The redesign of the company was approved by the principals of the Korindo Group. The total investment was over USD 40 million; 33 million was allocated to equipping and redesigning the facilities, recruitment of necessary manpower, and the installation of new systems. The rest of the funds were allocated to the establishment of organizations that would support the operations of KHI. These organizations represent companies operating alongside KHI under the Korindo Group such as Korindo Motors, a distribution company, and Clemont Financial, a leasing company.

The second part of the case will show how Korindo Heavy Industry formulated and executed the new strategy of entering the automotive industry. Having a new vision and mission is important to communicate how the new company would be. It is also important to understand how the new vision was to be implemented.

In his new office at the Research and Development Division of PT Korindo Heavy Industry (KHI), Mr. Miet Sugiarso, the newly-appointed head of Research and Development, pondered about the challenges that he and his associates would have to face in the months ahead. He had just been in another meeting with the Board of Directors of KHI regarding  the development of KHI’s newly formed automotive manufacturing division.

Several months before, sometime in late 2005, Sugiarso, along with his co-workers and friend, Puryanto, were invited to the offices of Korindo Heavy Industry by the company’s Board of Directors and offered positions to lead the development of a new business division for the manufacture and assembly of commercial vehicles. However, the company had never been involved in any project that was remotely close to automotive manufacturing.

Korindo Heavy Industry had been originally established to handle some of the manufacturing projects of the Korindo Group, a business conglomerate under which KHI operates. Originally, the Heavy Industry’s main business operation involved the manufacture of containers for shipping and transportation purposes. Within this industry, KHI prospered for nearly a decade before eventually being forced out of business due to competition from Chinese container manufacturing companies, as well as other external factors.

As the company declined, its directors began formulating plans to change the company’s core business towards more profitable ventures, which they hoped would be able to bring the company out of its current predicament, as well as provide them with new opportunities for growth. After much deliberation, the board of directors eventually decided to enter the automotive industry. A new course had been charted; what was needed next was to set the foundations for a successful take-off. The responsibility was offered to Sugiarso and his co-worker Puryanto, both of whom, had extensive knowledge of the automotive industry. They accepted the offer seeing it both as an opportunity and as a challenge, though, they realized that it would not be easy.

Korindo, having no prior experience in the motor the automotive industry meant that the company was ill-prepared to face the challenges of the new venture. Container manufacturing and motor vehicle manufacturing were completely different from each other. Many of its processes and systems would have to be rebuilt in order to meet the more stringent requirements of motor vehicle manufacturing. Furthermore, they faced the challenge of entering an industry that was already dominated by other more mature, and experienced players like Mitsubishi, Toyota, Hino, and others.

Meanwhile, there were pressures, from the Board of Directors, for the automotive manufacturing division to quickly begin its operations and to introduce and launch their first product within the next 6 months. Before that, Sugiarso and his team would have to first set up a working system as well as address critical issues such as a market penetration strategy, along with competitive strategies for their new products.

It is January 19, 2007, Ulf and Bo Andersson is pacing agitatedly about his hotel suite, located in the business district of South Jakarta. He is both excited and a little bit apprehensive about the decision he has soon to make. Bo is currently on a trip to Jakarta in search of a location for a sister office to expand GRIN, the company founded by Bo and his brother, Ulf Andersson. GRIN is a game development company based in Stockholm, Sweden which focuses on making games for the PC (Personal Computer) platform. The company’s latest hit,‘ Tom Clancy’s Ghost Recon: Advanced Warfighter’ (GRAW), published by Ubisoft Entertainment, has won reviews and awards worldwide. Bo, in his quest for a suitable office/studio location outside Sweden, is hoping that the new sister office will strategically support the main office in Stockholm in producing the next generation of games.

Looking out from his hotel suite, immersed in thought, Bo gazes at the huge sports complex across the street. The decision to expand won support from his brother and some people at GRIN, but choosing the location will be critical since it will mean a sizeable investment for the company. Prior to the trip to Indonesia, Bo considered the Baltic States in Eastern Europe, China, and India as potentially favorable locations. A merger with another game development company in the United States or Sweden is also an option for the expansion. Whatever the decision, the expansion is needed to acquire the necessary creative talent in building the next generation of AAA games (triple A: multiple platform games; games developed for multiple platforms, e.g.: PC, Sony PlayStation, Microsoft Xbox).

Within the past few days, in search of market opportunities and talent, Bo has met with game developers, universities, and even found potential office space in the central business district of Jakarta, all with the help of a Swedish acquaintance with years of experience doing business in Indonesia. The office space is located in a tower adjoining a shopping mall.

Bo turns his head and looks at the DVD disk sitting innocently on the coffee table. The disk was sold to him the day before in a software store at the shopping mall in a flimsy plastic sheet with a poorly printed paper-insert depicting the contents of the package. Bo bought the disk for 50 thousand Indonesian Rupiahs, or approximately 5 US Dollars. The paper-insert was printed from a scanned packaging of GRIN’s latest hit, Ghost Recon, and Bo purchased this pirated copy of the game his company developed at a fraction of the cost the publisher of the game sells it for elsewhere (Exhibit 1 shows packaging of pirated software). The store not only carries PC games, but also productivity applications, operating systems, software development tools, and other office/business software; basically any category of software a person would ever need. In that particular shopping mall, there are at least 3 other stores selling pirated software, and other small stands/kiosks selling pirated DVD movies and CDs (Exhibit 2 shows the typical software store). Jakarta seems to be a good location for finding talent; but Bo wonders whether the city is the right location to expand his company and develop the capacity to compete in the future.

It was a bright and fine Monday afternoon in September 2004; outside was a view of a typical busy work day in Jakarta.  Ina Suwandi, head of the Electronic Banking Subdivision of PT Bank Central Asia Tbk. (BCA), was sitting in her well-lit yet conservative office looking at the 2004 2nd semester performance report of Tunai BCA. Tunai BCA is a banking product which lets BCA customers withdraw cash from cashiers at participating retail stores as the customers pay for their purchases using the BCA ATM card, “Paspor BCA” (Exhibit 1 shows a Paspor BCA card). She recalled the phone call earlier that morning from Stephen Liestyo, Head of Consumer Banking.; Stephen wanted an explanation from her team about the performance of Tunai BCA. The frequency of BCA customers using their ‘Paspor BCA’ ATM cards as debit cards for purchases in retail outlets (Debit BCA) from January – September 2004 was 28,150,130, in stark contrast to the usage frequency of Tunai BCA which was only 1,182,673.  Since both Tunai BCA and Debit BCA banking products were based on the Paspor BCA ATM card, Debit BCA users were a potential market for Tunai BCA.  It was very clear in Ina’s mind how Stephen presented the firm’s vision: “Someday, somehow, Tunai BCA will be booming. People will shift away from using Automated Teller Machines (ATMs) to get their cash from the merchants (retailers) while shopping instead.  Look at Australia; withdrawing cash at the merchants is more popular than at ATMs.  We have to spread the idea, grow it and someday, somehow, we will harvest it.  We have to be the ‘First in Mind’, otherwise we cannot be Number 1 in the market”.  After Stephen finished his sentence, Ina realized that Tunai BCA’s success fully rested on her team’s shoulders. She needed to make Tunai BCA as successful as the other banking products offered by the bank. She had to decide what her subdivision should do to make the program successful. Reflecting back on the company’s history, Ina was aware that BCA had proved itself successful in creating a perception of a bank which offered convenience to its consumers. Tunai BCA was created to further enhance the bank’s offerings in providing convenience to BCA cardholders, merchants, and to the bank itself.

Rahmat Ismail sat in his seat on flight from Honolulu to Jakarta. His mind was racing and filled with the images of various scenes of his meetings and encounters in the past few months. As senior management of Bukaka Teknik Utama (Bukaka), the contractor awarded the contract to provide and install the passenger boarding bridges for Terminal II project at Cengkareng International Airport, Jakarta, he was very uneasy about the latest predicament concerning Bukaka’s technical partner, Jetway Systems (Jetway). Jetway provided engineering design and consultation for building forty-four passenger boarding bridges for new Terminal II at Cengkareng airport. In a recent meeting, Jetway’s and Bukaka’s management sat down to renegotiate fees and division of work between the two companies for the project. The meeting went sour, Jetway management decided to pull-out from the project, leaving Bukaka with no design and a looming deadline.

Having no partner, design, nor the experience of building passenger boarding bridges, Rahmat Ismail knew that there was no way Bukaka could meet project deliverables. Pressured by time, Rahmat Ismail realized that he had several options; including acquiring a new strategic partner or acquired the technology. The latter option of course was more rewarding for company, but more difficult and riskier due to the fact that Bukaka did not have engineering experience in building passenger boarding bridges. In his seat, Rahmat Ismail weighed his options, the credibility and future of Bukaka as an engineering company depended on his decision.