Strategic Management Analysis: PT Astra Internasional

19 Oct 2021

Uncategorized

INTRODUCTION

Brief History

Astra International was founded in 1957, based on a small trading business operated by brothers Tjia Kian Tie and William Soerydadjaya, part of an ethnic Chinese family that had already lived in Indonesia for several generations, adopting the “Muslim” name of Soerydadjaya. The family had begun its trading activities by the 1940s, when it helped supply Indonesian forces, including troops led by Suharto, during the Indonesian war of independence in the 1940s. William Soerydadjaya also enjoyed personal ties with Sumitro Djojohadikusumo, long the country’s top economist. The brothers’ company initially operated as a distributor of fruit juices and other agricultural and grocery goods, before adding a small export business as well.

PT Astra International started manufacturing in the early 1970s when the president back then, Soeharto encourage the development of a full-fledged manufacturing industry. PT Astra International then responded by starting to produce automotive batteries and motorcycle frames by 1973, and by the end of the 1970s, PT Astra International has already added electrical equipments, shock absorbers, Toyota car bodies and Daihatsu car bodies to their list of production. Since then, PT Astra International has added more things to their production list like chassis frames, brake systems, transmissions, and also engines for Toyota and Daihatsu.

PT ASTRA INTERNATIONAL Tbk

PT Astra International Tbk is one of Indonesia’s biggest broadened combinations. The organization’s activities started quite a while ago based on its center in automotive manufacturing and distribution, which remains its biggest division, at almost 83 percent of all total sales of IDR 31 trillion ($3.7 billion) in 2002. The kickoff of Indonesia’s import market at the beginning of the 21st century, particularly to individual ASEAN financial network individuals, has pushed Astra to adjust to it. Then in May 2003, the organization auctions off virtually the entirety of its property in its long-term automotive jointventure with Toyota. The move, the returns of which were reserved toward squaring away the organization’s $1 billion debt, pulled together Astra essentially on its automotive sales and distribution networks, which remains the biggest in Indonesia. The organization holds the exclusive distribution rights to Toyota (the nation’s greatest selling brand), Peugeot, Daihatsu, BMW, Isuzu, and Nissan, and also the exclusive manufacturing and distribution rights for Honda motorcycles. It is Southeast Asia’s largest independent automotive group. Operating predominantly in Indonesia, it is a provider of a full range of automobile and motorcycle products in partnerships with companies which include Toyota, Daihatsu, Isuzu, UD Trucks, Peugeot and BMW for automobiles, and Honda for motorcycles. Nearly all of the company’s operations are focused on the Indonesian market. The shakeup of the country’s government, including the forced resignation of former President Suharto, has brought new leadership to Astra as well, in the form of Budi Setiadharma, who serves as President Director. Astra International is listed on the Jakarta and Surabaya stock exchanges.

Astra also has a strong presence in the automotive component sector through its subsidiary PT Astra Otoparts Tbk. PT Astra International Tbk also has many other subsidiary companies that moves in other main sectors in the economic in Indonesia. They have subsdiary company that moves in automotive, like PT Astra Daihatsu Motor, PT Astra Honda Motor, PT Isuzu Astra Motor Indonesia, and PT Toyota Astra Motor, in financial services, they have Astra Credit Companies which consist of PT Astra Sedaya Finance, PT Swadharma Bhakti Sedaya Finance, PT Astra Auto Finance, PT Staco Estika Sedaya Finance. In heavy equipment they have PT United Tractors, in mining they have PT Pamapersada Nusantara which is a subsidiary company under PT United Tractors. In agribusiness, they have PT Astra Agro Lestari Tbk, and they also have a subsidiary company which moves in information system called PT Astra Graphia Tbk.

PT Astra International Tbk was established in Jakarta in 1957 as a general trading company under the name Astra International Inc. In 1990, the name was changed to PT Astra International Tbk, in the context of the initial public offering of the Company’s shares to the public, which was followed by the listing of the Company’s shares on the Indonesia Stock Exchange using the ticker ASII. Astra’s market capitalization value at the end of 2019 was IDR 280.3 trillion.

With a diversified business, Astra has touched various aspects of the nation’s life through its products and services. In everyday life, the people of Indonesia use motorcycles and cars, toll roads, printers, as well as financial services, banking and insurance from Astra. Business owners partnering with Astra using a variety of commercial vehicles, heavy equipment, logistics services, information technology systems and mining services from Astra. Many products, including palm oil, coal and motor vehicles continue to be exported, thus allowing Astra to contribute in generating foreign exchange revenues for the country.

At the end of 2019, Astra’s business operations across Indonesia are run through 235 subsidiaries, joint ventures and associates, and supported by 194,359 employees. As one of the nation’s largest business groups today, Astra has built a strong reputation through a diverse and quality products and services offering, with due observance to good corporate governance and environmental governance standards.

Astra continually aspires to become a corporate citizen that is considered to be a pride of the nation, one who is actively involved in the national efforts to improve the welfare of the Indonesian people. To this end, Astra runs business activities by a balanced combination of the business’ commercial interests and non-business contributions through ongoing social responsibility programs focused on four basic areas: education, environment, small and medium enterprises (SME) development and health.

Corporate Philosophy

To be an asset to the nation
To provide best services to our customers
To respect individuals and promote teamwork
To continually strive for excellence

Vision

To be one of the best managed corporations in Asia Pacific with emphasis on sustainable growth by building competence through people development, solid financial structure, customer satisfaction and efficiency.
To be socially responsible corporation and to be environmentally friendly.

Mission

To prosper with the nation by providing the best value to our stakeholders.

ANALYSIS

VALUE CREATING DIVERSIFICATION
Automotives

Astra’s automotive business network has become the most broad, driving and incorporated in Indonesia. Astra offers an assortment of engine vehicle alternatives as indicated by the necessities of individual and business buyers, from Honda motorbikes to different models and sizes of Toyota, Daihatsu, Isuzu, BMW, Peugeot and UD Trucks vehicles and trucks, just as different sorts of made car parts and extras. Astra Otoparts. In 2012, unexpectedly Astra effectively joined its name to two of its most current vehicle models: Astra Toyota AGYA and Astra Daihatsu AYLA.

For 2012, practically all positions of Astra’s car organizations figured out how to score positive execution, driven by different activities and work programs that were deliberately intended to consistently organize client needs, fulfillment and faithfulness. For every shopper fragment, there is consistently a broad and in vogue assortment of the most recent vehicle models accessible. Various inventive and reasonable customary and sharia credit choices are additionally offered in close collaboration with Astra’s financing organization.

After-deals administration is additionally persistently being created. This extensive and multi-stage administration design guarantees quality client connections are set up so Astra can keep on joining forces with clients all in all at each stage in the vehicle possession and use cycle. This dedication has brought about the accommodation, solace and flawlessness intrinsic in each Astra item and has at last situated Astra’s vehicles among the most loved positions of the Indonesian public.

Finance

Astra’s portfolio in the finance related administrations area is enhanced over all of their industry sections with a key part in fortifying the operational execution of different business chains. PT Federation International Finance (FIF) supports the financing of Honda motorcycles which is under PT Astra Honda Motor. Astra’s vehicle business depends on advances offered by Astra Credit Companies (ACC) and Toyota Astra Financial Services (TAFS), while hefty hardware financing is directed through Surya Artha Nusantara Finance (SANF) and Komatsu Astra Finance (KAF). Asuransi Astra Buana (AAB) gives protection inclusion in different fields for individual and business buyers, while Permata Bank offers banking administrations.

In 2012, Astra’s monetary administrations business delivered great outcomes, not just regarding all out income which rose 15% to RP 12.7 trillion yet in addition the commitment to Astra’s general benefit which expanded from 18.7% in 2011 to 19,1%. Because of a fair spotlight on a reasonable and extensive danger the executives framework, expanded productivity was likewise joined by upgrades in resource quality and a lower level of non-performing credits.

Heavy Equipment and Mining

PT United Tractors Tbk (UT) is recorded on the Indonesia Stock Exchange with 59.5% of its shares are owned by Astra International. PT United Tractors Tbk deals with the hefty gear and mining business fragments inside the Astra Group which is separated into three principle exercises, in particular deals of development hardware, (heavy equipments) mining temporary worker business, and coal mining. In the offer of development hardware, UT serves public vital industry areas including mining, manors, development and ranger service. In the interim, the mining contractual worker business run by PT Pamapersada Nusantara (Pama), an auxiliary of UT, has a rundown of customers, the vast majority of which are huge organizations holding mining concessions in the nation.

Agribusiness

Through responsibility for stake in PT Astra Agro Lestari Tbk (AAL), Astra oversees one of the biggest public palm oil organizations, with a complete planted oil palm zone of 272,994 hectares. PT Astra Argo Lestari has eight kernel pressing plant with a capacity limit of 920 tons/day and 26 palm oil preparing plants with an absolute creation limit of 1,230 tons of Tandan Buah Segar (TBS)/hour toward the finish of 2012. The Company’s positive presentation all through 2012 was indistinguishable from the heightening project in all lines of creation and ranch measures, including automation, land the board, water the executives and foundation upgrades, which have been dispatched as of late, joined by activities to expand creation limit. AAL finished the development of four new palm oil handling plants, two situated in East Kalimantan and the other in South Kalimantan and Central Sulawesi. Every plant added to an extra creation limit of 45 tons of TBS/hour, carrying the complete creation ability to 1,230 tons of TBS/hour or an expansion of 17.1% from the all out creation limit of 1,050 tons of TBS/hour toward the finish of 2011.

Infrastructure and Logistics

Astra proceeds to effectively create venture openings in foundation ventures in Indonesia that can make positive effects for Indonesia and Astra. With the correct undertaking essentials, Astra’s foundation portfolio is relied upon to be a steady and economical type of revenue with the benefit of a tax structure that will in general move in accordance with advancements in the swelling rate. In 2012, Astra’s transportation and coordinations business, which is overseen under SERA, posted income of IDR 6.3 trillion, or an expansion of 32.1% contrasted with 2011. The biggest commitment was contributed by the TRAC vehicle rental business with 43.0% of all out income. SERA, trailed by the trade-in used cars business deals, Mobil88 with 41.2%, SELOG coordinations business income of 14.7% and public transportation 1.1%. Net benefit arrived at Rp. 301 billion or an expansion of 14.7% contrasted with that in 2011 (with a vehicle rental commitment of 69.5%, used cars operations 15.4%, logistics activites 14.2% and public transportation 0.9%).

Information Technology

PT Astra Graphia Tbk (Astragraphia) is a subsidiary of Astra with 76.9% ownership whose shares are listed on the Indonesia Stock Exchange. Astragraphia offers business solutions based on Document, Information & Communication Technology (DICT). Document solutions are run directly by Astragraphia as the exclusive distributor of Fuji Xerox.

ICT Solutions is run by its subsidiary, namely PT Astra Graphia Information Technology (AGIT), which collaborates with SAP, Oracle, HP, IBM, Microsoft, and Cisco. Furthermore, the mobile banking solution is run by PT AGIT Monitise Indonesia, which is a joint venture company of AGIT in partnership with Monitise Asia Pacific. Astragraphia has 24 branch offices and 79 service depots in Indonesia.

THE FIVE FORCES OF COMPETITION MODEL

Threat of New Entrants

How easy it is for new competitors to enter the existing markets. PT Astra International faces a big threat from newcomers from China who can sell their products with the same quality but at a much lower price. To compete with that, PT Astra try to produce products that can compete with the price of the Chinese companies.

The danger of another contender relies upon:

Economies of scale
Capital for investment
Access to distribution
Access to technology
Brand loyalty, regardless of whether the client is loyal to a specific brand
Government regulations

Threat of Substitute Products

The number of substitute product is also one of the threats that a company can face and PT Astra International is not an exception. These days, with online transportation like Gojek, Grab and other online transportation, people will rather save their money by using those online transportation rather than buying their own cars.

Currently also in Indonesia, the government has been trying to improve public transportation as well. This means that PT Astra International’s potential customers will have more choices for a substitute product. This is why PT Astra International keep innovating so that those substitute products don’t threaten the sales of PT Astra International. They do this by having their other subsidiary company produce the substitute products. For example, if a customer want to have their own personal vehicle, but they cant afford a car yet, they also sell cheaper cars with good quality or if the customer want a cheaper personal vehicle, PT Astra Honda Motor sells motorcycles which can be a substitute product for the cars they are selling.

Bargaining Power of Buyers

The bargaining power of buyers when it comes to PT Astra International, customers do not really have a strong bargaining power because PT Astra have subsidiary companies in almost every main sector of the economy in Indonesia. This gives them a good market position in every sector that they are in. Which is why the customers do not have a strong bargaining power against PT Astra International.

Bargaining Power of Supplier

As I stated in the point above, PT Astra International has subsidiary companies in almost every main sector of the economy like transportation, forestry, infrastructure, information technology, logistics, and others, which makes their bargaining power of the supplier very strong.

Rivalry Among Competing Firms

PT Astra International have to face a tough competition in the market in every sector they are in. Some examples are, for automotive, they are competing with Toyota, Honda (Car), Suzuki, and others and on the finance sector, they are competing with well known banks across Indonesia like BCA, Mandiri and BRI.

TYPE OF DIVERSIFICATION

PT Astra International uses a corporate strategy to get in and dominate various segments in the market with their subsidiary companies like Astra Daihatsu Motor, Astra Honda Motor and Toyota Astra Motor for the automotive, PT Astra Sedaya Finance, PT Swadharma Bhakti Sedaya Finance, PT Astra Auto Finance, PT Staco Estika Sedaya Finance which are merged into PT Astra Credit Companies which moves in the financial segment. PT United Tractors Tbk which their stocks are owned 59,5% by PT Astra International moves in heavy equipments for mining, farming, constructions and also forestry. They also own 76.9% of PT Astra Graphia Tbk (Astragraphia) which moves in the information technology sector.

PT Astra International has a moderate to high levels of diversification. This is because they have many subsidiary companies which moves in different sector and there are limited links, for example, PT Astra International has subsidiary companies in the financial sectors which customers can use to apply for an installment when buying their products. They also have subsidiary companies which moves in agribusiness and infrastructure which they use their own heavy equipment from their other subsidiary company. This allow them to go in and dominate many segments of the market from luxury cars and motorcycles to cheap cars and motorcycles, they don’t just produce a certain product, but they also produce the substitute product for that. Like if a customer can’t afford a expensive car, they also sell cheaper car, and if there are customers looking for a cheaper alternative for transportation, they also sell motorcycles. This give them a strong position in the competition and also in the market, which is proven that with all the competitions and new automotive companies coming into Indonesian market, PT Astra still manage to be one of the top ones in the market. PT Astra also has a subsidiary company which focus on agriculture under the name of PT Astra Argo Lestari which is one of the biggest crude palm oil producer in Indonesia.

PT Astra is trying to expand their market segments and try to try other sectors, as they now have subsidiary companies in almost every vital part in Indonesian economics from transportations, agricultures, heavy equipment, logistics, finances and many more to ensure that they don’t have to rely on the sector to work as they can control the sector with their subsidiary companies.

INTERNAL ANALYSIS
Resources
Tangible Resources

Tangible Resources are the assets that have a physical appearance, in PT Astra International’s case, are their factories, their offices which are scattered all around the country, their equipment used in the factories and their employees which are the human resources

Intangible Resources

Intangible resources are the assets that don’t have a physical appearance, which in PT Astra International’s case is their exclusive import license for Toyota, which formed a Toyota-Astra joint venture, their patent, copyrights, brand and trade rights.

Capabilities

PT Astra International always try to emphasize excellence in various businesses so that they can build a more self-reliant Astra, capable of managing changes and overcoming internal and external challenges that could otherwise harm their business in the future. The three emphasizes of the strategy implementation are

Innovation

In an era of highly dynamic changes, the mechanism of business management needs to be adjusted with strong emphasis on breakthroughs and innovations in the business portfolio, model and processes to generate value-added results.

Astra Brand Value

Utilizing Astra brand value to optimize business strengths in order to earn the trust and loyalty of customers while upholding their responsibilities and preserving their reputation.

Astra Digitalization

Astra business models must be adapted to the latest digital trends which has become a new business landscape by developing digitally based service platforms to keep their business models relevant to the needs and demands of today’s customers.

Core Competencies
The Valuable competencies for PT Astra International is that the holds some of the big brands in Indonesia like Toyota, BMW, Peugeot, Isuzu for the cars, Honda for the motorcycles, Komatsu, UD Trucks, Scania for the construction machineries and heavy equipment.

PT Astra International rare capability is that they are one of the if not the only biggest corporate company which has subsidiary companies in almost every sector of the economy in Indonesia, which helps them to not rely on other company in the sector but instead, they can just control it with their subsidiary company in said sector.

It will be costly for other companies to imitate what PT Astra International do because PT Astra International has been doing it for a really long time and they also have exclusive import license which is expensive and difficult to get.

PT Astra International has a strong nonsubstitutable capabilities, because first, PT Astra International itself has subsidiary companies that sells substitute products for their more expensive products, and also, PT Astra International has already established a high reputation in the market.

Competitive Advantages

PT Astra International has a competitive advantage that no other company has. Even though they have a lot of subsidiary companies that moves in different sectors in the markets, they still manage to have a high degree of control within its operations.

Strategic Competitiveness

PT Astra International’s strategic competitiveness can be seen from the points that have been stated above. They have a high degree of control over their many subsidiary companies that moves in different sectors in the market in Indonesia. By having a good control over their companies, PT Astra International can achieve their objectives efficiently.

EXTERNAL ANALYSIS
Political / Legal

PT Astra International’s rise to fortune started way back in the early 1960s when Soekarno was still the president of Indonesia. Soekarno’s then public work development effort imports asphalt and other materials needed for the construction, and then in 1967 when after Soeharto became the president of Indonesia in the mid 1960s, PT Astra International was granted an import license. Now, with president Joko Widodo with his infrastructure development all across Indonesia, PT Astra International is also benefitted by this decision as PT Astra International also has a subsidiary company which moves in infrastructure and heavy equipment.

Economic

With more jobs opened and employment rate increased, it means that Indonesia’s economy is growing and the citizen’s buying power also increased. People who now has a better buying power will start to want their own personal vehicle and PT Astra International who sells some of the most well-known automotive brands in Indonesia will surely receive a benefit.

Socio-Cultural and Demographic

With the many current trends that’s happening right now in Indonesia, with one of them being online transportation like Gojek and Grab, and with many people work as a Gojek or Grab driver, it means that those people need to have their own personal vehicle, and with PT Astra International selling most of the well-known brands of vehicles, they will surely earn benefits.

Environmental and Sustainable Physical

PT Astra International ensures their sustainability by making sure that the company and the subsidiary companies perform as good as possible. They also give benefits to their employees to ensure employee loyalty so that they keep their employee turnover rate low to eliminate unnecessary costs.

Global

PT Astra International’s subsidiary company PT Astra Honda Motor export Completely Build Up (CBU) and Completely Knocked Down (CKD) motorcycles to countries such as, Brazil, Phillipines, Bangladesh, Vietnam, Malaysia, Japan, Thailand, and Cambodia.

FIVE BUSINESS LEVEL STRATEGY

PT Astra International uses the Cost Leadership business level strategy. PT Astra International targets a broad market, this can be seen by the number of subsidiary companies that PT Astra International owns, which each of them moves in a different segment but still limitedly linked with one another which will cut costs for each of the company whenever they want to do business.

PT Astra International focuses on giving the best products and services to their customers. This can be seen by the good aftersales services that PT Astra International gives to their customers, this can leads to customer loyalty and strengthen their position in the market. They also focus on their management of their subsidiary companies to ensure that they have a high degree of control of their subsidiary companies so that they can make sure that their subsidiary companies perform as good as possible and as efficient as possible to achieve their company’s vision and objectives.

PT Astra International keep their costs low by linking their subsidiary companies, which although moves in a different sector, they can work together. For example, PT Astra International has a subsidiary company that moves in infrastructure, agribusiness and also forestry, and they also have another subsidiary company that moves in heavy equipment that can be used for constructions, mining and forestry. This can help them achieve the lowest costs as they no longer have to rely on other company but instead they can move on their own by using products from their other subsidiary companies, and PT Astra International also has another subsidiary company that moves in finance, where customers who want to buy with installment, can use PT Astra’s finance company rather than using a third party finance company.

SUMMARY AND SUGGESTIONS

PT Astra International Tbk is one of Indonesia’s biggest broadened combinations. The organization’s activities started quite a while ago based on its center in automotive manufacturing and distribution, which remains its biggest division, at almost 83 percent of all total sales of IDR 31 trillion ($3.7 billion) in 2002. The kickoff of Indonesia’s import market at the beginning of the 21st century, particularly to individual ASEAN financial network individuals, has pushed Astra to adjust to it. Then in May 2003, the organization auctions off virtually the entirety of its property in its long-term automotive jointventure with Toyota. The move, the returns of which were reserved toward squaring away the organization’s $1 billion debt, pulled together Astra essentially on its automotive sales and distribution networks, which remains the biggest in Indonesia. The organization holds the exclusive distribution rights to Toyota (the nation’s greatest selling brand), Peugeot, Daihatsu, BMW, Isuzu, and Nissan, and also the exclusive manufacturing and distribution rights for Honda motorcycles. It is Southeast Asia’s largest independent automotive group. Astra continually aspires to become a corporate citizen that is considered to be a pride of the nation, one who is actively involved in the national efforts to improve the welfare of the Indonesian people. To this end, Astra runs business activities by a balanced combination of the business’ commercial interests and non-business contributions through ongoing social responsibility programs focused on four basic areas: education, environment, small and medium enterprises (SME) development and health.

PT Astra International, like all companies started out small, but with the right strategy and management, they have grown into one of the biggest if not the biggest corporate in Indonesia.

They have their own corporate philosophy and visions and mission as well which are for them to be one of the best managed corporate in Asia Pacific and also to be sustainable and to be a socially responsible coporation.

The analysis done in this paper are PT Astra International’s VALUE CREATING DIVERSIFICATION, THE FIVE FORCES OF COMPETITION MODEL, TYPE OF DIVERSIFICATION, INTERNAL ANALYSIS, EXTERNAL ANALYSIS and FIVE BUSINESS LEVEL STRATEGY, we know that PT Astra International is not just a company, but a corporation with many subsidiary companies under them which consist of companies that they started themselves or companies that they acquired through purchasing the shares. They do this to keep their costs low as each of the subsidiary companies can operate simultaneously with the other so that each subsidiary company doesn’t have to rely on other company in other sector to move as they have their own subsidiary company in said sector, and from those analysis above, we can know how PT Astra International operates and understand how did PT Astra International became one of if not the biggest corporate in Indonesia.

My suggestion for PT Astra International is that PT Astra International should start opening branches overseas so that PT Astra International can expand their market even further and gain more recognition internationally. This could open up new business opportunities which PT Astra International couldn’t get before. This will also help Indonesian company to be known in the global market which of course will bring benefits to PT Astra International and all of its subsidiary companies which fortunately moves in almost all of the main sectors of the Indonesian economics from transportation, agriculture, mining, constructions information system, financial services and also logistics. So I think it will be a wise decision for PT Astra International to try and not just export their products, but also start to open offices or another subsidiary company abroad.

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