It is anticipated that this crisis will lead to lower demand for a variety of products, Dieleman and Kamal (2009) surmised. This means the environment Rodamas must now operate in is one that is increasingly competitive.
Strategic Alternatives for Rodamas Group
There are a variety of strategic alternatives Rodamas Group can consider to address the emerging threats and take advantage of the upcoming opportunities with the new business environment within which the organization must operate. Of course, one possible alternative is that Rodamas Group simply keeps their current business model. They continue to look to partner with multinational companies for the manufacture and distribution of Indonesian made goods. Although now foreign organizations can entirely own a business in Indonesia, Rodamas offers unique benefits with their skills and experience that could still be of benefit to multinational organizations.
However, as Mucki Tan has realized, the organization does not own any proprietary competencies. Rodamas Group had sold off many of their smaller business units. This would facilitate one possible strategic option of focusing on a single business line he already had in place. However, Mucki Tan decided that this would not be a viable option since all of Rodamas Group's businesses had natural limits to growth. In addition, he was concerned about the instability of the Indonesian economy, and the need to diversify to minimize this risk ("Dieleman & Kamal, 2009). Putting all of Rodamas Group's eggs in one basket could spell disaster for the company, should the chosen industry fail.
A third strategic option Rodamas Group may consider is developing their own core competencies. These core competencies could then be used in a variety of businesses. Although Mucki Tan felt this would be a good solution, he was not sure his organization had core competencies that could be used in this option. It did not have technical research and development expertise, needed to be a competitive independent manufacturing unit. There was also the added complication of the non-competition clauses Rodamas Group had with its current partners that prohibit it from doing business in segments it was already operating in. Instead, Rodamas Group was only well-suited to producing simple products. Dieleman and Kamal (2009) note that this is a highly competitive market; however many other Indonesian firms had been successful producing products as diverse as clove cigarettes to basic toiletries. However, as noted, this is already a highly competitive market and the low barriers to entry mean that this competition is likely to increase.
Focusing on property development and management is another option Rodamas Group may consider. In this way, the organization could focus on an industry that was low-tech. Specifically, Mucki Tan considered the office rental sector. The office building the organization owned had transformed from being located in the middle of paddy rice fields to the center of a rapidly growing Jakarta. The property could be converted into office towers and the company could generate revenues through office rentals in the buildings they've built, as opposed to simply building buildings to sell directly upon completion . A past real estate project was conducted jointly between Rodamas Group and Sumitomo, one of the company's Japanese partners, and this venture was successful. However, again with the unstable Indonesian economy this could be risky. In addition, there are many larger players already in the real estate segment that Rodamas Group would have to compete against. Obviously, Mucki Tan's lack of experience in the sector would be a weakness for the organization, and the brand name of Rodamas Group was not established. Not to mention the current tax system in Indonesia which makes this strategy unfavorable. There is an expected tax structure, which could be a factor in the future (
Dieleman & Kamal, 2009).
Of course, Rodamas Group could transition into labor-intensive manufacturing, according to Dieleman and Kamal (2009). One disadvantage to this strategy is China's strong presence in the industry already. However, many multinational companies prefer to spread their suppliers out from different countries, to minimize risk. If Rodamas Group could meet the price and quality aspects to be competitive, it could receive a percentage of the industry. Much like the real estate option, Rodamas Group did not have much experience with this sector. There was concern that the company wouldn't be able to handle the varied requirements needed for the industry.
Rodamas Group could adopt a strategy of internationalization, undertaking foreign direct investment. This would help protect Rodamas Group from economic challenges that were specific to one country or region. However, the organization does not have the human resources capacity to effectively establish itself on foreign soil and successfully compete. Yet, there are new opportunities available globally, thanks to the current economic challenges, that may still make this an attractive option. To help mitigate risk, and to enhance available human resources capacities, Rodamas Group could internationalize through a partnership, with someone with whom they already have a relationship. Helping current partners, such as Japanese Asahi, set up manufacturing outside of their home country could help the organization develop regional manufacturing facilities. The primary drawback to this strategy would be the heavy reliance on Rodamas Group's partner in making the venture a success. Rodamas Group's experience with some Japanese managers made them doubt that regional decisions could be made effectively and that the company would be bogged down in bureaucracy (Dieleman & Kamal, 2009).
A last strategic option Rodamas Group could consider, Dieleman and Kamal (2009) put forth, would be to purchase existing manufacturing organizations that already of developed or licensed a technology. Business acquisition could be the perfect way to expand and acquire core competencies. However, Mucki Tan did not find an appropriate business, at the right price, in Indonesia. One small manufacturer the organization tried to purchase saw Rodamas Group's offer rejected, because it was perceived to be too low. Instead, the company remained in the control of the bank.
Recommended Strategy for Rodamas Group
The recommended business strategy for Rodamas Group is based on the organization's current core competencies, their current strengths, and opportunities to expand their core competencies. First, to date there is one set of skills at which Rodamas Group is truly good. The organization's current success is due to this reason, as it is what sets them apart from other competitors in the industry. Their primary competency lies in helping foreign countries establish themselves in Indonesia. Although Rodamas Group may consider itself an importer, manufacturer and distributor, what it truly is a facilitator of business. The company's primary role has been to handle local management personnel, as well as manage the interactions with the Indonesian government and other local players. Mucki Tan has developed a strong, personal network in Indonesia. As many multinational organizations understand, these connections can be critical to the successful establishment of a business in a foreign country. It's not necessarily what you know always, but instead it's oftentimes who you know.
Rodamas Group's core competency is consulting in the establishment of businesses in Indonesia, and should be a primary strategic focus. Instead of partnering with multinational corporations, Rodamas Group needs to take them on as clients. As noted earlier, Indonesia is enjoying significant growth and many companies are going to want to take advantage of this, especially with the new regulation allowing foreign companies to own 100% of businesses.
The second part of the organization's strategy should look to one of their current strengths in their land asset. The currently renovated factory space that has now become prime Jakarta real estate should be further developed. Building office space and leasing it out is the perfect way to have steady, long-term cash flow for the organization, while it pursues other objectives. In this way, the company further diversifies their holdings. This does not mean Rodamas Group should purchase more land and build multiple office space complexes, but they should definitely use their current assets to their fullest potential.
The third prong of this recommended business strategy is a hybrid of two alternatives already discussed. Rodamas Group should expand internationally; however, they should do so through existing business acquisition. As noted, Mucki Tan was unable to find a suitable business to purchase in Indonesia. With the current economic challenges being faced globally, Rodamas Group is likely to find the perfect business at the perfect price, outside their own borders. Not only will this give the organization proprietary competencies, but it will also help the company diversify geographically. Given the past economic challenges that Indonesia and the Asian region has experienced, looking to expand into the Western world through acquisition will help protect against a repeat of these localized challenges. Furthermore, given the effect the economic crisis has had on the Western world, in general, Rodamas Group could find a business for an incredibly reasonable price.
Implementation of this Strategy
To implement this three-prong strategy, there are several things Rodamas Group needs to do. First, the company needs to change their business mission and their mindset…