1 Corporate Strategy

Directional matrix is one of the analyses to give a recommendation of companys direction in its business strategy. The analysis basically will lead company to three main strategies: Growth, Stability or Retrenchment. The growth strategy can be divided into two, the concentration strategy and diversification strategy. Concentration strategy recommends company to build new product in existing market. Conversely, Diversification recommends building new product in new market or market development combined with product development. To use directional strategy matrix, IFAS and EFAS scores are needed. The IFAS score from the previous analysis is 3.4 and the EFAS score is 3.55. The score then plotted in the directional strategy matrix. EFAS 1 Q2: Stability QI: Growth

IFAS 1 3 5 Q4: Diversification

Q3: Retrenchment 5

Table 6.1 Directional Matrix Based on the matrix, Mustika Ratus existing position reflects quite high internal and external factors. It is stated that Mustika Ratu fall into the Quadrants I, the Growth strategy to face its current environment. In the growth strategy there are four alternatives strategies which are the horizontal growth, vertical growth, concentric diversification, and conglomerate

diversification. The Quantitative Strategic Planning Model (QSPM) is used to select which one is the best alternative for Mustika Ratu Corporate strategy. Followings are the QSPM for the Mustika Ratu corporate strategy

Code

Factors

Weight AS

Horizontal Growth TAS 0.075 0.105 0.050 0.126 0.033 0.050 0.377 0.251 0.067

Vertical Growth AS 5 2 5 2 2 1 4 5 5

Concentric Diversification TAS 0.038 0.042 0.050 0.100 0.017 AS 2 3 4 4 2

Conglomerate Diversification TAS 0.075 0.063 0.067 0.100 0.017 0.201 0.151 0.126 0.201

TAS AS 0.188 0.042 0.084 0.050 0.017 1 2 3 4 2

Strength S1 Direct sales channel S2 In-house distribution channel S3 Different product for different segment S4 Manufacturing with high quality operation S5 Own specialized plantation on Java Highly organized distribution system and IT S6 control system Product was natural and good quality, S7 especially for indonesia skin S8 Had the Muslim halal standards Weakness W1 Contract for plastic was set to expire in June W2 The stock had declined dramatically in tandem and make raising price of product up to 40% Any saving cost would come at expense of W3 quality Opportunity O1 Large Indonesian population O2 Similar demographics in Phillippines Strong demand of natural product in Malaysia Low threat of entrant because of the Asian O4 crisis More than 100 million Muslim consumers in O5 Middle East Threat T1 Asian Crisis in 1998 T2 Political tension Exchange rate of Rupiah against US Dollar T3 increased T4 Jakarta's stock market lost 95% of its value T5 Declined income of majority of Indonesian Foreign competitor with foreign-currency T6 dominated budget T7 Strong competition in muslim markets O3

0.038 0.021 0.017 0.025 0.008

2 5 3 5 4

0.050 1 0.075 5 0.063 4 0.0669 1

0.050 5 0.301 2 0.314 5 0.335 4

0.251 4 0.151 2 0.314 2 0.268 3

0.0837 2 0.0502 2 0.0126 4 0.0167 5 0.0293 4 0.0586 5 0.0293 3 0.0795 2 0.0418 2 0.0711 2 0.0460 3 0.0293 3 0.0335 5 0.0544 5 1

0.167 0.100 0.050 0.084 0.117 0.293 0.088 0.159 0.084 0.142 0.138 0.088 0.167 0.272 3.084

2 4 3 1 1 2 5 3 3 2 2 3 4 2

0.167 1 0.201 2 0.038 5 0.017 3 0.029 1 0.117 3 0.146 2 0.238 2 0.126 1 0.142 1 0.092 2 0.088 3 0.134 5 0.109 4 3.025

0.084 2 0.100 3 0.063 4 0.050 3 0.029 2 0.176 2 0.059 2 0.159 2 0.042 2 0.071 3 0.092 2 0.088 2 0.167 3 0.218 2 2.628

0.167 0.151 0.050 0.050 0.059 0.117 0.059 0.159 0.084 0.213 0.092 0.059 0.100 0.109 2.469

Table 6.2 QSPM Analysis for Corporate Strategy Below is the explanation for the Attractiveness Score (AS)
Attractiveness Score Notes 0 1 2 3 No effect Very Unattractive Reasonably unattractive Somewhat attractive

4 Reasonably attractive 5 Very Attractive

Table 6.3 Attractiveness Score From the QSPM analysis above, the Horizontal Growth seems to be the best corporate strategy to be implemented. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm. The benefits sought by firms that horizontally integrate are: Economies of scale - by selling more of the same product, for example, by geographic expansion. Economies of scope - by sharing resources common to different products. Increased market power (over suppliers and downstream channel members) Reduction in the cost of international trade by operating factories in foreign markets.