A. Company Profile
PT Indofood Sukses Makmur Tbk (“the Company”) was established in the Republic of Indonesia on August 14th, 1990 under its original name PT Panganjaya Intikusuma, based on Notarial Deed No. 228 of Benny Kristianto, S.H.
The Company’s head office is located at Sudirman Plaza, Indofood Tower, 27th Floor, Jln. Jend. Sudirman Kav. 76 ‐ 78, Jakarta, Indonesia, while its factories are situated in various locations in Java, Sumatera, Kalimantan, Sulawesi islands and Malaysia.
From simple beginnings as an instant noodle producer, Indofood has been progressively transformed to become a Total Food Solutions company with operations in all stages of food manufacturing from the production of raw materials and their processing through to consumer products on the retailer’s shelf. A leader within its industry in Indonesia, an extensive distribution system supports the position of the company’s products as household names in every part of the country.
The Company operates four complementary Strategic Business Groups (Group):
• Consumer Branded Products (CBP), the producer of a range of packaged foods under a number of divisions including Noodles, Dairy, Food Seasoning, Snack Foods, Nutrition & Special Foods and Biscuit. CBP Group is supported by the Food Ingredients and Packaging Divisions.
• Bogasari, producer of flour and pasta. The group is supported by a shipping unit.
• Agribusiness, principal activities range from research and development, oil palm seed breeding and cultivation as well as refining, branding and marketing of cooking oil, margarine and shortening. In addition, the group is also involved in the cultivation and processing of rubber, sugar cane, cocoa and tea.
• Distribution boasts the most extensive distribution network in Indonesia. It distributes the majority of the Company’s consumer products as well as third party products.
Indofood’s strongest legacy today is the strength of its brands, many of which have been companions to the people of Indonesia for years. These include a variety of brands of instant noodles (Indomie, Supermi and Sarimi), wheat flour (Segitiga Biru, Kunci Biru and Cakra Kembar), cooking oil (Bimoli), margarine (Simas Palmia). Despite intense competition, these brands remain the market leaders in their specific segments with a reputation for quality and value for money that remains unrivalled.
Agribusiness:
The Agribusiness Group operates under PT Salim Ivomas Pratama and PT PP London Sumatra Indonesia Tbk, public listed companies in Indonesia Stock Exchange. Both companies are subsidiaries of Indofood Agri Resources Ltd., a public listed company on the Singapore Stock Exchange.
Agribusiness Group is a vertically integrated operation possessing a number of leading brands derived from palm oil. Its operations cover the whole value chain from research and development, oil palm seed breeding and cultivation to milling, refining, branding and marketing of cooking oil, margarine, shortening and other palm oil derivative products. In addition, the group also engages in rubber, cocoa and tea plantations.
Within the Agribusiness Group there are three operational divisions namely Plantations, Cooking Oils & Fats and Commodities.
Distribution:
Indofood’s Distribution Group has the most extensive distribution network in Indonesia, penetrating to virtually every corner of the archipelago. In addition to Indofood’s own products, the group also distributes third-party products as well. The number of stock points has been expanded aggressively since 2005, providing wider and deeper penetration through efficient supply and delivery chains. Stock points are located in areas with a high density of retail outlets, including traditional markets, allowing each stock point to serve a closely defined geographical area in the shortest time possible.
B. ANALYSIS
1. Market analysis
Globally, Asian downturn and resulting pressure on income have forced families to prune expenditures on even essential items such as food, which has led to an increasing shift of consumption of staple food from rice to noodles. As a result, sales of instant noodles have increased significantly.
The global instant-noodle industry has estimated annual revenue of over US$3 billion, representing approximately 40 billion packets, across more than 100 countries. According to industry research, China accounts for approximately 37% of the market, followed by Indonesia with 23%. (First Pacific Company Limited Press Release, 1998). Meanwhile seen domestically in Indonesia, three categories dominate food spending. These are packaged foods, dried foods and bakery products. The combined sales value for all three was Rp.100 trillion in 2004. Instant noodles are the next largest categories after bakery, and noodle demand is expected to increase by about 3% (PT. Indofood, 2003). Table 1 shows the increase of per capita annual consumption of instant noodles in Indonesia for the past 7 years, which stands at 43 packets a year, and is forecast to grow 7% annually. (First Pacific Company Limited Press Release, 1998).
- political and legal analysis
Over the past year and so during Suharto’s era, Indofood enjoyed being monopolistic on the import of wheat and process food market and instead of paying taxes to government authorities, they get the milling fee from government, and controlled 80% of the flour market, dominated 90% of the instant noodle market at that time .(Indofood, 2003) But after March 1999 the government signed Law No. 5 Year 1999 pertaining to The Antimonopoly Act The law forbids oligopolistic practices, price fixing, and price discrimination (The US-ASEAN Business Council, 2003). The law also forbids individual companies from controlling more than 50% of the domestic market and two or three companies from controlling a combined 75% of the market.
In addition, in order to protect domestic industries from foreign competition, government lowering the tax tariff and creating non-tariff barriers for import products, especially in wheat commodity. It bring due to the increase of number wheat flour price which might be affect to the noodles industry.
In May 2001, the Ministry of Industry and Trade issued Decree Number 153/2001 on the Mandatory Application of the National Standard of Indonesia (SNI) for Fortified Wheat Flour. Both imported wheat flour and domestically produced wheat flour must follow SNI. Thus, Indofood instant noodles have to be more aware to the raw material quality and health consciousness (Hardinsyah and Suroso, 2002).
- Economic and Demographic
Based on data during 2004, the economic grew at a rate of 5%, relying heavily on the continuation of private consumption responsible for over 70% of GDP. The tsunami disaster may cut Indonesia's 2005 GDP growth by 0.1-0.4%. The World Bank revised its forecast for Indonesia's 2005 GDP growth to 5.4% from 5.0. Furthermore, Indonesia's economy will continue to expand and could reach 6% during 2006-2009 (Mabico Financial Company, 2005). It generally considered necessary to make an impact on the current level of unemployment and to improve prospects for 30 million people or 27.1% of population still living below the poverty line. In Indonesia’s US$ 153 billion economy new investment is currently still low compare to others Asian countries which estimated at 13% of GDP (Indofood Annual Report, 2005). In addition, the chief demographic factors behind the market trend, particularly in Indonesia.
Indonesia is the forth densest country in the world with 234 million populations, which has large purchasing power. Consumer market is dominated by young population (55% less than 25 years old). Demographic health indicators also have improved over the last three decades. More details information about economic and demography environment can be seen in Figure 4 and Appendix 1.
The impact of the global financial crisis served a big blow to the country’s manufacturing sector including instant noodles industry. The condition was worse for instant noodles industry with the soaring price of the basic material, wheat flour, in 2008 .to follow the fuel price hike.
In addition, the soaring prices of commodities in international market pushed up the inflation rate weakening the purchasing power of the general consumers. As a result demand for food products including instant noodles declined notably in the lower segment of the market. A number of producers of instant noodles for lower market segment were forced to suspend or stop operation with the rising price of wheat flour the main basic material of instant noodles.
Demands for instant noodles from the middle and higher market segments also scarcely grew resulting in sharp competition. The competition, however, has remained fair and healthy. There is no more price war between the country’s largest instant noodles producers producers decided to raise their selling prices to follow the rise in production cost.
The sharp market competition in the market of instant noodles, has resulted in cut in the market share of the Indofood Group through PT. Indofood Sukses Makmur with the market control by the brand of Indomie slashing to 77% from 90% earlier. Despite the global crisis, the country’s instant noodles production grew 6.9% to 1,544,072 tons in 2008 from 1,443,686 tons in the previous year .
Instant noodles industry has a large market value in Indonesia, estimated at Rp15 trillion in 2008. The market value could still increase as the country with a 225 million population provide a highly potential market with a per capita consumption of only 63 packets a year – still below South Korea’s per capital consumption of 70 packets a year.
Production capacity was 15 billion packets per year in 2008 , up from 14.5 billion packets per year in the previous year. Its capacity utilization was 80% in 2008. ISM is the largest producer of instant noodlest in Indonesia , even in Southeast Asia.
Currently ISM has 16 factories up from 14 units earlier located in Java, Sumatra, Kalimantan and Sulawesi. The company also has production facilities for spices to support its instant noodles industry. The factories, all located in Java are run by PT. Indosentra Pelangi. In addition, ISM also has two wheat procesisng factories in Jakarta and Surabaya - under PT ISM Bogasari and 1 factory to produce wheat flour sacks in Citereup.
Currently, the production capacity of Indofood with 8 units of installed production machines is 3,500 carton boxes of 40 packets per machine per shift. A day is made in three shifts that its daily production averages 3,360,000 packets.
ISM’s net sales of instant noodles in 2008 grew 29% to Rp 10.90 trillion from Rp 8.44 trillion in the previous year. Its sales volume grew 7.3% from 21.10 billion packets in 2007 to 12.98 billion packets in 2008. The company exports around 2% of its instant noodles production to more than 50 countries in the world.
- RECOMENDATION
- Market Entry Strategy
Source from wikipedia (2011) stated that a market entry strategy is the planned method of delivering goods or services to a target market and distributing them there. When importing or exporting services, it refers to establishing and managing contracts in a foreign country.
Many companies successfully operate in a niche market without ever expanding into new markets. Some businesses achieve increased sales, brand awareness and business stability by entering a new market. Developing a market entry strategy involves a thorough analysis of potential competitors and possible customers. Some of the relevant factors that are important in deciding the viability of entry into a particular market include Trade barriers, localized knowledge, price localization, Competition, and export subsidies.
Some of the risks incurred when entering a new market and start domestic or international trade include:
- Weather risk
- Systematic risk, different from systemic risk, the systematic risk is the risk inherent to the entire market or an entire market segment [3]
- Sovereign risk
- Foreign exchange risk
- Liquidity risk
While some companies prefer to develop by their own their market entry plans, other outsource to specialised companies. The knowledge of the local or target market by those specialized companies can mitigate trade risk.
Production at home Indirect exporting (export merchant) Direct exporting (foreign customer, agent, distributor, representative office, foreign branch, foreign subsidiaryÖ Production abroad without direct investment (management contract, franchising, licensing, contract manufacturing) with direct investment ( partly owned subsidiary, acquisition of a foreign company, set up a new company, equity joint venture).
When a company makes the commitment to go international, it must choose an entry strategy. The choice of entry strategy depends on:
• Market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions)
• Company capabilities and characteristics, including the degree of near-market knowledge, marketing involvement, and commitment that management is prepared to make
Alternate Market Entry Strategies:
• Import regulations may be imposed to protect health, conserve foreign exchange, protect home industry, or provide revenue in the form of tariffs.
• A company has four different modes of foreign market entry from which to select.
The various forms of market entry strategy are organized as usual, based on increasing Risk to the firm
An entry mode is the institutional narrangement by which a firm gets its products, technologies, human skills, or other resources into a market. Company thus seek entry to new marketplaces for the purpose of manufacturing and/or selling products within them. Three categories of entry modes that are available to companies:
- Exporting, importing, and countertrade
- Contractual entry
Including licencing, franchising, and turnkey projects
- Investment entry
Including wholly owned subsidiaries, joint ventures, and strategies aliances
Analysis for indofood company related with market entry strategy
1. Exporting, importing, and countertrade
Indonfood applied some entry modes that describe above. The most common method of buying and selling goods internationally is exporting and importing. Exporting is the act of sending goods and services from one nation to others and that importing is the act of bringing goods and services into a country from other countries.
Indofood company also do exporting and importing in it’s business. Indofood has ability to expand regionally and globally. Drawing on First Pacific's experience in marketing goods across Asia and Nissin Food's worldwide expertise in the food business, Indofood have more capability to accelerate its expansion into regional markets.
Moreover, Indofood’s instant noodles last year, the company exported products to more than 35 countries, which accounted for approximately 15% of revenues and it is expected that there is room to significantly increase this proportion. (Indofood Annual Report, 2005).
There are three main reasons why this company begin exporting :
1. Expand sales
2. Diversify sales
3. Gain experience
Degree of export involvement by Indofood
There are two basic forms of export involvement, that is :
- Direct exporting
Occur when a company sells its products directly to buyers in a target market.
- Indirect exporting
Is a practice by which a company sells its products to intermediaries who resell to buyers in a target market. There are several different types of intermediaries : agents, exportm management companies, and export trading companies.
Indofood aply direct exporting, that is by selling the product directly to the end users. Typically, they rely on either local sales representatives or distributors. Sales representatives (wheter an individual or an organization) represent only its own company’s products, not those of other companies. They promote the product in many ways, such as by attending trade fairs and making personal visits to local retailers and wholesellers.
Through indirect exporting, Indofood also has intermediaries, that is agents, individuals or organizations that represent one or more indirect exporters in a target market. Agents typically receive compensatition in the form of commisions on the value of sales. Because establishing a relationship with an agent is relatively easy and inexpensive, it is fairly common approach to indirect exporting.
2. Investment entry modes
For investment entry modes, indofood held joint ventures, that is separate company that is created and jointly owned by two or more independent entitites to achive a common business objective. Under certain circumstances, companies prefer to share ownership of an operation rather than take complete ownership. Joint venture partners can be privately owned companies, government agencies, or government-owned companies. Each party may contribute anything valued by its partners, including managerial talent, marketing expertise, market access, production technologies, financial capital, and superior knowledge of or techniques of research and development.
Bogasari world’s largest floor mill, Currently Indofood is the world’s largest instant noodles producer with an installed annual capacity of over 13 billion processed packs and 23 manufacturing plants through out Indonesia (PT. Indofood, 2003). Indofood brands, distributed in Indonesia through one of their own division and internationally Indofood subsidies by the third party distribution agency. Specifically for instant noodles products, the well-known and trusted brands of Indofood include household names such as Indomie.
Indofood continues to benefit from its significant competitive advantages in Indonesia. In 1998 the Joint venture between Salim’s Group’s Food, First Pacific and Nissin Food Products Co. of Japan, the company’s position in the market become stronger by making advances into international market share.
Fig 1 shows percentage of consortium
 |
Figure 1 Percentage of Consortium of Indofood Joint Venture
Source: Incorporates acquisitions of PLDT and Indofood, and disposal of Hagemeyer, 1998.
- Modification needed to international business strategy for production and marketing activities.
- Design and execute an implementation plan
It is important to draw up a plan for the management system changes that are needed in order to achieve sustainable development objectives. Translating sustainable development policies into operational terms is a major undertaking that will affect the entire organization. It involves changing the corporate culture and employee attitudes, defining responsibilities and accountability, and establishing organizational structures, information reporting systems and operational practices.
These changes are normally so substantial that a three-to-five-year plan with one year milestones will be needed. Managing this type of organizational change requires leadership from senior management. The board of directors, the chief executive officer and other senior executives must be actively involved in the process. They need to lead by example, and to set the tone for the rest of the organization.
As a starting point, after the board and senior management have established their sustainable development objectives, these should be communicated to the various stakeholder groups. Some organizations have ongoing consultation arrangements with stakeholders which facilitates this process. There is little point in embarking on a programme to meet stakeholders’ needs without first consulting stakeholders to ascertain what those needs are.
It is also important to determine any modifications that should be made to the organization’s systems and processes in order to ensure that day-to-day activities are performed in a manner that is consistent with these objectives.
The enterprise’s organizational structure should then be reviewed to determine who should take specific responsibility for the sustainable development objectives. In some cases, environmental management committees have been established; in others, a specific department has been established under the leadership of a senior environmental executive.
Some organizations incorporate statements of environmental responsibility into the job descriptions of managers and staff. Clearly defining accountability is essential to successful implementation.
Cultural change and retraining should complement the new goals. Reward systems and incentives reflecting the new corporate values should also be considered. Business planning processes should be modified to reflect the sustainable development priorities, the expanded stakeholder consultation process, and external monitoring needs.
Management information systems should be enhanced, in order to ensure that management and employees receive the information they need to assess their performance against the objectives.
Marketing activities should consider customers’ needs regarding sustainability. This will require changes to the organization’s market research efforts. This feedback can affect the way products are designed, produced, packaged, marketed and promoted. In some cases, new markets may be added or existing markets redefined.
Marketing aspect in Indofood firm actually already good, we can see from the market share rate of Indofood, For almost 37 years in the Indonesian market instant-noodle products always be the leading market since it has formed in 1968, which the 90% market share is the highest as compared to its competitors
Improving CRM (customer relationship management) from a general management perspective. CRM systems for marketing help the enterprise identify and target potential clients and generate leads for the sales team. A key marketing capability is tracking and measuring multichannel campaigns, including email, search, social media, telephone and direct mail. Metrics monitored include clicks, responses, leads, deals, and revenue. Alternatively, Prospect Relationship Management (PRM) solutions offer to track customer behavior and nurture them from first contact to sale, often cutting out the active sales process altogether.
In a web-focused marketing CRM solution, organizations create and track specific web activities that help develop the client relationship. These activities may include such activities as free downloads, online video content, and online web presentations
4 Steps for Fixing Customer Relationship Management
Align CRM to your Business Strategy
CRM has the ability to positively (and negatively) transform an organization’s relationship with its clients. As such, firms must take care to ensure that CRM strategies and investments are not inconsistent with their brand positioning, value proposition and business model. In order to minimize customer and cost risk, managers need to undertake a thorough analysis up-front in order to design the optimal strategy and program.
Start small but don’t under-invest
Although CRM is a mature technology, its implementation will still benefit from a measured deployment that can build early momentum & support, garner learnings in flight and measure ROI at key milestones. At the same time, firms must be careful not to be ‘penny wise and pound foolish’ by starving young CRM initiatives of the needed skills & resources, technology spend and internal priority.
Ensure marketing is up to the task
To maximize returns, managers must ensure that marketing and IT has robust capabilities as well as fundamental consumer knowledge before making any investments. If important analytics, demand generation and marketing communications capabilities are not in place at the outset, CRM will never realize its promise.
Don’t neglect the human dimension
Maximizing internal alignment and participation is vital to the success of CRM. Delivering this requires proven change management tools as well as providing adequate training and support resources. Moreover, companies must safeguard retention and their brand image by making sure their customers will not resent CRM-driven sales & marketing programs aimed at them.
Meanwhile production processes and operating procedures must be assessed against regulations, industry practices or internal standards, in order to determine areas for improvement. This represents an opportunity for the company to develop innovative production processes.
Assembly Operations
Having assembly facilities in foreign markets is very ideal when there are economies of scale in the manufacture of parts and components and when assembly operations are labour intensive and labour is cheap in the foreign country. It may be noted that a number of U.S. manufacturers ship the parts and components to the developing countries, get the product assembled there and bring it back home. The U.S. tariff law also encourages this.
Assembling the product meant for the foreign market in the foreign market itself has certain other advantages, besides the cost advantage. The import duty is normally low on parts and components than on the finished product. Assembly operations would satisfy the 'local content' demand, at least to some extent. Because of the employment generation, the foreign government's attitude will be more favourable than towards the import of the finished product.
The restructuring of operations.
The management of Indofood has redefined the operations, changing from a past focus on divisional profitability to core product profitability. It impact to better coordination, tighter supply chain management and lower working capital needs are expected to begin to be evident in improvements in both sales and margins.
It is important to note that, throughout this process, the input and feedback of those doing and supervising production scheduling must be included.
1. Study the production scheduling system. Create a model of the persons in the production scheduling system, their tasks and decisions, and the information flow between them.
Swimlanes, GRAI models, and other approaches can be used (Herrmann, 2004; Guinery anD MacCarthy, 2005).
2. Analyze this model and determine if changes to the information flow, task assignments, or decision-making responsibilities are desirable and feasible. If changes are needed, go to Step 6.
3. Given that the patterns of information flow are satisfactory, consider the decision-making process that the scheduler uses. Determine if the scheduler is able to manage bottleneck
resources effectively, understand the problems that occur (whether caused by others or by themselves), and take steps to handle future uncertainty (McKay and Wiers, 2004). If not, changes in these areas are suggested. If changes are needed, go to Step 6.
4. Consider dividing the workload between the human scheduler and a decision support tool. As suggested by McKay and Wiers (2006), the design of a scheduling decision support tool should be guided by the following concepts: (1) the ability of the scheduler to directly control the
schedule (called “transparency”), (2) the amount of uncertainty in the manufacturing system, (3)
the complexity of the scheduling decison, and (4) how well-defined the scheduling decision is.
An ill-defined scheduling decision is characterized by incompleteness, ambiguity, errors, inaccuracy, and possibly missing information (McKay and Wiers, 2006). If a new or improved
decision support tool is needed, go to Step 6.
5. Finally, consider improving production scheduling problem-solving by developing a more appropriate problem formulation or installing more powerful algorithms that can find better
solutions faster. Consult the enormous literature on scheduling problems for different approaches to these challenges.
6. Implement the changes that were selected.
7. Assess the impact of the implemented changes and repeat the above steps as necessary.
The historic work of Taylor, Gantt, and Johnson demonstrate the importance of three important perspectives: the organizational, the decision-making, and the problem-solving. This strategy explicitly incorporates all three. The progression within the strategy from one perspective to the next follows a well-established approach to system design, in which one considers the entire system before moving to its subsystems and then its components. Moreover, this progression corresponds to the historical development of these perspectives. Taylor changed the organization, then Gantt developed charts to improve decision-making, and finally Johnson studied the optimization problem.
In addition, this strategy uses multiple perspectives and involves the persons that have the problem in order to increase understanding of the real-world situation, which is an important objective (cf. Hall, 1985; Meredith, 2001). The strategy calls for implementing solutions, evaluating their performance, and repeating the process in a spirit of continuous (continual) improvement.
More generally, this strategy provides an interdisciplinary structure to attack the swampy complexities of real world messes, as the earliest work in operations research did (Miser, 1987). Because it addresses messy problems, requires the use of multiple techniques, and focuses on 13
understanding the situation, this strategy contributes to management engineering, an underdeveloped area of operations research that falls between the straightforward application of existing techniques and the research activities that add to our body of knowledge (Corbett and Van Wassenhove, 1993).
Regulatory requirements are easily identifiable, although they continually evolve. Sustainable development criteria are less precise, and are generally not yet clearly manifested in regulations. The use of industry practices as performance norms is expanding rapidly, and in some cases these standards exceed regulatory requirements.
The chemical industry’s ‘Responsible Care’ programme is one example of industry standards that companies can use to foster improvements in their processes and practices. Another popular tool is benchmarking.
At the same time, managers responsible for procurement must reassess their choice of suppliers, in terms of their products and the way in which they are produced, to ensure that the company’s sustainable development objectives are fostered through its purchasing activities.
Financial planning should consider the capital requirements for process changes, as well as possible tax incentives and the financial effect of new mechanisms such as credits for waste recovery.
A successful implementation plan depends on ‘rethinking the corporation’ if it is to respond to the paradigm shift associated with sustainable development. It is important to address not only the positive forces for change but also barriers and sources of resistance.
While the basic management framework may remain intact, substantial changes will probably be needed in the culture, the organization and its systems. The plan must have full ‘buy-in’ if it is to be effective. This in turn requires broad consultation and cultural change.
- Reference
Deloitte and Touche (1992). Business Strategies for sustainable development. Vol. undefined. Pp 10-12.
Jeffrey. W. Herman (2007). The Legacy of Taylor, Grantt, and Johnshon : how to improve production scheduling. Vol. 27 pp 11-15
Lluis. G. Renart and Charles Cabre (2007). How to Improve a CRM Strategy. Vol 690. Pp 4-8
Tidak ada komentar:
Posting Komentar