CHAPTER II BUSINESS ISSUE EXPLORATION
2.4. Internal Analysis
2.4.3. Value Chain Analysis
The value chain describes all the activities needed to produce goods or services, from design, raw material input, production processes to distribution to final consumers and after-marketing services. Porter explains that value chain analysis is a strategic analysis tool used to understand a company's advantages better, identify where customer value can be increased or decreased costs, and better understand a company's relationships with suppliers, customers, and other companies. The value chain identifies and links the various strategic activities of the company. The nature of the value chain depends on the nature of the industry and varies for manufacturing companies, service companies, and non-profit-oriented organizations (Porter, 1980 in Pawarrangan, 2012).
Value Chain Analysis views the company as part of the product value chain. The product value chain is an activity that starts from raw materials to after-sales handling. This value chain includes activities because of relationships with supplier linkages and consumer Linkages. This activity is a separate activity but highly dependent on one another (Porter, 2001 in Wibowo, 2014). Value Chain Analysis helps managers understand the company's position in the product value chain to increase competitive advantage. Value Chain Analysis Approach and Value Coalition is the best approach in building the company's value towards a better direction. According to Michael Porter, business consists of two activities: primary activities and support activities. The primary activities involved a product's physical creation, sale and distribution to buyers, and service after the sales. Support activities assist necessary for the primary activities to take place. The value chain shows how a product moves from the raw material stage to the final customer (Ireland, 2011). An overview of the value chain scheme with two primary and support activities can be seen in Figure 2.8.
Figure 2.8 Value Chain.
(Source: Modified from Ireland, Duane, Michaek Hitt & Robert Hoskisson, 2011)
2.4.3.1. Primary Activities
The main activities in the value chain are all business activities that can create value or benefits for customers in presenting something that can show the company's uniqueness in the market. This primary activity is considered an essential activity in running a business.
Some of the company's activities included in the main category are Inbound logistics, which is related to storing, receiving, and distributing products. Operation is the process of an activity that converts raw material products into final products. Outbound logistics is a company activity related to distributing products or services to customers. Marketing and sales are related to marketing and sales, such as promotion. The last part is Service, which is an activity related to providing services to improve further the maintenance of a product, such as maintenance, repair, and training.
1. Inbound Logistics
The raw materials used by WIKA are highly dependent on the type of project being managed. The project is a unique activity because it has different specifications and is not the same in each project. In general, the raw material components in making a WIKA final product are obtained from suppliers and subsidiaries. Raw materials such as rebar, concrete, and steel are distributed according to each project's specific specifications.
Specifically, for concrete materials, WIKA's subsidiary, PT. Wika Beton, can be a supplier to WIKA holding projects. Likewise, steel materials can be directly supplied and manufactured by a subsidiary of PT. Wika Industri Konstruksi and asphalt raw materials supplied by PT. Wika Bitumen. The role of the subsidiary as a supplier is also highly dependent on the price and availability of factories in carrying out their operations.
Sometimes if the subsidiary is overloaded with work, the holding project ends up getting raw materials from other suppliers.
2. Operations
Operating activity converts raw materials into finished products or services that consumers can directly use. This operational process includes the collection of raw material components, assembling the main and supporting components until entering the finishing stage. In EPC projects in the industrial sector, raw materials consist of several components
according to technical specifications, which are produced into a final product according to the specifications in the contract agreement. The following is the company's operating scheme in converting raw materials into final products in the project cycle with a conventional pattern, as shown in Table 2.10.
Table 2.10 Descriptions of the Operational Stages of the WIKA Project.
No .
Operation
Stage Description
1. Preparation Stage
Preparation of work areas, project offices, and temporary buildings.
Supporting buildings such as warehouses, mess, laboratories, and supporting utilities are also prepared to support work activities.
2. Measuremen t Stage
Implementation of measurement of worksite mapping and topographic geodetic survey to ensure actual conditions are following contract conditions. For specific projects, this phase also measures the geological conditions.
3. Construction Stage
Execution of construction work according to contract technical specifications. Many supporting materials and tools are used in this phase, such as rebar, concrete, wood, steel, stone, sand, heavy equipment, and other supporting materials. This construction phase is the operational core of the process of converting raw materials into final products.
4. Maintenance Stage
Products that have passed the construction period get a guarantee as a form of guarantee for the quality of the product. During this phase, if there is damage to the product, the contractor is responsible for the repair process.
5. Handover Stage
The final product has passed the quality assessment and is ready to be handed over to the project owner or end-user.
(Source: Author, 2022)
3. Outbound Logistics
Outbound logistics means transporting finished products from the business to the customer. Outbound logistics networks typically include manufacturers, distributors, retailers, and transportation teams. The manufacturer completes the product, and the product will be delivered to the distributor or directly to the customer. Outbound distribution process developed based on consumer demand by providing goods on time.
Some companies ship products directly to customers based on them, and some companies accept wholesale distributors and execution centers that use telecommunications or private operators.
The outbound logistics process of PT. Wijaya Karya (Persero) Tbk, which is engaged in construction services, has a final product that is directly distributed to specific consumers
with a contract of work. The resulting product is handed over directly to the owner as of the project owner. In business in the industrial market, through its subsidiaries, WIKA distributes finished products of precast concrete or steel fabrication to consumers through third parties using a rental system. The third-party responsible for the outbound logistics process is positioned as a permanent partner who has a contract to support the final goods delivery process in the logistics process.
4. Marketing and Sales
The construction industry still has promising market potential, even during a pandemic that must limit movement and mobility on all fronts. However, WIKA realizes that it is not only the Pandemic condition that must be faced in managing the market potential, but WIKA also has to face competition between players in the construction industry, which is quite tight, similar to state-owned private companies. WIKA has prepared a comprehensive marketing strategy to maintain and increase the Company's market share in the national construction industry. As part of the 2020 marketing strategy, WIKA analyzed the market segments and competitive conditions, as well as economic conditions due to the pandemic, including:
a) Using unique supporting images for price-sensitive segment education regarding price & quality comparisons,
b) Increasing the intensity of marketing communication that WIKA is a reliable company that provides prices based on quality,
c) Defining an awards mechanism for loyal customers using WIKA's services,
d) Providing stimuli for customers in the passive category to become promoters and retaining customers in the promoter category to remain as promoters,
e) Conducting macroeconomic analysis as an indicator for the analysis of future sectoral business growth.
The marketing process of PT. Wijaya Karya (Persero) Tbk will eventually produce an output of a project contract agreement with unique and varied specifications and a specific contract value depending on the type of scope of work. The benchmark for the company's marketing success is when the company manages to get a contract agreement with the employer to make WIKA a service provider. Based on the history of obtaining contracts and new projects being worked on, as explained in chapter 1 in Figure 1.11, it is known that until mid-2021, WIKA is still superior in obtaining project contracts in the infrastructure sector. With the order book and new contract data obtained by the company, the industrial sector is still far behind in
terms of acquisition value compared to infrastructure contracts. The current situation of the company's marketing is still not in line with the expectations of the Ministry of SOEs.
Through the Building EPC Champion program, which demands that WIKA has a high market share in the industrial sector, it is necessary to make systematic improvements in the industrial sector. Looking at the current actual condition of the company, the company needs a marketing development strategy to increase market share and the growth of acquiring new contracts in the Indonesian industrial sector.
5. Services
The Company is committed to always safeguarding the interests of consumers. This commitment is realized by improving the quality of the products and services provided.
WIKA maintains its reputation by strengthening its commitment to service excellence and customer satisfaction. The Company realizes quality service is the key to maintaining customer loyalty and business continuity. To ensure that WIKA always produces products and services following the demands of its customers, the implementation of a Management System is key to WIKA's success in the field. The WIKA management system consists of:
a) Quality Management System – ISO 9001:2015
b) Security Management System – PERKAP 24 (SMP):2007 c) Information Security Management System – ISO 27001:2013 d) Anti-Bribery Management System – ISO 37001:2016
e) Risk Management System – ISO 31001:2009
f) Environment Management System – ISO 14001:2015 g) Service IT Management System – ISO 20000-1:2008
h) Safety Management System – ISO 45001:2001 & PP RI 50 (SMKK3):2012
2.4.3.2. Support Activities
Supporting activities in the value chain are company activities that aim to provide activities to achieve the company's main activities. Supporting activities are also a support for the main activities, which will make the main activities less than optimal or cannot run at all. In terms of value chain management, the supporting activities include the following Procurement is an activity related to getting resources, such as the purchasing function used in the value chain. Firm Infrastructure is an activity related to costs and assets related to general management, finance, accounting, security, and information system safety. Human Resources Management is an activity of training, development, and compensation for all types of personnel, including developing workers' skill levels. Technology Development is an activity
related to improving processes, products, software development, telecommunication systems, new database capabilities, and building computerized support systems.
1. Procurement
WIKA's procurement of goods and services objectives and targets are as follows: Ensuring the process of granting contracts for goods and services procurement meets the principles of optimization, efficiency, effectiveness, and meets the principles of good corporate governance (GCG), as well as producing goods and services that are of the right quality, amount, time, cost, location, and Provider. Realizing procurements generate value for money flexibly and innovatively but are still competitive, transparent, and accountable based on good procurement ethics, enhancing national businesses' role. The following are WIKA's social responsibility activities towards suppliers in the company's procurement procedures:
a) The goods and services procurement process are carried out within PT Wijaya Karya (Persero) Tbk, following applicable procedures.
b) Involved a process for qualification and evaluation of vendor performance.
c) Increasing the use of goods and services produced in-country to expand domestic employment opportunities and industrial bases increases economic resilience and competitiveness.
d) Procuring goods and services using information technology and electronic transactions.
e) Simplifying the provisions and procedures to speed up the decision-making process in the goods and services procurement.
f) Announcing the goods and services procurement plan and implementation in each work unit/bureau to show transparency in procurement activities.
g) Maintaining the confidentiality of goods and services procurement documents that, by their nature, must confidential to prevent irregularities in the procurement process.
2. Firm Infrastructure
In the field of infrastructure, WIKA ensures that all units work well by carrying out their duties and functions, such as financial and risk management, legal management, quality, health, safety, environmental management, and operations management. A detailed
description of the infrastructure firm that contains procedures and regulations in each company function will be explained below.
a) Finance and Risk Management
Ensuring that financial management is carried out in a prudent and controlled manner and preparing accurate and accountable corporate financial reports using a reliable internal control system and sound risk management. All operational activities and financial management are carried out based on best practices and applicable principles following the laws and regulations.
b) Legal Management
The Code of Conduct is WIKA's commitment to comply with legal requirements and the highest ethical standards wherever WIKA conducts business/operational activities. In addition to following the prevailing laws and regulations, the Company's Management must also uphold ethical norms and values. The Code of Conduct applies to all Company personnel, namely the Board of Commissioners, Board of Directors, and all Employees. All Company personnel is aware of practicing good ethics to enhance and strengthen the Company's reputation. Code of Conduct disclosure that applies to all levels of the organization is manifested in every WIKA employee signing the Company's Ethics Standards Compliance Statement and Code of Corporate Governance. WIKA is committed to implementing a gratification control to create a healthy business climate, avoiding actions, behaviours, or actions that can cause conflicts of interest, Corruption, Collusion, and Nepotism, and always prioritizes the Company's interests above the personal, family, or group interests. Applying ethical values forms a part of compliance with good corporate governance (GCG).
c) Quality, Health, Safety, and Environment Management
Managing Quality, Safety, Health & Environment (QSHE) is a significant area for WIKA. Optimal QSHE supports work safety and quality, and customers will be more confident in using WIKA's services. WIKA's concern for environmental preservation is reported in environmental compliance documents before starting the construction process and includes ecological impacts on the environment, water and wastewater management during the project, and electricity usage. The company continues to develop regulations and supervision of this QSHE to avoid
environmental damage due to construction work. Evaluation of the QSHE is carried out periodically to ensure the implementation of governance procedures.
d) Operation Management
WIKA is committed to conducting its business and operational activities while paying attention to quality, responsibility, and sustainability. In sustainability governance, WIKA has also implemented ISO 26000-based corporate social responsibility. The core subject of ISO 26000 consists of governance, employment practices, Human Rights (HAM), environment, reasonable operating procedures, consumer issues, and community engagement and development.
3. Human Resources Management
The Human Capital Division is responsible for managing and controlling the functions of planning and fulfilling human capital, career planning, optimizing placement, coaching and developing competencies, industrial relations, and controlling division-level business costs. The division of duties and functions for each Department in the Human Capital Division is as follows:
a) Organizational Development Department
Its primary function is to prepare long-term and short-term plans on an annual basis related to Human Capital, organizational development strategies, planning and meeting Human Capital needs, developing and implementing corporate culture, and preparing systems and procedures related to Human Capital.
b) Talent Management Department
Its primary function is to manage talent after identifying key organizational positions, selecting talent, preparing talent development plans and career plans to prepare candidates for the successor process. Annual employee assessments and periodic employee assessments are also carried out to cluster employee talents to match the interests and talents of each employee. The pattern of employee development programs is adjusted to the talents of each employee.
c) WIKA's Centre of Excellence Department
Its primary function is to develop PT Wijaya Karya (Persero) Tbk's competence in human resources (soft and hard competence) through a systematic and integrated
development program. This department also makes employee development programs to ensure employees have superior knowledge that is useful in carrying out the company's business activities. The company also makes a program to improve the education status of employees with a scholarship program.
d) Human Capital Recruitment and Dignity Department
Its principal function is to fulfill the human resource needs required by the company.
Other functions are implementing performance management, maintaining a human capital information system, encouraging work targets, administration, and payroll, and establishing relationships with pension funds for human resource retirees.
e) Human Capital Desk Department
Every section within the Human Capital Division is responsible to the respective Directorates of PT. Wijaya Karya (Persero) Tbk's primary function is organizational development, preparation of HC requirements plans, recruitment and selection process, managing and optimizing employee placements, employee development and guidance, employee assessments, employee rewards industrial relations, preparing regeneration to support the Department of Operations.
4. Technology Development
WIKA is a value creator who can adapt to changing times. Starting a business as an electrical installer, then growing into an Engineering, Procurement, Construction (EPC), and Investment Company in many sectors, including power plants, toll roads, ports, and transportation. In its technological transformation, WIKA has always been at the forefront of construction technology and business unit expansion (Mass Rapid Transit, Oil and Gas, and Power Plant technology). Currently, WIKA is at the forefront of utilizing the leading technology Building Information Modelling (BIM), which can provide a comprehensive 3-dimensional picture of the project to be worked on. With BIM, WIKA can plan more precisely and minimize the risks that arise at the project stage.
From the subsidiary side, PT. Wijaya Karya (Persero) Tbk also continues to develop technology by digitizing its business processes. From the industrial side, PT. Wijaya Karya Beton Tbk carries out technology development as a commitment to the company's strategic steps. Synergizing with the WIKA Group IT Roadmap, WIKA Beton has also prepared an IT Digitization Roadmap until 2023, aligned with the Corporate Roadmap.
Starting in 2006, WIKA Beton pioneered the Company's Operational System known as Enterprise Resource Planning (ERP) which consists of Operating System, Finance, and Human Resource Management System (HRMS) modules. This ERP system marks the beginning of digitization in PT. Wijaya Karya Beton Tbk business processes, from administrative work initially done manually to digital. Until now, this ERP system has become an essential thing in the company's business processes and continues to be developed according to company needs. Besides developing software-based systems, WIKA Beton also develops infrastructure to support the development of digital information systems. In improving efficiency, optimizing production, and simplifying the company's business processes, PT. Wijaya Karya Beton Tbk builds a cloud-based WAN (Wide Area Network) network infrastructure where all WIKA Beton Work Units and Business Units can be connected. Along with the increasingly dominant role of Information Technology in company operations, PT. Wijaya Karya Beton Tbk continues to improve IT facilities that support digital-based infrastructure. Not only focusing on ERP development, but PT. Wijaya Karya Beton Tbk also perfects the digitization process by developing many integrated systems, such as the WTON Mobile Application, e-QC Application, and WTONPedia.