CHAPTER 1
INTRODUCTION
1.1
Background
Globalization refers to the growing interdependence of countries resulting from the
increased of economic integration via trade, foreign investment, foreign aid, and
international migration of people and ideas (www.worldbank.org). One of the main
elements of globalization is international business. Simply, international business refers
to various business activities by firm across national borders. Todays, along with the
increasing of globalization, international business becomes a popular topic between
business executives, government, and academics.
International business offers many opportunities and challenges. It creates wider
access to resources, goods, services, investments, and markets across geographical areas.
Firm can benefit from larger market, more profit, economic of scale, diversified risk and
revenue stream, advanced technologies, cheap labor, etc. On the other hand,
international business also create challenges, one of them is intense competition not just
between domestic companies but also from foreign companies.
International business happens in almost all business sectors worldwide, including
to real estate or property development sector in Indonesia. International business
increase number of property players and total real estate investment in Indonesia for the
last five years. Based on the Emerging Trends in Real Estate Asia Pacific report,
Indonesia (Jakarta) was ranked third out of 23 Cities in Asia Pacific regarding of
prospect property investment in 2014 (Bank Mandiri, 2014). The increase of real estate
or property development potential growth in Indonesia is caused by several factors.
First factor is the number of population. Indonesia is the fourth world largest
population countries in the world. The country has 252.812.245 million populations in
2014 and with 1, 1% average growth population rate per year, the population is
projected to reach 280 million in 2030 (www.worldbank.org). Figure 1.1 show total of
housing needs in Indonesia, in 2014 there are 15 million units of house needed. The data
shows that number of demand for housing to accommodate the growing population is
enormous.
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2
Figure 1.1 Housing Needs in Indonesia (million units)
Source: Bank Mandiri (2014)
Second factor is Indonesia economic growth and growth of middle high income
population. Indonesia is the 16th largest economy in the world (McKinsey Global
Institute, 2012). Indonesia has sustained economic growth since 2011 to 2014; in 2014
Indonesia economic growth rate is 5% (data.worldbank.org). Besides sustain economic
growth, Indonesia middle high income population is also increased. Middle class
population in Indonesia is increase from 37.7 % in 2003 to 56.5% in 2010 (World Bank
Report, 2011). Such rapid growth makes Indonesia listed as third-fastest among
emerging Asian economies after Thailand and China, according to the World Bank.
Third factor is the price of property in Indonesia is relatively low compare to other
ASEAN countries however the rental yield return is second highest in Asia. As can see
in Figure 1.2 the capital value price of property in Jakarta is behind the other countries.
On the other hand, rental yield return figure show that Jakarta is only behind 0,01% from
Manila as the highest rental yield country (Bank Mandiri, 2014).
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Figure 1.2 Capital Value (USD/sqm) and Rental Yield
Source: Bank Mandiri (2014)
PT. Lippo Karawaci, Tbk is one of the biggest local property developers in
Indonesia. The company was built in October 1990 by Mochtar Riady. In 1993, the
company started its first township project in Tangerang, west of Jakarta: Lippo Village.
Since then, the company has continued to launch several property development key
projects such as St. Moritz Panakukang in Makassar, Embarcadero Eastern and Western
Wing in Bintaro, Holland Village Office Tower and Condominium in Central Jakarta,
Millennium Village in Lippo Karawaci, and Orange County in Cikarang. Along the
journey, Lippo Karawaci has received many awards, including six awards from
Euromoney as “The Best Developer in Indonesia” in 2005, 2007, 2008, 2009, 2011, and
2012 and three awards as “The Best Developer in Indonesia” by South East Asia
Property in 2011, 2012, and 2013.
Current today’s market condition challenged Lippo to deal with the increasing
number of local and foreign property developers in Indonesia. Great potential of real
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estate and the entry of ASEAN Economic Community (AEC) in 2015 are inviting many
business enthusiasts from local and abroad to do a business in Indonesia. Competitors
from local property developers include PT. Agung Podomoro Land, Tbk, PT. Agung
Sedayu Permai, PT. Alam Sutera Realty, Ciputra Group, PT. Intiland Development,
Tbk, PT. Waskita Karya, Tbk, Sinarmas Land, and many others are getting tight.
Furthermore, Wendra Ajistyatama on The Jakarta Post, 11 July 2014 mention
competitors also comes from abroad such as Singapore (Pacific Star Holdings Pte and
Keppel Land), China, Korean, Japan (Tokyu Land), and Malaysia.
Weakening of global economic also becomes an important issue for property
company like Lippo. Weak global economic cause slow investment, weakening
currency, rising land prices and building materials and lower property demand.
According to Eddy Hussy, chairman of Real Estate Indonesia (REI) on Kompas, 21
August 2015, property market is having depression. The upper middle class segment
decrease 30-40% compared to sales in semester II 2014 in almost all major cities in
Indonesia.
In dealing with those challenges, PT. Lippo Karawaci must have the right business
strategies. Company need to periodically analyze its internal and external factor
condition to adjust their business strategy. This study is important to evaluate whether
Lippo current strategy is compatible to face today’s market condition or not and give a
recommendation about it. Based on the explanation above, it’s necessary to do a
research about PT. Lippo Karawaci business strategy to face today’s market challenge.
The title of this research is “Business Strategy Analysis of PT. Lippo Karawaci, Tbk”.
1.2
Identification of Problem
Based on the background explain above, the identification of problem is:
1. What is the condition of internal and external factors of PT. Lippo Karawaci,
Tbk?
2. What alternatives business strategies of PT. Lippo Karawaci, Tbk to keep
competitive?
3. What is business strategies recommendation for PT. Lippo Karawaci, Tbk?
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1.3
Purpose
The purposes that want to be achieved in this research are:
1. To know about the condition of internal and external factors of PT. Lippo
Karawaci, Tbk
2. To know about alternative business strategies in PT. Lippo Karawaci, Tbk to
keep competitive
3. To give business strategies recommendation for PT. Lippo Karawaci, Tbk
1.4
Benefit
The benefits of this research are:
1. To the company:
•
Give information about current internal and external conditions in
PT. Lippo Karawaci, Tbk
•
Give business strategy recommendation to keep competitive in
property industry
2. To Author:
•
May apply the theory that been studied in college to the real work
world
3. To Society:
•
Broaden the knowledge of others in business strategies analysis.
•
As a reference materials, especially for those who want to conduct
research with the same focus of study
1.5
Scope of Research
The scope of research is limited to one of the PT. Lippo Karawaci, Tbk business
unit which is all property projects in Indonesia that recorded in Head Office at Lippo
Village, Tangerang. This research explain about PT. Lippo Karawaci,Tbk in general to
create overall alternative strategy recommendation. Thus, it does not explain about the
company’s each activities such as financial and marketing in details. Data in this
research is analyzed by IFE, EFE, Five Porter, CPM, SWOT, IE, SPACE, Grand
Strategy, and QSPM Matrix.
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1.6
State of Art
Table1.1 State of Art
No
Journal
Method
Information
1
Geidy Tiara Ariendi, Arief
IE,
Empirical Study in property and real estate
Daryanto, and Bunasor Sanim,
SWOT,
company in Indonesia. The aim in this study is
Strategy for Increasing Business
QSPM
to find the primary strategies for enhance
Competitiveness of Green
competitiveness in PT. Ciputra Development,
Property, International Journal
Tbk green property development. The study
of Innovation and Scientific
result in total IFE score is 2,65 and total EFE
Research, ISSN 2351-8014 Vol.
score is 3,03. IE matrix located in cell four,
19 No. 1 Nov. 2015, pp. 24-32.
grow and build category. The QSPM highest
score with 6,65 is strategy to open a new project
in order to increase market share.
2
Etty Afriani, Fury Ratna Dewi,
IE,
Empirical Study in Food and Beverages
and Mulyati, Strategic
SWOT,
Company in Indonesia. This study was
Management Implementation
QSPM
conducted to examine comprehensively
Fred R. David and David
application of strategic management concepts
Concept at PT Indofood Sukses
Fred R. David and David at PT. Indofood. The
Makmur, Tbk, 2012,
QSPM matrix calculation results shows the 5.94
International Journal of Science
score for Horizontal Integration as the best
and Research (IJSR)
alternative strategies that can be implemented
ISSN (Online): 2319-7064
by PT. Indofood with expansion and
diversification.
3
Shanewaz Mahmood Sohel, Abu
CPM
Theoretical Study of CPM matrix. The study
Mohammad Atiqur Rahman, and
aims to critically appraise the importance of
Md. Aftab Uddin, Competitive
CPM in providing information for a company’s
Profile Matrix (CPM) As A
competitive advantage and its role in
Competitors’ Analysis Tool: A
formulating company’s strategy. CPM analysis
Theoretical Perspective, IJHPD
can be done by identifying Key Success Factors
Vol. 3 No. 1 Jan - June 2014.
(KSF) of the industry and evaluating the
company against its major competitors based on
7
No
Journal
the ratings of the KSFs. Information
Method
This research result that CPM is useful to
unlock the key drivers of competitiveness based
on firm’s internal and external environment.
4
Mahima Gupta, Charu Shri Dr,
IFE,
Empirical study of SME India Packaging
and Anshu Agrawal Dr, Strategy
EFE,
company. The proposed study aims to evaluate
Formulation for Performance
SWOT,
and analyze the Indian Corrugated
Improvement of Indian
SPACE,
manufacturing industry by the SWOT and
Corrugated Industry: An
QSPM
QSPM strategic planning approach. The
Application of SWOT Analysis
analysis results in higher external factor (EFE)
and QSPM Matrix, Journal of
than internal factor (IFE). SPACE Matrix
Applied Packaging Research
indicates aggressive strategy. The final QSPM
Vol 7, 2015
with TAS .score 4.06 results in suggestion for
the company to make more investment in
Research and Development.
5
Rodney Blackwell and Dianne
Industry
Theoretical study of external and internal
Eppler, An Approach to
Key
analysis tools. This study aim to find core
Strategic Situation Analysis:
Success
competencies and determination of industry key
Using Models as Analytical
Factor,
success factor (IKSFs). The study conclude that
Tools, The Journal of Global
Five
to create effective strategies these internal
Business Management Vol 10,
Forces
competencies must be matched with external
April 2014.
Model,
opportunities while minimizing external threats
and avoiding weaknesses to achieve
organizational goals.