RESEARCH METHODOLOGY FOR BUSINESS WORKSHEET

New Business Strategy Expansion to International Market

in South Sudan : Case of PT. Waskita Karya (Persero) Tbk
1. Introduction

I.1 Business Issue

PT Waskita Karya (Persero) Tbk is one of the State-Owned Enterprises in Indonesia in the
construction industry which formerly was a foreigner-held company. Then in 1961 the Indonesian
government took the ownership of PT Waskita Karya. Waskita Karya provides construction service
provider in highways, bridges, ports, airports, buildings, waste factories, cement factories, and energy
infrastructure.

Currently the Indonesian political situation is relatively stable, with government focus still on
infrastructure which will benefit to the company greatly as the government partner to support their
program. In addition, President Joko Widodo's term will last until 2024 thus there will not be
turbulence on the continuity of the current program, at least for another 2 years. In addition, the
government has begun building the infrastructure for the new capital city in Penajam Paser Utara,
East Kalimantan. Although there was some resistance initially for the plan, it has been commenced in
September 2022 and targeted will be ready for Independent day ceremony in August 2024.

The Indonesian government currently estimates 2022 GDP growth of 5.2%. Since 2017, Indonesia
was able to set consistent growth above 5% since 2017 but due to covid 19 pandemic the positive
record was put in halt. The economy was hit hard by the pandemic and as a result, Indonesia's
economy contracted by -2.1% in 2020. In 2021, the government started a vaccination program for the
public and as a result few public restriction policies were lifted to increase people's consumption and
drive the economy. This has caused the economy to rebound to 3.69% growth in 2021. Despite the
Omicron cases that peaked in February, the government continues to be optimistic and projected the
case will slow down in March 2022. Ongoing infrastructure development projects are expected to
remain in expansionary territory in 2022 thus Waskita can feel confident that its performance will
improve. Investor confidence in purchasing infrastructure from Waskita will also increase and ease the
process of divestitures of toll roads.

Currently Waskita is in a unique market in the Indonesian growing market, with strong support from
investors and government. Despite of the strong position, Waskita gained a challenging situation on
the financial performance with the overview of asset performance according to 2020

Business performance of Waskita has been declined since 2019, which mostly impacted by
decreasing sales revenue for the segment of toll road project. investment which have been saturated
in the market. bank interest imposed from financial funding of the projects.

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Source Financial report PT. Waskita Karya

Financial performance of PT. Waskita Karya in 2021 shows some decline in some aspects of the
financial statement. The company must be aware and put high focus and effort to improve the
company's financial performance. According to the 2021 financial report, PT. Waskita Karya recorded
Rp12.030,45 billion in revenues, which was 77,99% lower than the peak year's performance in 2018.
Also the net income performance amounted to a loss of Rp 1.300,73 billion.

The critical point of Waskita reflected in leverage ratio which is very high due to Debt Equity Ratio
(DER) above 3 points. The condition was caused by a huge amount funding sourced from bank
credit, which not only for project funding but also consumed for project investment. In order to improve
the financial health of BUMN Karya, the Ministry of SOE formed a Team for the Acceleration of
Financial Health Improvement of BUMN in the Construction and Toll Road Sector in accordance with
the Decree of the Minister of BUMN No. SK300/MBU/12/2009 and the latest amendments according
to SK-50 /MBU/Wk2/06/2021.

In addition with the programs to improve business sustainability of company, it is necessary to have
another business strategy in participating for international market. On the other hand, the tight
competition between national contractor in the internal market has almost reached in saturated level
that will impact to low potential margin and will be declined since the bidding process compete in low
bid prices. For international markets, still remain the big opportunity especially in a new developing
country. In line with the programs of Government of the Republic Indonesia to increase an
international contribution as a key player. It has inaugurated with diplomatic partnership between
Indonesia Government with The Government of South Sudan.

Government of South Sudan has signed a business agreement called Oil for Infrastructure, the
scheme will be effective after South Sudan has delivered crude oil to PT. Pertamina Kilang
International 15.000 bpd (600.000 – 900.000 bps) than Pertamina proceed payment in escrow
account deposit in National Bank Consortium (Himbara) which will be considered as an deposit
amount to guarantee payment of infrastructure project. The scope of infrastructure project are
Construction of Upgrading of Four Sections For the Road Projects (1000km) with 4 phases of
development stage.

I.2 Research Question

The following research questions are raised :

1. How is the opportunity in expantion of the business go global using PESTEL, VRIO analysis
2. Analysis of decision using AHP
3. Sensitivity analysis of the investment
4. Risk analysis of the potensial issues may incurred and the mitigation plan
5. Analysis of business models

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2. Business Issue Exploration

a. Conceptual Framework

 PESTEL Analysis

 VRIO Analysis

No Key Resources V R I O Competitive Consequences

1 General contractor Y Y N N Temporary Competitive Advantage

licenses

2 Asset capabilities Y Y Y Y Sustainable Competitive Advantage

3 Project Footprint Y Y Y Y Sustainable Competitive Advantage

4 Technology based Y N N N Competitive parity

operation

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b. Context of Business Issue

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c. Analysis of Business Environment

Define the 5 Whys from those 3 Problematics and create the Cause map diagram
1. The reason is financial performance of PT. Waskita Karya (Persero) Tbk, which has listed in
public should explain and clarity the root clause of the problem.

           
  What Problem(s) Declining business performance  
  When Date Since Covid-19 Pandemic 2020  

  Where Physical Location All projects  

  Unit, process, equipment Toll road developer  
  Work being done Generate business cycle  
  Impact to the Goals  
  Safety Regulate investment viability  
           

Toll road
Generate business cycle
Developer
Develop new Hit by Covid 19
business model pandemic

Tight competition,
shortage of profit All projects

2. According to Master Restructuring Agreement (MRA), there are several condition which strictly
control all the business decision especially related with investment, equity and viability of the
projects.

           
  What Problem(s) Financial restructuring rules  
  When Date 2021  
  Where Physical Location All projects  
  Unit, process, equipment Sustaining the business  
  Work being done Approved by all Lenders  
  Impact to the Goals  

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  Safety Stright requirement, no more invest  

           

Approved by Lenders Sustaining

Back to business
Overseas
corebusiness
Project
as Contractor

Strictly rules, no
more investment All projectss

3. To sustain their business, Waskita should select best opportunity project as main contractor with
no more any mislead

           
  What Problem(s) Business expansion to South Sudan  
  When Date 2023  
  Where Physical Location South Sudan  
  Unit, process, equipment Oil for Infrastructure  
  Work being done Government support  
  Impact to the Goals  
  Safety Political & security risks  
           

Government support Oil for

Improve Infrastructure
financial South Sudan
performance Project

Political & security

risks All projects

Identify the variables from the Cause Map Diagram

From the Cause map diagram, identify variables that interest you to explore

 International business
 Political & security risks
 Contract by FIDIC
 Tax policy

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 etc

From the Cause map diagram, identify possible theory to explore

 American Society for Civil Engineer

 Doing research in business & management, An essential to planning your project, Pearson
 South Sudan geopolitical
 Africa Cataloge
 FIDIC Contract
 etc

d. Stakeholder Analysis

Internal Customer
 State-owned Enterprise
 Lender association, consist of 21 Bank which involved in restructuring programs
 Pertamina International offshore
 Association of Indonesia’s State-owned Bank
 Vendor
 Amoco Construction as a Joint Operation Partner

External Customer
 Government of South Sudan
 Ministry of Roads and bridges of Government of South Sudan
 Construction Management Consultant
 Ministry of Petroleum of Government of South Sudan

Team Member for problem solving

 Overseas Division of PT. Waskita Karya (Persero) Tbk
 Board of Director of PT. Waskita Karya (Persero) Tbk
 Senior Vice President of Corporate Office of PT. Waskita Karya (Persero) Tbk
 Professional Expert
 Candidates of Project Teams