The presentation slide for the final project (thesis) defense seminar off Nebrian Hardika in MBA ITB, Bandung, Indonesia

1. Strategy Formulation & Recommendation for
PT Gagas Energi Indonesia in Mini LNG Business
Nebrian Hardika
Final Project Seminar

2. Background
Indonesia in top 10
World natural gas
producers
But was in 23rd in
the natural gas
consumptions
Natural Gas
consumptions
of the top 10
producers
excluding US
and Russia
Limited infrastructure in Indonesia
LNG Decreasing Export and increasing Domestic

3. Company Profile

4. Business Issues
● Insufficient gas infrastructure in Indonesia
● Major decline of petroleum global price
● Responsibility to support the government
● Still unregulated price for LNG
Research Objectives:
1. Analyze the business environment
2. Develop the suitable strategy
3. Design the implementation plant
MINI
for
Limitations:
This project does not discuss the
detail of the required plants

5. Analytical Framework

6. Macroeconomic Analysis
Conclusion
1. Regulation and
politic highly
affecting the
industry. Situation
favors Gagas as SBU
of state-owned
company to support
their program
2. The downfall of
crude oil price also
affect this industry
3. Mini LNG the new
technology to
distribute natural
gas

7. Natural Gas Industry Analysis
Threat of new entrants (low):
- high economic of scale (-2)
- high capital requirements (-3)
- Supportive government policy (-2)
- access to distribution channel (+0)
- low switching cost (+2)
Power of suppliers (high):
- possibility of forward integration (+0)
- supplier’s switching cost (+0)
- low number of suppliers (+1)
- the importance of suppliers products
to buyer (+2)
Threat of substitutes (high):
- government’s program (-1)
- high switching cost to substitute (-1)
- product’s differentiation (+1)
- most probable availability of substitute
products (+2)
Power of buyers (low):
- high number of buyers (-1)
- low backward integration (-1)
- med switching cost (+0)
- substitute products (+1)
Competitive rivalry (low):
- low number of equal competitor (-2)
- growing market (-1)
- high fixed cost (+1)
- high barrier to exit (+1)
CONCLUSION:
The industry condition favor firm
whose already established in the
market. Gagas benefit from this
stance.

8. Competitor Analysis
Critical Success
Factors
Advertising 0.094 0.047
Product Quality 0.615 0.615
Price Competitiveness 0.336 0.336
Financial Position 0.132 0.088
Customer Loyalty 0.531 0.531
Inventory System 0.147 0.147
Organization Structure 0.114 0.114
Production Capacity 0.138 0.138
Customer Services 0.144 0.144
Management Experience 0.132 0.088
Facilities Owned 0.495 0.33
2.878 2.578
Conclusion
Pertagas Niaga as the only firm which currently conducting the research in
Mini LNG have an advantage over Gagas

9. Financial Analysis
Industry Average (2014)
Fundamental Analysis:
Compared to national and
international industry
average, Gagas’s ratios
are competing. A good
liquidity means it have
enough cash to further
investment and a good
debt ratio means it still
okay to loan some funds

10. Business Model Analysis
- PLN
- Industries
- Commercials
- Extending the
scope of pipeline
- Safer and
Environment
friendly
- NG distribution
system to
remote areas
- NG distribution
system with
more energy
stored
Direct
distribution with
MRU and SPBG
Sign MOU with
their customers
with maintenance
Pipeline natural gas, CNG for industries and
CNG for transportation
Material cost, third parties cost, operational
cost, general & administrative expense
- PGN as their
main supplier
- Third party
partners
- CNG delivery
using trailer
and MRU
- Liquefaction
- Regasification
Pipeline natural
gas from PGN
or Pertamina

11. Value Chain Analysis
Primary Activities

12. Value Chain Analysis (cont’d)
Supporting Activities

13. SWOT Analysis

14. Strategy Formulation
Overall direction
Functional Strategy
Strategy formulation
from analysis result
5 Year Strategy Roadmap

15. GAGAS Overall Direction
Diversification Product Development
PROS
12 10
CONS
(7) (4)
Total
5 6
Existing Product New Product
Existing
Market
Market Penetration Product Development
New
Market
Market Development Diversification
Ansoff Matrix Pros & Cons Analysis
Based on Ansoff, due to the
New Product, there are 2
possible direction for 1st
year. Product Development
or Diversification
PRODUCT DEVELOPMENT

16. Overall Direction for 5 year

17. FunctionalStrategy

18. Functions Strategies
Marketing 1. SO2: Introduce and create a new market of mini LNG especially for industries and commercials which far from the pipeline natural gas
with sending teams to them
2. SO1: Provide and deliver the information and data regarding the advantages in using mini LNG to customers of CNG
3. ST2: Find other third parties to sign MOU for some years so it could anticipate the fluctuated value of Rupiah
4. WO2: Approach a company in Thailand to make a collaboration in mini LNG mini LNG business
5. SO5: Expand the LNG business for transportation
Operation 1. SO3: Calculate and define an optimal mini LNG mini LNG system chain to find a price that could compete the CNG and other energy
sources
Financial 1. WO1: Create and formulate some pricing strategy in buying the material cost (Natural Gas) from their parent company PGN, to support the
government program in line with PGN vision and mission
2. ST1: Invest in new assets for satellite LNG plant to accelerate the development of mini LNG system and lowering the operational cost to
meet a competitive price for the product before the competitor enter the market
3. WT1: Invest in the new SPBG for LNG distribution to customers
HR 1. SO4: Hire more PKWT or contract employees for this new mini LNG mini LNG business to lower it expense so the price could be cut
Functional Strategy (cont’d)

19. Strategy Roadmap

20. Strategy Roadmap (cont’d)

21. Implementation Plan

22. Implementation Plan (cont’d)

23. Estimated Financial Projection

24. Critical Risk Mitigation Strategy
The business is so sensitive
with the price changes
Consortium Collaboration with
competitor (Pertagas Niaga)
Abandon the
business
2 Proposed Strategies

25. CONCLUSION
1. With the current condition, government policy and the
growing market of Natural Gas, Mini LNG have a
strengths and advantages to play a big role in Indonesia
market
2. The product development strategy with its several
functional strategies are the suitable strategy to start
penetrating the market in Indonesia
3. Based on the strategy roadmap, the product
development strategy will be implemented in the first
year, follows with the market development for the 2nd
until 4th year then product development in the 5th year
Answering the Research Questions

27. Appendix -
Consolidated Balance
Sheet

28. Appendix - AHP Competitor Analysis

29. Appendix - Estimated Financial Feasibility