Case study analysis and structure

Rodamas -- Case Analysis

Situation Analysis

The Current Situation

Current Market Strategy iii. Competitor Analysis

SWOT Analysis

Summary of Situation

Identification of Solutions/Alternatives

Criteria

Situational Analysis

The Current Situation:

Rodamas Group is a well-known name in Indonesia because of its close association with many Japanese, American and some European companies. The company is currently managing diverse business from glass to food production to cosmetics. And hence it has developed strategic partnerships with manufacturers from various countries. Established in 1951 as Ho Hoa Trading Company Limited, Rodamas became a major business house dealing with many fragmented and diverse businesses. It closely reflects the nature of market in Indonesia which itself is highly diverse with 240 million consumers enjoying different kind of tastes. People have varied tastes and preferences for consumer goods and essentials and with so many people demanding foreign goods, it was important for multinationals to enter and explore Indonesian market. But legal constraints placed a serious barrier on their entry and hence they joined forces with companies like Ho Hoa Trading house to engage in business in the Indonesian market. This kind of association helped multinational companies deal with legal regulations, corruption, political complexities and licenses.

Rodamas initially faced very little or no competition as it ventured into different industries. Its association with Japanese multinationals allowed it to flourish as market leader in many consumer goods. However with the Asian crisis of 1998, things changes dramatically and business world became even more corrupt allowing multinationals from around the world to enter Indonesia with practically no barriers. These companies entered Indonesia with 100% ownership, something that Indonesia had not experienced before and hence gave companies like Ho Hao a very tough competition in variety of industries. Instead of joining hands with local business houses, these multinationals are now hiring expensive corporate lawyers to deal with issues like licensing and political regulations.

Rodamas is operating in Indonesia as a conglomerate and has a strong senior management team heading each business. However there are some internal weaknesses which need to closely studied and resolved such as lack of good human resource management strategies. With competition become stiffer, Rodamas is facing problems in many areas including:

Expansion

Competition with multinationals like Unilever

Small businesses becoming redundant

Poor political structure and serious corruption

Consolidation issue

Current Market Strategy:

Rodamas is currently working as a conglomerate with good management teams handling its many diverse businesses. It is a strong player in many industries and focuses on local production and distribution and has joined forces with important players in the field. Rodamas has deep knowledge of the market and distribution channels operating in Indonesia and hence though its businesses are diverse, it has been successful in most industries.

Competitor Analysis:

With the business barriers removed and multinationals hiring lawyers to deal with legal issues, competition from foreign companies has increased tremendously. Multinationals entering Indonesia with 100% ownership are posing a major threat to the existence and profitability of Rodamas. In the consumer goods market, Rodamas is operating under the name of Kao and Kao is facing direct competition from companies like Unilever and it has been seen that Indonesian consumers prefer to use consumer goods that have a global presence and reliability. For this reason Unilever is giving Kao a run for its money.

Similarly in the glass industry, Rodamas is operating under the name of Asahimas and with competition boiling up in this sector, this group has become stagnant in market share while other companies are quickly increasing their market share through serious consolidation efforts (Exhibit 6). The only industry where Rodamas is still a dominant player is the food industry.

Business

Share of Group Profits

Key Competitors

Building Material

24%

Few players

Food

42%

2 players

Consumer Goods

3%

Unilever

Distribution

15%

Other local business houses

Printing

9%

(For in-depth competition analysis, see Appendix 1)

In short, while Rodamas is losing ground in some businesses, it has been able to stay dominant in others. But even where it has large market share, Rodamas appears stagnant in its growth and doesn't know how to expand further.

SWOT Analysis

STRENGTHS

WEAKNESSES

Good knowledge of local market

No original brands

Respect and trust due to good record

Too many diverse businesses

Alliances with strong partners

No HR management strategies

Good financial management

Old ways of doing business

Potential partnerships with smaller Asian companies

Standardization adopted by multinationals

Consolidation

Erosion of local tastes and preferences

Expansion within and outside the country

Alliances with locals no longer needed

Buyout possibilities

Lawyers becoming dominant players

OPPORTUNITIES

THREATS

Summary of Situation:

Rodamas is now facing a challenging question: what does it need to do to better handle the competition given by multinationals. It needs to rethink the issues of strategy, sustainability, and globalization. It needs to redefine its mission and restructure its organizational model to better deal with the emerging challenges.

II. Statement of Problem/Opportunity:

Rodamas is facing stagnation in dominant markets and it is facing challenges where it has been edged out by competition. It is at a crossroad where it needs to redefine its mission, restructure its model and redesign its strategies to see how to stay dominant in Indonesian markets.

Identification of Solutions/Strategy Alternatives

Strategic Alternative 1: Consolidate

Leave small business to concentrate on bigger ones or consolidate all the small ones into one big business that would add to profitability and place less financial burden on the company.

Strategic Alternative 2: Expansion

Rodamas can expand within and outside the country through strategic alliances.

Strategic Alternative 3: Develop original brands

Rodamas has such strong knowledge of various businesses that it can develop some of its own brands to emerge as a solid local Indonesian company in field of choice

Criteria

Strategic Alternative 1: Consolidation

Some businesses in need of consolidation are Printing & Packaging and Consumer Products- they have been contributing less than 10% to total profits and hence can either be abandoned or consolidated into one big business.