Professional Documents
Culture Documents
1.1 Background
Coal as an important mineral for humans. Coal has become one of the basic
fossil energy sources that are exhausted and cannot be renewed. One of the main
functions of coal for human life is as a producer of electricity, and for this one
function, almost half of the world's electricity uses coal fuel. In Indonesia, aside
from oil and gas, coal is currently an important commodity in the mining world.
Two of the five large islands in Indonesia, namely Sumatra and Kalimantan, are
regions that are rich in coal content, the amount of which is one of the largest in
the world. In addition to domestic consumption, Indonesia also sells its coal
abroad. At present, Indonesia is the largest coal exporter in the world, with
market coverage from Asia, the Middle East, Europe, Australia, and America.
The characteristics of Indonesian coal are bituminous - sub-bituminous. This
quality is very suitable for Steam Power Plant fuel. Therefore a lot of interest in
other countries. Indonesia also has another advantage, namely its position as an
island nation. Coal shipping and shipping activities are becoming younger and
more efficient.
On the IDX there are 17 listed coal mining companies, and one of them is PT
Adaro Energi Tbk. PT Adaro is the second largest coal mining company in
Indonesia, coal products produced by the company have lower sulfur and ash
content and have branding envirocoal (Wicaksono, R. A, 2011).
Based on PKP2B No.J2 / Ji.DU / 52/82 dated November 16, 1982, Adaro
conducted coal exploration and mining activities in Balangan Regency and
Tabalong Regency, South Kalimantan Province. The Adaro Production Phase
began in 1991, while commercial production began in 1992. Adaro's coal
products have very low ash and sulfur content so that the combustion process
practically does not lead to environmental pollution. With its environmentally
friendly specifications, Adaro's coal products are marketed under the trademark
Envirocoal. Various policies implemented in many countries in the world,
especially in Europe related to the use of environmentally friendly fuels have
increased the potential for acceptance and market demand for environmentally
friendly coal, and have given a unique position for Envirocoal products in the
global market. The coal production of PT ADARO INDONESIA better known
as Envirocoal is currently marketed in more than 17 countries around the world
including India, Japan, China, Britain, Spain, and America as an energy source
for Steam Power Plants (PLTU). Adaro is currently implementing a surface
open-cut mining system at the Tutupan, Paringin, and Wara mining sites.
Because Adaro's coal is naturally clean, the washing process is no longer
needed, except the crushing process carried out at Kelani's, on the banks of the
Barito River, which is located approximately 80 km from the Tutupan mine site.
The overburden removal and coal transportation from the mine to the crushing
location of PT ADARO INDONESIA is carried out by five main contractors,
namely PT PAMAPERSADA NUSANTARA, PT BUKIT MAKMUR
MANDIRI UTAMA, PT RAHMAN ABDI JAYA, PT SAPTAINDRA SEJATI,
and PT RANTE MUTIARA INSANI. In August 2013 the human resources
involved in PT ADARO INDONESIA's operational activities are planned to
reach 20,036 people, consisting of 1,011 permanent workers, 15 foreign
workers, and 19,010 workers from contractors and subcontractors. As a form
of empowerment for the surrounding community, Adaro along with its
contractors and subcontractors currently accommodate up to 70% of the local
workforce, while the remaining 30% comes from outside the Kalimantan region.
CHAPTER II
THEORETICAL BASIS
2.1.1 Strategy
Strategy comes from the Greek strategy, which means leadership in the army.
According to Freddy (1997), the strategy is a means to an end. Strategic
concepts are concepts that need to be understood and applied in all kinds of
business fields. Its activities include careful observation of competition,
regulation, business cycles, consumer desires, and expectations as well as other
factors that can identify opportunities and threats.
Quinn (1999: 10) defines strategy as a form or plan that integrates the main
objectives, policies, and series of actions in an organization into a unified whole.
A well-formulated strategy will help to compile and allocate company resources
into a unique and sustainable form.
From the two opinions above, the strategy can be interpreted as a process of
determining a plan that integrates the main objectives in an organization into a
unified whole. Goldsworthy and Ashley (1996: 98) propose seven basic rules in
formulating a strategy as follows:
a) It must explain and interpret the future, not just the present.
b) Strategic direction must be able to determine the plan and not vice versa.
c) A strategy must focus on competitive advantage, not solely on financial
considerations.
d) It must be applied from the top-down, not from the bottom up.
e) The strategy must have an external orientation.
f) Flexibility is very essential.
g) The strategy must be centered on long-term results.
To ensure that the strategy can work well by convincing not only to be trusted
by others but indeed it can be implemented, Hatten and Hatten (1996: 108-109)
provide some guidelines as follows:
a) Strategies must be consistent with the environment
Depending on the scope of its activities. If many strategies are made, then one
strategy must be consistent with other strategies. Don't contradict or contradict
each other, all strategies are always harmonized with one another.
c) Effective strategies should be the focus and unite all resources and not
disintegrate with each other.
d) The strategy should focus on what are its strengths and not at points that are
precisely its weaknesses.
f) Strategies should take into account the risks that are not too large.
Indeed, each strategy carries risks, but it must be careful, so it does not plunge
the organization into a bigger hole. Therefore the strategy should always be
controlled.
g) The strategy should be developed based on the success that has been
achieved.
h) Signs of the success of the strategy are shown by the support of relevant
parties from the executives, from all unit leaders in the organization.
From the various opinions above, it can be concluded that the preparation of the
strategy must pay attention to the goals and objectives to be achieved in the
future, in addition to that an organization must always interact with the
environment where the strategy will be implemented so that the strategy is not
in conflict but line with the environment of the condition and see the internal
and external capabilities that include strengths and weaknesses of the
organization
According to David (2011: 5), strategic management can be defined as art and
knowledge in formulating, implementing, and evaluating cross-functional
decisions that enable an organization to achieve its goals. Strategic management
focuses on integrating management, marketing, finance or accounting,
production or operations, research and development, and computer information
systems to achieve organizational success.
According to David (2011: 6), the strategy management process consists of three
stages: strategy formulation, strategy implementation, and strategy evaluation.
Based on the theories that have been explained by the experts above,
conclusions can be drawn regarding the concept of strategic management is the
strategic management of art and knowledge in formulating, implementing, and
evaluating in the unity of the management process in an organization that is
fundamental to corporate strategy consisting of three stages are strategy
formulation, strategy implementation, and strategy evaluation.
3. Anticipate changes
A grand strategy is a general plan in the form of major actions that companies
use to achieve long-term goals. Strategic planners believe that the general
philosophy that describes the business or business enterprise is reflected in the
mission that must be translated into statements in the business strategy set.
Pearch II and Robinson (2007) say that strategic planning that long-term strategy
is derived from the company's efforts to find a basis for competitive advantage
from generic strategies, namely:
Chandler (1962, p.13) defines a grand strategy as "... the determination of the
basic long-term goals and objectives of the company and the use of a series of
actions and allocation of resources needed to realize those goals".
Glueck (1980) says that business strategies are integrated schemes that are
coordinated and extensively designed for companies to implement their future
goals.
Based on the theories that have been explained by the experts above, it can be
concluded that the Grand Strategy is a general long-term strategy plan in the
form of major actions from the company that is coordinated and extensively
designed to implement the company's future goals.
According to Wheelen and David (2008: 15), There are several levels in strategy
for large companies, there are three levels of management strategies that develop
following the development of the company's business, namely:
Corporate Level Strategy is a strategy that reflects the entire direction of the
company, intending to create growth for the company as a whole and
management of a variety of product line businesses. There are 3 kinds of
strategies that can be used at this corporate-level strategy, namely the growth
strategy the company is going through. The stability strategy (Stability Strategy)
is a strategy in dealing with the income slump that is being faced by a company.
And a retrenchment strategy is a strategy implemented to minimize or reduce the
efforts of the company.
1) Growth Strategy
Business strategy is a strategy that occurs at the product or business unit level
and is a strategy that is determined in the competitive position of the product or
service in a particular industry or certain market segments. Three types of
strategies can be used at this business-level strategy, namely " Cost
Excellence Strategy, Differentiation Strategy and Focus Strategy". The Focus
Strategy itself consists of a cost focus and a differentiation focus. At the
business level, the strategic strategy department. Strategies at this level are
formulated and established by managers who are tasked with responsible by top
management to manage supported businesses. The company's business strategy
is a pattern of decisions within a company that determines and expresses the
goals, intentions, and objectives that produce policy plans to achieve goals.
Functional Strategy is a strategy that occurs at the functional level such as,
operational, marketing, financial, human resources. Research and development
where this strategy will increase the functional area of the company so that it
gets a competitive advantage. This strategy must refer to the business strategy
and corporate strategy. focus on activities to maximize the productivity of the
resources used in providing the best value for meeting customer needs.
• Select the company's mission and goals Selecting the company's main mission
and the company's main objective.
• Analyze the external competitive environment of the organization to identify
opportunities and threats.
• Analyze the organization's internal operating environment to identify the
strengths and weaknesses of the organization.
• choose strategies that build organizational strengths and improve weaknesses
to take advantage of external opportunities and fight external threats. This
strategy must be consistent with the mission and main goals of the organization.
They must be congruent and are a viable business model.
• Implement strategies.
From some of the theories of the strategy management process above it can be
concluded that the strategic management process is a process that produces
several interrelated and sequential stages which include environmental analysis,
strategy formulation, strategy implementation, and evaluation of strategies
and strategic actions that will support the achievement of company goals.
Business is based on the thought of the belief that an organization reflects the
basic ideas of an organization's vision or mission. Vision and mission itself is a
statement made by the company internally to indirectly describe what becomes
the goals, objectives and work plans of the company. Vision and mission
statements have a positive role in the management of a company's strategy. A
clear vision and mission statement will guide managers in formulating, planning
and executing what strategies will be used so that what is the initial goal
together can be achieved. vision is the foresight of an individual or organization,
related to the goals to be achieved, and what needs to be done to realize that
vision in the future. the mission is everything (strategy, action) that must be
done to realize the vision.
According to Wibisono, the notion of vision is a series of sentences that state the
ideals or dreams of an organization to be achieved in the future. While the
definition of mission is the determination of the goals or objectives of the
company in the short term (1-3 years).
According to Herry Achmad Buchory and Djaslim Saladin (2010: 46) suggested
that the Environment (environment) is one factor that is taken into account in the
management of business activities. The environment is very influential in
business strategy planning.
According to Suryana (2006: 106) stated that the business environment can be a
driver or inhibitor of the company's running. Environments that can affect the
course of business/company are internal and external.
According to Herry Achmad Buchory and Djaslim Saladin (2010: 49) suggested
that the internal environment is "actors who are directly related to the
environment, which affect the company".
Based on the opinion of some experts above, it can be concluded that the
internal environment is an environment within a company whose elements in it
affect the company both directly and indirectly.
According to Viljoen in Moeljadi (1998: 28) argues that the external
environment is often referred to as external opportunities and threats, including
political, social, technological, economic, geographic, customers, suppliers,
competitors, creditors, and labor.
According to Pearce and Robinson; Hunger and Whelen in the research I Gusti
Putu Darya (2011: 66) states that the external environment of a company
presents many challenges faced by a company to attract or obtain the necessary
resources and to market goods and services profitably.
From some of the opinions above, it can be concluded that what is meant by the
external environment is an environment outside the company that can directly or
indirectly have an impact on company activities/business and can create
opportunities or threats for the company.
3. Phase 3, called the Decision Stage, involves only one technique, the
Quantitative Strategic Planning Matrix (QSPM). QSPM uses input
information from Phase 1 to objectively evaluate alternative strategies
identified in stage 2. QSPM shows the relative attractiveness of various
alternative strategies and thus provides an objective basis for the selection of
alternative strategies.
2.3.4. Implement the strategy
The corporate strategy builds the overall direction and goals expected by a
company. The company's strategy is used to control the company on certain
goals, but other corporate strategies are used to ensure the direction of the goals
received,and ensure to be able to understand and manage if significant
developments occur. (Kuncoro, 2005)
According to Grant and Owen (2010: 19), Business Strategy is a policy and
guidelines that determine the way a company competes in industry and in
particular the way companies form competitive advantage. Business strategy is
often also referred to as a functional business strategy because this strategy is
oriented to the functions of management activities, for example, marketing
strategy, production or operational strategy, distribution strategy and so on.
According to Wheelen and Hunger (2003: 21) business unit level strategies,
more directed at managing the activities and operations of a particular business.
Business strategy is a strategy that emphasizes the improvement of the
competitive position of the company's products or services in specific industries
or market segments served by the business. Business Strategy is at two levels
based on the level of aggregation (level of aggregation) level is after the
corporate strategy and after the functional strategy.
Chapter 3
Discussion
Adaro's history begins with global oil shocks in the 1970s. This led the
Government of Indonesia to revise its energy policy, which at the time was
proposed for oil and gas, to include coal as a fuel for domestic use. By
relinquishing the focus on coal in 1976, the Department of Mines divided East
and South Kalimantan into 8 coal blocks and opened tenders for these blocks.
The Spanish government company, Enadimsa, placed a bid for Block 8 in the
Tanjung region, South Kalimantan because coal accessed it in the area from
outcrops mapped by Dutch geologists in the 1930s and from intersections of oil
fields that had been drilled by Pertamina in the year 1960s. No other company
made an offer for the block, because at that time the location was considered too
far inland and had low-quality coal. The name 'Adaro' was chosen by the
Enadimsa company to honor the Adaro family, which is very well known in
Spanish history, who collected a large amount of mining activity in Spain for
several centuries. Thus was born PT Adaro Indonesia. The Adaro Indonesia
Coal Cooperation Agreement (CCA) was signed on November 2, 1982.
Enadimsa carried out exploration activities in the area of the agreement from
1983 to 1989, compiling a consortium of Australian and Indonesian companies
to buy 80% of Adaro Indonesia's ownership from Enadimsa. In the early part of
the 1990s, Adaro conducted study feasibility to lay the foundation for project
development. The important thing is to choose a transportation route for coal
transportation, and the decision is made to build an 80km coal hauling road
located west of the Barito River, rather than building a 130km road located east
of Adang Bay on the Kalimantan coast because it will be faster and cheap, and
especially because it can avoid roads that cross the Meratus Mountains. The coal
production was also decided to start from the Paringin mine because it has a
higher heat value than the Tutupan mine, and also the mine has a cover that
contains mudstone, the hard rock which is suitable in road construction. The
development of this mine is accelerated to bring coal to the market as quickly as
possible to build a customer base. The company decided to integrate as much as
possible with the local community, where all employees, both foreign and local,
lived in local cities, and recruitment focused on the local community with a
commitment to conduct training on a large scale. The maximum use of
contracting services is also used as an operational focus, especially the services
of contractors and local suppliers whenever possible. The first step in
developing a coal deposit was fundraising and in May 1990 an approach was
made with several banks to obtain project financing of US $ 28 million.
However, all the banks approached refused to provide financing because of the
consideration of problems related to coal quality because Adaro's sub-
bituminous coal type had not traded internationally with a significant volume
and the domestic market at that time was relatively small. There are doubts
about the feasibility of constructing a coal-hauling road, mainly because of 27
km of the proposed road crosses a swampy area, which is considered technically
feasible would also result in high construction costs. Therefore, the shareholders
provided development funds of US $ 20 million with commercial financial rates
for the construction and construction of Adaro's operational activities on the
condition that the funding needs be more sourced from the company's cash flow.
Construction of the coal hauling road began in September 1990 and took about
one year due to difficulties in laying a 27 km long road above marshes on the
side of the Barito River. Construction of a crushing, stockpiling and barge
loading system of 2 million tonnes per year in the Kelani's River began in March
1991. The Paring pit with a single 30-meter thick layer was opened in March
1991 using the services of a local contractor. The coal is first tested in a run-of-
mine stockpile and samples are then sent to Australia for combustion testing.
The results are good and show some potential positive things from the use of
coal in commercial heaters. The official opening of the Paring mine was carried
out in August 1991. During 1990, a marketing program was developed that
focused on potential markets where Adaro coal containing extremely low levels
of sulfur and ash could offer great benefits. To help with marketing activities, it
was decided to adopt trademarks for coal that would reflect these qualities and
after "aqua coal" was discussed and rejected, the name"Envirocoal" was chosen
to be used as Adaro's coal brand. The first sale of Adaro's coal was to Krupp
Industries from Germany who was interested in Envirocoal's environmentally
friendly character. The company's ship, MV Maersk Tanjong, which has its gear
and dredging equipment sailed to Europe on October 22 with 68,750 tons of
Envirocoal. After further trials, deliveries were made in 1992 to several potential
customers and with the completion of the construction of the coal infrastructure
and the establishment of a customer base, Adaro was declared to be operating
commercially on October 22, 1992. Since these early days, the Adaro Indonesia
mine has grown to become the largest single mine site in the southern
hemisphere, and production has grown from the start of 1 million tons in 1992,
and for several years scored remarkable growth. For example, in 2006, Adaro
Indonesia increased production by more than 28% from the previous year to
34.4 million tons.
To date, Adaro Indonesia's coal production and sales have maintained a stable
growth trend, and in 2018 Adaro's coal production reached 54 million tons.
Vision
1. Become a leading Indonesian mining and energy company group.
Mission
1. Satisfy customer needs.
2. Developing employees.
3. Establish partnerships with suppliers.
4. Support the development of society and the State.
5. Prioritizing safety and environmental sustainability.
6. Maximizing value for shareholders.
Adaro is a company that has a strong focus on the integrated coal mining
business through its subsidiaries. Adaro aims to help contribute to the
Indonesian economy by carrying out coal export activities outside Indonesia and
providing the best services for Indonesia, Shareholders, Company Partners and
their employees.
3.3.1. Product
Adaro's coal product is a sub-bituminous type with a moderate energy level,
which is one of the cleanest fossil fuels in the world thanks to its extremely low
sulfur, ash and nitrogen content. This trade-in coal has been recognized on the
global market as Envirocoal. It is mined in South Kalimantan by Adaro
Indonesia, Adaro Energy's main mining asset. In 2014 Balangan Coal products
which have low pollutant characteristics similar to Envirocoal began to be sold
to the market. Balangan Coal is mined from the greenfield coal deposit located
11km southeast of the Adaro Indonesia concession in Balangan Regency, South
Kalimantan.
3.3.2. Price
The Reference Coal Price (HBA) for direct selling (spot) which is valid from
1 August 2016 to 31 August 2020 at the Free On Board delivery point on a FOB
vessel is USD 58.37 / Ton, as released in the portal www.minerba.esdm.go.id.
HBA in August 2019 increased by USD 5.37 or rose 10.1% compared to the
HBA in July 2019 USD 53. HBA increase of 10.1% is the highest percentage
increase in HBA in the last 5 years. The highest increase in the percentage of
HBAs previously occurred in the February 2011 HBA of USD 127.05, which
rose by USD 14.65 or up 13% compared to the January 2011 HBA of USD
112.4. The February 2011 HBA is the highest HBA value to date since the HBA
was implemented. The HBA increase in August 2019 continued the upward
trend of HBA in the previous 2 months, namely: in June 2019 and July 2019.
When compared to the August 2015 HBA of USD 59.14 (year on year), the
August 2019 HBA edged down by USD 0.77 or decreased 1.3%. The HBA
value is the average of the 4 coal price indices commonly used in coal trading,
namely: Indonesia Coal Index, Platts59 Index, New Castle Export Index, and
New Castle Global Coal Index. HBA is a reference for coal prices on the equal
heat value of 6,322 kcal/kg Gross As Received (GAR), water content (total
moisture) 8%, sulfur content 0.8% as \received (ar), and ash content 15% ar.
Based on the HBA, then the Coal Benchmark Price (HPB) is calculated which is
influenced by the quality of coal, namely: the calorific value of coal, the water
content, sulfur content, and ash content following the main coal trademark or
brand called HPB Marker.
HPB Marker consists of 8 coal brands that are commonly known and traded.
The HPB Marker for the August 2016 period for 8 coal brands in USD / Ton are
as follows:
1. Gunung Bayan I: 62.42 (up 10.3% compared to July 2016 HPB)
2. Prima Coal: 63.97 (up 9.3% compared to July 2016 HPB)
3. Pinang 6150: 57.80 (up 9.3% compared to July 2016 HPB)
4. Indominco IM_East: 47.95 (up 10.0% compared to July 2016 HPB)
5. Against Coal: 47.60 (up 8.8% compared to July 2016 HPB)
6. Enviro Coal: 45.45 (up 8.1% compared to July 2016 HPB)
7. Jorong J-1: 36.57 (up 8.2% compared to July 2016 HPB)
8. Ecocoal: 33.64 (up 7.9% compared to July 2016 HPB)
In addition to these 8 coal trademarks, the Directorate General of Mineral and
Coal of the Ministry of Energy and Mineral Resources sets HPBs for other coal
trademarks every month including Medco Bara 6500, Baramarta Coal, Pinang
5500, Arutmin A5000, and LIM 3010.
3.3.3 Place
PT Adaro Energy has a good place in the Domestic Market and Global Market,
as the data below shows:
1. Sales of PT Adaro, which produces coal on the largest scale, reached 51.4
million tons in 2015, serving 56 customers in 14 countries. Average sales per
month reach 4.3 million tons.
2. Domestic coal sales were recorded at 11.0 million tons, or 22% of total sales,
of which 90% of this amount was supplied to power plants, and 90% of sales
were carried out on long-term contracts.
3. The remaining 40.4 million tons are sold in the export market. The single
largest export destination is China, where AI sales were not affected by weak
demand reflected in shipments to China of 8.6 million tons, 14% higher than in
2014. The second-largest single export destination in India with a volume of 6.9
million tons, 20% lower than in 2014 due to aggressive price competition.
4. North Asia - Japan, Hong Kong, Korea, and Taiwan - consumes 14.9 million
tons. Sales to these premium markets fell significantly due to price competition
from Australia and Russia. A total of 6.4 million tons of Adaro's coal were sold
to ASEAN countries, slightly lower than in 2014, but Adaro remains optimistic
by seeing signs of penetration into new Southeast Asian markets such as
Bangladesh and Vietnam.
3.3.4 Promotion