strategic management assignment - pt indofood
TRANSCRIPT
STRATEGIC MANAGEMENTAsprillya Balqist
Reza Fahlevi RahmanDwinanda RizalArfan Nur Akbar
Kevin Patria
COMPANY PROFILE• PT. Indofood CBP Sukses Makmur Tbk., better known as
Indofood, is a major Indonesian company involved in the food industry The company's headquarters are in Jakarta
• Indofood was founded in 1968 as Panganjaya Intikusuma till 1993, before changing to its current name in 1994. It is one of the companies owned by the family of Sudono Salim under the Salim Group.
Brief History
1990•Incorporated as PT Panganjaya Intikusuma. Established
51:49 joint venture (“JV”) with Seven-Up Netherlands B.V., an affiliate of PepsiCo Inc. to enter into snack foods industry (The JV has been transferred into ICBP in 2010 as part of the restructuring of CBP Group)
1994•Changed its name to PT Indofood Sukses Makmur. IPO of
763 million shares at Rp1,000 par value per share, listing on the IDX.
1995•Acquired Bogasari flour mill1997•Acquired 80% equity stake in a group of companies
involved implantations, agribusiness and distribution.
2006•Acquired 55.0% equity in shipping company Pacsari Pte.
Ltd. (“Pacsari”).•Acquired additional plantation companies in West
Kalimantan.2011•On June 9, 2011, SIMP, a direct and indirect subsidiary of
the•Company, conducted an IPO and listed its shares on the
IDX.
2012•ICBP established two JV companies with Asahi Group
Holdings Southeast Asia Pte. Ltd. (“Asahi”) to enter into the non-alcoholic beverage market in Indonesia.
2014•ICBP and Asahi, through its JV subsidiaries, acquired
assets related to the packaged water business including the brand of Club.
EmployeeTo be sustainable, Indofood recognizes that its rapid progress depends largely on the support of its human resources. Its workforce of some 80 thousand employees is an invaluable asset to support the Company’s current performance and growth. However, to maintain and improve its performance in the future, Indofood needs a highly competent and qualified workforce that is oriented towards the Company’s future needs. Company performance is dependent upon workforce quality, as a sound business strategy is difficult to execute without the support of competent human resources. Therefore, the Company is committed to continue building its human resources and organization to address both current and future challenges.
Products - Noodles
The Noodles Division produces and markets a range of bag noodles, cup noodles, egg noodles and instant vermicelli, and represents one of the world’s largest instant noodle producers with an annual capacity of more than 16 billion packs. Its diverse brand portfolio includes Indomie, Supermi, Sarimi, Sakura, Pop Mie, Pop Bihun and Mi Telur Cap 3 Ayam, catering to all market segments. These brands are renowned for their quality and high level of acceptance by consumers, and have won numerous awards for excellence and brand status.
Products - DairyThe Dairy Division is operated by Indolakto, a 68.57% indirect subsidiary of ICBP and one of the leading producers of dairy products in Indonesia. It produces a variety of dairy products including sweetened condensed milk (“SCM”), ultra-high temperature (“UHT”) milk, sterilized bottled milk, pasteurized liquid milk, powdered milk, butter and ice cream. Its flagship brand Indomilk has enjoyed strong market presence for more than 40 years and is one of Indonesia’s best-known brands. Other brands include Cap Enaak, Tiga Sapi, Indomilk Champ and Calci Skim for milk products, Orchid Butter for butter, and Indoeskrim for ice cream.
Products – Snack Foods
The Snack Foods Division comprises two business units, snack foods and biscuits. The snack foods unit is a JV company with PepsiCo that produces modern and traditional snacks including potato, cassava and soybean chips, curly and prawn crackers, and extruded snacks marketed under brand names such as Chitato, Lays, Qtela, Cheetos and JetZ, all of which enjoy strong market presence. The biscuits unit is solely operated by ICBP and produces a range of biscuit brands targeted at two different market segments: Trenz for youths, and Wonderland for families.
Vision and MissionYear Vision Mission
2009 To Become a Total Food Solutions Company
• To continuously improve our people, our process and our technology• To produce high quality, innovative, and affordable products which are preferred by customers• To ensure availability of our products to customers domestically and internationally• To contribute to the improvement of the quality of life of Indonesians with emphasis on nutrition• To continuously improve stakeholders’ value
Vision and MissionYear Vision Mission
2013 A Total Food Solutions Company
• To provide sustainable solutions for food needs
• To continuously improve our people, processes and technologies
• To contribute to the welfare of the society and environment in a sustainable manner
• To continuously improve stakeholders’ value
Vision Graphic
Directional
Focused
Flexible
Feasible
Desirable
Easy To Communicate
A Total Food Solutions Company
YES YES YES YES NO YES YES
Mission Criteria
• To provide sustainable solutions for food needs
• To continuously improve our people, processes and technologies
• To contribute to the welfare of the society and environment in a sustainable manner
• To continuously improve stakeholders’ value
EmployeeCustomersProductsMarketTechnologySurvival growth profitPhilosophySelf conceptPublic image
Current Future
Number of quality balance competitor
4 3
Product features 4 3
Capacity increase 4 4
Diversity of competitors 2 3
Overall 14 13
Rivalry Among Competitors
Current Future
Economic of scale 4 4
Product differentiation 4 4
Brand identification 4 3
Switching Cost 3 3
Access to distribution channels 4 4
Capital Requirement 5 5
Access to technology 5 5
Government protection 4 3
Experience effect 4 5
Overall 37 36
Barriers to Entry
Current Future
Asets specialization 3 3
Cost to exit 4 4
Government and social restriction 4 4
Overall 11 11
Barriers to Exit
Current Future
Availability of close substitutes
4 4
User’s switching cost 4 4
Substitute producer’s profitability & aggresiveness
3 3
Substitutes price/ value 4 4
Overall 15 15
Availability of Substitutes
Current Future
Number important buyers 4 4
Buyers switching cost 3 3
Buyers threat of backward integration
2 3
Industry threat of forward integration
4 4
Contribution to quality or service of buyer’s product
4 4
Buyer’s profitability 4 4
Overall 21 22
Power of Buyers
Current
Future
Number of important suppliers 4 4
Availability of substitutes for supplier product 4 4
Differentiation or switching cost of supplier’s product 3 3
Suppliers of contribution to quality or service of the industry product
3 3
Important of the industry to suppliers profit 4 4
Overall 18 18
Power of Supplier
Current future
Barriers to entry 4 4
Barriers to exit 4 4
Rivalry among competitors
5 5
Power of buyers 4 4
Power of suppliers 3 3
Availability of substitutes 4 4
Overall Assessment
Current Future
Overall industry
assesment
4 4
Overall Industry Assessment
External Factor Analysis
•weight ranges : 0.0 (not important) to 1.0 (veryimportant)•rating : between 1 and 4 the firm’s current strategies
respond to the factor, where : • 4 = the response is superior, • 3 = the response is above average, • 2 = the response is average, and• 1 = the response is poor.•Weight Score : weight x rating
Key external factor Weight Rating Weight score
OPPORTUNITIES
Domestic and global market is still wide open to be
exploited, either as a new area of expansion and the birth
rate is quite high. Instant noodle market in Nigeria has 38
million customers. It also Indomie exported to more than
50 countries.
0.2 3 0.6
Rising demand, due to the decline in purchasing power
caused by the rise in food prices but the national
minimum wage only increase by 10%.
0.1 4 0.4
The pattern of consumption of instant foods are high,
which is estimated to have a lifestyle community that is
approximately 50% of the total population.
0.07 2 0.14
Slow technological change in the noodle industry 0.05 3 0.15
THREATS Weight Rating Weight Score
The existence of such a substitution for instant food and
instant porridge instant rice
0.05 2 0.1
Competitors who have a quality product with aggressive
advertising
0.2 3 0.6
The possibility of the anti MSG and other harmful
substances as well as the threat of anti-monopoly law
(Article 52 paragraph 2 of the Antimonopoly Law)
0.1 4 0.4
High dependence with suppliers of raw materials wheat in
Australia, where wheat prices are likely to rise, resulting in
lower profit margin of 3.7% in 2006 to 2.1% in 2007. The
price of wheat rose due to bad weather and the level of
world wheat supplies low.
0.13 3 0.39
Low credit availability in the market due to the global
financial crisis to fund overseas expansion, namely Nigeria
and Saudi Arabia
0.1 3 0.3
TOTAL 1 3.08
EFE MATRIX PT INDOFOOD
The total weight score of Indofood is 3.08 which means Indofood is responding in outstanding way to existing
opportunities and threats in industry. The firm strategies effectively take an advantage of existing opportunities and
minimize the external threats.
CPM Indomie Mie sedap
Critical Success Factor
Weight Rating Score Rating Score
Advertising 0.05 2 0.1 3 0.15
Product Quality 0.2 4 0.8 3 0.6
Product Innovation 0.1 4 0.4 2 0.2
Price competitive 0.15 3 0.45 3 0.45
Customer loyalty 0.15 4 0.6 3 0.45
Global expansion 0.2 5 1 2 0.4
Sales distribution 0.05 3 0.15 2 0.1
Availability of raw material
0.1 3 0.3 3 0.3
TOTAL 1 3.8 2.65
INTERNAL EVALUATION MATRIX
Key internal factors
Weight Rating Weight score
STRENGTH
Product variance 0.3 4 1.2
Market share 70% 0.3 4 1.2
Wide distribution channel
0.2 4 0.8
WEAKNESSES
MSG 0.2 3 0.6
TOTAL 1 3.8
The Internal Factors Evaluation Matrix of PT. Indofood is 3.8 which means Indofood respond is outstanding to the
strength and weaknesses.
SWOT ANALYSIS
SWOT
STRENGTH• Product variance• Market share 70%• Wide distribution channel• Brand image• Have a reliable staff, supported by innovations that
continue to rely on the team's performance• Has penetrated overseas markets• Target markets reached all circle• Aggressive in advertising• Production has penetrated as far abroad• Has a separate group that handles the distribution of
its products• Many stock points strategically located in the region• Have internal R & D division that does not require an
external R & D
OPPORTUNITIES • Domestic and global market is still wide open to be
exploited, either as a new area of expansion and the birth rate is quite high. Instant noodle market in Nigeria has 38 million customers. It also Indomie exported to more than 50 countries.
• Rising demand, due to the decline in purchasing power caused by the rise in food prices but the national minimum wage only increase by 10%.
• The pattern of consumption of instant foods are high, which is estimated to have a lifestyle community that is approximately 50% of the total population
• Slow technological change in the noodle industry
WEAKNESSES• MSG• Has a huge marketing cost
THREATS• The existence of such a substitution for instant food and
instant porridge instant rice• Competitors who have a quality product with aggressive
advertising• The possibility of the anti MSG and other harmful substances
as well as the threat of anti-monopoly law (Article 52 paragraph 2 of the Antimonopoly Law)
• High dependence with suppliers of raw materials wheat in Australia, where wheat prices are likely to rise, resulting in lower profit margin of 3.7% in 2006 to 2.1% in 2007. The price of wheat rose due to bad weather and the level of world wheat supplies low.
• Low credit availability in the market due to the global financial crisis to fund overseas expansion, namely Nigeria and Saudi Arabia
Business Model Of IndofoodKey Partner
• Bogasari• AgriBusin
ess• Distributi
on• China
Minzhong Food corporation limited
• Packaging
Key Activities
• Production
• Marketing• Producing
Own
Value Proposition
• Dairy product
• Food seasoning
• Snack food
• Edible oil and fats
• Flour• Pasta
Costumer Relationship• Advertise
ment to Costumer
• Call Center
Costumer Segment
• Retail Market
• Traditional Market
• Convenient StoreKey
Resources
• Flour• Distributi
on• Packaging• AgriBusin
ess
Channels
• Large Scale Distribution
• Manual Distribution Center
Cost Structure
• Marketing• Distribution• Production• Packaging
Revenue stream• Sales From CBP, Bogasari,
Agribusiness, and Distribution• Bulk sales
WINGS BUSINESS MODELKey Partner• Group
Djarum (Pulau Gadung Trade Center)
• PT Adyabuana Persada (Hercules Ceramic
• Siam Cement Thailand (Gipsum)
Key Activities
• Production• Marketing• Producing
Own
Value Proposition
• Wings Household
• Wings Care (Wings Surya & Lion Wings)
• Wings Food (Alam Segar)
Costumer Relationship• Advertisem
ent to Costumer
• Call Center• Cust
service
Costumer Segment
• Retail Market
• Traditional Market
• Convenient StoreKey
Resources
• Flour• Distributio
n• Packaging• AgriBusine
ss
Channels
• Large Scale Distribution
• Manual Distribution Center
Cost Structure
• Marketing• Distribution• Production• Packaging
Revenue stream• Advertising
Competitive AdvantageInternal
• Range almost all market segment.• Affordable price.• A lot of variant flavor
External
• Language Label• Expand market to global world• Make healthy noodle.
Porter Generic Strategies
Indofood Value Chain Analysis
Value Chain
Primary Activities
•Inbound Logistic•Operation•Outbound Logistic•Marketing & Sales•Services
Inbound LogisticIndofood Wings Food
This activity is regarding how Indofood provide good quality products supported with good ingredients that most are come from their own subsidiary.
Understanding the purchase and chose to evaluate suppliers, maintain relationships with suppliers so as to improve the smoothness and efficiency of the company
OperationIndofood Wingsfood
- The operations of the Indofood Group span six separate divisions namely Noodles, Dairy, Snack Foods, Food Seasonings, Nutrition & Special Foods and Beverages.
- Customization on each product of Indofood based on customer’s demand
• To be responsible in maintaining the production process to achieve production targets while concentrating on the quality of goods, equipment, maintenance, and efficiency of use of raw materials.
Outbound LogisticIndofood Wingsfood
• Spreading the product into retail market.
• Exporting the product into more than 60 countries.
• Spreading the product into retail market
• Exporting the product into several countries, especially Saudi Arabia.
Marketing & SalesIndofood Wingsfood
• It basically targets the people till the age of 55, including working people, families, teenagers, children, and traveller.
• There are lot of variants of each product.
• Indofood has spread their product into a large number of customer.
• Good ads on TV
• Product marketing. Identifying target markets and potential competitors. Identifying customer needs, developing integrated product strategies for each brand and creating brand identity. Working in collaboration with the sales and R&D departments, as well as other departments.
ServicesIndofood Indofood
• Indofood provides call center for customer care of each product.
• Provides customer care by call center
Firm InfrastructureINDOFOOD WINGSFOOD
There are 18 production facilities in Indonesia, 1 malaysia, 8 China, 1 Brasil, 1 Philipine.
ProcurementINDOFOOD WINGSFOOD
• It basically deals with how to get the required resources
• It has to maintain the quality Their strategy to take some
ingredients from their own subsidiary and get some imported helps them maintain the quality as well as low prices.
Technology DevelopmentIndofood Wingsfood
• Implementing ERP • Must have a good
• Must have a good mastery of IT. Capable of organizing hardware, software and network infrastructure and of dealing with any problems that arise in the field. Must have a solid knowledge of programming and systems analysis, and be capable of providing solutions to problems. Capable of developing and maintaining cutting-edge communications and information systems. Able to work with other departments.
Human ResourcesIndofood Wingsfood
• With a total workforce of approximately 62 thousand, Indofood believe that employees are one of the most important group of stakeholders and an important element in the success continues. The Company believes that every employee has the capacity to excel and contribute to the success of not only the company, but the nation itself.
• Committed to the development of human resources and the organization so as to improve business efficiency and productivity and continuously increase value both for the Company and employees. Must have an in-depth understanding and mastery of human resources, recruitment and training strategies, as well as compensation and benefits.
Long term objective
Long term objective PT Indofood•Provide the best quality product with affordable price•Keep customer and distributor loyalty
STRATEGY of PT INDOFOOD
DEFINITION AND CONCEPT OF STRATEGIESStrategy is derived from the ancient Greek language 'Stratos‘ which is a term in the military field that refers to the action in general. Strategic management is the process of crafting decisions, activities, or a set of managerial plans to achieve corporate objectives within a specified period.Process of managerial plans :1. Environmental scanning2. Strategic formulation3. Strategic implementation4. Evaluation and control
The purpose of company to make management strategic :5. Stakeholder value6. Customer value7. Competitive advantage
Strategic in PT Indofood1. Product development strategy : increase sales by improving present products or services or creating new
one. For example : Indomie in 2004 introduce Sarimi and Supermi to compete with the competitor (Mie sedap), in 2006 introduce Indomie goreng kriuk with 3 diva as the endoser, in 2007 Sarimi Soto Koya with Luna Maya as the endorser, in 2008 Supermi Gobang, Gokar, and Goso with event launching Supermi Go “Makan mie serentak dengan peserta terbanyak” (more than 30k person based on MURI)
2. Market development strategy : Introducing present products or services into new geographic area. In 2007, the consumption of instant noodle in indonesia reached 11 million packs, one of the channel distribution of Indofood is Warung Indomie. The effective way is teach the owner of warung to make an Indomie, support their warung with banner, and monitoring the availability of the Indomie product.
3. Forward Integration : gaining ownership or increase control of distributors or retailers. Indofood has own distributor to distribute Indomie which is “Indomarco” to every region in Indonesia.
4. Backward Integration : seeking ownership or increase control of firm supplier. Indofood cooperate with PT Bogasari to provide wheat flour.
5. Market Penetration : seeks to increase market share for present products or services in present markets through greater marketing efforts. In Indomie advertising with Gita Gutawa as the endorse, Indomie emphasize their segmentation to teenager and family, Indomie also has a several event such as Jingle Dare for high school, Mama mia, and also the activity of ibu ibu PKK.
Vertical IntegrationFORWARD INTEGRATION
Gaining ownership or increase control of distributors or retailers. The six guidelines indicate when forward integration may be an effective strategic :1. When a company present distributors are expensive, unreliable, incapable with the company
needs.2. When the availability of quality distributors is so limited as to offer a competitive advantage 3. When an organization competes in an industry that is growing and is expected to continue to grow
markedly; this is a factor because forward integration reduces an organization’s ability to diversify if its basic industry falters
4. When an organization has both the capital and human resources needed to manage the new business of distributing its own products
5. When the advantages of stable production are particularly high; this is a consideration because an organization can increase the predictability of the demand for its output through forward integration.
6. When present distributors or retailers have high profit margins; this situation suggests that a company profitably could distribute its own products and price them more competitively by integrating forward
BACKWARD INTEGRATION Seeking ownership or increase control of firm supplier.Seven guidelines for when backward integration may be an especially effectivestrategy are:• When an organization’s present suppliers are especially expensive, or unreliable,or incapable of meeting the firm’s needs for parts, components, assemblies, or rawmaterials.• When the number of suppliers is small and the number of competitors is large.• When an organization competes in an industry that is growing rapidly; this is a factorbecause integrative-type strategies (forward, backward, and horizontal) reduce anorganization’s ability to diversify in a declining industry.• When an organization has both capital and human resources to manage the newbusiness of supplying its own raw materials.• When the advantages of stable prices are particularly important; this is a factorbecause an organization can stabilize the cost of its raw materials and the associatedprice of its product(s) through backward integration.• When present supplies have high profit margins, which suggests that the business of
supplying products or services in the given industry is a worthwhile venture.• When an organization needs to quickly acquire a needed resource.
Intensive strategiesMARKET PENETRATION
Seeks to increase market share for present products or services in present markets through greater marketing efforts. These five guidelines indicate when market penetration may be an especially effective strategy :• When current markets are not saturated with a particular product or
service.• When the usage rate of present customers could be increased significantly• When the market shares of major competitors have been declining while
total industry sales have been increasing.• When the correlation between dollar sales and dollar marketing
expenditures historically has been high.• When increased economies of scale provide major competitive advantages
MARKET DEVELOPMENTInvolves introducing present products or services into new geographic areas. These six guidelines indicate when market development may be an especially effective strategy:•When new channels of distribution are available that are
reliable, inexpensive, and of good quality.•When an organization is very successful at what it does.•When new untapped or unsaturated markets exist.•When an organization has the needed capital and human
resources to manage expanded operations.•When an organization has excess production capacity.•When an organization’s basic industry is rapidly becoming
global in scope.
PRODUCT DEVELOPMENTSeeks increased sales by improving or modifying present products or services. These five guidelines indicate when product development may be an especially effective strategy to pursue:• When an organization has successful products that are in the maturity
stage of the product life cycle; the idea here is to attract satisfied customers to try new (improved) products as a result of their positive experience with the organization’s present products or services.
• When an organization competes in an industry that is characterized by rapid technological developments.
• When major competitors offer better-quality products at comparable prices.
• When an organization competes in a high-growth industry.• When an organization has especially strong research and development
capabilities.
Diversification Strategies-Diversification is a corporate strategy to enter into a new market or industry which the business is not currently in, whilst also creating a new product for that new market
RelatedIt is when a business adds or expands its
existing product lines or markets. Example: a phone company adds or expands its wireless products and services by purchasing another
wireless company is engaging in related diversification.
Advantage: - understand the business and know what the
industry opportunities and threats are- number of related acquisitions fail to provide
the benefits or returns originally predicted.
UnrelatedIt is when a business adds new, or
unrelated, product lines or markets. For example, the same phone company might
decide to go into the television business or into the radio business. This is unrelated
diversification: there is no direct fit with the existing business.
Why would a company want to engage in unrelated diversification? Because there
may be cost efficiencies
Advantages and Motivation to use diversification strategy:
Most companies favor related diversification strategies in order to capitalize on synergies as follows:
• Transferring competitively valuable expertise, technological know-how, or other capabilities from one business to another.
• Combining the related activities of separate businesses into a single operation to achieve lower costs.
• Exploiting common use of a well-known brand name.
• Cross-business collaboration to create competitively valuable resource strengths and capabilities.
Motivation to use diversification strategy:1. Financial
Advantage: A company can gain financial advantages from diversifying its strategies. If company enters into joint ventures or acquires other companies it can increase its profits, cash flow and borrowing power. Disadvantage: However, some companies miscalculate the profitability of a venture versus the expense of getting into it.
2. Market Share
Advantages: By introducing new products, exploring new regions or targeting new groups of customers, a company can expand your customer base.Disadvantage: Each of these moves exposes the company to more competition, potential changes in customer preferences and seeing your products or services become obsolete due to new technology. These threats can rear their heads while the company is increasing expenditures on marketing and delivering your products.
Motivation to use diversification strategy:
3. Growth
Advantage: with measuring growth in terms of the number of employees, profits or sales, a diversified strategy can help you get there. For example, a company could move into industries that it is not currently involved in, form subsidiaries that act much like independent businesses and introduce global marketing as part of its diversified strategy.
Disadvantage: The risk of this strategy is not being able to manage all of these activities simultaneously. This can lead to inefficiencies that cut your profits. For example, if a company have several subsidiaries independently ordering supplies, it may be duplicating orders and thus spending money it could've used on marketing. The company has to make sure that each strategy pays for itself.
Motivation to use diversification strategy:4. Risk Protection
Advantages: To protect company from the risk of failure. If product "A" fails, new products "B" and "C" may do well and make up for the loss. Similarly, successful regional marketing may uncover lucrative opportunities that make up for a sluggish sales region.
Disadvantages: This risk protection comes at a cost. It means you will most likely spend money on strategies that don't pay off. Even though other strategies make up for the wasted money, a company might do better with a less diversified strategy that focuses on its most effective efforts.
DEFENSIVE STRATEGY
Retrenchment : Regrouping through cost and asset reduction to reverse declining sales and profit
Divestiture : selling a division or part of an organization
Liquidation : selling all of a company’s assets, in parts for their tangible worth.
Porter’s Five Generic StrategiesTarget Scope Advantage Advantage
(Low Cost) Product Uniqueness
Broad (Industry wide) Cost Leadership Differentiation
Narrow (Market wide) Focus Strategy (Low Cos) Focus strategy differentiation
Cost Leadership
• Aiming to become Lowest Cost Producer• The firm can compete on the price with every other
industries and earn higher unit profits.• Cost reduction provides the focus of the organization
strategy.• Target a broad market.• Competitive advantage is achieved by driving down
costs.• A successful cost leadership strategy requires that the
firm is the cost leader and is unchallenged in this position.• Especially beneficial: where customers are price
sensitive
Differentiation
• A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers.• Customers perceive the product to be different and
better than that of rivals.• The value added by the uniqueness of the product may
allow the firm to charge a premium price for it.• Differentiation can be based on product image or
durability, after-sales, quality, additional features.• It requires flair, research capability and strong
marketing.
Focus Strategy• The focus strategy concentrates on a narrow segment and within that
segment attempts to achieve either a cost advantage or differentiation.• The premise is that the needs of the group can be better serviced by
focusing entirely on it.• A firm using a focus strategy often enjoys a high degree of customer
loyalty, and this entrenched loyalty discourages other firms from competing directly.
• Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers.
• However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist
Focus Strategy (Differentiation)
•This dimension is not a separate strategy for big companies due to small market conditions. Big companies which chose applying differentiation strategies may also choose to apply in conjunction with focus strategies (either cost or differentiation). On the other hand this is definitely appropriate strategies for small companies especially for those wanting to avoid competition with big ones.
GENERIC STRATEGY PT INDOFOOD
Cost Leadership• PT Indofood has a several strategy to
push the production and distribution cost.
• PT Indofood cooperate with PT Bogasari in order to produce wheat which is one of the ingredient to make noodles (Indomie).
• PT Indofood has their own distribution channel to distribute Indomie, called “Indomarco”
Differentiation• Indomie has several flavor based on taste
of Indonesia such as Indomie goreng rendang, indomie goreng cabe ijo, Indomie rasa soto koya, Indomie Goreng Rasa Rendang Pedas Medan Indomie Rasa Coto Makassar Indomie Rasa Empal Gentong Indomie Rasa Kari Ayam Medan Indomie Rasa Mi Cakalang Indomie Rasa Mi Celor Indomie Rasa Mi Kocok Bandung Indomie Rasa Sop Buntut Indomie Rasa Soto Banjar Indomie Rasa Soto Banjar Limau Kulit Indomie Rasa Soto Betawi Indomie Rasa Soto Medan with affordable price.
Strategy EvaluationAsprillya BalqistKevin PatriaArfan Nur AkbarReza FahleviDwinanda Rizal
Strategic evaluation allows an organization to capitalize on internal strengths as the company develop, to exploit external opportunities as they emerge, to recognize and defend against
threats, and to mitigate internal weaknesses before become detrimental
3 Basic Activities :• Examining the underlying bases of a firm’s strategy• Comparing expected results with actual results
• Taking corrective actions to ensure that performance conforms to plans
Richard Rumelt’s Criteria for Evaluating Strategy
Three guidelines help determine if organizational problems are due to inconsistencies in strategy :1. if managerial problem continue
despite changes in personnel and if they tend to be issued-based rather than people-based, then strategies may be inconsistent.
2. If success for one organizational department means, or is interpreted to mean, failure for another department, then strategies mau be inconsistent.
3. If Policy problems and issues continue to be brought to the top for resolution, then strategies may be inconsistent
Consistency A strategy should not present inconsistent
goals and policies
Richard Rumelt’s Criteria for Evaluating Strategy
ConsonanceThe need for strategists to examine sets of trends, as well as individual trends,
in evaluating strategies.
Feasibility A strategy must neither overtax available resources nor create
unsolvable sub problems
AdavantageA strategy must provide for the
creation and/or maintenance of a competitive advantage in a selected criteria of activity (resources, skills,
position)
A strategy must represent an adaptive response to the external environment and to
be critical changes occurring within it.
Examine whether an organization has demonstrated in the past that it possesses the
abilities, competencies, skills, and talents needed to carry out a given strategy.
Competitive advantage normally are the result of superiority in one of three area : resources,
skills and position.
Strategy Evaluation PT INDOFOOD1. In 2004 Indomie made a mistake on the strategy to compete with Mie
Sedaap by following competitors by creating a brand which is Supermi Sedaaap and Noodle wing. Unfortunately, the strategy can not stem the Mie Sedaap. Knowing this, Indomie improve its strategy by not carrying out attacks on opponents brand, but to strengthen its own brand, such as innovation, improve retailer loyalty, and provide bonuses purchase.
2. In 2007, knowing that the huge production costs caused by external factors, namely the increase in wheat prices, the cost of transportation and electricity costs, resulting in lower profit margins, then Indomie make savings by using low-cost fuel and efficient machines.
3. Evaluation and corrections made Indomie based on achieving strategic objectives (loyalty, product quality, and innovation) and financial objectives (market share and profit margin).
IE Matrix
I II III
IV V VI
VII VIII IX
Kuat Rata-rata Lemah
Tinnggi
Sedang
Lemah
The total score weight of IFE
The
tota
l sco
re w
eigh
t of E
FE
Space Matrix
Awareness Exploration Commitment DissolutionProduct The same name between web
site address with the company name.
The display designed attractive and easy to use.
The information presented on the company's CSR program is very clear and complete
Provides easy navigation used website for customers Indofood.
There is a detailed explanation about the information the company's CSR program activities in the website.
Provide up-to-date information on the activities of companies in their CSR program
Communication Provide information to the
customers through web site or social networking.
Customer service artifacts in the "Contact Us".
Customers may comment on the menu leave a comment
Contact us" and "leave comment" aims to convey suggestions from customers.
Distribution The ease in accessing information on PT Indofood Sukses Makmur Tbk in the form of address and company profiles
Provide useful information to the customers such as CSR programs and information on the activities to be implemented or already implemented.
SWOT MATRIXIFAS / EFIEFAS / EFE
Strength (S)
Indofood has many distribution channel across nationMost of the noodles market share is owned by IndofoodHas many flavors of noodles, adjusting with Indonesian traditional tasteAffordable price for all market segmentsStrong image with its sloganGood marketing strategyGood advertising and promotion strategy
Weakness (W)
• Bad for health if consumed continuously
• Too many brands released
SWOT MATRIX
Opportunities (O)• Is a strong position in the market• Increased condition of purchasing
power• Utilizing e-Business in company
activities• Has opportunity to cooperate with
other similar company
SOIncrease customer loyalty by expanding the reach of Indofood CSR program activities in the various areas where the firm produces.
Providing information via the Internet by optimizing e-publication as a publication medium enterprise activity.
WO Using information technology to develop e-publication system to help business activities, as well as increase customer loyalty and public image.
Making activities / social program by working with companies that have similar products and take advantage of adequate manpower.
SWOT MATRIXThreats (T) • The global financial crisis which affecting commodity
prices
• Tight market competition
• Healthy life-style issues
STProvide information about the company's CSR program through online publication system to enhance the corporate image and win the competition in the industry.
Maintain customer loyalty by improving service for customers.
Threats (T) • The global financial crisis which affecting commodity prices
• Tight market competition
• Healthy life-style issues
STProvide information about the company's CSR program through online publication system to enhance the corporate image and win the competition in the industry.
Maintain customer loyalty by improving service for customers.
Quantitative Strategic Planning Matrix (QSPM)
Key Factor Weight
Strategy Alternative
Product Development Market Development
AS TAS AS TAS
Opportunity
Wide Open Market 0.2 3 0.6 4 0.8
Low Labor Wage 0.05 2 0.1 2 0.1
Increasing demand 0.1 4 0.4 3 0.3
Consumption pattern
0.15 3 0.45 3 0.45
Slow technology change
0.05 2 0.1 2 0.1
Threat New substitution of noodle
0.1 4 0.4 3 0.3
Aggressive advertising from competitor
0.2 3 0.6 3 0.6
Increasing price of wheat in the world
0.05 2 0.1 2 0.1
MSG and monopoly regulation
0.05 3 0.15 2 0.1
The possibility of a difficult funding
0.05 4 0.2 4 0.2
Strengths
Product Variance 0.2 4 0.8 3 0.6
Big Market share 0.15 3 0.45 3 0.45
Wide distribution 0.2 4 0.8 3 0.6
Financial support 0.2 4 0.8 3 0.6
Based on the total attractiveness score, strategy development product > strategy development market, than Indofood should implement strategy development product.
Weaknesses
Not adaptable with competitor
0.05 4 0.2 3 0.15
MSG towe 0.1 2 0.2 2 0.2
Total attractiveness score
6.35 5.65
BCG Matrix
DEVELOP EFE & IFE MATRIX
EFE Matrix Opportunities NO Critical Success Factors Wight Ratin
gTotal Score
Opportunities
1 Sound investment Climate 3 0.07 0.21
2 Deregulation of government restrictions on wheat flour import
4 0.10 0.4
3 Increase income per capita 3 0.07 0.21
4 Increase society aggregate consumption
4 0.07 0.28
5 High public response to the product
4 0.1 0.4
6 Instant paced lifestyle 4 0.7 0.28
7 Overseas expansion 4 0.7 0.28
EFE Matrix Threat No Critical success factor weigh
tRatng Total Score
1 Fluctuation Risk Commodity Price of raw materials
3 0.09 0.27
2 Reputanional risk issues related to food safety
4 0.05 0.2
3 Increase in minimum wage 3 0.06 0.18
4 Competitors quantity 3 0.07 0.21
5 Sabotage experts 3 0.08 0.24
6 Negative effect of hazardous substances HSE using
4 0.05 0.2
7 Strategic Issues of enviromental
4 0.05 0.2
1 3.56
IFE Matrix Strength No Critical success factor weigh
tRatng Total Score
1 Good financial performance 3 0.07 0.21
2 Company value increasing 4 0.07 0.28
3 Wide market share 4 0.08 0.32
4 Good brand equity 4 0.1 0.4
5 Extensive distribution network and quickly
4 0.07 0.28
6 Integrated supply chain and superior
4 0.09 0.36
7 Research and Development 4 0.07 0.28
IFE Matrix Weaknesses No Critical success factor weigh
tRatng Total Score
1 Require large Capital 3 0.08 0.24
2 High operational cost 3 0.07 0.21
3 High leverage ratio 3 0.06 0.18
4 Lack of internal control 2 0.05 0.1
5 Too many brands 2 0.05 0.1
6 Product are easily imitated (mass Product)
3 0.09 0.27
7 Certain product contain ingredients that harmful to HSE
2 0.05 0.1
1 3.33
DISTRIBUTION CHANNEL
Indofood has their own distribution channel called “Grup Distribusi Indofood”. One of the product, Indomie also has own distribution channel, called Indomarco to distribute the noodles for the store around Indonesia. In 2007 Indomie got 97% for The Most Powerful Distribution Performance by Qasa Consulting compare with the Mie Sedaap only got 73%.
MARKETING STRATEGY
SEGMENTATION
Indofood has 3 kinds of product of noodles :1. Sarimi : Sarimi has a cheaper price than the other
product of Indofood noodles, so their segmented the market for the low class
2. Supermie : Supermie has average price, so their segmented the product for the middle class
3. Indomie : Compared with the other product, indomie has a little expensive price, but also has a lot innovation for the indomie product, so their segmented the product for middle up class until high class
Research & DevelopmentThe Group’s R&D activities are centered on five key areas:• Plant breeding: The development of top quality seed and planting materials through
traditional and advanced breeding methods, a diverse germ-plasm base and biotechnology, supported by field trials that test progenies across a range of planting environments.
• Soils: Detailed soil survey maps that support site-specific, agronomic block management.• Agronomy: Precision soil management and crop cultivation techniques that provide our
estates with optimal recommendations on crop management and planting densities, providing insight for yield forecasts and block-by-block fertilizer and herbicide usage.
• Crop protection: The development of integrated pest management and biological pest control systems to minimize crop losses and to monitor, prevent and eradicate pests and diseases.
• Data capture, management and analysis: GPS surveys and remote sensing technology enable detailed 2D and 3D topographic maps, while Geographic Information System (GIS) tools provide analysis and troubleshooting to ensure optimum plantation management. An integrated, real-time software system provides visibility of data across subsidiaries, refineries and plantations.
CSRSustainable Plantations Through its Agribusiness Group the Company is actively engaged in the sustainable production of palm oil, and launched its Sustainability Report for the year 2012. The Agribusiness Group has made a commitment to achieving the Roundtable on Sustainable Palm Oil (“RSPO”) and Indonesian Sustainable Palm Oil (“ISPO”) certifications for all of its estates and palm oil mills by 2019. As of 2013, the Agribusiness Group has been awarded with ISPO certification for one palm oil mill and three plantation estates in North Sumatra. The Agribusiness Group succeeded in increasing its certified CPO production to close to 248 thousand tons, or some 28% of total CPO production during 2013. On top of sustainable production, the Agribusiness Group also engages in other initiatives including a zero burning policy to reduce carbon footprint, the maintenance of conservation areas based on RSPO principles and criteria, policies to reduce the use of paraquat-based pesticides, and waste reduction through agriculture and palm oil mill waste recycling, such as using liquid waste and empty fruit bunches as an energy source and as fertilizer.
Packaging Waste BankIn compliance with Law No. 18 Year 2008 regarding Solid Waste Management, and Government Regulation No. 81 Year 2012 regarding the Responsibilities of Producers in Household Solid Waste and Household-like Solid Waste Management, which require industries to implement these regulations within the next ten years, the Company formed a coalition with five other consumer goods firms to manage a “Packaging Waste Bank” pilot project in Pejaten, Pasar Minggu, South Jakarta. In 2013, the coalition focused intensively on conducting reviews, discussions and dialogs with various parties including academics, the Government, various communities and environmental observers, to seek an effective waste management model and communications program. Currently, initial steps are being taken to form an association for sustainable packaging, with Indofood as one of its founders. This has received positive feedback from the Government and other community organizations.
Business EthicsWHISTLE BLOWING The Group has put in place a whistle blowing policy and procedure ("Policy"). This Policy provides employees with clearly defined processes through which they may raise their concerns in good faith and in strict confidence, with respect to suspected fraud, corruption, dishonest practices or other malpractices that do not comply with the Group's standard operating procedures, to the Head of IAD, the Exco or the AC & RMC.The Policy aims to encourage the reporting of discrepancies and suspicious behaviors with the confidence that employees making such reports will be treated fairly and, to the extent possible, protected from reprisal.The AC & RMC reviewed and approved the Policy and was satisfied that independent investigation would be conducted for all whistleblowing reports and the appropriate follow-up actions would be taken to resolve the issues.
International Expansion
Currently Indofood already fulfilled their objectives and already done exporting the products to many countries especially for Indomie as the main product which already exported and gain the market share in other countries especially middle east countries. And the other products except Indomie is only licensing from another company for instance Lays and Pepsi. So we can conclude that right now and for a few years, we don’t need to add more countries as our market since except Asia, noodles are not that preferred by the market.