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Saturday, June 6, 2009

Going back to basics a better option

Although the rapid pace of expansion and the sheer size of companies have been idolised by many western economies, the latest global financial debacle that brought down many industry giants in the financial, automobile and manufacturing sectors, shows that being big does not necessarily mean greater efficiency and profitability.

On the contrary, many of the companies that are still staying afloat and have strong financial standing are the ones that have not gone on an overzealous expansion spree to flex their muscles around the various continents.

Instead of diversifying into various business sectors to prove their mettle, these companies have remained steadfast in what they do best and stayed focused on their areas of competencies.

By keeping to what they know best and not being caught up by the “borrowing and expanding game” that decapacitated most of the felled giants, it goes to show that companies should not expand just for the sake of expanding, or in the name of globalisation.

It looks like globalisation will have to take a back seat for a while as many of these “once huge” companies and conglomerates are still struggling for their survival.

The latest shake-up of the global economic and financial systems should be taken as a lesson for Malaysian corporations to avoid the temptation of growing too big, too fast – the path travelled by their western brethrens and one of the major contributors to the current financial quagmire.

Luckily for Malaysia, many of its companies, including property developers, have not gone overboard to expand into unknown territories overseas. Those who have done so have limited their exposure to markets that they are familiar with and only after due market intelligence studies are conducted.

Of course, there are some companies that have been “caught” after paying premium prices to take over some local companies for their offshore expansion. There have also been instances of property companies which went on a huge expansion binge by leveraging on bank borrowings to acquire huge landbanks and got caught when they bet on the wrong growth corridors.

These companies are still paying heavily for their mistakes after investors deserted their stocks.

Turning the table on these quick-fix expansion model and going back to the organic growth model that values prudence, manageability and efficiency looks like a better option these days.

Nurturing a company by focusing on its core competitive advantages and growing organically by harnessing its human resource expertise will be much healthier than blindly expanding into new areas without the right market knowledge.

Good property companies should be trendsetters in terms of product quality, innovative designs, pricing and service excellence.

Having a strong brand name and proven business model will certainly add value to a property company and raise its attractiveness in the eyes of buyers and investors, if the company is listed.

Property buyers are increasingly savvy these days and are more careful of which developers they buy from to ensure good quality products and timely delivery of their property.

Developers that are reputable and well regarded for their product quality and timely delivery usually have a strong following of loyal buyers.

Moreover, projects that are offered by these developers usually command a higher price premium over projects by other developers.

Although much effort and hard work are needed to build a strong reputation, all will be worthwhile at the end of the day when these efforts are translated into loyal buyers and good product take-up rate.

Those who have made it will be the ones to survive any bad glitches thrown their way, like the latest one that is brought about by the global financial meltdown.

Athough the market is likely to remain lacklustre over the next few months before it bottoms out later this year, industry players should harness their skills and competitiveness to prepare for the market upturn.

● Deputy news editor Angie Ng believes much can still be done by property players to lift the industry standards further and for them to vie for a bigger share of the global real estate market.

By The Star (by Angie Ng)


Anonymous said...

...please where can I buy a unicorn?

Anonymous said...

...please where can I buy a unicorn?