Situation Analysis Curtin University (Miri)
Introduction - History of OSK Group
The history of the OSK Group of Companies is characterized by over 37 years of rapid growth and expansion. As one of the pioneers in the Malaysian stockbroking business, the group shares a proud heritage of contributing towards the development and growth of the country's financial services and stockbroking industry. In the process, the OSK group achieved a commanding position in the industry backed by impeccable track record.
The OSK Group first commenced its stockbroking operations in 1963 under the name of O.S.K. & Partners. Subsequently, the company became a private unlimited company in 1973, and converted to a private limited company in 1981. In 1990, OSK Holdings Berhad was incorporated under a restructuring exercise for the flotation of the OSK Group on the Main Board of The Kuala Lumpur Stock Exchange and was listed on 31st May 1991.
OSK's Mission Statement & Core Values
OSK's Mission Statement “Our aim is to be an outstanding and dynamic corporation offering efficient services and a wide spectrum of investment opportunities to keep ahead with the growing needs of the nation”. The company strength lies in its core corporate values which have stood the test of time, even in today's fast-paced, highly competitive and change driven business environment.
As in everything we do, we put the interests of our client's first. This means giving our best, because we believe that their success is our success. They can also, therefore,expect the detailed personal attention that addresses individual needs, which is what our clients has to expect us and deserve. These are the kind values that define the way OSK conducts its business, and on which its reputation has been established.
1.) Political-Legal factors
An unfavourable social political condition in a country has a negative effect not only on the economic growth but also on the development in the stock market. Both local and foreign investors alike will be concern on the political developments in a country like the Malaysia 2008 General Election. The ruling coalition party, Barisan Nasional has lost its two-thirds majority in the Parliament and the investors responded negatively to the election result which let to a heavy sell down in the stock market where the Kuala Lumpur Composite Index fell 130 points (KLCI falls 7.24% in early trade 2008). Additionally, government had removed the 30% ownership practice vis-à-vis with foreign invested company.
Depending on how investors view the new policies or regulations, the changes will be reflected in the stock market. For example, a contraction in money supply fuels lower interest rates and it reduces the attractiveness to invest in stock market, whereas an increase in the reserve would further support the expansion of KLCI. Back in 1997 Asian financial crisis, when Malaysia pegged its ringgit against the USD, the Malaysian stock market plummeted to as low as 262.70 points. Furthermore, another political-legal aspect that made the decline of Foreign Investment could potentially due to the newly implemented policy to combat Money Laundering & Terrorism Financing in year 2010.
2.) Economic Factors
An economic climate is a major factor in determining the primary trend of a stock market. Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and cost of money, which is reflected by the level of interest rate).
Government budget deficits or surpluses: The market usually reacts negatively to widening governmentbudget deficits, and positively to narrowing budget deficits. Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Inflation levels and trends: Typically a currency will lose value if there is a high level ofinflationin the country or if inflation levels are perceived to be rising.
3.) Social-cultural Factors
An article from The Edge Malaysia, reported that from a survey conducted by Nielson, 79% of Malaysian saving for a rainy day is their priority, while financial security in retirement is the second priority in mind (68%).  Additionally, Malaysian likes to invest in capital protection, provide retirement income and allow for monthly investing rather than one lump sum.  According to the above research, the general Malaysian do not like to take high risk in investing, thus affecting their decision to invest in the stock and shares market as compare to the west.
4.) Competitive Factors
It is not easy to enter as one need to go through various approval processes by the Ministry of Finance, Bank Negara Malaysia (Central Bank), Securities Commission and Bursa Malaysia to get the trading license. However there are Competitors Company such as Affin, Alliance, AmInvestment, CIMB, ECM Libra, Hong Leong, Hwang-DBS Investment Bank Bhd, KAF, Kenanga, Maybank, MIDF Amanah, MIMB, Bhd, Public and RHB. All these Investment Banks are well established and very competitive in the industry. Kenanga Investment Bank for instance, is the pioneer Sarawak based stock broking company has the most remisiers in Sarawak. They have good franchisee in equity business and have strong presence in key town in Sarawak.
1.) Resources and Capabilities:
In the wake of the financial crisis in 2008, OSK's management had rationalized the branch by implementing cost cutting measures, scaling down employment and redeploy staff. Currently, OSK Investment Bank (OSKIB) has total staff strength of 48 in Sarawak, comprising of 29 sales staff and 19 support staff. Out of the 48 staff, OSKIB Miri Branch has allocated 4 sales staff and one operation staff.
Generally, the knowledge and skill of the workforce are acceptable. However, there are still plenty room for improvement improve to progress further. The recent changes with new management staffs joining the company, the confident of staff towards the company and the new management has improved partly due to the greater emphasis on teamwork and provision of clear directions in terms of career progression and business expansion plans. Despite the downturn, OSK has continued to provide training and development to staff as part of the staff retention strategy and to enhance the capability of staff in providing better customer service to exceed the expectations of OSK clients.
The company has invested a lot resource into upgrading of the IT infrastructure to ensure reliability of the over-the-counter and online share trading facility so as to win the trust and confidence of the client. OSK has spent millions of ringgit on building a brand name for the company through advertisement on various media like newpapers, magazines, brochures and television. As for market research and analysis, OSK had contributed significantly as its research paper is often published in the newspaper and magazines. This attributed to the company's emphasis on hiring the best people for job and continuous support by way of providing the best facilities and funding.
In the stock market, stock price fluctuates widely and are in contrast to the stability of bank deposits or bonds. The high risk involve in stock investment could affect an individual investor and economy in large scale. To mitigate such investment risk, the company has provided access to real-time information such as market news update, research reports and market charting tools for technical analysis. The staffs are given special professional training on market and trend analysis to further improve on the quality of investment advice given to clients.
2.) Current Offerings
3.) Previous Performance
4.) Business Relationships
5.) Key Issues
When it comes to investing money the investors tend to have uncertainty when is the best timing to buy and to sell their stock and shares because much is based on little research or just speculative. Psychological factors can actually explain why different investors behave in different ways which affect their investment decisions. One of the most common investor behaviours is overconfidence in their judgment towards the market. They actually underestimate the risk of the investment. Their major pitfall are overconfidence towards the market; they tend to trade too much which will lead them to high transaction costs which may even exceed the returns that they gained.
The second behaviour is the investor tends to have biased self- attribution which means that they usually support the information that favour their beliefs and they will underestimate or not considering the information that are against them. The third behaviour is known as loss aversion. This behaviour often happens to the investors that dislikes the losses much more than the gains. For example, when a person loss $200, the loss that he experience will have a bigger impact on him compare with when he is gaining $200. The investor will usually hang on to the losing stock hoping the price of the stock will bounce back. They will sell the gaining stock rather than the losing stock.
Another behaviour that most investor might have is the belief perseverance. This actually means that the investor will just simply ignore the information that is against their existing belief. They will even avoiding themselves from finding any new information because they afraid that the new information is against their initial opinion. Once the investor has decided that they make the right choice, they will believe it, even though there is evidence proving that their choice is wrong.
Current Market Description
In 2010, we expect the domestic economy to be on an uptrend. However, due to the recently imposition policy in Malaysia, Service Tax of RM50 has been charged on Credit Cards. Thus, consumer spending may be curtailed and inherently contract the economy as a whole. Additionally, we found out that implementation of GST also dampen consumer spending especially on high-end products and not to mention - Investment. Moreover, the 5% Capital Gain Tax to be imposed will adversely affect the market sentiments and demand.
On top of that, while we are ready to gives support to large to small scale of Business Enterprises. They would rather utilizing internally generated funds first and are not keen to approach Investment Banks, if they do, it be on very competitive rates, i.e. Cost of Funds + 1%. Nevertheless, clients' assumption on saving such cost turns out to be their pitfall in further business expansion.
In another market research, we learned that Housing and Commercial projects in the State on the upward trend, but the concern is whether the market can absorb surged in supply in the next 12 to 18 months when it is completed. In conjunction, investing in stock market overseas is blooming and we expect this trend to continue over the next 12 to 18 months. For this reason, OSK is as well targeting the Importers and Exporters Organizations segments as we believe the Internet trading will have a potential growth within the next 24 months, as this Cross-Border Trading is getting popular.
In Malaysia, another major segment is focus on established SME. The trend is as a family gets bigger; a succession planning for them may run into issues or problems with division of assets and control of entity. Consequently, when no consensus can be obtains, it restricted more business trading and investment. Such issue has been brought into concern because of younger generations is taking over control and managing their family business. Lastly, we firmly believe the potential of Private and Unit Trust if promoted aggressively would be synergetic with IPOs over the next 24 to 36 months. Thus, to maintain our market competitiveness, we are frequently alert with the factors and needs of our clients' satisfaction and respond to it accordingly.
For Osk, the competition is stiff as competitors offer attractive remuneration package and benefits, especially when they pinch OSK elite sales staff with promising career paths. Furthermore, white collar work forces in Sarawak still have the perception of working for commercial banks have a better promising career in long term.
AmInvestment Bank is seen to be a strong competitor as they have a full team of Corporate Finance team in Sarawak that assist to work with Company right up to IPO. Beside that commercial banks are charging lower brokerage fees for online trades. Competitors such as CIMB is offering attractive commission scheme to the remisiers and incentives thus threaten OSK position to attract talents to their team.
Another competitors which is Bank Islam, has a strong rapport with the Sarawak Government and its agencies which focus on bonds and advisory work. OSK is lacking is seen lacking of focus in this segment which gave its competitors gaining roots in it. Unethical business approach by competitors for example like undercut has also possesses a major challenge to OSK business approach.
Channel and Logistics Review
The 6 targeted markets that currently have in OSK were Corporate Finance, Wealth Management, Treasury, Debt Capital Market, Equity & Futures and Cross Border Trade. For the first Corporate Finance market, we are aiming to Retail and High Net-Worth Segment. For this reason, our major distribution channel is aims towards IPOs, Independent Advisory, and Underwriting & Placements to affluent Sarawak high-end customers needs.
We can accommodate such shift by having our business focus via good business sector and segment. To achieve it, we secure and engage support from different Corporate Divisions within Principal Office in securing Mandates. In addition, reporting for any updates and training on changes to rules and regulations. Furthermore, 2 staff from branch's Corporate & Government Unit will be trained and equipped to be a “replica” of Principal Office. This approach rewards us to support business in a fast turnaround trends and to be more business focus.
Moreover, OSK is also seriously engage in our two major markets which are Wealth Management that comes with Private Trust & Unit Trust, Asset Management and Estate Planning. In Treasury, the focus has been put into Forex Remittance and Forex & Ringgit Deposits. Respectively, the dissemination channels for both are targeted to Public Listed Companies, SMEs and Family Owned with 2nd or 3rd generations taking over's business. OSK concern about the affinity with clients and we enhance the affinity via our array of products catering to all level of clients.
In our last 3 major markets namely, Debt Capital Bonds, Equity & Futures and Cross Border Trade. The key reason for engaging into this sector is there would be at least a promising 20% increase in Equity & Futures turnover, Brokerage and Bonds within the year of 2010. Hence, to attain the goal, the distributions of strategies are to ensure that our entire client, referrals from staffs and business partners are exhausted in term of selling in.
The logistics strategy is to capture major Corporate accounts by establish and enhance relationship via network with the clients. Constantly, ensuring support and work as One and by having close association with the Corporate & Government Unit. Re-packaging the products to provide greatest flexibility for clients and delivering what the clients needs. Our aim is by year 2010; this Unit shall be involved in all deals done in Sarawak.
Outlook for Future (end of year forecast)
Further look into the future of OSK. We are refining the every edge of our business offerings. We closely examine and addressing the lucrative prospect that may brings to clients and other business segments. The 4Ps that we operate will be future heightened in year 2010 as shown in a year end research of year 2009; Investment banking increased its contribution to 35% in 2009 and hoping to increase its contribution up to 38%. It is strongly shown that our strategy to change the business direction and composition is yielding positive results so far and we need to continue to further strengthen this position by properly uplifting the 4Ps and making encouraging progress in this respect.
Product - In OSK, we offer varieties of products, however, the untapped markets in Miri Town which we offered in the Trustees Services. This helps client protect and manage their wealth for the interest of their loved ones, both during their lifetime and upon their demise. Furthermore, in year 2010, OSK encourage and easing the trading by adopting the use of Online Trading for Futures.
Price - For the reason of fixed price that have with stocks and shares, we encourage clients to makes online trading. It will further lower the Brokerage charges to 0.3% from 0.7% via Over-the-Counter transactions. Additionally, a Futures Trading brokerage charge is on tier basics. Hence, the higher the volume traded, the lower the brokerage will be charged.
Promotion - The strategy is by having liaises with Local Print Media in order to promote “Brand” to the markets which we operate and at the same time, via articles contributions, news and press conference on OSK Group daily, weekly and monthly. We also conduct regular seminars or road shows to get existed and potential clients together to further increase our clients' volume. In addition, we promote social, charity, and sponsorships of scholarships to create another mileage in terms of “Brand and “Affinity”. Our ultimate aims are for creating Brand Affinity to every household in Malaysia - Sarawak.
Place - In conjunction to Brand Affinity, geographically, our outlets must be situated in a high traffic area with prominent display of our signage. We identify the business focus, segment and sector of the new location to the most conveniences for our clients. Besides that, we reposition ourselves as a “Bank” than to traditional “Securities” firm. Such placement could be further enlightened by having our staff to carry the brand proudly in order to create image among their circle of associates.
Identify Gaps (between current and forecast situations) SWOT analysis
Strengths & Weaknesses Analysis (Internal Capability)
1. One stop financial centre by providing multiple products offering
2. Potential cross - selling business opportunities from existing clients' base
3. Branch network and representation in Key Towns.
4. Flexibility in packaging of products and price to fits clients' needs.
1. Lack of focus in promoting products and services
2. High staff turnover
3. Succession plan is weak
4. Weak remuneration packages
Opportunities and Threats Analysis (External Capability)
1. Huge SME which are ignorant about Banks products and services
2. Untapped Trusts services for SME, Corporate and High Net-Worth individuals
3. Huge pool of funds requiring professional management
4. Agency business team that available in market
1. Undercutting of rates and charges by competitors
2. Full corporate finance and undercutting via price and political power connections.
3. “Training” ground for competitors to pinch our staff with attractive remuneration packages.
KLCI falls 7.24% in early trade. 2008. http://biz.thestar.com.my/news/
(accessed February 12, 2010)