Home > Publication > Value Based Management

Value Based Management

December 22nd, 2008

Title: The Use of Value Based Management to Achieve Maximum Corporate Performance (Case: ELNUSA)

ABSTRACT

Repositioning business is very important to some parts of companies in turbulence situation influenced by external factors and especially internal problems, because it contributes the biggest performance to the companies. The competition in oil and gas service industry is already facing a fierce and turbulent, impact by decreasing oil price, regulation, social and regional autonomy. To map out companies cognitive problem before devising a problem solving solution has already become an important consideration to determine the competitiveness of each company. Repositioning business refers to maintaining and achieving performance of management especially improving quality services for customers to gain the best ultimate results that the business provides to its shareholders through focusing attention on the performance of the key internal processes which drive the business and direct attention to the basis of all future successes; organization, people and infrastructure. Major criterion in improving corporate performance through repositioning are: business synergy of group, value network, customer interfaces, strategic resources based on core competence and strategic assets and core strategies based on innovation in market capitalization or driven by mission of Shareholders.

To reposition its business the group of companies must define a solution for the “messy problem” and for the future. The future is not only about “releasing” wealth to make a continuous improvement (incremental component), but it is also about the management having a non linear idea to create a new wealth, and to make a radical and systemic business concept innovation beyond continuous improvement. Because to think about continuous improvement means to build product and process innovation that only results in unsustainable cost cutting, unsustainable revenue growth, unsustainable growth in shareholders return and unsustainable consolidation for the group’s business. This thesis defines the “messy problem” by using DuPont Analysis; Economic Value Added (EVA) and Market to Book Ratio (M/B Ratio) as a metrics of Value Based Management to evaluate the company’s overall performance. This is the first activity, to found company problem finding, fact-finding and problem definition. After define the problem finding, the next step is identify the company condition, and Elnusa’s condition still as “bubble” company.

The last activity is problem solving, the management of Elnusa must not merely think about the margin, they must also think of blowing up old business model and creating a new one through a competing business concept. A cognitive mapping of Elnusa’s repositioning is one of the models of strategic option development analysis approach to business concept innovation. This is to dramatically imagine how a different business concept differs from the existing business model.

Finally based on core strategies, strategic resources based on core competence and strategic assets, customer interfaces and value network, Elnusa group must based the selection of each business division on several criteria, such as:
• Is the business driven by shareholder’s mission or market capitalization?
• Does the business need high capital investment or selective investment?
• Does the profit orientation of the business support shareholder’s mission or market capitalization?
• Does the business still need endowment from Pertamina or not?
• Does the business using Value Based Management to run its activities?

To imagine a new business concept based on existing business is one of the best ways to initiate strategies and how to translate them into action. 1st holding consist of subsidiaries unit that still need endowment from Pertamina as main shareholder’s and these business has characteristics as Pertamina’s mission support and need high capital investment. The 2nd holding consist of subsidiaries unit that the business is driven by market capitalization and does not need endowment from Pertamina anymore.

Key Words: The result of this repositioning is creating the business concept models based on Value Based Management analysis into two holding companies.

Publication

  1. No comments yet.
  1. No trackbacks yet.