KELOMPOK 1Case StudyForward Integration -Management Strategy PT. Kalbe Farma Tbk (KLBF)ContentsMarket OverviewBusiness OverviewCorporate StrategyPerformance HighlightsSWOT AnalysisBusiness Decision StrategyConclusion

Total expenditure on health averaged 2.1% of GDP over the 11 year period 1999-2009.

BPJS Health program has commenced on January 2014 and with a target to cover 40% - 50% of the population in 2014 and the entire Indonesian population by 2019.

Indonesias Health Spending TrendsMarket OverviewApril 16, 2015Slide 42013 Pharmaceuticals Market Breakdown Kalbe continues to lead in the highly fragmented pharmaceuticals industry with over 200 players

Market Overview4April 16, 2015Slide 5Business Overview No. 1 player in Indonesian Prescription PharmaMarket. The largest medical representatives team in Indonesia with more than 2,350 personnel. Comprehensive product offerings for all income groups. Increasing competition following national insurance implementation.

Gross Profit Margin (GPM) declined from 61.1% in YTD 09 2013 to 60.2% in YTD 09 2014, mostly due to Rupiah depreciation and product mix.Consistent Top Line Growth5April 16, 2015Slide 6Shareholding Structure of the Company and Subsidiaries

Business Overview6April 16, 2015Slide 7Performance Highlights

Business Overview7Corporate StrategyApril 16, 2015Slide 8Kalbe has long track record of sustainable growth

8SWOT AnalysisMarket leader for public health products and the market leader for ethical productsAs well as producing many new products based on high technologyKalbe revenues increased approximately 18% per year.Kalbe do activities from procurement of raw materials, finished product manufacturing, marketing, to sales and distribution.Equipped with a solid team and good cooperation between departments internally and close relationships with partners, PT. Kalbe Farma Tbk increasingly established itself in the ranks of big companies in Indonesia.Sustained a fairly complete business structure, namely a distribution company and a hospital network that carries the brand Families and Partners International Partners, including school nursesBusiness StrengthSWOT AnalysisExpansion into noncore-business, such as the business property (PT Kalbe Land) and education which may result in less focus on business development pharmaceutical company.Weakness, basically the pharmaceutical industry is indeed a knowledge-intensive industries and highly-regulated, but regulatory aspects of pharmaceutical industry in Indonesia is considered sufficient weight The number of pharmacy (drug store) currently numbers about 6,000 pieces which concentrated in the cities to serve the people of Indonesia are more than 200 million inhabitants.Distributors which is quite a lot but do not have a wide reach and an efficient network that distribution costs are relatively expensive.

Business WeaknessSWOT AnalysisThe size of the Indonesian population and the still low per capita drug consumption cause a potential market that could be developed. Opportunity to enter into six key markets in Southeast Asia with a population reaching 500 million or approximately 8% of the world population. The total market is more than $ 890 billion in GDP and is likely to grow 5% per year over the next 5 years. And export opportunities as a result of the decline of the rupiah and the implementation of Good Manufacturing Practice good governance in Indonesia.The first strategy, trading based, namely the Kalbe appoint local distributors in export destination countries. This cooperation is very simple because it merely buying and selling activities only.Business OpportunitySWOT AnalysisThe existence of internal competition is quite hard. Something termed civil war is especially true in marketing channels. More specifically, in pharmaceutical products in the same category. In the cold medicine, for example, Kalbe have Procold while a mainstay Laboratories powerful enough, Mixagrip. Because of Kalbe and Dankos can see each individual data, they can bring down each other.The existence of the economic crisis has made the purchasing power of Indonesian folk medicine to decrease and threatening the survival of the national pharmaceutical industry mainly for the local market.The implementation of the Patent Act, 1997 and revised in 2001, Kalbe Farma pharmaceutical industry, which used to rely on the development of its products on a copy cat strategies of new products still under patent, it becomes harder to develop its products.

Business Threats Business Decision Strategies

Business Decision StrategiesCorporate ActionsKalbe has obtained the approval of the AGMS on May 14, 2014 to pay dividend of Rp.797bn,or equivalent to Rp.17 per share. This reflects a payout ratio of 42% for financial year 2013. Dividend has been paid on July 2,2014.

To accelerate expansion in the ready-to-drink segment, on July 6, 2012, Kalbe completed the acquisition of PT Hale International, a health beverage manufacturing company, also have their own distribution market, worth Rp 98.6billion.

Kalbe signed an agreement with PT Milko Beverage Industry to form a joint venture company, PT Kalbe Milko Indonesia, to manufacture liquid nutritionals products with an estimated investment of Rp 100150Bn.Acquisition of PT Millenia Dharma insani which previously starting as a pharmacy and subsequently expanding to become a clinic under the name of Mitrasana. Mitrasana Clinic provides affordable and integrated health facilities, consisting of clinics, pharmacies and mini markets. Currently, Mitrasana also provides hemodialysis treatments.Corporate ActionsThe Most Extensive Distribution NetworkKalbe signed an agreement with PT Enseval Putra Megatrading Tbk. (EPMT), a public company listed in the Indonesian Stock Exchange, This business is run through a 91.75%-owned subsidiary.Kalbes distribution network indirectly covers roughly 1 million outlets in Indonesia, comprising pharmaceuticals outlets such as hospitals and pharmacies, as well consumer health and nutritional products outlets

Business Decision StrategiesConclusionBased on the analysis above, we can conclude that : 1. Due to the low growth of pharmaceutical industry in Indonesia, even there a lot of pharmaceutical companies, but the number of companies that has good performance is small. This causes Kalbe Farma as one of pharmaceutical company in Indonesia beside pharmaceutical industry belong to the Government (Kimia Farma) have a strong position in health care sector. It can be proved by the number of Beta stock return of Kalbe Farma is greater than 1 (1.33) in the market. 2. Pharmaceutical Industry in Indonesia is vulnerable to the fluctuation of exchange rate. It caused by more than 90% of raw materials are imported from other countries. Compared to its neighboring countries, Indonesias healthcare market is still relatively small. Among ASEAN countries, Indonesia has one of the lowest total expenditures on health, averaged at only 2.6%-2.7% of its GDP. This is partially due relatively low health insurance penetration within the population, so health related expenditures are largely financed by households, out-of-pocket payments.

3. PT. Kalbe Farma Tbk put : Increasing the effectiveness of marketing and sales through global brand synergies, opening new market opportunities and distribution network to ensure product availability. as Number 1 Strategies which already defined in 2014.