Topic: Oman Bhd. (Oman) is listed on the Bursa Malaysia and is currently producing specialised steel rods for constructi

[answerhappygod]

Topic:
Oman Bhd. (Oman) is listed on the Bursa Malaysia and is currently
producing specialised steel
rods for construction of infrastructure. Currently the products are
mainly for domestic market
consumption. Due to the intense competition in the Malaysian
market, the company has come
out with two strategies, namely expansion strategy and
diversification strategy in order to sustain
and to maximise its shareholders’ wealth.
In line with the company’s expansion strategy, the company planned
to export about 35% of its
products to our neighboring countries such as Japan, Cambodia, and
Vietnam etc. This poses
higher business risks as the company has no prior trading
relationship with companies from the
above countries.
Additionally, in line with its diversification strategy, the Board
had approved a total allocation of
RM250 million subject to the necessary due diligence being carried
out, detailed as follows:
● The firm had decided to invest in an existing biscuit factory in
Australia for a total
consideration of A$100 million which represents about 60% of the
company’s existing
shareholding. The company had allocated about RM100 million and
would need to raise
the balance of the funds through either placement or borrowings in
either Malaysia
ringgit or Australia dollars.
● In line with the company’s global investment strategy, the
company has targeted
Thailand or Vietnam. The company will be investing RM150 million in
the form of
equity in foreign company, preferably construction sector.
1. Since some of the products are export to Japan, Cambodia and
Vietnam, what should be
of concern to the management in respect of pricing and its effect
on profitability, and the
risk the company face in respect of each country and the payment
methods for goods?