Genting Berhad: The Story of a Malaysian Conglomerate

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Case Details:

Case Code : BSTR108
Case Length : 22 Pages
Period : 1964 – 2004
Organization : Genting Berhad
Pub Date : 2004
Teaching Note :Not Available
Countries : Malaysia
Industry : Diversified

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Genting's Diversification Strategy

Though Genting was well established in its traditional leisure and hospitality businesses, it had adopted the diversification approach towards growth since the 1970s. This was done to reduce its dependence on the leisure and hospitality businesses as an income source. The company established operations in areas like plantations, power generation, paper manufacturing, oil and gas exploration, property development and IT and e-commerce.

PLANTATIONS

In September 1977, Genting established Asiatic Development Sdn Bhd (Asiatic), a private limited company to spearhead its plantation business. In February 1980, Asiatic was made a wholly owned subsidiary of Genting. To grow in the plantations business, the subsidiary adopted the route of acquiring similar businesses. In 1980, Asiatic acquired Rubber Trust Group, a group of three Hong Kong based rubber companies owning around 13,700 hectares of plantation land in peninsular Malaysia. In 1982, Asiatic was listed on the Kuala Lumpur Stock Exchange. In 1983, Asiatic acquired 676 hectares of oil palm plantations and oil mills. These acquisitions proved to be of great value in the years to come, considering the development potential of the land and its capital appreciation...

Expanding into the Pleasure Cruising Business

Genting expanded its leisure and hospitality businesses into cruise line operations by establishing Star Cruises Limited (Star Cruises) in 1993. Launched through RWB, Star Cruises was listed in the Singapore Stock Exchange in April 1998 and in the Stock Exchange of Hong Kong in November 2000.

Launching a cruise company in the Asian market was considered an audacious idea by many analysts. This was because at that time, the concept of pleasure cruising was not very popular in the region. Though occasionally foreign vessels cruised the region for small durations in winter, they carried passengers mostly from Europe, America and Britain. Initially, the company operated a couple of small European car ferries (Star Aquarius and Star Pisces) running short cruises, catering mainly to the Chinese markets. Industry observers felt that Star Cruise helped build the cruising industry in Asia. Since gambling was a popular recreation activity in Asia, Star Cruise took this as a starting point and promoted the idea of overnight gambling cruises in the early 1990s...

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Tackling the SARS Threat & Beyond

In 2003, Genting fared well in all of the business segments it operated in, except its leisure and hospitality business. This was attributed to the SARS epidemic and the global economic slowdown. Though Malaysia was affected relatively mildly by the outbreak of the illness, with two deaths among five (all of whom were infected overseas), tourists were unwilling to travel to this region because of the fear of contracting the disease. Genting's decline in the FEER rankings in 2003 was seen as a direct fallout of the fear of SARS...

Exhibits

Exhibit I: Genting Berhad - Corporate Structure
Exhibit II: Genting Berhad - Ten-Year Financial Highlights (1993 - 2002)
Exhibit III: Awards and Recognition Received by Genting (1996-2004)
Exhibit IV: A note on Malaysia's Tourism Industry
Exhibit V: Asiatic Plantations and Property
Exhibit VI: Star Cruise - Fleet in Operation

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