PT. MANDOM INDONESIA TBK.

BUSINESS STRATEGYMM 5012

Fikhi Adrian - 29112Perthyzsa Azaria – 29112026Molly Sitompul – 29112027

Lutfi Kausar Rahman – 29112041Yongke Yoswara – 29112250

MANAGEMENT BUSINESS OF ADMINISTRATIONSCHOOL OF BUSINESS AND MANAGEMENT

INSTITUT TEKNOLOGI BANDUNGFEBRUARI 2013

TABLE OF CONTENTS

TABLE OF CONTENTS....................................................................................................1CHAPTER I. INTRODUCTION.......................................................................................2

I.1. BACKGROUND..................................................................................................2

I.2. ABOUT COMPANY...........................................................................................2

I.3. EXTERNAL AND INTERNAL ANALYSIS......................................................3

I.3.1. INTERNAL ANALYSIS..................................................................................3

I.3.2. INDUSTRY COMPETITION ANALYSIS......................................................4

I.4. BUSINESS STRATEGY.....................................................................................5

CHAPTER II. BUSINESS MODEL ANALYSIS.............................................................7

II.1. COMPONENT OF BUSINESS MODEL............................................................7

II.1.1. CUSTOMER VALUE PROPOSITIONS......................................................7

II.1.2. PROFIT FORMULA.....................................................................................7

II.1.3. KEY RESOURCES.......................................................................................8

II.1.4. KEY PROCESSES........................................................................................9

II.2. VALUE CHAIN ANALYSIS..............................................................................9

II.3. ACTIVITIES MAP.............................................................................................11

II.4. BUSINES MODEL AND VALUE PROPOSITION ALIGNMENT................11

II.5. BUSINESS MODEL NEED ANALYSIS..........................................................12

CHAPTER III. CONCLUSION AND RECOMMENDATION...................................13

III.1. CONCLUSION..................................................................................................13

III.2. RECOMMENDATION......................................................................................13

III.3. LESSON LEARNED.........................................................................................13

REFERENCE....................................................................................................................14

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CHAPTER I. INTRODUCTION

I.1. BACKGROUND

Southeast Asia is a growing and diverse market for international personal care

product brands, despite the challenges (and some losses) caused by the recession. The

region contains relatively rich emerging markets (and the very rich city state of

Singapore), and its major poorer countries, notably Vietnam and Indonesia are growing

fast and emerging robustly from the recession.

Indonesia is home to approximately 700 cosmetic companies. In 2011 beauty and

personal care sales grew strongly in both volume and value terms, accelerating more than

in 2010. Rising disposable income due to strong economic growth in Indonesia facilitated

better purchasing power enabling consumers to buy beauty and personal care products.

The favourable performance was also supported by a flurry of new product launches,

aggressive promotional activity by players and rapid expansion of retailers. These factors

led to increased consumer knowledge of many products, and a consequent increase in

spending on different product types.

Beauty and personal care is still expected to perform respectably over the forecast

period. The potential for growth is still good, as the geographical penetration of many

products had yet to reach an optimum level in the review period, given the vast size of the

country. While urban dwellers will remain the main engines of growth, rural inhabitants

are expected to increasingly contribute to rising volume sales of basic necessities, such as

bath and shower, hair care and oral care. Improved distribution networks in rural areas and

manufacturers’ attempts to make their products more affordable to every income level will

give rural dwellers better access to beauty and personal care. At the same time, urbanites

are expected to trade-up to more value-added products, such as those considered masstige.

I.2. ABOUT COMPANY

PT. Mandom Indonesia Tbk. was established as a joint venture between Mandom

Corporation Japan and PT. The City Factory. The Company was incorporated bearing the

name PT. Tancho Indonesia and changed to PT. Mandom Indonesia Tbk. on 2001. On

1993, the company became the 167th company and the 11th Japanese joint venture

company listing its share on the Indonesia Stock Exchange.

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The company holds on to the vision of “Towards Asia Global Company Based in

Indonesia”. Their mission is to provide a comfortable lifestyle supported by health and

beauty. PT. Mandom Indonesia Tbk. has three values as their foundation: (1) Creating

lifestyle value with consumers, for consumers, (2) Active employee participation, (3)

Social responsibility and sustainability.

The company's commercial production was started on 1971 when the company

initially produced hair care products, which then developed by producing fragrances and

cosmetics. Currently, Mandom has collaborated with several international brands, such as

RoC from France and Hakugen from Japan, to promote and distribute their products in

Indonesian cosmetics market. Some of their products are Gatsby, Pixy, Pucelle, Spalding,

etc.

Besides domestic market, the company also exports its products to some countries

such as United Arab Emirates (UAE), Japan, India, Malaysia, Thailand, and others.

Through UAE, the company's products are re-exported to some countries in Africa,

Middle East, Eastern Europe, and others.

PT. Mandom Indonesia Tbk. has many awards from their product: Indonesia Best

Packaging Award, Top Brand Award (from Frontier Magazine and Marketing Magazine),

Top Brand for Teens, etc.

I.3. EXTERNAL AND INTERNAL ANALYSIS

I.3.1. INTERNAL ANALYSIS

Resources

There are two types of resources in PT. Mandom Indonesia Tbk.: tangible and

intangible resources. PT. Mandom Indonesia Tbk. has 2 factories in Sunter and Cibitung.

In Sunter, company produce all of their cosmetic products and in Cibitung, the factory is

established to produce packaging and as their logistic centers. They also have technology

in research and development center as their strong resources to compete with other

competitors. The organization in this company is structured well.

For intangible resources, PT. Mandom Indonesia Tbk.’s products are well known

in market so their brand image and reputation are one of many intangible resources for

company. The company has been established for 40 years so they have good enough

reputation and trustable products for several demographical age segmentation. Company

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also have about 4100 employees with their knowledge and skills as company’s intangible

resources.

Capabilities

In distribution areas, company can effectively use their logistic and management

technique. They build the factory for logistic center in Cibitung that is placed in the

middle of industry area. In manufacture, PT. Mandom Indonesia Tbk. design and produce

reliable products that can compete in the market. In research and development, they use

high technology to make innovation in their products.

Corporate Value

PT. Mandom Indonesia Tbk. has three values as their foundation:

(1) Creating lifestyle value with consumers, for consumers

The words “beauty”, “health”, “cleanliness”, and “fun” summarize our business. We will

do our best to listen to our consumers’ needs and wants and turn them into attractive

products and services, and to bring those “values” to as many consumers as possible

(2) Active employee participation

The corporate name “Mandom”, deriving from “Human” and “Freedom”, represents the

respect for human dignity and a liberal atmosphere. At the core of the Mandom Group is

an environment where employees can freely demonstrate their creativity through open and

lively discussions. The continuous growth of both the individuals and the entire

organization will enhance our value.

(3) Social responsibility and sustainability.

We will try to establish mutual communication with our stakeholders in order to build and

sustain favorable relationships with them. We aim to respond quickly to their demands on

our economic and social responsibilities. We will also be “a good corporate citizen” and

dedicate ourselves to society’s development.

I.3.2. INDUSTRY COMPETITION ANALYSIS

Rivalry among established competitions

The level of competition among the existing established competitors in personal care

product industry is high. The biggest competitors are Unilever, Kao, and P&G. The

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competitors have huge resources and strong power in personal care product industry. The

competitors also have strong brand awareness in consumer mind-sets.

Bargaining power of suppliers

Bargaining power of suppliers in personal care product industry is low because there are

so many options for the company to supply their needs of raw material. PT. Mandom

Indonesia Tbk. has their own factory for packaging of their products. For chemical raw

material, there are many supplier can supply.

Bargaining power of buyers

The bargaining power of buyers is high. Buyers have various options to choose the

personal care products. Buyers have strong ability to force down price for quality of the

products because buyers have so many brands to compare with.

Threat of substitute products or services

PT. Mandom Indonesia Tbk.’s products can be replaced with other competitor' products.

For example: Gatsby facial wash can be replaced with face wash bar-shaped soap, cleasing

milk, and body soap from other competitors. Pucelle cologne can be replaced with body

spray or aromatherapy products from other competitors.

Threat of the entry of new competitors

The level of threat of new entrants is high in this industry because there are so many

personal care product industry competitors. The competitors has strong brand awareness

in the customer mind-set and the competitors have so many experience in personal care

industry.

I.4. BUSINESS STRATEGY

Based on Porter, there are three generic business strategies for the company. The

first of three strategies is called overall cost leadership. A cost leadership strategy involves

a firm being the lowest-cost producer within the industry. The second strategy is

differentiation. A differentiation strategy is based on an organization producing products

or services which are perceived by customers as unique or different. A differentiated

product has the opportunity to meet different customer needs more closely. The third

generic strategy is referred to as a focus strategy. A focus strategy allows an organization

to target a segment or niche within the market. The segment may be based on a particular

customer group, geographical markets, or specific product lines.

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PT. Mandom Indonesia Tbk. is using cost leadership strategy. Their products are

also known as a budget or low price products. There is little difference in products’ feature

compared to other similar products that produced by competitors. In innovation, PT.

Mandom Indonesia Tbk.’s products are not pioneers. They release their products after

other products develop and release new products or feature. For example, PT. Mandom

Indonesia Tbk.release facial wash product lately, long time after other competitors launch

facial wash product. This situation can reduce their cost by reducing research cost.

Quality of their products is not quite high. Their products’ quality is average and

quiet similar even lower compared to other competitors in some products. Consumer

goods, in this case is cosmetics, don’t need high reliability product. These kinds of

products are high in turning ratio number. Their products are safe for people daily usage

and fulfill the health standard of Indonesia. This situation affects the cost of raw materials.

The raw material should be in lower quality in order to make the cost lower. These cost

strategies make the price can be lower compared to other competitor.

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CHAPTER II. BUSINESS MODEL ANALYSIS

II.1. COMPONENT OF BUSINESS MODEL

II.1.1. CUSTOMER VALUE PROPOSITIONS

Customer value proposition is a description of the experiences a target user will

realize upon purchase and use of a product. The customer value proposition is the most

important tool in PT Mandom Indonesia Tbk.’s to market their product. Company use

customer value proposition as a foundation for understanding how their product will

realistically be valued by their consumer.

The first value of PT. Mandom Indonesia Tbk. is “creating lifestyle value with

consumers, for consumers”. The company makes every products based on consumers’

research and they want to deliver the value to the customer using their products. It is

important for the company to be able to constantly provide the best for the consumer

without compromising the quality of the company’s products. The company always study

and observe consumer behavior in order to be able to provide product innovations which

are suitable and usefull for the customers.

II.1.2. PROFIT FORMULA

Revenue Model

The company net sales in 2011 consist of:

Hair care 615.695.034.761Skin care and make up 598.371.367.462Fragrance 424.221.854.573Others 16.382.841.562TOTAL 1.654.671.098.358

Domestic sales were Rp 1.22 trillion or grew by 11.1% compared to the previous

year. Meanwhile, export sales were recorded at Rp 437.72 billion or grew by 17.7%

compared to the previous year, with the support of the rapid growth of the Indian market

and the smooth export sales to Dubai as a pillar of the Company’s export business.

Accordingly, the ratio of domestic to export sales was 73.5%:26.5%.

Cost Structure

Commonly, all businesses have to create and keep their cost structure efficiently.

Otherwise, there’s business model that depends on efficient cost structure. According to

Alexander Osterwalder and Yves Pigneur, there’s two type of cost structure: cost-driven

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and value-driven. In a business model that use cost-driven, company focus on minimalize

cost to create the optimal cost-structure. But when company use value-drive cost structure,

cost efficiency is not a major consideration. The main tagert is company give premium

service to customer. PT. Mandom Indonesia Tbk. used cost-driven in their cost structure

because their business strategy is low cost so they minimize their cost (direct and indirect

cost).

Cost structure includes the key assets, direct cost, and indirect cost.

Key assets

PT. Mandom Indonesia Tbk. has total assets of IDR 844,694,007,386.00 key

consisting of land, buildings, machinery and equipment, furniture and fittings,

vehicles, and constraction in progress. Of total assets is key, Machinery and

equipment is an important asset to running of the business, because of machinery

and equipment have 59% of the total key assets owned, PT. Mandom Indonesia

Tbk. should be able to allocate invesment of IDR 844,694,007,386.00 in each year.

Direct cost

Direct cost itself is a cost that can be seen directly on a firm and direct bearing on

the main business road of a company. At PT. Mandom Indonesia Tbk. has that

consists of raw and packaging materials used, direct labor cost, amortization and

depreciation, and factory overhead costs. which has a total of IDR

1,078,059,017,282.00. PT. Mandom Indonesia Tbk. is a company that

manufactures of body care products, it is the biggest direct cost of raw and

packaging for 81.50% of the total direct cost incurred by company every year.

Indirect cost

Contrast to the direct costs, indirect costs are costs that can not be seen directly its

effect on a production but actually although not seen directly, the cost goes greatly

affect the company. Indirect costs at PT. Mandom Indonesia Tbk. divided into two,

the first selling expenses amounted to IDR 256,787,803,418.00 or 62% and that

both the general and administrative expenses amounted to IDR

151,473,210,966.00 or 37%. Total of these two factors, company has indirect costs

amounting to IDR 408,261,014,384.00 and it can be concluded that the biggest

factor affecting the amount of indirect costs at company is selling epenses.

In the good company, direct cost must bigger than indirect cost because direct cost is the

real cost that influence the production of the company. Based on their financial report, PT.

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Mandom Indonesia Tbk. can be concluded that the company is good company because

their direct cost (72.5%) is bigger than their indirect cost.

II.1.3. KEY RESOURCES

Key resources are the required asset of PT. Mandom Indonesia Tbk to offer and deliver

value proposition to the customer.

Human Resource

Continues improvement for their employee, the Company facilitates the employees

in competency development for both technical skills and soft skills. The employee

become their competitive advantages because of their capability at research and

soft skill.

Strong brand

Strong brand of PT. Mandom Indonesia Tbk, support by advertising with popular

artist. PT. Mandom Indonesia Tbk is a market leader for hairstyling product and

men’s fragrance. 70,5% of market share for hair styling and 16,5% of market share

for men’s fragrance.

Technology

Great Japan technology for make perfectly cosmetic to fulfill market need is their

key resource. They make modern factory at Jakarta to make the product and

Cibitung as their packaging factory. The Cibitung factory must become a

production hub for the whole of Asia. It must manufacture even higher quality and

lower cost products.

Channel

Distribution channel of PT. Mandom Indonesia Tbk spread widely all over

Indonesia, Thailand and India. In Indonesia, their product sales were at the big

mall until traditional market and small retailer. Because of their strong distribution

channel they can survive at strong competitive environment with P&G and

Unilever.

II.1.4. KEY PROCESSES

PT. Mandom Indonesia Tbk. has good process from R&D until the deliver their

product to the customer that allows them to deliver value to their customer. The whole

process from R&D to delivery their product to the customer is their key process. As the

starting point of their processes, the development of new product plays important role for

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the company. Therefore, according to one of the company’s values, namely “Creating

lifestyle value with consumers, for consumers”, the company conducts new product

development based on researches on consumers’ needs and analysis of market trends as

well as constructs detailed plans as a result of intensive discussions among the relevant

divisions.

The second process is production. The production department played an important

role as the basis of production for PT. Mandom Indonesia Tbk. The production process

paid special attention to the effort for the development of a competitive production

system, both from the aspect of quality and cost. After production process, next process is

packaging. The production of this packaging requires high technical ability due to its

different specifications with the packaging which have been produced so far by the

company, and the company has successfully met the requirements, so that shipping is

scheduled to commence in 2012.

The next key process which also is an important part is the delivery of their

products to their retailers. They must ensure that the delivery schedule. This is one of the

key processes so that they can of their product delivering value to the customer. From the

customer, it will be returned to the process R & D. The company will conduct research to

determine customer needs and the latest technological developments that could still focus

on the customer needs.

II.2. VALUE CHAIN ANALYSIS

Primary Activities

The production department played an important role as the basis of production for

PT. Mandom Indonesia Tbk. The production department also paid special attention to the

effort for the development of a competitive production system, both from the aspect of

quality and cost.

In marketing and sales, the activities were prioritized to support the focus brands

for men and women, namely GATSBY and PIXY. The company broadcasted TV

commercials. Along with the broadcast of TV commercial, the company has displayed

Points of Purchase (POP) in stores, such as hangers. PT Mandom Indonesia Tbk. has 2

kinds of sales: domestic and export. The ratio of domestic to export sales was 73.5% :

26.5%. Meanwhile, in order to improve service for customer, PT. Mandom Indonesia Tbk.

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strengthened the membership program, for example: PIXY Beauty Community (PBC).

Various events had been conducted for PBC members

In terms of purchasing activity, the company also encountered difficulties in

purchasing resin materials and supply of some raw materials. However, such problems can

be solved without significantly affecting the production process by implementing the

policy of early order and increasing the secure stock level, as well as the purchasing policy

from multiple suppliers.

Support Activities

The Company conducts new product development based on researches on

consumers’ needs and analysis of market trends as well as constructs detailed plans as a

result of intensive discussions among the relevant divisions.

In human resources, the company is fully committed to incessantly increase its

ability in recruiting, maintaining, and developing its employees. One of the Company’s

efforts in managing the employees’ competence is by implementing a Career

Development Program (CDP). Furthermore, the Company also facilitates the employees in

competency development for both technical skills and soft skills.

As part of the community, PT. Mandom Indonesia Tbk. is fully aware of the

importance of a community friendly business. Therefore, the company divides its focus on

social activities to environment and education. In the area of environment, the Company

continuously improves its awareness of waste water treatment both for production and

domestic waste. In the area of education, the company actively participates in facilitating

students of SMK in Jabodetabek area for a job training opportunity.

Starting 2011, the company enhanced the use of information technology (IT) to

strengthen information sharing activities with the consumers. Activities through Facebook

have been conducted by synchronizing among ASIAN countries which market products in

order to increase the number of customers.

II.3. ACTIVITIES MAP

PT. Mandom Indonesia Tbk. has positioned themselves as low cost manufacture,

globalization, and lifestyle product. For low cost manufacture position, the activity that

support their position are production in emerging country, efficient production system,

packaging production system, men and women product categorizing, and mass production.

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Their production is in emerging countries because of the low cost operational, especially

in labour cost. They also use modern technology to make their production more efficient.

They have their own factory for packaging so they can reduce their cost in purchasing for

packaging. They categorize their products based on women and men product so they can

focus on their product development. They can get low cost product with supported from

mass production and high volume of sales.

For globalization position, they have several factories at Asia (Japan, India, &

Indonesia). Their strategic position factories at Asia make them easier to deliver product

all around Asia. To compete in global market, the company develop some training to

improve their employees’ skill (soft skills and hard skills) and make them more

competents in order to meet challenges in global market.

They also positioned themselves as company with lifestyle product. To sustain at

this position they make their product with excellence design to meet costumer needs.

Company do some dynamic marketing to make their brand awareness as lifestyle

products. PT. Mandom Indonesia Tbk. did some research and development based on

customer’s needs.

II.4. BUSINES MODEL AND VALUE PROPOSITION ALIGNMENT

Cost - Price

Their position of price is leader. Cut the cost by producing the products’ packaging in

their own plant. Some raw material developed. They also have many suppliers can supply

their material. Based on our analysis these situations impact the cost which make the

company can reduce their operating cost.

Innovation - Features

Their position of features is basic. There are no any special features in their product. Their

innovations are incrementally changed. So the features of products are basic and little bit

customized in some variant.

Reliability - Quality

The quality of their products is average and acceptable. Consumer goods, in this case is

cosmetics, don’t need high reliability. These kinds of products are high in turning ratio

number. Their products are safe for people daily usage and fulfill the health standard of

Indonesia.

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Relationship – Support

The level of support is standard. This company has medium intensity of relationship to

their customers. There are informations that show company’s relationship to its customers

such as gathering, seminars, and other forms of activities that develop company –

customer relationship. But there is no customer’s hotline number for complaints and

information as other competitors have been developed.

Channels – Availability

The level of availability is spread. These products are widely available in Indonesia.

Products are available in supermarket, main retailer, small retailer, and sometimes in

traditional market. It is not difficult to find Mandom’s products in Indonesia.

Brand – Reputation

The level of reputation is well-known. Mandom’s products are well known as economical

products that fit to most of Indonesian customer’s needs. Their products are not difficult to

find and have been identical for most Indonesian consumers.

II.5. BUSINESS MODEL NEED ANALYSIS

Cost - Price

Value of products will be improved in line with the price. Improvements that can do to

increase the value of products is gaining their quality of products. The price will be

increased from price leader into competitive acceptance price range.

Innovation - Features

They should improve their packaging design in order to fit the current trend and lifestyle.

They can analyze the current trend from the customer and current lifestyle. PT. Mandom

Indonesia Tbk. also does some incremental innovation on composition of their products.

Reliability - Quality

In order to compete with many competitors, they have to increase the quality of their

products by modernize their production system. The production systems include machine,

equipment, and also supported technology. They should develop safe and healthy

products. For example: they change their compositions to be more natural.

Relationship – Support

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To maintain their relationship with the customer, the company has to develop hotline

customer service and show at the product package. The company enhanced the use of

information technology (especially internet) to strengthen information sharing about their

products to customers. For example they can develop forum discussion and social media

to increase product’s brand awareness.

Channels – Availability

They must keep their product availability in the market to fulfill customer’s needs and

demands. They gain their maintaining of product availability in local and international

market. Products are available in supermarket, main retailer, small retailer, and sometimes

in traditional market in every area of Indonesia and also another country.

Brand – Reputation

The company must focus on social activities to environment and education. In the area of

environment, the company continuously improves its awareness of waste water treatment

both for production and domestic waste in order to avoid any negative impact to the

environment. The company actively participates in facilitating students of SMK in

Jabodetabek area for a job training opportunit. The company also provides a training on

the subject of ethics of appearance and attitude, selling technique, and others, in order to

support the students to be ready in communicating with the consumer.

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CHAPTER III. CONCLUSION AND RECOMMENDATION

III.1. CONCLUSION

PT. Mandom Indonesia Tbk. was established as a joint venture between Mandom

Corporation Japan and PT. The City Factory. The vision of this company is “Towards

Asia Global Company Based in Indonesia”. Besides domestic market, the company also

exports its products to some countries. The company has many strong competitors, such as

Unilever and P&G.

PT. Mandom Indonesia Tbk. is using cost leadership strategy.

III.2. RECOMMENDATION

III.3. LESSON LEARNED

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Exhibit X Value Chain Analysis

Exhibit X Business Model and Value Proposition Alignment

Exhibit X Activity Map

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