CHAPTER 1 INTRODUCTION CHAPTER 1: CASE DESCRIPTION 1.1. BACKGROUND
Growth is one of the essence of a business. Without growth, a company will not be able to survive in rapid changes and toughness in the industry now a days. Even when a company grows, it does not mean that the company has save its future. How about the growth of its competitor? Do they also have the same growth? Or even higher? How about new competitors coming in with a new technology? In order to keep its sustainable growth over its competitors in the industry, then a company has to build distinctive competitive advantages that favorable to its customers. These competitive advantages should also be maintained and changed if necessary according to the global trend and technology changing that impact to the business. Therefore, the relentlessly seeking new opportunities and adding new and distinct capabilities become very important to a company in order to sustain its profitable growth. According to Chakravarthy and Lorange, “commitment to profitable growth is also a commitment to continuous growth”.1 Thus, if a company
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Bala Chakravarthy & Peter Lorance, Profit or Growth?, 2007, p. 19
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pursue to have a growth – with profit include in it, then it has to have a continuous spirit of growth. Strategy is needed to grow. A healthy grow cannot be expected by just waiting the time to reveal it. In order to pursuit a long lasting profitable growth, a company should have a growth strategy that carefully crafted, clear and simple, which provides the best means for a business leader or entrepreneur to maximize corporate value. (Finkelstein, Harvey and Lawton 2007). On the execution side, a profitable growth should be supported by entrepreneur-managers and renewal sponsor, who initiate or foster the strategies and lead the execution. The main role of the manager is managing all the resources to make sure the correct and smooth implementation of the strategies. Therefore, the style of leadership of the manager will determine how the strategies will be executed. PT. Adira Dinamika Multi Finance, Tbk (Adira Finance) as one of prominent player in multi finance industry in Indonesia, has an interesting history of growth. Start from a car financing company founded in 1990, Adira Finance has shown a tremendous growth in the period of 2001 – 2008. This thesis will elaborate strategies of Adira Finance to grow and how they renew their strategies from time to time, with the leadership style of its President Director.
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1.2. PROBLEM STATEMENT
Multi Finance industry in Indonesia have a significant growth in the past three years. Data Consult reported in 20072 that the multi finance industry has expanded by 15% annually on the average according to the data given by The Association of Financing Company (APPI). The expansion followed by improved condition of the country's economy. The gradual cut in SBI (Bank Indonesia promissory note) interest rate to 8% by the end of 2007 (and 6,5% by October 2009 – see Table 1. BI Rate) contributed to the growth of the multi-finance industry. The industry is dominated by leasing and consumer finance especially car and motorcycle purchase financing. The two financing systems contribute 95% to the total value of financing business in the country. The expansion of the multi-finance industry is reflected by its assets. Total assets of multi-finance industry was recorded at Rp 127.26 trillion by the end of 2007, up 17.5% from Rp 108.34 trillion in the previous year. The total asset value, however, still fell short of the target of Rp 130 trillion set by APPI. Yet, not every multi finance company enjoys a profitable growth, or even a growth. Data Consult reported that in 2007, the government suspended the operation of a number of multi-finance companies for a number of reasons - poor performance and violation of regulations. Among the companies were PT. Artamas Multi
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source: http://www.datacon.co.id/multifinance%20industry.html, 20 September, 2009
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Finance, PT. Air Multi Finance Corporation, PT. Infiniti Finance, PT. JRD Finance Utama, PT. Primarindo Finance Corporation, and PT. Primadana Putra Finance. Adira Finance as one of the player in multi finance industry has been faced the same challenges that other multi finance companies faced. How did Adira Finance overcome the challenges and come up as a winner as it become the largest multi finance company in the country with leap-frog profit achieved in 2008? What was the strategies applied and how did Adira Finance applied the strategies? How important was the role of Mr. Stanley Setia Atmadja, the President Director, in crafting and executing the strategies applied? How did he lead the execution of the strategies? What kind of leadership style shown by him in leading his team toward the achievement of those strategies?
1.3. SIGNIFICANCE OF STUDY
The goal of this thesis is to learn and make an example of how an Indonesian company renew its strategies from time to time through new market and new distinctive competencies approach in order to sustain its profitable growth and how an entrepreneur-manager needed to support the strategies execution.
The benefits are: •
For company, to understand and compare or use it as an example / reference for their own business strategy in the future.
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For academic view, this thesis can be used to gain some understanding and examples on how a theory works in business world.
1.4. SCOPE/ LIMITATION
The scope that will be analyzed within this thesis would be limited to the renewal strategies developed by Adira Finance to sustain its profitable growth during 1990 – 2008 and leadership style shown by the President Director, Mr. Stanley Setia Atmadja.
