Sime Darby is a leading Malaysian conglomerate with over 300 controlled companies and 36,000 employees. It started in 1910 with rubber plantations and has since diversified into various industries including palm oil, cocoa, manufacturing, and property through acquisitions. In the 1990s, Sime Darby was considering acquiring UMBC, Malaysia's fourth largest bank, but faced risks from lack of experience in financial services and unhealthy potential returns. The document discusses Sime Darby's history, diversification strategy, operations across various countries in Southeast Asia, and political risks faced in different regions.

1. SIME DARBY
BERHAD (A):
1995
CASE STUDY

2. Company’s profile
One of leading Multinational
Conglomerates in South East Asia
GENERAL
Manufacturing TRADING
Scope of
Business
PLANTATION
Controlled over 300
Companies
PROPERTY
with 36,000 Employees

3. COMPANY’s HISTORY
Acquired BF
Started with Goodrich and
Rubber Plantation Other Companies
1960 1995
1910 1981
Diversified to Palm More than 70%
Oil and Cocoa of Shares is
Plantation Owned by
Public
COMPANY’S HISTORY

4. CASE OVERVIEW
Great record in overall leadership and long term vision.
Sime Derby became a company that doing so many
acquisition and diversification of their business.
It makes a Sime Derby a Giant conglomerates with so
many diversified business.
When there is no diversified business, Sime Derby
became a slow moving conglomerates

5. PROBLEM: DILEMMA OF UMBC
Acquisition of UMBC is predicted to bring
many benefits.
ACQUIRE OR NOT?

6. PROBLEM: DILEMMA OF UMBC
ACQUIRE OR NOT?
As a slow-moving conglomerates, there is no
need to acquire more companies.
Short-term opportunities are available.

7. Reason of Diversification
Diversification to Cocoa and Palm Oil Industry:
1960s because the demand for rubber had abated.
Continuing Diversification:
1970s to keep up with Malaysian economic activities.
DIVERSIFICATION STRATEGY

8. OPPORTUNITIES OF MALAYSIAN ENVIRONMENT
FINANCIAL SECTOR HEAVY EQUIPMENT
AND PROPERTY
High Saving Rates
Young Population
Low Penetration of Policy
DIVERSIFICATION STRATEGY

9. OPPORTUNITIES OF MALAYSIAN ENVIRONMENT
FINANCIAL SECTOR HEAVY EQUIPMENT
AND PROPERTY
The development of infrastructure
and administrative system in
Malaysia.
DIVERSIFICATION STRATEGY

10. FORWARD INTEGRATION
Rubber Plantation (1960)
Tires (1981)
DIVERSIFICATION STRATEGY

11. GEOGRAPHIC DIVISION
Sime Darby has extensive trading and manufacturing
interests in Hong Kong, Singapore, Philippines, and Australia.
It also operated in several countries such as Thailand,
Indonesia, Egypt, United States, etc.

12. GEOGRAPHIC DIVISION
There are variety of functions in Sime Darby such as annual
management plan which is initiated at grass–roots level,
productivity reviews, and management committee meetings that
handled at the corporate level.
The annual planning cycle and productivity reviews were
supplemented by other procedures called the
Group
Procedures and Authorities System (GPA), and the
Internal Audit process.
There’re problems in human resources of Sime Darby, the
company are started to losing people to their competitor.
The core international operations had traditionally been in
trading and motor vehicle dealership.

13. GEOGRAPHIC DIVISION
Head Office Investment
Hotels, manufacturing, hospitals, insurance broking, and
independent power production.
Malaysia Region
Investment company (PSD holdings): 26 subsidiaries and 3
associated companies.
Oil and Gas
Engineering, fabrication, and project management.
MALAYSIA OPERATIONS

14. GEOGRAPHIC DIVISION
Headed by Sime Darby Hongkong, Plc.
Motor vehicle as the largest sectors (60%):
Principal represented BMW, Mitsubishi, Ford, Suzuki, Alfa Romeo.
Caterpillar construction equipment as second
largest division.
HONG KONG OPERATIONS

15. GEOGRAPHIC DIVISION
SINGAPORE OPERATIONS
Headed by Sime Darby Singapore, Plc.
To generate operations in Singapore and Brunei
Operations activities (profit volume order):
Motor Dealership Property
Heavy Equipment
Packaging
Insurance (had joint ventures
Consumer Trading
with AXA France)

16. GEOGRAPHIC DIVISION
Headed by Sime Darby Australia.
Has two major activities:
Distribution and Servicing Provision of Travel and
Suzuki Vehicles Related Services
AUSTRALIA OPERATIONS

17. GEOGRAPHIC DIVISION
Headed by Sime Darby Phillipines Plc.
Major problem is on unions (wage demand)
Existing business dealt with distribution of agricultural
equipment and plantations management.
PHILIPPINES OPERATIONS

18. GEOGRAPHIC DIVISION
Turmoil:
General Strikes, Riots, Terrorism.
Financial Transfer:
Currency between local and foreign, fiscal and monetary policy,
payment of exports
Direct Investment:
Risk of foreign investment in subsidiaries, taxation discrimination,
labor cost.
Export Market:
Barriers to import, market condition, difficulties in receiving
payments.
POLITICAL RISK IN REGIONS

19. GEOGRAPHIC DIVISION
Efficiency Judicial System:
Efficiency and integrity of legal environment
Rule of Law:
Law and traditions in country
Corruption:
Level of government corruption, likeliness of official receive
bribes
Risk of Expropriation:
Risk of forced nationalism
Repudiation of contracts by Government:
Risk of contract modification by Government
POLITICAL RISK IN REGIONS

20. Malaysia’s fourth largest bank
in term of assets.
WHY Allows Sime Darby to play a significant
role in Malaysia’s fast expanding financial
services sector.
RISK
UMBC has an extensive branch network
within Malaysia and overseas.
It also has a
merchant bank, a finance
company and a stockbroker.
UMBC ACQUISITION

21. Malaysia’s fourth largest bank
in term of assets.
WHY
RISK Unhealthy return on investment.
Lack of experience in service sector, especially
financial industry.
Lack of skilled employees.
UMBC ACQUISITION

22. THANK YOU FOR
YOUR
ATTENTION.
Question?