Gbe presentation

General Business Environment

Presented by Bambang Wijarnako

Ex. 33 A – MMUGM Jakarta

(Case Study – PT Borneo Alam Semesta)


The Content

Indonesia’s Coal Mining Industry at a glance

Company Profiles – PT Borneo Alam Semesta

Industry’s Macro Environment

Ultimate Threats of Industry’s Macro Environment

Ultimate Opportunities of Industry’s Macro Environment

Recommended Actions

Characteristic of Mining Contracting

Indonesia’s Coal Mining Industry at a glance


Indonesia’s Coal Mining Industry at a Glance

3 % Global Coal Reserve

5 times production’s growth between 2000 - 2012

Contribution to Indonesia’s Gross Domestic Product 4 %

China has been The top Indonesia’s coal importer since 2009

Negative Trend on World’s Coal Price Index since January 2012

Coal’s export to China declined in 2013




Capital & Labor Intensive

Business to Business Agreement (Mining License holder and Contractor)

Single or Double Rate Contract Price

There is a specific government regulation regarding mining operation

Most of mining area located in the remote area

The main consideration for the contract are the price and safety record.




Established in May 2005 as a coal mining and heavy equipment rental company in South Kalimantan

In 2006, BAS had heavy equipment rental contract with PT Putra Perkasa Abadi and PT Bokormas Wahana Makmur

In 2008, BAS have secured contract as a Mining Contractor for PT Jorong Barutama Grestone

In 2010, BAS have secured contract as a Mining Contractor for PT Trubindo Coal Mining

In 2012, BAS have secured contract as a Mining Contractor for PT Pinang Coal


Company Profile – PT Borneo Alam Semesta

In Oct 2013, BAS decided to pull off from Pinang Coal due to the payment failure.

Number of Employee : 1.070 (May 2014)




THE FIRM

Mo

netary &

Fiscal Po

licies


Demography

Impact LevelLow Mod High

Related Factors Population Structure based on age

Population Structure based on gender

Population Structure based on Education

Employment Structure based on Sector

Threats • Limited availability of Highly Skilled Man Power

• Lack of man power resources for leadership position

• Unbalance manpower structure based on gender

• The competency of existing experienced man power is not

suitable for mining operation.

√

√

√

√

Opportunities • Develop skilled man power from scratch for hard

competencies and soft competencies.

• Attach the training and development program for Local

Communities into Community Development Program.

• Opportunity to develop female operator √

√

√

Strategy Options • Develop training program on basic mining operation

competencies for local communities.

• Develop bridging training program for man power from

other sectors regarding mining operation.

• Develop training program for female operator √

√

√


Social Environment


Related Factors Issues on Local and Non Local Employee

Pressure from Local Non Government Organization (NGO)

Kinship Relation Among Employees

• Threats • pressure to recruit the employee from local community with

very limited experience and competencies which will affect

company productivity.

• High cost of operation due to the additional activities in

approaching local NGO and traditional leaders.

• Difficult to apply the punishment to the employee when they

violate the regulation.

√

√

√

Opportunities • Opportunity to develop people surrounding the mining area

in line with company strategy

• Involving the NGO in the activities that suit with their

competency and provide the benefit for the company.

• Easy to spread the information to the employee

√

√

√

Strategy Options • Recruit the experience employee from the outside area and

backed up by the training and development program for local

people.

• Involving the NGO in supported activities such us security

and community development

• Communicate the company regulation properly in the

induction process .

√

√

√


Cultural Environment


Related Factors • Traditional Communities

Threats • Traditional ceremony which can affect the absence rate of the

employee.

• Violation of local rules by the employee from the outside

area.

√

√

Opportunities • Entertainment for employee form the outside area to

overcome boredom.

√

Strategy Options • Apply the regulation of the absenteeism firmly

• Include the local rules in the Induction Material √

√


Economic Development


Related Factors • Economic Growth

• Unemployment Rate

• Inflation

Threats • The weakening of economic growth could affect all economy

sectors.

• The inflation could affect the cost of labor

√

√

Opportunities • Unemployment rate due to the weakening of economic will

provide the company the broad selection of candidate in the

market.

• Increasing the opportunity to get the source of fund as a

result of weakening other sectors.

√

√

Strategy Options • Include inflation rate as variable to determine the general

salary increase.

• Put minimum wage as one of variable for raise and fall in the

contract agreement.

√

√


Monetary and Fiscal Policies


Related Factors • Interest Rate

• Taxes

Threats • The increasing of Interest Rate will increase the total cost

because most of fleet are acquired through leasing scheme.

• The new taxes will give the company additional expenses

√

√

Opportunities • If the company have good fleet maintenance system, the

usage of fleet which has ended the leasing period will

increase the company competitive advantage.

√

Strategy Options • The interest rate and Taxes should be considered when

proposing the price

• Develop the good fleet maintenance system to extent the

fleet’s economic life.

√

√


Information Technology


Related Factors • Internet & Email System

• Enterprise Resource Planning

• Social Medial

• Symmetric Information

Threats • Possibility to loss productive time of the employee

• Need to develop the new competency related with ERP

• High turn over rate

√

√

√

Opportunities • spread the information effectively and efficiently

• The opportunity to the develop The effective and efficient

business process

• Decrease the labor cost and transaction cost √

√

√

Strategy Options • Develop the clear regulation the usage of any Information

and communication System including the consequences of

the violation

• Develop the effective and efficient business process based on

available IT Infrastructure and system.

• Develop Knowledge Management System to develop

employee’s knowledge and competency.

√

√

√


Processing Technology


Related Factors • New Technology

• New Practices

Threats • New Technology required new investment

• New Practice required new business process and new

competencies

√

√

Opportunities • Opportunity to escalate the productivity and cost

effectiveness√

Strategy Options • Select the appropriate technology and business practices

which suitable with company strategy.

√


Natural Environment


Related Factors • Geographical Position

• Stones Lithology

• Topographic Condition

• Rainfall Rate

Threats • Distance between pit and port will determine the final cost.

• Harder stone will increase the mining Cost

• High SR as result of topographic condition will escalate the

mining cost

• High rainfall rate will decrease the production level.

√

√

√

√

Opportunities • The difficult natural environment condition will tend to the

higher price

√

Strategy Options • Develop operating plan which is considered Geographical

Position, Stones Lithology, Topographic Condition and Rainfall

Rate

√


Regional Economy


Related Factors • Regional Autonomy

Threats • Potential higher taxes as the result of new taxes applied by

the regency or province government to increase the local

revenue .

• Different minimum regional/sectoral wages for every mining

area.

√

√

Opportunities • Easier access to mining area as result of high regional

economy growth

• Industrial relation issue could be fixed in regency level

√

√

Strategy Options • Man power budget should be different for every area based

on the respective minimum wages.

• Operating budget should identify and include all local taxes.

√

√


Industry and Sectoral Environment


Related Factors • Demand and Supply of The Product

• Product Price

• Industry and Sectoral Performance

Threats • The decrease of coal price and demand will affect the

production target set by the owner.

√

Opportunities • The close out of some mining contracting company provide

the competent resource in the market.

• Opportunity to re-set the salary scale as the result of

Sectoral/Industry weakening.

• Best time for reconfigure the man power ratio and structure

√

√

√

Strategy Options • Slimming the organization and cut the most unproductive

employee to decrease direct and indirect labor cost.

• Review the over all business process to enhance the

effectiveness and efficiency of the operation

√

√


Governmental Environment


Related Factors • Minimum Wages Policies

• Occupational and Health , Safety and Environment

Requirement

Threats • The increasing of minimum wages are different among

regencies.

• Increasing operating cost as the result of implementation of

the OHSE Requirement.

√

√

Opportunities • More safety and healthier workplace business process could

escalate the company baseline.

√

Strategy Options • Rise and fall due to the change of minimum wages should be

different among projects.

• Comply all the business process to the OHSE requirement

√

√


International Political Environment


Related Factors • Economic Integration

• International Finance

Threats • Decreasing the barrier to entry for foreign investment into

mining sector.

• Increasing the industrial rivalry in mining contracting

√

√

Opportunities • Emergence the new investment or new project

• opportunity to have better price due to the different of

standard

√

√

Strategy Options • Implement the quality improvement framework to increase

the effectiveness and the efficiency of the operation

• Regular training and development program to increase

employee competencies and company core competencies.

√

√


Domestic Political Environment


Related Factors • General Election and other election

Threats • Disruption to mining operation in the election period

• Additional labor cost for the election day

√

√

Opportunities • Additional unscheduled maintenance period √

Strategy Options • Provide special incentive for employees who work in the

election day.

• Develop the clear regulation regarding the absenteeism in the

campaign period.

√

√




Demography • Limited availability of Highly Skilled Man Power

• Lack of man power resources for leadership position

• The competency of existing experienced man power is not

suitable for mining operation.

Social Environment • Pressure to recruit the employee from local community

with have very limited experience and competencies which

will affect company productivity.

Cultural Environment • Traditional ceremony which can affect the absence rate of the employee.

Economic Development • The inflation could affect the cost of labor

Monetary and Fiscal Policies • The increasing of Interest Rate will increase the operating

cost because most of fleet are acquired through leasing

scheme.

• The new taxes will give the company additional expenses

Information Technology • Possibility to loss productive time of the employee

Processing Technology • New Technology required new investment

• New Practice required new business process and new

competencies



Natural Environment • Distance between pit and port will determine the final cost.

• Harder stone will increase the mining Cost

• High SR as result of topographic condition will escalate the mining cost

• High rainfall rate will decrease the production level.

Regional Economy • Potential higher taxes as the relult of new taxes applied by the regency

or province government to increase the local revenue .

• Different minimum regional/sectoral wages for every mining area.

Industry and Sectoral Policies • The decrease of coal price and demand will affect the productiontarget set by the owner.

Governmental • The increasing of minimum wages are different among regencies.

• Increasing operating cost as the result of implementation of the OHSE

Requirement.

International Political • Decreasing the barrier to entry for foreign investment into mining

sector.

• Increasing the industrial rivalry in mining contracting

Domestic Political • Disruption to mining operation in the election period

• Additional labor cost for the election day




Demography • Develop skilled man power from scratch for hard

competencies and soft competencies.

• Attach the training and development program for Local

Communities into Community Development Program.

Social Environment • Opportunity to develop people surrounding the mining

area in line with company strategy

Cultural Environment

Economic Development

Monetary and Fiscal Policies • If the company have good fleet maintenance system, the usage of fleet which has ended the leasing period will increase the company’s competitive advantage.

Information Technology • spread the information effectively and efficiently

• The opportunity to the develop The effective and efficient

business process

Processing Technology • Opportunity to escalate the productivity and cost effectiveness



Natural Environment • The difficult natural environment condition will tend to the

higher price

Regional Economy

Industry and Sectoral Policies • Opportunity to re-set the salary scale as the result of

Sectoral/Industry weakening.

• Best time for reconfigure the man power ratio and structure

Governmental • More safety and healthier workplace business process could escalate the company baseline.

International Political • Emergence the new investment or new project

• opportunity to have better price due to the different of

standard.

Domestic Political

Recommended Actions


Recommended Actions

• Develop training program on basic mining operation competencies for local

communities.

• Develop bridging training program for man power from other sectors regarding mining

operation.

• Recruit the experience employee from the outside area and backed up by the training

and development program for local people.

• Communicate the company regulation properly in the induction process .

• Apply the regulation of the absenteeism firmly

• Include inflation rate as variable to determine the general salary increase.

• Put minimum wage as one of variable for raise and fall in the contract agreement.

• The interest rate and Taxes should be considered when proposing the price

• Develop the good fleet maintenance system to extent the fleet’s economic life.

• Develop the clear regulation the usage of any Information and communication System

including the consequences of the violation

• Develop the effective and efficient business process based on available IT Infrastructure

and system.

• Develop Knowledge Management System to develop employee’s knowledge and

competency.


Recommended Actions

• Select the appropriate technology and business practices which suitable with company

strategy.

• Develop operating plan which is considered Geographical Position, Stones Lithology,

Topographic Condition and Rainfall Rate

• Man power budget should be different for every area based on the respective

minimum wages.

• Operating budget should identify and include all local taxes.

• Slimming the organization and cut the most unproductive employee to decrease direct

and indirect labor cost.

• Review the over all business process to enhance the effectiveness and the efficiency of

the operation

• Rise and fall due to the change of minimum wages should be different among projects.

• Comply all the business process to the OHSE requirement

• Provide special incentive for employees who work in the election day.

• Develop the clear regulation regarding the absenteeism in the campaign period.


Thank You