Mr.

Abhishek Bhatia
UNIVERSITY NUMBER: 3035214832

Rodamas Group:
Designing Strategies for
changing realties in
Emerging Economies

1) What are the core competencies of Rodamas? Are they sources of sustainable
advantages?
Some of the core competencies of Rodamas group in my opinion are:

High Management competency of the management relative to other business professional in

Indonesia which enabled THEM to understand international business and form partnerships
Risk averse conservative management style which enabled the company to grow steadily
without any financial risks and also stay under the radar of bureaucracy
Image of an ethical efficient and trustworthy partner
A holistic understanding of the Indonesian market in terms consumer demands, unmet needs
for identifying suitable opportunities, regulations, regulators and local challenges
Strategic connections to foreign companies across the globe as well as with the local
government and businesses which helped smooth obtaining of licenses, land and other
requirements
Expertize in hiring capable local management and establishing efficient distribution channels
in Indonesia
Understanding and experience of working in a wide range of industries and product categories
Breadth of experience in imports distribution as well as manufacturing through the various
partnerships formed over the years

To analyze whether the above competencies are sources of competitive advantages a VRIO
analysis of the company has been placed as Exhibit-1.

Based on the VRIO analysis, we note that the company has a temporary source of competitive
advantage on account of its exploitation of the business environment conditions that existed at
the time.

However, in the near future in my opinion Rodamas group may face erosion of its current
position if it does not alter its position in the market.

The company should consider building on it core competencies or identify new opportunities
in terms of probable new business ventures or opportunities for collaboration.

2) What are the main characteristics of the business environment before and after the 2008
Asia Financial Crisis? How do such changes affect Rodamas core competencies?
The key characteristics of the market pre and post the 2008 crisis are as follows:

The business environment was thriving in Indonesia before the crisis with strong growth and
in terms of value of the Indonesian currency with respect to the US dollar. Post crisis, most
companies went bankrupt as the value of the Indonesian currency plummeted and the cost of
their loans (which they had converted to US dollar) had sky rocketed. This crisis led to the
closure of several players and created opportunity for Rodamas in the market in terms of
expansion and acquisitions.
The crisis also marked the end of Suharto which led to establishment of a new anti-corruption
regime. It also moved the country towards a more open economy in which tariffs and trade
barriers had come down. This made the business landscape for Rodamas more competitive
than before.
2

Many of the protective measures were removed. 100% FDI was allowed into most sectors
which allowed foreign players to directly enter the market, giving rise to competition as well
as eliminating the need for a local partner if the company chose to. This policy had a direct
impact on business strategy of Rodamas of forming ventures and could potentially alter the
competitive landscape and market opportunities.
Service companies where thriving and started to replace the local partners. Through their
services companies could actively consider managing their own marketing and distribution
channels.
Post the crisis, there were noticeable changes in the governance practices in multinationals.
There were tightening laws on corporate governance and stricter accounting rules which made
multinationals to use lawyers and consultants for rectifying local issues rather than using local
partners. Thus, the role and say of companies like Rodamas was reducing in their ventures
Additionally, the crisis created a shift in the companies towards consolidation and
standardization. This meant that it became difficult for partners like Rodamas to convince
their venture partners to adapt a product to fit the local demand. This often led to friction
between the partners as well and led to termination of several key alliances although the
business was performing well in the market.
The foreign companies in Indonesia post the crisis enjoyed a dominant position and wanted to
extend their control over the local partners responsibilities like local marketing and
distribution.
The crisis also led to the rise of multinationals from emerging economies like China and India.
This created a window of opportunity for Rodamas to form new alliances on favorable terms
with the potential new parties interested in Indonesia.
The impact of such changes on the core competencies of Rodamas are as follows:

Inspite of the above changes, Rodamas still remains an efficient and trustworthy partner
Although, direct FDI eliminates the need of any foreign partner the existing corruption and
bureaucracy coupled with the need for deep market penetration still keeps the need for
partners like Rodamas still alive.
The source of temporary competitive advantage is now even easier to break into. The opening
of FDI creates the need for Rodamas to create new competencies as the previous
competencies may soon become irrelevant. The group needs to focus towards building its own
expertise in terms of design and manufacturing so that they can become self reliant.
The company was also facing high attrition in its middle management due to the above
changes in the business environment which would make them loose vital human capital which
is one of the key reasons for its success in the local Indonesian market.
The company may also need to consolidate some of its businesses due to expected
competition & thus would loose out on its edge of having a foot-hold in a breadth of
businesses.

3) What are the different strategic alternatives for Rodamas and what are the Pros &
Cons of each?
The following strategic options are available to the firm at this point:

Enter the consumer product market of manufacturing for the local Indonesian market on its
own for simple products like basic toiletries.
PROS

CONS
3

In-house capability for

end to end value chain
management
Success of many local
firms
Understanding of local
market & Expertise in
distribution
Breadth of experience
across a variety of
product categories

Non-competition clause in
certain businesses
High existing competition
No starting base
Low market entry barrier

Enter the consumer product market & industrial products for new companies in Indonesia by
forming strategic alliances. (such as food & beverage, industrial goods such as construction
material, chemicals etc.)
PROS

CONS

Highly experienced in
alliances. Strong
reputation
Limited competition in
most businesses
Understanding of local
market & Expertise in
distribution
Breadth of experience
across a variety of
product categories
Limited investment &
risk

Limited stake in the

business
Dependence on foreign
partner
No R&D exposure

Entering the real estate business through building and leasing of office property
PROS

CONS

Experience in real estate

Favorable land site
available with the
company in Jakarta
Rapid expansion &
potential demand in
Jakarta expected

Lack of strong brand name

Existing connections
with the local
government officials

Government regulations.
Unfavorable tax regime
Volatile industry
High competition. Rodamas
would be a small player.
Getting further land sites
would be a problem.
High investment

Labour
intensive manufacturing by focusing on the traditional role of partnership with developing
transnational corporations market like China
4

PROS

CONS

Intent of multinational to
diversify into different
regions
In line with company
philosophy of forming
alliances

Direct competition from other

low cost regions

Internationalization with existing partners like Asahi in other Asian markets like Thailand
PROS

CONS

Economic crisis created

worldwide opportunities
that could be captured
Existing favorable alliance
partnerships and products

Limited knowledge of new

regions. Regions could be
unsustainable
Limited power of the local
managers in deciding alliance
partner for new regions
Extensive research required.
Bureaucracy, Manpower,
distribution etc. may pose a
threat

Limited financial risk

No R&D
knowledge/innovation
required
Success of previous
foreign ventures

Volatile nature of partnership.

Companies could walk out to
another region
Limited experience
Small share and limited profits

Entering the consumer products distribution & logistics business

PROS

CONS

Experience in the sector

in both urban & rural
areas
Increased market
penetration
Attractive consumer
product market

Low margins

Can be outsourced to
other multi-nationals as
a service

Poor infrastructure, high costs

Dependency on bigger
accounts to make business
profitable
Bargaining & business
conflicts may arise
Finding the right set of
products for the business
would be a challenge

Acquisition of existing manufacturing businesses that already developed or licensed a

technology
PROS

CONS
5

Access to developed
technology or existing
licenses
Availability of Finances
Advantage of
additional/acquired
channels
Cost effective & limited
setup time

Finding the right business at

the right price is a challenge.
New capabilities may be
required which could take time
Clashes in corporate
culture/philosophy

4) What strategy would you recommend Rodamas to take?

For understanding the recommended strategy that the Rodamas group
should take at this point, it is vital to understand the strengths and
weaknesses of the company and also critically analyze each opportunity.

The SWOT analysis has been placed as Exhibit-2

Porters five force model along with the Diamond model has been used to
evaluate the various strategic options. These have been placed as
Exhibit-3. Furthermore, research trends in Exhibit-4 have been used to
evaluate future potential.
Based on the analysis presented in the exhibit, it is evident that a multitier strategy is required to cater to the changing dynamics of the market
and ensure sustenance of the business.

The company should focus its core strength & vast experience in
distribution to act as a distribution and logistics provider to business.
Through the various alliances, the company has a good understanding of
foreign partners needs and can tie up with new firm entering Indonesia
and increase the scale of this business.

Since the consumer purchasing trend is increasing, the company should

consider relying on its second core strength by forming further alliances to
allow companies to enter Indonesia for various consumer products (Food &
Beverage and other industrial products like chemicals, construction
material to cater to corporate demands as well). Divesting from its
dependency on its partnerships by gradually building its own R&D
capability should also be considered in the long term.

Forward and backward integration should be considered for maximizing

the companies position in profitable businesses like Asahi, Building
materials, Printing by Dai Pon, MSG etc.

In conclusion, a focused approach towards the key businesses coupled

with grabbing the current most favorable opportunities inline with the
company strengths be should considered by the company for its long-term
sustenance.
6

5) What would it take to successfully implement this strategy successfully?

For the success of any strategy it is vital to establish a competitive
advantage. Although, the very nature of competitive advantage makes it
prone to attack by other rivals in the industry and it may disappear over
time. However, in my opinion the company should consider adopting the
following measures:

Exploiting the niches in the market by New strategic alliances and

Forward / Backward Integration recommended above. This would require a
re-alignment of SBUs and promotion of a positive collaborative
environment between SBUs to leverage on each others strengths.

The company should recognize and celebrate achievements. This not helps
open up the group to the world and thus, creates a brand name, but also
supplements employee retention in the company.

The company should consider using IPO's to finance ventures mentioned

above. This will free finances to jumpstart the integration projects
mentioned above and allow the group to have cash reserves in times of
critical need.

The company should convert its core distribution competency into a

strength by spinning off a Supply Logistics and Distribution Company to
better manage the entire process.

Rodamas can should also consider Technology Transfers in their alliances

thereby increasing their competence over time.

Appendix:
EXHIBIT-1:
Resource Matrix
Tangible
Financial

Availability of healthy
cash with the firm to
support existing business

Physical

Favorable manufacturing
locations & distribution
channels
No patents, or notable
R&D skills
Effective administration
and strategies

Technological
Organizational

Intangible
Human

Innovation &
Creativity
Reputation

Experienced top
management, favorable
connections, capable
local talent pool
Limited scientific skills;
reliant on partners
Limited Brand awareness

Valuable
?

Rare?

Costly to
imitate?

Exploited
by the
organizatio
n?

Competitive
implication

Yes

Yes

No

Yes

Temporary
Competitive
disadvantage

EXHIBIT-2:
STRENGTHS

WEAKNESS

Strong & experienced

management
High understanding of
local market &
distribution channels
Strong consumer
product experience
Availability of Finances
Strategic connections to
the government &
foreign partners
OPPORTUNITIES

Limited R&D/tech capability

Emerging consumer
markets, expansion
opportunities
High demand of low tech
basic products & real
estate
Opportunity to acquire
businesses due to the
financial crisis

Exchange rate fluctuations

High dependence on
partnerships
Conservative management
style
Lack of brand name
High employee attrition
THREATS

Volatility in partnerships
Intense competition

EXHIBIT-3:
8

Strategy

Threat of
New
Entrants

Threat of
Substitute
product/Se
rvices

Enter the
market of
manufacturi
ng simple
products for
the local
Indonesian
market

Low entry
barriers,
Low brand
equity,
Cost
disadvant
ages, low
product
differentia
tion

Low buyer
switching
costs,
Number of
products
available in
the market,
low level of
perceived
differentiati
on

Enter the
consumer
product market
& products

High entry
barriers.
Difficult to
form
alliances
in a short
time

Low to
moderate
threat
depending
on type of
business

Low to
moderate
bargainin
g power

Low
degree of
bargainin
g power

Entering the
real estate
business
through
building and
leasing of
office
property

High cost
barrier of
entry, cost
advantage
, new
business
model

Relatively
low buyer
leverage

Low
degree of
differentia
tion of
inputs

Labour
intensive
manufacturi
ng by
focusing on
the
traditional
role of
partnership
with
developing
transnationa
l

Existing
alliances,
high
barrier for
others to
form
similar
alliances,
foreign
firms may
directly
enter

Strategic
location,
high level of
perceived
may be
there by
adopting a
niche
segment
High
volatility;
firms may
move easily
to other
advantageo
us regions
for higher
profits

Ease of
substituti
on, low
perceived
level of
differentia
tion
between
partners

Relatively
low
bargainin
g power
of
suppliers
because
of
expected
scale of
operation
s

Bargaini Bargaini
ng power ng power
of
of
consume suppliers
rs
High
Low
buyer
degree of
leverage, differentia
availabilit
tion of
y of
inputs,
substitute
probable
s
high
concentra
tion of
suppliers

Intensity
of
competiti
on
Large pool
of local
manufactu
rers,
Limited
scope of
sustainabl
e
competitiv
e
advantage
through
innovation
Low
intensity
of
competitio
n. As
products
would
mostly be
imports
currently
Existing
big
players,
opportunit
y of spatial
differentiat
ion
Low
prevalent
competitio
n for this
particular
model of
manufactu
ring

corporations
market like
China

International
ization with
existing
partners like
Asahi in
other Asian
markets like
Thailand

Entering the
consumer
products
distribution
business

High entry
barriers
for other
firms,
already
establishe
d business
and global
presence
of parent
company
Establishe
d channel,
deep
penetratio
n, High
cost of
entry and
profitabilit
y

Low threat
from
substitute
products

Low
bargainin
g power
of
consumer
s

Low to
Moderate
bargainin
g power
of
suppliers

Low
intensity
of
competitio
n expected
in other
Asian
regions

Low threat
as company
offers a
deep
knowledge
and
channels for
distribution

Moderate
bargainin
g power
of
consumer

Low
bargainin
g power
of
suppliers

Low
competitio
n expected
from
middle to
small scale
companies
in need of
services

EXHIBIT-4:
Consuming Class Projections:

Source: www.mckinsey.com/insights/asia-pacific/the_archipelago_economy

Retail Sector Projections:

10

Source: www.mckinsey.com/insights/asia-pacific/the_archipelago_economy

Sector Wise Projections:

Source: www.mckinsey.com/insights/asia-pacific/the_archipelago_economy

11