Rodamas Group:

Designing Strategies for

Changing Realities in Emerging
Economies

Syndicate 5
Bibhushan Raj Joshi (29118701)
Hawa Firdausi K (29118145)
Jonathan Febrian (29118124)
Rodamas Profile
• Rodamas (means “golden wheel”) is an
Indonesian manufacture company that
is active in several line businesses.
• Started in 1959 by Tan Siong Kie, a
Chinese Indonesian, in Jakarta, under
the name Ho Hoa Trading Company
Limited. Currently led by Tan Siong Kie’s
son, Mucki Tan.
• Rodamas was established as a response
of Indonesia’s rising industrial
development after its proclaimed
independence, which focused on import
trade and developed partnership with
foreign manufacturers to produce basic
products, starting from roof material
and gourmet powder.
• Rodamas has now diversified its
product, consist of:

2
Business Problem
• Due to changing environment, Rodamas started to
think of moving away from its traditional business
model.
• Challenges;

Capabilities
• Rodamas does not own any proprietary competencies

Rising competitors
• Rodamas has given up some market share to other
competitor (eq. Unilever)
Saturated market
• Rodamas line businesses have natural limits of growth

Diversification strategy
• What strategy should Rodamas pursue to secure its
place?
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Alternative Strategies

1. Entering the property sector

2. Move into labor-intensive manufacturing

3. Internationalization via foreign direct investment

4. Focus on distribution business

5. Buy existing manufacturing business

4
Justification for Diversifying

The industry The The

attractiveness cost-of-entry better-off
test test test

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Real estate business

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1. Entering the property sector
Industry Attractiveness Test – Porter’s 5 Forces Analysis
Threat of New Entrants (Low)
• Players: Rodamas, International and
national plaoyers
• Capital requirement is high
• Cost advantage (favourable location)
• Tax system is not favourable
• Government regulations
Bargaining Power of Supplier (High)
• Players: Local Contractors, Land
owners and Financial institution
• Industry don’t have the potential to
integrate backward
•
Industry: property
Geographic scope: Indonesia
Rivalry Among Competitors (High)
• Players: Adhi Karya, PP Properti
• Competitors are numerous
• High fixed cost
Threat of Substitute (Moderate)
• Players: government or non-profit
housing, rentals and lease
• Substitutes are readily available
• Substitution cost is cheaper.
Bargaining Power of Buyer (High)
• Players: Office, Investor, Individuals
• Demand is low
• Have the ability to postpone
• Low or no cost of switching
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Cost of Entry Test: Real Estate Business

Cost needed to enter the industry

• Tax
• Business Knowledge
• Certification to start the business

Better-off Test
Available resources that needed to enter the industry

Tangible
Financial resource
Organizational resource
Physical resources
Technological resource
Intangible
✔ Human resource
Innovation resource
✔ Reputation resource

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Real estate business (Not Recommended)

PROS CONS

● Favorable land site available with the company in ● Lack of strong brand name
Jakarta ● Government regulations.
● Rapid expansion & potential demand in Jakarta ● Unfavorable tax regime
expected ● Volatile industry
● Existing connections with the local government ● High competition. Rodamas would be a small player.
officials ● Getting further land sites would be a problem.
● High investment

● There are several disadvantages for Rodamas in this industry such as

○ High degree of rivalry, high supplier power and high bargaining power of buyer.
○ New area and industry for Rodamas
○ Highly dependent on Government regulation
○ Lack of Brand Name
● This makes it difficult for Rodamas to make significant impact in this industry. So Rodamas should not enter this
industry

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Entering Property Sector

Move to labor intensive

manufacturing
Key Factors Weight Notes

Attractive Score Total Attractive

(AS) Score (TAS)

External
Economy 0,05 2 0,1 Related and depend from buying power of customer
Political/Legal/Governmental 0,05 1 0,05 Need to understand about legalization and tax rate
Social/Cultural/Demographic/Environm
ental 0,1 2 0,2 According how many population in target area
Technological 0,1 2 0,2 The strategy is an average response in technological factor
Competitive 0,1 3 0,3 Many strong existing competitor who had experienced

Internal
Management 0,05 1 0,05 The strategy is a poor response to internal management
Marketing 0,2 1 0,2 Low brand recognition
Finance/Accounting 0,05 2 0,1 The strategy is an average response to financial factor
Production/Operations 0,05 2 0,1 The strategy is an average response to operational factor
Research and Development 0,05 1 0,05 The strategy is a poor response to R&D factor
Computer Information Systems 0,2 2 0,4 The strategy is an average response to IT system
Total 1,00 1,7

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labor-intensive manufacturing

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Move into labor-intensive manufacturing
PROS CONS

● In-house capability for end to end value chain ● Non-competition clause in certain businesses
Management ● High existing competition
● Success of many local firms ● No starting base
● Understanding of local market & Expertise in distribution ● Low market entry barrier
● Breadth of experience across a variety of product
categories

Strength Opportunities

● Highly qualified management ● New source of income and profit

● Understanding of local market and demand ● Competitive edge among competitors
● Good relation with the existing suppliers and buyers ● Reduction in labor cost

Weakness Threat

● Lack of good band recognition ● Government Policies

● No starting base and resources ● Lack of skilled workers
● Lack of skilled workers
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Move into labor-intensive manufacturing (Not Recommended)

Move to labor intensive

manufacturing
Key Factors Weight Notes

Attractive Score Total Attractive

(AS) Score (TAS)

External
Economy 0,05 2 0,1 Salary and labor are highly depent on current economy
Political/Legal/Governmental 0,05 1 0,05 Bundling promotion response is less effective on political situation
Social/Cultural/Demographic/Environm
ental 0,1 3 0,3 Allows the workders to get jobs and build trust in the organization
Technological 0,1 2 0,2 The strategy is an average response in technological factor
Competitive 0,1 3 0,3 Bundling promotion gives an advantage in competitiveness

Internal
Management 0,05 1 0,05 The strategy is a poor response to internal management
Marketing 0,2 1 0,2 Low brand recognition
Finance/Accounting 0,05 2 0,1 The strategy is an average response to financial factor
Production/Operations 0,05 4 0,2 The strategy is an average response to operational factor
Research and Development 0,05 1 0,05 The strategy is a poor response to R&D factor
Computer Information Systems 0,2 2 0,4 The strategy is an average response to IT system
Total 1,00 1.95

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 Internationalization via foreign direct
investment

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Industry Attractiveness Test –
3. Internationalization via foreign direct investment

PROS CONS

· Economic crisis created worldwide opportunities that · Limited knowledge of new

could be captured regions. Regions could be
· Existing favorable alliance partnerships and products unsustainable
· Limited financial risk · Extensive research required.
· No R&D knowledge/innovation required · Bureaucracy, Manpower,
· Success of previous foreign ventures distribution etc. may pose a
threat
QSPM for Internationalization

Internationalization
Key Factors Weight Notes

Attractive Score Total Attractive

(AS) Score (TAS)

External
By joining promotion for online shop/game, it will create positive demand in
Economy 0,05 3 0,15 economic scope
Political/Legal/Governmental 0,05 3 0,15 Bundling promotion response is less effective on political situation
Social/Cultural/Demographic/Environm
ental 0,1 3 0,3 International name provides a good reputaionand trust in the society
Technological 0,1 3 0,3 The strategy is an good response in technological factor
Competitive 0,1 3 0,3 Internationalization can help to gain competitive advantage

Internal
Management 0,05 3 0.15 The strategy is a good response to internal management
Marketing 0,2 4 0,8 Internationalization helps to build name and reputation
Finance/Accounting 0,05 2 0,1 The strategy is an average response to financial factor
Production/Operations 0,05 3 0,15 The strategy is an average response to operational factor
Research and Development 0,05 4 0,2 The strategy is agoodr response to R&D factor
Computer Information Systems 0,2 3 0,6 The strategy is an average response to IT system
Total 1,00 3.2

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Internationalization (Recommended)

● This strategy provides a global reach and gives the organization large room to explore
● Allows limited financial risk
● Provides huge potential in the future

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Focus on distribution business

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Industry Attractiveness Test –
4. Focus on distribution business
PROS
● Experience in the sector in both urban
& rural areas
● Increased market penetration
● Attractive consumer product market
● Can be outsourced to other
multi-nationals as a service
CONS
● Low margins
● Poor infrastructure, high costs
● Dependency on bigger accounts to make business
profitable
● Bargaining & business conflicts may arise
● Finding the right set of products for the business would
be a challenge
 Intended Market: X-Axis
intended market

be the same as in our partially overlap with be entirely different from

present market present market our present market or are
unknown

customer's behavior and decision-making

1 2 3 4 5 1
processes will

Since their main customers are from Indonesia, their previous knowledge will be
helpful

our distribution and sales activities will 1 2 3 4 5 1

Rodamas has been active in the manufacturing and distribution of a long time, so
definitely, their distribution and sales activities will be useful

the competitive set (incumbents or potential

1 2 3 4 5 2
entrants) will

Rodamas is somewhat relevant with the competitors in their own areas of business
 Intended Market: X-Axis cont.
intended market

Highly relevant Somewhat relevant Not at relevant

Our brand promise is 1 2 3 4 5 3

Rodamas brand is not that popular brand

Our current customer relationship are 1 2 3 4 5 5

Their customer might be totally different than their existing customer and lie
in different market segment.

Our knowledge of competitors’ behavior

1 2 3 4 5 2
and intentions is

Rodamas has a long history of involvement in the market of indonesia and

fimiliar with the competitors behavior.

Total X-axis coordinate 14

 Product/Technology: Y-Axis
Product/Technology

Is fully applicable Will require significant Is not applicable

adaptation

Our current development capability 1 2 3 4 5 1

Roda mas has a capable management system for the distribution of Go-Jek is a
stable and widely used app being used in Indonesia with new updates and
development in the technology.

Our technology competency 1 2 3 4 5 1

Successful in providing customer with good UI and UX application with the latest
technology.

Our intellectual property protection 1 2 3 4 5 2

Concern about Safety of driver and user. Considers the crime rate of the country

Our manufacturing and service delivery system 1 2 3 4 5 1

Gojek services and facilities can be similar with of existing companies in other
countries.
Product/Technology: Y-Axis cont.
Product/Technology

Are identical to those of our Overlap somewhat with Completely differ

current offerings those of our current from those of our
offerings current offerings

The required knowledge and science bases 1 2 3 4 5 2

Rodamas is well versed with the knowledge and science behind the distribution.

The necessary product and service functions 1 2 3 4 5 2

The product and services are similar to the one the company is using in their
current business

The expected quality standards 1 2 3 4 5 3

Rodamas, current quality standards use for their products will be somehow useful
for the distribution as well

Total Y-Axis coordinate 12

RISK Matrix

The Graph shows

that, the risk is within
the area of Same as
current offering of
technology and
same as present
intended market. So
there is a 25-40% of
risk in this approach.
Focus on distribution business
● This business is similar to their existing business
● According to the risk matrix the risk for entering this business is medium.
● Also Rodamas has high degree of knowledge and experience in this business
and can use their existing resources.
QSPM for Distribution Business

Internationalization
Key Factors Weight Notes

Attractive Score Total Attractive

(AS) Score (TAS)

External
By joining promotion for online shop/game, it will create positive demand in
Economy 0,05 3 0,15 economic scope
Political/Legal/Governmental 0,05 1 0,05 Bundling promotion response is less effective on political situation
Social/Cultural/Demographic/Environm
ental 0,1 3 0,3 Provides a certain social advantage
Technological 0,1 3 0,3 The strategy is an good response in technological factor
Competitive 0,1 3 0,3 Helps to gain competitive edge among competitors

Internal
Management 0,05 3 0.15 The strategy is a good response to internal management
Marketing 0,2 2 0,4 Rodamas doesnt have a reputable name in the industry
Finance/Accounting 0,05 2 0,1 The strategy is an average response to financial factor
Production/Operations 0,05 3 0,15 The strategy is an average response to operational factor
Research and Development 0,05 2 0,1 The strategy is agood response to R&D factor
Computer Information Systems 0,2 3 0,6 The strategy is an average response to IT system
Total 1,00 2.6

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Acquisition

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Industry Attractiveness Test
5. Buy existing manufacturing business/ Aquisition

PROS CONS

· Access to developed technology · Finding the right business at the right price is a
or existing licenses challenge.
· Availability of Finances · New capabilities may be required which could take time
· Advantage of additional/acquired · Clashes in corporate culture/philosophy
channels
· Cost effective & limited
· setup time
 IE Matrix for Acquisition

Based on analysis, Acquisition strategy

have medium risk and we recommend
but need to concern about weakness
and threat factors 29
QSPM for Acquisition

Aquitision
Key Factors Weight Notes

Attractive Score Total Attractive

(AS) Score (TAS)

External
Economy 0,05 3 0,15 Can play a vital role for steady growth
Political/Legal/Governmental 0,05 3 0,15 Thoroughly executted acquition leads to better political advantage
Social/Cultural/Demographic/Environm
ental 0,1 3 0,3 Can establish social reputation with proper execution
Technological 0,1 2 0,2 The strategy is an average response in technological factor
Competitive 0,1 3 0,3 Bundling promotion gives an advantage in competitiveness

Internal
Management 0,05 3 0,15 The strategy is a good response to internal management
Marketing 0,2 4 0,8 Can provide media coverage and better marketing if done properly
Finance/Accounting 0,05 2 0,1 The strategy is an average response to financial factor
Production/Operations 0,05 2 0,1 The strategy is an average response to operational factor
Research and Development 0,05 4 0,2 The strategy is a poor response to R&D factor
Computer Information Systems 0,2 3 0,6 The strategy is an average response to IT system
Total 1,00 3.05

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Overall SWOT Analysis
Strength
• Experienced, more than 5 decades in Indonesia. Has
an in-depth knowledge of local market, consumer,
and regulation.
• Distribution service
• Asahimas is the largest glass producer in southeast
Asia
• Tan’s reputable profile on negotiation
• Conservative management style makes steady (but
slow) growth without any financial problem
Opportunity
• New hired managers offer dynamic change in future
strategy
• Rapidly growing population in Indonesia
• Trustworthy local partner still sought-after
• Office building is located in rapidly growing area in
Jakarta
Weakness
• Risk averse and conservative makes the slower
growth
• Lack of qualified people in management and sales
• No proprietary competencies
• Lack of R&D
Threat
• 100% foreign investment makes companies less
dependent on local partner
• Standardized products pushes Rodamas to be
centralized, unable to use own knowledge
• Basic product market is crowded with competitors
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Comparison of Alternative Strategies
Strategies Cost of Entry QSPM Score Recommendation

Entering the property sector Development and renovation cost 1.7 High Risk - Do not Enter this sector
Legal cost related to development
Advertisement cost

Move into labor-intensive Inventory cost 1.95 Medium Risk with high investment
Employee cost - Do not enter

Internationalization International import export tax 3.2 Medium Risk and High opportunity-
Enter

Focus on distribution business Transportation and shipment cost 2.6 Medium Risk with average
Inventory and Quality control cost opportunity- Do not enter this
Sector

Buy existing manufacturing Acquisition cost 3.05 Medium Risk and high opportunity-
business Legal fees Enter
(Acquisition) Employee training and
development cost

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Recommendation

● Rodamas has a long history in the Indonesian market, so

they should used this strength and experience to
contribute in the distribution and logistic sectors.
● As shown from the comparison the best off strategy to
undertake is to either acquire a new company or
Internationalization with a foreign company. As this
strategy has internal and external advantages.
● Create Vatous partners and collaboration with
international companies to enter the new industry in
Indonesia.
● Rodamas should try to exploit the niche market with
strategic alliances.
● Rodamas should use its experience and partnership with
foreign manufacturers to takeover the indonesian
market.
● Overall, Rodamas should use its existing strong stance in
the industry and relationship to expand its business in the 33
industry they have experience in.
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