External Environment

IJM Corporation Berhad (IJM), as it struggled to find a way to sustain in the industry has chose
to venture and focus abroad specifically India and Middle East. India has a very large population.
With this demographic factor India currently lacks the infrastructure which leads the
government to introduced private investment. Construction industry plays an important role in
the development process where industrialization leads to the need for housing, infrastructure and
other basic amenities. The sociocultural factor is important, where the policy conducted by IJM
in which they employed Indian workers to work on mega Malaysian projects is indeed an
effective way to better understand the Indian culture. Construction of infrastructure always a
custom made product. In Malaysia, construction of houses also always comes out with new
elegant design and trendy. The process is much more difficult than manufacturing any product
where there is repetition.
The construction boom experienced had caused the price escalation and the tight supply
of materials which leads to large increase in the building costs and may change the actual amount
agreed beforehand. It is common in the industry for a project to take years to complete and
inflation rates are in excess. In Malaysia, when government announced new economic plan or
budget for next year, IJM will be the one involve in construction activity from small house to the
mega infrastructure. These are economic factors that will directly affect IJM.
Other challenges ranging from political changes and war conflicts are unavoidable and
beyond the control of the contractor. The effect of this on the construction business will results in
delay and the cost definitely will increase. Some of the global event such Asia Games and
Olympic Games normally will be equipped with the infrastructures. IJM will be affected by
those events whether as host company or joint venture constructions.
Due to technological advancement, IJM innovates constantly innovates and improves on
the quality of its products and services in order to remain relevant to evolving technology and
consumer preferences. IJM come out with the product which environmentally friendly. IJM also
invest in high technology equipment base in order to compete with other players.
Although IJM has conducted with market research in their construction areas, the physical
factor such flood and tsunamis are still unpredictable. Flood in India has caused massive losses
of life and property.
Industry Analysis

The degree of rivalry influences the level of profitability. Factors influencing rivalry are
industry growth rate, concentration and balance of competitors, degree of differentiation and
switching costs. Parts of the construction industry, especially at the lower end of the
technological scale, do have large numbers of similarly-sized competitors with undifferentiated
products and services and fixed costs tend to be somewhat low. Being a well known company,
with the high capacity of machinery and advance technology, IJM’s product always differentiate
from its competitor. Therefore, the degree of rivalry among existing competitors is low.
In the construction industry, where the level of technological innovation required is low,
new entrants pose a continuous and considerable threat to existing firms. On the other hand,
where technological innovation is high there is no real threat of new entrants. IJM has put large
investment computing and engineering technology providing a barrier to new entrants in the
larger project and high-technology end of the construction sector. In general, the threat of
substitutes is low as construction product is unique and custom made. It is not a prototype
product which can be easily imitated.
Buyers and suppliers influence profitability positively or negatively due to their influence
on prices and quality of output. In this context, the buyers refer to clients and suppliers refer to
contractors. Buyers in the construction industry are quite powerful because the cost of
construction products is usually significant. Most of the mega projects buyer is government.
Therefore they normally want the lower price but good quality. In this case, buyer will determine
the price and IJM need to compete for the lower price. On the other hand, for supplier the
bargaining power is low as IJM has built a good relationship with their supplier or contractor.
The networking is very strong and the activity is more to win-win situation.
In conclusion, being a well established company in constructions for many decades has
enabled IJM to build a strong barrier from new competitors and by maintaining the relationship
and networking that they have now will determine the sustainable of this company in the future.

Internal Analysis

Strength: IJM has become one of the largest and most diversified construction groups in
Malaysia. It took more than 40 years to attain a competitive level of competence related
diversification. It has gained worldwide presence and made a name for itself both locally and
internationally in the fields of construction, property development, manufacturing and more. IJM
supported by their own manufacturing piles company which is the base item in construction. IJM
also is one of the pioneers in producing green technology pile. The timely payment to sub-
contractors and suppliers has built a strong relationship and brand name. With strong networking
with stakeholders (supplier, contractors, banks and customer) enabled them to sustain in this
industry. In addition, IJM is not owner-driven company but management and board-driven. The
top level of management came from various backgrounds and these expertises determine the next
direction of IJM. IJM also practice professionalism and good corporate governance to set
standards for quality. The top level of management came from various backgrounds and these
expertises determine the next direction of IJM. Good corporate governance that has been
practiced also is one of the strength in IJM. While to interact with public, IJM actively involved
in Corporate Social Responsibilities (CSR) for example donations and scholarship programs.
Weaknesses: Even though they made quite a reputation in Malaysia, IJM has failed to acquire
local projects and that is why IJM is looking for markets outside home. In terms of sources, IJM
is too dependent on the subsidiaries which manufacturing piles. If anything bad happened to this
company, it will lead to failure to IJM.
Opportunities: IJM maintains a highly optimistic outlook. They are going to expand in China
and Southeast countries such Vietnam and Philippines. This growing and emerging market will
guarantee IJM a wide empire. During global events like Asia Games or Asean Games, IJM must
take opportunities to involve in constructions of new infrastructures for games preparation. In
terms of technology, IJM can build a unique name in green technology by producing the
environmentally friendly building and infrastructure.
Threat: Construction industry is a complex environment, unpredictable and full of uncertainties
and fragile. The harsh environment like flood in India is the greatest threat to IJM. Other
challenges ranging from political changes and war conflicts are unavoidable and beyond the
control of the contractor. The ups and downs in economy due to inflations or recession will result
to doom in constructions and this will take years to recover.