Charting Naza's Direction

Driven by the need to defend their father's legacy, the three brothers of the Naza Group (Datuk Wira SM Faisal SM Nasimuddin, SM Nasaruddin SM Nasimuddin and SM Faliq SM Nasimuddin) have forged a bond tighter than ever to steer the Naza Group into the next stage of growth and prosper since their father Tan Sri Nasimuddin started the group's automotive business with just RM30,000 in 1975. To assist bumiputera car traders then, the Malaysian government gave approved permits (AP - which allow for the importation of cars) to them. The government hopes that they would eventually graduate to become bigger businesses and partner foreign car manufacturers. Nasimuddin succeeded in applying and receiving his own APs to import used luxury cars. Following this achievement, his company then went on to invest heavily in showrooms and later built an automotive assembly plant. Thus, the late Nasimuddin is still remembered today as a visionary who created an automotive giant in Malaysia. Nasimuddin had about 100 active companies without a holding company when he passed away. The brothers' focus then was to instill professionalism into the Naza Group by putting a framework of corporate governance and professional CEOs with performance-based Key Performance Index (KPI) to achieve in place at the key business divisions of the group. This measure is to allow for a proper organisational structure, diligence and auditors. The brothers stressed on the need for them to drive strategy while leaving operations to management and the board of directors of the individual divisions within the group. In order to grow, each business within the Naza Group is now on a five-year roadmap in terms of the direction they are headed. The brothers also had to chart a new future for the Naza group to ensure the longevity of the business by streamlining only its potential businesses into Tier-1 or Tier-2. As they knew their core-competencies early on, some businesses like the group's hotel business were something the brothers decided to sell about four years ago. Naza Group has about 3,000 staff and staying efficient is one of its main priorities by keeping its number of employees low and improves productivity. Naza Group's automotive business remains the main focus of the group, which accounts for 60% of group revenue. However, at the end of 2016, its automotive division's revenue was RM2.66, down from the RM3.5 billion registered in 2015. This is also reflective of Malaysia's total vehicle sales which contracted for the second year in 2017 - 514,679 units (down 0.6% from 580,085 units in 2016). Vehicle sales have been forecasted by the Malaysian Automotive Association to grow 2.3% to 526,500 units in 2018. Originally set up in 1975 to import used Japanese cars, 1996 then saw Naza being appointed by South Korea's Kia Motors Corp as the franchise holder for the brand Kia in Malaysia. In 2001 Naza became the assembler for completely-knocked-down packs for Kia. By 2003 Naza Automotive Manufacturing Sdn Bhd (NAM) was established. NAM with a workforce close to 450 and an annual production capacity of 50,000 cars, has built 200,000 cars as of October 2017. Naza's success continued when it is ranked in the top-three among Kia distributors in ASEAN. Following another successful 10-year franchise collaboration since 2008 between Nasim Sdn Bhd (of the Naza Group) and France's Groupe PSA, Nasim has targeted a sale of 3,600 units of the Peugeot brand in 2018. Currently Nasim Sdn Bhd have 10% share of European brand car market in Malaysia, but it hopes to achieve an 18% share of this market within the next three years. The collaboration with Groupe PSA is further strengthened when a share sale and joint- venture agreements with Naza Corp Holdings Sdn Bhd was signed in early 2018 to acquire 56% stake in Naza's NAM assembly plant in Gurun, Kedah. It thus makes Malaysia as Groupe PSA's manufacturing hub for ASEAN with a forecast volume of 18,000 units in 2019 and 21,000 units by the year 2020. This is part of Groupe PSA's 'Push to Pass' strategic plan to achieve its vision to be a great global carmaker with cutting-edge efficiency and as the preferred mobility provider worldwide for lifetime customer relationship. Among the objective for Group PSA is to achieve 10% and 15% group revenue growth by 2018 and 2021 respectively. This could benefit Naza's plant as it would improve the utilisation rate and bring down cost. A good partner (via Naza) in a country that is growing economically, with a business-friendly government are the main reasons Groupe PSA choose to invest in Malaysia. This also would allow Groupe PSA to venture its business in all ASEAN markets that accounts for 600 million in population, a market that is forecast to grow beyond four billion cars. The deal also saw Naza group as the sole distributor of Peugeot, Citroen and DS Automobiles in domestic market and potentially ASEAN. In order to be a major conglomerate, Naza must also look at other businesses. Thus, in a matter of less than 10 years, the Naza brothers have established other core businesses. One core business is the group's large business interest in property development via Naza TTDI Sdn Bhd. In 2010 the group then set up Naza Engineering & Construction Sdn Bhd (Naza EC) initially to complement its property arm, Naza TTDI Sdn Bhd. Naza EC has all the necessary licenses, and offers complete construction solutions, specialising in civil engineering and infrastructure works. It has RM1.1 bil to RM1.2 bil worth of external work in its order book. Naza Communications Sdn Bhd was formed in 2014 to own and be a Network Facilities Provider and Network Service Provider to provide engineering designs and solutions to top telcos such as Maxis Bhd, Celcom Axiata Bhd, Digi Telecommunications Sdn Bhd and U-Mobile Sdn Bhd. Naza Group's other venture is into the food and agriculture business. Its Wood Vision Sdn Bhd has around 4,000ha of oil palm land and with over 20 years of experience in running, managing and maintaining oil palm plantations. The company will integrate its plantations with livestock such as cattle and goat breeding, as well as bird's nest farming. Source: Adapted from 'Charting Naza's Direction', The Star, Starbizweek, 7 October 2017; 'PSA Makes Naza Its ASEAN Hub', The Star, Starbizweek, 27 February 2018.

QUESTION 1: Describe four (4) strengths of the Naza Group. (8 marks)*

QUESTION 2 (a): Describe vision statement. (2 marks)

QUESTION 2 (b): Summarize the facts and information in the case into a vision statement for Naza Group. (7 marks)

QUESTION 3. Describe three (3) internal factors and three (3) external factors that contributed towards Naza Group's success. (18 marks)

QUESTION 4. Explain three (3) strategies implemented by the Naza Group. (15 marks)