PROPOSED STRATEGY FOR PT LN TO INCREASE THE

USINESS PERFORMANCE IN RENEWABLE ENERGY

BUSINESS UNIT

FINAL PROJECT

By:
AMANDA JUSTICIA
NIM: 29113059

MASTER OF BUSINESS ADMINISTRATION PROGRAM

SCHOOL OF BUSINESS AND MANAGEMENT
BANDUNG INSTITUTE OF TECHNOLOGY
2016

PROPOSED STRATEGY FOR PT LN TO INCREASE THE

BUSINESS PERFORMANCE IN RENEWABLE ENERGY
BUSINESS UNIT

AMANDA JUSTICIA
NIM: 29113059
Program Pascasarjana, Institut teknologi Bandung, 2016
Pembimbing: Harimukti Wandebori, ST, MBA

ABSTRACT
Solar panel industry is one of the potential businesses both in global and domestic market. The
needs for alternative energy source that offer an eco-friendly solution to fulfil the electrification
ratio in Indonesia is one of reasonable factor to develop this business. One of the solar panel
manufacturer in Indonesia is PT LN. Unfortunately, in the last three years throughout 20122014, their sales performance was not quite good. The condition is contrary with the
governments support that encourage the growth of this business.
This research aims to formulate strategy for PT LN to improve the market performance in
middle term and increase the competitive advantage in long-term purposes. Using qualitative
methods as data collection by conduct primary data and secondary data collection, the research
summarizes various information and data to be analyzed through external and internal analysis
tools that will drive the analysis to the root cause of the problem being faced. Based on the
analysis, the root cause of business problem is the lack of PT LNs sensitivity in taking steps in
this competitive solar panel industry.
The research output is the formulation strategies for PT LN. The formulation produce two
stages of proposed strategies, the first one is hold and maintain strategy in the first phase to
stabilize the market performance, and the second is grow and build strategy in second phase to
leverage larger company through vertical integration at the corporate level. At the business
level, the business strategy is being proposed to support hold and maintain is cost leadership to
obtain economic benefits for operational activities and pricing strategies. Meanwhile, the
business strategy to promote grow and build strategy is differentiation to create value added
and advantages in improving products competitiveness of PT LN. In the end, the formulation
strategy will refer to the proposed action plan at functional level as the implications of strategy
implementation.
The first stage will execute within three years, starting in the second quarter of 2016 until the
end of 2019. Meanwhile, the second phase will be carried out within five years, start from 2020
until the end of 2024.
Key words: Business Strategy, Solar Panel Industry, Strategy Formulation.

TABLE OF CONTENTS

ABSTRACT ............................................................................................................... 2
ABSTRAK ................................................................. Error! Bookmark not defined.
TABLE OF CONTENTS ........................................................................................... 3
LIST OF FIGURES ................................................. Error! Bookmark not defined.
LIST OF TABLES ................................................... Error! Bookmark not defined.
LIST OF APPENDICES .......................................... Error! Bookmark not defined.
GLOSARRY OF TERMS........................................ Error! Bookmark not defined.
CHAPTER 1

INTRODUCTION ............................................................................ 5

1.1

Background ...................................................................................................... 5

1.2

Company Profile ............................................................................................ 11

1.2.1

Company History ................................................................................... 11

1.2.2

Vision and Mission ................................................................................ 12

1.2.3

Organizational Structure ........................................................................ 13

1.2.4

Business Activities ................................................................................. 14

1.2.5

Customers .............................................................................................. 18

1.2.5.1

Subsidiaries: PT S E I ..................................................................... 18

1.2.5.2

Private EPC..................................................................................... 19

1.2.6

PT LNs Renewable Energy Position .................................................... 19

1.3

Business Issue ................................................................................................ 20

1.4

Objectives of Final Project ............................................................................ 23

1.5

Research Questions ........................................................................................ 24

1.6

Limitation of Research................................................................................... 24

CHAPTER 2

ISSUE EXPLORATION ................ Error! Bookmark not defined.

2.1

Conceptual Framework .................................. Error! Bookmark not defined.

2.2

Research Methodology .................................. Error! Bookmark not defined.

2.2.1 Data Validation Technnique .......................... Error! Bookmark not defined.

2.3

Business Issue Information ............................ Error! Bookmark not defined.

2.4

Internal Analysis ............................................ Error! Bookmark not defined.

2.4.1

Resources ............................................... Error! Bookmark not defined.

2.4.2

Capabilities ............................................ Error! Bookmark not defined.

2.4.3

Discovering Core Competencies............ Error! Bookmark not defined.

2.5

External Analysis ........................................... Error! Bookmark not defined.

2.5.1

General Environment ............................. Error! Bookmark not defined.

2.5.2

Industry Analysis ................................... Error! Bookmark not defined.

2.5.3

Competitor Analysis .............................. Error! Bookmark not defined.

2.6

SWOT Analysis ............................................. Error! Bookmark not defined.

2.7

WHO, WHAT, and HOW Issue .................... Error! Bookmark not defined.

2.8

Root Cause ..................................................... Error! Bookmark not defined.

CHAPTER 3

BUSINESS SOLUTION ................ Error! Bookmark not defined.

3.1

Strategy Formulation ..................................... Error! Bookmark not defined.

3.2

External Factor Analysis (EFAS) and Internal Factor Analysis (IFAS) plus
Strategic Factor Analysis Summary (SFAS) . Error! Bookmark not defined.

3.3

Corporate Strategy ......................................... Error! Bookmark not defined.

3.4

Business Strategy ........................................... Error! Bookmark not defined.

3.5

Functional Strategy ........................................ Error! Bookmark not defined.

CHAPTER 4 CONCLUSION AND IMPLEMENTAN PLANError! Bookmark not

defined.
4.1

Conclusion ..................................................... Error! Bookmark not defined.

4.2

Implementation Plan ...................................... Error! Bookmark not defined.

4.3

Implementation Timeline............................... Error! Bookmark not defined.

REFERENCE ........................................................... Error! Bookmark not defined.

APPENDICES ......................................................... Error! Bookmark not defined.

CHAPTER 1
INTRODUCTION
CHAPTER 1

1.1

INTRODUCTION

Background

The importance of fossil fuels as the vital energy source in fulfilling humans need on
electricity and transportation is inevitably. It became prior source as the most energy
that been used massively with the consequences on glass house effect and climate
change. The total of energy requirement all over the world for 2011 is 10 terra watt (3
x 1020 J) and it is predicted to increase by 3 times become 30 terra watt in 2030
(Matsumura, 2009). The tendency of energy consumed by Indonesia from time to time
is also increasing by 4.7 % as the consequences of increasing usage (Badan Pengkajian
dan Penerapan Teknologi, 2013:100). During this last 7 year, the production and
consumption towards energy is shown vice versa as demands is exceeding supplies in
figure below.

Figure Error! No text of specified style in document..1 Energy Necessity in

Indonesia 1999-2010
Source: https://konversi.wordpress.com/2008/12/10/mengapa-harus-pltn/ accessed on
5 June 2015.
This figure show an imbalance pattern between consumption and production of energy
used. In 2011, the electricity power plant spent 10.7 million kLiter on usage of fossil
fuels, whereas Indonesia is still depend on other country to fulfilling its need on fossil

fuels. This high consumption was mostly spent to accomplish electricity necessities.
Ironically, based on Japanese Energy Conservation Data Centre on 2011, some part of
Indonesian society still do not get the virtue of electricity because the lack of capacity
source. The data said that the electricity consumption Indonesia per capita is only 2.251
Kwh, meanwhile the total of electricity consumption in South East Asia is 2.655 kWh,
and it goes at 9.170 kWh for all over the worlds consumption (Al-Hafiizh, 2015.)

That is why in some remote area of Indonesia, there is no sufficient source to build the
electricity infrastructure neither stock supply. They are still untouched. Governments
discourse about rolling blackout in several island in Indonesia as the result of lack
capacity due to insufficient electricity source, and thus the supply capacity of energy
for electricity source is become crucial, but the most important is, it has to be safe and
environmental friendly. Peoples awareness of clean and sustainable environment lead
the alternative to invent solar system technology in order to reduce humans addiction
on fossil fuels.

Indonesian natural resources are quite rich to be utilized as an electricity source

supplier, included sunlight. It can convert the radiation into electric current through
solar system technology or solar cell, thus it can be one of a good power plant source.
Indonesia has two kind of seasons along the year, rainy and dry season. This condition
is enabling Indonesia to receive the abundant sunlight every year compare to another
country that has four season every year. The total energy of sunlight that hit earth
surface is 2,6 x 1024 joule per year while the energy that can be converted through
photosynthesis process all over the earth surface is 2,8 x 1021 J per year. So, if we look
at the required total energy compared to sun energy that hit the earth surface, by covered
0,05% for total earth surface coverage (the total of earth surface is 5,1 x 108 km2 - with
the efficiency of solar cell that contain 20% all the energy required) all the energy
needed by the earth is already fulfilled. Several natural resources in Indonesia are
potential to be convert into renewable energy sources on purpose to meet the needs for
electricity, as it show in table below.

Table Error! No text of specified style in document..1 Potential Energy in Indonesia

2007
No.
1
2
3
4
5
6
7
8
9

Energy resources
Geothermal
Hydro
Mini microhydro
Biomass
Solar energy
Wind energy
uranium
Coal bed methane
Shale gas

Potential

Installed capacity

16.502 MW
75.000 MW
769,7 MW
13.662 Mwe
4,80 kWh/m2/day
3-6 m/s
3000 MW
453 TSCF
574 TSCF

1.341 MW
7.059 MW
512 MW
1.364 Mwe
42,78 MW
1,33 MW
30 MW

Source: http:// dtwh2.esdm.go.id/dw2007/data/sumberdaya/potensi-produksi-energiindonesia-2007.jpg

While the total intensity of the sunlight radiation per area in Indonesia is as follow:
Table Error! No text of specified style in document..2 Intensity of the sunlight
radiation per area in Indonesia
Provinsi

Aceh
Sumatera Selatan
Lampung
DKI Jakarta
Banten
Jawa Barat
Jawa Tengah
DI Yogyakarta
Jawa Timur
Kalimantan Barat
Kalimantan Timur
Kalimantan Selatan
Gorontalo
Sulawesi Tenggara
Papua
Bali
NTB
NTT

Lokasi

Tahun
Pengukuran

Posisi Geograpis

Intensitas
Radiasi
(Wh/m2)

Pidie

1980

4015' LS;96052 BT

4.097

Ogan Komering Ulu

1979-1981

3010' LS;104042 BT

4.951

Kab. Lampung Selatan

1972-1979

Jakarta Utara

1965-1981

Tangerang

1980

Lebak

1991-1995

Bogor

1980

Bandung

1980

6 56' LS; 107 38' BT

4.149

Semarang

1979-1981

6059' LS;110023' BT

5.488

Yogyakarta

1980

7037' LS; 110001' BT

4.5

Pacitan

1980

Pontianak

1991-1993

4 36' LS; 9 11' BT

4.552

Kabupaten Berau

1991-1995

0032' LU; 117052' BT

4.172

1979-1981

3027' LS; 114050' BT

4.796

Kota Baru

1991-1995

5.234

6 11' LS;106 05 BT

4.187

6007' LS;106030 BT

4.324

6011' LS;106030 BT

4.446

4 28' LS;105 48 BT

6 11' LS;106 39' BT

0

7 18' LS; 112 42' BT

0

2.558

4.3

4.573

3 25' LS; 114 41' BT

Gorontalo

1991-1995

1 32' LU; 124 55' BT

4.911

Donggala

1991-1995

0057' LS; 12000' BT

2.512

Jayapura

1992-1994

8037' LS; 112012' BT

5.72

Denpasar

1977-1979

Kabupaten Sumbawa

1991-1995

Ngada

1975-1978

5.263

9 37' LS; 120 16' BT

5.747

1009' LS; 123036' BT

5.117

8 40' LS; 115 13' BT

Source: Rahardjo I. & Fitriana I., n.d Analisis Potensi Pembangkit Listrik Tenaga Surya
di Indonesia: 3.
Knowing abundant resources could be utilized, government issued a blueprint of
diversification, a framework to support green sources of renewable energy. This
pledged in blueprint of Presidential Regulation No.5/2006 about National Energy
Policy that renewed subsequently in Presidential Regulation No.79/2014 as recorded in
article 1, verse 25. Energy diversification is attempt in using any kind of potential
energy sources on behalf to optimize energy supply in a long term period. Moreover,
government have issued previously Energy and Mineral Resources (Energi dan Sumber
Daya Mineral) Ministerial Regulation No. 17/2003 points c which stated that
Perusahaan Listrik Negara (PLN) is required to purchase the entire electricity coming
from photovoltaic solar power either from state owned company, regionally owned
company, private company, or koperasi.1 This policy is synergized with the objectives
stated in the 2006 blueprint that Indonesia is expected to reduce its dependence on fuel
and start to utilize other alternative energy sources in 2025, which pledged in article 2,
paragraph 2 that national energy consumption derived from solar power can be
increased until 5% percent.
The utilization of solar energy is supported through governments instrument, while in
the same time support a better condition for earth. This will be a good opportunity for
solar module company to enter Indonesian market of renewable energy industry. PT
LN as a Stated-Owned Enterprise (SOE) manufacturer of solar power plant has a
promising chance. In future, it seen to be a potential business, more over production of
solar cell all over the world is increasing every year and reach 6.22 GWatt in total on
2008 and so Indonesian demand on renewable energy will inevitably. (Yulianto, 2011)

PT LN is a manufacturer of solar module in Indonesia. Since 1997, the development of

renewable energy on solar energy has been initiated by PT LN. They developed solar
power plants or PLTS (Pembangkit Listrik Tenaga Surya) and installed more than 3.5
MWatt of solar energy that time. PT LN produce their own solar module rather than
assembly.

This policy is also known as FIT (Feed in Tarrif) solution.

PT LNs Renewable Energy specialization is Photovoltaic (PV) module or known as

solar panel. It is the core product they are manufacturing, and derivated into other
product diversification. Photovoltaic itself is a specialized semiconductor diode that
converts radiation of ultraviolet (UV) into electricity through the conversion of Direct
Current (DC). It made from processed silicon combined with other elements that
constructed in such way. PV module is made from combination of PV cells that
wrapped together into a frame named PV module or Solar Panel. Although PT LN
produce their own PV module, but for the PV cell itself, they still imported it from
abroad. PT LNs creation resulting PV module in several capacity, ranged from 50 Wp
(Watt-peak), 135 Wp, 200 Wp, 230 Wp until 260 Wp. The appearance of PV module
is like the figure below.

Figure Error! No text of specified style in document..2 Variation of PV Module

Source: courtesy of APAMSI
From the core product, PT LN create derivative products of solar home system (SHS),
solar street light in singular form until solar tree, and operating Solar Power Plant. SHS
provide a modest power plant source that mostly used to generate lighting system, for
individual or big parties usage. For individual usage, they produce solar home system,
a stand-alone system that suitable for residential lighting applications that could be
expanded in medium size residential applications for other home appliances, such as
lighting, computer or water pump. For bigger party usage, they produce solar street and
solar tree. While, the Solar street only provide a street lighting applications with
features that allow more efficient use of energy, solar tree is a solar power plant for
urban usage for bigger electricity applications.

The business model of PT LN is B2B (business to business) model, the segment for
LNs customer is EPC in similar business that directly have in touch with end user,
9

while the primary target is its subsidiary EPC company, PT SEI. PT SEI has a binding
contract named kontrak payung every year. Therefore, the client are PT SEI and another
EPC that willing to purchase from PT LN as manufacture. PT LN is a State Owned
Enterprise (SOE) and pioneer of solar power plant in Indonesia. Compare to other
competitor, LN is trustworthy regarding its long history since 1997.

After renewable energy become an independent strategic business unit, the sales
recorded quite good in the first year but getting lower in subsequent year, as shown in
table below.

Figure Error! No text of specified style in document..3 Renewable Energy of

Photovoltaic Module Unit Sales 2011-2014
Source: PT LN

Figure Error! No text of specified style in document..4 Solar Home System Unit
Sales 2011-2014
Source: PT LN

10

From the data above, we get a decreasing sales result from 2011 to 2014 that urge some
question and indicates several possibilities, a lack of demand or higher competition
between the firms while the business is seen promising, predicting to be progressive
where renewable energy will be campaigned massively in future based on several
consideration stated above. This become a challenge for PT LN to overcome the
decreasing trend through strengthening PT LN position. Thus, the new strategy is
needed in order to enhance the profitability and market performance.

1.2
1.2.1

Company Profile
Company History

PT LN is a state owned company under the coordination of State Ministry for SOE
(State Owned Enterprise) that focused on producing electronics product. It established
on 1965 when the status still become LIPI (Lembaga Ilmu Pengetahuan Indonesia). It
started to transform become state owned company on 1991, and brought the conversion
of companys name, PT LN. PT LN located in Jl. Soekarno Hatta Bandung. The
transformation in PT LN during their period is as followed:

Figure Error! No text of specified style in document..5 PT LNs Transformation

Source: PT LN

11

There are two transformation phase in four period. The first transformation is a basic
culture in the first period of 1991 2000 where PT LN change its institution form of
research and development become business entity. Adjustment made by change the
name from LN LIPI to PT LN Industry. The second period of 2000-2002 is a consumer
good era. The second phase occur in the third period of 2002-2007.

PT LN consist of 3 business unit previously and developed the business line become 5
business unit nowadays, namely:
a.

Railway Transportation

b.

Navigation System

c.

Telecommunication

d.

Defense Electronics

e.

Renewable Energy

In the fourth period of 2007 up to now, PT LN accelerate the firms to change its business
model from EPC (Engineering, Procurement and Construction) become manufacture,
development and services. The aim is to accelerate PT LN become a world class
company with a competitive technology independently, so PT LN doesnt handle retail
business any longer in order to focus only on research and products development thus,
PT LN establish three subsidiary. This subsidiary function as retail business in
marketing the product to end customer.

1.2.2

Vision and Mission

Vision of PT LN:
The vision is to become an electronica world class company

Mission of PT LN:
The mission is to improve stakeholders welfare through product innovation in
electronical industry and infrastructure.

The Statement of Objective 2014:

Building excellence through technological innovation for sustainable development.

12

1.2.3

Organizational Structure

Figure Error! No text of specified style in document..6 PT LNs Organization Structure

Source: PT LN

13

1.2.4

Business Activities

PT LN as a SOE is responsible to develop the business, make profit and produce the electronics
products for industries. They are local and national producer as well for various electronics product
with various function and usage based on Strategic Business Unit works. Their office is located in
Soekarno Hatta, Bandung, where they build their manufacture here as well as creation and
production of several electronics products are made.

Before the transformation stated above in 2002, PT LN is an EPC (Engineering, Procurement and
Construction) company. An EPC company is responsible for all process from engineering,
procurement until construction services to the client. Engineering means the project largely
managed by contractor since the beginning, the cost risk and control are fully handle by the
Contractor, away from the owner. It includes survey, planning and designing, process designing,
basic designing, detailed design, and engineering. Procurement means provide the service to
supply the equipment and materials needed, while construct means installation, to construct the
project, include the service of commissioning and testing, product training and maintenance, and
after sales service. The second transformation they did is to purpose of boosting total revenue from
all potential business unit, PT LN did not run EPC activity anymore since 2007. EPC activity
become subsidiarys focus, the one who involved directly with the end user. The EPC activity now
becoming the responsibility of PT SEI, PT Eltrans, and PT LN Railway System. Now, they focus
on manufacturing products only to increase product development and production capability.
PT LN create Solar Power Plant by producing Photovoltaic (PV) module.2 They already operated
solar power plant since 1997. Solar power plant uses sunlight as it main source to trigger electricity.
The client is mostly come from government. PT LN has built solar power plant in some areas, i.e.
Sulawesi, Maluku, Yogyakarta, East Nusa Tenggara, Kalimantan, Java and other islands, 100,000
SHS in almost all provinces in Indonesia, solar street lighting for roads protocol and toll roads in
major cities, as well as solar tree for government and private company. Here are the products of
renewable energy:

Photovoltaic module or PV module is the other name for solar panel that made from crystalline technology, because
the main source of raw material is coming from either the polycrystalline or monocrystalline.

14

1. Stand-alone solar power plant and hybrid solar power plant. Stand-alone solar power plant is
a power plant that using sunlight only as its prior resources, while hybrid solar power plant is
a combination power plant that mixed sunlight with other renewable energy sources. The
hybrid power plant is :
a. Diesel solar power plant
b. Windmill solar power plant
c. Hydro micro solar power plant
d. Generator solar power plant
2. On Grid solar power plan
Solar power plan that has to be integrated to State Electricity Company or PLN (Perusahaan
Listrik Negara).
3. Off grid solar power plant
A separated solar power plan that doesnt have to be integrated with PLN. The energy comes
from sunlight that received and stored in the battery to be converted become electricity.

The main source to make solar power plant is solar module / photovoltaic. In a single solar power
plant, there would be several photovoltaic that bounded in a thourough frame become a unity.
Beside photovoltaic, this solar power plant has other component in order to get it works, such as
Inverter, Photovoltaic, solar cash control and battery. They are the supportive component to trigger
the works of solar power plant.

For the photovoltaic itself, PT LN created it in several capacity:

a. PV 50 WP
b. PV 100 WP
c. PV 135 WP
d. PV 180 WP
e. PV 200 WP
f. PV 230 WP
g. PV 245 WP
h. PV 260 WP

15

The product already installed along sub urban with total more than 3.5 MWatt energy. From this
PV, PT LN create derivative product, these are:

a. SHS (Solar Home System)

SHS is an independent solar power plant system as a solution in providing a flexible and
practical power source to meet the needs of electricity for household appliances, such as
lighting, computers, television etc., especially in remote areas untouched by PLNs
network electricity.

Figure Error! No text of specified style in document..7 Solar Home System

b. Solar Street Light
Solar Street Light used as a lighting system on public roads, housing or highways. It
provide a public lighting to replace the use of electrical grid by transform solar energy into
DC current, and then save the energy into the battery through Battery Control Unit. By
using an automatic sensor, solar street light will light up by itself since the sunset until
sunrise.

16

Figure Error! No text of specified style in document..8 Solar Street Light

c. Solar tree
Solar tree is the concept of solar power plants for revolutionary urban lighting. It use
multiple solar panel to produce lighting and electricity. The panels arranged in a pole
shaped a form of tree in such decorative way.

Figure Error! No text of specified style in document..9 Solar Tree

17

1.2.5

Customers

1.2.5.1 Subsidiaries: PT S E I
PT LN

have three subsidiaries as EPC, PT. Eltran Indonesia that handle the business in

broadcasting, transmission, information technology, and navigation equipment; PT LN Railway

Systems that manage on Railway Signaling Systems, Traction System, Substation Systems, and
Telecommunication Systems procurement; and PT SEI that focus on solar system panel.

Figure Error! No text of specified style in document..10 PT LNs Subsidiary

PT SEI developed as subsequent phase of PT LNs Renewable Energy Business Unit in selling PV
product, running the EPC activities. They responsible for marketing and sales the product to
consumer. PT SEI started initiated on February 2009, owned by PT LN with 90% shareholder
proposition and the rest of 10% shareholder owned by PT Eltran Indonesia. PT SEI has dealt with
hundreds of renewable energy projects all over Indonesia. Mostly the consumer are come from
government in the first position, followed by SOE and private company or agencies and the last is
private individual user, but this segment only grab the small portion.

The Standard Operational Procedure for PT SEI is they purchase the product to PT LN as their
single supplier. Every year they have list of amount product they have to buy from PT LN. If they
run a shortage product, they will order again to PT LN, and PT LN immediately will produce the
product within due time. It means that the demand from consumer is high, thus PT SEI has to order
additional stock. But if they have an excess stock, they still have to pay to PT LN because from
the beginning they already order a certain amount. It means that the demand from consumer is
low, thus PT SEI has SEI and PT LN, a regulation of purchasing and order procedure between
subsidiary and parent company.

18

1.2.5.2 Private EPC

Private EPC is customer that come from other company that also conduct business in selling solar
panel system to end customer. These private EPC will compete head to head with PT SEI.3 Solar
panel business is having a progressive trend, thus many companies in solar panel are urging
nowadays, from a small-scale company to a big scale company. There are 386 solar panel business
in Indonesia with B2C business model. From googling exploration activity, by typing solar panel
bandung keyword, we will get the first page of almost all article is selling solar panel. There are
33

solar

panel

seller

in

Bandung

region

only

(http://www.indotrading.com/bandung/company/solar-panel, accessed on 27 August 2015).

PT LN sell the PV to EPC all over Indonesia, but the bigger consumer is come from West Java. In
2011, the revenue that comes from private EPC is 15%. Both of those EPC and PT SEI are compete
each other. In B2C, PT SEI is a market leader for solar panel with 50 % ownership of market share
in Indonesia. (Yoka, 2013:35)

1.2.6

PT LNs Renewable Energy Position

PT LN has already produce solar power plant since 1997. LNs competitive advantage is their low
cost leadership compare to competitors. Being trustworthy as SOE supposed to be their advantage
also, in addition that PT LNs solar panel product recorded in Indonesian Solar Module
Manufacturer Association or APAMSI (Asosiasi Pabrikan Modul Surya Indonesia), an association
for Indonesian standardization of solar module company. PT LN also has a certificate of Local
Component Certification or TKDN (Tingkat Komponen Dalam Negeri) pass. TKDN is amount of
domestic components in goods, services, or labor in particular percentage of 40%, not less than
that. PT LNs TKDN is 40.54%, which become an advantage to compete with other company.
Other certification is PT LN passed corrosion test, thus they have a product durability.

Consumer profiling for the private EPC cant be filled for companys confidential reason.

19

1.3

Business Issue

More and more, the issue of scarcity will continue to be increasingly problematic in years to come.
Given the condition, requirement toward a viable alternative energy will increase, moreover
encouraged by governments support gives the positive climate for this business. It drives
competition among solar panel business owner lately, especially B2C business model. They will
aware to respond market and sensitive towards customers demand, thus the company answering
very soon. Request from both of customer and end user will be made to EPC (C2B), the EPC will
directed the request by make an order to the manufacturer (B2B). EPC spread out fast in Indonesia.
Its increasing growth is around 40% per year since the last 10 years. The magnitude of the
opportunities is available not only for the EPC company, but also the manufacturer.

The industry have been growing as home utilities, businesses and governments started to installed
the solar panel. The industry grew for 59% along 20092014 in USA, and will grow conventional
linear until 2040 (Deloitte, 2015. pp 3, 31). For Asia Pacific country, solar panel market will grow
at CAGR of 14.8% over the period of 2014-2020 (PR Newswire, 2015). Meanwhile, the global
CAGR of solar PV has grew faster around 41% per year, it depicts that global solar PV usage is
increase twice every two years. (Shurtleff, 2014). These data present an increasing trend of solar
panel installation / production. Based on the CAGR analysis, it is assumed that the demand
projection will growth until 2020.

CAGR
ANNUAL RATE

20
15
10
5
0
2014

2015

2016

2017

2018

2019

2020

YEAR
USA

Asia Pacific

Global

Figure Error! No text of specified style in document..11 Demand Forecasting on Solar Panel
Source: Modified from several literature

20

Based on the figure, the demand in USA grow significantly for the next 6 years, followed by global
demand in second place. The demand in Asia Pacific is also growth, albeit the percentage is lower
than USA and the global. Even, previous research analysis told that Asia-Pacific is expected to be
the fastest growing market during 2015 to 2020 (https://www.psmarketresearch.com/marketanalysis/solar-panel-market). The research is make sense because Asia is developing economic
countries that have huge requirements toward electricity due to rapid industrialization and
population growth.

As one of the reputable SOE and pioneering solar panel company, PT LN has 30% market share
in Indonesia solar panel business. (Lubis, 2013:3). Previous research conducted by Tarmidzi Lubis
reveal the findings that renewable energy has good score in industry attractiveness with the score
of 4.45. The position on BCG growth share matrix, placed renewable energy in strong position
among the other business unit in PT LN. It can be concluded renewable energy possess best relative
competitive position. The growth rate factor in solar industry support this business unit to have a
good opportunity (Lubis, 2013:35).
%

Business Growth Rate

22

Renewable
Energy

Defense

13

ICT

2.4

Railways

0.86 0.61

0.039 0.021 10x -2

Relative Competitive Position

Figure Error! No text of specified style in document..12 BCG Growth Share of Renewable
Energy

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Knowing several availability of opportunities in this circumstance will give PT LN a brighter

future in this industry. The performance of company is matter in this context, because it suppport
their ability to be succeed or failed. They need to come up with favorable capabilities and good
performance to capture the chance.

Renewable Energy is the last business line that began to be independent strategic business unit on
2011. Previously, renewable energy was under the supervision of DPPU (Departemen Pembinaan
dan Pengembangan Umum) (Lubis and Palupi. Personal Interview by Justicia. Bandung, LEN: 16
June 2015). It has been 4 year since Renewable Energy began to manage their own business unit.
The establishment of new business unit is expected be able to accelerate the increasing whole
business activities performance in PT LN Renewable Energy Business Unit. Unfortunately, they
encounter low performance in sales for the last three years. Sales was recorded quite well in 2011,
but getting lower subsequently, as shown in table below.

Figure Error! No text of specified style in document..13 Renewable Energy of Photovoltaic

Module Unit Sales 2011-2014
Source: PT LN

22

Figure Error! No text of specified style in document..14 Solar Home System Unit Sales 20112014
Source: PT LN
Sales is one of measurable signification that indicates firms performance. The first figure is the
sales data of Photovoltaic Module Unit in PT LN during 2011 2012. Along the period, sales was
start to decrease in 2012 until the two years later. The second figure show us the data of SHS Unit
Sales along 2011-2014. On the second figure, there is also a falling trend in SHS Sales. From both
of the figure above, it signify that the declining trend is occured in all of solar products. The
measurement of sales performance in the preliminary step become a symptom of problems. The
declining trend is quite significant that urge doubt toward the whole business activities in perform
the function because the declining was occur in all products. It drives the analysis to figure out on
what is happening exactly by trace the possibility to generate the root cause. In other words, sales
is the symptom of implisit problem that drag to other causes. Assuming that the sales was quite
bad, they will not capture the opportunity If PT LN keep this performance. Thus, the whole
performance need to be evaluated due to that indication.

1.4

Objectives of Final Project

This research is aiming to:
1. Analyze the business environment of solar panel industry in Indonesia as the guidance
in formulate the right strategy for PT LN ;
2. Develop the strategy that can be implemented in PT LN to improve the performance,
and

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3. Design the implementation plan of the proposed strategy.

1.5

Research Questions
1. How is the business environment of solar panel industry in Indonesia?
2. What is the strategy that can be implemented to improve the business performance?
3. How to implement the proposed strategy?
4. What is the next strategy for the long term planning?

1.6

Limitation of Research

The analysis on this final project is limited to generate the right strategies for PT LN and the
implementation plan for execution. The period of assessing the market performance is limited to
last 3 years data from 2011 until 2014. This final project will no further discuss the detail of
financial analysis, operation management and human resources toward the respond of upcoming
strategy that will be obtain in further chapter.

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