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PT. MANDOM INDONESIA TBK.

BUSINESS STRATEGY MM 5012

Fikhi Adrian - 29112 Perthyzsa Azaria 29112026 Molly Sitompul 29112027 Lutfi Kausar Rahman 29112041 Yongke Yoswara 29112250

MANAGEMENT BUSINESS OF ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG FEBRUARI 2013

TABLE OF CONTENTS

TABLE OF CONTENTS ................................................................................................... 1 CHAPTER I. INTRODUCTION ...................................................................................... 2 I.1. I.2. I.3. I.3.1. I.3.2. I.4. BACKGROUND .................................................................................................. 2 ABOUT COMPANY ........................................................................................... 2 EXTERNAL AND INTERNAL ANALYSIS ..................................................... 3 INTERNAL ANALYSIS .................................................................................. 3 INDUSTRY COMPETITION ANALYSIS ..................................................... 4 BUSINESS STRATEGY ..................................................................................... 5

CHAPTER II. BUSINESS MODEL ANALYSIS ............................................................ 7 II.1. II.1.1. II.1.2. II.1.3. II.1.4. II.2. II.3. II.4. II.5. COMPONENT OF BUSINESS MODEL ............................................................ 7 CUSTOMER VALUE PROPOSITIONS ...................................................... 7 PROFIT FORMULA ..................................................................................... 7 KEY RESOURCES ....................................................................................... 9 KEY PROCESSES ........................................................................................ 9 VALUE CHAIN ANALYSIS ............................................................................ 10 ACTIVITIES MAP ............................................................................................ 11 BUSINES MODEL AND VALUE PROPOSITION ALIGNMENT ................ 12 BUSINESS MODEL NEED ANALYSIS ......................................................... 13

CHAPTER III. CONCLUSION AND RECOMMENDATION ................................... 15 III.1. III.2. III.3. CONCLUSION .................................................................................................. 15 RECOMMENDATION ..................................................................................... 15 LESSON LEARNED ......................................................................................... 15

REFERENCE .................................................................................................................... 16

CHAPTER I. INTRODUCTION
I.1. BACKGROUND Southeast Asia is a growing and diverse market for international personal care product brands, despite the challenges (and some losses) caused by the recession. The region contains relatively rich emerging markets (and the very rich city state of Singapore), and its major poorer countries, notably Vietnam and Indonesia are growing fast and emerging robustly from the recession. Indonesia is home to approximately 700 cosmetic companies. In 2011 beauty and personal care sales grew strongly in both volume and value terms, accelerating more than in 2010. Rising disposable income due to strong economic growth in Indonesia facilitated better purchasing power enabling consumers to buy beauty and personal care products. The favourable performance was also supported by a flurry of new product launches, aggressive promotional activity by players and rapid expansion of retailers. These factors led to increased consumer knowledge of many products, and a consequent increase in spending on different product types. Beauty and personal care is still expected to perform respectably over the forecast period. The potential for growth is still good, as the geographical penetration of many products had yet to reach an optimum level in the review period, given the vast size of the country. While urban dwellers will remain the main engines of growth, rural inhabitants are expected to increasingly contribute to rising volume sales of basic necessities, such as bath and shower, hair care and oral care. Improved distribution networks in rural areas and manufacturers attempts to make their products more affordable to every income level will give rural dwellers better access to beauty and personal care. At the same time, urbanites are expected to trade-up to more value-added products, such as those considered masstige. I.2. ABOUT COMPANY PT. Mandom Indonesia Tbk. was established as a joint venture between Mandom Corporation Japan and PT. The City Factory. The Company was incorporated bearing the name PT. Tancho Indonesia and changed to PT. Mandom Indonesia Tbk. on 2001. On 1993, the company became the 167th company and the 11th Japanese joint venture company listing its share on the Indonesia Stock Exchange.

The company holds on to the vision of Towards Asia Global Company Based in Indonesia. Their mission is to provide a comfortable lifestyle supported by health and beauty. PT. Mandom Indonesia Tbk. has three values as their foundation: (1) Creating lifestyle value with consumers, for consumers, (2) Active employee participation, (3) Social responsibility and sustainability. The company's commercial production was started on 1971 when the company initially produced hair care products, which then developed by producing fragrances and cosmetics. Currently, Mandom has collaborated with several international brands, such as RoC from France and Hakugen from Japan, to promote and distribute their products in Indonesian cosmetics market. Some of their products are Gatsby, Pixy, Pucelle, Spalding, etc. Besides domestic market, the company also exports its products to some countries such as United Arab Emirates (UAE), Japan, India, Malaysia, Thailand, and others. Through UAE, the company's products are re-exported to some countries in Africa, Middle East, Eastern Europe, and others. PT. Mandom Indonesia Tbk. has many awards from their product: Indonesia Best Packaging Award, Top Brand Award (from Frontier Magazine and Marketing Magazine), Top Brand for Teens, etc. I.3. EXTERNAL AND INTERNAL ANALYSIS

I.3.1. INTERNAL ANALYSIS Resources There are two types of resources in PT. Mandom Indonesia Tbk.: tangible and intangible resources. PT. Mandom Indonesia Tbk. has 2 factories in Sunter and Cibitung. In Sunter, company produce all of their cosmetic products and in Cibitung, the factory is established to produce packaging and as their logistic centers. They also have technology in research and development center as their strong resources to compete with other competitors. The organization in this company is structured well. For intangible resources, PT. Mandom Indonesia Tbk.s products are well known in market so their brand image and reputation are one of many intangible resources for company. The company has been established for 40 years so they have good enough reputation and trustable products for several demographical age segmentation. Company 3

also have about 4100 employees with their knowledge and skills as companys intangible resources. Capabilities In distribution areas, company can effectively use their logistic and management technique. They build the factory for logistic center in Cibitung that is placed in the middle of industry area. In manufacture, PT. Mandom Indonesia Tbk. design and produce reliable products that can compete in the market. In research and development, they use high technology to make innovation in their products. Corporate Value PT. Mandom Indonesia Tbk. has three values as their foundation: (1) Creating lifestyle value with consumers, for consumers The words beauty, health, cleanliness, and fun summarize our business. We will do our best to listen to our consumers needs and wants and turn them into attractive products and services, and to bring those values to as many consumers as possible (2) Active employee participation The corporate name Mandom, deriving from Human and Freedom, represents the respect for human dignity and a liberal atmosphere. At the core of the Mandom Group is an environment where employees can freely demonstrate their creativity through open and lively discussions. The continuous growth of both the individuals and the entire organization will enhance our value. (3) Social responsibility and sustainability. We will try to establish mutual communication with our stakeholders in order to build and sustain favorable relationships with them. We aim to respond quickly to their demands on our economic and social responsibilities. We will also be a good corporate citizen and dedicate ourselves to societys development. I.3.2. INDUSTRY COMPETITION ANALYSIS Rivalry among established competitions The level of competition among the existing established competitors in personal care product industry is high. The biggest competitors are Unilever, Kao, and P&G. The

competitors have huge resources and strong power in personal care product industry. The competitors also have strong brand awareness in consumer mind-sets. Bargaining power of suppliers Bargaining power of suppliers in personal care product industry is low because there are so many options for the company to supply their needs of raw material. PT. Mandom Indonesia Tbk. has their own factory for packaging of their products. For chemical raw material, there are many supplier can supply. Bargaining power of buyers The bargaining power of buyers is high. Buyers have various options to choose the personal care products. Buyers have strong ability to force down price for quality of the products because buyers have so many brands to compare with. Threat of substitute products or services PT. Mandom Indonesia Tbk.s products can be replaced with other competitor' products. For example: Gatsby facial wash can be replaced with face wash bar-shaped soap, cleasing milk, and body soap from other competitors. Pucelle cologne can be replaced with body spray or aromatherapy products from other competitors. Threat of the entry of new competitors The level of threat of new entrants is high in this industry because there are so many personal care product industry competitors. The competitors has strong brand awareness in the customer mind-set and the competitors have so many experience in personal care industry. I.4. BUSINESS STRATEGY Based on Porter, there are three generic business strategies for the company. The first of three strategies is called overall cost leadership. A cost leadership strategy involves a firm being the lowest-cost producer within the industry. The second strategy is differentiation. A differentiation strategy is based on an organization producing products or services which are perceived by customers as unique or different. A differentiated product has the opportunity to meet different customer needs more closely. The third generic strategy is referred to as a focus strategy. A focus strategy allows an organization to target a segment or niche within the market. The segment may be based on a particular customer group, geographical markets, or specific product lines. 5

PT. Mandom Indonesia Tbk. is using cost leadership strategy. Their products are also known as a budget or low price products. There is little difference in products feature compared to other similar products that produced by competitors. In innovation, PT. Mandom Indonesia Tbk.s products are not pioneers. They release their products after other products develop and release new products or feature. For example, PT. Mandom Indonesia Tbk.release facial wash product lately, long time after other competitors launch facial wash product. This situation can reduce their cost by reducing research cost. Quality of their products is not quite high. Their products quality is average and quiet similar even lower compared to other competitors in some products. Consumer goods, in this case is cosmetics, dont need high reliability product. These kinds of products are high in turning ratio number. Their products are safe for people daily usage and fulfill the health standard of Indonesia. This situation affects the cost of raw materials. The raw material should be in lower quality in order to make the cost lower. These cost strategies make the price can be lower compared to other competitor.

CHAPTER II. BUSINESS MODEL ANALYSIS


II.1. COMPONENT OF BUSINESS MODEL II.1.1. CUSTOMER VALUE PROPOSITIONS Customer value proposition is a description of the experiences a target user will realize upon purchase and use of a product. The customer value proposition is the most important tool in PT Mandom Indonesia Tbk.s to market their product. Company use customer value proposition as a foundation for understanding how their product will realistically be valued by their consumer. The first value of PT. Mandom Indonesia Tbk. is creating lifestyle value with consumers, for consumers. The company makes every products based on consumers research and they want to deliver the value to the customer using their products. It is important for the company to be able to constantly provide the best for the consumer without compromising the quality of the companys products. The company always study and observe consumer behavior in order to be able to provide product innovations which are suitable and usefull for the customers. II.1.2. PROFIT FORMULA Revenue Model The company net sales in 2011 consist of: Hair care Skin care and make up Fragrance Others TOTAL 615.695.034.761 598.371.367.462 424.221.854.573 16.382.841.562 1.654.671.098.358

Domestic sales were Rp 1.22 trillion or grew by 11.1% compared to the previous year. Meanwhile, export sales were recorded at Rp 437.72 billion or grew by 17.7% compared to the previous year, with the support of the rapid growth of the Indian market and the smooth export sales to Dubai as a pillar of the Companys export business. Accordingly, the ratio of domestic to export sales was 73.5%:26.5%. Cost Structure Commonly, all businesses have to create and keep their cost structure efficiently. Otherwise, theres business model that depends on efficient cost structure. According to 7

Alexander Osterwalder and Yves Pigneur, theres two type of cost structure: cost-driven and value-driven. In a business model that use cost-driven, company focus on minimalize cost to create the optimal cost-structure. But when company use value-drive cost structure, cost efficiency is not a major consideration. The main tagert is company give premium service to customer. PT. Mandom Indonesia Tbk. used cost-driven in their cost structure because their business strategy is low cost so they minimize their cost (direct and indirect cost). Cost structure includes the key assets, direct cost, and indirect cost. Key assets PT. Mandom Indonesia Tbk. has total assets of IDR 844,694,007,386.00 key consisting of land, buildings, machinery and equipment, furniture and fittings, vehicles, and constraction in progress. Of total assets is key, Machinery and equipment is an important asset to running of the business, because of machinery and equipment have 59% of the total key assets owned, PT. Mandom Indonesia Tbk. should be able to allocate invesment of IDR 844,694,007,386.00 in each year. Direct cost Direct cost itself is a cost that can be seen directly on a firm and direct bearing on the main business road of a company. At PT. Mandom Indonesia Tbk. has that consists of raw and packaging materials used, direct labor cost, amortization and depreciation, and factory overhead costs. which has a total of IDR 1,078,059,017,282.00. PT. Mandom Indonesia Tbk. is a company that manufactures of body care products, it is the biggest direct cost of raw and packaging for 81.50% of the total direct cost incurred by company every year. Indirect cost Contrast to the direct costs, indirect costs are costs that can not be seen directly its effect on a production but actually although not seen directly, the cost goes greatly affect the company. Indirect costs at PT. Mandom Indonesia Tbk. divided into two, the first selling expenses amounted to IDR 256,787,803,418.00 or 62% and that both the general and administrative expenses amounted to IDR

151,473,210,966.00 or 37%. Total of these two factors, company has indirect costs amounting to IDR 408,261,014,384.00 and it can be concluded that the biggest factor affecting the amount of indirect costs at company is selling epenses.

In the good company, direct cost must bigger than indirect cost because direct cost is the real cost that influence the production of the company. Based on their financial report, PT. Mandom Indonesia Tbk. can be concluded that the company is good company because their direct cost (72.5%) is bigger than their indirect cost. II.1.3. KEY RESOURCES Key resources are the required asset of PT. Mandom Indonesia Tbk to offer and deliver value proposition to the customer. Human Resource Continues improvement for their employee, the Company facilitates the employees in competency development for both technical skills and soft skills. The employee become their competitive advantages because of their capability at research and soft skill. Strong brand Strong brand of PT. Mandom Indonesia Tbk, support by advertising with popular artist. PT. Mandom Indonesia Tbk is a market leader for hairstyling product and mens fragrance. 70,5% of market share for hair styling and 16,5% of market share for mens fragrance. Technology Great Japan technology for make perfectly cosmetic to fulfill market need is their key resource. They make modern factory at Jakarta to make the product and Cibitung as their packaging factory. The Cibitung factory must become a production hub for the whole of Asia. It must manufacture even higher quality and lower cost products. Channel Distribution channel of PT. Mandom Indonesia Tbk spread widely all over Indonesia, Thailand and India. In Indonesia, their product sales were at the big mall until traditional market and small retailer. Because of their strong distribution channel they can survive at strong competitive environment with P&G and Unilever. II.1.4. KEY PROCESSES PT. Mandom Indonesia Tbk. has good process from R&D until the deliver their product to the customer that allows them to deliver value to their customer. The whole 9

process from R&D to delivery their product to the customer is their key process. As the starting point of their processes, the development of new product plays important role for the company. Therefore, according to one of the companys values, namely Creating lifestyle value with consumers, for consumers, the company conducts new product development based on researches on consumers needs and analysis of market trends as well as constructs detailed plans as a result of intensive discussions among the relevant divisions. The second process is production. The production department played an important role as the basis of production for PT. Mandom Indonesia Tbk. The production process paid special attention to the effort for the development of a competitive production system, both from the aspect of quality and cost. After production process, next process is packaging. The production of this packaging requires high technical ability due to its different specifications with the packaging which have been produced so far by the company, and the company has successfully met the requirements, so that shipping is scheduled to commence in 2012. The next key process which also is an important part is the delivery of their products to their retailers. They must ensure that the delivery schedule. This is one of the key processes so that they can of their product delivering value to the customer. From the customer, it will be returned to the process R & D. The company will conduct research to determine customer needs and the latest technological developments that could still focus on the customer needs. II.2. VALUE CHAIN ANALYSIS Primary Activities The production department played an important role as the basis of production for PT. Mandom Indonesia Tbk. The production department also paid special attention to the effort for the development of a competitive production system, both from the aspect of quality and cost. In marketing and sales, the activities were prioritized to support the focus brands for men and women, namely GATSBY and PIXY. The company broadcasted TV commercials. Along with the broadcast of TV commercial, the company has displayed Points of Purchase (POP) in stores, such as hangers. PT Mandom Indonesia Tbk. has 2 kinds of sales: domestic and export. The ratio of domestic to export sales was 73.5% : 10

26.5%. Meanwhile, in order to improve service for customer, PT. Mandom Indonesia Tbk. strengthened the membership program, for example: PIXY Beauty Community (PBC). Various events had been conducted for PBC members In terms of purchasing activity, the company also encountered difficulties in purchasing resin materials and supply of some raw materials. However, such problems can be solved without significantly affecting the production process by implementing the policy of early order and increasing the secure stock level, as well as the purchasing policy from multiple suppliers. Support Activities The Company conducts new product development based on researches on consumers needs and analysis of market trends as well as constructs detailed plans as a result of intensive discussions among the relevant divisions. In human resources, the company is fully committed to incessantly increase its ability in recruiting, maintaining, and developing its employees. One of the Companys efforts in managing the employees competence is by implementing a Career Development Program (CDP). Furthermore, the Company also facilitates the employees in competency development for both technical skills and soft skills. As part of the community, PT. Mandom Indonesia Tbk. is fully aware of the importance of a community friendly business. Therefore, the company divides its focus on social activities to environment and education. In the area of environment, the Company continuously improves its awareness of waste water treatment both for production and domestic waste. In the area of education, the company actively participates in facilitating students of SMK in Jabodetabek area for a job training opportunity. Starting 2011, the company enhanced the use of information technology (IT) to strengthen information sharing activities with the consumers. Activities through Facebook have been conducted by synchronizing among ASIAN countries which market products in order to increase the number of customers. II.3. ACTIVITIES MAP PT. Mandom Indonesia Tbk. has positioned themselves as low cost manufacture, globalization, and lifestyle product. For low cost manufacture position, the activity that support their position are production in emerging country, efficient production system,

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packaging production system, men and women product categorizing, and mass production. Their production is in emerging countries because of the low cost operational, especially in labour cost. They also use modern technology to make their production more efficient. They have their own factory for packaging so they can reduce their cost in purchasing for packaging. They categorize their products based on women and men product so they can focus on their product development. They can get low cost product with supported from mass production and high volume of sales. For globalization position, they have several factories at Asia (Japan, India, & Indonesia). Their strategic position factories at Asia make them easier to deliver product all around Asia. To compete in global market, the company develop some training to improve their employees skill (soft skills and hard skills) and make them more competents in order to meet challenges in global market. They also positioned themselves as company with lifestyle product. To sustain at this position they make their product with excellence design to meet costumer needs. Company do some dynamic marketing to make their brand awareness as lifestyle products. PT. Mandom Indonesia Tbk. did some research and development based on customers needs. II.4. BUSINES MODEL AND VALUE PROPOSITION ALIGNMENT Cost - Price Their position of price is leader. Cut the cost by producing the products packaging in their own plant. Some raw material developed. They also have many suppliers can supply their material. Based on our analysis these situations impact the cost which make the company can reduce their operating cost. Innovation - Features Their position of features is basic. There are no any special features in their product. Their innovations are incrementally changed. So the features of products are basic and little bit customized in some variant. Reliability - Quality The quality of their products is average and acceptable. Consumer goods, in this case is cosmetics, dont need high reliability. These kinds of products are high in turning ratio

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number. Their products are safe for people daily usage and fulfill the health standard of Indonesia. Relationship Support The level of support is standard. This company has medium intensity of relationship to their customers. There are informations that show companys relationship to its customers such as gathering, seminars, and other forms of activities that develop company customer relationship. But there is no customers hotline number for complaints and information as other competitors have been developed. Channels Availability The level of availability is spread. These products are widely available in Indonesia. Products are available in supermarket, main retailer, small retailer, and sometimes in traditional market. It is not difficult to find Mandoms products in Indonesia. Brand Reputation The level of reputation is well-known. Mandoms products are well known as economical products that fit to most of Indonesian customers needs. Their products are not difficult to find and have been identical for most Indonesian consumers. II.5. BUSINESS MODEL NEED ANALYSIS Cost - Price Value of products will be improved in line with the price. Improvements that can do to increase the value of products is gaining their quality of products. The price will be increased from price leader into competitive acceptance price range. Innovation - Features They should improve their packaging design in order to fit the current trend and lifestyle. They can analyze the current trend from the customer and current lifestyle. PT. Mandom Indonesia Tbk. also does some incremental innovation on composition of their products. Reliability - Quality In order to compete with many competitors, they have to increase the quality of their products by modernize their production system. The production systems include machine, equipment, and also supported technology. They should develop safe and healthy

products. For example: they change their compositions to be more natural. 13

Relationship Support To maintain their relationship with the customer, the company has to develop hotline customer service and show at the product package. The company enhanced the use of information technology (especially internet) to strengthen information sharing about their products to customers. For example they can develop forum discussion and social media to increase products brand awareness. Channels Availability They must keep their product availability in the market to fulfill customers needs and demands. They gain their maintaining of product availability in local and international market. Products are available in supermarket, main retailer, small retailer, and sometimes in traditional market in every area of Indonesia and also another country. Brand Reputation The company must focus on social activities to environment and education. In the area of environment, the company continuously improves its awareness of waste water treatment both for production and domestic waste in order to avoid any negative impact to the environment. The company actively participates in facilitating students of SMK in Jabodetabek area for a job training opportunit. The company also provides a training on the subject of ethics of appearance and attitude, selling technique, and others, in order to support the students to be ready in communicating with the consumer.

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CHAPTER III. CONCLUSION AND RECOMMENDATION


III.1. CONCLUSION PT. Mandom Indonesia Tbk. was established as a joint venture between Mandom Corporation Japan and PT. The City Factory. The vision of this company is Towards Asia Global Company Based in Indonesia. Besides domestic market, the company also exports its products to some countries. The company has many strong competitors, such as Unilever and P&G. PT. Mandom Indonesia Tbk. is using cost leadership strategy. III.2. RECOMMENDATION III.3. LESSON LEARNED

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Exhibit X Value Chain Analysis Exhibit X Business Model and Value Proposition Alignment

Exhibit X Activity Map REFERENCE


PPM Management Team. 2012. Canvas Business Model. Jakarta: PPM. Henry, Anthony E. 2011. Understanding Strategic Management. NewYork: Oxford University Markgraf, Bert. 2012. Describe the Three Levels of Strategy for a Single-Business Company. http://smallbusiness.chron.com/describe-three-levels-strategy-singlebusiness-company23508.html, retrieved on 17/02/2013. Matthews, Alex. 2012. The Tracey & Wiersema Value Discipline Model Part 1. http://www.enterprise-advocate.com/2012/02/the-tracey-wiersema-value-disciplinemodel-part-1/, retrieved on 17/02/2013. Riley, Jim. 2012. What is Strategy. http://www.tutor2u.net/business/strategy/, retrieved on 14/02/2013. QuickMBA. 2010. Porter's Five Forces. http://www.quickmba.com/strategy/porter.shtml, retrieved on 16/02/2013. Zwilling, Martin. 2010. The 6 Keys to Real Sustainable Competitive Advantage. http://www.businessinsider.com/the-6-keys-to-sustainable-competitive-advantage-20106?op=1, retrieved on 15/02/2013.

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