Business Strategy

MUSTIKA RATU: NAVIGATING THROUGH SOCIAL AND ECONOMIC CRISIS

COMPANY BACKGROUND The founder, Ny. B.R.A. Mooryati Soedibjo, throughout her youth, she acquired considerable knowledge of Javanese history and culture and, from her grandmother, a unique expertise in the formulation of jamus and cosmetics. Jamus were health supplements, traditional medicines and cosmetics made from local plants and herbs and available in the forms of pills, powders and tea bags. In 1956, she began formulating an exfoliating mask and various jamus for the wives of her husbands colleagues, using a makeshift production facility in her garage, and over time the purchase of a pill-making machine marked the beginning of the companys expansion. In 1987, the company was incorporated, and began with just 10 employees. Over the years, production facilities were upgraded and allowed manufacturing with modern equipment, meeting rigorous standards for quality and safety according to the 1997 annual report. Advertising was used to create brand awareness and to increase demand for Mustika Ratus products in major markets. In 1995, Mustika Ratu capitalized on their success and went public, issuing 107,000,000 shares, priced at Rp. 2,600 in their IPO.

PROBLEM 1997 had marked the beginning of an enormous challenge for Indonesia as its economy was one of the worst hit by Asian fnancial crisis. Virtually every company doing business in Indonesia, and especially in Jakarta, had been adversely affected to some degree by the social chaos. Mustika Ratu was no exception. Yogesh Dixit, managing dirctor of Musika Ratu, was wondering whether the situation should lead Mustika Ratu to focus its energy on its domestic market and to protect its existing position. In turn, the crisis could also present opportunities. Perhaps now was the most opportune time for speeding international expansion

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INTERNAL ASSESSMENT a. Culture b. Mustika Ratu is a leading Indonesian manufacturer of cosmetics and traditional herbal supplements (S) Mustika Ratu is a beauty product that specially for Indonesian skin (S)

Structure Mustika Ratu used each of these channels to market their extensive products lines (S) In mid-1996, Mustika Ratu established a direct selling division (S) Mustika Ratu had opened 14 House of Mustika Ratu outlets in major urban centres (S)

c.

Resources Man Mustika Ratu had 4000 agents, 1.300 beauty advisers and 40.000 retail outlets (S) Material Product of Mustika Ratu has made by health and beauty properties of local plants and herbs (S) Mustika Ratu had their own specialization plantations on Java (S) Mustika Ratu has Halal standart (S)

Machine Mustika Ratu used modern imported equipment (S) Controlled through a recently installed information technology (IT) system (S)

Method Mustika Ratu focus on domestic market and protect the existing position (S) Quality control was a key part of the companys product strategy (S) The promotion through a myriad of media and point of sale promotions (S) Sponsorship of several major beauty events (S) Concentrated on intensifying their departement store distribution channels (S)

Money In 1998 the stock had declined dramatically (W) Mustika Ratu has a top selling of the company revenue (S)

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EXTERNAL ASSESSMENT 1. PESTEL Political Legal The political tensions running up to a parliamentary election June, along with the issue of sovereignty in some regions of the country were expected to manifest in continued social unrest (O) Economics The Asian financial crisis had devasted the Indonesian economy (W) Foreign direct investment (FDI) had dried up and the domestic bankruptcy rate increased dramatically (W) Close to half of Indonesias 200 banks were insolvent (W)

Socialcultural Population of Indonesia is over 210 million and Indonesia is the fourth most populus country in the world (O) Indonesia is a rich natural resources and agriculture (O) The ranks of the unemployed swelled by thousands each day (W) In urban center, these market held the potential of more 100 milion Muslim consumer (O) In Malaysia, Mustika ratu in dou bling sales (O)

Technological Using a mail order distribution channel in Hongkong and Holland (O) The companys web site invited distributors meeting certain criteria to form strategic alliance (O)

2.

5 PORTERS Threat Of New Entrance Low (O) Mustika ratu is leading Indonesian manufacturer of cosmetics and traditional herbal supplements. Product of Mustika Ratu has made by healt and beauty properties of local plants and herbs and halal standard. And this is will be difficult to new entrance to enter the market. Bargaining Power Of Buyers Low (O) The buyers did not really have bargaining power when it came to spezialitation product of cosmetic and traditional herbal of Mustika Ratu. The scale of Mustika Ratu business reduces the bargaining power of any single group of buyers.

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Threat Of Subtitutes Products Or Service Low (O) The substitution of manufacturer of cosmetic and traditional herbal will be lower chances for Mustika Ratu products.

Bargaining Power Of Suppliers Low (O) Not much bargaining power for product suppliers. The Mustika Ratu their own specialization plantations on Java. So bargaining Power of Supplier is low.

Rivalry Amongst Competing Firms Low (O) Product of Mustika Ratu have not much competitor in Indonesia. Their product is spezialitation so a little competitor for Mustika Ratu.

CORPORATE STRATEGY AND BUSINESS STRATEGY IFAS , EFAS AND QSPM IFAS and EFAS before crisis for Mustika Ratu summary showed on Table 1 and Table 2
Table 1 IFAS Before Crisis for Mustika Ratu
IFAS STRENGTH Weight Rating Weighted Score 0,8 0,09 0,12 0,06 0,06 0,01 0,21 0,21 0,14 0,18 0,02 0,21 0,12 0,24 0,21 0,18 0,105 2,965

Mustika Ratu is a leading Indonesian manufacturer of cosmetics and traditional herbal supplements Mustika Ratu is a beauty product that specially for Indonesian skin Mustika Ratu used each of these channels to market their extensive products lines In mid-1996, Mustika Ratu established a direct selling division Mustika Ratu had opened 14 House of Mustika Ratu outlets in major urban centres Mustika Ratu had 4.000 agents, 1.300 beauty advisers and 40.000 retail outlets Product of Mustika Ratu has made by health and beauty properties of local plants and herbs Mustika Ratu had their own specialization plantations on Java Mustika Ratu has Halal standart Mustika Ratu used modern imported equipment Controlled through a recently installed information technology (IT) system Mustika Ratu focus on domestic market and protect the existing position Quality control was a key part of the companys product strategy The promotion through a myriad of media and point of sale promotions Sponsorship of several major beauty events Concentrated on intensifying their departement store distribution channels Mustika Ratu has a top selling of the company revenue TOTAL

0,200 0,030 0,040 0,030 0,020 0,005 0,070 0,070 0,070 0,060 0,010 0,070 0,040 0,060 0,070 0,060 0,035 1

4 3 3 2 3 2 3 3 2 3 2 3 3 4 3 3 3

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Table 2 EFAS Before Crisis for Mustika Ratu

EFAS OPPORTUNITY Weight Rating Weighted Score 0,66 1,28 0,48 0,36 0,2 0,16 3,14

Population of Indonesia is over 210 million and Indonesia is the fourth most populus country in the world Indonesia is a rich natural resources and agriculture In urban center, these market held the potential of more 100 milion Muslim consumer In Malaysia, Mustika ratu in doubling sales Using a mail order distribution channel in Hongkong and Holland The companys web site invited distributors meeting certain criteria to form strategic alliance
TOTAL

0,22 0,32 0,16 0,12 0,1 0,08 1

3 4 3 3 2 2

From the result above (table 1 and 2), we can see that the IFAS method total score is 2.965 and the EFAS total score is 3.14. We can plot this result to the directional strategic matrix. The result can see from picture 1.

Picture 1 Directional strategic matrix Before Crisis for Mustika ratu

From this result we can conclude that the Mustika Ratu is a growth company and the company do horizontal growth because wide market until mid-east. When happened crisis financial in Indonesia, corporate strategy and business strategy for Mustika Ratu changed to keep the company survival. IFAS and EFAS for Mustika Ratu When Crisis Financial showed on Table 3 and Table 4.
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Business Strategy Table 3 IFAS When Crisis for Mustika Ratu

IFAS STRENGTH Weight Rating Weighted Score 0,24 0,24 0,21 0,16 0,14 0,18 0,1 0,24 0,15 0,21 0,18 1,25 2,050

Mustika Ratu is a leading Indonesian manufacturer of cosmetics and traditional herbal supplements Mustika Ratu is a beauty product that specially for Indonesian skin Product of Mustika Ratu has made by health and beauty properties of local plants and herbs Mustika Ratu had their own specialization plantations on Java Mustika Ratu has Halal standart Mustika Ratu used modern imported equipment Controlled through a recently installed information technology (IT) system Mustika Ratu focus on domestic market and protect the existing position Quality control was a key part of the companys product strategy The promotion through a myriad of media and point of sale promotions Concentrated on intensifying their departement store distribution channels
WEAKNESS

0,08 0,08 0,07 0,08 0,07 0,06 0,05 0,08 0,05 0,07 0,06 0,25 1,00

3 3 3 2 2 3 2 3 3 3 3 5

In 1998 the stock had declined dramatically TOTAL

Table 4 EFAS When Crisis for Mustika Ratu

OPPORTUNITY

The political tensions running up to a parliamentary election June, along with the issue of sovereignty in some regions of the country were expected to manifest in continued social unrest Population of Indonesia is over 210 million and Indonesia is the fourth most populus country in the world Indonesia is a rich natural resources and agriculture In urban center, these market held the potential of more 100 milion Muslim consumer In Malaysia, Mustika ratu in doubling sales The companys web site invited distributors meeting certain criteria to form strategic alliance THREATS The Asian financial crisis had devastated the Indonesian economy Foreign direct investment (FDI) had dried up and the domestic bankruptcy rate increased dramatically Close to half of Indonesias 200 banks were insolvent The ranks of the unemployed swelled by thousands each day
TOTAL

0,07

0,14

0,11 0,13 0,11 0,1 0,08

3 4 3 3 2

0,33 0,52 0,33 0,3 0,16

0,13 0,12 0,08 0,07 1

4 3 3 4

0,52 0,36 0,24 0,28 3,18

From the result (Table 3 and Table 4), we can conclude that the Mustika Ratu is a stability criteria in facing financial crisis. The company have 3 option to keept the position as a leading Indonesian manufacturer of cosmetics and traditional herbal supplements, that are: 1. 2. 3. Pause/Proceed with Caution No Change Profit

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For choose the best alternative option, we are using the QSPM (Quantitave Strategic Planning Method) method that could see from table 5.
Table 5 QSPM For Mustika Ratu When Financial Crisis
Weight STRENGTH Rating Option 1 (Pause) Weighted Score 3 3 3 3 4 3 3 3 3 3 3 5 0,09 0,09 0,06 0,09 0,16 0,12 0,12 0,12 0,12 0,09 0,09 0,375 Option 2 (No Change) Weighted Rating Score 3 3 3 3 4 3 3 3 3 3 3 5 0,090 0,090 0,060 0,090 0,160 0,120 0,120 0,120 0,120 0,090 0,090 0,375 Rating Option 3 (Profit) Weighted Score 3 3 3 3 4 3 3 3 3 3 3 5 0,09 0,09 0,06 0,09 0,16 0,12 0,12 0,12 0,12 0,09 0,09 0,375

Mustika Ratu is a leading Indonesian manufacturer of cosmetics and traditional herbal supplements Mustika Ratu is a beauty product that specially for Indonesian skin Product of Mustika Ratu has made by health and beauty properties of local plants and herbs Mustika Ratu had their own specialization plantations on Java Mustika Ratu has Halal standart Mustika Ratu used modern imported equipment Controlled through a recently installed information technology (IT) system Mustika Ratu focus on domestic market and protect the existing position Quality control was a key part of the companys product strategy The promotion through a myriad of media and point of sale promotions Concentrated on intensifying their departement store distribution channels
WEAKNESS

0,03 0,03 0,02 0,03 0,04 0,04 0,04 0,04 0,04 0,03 0,03 0,08

In 1998 the stock had declined dramatically

OPPORTUNITY

The political tensions running up to a parliamentary election June, along with the issue of sovereignty in some regions of the country were expected to manifest in continued social unrest Population of Indonesia is over 210 million and Indonesia is the fourth most populus country in the world Indonesia is a rich natural resources and agriculture In urban center, these market held the potential of more 100 milion Muslim consumer In Malaysia, Mustika ratu in doubling sales The companys web site invited distributors meeting certain criteria to form strategic alliance THREATS The Asian financial crisis had devastated the Indonesian economy Foreign direct investment (FDI) had dried up and the domestic bankruptcy rate increased dramatically Close to half of Indonesias 200 banks were insolvent The ranks of the unemployed swelled by thousands each day
TOTAL

0,06

0,24

0,240

0,24

0,05 0,05 0,05 0,05 0,05

3 4 3 3 3

0,15 0,2 0,15 0,15 0,15

3 4 3 3 3

0,150 0,200 0,150 0,150 0,150

3 4 3 3 3

0,15 0,2 0,15 0,15 0,15

0,08 0,07 0,05 0,04 1,00

4 3 3 3

0,32 0,21 0,15 0,12 3,37

4 3 3 2

0,320 0,210 0,150 0,080 3,33

5 4 4 3

0,4 0,28 0,2 0,12 3,57

From the result from Table 5, we choose profit strategy with narrow product, especially cosmetic and herbal supplement. This profit strategy catch asian market and focus on Indonesian market.

FUNCTIONAL STRATEGY Functional strategy that company should do to increasing sales from Indonesian Market showed on Table 6 and functional strategy to increasing sales form Asian market showed on Table 7.

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Business Strategy Table 6 TOWS Market for Indonesian Market

STRENGTH S1 WEAKNESS

INTERNAL FACTOR

S2 S3 S4 S5 S6 S7

EXTERNAL FACTOR
S8 S9 S10 S11 OPPORTUNITY

Mustika Ratu is a leading Indonesian manufacturer of In 1998 the stock had W1 cosmetics and traditional herbal supplements declined dramatically Mustika Ratu is a beauty product that specially for Indonesian skin Product of Mustika Ratu has made by health and beauty properties of local plants and herbs Mustika Ratu had their own specialization plantations on Java Mustika Ratu has Halal standart Mustika Ratu used modern imported equipment Controlled through a recently installed information technology (IT) system Mustika Ratu focus on domestic market and protect the existing position Quality control was a key part of the companys product strategy The promotion through a myriad of media and point of sale promotions Concentrated on intensifying their departement store distribution channels
SO STRATEGIES WO STRATEGIES Increasing sales from domestic 1. market( middle-low) and moeslem market (O2;O4;W1)

O1

O2 O3 O4

The political tensions running up to a parliamentary election June, along with the issue of sovereignty in some regions of the country were expected to manifest in continued social unrest Population of Indonesia is over 210 million and Indonesia is the fourth most populus country in the world Indonesia is a rich natural resources and agriculture In urban center, these market held the potential of more 100 milion Moeslem consumer
THREATS

1.

Focus market for Low-Middle (S2;S3;O2)

2. 3. 4.

Strengthen brand name in marketing strategy (S1;S4;O1) Continous improvement for quality product (S6;S9;O3) Catch moeslem market for introduce the Halal product (S5;S10;O4) ST STRATEGIES WT STRATEGIES Program training in recruitment 1. for get expert employee to increase sales in Indonesian

The Asian financial crisis had devastated the Indonesian economy Foreign direct investment (FDI) had dried up and T2 the domestic bankruptcy rate increased dramatically Close to half of Indonesias 200 banks were T3 insolvent The ranks of the unemployed swelled by thousands T4 each day
T1

1.

Push strategy (S7;S8;T1)

2.

Increasing relationship with distributor (S11;T3;T2)

Table 7 TOWS Market for Asian Market

STRENGTH S1 WEAKNESS

INTERNAL FACTOR

S2 S3 S4 S5 S6 S7

EXTERNAL FACTOR
S8 OPPORTUNITY

Mustika Ratu is a leading Indonesian manufacturer of In 1998 the stock had W1 cosmetics and traditional herbal supplements declined dramatically Product of Mustika Ratu has made by health and beauty properties of local plants and herbs Mustika Ratu has Halal standart Mustika Ratu used modern imported equipment Controlled through a recently installed information technology (IT) system Quality control was a key part of the companys product strategy The promotion through a myriad of media and point of sale promotions Concentrated on intensifying their departement store distribution channels
SO STRATEGIES WO STRATEGIES Wide market to Asian (middlelow) and moeslem market by 1. strategic alliance (O3;W1)

O1

Indonesia is a rich natural resources and agriculture In Malaysia, Mustika ratu in doubling sales The companys web site invited distributors meeting certain criteria to form strategic alliance
THREATS

1.

Continous improvement to quality product (S4;S6;O1)

O2 O3

2. 3.

Strengthen distribution channel (SS5;S8;O3) Catch moeslem market for introduce the Halal product, especially malaysia (S2;S3;O2) ST STRATEGIES WT STRATEGIES Program training in recruitment for get expert employee to 1. increase sales in Asian market (W1;T4)

T1

The Asian financial crisis had devastated the Indonesian economy

1.

Increasing slaes from Asian Market (middle-Low) (S3;S7;T1)

Foreign direct investment (FDI) had dried up and the domestic bankruptcy rate increased dramatically Close to half of Indonesias 200 banks were T3 insolvent The ranks of the unemployed swelled by thousands T4 each day
T2

2.

Introduce product to asian market (S1;T2;T3)

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