FACULTY OF ECONOMIC AND MUAMALAT

BACHELOR OF ADMINISTRATION AND CORPORATE RELATION

Strategic Management and Operation
(MGB4033)
Title:
UMW Holdings Berhad Case Study Analysis
Prepared to:
Dr. Ummi Salwa Bte Ahmad Bustamam
Prepared by:
TMD 2
Nurul Athirah Bt Tajudin

1112186

Siti Salamah Bt Abd. Kalib

1112194

Nurul Itriyah Bt Ab. Hamid

1112195

Nur Faizah Bt Mohd. Hanif

1112181

Muhammad Syafiq Bin Sahanuddin

1112203

UMW HOLDINGS: SUSTAINING A CENTENNIAL CORPORATION

Utilizing upon Porters 5 Forces, analyze the 4 industries that UMW is involved.
1) Porters 5 Forces on automotive assembly and distribution
I.

II.

III.

New entrance

Big capital to invest

Competitive industry as there are many rivalry for them to continue living

High demand buyer

Supply from the suppliers are tremendous

Supplier

Bargaining power low from supplier view

Supplied engineer

Research and development lab or department

Buyer

IV.

V.

Bargaining power is high as the buyers have many options in the market

Substitute

Public transportation as busses, taxi, monorail /trains

Motorcycles

Bicycles

Rivalry

Luxury cars as BMW, Mercedez Benz, Ferrari

Honda

Local cars manufacturer as Perodua, Proton

2) Porters 5 Forces on automotive components and lubricants of OEM and REM

I.

New entrance

Big capital to start up as need to accommodate with all the components

Transportation fees as to carry out and in the components from one

destinations to others

II.

Marketing advertisement

Suppliers

Bargaining power from suppliers quite high as they are many options for
them to acquire.

The need of supply for engineers / technicians

Expertise in the requirement fields

Research and development departments for each of components to be

tested

III.

Buyer

Low purchasing power as they could not demand or purchase the

components from anywhere

IV.

Substitute

V.

Potential buyers from repair shop, service centre

None

Rivalry

Water transportation that does not using any of those components for
example canoe, sampan, craft

3) Porters 5 Forces on heavy equipment

I.

New entrance

Hard to enter because of high capital requirements for starting up the

business

Profitability is high because of the high growth of the countrys commercial

sectors including constructions, electrical and electronics components,
machineries and more.

Follow the procedures from the regulations like Customs Orders (Prohibition
of Imports) 1998 and the Customs Act 1967.

It is hard for the customer to change from one supplier to another because
the cost for heavy equipment is quiet high.

II.

Suppliers

Mostly heavy equipment company in Malaysia import the equipment from

the other country like Japanese. There was no heavy equipment
manufacturer that originally from Malaysia.

The bargain power of supplier is high because the market is dominated by a

few large manufacturers like Komatsu, Kawasaki and Volvo.

III.

Expertise like engineer, R&D team and others.

Buyer

The bargaining power of buyer is high in this industry. The increase number
of suppliers for heavy equipment in Malaysia that rent or sale make the
customer have many options to choose.

High cost in renting or buying heavy equipment cause the purchasing power
of the buyer low.

However, there were still a lot of potential buyers that demand highly for
heavy equipment like Telekom, Tenaga Nasional Berhad, Constructions
Company, printing company and more.

IV.

Substitute

Normal people prefer to use tools like hoe and their energy more than using
tractors because it is cheap and conventional for them.

There were no substitutes for the big industry like agricultural, constructions
and communications industry.

V.

Rivalry

Volvo Malaysia, Sunway Enterprise Sdn. Bhd., Charis Machinery Sdn. Bhd.
and more.

4) Oil and gas-drilling industries

I.

New entrance

The high capitals in starting up the business make it hard to enter this
industry.

High profitability because there were only two companies that provides oil
and gas drilling industries which is UMW Holding Berhad and SapuraKencana
Petroleum Berhad.

Hard to switch the cost because there were no substitutes or other

alternative that the customer can choose.

II.

Suppliers

Heavy equipment suppliers, engineer, expertise in machinery and drilling,

workers that specialize in drilling and more.

High bargaining powers since there were many heavy equipment suppliers in
Malaysia. However, there were just little heavy equipment manufacturers in
Malaysia. This situation can make the bargaining power of suppliers low
because the two companies above will need to import from the other
country like Japan and Sweden if they want to create or build the machine.

III.

IV.

Buyers

Low bargaining power because they were not many choices to choose.

PETRONAS, SHELL, BHP Petrol and more.

Substitute

No substitute. The company does not have other alternative if they want to
drill oil and gas.

V.

Rivalry

SapuraKencana Petroleum Berhad.

Based on the analysis, suggest which industry / business that UMW should focus on provide
suitable strategies to be deployed.
Based on the analysis above, UMW should focus on heavy equipment and oil and gas
drilling because both have a promising future. The profitability and growth in these two
industries is high plus the competitiveness level of both industries is still low because of
lacking number of rival in Malaysia and there still no substitution for both industries. We
suggest three strategies that seem suitable for UMW Holdings Berhad could deploy.
First, the company should diversify their strategy by involving more in heavy
equipment and oil and gas drilling industries. They should not only focus on automotive
assembly and distributions and automotive components and lubricants OEM and REM.

UMW must invest more on industries that seem to give high profitability which is heavy
equipment and oil and gas industries.
The second one is, franchising the heavy equipment manufacturer like Volvo or
Kawasaki or Komatsu. Franchising can lower the financial risk of the company because the
investments are lower. Besides, UMW company will not having any difficulties to find heavy
equipments suppliers for their company. Moreover, it is increasing the chances of business
success because the company will be associated with proven and quality products.
The last but not least is organically. UMW company can conduct the oil and gas
industries with their own strengths without joint venture with any other company that
having similar interest with the company. Since the company also managing the heavy
equipment industries, it is an advantage that the company can take in conducting the oil
and gas industries by themselves.