INTERNATIONAL BUSINESS STRATEGY OF WIJAYA KARYA

Thursday, December 10, 2015 | Presented by Alma Sardadi, Nurul Jannah & Melvin Hade

MGMT 11023 International Business

INDUSTRY & COMPETITOR

ANALYSISAlma & Melvin

CORPORATE STRATEGY

Melvin Hade

COMPANY PROFILE

ORGANISATION STRUCTURE & CULTURE

Alma Sardadi

Nurul Jannah

Opening Video

COMPANY PROFILEAlma Sardadi

HISTORY OF THE BUSINESS

➤ WIKA was formed through a nationalisation process from a Dutch company named Naamloze Vennotschap Technische Handel Maatschappij en Bouwbedijf Vis en Co.

➤ Perusahaan Negara Pembangunan Widjaja Karja.

➤ Started as a electrical and water-pipe installation business.

➤ Early 1960s: Constructed Gelanggang Olah Raga Bung Karno

➤ 1972: Transformed into PT. Wijaya Karya.

➤ 1982: Major expansion of new divisions (Construction Civil, Industrial Construction, Concrete and Metal Products, Housing Divisions.

NATURE OF THE BUSINESS

MAIN SUBSIDIARIES OF WIJAYA KARYA

GLOBAL PRESENCE

Myanmar Algeria Libya Brunei

United Arab Emirates

IndonesiaTimor LesteSaudi Arabia

Toll Road

Oekusi Airport Infrastructure Apartment

ApartmentShopping CenterMulticomplex

Hotel

Residential Project

Office Building

Infrastructure

Representative Office

Shopping Center Buildings

Energy

Industry Material

Commercial Building

INDUSTRY & COMPETITOR ANALYSIS

Alma Sardadi & Melvin Hade

DOMESTIC COMPETITOR ANALYSIS

Wijaya Karya

Waskita Karya

PTPP

Adhi Karya

Hutama Karya

Total Bangun

Jaya Konstruksi

Multi Structure

Nusa Raya Cipta

Brantas Abipraya

0 350 700 1050 1400171.7

210.9

260

412

430

524.8

794.5

800

917.5

1,234.2

124.7

173.8

217

353

390

375.2

735.7

620

799.4

976.6

2011 2012

Top 10 Contractors in Indonesia (in million US$)Source: Indonesia Contractor Association

INTERNATIONAL COMPETITOR FROM INDONESIA

Source: Processed by Hafiz Zahoor from Indonesia Construction Company Data

Companies Project Type Location Year

HUTAMA

Road infrastructure Malaysia 1990-1993Road infrastructure Philippines 1996-1999

Administration building Brunei 2012Road infrastructure Algeria 2007Shopping Complex Libya 2010

Power Plan Timor Leste 2011

WIKA

Road infrastructure Papua New Guinea 2011Road infrastructure Brunei 2012Road infrastructure Timor Leste 2012

Housing Algeria 2013Hotel & Apartment Qatar 2006

Commercial Complex Oman 2007Railway India 2007

Apartment and Commercial Building

UAE 2006

WASKITA

Educational building Saudi Arabia 2012Religion Building Saudi Arabia 2013Airport Upgrading Timor Leste 2013

PT. PPAdministration Building Timor Leste 2012

Shopping Complex Timor Leste 2013

INTERNATIONAL COMPETITOR ANALYSIS

Countries Number Revenue Overseas Rev.

% of Overseas Number Revenue Overseas

Rev.% of

Overseas

China 41 438,303 59,125 13,5 50 497,908 66,000 13.26

US 35 126,278 57,036 45.2 42 167,675 78,481 46.81

South Korea

14 64,179 25,935 40.4 14 82,663 41,134 49.76

Japan 13 103,384 17,854 17.3 15 101,861 21,016 20.63

Italy 13 37,184 31,333 84.3 11 33,582 28,472 84.78

Spain 12 140,830 60,228 42.8 11 98,311 72,690 73.94

Turkey 12 13,345 9,362 70.2 10 12,712 8,482 66.72

Countries Having the Biggest Number of Contractor of Companies Performing Overseas Projects (in Millions USD)

Source: Processed by Hafiz Zahoor from 225 Construction Companies (2012 and 2013)

2012 2013

ORGANISATION STRUCTURE & CULTURE

Nurul Jannah

ORGANIZATIONAL CULTURE

➤3 Components: ➤Based on Wijaya Karya’s Vision ➤Based on Wijaya Karya’s Motto ➤Company Values

ORGANIZATIONAL CULTURE

➤Vision: To become the best and most i n t e g r a t e d E P C ( E n g i n e e r i n g , Procurement and Construction) and Investment Company.

➤Motto: Spirit of Innovation

COMPANY VALUES

Innovation

Balanced

Excellence

Commitment

Relationship Integrity

Teamwork

Values of WIKA

CENTRALIZATION VS DECENTRALIZATION

➤Huge company, not only operates in Jakarta, but all over Indonesia.

➤Not only Indonesia, but 7 other countries ➤More to Decentralisation (esp. Operations):

➤ Huge company which not only in Jakarta ➤ Have a better company ➤ Permits greater flexibility and more rapid

response

HOFSTEDE’S DIMENSION

➤Power Distance: Medium to High Power Distance

➤Collectivism: ➤Rooted in the Indonesian culture and

values ➤Nature of WIKA’s business and projects

➤Masculinity vs Femininity: Medium ➤Uncertainty Avoidance: Medium

Add in the final paper

HOFSTEDE’S STUDY

78 48 14 46

ORGANIZATIONAL STRUCTURE

➤Functional Structure: 5 Main Functions ➤I n t e r n a t i o n a l D i v i s i o n : O n e

department deals with domestic projects and one department dea ls with international projects

➤Matrix Structure: Project level, each project has its own matrix structure

BOARD OF DIRECTORS

➤President Director: Bintang Perbowo ➤Managing Directors:

➤1 Human Resources Director ➤1 Finance Director ➤4 Operational Director

1 President Director, 1 HR Director, 1 Finance Director, 4 Operational Director

STAFFING POLICY

➤Adopts ethnocentric staffing policy. ➤Sends thousands of workers and

engineers to Algeria and Libya for construction projects.

➤Benefit: Opportunity for Indonesian nationals to be hired for international projects

CORPORATE STRATEGY

Melvin Hade

- Bintang Perbowo, President Director of WIKA

“Sementara untuk strategi eksternal, WIKA menerapkan pola kerjasama sebagai

kontraktor dengan perusahaan luar negeri maupun lokal negara setempat. WIKA juga

menerapkan pola Joint Venture. ”

ENTRY-MODE STRATEGY

Strategic Alliance

FDI

Joint Venture

EVALUATION OF ENTRY-MODE STRATEGY

➤ Short-Term Business Opportunity: Strategic Alliance ➤ Long-Term Business Opportunity: FDI/Joint Venture ➤ Suggested Entry-Mode Strategy: Strategic

Alliances ➤ Advantages of Strategic Alliances:

➤ Sharing of fixed cost with partners ➤ Relatively less costly ➤ Less risk associated

STRATEGY OF INTERNATIONAL BUSINESS

Global Standardisation

Strategy

Transnational Strategy

International Strategy

Localisation Strategy

Higher Pressure for Localisation

Hig

her P

ress

ure f

or C

ost R

educ

tion

INTERNATIONAL STRATEGY

➤ Low cost pressures + low pressure for local responsiveness

➤ Minimal product customisation ➤ Selling products that serves universal

needs , but they do not face significant competitors.

➤ Firm can charge higher prices, since low competition

➤ Centralise product development and R&D in home country

GLOBAL STANDARDISATION STRATEGY

➤ Global Standardisation Strategy focus on profitability and profit growth by using cost reduction that comes from economies of scale and learning effects.

➤ Low-cost strategy on a global scale.

➤ High pressure for cost reduction, low pressure for local responsiveness.

➤ Minimal product customization

➤ Standardised product worldwide to benefit from economies of scale and learning effects.

EVALUATION OF STRATEGY

➤ High Competition: Global Standardisation Strategy

➤ Low Competition: International Strategy

➤ Suggested Strategy: Global Standardisation Strategy

➤ High Levels of Competition: Higher competition forces WIKA to offer competitive pricing in order to win project tenders.

➤ Developing Markets: Most international market that WIKA penetrated are developing markets.

➤ Government of developing countries have limited budget > pressure for cost reduction.

➤ Nature of Business: Serves universal needs, low customisation needed and WIKA is an Indonesian company with no int’l experience

DRAWBACKS OF STRATEGY

➤ Drawbacks of Strategic Alliances:

➤ Give out managerial and technical know-how to partners who can be competitors in the global market.

➤ Some risk may still be associated such as conflict with partners

➤ Drawbacks of Global Standardisation Strategy:

➤ Macroeconomics Risk: Changes in government policy and regulations regarding construction and infrastructure.

➤ Social/Demand Risk: When there are sudden changes in demand, where demand for local responsiveness are high, Wijaya Karya products may not be suitable anymore.

➤ Operational Risk: Changes in employment laws, minimum wages and operational laws.

CONCLUSION

Entry-Mode Strategy IB Strategy Organisational Structure

Organisational Culture Domestic Competitor Global Competitor

Strategic Alliances

Global Standardisation

Strategy

Functional Structure

Medium-High Power Distance & High Collectivism

International Division

Matrix Structure

REFERENCES"Company Profile." Wijaya Karya. Web. 1 Dec. 2015. <http://www.wika.co.id/id/pages/commitment>.

Dr. Sudarto. "Overview of Construction Services & Industry in Indonesia." 2011. Web. 3 Dec. 2015. <http://indonesien.ahk.de/f i l e a d m i n / a h k _ i n d o n e s i e n / B i l d e r / T r a d e _ _ F a i r s /b a u m a _ 2 0 1 3 _ I n d o n e s i a _ D a y _ p p t s /1140_Indonesia_Contractor_Association.pdf>.

"Facts Of Myanmar’s Building & Construction Industry." Build Myanmar. Web. 3 Dec. 2015. <http://www.buildmyanmar.com/post/256/Industry-Facts.html>.

"PT. Wijaya Karya Klaim Kirim Ribuan Karyawan Ke Luar Negeri." Indo Pos. N.p., n.d. Web. 3 Dec. 2015. <http://www.indopos.co.id/2015/03/pt-wijaya-karya-klaim-kirim-ribuan-karyawan-ke-luar-negeri.html>.

"PT Wijaya Karya." BUMN RI. N.p., 2015. Web. 3 Dec. 2015. <http://www.bumn.go.id/wika>.

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Great People, Great Business by Rini M. Soemarno.

"Wika Akan Agresif Di Luar Negeri." Berita Satu. Web. 3 Dec. 2015. <http://www.beritasatu.com/pasar-modal/238080-wika-akan-agresif-di-luar-negeri.html>.

"Wijaya Karya Sembilan Proyek Konstruksi Di Luar Negeri." Merdeka. Web. 3 Dec. 2015. <http://www.merdeka.com/uang/wijaya-karya-sembilan-proyek-konstruksi-di-luar-negeri.html>.

"Wijaya Karya Dipercaya Garap Proyek Besar Aljazair." VivaNews. N.p., 8 Jan. 2013. Web. 1 Dec. 2015. <http://bisnis.news.viva.co.id/news/read/380462-wijaya-karya-dipercaya-garap-proyek-besar-aljazair>.

"Wijaya Karya Sembilan Proyek Konstruksi Di Luar Negeri." Merdeka. N.p., 29 Jan. 2015. Web. 3 Dec. 2015. <http://www.merdeka.com/uang/wijaya-karya-sembilan-proyek-konstruksi-di-luar-negeri.html>.

"Wijaya Karya to Boost Overseas Portfolio." The Jakarta Post. 10 Jan. 2014. Web. 03 Dec. 2015. <http://www.thejakartapost.com/news/2014/01/10/wijaya-karya-boost-overseas-portfolio.html>.

"Wijaya Karya Profile." Reuters. N.p., 2015. Web. 3 Dec. 2015. <http://w w w. r e u t e r s . c o m / f i n a n c e / s t o c k s / c o m p a n y P r o f i l e ?symbol=WIKA.JK>.

END OF PRESENTATIONThursday, December 10, 2015 | Presented by Alma Sardadi, Nurul Jannah & Melvin Hade

MGMT 11023 International Business