Hicom Downturn

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The downturn of heavy industries corporation of
Malaysia Berhad (HICOM) due to depleted demand,
poor planning, adverse economic factors, and
inexperienced or inept management..

CHAPTER 1

OVERVIEW OF THE PROBLEM
The depressed economic condition experienced in the
last financial year continued to prevail during the period
under review. Consequently, HICOM’s companies
involved in the manufacture of intermediate industrial
products such as steel billets and cement had been
severely affected, particularly due to the slowdown in the
construction industry. The passenger car market also
shrank considerably and as a result Perusahaan Otmobil
Nasional Sdn Bhd (PROTON) was unable to achieve its
planned volume of production. Similarly, the production
of motorcycle engines by HICOM’s three associated
companies drastically reduced due to poor demand.

In line with the objective of achieving vertical
integration in the motorcycle industry, a new
company named HICOM Diecasting Sdn Bhd was
formed during the year to manufacture die-cast
parts for motorcycle and automotive components.
Approval was also granted by the Government for
HICOM to implement the Engineering Complex
project which would provide modern facilities to
undertake forging, casting, and machining of
components and other industrial uses.

The adverse result of the Group was mainly due to
the losses suffered by its subsidiary companies,
Perwaja Trengganu Sdn Bhd (PTSB) and
(PROTON) and its associated company Kedah
Cement Sdn Bhd (KCSB).
On its incorporation on the 27th of November
1980 the activities of HICOM have grown
tremendously and as a result more efforts are now
required to consolidate the operations of its
subsidiaries and associated companies.

One significant change is the creation of a new Division
called the Operations Division which is responsible for
monitoring and coordinating the Group’s operations.

Two other new functional Divisions, namely the
Engineering and Research Division were also created to
fully reflect the scope of responsibilities of the company.
The reorganization was done without any increase in staff

Business analysts believe that HICOM’s dismal
financial performance had been brought about
by a combination of poor planning, adverse
economic factors, and inexperienced or inept
management.

STATEMENT OF THE PROBLEM
What are those matters to be consider to recover
the downturn of HICOM?

ASSUMPTION OF THE STUDY
We assume that the following matters are to be consider in rectifying the current status of HICOM:
– The implemented organizational structure, and
– The demand of cars, and motorcycle and automotive components.

The aforementioned matters are the fundamental foundations that should be mended because these would serve as the tools to be used in attaining the organization’s objectives. Especially that the main reason of its downturn was due to their suffering from losses, the demand would play as a big role in this study and of course an effective and functional organizational structure.

SIGNIFICANCE OF THE STUDY
In pursuing this study we intend to produce
adequate means to generate effectual planning
involving proper shake-up of organizational
structure and meeting the actual demands to
come up to an equilibrium and reduce
incurrence of losses.

SCOPE AND LIMITATION
The study limits only in those matters
mentioned in the assumptions of the study, the
implemented organizational structure and the
depletion of demand, which are believed as the
main reasons of the worsening of the
operational activities, effectiveness of significant
functions and the generation of revenues.

• The organizational structure
Determines the flow of authorities. An
organization has an effective organizational
structure if its objectives and aims are being met.
Organizational structure determines how
the roles, power and responsibilities are assigned,
controlled,...
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