CHAPTER I COMPANY OVERVIEW

PT Semen Gresik (Persero) Tbk. Is one of the most succesfull government owned company in Indonesia. It is also one of the first geovernment owned company which listed their stock in Indonesia Stock Exchange (IDX). PT Semen Gresik (Persero) Tbk. Officially inaugurated on August 7, 1957 by the first President of the Republic of Indonesia with installed capacity of 250,000 tons cement per year and now, with their good progress, the real installed capacity of PT Semen Gresik (Persero) Tbk. has reached 16,92 million tons per year, and it covers about 46% of domestic cement market.

This company conducts in cement industry, and owned several subsidiaries as strategic Tools, in order to give the maximum contributions. In addition, their existence is expected to incur beneficial synergy in order to achieve the purpose in accordance with the stipulated core business. Below are the brief profiles of the subsidiaries of the company. Subsidiaries of PT Semen Gresik (Persero) Tbk. Are : 1. PT Semen Padang 2. PT United Tractors Semen Gresik 3. PT Semen Tonasa 4. PT Swadaya Graha 5. PT Kawasan Industri Gresik 6. PT Varia Usaha 7. PT Industri Kemasan Semen Gresik 8. PT Eternit Gresik

These subsidiaries contributes in many ways, for instance ; PT Semen Padang conducts manufacture and marketing in Sumatera, PT Varia Usaha conducts in transportation of the cement and also some ready-mix products which are used in infrastructure construction. One more important subsidiaries is PT Industri Kemasan Semen Gresik, which produces the packaging of the cement products.

The Company produces various types of cement. The main type of cement produced is Type I Portland Cement (Ordinary Portland Cement OPC). In addition, various specific types and mixed cement are also produced, for limited use and in smaller amount than OPC.

Their financial performance is as what we expected from one of the market leader in an industry. The Companys total sales revenue in 2011 reported at Rp16,379 billion or an increase of 14.2% from Rp14,344 billion in 2010. Cement sales contribute 99.8% of Companys revenue. The Companys net sales in the domestic market in 2011 amounted to Rp16,319 billion, an increase of 14.8% compared to the previous year, while export amounted to Rp59,5 billion or decrease of 52.9% compared to the same period last year. The domestic average selling price increased by 2.5% year-onyear, while the export average selling price increased by 28,6% year-on-year.

Although there is an increase in the net income, the cost of revenue increased by 18% from Rp7,534 billion in 2010 to Rp8,892 billion, primarily as a result of an increase in costs of transportation, energy and depreciation.

As for its stock prices, it is not as stable as other companies, but due to its position as a market leader in Indonesias cement industry, this fact does not concerns with the companys performance, it is much more affected by the stock market itself.

CHAPTER II ANALYSIS 1. SWOT Analysis 1. 2. 3. 4. 5. 6. Strengths Good Plant Site Locations Distribution Network Large Production Capacity Market Leader Strong Financial Position Good Human Resources Opportunities Economic Growth Favorable Interest Rate Infrastructure Program Cement Consumption per Capita International Markets Weakness 1. Dependant to Fuel and other Energy Sources 2. Geographical Disparity 3. Small International Acknowledgement 4. Insufficient Production Capacity for International Market 5. Political Interference Threats 1. Fuel Price instability 2. Market Penetrations

1. 2. 3. 4. 5.

2. Vision and Mission

Vision

To become the foremost cement company in South East Asia. Mission

To produce and trade cement and other relevant products with an orientation on customer satisfaction by applying environmentally - friendly technology. To create a corporate management meeting international standards by upholding the business ethics, solidarity and to take proactive, efficient and innovative actions in performing the works. To have competitiveness in domestic and international cement markets. To empower and maintain synergy among strategic business units to improve added value in a sustainable manner. To have a commitment to the improvement of the welfare of the stakeholders, especially shareholders, employees and the surrounding community.

3. Business Level Strategy PT. Semen Gresik (Persero) Tbk. business may segmented to three division (business-level) based on product characteristic as follows: 1) Cement Business PT Semen Gresik and two of it subsidiaries in this business segment are :

1. PT Semen Gresik 2. PT Semen Padang 3. PT Semen Tonasa These companies produces the same products, which is Portland Cements. ). In addition, various specific types and mixed cement are also produced, for limited use and in smaller amount than Portland Cements.

2) Non Cement Three industries in this segment conduct businesses in : 1. Mining Industries 2. Cement Bags 3. Real Estate Most of these industries are supporting the main businesss (Cement Manufacturing). In Mining Industries, conducted by PT United Tractors Semen Gresik (UTSG), mainly mines limestone and clay mining to be used as cement manufacture process. Cement Bags production conducted by PT Industri Kemasan Semen Gresik. 3) Other Businesses Two companies conducts its business in this segment, they are PT Swadaya Graha which conducts its activities in construction services. The other company is PT Varia Usaha which conducts business in the transportation industry. In business-level strategies, all of PT Semen Gresik (Persero) Tbk. business segments use Cost Leadership Strategy. As its annual report describes Semen Gresik (Persero) Tbk focuses on cost leadership: With all the projections that are expected to give positive impacts to the Indonesian economy, the Company is preparing plans, targets and operational strategy for 2011 enabling the company to get the opportunity and conduct its optimal operational performance. Strategic Initiatives have been prepared based on four strategic management focuses, namely Revenue Management, Cost Management, Capacity

Management and Improving Competitive Advantage and supported by the Companys major strength. Good corporate governance (through management structure, SOP, internal control function, corporate culture), implementation of a revenue management system, cost management activities, and capacity management are the steps taken by PT Semen Gresik (Persero) Tbk. To achieve its cost leadership strategy. 4. Corporate-Level Strategy In the same steps as its business-level strategies, PT Semen Gresik (Persero) Tbk focuses on maintaining its cost of production to keep the company in good condition. The steps taken by PT Semen Gresik (Persero) Tbk. is implementation of a revenue management system, cost management activities, and capacity management. With the support of solid financial fundamentals, the Company continued the implementation of the following strategies to achieve sustainable growth: 1. Undertake capacity expansion The Company will endeavor to undertake capacity growth, whether brownfield or greenfield, to meet accelerating cement demand in Indonesia. At the same time it will continue to upgrade its manufacturing facilities to increase the capacity and yield of existing equipment. As at the end of 2009 the Company had a total cement production capacity of 19.0 million tons and is currently in the process of constructing new plants in Java (2.5 million tons) and Sulawesi (2.5 million tons). The Company will continue to base future investment decisions for new plant construction on the assessment of local demand trends and the associated costs to serve for each province. In addition, the Company will continue to identify strategic opportunities for inorganic capacity growth that will maximize returns.

2. Manage energy security

The Company plans to maintain a prudent balance between power supply from PLN and own power generation. This will ensure better control over both supply conitnuity and operating costs. The Company is currently building a 2 X 35 MW coal-fired power plant in Sulawesi to meet the requirements of its new cement plant at that location. Given the increasing deregulation in the power sector the Company will explore relevant business models for own power generation. The Company also intends to enter into strategic partnerships in

order to meet its energy requirements for plants operational activity.

3. Enhance company image the Company is committed to continually pay attention and consistently invest some funds to create an environmentally friendly operations and to promote community development in the surrounding area so the relation with the environment as a whole can be meaningful and positive on the corporate image. The Company believes and continues to implement the concept of triple bottom line in strengthening the corporate image, such as a balance between economic and social growth and environmental development. The Company ensures that business growth including community development in the surrounding area must be simultaneously executed with the overall business expansion plan.

4. Move closer to the customer the customers satisfaction and loyalty is very important for the Company. In an era of increasing competition and market sophistication, the Company remains flexible and responsive in adjusting its business model to meet customer requirements in the most effective way. Product quality and on-time delivery remain the cornerstones of the Companys brand image. The Company will continue to maintain the satisfaction and loyalty of customers through an intimate understanding of their needs.

5. Enable corporate growth the Company strives to enhance the quality of its main asset such as, the organization capital, information capital and human capital - as a direct catalyst in accelerating business growth. In 2010, the Company succeeded migrating ERP with the support of a fully dedicated team on the successful implementation of the Information & Communication Technology (IC T) program, which in turn will improve the system and focus on Strategic Information System (SIS) as well as human resource programs.

6. Keep risks under control The Company recognizes its responsibility to deliver sustainable growth at an acceptable levels of risk. To this end, the Companys leadership team regularly monitors the risk management program and ensures that it is configured for maximum effectiveness. The Companys financial strength further enables the Company to manage known and anticipated risks as it continues to pursue an aggressive,but prudent growth plan.

5. Global Strategy PT Semen Gresik does not conduct too many global business activities, the global activities done by PT Semen Gresik is merely selling its product internationally. From the figures, we can also see that it only sells a small amount of cement internationally. This is due to the lack of production capacity to meet the local demands, moreover the international demands.

Although the second figure shows that Indonesias cement demand is quite low compared to other countries, the production capacity cant meet the demand. The capacity improvement of PT Semen Gresik is hoped to be able to exceed this demand, moreover, due to Indonesias rich natural resources which is not owned by most of the other countries, it is hoped that PT Semen Gresik can be one of the big player in International Cement Market.

6. Cooperative Strategy Some strategic alliances has been made by PT Semen Gresik to enhance its market power and expand its existing market share. Some significance forms of PT SG strategic alliance are: a) On July 21 2010, Signed Memorandum of Understanding (MoU) with PT PLN (Persero) concerning security of electricity supply. b)