation of technology in the workplace. If technology would have been used
effectively in FELDA then the changes of mismanagement would have been seriously
reduced.
 Legal: The legalities in Malaysia have changed and it has become more consumers
centric and companies have to ensure that they get everything right so that they do not
have to face any kinds of legal complications.
 Environment: The greatest impact on the business of FELDA BHD is of the
environmental concerns especially in terms of the fact that the production of the palm
oil is effected by the change in the environment. Since they are working towards
plantation hence they need to be more precise over the way in which they can deal
with environment related parameters especially in the infrastructure and housing
development (Noor Hisham & Cik Mohd Rizuan, 2013).
Porter’s five force analysis
In order to deal with the industry environment, the use of Porter’s five force analysis can be
critical.
 Bargaining power of suppliers: There are large numbers of suppliers available in the
market both in Malaysia and international market. However this company has not