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TRANSCRIPT
CHAPTER 1
INTRODUCTION
1.1 Problem Background
The cement industry in Indonesia is a fast moving Industry that will
always be ahead of its game. Strategic planning, Deeper market penetration is
one of the important factors that should be recognized and prepared, because
companies should run in very efficient way to face the fierce competition in the
industry.
There are several leading players for cement industry in Indonesia: PT
Semen Indonesia (Persero) Tbk, PT Indocement Tunggal Prakarsa Tbk and PT
Holcim Indonesia Tbk1. They have been ruling the markets for a long period of
time and in a very competitive industry like this, other emerging players, like PT
Semen MerahPutih for instance have toprogress forward using their resources to
capture and gain market share.
In order to do so, the right approach is to develop a strong marketing
strategy in order to expand the business. Marketing strategy is one of the
strategic factors that have to be prepared very well. Marketing strategy is
definedas a process that can allow an organization to concentrate its resources on
the optimal opportunities with the goals of increasing sales and achieving a
sustainable competitive advantage2.
1Asosiasi Semen Indonesia20132Baker, Michael The Strategic Marketing Plan Audit 2008.
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A company needs to build a strategic plan to identify business
alternatives, establish challenging goals, determine the optimal marketing mix to
obtain the goals, and configure detail of implementation.
1.2 Cement Definition
Cement is a binder, a substance that sets and hardens independently, and
can bind other materials together. The word "cement" traces to the Romans,
who used the term opus caementicium to describe masonry resembling
modern concrete that was made from crushed rock with burnt lime as binder.
The volcanic ash and pulverized brick additives that were added to the burnt
lime to obtain ahydraulic binder were later referred to as cementum,
cimentum, cäment, and cement.
Cements used in construction can be characterized as being either
hydraulic or non-hydraulic. Hydraulic cements (e.g., Portland cement) harden
because of hydration, a chemical reaction between the anhydrous cement
powder and water. Thus, they can harden underwater or when constantly
exposed to wet weather. The chemical reaction results in hydrates that are not
very water-soluble and so are quite durable in water. Non-hydraulic cements
do not harden underwater; for example, slaked limes harden by reaction with
atmospheric carbon dioxide3
3Gartner, Ellis; Macphee, Donald (2011)."A physico-chemical basis for novel cementitious binders". Cement and Concrete Research 41 (7): 736–749. doi:10.1016/j.cemconres.2011.03.006.
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The most important uses of cement are as aningredient in the production of
mortar in masonry, and of concrete, a combination of cement and an
aggregate to form a strong building material.
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Figure 1.1 Cement process diagram
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1.3 Overview of Cement Industry in the world
In the year 2010, it was indicated that the world production of hydraulic cement
was 3.300 million tones. The top three producers were China with 1,800, India
with 220 million tons, and USA with 63.5 million tons for a combined total of
over half the world total by the world's three most populated states4.
Figure 1.2 World Cement Consumption
1.4 Company Background4 United States Geological Survey. "USGS Mineral Program Cement Report. (Jan 2011)".
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Ganda Cement is a holding company engaged in the field of cement and
transportation. Cemindo Gemilang is a subsidiary company under Ganda Cement,
which sells Cement under the Semen Merah Putih Brand.
Vision :
Being a leading company in Asia Pacific that has a variety of investment and
provide benefits to shareholders
Mission:
Create sustainable business growth through focus on the business of palm oil,
natural resource management, building materials and construction, property and
trade through the assessment of investment opportunities in a professional
manner, due diligence and risk analysis are intensively with qualified and engaged
employees and systems world class concerned with social welfare and the
environment. "
1.4.1 Ganda Group Core Value
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Figure 1.3 Group Core Values
P.T Semen Merah Putih is now available to support the development of the
country and meet the market demand with guaranteed quality and reasonable
prices. In the spirit of national development, Semen Merah Putih will be the idol
of the nation to establish a strong foundation for a bright future.
Presently, most production for the Semen Merah Putih Brand is produce by
Chinfon Cement in Vietnam. Chinfon Cement has won various awards including
Golden Dragon Award award in the year 2001 to 2008 provided by the Vietnam
Economic Times and the Department of Planning and Investment. As a young
entity, Semen Merah Putih Brand, with the full support of Chinfon Cement
Corporation, will sell high-quality cement and be recognized internationally.
Figure 1.4 Organization Chart Cemindo GemilangIPMI | 7
1.4.2 Organization Chart
In Figure 2, it is shown that as of 2013 P.T Cemindo Gemilang Organization
consists 1(one) President Director, 5(five) Division Directors, 8 (eight) General
Managers and 7 (seven) sub- Division Managers.
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1.4.3 Semen Merah Putih Cement Classification
Under Semen Merah Putihbrand, the company is planning to launch their product
in four categories based on the formula and type of raw materials that they have,
which are:
Type I Portland Cement (Grey Cement)
The most commonly used type of cement for general construction,
especially when making precast and precast-pre-stressed concrete that is
not to be in contact with soils or ground water. It is suitable for mixing
concrete for structure that requires a high compressive strength5
Ready-mix Concrete
Ready-mix concrete is a type of concrete that is manufactured in a
factory or batching plant, according to a formula, and then delivered to
a work site by truck mounted transit mixers. This results in a precise
mixture, allowing specialty concrete mixtures to be developed and
implemented on construction sites.
Mortar Cement
Mortar Cement created by mixing sand and water with Ordinary
Portland Cement.
The mortar can be used for a number of applications, such as plastering
over bricks or other forms of masonry. Sometimes this type is referred
as sand cement.
5 Semen MerahPutih Portfolio, 2013IPMI | 9
White Cement
White Cement is similar to ordinary or gray cement in all respects
except for high degree of whiteness. Obtaining this color requires
substantial modification method of manufacture. Because of this, it is
somewhat more expensive than the grey products. White cement is
usually used in combination with white aggregates to produce white
concrete for prestige construction projects and decorative works. White
concrete usually takes the form of precast cladding panels, since it’s not
economical to use white cement for structural purposes.
1.4.4 Cement Factory
Chinfont Cement
SINCE 1992 Capacity Cement production 4,5 million ton
Figure 1.5 factory Cement Chinfon in Vietnam
Semen Merah Putih factory in Bayah
Using the latest technology machinery.The complete supply chain process, from
production to its own port
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Figure 1.6 Factory Semen Merah Putih
1.4.5 Brand and Product
Cement is Manufactured products, in the form of a fine powder, which
hardens and is binding after mixed with water. Brand Semen Kupang NTT began
to supply the market in 2011, the brand Semen Merah Putih starts supplying
major cities in the western part of Indonesia in 2012. Merah Putih Bulk supplies
concrete cement plant and cement grinding station and parallel to supply the needs
of the market in West Java in 2013
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Figure 1.7 Semen Merah Putih Portland
Ready Mix Semen Merah Putih
Ready-mix concrete is a type of concrete that is manufactured in a factory
or batching plant, according to a formula, and then delivered to a work site by
truck mounted transit mixers. This results in a precise mixture, allowing specialty
concrete mixtures to be developed and implemented on construction
Figure 1.8 Ready Mix Semen Merah Putih
This is The many kinds of cement type:
Type I Portland Cement (Grey Cement)
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The most commonly used type of cement for general construction, especially
when making precast and precast-pre-stressed concrete that is not to be in
contact with soils or ground water. It is suitable for mixing concrete for structure
that requires a high compressive strength6
Figure 1.9.A Portland cement, to the Portland Cement & generalconstruction, to houses
Type II (Moderate Sulfat Resistance)
Portland cement is in use requires resistance to heat of hydration and
sulfate were moderate, such as dams, docks and heavy foundations.
6 Semen Merah Putih Portfolio, 2013IPMI | 13
Figure 1.9.B Moderate Sulfate Resistance Cement – Dams
Type III (High Early Strength)
Portland cement in use requires a high initial compressive strength, like
bridges or overpasses.
Figure 1.9.C High Early Cement Compressive Strength - Bridge
Type IV (Low Heat of Hydration)
Portland cement is in use requires a low heat of hydration, usually used for
massive concrete structures such as dams or airfields.
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Figure 1.9.D Resilience High Sulfate Cement - Area marine / corrosive
Type V (Sulfat Resistance)
Portland cement is in use require high resistance to sulfate, such as marine
docks, area mining, chemical storage or brackish water.
Figure 1.9.E Oil Well Cement, for oil well area
1.5 Semen Merah Putih Cement Standard Quality
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Semen Merah Putih brand is atop premium market class quality cement.
They have met the criteria standard set by the Indonesian government under the
law Peraturan Menteri Perindustrian (Permenperin) Nomor
35/M-IND/PER/4/2007, 17 April 2007.
Semen Merah Putih Cement Standard Classification6
Indikasi Kualitas SNI 15-7064-2004 Merah Putih BrandKuatTekan
3Days kg/cm2 125 min 207 min
7 days kg/cm2 200 min 346 min
28 days kg/cm2 250 min 451 min
Smoothness with Blaine Equipment m2/kg
280 min 345
Air Volume % 12 max 6.95Bonding Time
Beginning Mins 45 126End Mins 375 max 210Apparent % 50 min 80.5Depreciation by Autoclave % 0,2 max 0.02Table 1.1MerahPutih Cement Standard Comparison
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Table 1.1 shows the Cement Merah Putih Standard comparison to SNI (Standard
National Indonesia). In terms of Product Quality, Semen Merah Putih clearly is
above the standard requirement in their Cement. The table illustration is created
from the Semen Merah Putih Brand Catalogue that will be shown below in Figure
6 Semen MerahPutih Portfolio, 2013
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Figure 1.10 Quality Indicator
Source: Semen Merah Putih Product Portfolio Catalogues’
1.6 Goals of the project
The objective of this project study is to perform an analysis in relation to Cement
Industry in Indonesia and analyze the most suitable Penetration Strategy for
Semen Merah Putih Brand for the future. In addition to that, the writer also will;
1. Recommend inputs for the company as part of theirStrategic marketing
approachto enter Indonesian cement market.
2. Implement the theory that already gained in the classroom to the actual
situation in correlation to Semen Merah Putih Brand.
1.7 Project Structure
This report has been structured in five (5) main chapters. The chapters are
described in the following lines.
Chapter 1 (Introduction): This section opens up the paper with
Problem Background and Company Profile.
Chapter 2 (Literature Review): This chapter will present theories,
analysis tools, its approaches and other related studies to the paper.
Chapter 3 (Problem Elaboration): This segment will discuss the
paper objectives, purposes, situational analysis and methodology to
approach the problem.
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Chapter 4 (Result & Analysis): This chapter will present the gathered
data and application to the tools in Literature Review. It also will
present the result of the analysis.
Chapter 5 (Conclusion & Recommendation): This chapter will
present the result and findings and interpret them accordingly.
Figure 1.11 Project Outline.
CHAPTER 2
LITERATURE REVIEW
2.1 PEST Analysis
PEST analysis (Political, Economic, Social and Technological analysis)
describes a framework of macro environmental factors used in the environmental
scanning component of strategic management.7
7 Thompson, J. and Martin, F. (2010). Strategic Management: Awareness & Change. 6th ed. Cengage Learning EMEA, p. 86-88, 8618Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGraw-Hill/Irwin, p. 56-61
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Introduction
Literature Review
Problem Elaboration
Result and Analysis
Conclusion and Reccomendation
It is a part of the external analysis when conducting a strategic analysis or
doing market research, and gives an overview of the different macro
environmental factors that the company has to take into consideration.
It is a useful strategic tool for understanding market growth or decline,
business position, potential and direction for operations. The growing importance
of environmental or ecological factors in the first decade of the 21st century have
given rise to green business and encouraged widespread use of an updated version
of the PEST framework.
PEST or PESTEL analysis is a simple and effective tool used in situation analysis
to identify the key external (macro environment level) forces that might affect an
organization.8
Figure 2.1: PEST Analysis
The basic PEST analysis includes four factors; they are Political,
Economic, Social and Technological.
Political
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Political factors are basically to what degree
the government intervenes in the economy. Specifically, political
factors include areas such as tax policy, labor law, environmental
law, trade restrictions, tariffs, and political stability. Political factors
may also include goods and services which the government wants to
provide or be provided (merit goods) and those that the government
does not want to be provided (demerit goods or merit bads).
Furthermore, governments have great influence on
the health, education, and infra structure of a nation.
Economic
Factors include economic growth, interest rates, exchange rates and
the inflation rate. These factors have major impacts on how businesses
operate and make decisions. For example, interest rates affect a
firm's cost of capital and therefore to what extent a business grows and
expands. Exchange rates affect the costs of exporting goods and the
supply and price of imported goods in an economy.
Social
Factors include the cultural aspects and include health consciousness,
population growth rateinclude health consciousness, age distribution,
career attitudes and emphasis on safety. Trends in social factors affect the
demand for a company's products and how that company operates. For
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example, an aging population may imply a smaller and less-willing
workforce (thus increasing the cost of labor). Furthermore, companies
may change various management strategies to adapt to these social trends
(such as recruiting elderly workers).
Technological
Factors include technological aspects such as R&D activity, automation,
technology incentives and the rate of technological. They can
determine barriers to entry, minimum efficient production level and
influence outsourcing decisions. Furthermore, technological shifts can
affect costs, quality, and lead to innovation.9
9en.wikipedia.org/wiki/PEST analysis
Table 2.1 PEST
Political Economic Social Cultural Technology
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1. Government stability and likely changes
2. Bureaucracy3. Corruption level4. Tax policy (rates
and incentives)5. Freedom of press6. Regulation/de-
regulation7. Trade control8. Import restrictions
(quality and quantity)
9. Tariffs10. Competition
regulation11. Government
involvement in trade unions and agreements
12. Environmental Law
13. Education Law14. Anti-trust law15. Discrimination
law16. Copyright, patents
/ Intellectual property law
17. Consumer protection and e-commerce
18. Employment law19. Health and safety
law20. Data protection
law21. Laws regulating
environment pollution
1. Growth rates2. Inflation rate3. Interest rates4. Exchange rates5. Unemployment
trends6. Labor costs7. Stage of
business cycle8. Credit
availability9. Trade flows
and patterns10. Level of
consumers’ disposable income
11. Monetary policies
12. Fiscal policies13. Price
fluctuations14. Stock market
trends15. Weather16. Climate change
1. Health consciousness
2. Education level3. Attitudes
toward imported goods and services
4. Attitudes toward work, leisure, career and retirement
5. Attitudes toward product quality and customer service
6. Attitudes toward saving and investing
7. Emphasis on safety
8. Lifestyles9. Buying habits10. Religion and
beliefs11. Attitudes
toward “green” or ecological products
12. Attitudes toward and support for renewable energy
13. Population growth rate
14. Immigration and emigration rates
1. Basic infrastructure level
2. Rate of technological change
3. Spending on research & development
4. Technology incentives
5. Legislation regarding technology
6. Technology level in your industry
7. Communication infrastructure
8. Access to newest technology
9. Internet infrastructure and penetration
The main objectives of PEST Analysis:
1. Find out the current external factors affecting an organization;
2. Identify the external factors that may change in the future;
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3. To exploit the changes (opportunities) or defend against them (threats)
better than competitors would do.
2.2 Product Life Cycle Theory
Product Life Cycle theory is a theory based upon biological life cycle.
Likeliving creature, products is also has its life cycle. It grows passing a various
stages, from birth until death.
After a period of development it is introduced or launched into the market; it gains
more and more customers as it grows;
Eventually the market stabilizes and the product becomes mature; then after a
period of time the product is overtaken by development and the introduction of
superior competitors, it goes into decline and is eventually withdrawn.
Figure 2.2 Product Life Cycles
There are four stages in Product Life Cycles. Each of themhas their own
Characteristic10 and four of them are:
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1) Market Introduction Stage
Introduction Stage is the stage where the product is introduce for the firsttime.
The main objective of the company in this stage is to persuade early tobuy, and to
meet consumer's needs with a quality product at the lowest possible cost in order
to return the highest level of profit. Usually, the company makes no or less profit
in this stage, because sales may be slow as the company’s goals is to builds
awareness of its product among potential customers. Advertising is important at
this stage, so the marketing budget is often substantial.
2) Growth Stage
Growth Stage takes place when the product already survives in the Introduction
Stage. Sales volume start to increase and profitability begin to rise. Cost of
production is lowered along with increase in production volume. Goals of the
company are to increase the public awareness and also build brand loyalty of the
customers by adding more first time buyers and maintain the remaining
customers.
________________
10Philip Kotler, Marketing Management (Prentice Hall 11th Edition : 2003), 328
3) Maturity Stage
At the maturity stage, sales growth has started to slow and is approaching the
point where decline will begin. Maturity stage is commonly the longest stage of a
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product, where it could reach decades. In this stage, the probability for
competitors to step forward with a better quality product and lower price is very
high. That’s why, the main objectives in this stage are to defend the market share
and maintain the customer’s loyalty. Price wars and discount system is the
common characteristic, which could lead to lower profitability for the remaining
companies.
4) Saturation and Decline Stage
This occurs when the product peaks in the maturity stage and then begins a
downward slide in sales. Eventually, sales will drop to the point where the
profitability is no longer feasible to continue making the product. Investment is
minimized. The product can simply be discontinued.
Each stage in Product Life Cycle Theory will have different
strategyimplementation. Target and application of elements in 4P Marketing Mix
will be different, because every stage has its own objectives. Marketing Strategy
Implication based on the Product Life Cycle will help a company to set up the
specific strategy that might be more effective to be executed.
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Figure 2.2.A Marketing Strategy Implication of the Product Life Cycle
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2.3 Marketing Segmentation and Targeting
Market segmentation is a theory that divides the market into group
ofhomogenous consumers.
A single product cannot fulfill the needs of all customers, but it can always serve
more than one customers11. Therefore, the purpose of Market Segmentation is to
select the appropriate target market in order to make a successful marketing
program. To become a useful analysis for the company, Market Segmentation has
to fulfill several criteria, which are:
Measurable
Size, purchasing power and characteristic of the segment can be measured.
Accessible
Segment selected can be reached and served effectively
Substantial
Segment selected must be large enough to have sufficient sales and
growth potential to offer long run profits for the company.
Differentiable
The segments are conceptually distinguishable and respond differently to
different marketing-mix elements and programs.
Actionable
Effective programs can be designed/or attracting a given market segment.
_______________________________11J. Paul Peter and James H. Donnelly, Marketing Management (McGraw Hill International Edition 8thEdition : 2007), 65
There is no single way to segment a market. A marketer has to try
different segmentation variables, alone and in combination, to find the best
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way to viewthe market structure. However, we can identify the major
variables that usuallyused in segmenting, which are Geographic,
Demographic, Psychographic and Behavioral aspect. Below the four aspects
are describe.
1) Geographic Segmentation
Geographic Segmentation divides the market based on the geographical
units.
This segmentation is an important process, especially for multinational and
global corporation. Geographic segmentation includes:
Region (Europe, Northern America, West Java Area, etc)
Countries (Indonesia, USA, Japan, etc)
City / Town size (New York City, Jakarta, etc)
Population Density (Urban, Suburban, Rural, Semi-Rural)
Climate (Northern, Southern)
2) Demographic Segmentation
Demographic Segmentation divide the market into groups based on
demographic variables such as age, sex, family size, family life cycle,
income,occupation, education, religion, race and nationality.
Demographicsegmentation is the most segmentation that used commonly,
because customer’s needs and wants are often related to the demographic
factors.
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Age
Customer’s wants and needs are always changing along with their age.
Company should use different product and approach in marketing for different
age target.
Life-Cycle Stage
A little different from the age segmentation, Life-Cycle stage is using human’s
phase of life (teenage, adult, etc) as the basic.
Gender
Gender segmentation is using sex as the basic, and often used in consumer
marketing. The best examples are in clothing products, cosmetic
products,magazines product, etc.
Income
Segmentation using income as the basic is also popular. Many companies
target the customers based on their income, especially for the luxuryproducts
such as jewelry, high branded car, etc.
Generation
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Generation segmentation is mostly influence by the times that customers grow
up. Each generation usually have different preferences, such as inmusic,
movies, political view, culture, etc.
Social Class
Segmentation could divide buyer based on their social class, an ordered
divisions of citizen in a society whose members share similar values,interests
and behaviors.
3) Psychographic Segmentation
Psychographic segmentation divides buyers into groups based on social
class, lifestyle or personality characteristics. People in the same demographic
groupcan have very different psychographic.
Lifestyle
People’s interest in goods is affected by their lifestyle, because the product
they bought is expressing their lifestyles, the way people usually do in their
daily life.
Personality
Companies also use personality variables to segment the market, giving their
product personalities can correspond with customer’s personality. This
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segmentation works for product with certain and specificcharacteristic such as
alcohols, cosmetics, cigarettes, etc.
Values
This segmentation is dividing the customers based on their beliefs system that
cause customer’s attitude and behavior.
4) Behavioral Segmentation
Behavioral segmentation is dividing the customers based on their
knowledge of, attitude towards, use of, or response to a product. It divided
into severalcategories, which is Occasion, Benefits, User Status, Usage Rate,
Loyalty, Status, Buyer-Readiness Stage, and Attitude.
Occasion
Buyers can be divided according to the occasions when they develop a need,
purchase, or use a product.
Benefits
Customers can be segmented by the benefit they find in the particular product.
User Status
This segmentation is dividing the customers into non-users, ex-users, potential
users, first time users or regular users.
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Usage Rate
Market can be segmented based on how often the customers use the product.
Loyalty Status
Customers have the tendencies towards loyalty to a product. They can be
divided into Light, Medium or Heavy users.
Buyer-Readiness Stage
Market consists of customers who have different stage of readiness to buy a
product.
Attitude
Customers are also can be divided into class where it based on their attitudein
terms of accepting a product.
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Figure 2.3 Market Segmentation Model
Based on the market segmentation that is already developed, the next step
is to select the target market. The firm has to evaluate various segments
anddecide how many and which one to target. Basic evaluation to targeting a
marketis its attractiveness and firm’s objectives and resources. When choosing
which segment to target, the firm can focus to single segment, several
segment, specific product, specific market, or full market.
Single Segment Concentration
The firm chooses a single particular segment as their target with a certain
product. Through concentrated marketing, the firm could gain a strong
knowledge in the segment and get strong market presence.
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Selective Specialization
The firm targets number of segments where each segment has their own
attractiveness. With this targeting method, the firm could diversify its risk
tofail in the market.
Product Specialization
The firms create a certain product that can cover several segments, different
customers groups and build a strong reputation in a specific product.
Market Specialization
The firms create a product line that could serve needs of a specific market.
Usually, the firm could get the strong reputation in the particular market.
Full Market.
The firm attempt to serve all customers group with their product line and
cover the whole market.
2.4 Marketing mix; 4 P’s
The marketing mix is a business tool used in marketing and by marketing
professionals. The marketing mix is often crucial when determining a product
or brand's offer, and is often synonymous with the four Ps:
1. Price.
2. Product.
3. Promotion.
4. Place.
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Product:
A product is seen as an item that satisfies what a consumer
demands. It is a tangible good or an intangible service. For example good
will for intangible. Tangible products are those that have an independent
physical existence. Typical examples of mass-produced, tangible objects
are the motor car and the disposable razor. A less obvious but ubiquitous
mass-produced service is a computer operating system. Every product is
subject to a life-cycle including a growth phase followed by a maturity
phase and finally an eventual period of decline as sales falls. Marketers
must do careful research on how long the life cycle of the product they
are marketing is likely to be and focus their attention on different
challenges that arise as the product move.
The marketer must also consider the product mix. Marketers can
expand the current product mix by increasing a certain product line's depth
or by increasing the number of product lines. Marketers should consider
how to position the product, how to exploit the brand, how to exploit the
company's resources and how to configure the product mix so that each
product complements the other. The marketer must also consider product
development strategies12
12 Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann
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Price
The amount a customer pays for the product. The price is very
important as it determines the company's profit and hence, survival.
Adjusting the price has a profound impact on the marketing strategy, and
depending on the price elasticity of the product, often it will affect
the demand and sales as well. The marketer should set a price that
complements the other elements of the marketing mix13
When setting a price, the marketer must be aware of the customer
perceived value for the product. Three basic pricing strategies are: market
skimming pricing, market penetration pricing and neutral pricing. The
'reference value' (where the consumer refers to the prices of competing
products) and the 'differential value' (the consumer's view of this product's
attributes versus the attributes of other products) must be taken into
account14
13Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann14Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann
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Promotion.
All of the methods of communication that a marketer may use to
provide information to different parties about the product. Promotion
comprises elements such as: advertising, public relations, personal
selling and sales promotion
Advertising covers any communication that is paid for, from
cinema commercials, radio and Internet advertisements through print
media and billboards. Public relations is where the communication is not
directly paid for and includes press releases, sponsorship deals,
exhibitions, conferences, seminars or trade fairs and events. Word-of-
mouth is any apparently informal communication about the product by
ordinary individuals, satisfied customers or people specifically engaged to
create word of mouth momentum. Sales staff often plays an important role
in word of mouth and public relations.
Place
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Refers to providing the product at a place which is convenient for
consumers to access. Various strategies such as intensive distribution,
selective distribution, exclusive distribution and franchising can be used
by the marketer to complement the other aspects of the marketing mix15
Figure 2.4 Marketing Mix model
_________________________
15Kerin, Hartley and Rudelius "Marketing, The Core," 4th Edition, McGraw Hill Publishing 2001
2.5 Porter 5 Forces Analysis
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The use of Porter’s Five (5) forces analysis is also an essential part of
determining the industry values. Every industry has an underlying structure and
technical characteristic of its own, and analyzing the key point would lead to a
better strategy.
Porter five forces is framework to analyze the industry formed by Michael
Eugene Porter of Harvard Business School in 1979. This model is the most
commonly used analytical tool to examine the competitive environment16. It
describes the intensity of the competition within an industry based on the five
aspects that drive the industry attractiveness.
Figure 2.5 Porter’s Five Forces Model of Competition
16David J. Ketchen and Alan B. Eisner, Strategy (McGraw Hill International Edition : 2009), 86
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Threat of the New Entrants
Threat of New Entrants refers to the possibility that newcomers
might erode the profit of established firms in the industry. (Whelan &
Hunger, 2010:159)17The seriousness of the threat is depend on the
barrier of entry and combined reaction from existing competitors.
There are six major sources for barriers to entry, which is:
Economic of Scales
Economic of scales refers to the saving that a company could
achieve due to the increase of volume. Firms that could implement
the economics of scales could create barrier of entry for the new
entrants by reducing the prices.
Product Differentiation
Strong brand recognition of the existing company will create
barrier for new entrants, because they have to spend more to gain
customers loyalty.
Capital Requirement
Needs to invest a large amount of financial resources is also a
barrier for the new entrants. It is risky and might be an
unrecoverable investment.
___________________
17 Wheelen, Thomas L. &Hunger, David j.2010.Strategig Management and Business policy 12th Ed New jersey. Pearson Prentice Hall
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Switching Cost
A barrier of entry is created by the existence of onetime cost that
the buyer faces when switching cost from one supplier’s product or
service to another.
Access to Distribution Channel
Needs to create a channel to the distribution channel for the product
is also could create a barrier of entry. Government Policy
Rivalry among Existing Firms
According to Porter, intense rivalry is related to the presence of several
factors including18 for most industry, the intensity of the competitive rivalry within
the industry is the dominant factor of the competitiveness of the industry.
Competitive rivalry is likely to be based on dimensions such as price, quality,
and innovation.
Number of Competitor
Number of competitors becomes an important factor in the analysis.
This factor, size and position of the firms in the industry is the main
factor of how competitive the industry are.
18Dwyer, Robert &john T.2009.Business marketing: Connecting Strategy, Relationship and learning 4 Ed
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Industry growth
Industry Growth also become a factor in the analysis, because it also
decide whether the competition become a tough competition or not,
since the company will seek a chance to expand their sales.
Exit Barrier
Exit barrier are economic, strategic, and emotional factors that keep firm
competing even though they may be earning low or negative returns on
their investment. Needs to create a channel to the distribution channel
for the product is also could create a barrier of entry.
Government Policy
The Government can limit or even foreclose entry to industry, with such
control as license requirements, limits on access to raw materials, and tax
incentives.
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Threat of Substitutes Product or Service
The main objective of this analysis is identifying the substitute products or
services that can perform same function as the industry offering.19 Availability of
substitute’s product in the market will limit the potential sales of the industry’s
product, especially when the substitute product is on the lower level of price.
Low switching cost for the customers will also have high impact on customer’s
loyalty. Even though they have a different appearance and may not appear to be
easily subtitutable20
Bargaining Power of Buyers
Bargaining power of customer refers to the ability of the customers to put
the firms within the industry under pressure that could reduce the profitability of
the industry. The power of buyer can be affected by these factors21
19 Wheelen, Thomas L. &Hunger, David j.2010.Strategig Management and Business policy 12th Ed New jersey. Pearson Prentice Hall20Dwyer, Robert &john T.2009.Business marketing: Connecting Strategy, Relationship and learning 4thEd21Wheelen&Hunger
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Switching Cost
Low switching cost means easier for the customers to switch to other
product, especially when the product is price sensitive. Means the power
of the customers will be raised.
Number of Product Available
If there’s a lot of same kind of product is available in the market, then the
customers can choose any product that will give them more benefit. It will
be harder for the firm to maintain the customer’s loyalty.
Number of Substitute Product Available
Availability of the substitute product will also affect the customer’s
judgment.
Bargaining power of Supplier
Supplier can apply the bargaining power over the participants in the industry
by raising the price or reduce the quality of the materials. Powerful supplier can
squeeze profitability of firms in an industry so they can’t recover the costs of raw
material inputs the factors that determine power of supplier are:22
22Dwyer, Robert &john T.2009.Business marketing: Connecting Strategy, Relationship and learning 4thEd
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Number of Supplier Available.
If the number of supplier is limited, then they have higher bargaining
power because it is not easy to find a replacement for their position.
Uniqueness and Importance of the Materials
More unique or important the material to the production, more power that
the supplier has and especially when the material is customize.
P=Particular Industry is a Small Part of the Supplier’s Sales
If the industry is just a small part of the supplier’s revenue and less
important, than they will have more bargaining power
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2.6 S.W.O.T Analysis
SWOT analysis is a structured planning method used to evaluate
the Strengths, Weaknesses, Opportunities, and Threats involved in a project or
in a business venture. A SWOT analysis can be carried out for a product,
place, industry or person. It involves specifying the objective of the business
venture or project and identifying the internal and external factors that are
favorable and unfavorable to achieving that objective
The technique is credited to Albert Humphrey, who led a convention at
the Stanford Research Institute (now SRI International) in the 1960s and
1970s using data fromFortune 500 companies. The degree to which the
internal environment of the firm matches with the external environment is
expressed by the concept of strategic fit.
Setting the objective should be done after the SWOT analysis has been
performed. This would allow achievable goals or objectives to be set for the
organization.
S trengths : characteristics of the business or project that give it an advantage
over others
W eaknesses : are characteristics that place the team at a disadvantage relative
to others
O pportunities : elements that the project could exploit to its advantage
T hreats: elements in the environment that could cause trouble for the
business or project
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Figure 2.6 SWOT Analysis
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CHAPTER 3
PROBLEM DESCRIPTION
3.1 Problem Elaboration
Cement is a very strategic commodity in Indonesia. Economic growth in
Indonesia, good investment condition and supported by Government regulation
give a bright hope for Industry growth. As a developing country, infrastructure
expansion becomes one of main focus. Therefore, cement supply becomes crucial
needs for Indonesia infrastructure and construction industry
Figure 3.1: Domestic Cement Consumption
In the recent crisis of 2008, cement demand was rising very fast.
According to the data from Asosiasi Semen Indonesia, demand forecast for year
2011 will be increase 10 percent from 2010. It will increase from 40 million tons
to 44 million tons, and it will continue to increase until 2020. Therefore, analyst is
concerned about the possibility of cement supply shortage if this activity is not
matched with overall production capacity from cement manufacturer.
Resource Asosiasi cemen Indonesia
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3.2 Cement Market: Indonesia
The world’s 16th largest economy by GDP is Indonesia. It is predicted to
become the seventh (7) largest by 2030. The World Bank predicts that the
country’s economy will grow by 6.6% this year, outperforming many other
emerging powers. The cement industry is certainly benefiting from such
confidence, with predictions that the market will grow at a double digit rate in
201323
Indonesia's Quarterly GDP Growth 2009–2013 (annual percentage change) Year
Quarter I
Quarter II Quarter III Quarter IV
2013 6.05 5.83 5.62 -
2012 6.29 6.36 6.16 6.11
2011 6.45 6.52 6.49 6.50
2010 5.99 6.29 5.81 6.81
2009 4.60 4.37 4.31 4.58
Table 3.1Source: Statistics Indonesia (BPS)
2010 2011 2012
2013
Cement Production in million tons
37.8 52.0 60.6¹
65.0¹
Cement 40.8 48.0
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Consumptionin million tons 55.0¹ 61.0¹
Table 3.2Source: Indonesian Cement Association
23Cook, Paul-Maxwell, World Cement, Insight into Asian Cement Industry, 2013
The country’s largest cement producer, Semen Indonesia (formerly Semen
Gresik), achieved record production last year with an increase of 18%. The
company expects to produce 28.3 million tons of cement this year, helped by
plans to build a new plant in Rembang, Central Java, and the recent acquisition of
a cement manufacturer in Vietnam.
It has set aside US$400 million for capital expenditure this year. A major
competitor is, of course, PT Holcim Indonesia. In looking to claim a bigger
market share in East Java, it is moving rapidly to the launch of its new plant in
Tuban in November of this year. It will have an annual production of
1.7 million tons. As a further boost, Holcim has begun production of a second
plant, Tuban II. This 1.7 million tons facility is expected to be completed in 2015.
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Figure 3.2: Cement Industry
The country’s second largest producer, PT Indocement Tunggal Prakarsa is
said to have set aside US$260 million – US$320 million for capital expenditure
this year. The company is developing a new plant with a total production of
4.4 million tons in Citeurep, West Java. The Sinoma Group is involved with
equipment procurement and construction work.
It is scheduled for service in mid-2015. Feasibility studies are in hand for
two additional plants, one in Central Java and another outside Java. Operations at
PT Semen Bosowa Maros’ 5.2 million tones plant in South Sulawesi are expected
to begin in 2014. In the meantime, Thailand’s Siam Cement Group will further
expand its presence in Indonesia by building a new plant in Sukabumi, West Java,
with a total investment of US$356 million. The plant should be operational by
2015.IPMI | 52
Indonesia’s Cement production and consumption
Research indicates that Indonesia's cement production and cement
consumption have risen rapidly in recent years. As the country has been showing
solid economic growth for a decade and is forecast to continue this growth,
property and infrastructure projects have grown in number accordingly, thus
increasing demand for building materials such as cement. Moreover, the
government is committed to enhance the country's much-needed
infrastructure development.24
24R.M.A Van der Schaar, www.indonesia investment.com, The Rise of Indonesia's Cement Production and Consumption
The table below indicates this rapid rise in both cement production and
consumption in Indonesia:
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Figure 3.3 Cement production and consumption in Indonesia
The Indonesian residential sector is the largest consumer of Indonesian
cement, followed by infrastructure.
Per capita cement consumption in Indonesia - which currently stands at
around 200 kilogram per year - is one of the lowest in Asia, and in combination
with a booming (macro) economy it therefore contains ample room for growth.
Currently the island of Java accounts for more than half of Indonesia's total
cement consumption, followed by the islands of Sumatra, Kalimantan and
Sulawesi. Java and Sumatra together account for around 75 percent of Indonesian
cement consumption.
These two islands (Java in particular) are home to the majority (almost 80
percent) of Indonesians. But, although small in absolute numbers, the cement
consumption share is increasing fastest in Eastern Indonesia. The period January-
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November 2012 brought a 54 percent increase in cement consumption in eastern
Indonesia compared to the same period in the previous year. In Java and Sumatra
these numbers were much lower (15 and nine percent respectively) during the
same period
Factors that contributed to rising in demand for cement consumption
Indonesia has been experiencing continuous and robust economic growth
for a number of years. The country’s gross (GDP) grew over six percent annually
since 2007 (except for 2009 when international turmoil caused Indonesia's GDP
growth to drop to (a still impressive) 4.6 percent. Moreover, future projections
predict that this growth is most likely to remain above six percent in the coming
years. The principal pillars of Indonesia's current GDP growth are domestic
consumption and investments. The former accounts for around two-thirds of
Indonesia's GDP growth and is fueled by a quickly expanding Indonesian
middle class. According to a World Bank report, each year seven million people
join the ranks of Indonesia's middle class and their subsequent consumptive
behavior and demands give rise to new housing and real estate development.
The development of property projects is also supported by Indonesia's stable and
historically low benchmark interest rate (5.75 percent since February 2012).
Property projects are therefore predicted to continue its pace in the next
quarters, despite a government policy, introduced last year, which stipulates an
increase in down payment on mortgages to 30 percent.
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Similarly, the planning of infrastructure projects is on the rise. The
Indonesian government realizes the lack of quantity and quality of the
country's infrastructure and is currently focused on increasing investments in this
sector; both direct and in cooperation with the private sector through public-
private partnerships. This will have an impact on domestic cement demand as
large quantities of cement are needed to build the large-scale infrastructure
projects (which includes roads, bridges, airports and seaports)
3.3 Problem Analysis inside Semen Merah Putih Brand
As a new brand that will enter the industry, Semen Merah Putih have to fight to
penetrate the market, which already dominated by companies that mostly already
exist for years. Therefore, Market Penetration Strategy becomes an important
subject in order to bring the company to achieve its objectives with the most
efficient way.
This led the writer to come up with four (4)problem identification:
1. Semen Merah Putih has to evaluate strategic option that best fit the
company’s vision andmission. (Strategic Marketing)
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2. Analyze the Macroeconomic views of the Indonesia cement industry.
(PEST)
3. A complete and concise Competitor’s analysis checks to determine the
Industry rivalry. (Porter’s Five Forces)
4. Identify the company resource of Strengths and Weakness and its
external Opportunities and Threats. (SWOT Analysis)
3.4 Solution Approach
The approach to complete this study is by using PEST Analysis to examine
the key external factors, then by using Porters’ 5 Forces analysis tools to analyze
the competitive strengths and attractiveness of the market. The last analysis will
be to perform SWOT analysis to gather information on both external and internal
factors and synthesizing the correlation to come up with solution.
Due to the confidentiality of certain data from Semen MerahPutih the author
uses alternative approach to complete the revision of the project. Data are taken
from several collective resources:
1) General company profile of Semen Merah Putih.
2) List of questionnaires for interviews.
3) Eligible data from Badan Pusat Statistik (BPS).
4) Eligible data from Asosiasi Semen Indonesia (ASI).
5) Eligible data from World Cement Association (WCA).
6) Data from published report of P.T Semen Gresik Annual Report.
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3.5 Methodology to Answer the Problem
1. Study Methodology
Exploratory study is a type of problem approach method that has not
clearly defined. Exploratory study often relies on the secondary such as
reviewing available literature and/or data, or qualitative approaches such
as informal discussions with consumers, employees, management or
competitors, and more formal approaches through in-depth interviews,
focus groups, projective method, case studies, or pilot studies25
25 Donald R. Cooper and Pamela S. Schindler, Business Research Methods (McGraw Hill 9th Edition: 2009), 709.
2. Type and Classification of Data
Primary Data
Original works of research or raw data without interpretation or
pronouncement that represents an official opinion or position. Primary
sources are always the most authoritative because the information has
not been filtered by a second party.
Secondary Data
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Secondary data is an interpretation of primary data. Encyclopedia,
textbooks, handbooks, magazine, newspaper article, etc, are
considered as secondary data.
3. Source of Data
Interview
Interview is a primary data collection technique for gathering data in
qualitative data methodologies. Interviews vary based on the number
of people involved during the interview, the level of structure, the
proximity of interviewer to the participant, and the number of
interview conducted during research.
Literature Study
Literature study is review of books, articles in journals or professional
literature, research studies, and web published materials that relate to the
management dilemma, management question, or research question.
3.6 Data collection method
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As mentioned above, the author uses several techniques for acquiring data and
information in connection with this project. For the Interview approach, the author
distributed a list of general questionnaires to several employee of Semen Merah
Putih. The objective of this approach is to gather data, knowledge and information
as much as possible regarding Semen Merah Putih internal aspect, such as
Strengths and Weaknesses. In addition, the questionnaires are also set up for a few
Cement distributors within the vicinity. The objective is to gain knowledgeable
information ofExternal aspect such as buying habits, buying preferences and such.
CHAPTER 4
RESULTS AND DISCUSSION
4.1 Analysis of the Cement Industry
In relation to analysis of the cement industry, one must identify what are
the external and internal factors that affected the industry in general. By
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understanding that, the focus is to generate an idea on what will affect the
industry’s sustainability not only now but also for the future.
4.1.1 Pest Analysis
PEST analysis is a useful tool for understanding the big picture of
operating and takes advantage of opportunities. PEST analysis includes
political, environmental, social and technological factors, which affects both the
companies as well as industry.
Political Factors:
The coal rates, power tariffs, railway tariffs, freight, royalty and cuss on
limestone primarily control the price of cement.
The growth of Property and Infrastructure project has enhance the demand
of building materials, mainly cement26
26Source Cement Indonesia 2013
Indonesian government realizes the lack of quantity and quality of the
country's infrastructure and is currently focused on increasing investments
in this sector; both direct and in cooperation with the private sector
through public-private partnerships. This will have an impact on domestic
cement demand as large quantities of cement are needed to build the large-
scale infrastructure projects such as roads, bridges, airports and seaports.
Economic FactorsIPMI | 61
Indonesia has been experiencing continuous and robust economic growth
for a number of years. Indonesia’s gross domestic product (GDP) grew
over six percent annually since 2007 (except for 2009 when international
turmoil caused Indonesia's GDP growth to drop to (a still impressive) 4.6
percent26. The principal pillars of Indonesia's current GDP growth are
domestic consumption and investments.
Export: Indonesia export in cement industry is dominated by its clinker
than cement products. In period January – June 2012, Indonesia cement
and clinker export shows a significant decrease to 147,000 tons from
1,162,000 tons at same period in last year. High national demand for
cement and clinker has influenced to low and decreasing number of those
products to export. Most of clinker from Indonesia is exported to
Australia, Bangladesh, Malaysia, Singapore and Sri Lanka, meanwhile
the cement is exported to East Timor and French Polynesia.
26Source: Indonesian Cement Association
Import: Indonesia import both cement and clinker. During January – June
2012, Indonesia is importing around 1,253 thousand tons of clinker or
increase 54.1% compared to same period last year. Indonesia is also
importing around 481 thousand tons of cement during January – June
2012, or increase by 5.3% compared to same period in the last year.
Indonesia is importing clinker from Taiwan, South Korea, Vietnam, and
Malaysia, and also importing cement from Malaysia and Vietnam.
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Price:Indonesia’s cement price movement is influenced mostly by
several factors:
1. Coal Price
Around 30-40% of cement production cost is influenced by coal
price. Coal Cement factory needs around 30% of hard choking coal
and 70% of low-medium calorie coal. During last quarter of 2011,
the limited supplies of coal which has made the coal price
increasing has also influenced many manufacturers to increase
their cement price.
2. Electricity Price
Indonesian government under Ministry of Energy and Mineral
Resource regulation No. 30 Year 2012, is raising the electricity
price gradually at each quarter until achieve 15% of increase. The
15% increasing is predicted will affect production cost by 5%.
In 2009, PT. Semen Gresik as a state owned enterprise has signed
business to business cooperation agreement with PT. PLN to
supply electricity of 187 Mega Volt ampere with 0.089 US$ per
kwh. This situation makes PT. Semen Gresik is not influenced to
electricity price movement.
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3. Industrial Fuel Price
According to corporate secretary of PT. Indocement Tunggal
Prakarsa, around 1/3 of energy use in cement production is
powered by fuel oil. The increase of fuel oil price by 15-20% is
considered will also increase the production cost by 10-20%.
4. Transportation/Logistic Cost
According to World Cement (www.worldcement.com), the lack of
proper infrastructure in transporting cement has made the
Indonesia cement price is amongst the highest in Southeast Asia.
Since the cement price is also affected by market mechanism
(supply – demand), the lack of infrastructure which hampers the
cement supply is causing higher price.
Social Factors
The rise of middle- class sector is also a major factor in contributing to
Indonesia’s GDP growth. According to a World Bank report, each year seven
million people join the ranks of Indonesia's middle class and their subsequent
consumptive behavior and demands give rise to new housing and real estate
development.
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The cement industry in Indonesia consists of both the organized sector and the
unorganized sector. Organized sector comprises of the well-known cement
manufacturing companies while the main players of the unorganized sector are
the regional and local cement-producing units in various states across the
country. Indonesia consumers prefer buying branded cement like Semen
Indonesia, Semen Tiga Roda and, Holcim
Technology Factors
The Government of Indonesia plans to study and possibly acquire new
technologies from the cement industry of world. The government is discussing
technology transfer in the field of energy conservation and environment
protection to help improve efficiency of the Indonesia cement industry
4.1.2 PORTER’S 5 FORCES ANALYSIS
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Figure 4.1 Porter Analysis
Rivalry within the Industry
There are nine (9) cement manufacturing company that have the production unit
in Indonesia. In Figure 10, it will illustrate the Market Share of the three (3)
biggest players within the industry. The Market is clearly dominated by Semen
Gresik (45%), followed by Indocement (30%) and Holcim (15%).
This also shows that the competitions are very strong among these Industry
movers and with the coming economy growth, it will only get stronger.
Figure 4.2 Market Share of National Cement
Competitor Analysis
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The purpose of this study depicted below in Table 4, is to identify in terms of
Semen Merah Putih positioning related to two (2) of the biggest player within the
industry, Holcim and Semen Tiga Roda.
Holcim Semen TigaRoda Semen MerahPutih
No Since 1971 Acquire semen CibinongBecome Holcim 2006
1985,Indocement 1982 Chinfon Cement Become Semen MerahPutih 2011
1
2
3
4
5
Products -SerbaGuna-Smooth Fibre-Ready Flow-Ready flow plus--Holcim durable-Extra Durable-Drillwell plus
-Portland Composite Cement (PCC)-Ordinary Portland Cement (OPC)-Oil Well Cement (OWC)-TR30 White Skim Coat-White Cement-Ready-Mix Concrete-Aggregates (produced by Indocement’s subsidiaries)
-Type I Portland Cement (Grey Cement)-Mortar Cement-White cement
Price - - -
Place Maloko, Jawa Barat,
Jeladri, JawaTimur
Jawa 40,7% to 41,7%,
Kalimantan, 28,9% to 30,1%
Promotion strategy
The Company did advertising
on ATL and BTL
The Company did advertising on trucks, buses, and transporting container products Indocement. Advertising in print and electronic media such as billboards, television and radio carried out intensively
-One of the major events is the 2012 Indocement Awards, which is the pride of the Company. The program aimed to the contractors, developers, university students, researchers and public. The theme of 2012 Indocement Awardsis Beyond Innovation
-The Company did advertising on trucks, buses, and transporting container products Indocement. Advertising in print and electronic media such as billboards.
Table 4.1 Competitor Analysis
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Threat of New Entrants
There are some barriers that make it hard for new entrants to enter into the market.
High Capital: Investment required establishing a cement manufacturing
company is categorized as high. Cost to produce 1 ton of cement is
approximately USD 150 – 175, depend on the production capacity. The
capacity for warehouse is also different among the factories. Usually the
factory has to prepare the warehouse capacity for 3 weeks stock reserve,
and this could charge them with high cost depend on the production.
Economic of scale: The existing companies have the advantages from
economies of scale, because they already established for years and have
higher production capacity. Commonly, a new factory will not directly
produce a high production capacity. It will start with low capacity first,
and raise it with along with increase of demand. As a result, the existing
company will have the advantage in Economies of scale.
High Switching cost: High switching cost make it difficult for customers
to change products they normally use
We can conclude that the possibility of new entrants to enter the market is exists,
but they have to face several barriers of entry. Therefore, we can categorize these
factors as low threat.
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Threat from Substitute Product
Cement is the main material to support the infrastructure development in
Indonesia. For now, research and development in substitute material to replace
cement does not exist yet.
Bargaining Power of buyer
Buyer power exists when only one buyer exists in the market (monopsony), which
makes the power entirely in the hands of the buyer. In the cement industry, power
of buyers is limited due to the lack of substitutes.
Bargaining Power of Supplier
Main materials for cement production are Limestone and Clay. Usually, a cement
manufacturing company owned or has partnership agreement with the mining
company that have the exploitation right. So, the bargaining power should not be
very high because they have their own agreement.
From the equipment supplier point of view, there are plenty of companies that can
provide the firm’s needs for equipment. However, because the equipment is
typically specified for the cement processing only, the equipment might be
expensive because it needs certain customization.
After analyzing several facts above, we can conclude that supplier for raw
material and equipment is very essential for cement industry. Nevertheless,
because of partnership agreement with raw material supplier factor and there are
several company that could provide the needs of equipment, we can categorize
this factor as medium
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4.1.3 SWOT ANALYSIS
In the last segment of the analysis, the writer will use SWOT analysis
framework by Albert Humphrey to allow easier overview of the industry. The
analysis is categorized into: (1) Strengths; (2) Weakness; (3) Opportunities; and
(4) Threats.
Figure 4.3 SWOT Analysis
4.1.3 A. SWOT Analysis Framework
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The objective of this study is to clearly define the influencing factor of
cement industry in Indonesia and what are the main key factors that can be
integrated to bring positive impact and advantages for Semen Merah Putih Brand.
Strengths:
Durability : Robustness of cement quality is a distinctive trait that every Cement
manufacturer should have.
Environmentally friendly : Merah Putih Cement advanced technology in its Cement
production is able to decrease significantly Carbon Dioxide (CO2)gas emission.
Trusted Quality : Cement produces by Merah Putih are imported from Chinfon
Vietnam who has a long list of outstanding awards and recognition.
Efficiency : The technology owns by Chinfon utilize less time and energy.
Weakness
Merah Putih is still import their Cement from Chinfon in Vietnam this lead to high
operation cost.
Merah Putih brand is still a new player in the Indonesia Cement Industry.
Opportunities
Foreign Direct Investment in Infrastructure makes more room to sustain growth.
Infrastructure and Housing development
No Substitute
Threats
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Existing Competitor
The market conditions has been controlled by the big players
New Competitor
Economic inflation have a significant influence on the cement Industry
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SWOT
STRENGTHS-DURABILITY
-ENVIROMENTALLY FRIENDLY
-TRUSTED QUALITY-CEMENT PLANT DEVELOPMENT
- EFICIENCY
WEAKNESS
- IMPORTED- OPERATION COST-UNKNOWN BRAND
OPPORTUNITIES
- HIGH MORTGAGE-EASY HOUSING LOAN-INCREASE INVESTMENT INFRASTRUCTURE
S+O : -Premium class product, edge competitiveness-Penetration in Java-In collaboration with developer
W+O-Established factory will reduce cost-Optimize existing stock until the factory
THREAT
-EXISTING COMPETITOR- NEW COMPETITOR- INFLATION
S+T :Service to distributors and customers so that
they are loyal-With which they build factories in Indonesia
shipping cost and production cost price
will minimize competitiveness
W+T : Ensure
availability of stock levels.
Set up factory building. 2015
-Expanding
Table 4.2 SWOT Analysis Framework
4.1.3 B. SWOT Analysis Elaboration
S+O: Strategies to make use of Opportunities through Strengths
Compete on quality basis:
Semen Merah Putih should utilize its Brand Premium quality in
competing in larger and broader market, for example Government
Infrastructures, Real Estate and High Rise building.
Concentrated on BTL strategy, for efficiency
Specific penetration strategy for cost reduction:
Capture direct specific market, which can have a sustainable
relationship so, that minimizes budget spending for promotion
or advertising.
Use other media tools for advertising, creative promotion:
Creating brand awareness can be challenging and thus Semen
MerahPutih can find other media tools for introducing their brand.
Right segmentation and positioning: Identifying and
Concentrating on the right market will be a great advantage for
competitiveness.
S+T: Strategies to prevent Threat through our Strengths
Enhancing price competitiveness with the new factory in
Indonesia:
The new build factory in Bayah will surely give Merah Putih
effective and efficient distribution
Expanding distribution to other areas:
Identifying potential unknown market can give Merah Putih an
advantage.
Working together with developer projects to ensure market
growth:
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Maintain great relationship with Projects Developer and possibly
creating a rich client database to ensure growth.
Capture market share by aligning distribution need using Top
Products: Optimizing the most suitable product for specific
projects will give maximum consumer satisfaction.
Optimize selected product differentiation with premium price:
Stays positively focuson the right product, rather that concentrating
on pre-mature differentiation.
Co-operation with other neighboring countries to keep up with
market trends: Being able to know what are the market trends
regularly through other emerging countries who share the same
industry will be valuable.
Give incentives to Distributor and customer:
Use creative marketing and sales strategy for consumers.
W+T: Strategies to minimize the potential dangers in the Industry where our
Weakness meets Threats
Ensuring stock level in Distributor:
Making sure Product Availability and readiness in Distribution channel
can minimize potential competitor risk.
Speed Up factory building as soon as possible.
W+O: Strategies to make use of Opportunities to minimize Weakness
Build marketing team:
Developing a solid marketing team to assist and help with in-field
situation
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Hire business consultant business development:
Utilize the help of Consultant to develop a strategic business plan and
business development.
Build cement communities distributor for input and output:
Create a community for clients and maintain regular meetings for
discussions and agenda.
New Investors in Indonesia Cement Industry
The increase in cement consumption in the country especially during the
year 2011 until about 2012 making some producers in Indonesia continue to
compete to increase its production capacity by building a new factory unit which
is expected in the next 2-3 years to operate normally and could produce to meet
the needs of cement in the country .
In 2012, the number of existing installed capacity amounted to 56.82
million tons; cement demand in the country is expected to reach 52.8 million tons.
In the next three years if the average cement demand grew by 10 % every
yearthen expected cement demand in 2015 will reach 70.2 million tons.27 If we
see from some of the above data, then if in the next 3 years in Indonesia there is
no additional capacity from existing plants it stands to Indonesia will experience a
' shortage ' or cement crisis, given the ongoing development of this now so rapidly
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27Asosiasi Semen Indonesia, June, 2012and in same time with a large scale, not to mention the level of demand for
property higher.
No. Project Name / Investor Capacity/ yr. Location
1 China Anhui 10 juta ton Kalsel/Kaltim/Kalbar/Papua Barat
2,5 juta ton Tanjung, Kalsel
2 China Trio Int. Engineering Co. Ltd 1,5 juta ton Subang, Jabar
3 (SDIC) State Development and Investment Cooperation
1 juta ton Papua
4 Siam Cement Group – Thailand
(Akuisisi Boral/Jaya Readymix)
1,8 juta ton Sukabumi, Jabar
1,2 juta ton Bayah, Banten
5 PakuBumi / Semen Karawang
PT Jui Shin Indonesia
2,5 juta ton Karawang, Jabar
6 PT Semen Grobogan /
Gajah Tunggal (China Triumph IntEng Co Ltd – CTIEC)
1,5 juta ton Grobogan, Jateng
7 Wilmar Group 2 juta ton Banten
8 Ultra Tech Cement – India 4 juta ton Wonogiri, Jateng
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Table 4.3 Indonesia Cement Market
The above data and table shows that the Indonesia’s Cement market is
completely open for grasp from the private sector mostly. This will give equal
opportunities for Semen Merah Putih to be as competitive as possible.
4.1.4 General Key Success Factor in Cement Industry:
1. Quality productwith SNI
2. High brand awareness should be strong to get the market
3. Relationship with distributor is important because they sell the product
4. Strong team marketing to introducing brand to the market
5. Cost efficiency to ensure specific allocation of spending cost
(As summary from PEST and SWOT)
4.1.5 Elaboration of Key Success Factors
1. By ensuring product quality using SNI standard and Chinfon Cement
system, Merah Putihis able to increase market competitiveness to
distribution channel.
2. Working with big developer and real estate agency to capture deeper
market penetration and segment.
3 Maintain Distribution channel widely not only local but possibility
outside Indonesia
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4. Utilize marketing and sales team to promote Brand Merah Putih to
every area
5. Specific segmentation will generate costreduction and time efficiency.
4.1.6 Key Strategies from SWOT, PEST and PORTER’S Analysis
1. Invest more to production to ensure Quality Standard
2. Create a solid marketing team in order to increased brand awareness to
the public
3. Manage cost spending by allocation to top priorities e.g. Production and
technology
4. Pay attention to overseas market, especially the developing neighbor
countries such as Vietnam, Laos, Philippine and Cambodia
5. Identify new market possibility by keeping up to date to economy and
industry
6. Allocate resources in big city and secondary city areas and gather
information and brand awareness.
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4.1.7 Semen Merah Putih Ideal Marketing Strategy approach
Viewing its vision and mission, the company has to put it into a strategy to
go through Indonesia market for the first time. After did an informal interview
with the manager of marketing division, the marketing strategy of the company
can be summarized as follow
1. Introduce the market with a premium product to close the gap with the
existing companies in the market.
2. Use direct selling and distribution to capture the market from varies
segment.
3. Use the penetration for every area
4. Focus on the after sales service to maintain customer’s loyalty and
distibutor.
5. Concentrate the promotion and selling on the West Java area first.
6. Pay attention to overseas market, especially the developing neighbor
countries such as Vietnam, Laos, Philippine and Cambodia.
7. Not reduce the price, but create a differentiation and value of the
product
Semen Merah Putih, as a new brand has developed and organized
marketingplan that focused in Segmenting and Targeting the market itself. In
cement market, its segmentation can be divides into several segment based on the
customer’s needs and preferences.
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Based on the theory of Market Segmentation and Targeting, the way to
segment the market can be various. Every market has the different variables, but it
would be better for the company if the segments were divided again into more
specific segment based on its characteristics, so the strategy to reach the potential
customers will be more accurate.
For the Household segment, the company can divide type of customer
based on the geographical area and income. Geographical segment can categorize
the customers based on their location, structure of the land, typical weather of the
environment, etc. Meanwhile, based on their income, the customers can be
divided into low, medium, or high income.
For the construction segment, the company can divide the characteristic of
the segment based on the use of the construction. The type and requirement of
materials for commercial construction and public infrastructure construction will
be different.
On the other hand, in targeting the market it’s better for the company if the
company focusing on one market specific segment at first, considering that they
are still on the introduction stage. The company can be more focus in introducing
their brand to the market, deliver the message to the customers, and build brand
recognition.
Basically, every type of segment has different characteristic. Although the
company is already select the construction industry as their main target, they
could select more specific target based on the further segmentation recommended.
The commercial construction would be an ideal target for this stage, considering
they want differentiation as their positioning.
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4.1.8 Marketing Mix based on Product Life Cycle Theory
Just like a biological creature, each product has its own life cycle, as
explained on the literature review. Implementation of the strategy and risks on
each stage is different because the basic objective is also different.
On the earlier stage of life cycle, the basic objectives are to introduce product
line to the market and build brand recognition from existing customers. In the
condition of Semen Merah Putih, the product has to be able to penetrate the
domination of the existing product that has the advantage in term of brand
recognition.
Product
Product strategy for Semen Merah Putih is to create a high end or premium
product in order to close the gap between Semen Merah Putih with other existing
product.
Ideally based on the theory, in introduction stage a company should provide the
market with high quality product in order to gain customer’s trust. So basically,
the strategy is already ideal.
Price
Basically as a commodity product, cement price is inelastic. Price for cement has
its own standards, and reducing it will not affect much on the sales. So the
company strategy is more on creating product differentiationthan reducing the
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price. This strategy is already fit with the theory, but thecompany needs to be
more detail what kind of differentiation they want.
Place or Channel
Based on the interview, the focus of the company is to build the distribution
channel on the West Java area first. This strategy is fit with the theory. In
addition, considering that the market is shifting towards outside Java Island, the
company must start to think to build distribution channels to outside Java Island,
especially for East Indonesia Area.
Promotion
Semen Merah Putih started to enter the national market in April 2012. Ninety
percent (90%) of the market are controlled by the big players. For now, Semen
Merah Putih is investing in Branding and Marketing effort to introduce their
product out on the market.
Branding will be educated to end user, such as home owners, contractors and
distribution shop. Semen Merah Putih is also provide a wide range of trade
promotion gimmick that can trigger them to sell the product at the same time
recommending Semen Merah Putih brand.
In addition, promotion and advertisement through media mass, such as TVs and
radios is also in progress to capture broader public segment. Last, Semen Merah
Putih have already held Promotional Campaign, in part of Branding Strategy to
create awareness by inviting small distributors and retailers to come and join with
their families together.
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CURRENT
STRATEGY
GAP IDEAL
STRATEGY
ACTION
PLAN
Enter the market with Premium Product
Low brand awareness
Trust
o Use differentiation
o Select target market
Create innovative branding and advertisement
Established customer and distributor’s loyalty
Trust o Educate Customers with Product strngths
Use incentives and create programs to gain loyalty
Cement is imported from Vietnam
High operation and shipping cost
o Build production facility
Factory in Bayah is under progress
Figure 4.4 Strategic Development model
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CHAPTER 5
CONCLUSION AND RECOMMENDATION
5.1 Conclusion
In Indonesia cement industry has reached a phase where the big players have
dominated the market for a period of time. For a new Brand to enter the market it
needs to have a structured marketing plan, feasible strategies and targeted forecast
for the future. Thus, knowing and understanding the market becomes an essential
factor. Strategic marketing plan will be the main guideline for the company in
order to enter the market.
Structured Marketing Mix will be useful for the company as one of the pattern
to penetrate the market according to the product life stage. Meanwhile, Industrial
Analysis using Porter 5 Forces Analysis will give the company benefit in order to
give a clearer description about national cement industry.
In addition to that, market segmentation, targeting and positioning will give
the company a better direction the company so their strategy can work effective
and accurate, and fit with their specific target market.
For Semen Merah Putih after analyzing the strategic marketing plan of the
company, we can conclude that their marketing strategy can be improved further.
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Using the tools that already mention in the Chapter 2 and Chapter 4, hopefully
this report and its recommendation could help the company to decide and plan
more accurate strategy.
5.2 Recommendation
There are a few recommendations that I strongly believe applicable for
PT Semen Merah Putih and could help them in their strategic marketing aspect.
a. Segmentation: Divide their segment into more specific segment.
For Premium Brand maybe, they still can divide the market into
more specific segment based for the Household segment
(geographical area and income of customers) and Construction
(commercial construction and public infrastructure).
b. Targeting: Ascertain the commercial construction industry as their
main target market in the introduction stage.
c. Positioning: Decide what differentiation that would be chose more
specifically.
d. Promotion : Other than advertising, the company can consider to
use public relation and personal selling as the promotion modes
with the consideration of commercial construction as their main
target market
e. Using digital marketing and media as one of the promotional tools,
because in this era, this tool could be more effective and accurate
than the conventional way.
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In addition, Semen Merah Putih brand can develop an Annual Strategic
Projection Plan. The objective of this plan is to assess several aspect. They are;
1. Where is Semen Merah Putih Brand currently now? In terms of e.g
Sales, Distribution aspect, Brand awareness, etc.
2. What step(s) are in order of priorty need to be done?
3. Where they want to be one, two or five years from now?
4. How can Semen Merah Putih handle competitors rivalry?
5. Which competitor is the most noticeable and exist in the Industry?
These are just some of the many Strategic development approach that
Semen Merah Putih can conclude to bring the best out of their new Brand.
Based on the author studies’, the great Cement Companies like Semen Gresik, has
been developing an annual projection reports and forecast. The contents might
vary from year to year but several apects that worth to be noted are:
1. Current Industry analysis is performed
2. Economic growth and Cement Consumption.
3. Domestic consumption
4. Key Drivers for Domestic Cement Demand.
5. Market Segmentation status. (Geography)
6. Strategic focus for the future.
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These elements help Semen Gresik to be on the top of the Industry for quite
some time. If Semen Merah Putih can find the most suitable Strategic Plan and
Business development projections, they will be ahead as well.
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