Introduction
The object of this investigation is Rodamas Group. The Rodamas (which means “golden wheel”) has been found in 1951 in Jakarta (Dieleman & Kamal, 2009, 2). While Indonesia differed by little industrial activity and had no expertise to produce even basic products domestically, the company Rodamas played he roe of the importer. The Rodamas had close relationships with different multinational companies, especially from Japanese, which were interested in selling products on the Indonesian market. In the late 1960s and 1970s Rodamas naturally extended its trading partnerships with different foreign companies into manufacturing joint ventures. Thus, the mission of the company can be considered as acting as a central hub for a global array of industry leaders. The core competencies of Rodamas are as follows:
a high level of diversification: the company operates in a wide range of industries and product categories;
the company has great experience in Indonesia and as a result Rodamas has in-depth knowledge of the market, consumers, regulators, regulations, the opportunities and local challenges;
Rodamas works in both manufacturing and distribution fields;
a quite high flexibility of the company: for example, in the 1980s Rodamas transformed from importer to exporter of different products which were produced in Indonesia.
Issues
Rodamas Group focused on the local market significantly. But such market has limits and much more opportunities can be opened on the global market. It should be noted, that the global market has been changed greatly in the last fifty years. The services and outsourcing moved to the forefront. In this case, the current strategy of Rodamas Group is not appropriate. The main issues are as follows:
does the company have adequate capabilities to adapt to the new conditions of business environment?
what management must do with local plants of the company?
which directions will be perspective and profitable for the company in conformity with changes in the global market as well as Indonesian one?
In this case, it should to analyze such criteria as changes in business structure of the company during the last years, market share of each unit in business structure, profitability level, the level of competition, trends in the global economy and perspective fields for further investments.
In any case, entering the international market and cooperation with companies from other countries of the South-East Asia can open many more opportunities for the Rodamas Group to develop effectively, than concentrating on the local market.
Analysis
Rodamas Group has begun its activity in the 1950s. Those business environments payed great attention to the trade of goods. Indonesia generated a quite big demand for the products, which were manufactured in Japan and other countries South-East Asia. And Rodamas Group played the role of importer very well. When the company developed new directions, its structure was expanded and business was more diversified. In this case, there were a lot of competitors, but there is no one important rival. The strategy of Rodamas Group was risk-averse and it aimed to the slow and steady growth. It was more effective in Indonesia, while other family groups used high-risk and high-return strategies.
Let’s analyze structure of Rodamas Group and financial results of all its major businesses before the crisis. The revenue of Rodamas Group has grown rapidly until 2007. For example, the consolidated turnover of Rodamas was around 250 million of dollars for 2006 and 2007. Profits almost doubled from 17 million of dollars in 2006 to 32 million dollars in 2007 (Dieleman & Kamal, 2009, 6). At the same time, some businesses of Rodamas Group have already reached their limits and competition has grown on the local market.
Before the Asian Crisis, Rodamas Group had its own system of training its future managers internally. Thus, a company can replace its middle and senior management. It helps to find active and dynamic people, who are more willing to accept a future change of strategy. Anyway, the lack of qualified people remains actual for the company.
The business environment was quite favorable for Rodamas Group before the crisis. There are a lot of problems, which appear after crisis. For example, the standardization of products increased worldwide. In this case, it was quite difficult to convince Rodama’s partners to adapt a product to fit local market demand.
As we know, the global economy was entering into a crisis at the end of 2008, which would most likely also affect Rodamas. Its cash flows were influenced by the lower demand for different products.
In conclusion one can say, Rodamas Group faced enough problems in its activity within the local market. Its concentration on the local market can turn from the benefit into a drawback for the company in the future. In this case, it needs to enter global markets and work as exporter of products or services.
Alternatives
One of the great opportunities for further growth of Rodamas Group is connected with the rise of multinationals from emerging economies, such as China, Thailand and India. Rodamas Group should also monitor the activity of the companies from China and the Middle East. The advantages of such alternative are as follows:
entering new markets,
Chinese companies are more likely to understand the value of connections.
But there are some problems. First of them is connected with that Chinese companies focus more on the export. Secondly, Chinese investors are more interested in investment in natural resources. This area is new to Rodamas Group, because it does not have experience in this field. It will be quite difficult to enter this sector in the near future.
The next alternative is connected with selling of some smaller businesses, which belong to Rodamas Group. Let’s analyze the current structure of the Rodamas Group in order to understand which businesses must be sold.
There are five major directions of Rodamas Group:
building material,
food product,
consumer goods product,
chemical,
other businesses.
First three directions provide huge part of revenue of Rodams Group. In this case, variants for the sale are as follows: PT Asahimas Chemical, PT Riken Asahi Plastics Indonesia, PT Kao Indonesia Chemical, PT Video Display Glass Indonesia and some others. For example, the part of the company Unilever has increased more than three times in skin and facial care segment during 2002-2007 in comparison with the company Kao (Dieleman & Kamal, 2009, 13). The last one lost its positions in the Indonesian body care segment and sanitary napkin segment. Such competitor as Unilever has a strong position on the market. In this case, PT Kao Indonesia has already reached the maximum of its development. There is no need to invest in this direction. It can be possible to sell this business, given that the part of consumer goods exceeded only 3% in the overall profits of the Rodamas Group in 2007 (Dieleman & Kamal, 2009, 13).
As for other directions, there is an opposite situation. For example, the part of food products amounts around 42% of the total profits of the Rodamas Group. The same indicator of group building materials is around 24%. These two directions are crucial for the company. PT Asahimas Flat Glass Tbk has kept its position among other competitors. It provided around 49% of total glass production capacity in Indonesia in 2002 as well as in 2007 (Dieleman & Kamal, 2009, 15). It is a stable business direction of the Rodamas Group. But the situation can change, because the prices of building materials can fall. In this case, it should monitor major competitors in this field and their prices regularly.
Given that Ajimoto and Sasa belong to the Rodamas Group, its part of the food production capacity in Indonesia has reached more than 50% in 2007. On the one hand, it is a great indicator. On the other hand, there is no strong perspective to the further growth, because local food production market is limited. It can be possible to start export food products to the countries – neighbors, but such production requires compliance with international standards that can increase the final price to the consumer.
One more alternative is connected with the development of informational technologies. The twenty first century marked the beginning of the information society. Outsourcing of services becomes more popular in the countries with the emerging economies. The main reason of it is appearance of qualified personnel and lower labor costs in comparison with American or European staff.
Recommendation
The main recommendation for the company includes the following aspects:
The last direction must be the task of long-term strategy of the Rodamas Group. The lack of experience in this field can be substituted by cooperation with the companies from South Korea.
Conclusion
In conclusion one can say, that the Rodamas Group is characterized by strong diversified business structure. It is the main advantage of this company in Indonesia. After crisis the company can choose which directions should be developed, which can be sold or are kept in its current state.
References
Dieleman, M., & Kamal, S. (2009). Rodamas Group: Designing Strategies for Changing Realities in Emerging Economies (pp. 1-16). Richard Ivey School of Business.
