Salim Group Strategic Flexibility

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Table of Contents

Flexibility
Environmental forces
Lesson learned from Salim Group
Salim Group Late Movers Lesson
List of References

Flexibility

In order for Anthony Salim group to operate flexibly to capture whatever opportunities may arise on the axis between Australia, ASEAN and China, there must be certain tasks which its companies are required to fulfil. With regards to corporate communication, Salim group tends to stay off the media publication completely.

This in itself hinders transparency of its operations and shields the public from knowing its internal goals, size and performance. Dieleman (2006) also argues that “Even relative insiders such as board members of the OPUs do not know exactly what Salim Group as a whole is up to” (p.14).

Since International accounting standards require transparency and disclosure, Salim Group may experience difficulties going multination due to violation of this very standard. Benny also explains in Dieleman (2006) that “We don’t give interviews to reporters, normally” (p.14).

Keeping low profile operations in its internal management information system as well as towards outside world communication may compromise its competence and progressive leadership may hinder its effort in attracting investors.

Another difficulty raises the issue where Salim Group permits its companies to operate under different legal basis. While the legal system in principle offers uniform interpretations concerning the application, Salim Group system requirements have not obliged to this law.

Dieleman (2006) also states that it is always unclear to know if a particular company belongs to the Salim Group until it publishes its end year results in the publicly listed companies, and if it’s a private owned company may be hard to prove its private operations.

In this regard, a private holding may be rigid in operating under the provided stringent rules by holding a company. This may prove difficult in providing uniform system that is recognised by all companies. In conclusion, providing uniform interpretation as a strategy to preserve the autonomy of all its operations are required by Salim Group.

It would be naive to believe that having family members control Salim holding would ensure that the firms in question internalise the costs of the damaging practices. A problem arises when it is impossible to raise short-term finances in cases of emergencies.

Here, there’s a possibility of these companies failing to organise themselves economically hence limiting their exposure to international markets. Another relevant issue is that since the Salim family holds majority shares that ultimately influences decision making, the organisation may experience complexities in all the separate legal entities.

The bigger the number of separate legal entities there are, the more difficult it is to legally establish the liability of any particular firm. At this point, Salim Group can not be relied upon to ensure effective management in all the mentioned countries.

Around 1972, Salim Group started exploiting its strategy by way of selecting business opportunities rather than being driven by mere opportunities. This market based strategy enabled the introduction of professional management as a way of decreasing government dependency.

On the contrary though, international network requires coordinative decision of the involved countries and enterprises without subjecting stringent rules to the corresponding government agencies. In order to operate flexibly, Salim Group should give these countries a chance to express their economic preference and consider their income constraints (Dieleman 2006, p.4).

Since the company started organising its business through the value chain, countries that will be selected to produce food commodities should be provided incentives to produce quality goods at low costs and to attract new innovations.

Also, the fall of Suharto, one of the Salim Group corporate sectors due to huge debts experienced during the period of May1992 could have been minimised or eliminated altogether if the company would have engaged government agencies.

The major reason for the company’s bankruptcy was because that the family was unable to rescue the bank forcing it to hand all its operation to the government for recapitalisation. Even if particular companies are not threatened by bankruptcy, collaboration with individual countries’ governments reduces tension between short-term economic imperatives and long-term environmental interests that may lead to its closure.

Since companies operations are largely managed by family members, significant investors are most likely to dump stocks whose performance disappoints them.

This statement is supported by Dieleman (2006) quote that states “apart from internal rigorous control system, most of the group’s contributors to profit are listed companies, exposing them to the external control mechanism of the market (minority shareholders” (p.13). Normally when enterprises are subjected to short-term pressure to maintain their earnings, long-term investment opportunities may be ignored subjecting the firms’ survival to receivership.

Conclusively, rather than subjecting its business strategies to western multinationals that requires limiting its group core businesses into one strategy to control costs, Salim Group took an entirely different path of geographical orientation that involved very large number industries ranging from food, property, media and telecom limiting its ability to specialise.

Even if all the above problems are overlooked, the problem remains what Dieleman (2006) terms as “creating a toll-road with many stations” (p.15)” will not increase business opportunities. Linking production in a particular country to consumer markets in another county argument, once again, does not provide management practices that will ensure prosperity of future generations.

Environmental forces

Environmental forces describe changes in the environment in which business operations and the driving forces that control their relationships. The company’s success is dependent on its diversification strategy that combined food processing with trading business.

According to Dieleman (2006), Salim Group followed the belief that “all businesses are good” (p.3). As Salim explains in Dieleman (2006), “the group evolved not be design, but by necessity. Whatever opportunity was good, we just grapped” (p.3).

Another strategy that involved combining business skills and political contacts to gain market dominance resulted to lack of dependency resulting to collective irrationality leading to rapid depletion of the resources where common grounds were not achieved.

Evidently, when business activities are exchanged with political favours, new business environment driven by import monopolies are likely to occur. Salim Group early expansion in Indonesia subjected its business environment to political orientation forcing its closure. This trading environment is limited to protecting the business against force and fraud since business matters are not left to voluntary agreement in the market place.

In a social philosophy, providing favourable business environment aimed at attracting foreign investors is regarded as beneficial to business survival. If one holds the general view that connection with the presidential family increases business opportunities, then once political changes occur, the business is likely to collapse

. The standards argument against a business being tied closely with political families begins with the Dieleman (2006) quote that stated “…..when the Salim Group, by then closely connected wit the presidential family, tried to move its noodle company out of Indonesia,…..many suspected that the group had inside information on upcoming political changes..”(p.5). Change of political leadership will evidently create a hostile environment in a profound different political situation.

Lesson learned from Salim Group

With regards to environmental forces, a business should device one practical core business of strategising its business operations. Shifts in mindsets from textile industries to finance operations provide endless financial struggles. A business strategy should stick to its principles to measure its present performance with future costs of today’s environmental practices and future technological developments.

Since market trends change to keep a breast of Information technology, my future career in entrepreneurship will ensure its operations are up to date with technological development present in evolving markets to keep up with competitive market environments.

Human resource in this regard will put emphasis on attracting and retaining talent by quickly adopting to and becoming resilient to innovative technologies. Information technology has influenced all aspects of human resource departments making them more focused to competence.

Artlett and Ghoshal (2000) quote “the global market place is information based and knowledge intensive” (p.140). This change of environment brings about work diversity as required in my future career. In my perspective, diversity will include motivating employees through gain-sharing and application of innovative technologies.

Government involvement in my business may serve as a source of environmental regulations as I would prefer a free market where unequivocal market price is determined. My point is not that government involvement cannot be assigned to such matters, but its involvement will not claim an “objective measure” of determining its operations.

Involving political perspectives to some extend will be beneficial in environmental practices since costs analysis in the price terms may have an inherent bias. In this case, certain costs and certain benefits will be given certain consideration including waiving taxes.

There is a second area where transparency is required disclosing company operations. In this case, my business will disclose all its potential divergence to the public and the media as well as a strategy to attract foreign investors.

Salim Group assumed that keeping low profile operations in its internal management information system as well as towards outside world communication may compromise its competence and progressive leadership. Salim Group article also point out that combination of business skills with political favours provide favourable trading conditions. This is not a reality since Defining and weighing costs are inherently political matter.

Since the application of innovation technologies relies heavily on HR practices, the selection of suitable entrepreneurship programs and qualified human resource manager is required to be able to cope with the technological changes as success or failure of a company relies on them.

Reasons driving technological change and the frequency that organisations are required to adapt to these changes can also be incorporated in my business strategy to how the business can cope with technological changes.

Research can also be done in technology firms such as internet and software companies could be examined for different HR practices that respond to technological changes. From this, the conclusion is derived that engaging in a business that specialises in one product and studying the scope of markets is of paramount importance in determining economic pressures that may lead them to engage in practices that undermine its survival.

In conclusion, communication is indeed a top considered strategy in management process with the ultimate goal achieving organisational goals. In this regard, my future career of entrepreneurship will ensure communication goals are aligned with organisation objectives regardless of their predefined objectives such as increased productivity, money surplus and increase livelihoods.

Effective communication and efficient feedback system are among the best management principles required of an organisation. In this regard, I will provide transparency in my business operations and invite the media when publishing my end year financial results. The idea could be established that communication skills such as an effective communicator plays a significant role in ensuring organisation accomplish its goals.

Salim Group Late Movers Lesson

Salim Group growth since the 1950s through the Asian financial crisis of the late 1990s have been attributed to its newly introduced technologies has increased its likelihood to acquire capital gains. Evidently, relationships between technology changes and human resource development practices are quite fascinating.

Research argues that application of innovative technologies improve job performances and human performance. On the other hand however, employee development that required on-job training plays a crucial role in efficiency and inefficiency of a company. It is evidenced that technology has enabled creation of new avenues for grassroots activism and community building.

Success of an organisation relies entirely on the ability of an HR manager to manage a multicultural organisation of different religious beliefs, income, educational and work experience. Programs designed to prepared managers to manage diverse workforce that can bring different views at work and perspectives and innovative ideas.

Promoting and fighting challenges faced at work places requires reorganising company’s source of assets into strategic organisation talents that capitalize on of diverse cultures. This global arena as demonstrated by late movers that capitalises on a mixture of businesses opportunities requires manpower that rapidly and creatively adopts and applies innovative technologies.

An organisation primary goal should be driven in an environment that supports diversity broadly, as a strategy to retain and attract to survive in competitive markets. Chan (2004) emphasizes that “businesses have to be mindful and strive towards knowledge based and high technology economy approach in most circumstances, lured to share expertise , diversity management requires skilful balancing act of the HR manager” (p.1).

In doing this however, an organisation requires to rapidly respond to human complexity by encouraging training and human skill evaluations. This is done by balancing the talent of a broad workforce to correspond to wider customer base. This requires what Chan (2004) quotes as “planning, organizing, leading and controlling of organisational resources to ensure effective management of workplace diversity to attain organisational goals” (p.1).

Leveraging diverse talents and strategies to retain manpower requires application of gaining-sharing program that meets minimum requirements of an organisation. This requirement is crucial for the success of a company, and requires employees to participate in planning and influencing the implementation of gain-sharing formula.

These gain-sharing programs require brain storming ideas such as; 1) change of work attitudes as a strategy to motivate employees to increase productivity 2) providing challenging and reasonable targets 3) providing useful and immediate feedback as guidance to realize gain-sharing payouts.

To do this, Chan (2004) urges organisations to provide frequent, objective and clear feedback system to drive members’ performance towards gain-sharing target 4) provide effective mechanism that will enable employees initiate changes. This can be achieved by ingraining work procedures and methods in gain sharing programs to provide room for new technology.

The second dimension applied by late movers is the corporate responsibility embedded in its business operations, polices and practices. Involved with leading the way in the organisation operates, ethical theories when applied correctly create value with its employees, customers, shareholders and the surrounding community by connecting company’s sense of purpose with a sense of accomplishment.

Corporate responsibility has immensely gained recognition in top management functions as it actively maximises the good of the society by following the principles while employing maximum efforts in avoiding the morally wrong doings or rather putting constraints on actions.

Managing information systems relies heavily on effective managerial control. The lasting effects are experienced through strategic planning and decision making which are very significant in spotting significant variations.

By also ensuring communication channels are driven in the right directions, feedback systems should be delivered in the right direction and time and relayed to the right people for immediate actions. In this regard, only important and critical information should be relayed to company websites and made available to the human resource department. This strategy ensured information technology has been ingrained with strategic business goals.

Human resource management goals must be aligned with those of employee and organisation needs. Organisation should be flexible enough to quickly adopt and change directions towards customer oriented. This calls for keeping abreast with the latest technological changes and managing organisation effectively through becoming knowledgeable, being able to lead and control the human resource through providing training and employee development

Another issue is where Salim Group required its companies to operate under different legal basis. Legal system in principle offers uniform interpretations concerning the application, Salim Group system requirements should have obliged to this requirement.

DIELEMAN (2006) also states that it is always unclear to know if a particular company belongs to the Salim Group until it publishes its end year results in the publicly listed companies, and if it’s a private owned company may be hard to prove its private operations.

This proves difficult in providing uniform system that is recognised by all companies. Providing uniform interpretation as a strategy to preserve the autonomy of all its operations are required by Salim Group. Also, having family members control Salim holding will not ensure firms internalise costs and may be impossible to raise short-term finances in cases of emergencies.

Also, there’s a possibility of these companies failing to organise themselves economically hence limiting their exposure to international markets. Another relevant issue is that since the Salim family holds majority shares that ultimately influences decision making, the organisation may experience complex management in all the separate legal entities.

In conclusion, company’s success is dependent on its diversification strategy that combined food processing with trading business played a major role in its succes. Selecting opportunities based on upcoming opportunities enabled the group penetrate most countries in Asia.

It enabled the introduction of professional management as a way of decreasing government dependency. Since international network requires coordinative decision of the involved countries and enterprises without subjecting stringent rules to the corresponding government agencies, Salim Group in order to operate flexibly enabled the countries it traded in a chance to express their economic preference and consider their income constraints. Since the company started organising its business through the value chain, countries that were considered to produce certain commodities cheaper were identified.

List of References

Artlett, C.A. & GhoshaL, S. 2000, ‘Going Global: Lessons from Late Movers’, Harvard Business Review, vol. 78, no. 2, pp. 132-142

Chan, A. 2004, ‘The Challenges of Human Resource Management: Diversity Working’. Web.

Dieleman, M. 2006, ‘The Salim Group: The Art of Strategic Flexibility. Asian Case’, Research Journal, vol. 10, no. 1, pp. 1-25

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