strategic management hm sampoerna

© 2015 International ICT Business

STRATEGIC MANAGEMENT

Compiled by:Agung Andara

Rafa NajiyaAkyes DapilcaKenang Kana

Zul Asmi Retno

Lecturer by:Dr. Ir. Yudi Pramudiana, MM., MT.Risris rismayani, SMB., SPd, MM.


STRATEGIC MANAGEMENT FRAMEWORK


“What do company want to

become?”

Strategies are the means by which long-term objectives will be achieved.

“What is company business

?”

Result = Strengths and weaknesses

•Are an organization’s controllable activities that are performed especially well or poorly.

•Strengths and weaknesses are determined relative to competitors

• Strengths and weaknesses may be determined relative to a firm’s own objectives.

Result = Opportunities and Threads

•Economic•Social•cultural•Demographic•Environmental•Political•Legal•Governmental•Technological• Competitive trends and events that could significantly benefit or

harm an organization in the future

As specific results that an organization seeks to achieve in pursuing its basic mission.

“Long-term” means more than one year.

They state:• direction•aid in evaluation•create synergy•reveal priorities•focus coordination•provide a basis for effective planning, organizing, motivating, and controlling activities.

Objectives should be:•Challenging•Measurable•Consistent•Reasonable•clear. In a multidimensional firm, objectives should be established for the overall company and for each division.

Successful strategy implementation

requires the support of, as well as

discipline and hard work from, motivated

managers and employees.

Successful strategy implementation depends on cooperation among all

functional anddivisional managers in an organization.

Effective strategy evaluation allows an organization to:

•capitalize on internal strengths as they develop•exploit external opportunities as they emerge•recognize and defend against threats•mitigate internal weaknesses before they become detrimental.

Business strategies may include :•geographic expansion•Diversification•Acquisition•product development•market penetration•Retrenchment•Divestiture•Liquidation•joint ventures.


Although not a guarantee for success, strategic management allows organizations to make :

effective long-term decisions execute those decisions efficiently take corrective actions as needed to ensure

success.


COMPANY PROFILE


PT Hanjaya Mandala Sampoerna Tbk. ("Sampoerna") is one of the leading cigarette manufacturer in Indonesia.

produce a number of brands of cigarettes are known, such as Sampoerna Kretek, A Mild, as well as the "King of Kretek" legendary Dji Sam Soe.

An affiliate of PT Philip Morris Indonesia and part of Philip Morris International, the leading cigarette manufacturer in the world.

Brief Information


1913Liem Seeng Tee, a Chinese immigrant, began making and selling hand-rolled cigarette in his home in Surabaya, Indonesia. His small business was one of the first companies to produce and market cigarettes and white cigarettes.

History


1930 Liem Seeng Tee later changed the family name

and the name of his company to Sampoerna, which means "perfection".

After developing his business, he moved both his family and his factory to an abandoned complex of buildings in Surabaya later renovated and named Taman Sampoerna.

History (cont.)


1959Sampoerna Leadership switch to the second generation under the leadership of Aga Sampoerna, which focuses on the production of Clove Cigarettes Hand (SKT) premium.

History (cont.)


1978The third generation family Sampoerna, Putera Sampoerna, took over the company, and accelerated the growth of Sampoerna.

History (cont.)


1989Sampoerna launched brand A mild in Indonesia1990

Sampoerna into a public limited company with modern corporate structure and initiate a period of investment and expansion.

Sampoerna managed to strengthen its position as one of the leading companies in Indonesia.

History (cont.)


2005Sampoerna's success attracted the attention of Philip Morris International Inc. (PMI), one of the leading tobacco company in the world. Finally, in May 2005, PT Philip Morris Indonesia, an affiliate of PMI, acquiring majority ownership of Sampoerna.

History (cont.)


2008Sampoerna inaugurated cigarette clove machines (SKM) in Karawang, West Java, with an investment of USD 250 million.

2013Sampoerna commemorate the 100th anniversary of the founding of the company

History (cont.)


At the end of 2013, the number of employees of Sampoerna and its subsidiaries have reached about 33,500 people. In addition, the Company is also working with 38 units Cigarette Production Partners (MPS), which are in various locations on the island of Java in producing Clove Cigarettes Hand, and overall has more than 56,500 employees.

Employee


Product


Sampoerna A Mild launched in 1989 and is a pioneer of tobacco products LTLN category (low tar low nicotine) in Indonesia. In 2013, A Mild retaining the position as a cigarette brand with the largest market share in Indonesia.

Product (cont.)


Dji Sam Soe variants include segments SKT and SKM. Dji Sam Soe Filter, Dji Sam Soe Magnum Filter, and Dji Sam Soe Magnum Blue which was launched in early 2014, is part of SKM segment. While Dji Sam Soe Kretek and Dji Sam Soe Super Premium is part of SKT segment.

Product (cont.)


Sampoerna Kretek is hand-rolled cigarettes were first produced in 1968 in Denpasar, Bali, by Aga Sampoerna, the second generation of the Sampoerna family. By combining quality tobacco and cloves, Sampoerna Kretek successfully be hand-rolled cigarettes best-in-class.

Product (cont.)


U Mild launched in 2005 as part of a portfolio of products LTLN with Sampoerna A Mild . U Mild sales keep increasing since the launch, reaching 35.6% in 2013.

Product (cont.)


Marlboro was launched in Indonesia in 1984 by PMID and is one of the largest international brands in the market. Sampoerna distribute Marlboro in Indonesia. Currently there are five variants comprising Marlboro Marlboro Red, Marlboro Lights, Marlboro Black Menthol, Menthol and Marlboro Lights and Marlboro Ice Blast.

Product (cont.)


THE BUSINESS VISSION AND

MISSION


Vision characterised

Adult smokers

Three Hands Philosophy

Employees and Business

partners

Society


Sampoerna address it through…

Delivering high quality products in their preferred price category

Provide competitive compensation and good working condition for employees

Giving back to society

Building relationship with business partners

Continually seeking out in period of time what adult smoker wants and match their expectations


Good Company’s vision

•SpecificS•MeasurableM•Achievable A•Realistic R•Timed T

Sampoerna explained what their goals, and what need to be done. Through deliver the high quality products, and build the relationship with partners and society

The measurement is when the goals are already achieved. So far, Sampoerna already obtained their goals and objectives

The visions of Sampoerna are able to accept. It proofed with what already done by those responsible for achieving it

The visions of Sampoerna are possible to attain. It reflects by what Sampoerna done until now

Sampoerna clearly stated that they continually seeking out in period of time to their customer needs and tried to match their expectations


Mission Outline

1. Providing high quality products to adult smokers in the price category of brand choice

2. Provide competitive compensation and a good working environment for employees and foster good relationships with business partners

3. Giving contribution to the wide community


MISSION ANALYSIS ASPECTS

Aspects in our analysis that match with company mission statement’s: 1. Costumers2. Product or Services3. Philosophy4. Self Concept5. Concern : Public Image 6. Concern : Employees


1. Costumers Sampoerna mission is to provide a high

quality products to adult smokers in the price category of brand choice.

In facts Sampoerna consumers are not limited to adults only, but also a favorite choice for teenagers in Indonesia especially in their Mild Variants.

It still meets the criteria of the missions.


Products or Services

Firm major products and services are :

1) Sampoerna AIncluding Sampoerna Clove Machine variants such as A Mild

2) Dji Sam Soe SampoernaThe first Handmade Clove Cigarette produce by HM Sampoerna.

3. Sampoerna Clove(Handmade Clove Cigarette produce in Denpasar, 1968)


Products or Services

4. U MildRelease in 2005 as a portfolio products along with A Mild release.

5. Marlboro• Made by Phillip Morris International and

distribute in Indonesia by HM Sampoerna.

• Consist of 5 variant such as : Marlboro Red, Marlboro Lights, Marlboro Lights Menthol, and Marlboro Ice blast


Philosophy The basic beliefs, values, aspirations, and

ethical become priorities of the firms. As mentioned in their mission statement

that they also focus on the activities of economic empowerment, education, environmental protection, and disaster management.


Self Concept

The firm commit their major competitive advantage as mentioned in their mission statement. Such as :1. Provide high quality products2. Price category of brand choice3. Competitive compensation 4. Good working environment for their

employees5. Maintains good relationship with business

partners6. Contribution to the wide community


Concern : Public Image The firm is highly response to the social,

community, and environments. As their mission to give a contribution to the wider community.

By giving a contribution to the community, they also build their public image.


Concern : Employees Employees become a valuable asset in the

HM Sampoerna. Compensation, work environment and good

opportunities for career development and self-esteem is a key element in building employee motivation and productivity in the firm as mentioned in the mission statements.


EXTERNAL ASSESSMENT


5 FORCES ANALYSIS

Highly unattractive =1 Mildly unattractive =2 Neutral =3 Mildly attractive =4 Highly attractive =5


Current Future

Number of quality balance competitor

2 2

Product features

3 3

Capacity increase

3 4

Diversity of competitors

3 3

Overall 2,75 3

Rivalry among competitor


Current Future

Economic of scale 5 4

Product differentiation

3 3

Brand identification 4 4

Switching Cost 3 3

Access to distribution channels

3 3

Capital Requirement 1 1

Access to technology

3 3

Government protection

3 3

Experience effect 4 4

Overall 3.22 3.44

Barriers to entry


Current Future

Assets specialization

3 3

Cost to exit 1 1

Government and social restriction

2 3

Overall 2 2.33

Barriers to exit


Current Future

Number important buyers

4 4

Buyers switching cost

2 3

Buyers threat of backward integration

2 2

Industry threat of forward integration

2 2

Contribution to quality or service of buyer’s product

4 4

Buyer’s profitability 4 4

Overall 3 3.17

Power of buyers


Number of important suppliers

2 2

Availability of substitutes for supplier product

2 2

Differentiation or switching cost of supplier’s product

3 3

Suppliers of contribution to quality or service of the industry product

4 4

Important of the industry to suppliers profit

4 4

Overall 3 3

Power of suppliers


Current Future

Availability of close substitutes

3 3

User’s switching cost

2 3

Substitute producer’s profitability & aggresiveness

3 3

Substitutes price/ value

2 2

Overall 2 2.75

Availability of substitutes


Current future

Barriers to entry

3.11 3

Barriers to exit 2.33 2.67

Rivalry among competitors

2.75 3

Power of buyers 2.5 2.67

Power of suppliers

3.6 3.6

Availability of substitutes

3.75 4

Overall assesment


Current Future

Overall industry assesment

3 3.16

Overall industry assesment


Industry Analysis: The External Factor Evaluation (EFE) Matrix

CompetitivePoliticalCultural

Technological

EnvironmentalSocial

Governmental

DemographicEconomic

Summarize & Evaluate


WEIGHT indicates the relative

importance of that factor to being successful in the firm’s industry.

ranges from 0.0 (not important) to 1.0 (very important).

The sum of all weights assigned to the factors must equal 1.0

RATING indicate how

effectively the firm’s current strategies respond to the factor.

4 = the response is superior

3 = the response is above average

2 = the response is average

1 = the response is poor.


EFE – HM Sampoerna tbk.

Key External Factors Weight RatingWtd

Score

Opportunities1. Plan affirmation of "RUU Pertembakauan"

0.10 2 0.20

2. Indonesian smokers are the second highest in the world

0.20 4 0.80

3. Demand for cigarette increasing (8%) anually

0.15 3 0.45

4. Exporting of cigarette growing (7,4%- 10%) anually

0.10 3 0.30

5. Indonesia is growing 1.49% anually in population

0.10 3 0.30


EFE – HM Sampoerna tbk. (cont’d)


Score

Opportunities (cont’d)

7. Variant invention 0.13 4 0.52

8. Smoking has became a new urban lifestyle

0.12 30.36

9. Inovation Of LTLN In Cigarette Product

0.10 4 0.40

Total 1.00 3.33




Score

Threats 1. Increase in cigarette’s tax rate of 8.72% on average

0.20 3 0.60

2. Trend towards healthy life 0.20 4 0.80

3. Increase in cigarette industry total production of 5.55%

0.10 2 0.20

4. Government Regulation Of Tobacco Advertising Restrictions

0.10 2 0.20




Score

Threats (cont’d)

5. Increasing on tobaco price of 25% 0.20 3 0.60

6. Demand for electric cigarette growing recently

0.05 1 0.05

7. Probability Indonesia join FCTC 0.10 1 0.10

8. MUI statement of cigarette prohibition 0.05 1 0.05

Total 1.00 2.60

HIGHEST POSSIBLE Total weighted score is 4.0

Organization response is outstanding to threats and weaknesses

Industry Analysis EFE

LOWEST POSSIBLE Total weighted score is 1.0

• Firm’s strategies not capitalizing on opportunities or avoiding threats

AVERAGE Total weighted score is 2.5



opportunityTotal weighted score of 3.33

• Is near to the highest score of 4 • Indicates that HM Sampoerna tbk. is doing

excellent, taking advantage of the existing opportunities in its industry.

threats Total weighted score of 2.60

• Is above the average (midpoint) of 2.5• Indicates that HM Sampoerna tbk. is pretty

well in minimizing the potential adverse effect of external threats


Industry Analysis: Competitive Profile Matrix (CPM)

Identifies firm’s major competitors and their strengths & weaknesses in relation to a sample firm’s strategic positions4 = major strength

3 = minor strength2 = major weakness1 = major weakness


Sampoerna Gudang Garam

CSF’s Wt Rating Wt’d Score

Rating Wt’d Score

Market share 0.25 4 1 3 0.75

Fin position 0.15 4 0.60 2 0.30

Prod. Variant 0.10 3 0.30 4 0.40

Cons. Loyalty 0.10 4 0.40 3 0.30

Sales Distr 0.15 3 0.45 3 0.45

Global Exp. 0.15 4 0.60 3 0.45


SampoernaGudang Garam

CSF’s (cont’d) Wt Rating Wt’d Score

Rating Wt’d Score

Price competitive 0.05 2 0.10 4 0.20

Mgt. experience 0.05 3 0.15 4 0.20

Total 1.00 3.60 3.05


INTERNAL ASSESSMENT


Refers to the process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products.

Value Chain Analysis (VCA)


Primary activities – Logistic

HM SAMPOERNA GUDANG GARAM

Raw materials are mostly sourced domestically The raw materials, notably tobacco leaf and cloves

Invested in logistic infrastructure to enhance our inventory control system in our warehouses.


Primary activities - Operation


•Supporting the business entirely by providing high quality products to the adult smokers in Indonesia •Delivering quality and innovation as well as high corporate quality standard

•Serving both the fast growing light and mild segment and the full flavour segment, providing both the choice and the quality associated with Gudang Garam’s name


Primary activities – Marketing and Sales


Sampoerna sells and distributes cigarettes through a total of 105 sales offices located on the islands of Sumatra, Java, Bali,Kalimantan, as well as Eastern Indonesia

Produced sound revenue and earnings, and has embarked on a significant investment drive to sustain the prospects


Support activities – Human Resource


Providing competitive compensation and good working conditions for employees and building good relationship with business partners

Employee welfare remains a priority both at all operational premises and through the provision of social and sports facilities, health and safety routines.


Support activities -Procurement


•Sampoerna operates 9 manufacturing facilities in Indonesia•Sampoerna has partnership with 38 third-party operators

Foreign exchange exposure does arise from time to time in periodical purchases of machinery/equipment from overseas suppliers and, to lesser degree, from the routine procurement of imported raw materials such as filter material, flavours, and spare parts


Support activities – Firm infrastructure


Sampoerna commit to running the company’s program for serving the all stakeholders through develop, and maintain the standard and integrity of the company.

As part of our overall branding strategy, we refreshed the pack design of our leading SKM (machine made) and SKT (hand made) products


IFE – HM Sampoerna tbk. (2013)

Key Internal Factors Weight RatingWtd

Score

Strengths 1. Increasing in ROE 33% from 1750

to 2269 IDR0.10 4 0.40

2. Best company in term to satisfy the customers (2013award)

0.20 4 0.80

3. HMS is the market leader in Tobacco Industry

0.15 4 0.60

4. Increasing in total revenue by 12.6% 0.10 3 0.30

5. HMS has lot of variant product 0.10 3 0.30


IFE – HM Sampoerna tbk. 2013 (cont’d)


Score

Strengths (cont’d)

7. HMS has loyal customers 0.10 4 0.40

8. HMS achieve 2013 Top Brand Award 0.15 4 0.60

9. Increased in customer 8,6% 0.10 3 0.30

Total 1.00 3.70




Score

Weaknesses 1. Decreasing in sales volume of SKT

13%0.10 2 0.20

2. Work termination of 2700 labors in 2 main factories

0.30 4 1.20

3. Unaffordable price caused by promotion and material cost

0.25 4 1.00

4. Slow growth on certain product 0.10 3 0.30




Score

Weaknesses (cont’d)5. Haven’t had the ability to compete in a Global Market

0.10 2 0.20

6. Inappropriate in capital allocation 0.15 4 0.60

Total 1.00 3.50

HIGHEST POSSIBLE Total weighted score is 4.0

Organization response is outstanding to threats and weaknesses

Industry Analysis IFE

LOWEST POSSIBLE Total weighted score is 1.0

• Firm’s strategies not capitalizing on opportunities or avoiding threats

AVERAGE Total weighted score is 2.5



strengthsTotal weighted score of 3.70


excellent optimizing their ability and resulting giving a power for them to stand as a market leader in its industry.

weaknessesTotal weighted score of 3.50

• Is near to the highest score of 4 • Indicates that HM Sampoerna tbk. Is doing

excellent managing their weaknesses so it won’t threaten their position in the market.


LONGTERM OBJECTIVE


Longterm Objective of HM Sampoerna To offer the best smoking experince to adult

smokers in Indonesia Continually seeking out what adult smokers

prefer and delivering the best products to match their expectations

Create a reputation for quality innovation as well as high corporate governance standard


Definition and concept of strategies Definition: Strategy is organization’s

pattern of response to its environment over a period of time to achieve its goals and mission

Concept:The concept of strategy has been borrowed from the military and adapted for use in business


Implemented Strategies Implemented Integrated Marketing

Communication (IMC) especially in building A Mild brand (late 1980) Sales

Division has a good digital mapping technology which able the company to be more accurately do the brand building in with their traditional retailer


Vertical Integration

Backward

Philip Morris International Inc.

Forward

PT ASIA TEMBAKAU PT HARAPAN MAJU SENTOSA PT PERSADA MAKMUR

INDONESIA PT UNION SAMPOERNA DINAMIKA PT AGASAM PT GOLF TAMAN DAYU PT HANDAL LOGISTIK

NUSANTARA PT PERUSAHAAN DAGANG

DAN INDUSTRI PANAMAS PT SAMPOERNA PRINTPACK PT TAMAN DAYU PT WAHANA SAMPOERNA


Intensive strategies

Market Penetration Market Development

Product Development

•Advertising expenditure•Publicity effort


Diversification : Related


Defensive

liquidation Retrenchment

In May, 2005, Philip Morris International, at that time a subsidiary of the Altria Group, completed the acquisition of 97.95% of the company. Sampoerna reported 2006 net sales of 29.55 trillion rupiah (approximately $3.22bn using the February 22, 2008 exchange rate) resulting in 3.53 trillion rupiah net income.

PT HM Sampoerna cut off 2.700 it’s workers in 2 of it’s handmade cigarette clove (SKT) factories in East Java (Lumajang and Jember) because the costumer preference of that product was change which lead SKT market to constantly decreased since 2012 until 2013.


Porter’s Five Generic Strategies Focus – Best Value

HM Sampoerna is a little bit expensive rather than other cigarette’s product. Because, they offer best quality of tobacco


STRATEGIES


SWOT MATRI

X Opportunities:1.Plan affirmation of "RUU Pertembakauan"2. Indonesian smokers are the second highest in the world3. Demand for cigarette increasing (8%) anually4. Exporting of cigarette growing (7,4%-10%) anually 5. Indonesia is growing 1.49% anually in population6.Variant invention 7. Smoking has became a new urban lifestyle8. Inovation Of LTLN In Cigarette ProductThreats:1.Increase in cigarette’s tax rate of 8.72% on average2. Trend towards healthy life3. Increase in cigarette industry total production of 5.55%4. Government Regulation Of Tobacco Advertising Restrictions5. Increasing on tobaco price of 25%6. Demand for electric cigarette growing recently 7. Probability Indonesia join FCTC8. MUI statement of cigarette prohibition

Strengths:1. Increasing in ROE 33% from 1750 to 2269 IDR2. Best company in term to satisfy the customers (2013award)3. HMS is the market leader in Tobacco Industry4. Increasing in total revenue by 12.6%5. HMS has lot of variant product 6. HMS has loyal customers7. HMS achieve 2013 Top Brand Award8. Increased in customer 8,6%

Weaknesses:1.Decreasing in sales volume of SKT 13%2. Work termination of 2700 labors in 2 main factories3. Unaffordable price caused by promotion and material cost4. Slow growth on certain product (Avolution)5. Haven’t had the ability to compete in a Global Market6. Inappropriate in capital allocation

1. New products innovation for global target market

2. Looking for investor3. Increasing the promotion to gain

brand awareness and expand the business

4. Maintaining the market power of HM Sampoerna popular product(mild)

1. Making the strategies to promote the certain product (Avolution) in the global market

2. Making new variant inventions3. Promotion through sponsoring

the big events to gain brand awareness of the customer

1. Decrease the producing of the certain products

2. Making the CSR strategy to deal and anticipate the MUI statement and government regulation

3. Brand image of a certain products

4. Taking the advantage from the annually events to promote the products

1. Joining to the anti-cigarette campaign to gain brand awareness

2. Controlling the market through decreasing prices of the certain product

3. Conduct the research to find the cheaper raw materials

4. Promoting the Brand image “The Finest Quality” to the customer


FINANCIAL POSITION (FP) Ratings

HMS current ratio is higher 79% compared to GG 5.0

HMS give ROE (76.4%) significantly higher than GG (14.9%)

5.0

HMS has 5385 billion less than GG in net working capital 4.0

Earning per share for HMS (Rp 2468) is higher than GG (Rp 2250)

4.0

18.0

Internal Strategic Position

COMPETITIVE POSITION (CP) Ratings

HMS got highest percentage of market share in cigarettes industry with 36.1%

-1.0

HMS can satisfy their customer needs; proven by award -2.0

-3.0


External Strategic PositionSTABILITY POSITION (SP) Ratings

The exchange rate for rupiah has weakened -5.0

The new regulation for tax of 10% of excise duty has made the industry not stable

-4.0

The price range for cigarette products within industry is not significantly different, but still have influence on sales of products

-2.0

Barriers to exit from cigarette industry is really costly -5.0

-16.0

INDUSTRY POSITION (IP) Ratings

-5.0

-4.0

-2.0

-5.0


SP Average is -16.0÷4 = -4.0 IP Average is – FP Average is 18.0÷4 = -4.5 CP Average is -3.0÷2 = -1.5

Directional Vector Coordinate :X-axis -1.5+(ip)Y-axis -4.0 -4.5=

conclusion


Click icon to add picture

The Internal and External (IE) Matrix


BUSINESS MODEL FRAMEWORK

Key resources

Customer segment

Cost structure

Revenue stream

Distribution channel

Customer relationship

Value proposition

Key partnership

Key activities

INFRASTRUCTURE

CUSTOMEROFFER

FINANCE


MAN MONEY :profit, shareholder

investment MATERIAL :tobacco leaf & clove MACHINE :SKM INFORMATION

KEY RESOURCES


KEY PARTNERSHIP


Value Preposition

1. Providing high quality products to adult smokers in the price category of brand choice

2. Provide competitive compensation and a good working environment for employees and foster good relationships with business partners

3. Giving contribution to the wide community

Three Hands Philosophy


Sampoerna has a good relationship among it’s costumer. Sampoerna are fully committed to producing high quality with reasonable price for adult consumers. By committed to keep the costumer satisfaction level higher, indirectly Sampoerna also maintain it’s relationship with them. Sampoerna can reach their good performance in costumer relationship. This is achieved through offering relevant products and innovations to meet the costumer changing preferences.

CUSTOMER RELATIONSHIP


PT Panamas as the sole distributor of PT HM Sampoerna’s product.

DISTRIBUTION CHANNEL


CUSTOMER SEGMENT

Adult smokers


EXTERNAL-CUSTOMER PREFFERENCE-SKM INTENSIVE-

INTERNAL-LOT OF VARIANT-ACQUISITION BY PHILIP MORRIS

INTERNATIONAL-PIONEER OF LTLN CIGARETTE

COMPETITIVE ADVANTAGE



Agung AndaraRafa Najiya

Akyes DapilcaKenang Kana

Zul Asmi Retno

Chapter 8 Marketing, Finance/Accounting,

R&D, and MIS Issues


HM SampoernaMARKETING


Market Segmentation

A-mild, more toward that effort Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, pekerjaann, education, religion, race and nationality.

Sampoerna A-mild, divide society into segments of educated people who will truly understand the dangers of smoking but still choose to smoke. In the segment of educated people, there is a potential consumer for cigarette manufacturers, namely well-educated young people who know the effects of smoking, but to take the risk for smoking.Later can become long term customers for the company, because smoking can cause entanglement. If the young consumers are bound, then the company will have the potential to be loyal consumers in the long run.


For the PT HM Sampoerna Tbk will continue to try to penetrate the premium for tobacco products. Such as by launching a new product named Avolution.Avolution been thrown into the market to enliven the market in Indonesian kretek segment with a target market for adult smokers. The target market of cigarettes Avolution is aged adults aged between 25 to 29 years


Market Positioning

LOW PRICE

LOW QUALITY

HIGH PRICE

HIGH QUALITY

Sampoerna

Bentoel

Djarum

Gudang Garam

Dunhill

Pall Mall

Apache

Marlboro

Esse

La Light


HM SampoernaFinance


Financial Highlight


Cont.


Asset of HM Sampoerna

Current assets were IDR 21.2 trillion as of December 31, 2013, relatively the same as at 31 December 2012

Noncurrent assets were slightly higher at IDR 6.2 trillion as of December 31, 2013 compared with IDR 5.1 trillion as of December 31, 2012

Total assets increased from IDR 26.2 trillion as at December31, 2012 to IDR 27.4 trillion as at December 31, 2013


Capital of HM Sampoerna

Net cash used in investing activities increased from IDR 0.9 trillion in 2012 to IDR 1.1 trillion in 2013

Driven primarily by higher capital expenditure by IDR 0.7 trillion to IDR 1.5 trillion in 2013


Financial Objective - Revenue

Revenue: Sampoerna’s excise payment contributed 29.6% of Government excise revenue from tobacco products in 2013 of IDR 103.6 trillion*


Financial Objective - Profit In 2013, total financing income was IDR 49

billion, mainly representing interest income generated from cash in bank and receivable from related parties

Profit attributable to the Owner of the Parent for 2013 was IDR 10.8 trillion, up by 8.8% from the IDR 9.9 trillion achieved in 2012


HM Sampoerna Research & Development


ObjectivesAs we know from the HM Sampoerna long term objectives : To offer the best smoking experince to adult smokers

in Indonesia Continually seeking out what adult smokers prefer and

delivering the best products to match their expectations

Create a reputation for quality innovation as well as high corporate governance standard

In order keep it’s competitive advantages in balance, HM Sampoerna should conduct a proper Research & Development methods that can fulfilled those objectives as a parameter for their proper research developments.


R&DWe emphasize several aspects that suitable with the company long term objectives :1. Conduct a periodical survey regarding to the costumer satisfaction of

their smoking experiences while they are consuming HM Sampoerna products & compare with the other brand.

2. After the surveys and questionnaires, the results from the data collection were analyzed by HM Sampoerna R&D department in order to analyze the changing pattern of the costumer preferences and match with their demands.

3. HM Sampoerna was the pioneer of the mild clove cigarette since a long time ago, so it is very famous among Indonesian smokers and HM Sampoerna has a strong brand identity. Beside the strong brand identity that the company has, HM Sampoerna comitted to keep it’s a quality in a sustainable top performace. That’s why all of it’s product line has their own costumer segmentation that keep grows the time by time.

4. As we know that hM Sampoerna was sold to Phillip Morris international, so the business activities starting from it’s acquition period untill are using the same R&D method from the previous owner (Putera Sampoerna).

5. Even that the price of the Sampoerna mild variants are a little bit higher that the other competitiors, but the line of products for Sampoerna Mild dominate the market of the mild cigarette machine in Indonesia.


Cost Contributor

We couldn’t find the exact contribution percentage of the total cost that HM Sampoerna spend since in R&D activities because it is not mentioned in it’s annual report.


HM Sampoerna MIS


MIS Technology is used by HM Sampoerna ERP (enterprise resource planning )

from ORACLEInformation systems that support the transaction or the daily operations in the management of company resources. The resources include money, people, machines, spare parts, time, materials and capacity.

PeopleSoft HR


MIS Implementation in HM Sampoerna Make the supply chain management

(supplier, warehouse,distribution,etc) more efficient and effective

Monitoring key performance indicator more better

support customer service, better support specific industry vertical (vertical industry), and also more supportive of the decision-making process (decision support)





Zul Asmi Retno

Chapter 9 Strategy review, Evaluation and

Control


HM Sampoerna’s Present Strategy

1. Conduct the specific advertisement for the marketing

2. Personal Selling efficiency3. Quality control4. Products concistency


STRATEGIC EVALUATION ASSESMENT MATRIX - HM SAMPOERNA TBK

HAVE MAJOR CHANGES OCCURED IN THE FIRM’S INTERNAL

STRATEGIC POSITION ?

HAVE MAJOR CHANGES OCCURED IN THE FIRM’S EXTERNAL STRATEGIC

POSITION ?

HAS THE FIRM PROGRESSED

SATISFACTORILY TOWARD ACHIEVING ITS STATED O BJECTIVES?

RESULT

NO YES YES TAKE CORRECTIVE

ACTION


TAKE CORRECTIVE ACTION Alternatives1. Budget cutting cost2. Reduces marketing cost3. Increase product price4. Layoff current workforce

= so they can maintain their profit margin at least in the same rate as their current position


HM Sampoerna is a pioneer cigarette company in Indonesia, so they have a strong brand awareness and for this short term period, they don’t need to change and implement any new strategy.

HM Sampoerna just have to be consistent with their current strategy, especially in their product variants quality.


EFE – HM Sampoerna tbk.


Score

Opportunities1. Plan affirmation of "RUU Pertembakauan"

0.10 2 0.20

2. Indonesian smokers are the second highest in the world

0.20 4 0.80

3. Demand for cigarette increasing (8%) anually

0.15 3 0.45

4. Exporting of cigarette growing (7,4%- 10%) anually

0.10 3 0.30

5. Indonesia is growing 1.49% anually in population

0.10 3 0.30




Score

Opportunities (cont’d)

7. Variant invention 0.13 4 0.52

8. Smoking has became a new urban lifestyle

0.12 30.36

9. Inovation Of LTLN In Cigarette Product

0.10 4 0.40

Total 1.00 3.33




Score

Threats 1. Increase in cigarette’s tax rate of 8.72% on average

0.20 3 0.60

2. Trend towards healthy life 0.20 4 0.80

3. Increase in cigarette industry total production of 5.55%

0.10 2 0.20

4. Government Regulation Of Tobacco Advertising Restrictions

0.10 2 0.20




Score

Threats (cont’d)

5. Increasing on tobaco price of 25% 0.20 3 0.60

6. Demand for electric cigarette growing recently

0.05 1 0.05

7. Probability Indonesia join FCTC 0.10 1 0.10

8. MUI statement of cigarette prohibition 0.05 1 0.05

Total 1.00 2.60


opportunityTotal weighted score of 3.33


excellent, taking advantage of the existing opportunities in its industry.

threats Total weighted score of 2.60

• Is above the average (midpoint) of 2.5• Indicates that HM Sampoerna tbk. is pretty

well in minimizing the potential adverse effect of external threats


IFE – HM Sampoerna tbk. (2013)


Score

Strengths 1. Increasing in ROE 33% from 1750

to 2269 IDR0.10 4 0.40

2. Best company in term to satisfy the customers (2013award)

0.20 4 0.80

3. HMS is the market leader in Tobacco Industry

0.15 4 0.60

4. Increasing in total revenue by 12.6% 0.10 3 0.30

5. HMS has lot of variant product 0.10 3 0.30




Score

Strengths (cont’d)

7. HMS has loyal customers 0.10 4 0.40

8. HMS achieve 2013 Top Brand Award 0.15 4 0.60

9. Increased in customer 8,6% 0.10 3 0.30

Total 1.00 3.70




Score

Weaknesses 1. Decreasing in sales volume of SKT

13%0.10 2 0.20

2. Work termination of 2700 labors in 2 main factories

0.30 4 1.20

3. Unaffordable price caused by promotion and material cost

0.25 4 1.00

4. Slow growth on certain product 0.10 3 0.30




Score

Weaknesses (cont’d)5. Haven’t had the ability to compete in a Global Market

0.10 2 0.20

6. Inappropriate in capital allocation 0.15 4 0.60

Total 1.00 3.50


strengthsTotal weighted score of 3.70


excellent optimizing their ability and resulting giving a power for them to stand as a market leader in its industry.

weaknessesTotal weighted score of 3.50

• Is near to the highest score of 4 • Indicates that HM Sampoerna tbk. Is doing

excellent managing their weaknesses so it won’t threaten their position in the market.


HM SampoernaCSR AND BUSINESS ETHIC





Zul Asmi Retno

Chapter 10Business Ethics/ Social Responsibility/

Environmental Sustainability


Business Ethics Issues

Controversial Tobacco Ad Pulled Following Public Outrage


Contributions and Corporate Social Responsibility

Sampoerna believes that a sustainable business should look beyond financial growth and

performance. Instead, we must also make socially responsible investments in support of both people and planet. We are committed to sustainable social

investments that benefit our employees and business partners, environment, and communities where we operate and source tobacco and cloves.


CSR

ACCESS TO EDUCATION

ECONOMIC OPPORTUNITY

EMPOWERING WOMEN

DISASTER RELIEF AND PREPAREDNESS


ACCESS TO EDUCATION


ECONOMIC OPPORTUNITY


EMPOWERING WOMEN


DISASTER RELIEF AND PREPAREDNESS


Environtment Sustainability Issue

Restoration Spring Mountains Region ArjunaJune 25, 2013

PT HM Sampoerna Tbk. ("Sampoerna") today launched a restoration program springs Arjuna Mountains Region. With the launch of the program, Sampoerna 27,000 trees planted bamboo and manufacture of 100 recharge wells throughout the year 2013.


Business Ethics


Key Issues in CSR Labour rights:

◦ child labour ◦ forced labour ◦ right to organise ◦ safety and health

Environmental conditions◦ water & air emissions◦ climate change

Human rights◦ cooperation with paramilitary forces◦ complicity in extra-judicial killings

Poverty Alleviation◦ job creation◦ public revenues◦ skills and technology





Zul Asmi Retno

Chapter 11 Global/International Issues


HM Sampoerna INTERNATIONAL EXPANSION MODEL

-Brunei Darussalam


STEP 1 Population: 408,786 people Smoker: 9% from population or about

37,000 people GDP in 2013: 24184.67 US dollars GDP growth: 2.9%


STEP 2: Political/Security Risk Political stability

Brunei has outstanding record of political stability that has been led by a benevolent monarchy that can be traced back, in an unbroken line of succession, over 600 years to when the first Sultan was installed in 1363.


Protection from Tobacco in BruneiSmokefree HealthCare Facilities Yes

Smokefree Universities Yes

Smokefree Government Facilities Yes

Smokefree Indoor Offices Yes

Smokefree Restaurants Yes

Smokefree Pubs & Bars Yes

Smokefree Public Transport Yes

All Other Indoor Public Places Smokefree

No

Funds for Smokefree Inforcement No


TOBACCO IN BRUNEI Brunei does not allow the tobacco industry to

participate in health policy development, accepts no contributions from the tobacco industry or CSR activities, gives no benefits to the industry, has no unnecessary interaction with the industry, and requires the industry’s representatives to provide information periodically. It must be noted that Brunei does not grow tobacco, has no cigarette manufacturing facilities, and has a very small tobacco market.

Brunei Darussalam became a Party to the WHO Framework Convention on Tobacco Control


A. Culture and Lifestyle

Smoking in Brunei in the days of old was seen as a cultural thing. They said “if you do know how to smoke you have not grown up yet”

Cigarettes were not only served during wedding ceremonies but were also served during other social events as well, even strictly religious ones such as "tahlil" and "doa selamat" ceremonies, as well as circumcision events and the likes — in fact at any social gathering. Without cigarettes being served at the end of the meal, the event was seen as incomplete

Step 3- Business Initiation Easiness Assessment


B. Procedure of Investment

The regulations require any person who imports, distributes, sells or offers for sale, permits to be sold or offered for sale or has in his possession for sale, any tobacco product to be licensed by the Director-General

Tobacco (Licensing of Importers, Wholesalers and Retailers) Regulations, 2007 establish the requirements to apply for and maintain a retail license and set forth the sanctions related to licensure violations

Cont. Step 3


All tobacco products are imported, and the Ministry of Health, as the Tobacco License Authority, requires licenses for all importers and retailers of tobacco products. A retail license costs BND 300 per year, while an import license costs BND 2,500 per year

Cont.

Number of Licensed Tobacco Retailers and Importers in Brunei Darussalam, 2008-2012


Government revenue from tobacco tax 2005 – 2011 (figures in USD)*

Cont.


MANY small vendors have ceased selling tobacco products saying it is no longer profitable due to costly licensing and stricter policing from health authorities.

Business owners said the annual license to sell cigarettes has risen from $500 to $2,500, under amendments to the Tobacco Order, making the profit margin for selling cigarettes negligible for small businesses

Other convenience stores have also stopped selling cigarettes after the Ministry of Health informed them they were in violation of laws that prohibit businesses from selling tobacco products within a kilometre radius of schools

Step 4 – Industry Attractiveness


Step 5 - Country Rank & Indentification of KSF

key success factors for preliminary investment

stage in Brunei Supportive Environment Infrastructure Flexible Policies Finance, Bank and Insurance Taxation


Cont. - Country Rank & Indentification of KSF

The country with the lowest level of tobacco industry interference was Brunei (29) – the only country in Shoutheast Asian with a score under 50.

list of countries by annual per capita consumption of tobacco cigarettes brunei ranking is 72 with number per cigarette per adult per year 751.


Step 6- Specific Internal Competitiveness Assessment

have a diverse and experienced team of professionals from seven different countries with an average experience of nearly 20 years in HM Sampoerna across a wide range of markets and functions

one key to the success of Sampoerna is adherence to the principles of good corporate governance,

Training programs are held regularly and closely monitored employee participation


STEP 7: Entry Strategy Formulation Seeing the condition and the opportunity in Brunei’s

tobacco market. The best strategy to enter the market would be export products considering that Brunei doesn’t provide any facilities to support tobacco industry. Export can neither direct or indirect method such as agent or retailer.

strategic management hm sampoerna

Education

company business

business strategies

small business

philip morris international

longterm objectives

internal weaknesses

internal strengths

sampoerna kretek