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Rodamas Group Designing Strategies for Changing Realities in Emerging Economies Syndicate 6: Aneira Syahadatil Arsya Kresno Budi W Qonita Usthufiya Damarendro Hutomo
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Company Profile
More detailed analysis on entering the property sector explained on slide 25 onwards
Rodamas (means “golden wheel”) is an Indonesian manufacture company that is active in several line businesses.
Started in 1959 by Tan Siong Kie, a Chinese Indonesian, in Jakarta, under the name Ho Hoa Trading Company Limited. Currently led by Tan Siong Kie’s son, Mucki Tan. Rodamas was established as a response of Indonesia’s rising industrial development after its proclaimed independence, which focused on import trade and developed partnership with foreign manufacturers to produce basic products, starting from roof material and gourmet powder.
“To keep up with modern time , Rodamas planned to changed from conventional business model” Business Problem
Business Problem
Capabilities Rodamas does not own any proprietary competencies
Saturated Market Rodamas line businesses have natural limits of growth
Rising competitors Market has been grown also competitor on the market share (ex: Indofood)
Diversification strategy What strategy suit with situation of Rodamas facing to secure its position in the market?
Alternative Strategies Entering the property sector
Focus on customer product distribution business
Move into labor-intensive manufacturing
Acquisition of manufacturing plant
Internalization via foreign direct investment
Justification for Diversifying Testing Whether The Diversification Will Add Long-term Value For Shareholders
01
The cost-of-entry test
02
03
The industry attractiveness test
04
SWOT ANALYSIS
The better-off test
Porter 5-Forces
More detailed analysis on entering the property sector explained on slide 25 onwards
PORTER 5 FORCES Entering the property sector High
High
High
Medium
Medium
Threat of New Entrants
Bargaining Power of Supplier
Rivalry among Competitor
Threat of Substitute
Bargaining Power of Buyer
● Rodamas has minimal experience in the property sector.
● many well-known competitors
● Many players that non profit tenants, lease
● Public or private company such as PP Property, agung podomoro, etc.
● Whether or no switching cost
● Some of the players is Rodamas and multinational companies ● Need large of cost ● Different taxes system ● Advantages based on locations ● Government regulation
● Owned few properties.
● Others real estate offers lower prices for the same quality.
●
Low demand as there are many
●
No switching cost as no techonology/syste m introduced
ADVANTAGES DISADVANTAGES
More detailed analysis on entering the property sector explained on slide 25 onwards
Entering the property sector
Advantages
Disadvantages
Rodamas can be a player in the property sector.
Indonesia's tax system is different.
The strategic position of the property owned by the rodamas adds value to their business.
Tan's lack of experience in the property sector.
The company earns long-term income from rental property.
Rodamas doesn’t have a fairly well-known brand name. The level of competition in real estate in Indonesia is high.
Attractiveness: This industry is quite attractive because Rodamas have never get into property sector. However, due to low experience and risks that received also many competitors in the property sector, this strategy is not the best choice. Cost of Entry: Based on the porter 5 forces, the cost of entry is moderate. Better Off: Based on advantages and disadvantages, it has more disadvantages, the risk received is quite large.
PORTER 5 FORCES Internationalization via foreign direct investment Medium
High
Medium
Low
High
Threat of New Entrants
Bargaining Power of Supplier
Rivalry among Competitor
Threat of Substitute
Bargaining Power of Buyer
● Limited knowledge due to new experiences ● Limited financial risk due to partnership
● Profitable partnership product
● Few regional competitors
● Because manufacture is in Indonesia, the costs will be less
● Partnering with Asahi already has a reputation in Indonesia
● The product cost more cheaper
● High purchasing power of the product
● The brand is well known as the largest in Southeast Asia.
ADVANTAGES DISADVANTAGES
Internationalization via foreign direct investment Advantages
Disadvantages
Economic crises around the world provide opportunities.
Lack of human resources from the company.
Expanded the role by establishing manufacturing in the Asian market.
The decision depends on the partner
Can be a partner in the success of the Asahi company's regional concentration. Provides huge potential in the future.
Attractiveness: Based on porter 5 forces, this strategy is very attractive because the risks received by Rodamas are few due to cooperation with the Asahi company. Cost of Entry: based on a 5 force porter, the cost of entry is High. Better Off: Based on advantages and disadvantages, this strategy is more profitable because of the lack of big risks that will occur, this choice will be the best strategy.
PORTER 5 FORCES Focus on distribution business High
Low
High
High
Moderate
Threat of New Entrants
Bargaining Power of Supplier
Rivalry among Competitor
Threat of Substitute
Bargaining Power of Buyer
● Build a channel to expand distribution so that the incoming costs are high and profitability.
● The local market is saturated.
● A lot of distributor but Rodamas was involved in a number of sectors ● The competitors were diverse and not specific.
● High because competitors from various sectors, such as food, building materials, chemicals, quite a lot
● The distribution area coverage should be expanded to increase purchasing power
ADVANTAGES DISADVANTAGES
Focus on distribution business Advantages
Disadvantages
Already have experience in the distribution sector in urban and rural areas.
Low margin in Indonesia, it’s depends on the volume of demand. Low demand, low profit.
Few competitors on several products.
Poor infrastructure and high fixed costs. High level of corporate conflict. Requires investment in time management.
Attractiveness: This industry is interesting because Rodamas have long been in the distribution business. The experience gained is quite a lot. However, for now, conditions in Indonesia can pose a lot of risks to companies. Indonesia's current conditions do not support this strategy. Cost of Entry: Based on porter 5 forces, cost of entry is medium. Better Off: Based on advantages and disadvantages, this strategy provides more risk and conflict to the company than profits, and will incur considerable costs. Then this strategy is not the best choice.
PORTER 5 FORCES Move into Labor Intensive Manufacturing Medium
Low
High
High
High
Threat of New Entrants
Bargaining Power of Supplier
Rivalry among Competitor
Threat of Substitute
Bargaining Power of Buyer
●
●
High Economies of
●
Industry do not
●
multinationals
●
Substitute are
●
Multinationals
Scale
pay high cost in
could walk out
available and
spread their
Low Capital
changing supplier
tomorrow
better
suppliers
Labor weakly
performance
Requirement
●
differentiated
●
Medium labor cost
●
No brand
●
Low switching cost
preferences
●
Competitor big
●
Low switching cost
●
Buyer switching cost are low
ADVANTAGES DISADVANTAGES
Move into Labor Intensive Manufacturing Advantages
Disadvantages
Broad connections can still be useful
Vulnerable to inflation and unstable condition
Labor intensive is more flexible in terms of quantity
Labor cost increase as scale increase
Capital Intensive for quick economic development
Attractiveness: The industry is quite attractive as based on porter 5 forces, advantages and disadvantages. Even though the threat from 3 factors are high, the major advantage in this strategy is its flexibility. Indonesia is populated country, thus, labor supply (high turn around) will not be a problem.
Cost of Entry: Based on Porter 5 forces, Cost of entry is medium Better off: Based on advantages and disadvantages, it has more advantage
PORTER 5 FORCES Acquisition of manufacturing plant Low
Medium
Medium
Low
Medium
Threat of New Entrants
Bargaining Power of Supplier
Rivalry among Competitor
Threat of Substitute
Bargaining Power of Buyer
●
New entrants
●
Rodamas is in
●
Rodamas would
●
For rival, finding
●
Find company
wont have
good financial
need more
the right
that have fair
enough
condition, but
efforts in finding
business at the
price and can
resources to
lack of R&D
the right
right price is a
bring value to
acquire new
skills
manufacturer
challenge.
the company is
plant
which is not overpriced
a challenges
ADVANTAGES DISADVANTAGES
Acquisition of manufacturing plant
Advantages
Disadvantages
Access to developed technology or existing licenses
High capital requirement
Has proper capital, resource, and capabilities
New entrants will duplicate the product
Effectivity of cost
Overpriced manufacturer must be avoided Conflict in corporate culture
Attractiveness: Rodamas already had experience in this sector and has a good brand images. Cost of Entry: High capital requirement, overpriced manufacturer Better Off: The company needs to find existing manufacturing business that is not overpriced. By acquisitioning manufacturing plant it will improve R&D skills and by supervision of the management of Rodamas.
Based on 5 Alternatives, two the best options are Internationalization via foreign direct investment Buy Existing Manufacturing Business
Primary Activities: Operations - Manufacturing system can be transferred, shared and utilized so long that the industry is the same Support Activities: Technology - Technology in one country can be used as a support in a new location
Value Chain Relationship with Internationalization via foreign direct investment
Primary Activities: All resources and capabilities can be shared among two business if they are related (similar market, geographical, technology, and condition) Support Activities: All resources and capabilities can be shared among two business if they are related (similar market, geographical, technology, and condition) E.g Technology - Technology can be transferred from the advanced manufacturing company
Value Chain Relationship with Buy Existing Manufacturing Business
Swot Analysis
Internationalization via foreign direct investment
Strength ● ● ● ●
Local market knowledge Market reputation in trade market Success for price strategy Profitable partnership products
Weaknesses ● ● ●
Increasing costs More Competitive market Decrease in market share
Opportunity ■ ■
■ ■
Enter the new market Developed new technology Relocation for production Responsible business
Threat ●
● ● ●
Increase in the competition in the market Bigger risk to enter a new market Current competition Life cycle of products
SWOT Analysis
Buy Existing Manufacturing Business Weakness
Strength ■
■ ■
Developed technology or havexisting license Cost effective and limited Strong ethical values
➔
➔
➔
Innovation may falter overtime Clashes in corporate culture/philos ophy Poor diversification
Opportunity ➔
➔
Good at taking advantage of opportunities Availability of finances
Threat ➔
➔
Uncertain market growth Rise in the cost and daily products
Recomendation Rodamas should... ●
Internalization with foreign company based on the result analysis best off strategy and Use existing good strong relationship to expand business
Thankyou!
More detailed analysis on entering the property sector explained next slide
Analysis Entering the property sector Rodamas main business is distribution, starting from chemicals, food products, consumer goods products, building materials in meeting the basic needs of Indonesian society. To develop Rodamas from traditional to modern business, requires several business change movements. One of the business strategies on offer is enter the property sector business. Several reasons are relate if Rodamas enters the property sector is the sales system used in the value chain will be related to the company's knowledge in the property sector. However, it is unrelated because Rodamas have long experience in the distribution sector business, it will be less suitable to enter the property sector. With a brand name that not strong, it will be difficult for Rodamas to succeed in the property business, given the intense competition in it. Entering the property sector will be very unfavorable for Rodamas due to the large number of risks that will be experienced and Indonesia's unfavorable conditions. the detail explanation will be explained in the slide below.
Scope: property industry in
PORTER 5 FORCES
Entering the property sector
Indonesia
High
High
High
Medium
Medium
Threat of New Entrants
Bargaining Power of Supplier
Rivalry among Competitor
Threat of Substitute
Bargaining Power of Buyer
● Rodamas has minimal experience in the property sector.
● many well-known competitors
● Some of the players is Rodamas and multinational companies ● Need large of cost ● Different taxes system ● Advantages based on locations ● Government regulation
● Owned few properties.
● Public or private company such as PP Property, agung podomoro, etc.
● Many substitutes are conventional (buy, develop, sell) -> perceived to be economically wise by customer
●
Low demand
●
No switching cost as no techonology/syste m introduced
● No switching cost ● Others real estate offers lower prices for the same quality.
●
Population keep increasing
ADVANTAGES DISADVANTAGES Scope: property industry in
Entering the property sector
Indonesia
Advantages
Disadvantages
Rodamas can be a player in the property sector.
Indonesia's tax system is different.
The strategic position of the property owned by the rodamas adds value to their business.
Tan's lack of experience in the property sector.
The company earns long-term income from rental property.
Rodamas doesn’t have a fairly well-known brand name. The level of competition in real estate in Indonesia is high.
Attractiveness: This industry is quite attractive because Rodamas have never get into property sector. However, due to low experience and risks that received also many competitors in the property sector, this strategy is not the best choice. Cost of Entry: Based on the porter 5 forces, the cost of entry is moderate. Better Off: Based on advantages and disadvantages, it has more disadvantages, the risk received is quite large.
Value Chain Relationship with Entering property sector
Initiation ●
●
Rodamas entering property business sector to develop modern business strategy While the threat of new entrant is high, Rodamas should maintain their price or increase funding and investment to discourage new competition
Compliances ●
●
The entering property sector strategy unacceptable because it posses a high risk in terms of investment in strategic marketing Rodamas will need investment and funds for launching strategic campaign
Sales and development ●
●
●
The industry operates is highly fragmented Rodamas will experience slowing growth during this stage of the industry life cycle Competing players also exit the industry because of the changes and low demand
Asset development ●
●
Rodamas can expand into other markets through its previous experience, as well as through partnerships and contracts with other agents and parties. Contract with offshore agents and licenses, to broaden portfolio by adding new products based on market research and data.
Asset Management Rodamas group designing strategies in property sector can generate considerable sustainable competitive advantage utilizing these systems. This is done through means of traditional as well as modern procedures to embraced to competitive advantages hand and increases its share of the pie
Value Chain Relationship with Entering property sector
Rodamas Property Sector Internal Value chain
Swot Analysis (from value chain and porter 5 forces) Entering the property sector Weaknesses
Strength ● ●
Has a lot of capital Can be a long term investment to the company
●
●
Rodamas has a strong brand image but not well-known company in the property sector Hard to get trust from customer (because the company is not experiencing)
Opportunity ● Population increase means there will be market ● Many young families in the future means they will first prefer rent compared to buy (align with Tan’s plan to rent the location)
Threat ●
High rivalry among competitor
●
Many well-known competitor
●
No switching cost and limited demand
●
Tax Structure not favourable
Conclusion ●
Based on the analysis, that the strategy for entering the property sector is Not Fit for Rodamas, as seen from the company's situation that is not possible based the lack of experience from the company.
●
The possibility of risk occurring is quite high, it can be seen from the disadvantage, weakness and threat of Rodamas company.
●
So it can be concluded that the best choice for Rodamas in entering the property sector strategy is No Go.
