1.

0 CASE SUMMARY

The case tells the story of the Rodamas Group, where Rodamas means “golden wheel”.
Rodamas Group owned by the ethnic Chinese Tan family in Indonesia. Rodamas was
engaged in variety of businesses. These included food, healthcare, personal care and
hygiene, chemicals, glass, diamond coated tools, building parts and components, printing
and packaging and consumer product distributions. Rodamas was started By Mucki Tan’s
father Tan Siong Kie in 1951.

The company started as a trading firm and, over time, became a joint venture
partner in manufacturing businesses with a range of mainly Japanese partners after
Indonesia started to embark an industrialization program in the late 1960s. In the 1980s the
company continued to grow and prosper until it became part of the top business groups in
Indonesia. The Rodamas was done a lots of partnership with others company such as Japan
and a few in United State. The role of Rodamas in these partnerships was to deal with local
regulations, hire local personnel and distribute the products in Indonesia.

When the then President Suharto was toppled in the Asian Crisis in 1998, Indonesia
underwent several drastic changes, including the transition to democracy. This changes has
huge impact on Rodamas businesses. Its economy became more open, and foreign firms
were allowed to operate in the country without having a local partner. In addition, several
global business developments, including the tendency of multinationals to rely on lawyers
and consultants rather than local equity partners, threatened the Rodamas business model.

On the other hand, with the increasing standardization of product worldwide, it make
Rodamas difficult to convince Rodamas’s partners to adapt a product to fit local market
demand. Lower demand for various products was predicted which would impact Rodamas’s
cash flow.

In view of this, the current leader, Mucki Tan, is reconsidering the future of his
company and weighing a few strategic options to which are internationalize with existing
partners, develop own businesses that need little technology, such as property, buy existing
manufacturing firms, focus on distribution of products for foreign multinationals, focus on a
traditional partnership role with a new wave of foreign direct investment (FDI) from
developing market multinationals, more specifically, China.

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2.0 PROBLEM STATEMENT

2.1 What are the core competencies of Rodamas? Are they sources of
sustainable advantages?

Some of the core competencies of Rodamas group in my opinion are High Management
competency of the management relative to other business professional in Indonesia which
enabled them to understand international business and form partnerships. This is because
mostly Rodamad was involved with partnership with company outside the Indonesia.
Rodamas has a strong knowledge in terms of the regulation, markets, and also the standard
of the international businesses. By having these advantages, Rodamas was able to get the
opportunity to expand their businesses outside Indonesia.

On the other hand with the conservative management style which enabled the
company to grow steadily without any financial risks and also stay under the radar of
bureaucracy. Mucki Tan and his father have a same style when it comes to the management.
Both of them appeared to be more conservative and risk-averse and had a preference for
slow and steady growth rather than applying a high risk high return strategy.

Rodamas also has strategic connections to foreign companies across the globe as
well as with the local government and businesses which helped smooth obtaining of licenses
land and other requirements. This can be prove by having a partnership with the Japanese
firm. These Japanese partners of Rodamas played the most significant role in the success of
the company. while the Japanese were in charge of technology and production, they tended
to involve the Rodamas management in making decision and they tried to avoid potential
conflict.

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2.2 What are the main characteristics of the business environment before and
after the 2008 Asia Financial crisis?

2.2.1 Before

The business environment was thriving in Indonesia before the crisis with strong growth and
in terms of value of the Indonesian currency with respect to the US dollar. Post crisis, most
companies went bankrupt as the value of the Indonesian currency plummeted and the cost
of their loans which they had converted to US dollar had sky rocketed. This crisis led to the
closure of several players and created opportunity for Rodamas in the market in terms of
expansion and acquisitions.

The crisis also marked the end of Suharto which led to establishment of a new anti-
corruption regime. It also moved the country towards a more open economy in which tariffs
and trade barriers had come down. This made the business landscape for Rodamas more
competitive than before.

Many of the protective measures were removed. 100% FDI was allowed into most
sectors which allowed foreign players to directly enter the market! giving rise to competition
as well as eliminating the need for a local partner if the company chose to. This policy had a
direct impact on business strategy of Rodamas of forming ventures and could potentially
alter the competitive landscape and market opportunities.

2.2.2 After

There were noticeable changes in the governance practices in multinationals. There were
tightening laws on corporate governance and stricter accounting rules which made
multinationals to use lawyers and consultants for rectifying local issues rather than using
local partners. Thus, the role and say of companies like Rodamas was reducing in their
ventures

Additionally, the crisis created a shift in the companies towards consolidation and
standardisation. This meant that it became difficult for partners like Rodamas to convince
their venture partners to adapt a product to fit the local demand. This often led to friction
between the partners as well and led to termination of several key alliances although the
business was performing well in the market.

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 The crisis also led to the rise of multinationals from emerging economies like China
and India. This created a window of opportunity for Rodamas to form new alliances on
favorable terms with the potential new parties interested in Indonesia.

2.3 How do such changes affect Rodamas core competencies?

Despite of the above changes, Rodamas still remains an efficient and trustworthy partner.
Although, direct FDI eliminates the need of any foreign partner the existing corruption and
bureaucracy coupled with the need for deep market penetration still keeps the need for
partners like Rodamas still alive. On the other hand, the source of temporary competitive
advantage is now even easier to break into. The opening of FDI creates the need for
Rodamas to create new competencies as the previous competencies may soon become
irrelevant. The group needs to focus towards building its owned expertise in terms of design
and manufacturing so that they can become self-reliant.

The company was also facing high attrition in its middle management due to the
above changes in the business environment which would make them loose vital human
capital which is one of the key reasons for its success in the local Indonesian market. The
company may also need to consolidate some of its businesses due to expected competition
and thus would loose out on its edge of having a foot hold in a breadth of businesses.

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3.0 ALTERNATIVE STRATEGIES

3.1 Internationalization with existing partners.

By having internalization with existing partners, Rodamas can establishing and managing
successful collaborations and partnerships. However, to be success with this strategies
Rodamas should have a strategic planning. It should be based on a careful planning process
that clarifies international goals and objectives, particularly with respect to final outcomes
which is the business goals. International collaborations should align with overall
institutional mission and priorities, and should take into account availability of financial and
personnel resources.

3.2 Develop own businesses that need little technology.

There's a fine line between too much and not enough. Spend too much on technology it will
consume your time and budget, leaving you ill prepared to do anything else on your
business. Rodamas should select a few of technology that will bring advantages to their
businesses. A little technology will help Rodamas to seethe real benefit, prevent the worst
disasters, and not miss out on any major opportunities, while not spending more than
Rodamans can handle. Rodamas need to hire a good consultant to help them use as much
quality free software in their business as possible.

3.3 Buy existing manufacturing firms.

By buying an existing manufacturing firms, there may be established customers, a reliable

income, a reputation to capitalise and build on and a useful network of contacts. Rodamas
does not have to worried about the future income however Rodamas need to make some
improvement on the manufacturing to add value on it. On the other hand, by buying an
existing manufacturing firms, a business plan and marketing method should already be in
place. Rodamas would cut the budget on this section and focus how to enhance and attract
potential buyers. Existing manufacturing firms must have existing employees for sure.
Therefore, Rodmas does not have to hired and train a new employees as there are existing
employees that should have experience that Rodamas can draw on.

3.4 Focus on distribution of products for foreign multinationals.

Due to economic crisis its created world wide opportunities that could be captured by
Rodamas. By focusing distribution for foreign multinational there is no need for doing

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research and development and innovation required. On the other hand, Rodamas has a
good record on previous foreign ventures.

3.5 Focus on a traditional partnership specifically China.

This strategy was in line with the company philosophy from the beginning. Rodamas was
known with their expertise with forming alliances with other company whether local or
oversea country.

4.0 SWOT ANALYSIS

At this point, it is vital to understand the strengths and weaknesses of the company and also
critically analyse each opportunity and the threat as well.

4.1 Strength

I. Strong and experienced management.

Mucki Tan was the only son of Tan Senior. He obtained his degree in business at
University of Portland in Oregon, United States. Mucki Tan joined the family business
in 1980 as a manager. The management divided the company into food, chemical,
construction materials and other businesses. The company had a process of training
its future manager internally. This is because Tan, like his father believed in
providing autonomy to the managers. Rodamas was proud of its management
trainee program and most of the managers that the company had moved up through
this program.
II. High understanding of local market and distribution channels.
Rodamas Group has a knowledge and understanding of the regulations and politics
of local markets as well for business outside the Indonesia. This is important as to
ensure that their businesses follow the standard to get know in-depth knowlwdge of
the market, consumer , regulators, the regulations, the opportunities and local
challenges. By knowing all of these matters it will helps Rodamas Group to strength
their businesses.
III. No specific competitors.
The competitors of Rodamas were diverse and there was no specific competitors as
the company was engaged in a variety of businesses. Rodamas engaged in numbers
of sectors. These included food, healthcare, personal care and hygeine, chemicals,
glass, diamond coated tools, building parts and components, printing and packaging
and consumer product distribution. By involving in a lots of different sector it will

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 generate more income because it will attract a lot of potential customer in the
different markets.

4.2 Weakness

I. High dependence on partnership.

Rodamas have done a lot of partnership contract. Partership is good to entering a
new markets, however too much rely on partnership may have negative effect to the
businesses. The possible of having an argument with the partner may arise if both
parties have different view of how the business should be conducted.
II. Conservative management style.
Mucki Tan and his father have a same style when it comes to the management. Both
of them appeared to be more conservative and risk-averse and had a preference for
slow and steady growth rather than applying a high risk high return strategy. Mucki
Tan was a very careful man and always made sure that his company abided by the
regulations. Conservative management style will lead to slow process on making
decision. The possibility that the manager may lose importance towards the
employees as the manager is seen to be unable to make a decision for himself/
herself.
III. Limited Research and Development.
Research and development (R&D) is a valuable tool for growing and improving your
business. R&D involves researching your market and customer needs and developing
new and improved products and services to fit these needs. Businesses that have an
R&D strategy have a greater chance of success than businesses that don't. However,
Rodamas Group did not take any step to make R&D for their business. Rodamas put
too much rely on the partnership.

4.3 Opportunity

I. Emerging consumer market, expansion opportunities.

Indonesia is a countries which have started to grow but have yet to reach a mature
stage of development where there is significant potential for economic. From the
case, Rodamas has found a lot of right local partner. Market entry strategy is crucial
and companies should think carefully about working with local partners. On the other
hand, Rodamas also have the strong knowledge about the market before entering
into the pool. This is important to gain a deep understanding of the market is crucial.

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 This includes the education system, competitors, the operation environment,
consumers and suppliers.
II. Opportunity to acquire businesses due to the financial crisis.
Financial crisis was happened of the late 1990s. Prior to the crisis, most companies
had converted their loans to U.S Dollar loans since interest rates were more
attractive.

4.4 Threat

I. Exchange rate fluctuation.

Exchange rates fluctuate due to many factors. Some may be strictly financial but
political events can also affect the exchange rates. In the case of the Rodamas, it
may have face this threat because of they do involve with foreign businesses.

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5.0 PORTER’S FIVE FORCE MODEL

Strategy Threat of Threat of Bargaining Bargaining Intensity of

new substitute power of power of competition
entrants consumers supplier
Enter the Low entry Low buyer High buyer Low degree Large pool of
market of barriers, low switching leverage, of local
manufacturing brand equity, costs, availability of differentiation manufacturers,
simple cost number of substitutes of inputs, limited scope
products for disadvantages, products probable high of sustainable
the local low product available in concentration competitive
Indonesian differentiation the market, of suppliers advantages
market low level of through
perceived innovation
differentiation
Enter the High entry Low to Low to Low degree Low intensity
consumer barriers. moderate moderate of bargaining of competition.
product Difficult to threat bargaining power As products
market and form alliances depending on power would mostly
products in a short type of be imports
time. business currently
Entering the High cost Strategic Relatively low Low degree Existing big
real estate barrier of location, high buyer of players,
business entry, cost level of leverage differentiation opportunity of
through advantage, perceived of inputs spatial
building and new business may be there differentiation
leasing of model by adopting a
office niche
property segment
Labour Existing High volatility Ease of Relatively low Low prevalent
intensive alliances, high means firms substitution, bargaining competition
manufacturing barrier for may move low perceived power of for this
by focusing others to form easily to level of suppliers particular
on the similar other differentiation because of model of
traditional alliances, advantageous between expected manufacturing

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role of foreign firms regions for partners scale of
partnership may directly higher profits operations
with enter
developing
transnational
corporation
market like
china
Internalization High entry Low threat Low Low to Low intensity
with existing barriers for from bargaining moderate of competition
partners like other firms, substitute power of bargaining expected in
Asahi in other already product consumers power of other Asian
Asian markets establish suppliers regions
like Thailand business and
global
presence of
parent
company
Entering the Establish Low threat as Moderate Low Low
consumer channel, deep company bargaining bargaining competition
products penetration, offers a deep power of power of expected from
distribution high cost of knowledge consumer suppliers middle to
business entry and and channels small scale
profitability for companies in
distribution need of
services

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6.0 RECOMMENDATION

After doing with all the analysis there a several recommendation that Rodamas can get it
done. The first recommendation is Rodamas should focus its core strength and vast
experience in distribution to act as a distribution and logistic provider to business. Through
the various alliances, the company already has a good understanding foreign partners needs
and can tie up with new firm entering Indonesia and increase the scale of this business. This
can lead to the larger market for Rodamas itself.

On the other hand, since the consumer purchasing trend is increasing, the company
should consider relying on its second core strength by forming further alliances allow
companies to enter Indonesia for various consumer products such as food and beverage and
other industrial products like chemicals, construction material to cater to corporate demands
as well. Divesting from its dependency should also be considered in the long term.

Next recommendation is it is vital to establish a competitive advantages. Although,

the very nature of competitive advantages makes it prone to attack by other rivals in the
industry and it may disappear over time. However, in my opinion the company should
consider adopting the following measures. Which are:
i. Exploiting the niche in the markets by new strategic alliances. This would require a
re-alignment of SBU’S and promotion of positive collaborative environment SBU’s to
leverage on each other strengths.
ii. The company should consider using IPO’s to finance ventures mentioned above.
This will free finances to jumpstart the integration projects mentioned above and
allow the group to have cash reserves in time of critical need.
iii. The company should convert its core distribution compentency into a strength by
spinning off a supply logisctic and distribution company to better manage the entire
process.
iv. Rodamas can also consider “technology transfer” in their allliances thereby
increasing their competence over time.

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7.0 CONCLUSION

For 
 people
 like
 Tan senior,
 it
 was 
 a 
 difficult
 and
 hostile
 setting
 in 
 which
 one
 had
 to
 navigate

carefully.
But
 it
 was
 the opportunities,
since 
many 
existing
 foreign
 businesses
 closed
 and
 left

a
 gap 
 that
 needed
 to
 be
 filled.
 
 In
 this
 context,
 with
 little
 industrial
 activity
 and
 no
 expertise
 to

produce 
even 
basic
 products
domestically,
 
 many 
business 
leaders
 focused
 on 
trade,
mostly

import 
 trade, 
 and 
 Rodamas 
 followed 
 this 
 pattern. 
 It 
 developed 
 partnerships 
 with 
 foreign 

manufacturers
and
 became
 their
 agent 
in
 Indonesia
.

Rodamas has been involved in consumer goods product, personal care and
household product medicated plaster, liniment and others. The case was reflected on the
strength of Rodamas’s core competence — a local partnership role in a difficult emerging
market – Indonesia .

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8.0 REFERENCES

Rodamas Group: Designing Strategies for Changing Realities in Emerging Economies

Harvard Case Solution & Analysis retrieved from
http://www.thecasesolutions.com/rodamas-group-designing-strategies-for-changing-
realities-in-emerging-economies-5011 on 19.04.2016.

Rodamas Group: Designing Strategies for Changing Realities in Emerging Economies

retrieved from https://hbr.org/product/rodamas-group-designing-strategies-for-
changing-realities-in-emerging-economies/909M49-PDF-ENG on 20.04.2016.

Rodamas Group: Designing the Portfolio Case Solution retrieved from

http://casesolutionsprovider.blogspot.my/2015/08/rodamas-group-designing-portfolio-
case.html on 23.04.2016.

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