KORINDO HEAVY INDUSTRIES: SETTING A NEW DIRECTION (A)

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.