CHAPTER 1

INTRODUCTION

1.1 Problem Background

The cement industry in Indonesia is a fast moving Industry that will

always be ahead of its game. Strategic planning, Deeper market penetration is

one of the important factors that should be recognized and prepared, because

companies should run in very efficient way to face the fierce competition in the

industry.

There are several leading players for cement industry in Indonesia: PT

Semen Indonesia (Persero) Tbk, PT Indocement Tunggal Prakarsa Tbk and PT

Holcim Indonesia Tbk1. They have been ruling the markets for a long period of

time and in a very competitive industry like this, other emerging players, like PT

Semen MerahPutih for instance have toprogress forward using their resources to

capture and gain market share.

In order to do so, the right approach is to develop a strong marketing

strategy in order to expand the business. Marketing strategy is one of the

strategic factors that have to be prepared very well. Marketing strategy is

definedas a process that can allow an organization to concentrate its resources on

the optimal opportunities with the goals of increasing sales and achieving a

sustainable competitive advantage2.

1Asosiasi Semen Indonesia20132Baker, Michael The Strategic Marketing Plan Audit 2008.

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A company needs to build a strategic plan to identify business

alternatives, establish challenging goals, determine the optimal marketing mix to

obtain the goals, and configure detail of implementation.

1.2 Cement Definition

Cement is a binder, a substance that sets and hardens independently, and

can bind other materials together. The word "cement" traces to the Romans,

who used the term opus caementicium to describe masonry resembling

modern concrete that was made from crushed rock with burnt lime as binder.

The volcanic ash and pulverized brick additives that were added to the burnt

lime to obtain ahydraulic binder were later referred to as cementum,

cimentum, cäment, and cement.

Cements used in construction can be characterized as being either

hydraulic or non-hydraulic. Hydraulic cements (e.g., Portland cement) harden

because of hydration, a chemical reaction between the anhydrous cement

powder and water. Thus, they can harden underwater or when constantly

exposed to wet weather. The chemical reaction results in hydrates that are not

very water-soluble and so are quite durable in water. Non-hydraulic cements

do not harden underwater; for example, slaked limes harden by reaction with

atmospheric carbon dioxide3

3Gartner, Ellis; Macphee, Donald (2011)."A physico-chemical basis for novel cementitious binders". Cement and Concrete Research 41 (7): 736–749. doi:10.1016/j.cemconres.2011.03.006.

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The most important uses of cement are as aningredient in the production of

mortar in masonry, and of concrete, a combination of cement and an

aggregate to form a strong building material.

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Figure 1.1 Cement process diagram

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1.3 Overview of Cement Industry in the world

In the year 2010, it was indicated that the world production of hydraulic cement

was 3.300 million tones. The top three producers were China with 1,800, India

with 220 million tons, and USA with 63.5 million tons for a combined total of

over half the world total by the world's three most populated states4.

Figure 1.2 World Cement Consumption

1.4 Company Background4 United States Geological Survey. "USGS Mineral Program Cement Report. (Jan 2011)".

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Ganda Cement is a holding company engaged in the field of cement and

transportation. Cemindo Gemilang is a subsidiary company under Ganda Cement,

which sells Cement under the Semen Merah Putih Brand.

Vision :

Being a leading company in Asia Pacific that has a variety of investment and

provide benefits to shareholders

Mission:

Create sustainable business growth through focus on the business of palm oil,

natural resource management, building materials and construction, property and

trade through the assessment of investment opportunities in a professional

manner, due diligence and risk analysis are intensively with qualified and engaged

employees and systems world class concerned with social welfare and the

environment. "

1.4.1 Ganda Group Core Value

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Figure 1.3 Group Core Values

P.T Semen Merah Putih is now available to support the development of the

country and meet the market demand with guaranteed quality and reasonable

prices. In the spirit of national development, Semen Merah Putih will be the idol

of the nation to establish a strong foundation for a bright future.

Presently, most production for the Semen Merah Putih Brand is produce by

Chinfon Cement in Vietnam. Chinfon Cement has won various awards including

Golden Dragon Award award in the year 2001 to 2008 provided by the Vietnam

Economic Times and the Department of Planning and Investment. As a young

entity, Semen Merah Putih Brand, with the full support of Chinfon Cement

Corporation, will sell high-quality cement and be recognized internationally.

Figure 1.4 Organization Chart Cemindo GemilangIPMI | 7

1.4.2 Organization Chart

In Figure 2, it is shown that as of 2013 P.T Cemindo Gemilang Organization

consists 1(one) President Director, 5(five) Division Directors, 8 (eight) General

Managers and 7 (seven) sub- Division Managers.

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1.4.3 Semen Merah Putih Cement Classification

Under Semen Merah Putihbrand, the company is planning to launch their product

in four categories based on the formula and type of raw materials that they have,

which are:

Type I Portland Cement (Grey Cement)

The most commonly used type of cement for general construction,

especially when making precast and precast-pre-stressed concrete that is

not to be in contact with soils or ground water. It is suitable for mixing

concrete for structure that requires a high compressive strength5

Ready-mix Concrete

Ready-mix concrete is a type of concrete that is manufactured in a

factory or batching plant, according to a formula, and then delivered to

a work site by truck mounted transit mixers. This results in a precise

mixture, allowing specialty concrete mixtures to be developed and

implemented on construction sites.

Mortar Cement

Mortar Cement created by mixing sand and water with Ordinary

Portland Cement.

The mortar can be used for a number of applications, such as plastering

over bricks or other forms of masonry. Sometimes this type is referred

as sand cement.

5 Semen MerahPutih Portfolio, 2013IPMI | 9

White Cement

White Cement is similar to ordinary or gray cement in all respects

except for high degree of whiteness. Obtaining this color requires

substantial modification method of manufacture. Because of this, it is

somewhat more expensive than the grey products. White cement is

usually used in combination with white aggregates to produce white

concrete for prestige construction projects and decorative works. White

concrete usually takes the form of precast cladding panels, since it’s not

economical to use white cement for structural purposes.

1.4.4 Cement Factory

Chinfont Cement

SINCE 1992 Capacity Cement production 4,5 million ton

Figure 1.5 factory Cement Chinfon in Vietnam

Semen Merah Putih factory in Bayah

Using the latest technology machinery.The complete supply chain process, from

production to its own port

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Figure 1.6 Factory Semen Merah Putih

1.4.5 Brand and Product

Cement is Manufactured products, in the form of a fine powder, which

hardens and is binding after mixed with water. Brand Semen Kupang NTT began

to supply the market in 2011, the brand Semen Merah Putih starts supplying

major cities in the western part of Indonesia in 2012. Merah Putih Bulk supplies

concrete cement plant and cement grinding station and parallel to supply the needs

of the market in West Java in 2013

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Figure 1.7 Semen Merah Putih Portland

Ready Mix Semen Merah Putih

Ready-mix concrete is a type of concrete that is manufactured in a factory

or batching plant, according to a formula, and then delivered to a work site by

truck mounted transit mixers. This results in a precise mixture, allowing specialty

concrete mixtures to be developed and implemented on construction

Figure 1.8 Ready Mix Semen Merah Putih

This is The many kinds of cement type:

Type I Portland Cement (Grey Cement)

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The most commonly used type of cement for general construction, especially

when making precast and precast-pre-stressed concrete that is not to be in

contact with soils or ground water. It is suitable for mixing concrete for structure

that requires a high compressive strength6

Figure 1.9.A Portland cement, to the Portland Cement & generalconstruction, to houses

Type II (Moderate Sulfat Resistance)

Portland cement is in use requires resistance to heat of hydration and

sulfate were moderate, such as dams, docks and heavy foundations.

6 Semen Merah Putih Portfolio, 2013IPMI | 13

Figure 1.9.B Moderate Sulfate Resistance Cement – Dams

Type III (High Early Strength)

Portland cement in use requires a high initial compressive strength, like

bridges or overpasses.

Figure 1.9.C High Early Cement Compressive Strength - Bridge

Type IV (Low Heat of Hydration)

Portland cement is in use requires a low heat of hydration, usually used for

massive concrete structures such as dams or airfields.

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Figure 1.9.D Resilience High Sulfate Cement - Area marine / corrosive

Type V (Sulfat Resistance)

Portland cement is in use require high resistance to sulfate, such as marine

docks, area mining, chemical storage or brackish water.

Figure 1.9.E Oil Well Cement, for oil well area

1.5 Semen Merah Putih Cement Standard Quality

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Semen Merah Putih brand is atop premium market class quality cement.

They have met the criteria standard set by the Indonesian government under the

law Peraturan Menteri Perindustrian (Permenperin) Nomor

35/M-IND/PER/4/2007, 17 April 2007.

Semen Merah Putih Cement Standard Classification6

Indikasi Kualitas SNI 15-7064-2004 Merah Putih BrandKuatTekan

3Days kg/cm2 125 min 207 min

7 days kg/cm2 200 min 346 min

28 days kg/cm2 250 min 451 min

Smoothness with Blaine Equipment m2/kg

280 min 345

Air Volume % 12 max 6.95Bonding Time

Beginning Mins 45 126End Mins 375 max 210Apparent % 50 min 80.5Depreciation by Autoclave % 0,2 max 0.02Table 1.1MerahPutih Cement Standard Comparison

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Table 1.1 shows the Cement Merah Putih Standard comparison to SNI (Standard

National Indonesia). In terms of Product Quality, Semen Merah Putih clearly is

above the standard requirement in their Cement. The table illustration is created

from the Semen Merah Putih Brand Catalogue that will be shown below in Figure

6 Semen MerahPutih Portfolio, 2013

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Figure 1.10 Quality Indicator

Source: Semen Merah Putih Product Portfolio Catalogues’

1.6 Goals of the project

The objective of this project study is to perform an analysis in relation to Cement

Industry in Indonesia and analyze the most suitable Penetration Strategy for

Semen Merah Putih Brand for the future. In addition to that, the writer also will;

1. Recommend inputs for the company as part of theirStrategic marketing

approachto enter Indonesian cement market.

2. Implement the theory that already gained in the classroom to the actual

situation in correlation to Semen Merah Putih Brand.

1.7 Project Structure

This report has been structured in five (5) main chapters. The chapters are

described in the following lines.

Chapter 1 (Introduction): This section opens up the paper with

Problem Background and Company Profile.

Chapter 2 (Literature Review): This chapter will present theories,

analysis tools, its approaches and other related studies to the paper.

Chapter 3 (Problem Elaboration): This segment will discuss the

paper objectives, purposes, situational analysis and methodology to

approach the problem.

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Chapter 4 (Result & Analysis): This chapter will present the gathered

data and application to the tools in Literature Review. It also will

present the result of the analysis.

Chapter 5 (Conclusion & Recommendation): This chapter will

present the result and findings and interpret them accordingly.

Figure 1.11 Project Outline.

CHAPTER 2

LITERATURE REVIEW

2.1 PEST Analysis

PEST analysis (Political, Economic, Social and Technological analysis)

describes a framework of macro environmental factors used in the environmental

scanning component of strategic management.7 

7 Thompson, J. and Martin, F. (2010). Strategic Management: Awareness & Change. 6th ed. Cengage Learning EMEA, p. 86-88, 8618Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGraw-Hill/Irwin, p. 56-61

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Introduction

Literature Review

Problem Elaboration

Result and Analysis

Conclusion and Reccomendation

It is a part of the external analysis when conducting a strategic analysis or

doing market research, and gives an overview of the different macro

environmental factors that the company has to take into consideration.

It is a useful strategic tool for understanding market growth or decline,

business position, potential and direction for operations. The growing importance

of environmental or ecological factors in the first decade of the 21st century have

given rise to green business and encouraged widespread use of an updated version

of the PEST framework.

PEST or PESTEL analysis is a simple and effective tool used in situation analysis

to identify the key external (macro environment level) forces that might affect an

organization.8

Figure 2.1: PEST Analysis

The basic PEST analysis includes four factors; they are Political,

Economic, Social and Technological.

Political

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Political factors are basically to what degree

the government intervenes in the economy. Specifically, political

factors include areas such as tax policy, labor law, environmental

law, trade restrictions, tariffs, and political stability. Political factors

may also include goods and services which the government wants to

provide or be provided (merit goods) and those that the government

does not want to be provided (demerit goods or merit bads).

Furthermore, governments have great influence on

the health, education, and infra structure of a nation.

Economic 

Factors include economic growth, interest rates, exchange rates and

the inflation rate. These factors have major impacts on how businesses

operate and make decisions. For example, interest rates affect a

firm's cost of capital and therefore to what extent a business grows and

expands. Exchange rates affect the costs of exporting goods and the

supply and price of imported goods in an economy.

Social 

Factors include the cultural aspects and include health consciousness,

population growth rateinclude health consciousness, age distribution,

career attitudes and emphasis on safety. Trends in social factors affect the

demand for a company's products and how that company operates. For

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example, an aging population may imply a smaller and less-willing

workforce (thus increasing the cost of labor). Furthermore, companies

may change various management strategies to adapt to these social trends

(such as recruiting elderly workers).

Technological 

Factors include technological aspects such as R&D activity, automation,

technology incentives and the rate of technological. They can

determine barriers to entry, minimum efficient production level and

influence outsourcing decisions. Furthermore, technological shifts can

affect costs, quality, and lead to innovation.9

9en.wikipedia.org/wiki/PEST analysis

Table 2.1 PEST

Political Economic Social Cultural Technology

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1. Government stability and likely changes

2. Bureaucracy3. Corruption level4. Tax policy (rates

and incentives)5. Freedom of press6. Regulation/de-

regulation7. Trade control8. Import restrictions

(quality and quantity)

9. Tariffs10. Competition

regulation11. Government

involvement in trade unions and agreements

12. Environmental Law

13. Education Law14. Anti-trust law15. Discrimination

law16. Copyright, patents

/ Intellectual property law

17. Consumer protection and e-commerce

18. Employment law19. Health and safety

law20. Data protection

law21. Laws regulating

environment pollution

1. Growth rates2. Inflation rate3. Interest rates4. Exchange rates5. Unemployment

trends6. Labor costs7. Stage of

business cycle8. Credit

availability9. Trade flows

and patterns10. Level of

consumers’ disposable income

11. Monetary policies

12. Fiscal policies13. Price

fluctuations14. Stock market

trends15. Weather16. Climate change

1. Health consciousness

2. Education level3. Attitudes

toward imported goods and services

4. Attitudes toward work, leisure, career and retirement

5. Attitudes toward product quality and customer service

6. Attitudes toward saving and investing

7. Emphasis on safety

8. Lifestyles9. Buying habits10. Religion and

beliefs11. Attitudes

toward “green” or ecological products

12. Attitudes toward and support for renewable energy

13. Population growth rate

14. Immigration and emigration rates

1. Basic infrastructure level

2. Rate of technological change

3. Spending on research & development

4. Technology incentives

5. Legislation regarding technology

6. Technology level in your industry

7. Communication infrastructure

8. Access to newest technology

9. Internet infrastructure and penetration

The main objectives of PEST Analysis:

1. Find out the current external factors affecting an organization;

2. Identify the external factors that may change in the future;

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3. To exploit the changes (opportunities) or defend against them (threats)

better than competitors would do.

2.2 Product Life Cycle Theory

Product Life Cycle theory is a theory based upon biological life cycle.

Likeliving creature, products is also has its life cycle. It grows passing a various

stages, from birth until death.

After a period of development it is introduced or launched into the market; it gains

more and more customers as it grows;

Eventually the market stabilizes and the product becomes mature; then after a

period of time the product is overtaken by development and the introduction of

superior competitors, it goes into decline and is eventually withdrawn.

Figure 2.2 Product Life Cycles

There are four stages in Product Life Cycles. Each of themhas their own

Characteristic10 and four of them are:

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1) Market Introduction Stage

Introduction Stage is the stage where the product is introduce for the firsttime.

The main objective of the company in this stage is to persuade early tobuy, and to

meet consumer's needs with a quality product at the lowest possible cost in order

to return the highest level of profit. Usually, the company makes no or less profit

in this stage, because sales may be slow as the company’s goals is to builds

awareness of its product among potential customers. Advertising is important at

this stage, so the marketing budget is often substantial.

2) Growth Stage

Growth Stage takes place when the product already survives in the Introduction

Stage. Sales volume start to increase and profitability begin to rise. Cost of

production is lowered along with increase in production volume. Goals of the

company are to increase the public awareness and also build brand loyalty of the

customers by adding more first time buyers and maintain the remaining

customers.

________________

10Philip Kotler, Marketing Management (Prentice Hall 11th Edition : 2003), 328

3) Maturity Stage

At the maturity stage, sales growth has started to slow and is approaching the

point where decline will begin. Maturity stage is commonly the longest stage of a

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product, where it could reach decades. In this stage, the probability for

competitors to step forward with a better quality product and lower price is very

high. That’s why, the main objectives in this stage are to defend the market share

and maintain the customer’s loyalty. Price wars and discount system is the

common characteristic, which could lead to lower profitability for the remaining

companies.

4) Saturation and Decline Stage

This occurs when the product peaks in the maturity stage and then begins a

downward slide in sales. Eventually, sales will drop to the point where the

profitability is no longer feasible to continue making the product. Investment is

minimized. The product can simply be discontinued.

Each stage in Product Life Cycle Theory will have different

strategyimplementation. Target and application of elements in 4P Marketing Mix

will be different, because every stage has its own objectives. Marketing Strategy

Implication based on the Product Life Cycle will help a company to set up the

specific strategy that might be more effective to be executed.

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Figure 2.2.A Marketing Strategy Implication of the Product Life Cycle

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2.3 Marketing Segmentation and Targeting

Market segmentation is a theory that divides the market into group

ofhomogenous consumers.

A single product cannot fulfill the needs of all customers, but it can always serve

more than one customers11. Therefore, the purpose of Market Segmentation is to

select the appropriate target market in order to make a successful marketing

program. To become a useful analysis for the company, Market Segmentation has

to fulfill several criteria, which are:

Measurable

Size, purchasing power and characteristic of the segment can be measured.

Accessible

Segment selected can be reached and served effectively

Substantial

Segment selected must be large enough to have sufficient sales and

growth potential to offer long run profits for the company.

Differentiable

The segments are conceptually distinguishable and respond differently to

different marketing-mix elements and programs.

Actionable

Effective programs can be designed/or attracting a given market segment.

_______________________________11J. Paul Peter and James H. Donnelly, Marketing Management (McGraw Hill International Edition 8thEdition : 2007), 65

There is no single way to segment a market. A marketer has to try

different segmentation variables, alone and in combination, to find the best

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way to viewthe market structure. However, we can identify the major

variables that usuallyused in segmenting, which are Geographic,

Demographic, Psychographic and Behavioral aspect. Below the four aspects

are describe.

1) Geographic Segmentation

Geographic Segmentation divides the market based on the geographical

units.

This segmentation is an important process, especially for multinational and

global corporation. Geographic segmentation includes:

Region (Europe, Northern America, West Java Area, etc)

Countries (Indonesia, USA, Japan, etc)

City / Town size (New York City, Jakarta, etc)

Population Density (Urban, Suburban, Rural, Semi-Rural)

Climate (Northern, Southern)

2) Demographic Segmentation

Demographic Segmentation divide the market into groups based on

demographic variables such as age, sex, family size, family life cycle,

income,occupation, education, religion, race and nationality.

Demographicsegmentation is the most segmentation that used commonly,

because customer’s needs and wants are often related to the demographic

factors.

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Age

Customer’s wants and needs are always changing along with their age.

Company should use different product and approach in marketing for different

age target.

Life-Cycle Stage

A little different from the age segmentation, Life-Cycle stage is using human’s

phase of life (teenage, adult, etc) as the basic.

Gender

Gender segmentation is using sex as the basic, and often used in consumer

marketing. The best examples are in clothing products, cosmetic

products,magazines product, etc.

Income

Segmentation using income as the basic is also popular. Many companies

target the customers based on their income, especially for the luxuryproducts

such as jewelry, high branded car, etc.

Generation

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Generation segmentation is mostly influence by the times that customers grow

up. Each generation usually have different preferences, such as inmusic,

movies, political view, culture, etc.

Social Class

Segmentation could divide buyer based on their social class, an ordered

divisions of citizen in a society whose members share similar values,interests

and behaviors.

3) Psychographic Segmentation

Psychographic segmentation divides buyers into groups based on social

class, lifestyle or personality characteristics. People in the same demographic

groupcan have very different psychographic.

Lifestyle

People’s interest in goods is affected by their lifestyle, because the product

they bought is expressing their lifestyles, the way people usually do in their

daily life.

Personality

Companies also use personality variables to segment the market, giving their

product personalities can correspond with customer’s personality. This

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segmentation works for product with certain and specificcharacteristic such as

alcohols, cosmetics, cigarettes, etc.

Values

This segmentation is dividing the customers based on their beliefs system that

cause customer’s attitude and behavior.

4) Behavioral Segmentation

Behavioral segmentation is dividing the customers based on their

knowledge of, attitude towards, use of, or response to a product. It divided

into severalcategories, which is Occasion, Benefits, User Status, Usage Rate,

Loyalty, Status, Buyer-Readiness Stage, and Attitude.

Occasion

Buyers can be divided according to the occasions when they develop a need,

purchase, or use a product.

Benefits

Customers can be segmented by the benefit they find in the particular product.

User Status

This segmentation is dividing the customers into non-users, ex-users, potential

users, first time users or regular users.

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Usage Rate

Market can be segmented based on how often the customers use the product.

Loyalty Status

Customers have the tendencies towards loyalty to a product. They can be

divided into Light, Medium or Heavy users.

Buyer-Readiness Stage

Market consists of customers who have different stage of readiness to buy a

product.

Attitude

Customers are also can be divided into class where it based on their attitudein

terms of accepting a product.

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Figure 2.3 Market Segmentation Model

Based on the market segmentation that is already developed, the next step

is to select the target market. The firm has to evaluate various segments

anddecide how many and which one to target. Basic evaluation to targeting a

marketis its attractiveness and firm’s objectives and resources. When choosing

which segment to target, the firm can focus to single segment, several

segment, specific product, specific market, or full market.

Single Segment Concentration

The firm chooses a single particular segment as their target with a certain

product. Through concentrated marketing, the firm could gain a strong

knowledge in the segment and get strong market presence.

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Selective Specialization

The firm targets number of segments where each segment has their own

attractiveness. With this targeting method, the firm could diversify its risk

tofail in the market.

Product Specialization

The firms create a certain product that can cover several segments, different

customers groups and build a strong reputation in a specific product.

Market Specialization

The firms create a product line that could serve needs of a specific market.

Usually, the firm could get the strong reputation in the particular market.

Full Market.

The firm attempt to serve all customers group with their product line and

cover the whole market.

2.4 Marketing mix; 4 P’s

The marketing mix is a business tool used in marketing and by marketing

professionals. The marketing mix is often crucial when determining a product

or brand's offer, and is often synonymous with the four Ps: 

1. Price.

2. Product. 

3. Promotion.

4. Place.

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Product:

A product is seen as an item that satisfies what a consumer

demands. It is a tangible good or an intangible service. For example good

will for intangible. Tangible products are those that have an independent

physical existence. Typical examples of mass-produced, tangible objects

are the motor car and the disposable razor. A less obvious but ubiquitous

mass-produced service is a computer operating system. Every product is

subject to a life-cycle including a growth phase followed by a maturity

phase and finally an eventual period of decline as sales falls. Marketers

must do careful research on how long the life cycle of the product they

are marketing is likely to be and focus their attention on different

challenges that arise as the product move.

The marketer must also consider the product mix. Marketers can

expand the current product mix by increasing a certain product line's depth

or by increasing the number of product lines. Marketers should consider

how to position the product, how to exploit the brand, how to exploit the

company's resources and how to configure the product mix so that each

product complements the other. The marketer must also consider product

development strategies12

12 Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann

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Price

The amount a customer pays for the product. The price is very

important as it determines the company's profit and hence, survival.

Adjusting the price has a profound impact on the marketing strategy, and

depending on the price elasticity of the product, often it will affect

the demand and sales as well. The marketer should set a price that

complements the other elements of the marketing mix13

When setting a price, the marketer must be aware of the customer

perceived value for the product. Three basic pricing strategies are: market

skimming pricing, market penetration pricing and neutral pricing. The

'reference value' (where the consumer refers to the prices of competing

products) and the 'differential value' (the consumer's view of this product's

attributes versus the attributes of other products) must be taken into

account14

13Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann14Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann

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Promotion.

All of the methods of communication that a marketer may use to

provide information to different parties about the product. Promotion

comprises elements such as: advertising, public relations, personal

selling and sales promotion

Advertising covers any communication that is paid for, from

cinema commercials, radio and Internet advertisements through print

media and billboards. Public relations is where the communication is not

directly paid for and includes press releases, sponsorship deals,

exhibitions, conferences, seminars or trade fairs and events. Word-of-

mouth is any apparently informal communication about the product by

ordinary individuals, satisfied customers or people specifically engaged to

create word of mouth momentum. Sales staff often plays an important role

in word of mouth and public relations.

Place

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Refers to providing the product at a place which is convenient for

consumers to access. Various strategies such as intensive distribution,

selective distribution, exclusive distribution and franchising can be used

by the marketer to complement the other aspects of the marketing mix15

Figure 2.4 Marketing Mix model

_________________________

15Kerin, Hartley and Rudelius "Marketing, The Core," 4th Edition, McGraw Hill Publishing 2001

2.5 Porter 5 Forces Analysis

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The use of Porter’s Five (5) forces analysis is also an essential part of

determining the industry values. Every industry has an underlying structure and

technical characteristic of its own, and analyzing the key point would lead to a

better strategy.

Porter five forces is framework to analyze the industry formed by Michael

Eugene Porter of Harvard Business School in 1979. This model is the most

commonly used analytical tool to examine the competitive environment16. It

describes the intensity of the competition within an industry based on the five

aspects that drive the industry attractiveness.

Figure 2.5 Porter’s Five Forces Model of Competition

16David J. Ketchen and Alan B. Eisner, Strategy (McGraw Hill International Edition : 2009), 86

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Threat of the New Entrants

Threat of New Entrants refers to the possibility that newcomers

might erode the profit of established firms in the industry. (Whelan &

Hunger, 2010:159)17The seriousness of the threat is depend on the

barrier of entry and combined reaction from existing competitors.

There are six major sources for barriers to entry, which is:

Economic of Scales

Economic of scales refers to the saving that a company could

achieve due to the increase of volume. Firms that could implement

the economics of scales could create barrier of entry for the new

entrants by reducing the prices.

Product Differentiation

Strong brand recognition of the existing company will create

barrier for new entrants, because they have to spend more to gain

customers loyalty.

Capital Requirement

Needs to invest a large amount of financial resources is also a

barrier for the new entrants. It is risky and might be an

unrecoverable investment.

___________________

17 Wheelen, Thomas L. &Hunger, David j.2010.Strategig Management and Business policy 12th Ed New jersey. Pearson Prentice Hall

IPMI | 41

Switching Cost

A barrier of entry is created by the existence of onetime cost that

the buyer faces when switching cost from one supplier’s product or

service to another.

Access to Distribution Channel

Needs to create a channel to the distribution channel for the product

is also could create a barrier of entry. Government Policy

Rivalry among Existing Firms

According to Porter, intense rivalry is related to the presence of several

factors including18 for most industry, the intensity of the competitive rivalry within

the industry is the dominant factor of the competitiveness of the industry.

Competitive rivalry is likely to be based on dimensions such as price, quality,

and innovation.

Number of Competitor

Number of competitors becomes an important factor in the analysis.

This factor, size and position of the firms in the industry is the main

factor of how competitive the industry are.

18Dwyer, Robert &john T.2009.Business marketing: Connecting Strategy, Relationship and learning 4 Ed

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Industry growth

Industry Growth also become a factor in the analysis, because it also

decide whether the competition become a tough competition or not,

since the company will seek a chance to expand their sales.

Exit Barrier

Exit barrier are economic, strategic, and emotional factors that keep firm

competing even though they may be earning low or negative returns on

their investment. Needs to create a channel to the distribution channel

for the product is also could create a barrier of entry.

Government Policy

The Government can limit or even foreclose entry to industry, with such

control as license requirements, limits on access to raw materials, and tax

incentives.

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Threat of Substitutes Product or Service

The main objective of this analysis is identifying the substitute products or

services that can perform same function as the industry offering.19 Availability of

substitute’s product in the market will limit the potential sales of the industry’s

product, especially when the substitute product is on the lower level of price.

Low switching cost for the customers will also have high impact on customer’s

loyalty. Even though they have a different appearance and may not appear to be

easily subtitutable20

Bargaining Power of Buyers

Bargaining power of customer refers to the ability of the customers to put

the firms within the industry under pressure that could reduce the profitability of

the industry. The power of buyer can be affected by these factors21

19 Wheelen, Thomas L. &Hunger, David j.2010.Strategig Management and Business policy 12th Ed New jersey. Pearson Prentice Hall20Dwyer, Robert &john T.2009.Business marketing: Connecting Strategy, Relationship and learning 4thEd21Wheelen&Hunger

IPMI | 44

Switching Cost

Low switching cost means easier for the customers to switch to other

product, especially when the product is price sensitive. Means the power

of the customers will be raised.

Number of Product Available

If there’s a lot of same kind of product is available in the market, then the

customers can choose any product that will give them more benefit. It will

be harder for the firm to maintain the customer’s loyalty.

Number of Substitute Product Available

Availability of the substitute product will also affect the customer’s

judgment.

Bargaining power of Supplier

Supplier can apply the bargaining power over the participants in the industry

by raising the price or reduce the quality of the materials. Powerful supplier can

squeeze profitability of firms in an industry so they can’t recover the costs of raw

material inputs the factors that determine power of supplier are:22

22Dwyer, Robert &john T.2009.Business marketing: Connecting Strategy, Relationship and learning 4thEd

IPMI | 45

Number of Supplier Available.

If the number of supplier is limited, then they have higher bargaining

power because it is not easy to find a replacement for their position.

Uniqueness and Importance of the Materials

More unique or important the material to the production, more power that

the supplier has and especially when the material is customize.

P=Particular Industry is a Small Part of the Supplier’s Sales

If the industry is just a small part of the supplier’s revenue and less

important, than they will have more bargaining power

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2.6 S.W.O.T Analysis

SWOT analysis is a structured planning method used to evaluate

the Strengths, Weaknesses, Opportunities, and Threats involved in a project or

in a business venture. A SWOT analysis can be carried out for a product,

place, industry or person. It involves specifying the objective of the business

venture or project and identifying the internal and external factors that are

favorable and unfavorable to achieving that objective

The technique is credited to Albert Humphrey, who led a convention at

the Stanford Research Institute (now SRI International) in the 1960s and

1970s using data fromFortune 500 companies. The degree to which the

internal environment of the firm matches with the external environment is

expressed by the concept of strategic fit.

Setting the objective should be done after the SWOT analysis has been

performed. This would allow achievable goals or objectives to be set for the

organization.

S trengths : characteristics of the business or project that give it an advantage

over others

W eaknesses : are characteristics that place the team at a disadvantage relative

to others

O pportunities : elements that the project could exploit to its advantage

T hreats: elements in the environment that could cause trouble for the

business or project

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Figure 2.6 SWOT Analysis

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CHAPTER 3

PROBLEM DESCRIPTION

3.1 Problem Elaboration

Cement is a very strategic commodity in Indonesia. Economic growth in

Indonesia, good investment condition and supported by Government regulation

give a bright hope for Industry growth. As a developing country, infrastructure

expansion becomes one of main focus. Therefore, cement supply becomes crucial

needs for Indonesia infrastructure and construction industry

Figure 3.1: Domestic Cement Consumption

In the recent crisis of 2008, cement demand was rising very fast.

According to the data from Asosiasi Semen Indonesia, demand forecast for year

2011 will be increase 10 percent from 2010. It will increase from 40 million tons

to 44 million tons, and it will continue to increase until 2020. Therefore, analyst is

concerned about the possibility of cement supply shortage if this activity is not

matched with overall production capacity from cement manufacturer.

Resource Asosiasi cemen Indonesia

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3.2 Cement Market: Indonesia

The world’s 16th largest economy by GDP is Indonesia. It is predicted to

become the seventh (7) largest by 2030. The World Bank predicts that the

country’s economy will grow by 6.6% this year, outperforming many other

emerging powers. The cement industry is certainly benefiting from such

confidence, with predictions that the market will grow at a double digit rate in

201323

Indonesia's Quarterly GDP Growth 2009–2013 (annual percentage change) Year

   Quarter I

   Quarter II    Quarter III    Quarter IV

 2013        6.05        5.83         5.62            -

 2012        6.29        6.36         6.16         6.11

 2011        6.45        6.52         6.49         6.50

 2010        5.99        6.29         5.81         6.81

 2009        4.60         4.37         4.31         4.58

Table 3.1Source: Statistics Indonesia (BPS)

     2010    2011    2012

   2013

Cement Production in million tons

   37.8    52.0    60.6¹

   65.0¹

Cement    40.8    48.0      

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Consumptionin million tons 55.0¹ 61.0¹

Table 3.2Source: Indonesian Cement Association

23Cook, Paul-Maxwell, World Cement, Insight into Asian Cement Industry, 2013

The country’s largest cement producer, Semen Indonesia (formerly Semen

Gresik), achieved record production last year with an increase of 18%. The

company expects to produce 28.3 million tons of cement this year, helped by

plans to build a new plant in Rembang, Central Java, and the recent acquisition of

a cement manufacturer in Vietnam.

It has set aside US$400 million for capital expenditure this year. A major

competitor is, of course, PT Holcim Indonesia. In looking to claim a bigger

market share in East Java, it is moving rapidly to the launch of its new plant in

Tuban in November of this year. It will have an annual production of

1.7 million tons. As a further boost, Holcim has begun production of a second

plant, Tuban II. This 1.7 million tons facility is expected to be completed in 2015.

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Figure 3.2: Cement Industry

The country’s second largest producer, PT Indocement Tunggal Prakarsa is

said to have set aside US$260 million – US$320 million for capital expenditure

this year. The company is developing a new plant with a total production of

4.4 million tons in Citeurep, West Java. The Sinoma Group is involved with

equipment procurement and construction work.

It is scheduled for service in mid-2015. Feasibility studies are in hand for

two additional plants, one in Central Java and another outside Java. Operations at

PT Semen Bosowa Maros’ 5.2 million tones plant in South Sulawesi are expected

to begin in 2014. In the meantime, Thailand’s Siam Cement Group will further

expand its presence in Indonesia by building a new plant in Sukabumi, West Java,

with a total investment of US$356 million. The plant should be operational by

2015.IPMI | 52

Indonesia’s Cement production and consumption

Research indicates that Indonesia's cement production and cement

consumption have risen rapidly in recent years. As the country has been showing

solid economic growth for a decade and is forecast to continue this growth,

property and infrastructure projects have grown in number accordingly, thus

increasing demand for building materials such as cement. Moreover, the

government is committed to enhance the country's much-needed

infrastructure development.24

24R.M.A Van der Schaar, www.indonesia investment.com, The Rise of Indonesia's Cement Production and Consumption

The table below indicates this rapid rise in both cement production and

consumption in Indonesia:

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Figure 3.3 Cement production and consumption in Indonesia

The Indonesian residential sector is the largest consumer of Indonesian

cement, followed by infrastructure.

Per capita cement consumption in Indonesia - which currently stands at

around 200 kilogram per year - is one of the lowest in Asia, and in combination

with a booming (macro) economy it therefore contains ample room for growth.

Currently the island of Java accounts for more than half of Indonesia's total

cement consumption, followed by the islands of Sumatra, Kalimantan and

Sulawesi. Java and Sumatra together account for around 75 percent of Indonesian

cement consumption.

These two islands (Java in particular) are home to the majority (almost 80

percent) of Indonesians. But, although small in absolute numbers, the cement

consumption share is increasing fastest in Eastern Indonesia. The period January-

IPMI | 54

November 2012 brought a 54 percent increase in cement consumption in eastern

Indonesia compared to the same period in the previous year. In Java and Sumatra

these numbers were much lower (15 and nine percent respectively) during the

same period

Factors that contributed to rising in demand for cement consumption

Indonesia has been experiencing continuous and robust economic growth

for a number of years. The country’s gross (GDP) grew over six percent annually

since 2007 (except for 2009 when international turmoil caused Indonesia's GDP

growth to drop to (a still impressive) 4.6 percent. Moreover, future projections

predict that this growth is most likely to remain above six percent in the coming

years. The principal pillars of Indonesia's current GDP growth are domestic

consumption and investments. The former accounts for around two-thirds of

Indonesia's GDP growth and is fueled by a quickly expanding Indonesian

middle class. According to a World Bank report, each year seven million people

join the ranks of Indonesia's middle class and their subsequent consumptive

behavior and demands give rise to new housing and real estate development.

The development of property projects is also supported by Indonesia's stable and

historically low benchmark interest rate (5.75 percent since February 2012).

Property projects are therefore predicted to continue its pace in the next

quarters, despite a government policy, introduced last year, which stipulates an

increase in down payment on mortgages to 30 percent.

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Similarly, the planning of infrastructure projects is on the rise. The

Indonesian government realizes the lack of quantity and quality of the

country's infrastructure and is currently focused on increasing investments in this

sector; both direct and in cooperation with the private sector through public-

private partnerships. This will have an impact on domestic cement demand as

large quantities of cement are needed to build the large-scale infrastructure

projects (which includes roads, bridges, airports and seaports)

3.3 Problem Analysis inside Semen Merah Putih Brand

As a new brand that will enter the industry, Semen Merah Putih have to fight to

penetrate the market, which already dominated by companies that mostly already

exist for years. Therefore, Market Penetration Strategy becomes an important

subject in order to bring the company to achieve its objectives with the most

efficient way.

This led the writer to come up with four (4)problem identification:

1. Semen Merah Putih has to evaluate strategic option that best fit the

company’s vision andmission. (Strategic Marketing)

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2. Analyze the Macroeconomic views of the Indonesia cement industry.

(PEST)

3. A complete and concise Competitor’s analysis checks to determine the

Industry rivalry. (Porter’s Five Forces)

4. Identify the company resource of Strengths and Weakness and its

external Opportunities and Threats. (SWOT Analysis)

3.4 Solution Approach

The approach to complete this study is by using PEST Analysis to examine

the key external factors, then by using Porters’ 5 Forces analysis tools to analyze

the competitive strengths and attractiveness of the market. The last analysis will

be to perform SWOT analysis to gather information on both external and internal

factors and synthesizing the correlation to come up with solution.

Due to the confidentiality of certain data from Semen MerahPutih the author

uses alternative approach to complete the revision of the project. Data are taken

from several collective resources:

1) General company profile of Semen Merah Putih.

2) List of questionnaires for interviews.

3) Eligible data from Badan Pusat Statistik (BPS).

4) Eligible data from Asosiasi Semen Indonesia (ASI).

5) Eligible data from World Cement Association (WCA).

6) Data from published report of P.T Semen Gresik Annual Report.

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3.5 Methodology to Answer the Problem

1. Study Methodology

Exploratory study is a type of problem approach method that has not

clearly defined. Exploratory study often relies on the secondary such as

reviewing available literature and/or data, or qualitative approaches such

as informal discussions with consumers, employees, management or

competitors, and more formal approaches through in-depth interviews,

focus groups, projective method, case studies, or pilot studies25

25 Donald R. Cooper and Pamela S. Schindler, Business Research Methods (McGraw Hill 9th Edition: 2009), 709.

2. Type and Classification of Data

Primary Data

Original works of research or raw data without interpretation or

pronouncement that represents an official opinion or position. Primary

sources are always the most authoritative because the information has

not been filtered by a second party.

Secondary Data

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Secondary data is an interpretation of primary data. Encyclopedia,

textbooks, handbooks, magazine, newspaper article, etc, are

considered as secondary data.

3. Source of Data

Interview

Interview is a primary data collection technique for gathering data in

qualitative data methodologies. Interviews vary based on the number

of people involved during the interview, the level of structure, the

proximity of interviewer to the participant, and the number of

interview conducted during research.

Literature Study

Literature study is review of books, articles in journals or professional

literature, research studies, and web published materials that relate to the

management dilemma, management question, or research question.

3.6 Data collection method

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As mentioned above, the author uses several techniques for acquiring data and

information in connection with this project. For the Interview approach, the author

distributed a list of general questionnaires to several employee of Semen Merah

Putih. The objective of this approach is to gather data, knowledge and information

as much as possible regarding Semen Merah Putih internal aspect, such as

Strengths and Weaknesses. In addition, the questionnaires are also set up for a few

Cement distributors within the vicinity. The objective is to gain knowledgeable

information ofExternal aspect such as buying habits, buying preferences and such.

CHAPTER 4

RESULTS AND DISCUSSION

4.1 Analysis of the Cement Industry

In relation to analysis of the cement industry, one must identify what are

the external and internal factors that affected the industry in general. By

IPMI | 60

understanding that, the focus is to generate an idea on what will affect the

industry’s sustainability not only now but also for the future.

4.1.1 Pest Analysis

PEST analysis is a useful tool for understanding the big picture of

operating and takes  advantage of opportunities. PEST analysis includes

political, environmental, social and technological factors, which affects both the

companies as well as industry.

Political Factors:

The coal rates, power tariffs, railway tariffs, freight, royalty and cuss on

limestone primarily control the price of cement.

The growth of Property and Infrastructure project has enhance the demand

of building materials, mainly cement26

26Source Cement Indonesia 2013

Indonesian government realizes the lack of quantity and quality of the

country's infrastructure and is currently focused on increasing investments

in this sector; both direct and in cooperation with the private sector

through public-private partnerships. This will have an impact on domestic

cement demand as large quantities of cement are needed to build the large-

scale infrastructure projects such as roads, bridges, airports and seaports.

Economic FactorsIPMI | 61

Indonesia has been experiencing continuous and robust economic growth

for a number of years. Indonesia’s gross domestic product (GDP) grew

over six percent annually since 2007 (except for 2009 when international

turmoil caused Indonesia's GDP growth to drop to (a still impressive) 4.6

percent26. The principal pillars of Indonesia's current GDP growth are

domestic consumption and investments.

Export: Indonesia export in cement industry is dominated by its clinker

than cement products. In period January – June 2012, Indonesia cement

and clinker export shows a significant decrease to 147,000 tons from

1,162,000 tons at same period in last year. High national demand for

cement and clinker has influenced to low and decreasing number of those

products to export. Most of clinker from Indonesia is exported to

Australia, Bangladesh, Malaysia, Singapore and Sri Lanka, meanwhile

the cement is exported to East Timor and French Polynesia.

26Source: Indonesian Cement Association

Import: Indonesia import both cement and clinker. During January – June

2012, Indonesia is importing around 1,253 thousand tons of clinker or

increase 54.1% compared to same period last year. Indonesia is also

importing around 481 thousand tons of cement during January – June

2012, or increase by 5.3% compared to same period in the last year.

Indonesia is importing clinker from Taiwan, South Korea, Vietnam, and

Malaysia, and also importing cement from Malaysia and Vietnam.

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Price:Indonesia’s cement price movement is influenced mostly by

several factors:

1. Coal Price

Around 30-40% of cement production cost is influenced by coal

price. Coal Cement factory needs around 30% of hard choking coal

and 70% of low-medium calorie coal. During last quarter of 2011,

the limited supplies of coal which has made the coal price

increasing has also influenced many manufacturers to increase

their cement price.

2. Electricity Price

Indonesian government under Ministry of Energy and Mineral

Resource regulation No. 30 Year 2012, is raising the electricity

price gradually at each quarter until achieve 15% of increase. The

15% increasing is predicted will affect production cost by 5%.

In 2009, PT. Semen Gresik as a state owned enterprise has signed

business to business cooperation agreement with PT. PLN to

supply electricity of 187 Mega Volt ampere with 0.089 US$ per

kwh. This situation makes PT. Semen Gresik is not influenced to

electricity price movement.

IPMI | 63

3. Industrial Fuel Price

According to corporate secretary of PT. Indocement Tunggal

Prakarsa, around 1/3 of energy use in cement production is

powered by fuel oil. The increase of fuel oil price by 15-20% is

considered will also increase the production cost by 10-20%.

4. Transportation/Logistic Cost

According to World Cement (www.worldcement.com), the lack of

proper infrastructure in transporting cement has made the

Indonesia cement price is amongst the highest in Southeast Asia. 

Since the cement price is also affected by market mechanism

(supply – demand), the lack of infrastructure which hampers the

cement supply is causing higher price.

Social Factors

The rise of middle- class sector is also a major factor in contributing to

Indonesia’s GDP growth. According to a World Bank report, each year seven

million people join the ranks of Indonesia's middle class and their subsequent

consumptive behavior and demands give rise to new housing and real estate

development.

IPMI | 64

The cement industry in Indonesia consists of both the organized sector and the

unorganized sector. Organized sector comprises of the well-known cement

manufacturing companies while the main players of the unorganized sector are

the regional and local cement-producing units in various states across the

country. Indonesia consumers prefer buying branded cement like Semen

Indonesia, Semen Tiga Roda and, Holcim

Technology Factors

The Government of Indonesia plans to study and possibly acquire new

technologies from the cement industry of world. The government is discussing

technology transfer in the field of energy conservation and environment

protection to help improve efficiency of the Indonesia cement industry

4.1.2 PORTER’S 5 FORCES ANALYSIS

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Figure 4.1 Porter Analysis

Rivalry within the Industry

There are nine (9) cement manufacturing company that have the production unit

in Indonesia. In Figure 10, it will illustrate the Market Share of the three (3)

biggest players within the industry. The Market is clearly dominated by Semen

Gresik (45%), followed by Indocement (30%) and Holcim (15%).

This also shows that the competitions are very strong among these Industry

movers and with the coming economy growth, it will only get stronger.

Figure 4.2 Market Share of National Cement

Competitor Analysis

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The purpose of this study depicted below in Table 4, is to identify in terms of

Semen Merah Putih positioning related to two (2) of the biggest player within the

industry, Holcim and Semen Tiga Roda.

Holcim Semen TigaRoda Semen MerahPutih

No Since 1971 Acquire semen CibinongBecome Holcim 2006

1985,Indocement 1982 Chinfon Cement Become Semen MerahPutih 2011

1

2

3

4

5

Products -SerbaGuna-Smooth Fibre-Ready Flow-Ready flow plus--Holcim durable-Extra Durable-Drillwell plus

-Portland Composite Cement (PCC)-Ordinary Portland Cement (OPC)-Oil Well Cement (OWC)-TR30 White Skim Coat-White Cement-Ready-Mix Concrete-Aggregates (produced by Indocement’s subsidiaries)

-Type I Portland Cement (Grey Cement)-Mortar Cement-White cement

Price - - -

Place Maloko, Jawa Barat,

Jeladri, JawaTimur

Jawa 40,7% to 41,7%,

Kalimantan, 28,9% to 30,1%

Promotion strategy

The Company did advertising

on ATL and BTL

The Company did advertising on trucks, buses, and transporting container products Indocement. Advertising in print and electronic media such as billboards, television and radio carried out intensively

-One of the major events is the 2012 Indocement Awards, which is the pride of the Company. The program aimed to the contractors, developers, university students, researchers and public. The theme of 2012 Indocement Awardsis Beyond Innovation

-The Company did advertising on trucks, buses, and transporting container products Indocement. Advertising in print and electronic media such as billboards.

Table 4.1 Competitor Analysis

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Threat of New Entrants

There are some barriers that make it hard for new entrants to enter into the market.

High Capital: Investment required establishing a cement manufacturing

company is categorized as high. Cost to produce 1 ton of cement is

approximately USD 150 – 175, depend on the production capacity. The

capacity for warehouse is also different among the factories. Usually the

factory has to prepare the warehouse capacity for 3 weeks stock reserve,

and this could charge them with high cost depend on the production.

Economic of scale: The existing companies have the advantages from

economies of scale, because they already established for years and have

higher production capacity. Commonly, a new factory will not directly

produce a high production capacity. It will start with low capacity first,

and raise it with along with increase of demand. As a result, the existing

company will have the advantage in Economies of scale.

High Switching cost: High switching cost make it difficult for customers

to change products they normally use

We can conclude that the possibility of new entrants to enter the market is exists,

but they have to face several barriers of entry. Therefore, we can categorize these

factors as low threat.

IPMI | 68

Threat from Substitute Product

Cement is the main material to support the infrastructure development in

Indonesia. For now, research and development in substitute material to replace

cement does not exist yet.

Bargaining Power of buyer

Buyer power exists when only one buyer exists in the market (monopsony), which

makes the power entirely in the hands of the buyer. In the cement industry, power

of buyers is limited due to the lack of substitutes.

Bargaining Power of Supplier

Main materials for cement production are Limestone and Clay. Usually, a cement

manufacturing company owned or has partnership agreement with the mining

company that have the exploitation right. So, the bargaining power should not be

very high because they have their own agreement.

From the equipment supplier point of view, there are plenty of companies that can

provide the firm’s needs for equipment. However, because the equipment is

typically specified for the cement processing only, the equipment might be

expensive because it needs certain customization.

After analyzing several facts above, we can conclude that supplier for raw

material and equipment is very essential for cement industry. Nevertheless,

because of partnership agreement with raw material supplier factor and there are

several company that could provide the needs of equipment, we can categorize

this factor as medium

IPMI | 69

4.1.3 SWOT ANALYSIS

In the last segment of the analysis, the writer will use SWOT analysis

framework by Albert Humphrey to allow easier overview of the industry. The

analysis is categorized into: (1) Strengths; (2) Weakness; (3) Opportunities; and

(4) Threats.

Figure 4.3 SWOT Analysis

4.1.3 A. SWOT Analysis Framework

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The objective of this study is to clearly define the influencing factor of

cement industry in Indonesia and what are the main key factors that can be

integrated to bring positive impact and advantages for Semen Merah Putih Brand.

Strengths:

Durability : Robustness of cement quality is a distinctive trait that every Cement

manufacturer should have.

Environmentally friendly : Merah Putih Cement advanced technology in its Cement

production is able to decrease significantly Carbon Dioxide (CO2)gas emission.

Trusted Quality : Cement produces by Merah Putih are imported from Chinfon

Vietnam who has a long list of outstanding awards and recognition.

Efficiency : The technology owns by Chinfon utilize less time and energy.

Weakness

Merah Putih is still import their Cement from Chinfon in Vietnam this lead to high

operation cost.

Merah Putih brand is still a new player in the Indonesia Cement Industry.

Opportunities

Foreign Direct Investment in Infrastructure makes more room to sustain growth.

Infrastructure and Housing development

No Substitute

Threats

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Existing Competitor

The market conditions has been controlled by the big players

New Competitor

Economic inflation have a significant influence on the cement Industry

IPMI | 72

SWOT

STRENGTHS-DURABILITY

-ENVIROMENTALLY FRIENDLY

-TRUSTED QUALITY-CEMENT PLANT DEVELOPMENT

- EFICIENCY

WEAKNESS

- IMPORTED- OPERATION COST-UNKNOWN BRAND

OPPORTUNITIES

- HIGH MORTGAGE-EASY HOUSING LOAN-INCREASE INVESTMENT INFRASTRUCTURE

S+O : -Premium class product, edge competitiveness-Penetration in Java-In collaboration with developer

W+O-Established factory will reduce cost-Optimize existing stock until the factory

THREAT

-EXISTING COMPETITOR- NEW COMPETITOR- INFLATION

S+T :Service to distributors and customers so that

they are loyal-With which they build factories in Indonesia

shipping cost and production cost price

will minimize competitiveness

W+T : Ensure

availability of stock levels.

Set up factory building. 2015

-Expanding

Table 4.2 SWOT Analysis Framework

4.1.3 B. SWOT Analysis Elaboration

S+O: Strategies to make use of Opportunities through Strengths

Compete on quality basis:

Semen Merah Putih should utilize its Brand Premium quality in

competing in larger and broader market, for example Government

Infrastructures, Real Estate and High Rise building.

Concentrated on BTL strategy, for efficiency

Specific penetration strategy for cost reduction:

Capture direct specific market, which can have a sustainable

relationship so, that minimizes budget spending for promotion

or advertising.

Use other media tools for advertising, creative promotion:

Creating brand awareness can be challenging and thus Semen

MerahPutih can find other media tools for introducing their brand.

Right segmentation and positioning: Identifying and

Concentrating on the right market will be a great advantage for

competitiveness.

S+T: Strategies to prevent Threat through our Strengths

Enhancing price competitiveness with the new factory in

Indonesia:

The new build factory in Bayah will surely give Merah Putih

effective and efficient distribution

Expanding distribution to other areas:

Identifying potential unknown market can give Merah Putih an

advantage.

Working together with developer projects to ensure market

growth:

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Maintain great relationship with Projects Developer and possibly

creating a rich client database to ensure growth.

Capture market share by aligning distribution need using Top

Products: Optimizing the most suitable product for specific

projects will give maximum consumer satisfaction.

Optimize selected product differentiation with premium price:

Stays positively focuson the right product, rather that concentrating

on pre-mature differentiation.

Co-operation with other neighboring countries to keep up with

market trends: Being able to know what are the market trends

regularly through other emerging countries who   share the same

industry will be valuable.

Give incentives to Distributor and customer:

Use creative marketing and sales strategy for consumers.

W+T: Strategies to minimize the potential dangers in the Industry where our

Weakness meets   Threats

Ensuring stock level in Distributor:

Making sure Product Availability and readiness in Distribution channel

can minimize potential competitor risk.

Speed Up factory building as soon as possible.

W+O: Strategies to make use of Opportunities to minimize Weakness

Build marketing team:

Developing a solid marketing team to assist and help with in-field

situation

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Hire business consultant business development:

Utilize the help of Consultant to develop  a strategic business plan and

business development.

Build cement communities distributor for input and output:

Create a community for clients and maintain regular meetings for

discussions and agenda.

New Investors in Indonesia Cement Industry

The increase in cement consumption in the country especially during the

year 2011 until about 2012 making some producers in Indonesia continue to

compete to increase its production capacity by building a new factory unit which

is expected in the next 2-3 years to operate normally and could produce to meet

the needs of cement in the country .

In 2012, the number of existing installed capacity amounted to 56.82

million tons; cement demand in the country is expected to reach 52.8 million tons.

In the next three years if the average cement demand grew by 10 % every

yearthen expected cement demand in 2015 will reach 70.2 million tons.27 If we

see from some of the above data, then if in the next 3 years in Indonesia there is

no additional capacity from existing plants it stands to Indonesia will experience a

' shortage ' or cement crisis, given the ongoing development of this now so rapidly

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27Asosiasi Semen Indonesia, June, 2012and in same time with a large scale, not to mention the level of demand for

property higher.

No. Project Name / Investor Capacity/ yr. Location

1 China Anhui 10 juta ton Kalsel/Kaltim/Kalbar/Papua Barat

    2,5 juta ton Tanjung, Kalsel

2 China Trio Int. Engineering Co. Ltd 1,5 juta ton Subang, Jabar

3 (SDIC) State Development and Investment Cooperation

1 juta ton Papua

4 Siam Cement Group – Thailand

(Akuisisi Boral/Jaya Readymix)

1,8 juta ton Sukabumi, Jabar

    1,2 juta ton Bayah, Banten

5 PakuBumi / Semen Karawang

PT Jui Shin Indonesia

2,5 juta ton Karawang, Jabar

6 PT Semen Grobogan /

Gajah Tunggal (China Triumph IntEng Co Ltd – CTIEC)

1,5 juta ton Grobogan, Jateng

7 Wilmar Group 2 juta ton Banten

8 Ultra Tech Cement – India 4 juta ton Wonogiri, Jateng

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Table 4.3 Indonesia Cement Market

The above data and table shows that the Indonesia’s Cement market is

completely open for grasp from the private sector mostly. This will give equal

opportunities for Semen Merah Putih to be as competitive as possible.

4.1.4 General Key Success Factor in Cement Industry:

1. Quality productwith SNI

2. High brand awareness should be strong to get the market

3. Relationship with distributor is important because they sell the product

4. Strong team marketing to introducing brand to the market

5. Cost efficiency to ensure specific allocation of spending cost

(As summary from  PEST and SWOT)

4.1.5 Elaboration of Key Success Factors

1. By ensuring product quality using SNI standard and Chinfon Cement

system, Merah  Putihis able to increase market competitiveness to

distribution channel.

2. Working with big developer and real estate agency to capture deeper

market penetration and segment.

3 Maintain Distribution channel widely not only local but possibility

outside Indonesia

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4. Utilize marketing and sales team to promote Brand Merah Putih to

every area

5. Specific segmentation will generate costreduction and time efficiency.

4.1.6 Key Strategies from SWOT, PEST and PORTER’S Analysis

1. Invest more to production to ensure Quality Standard

2. Create a solid marketing team in order to increased brand awareness to

the public

3. Manage cost spending by allocation to top priorities e.g. Production and

technology

4. Pay attention to overseas market, especially the developing neighbor

countries such as Vietnam, Laos, Philippine and Cambodia

5. Identify new market possibility by keeping up to date to economy and

industry

6. Allocate resources in big city and secondary city areas and gather

information and brand awareness.

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4.1.7 Semen Merah Putih Ideal Marketing Strategy approach

Viewing its vision and mission, the company has to put it into a strategy to

go through Indonesia market for the first time. After did an informal interview

with the manager of marketing division, the marketing strategy of the company

can be summarized as follow

1. Introduce the market with a premium product to close the gap with the

existing companies in the market.

2. Use direct selling and distribution to capture the market from varies

segment.

3. Use the penetration for every area

4. Focus on the after sales service to maintain customer’s loyalty and

distibutor.

5. Concentrate the promotion and selling on the West Java area first.

6. Pay attention to overseas market, especially the developing neighbor

countries such as Vietnam, Laos, Philippine and Cambodia.

7. Not reduce the price, but create a differentiation and value of the

product

Semen Merah Putih, as a new brand has developed and organized

marketingplan that focused in Segmenting and Targeting the market itself. In

cement market, its segmentation can be divides into several segment based on the

customer’s needs and preferences.

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Based on the theory of Market Segmentation and Targeting, the way to

segment the market can be various. Every market has the different variables, but it

would be better for the company if the segments were divided again into more

specific segment based on its characteristics, so the strategy to reach the potential

customers will be more accurate.

For the Household segment, the company can divide type of customer

based on the geographical area and income. Geographical segment can categorize

the customers based on their location, structure of the land, typical weather of the

environment, etc. Meanwhile, based on their income, the customers can be

divided into low, medium, or high income.

For the construction segment, the company can divide the characteristic of

the segment based on the use of the construction. The type and requirement of

materials for commercial construction and public infrastructure construction will

be different.

On the other hand, in targeting the market it’s better for the company if the

company focusing on one market specific segment at first, considering that they

are still on the introduction stage. The company can be more focus in introducing

their brand to the market, deliver the message to the customers, and build brand

recognition.

Basically, every type of segment has different characteristic. Although the

company is already select the construction industry as their main target, they

could select more specific target based on the further segmentation recommended.

The commercial construction would be an ideal target for this stage, considering

they want differentiation as their positioning.

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4.1.8 Marketing Mix based on Product Life Cycle Theory

Just like a biological creature, each product has its own life cycle, as

explained on the literature review. Implementation of the strategy and risks on

each stage is different because the basic objective is also different.

On the earlier stage of life cycle, the basic objectives are to introduce product

line to the market and build brand recognition from existing customers. In the

condition of Semen Merah Putih, the product has to be able to penetrate the

domination of the existing product that has the advantage in term of brand

recognition.

Product

Product strategy for Semen Merah Putih is to create a high end or premium

product in order to close the gap between Semen Merah Putih with other existing

product.

Ideally based on the theory, in introduction stage a company should provide the

market with high quality product in order to gain customer’s trust. So basically,

the strategy is already ideal.

Price

Basically as a commodity product, cement price is inelastic. Price for cement has

its own standards, and reducing it will not affect much on the sales. So the

company strategy is more on creating product differentiationthan reducing the

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price. This strategy is already fit with the theory, but thecompany needs to be

more detail what kind of differentiation they want.

Place or Channel

Based on the interview, the focus of the company is to build the distribution

channel on the West Java area first. This strategy is fit with the theory. In

addition, considering that the market is shifting towards outside Java Island, the

company must start to think to build distribution channels to outside Java Island,

especially for East Indonesia Area.

Promotion

Semen Merah Putih started to enter the national market in April 2012. Ninety

percent (90%) of the market are controlled by the big players. For now, Semen

Merah Putih is investing in Branding and Marketing effort to introduce their

product out on the market.

Branding will be educated to end user, such as home owners, contractors and

distribution shop. Semen Merah Putih is also provide a wide range of trade

promotion gimmick that can trigger them to sell the product at the same time

recommending Semen Merah Putih brand.

In addition, promotion and advertisement through media mass, such as TVs and

radios is also in progress to capture broader public segment. Last, Semen Merah

Putih have already held Promotional Campaign, in part of Branding Strategy to

create awareness by inviting small distributors and retailers to come and join with

their families together.

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CURRENT

STRATEGY

GAP IDEAL

STRATEGY

ACTION

PLAN

Enter the market with Premium Product

Low brand awareness

Trust

o Use differentiation

o Select target market

Create innovative branding and advertisement

Established customer and distributor’s loyalty

Trust o Educate Customers with Product strngths

Use incentives and create programs to gain loyalty

Cement is imported from Vietnam

High operation and shipping cost

o Build production facility

Factory in Bayah is under progress

Figure 4.4 Strategic Development model

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CHAPTER 5

CONCLUSION AND RECOMMENDATION

5.1 Conclusion

In Indonesia cement industry has reached a phase where the big players have

dominated the market for a period of time. For a new Brand to enter the market it

needs to have a structured marketing plan, feasible strategies and targeted forecast

for the future. Thus, knowing and understanding the market becomes an essential

factor. Strategic marketing plan will be the main guideline for the company in

order to enter the market.

Structured Marketing Mix will be useful for the company as one of the pattern

to penetrate the market according to the product life stage. Meanwhile, Industrial

Analysis using Porter 5 Forces Analysis will give the company benefit in order to

give a clearer description about national cement industry.

In addition to that, market segmentation, targeting and positioning will give

the company a better direction the company so their strategy can work effective

and accurate, and fit with their specific target market.

For Semen Merah Putih after analyzing the strategic marketing plan of the

company, we can conclude that their marketing strategy can be improved further.

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Using the tools that already mention in the Chapter 2 and Chapter 4, hopefully

this report and its recommendation could help the company to decide and plan

more accurate strategy.

5.2 Recommendation

There are a few recommendations that I strongly believe applicable for

PT Semen Merah Putih and could help them in their strategic marketing aspect.

a. Segmentation: Divide their segment into more specific segment.

For Premium Brand maybe, they still can divide the market into

more specific segment based for the Household segment

(geographical area and income of customers) and Construction

(commercial construction and public infrastructure).

b. Targeting: Ascertain the commercial construction industry as their

main target market in the introduction stage.

c. Positioning: Decide what differentiation that would be chose more

specifically.

d. Promotion : Other than advertising, the company can consider to

use public relation and personal selling as the promotion modes

with the consideration of commercial construction as their main

target market

e. Using digital marketing and media as one of the promotional tools,

because in this era, this tool could be more effective and accurate

than the conventional way.

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In addition, Semen Merah Putih brand can develop an Annual Strategic

Projection Plan. The objective of this plan is to assess several aspect. They are;

1. Where is Semen Merah Putih Brand currently now? In terms of e.g

Sales, Distribution aspect, Brand awareness, etc.

2. What step(s) are in order of priorty need to be done?

3. Where they want to be one, two or five years from now?

4. How can Semen Merah Putih handle competitors rivalry?

5. Which competitor is the most noticeable and exist in the Industry?

These are just some of the many Strategic development approach that

Semen Merah Putih can conclude to bring the best out of their new Brand.

Based on the author studies’, the great Cement Companies like Semen Gresik, has

been developing an annual projection reports and forecast. The contents might

vary from year to year but several apects that worth to be noted are:

1. Current Industry analysis is performed

2. Economic growth and Cement Consumption.

3. Domestic consumption

4. Key Drivers for Domestic Cement Demand.

5. Market Segmentation status. (Geography)

6. Strategic focus for the future.

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These elements help Semen Gresik to be on the top of the Industry for quite

some time. If Semen Merah Putih can find the most suitable Strategic Plan and

Business development projections, they will be ahead as well.

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