STRATEGY MANAGEMENTStrategy Analysis of Garuda Indonesia

Lecturers: Risris Rismayani, S.MB., S.Pd MM & Yudi Pramudiana, ST., MM

GROUP MEMBERS: Zakiyah Ulfah (1201130437) Raihan H. D. Widodo (1201130438) Bobby Romadhoni (1201130442) Reynaldi Ahmad Juliawan (1201130449) Karunia Apriliani R. (1201130461) Husein Nasimov (120030467)

International ICT Business

About Garuda Indonesia In 1950, Garuda Indonesia officially became a state owned company. Garuda Indonesia’s fleet continued to grow and eventually made its

first flight to Mecca carrying Indonesian hajj pilgrims in 1956. In 1965, the first flight to European countries started was made with

Amsterdam as the final destination.

Vision and Mission 2009 - 2013A strong distinguished airline through providing quality services to serve people and goods around the world with Indonesian hospitality.

The flag carrier of Indonesia that promotes Indonesia to the world, supporting national economic development by delivering professional air travel services.

LONG TERM OBJECTIVE

Maintain the growth and become more competitive not only nationally but also internationally.

Continue to expand its network, reaching fast growing economic cities and new tourist destinations.

Strategies that have been implemented

Garuda Indonesia uses Balance Score Card (BSC) approach and determined strategic objectives which were grouped into 4 perspectives; Financial perspective, Customer perspective, Internal Process, and Learning & Growth perspective.

BUSINESS FRAMEWORK MODEL

1. CUSTOMERS First Class Economy Class

2. VALUE PROPOSITION Uniqueness statement that the organization provide to its Customer

Segment. Garuda Indonesia introduces ‘New Service Concept’ in its First Class

service to the standard of Skytrax 5-Star.

3. CHANNELS Kiosk Counter which is a moveable sales counter and managed by

third parties. Generally Kiosk counter was located at hotel lobby, mall and office building.

Garuda Online Sales (GOS) is responsible to make planning, establishing policy, evaluating and leveraging sales and marketing through GOS Member with Internet facility.

4. CUSTOMER RELATIONSHIP Garuda distribute 100,000 re-cycle books to SD Negeri 28 Maripi, Ds

Distrik and Pondok Pesantren Hidayatullah, South Monokwari. Garuda gave away Groceris in 2012 as a concern over the

skyrocketing prices of daily necessities (groceries) due to the rising price of fuel oil.

6. KEY RESOURCES Finance:

Raising money from investors or lend it from bank Physical:

Planes and spareparts from either Boeing or Airbus Intellectual:

Patent, copyrights, trademarks Human Resources:

Pilot school, flight attendant, accounting, marketing and other school

7. KEY ACTIVITIES (VALUE CHAIN)

Support Activities Corporate culture that will encourage the creation of a conducive working environment.

Talent management that will ensure the availability of the Company’s future leaders.

Improving and expanding the role of people manager who is able to be the competent mentor and coach

Number of employee in 2013 was 7,861 employees, grew by 12,2% compared with the number of employee in 2012.

Human Resources

Support Activities

Improving capacity, reliability, and security related to network to support the operational readiness of Amadeus Altea.

Completing the implementation of Enterprise Service Bus, Operation Data Stores, and MQ Server.

Migrating PSS ARGA to Amadeus Altea. And in the same year completing the Reservation, Inventory, and Ticketing and Departure Control System.

Completing the Integrated Contact Center to support passenger services in comply with the SkyTeam standard.

Information Technology

Support ActivitiesProcurement & Logistic System

Joint Procurement that support the effectiveness and maintain the quality standards in order to join the

SkyTeam Global Alliance.

Garuda has intensively developed a system based on Materials Management & Supplier Relationship

Management.

Barcode systems and the development of E-Catalogue to improve the effectiveness of

procurement and logistic system.

The Company also optimizing the use of web-based Electronic Procurement.

Primary ActivitiesMarketing & Sales

One of marketing activities conducted by

the Company is the Garuda Indonesia

Travel Fair.GATF is Garuda

Indonesia’s annual exhibition held in

various regions with its peak in Jakarta.

The 2013 GATF managed to generate revenue of more than

IDR 70 billion.

For Garuda Indonesia, the gain from increased corporate sales was to have sustainable

captive market, aside from reduction of distribution cost

and expansion of market.

Primary ActivitiesService

Pre Flight: ‘First Class Lounge’ where Garuda Indonesia became the only airline in Indonesia offering

this service.

In Flight: The additions of Boeing 777-300 were equipped with new service concept that is intimate,

warm, and luxury.

Post Flight: “Premium Arrival Lounge and Baggage Collection.”

8. KEY PARTNERS Airbus & BoeingThey are Garuda’s key partners and also suppliers, they provide airplane and its spareparts Garuda Indonesia has more than 1000 partners all around the world,

some of them are:

9. COST Total cost efficiency in 2013 amounted to Rp 124

billion, significant increase of 41% from Rp 88 billion in 2012.

Garuda managed to save the use of fuel up to 18.5 million liters in 2013. Total fuel burn in 2013 was recorded at 1,371 million. The increase was triggered by intensified operation, of which flight frequency increased by 22% while “Available Tonne Kilometer” (ATK) also escalated by 16%.

(cont.) Most important cost inherent: Airplane cost Most expensive key resources: Airplane and its spareparts Most expensive key activities: Supporting activities; procurement &

logistics Garuda Indonesia is a value driven business, it focuses on value

creation, premium value proposition

SOURCE OF COMPETITIVE ADVANTAGE

1. INTERNAL Human resources

Corporate culture that will encourage the creation of a conducive working environment Service

Provides ‘First Class Lounge’ service Logistics and Operation

Joint Procurement that support the effectiveness and maintain the quality standards

(cont.) Information Technology

Completing the Integrated Contact Center to support passenger services in comply with the SkyTeam standard

External

CustomersCustomers or target market of Garuda Indonesia are very wide spread.

CompetitorsGaruda has either local or international competitors that operate the same route with them

Market TrendsWorld market trends now are moving extremely. Because of the economic crisis, now people are preferred to travel in short haul more than long haul. Short haul mean people are travel in regional around the country.

Potential LimitationThere are a lot of potential limitations to make success this project.

Time ConsumingThis project is a really time consuming project.

BudgetThis project also needs a big amount of money.

Technology IntegrationTechnology integration is another limitation of this project.

Internal Assessment

Rivalry Among CompetitorThe rivalry among competitor is very tight. The Ministry of Transportation of Republic of Indonesia has noted that competition in the airline industry will be increasingly fierce and accompanied by the increased number of users. In 2013, the number of foreign airlines companies entered Soekarno Hatta Airport was 37. (Source: Airport Authority).

Barriers to EntryThe aviation industry in Indonesia in 2013 is still considered prospective, in line with the economic growth and the increase in purchasing power. The increasing demand for air travel has prompted many airlines companies to join the competition in Indonesian aviation industry. More affordable ticket prices, as well as more choice of airlines, have made more and more Indonesian people choose flight as the main mode of transportation. So we can say that the barriers to entry this industry is low.

Availability of Substitutes.In the aviation industry in Indonesia there’s no perfect substitutes. Because Indonesia is an archipelago state, it will be hard to travel from island to island by trains, cars, or buses. Well, ship can be an option but it will took a too much time even though the tickets are cheaper. Since airplane tickets now are more affordable, and travelling by airplane is so much faster and the passenger will not get tired on the way to their destinations, customers prefer to travels by airplanes than ships. It is for domestic route. As for international routes, of course airplane is very preferable.

Power of SupplierSupplier power in the airline industry is high as there are only a handful of suppliers. Additionally, aircrafts must be ordered far in advance. The airlines company has only two primary choices for supply of their jets which is either the Airbus or Boeing. Due to this reason, the supplier has significant power. The long term nature of these purchases creates a long-term relationship whereby the airline is often motivated to purchase the same kind of jets always.

Power of BuyerPower of buyers is significantly high in the airline industry. This is because consumers are given the privilege of searching for the lowest flights available on the internet and to complete the transaction without an intermediary. Buyer power increases because of this reason.

SWOT ANALYSIS

SWOT AnalysisStrength

Garuda Indonesia has successfully migrated to the new PSS system called Altea developed by Amadeus, which has been used by 8 of the 19 airlines members of SkyTeam.

Garuda Indonesia passengers now can fly to more destinations in the world using SkyTeam networks with optimal comfort and in convenient way.

What is Amadeus Altéa ?

A complete Passenger Service System that will help you turn your strategy into tangible results.

It offers full reservation, inventory and departure control capabilities, and delivers a uniquely integrated

solution.

SWOT AnalysisWeakness

The expensive price ticket that they offered.

The lack of Human Resources

Need more pilot

Customer Relationship Problem

Financial problem

Customer still have complaint on Garuda services especially in :

1)Dated entertainment system2)Pilot announcements3)Unexciting lounges

4)No frequent flyer program and public perception.

US $1.2 milliard estimated to go down 18% because of the decline of sales.

SWOT AnalysisOpportunities

On March 5, 2014, Garuda Indonesia will officially become the 20th member of the SkyTeam alliance, an alliance of global airlines. This means that the opportunities for Garuda Indonesia to carry passengers from abroad will be even greater.

SWOT AnalysisThreat Global economic crisis still poses serious

threat mainly arises from the recovery process in Europe and the weakening of the

U.S. economy due to tightening of public spending program

Sizeable fleet expansion in 2013 brought less optimal results given high domestic

inflation and weakening of Rupiah against other global currencies.

Limited infrastructure of airports may potentially interfere the achievement of the

Company’s operational targets.

5 PORTER GENERIC STRATEGIES

Garuda Indonesia Airline use Best Value as a generic strategies.

That offers services to a wide range of customers at the best price-value available on the market.

The best value strategy aims to offer customer a range of services at the average price available compared to a rival’s prices such as a ticket and cabin luggage.

Compared with AirAsia. Garuda Indonesia become a number one airline that have best services in domestic or international route.

Garuda Indonesia has a expensive price, its equal with the services that Garuda Indonesia give to they customers.

VERTICAL INTEGRATION

Forward Integration: Garuda Indonesia is not allowed to do forward integration by the government. They once tried to integrate with PT. Abacus to do dual access but they got busted and got fined with Rp. 1 Billion.

Backward Integration: Garuda Indonesia established PT. Garuda Maintenance Facility Aero Asia 26 April 2002. It runs repair and maintenance service for their own internal and external airplane components.

Horizontal Integration: Garuda Indonesia established PT. Citilink Indonesia in 6 January 2009 as their effort of doing horizontal integration. Its purpose is to reach consumer with low-cost flight preference whereas Garuda Indonesia itself provide premium flight.

MARKET INTENSIVE

Market Penetration: Garuda Indonesia has done market penetration effort not only in local market but also in global market to expand the market they targeted. For example, Maintain the image of Garuda as a full service carrier in Indonesia and becoming a member of SkyTeam Alliance

Market Development: Proved in 2012, Garuda has done market development effort. The company planned business development by focusing on fulfilling the purpose of being a member of the Global Alliance in order to improve the market and also to overcome the challanges of the increasing price of fuel and increasing number of competitor in the airline industry.

Product Development: In implementing this strategies Garuda has developed its fleet according to the growth and the potency of International and National market and also renewing and simplyfying the type of airplane being used.

DIVERSIFICATION

Related

PT Citilink Indonesia was founded in 2009 and engaging in the business of low cost carrier. Citilink obtained Scheduled Commercial Air Transportation Permit No. SIUAU/NB-027 on January 27, 2012 and Air Operator Certificate (AOC) Number AOC/121-046 on June 22, 2012 from the Ministry of Transportation.

Unrelated

Computerized Reservation System (CRS). PT Aero Wisata was established in Jakarta on June 30, 1973 with a mission to develop businesses related to tourism and hospitality industry. To support this mission, Aero Wisata has some subsidiaries engaged in hotel, catering service, land transportation, agency services, as well as tours & travel services.

MATRIX(ES)

Competitive Profile MatrixCritical Factor

Issues Weight Garuda Indonesia Lion Air

RatingWeighted Rating

Score Rating Weighted Rating Score

Technology 0.15 4 0.60 4 0.60

Advertising 0.05 4 0.20 4 0.20

Price 0.13 2 0.26 3 0.39

Facility 0.12 3 0.36 3 0.36

Services 0.25 3 0.75 2 0.50

Flight Route 0.03 3 0.09 3 0.09

On Time 0.10 2 0.20 1 0.10

Security 0.17 3 0.51 1 0.17

TOTAL 1 2.97 2.41

BCG MATRIXGaruda Indonesia control in 50% market domestic airplane. Due to expand in customer service and business relations with other airline companies, Garuda Indonesia become an important domain in International Market. For give services in the largest market, Garuda Indonesia has 40 branches company in Indonesia , 38 branches company in which the other country, and 13 representative office. Also Garuda Indonesia has 30 route y aviation and 24 route international aviation.

Financial Position (FP) Ratings

liquidity 3

Assets turnover 3

Earning per share 3

High return on investment 4

Total 13

Industry Position (IP) Ratings

Growth potential (High market needs) 3

Profit Potential 3

Recourse Utilization 4

Leader In Innovation 4

Total 14

SPACE MATRIX

Stability Position (SP) Ratings

Dollar in Rupiahs Rate -2

Minimum wage for labor ( high rate of labor strike ) -3

Economical condition -2

Total -7

Competitive Position (CP) Ratings

Has a huge market share in Indonesia - 4

Good Brand Image in Indonesia -2

High frequency of marketing campaign -3

Total -9

Constructing Matrix

FP Average is 13 : 4 = 3,25

IP Average is 14 : 4 = 3,25

SP Average is -7 : 3 = -2.33

CP Average is -9 : 3 = -3

Directional Vector Coordinate : o x-axis : 3,25 – 2.33 =

0.92o y-axis : 3,25 – 3 = 0.25

CP

FP

SP

IP0,92

0,25

ConclusionAfter we calculate the average of each position and also found the x and y coordinate, we get that the line is in the top right side. It means the most

appropriate strategy for APLN is aggressive strategy.

Quantitative Strategic Planning Matrix

Add Flight Routes to Europe and US Add Flight Routes from and to East Asia, Middle East and Pacific Asia

Key Factors Weight AS TAS AS TAS

Opportunities Member of Skyteam Global Alliance 0.20 4 0.80 4 0.80

Threats

Recovery process of Europe 0.25 3 0.90 2 0.50

Weakening of The US economy 0.25 3 0.90 2 0.50

High domestic inflation 0.15 _ _ 3 0.45

Weakening of Rupiah against foreign currencies 0.15 2 0.20 3 0.30

1.00 Strength

Migrated to the new PSS system called Altea 0.25 3 0.75 3 0.75

Usage of SkyTeam networks 0.30 3 0.90 3 0.90

Weakness

Expensive Price 0.05 _ _ _

Lack of human resource 0.10 _ _ _

Need more pilot 0.05 _ _ _

Customer relationship problem 0.05 2 0.10 3 0.15

Financial problem 0.20 3 0.60 2 0.40

Total 1.00 5.15 4.75

Internal Factor Evaluation MatrixNo. Strength Weight Rating Weighted

Rating Score

1. Installing new PSS system called Altea 0.15 4 0.2

2. Passengerscan fly to more destinations in the world using SkyTeam networks

0.05 3 0.15

3. Offering premium proposition to Garuda Indonesia’s product

0.15 3 0.45

4. Aircraft MaintenanceManagement Division

0.1 4 0.4

No. Weakness Weighted Rating Weighted Rating Score

1. The expensive price ticket that they offered.

0.05 2 0.10

2. The lack of Human Resources

0.15 1 0.15

3. Need more pilot 0.05 1 0.05

4. Customer relationship problem

0.10 2 0.10

5. Financial problem 0.2 2 0.4

TOTAL 1 2.00

External Evaluation MatrixOpportunities Weight Rating Weighted Rating Score

Economic Development 0.20 4 0.80

International Market 0.10 3 0.30

High - Technology 0.15 3 0.45

THREAT

High Barrier Entry 0.15 4 0.60

Competitive environment 0.15 3 0.45

Substitute Lower Price 0.10 3 0.30

Political Condition 0.05 3 0.10

Total 1 3.00

Internal External Matrix

Internal External Matrix Garuda Indonesia prescription for divisions that fall into cells II, since

EFE is 3.00 and IFE 2.00. Garuda Indonesia can use grow and build strategy.

SWOT Matrix

Garuda Indonesia is in quadrant IV, diversification. It shows Garuda Indonesia has a competitive advantage in the competitive market that is

increasingly intense aviation industry from year to year. Take the advantage owned Garuda need to be able to compete. Garuda Indonesia

has more power in the field of technology. That power should be maximized in order to provide different services and can seize the market

in the aviation industry.

Diversification

Weakness

Strength

Opportunity

Threat

INTERNAL/EXTERNAL STRENGTH WEAKNESS

1. Increasing the role of people manager

2. Implemented IBE (internet booking engine)

3. Optimalitation Intergrated operation control (IOS)

4. Push the inovation for create high valueadded products

5. Develop customer relationship management

6. Promotion from digital and social media

1. Technical factor and flight operations like limitation the amount of cockpit and cabin crew

2. Garuda indonesia has a weakness a proximately hundred pilot annually.

3. Garuda depend on automatically system for running the business.

OPPORTUNITIES STRATEGY S-O STRATEGY W-O

1. The inscreasing economi growth

2. The new fleet ranks supported leading edge technology and fuel-efficient

3. potential in the international market will be more powerful when combined with the company global alliance

1. Provide training and development of managers that employees can develop competencies that affect the performance of employees in the company rise.

2. Innovations on the new fleet for the company to improve efficiency in the future

1. Recruitment cockpit, cabin crew and pilots to avoid further delays to the Garuda Indonesia flight schedule and can increase the number of its flights.

Threat Strategy S-T Strategy W-T

1. Political situation of a country or place, can affect the procurement route to the venue

2. Land and sea transport equipment cheaper than airplanes

1. Application of the new IBE to remain competitive with its other transportation services

2. Do CRM development company to maintain user loyalty Garuda Indonesia flight services

1. The addition of the pilot, cockpit and cabin crew to minimize delay and give satisfaction to the users of transport services by increasing the number of flights and services rendered, as well as making flight service users to remain competitive with other transportation services even have competitive advantages

3. Competitive conditions tend to increase the national aviation industry and international as well as the application of treble Udder space (open sky) ASEAN secure breath.

4. Strong capital needed to plunge into the aviation industry.

5. Aviation industry creditors lend funds in large quantities and the average in the form of long-term debt

3. Forming mindset that Garuda Indonesia deliver customer-friendly service

4. Update flight information via social media at the web when the tread cancellation terming

FORMULATE GENERIC STRATEGY In case, Garuda Indonesia become Focus Strategy. It means

that the company focus in how to offer the best airline service with prestige and pride to own.

In addition special attention to a service or a narrow line of services or to the segment of the market that gives the company a competitive edge. The objective is to better serve the targeted market through concentration of organizational resources on such a market.

The target market can further be segmented into such dimensions as demographics (age, gender, education, religion, income, life-cycle stage), lifestyles (similarities in attitudes, interests) or other dimensions.

MARKETING Market Segmentation Garuda’s new regional jets and turboprops will compete

primarily against their competitors. While the regional jets will fly under the main Garuda brand and operate under a full-service regional model with dual-class configuration, the turboprops will most likely be delivered in single-class configuration

(cont) Gardua see a need to cover all sectors of Indonesia’s domestic

market Serving Indonesia’s fast-expanding middle class, demand for full-

service travel is also expected to grow as wealthy Indonesians travel more frequently

Many wealthy Indonesians insist on flying first class, even domestically, creating a need for some carriers to continue offering a two-class cabin even on the shortest routes.

MARKETING Market Proposition

• Air Asia

High Cost

Good Facility

Low cost

Bad Facility

• Garuda

• Lion Air• Citilink

Assets Total assets 2011: 2,083,006,809 Total assets 2012: 2,517,997,766 Total assets 2013: 2,953,784,952

Capital Total equity 2011: 922,797,776 Total equity 2012:

1,114,960,078 Total equity 2013:

1,117,148,117

R&D

Objectives1. To replace core airline system (PSS);2. To provide technology required to join the SkyTeam alliance.3. To develop a reliable platform of technology for all area of business.4. To facilitate in making differences for certain business area.5. To develop IT capability to significantly improve Garuda’s ability to implement various IT initiatives

Cost Contributor At the end of 2013, Garuda Indonesia gained revenue by

3.716.076.586 The cost of R&D is 306.221.089 Cost contributor:

Technology service used in Garuda Indonesia

IOSA (IATA Operational Safety Audit) as proves that the airline has fulfilled global best practice in safety and security procedures.

Individual touch-screen LCD TVs for executive and economy class passengers and equipped with Audio Video on Demand (AVoD). AVoD is an entertainment system that offers latest movie and audio tracks at your fingertips.

Garuda Indonesia is planning to provide wireless Internet service (Wi-Fi) for their eight new aircraft at the end of this year.

With the 24-hour pass, a passenger is also entitled to enjoy TV channels: BBC, CNN, CNBC, Euronews and NHK.

8 Principles Of Technology All of which are intended to support the achievement of the Company, as well as to differentiate whenever needed. The eight principles are: Choosing a system that complies with the aviation industry standard and applying it to functions that allow Garuda Indonesia to be competitive. Choosing a dynamic IT systems with the best-in-class Capabilities to applied on functions that are required to have of competitive differentiation. For

other functions, the initiatives focused on using an integrated system on a platform that has been proven reliable and need not customization.

Developing flexible and re-usable IT architecture, and facilitate easy access for passengers to get services and information through various channels.

The implementation of Garuda Indonesia IT initiatives is based on scale of priorities, focusing on the following key objectives:

To replace core airline system (PSS); To provide technology required to join the SkyTeam alliance. To develop a reliable platform of technology for all area of business. To facilitate in making differences for certain business area. To develop IT capability to significantly improve Garuda’s ability to implement various IT

initiatives

Business Ethics IssuesGaruda Indonesia

2011 IssueGaruda Indonesia launched Business Ethics and Work Ethic on February 10, 2011, marked by the signing of commitment by the Board of Directors and the Board of Commissioners, the Vice President, and the Senior General Manager of Branch Offices. The book of Business Ethics and Work Ethics of the Company was ratified by the President Director Decree No. JKTDZ/ SKEP/50023/11 dated 11 March 2011.

2013 Award GovernanceCorporate Governance Perception Index (CGPI) Award In 2013, Garuda Indonesia participated in the research of GCG implementation rating held by The Indonesian Institute for Corporate Governance (IICG) under the theme “Good Corporate Governance in the Perspective of Knowledge”. It is the fifth participation of Garuda Indonesia. Garuda Indonesia’s score was 85.84 and named as “Most Trusted Company”.

Business Ethics and Work Ethics provides Corporate Identity, which contains the Company’s Vision and Mission, and Corporate

Values, Key Behaviours to be upheld by employees. Commendable Behaviour, describing relation with fellow employees, customers, business

partners, shareholders, and Competitors. Compliance, describing transparency of communication and financial information,

handling conflicts of interest, gratification control, protection of the Company’s assets and confidentiality.

Employee responsibility, describing employees’ responsibility towards society, Government and Environment.

Enforcement of Business Ethics and Ethics Code, describing Whistle Blowing System (WBS), sanctions for violations, socialization of Business Ethics and Work Ethics, the signing of Integrity Pact by all employees.

WBS Report In 2013, there were 63 incoming reports to the WBSwebsite www.ga-whistleblower.com System. the incoming reports in 2013 can be categorized as follows:

29 unsubstantiated reports (46%) 19 complaints related to services/operations (not related to fraud or

breach of corporate ethics) (30%) 15 substantiated reports of fraud and ethics violations(24%)

From 15 substantiated reports, 9 were followed with by investigation by the designated investigator. From the investigation, 1 report was proved and 1 was not. Based on these data, the percentage of proved reports reaching 7% of the total number of incoming reports through WBS.

How to manage WBS in GA

Customer input

Report

Investigation

Followed up

Complaints

Evaluation on Whistleblowing System Since its commencement in 2010, improvements on the implementation and management of WBS continues to be carried out in various ways, including through dissemination aiming at increasing the understanding and awareness of the Company or stakeholders, improving regulations, the use of independent party, and improvement on information technology for WBS.

Consumer Protection Commitment

Principles and Policies Customers are the Company’s major stakeholder, and therefore the Company

strives to continuously improve the quality of service to its passengers as well as provide optimum protection for passengers. Service quality improvements are pursued on all stages of the passenger travel chain, comprising the pre-journey, pre/in/post flight, and post-journey stages.

Convenient Access

The Company provides a number of access to submit Customer Voice in the form of Compliment, Suggestion and Complaint. The accesses are: Website GA

Suggestion FormOne of the accesses for Customer Voice is attached in the inflight magazine Garuda Indonesia, which is the suggestion form. It is the media used to survey Garuda Indonesia’s customers satisfaction.

CSR

Vision Managing an effective and appropriate

Corporate Social Responsibility program so as to provide

positive impact on society, environment, and the Company.

Mission Committed to economic, social, and

environmental community empowerment in Indonesia

through innovative sustainable programs

“Garuda Indonesia Cares” Program is a form of implementation of the Triple Bottom Line

concept (Economic, Environment, and Social), manifested by the Company through the efforts of balancing the sustainability of profitability (economic ), the welfare of society social, and environmental preservation (environment).

Garuda Indonesia Cares for Economy Socio-economic progress of the community living in the vicinity of where

Garuda Indonesia operates is one of the ways to indicate the success of a CSR program.

Garuda Indonesia Partnership Program consists of two components, namely:1. Providing soft loans to finance the working capital or the purchase of fixed assets in

order to increase production and sales,2. Providing free coaching for education, training, apprenticeship, promotion and other

matters related with partners’ productivity and managerial improvement.

Garuda also provides training for established partners through education, training, apprenticeship, and promotion. Garuda Indonesia has disbursed IDR 264 million in 2013. Garuda Indonesia also helped its partners to conduct promotion activities, such as through exhibitions which involved partners. In 2013, the activities included:1. 6th Adiwastra Indonesia 20132. Bazaar Ramadhan 20133. Garuda Indonesia Travel Fair (GATF) 20134. APEC Exhibition in Bali5. Exhibition to commemorate the anniversary of IIPBUMN and Mother’s Day

Garuda Indonesia Cares for the CommunityDevelopment Education, Training and Sport

Development and Training Program for Weaving Artisan School Renovation Program and Educational Facility Aid Garuda Indonesia‘s Commitment Towards Tennis through “Garuda Indonesia

Tennis Open” Health

Concern for Cervical Cancer and AIDS in Eastern Indonesia Garuda Indonesia Cares for the Health of Kapuk Muara Community

Corporate Governance Structure In general, the corporate governance structure in Garuda Indonesia obeys and

complies with the prevailing regulations, comprising General Meeting of Shareholders (GMS), the Board of Commissioners, and the Board of Directors.

Each organ has the rights and obligations as well as role in the implementation of Good Corporate Governance set forth in the Articles of Association of Garuda Indonesia and/or stipulated in the prevailing laws and regulations.

GMS is the Company’s highest decision making body and a forum for shareholders to exercise their rights, while observing the provisions from the Articles of Association and the prevailing law and regulation.

GMS shall not intervene in the conduct of duties, functions and authority of the Board of Commissioners and the Board of Directors.

The Board of Commissioners is the organ in charge of and collectively responsible for overseeing and providing advices to the Board of Directors regarding the management policies, including ensuring that the Company has been implementing good corporate governance.

Implementation of Principles of Good Corporate Governance The Company prioritizes its sustainability and the interests of stakeholders. The Company also assigned a priority to its compliance with the applicable laws and regulations. As a State-Owned Enterprise (“SOE”) the Company implements the principles of good corporate governance in order to grow, to flourish and to sustain. The GCG implementation in the Company aims to:a. Optimize the Company’s value in order to have a strong competitiveness so that it can maintain its existence and sustainability as well as achieving its goals and objectives;

Implementation of Principles of Good Corporate Governance b. Promote a professional, efficient and effective management, as well as empower the function and enhance the independence of the Company’s organ;c. Encourage the Company’s organ to make decisions and to take actions based on high moral values and compliance with laws and regulations, as well as awareness of social responsibility towards its stakeholders, and environmental sustainability;d. Promote the Company’s contributions to nationale. Promote conducive climate for national investment.

Implementation of GCG principles: Transparency In maintaining objectivity in its course of business, the Company shall provide material and relevant information, in a way that is easily accessible and be understood by stakeholders. AccountabilityThe Company seeks to report its business performance in a transparent and fair manner, through proper and measurable administration in accordance with the interests of the Company, while taking into account the interests of shareholders and other stakeholders.

Implementation of GCG principles: ResponsibilityThe Company’s Organs (General Meeting of Shareholders, Board of Commissioners and Board of Directors) shall comply with the prevailing laws, regulations, Articles of Association and the Company regulations, and perform their responsibilities towards the community and the environment, in order to maintain business sustainability and gained recognition as good corporate citizen. IndependencyTo further expedite the implementation of good corporate governance principles, the Company shall be managed independently so that each company’s organ does not dominate nor intervene one another. Each organ shall not be influenced by certain party’s interests, free from conflict of interest and from any influence or pressure, so that any decisions will be made objectively.

Implementation of GCG principles: Fairness and EqualityThe Company shall take into consideration the interests of shareholders and other stakeholders, based on the principles of fairness and equality.

GCG Implementation in 2013The year of 2013 was the last stage of “Good Garuda Citizen”, in which the Company strives to build itself as an ethically responsible company by establishing good corporate governance culture. In 2013, Garuda Indonesia started to use assessment results on GCG implementation as one of the Key Performance Indicators (KPIs).

Evaluation and AchievementIn 2013, the Company achieved the following positive accomplishments: Number of passengers grew by 22.3% to 25 million, and cargo grew by 23.4% to

345.923 ton. Seat load factor reached 74.1% and aircraft utilization rate can be maintained at 10

hours 44 minutes. Amidst the busy traffic of the airports – especially Soekarno-Hatta, our On Time

Performance can be maintained at above 80%, namely 83.8%. Operating Income grew by 7% to USD 3.72 billion compared to 2012 which stood at

USD 3.47 billion, and revenue from passenger grew by 10% to USD 2.96

The Model to Decide an International Expansion

Step I:Market AttractivenessAssessment

Step III:BusinessInitiation EasinessAssessment

Step IV:Industry Attractiveness(per specific industry)

Service Domain Assessment(Demand Side)

Step II:Risk of Politic/Security

Technological & Industry Characteristic Assessment (Supply Side)

Step VI:SpecificInternal Competitive nessAssessment

Organizational & Financial

Assessment

Step V:Country Rank & Indentifi

cation of KSF

Technological & Industry

Characteristic Assessment (Supply Side)

Since Garuda Indonesia has big international market, we choose New Zealand as our new target market.

https://www.garuda-indonesia.com/id/en/destination/route-map/index-international.page

STEP I: Market Attractiveness Assessment Population In Total (2013): 4.442 Million GDP (2013): $185.8 Billion GDP Growth:

STEP IIRISK OF POLITICAL AND SECURITY IN NEW ZEALAND

Principles Security of New Zealand The national security system should address all significant risks to New Zealanders and the nation,

so that people can live confidently and have opportunities to advance their way of life. National security goals should be pursued in an accountable way, which meets the Government’s

responsibility to protect New Zealand, its people, and its interests, while respecting civil liberties and the rule of law.

The principle of subsidiarity should be applied to national security decisions, which means that the responsibility and authority for decisions, and use of resources, ordinarily rests at the level of those closest to the risk and best able to manage it.

New Zealand should strive to maintain independent control of its own security, while acknowledging that it also benefits from norms of international law and state behaviour which are consistent with our values, global and regional stability, and the support and goodwill of our partners and friends.

3 types of Stability and Security in New Zealand Stable democracyNew Zealand’s political system is based on the British model and is stable. There is a single house of Parliament, and the role of head of state is held by Queen Elizabeth II, as Queen of New Zealand. Democratic engagement is strong. Typically between 75-80% of New Zealanders turn out to vote in general elections. Strong institutionsOur legal system is based on English law. The judicial system is independent and robust. Private property rights are strongly protected, contracts are secure and intellectual property rights are enforced.The sound legal framework is supported by a free and independent media, ensuring high levels of transparency in Government and corporate decision-making. Economic underpinningsA long term drive for diversification means that New Zealand’s economy, although still powered mainly by agriculture, now also benefits from a flourishing manufacturing sector, a thriving tourism industry, and a strong renewable energy resource base.

Energy security in international politicsEnergy security is a highly politicised concept in recent times because of the twin challenges of climate change and shifts in the global energy market. When an issue is politicised it is brought to the forefront of political debate and prioritised in policy formation. In the report Energy Security in Europe: proceedings from the Conference “Energy Security in Europe,” it states that since 2006, the energy security and climate change nexus has been prioritised in political agendas across the world. This is because climate change injects much uncertainty in regards to the future of the energy system, and the nature of risks to this system. Alan DuPont argues that ‘Climate change will complicate energy choices and heighten anxieties about future supplies of energy, particularly oil, as the transition from highly polluting fossil fuels to cleaner sources of energy gathers speed

Risk perceptions and energy security theory in New ZealandThe politics of energy security is as such a debate on the nature and level of risks to the energy system. Security, and risks to security, are in part a question of perception,63 and the number of actors that can have different views on energy security is broad. In the International Institute for Strategic Studies (IISS) Transatlantic Dialogue on Climate Change and Security, hosted in 2010, the language of threat was used by participants in the debate to emphasise different risks to energy security and climate change.

ConclusionSecuritisation Theory can examine the extent to which energy security is political in New Zealand. In other words, Securitisation Theory can examine how and why energy security has been framed in politics or as something to be addressed by government.

SOCIO-CULTURAL INTERACTION New Zealand regards Indonesia’s democratic transformation as one

of the great achievements of the last decade and fully supports the sovereignty and territorial integrity of Indonesia. Given the two countries’ common interests as democracies and neighbours in the Asia Pacific region, New Zealand and Indonesia are natural partners in the evolving regional architecture and well-positioned to work together to meet 21st century challenges.

INVESTMENT PROCEDURE In New Zealand has put a lot of effort to simplify the rules and taxes

also offering investors many other benefits that enhance the whole experience of doing business

POTENTIAL OF M&A Garuda Indonesia can make a codeshare agreement (aviation

business arrangement where two or more airlines share the same flight) with Air New Zealand in order to open a new flights destination to New Zealand

GOVERNMENT’S SUPPORT There is Republic of Indonesia embassy in Wellington, New Zealand

as well as New Zealand embassy in Jakarta. The New Zealand Government is committed to further strengthening the good relationship between Indonesia and New Zealand.

STEP IVIndustry Attractiveness(per specific industry)

CompetitionThe competition within Airline Industry in New Zealand is not really tight. There are only a handful number of airline company which specializes in premium flights. For Example: Air New Zealand. Just like Garuda Indonesia, Air New Zealand offers high quality flights with reasonable price rather than flights with cheaper price but offers normal quality. Even though, Air New Zealand is very popular in New Zealand itself, so it is recommended to consider it as a tough competitor and take careful actions when trying to enter the market

Access To TechnologyTechnology in New Zealand is quite advanced, even better than Indonesia. Internet and other communication technologies have already became a normal thing in New Zealand. People book flights through the Internet, frequent use of online tickets and also online customer services. So in this case, technology is not a problem

Access To End-UserAs stated before, there are only a handful number of airline company which specializes in premium flights. People in New Zealand may want to try something new. So if Garuda is able to gain attention of customer and might as well be able to spread brand awareness among the citizen of New Zealand, Garuda Indonesia will stand a chance.

STEP V: Country Rank & Identification of KSF

Step VI Specific Internal Competitiveness Assessment

Due Diligence Due Diligence is a term used for a number of concepts involving

either the performance of an investigation of a business or person, or of an act with a certain standard of care. It can be a legal obligation, but the term willmore commonly apply to voluntary investigations, some common.

Definition of due diligence for Black’s Law: “the diligence reasonably expected from, and ordinarily exercised by a person who seeks to satisfy a legal requirement or to discharge on obligation”.

Control System

Procedures designed and established to check,record,regulate,supervise,authenticate, and (if

necessary) restrict, the access to an asset,resource or system.

Recruitment SystemStep #1 — Determine your ideal recruiting target — the goal of this step is to determine precisely who recruiting efforts should target, including performance level, experience level, and whether or not they are actively looking for a job.Step #2 — Understanding your target’s decision criteria — a significant part of any recruiting process is attracting desired talent, which you cannot do effectively without understanding what your targets consider important.Step #3 — Knowing where your target “hangs out” — having defined your target and their decision criteria, the next step aims at identifying where you are most likely to find the target talent, including what communication channels would be effective for recruitment messages. Step #4 — Employment branding — driving a pipeline of talent is the role of employment branding, a science-driven discipline that produces a consistent flow of qualified talent interested in some day working for your organization.Step #5 — Learning your target’s job search process — at this step you implement a process designed to identify the typical process that your target audience uses once they begin a job search. The goal is to better understand precisely how they look for jobs, so that you can engineer your approach to advertising opportunities to make your jobs visible to them.

Step #6 — Posting jobs for active candidates — because active candidates are proactively seeking out job openings, it doesn’t take a lot to make your job postings visible.

Step #7 — Directly sourcing “non-active” prospects — because “non-active” prospects are not in job search mode, they are unlikely to read any job postings or to visit your corporate career site.

Step #8 — Providing prospects with additional information — at this step potential candidates have decided to consider your firm but want additional information before they decide to actually apply.

Step #9 — The job application process — by this step, potential candidates have been convinced to apply for a position, so the goal is for a large percentage of the qualified individuals who visit the site to complete the application process.

Step #10 – Sorting applications by job — once applications are received, the goal is to ensure that the highest quality applications are sorted relevant to the most appropriate jobs (manually or via software).

Step #11 — The initial screening of applications and resumes — at this step applications are screened to see if they meet minimum qualifications for the job.

Step #12 — The initial phone screen — having screened resumes, the next step involves screening the individual behind the application.

Step #13 — Interviewing and selling qualified applicants — in this step the most qualified candidates advance to formal interviews and other assessment activities.

Step #14 — The final interview — the goal of this step is to confirm your initial desirability ranking and set expectations among those most likely to receive an offer.

Step #15 — The reference checking process — with your short list vetted and expectations for an offer set, the next step validates the perception of your assessment team using references.

Step #16 — The offer process — the goal of this step is to put together an offer that is within the company’s boundaries and that meets as many of the candidates “job acceptance criteria” as possible.

Step #17 — The post-offer acceptance process — once an offer is accepted, it doesn’t ensure the candidate will actually show up for work! The goal of this step is to ensure those that accept our offers don’t back out (as a result of a counteroffer or second thoughts).

Step #18 — contrary to popular belief, the primary goal of onboarding is not to get employees enrolled in benefits, but rather to provide resources and information that enable new hires to become productive as fast as possible.

Step #19 — Feedback and new hire monitoring — if the ultimate goal is continuous improvement of the recruiting process, then this step is the most important of all.

SOURCES Garuda Indonesia Annual Report 2013 http://gosga.garuda-indonesia.com/web/public/aboutus/en http://

inggitsoekarno.blogspot.com/2013/10/program-csr-company-social.html

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www.garuda-indonesia.com/id/en/corporate-partners/index.page https://

www.garuda-indonesia.com/id/en/destination/route-map/index-international.page

http://data.worldbank.org/country/new-zealand#cp_surv