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THE NATIONAL RENEWABLE ENERGY STRATEGIC PLANNING USING

BUFE METHOD

Bambang Sugiyono Agus Purwono


(Doctorate Program in Management Science)
Ubud Salim
(Faculty of Economics – University of Brawijaya – Indonesia)
Djumahir
(Faculty of Economics – University of Brawijaya – Indonesia)
Solimun
(Lecturer – State Polytechnics of Malang – Indonesia)

Abstract

Purpose – The purpose of this paper are to introduce and develop the BUFE methods
or eight steps for designing the Strategic Planning
Design/methodology/approach – The two types of research variables are internal
and external environments. Internal environments including strengths and weaknesses
and external environments including opportunities and threats. The variables of
strengths consist of inbound logistics, operations, outbound logistics, marketing and
sales, service. The variables of weaknesses consist of firm infrastructure, human
resources management, technological development, and procurement. The external
environments consist of technology, demographic trends, economic trends, political
and legal environment, and socio-cultural environment. Participants were regulators,
providers or producers, researchers, and end users who concern with the renewable
energy. The method of analysis used qualitative approach. The qualitative approach
were interviewed twenty five participants. The interviews were recorded by audio-
visual or handy-cam.
Findings – The paper finds that, the qualitative approach arranged the eight steps for
designing the Strategic Planning are Vision, Missions, Objectives, Strategies, Policy,
Program, Budgets, and Procedures.
Practical implications – The findings of the study are useful for lecturers,
administrators, project managers, and practitioners easily.
Limitations - The findings of the study did not discuss about business ethics, and
values.
Original/value – The paper was a part of a dissertation resulting the eight steps for
designing the Strategic Planning.

Keywords Strategic Planning, Renewable Energy, Eight Steps.

1. Introduction
An interesting phenomena in Indonesia (in some provinces) in the middle of
the year 2005 was the longest queuing at the Gas Station (SPBU/Stasiun Pengisian
Bahan Bakar Umum). Some cars have waited for a half day, because there was not
enough fuel at the Gas Station. If there is any gasoline or diesel oil in the SPBU, the

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fuel price increases very highly and the volume was very limited. The problem
solution is to substitute the fossil fuel or non- renewable energy (the gasoline and
diesel oil) with the non-fossil oil or bio-fuel or alternative energy or renewable energy
(e.g. Straight Jatropha Curcas Oil/SJC Oil, Cassava, Algae, sugar cane, Coconut
Palm/Cocos nucifera, African Oil Palm/Elaeis guineensis, cassava/manihot esculenta,
Zea mays L., Arenga pinnata, etc).

The Economic Potential


The average diesel oil consumption level in Indonesia is up to 14 million
kiloliter or 88,000 barrel (1 barrel = 159,25 liter) every year. For making a
substitution of 5% only, it needs about 700 thousand kiloliter (4.400.000 barrel) of
bio-diesel every year. That bio-diesel demand actually can be obtained easily in
Indonesia, because Indonesia is rich enough with a lot of plants that can produce bio-
diesel mixture. The main source of bio-diesel is the cheap CPO (Crude Palm Oil) and
SJC oil.
The bio-fuel specialist from ITB, Manurung, R, stated that 1 Ha of SJC plant
can produce about 4.3 tons of oil per year or can produced about 4.7 kiloliter of bio-
fuel per year. Remembering that the SJC plant can grow in non-productive/dry/critics
areas and Indonesia has extensive dry areas, castor planting is expected to give an
excess for society.

Besides, the planting SJC plants for bio-diesel supply is also good for
increasing the productivity of the dry areas and later can increase the land owner’s
income. This dry area exploitation also will not affect the food supply. According to
the data from Centre Beaurau of Statistics (BPS/Badan Pusat Statistik), in 2003 the
critical area in Indonesia is up to 22 million Ha. Based on the estimation of
Manurung, R, above, the planting of SJC plant in the critic area is only 10% can
obtain 10.3 million kiloliter of bio fuel every year.

After the realization and distribution of the bio-fuel or bio-energy, the


government and the people will receive:

1. The reduction of the operating cost in industries, because the price of the bio-
fuel is lower compared to gasoline and diesel oil.
2. Fishermen will be able to fish and sail their boats (fueling the bio-diesel oil)
which will allow them to produce for the domestic and export commodities.
3. The involvement of the people who live around the bio-fuel factories as
workers (a creating new jobs).
4. The reducing of the operating cost of the factories because the bio-fuel price is
lower than the gasoline and diesel oil.
5. The increasing knowledge and skill of the people who live around the bio-
fuel oil factories.
6. The increasing revenues or tax for the regional government.

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Government Commitment
There are many of the Government commitments such as the Presidential
Regulation No. 5 (2006), about National Energy Policy, the Presidential Directive
No. 1 (2006), about supplying and exploiting of bio-fuel as an alternative energy, the
Government will plan to mix diesel oil with bio-diesel up to 10% in 2010, PT
Pertamina’s target to change 400,000 kiloliter of diesel oil with bio-fuel from SJC oil
in three years and later will be marketed through more than 200 gas Station in
Jakarta, Surabaya and Denpasar (Hanung Budya, Vice Director of Commercial of PT
Pertamina, Ltd), LoC (Letter of Commitment) between Eco-Securities with 11
Indonesian companies to guarantee bio-diesel market (November 22, 2005), the
forming of the National Team to Bio-fuel Program, which is recognized by Al-Hilal
Hamdi, Director General of Oil and nature Gas (Tubagus Haryono) decree no.
3674K/24/DJM/2006 dated on March 17, 2006 about allowing the mixing gasoline
with 10% ethanol/alcohol, and the Government has determined SNI 04-7182-2006,
that is standard for substitution of fuel of diesel motor (B10). With these Letters, it
means the using of B10 and E10 can be used legally by the society.

2. Literature Review

Strategic Management Process


Stephens P Robbins (Robbins, 2009: 276) stated that Strategic Management
Process defined as a six-step process that encompasses strategic planning,
implementation, and evaluation (Figue 1). The six-step are:

1. Indentifying the organisation’s current mission, goals and strategies,


2. External analysis,
3. Analysing the organisation’s resources and capabilities (internal analysis),
4. Formulating strategies (SWOT analysis),
5. Implementing strategies, and
6. Evaluating results.
In other words, the strategic management process is gathering the quantitative
data and qualitative data for designing the matrix SWOT and SWOT analysis and
designing the strategic planning for formulation strategy, and the next step are
implementation strategy and evaluation and measure (Figure 2).

Strategic Planning
The function of management consist of planning, organizing, actuating, and
controlling (POAC). Strategic planning is a part of the planning function.

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Figure 1 Strategic Management Process

Figure 2 Strategic management process for formulation strategy

Harold Koontz and Heinz Weihrich (Koontz, 1988: 62, 82) stated that the
strategic planning steps are Purposes or missions, Objectives, Strategies, Policies,
Procedures, Rules, Programs, and Budgets (Figure 3).
Bititci’s observation (Lee, 1998: 527, 531) stated that hoshin kanri (policy
deployment) is not a solution to all planning problems but a process which enables
managers to plan effectively and translate those plans into actions. And the steps for
designing strategic planning are vision, Business Objectives, Strategic goals, Critical
success factors, Critical task action plan, and Performance measure (Figure 4).
In other words, the writer defined the strategic planning steps as Vision, Missions,
Objectives, Strategies, Policy, Program, Budgets, and Procedures (Figure 6).

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Figure 3 Hierarchy of plans

Figure 4 Steps in Strategic Planning

Internal and External Environment


Kulwant Singh (Singh, 2004: A9) stated that strategy intent and strategic
mission influenced by external environment consist of opportunities (possibilities)
and threats (constraints) and internal environment consist of strengths and
weaknesses. The variables of strengths consist of inbound logistics, operations,
outbound logistics, marketing and sales, service. The variables of weaknesses consist

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of firm infrastructure, human resources management, technological development,
and procurement.
The other approach for determine the external environment/variables using
Michael E Porter’s Value Chain Analysis (Hitt, 2005: 89) and the external
environments consist of technology, demographic trends, economic trends, political
and legal environment, and socio-cultural
cultural environment (Figure 5).

Figure
igure 5 Michael E Porter’s Value Chain Analysis

Fries (2006: 6) stated that the relationship between organisation and


environment factors impact to the factors of strategy (Figure 6).

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Figure 6. Factors that influenced the Strategy

3. Analysis And Interpretation

Qualitative Methods of Analysis


The BUFE methods for designing the Strategic Planning
Hitt (2005: 7) stated that the strategy is an integrated and coordinated set of
commitments and actions designed to exploit core competencies and gain a
competitive advantage. Koontz and Weihrich (Koontz, 1988: 58) stated that Strategic
Planning can be used as a set of concepts or statements that integrates the
organizations’ goals, policies, and action in order to fulfill the organizations’ future
mission. Strategic planning can help the organizations to achieve their long-term
objectives. Strategic planning is the systematic identification of opportunities and
threats that lie in the future. Strategic planning can build expected future trends, data,
and assumptions. Strategic planning is much more action oriented than long range
planning. And the Strategic planning will improve the company performance.
In this paper the writer will discuss the BUFE methods or eight steps that
anyone can design their own strategic planning using these eight steps. The steps are:
Vision, Missions, Objectives, Strategies, Policy, Program, Budgets, and Procedures.
Figure 6 presents the BUFE (Brawijaya University – Faculty of Economics) methods
or eight steps designing the strategic planning.

Figure 7 presents the definition of every step in the eight steps designing the strategic
planning.

For the purpose of this discussion some of the steps will be taken separately.

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Figure 6 The eight steps designing the strategic planning

The eight (8) Step discussion


Step 1 - Vision

Determining the strategic direction of a firm involves developing a long-term vision


of the firm’s strategic intent. A long-term vision seems typically at least five to ten
years into the future. A philosophy with goals consist of the image and character of
the firm. The ideal long-term vision has two parts: a core ideology and an envisioned
future. While the core ideology motivates employees through the company heritage,
the envisioned future encourages employees to stretch beyond their expectations of
accomplishment and requires significant change and progress in order to be realized.
The envisioned future serves as a guide to many aspects of a firm’s strategy
implementation process, including motivation, leadership, employee empowerment,
and organizational design (Hitt, 2005: 385).

Figure 7 The definition of each steps in the strategic planning

A vision describes what the organization would like to become (Wheelen,


2004: 11). A vision involves looking to the future, attempting to assess what is
needed and the best ways to supply those needs (Murphy, 2004: 87, 98). A vision
defined as an almost “impossible dream” that provides a direction for the company
for the next 10 to 20 years (Kotler, 2009: 82). All members of the organization should
be able to identify themselves with it and it should help them to feel proud, excited,
and be part of something that is much bigger than themselves. A vision should stretch
the organization’s capabilities and image of itself. It gives shape and direction to the
organization’s future.

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Vision ranges in length from a couple of words to several pages, the shortest
is, the easiest to remember. Effective vision statements are clear, concise, catchy, and
memorable.

In another word, a vision is defined by realizing the impossible dreams in the future.

The ministry of energy and mineral resources (2007) stated that

The Indonesian government set up the Autonomous Village Energy


(Desa Mandiri Energi/DME) program, the aim of which is to provide
2000 poor, remote villages with modern energy systems based on
renewable that can be sustainably operated by the local community. By
January 2009, however, only 430 villages had been electrified.
The purpose of the project is to improve the rate of implementation of
the DME program and thus to contribute to the dissemination of
renewable energy sources in rural regions of Indonesia. The quality of
the implementation process is to be improved through a structured
dialogue between all the involved parties including self-evaluations and
independent evaluations. As a support, several studies will be prepared
in order both to identify examples of good practice and also to develop a
uniform implementation structure as well as proposals for suitable
technologies. The dialogue will be accompanied by a training program
designed to boost the technological capacities of the implementation
structures.
Implementation of the measures will speed up the realization of the
DME program and thus the dissemination of renewable energies.
Electrification of the villages will contribute to the economic
development of the affected regions and will also create jobs.
Another participants – SUT - expressed:
You (the people in the villages) will learn and operate the sophisticated
technology if you have the mindset “doing the things right” and able to
carry out the appropriate training program, so in the future you can
operate the (high tech) processors efficiently.

The vision of National Renewable Energy Strategy (Figure 8) is empowering the


communities (the people in the villages) to sustain and to produce the bio-fuels
efficiently also to maintain the environment.

Step 2 - Mission

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When properly constructed, a mission statement should provide a clear, concise
description of an organization’s overall purpose. A mission statement should answer
three questions (Thompson, 2003: 32):

1. Who we are?
2. What do we do?
3. Where we are now?
The mission can enable large groups of individuals to work in a unified direction
toward a common cause. A good mission statement is compelling, passionate, and
energizing. It should be risky and challenging, but also achievable.

The definition of the mission statements broadly describe an organization’s present


capabilities, customer focus, activities, and business make-up (Thompson, 2003: 7).
Hitt (2005: 22) stated that strategic mission is a statement of a firm’s unique purpose
and the scope of its operations in product and market terms. Wheelen (2004: 10)
stated that an organization’s mission is the purpose or reason for the organization’s
existence. Fred R David (David, 2003: 10) stated that misson statements are enduring
statements of purpose that distinguish one business from other similar firms.

Figure 8 The Vision statement

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Figure 9 The Mission statements

The prerequisite of the mission (Armstrong, 2007: 38-39) are Market


oriented, Realistic, Specific, Market environment, Distinctive competencies, and
Motivating.

Another participants - AB - expressed:

The regional government have to support for producing the bio-fuels or


alternative energy related to the budgets, human resources training
program (the people in the vilagges) and commercialize the products.
Regional government design a small group activities (SGA) in the
villages and arrange the cooperation between regional government,
people in the villages and universities. The SGA will produce the bio-
fuels, distribute to the people in local villages and the rest should be
commercialize, and the Pertamina company should be purchased the
products as a national stock.

Figure 9 presents the mission statements of National Renewable Energy Strategy.

Step 3 - Goals/Objectives

Mission and vision, although frequently short statements, are broad,


encompassing and far-reaching. They can often seem overwhelming and perhaps
even impossible to achieve. Goals and objectives create the bite size pieces, the road
map and manageable stepping stones to achieve the mission, make the vision a
reality, and navigate the course we have set for our business, or for ourselves.
Goals are the bigger fuzzy things and objectives are the SMART (Amstrong, 2007:
38-39): Specific, Measurable, Attainable (accountable), Rewarding (realistic), and
Timed (timeliness).
To be effective goals and objectives they must be written. If they aren’t written
they’re merely ideas with no real power or conviction behind them. Written goals and
objectives provide motivation to achieve them and can then be used as reminder to
you and others. Clearly and specifically written, they also eliminate confusion and
misunderstanding.
The definition of the objectives are:

1. The desired results (Murphy, 2004: 87).

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2. A desirable direction in which we want to move (Dervitsiotis, 1981: 9).
3. The ends toward which activity is aimed (Koontz 1988: 62).
4. The end results of planned activity (Wheelen, 2004: 12).
The prerequisite of the objectives should be as specific as possible.
Figure 10 presents the objectives statement of National Renewable Energy Strategy.

Step 4 - Strategy
For years the military used the word “strategies” to mean grand plans made in the
light of what is believed and adversary might or might not do. While the term
“strategies” still usually has a competitive implication, managers increasingly use it
to reflect broad areas of an enterprise operation.

Figure 10 The Objectives statements

The definitions of the strategy are:


1. As plan, play, pattern, position, and perspective (5 P’s Mintzberg) (Hubbard,
2004: 11).
2. The broad program for defining and achieving an organization’s objectives;
the organization’s response to its environment over time (Stoner, 1995: 266).

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3. The decisions and actions that determine the long-run performance of an
organization (Robbins, 2009: 273).
4. The act of the general or plan the destruction of one’s enemies through
effective use resources (Calingo, 1997: 5).
5. The act of the general or a general leading an army (Calingo, 1997: 5).
6. Both proactive/planned (intended and deliberate) and reactive (adaptive)
(Thompson, 2001: 12).
7. Strategy is the skill in managing or planning (Feurer, 1995:11).

H Igor Ansoff (Kotler, 2009: 85) stated that the prerequisite of the strategy are
Market penetration, Product development, Market development, and Product
diversification.

Another participants - YO - expressed:


Nusa Tenggara Timur is one of the potential region to produce an
alternative energy using raw materials such as the sorghum, and
Borassus flabellifer or palmyra (lontar or siwalan). There are many non-
productive field. The regional government look like expressed not
seriously – sometimes is very boombastics but the other side nothing to
do, so the people in the villages always ask – how will the alternative
energy continue? The regional govenment concern about the alternative
energy but did not focus, always talk about the equipments or
technology selection. The contraint is water supply. The regional
govenment is not talk only – using political will –say nothing – have to
do the reality.

Figure 11 presents the strategy statement of National Renewable Energy Strategy.

Figure 11 The strategy statements

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5 - Policy
Policies also are plans in that they are general statements or understandings which
guide or channel thinking in decision making.

The definitions of the policy are:

1. A standing plan that establishes general guidelines for decision making.


(Stoner, 1995: 296). And a standing plan is an established set of decisions
used by managers to deal with recurring or organizational activities; major
type are policies, procedures, and rules.
2. Plans in that they are general statements or understanding which guide or
channel thinking in decision making (Koontz, 1988: 64).
3. A broad guideline for decision making that links formulation of strategy with
its implementation (Wheelen, 2004: 14).
Another participants - AB - expressed:

The lecturers in universities should provide their working time to


observe this product till 15%.
Another participants - RSj - expressed:

This alternative energy will create a new jobs. The government should
arrange the condusive rules, or give the tax holiday for the investors.

Figure 12 presents the policy statements of National Renewable Energy Strategy.

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Figure 12 The policy statements

Step 6 - Program
Program are a complex of goals, policies, procedures, task assignments, steps
to be taken, resources to be employed, and other elements necessary to carry out a
given course of action; they are ordinarily supported by budgets.
The definition of the program is activities needed to accomplish the plan.
Figure 13 presents the program statements of National Renewable Energy Strategy.

Step 7 - Budgets
A budget is a statement of expected results expressed in numerical terms. It
may be referred to as a “numberized” program. In fact, the financial operating budget
is often called a “profit plan.” It may be expressed either in financial terms or in terms
of labor-hours, unit of product, machine-hours, or any other numerically measurable
term. It may deal with operations, as the expense budget does; it may reflect capital
outlays, as the capital expenditures budget does; or it may show cash flow, as the
cash budget does.

Another participants – Har - expressed:

We can invite the foreign investors, but if we can use the local investors
is better than the first.
The definition of the budgets is the cost of programs or some budgets are also control
devices.

Figure 14 presents the budgets statement of National Renewable Energy Strategy.

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Figure 13 The program statements

Step 8 - Procedures
Procedures are plans that establish a required method of handling future activities.
They are guides to action, rather than to thinking, and they detail the exact manner in
which certain activities must be accomplished. They are chronological sequences of
required actions.

Another participants – CY - expressed:

Be carefull, use the equipment in good procedures, the highest


efficiency, prepare the every raw materials and equipment wiil be used,
sequence the processes. And concerning the environment or ecology.
The definition of the procedures is sequence of steps needed to do the job.

Figure 15 presents the procedures statement of National Renewable Energy Strategy.

Figure 14 The budgets statements

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Figure 15 The Procedures statements

4. Conclusions
The eight steps designing the strategic planning are Vision, Missions, Objectives,
Strategies, Policy, Program, Budgets, and Procedures.

Implications

There are two implications of the research are theoretical implications and
practical implications.
Theoretical implications
The research findings is the steps for designing the strategic planning are
Vision, Purposes or missions, Objectives, Strategies, Policies, Programs, Budgets,
and Procedures. This finding will improve the statements of the past researchers -
Harold Koontz and Heinz Weihrich (Koontz, 1988: 62, 82) stated that the hierarchy
of the plans are Purposes or missions, Objectives, Strategies, Policies, Procedures,
Rules, Programs, and Budgets. This finding is supported by the Bititci’s observation
(Lee, 1998: 527, 531) stated that hoshin kanri (policy deployment) is not a solution
to all planning problems but a process which enables managers to plan effectively and
translate those plans into actions. And the steps for designing strategic planning are
vision, Business Objectives, Strategic goals, Critical success factors, Critical task
action plan, and Performance measure. The findings provided the statements of
Thomas L Wheelen and J David Hunger (Wheelen, 2004: 9-10) stated that Strategic
Management Process consist of four basic elements: Environmental scanning,
strategy formulation (missions, Objectives, Strategies, Policies), Strategy
implementation (Programs, Budgets, and Procedures), and Evaluation and Control
(Performance). Environmental scanning is the monitoring, evaluating, and
disseminating fo information from the external and internal environments to the key
people within the corporation.
Practical Implications
The findings of the study are useful for lecturers, administrators, project
managers, and practitioners easily.

Limitations

The findings of the study did not discuss about business ethics, and values.

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