The assignment comprises of a report that is prepared with the sole objective of identifying the issues regarding the organisational structure, competitive position, competitive strategies as well as cross-border business strategies. The report further deals with the analysis of the further findings of research concerning strategies implemented by a company to enter a new country and increase its competitive level. In order to fulfil the objective of this report a case study is chosen to make the study more specific to the topic as well as the industry concerned. Hence, the Indonesian company of production of building materials that is Semen is chosen for the purpose.
A research paper is prepared which consists of academic writing based on the articles, journals or books written by authors. That is, it consists of reference to the write-ups and research made previously by other authors from his or her original research work. The references are usually regarding the topic that is concerning the academic writing and definitely an interpretation of the findings of research by other researchers. However, it may present a totally different or new invention.
In this assignment, a report is prepared concerning the case study which is regarding the Indonesian organisation, Semen. The report has been made after a careful identification and analysis of the various issues that are evident in the organisation. The issues that are projected in the report are regarding the strategic issues of the chosen company, regarding management of different aspect of business and the strategies that are applied to enter a new market of a different country or to handle cross-border competitions too.
Company overview and current position in operation
PT Semen Indonesia Tbk or Semen Indonesia is a building material producing company in Indonesia (semenindonesia.com, 2018). It was formerly known as Semen Gresik Group. The company was founded in 1957 and currently headquartered at Gresik in Indonesia. The company is believed to be one of the largest cement production companies in the world, due to the fact that in 2012 the company produced 29 million tonnes of cement. In a shareholders’ meeting, it was decided to change the name of the company from Semen Gresik Group into PT Semen Indonesia Tbk.
Currently, the company has cement plants which are located in the islands namely Java, Sulawesi and Sumatra. These cement plants are supported and backed up by an intensive distribution network. This helps to distribute cement to all parts of the country, Indonesia. Considering the sales of domestic cement in all parts of Indonesia, the company has owned the largest share in the market owing to forty percent. The company is the first to be a state-owned company to appear and go public in the Stock Exchange of Jakarta as well as the stock exchange of Surabaya. Apart from production of cement, the company is also into industrial real estate, mining as well as manufacturing of cement bags. In recent years, with the increasing demands of cement in the domestic market along with the establishment of new plants at different locations within the country, the company has been able to fulfil the demands in the market as well as increase the sales to record heights. Currently, the company has acquired c.41% of the market share according to Stock Exchange of Indonesia as well as the OTC markets of US (Wiharto, 2018). It is the largest producer of cement in Indonesia (Sulaiman, 2018). However, the recent flattish growth of housing market in Indonesia will affect the state soon.
Review of International strategies of competition
As Indonesia was suffering from an economic downturn, it was affecting the economic status of the company. In order to add up to the edge of competition, the company has implemented several policies or strategies which may be regarding effective cost management, development of programs of distribution as well as productions of cement. In this phase, the company has implemented the strategy of diversification in business ventures and explored the international market. In case of entry and management of international market, the company has been strict to the practices of its basic strategies of effective management of costs and network of distribution. The company has largely invested into the concept of improving the quality of products and executed plans to bring in assurance of long-term growth by overcoming the challenges of competition in the international markets. The company has excessively used the strategy of cost management and cost-cutting to increase the level of competition in the international marketing, even though reducing the margin for the company's profit. However, on the whole, the strategy of cost-cutting and low pricing increase the sales for the company which ultimately add up to the total estimated profit for the company. Then the company has implemented cost management in case of production of cement by adopting techniques of production which have reduced the overall cost of production and saves the costs of maintenance. The company has also implemented strategies to optimise the use of packaging as well as to increase the efficiency of the cost of distribution which has ultimately helped to reduce the cost of operation of the business irrespective of all the costs relative to the different aspects of business. As per reports, these strategies have increased the ratio of cost to revenue and the ratio of operational cost to the sales revenue has been stable even in the rising market of Semen in the international market (Bouncken et al. 2015, p.580).
Design of organizational structure and issues of control
The organisational structure provides the insight into the internal structure relative to the business organisations. The structure of the organisation depicts the hierarchy of the specific roles in the business and the associated responsibilities (Cascio, 2018, p.345). In case of Semen Indonesia, the company is headed by the President Director who is entitled to all the aspects of the organisation. Next below, the president is the directors of the department of production as well as R&D (Research and Development), engineer and project, marketing and supply chain, finance, business strategy and development of enterprise and HR and legal. The director of business strategy and development enterprise are required to plan and develop business strategies and also manage the department of raw material, corporate development as well as the corporate support of business. The director of R&D manages services, technologies and products of R&D. The director of engineering as well as project development manages the planning, designing and the engineering products, technology as well as services (Eastman, 2018, p.231). The director of marketing as well as supply chain manages the concerned department and provides corporate planning and marketing. The director of HR and legal issues manages the development of HR systems and legal matters.
Even if there is a considerable framework of hierarchy in the structure of the organisations with specific responsibilities defined for each role, there are issues that come up which are issues of control. There is the existence of shadow bureaucracy which is often overlooked by the management. Even though the roles and responsibilities are well defined, during execution, not every employee can be considered a team player as the managerial heads are often in the process of consolidating his or her power rather being a player. The lack of managing control in the organisation is also evident due to scarcity of the resources available for control management, inaccurate measurement as well as incorrect flow of information. Absence of resources like supervisory staffs, tools or even skilled specialists can measure the control of the systems of the business. Moreover, when the company is into international business, then the company has to face the issues of implication of international laws and system of international accounting in the policies of the company.
The strategies that a company takes up to enter the international market are important to the fact that it determines whether the company can establish an entity of itself (Cornelissen and Cornelissen, 2017, p.342). The company, Semen Indonesia has been implementing strategies related to direct exporting, acquiring another company, finding turnkey projects in foreign markets and licensing. The strategy of direct exporting has been implemented by the company to break into the markets of its neighbouring countries. Owing to the fact that the culture and the market trends of the neighbouring countries are in good verse of the company, the company sells its products directly in the market. In such cases, there are agents and distributors of the company in the foreign land who help branch between the company and the stores. In addition to this, the strategy of acquiring other companies which have been in practice in the company relevant to the domestic market has been applied even in the international market. This policy is the easiest way to enter the foreign market as it helps the company enjoy a readily available share of the market of the acquired company. In such case, there is also an existing customer base as well as the image of the brand which works in favour of the company. Even though there are strict regulations for the new companies in a country, these can be easily bypassed and in some cases the government considers the company as a local firm which facilitates the process of licensing. Moreover, in case of countries with strict governance or has issues which are legal, the company opts for turnkey production. In this case, the company produces its products in the foreign lands but the products are marketed by other companies existing in the country. Licensing is also adopted by the company to enter into a foreign country where the market is huge and the competition is excessive. In that case the company goes for licensing that is to allow temporary ownership of the company in that country.
Management of operational control, supply chain and production
The management of operational control implies the principle of right action at the right time (Yin, 2017, p.411). There are three subsidiaries to the concept of control of which operational control is a part (Burton et al. 2015, p.123). In the case of Semen Indonesia, it is related to processes and systems of operation that are carried out by the company and its operating units. The company has an operation control system within the business unit of the company in each country. It is attained by setting control standards of performance, comparing performance with the standards, measuring the deviations as well as the actual performances. The control standards are set according to the desire for the level of the performance expected of each employee (Eyring et al. 2016, p.1950). Moreover, it is set according to the goals of the company as well as the objectives of the process. A valid measurement process is conducted regarding the performance of operations according to the control (De Villa et al. 2015, p.420). Further, in the process, the performance is compared to the original standards. The comparison is drawn to define the differences as well as to calculate the deviation in the next step (Jackson et al. 2014, p.53). Due to the complexities that arise in the business in the international market, the control techniques that are chosen for the management of operations of the company are also varied and applied on the basis of the level of complexity of competition faced in the international market. For example, in accounting, there are strict regulations set according to the legislation of the government which are required to be maintained along with the prescribed methods.
In a competitive global economy, the management of supply chain is important which directs the process from production to planning of supplies to the market (Knight and Liesch, 2016, p.94). Over the past few years, the company has implemented new strategies to manage the supply chain of its international business. However, the basic concept is similar to the strategies implemented in the management of supply chain in the domestic market. However, in case of international market, the geographical area is unknown or may be wider in some cases. The policies of supply chain are apparent to the strategies that are implemented by the company in doing business in that country. In case the company produces domestically but exports to other countries, then the logistics and supply chain that are managed are different compared as to when the production is done in the foreign countries. In case of international distribution, the manufactured products are shipped to other countries where they are marketed and sold. In case of supply chain which is global and integrated, the products are manufactured, marketed and sold at different locations.
The management of the production for international market deals with managing the process of producing in the international market as well as locations (Musso and Francioni, 2014, p.310). The management of the production for international market deals with managing the process of producing in the international market as well as locations As per the company, the product management deals with analysing the condition of the market, defining the features of the product and to oversee the production procedure. The product development process which is managed by the product manager involves considering the life cycle of the product, product definition and its requirements (Luthans and Doh, 2018, p.452).
Human Resource management across borders
It is true to the fact that the companies that are globalising in recent times face problems in managing human resources (Stadtler, 2015, p.21). In case of Semen Indonesia, the company has been managing human resources in a way that helps to cater to the operation of its business internationally. Although the company has been trading internationally in different other countries it has been employing overseas employees in most of the cases. Outsourcing of human resources has been evident in very few cases like in the production units while a new product development phase is conducted. Even though the company has been performing the research and development work domestically however in special projects the company is found to outsource its workforce. Outsourcing of human resources has been evident mostly in case of managers who are aware of the company’s principles, objectives and work culture. This helps to impart a similar work environment even in a foreign land that reflects the vision of the company as well as merges with the foreign environment by recruiting offshore employees. The company also follows the staffing policies that are followed by companies operating in international markets. The company has adopted polycentric approach in case of recruiting staffs as labours who are employees are hired from the host country. This has helped reduce the cost of labour and hence have less issues related to adjustment as well as communication due to the fact that the employees belong to the same region, In case of managerial positions the company has adopted the ethnocentric approach which means that the employees are appointed and outsourced from the country in which the company is based to other countries.
Management Key issues or opportunities
Going global or globalisation of business leads to several challenges that the company has to face in an overseas environment (Monczka et al. 2015, p.132). At the first place, the company faced the issue of coordination with the foreign culture which is pertaining to the social, economical as well as work. This problem is relevant to the operations of business and also applicable in case of the outsourced employees. In such cases, the company has adopted strategies as to combat the issues by recruiting local employees and providing handbooks to the outsourced employees that provide information regarding the local requirements. However, the company has implemented cohesive strategies for sales; delivery as well as branding that have allowed it to gradually acquire the foreign market. Moreover, the company has evaluated the pricing model according to the economic status of the country and more specifically the purchasing power of the citizens of the foreign country. This has increased the opportunities for sales for the company. However, the company has deployed outsourced employees in the accounting processes which has created issues of policies and laws that are applicable to the accounting principles of the foreign country. This has created problems of policies as well as procedures of local corporate. This is because the infrastructure of proper taxation, as well as finances, are required which are not set up by the company and has resulted in untimely reporting and complete malfunction in that case.
The strategies that are implemented by the company relative to the international competition have helped to create an identity of its own in the new market. However, the sales ratio suggests being stable which denotes that there is no further growth that is evident in the same. This proves that the strategies that are implemented for international competition have to be improvised. The strategies have to be unified so that fewer strategies are applied and that does not vary from one country to another (Binder, 2016, p.112). This will affect the operations in a more effective manner. In such cases, the company has to solve all the legal issues it has with the governance of certain countries and manage the business following unified business principles. Moreover, the company is required of cutting down on the cost related to production, operation as well as logistics to lower the pricing and add up to the competitive advantage of the overseas market. The company should set up more of offshore production units to reduce the cost of logistics and exempt the duties of exporting. Moreover, outsourcing of resources will help reduce the cost of labour in places of higher cost of labour.
The report has been prepared to create a research paper to identify the issues that are related to international business. In order to substantiate the topic of research a case study has been chosen which is relative to the company Semen Indonesia. The company has been venturing into the international market as such it has implemented certain strategies associated with the production, sales, marketing and operations management to enter the new market. The report is provided with the overview of the company as well as its current position in the market. The report further comprises of detailed analysis of the issues of control in every aspect of business management that is beneficial for facing the tough competition in the international market or rather in a new market scenario of a different country. The report finally assesses the strategies implemented by the company as well as highlights the issues faced by the company as a result of the strategies implemented.
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