Strategic Management Analysis: PT. Kalbe Farma
1. COMPANY PROFILE
Company Name : PT. Kalbe Farma
Brief Introduction :
Kalbe Farma that is known for the motto “The Scientific Pursuit of Health for a Better Life” was founded on September 10, 1966, the 6 brothers, namely Khouw Lip Tjoen, Khouw Lip Hiang, Khouw Lip Swan, Boenjamin Setiawan, Maria Karmila, F. Bing Aryanto. Kalbe Farma has come a long way compared to the beginning of starting a business that was founded in the garage where its founder lived. The company which is under the auspices of the Kalbe Group is a pharmaceutical company which is one of the giants in its industry.
The Company started in 1966 in a small garage in Jakarta City, and currently Kalbe Farma is operating in Indonesia with it’s head office located in Jl. Let. Jend. Suprapto Kav. 4, Jakarta 10510, P.O.Box 3105 Jak, Jakarta – Indonesia. Although Kalbe Farma is a company that is founded in Indonesia, This company is also serving global market through it’s products and services.
Kalbe Farma which is part of Kalbe Group itself is a famous and well-known company that operates it’s business in the pharmaceutical and healthcare products which is aimed to improve the healthcare condition and boost physical health of their customer to a higher level in order to help their customers perform well in their daily activities related to physical contribution.
The business operation that has been done by Kalbe Farma is an implementation of it’s original values and goals which is stated in their vision and mission below :
Vision :
To be the best Indonesian global healthcare company driven by innovation, strong brands, and excellent management
Mission :
To improve health for a better life
This Vision and Mission is supported and complemented with the business field of Kalbe Farma itself mentioned above which is pharmaceutical and healthcare products. After looking at the vision and mission of Kalbe Farma as well as their business field it may sound obvious the target market that they aim using their products. The target market that Kalbe Farma is aiming through their products are very wide and are maintaining an unique characteristics in each of their market segments. The target market itself can be viewed generally as people who wants to maintain and improve their physical and mental health and also people who wants to get cured from the disturbance they felt both physically or mentally. By targeting a very wide and various target market, Kalbe Farma should aim to provide various products that can fulfill the needs of each of the market segments included in their targeted market.
Kalbe Farma showed it’s ambition and goodwill through trying their best to provide their customers with pharmaceutical and healthcare products as much as they can. Their effort is showed by the divisions and/or business line that they have up to this point. Looking deeper to the business field of Kalbe Farma, they have several business lines and/or divisions that are still located inside the pharmaceutical and healthcare products that can provide and serve each of the unique demand and characteristics that each of their market segments have. Mainly, Kalbe Farma divide their business operations into 4 different sectors that each provides different products and serves different goals for each of the product types which includes :
- Prescription Drugs
- General Medicine
- Energy Drinks
- Nutritious Food and beverages
The 4 main business lines and/or divisions is established in order to fulfill as many demands and needs that is demanded by their wide target markets. Each of this divisons is producing different sets of product types ranging from daily consumption products such as nutritious food and beverages and energy drinks that is consumed to improve daily condition up to general and prescription drugs that are used for only specific and further treatment in order to recover a certain person’s health and condition.
For more than 50 years of providing pharmaceutical products and supplies, Kalbe Farma is able to defend their position in the industry and able to adjust to the evolving situation and condition of it’s potential market. Kalbe Farma had done massive expansion in the past by acquiring many companies to diversify their product and reach an even bigger market. By being one of the giants in their industry, Kalbe Farma has also listed their company in the stock market and obtaining a huge amount of capital from the stock market investors.
With more than 17000 employees around Indonesia, Kalbe Farma just recently is nominated as the biggest pharmaceutical and healthcare products provider in Indonesia. This great achievement can be obtained through their continuous research and development as well as their marketing and other business process that are aligned with their vision and mission mentioned before. Nowadays, the products of Kalbe Farma may be viewed as a daily products rather than healthcare products as their products can be found in almost every places that is visited everyday.
The Achievement that is obtained in domestic sectors are also the result of one of their strategies which is continuous research and development. By having a strong brand and influence in the domestic sectors, Kalbe Farma can easily expand their research facilities in Indonesia resulting in a better products that they can provide for the domestic market.
After Kalbe Farma positioned their business in the High-Ground of the industry in Indonesia, finally it is time for Kalbe Farma serves and provide their pharmaceutical and healthcare products into a wider market which is the global market. Kalbe Farma had become a company who also serves the needs of the global markets for products that are included in their business field. Kalbe Farma also has achieved a strong position in the global market. Kalbe Farma is a well-known as also the biggest Pharmaceutical and Healthcare Company in South-East Asian. Aside from that, the influence and impact of Kalbe Farma ‘s business itself is significantly felt in ASEAN, Nigeria, and South Africa
The influence and achievement in international society has also been recognized by other multi-national companies from different countries. This recognition may lead to further collaboration and joint-operation in order to serve the global market even better.
That conclude the Company Introduction of Kalbe Farma that will bring us to a further critical analysis and discussion about a more detailed aspects of Kalbe Farma and it’s business operations.
2. CRITICAL ANALYSIS AND DISCUSSION
INTERNAL ANALYSIS
Internal Analysis is an analysis that should be done first in order to know detailed information about a certain company. Internal Analysis is an effective method to know where is the company now and what should be done by the company itself in order to maintain their business and boost their growth. Here is the internal analysis of Kalbe Farma viewed using the SWOT method focusing on Strength and Weakness as internal analysis :
STRENGTH
- Kalbe Farma is a well-known giant in it’s industry that have been providing the society with pharmaceutical and healthcare products for many years. Kalbe Farma’s products and brand are very well-know and famous in the society. Therefore this aspects can be included as Kalbe Farma’s strength that can support their business operations and maintain a stable sales and demand in this competitive market. With experienced staff and personnel for their whole business process, it is an advantages for Kalbe Farma that helps the company maintain it’s position as one of the giant company in Indonesia.
- Kalbe Farma has many supporting tools and equipments in order to improve their products and service that Kalbe Farma provides to the society. Kalbe Farma has several research facilities equipped with modern technologies that is aiming to undergo continuous improvement towards their products and their production method. Kalbe Farma’s production sector are supported by 7 GMP (Good Manufacturing Practice) with international standards.
- Kalbe Farma has established many distribution channels and partners that allows them to distribute their products to various distribution partners all over Indonesia and to other countries. With more than 6000+ personnel and 1 million outlets and store in Indonesia and also supported by the hospital partners and nursing schools.
WEAKNESS
- Kalbe Farma’s several products are considered as seasonal products as it may not be consumed everyday and because of that, it may be hard for Kalbe Farma to control their inventory and distribution process as the demand tends to be more fluctuative compared to products like Foods and Beverages.
- Kalbe Farma’s expansion to a non-core business field such as towards the property and education sector may result in drawbacks and less focused management operation that will lead to their original goals.
- Based on the proportion of imported raw material ratio, Kalbe Farma is suffering more damage from the weakening of Indonesian currency against other currencies. The 90% proportion of imported raw materials will give Kalbe Farma a slight decrease of profit and a slight increase in their cost of goods sold.
EXTERNAL ANALYSIS
After looking at Kalbe Farma’s strength and weakness, we also need to consider the external environment of Kalbe Farma that contains Opportunities that the company can exploit as well as the Threat that may prevent the company to achieve it’s goals in the current period. Here is a brief explanation of Kalbe Farma’s external analysis focusing on the Opportunities and Threat from external parties and environment :
OPPORTUNITY
- Although the demand of pharmaceutical and healthcare products in Indonesia can be considered quite various, the consumption rate of medicine in Indonesia is still low implying that there still much potential for pharmaceutical and healthcare industry expansion. The opportunity for Kalbe Farma to expand towards the six main market in South-East Asian with a 8% of world’s population is surely an enormous potential market that can be explored further.
- The influence of Kalbe Farma has lead the company to unlock more collaborations opportunity with various company from outside Indonesia. This opportunity can lead to a better research and development of their products and services hrough continuous research by exchanging technology and knowledge with another countries.
- The globalization and influence of Kalbe Farma in global market is also an opportunity for Kalbe Farma to obtain various ingredients and a wider variety of raw materials with better deals from another countries.
THREAT
- Domestic Competitors and a very competitive industry mainly in Indonesia will also influence the business operations of Kalbe Farma mainly in logistics and distribution of Kalbe Farma’s products. The transparency of data that can also be viewed by competitor can also be a threat as the companies can used that data to counter another company’s strategies.
- The tendency of Indonesian Government policies that are focused on the monitoring and strict regulations instead of industrial growth oriented can make the growth of companies in the pharmaceutical and healthcare industry.
- The threat of fake medicine is still happening in the market that causes the price of real medicine becoming more unstable and uncontrollable.
- The global competition in the pharmaceutical and healthcare industry is also very competitive and Kalbe Farma’s product still can be countered by products from products of companies that operates in various countries with a modern and high-technology research and development.
- The domestic production of pharmaceutical raw materials can’t compete with imported raw materials therefore creating more lead time and high-cost raw materials for companies in pharmaceutical and healthcare industry to produce their medicines.
- The pharmaceutical care system in Indonesia is not yet fully optimized as there are shortage in several resources related to the healthcare services in Indonesia. The ratio of doctor towards population is one of the example. With 140 doctor covering every 1 million population, it is fair to say that the healthcare service in Indonesia is still lacking an therefore this also affects the business activities of Kalbe Farma where their distributor can’t reach a wider range of distribution as there is a scarcity of healthcare manpower that can help distributing Kalbe Farma’s Products throughout Indonesia.
DIVERSIFICATION
Kalbe Farma as a multi-national company is striving as time goes by in order to maintain and further expand the scope of their business and their target market. One of the interesting that can be discussed about Kalbe Farma in terms of their business development matter is the diversification of their products. Although generally speaking, Kalbe Farma seems to have a single business line that serves a very broad market, Kalbe Farma is a company that is more than just that. In trying to provide and offer the best pharmaceutical product and healthcare support, Kalbe Farma mainly divides their business lines into 4 big division as mentioned in the introduction sections. Here is the 4 main big divisions with a brief explanation about each of them :
- Prescription Drugs
This business line and/or division of Kalbe Farma is operating their business and operation revolving around specific drugs that are mainly used in hospital and treatment center and usually used for a more depth treatment that can be solved using general medicine. As mentioned above that this is prescription drugs, the main target of this division is providing sufficient supply of those specific drugs in order to meet the demand of the products in the market.
- General Medicine
This second business line and/or division of Kalbe Farma is still connected to the first divison but a wider range of market. This division is producing the general medicine that we consume if we feel unwell or a bit sick on daily basis. This division also produce medicines for simple and daily diseases that we may feel. The target customer of this division of course is larger in terms of number and scope as the products produced in this division is mor general and can be obtained in almost every place ranged from hospital until minimarkets.
- Energy Drinks
The third division and/or business line of Kalbe Farma has an even larger market segments as this division is focusing it’s production on energy drinks that can be consumed everyday to restore our energy after heavy activities and also to reduce fatigue that we have experienced during daily activities. The products of this business line itself is different and unrelated to the first two divisions of Kalbe Farma as the goal of the products is to maintain physical health and boost physical condition, not to cure a certain diseases or illness that a certain person has.
- Nutritious Food and beverages
The fourth division and/or business lines in Kalbe Farma is also a wide ranged business that target different types of customer in different markets. The products produced in this division is a focused type of products where each of the of the product category serves only a certain part of this division’s market. To give more explanation, the products of this division is usually consumed at a certain phase of life. For example, High-Calcium Milk is consumed at the growth phase and Half-Centuries Adult either to boost and improve their growth or to help maintain their body conditions. Another example is Pregnancy Milk that is consumed when a woman is pregnant in order to give a supply of nutritious substances needed by both the baby and the woman in the 9-months period.
Although, it seems that each of PT. Kalbe Farma’s division is standing alone, but all of their products are still inside the same industry which is Health and Nutrition industry. These 4 Divisions generally serves similar target market which is people who pay attention and wanted to improve both their short-term and long-term health. But if we try to analyze PT. Kalbe Farma deeper, we may find out that each of divisions serves their own segments and there is no direct relation between the divisions so it is more suitable to be considered as Unrelated Diversification rather than Related-Constrained Diversification.
One example that may support my argument is :
The closest division between those four divisions are Nutrition Products and Energy Drinks, however the products from this two divisions are not related. Young kids may drink Zee in order to gain sufficient calcium to improve their physical growth but they cannot add the effect of drinking Zee by using ExtraJoss as ExtraJoss is used to improve our stamina and to replenish our energy. This example show us that those two products are unrelated and they serve different purposes and target markets.
Effect of Diversification for PT. Kalbe Farma :
By having high diversity of business and products, PT. Kalbe Farma can perform well in different situation and conditions as their source of income is not limited to a single business line. This diversification help PT. Kalbe Farma to survive during the low sales period of a certain divisions as their other business divisions can backup the bad-performing divisions in order to maintain the whole company’s performance as a single business entity. By having high diversity, for this PT. Kalbe Farma case it may bring advantages to their business operations and will help the company in achieving greater growth and expanding their business and market.
COMPETITOR ANALYSIS
- Competitor Analysis :
- Kalbe farm as a company that runs inside the healthcare product industry have multiple big competitors both in Indonesia and outside. The biggest competitors of Kalbe Farma in Indonesia itself is Sanbe Farma with 5.92% market share and Dexa Medica with 3.82% .
- PT Kalbe Farma as a company will analyze and observe it’s competitors as the competition in the industry mainly in Indonesia in considered very competitive and the scope of the industry itself is considered as specific so analyzing competitors and observing their strategies is a good way to plan their next move.
- Aside from those two big competitors in the industry, PT. Kalbe Farma also have another competitors which is PT. Indo Farma, PT. Kimia Farma, PT Bio Farma which are government’s company that surely will be supported by the government.
- Another competitors is estimated to also enter the industry which is PT Sumber Alfaria Trijaya that is also expanding the business into general health sectors.
- Competitive Responses :
- One of the Responses that PT. Kalbe Farma do in order to compete and gain advantages over it’s competitor in this competitive market is by maintaining a diversified products that can serve a wider market and therefore give them an advantages in the market share of 6.19% in Indonesia.
- Another company’s action in responding towards the competitive industry is by maintaining a high profit margin which is 48.2% which is considered higher than it’s competitor.
- Kalbe Farma also implement focused strategy which focuses on urgent location in order to secure their logistics and stock in several crucial locations.
COMPETITIVE DYNAMICS ANALYSIS (ACTIONS AND STRATEGIES)
In order to counter the current conditions that gives many challenges for Kalbe Farma, there are several key actions and strategies that are implemented by Kalbe Farma in order to survive in this competitive industry and to maintain and even boost Kalbe Farma company’s growth. The strategies implemented by Kalbe Farma has lead to a successful career of the company itself in the pharmaceutical and healthcare industry. The following strategies came up according to the need of the company based on the internal analysis of the company in order to achieve their initial goal stated through the vision and mission. Few strategies of Kalbe Farma that should be highlighted and well-known for it’s success in supporting Kalbe Farma are as follow :
- Maintaining Effective Operations
The fact that Kalbe Farma has been running it’s business operation and serving their target customer for over 50 years it is impossible if there isn’t any changes in Kalbe Farma’s business operations. In order to serve many generations with different characteristics and a wide variety of needs and wants, the way Kalbe Farma runs it’s business is surely experiencing changes in order to adjust to the evolving society. One of the strategies that is implemented by Kalbe Farma to resolve this issue is by applying the maintaining effective operations strategy.
Kalbe Farma keeps on brainstorming and discussing ideas that is related ti their business operations in order to renew the way their business runs by implementing the modern technologies, evaluating current operations in order to spot flaws and obstacles in order to fix them and come up with a new way in running their business in order to provide the best service possible to maintain their position in the market.
By implementing continuous evaluation and review Kalbe Farma can come up with a solution for every problem that they encounter. This habit can help them sustain in unexpected situations such as this covid-19 situations that has been happening for months. By adjusting their operations to be as efficient as possible and looking at the circumstances, they can survive and continue to providing their products to their market.
- Continuous Research and Development
Another strategy that is implemented by Kalbe Farma in order to develop their business and to survive in this competitive market is by implementing continuous research and development. Kalbe Farma keeps on investing their resources for research and development such as building research center in order to develop their products that will also give them competitive advantages in the market compared to their competitors.
Kalbe Farma also utilize their brand and influence to collaborate with various company in the same industry both domestic and international in order to form a joint-ventures that will improve their research process in order to develop many aspects related to their business.
- Merger and Acquisitions
The last strategy that Is highlighted in this analysis is the merging and acquisitions strategy that is done by Kalbe Farma in the past in order to survive during the hard time of the industry. Before 2000s, the pharmaceutical and healthcare has experienced hard times where the demand are relatively low and the competition is becoming more competitive. In order to secure their position in the market, Kalbe Farma had merged with another company in order to maintain their business and to restore their cash flow.
FIVE BUSINESS LEVEL STRATEGY
According to this theory, the strategies that are implemented by each companies can be divided based on the scope of their target market and the value that they offer ( low cost or differentiation ). In Kalbe Farma business case, Kalbe Farma is trying to utilize and integrated business level strategy as Kalbe Farma is providing differentiation in their products from their competitors in order to provide special products for their customer,
Cost Leadership :
Kalbe Farma is trying to lower their production cost by keep on finding new effective ways to produce their products. Aside from that, Kalbe Farma is also trying to lower their cost in order process cush as the transportation cost. By building factories and distribution channels in various region in Indonesia, Kalbe Farma tried to reduce their material transportation cost as well as their finished produc distribution cost in order to give as low price as possible while also maintaining a high profit margin to maintain their revenues and increase their whole company’s profit.
Differentiation :
Kalbe Farma is providing differentiation in their products from their competitors by using specialized production method and using high-quality raw materials that are proven to be nutritious and suitable for their target market based on their previous research of the materials. By providing differentiated products from their competitors, it will give Kalbe Farma a strong brand positioning that will help them achieve an even stronger position in the market.
This mixed integration type of strategy that is implemented by Kalbe Farma is proven to be able to support their business to achieve their visions, missions, and goals. By utilizing several strategies and looking the business at several perspective, Kalbe Farma’s strategies are very aligned and suitable in covering the drawbacks created by each of the strategies implemented by Kalbe Farma. This strategy integration can help Kalbe Farma in providing differentiated and low cost products in order to provide the best products they can give to the market.
3. SUMMARY AND CONCLUSION
Kalbe Farma itself is a huge company created in 1966 that is operating inside the pharmaceutical and healthcare industry. The main operating office or the head office of Kalbe Farma is located in Jakarta, Indonesia. Have been operating for over than 50 years, Kalbe Farma has many assets both tangible and intangible supported by their resources and capabilities. As you may know that Kalbe Farma is currently holding many trademarks from their past acquisitions of companies in the similar industry and also certificate of recognition from the Governmental Institution stating that their products are allowed to enter the market. As for the tangible assets, Kalbe Farma has factories located in various places in order to fulfill the demand for their products.
Although Kalbe Farma have been standing strong in the industry and also considered as one of the giant company both in Indonesia and South-East Asia, Kalbe Farma should always be aware of the external environment outside of their company in order to keep developing their business and to prepare for incoming threat from external parties that may damage their business such as Indonesia’s society consumption rate related to their products and other related matters. Kalbe Farma should also develop more and evolve in order to compete with giant companies from other companies that may intervene with Kalbe Farma’s market in the future.
Looking at this facts and condition, Kalbe Farma should be implementing the differentiation strategy as Kalbe Farma serves a broad market and in the pharmaceutical industry itself, one of the main strategy that can be applied to gain competitive advantages against other competitors is by implementing product differentiation to stand out in the industry. Kalbe Farma should utilize it’s high amount of resources and capabilities to perform continuous research and development to provide better products improvements as well as new product development to ensure the company growth and to maintain their position as one of the industry giants.
Kalbe Farma should keep on implementing the strategies that they have implemented up until now to maintain their position in the market. Strategies such as maintaining effective operations that may give them the upper hand in providing their products to the market, continuous research and development to assure the quality of the products that are distributed in the market and also to improve the quality itself, and merger and acquisitions that can help them to minimize their competitors in the market as well as expanding their business should be implemented overtime. These strategies are the key factories that will help Kalbe Farma keep on moving forward.
Aside from the implemented strategies, Kalbe Farma should also explore deeper into new things and new service in order to improve their sales and revenues. Modern and digital technologies equipped with internet is a very common thing is society nowadays is a good way to expand their business. Knowing that we are entering the Internet of Things era means that Kalbe Farma’s target customer is also accessing the internet and it may be an opportunity for Kalbe Farma to be able to develop their digital and online business process in order to provide their target market with the demanded products via online as we know that bye shifting to the internet and operating digitally, every companies may be able to reduce their operating expenses and exploring a wider market and community by utilizing the advantages of data transfer in the internet that are able to reach every people no matter where and when.
That’s all the study and analysis of Kalbe Farma in the perspective of strategy management as well as my opinion about Kalbe Farma. There are still many informations and insights that can be obtained through many resources outside of this study. That will conclude my study for now and thank you for reading this analysis of Kalbe Farma.
References
https://www.kalbe.co.id/offices-and-representatives
https://www.kalbe.co.id/corporate-values/vision-and-mission
https://farmasiindustri.com/industri/top-10-perusahaan-farmasi-indonesia.html
https://amp.kontan.co.id/news/persaingan-bisnis-apotek-makin-sengit