Strategic Management Analysis: PT Bank Danamon Indonesia Tbk.

19 Oct 2021

CHAPTER I

INTRODUCTION

            PT Bank Danamon Indonesia Tbk. is an Indonesian bank founded in 1956, and as of 2020, currently provides their services in almost all major cities in Indonesia, such as Jakarta, Bandung, Surabaya, Semarang, Medan, Jambi, Padang, Pontianak, Jayapura, etc. (PT. Bank Danamon Indonesia, 2020a). Danamon Bank is currently headquartered in Menara Bank Danamon, which is located in South Jakarta. Initially founded in 1956, PT Bank Danamon Indonesia Tbk., alongside it’s subsidiary, PT Adira Dinamika Multi Finance Tbk. (Adira Finance), currently provides financial services to Indonesian and foreign customers, such as in providing clients with credit loans, current accounts, home and vehicle loans, savings, time deposits, foreign currency services, credit cards, unsecured credits, sharia banking and insurance for muslim customers and clients, etc. Additionally the bank is also listed in the Indonesian Stock Exchange, where the bank’s uses BDMN as their share code in the Indonesia Stock Exchange (PT. Bank Danamon Indonesia, 2020b).

 

As a bank, PT Bank Danamon Indonesia’s corporate values lies on four core values, which are Collaboration, Integrity, Customer Centric, and Adaptive, or abbreviated as BISA. The company aims to increase the level of diversity in order to achieve the company’s shared objectives (Collaboration). The company also try to ensure that all members of Danamon Bank are governed as effectively as possible, where the bank ensures that all members of the bank are professional, open and responsible on how they bring themselves as individuals (Integrity). PT Bank Danamon Indonesia also tries to become a customer centric company by ensuring that all customers and stakeholders are provided with excellent services (Customer Centric). Finally, the bank also ensures that they’re always adapting and improving in order to become the leading financial institution in Indonesia (Adaptive) (PT. Bank Danamon Indonesia Tbk. n.d.).

 

Based on the company’s core values, PT Bank Danamon Indonesia’s visions are in improving their customer’s quality of life, where the bank believes that their overall purpose is in ensuring that all people who’s involved in the bank’s ecosystem, including the bank’s clients, employees and the society at large, should be able to thrive and grow in order to prosper. In order to achieve the vision that the bank has set for themselves, the bank has also ensured that the company’s missions and objectives are aligned with their vision, which are as follows (PT. Bank Danamon Indonesia Tbk., n.d.):

 

  • Becoming the leading financial institution in Indonesia in order to become an intermediary for all of the bank’s clients in a
  • Becoming a significant factor in the country’s economical growth by being a leader in the banking industry.
  • Becoming a valuable and significant business partner for the bank’s clients, while also being a valuable corporation for the general public.
  • Becoming a customer centric financial institution that aims to serve all segments of the customers with their own unique value proposition, which is driven by the bank’s excellent quality of sales and services and highly modern technology.
  • Responding to the need of the bank’s clients and customers in a caring and timely manner, in order to fulfill their financial needs.
  • Becoming respected by all members of the bank’s ecosystem, which includes the bank’s customers, employees, stakeholders, regulators and also the society.

 

PT Bank Danamon Indonesia Tbk., alongside it’s subsidiary, PT Adira Dinamika Multi Finance Tbk. (Adira Finance and Adira Insurance), is currently managing a total of IDR 203 trillion assets as of the end of March, 2020. Danamon Bank is also currently part of the MUFG Bank, which is the largest bank in Japan and one of the leading financial institution in the world. In the stock market, 92,47% of Bank Danamon’s shares are currently held by The MUFG Bank, while 7,53% of Bank Danamon’s shares are held by the public. The bank is currently operating 856 units of branches, which includes conventional and sharia banks, and also operates 60.000 ATMs across the country, and also have an active partnership with ATM Bersama, PRIMA and ALTO. Other than physical assets, Danamon Bank’s services can also be accessed from the bank’s own mobile and online banking application (D-Bank), and through the use of SMS Banking. In 2019, Bank Danamon has also been recently awarded by the Infobank Banking Service Excellence Awards for Overall Performance, where the bank was ranked first in the perceived quality of Teller & SMS Banking services by consumers, and is ranked second in the perceived quality of the bank’s Online Banking services by consumers (PT. Bank Danamon Indonesia Tbk. 2020b).

 

  1. Bank Danamon Indonesia Tbk. tries to serve all customer segments in the market, be it regular clients, Small-Medium Enterprises (SMEs), micro-small entrepreneurs, commercial and corporate banks, etc. PT. Bank Danamon is able to do this because of the range of financial services that the bank serves to their customers. Micro-small businesses & entrepreneurs, the self-employed, and the society in general will always have access to Danamon Bank’s micro banks, which gives them the ability to take small and reasonable loans. Small-Medium Enterprises and the middle-class are able to use the SME banks and regular consumer banks that Danamon Bank has provided for them. Finally, large corporations, financial & commercial institutions, and the affluent will be able to use Danamon Bank’s privilege banking and enterprise banking. Additionally, Danamon Bank also provides financial services for automotive and consumer goods through the bank’s subsidiary, Adira Finance, and will also be abe able to have access towards the bank’s general insurance offerings through Adira Insurance, another subsidiary of Danamon Bank. Additionally, Danamon Bank also provides syariah banks for muslims who’s interested for a more holistic system of banking (PT. Bank Danamon Indonesia Tbk., 2018).

 

According to Kinerja Bank (2019), the five biggest conventional banks in Indonesia when judged by the total assets that they possesses are PT. Bank Rakyat Indonesia (PERSERO), Tbk (BRI), Pt. Bank Mandiri (PERSERO), TBK (Mandiri), PT. Bank Central Asia, TBK (BCA), PT. Bank Negara Indonesia (PERSERO), Tbk (BNI), PT. Bank Tabungan Negara (PERSERO), Tbk. (BTN). PT Bank Danamon Indonesia is currently sitting at 10th place, according to the total assets that they possesses when compared to other banks in Indonesia. The main competitor or rivals of PT Bank Danamon Indonesia is obviously going to be other conventional banks in the country, where they try to attract new clients and debtors to their banks by implementing as low of an interest rate as possible. But in order for Danamon Bank to achieve their mission and vision, which is in becoming the leading financial institution in Indonesia, Danamon Bank must be able to at least achieve the top three position.

CHAPTER II

ANALYSIS AND DISCUSSION

 EXTERNAL ANALYSIS

            Because external analysis are generally conducted in order to judge the current external environment for a company, this external analysis will be using the current Covid-19 pandemic as a foundation for PT. Bank Danamon Indonesia’s external environment in the context of Indonesia.

Economic:
According to the World Bank (2020), as the world’s 10th largest economy when valued according to the country’s purchasing power parity, Indonesia has been successful in decreasing the country’s rate of poverty, while also being able to keep a constant state of economic growth since the 1998 economic crisis. This constant state of economic growth has caused the country to be qualified as an upper-middle income country, but the Covid-19 pandemic has caused the country’s economic growth to stagnate, and during Q3 of 2020, the country’s economy is on a state of regression. According to FocusEconomics (2020), the amount of Indonesian products that’s exported has also decreased during the pandemic, and the country’s economy during the third quarter of 2020 is expected to stagnate. Additionally, the recently approved Omnibus Law may caused an increase of investments into the country, increasing the country’s economic growth, but the uncertainty of the Covid-19 pandemic will causes uncertainties in the state of the country’s economy in the future.

 Demographic:

            According to a research conducted by Lath, et al. (2020) of McKinsey, Indonesians are generally not as technology-savvy when compared to other countries in South-East Asia, in which Indonesia is facing a shortage of nine million workers with the necessary digital skills between the years of 2015 and 2030. This means that as time progresses, Indonesians may need more time to familiarize themselves with technology. This means that some clients may not understand how to use Danamon’s online banking application, D-Bank, or worse, might not even learned of the app’s existence. Additionally, the research conducted by Lath, et al. (2020) also shows how Indonesia’s labor productivity are still lower when compared to other countries in South-East Asia, such as Malaysia, Singapore & Thailand. This means that with lower level of labor, the amount of people who’s interested in becoming entrepreneurs in order to start their own companies will also be lower. The situation is going to be even worse during the Covid-19 pandemic, where The World Bank (2020) has reported that approximately 5,5-8 million Indonesians may live below the poverty line due to the negative effects of the Covid-19 pandemic on Indonesia’s economy. This means that with low level of labor productivity, and the predicted increase on the amount of people that’s living below the poverty line, financial institutions in Indonesia, including Danamon Bank, will not be able to achieve an increase in the amount of interests revenue generated from credit loans, because with lower level of credits loaned out to clients, the revenue generated from the interests of those loans will also tend to be lower, decreasing the bank’s profits.

 

Political/Legal:

            According to an article written by Oktarianisa (2020), because of the Covid-19 pandemic, the Indonesian government has been forced to implement a financial regulation in order to ensure that debtors are still able to fulfill their debts to the bank, which is known as the POJK No.11/POJK.03/2020. The government had expected that the POJK is going to maintain the stability of the country’s financial system, encourage the optimization of Indonesia’s banking system, especially as an intermediary on providing credit funds to the people intermediation function, and ultimately support the country’s economic growth during the pandemic. Because of the increasing amount of Covid-19 cases in Indonesia, the government has decided to prolong the regulation for another year. This means that financial institutions in Indonesia, including Danamon Bank, must follow the government’s regulations regarding general debtors’ risk management process, which means that banks are forced to implement lower interest rates, extending the period of debtors’ loan maturity, etc. This means that almost all financial institutions in the country, including Danamon Bank, are forced to implement some regulations in order to comply with the Indonesian government’s orders, which means that PT Bank Danamaon Indonesia Tbk is going to experience a decreased amount of interests revenue generated from loan payments due to the Covid-19 pandemic.

 

Technological:

A research conducted by Singapurwoko (2019), shows how financial technology companies are causing a disruption in the business practices of financial institutions in Indonesia. The research shows how the business model of financial technology companies, in which they’re able to receive their funds by issuing stocks or bonds, which is then distributed in the form of credit loans. This has caused the general amount of average credit loans that’s distributed in the society to decrease, causing a decrease in the amount of bank loans that’s distributed in the society. Because financial technology companies are only able to provide credit loans to individual clients or micro-companies, this will cause a potential disruption for Danamon Bank’s micro-banks, where both financial technology companies and micro-banks are serving the same customer segments. All in all, the recent emergence of financial technology companies will be a challenge for financial institutions in achieving their potential profits, including Danamon Bank.

 

Global:

            According to an article written by partners of Delloite (American professional accounting services provider),  Heussner, et al. (2020), the Covid-19 pandemic has caused a massive outflows of company assets during the Covid-19 pandemic, which has caused a decrease of the general financial institutions’ net worth across the world, including Indonesia. The covid-19 pandemic has forced the government across the globe to call upon their national banks to support their regulations (In Indonesia’s case, POJK), in order to provide emergency funds and stimulus for the country’s economy to avoid an economic collapse. Because of this, the general risks of the banking industry are also increasing, which means that there is an increased risk of unintended credit losses & misallocations, or even worse, increasing a bank’s solvency risks, including Danamon Bank.

 

Sociocultural:

            According to a research conducted by Disemadi & Shaleh (2020), the POJK regulation may cause unintended consequences if it’s implemented in an unorderly manner. When debtors are still unable to pay their debts back to the banks that they’re owing to, debtors may slither through the credit relaxation policies in the POJK regulations in order to prolong the maturity dates of their obligations. This will cause negative consequences for Indonesia’s economy and financial institutions, including Danamon Bank. This means that the Covid-19 pandemic has caused people to be less willing in taking new debts or fulfilling their debts and obligations to banks. Additionally, the Covid-19 pandemic has caused people to be less interested in taking new debts from the banks, because of the declining rate of consumerism in every country across the globe, because people could generally lose their job in the middle of the Covid-19 pandemic, forcing them to save their money and be more frugal (Frankel, 2020). All in all, this will also pose as another factor that will cause a decrease in Danamon Bank’s interest revenues generated from their debtors’ loan payments.

 

Sustainable Physical:

            According to Scholtens & van’t Klooster (2019), banks plays a huge role for a country’s economic development, and in helping the population in ensuring that all their financial needs and troubles are being met. The literature review in the research conducted by Scholtens & van’t Klooster (2019) also shows how there is a positive relationship between perceived sustainability and the bank’s general performance, but tends to neglect the risk factors that comes to banking, such as the bank’s risk of default. The research conducted by Scholtens & van’t Klooster (2019) shows how a bank that shows sustainable characteristics in their business model, such as in fulfilling their corporate social responsibilities to their clients, are able to lower their risk of default while also helping the country’s economic performance. Because Danamon Bank places a high focus in their clients’ satisfaction in choosing Danamon Bank as their baking partners, Danamon Bank is able to achieve a higher level of corporate social responsibility, in which the bank ensures that the customer’s satisfaction comes first. Based on the research conducted by Scholtens & van’t Klooster (2019), we can assume that the bank is able to achieve a higher profit because of Danamon Bank’s vision, which is becoming a customer centric financial institution that aims to serve all segments of the customer.

 

FIVE FORCES OF COMPETITION MODEL

 

Threat of New Entrants:

            In general, it’s extremely hard and complicated for a new bank to emerge in the market. According to Kiger (2020), if someone’s interested in opening a new bank, they would need to have a very large amount of capital, an effective business plan in place to ensure the bank’s successful operations, and to be extremely patient, as the process would approximately take 1,5 years to complete. Additionally, the founder of the bank would first need to apply their bank to the government regulators who’s in charge of every bank’s daily operations on the country. Furthermore, there is a chance that the bank wouldn’t be approved and chartered by the government regulators, which means that the founder of the bank won’t have his bank approved for operations, while also losing all the costs incurred during the process. The perceived risks, costs, time and regulations that needed to be completed to start a new bank means that there is a very low threat of new entrants in the banking industry.

 

Rivalry Among Competing Firms:

In general, it’s easy for bank clients to switch from a bank into another, which means that it’s very important for banks to reduce the number of clients who decides to opt out of their bank accounts in favor for another bank. This means that every banks on the industry are competing among each other in providing their clients with the lowest prices on their offerings or interest rates. As mentioned earlier, PT Danamon Bank Indonesia is currently placed in 10th place, which means that the bank’s main competitors are the other 9 banks above them, in which all of the banks try to provide the lowest level of interest rates on credit loans or on their offerings and services. All in all, this means that the level of rivalry among competing firms in the banking industry is moderate, where each banks try to provide their clients with the most competitive prices or interest rates in order to lure them away from other banks.

 

Threat of Substitute Products:

            As mentioned in the previous chapter, there is a growing emergence of financial technology companies in Indonesia, such as OVO, GoPay, Dana, etc. Financial technology companies generally provides general financial services that used to only be provided by banks, such as credit loans, credit payments, savings account, etc. This financial technology companies will provide the people with more choices regarding their financial needs. This means that if there’s more innovation in the financial industry, new financial technology companies will emerge, and will increase the threat of substitute products in the banking industry. Fortunately, Danamon Bank also owns their own online banking application, D-Bank, which enables Danamon Bank’s clients to use the bank’s services from the comforts of their smartphones.

 

Bargaining Power of Buyers:

            In the banking industry, the bargaining power of buyers depends on the amount of savings that they possesses on their banking accounts. This means that individuals who doesn’t have that much funds in their banking accounts will generally have a lower bargaining power, because when these individuals switch into another bank, the original bank won’t have any significant losses on their financial position. On the other hand, high net-worth individuals, or people with a significant amount of funds or savings on their bank accounts will have a higher bargaining power. This is because if a high net-worth individual decides to switch his/her bank of preference, this will cause a significant decrease in the original bank’s financial position and profitability (Maverick, 2020). Danamon Bank is able to address this issue by providing each customer segments that would be able to fulfill their financial needs. For example, people with more funds may use Danamon Bank’s priority banking or enterprise banking to help the individual’s company when it comes to the company’s banking process. While people with less funds or micro-companies can use Danamon Banking’s micro banking system to help solve their financial needs.

 

Bargaining Power of Suppliers:

            In the banking industry, the main suppliers for the banks on a country are the bank’s clients, in which these clients can store their funds on their bank accounts, which can then be used by the banks as their main source of capital. Another supplier for a bank are their own employees, which supplies the bank with the necessary labor required to run the bank’s daily activities. In general, the bargaining power of suppliers in the banking industry is the same as the bargaining power of buyers, where the amount of savings that they possesses on their banking accounts will influence the bargaining power that they have on their bank. Because these banks can’t afford to lose  high-net worth individuals to other banks, high net-worth individuals can have more choices and offers given to them by their banks. (Maverick, 2020).

 

TYPE OF DIVERSIFICATION

  1. Bank Danamon Indonesia is able to achieve their position as one of the biggest conventional banks in Indonesia because of their attempts to diversify their revenue streams, while also being able to ensure that the bank’s main business model are uncompromised. Because of the bank’s revenue stream diversification, Danamon Bank’s type of diversification generally falls in the related constrained category. Danamon Bank’s revenue stream comes from their interest rates from their credit loans to their clients, the revenue generated from the bank’s subsidiary, and also in their trading of assets and portfolio in Indonesia’s stock exchange (PT. Bank Danamon Indonesia Tbk. 2020a).

As a multionational corporation, PT. Bank Danamon Indonesia is a subsidiary of the MUFG Bank, one of the biggest banks in Japan. Danamon Bank is also currently in a strategic partnership with ATM Bersama, PRIMA and ALTO (PT. Bank Danamon Indonesia Tbk., 2020a). Other than that, Danamon Bank is also the parent company for Adira Finance, an automotive financing firm. On 2018 alone, Danamon Bank is able to generate an income of Rp36,6 trillion from their corporate banking system, commercial banking system and also their financial institutions alone (Gorbiano, 2018).

Danamon Bank’s revenue streams doesn’t only come from their corporate banking system, commercial banking system and also their financial institutions, but also comes from the bank’s credit portfolio, and trade finances. For example, Danamon Bank’s mass market credit channel, Danamon Simpan Pinjam, that only aims to give out credit loans to traditional and small companies, is also gaining traction, where there is an increase of 2 percent of credit loans given out to the bank’s clients in 2017 alone. Other than that, Danamon Bank is also able to generate their revenues from the trading of their assets and also in increasing their stocks portfolio in Indonesia’s stock exchange, where Danamon Bank currently possesses approximately Rp122,9 trillion in tangible assets and stocks portfolio in 2017, a growth of 5 percent from the previous years. Additionally, Danamon Bank is the parent company of automotive financing firm, Adira Finance, and the subsidiary is able to generate an income of Rp45,2 trillion in 2017 alone, which means that the bank is also able to generate their income from other businesses that are also directly linked to the company’s operations. As explained before (Gorbiano, 2018).

As stated in the previous chapter, Danamon Bank is also currently in a strategic partnership with ATM Bersama, PRIMA, and Alto, which allows the bank’s clients to send their funds to other banks, making it easier for clients to send their funds allocated on their Danamon accounts to other banks, and vice versa (PT. Bank Danamon Indonesia Tbk., 2020a). In general, when a client intends to transfer their funds from one bank to another, the sender will be charged with a nominal fee for conducting the transfer. In the case of Danamon Bank, the bank charges Rp7.500 for the transfers of funds in ATM Bersama/ALTO, and charges USD 8 for the transfers of foreign currencies into another bank (Danamon Online, n.d.). Albeit insignificant, this provides the bank with another stream of revenue, where the bank can also rely on the charges incurred from these transfer of funds as a mean of income.

 

FIVE BUSINESS LEVEL STRATEGY

PT Bank Danamon’s strategy to achieve cost leadership can be seen from their decision to give as low of an interest rate as possible to debtors. According to Danamon Bank’s article regarding the current active interest rates (PT. Danamon Bank Indonesia, Tbk., 2020c), as of the 21th of September, 2020, Danamon Bank is currently applying their interest rates as follows:

By looking at the table, we can safely assume that the bank is giving out a reasonable and highly attractive interest rates for each amounts of deposits that clients have on their balance. This means that Danamon Bank is able to compete with other conventional banks in Indonesia when judging from the bank’s active interest rates for deposits.

Differentiation:

In the case of differentiation, PT Bank Danamon’s strategy is by trying to give as many services and facilities as possible for the bank in order for the bank to be able to serve their customers as best as they could, which is aligned with the company’s vision, missions and objectives. As explained before in the bank’s company profile article (2020b), Danamon bank is currently operating a total of 856 units of branches, and is also currently operating 60.000 ATMs across Indonesia. Danamon bank also have their own mobile and online banking application (D-Bank), that clients can use to check on their account balance, transactions history, etc. All in all, as already stated in the previous chapter, Danamon Bank practically provides almost all forms of financial services to potential clients and consumers.

 

 

 

Focused Cost Leadership:

PT Bank Danamon’s decision to implement a Focused Cost Leadership is by trying to implement bigger interest rates for richer clients. This can be seen from the bank’s interest rate table that was already given previously, where richer clients are able to reap the benefits of getting a higher deposit from the relatively higher interest rate (4,25% interest rates for clients who have Rp30 billion in their account balance) when compared to clients who doesn’t have enough balance in their bank accounts (0,5% interest rates for clients who have between Rp50 million and 500 million in their account balance).

 

Focused Differentiation:

As in the case of most banks, PT Bank Danamon’s strategy to implement a differentiation focus strategy is by providing the bank’s clients and consumers with both conventional banks and shariah banks for more religious clients. As stated in the previous chapter, the bank’s focus in fulfilling the needs of all customer segments, where the bank provides micro-banks, conventional banking, privilege banking, and enterprise banking, also shows how focused the bank is on fulfilling their vision of increasing their financial prosperity by providing them with almost all sorts of financial services. Danamon Bank’s focus in fulfilling the financial needs of their clients and customers can also be seen from their currently active 856 units of branches. This shows how devoted the bank is in trying to serve as many clients as possible to increase the bank’s market share on the Indonesian banking industry, and in fulfilling their vision, mission and objectives.

 

Integrated Cost Leadership/Differentiation:

On the case of an Integrated Cost Leadership/Differentiation, this strategy can be seen from the bank’s online banking application (D-Bank), where clients can use the application to transfer their cash to another bank account, to check on client’s remaining balances in their debit cards, to check on the credits that’s due to be paid on their credit cards, and to check on their transaction history from the client’s debit cards (PT. Bank Danamon Indonesia Tbk., 2020a).

 

COMPETITIVE RIVALRY

As stated before, PT Bank Danamon Indonesia’s currently placed in the 10th position when compared to other banks in the country based on the total assets that they possesses. This means that Danamon Bank already has a strong foothold in the market, and can keep on increasing the value proposition of the bank (decreasing interest rates, new technologies, etc.), without severe consequences. Based on this information, the competitive behavior of PT Bank Danamon Indonesia, as is the same as other banks, is in implementing as low of an interest rate as possible (cost leadership) when compared to other banks.

 

It is also previously stated that PT Bank Danamon Indonesia is a subsidiary of a Japanese bank, which means that there is a multimarket competition between PT Bank Danamon Indonesia and other conventional banks in the global market. According to PT Bank Danamon Indonesia’s profile page (2020a), the bank was founded in 1956, which means that Danamon Bank can be considered as a late mover, as the business model of a bank has long existed way before Danamon Bank’s inception. Because of PT Bank Danamon Indonesia’s status as a late mover, Danamon Bank are going to only be able to build or defend their competitive advantages (low rate of interests) in order to increase their market share.

 

The market commonality of the banking industry is very large, but this is also accompanied by the large obstacle of market entry into the banking industry. This is because of the similarity in all of conventional banks’ business models, but in order to open a new conventional bank, a very large amount of capital is going to be needed in order to compete in the banking industry. The resource similarity of PT Bank Danamon Indonesia when compared to other competitors in the market is very similar in the types of intangible and tangible assets that they hold. The main difference lies in the amount of intangible and tangible assets that they hold. Finally \, PT Bank Danamon Indonesia also have a standard cycle market. This is because the main value proposition that banks can give to clients is from the rate of interests that they’re implementing for debtors and borrowers.

 

COMPETITIVE DYNAMICS

            In the current banking industry, the emergence of financial technology companies has given many banks the incentive to also launch their own mobile banking application, where Danamon Bank has their own online banking application in D-Bank. According to a research conducted by Mulyaningsih & Anne (2012), Indonesia has a larger amount of banks when compared to other countries in the Southeast Asia region, but the total market share of the Indonesian banking industry is only concentrated to a couple of large banks. The research also shows how most large banks in the banking industry are trying to achieve a higher amount of market share in the country by merging with other banks, which in turn increases the value of these banks while also eliminating potential competitions in the market. The research conducted by Mulyaningsih & Anne (2012) also shows how Indonesian banks are generally trying to compete against other banks by implementing the lowest possible interest rates to clients, where in 2009, 88 percent of the Indonesian banking industry’s income mainly comes from interests generated from credit loans.

CHAPTER III

SUMMARY AND SUGGESTIONS

PT Bank Danamon Indonesia Tbk. is able to achieve long company sustainability and achieve their position as a living legend company because of the bank’s ability to adapt according to the market’s demand, while also being able to perceive the trends of the industry and act accordingly. An example of this would be the bank’s decision to create a mobile banking application for their customers and clients will make it easier for customers to enjoy the services of the bank, and shows how Bank Danamon is able to perceive the increasing capability and trend of technology, and implementing it in their system in order to increase the bank’s value. The bank is also able to cater to more than one type of customers segment, which can be seen from the diverse financial services that they provide to consumers, such as privilege banking, conventional banking, micro-banking, automobile insurance, etc. Danamon Bank is also currently operating sharia bank branches on Indonesia, which means that they’re able to cater to muslims, a majority religion in the country, therefore increasing the bank’s image and reputation in the country. Bank Danamon is also highly capable of giving out excellent services to their clients or customers, which can be seen from the fact that the bank was awarded by the Infobank Banking Service Excellence Awards for Overall Performance, which is a highly prestigious award in the banking industry. By being able to provide an excellent service to current or potential clients and customers, the bank is able to establish a certain value with their clients and customers, which will make them more satisfied with Bank Danamon’s services, and will be more inclined to use the bank again in the future.

 

Even though there is relatively low level of threats from new companies in the banking industry and the bargaining power of buyers & suppliers, Danamon Bank will still have to pay more attention on the other major banks in the country, as they’re going to be Danamon Bank’s biggest competitors on the Indonesian banking industry. The bank’s main challenges relates to their external environment because of the ongoing Covid-19 pandemic, where the pandemic has made it harder for Danamon Bank to adapt to the volatile economy of Indonesia, regulations imposed by the government to stabilize the economy during the pandemic, such as the POJK, etc. Additionally, the emergence and growing significance of financial technology companies in Indonesia will also be a significant challenge that Danamon Bank will have to overcome in the future.

            In order to stay competitive during the Covid-19 pandemic, PT Bank Danamon Indonesia Tbk must be willing to implement some changes on their business operations. An article written by partners of Delloite (American professional accounting services provider),  Heussner, et al. (2020), provides a significant amount of recommendations and suggestions that could help banks stay competitive during the pandemic, which can also be applied to Danamon Bank. Danamon Bank would need to evaluate the feasibility of their transfer pricing policies and regulations, instead of trying to reduce their interest rates even more in order to compete with other banks in the Indonesian banking industry. For example, a bank that doesn’t have a sufficient transfer pricing model in place will not be able to deal with certain events, such as in determining the amount of funds or costs that should be split among a bank’s local chains. Additionally, when Danamon Bank is able to change their transfer pricing policies, the company and their insurance company, PT Adira Dinamika Multi Finance Tbk, would also be able to manage the natural risks that comes from the financial industry, and also in ensuring that new contracts and commercial arrangement between the bank and their clients are being made rationally, decreasing the company’s overhead costs.

Danamon Bank must also improve their transfer pricing documentation process in a more seamless manner during the pandemic, in order to ensure that Danamon Bank’s branches are able to transfer their portfolio, assets, and capital among each other in a more effective manner. This will provide the bank with more accurate tax obligations that the bank’s obligated to fulfill, which will ensure that the bank is always paying the right amount of corporate taxes to the government, improving the bank’s financial situation, and their relationship with the government as a bank that fulfills their tax obligations. Additionally, Danamon Bank must be able to compete with emerging financial companies by increasing the amount of investments on their IT systems and technology, in order to increase Danamon Bank’s technologies and IT systems,  such as D-Bank. The increased investments will help improve Danamon Bank’s ability to serve their customers.

 

References

Danamon Online. (n.d.). “Danamon Online Banking”. Retrieved from https://www.danamonline.com/onlinebanking/include/en/popups/layanan_17.html

Disemadi, H. S., Shaleh, A. I. (2020). Banking credit restructuring policy amid COVID-19 pandemic in Indonesia. Jurnal Inovasi Ekonomi. 5. doi:10.22219/jiko.v5i3.11790.

FocusEconomics. (2020, October 20). “Indonesia Economic Outlook”. Retrieved from https://www.focus-economics.com/countries/indonesia

Frankel, R. S. (2020, July 17). “Credit Card Debt Is Down During COVID-19. Here’s Why”. Retrieved from https://www.forbes.com/sites/advisor/2020/07/17/credit-card-debt-is-down-during-covid-19-heres-why/?sh=3aae6cee73a1

Gorbiano, M. I. (2018, February 13). “Bank Danamon to continue diversifying revenue streams”. Retrieved from https://www.thejakartapost.com/news/2018/02/13/bank-danamon-continue-diversifying-revenue-streams.html

Heussner, R., Ma’ilei, S., Weston, S. (2020, July 29). “How COVID-19 has impacted the financial services sector”. Retrieved from https://www.internationaltaxreview.com/article/b1mph5b8yvgwwv/how-covid-19-has-impacted-the-financial-services-sector

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Jason Auryn Ho 2201751783/MG Herlina