Heavy Industries Corporation of Malaysia Berhad (HICOM)

Case Analysis for Management 18

Submitted to: Prof. Teresita M. Banayag,MBA

Submitted by: Carla Rosales Nikko Lexis Tejano Jennifer Zonio May Hazel Ann Sanchez Ryan Rommel Rosario

March 01, 2012

Heavy Industries Corporation of Malaysia Berhad(HICOM) TIME CONTEXT: March 31, 1987 POINT OF VIEW: Tan Sri Jamil, President of the Heavy Industries Corp.

MAIN PROBLEM: What should be HICOM do to its three(3) subsidiaries or associate companies to mend its adverse effects to the company?

SECONDARY PROBLEM: Production of motorcycle engines by HICOMs three associated companies which

was drastically reduced due to poor demand.

Appreciation of Yen by approximately 80% since the implementation of various

projects has also resulted in abnormally huge foreign exchange losses for HICOM.

COMPANY OBJECTIVES: Allude measures for minimizing, if not totally eradicating HICOMs losses and avoid its future re-incurrence.

SWOT ANALYSIS: STRENGTHS: HICOM owns 51% of interest in Perwaja Trengganu Sdn Bhd(PTSB) 70% of interest in Perusahaan Otomobil Nasioal Sedab

Bhd(PROTON) aside from other subsidiarycompanies under metalbbased, engineering, realty development, trading and processing industries.

Creation of new division called Operation Division of HICOM, responsible for

monitoring and coordinating its operations which is envisaged that prompt assistance due to it could be rendered to the subsidiaries and associated companies as when

required.

Perusan Otomobil Nasional Sedab Bhd(PROTON) holds 65% market share in

Malaysia

WEAKNESSES: A combination of poor planning and inexperienced or inept management.

Executives are viewed as bureaucratic and lacking of leadership needed to cope with

the plants(PTSB) problem.

Large Yen dept.

OPPORTUNITIES: The improvement in prices of primary commodities in the world market, inflow of

funds into the country and the improved business confidence that are expected

to result in increased demand for products manufactured by HICOM.

e.g. growth of Malaysias economy and resumption of public and

private construction was anticipated and would mean the rise for

demand in billets was, likewise, expected.

The closure of the direct reduction plant had resulted in the price of steel scrap to be

cheaper than that of hot briquetted iron, with its view to incorporate increased use of

steel scrap would be a great strategy to improve competitiveness to its products.

THREATS: Future market share of Kedah cement (another subsidiary of HICOM) was expected

to fall with the coming on stream of another cement plant in Malaysia.

Potential entrants within the manufacturing and sale of hot briquette iron and steel

billets may establish effective operations for the span of 2 years.

ALTERNATIVE COURSES OF ACTIONS: 1. Continue operations in :

Perwaja Trengganu Sdn Bhd(PTSB)

Pros : a. Malaysias economy is expected to grow.

b. With new leadership(Datuk Eric Chia), come fresher business

perspectives and innovations. Cons : a. Anticipated increase in demand may not materialize b. Obsolescence of equipments due to technology advancement. Perusahaan Otonobil Nasional Sedan Bhd(PROTON)

Pros: a. Retain and exploit 65% market share b. Seize opportunity to enter US market c. Termination will undermine Malaysias industrialization plans d. Domestic and international markets appear to be more promising Cons: a. Loss may be significant but tolerable.

2.

Discontinue operations in Kedah Cement Sdn Bdh(KCSB)

Pros: a. Avoid further losses due to expected coming on stream of another

cement plant in Central Malaysia.

b. Stop the incurring of debts in the future. Cons: a. KCSB would be out of the processing industry.

RECOMMENDATIONS : Poor performance of HICOM and its company subsidiaries was brought by both internal and external factors. It is therefore necessary to discontinue some of its subsidiaries or associates. With its most desirable effects to HICOMs current situation, it would be necessary that PROTON should continue its operations, that Perwaja Trengganu Sdn Bhd(PTSB) be closed and Kedah Cement Sdn Bdh be discontinued.