Poh Kong Draft

Strategic Analysis of POH KONG

To Examine Poh Kong Strategy via Internal and External

Analysis

Objective of the Presentation

2

1. Company Introduction

a. Poh Kong History b. Poh Kong Vission, Mission, Strategic Objectives and Detailed Objectives, and

Award & Recognition 2 External Analysis

a. PESTEL Analysisb. Five Forces Modelc. Strategic Group Mapping d. Key Success Factors

e. Drivers of Change 3 Internal Analysis

a. Poh Kong Current Financial Strengths Analysis b. SWOT c. Value Chain Analysis d. Competitive Strength Assessment from Internal Perspective.

4. Islamic Perspective 5. Conclusion & Recommendation

Presentation Outline

3

3. Internal Analysis

Agenda

4

5. Conclusion & Recommendation

4. Islamic Perspective

2. External Analysis


Company Introduction : History Of Poh Kong

1995

1990

1985

1975

1970

1960

1980

2010

2005

2000 xx

xx

er

Xx

Xx

Xx

Poh Kong’s Today

Jewelry Industry

Competitively fragmented Various Companies with broad scope of product

offerings Market segment depends upon the marketing Popular current, stylish jewelry, ranging in quality

from very good to price point quality Companies create demand through Marketing

Characteristic

Jewelry Industry

Luxury goods Market

Luxury goods

Mature Stage

Event-centric

Business type

Sensitive to consumer income, economic cycle

Jewelry Industry

Industry Overview

51%

31%

5%

4% 9%

Portion of

Material

Gold Silver Platinum

Other Metals Metal Combination

35%

26%

13%

24%

3%

Portion of

Items

Earings Neckwear Rings

Wristwear Other


Agenda

10





What does macro-environmental factor reveal about Poh Kong competitive advantages in Malaysia Jewelry industry?

1

2

How does Five Forces relates Poh Kong intensity of competition?

3How Poh Kong Position in Malaysia ?

4

What is the Key Success Factor of Poh Kong In Malaysia & How well is Poh Kong performance compare to its closest rivals?

5

What are the important drivers of changes that may impact Poh Kong’s Strategic & Financial position in Malaysia?

External Analysis

Economical

Technological Environmental

Economic growth[1] GDP Growth[1] 4.0% Global economic

instability[1] Foreign direct investment

(FDI) [1] Inflation 0.6(2009) 1.7 (2010) 3.7 (2011) Unemployment 3.1%

xx

Sustainable multi-racial society]

Country’s complex bureaucracy governance[1]

Sources: Poh Kong Annual Report 2010 [2]

Cost saving & efficiency [3]

Security [3]

Customer Needs / convenience[3]

Political

xxx

3 racial group (Malay, Indian, Chinese)

Population 28.401 million (2010)

Population below Poverty Life Life Expectancy (2011) 71.7(male), 76.6 (Female)

Social

Legislation

Political-Economic-Social-Technological-Environment-LegislationsWhat does macro- environmental factor reveal Poh Kong competitive advantages in Malaysia jewelry store industry?

Rivalry among

competing sellers

Firms in other industry offering

substitute Products

Potential New Entrants

Buyers/ Customer

Bargaining Power

Suppliers

Five Forces AnalysisHow does Five Forces relates Poh Kong intensity of competition?

Five Forces AnalysisHow does Five Forces relates Poh Kong intensity of competition?

Bargaining power of suppliers• Scarce resource, great value to retail firms• National, International reputation to get diamond

Industry Rivalry• Slow industry growth• Low switching costs for consumers• Large # of firms attract same customer• Globally expanded, top competitors open many stores

Threat of Substitute• High-end Specialty retailer

Bargaining power of buyers• Not standardized• Not much influence on products and price

Threat of New Entrants• Product Differentiation• Capital Requirement

Bargaining power of suppliers

Threat of New Entrants Industry Rivalry

Threat of New Entrants

Five Forces Analysis (cont’d)

Rivalry among

competing

sellers- High

Large number of jewelry store• More jewelry

store that are currently operating in Malaysia (local and foreign jewelry store).

• Compete to attract the same number of customer and resources.

• Poh Kong and other jewelry store like Habib’s Jewel struggle for market leadership.

Rivalry among

competing sellers

Buyers / Customer bargaining

power

Threat of substitute product

Supplier bargaining

power

Threat of new entrants

Location of the jewelry store

• Greater struggle between the jewelry store to capture customer. In Malaysia most of the

• Poh Kong closest rivalry, Habib's Jewel are offering similar product and services.

Product Differentiation

• Product differentiation associated with higher level of rivalry – but limited by …

• compete to boost their brand recognition and improve their quality of services in order to gain market shares


Buyers / Custom

er bargaini

ng power- High

High information availability

• In Malaysia : increase in the number of internet user from year to year

• Compare the design and services between the jewelry store

Rivalry among

competing sellers


power


Supplier bargaining

power


High buyer price sensitivity

• Low switching cost

• Customer may buy it on loan basis


Supplier bargaini

ng power- Medium

Technology provider

• xxx

Rivalry among

competing sellers


power


Supplier bargaining

power


Gold and Diamond supplier

• ff


Threat of

substitute

product -

Medium

Rivalry among

competing sellers


power


Supplier bargaining

power


• Other branded company provide luxurious product


Threat of new

entrant - Low

Rivalry among

competing sellers


power


Supplier bargaining

power


• Require high capital start up

• Required high security

• Brand recognition - invest alots of money and time

• High level of resources.

Strategic Mapping

20

jewelry store

Deposit (RM Bil)

Loans (RM Bil)

BranchesSelf-

Service- teminal (ATM)

Total Asset (RM Bil)

Poh Kong 261 242 385 2847 380

Habib's Jewel

200 268 324 2057 269

Public jewelry store

180 262 250 488 229

RHB Capital 94 84 185 1058 129

AMMB 71 70 186 803 105

Affin jewelry store

32 26 91 160 45

Alliance 28 22 99 171 37

Sources: Annual Report of Poh Kong, Habib's Jewel, Public jewelry store, RHB jewelry store, AMMB, Affin jewelry store & Alliance

Do Poh Kong is in the Best Position in Malaysia & have potential to be a Financial Leader in the region?

21

L

oan

s an

d D

ep

osi

t

Branches and Self-Service Terminal

HIGH MEDIUM

LOW

H

IGH

M

ED

IUM

L

OW

RHB Capital

Affin

Strategic Mapping (cont’d)

Public jewelry

store

Poh Kong

Habib's Jewel

Alliance

AMMB

Key Success Factor - Competitive Profile Matrix (CPM)What is the Key Success Factor of Poh Kong In Malaysia & How well is Poh Kong performance compare to its closest rivals

Poh Kong Habib's Jewel jewelry store

Public jewelry store

CRITICAL SUCCESS FACTORS

WEIGHT

RATING

WEIGHTED SCORE

RATING

WEIGHTED SCORE

RATING WEIGTHED SCORE

PRODUCTS & SERVICES

0.15 40.60 3 0.45 3 0.45

TECHNOLOGY 0.14 4 0.56 3 0.42 1 0.14

GLOBAL EXPANSION 0.06 3 0.18 2 0.12 2 0.12

FINANCIAL POSITION 0.08 4 0.32 4 0.32 2 0.16

SERVICE QUALITY 0.13 3 0.39 3 0.39 3 0.39

jewelry store BRANCHES / SELF-SERVICE TERMINAL

0.12 50.60 4 0.48 3 0.36

MARKET SHARE 0.06 4 0.24 3 0.18 2 0.12

STRONG MANAGEMENT TEAM

0.09 40.36 4 0.36 3 0.27

MARKETING 0.09 4 0.36 4 0.36 3 0.27

CUSTOMER LOYALTY 0.08 3 0.24 4 0.32 2 0.16

TOTAL 1.00 3.85 3.40 2.44

Drivers of Changes

Economic Conditions Globalization Technology

Changing Societal Concern, Attitudes & Lifestyle

Regulatory influences and government policy changes

Product & Services

• Euro Crisis & US Economic Condition

• Malaysia economic growth & deficit

• Economic Transformation Programme will create opportunities

• for Poh Kong’s

• Increase consumer demand – Regional Business expansion

• ASEAN Free Trade AFTA

• Environmental corcern – Paperless jewelry store

• Improve security at every stage of operation via IT advancement

• Mobile jewelry store lifestyle • maximum loan-to-value (LTV) ratio of 70 %

• Islamic jewelry store

What are the important drivers of changes that may impact Poh Kong’s Strategic & Financial position in Malaysian jewelry store industry?

Quality of Diamond

Ability to customize

Romance & Luxury

Marketing

Marketing

Marketing

Sensitivity to Economic Cycle

Threat of lower Jewelry & Online sale

High competition & matured market

Economy recovery

Online sale increase

Separated brand

Rule of the Game Characteristic Opportunity

Product differentiation

Brand Loyalty

Key Success Factor


Agenda

25





26

Current Financial Analysis including Financial Ratio Analysis

Net profit (Profit After Tax And Minority Interest) rising by 16.6% from RM3.8 billion for FY 2010 to 4.5 billion for FY 2011 The group total

assets expanded by 22.4% from RM337 billion as of 30 June 2010 to RM412 billion as of 30 June 2011.

172 237 245 391644

8641075

2981

130

9701360

840

16591996

242525032772

31782928

692

3818

4450

0500

100015002000250030003500400045005000

Net Profit

Net Profit

31 40 48 56 72 82 94 110 115 117 127146 151 161

180 192224

257 269311

337

412

0

50

100

150

200

250

300

350

400

450

Total Assets

Total Assets

27

In FY 2011, Poh Kong’s share price rose by 18.3% from RM7.56 to RM8.94.

1.1 1.1 1.31.9

3.5

4.6

5.76.3

2.0

5.5

7.4

4.9

6.3 6.2

7.37.8 7.7

8.6

6.35.9

7.6

8.9

0.0

1.02.03.0

4.05.0

6.07.08.0

9.010.0

Share Price

Share Price

Current Financial Analysis including Financial Ratio Analysis (cont’d)

28

Earnings Per Share rose by 13.8% to 61.4 cent for FY 2011 from 53.9 cent for FY 2010. Earnings Per Share is defined as net income divided by the number of shares outstanding.

Return On Equity increase to 15.2% for FY2011 from 14.5% for FY2010 which exceeding the targeted Return On Equity of 14%. Return On Equity is defined as net profit divided by the shareholders equity.

Current Financial Analysis including Financial Ratio Analysis (cont’d)

29

Current position analysis for non financial analysis

Key Management Changes Several key management changes also contributed to strengthened the

Poh Kong leadership. Among the changes are: - Appointment of Muzaffar Hashim as Chief Executive

Officer of Poh Kong Islamic Berhad. - Appointment of Hans De Cuyper as Head of Etiqa

Insurance and Takaful. - Appointment of Dr John Lee Hin Hock as Group Chief

Risk Officer.

Customer Based For the FY 2011, Poh Kong have about 21 million customers

worldwide compared to 18 million customers for FY 2010.

Weakness (W)

1.Low in Customer satisfaction.

2. Product Innovation might weaken.

3. Tendancy of investing in non-stable

economic countries.

Strengths (S) 1.Largest commercial jewelry store in Malaysia 2.Strong Financial Position 3.Strong Reputation In Malaysia 4. Technology usage 5. Caliber senior management 6. Islamic jewelry store 7. Good Credit Ratings

Threats (T) 1. Recession 2.Competition 3.InformationTechnology

Opportunities (O) 1.Islamic jewelry store 2.Strong Financial Position 3.Good Economic Opportunities 4.Core values 5. Corporate Social Responsibility

(CSR)

SWOT Analysis

30

31

Value Chain Analysis

Primary

Activities and

Costs

Support

Activities and

Costs

Sales & Origination

Processing Approval Acceptance Documentation Disbursement & Release

RepaymentMonitoring & Enhancement

Enterprise Transformation Services

Group Human Resources

Group Finance Office

Group Credit & Risk Management

Legal, Compliance & Communications


Agenda

32





Islamic Perspective

33

An Islamic managerial leader should serve his followers or subordinates under some distinctive principles as such:

i. Shura

Managerial leaders in Islam must consult with their people before making any decision. Allah (Swt) directed his Prophet (Sm) to consult with his companions.

Allah says “And those who have answered the call of their lord and establish prayer and who conduct their affairs by consultation and spend out what we bestow on them for sustenance.” (Surah Al Shura, Verse-38).

Allah also says “And by the mercy of Allah, you dealt with them gently. And had you been severe or harsh-hearted, they would have broken away from about you; so pass over (their faults), and ask for (Allah’s) forgiveness for them; and consult with them in affairs. Then when you have made a decision, put your trust in Allah.” (Surah Al-Imran, Verse-159).

Islamic Perspective (cont’d)

34

ii. Accountability

Islam teaches accountability as vital component of management. According to Islam, each and every human being will be made responsible for his good or bad deeds and accordingly he will be rewarded or punished.

Allah says “…whosoever does good equal to the weight of an atom (or a small ant) shall see it. And whosoever does evil equal to the weight of an atom (or a small ant) shall see it.” (Surah Az-Zilzal,Verse- 7-8 ).

In addition, Islam places great emphasis on the code of lawful and unlawful in business transactions. Many Qur’anic verses disapprove the wrongful taking of the property.

Allay says “Do not devour one another’s property

wrongfully, nor throw it before the judges in order to devour a portion of other’s property sinfully and knowingly.” (2:188).

Allah also says “Do not devour another’s property

wrongfully – unless it be by trade based on mutual consent.” (4:29).


Agenda

35





Conclusion & Recommendation

36

Low jewelry price

Design Consumers are seeking out color, retro glamour and statement pieces More fashion designers are entering

Niche Market Marketing to Men’s, Younger adults gay, lesbian

Celebrities Not only ads. But also in jewelry collections

Low end retailer: Wal-Mart, Sears By cutting cost and lower quality goods: discount deeper, thinner

margins for cost conscious customer New technology

Documents

Poh Kong Draft