Adaro's Company Analysis [PDF]

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CHAPTER 1 1.1 Background Coal as an important mineral for humans. Coal has become one of the basic fossil energy sources that are exhausted and cannot be renewed. One of the main functions of coal for human life is as a producer of electricity, and for this one function, almost half of the world's electricity uses coal fuel. In Indonesia, aside from oil and gas, coal is currently an important commodity in the mining world. Two of the five large islands in Indonesia, namely Sumatra and Kalimantan, are regions that are rich in coal content, the amount of which is one of the largest in the world. In addition to domestic consumption, Indonesia also sells its coal abroad. At present, Indonesia is the largest coal exporter in the world, with market coverage from Asia, the Middle East, Europe, Australia, and America. The characteristics of Indonesian coal are bituminous - sub-bituminous. This quality is very suitable for Steam Power Plant fuel. Therefore a lot of interest in other countries. Indonesia also has another advantage, namely its position as an island nation. Coal shipping and shipping activities are becoming younger and more efficient. On the IDX there are 17 listed coal mining companies, and one of them is PT Adaro Energi Tbk. PT Adaro is the second largest coal mining company in Indonesia, coal products produced by the company have lower sulfur and ash content and have branding envirocoal (Wicaksono, R. A, 2011). PT Adaro Indonesia ("Adaro") was established in 1982, is one of the first generation Coal Mining Business Cooperation Agreement ("PKP2B") contractors. Based on PKP2B No.J2 / Ji.DU / 52/82 dated November 16, 1982, Adaro conducted coal exploration and mining activities in Balangan Regency and Tabalong Regency, South Kalimantan Province. The Adaro Production Phase began in 1991, while commercial production began in 1992. Adaro's coal products have very low ash and sulfur content so that the combustion process practically does not lead to environmental pollution. With its environmentally friendly specifications, Adaro's coal products are marketed under the trademark Envirocoal. Various policies implemented in many countries in the world, especially in Europe related to the use of environmentally friendly fuels have increased the potential for acceptance and market demand for environmentally friendly coal, and have given a unique position for Envirocoal products in the



global market. The coal production of PT ADARO INDONESIA better known as Envirocoal is currently marketed in more than 17 countries around the world including India, Japan, China, Britain, Spain, and America as an energy source for Steam Power Plants (PLTU). Adaro is currently implementing a surface open-cut mining system at the Tutupan, Paringin, and Wara mining sites. Because Adaro's coal is naturally clean, the washing process is no longer needed, except the crushing process carried out at Kelani's, on the banks of the Barito River, which is located approximately 80 km from the Tutupan mine site. The overburden removal and coal transportation from the mine to the crushing location of PT ADARO INDONESIA is carried out by five main contractors, namely PT PAMAPERSADA NUSANTARA, PT BUKIT MAKMUR MANDIRI UTAMA, PT RAHMAN ABDI JAYA, PT SAPTAINDRA SEJATI, and PT RANTE MUTIARA INSANI. In August 2013 the human resources involved in PT ADARO INDONESIA's operational activities are planned to reach 20,036 people, consisting of 1,011 permanent workers, 15 foreign workers, and 19,010 workers from contractors and subcontractors. As a form of empowerment for the surrounding community, Adaro along with its contractors and subcontractors currently accommodate up to 70% of the local workforce, while the remaining 30% comes from outside the Kalimantan region.



CHAPTER II THEORETICAL BASIS 2.1 Strategy Concept 2.1.1 Strategy Strategy comes from the Greek strategy, which means leadership in the army. According to Freddy (1997), the strategy is a means to an end. Strategic concepts are concepts that need to be understood and applied in all kinds of business fields. Its activities include careful observation of competition, regulation, business cycles, consumer desires, and expectations as well as other factors that can identify opportunities and threats. According to Marrus (2002: 31) strategy is defined as a process of determining the plans of top leaders who focus on the long-term goals of the organization, accompanied by the preparation of a way or effort on how to achieve these goals. Quinn (1999: 10) defines strategy as a form or plan that integrates the main objectives, policies, and series of actions in an organization into a unified whole. A well-formulated strategy will help to compile and allocate company resources into a unique and sustainable form. From the two opinions above, the strategy can be interpreted as a process of determining a plan that integrates the main objectives in an organization into a unified whole. Goldsworthy and Ashley (1996: 98) propose seven basic rules in formulating a strategy as follows: a) It must explain and interpret the future, not just the present. b) Strategic direction must be able to determine the plan and not vice versa. c) A strategy must focus on competitive advantage, not solely on financial considerations. d) It must be applied from the top-down, not from the bottom up. e) The strategy must have an external orientation. f) Flexibility is very essential. g) The strategy must be centered on long-term results. To ensure that the strategy can work well by convincing not only to be trusted by others but indeed it can be implemented, Hatten and Hatten (1996: 108-109) provide some guidelines as follows:



a) Strategies must be consistent with the environment Strategies are made to go with the flow of community development, in an environment that provides opportunities to move forward. b) Every organization does not only make one strategy Depending on the scope of its activities. If many strategies are made, then one strategy must be consistent with other strategies. Don't contradict or contradict each other, all strategies are always harmonized with one another. c) Effective strategies should be the focus and unite all resources and not disintegrate with each other. Unfair competition between various work units in an organization often claims its resources, leaving it separate from other work units so that the unified forces harm the organization's position. d) The strategy should focus on what are its strengths and not at points that are precisely its weaknesses. Besides, it should also take advantage of competitors' weaknesses and make appropriate steps to occupy a stronger competitive position. e) Resources are critical. Considering that strategy is possible, something that is indeed feasible should be made. f) Strategies should take into account the risks that are not too large. Indeed, each strategy carries risks, but it must be careful, so it does not plunge the organization into a bigger hole. Therefore the strategy should always be controlled. g) The strategy should be developed based on the success that has been achieved. h) Signs of the success of the strategy are shown by the support of relevant parties from the executives, from all unit leaders in the organization.



From the various opinions above, it can be concluded that the preparation of the strategy must pay attention to the goals and objectives to be achieved in the future, in addition to that an organization must always interact with the environment where the strategy will be implemented so that the strategy is not in conflict but line with the environment of the condition and see the internal and external capabilities that include strengths and weaknesses of the organization 2.1.2 Strategy Management According to David (2011: 5), strategic management can be defined as art and knowledge in formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its goals. Strategic management focuses on integrating management, marketing, finance or accounting, production or operations, research and development, and computer information systems to achieve organizational success. According to Aime Heene and Sebastian (2010: 9-10), strategy management is a unified management process in an organization that repeatedly creates value and the ability to deliver and expand its distribution to stakeholders or other interested parties. There are 5 tasks in strategy management: 1. Develop a vision and mission 2. Set goals and objectives 3. Create a strategy to achieve the target 4. Implement and implement strategy 5. Evaluate the strategy and direction According to Indriyanty (2013: 3), strategic management is a fundamental part of corporate strategy is a decision regarding the business arena that companies will enter or leave. The corporate strategy aims to synergize relationships across business units. According to David (2011: 6), the strategy management process consists of three stages: strategy formulation, strategy implementation, and strategy evaluation. Based on the theories that have been explained by the experts above, conclusions can be drawn regarding the concept of strategic management is the strategic management of art and knowledge in formulating, implementing, and evaluating in the unity of the management process in an organization that is



fundamental to corporate strategy consisting of three stages are strategy formulation, strategy implementation, and strategy evaluation. 2.1.3 Strategic Management Objectives The main objective in strategic management is to integrate the company's internal variables to provide unique competencies, which enable the company to achieve a competitive advantage continuously so that it generates profits (Wheelen and Hunger, 2001: 1112). According to Suwandiyanto, in his book entitled "Strategy Management and Corporate Policy" in business, strategy management has several main objectives, including: 1. Safeguard the interests of various parties In the implementation of strategy management, the role of managers is very important. The manager in formulating a strategy that is by meeting the needs of each party including suppliers, employees, banks, shareholders, and the community. Some of these components are very instrumental in the success of a policy that has been designed. 2. Give direction in achieving goals The purpose of strategic management, in this case, is that a strategy manager must be able to show all parties about the direction and objectives of the company. These clear company goals and directions can be used as the basis for successcontrol and evaluation. 3. Anticipate changes Strategic management allows executives to anticipate various changes that exist, and prepare guidelines for its control to broaden their frame of mind perspective. 4. Related to effectiveness and efficiency The responsibility of a manager in a company must not only concentrate on the ability of the interests of efficiency, but he must also have more attention to resources to work hard by doing work effectively and better.



Based on the theories that have been explained by the experts above, it can be concluded that the Strategic Management Objectives are giving competency to achieve a competitive advantage in business continuously so that it produces profits. 2.1.4 Benefits of Strategy Management By using strategic management as an organizational framework for achieving and achieving goals, it encourages every manager to be able to think more creatively and strategically. According to Greenley, strategic management provides the following benefits: 1. It allows for the identification, prioritization, and exploitation of opportunities. 2. Provide an objective view of management problems. 3. Present a framework for better control and coordination activities. 4. Minimize the effects of adverse conditions and changes. 5. It allows that big decisions can better support the goals set. 6. It allows for a more effective allocation of time and resources for identified opportunities. 7. Allow for the allocation of resources and less time to correct wrong or unplanned decisions 8. Create a framework for internal communication between staff. 9. Help integrate individual behavior into joint ventures. 10. It provides a basis for clarifying individual responsibilities. 11. Encourage thinking into the future. 12. Provide a cooperative, integrated and enthusiastic approach to dealing with problems and opportunities. 13. Encourage the creation of a positive attitude about change. 14. It provides a level of discipline and formality to the management of a business. 2.1.5 Grand Strategy A grand strategy is a general plan in the form of major actions that companies use to achieve long-term goals. Strategic planners believe that the general philosophy that describes the business or business enterprise is reflected in the mission that must be translated into statements in the business strategy set.



Pearch II and Robinson (2007) say that strategic planning that long-term strategy is derived from the company's efforts to find a basis for competitive advantage from generic strategies, namely: 1. Pursuing to achieve low cost (overall Cost Leadership) in the industry. To control costs in overall cost leadership, cost efficiencies can be obtained from having 12 experienced employees, controlling overhead costs, minimizing research and development costs, service, salesforce, advertising and so on. 2. Pursuing to create unique products for customers who are varied or differentiated. Differentiation can be done through the dimensions of the design image or brand, the technology used, special characteristics, service to customers and have a better distribution. The advantage of using differentiation in addition to above-average profit is consumers' sensitivity to low prices, differentiation products create high entry barriers and the position of substitute products is also high. 3. Pursuing to serve special requests to one or several consumer or industry groups. Focusing (focusing) on costs or differentiation. The three business strategies above are also called generic strategies developed by Porter (1980) which are used to deal with 5 (five) forces that influence the industry (Suci, 2009) Chandler (1962, p.13) defines a grand strategy as "... the determination of the basic long-term goals and objectives of the company and the use of a series of actions and allocation of resources needed to realize those goals". Glueck (1980) says that business strategies are integrated schemes that are coordinated and extensively designed for companies to implement their future goals. Based on the theories that have been explained by the experts above, it can be concluded that the Grand Strategy is a general long-term strategy plan in the form of major actions from the company that is coordinated and extensively designed to implement the company's future goals. 2.1.6 Global Strategy Levitt (1983) argues firmly that advances in communication technology and transportation and increased travel around the world have been homogenized by the world market. Thus, multinational companies that treat individual country



markets separately tend to disappear and are replaced by global companies that sell standard products in the same way everywhere in the world. Porter (1986) recognizes the interdependence among various country markets and argues that global strategy has two basic dimensions: the configuration of value-added activities and the coordination of activities in the market. He argues that the strategic importance in global markets is to concentrate on value-added activities to exploit the differences in factor costs and extend competitive advantage by interdependent coordination between markets. 2.2 Strategy Levels According to Wheelen and David (2008: 15), There are several levels in strategy for large companies, there are three levels of management strategies that develop following the development of the company's business, namely: 2.2.1. Corporate Level Strategy Corporate Level Strategy is a strategy that reflects the entire direction of the company, intending to create growth for the company as a whole and management of a variety of product line businesses. There are 3 kinds of strategies that can be used at this corporate-level strategy, namely the growth strategy the company is going through. The stability strategy (Stability Strategy) is a strategy in dealing with the income slump that is being faced by a company. And a retrenchment strategy is a strategy implemented to minimize or reduce the efforts of the company. 1) Growth Strategy In the category of growth/expansion strategy (growth/expansion strategy) is run by the company to pursue corporate growth, which can be in the form of increased sales, profits, business expansion, and others that will have an impact on company development/growth. 2) Integration Strategy (Integration Strategy) Integration strategy means uniting several businesses ranges from upstream, supplier networks to downstream, distributor networks and horizontally towards competitors. 3) Diversification Strategy (Diversification Strategy) is a type of strategy that is less popular because of the difficulty of managing different business activities.



2.2.2 Business strategy Business strategy is a strategy that occurs at the product or business unit level and is a strategy that is determined in the competitive position of the product or service in a particular industry or certain market segments. Three types of strategies can be used at this business-level strategy, namely " Cost Excellence Strategy, Differentiation Strategy and Focus Strategy". The Focus Strategy itself consists of a cost focus and a differentiation focus. At the business level, the strategic strategy department. Strategies at this level are formulated and established by managers who are tasked with responsible by top management to manage supported businesses. The company's business strategy is a pattern of decisions within a company that determines and expresses the goals, intentions, and objectives that produce policy plans to achieve goals. 2.2.3 Functional Strategy Functional Strategy is a strategy that occurs at the functional level such as, operational, marketing, financial, human resources. Research and development where this strategy will increase the functional area of the company so that it gets a competitive advantage. This strategy must refer to the business strategy and corporate strategy. focus on activities to maximize the productivity of the resources used in providing the best value for meeting customer needs.



2.3 Strategy Management Process According to Ismail (2012: 70), the strategy management process is a process that produces various strategic decisions and actions that will support the achievement of company goals. When conducting strategic management activities, company managers will process the input obtained through an evaluation of the company's mission, goals and strategies at this time and an analysis of the internal environment (through this analysis, the company can



identify several opportunities and threats). Through processing these inputs, the company will be able to formulate the company's mission and vision. According to Kuncoro, (2006: 13), the strategy management process is a process that includes several interrelated and sequential stages. The main stages in the strategic management process generally include environmental analysis, strategy formulation, strategy implementation, and strategy evaluation. According to Hill (2010: 12), the strategic management planning process consists of 5 steps : • Select the company's mission and goals Selecting the company's main mission and the company's main objective. • Analyze the external competitive environment of the organization to identify opportunities and threats. • Analyze the organization's internal operating environment to identify the strengths and weaknesses of the organization. • choose strategies that build organizational strengths and improve weaknesses to take advantage of external opportunities and fight external threats. This strategy must be consistent with the mission and main goals of the organization. They must be congruent and are a viable business model. • Implement strategies. From some of the theories of the strategy management process above it can be concluded that the strategic management process is a process that produces several interrelated and sequential stages which include environmental analysis, strategy formulation, strategy implementation, and evaluation of strategies and strategic actions that will support the achievement of company goals. 2.3.1. Establish the direction and mission of the organization Business is based on the thought of the belief that an organization reflects the basic ideas of an organization's vision or mission. Vision and mission itself is a statement made by the company internally to indirectly describe what becomes the goals, objectives and work plans of the company. Vision and mission statements have a positive role in the management of a company's strategy. A clear vision and mission statement will guide managers in formulating, planning and executing what strategies will be used so that what is the initial goal together can be achieved. vision is the foresight of an individual or organization, related to the goals to be achieved, and what needs to be done to realize that



vision in the future. the mission is everything (strategy, action) that must be done to realize the vision. According to Wibisono, the notion of vision is a series of sentences that state the ideals or dreams of an organization to be achieved in the future. While the definition of mission is the determination of the goals or objectives of the company in the short term (1-3 years). According to Arry Akhmad Arman, the notion of vision is a statement that defines something that an individual or an organization wants to achieve in the future, while the notion of the mission is statements that explain what is being and will be done or which is to be achieved shortly. So it can be concluded that when a company or organization sets a direction and mission of the organization, they must have a vision and mission that is the basis of the company or organization that they build and run. Following the explanations of vision and mission theory by these experts, it can be concluded that vision is a series of sentences of the ideals of an organization or company that the company or organization wants to achieve in the future. While the mission is setting goals to be done or to be achieved shortly. 2.3.2. Understand the internal and external environment According to Herry Achmad Buchory and Djaslim Saladin (2010: 46) suggested that the Environment (environment) is one factor that is taken into account in the management of business activities. The environment is very influential in business strategy planning. According to Suryana (2006: 106) stated that the business environment can be a driver or inhibitor of the company's running. Environments that can affect the course of business/company are internal and external. According to Wispandono (2010: 155), the internal environment is the organizational environment within an organization. According to Herry Achmad Buchory and Djaslim Saladin (2010: 49) suggested that the internal environment is "actors who are directly related to the environment, which affect the company". Based on the opinion of some experts above, it can be concluded that the internal environment is an environment within a company whose elements in it affect the company both directly and indirectly.



According to Viljoen in Moeljadi (1998: 28) argues that the external environment is often referred to as external opportunities and threats, including political, social, technological, economic, geographic, customers, suppliers, competitors, creditors, and labor. According to Pearce and Robinson; Hunger and Whelen in the research I Gusti Putu Darya (2011: 66) states that the external environment of a company presents many challenges faced by a company to attract or obtain the necessary resources and to market goods and services profitably. From some of the opinions above, it can be concluded that what is meant by the external environment is an environment outside the company that can directly or indirectly have an impact on company activities/business and can create opportunities or threats for the company. 2.3.3. Formulate a strategy The formulation of strategy is one of how a company determines the strategy that will be used to achieve the stated goals. According to David (2009: 324), important strategy formulation techniques can be integrated into a three-stage decision-making framework: 1. Phase 1 in the strategy formulation framework consists of an External Factor Evaluation (EFE), Internal Factor Evaluation (IFE), and a Competitive Profile Matrix (CPM). This stage is called the Input Phase. This stage summarizes the basic information needed to formulate a strategy. 2. Phase 2, called the Matching Phase, focuses on creating viable alternative strategies by taking into account the main external and internal factors. Phase 2 techniques include Strength-Weakness-Weakness-OpportunitiesThreats-SWOT Matrix, Strategic Position and Action Evaluation-SPACE Matrix, Boston Consulting Group (BCG) Matrix, Internal-External Matrix (Internal-External-IE), and the Grand Strategy Matrix. 3. Phase 3, called the Decision Stage, involves only one technique, the Quantitative Strategic Planning Matrix (QSPM). QSPM uses input information from Phase 1 to objectively evaluate alternative strategies identified in stage 2. QSPM shows the relative attractiveness of various alternative strategies and thus provides an objective basis for the selection of alternative strategies.



2.3.4. Implement the strategy A strategy that is formulated, must be developed logically in the form of action. This is what is called strategy implementation. Strategy implementation is the process by which management embodies its strategies and policies in action through the development of programs, budgets, and procedures. Implementation of the strategies needed to be detailed and precise must be taken to be realized. 2.3.5. Evaluate and oversee strategies Evaluation and control is the process of company activities that evaluate a company's performance and control the course of the activities of a company so that it runs smoothly and as expected. Strategic control is control that follows the strategy being implemented, detects problems or changes that occur in the rationale, and makes adjustments as needed. Strategy control focuses on monitoring and evaluating the strategic management process to improve and ensure that the system is functioning as it should. Control of this strategy will be very useful and will be an input for the company's next strategy management process.



2.4 Corporate Strategy The corporate strategy builds the overall direction and goals expected by a company. The company's strategy is used to control the company on certain goals, but other corporate strategies are used to ensure the direction of the goals received,and ensure to be able to understand and manage if significant developments occur. (Kuncoro, 2005) 2.4.1 Portfolio Strategy A portfolio is a collection of investment instruments that are formed to meet a general investment goal. The portfolio has the concept of investing in more than one investment instrument. the purpose of creating an investment portfolio is to diversify risk so that the funds owned have minimum risk. Markowitz's portfolio theory (1952) through an article in the Journal of Finance and continued with his book in 1959 gives the idea that investors will always choose a high rate of return with low risk. 2.4.2. Matrix BCG (Boston Consulting Group) BCG Matrix is a business analysis tool used to assist companies in considering growth opportunities with long-term strategic planning and reviewing the company's product portfolio to decide to invest, develop or stop their products. The BCG matrix was developed by Bruce Henderson in the 1970s. Bruce Henderson is also the founder of Boston Consulting Group (BCG), a leading global management consulting firm that was ranked the third best company to work on the Forbes version in 2014. The BCG matrix is also closely related to the product life cycle (product life cycle) so often referred to as the Product Portfolio Matrix. Other names for the BCG Matrix include the BCG GrowthShare Matrix, the Boston Box and the Portfolio Diagram (Portfolio Diagram). 2.4.3. Business growth rate According to the Director of the Management Program at Bina Nusantara Business School, Tubagus Hanafi Soeriaatmadja, there are three growth points. First, the momentum portfolio is the organic growth of the company along with the growth of the market segments it enters. The momentum portfolio is obtained when the company utilizes the blue ocean/innovation strategy to create a new market. Second, share gain. This is the organic growth of the company that is obtained from the increase/decrease in the company's market share from competitors. Share gain is obtained when the company uses a continuous



improvement strategy that can produce products with more features, cheaper and better services. Third, mergers and acquisitions. This means inorganic growth that results from merging, buying or selling a company. An acquisition/merger is carried out when the market is no longer sufficient to accommodate the desired growth rate. Wal Mart is growing rapidly by acquiring retail companies throughout the world. 2.5 Business Strategy According to Grant and Owen (2010: 19), Business Strategy is a policy and guidelines that determine the way a company competes in industry and in particular the way companies form competitive advantage. Business strategy is often also referred to as a functional business strategy because this strategy is oriented to the functions of management activities, for example, marketing strategy, production or operational strategy, distribution strategy and so on. According to Wheelen and Hunger (2003: 21) business unit level strategies, more directed at managing the activities and operations of a particular business. Business strategy is a strategy that emphasizes the improvement of the competitive position of the company's products or services in specific industries or market segments served by the business. Business Strategy is at two levels based on the level of aggregation (level of aggregation) level is after the corporate strategy and after the functional strategy.



Chapter 3 Discussion 3.1 History of The Company Adaro's history begins with global oil shocks in the 1970s. This led the Government of Indonesia to revise its energy policy, which at the time was proposed for oil and gas, to include coal as a fuel for domestic use. By relinquishing the focus on coal in 1976, the Department of Mines divided East and South Kalimantan into 8 coal blocks and opened tenders for these blocks. The Spanish government company, Enadimsa, placed a bid for Block 8 in the Tanjung region, South Kalimantan because coal accessed it in the area from outcrops mapped by Dutch geologists in the 1930s and from intersections of oil fields that had been drilled by Pertamina in the year 1960s. No other company made an offer for the block, because at that time the location was considered too far inland and had low-quality coal. The name 'Adaro' was chosen by the Enadimsa company to honor the Adaro family, which is very well known in Spanish history, who collected a large amount of mining activity in Spain for several centuries. Thus was born PT Adaro Indonesia. The Adaro Indonesia Coal Cooperation Agreement (CCA) was signed on November 2, 1982. Enadimsa carried out exploration activities in the area of the agreement from 1983 to 1989, compiling a consortium of Australian and Indonesian companies to buy 80% of Adaro Indonesia's ownership from Enadimsa. In the early part of the 1990s, Adaro conducted study feasibility to lay the foundation for project development. The important thing is to choose a transportation route for coal transportation, and the decision is made to build an 80km coal hauling road located west of the Barito River, rather than building a 130km road located east of Adang Bay on the Kalimantan coast because it will be faster and cheap, and especially because it can avoid roads that cross the Meratus Mountains. The coal production was also decided to start from the Paringin mine because it has a higher heat value than the Tutupan mine, and also the mine has a cover that contains mudstone, the hard rock which is suitable in road construction. The development of this mine is accelerated to bring coal to the market as quickly as possible to build a customer base. The company decided to integrate as much as possible with the local community, where all employees, both foreign and local, lived in local cities, and recruitment focused on the local community with a commitment to conduct training on a large scale. The maximum use of contracting services is also used as an operational focus, especially the services of contractors and local suppliers whenever possible. The first step in



developing a coal deposit was fundraising and in May 1990 an approach was made with several banks to obtain project financing of US $ 28 million. However, all the banks approached refused to provide financing because of the consideration of problems related to coal quality because Adaro's subbituminous coal type had not traded internationally with a significant volume and the domestic market at that time was relatively small. There are doubts about the feasibility of constructing a coal-hauling road, mainly because of 27 km of the proposed road crosses a swampy area, which is considered technically feasible would also result in high construction costs. Therefore, the shareholders provided development funds of US $ 20 million with commercial financial rates for the construction and construction of Adaro's operational activities on the condition that the funding needs be more sourced from the company's cash flow. Construction of the coal hauling road began in September 1990 and took about one year due to difficulties in laying a 27 km long road above marshes on the side of the Barito River. Construction of a crushing, stockpiling and barge loading system of 2 million tonnes per year in the Kelani's River began in March 1991. The Paring pit with a single 30-meter thick layer was opened in March 1991 using the services of a local contractor. The coal is first tested in a run-ofmine stockpile and samples are then sent to Australia for combustion testing. The results are good and show some potential positive things from the use of coal in commercial heaters. The official opening of the Paring mine was carried out in August 1991. During 1990, a marketing program was developed that focused on potential markets where Adaro coal containing extremely low levels of sulfur and ash could offer great benefits. To help with marketing activities, it was decided to adopt trademarks for coal that would reflect these qualities and after "aqua coal" was discussed and rejected, the name"Envirocoal" was chosen to be used as Adaro's coal brand. The first sale of Adaro's coal was to Krupp Industries from Germany who was interested in Envirocoal's environmentally friendly character. The company's ship, MV Maersk Tanjong, which has its gear and dredging equipment sailed to Europe on October 22 with 68,750 tons of Envirocoal. After further trials, deliveries were made in 1992 to several potential customers and with the completion of the construction of the coal infrastructure and the establishment of a customer base, Adaro was declared to be operating commercially on October 22, 1992. Since these early days, the Adaro Indonesia mine has grown to become the largest single mine site in the southern hemisphere, and production has grown from the start of 1 million tons in 1992, and for several years scored remarkable growth. For example, in 2006, Adaro Indonesia increased production by more than 28% from the previous year to 34.4 million tons.



To date, Adaro Indonesia's coal production and sales have maintained a stable growth trend, and in 2018 Adaro's coal production reached 54 million tons. 3.2 Company Vision, Mission, and Objectives 3.2.1 Company Vision and Mission Vision 1. Become a leading Indonesian mining and energy company group. Mission 1. Satisfy customer needs. 2. Developing employees. 3. Establish partnerships with suppliers. 4. Support the development of society and the State. 5. Prioritizing safety and environmental sustainability. 6. Maximizing value for shareholders. 3.2.2 Company Objectives Adaro is a company that has a strong focus on the integrated coal mining business through its subsidiaries. Adaro aims to help contribute to the Indonesian economy by carrying out coal export activities outside Indonesia and providing the best services for Indonesia, Shareholders, Company Partners and their employees.



3.3 Mix Marketing Company 3.3.1. Product Adaro's coal product is a sub-bituminous type with a moderate energy level, which is one of the cleanest fossil fuels in the world thanks to its extremely low sulfur, ash and nitrogen content. This trade-in coal has been recognized on the global market as Envirocoal. It is mined in South Kalimantan by Adaro Indonesia, Adaro Energy's main mining asset. In 2014 Balangan Coal products which have low pollutant characteristics similar to Envirocoal began to be sold to the market. Balangan Coal is mined from the greenfield coal deposit located 11km southeast of the Adaro Indonesia concession in Balangan Regency, South Kalimantan.



3.3.2. Price The Reference Coal Price (HBA) for direct selling (spot) which is valid from 1 August 2016 to 31 August 2020 at the Free On Board delivery point on a FOB vessel is USD 58.37 / Ton, as released in the portal www.minerba.esdm.go.id. HBA in August 2019 increased by USD 5.37 or rose 10.1% compared to the HBA in July 2019 USD 53. HBA increase of 10.1% is the highest percentage increase in HBA in the last 5 years. The highest increase in the percentage of HBAs previously occurred in the February 2011 HBA of USD 127.05, which rose by USD 14.65 or up 13% compared to the January 2011 HBA of USD 112.4. The February 2011 HBA is the highest HBA value to date since the HBA was implemented. The HBA increase in August 2019 continued the upward trend of HBA in the previous 2 months, namely: in June 2019 and July 2019. When compared to the August 2015 HBA of USD 59.14 (year on year), the August 2019 HBA edged down by USD 0.77 or decreased 1.3%. The HBA value is the average of the 4 coal price indices commonly used in coal trading, namely: Indonesia Coal Index, Platts59 Index, New Castle Export Index, and New Castle Global Coal Index. HBA is a reference for coal prices on the equal heat value of 6,322 kcal/kg Gross As Received (GAR), water content (total moisture) 8%, sulfur content 0.8% as \received (ar), and ash content 15% ar. Based on the HBA, then the Coal Benchmark Price (HPB) is calculated which is influenced by the quality of coal, namely: the calorific value of coal, the water content, sulfur content, and ash content following the main coal trademark or brand called HPB Marker. HPB Marker consists of 8 coal brands that are commonly known and traded. The HPB Marker for the August 2016 period for 8 coal brands in USD / Ton are as follows: 1. Gunung Bayan I: 62.42 (up 10.3% compared to July 2016 HPB) 2. Prima Coal: 63.97 (up 9.3% compared to July 2016 HPB) 3. Pinang 6150: 57.80 (up 9.3% compared to July 2016 HPB) 4. Indominco IM_East: 47.95 (up 10.0% compared to July 2016 HPB) 5. Against Coal: 47.60 (up 8.8% compared to July 2016 HPB) 6. Enviro Coal: 45.45 (up 8.1% compared to July 2016 HPB) 7. Jorong J-1: 36.57 (up 8.2% compared to July 2016 HPB) 8. Ecocoal: 33.64 (up 7.9% compared to July 2016 HPB) In addition to these 8 coal trademarks, the Directorate General of Mineral and Coal of the Ministry of Energy and Mineral Resources sets HPBs for other coal trademarks every month including Medco Bara 6500, Baramarta Coal, Pinang 5500, Arutmin A5000, and LIM 3010.



3.3.3 Place PT Adaro Energy has a good place in the Domestic Market and Global Market, as the data below shows: 1. Sales of PT Adaro, which produces coal on the largest scale, reached 51.4 million tons in 2015, serving 56 customers in 14 countries. Average sales per month reach 4.3 million tons. 2. Domestic coal sales were recorded at 11.0 million tons, or 22% of total sales, of which 90% of this amount was supplied to power plants, and 90% of sales were carried out on long-term contracts. 3. The remaining 40.4 million tons are sold in the export market. The single largest export destination is China, where AI sales were not affected by weak demand reflected in shipments to China of 8.6 million tons, 14% higher than in 2014. The second-largest single export destination in India with a volume of 6.9 million tons, 20% lower than in 2014 due to aggressive price competition. 4. North Asia - Japan, Hong Kong, Korea, and Taiwan - consumes 14.9 million tons. Sales to these premium markets fell significantly due to price competition from Australia and Russia. A total of 6.4 million tons of Adaro's coal were sold to ASEAN countries, slightly lower than in 2014, but Adaro remains optimistic by seeing signs of penetration into new Southeast Asian markets such as Bangladesh and Vietnam. 3.3.4 Promotion Observing integrated communication conducted by PT Adaro Energy Tbk becomes an interesting thing. Because the company is engaged in coal mining and companies that run B-to-B (business to business). In this case, selling coal is certainly different from selling bath soap. However, Adaro has successfully implemented its integrated communication without hard selling. Evirocoral, Adaro's coal trademark, does have several advantages. This coal has ash content of 1-2.5%, 0.9% nitrogen and 0.1% sulfur. This energy raw material with low gas emission and air particles are also environmentally friendly. Another advantage is that it can produce a stable and perfect ignition with combustion efficiency exceeding 99.7%, thereby reducing operational costs. In 2010, the theme "Creating Maximum Sustainable Value" was Adaro's strategy and tools shown to potential buyers and investors of Adaro's shares. In practical communication, Adaro conducts promotions that are soft (media advertisements)



and are more directed towards stakeholders, such as greetings on holidays, new year and other wishes. In addition to conducting personal selling and direct selling of coal products, Adaro also conducts Corporate Social Responsibility (CSR). To support the implementation of CSR, Adaro also established the Adaro Energy Foundation. When the company's CSR didn't highlight the problem of HIV / AIDS a lot, the foundation was successful with its campaign. Business strategies and CSR programs that are done also gained much appreciation and appreciation from stakeholders, such as the Adaro Platts Award which was also communicated to stakeholders through advertising. In a strategic approach, the communication function of PT Adaro Energy can be seen covering many subfunctions - from image and identity communication, advertising and advocacy, to marketing communication by conducting soft selling. The communication function is intended as a liaison between the company and stakeholders to create and maintain a company's image, monitor, review and respond to attitudes and perceptions of public opinion, and establish good relations with related institutions including the media.



3.4 Internal Analysis of The Company 3.4.1 Analysis of financial statements



Adaro's financial performance in the past 4 years has been fairly fluctuating. In 2018 its operating income was valued at USD 3,620 million, with gross profit increasing in 2018 with a total of USD 1,210 million and the company's net profit of USD 478 million.



For Adaro's financial performance ratio, the gross profit margin in 2018 was 33.4%, this ratio decreased by 1.6% from the previous year which was 35.0%. Ebitda margin in 2018 was 33.9% also decreased in 2018 by 6.1% from the previous year by 40.0%. Our company's ROE in 2018 was 11.0% in 2018, which means the company's capital ability to generate returns using capital is only about 11%. Our company's ROA is 6.8%, which means the ability of assets to produce return is 6.8%



3.4.2 Organizational Structure