Potential Advantages and challenges in International Business Strategy.pdf

The discussion will be divided into four sections the

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The discussion will be divided into four sections. The second section provides back- ground information on and current situation at CPI. The third part talks about the value chain of the company and the influence of IT on the value creation. Subsequently, the ICT implementation is described in the fourth section. Eventually, the conclusion section summarises the discussion. Charoen Pokphand Indonesia (CPI) Background Information Charoen Pokphand Group, chaired by Dhanin Chearavanont, has its headquarters in Thailand. Its business units range from agricul- tural products to telecommunications, automo- tive, investment, and other businesses. The con- glomerate has subsidiaries in major countries throughout the world and employs approximate- ly 170,000 people (CP, 2005). In Indonesia, the company obtained the licence from the government through Foreign Capital Investment Facility in 1971, to establish poultry feeds factory in Jakarta on a land area of 2.4 hectares (CPI, 2005). Charoen Pokphand Indonesia (CPI) has been being presided over by Sumet Jiaravanon since then. The firm em- barked on its commercial operations in 1972 with production capacity of 20,000 tons a year. The products consist of, amongst others, cattle feeds (cow, pig) and poultry feeds (layer, broiler, and duck). After undertaking several production improvements, the company heretofore has a production capacity of 650,000 tons a year in its factories in Jakarta, Surabaya, and Medan. Realising the increase in the market de- mand for shrimp feeds, CPI decided to expand its business in the production of shrimp feeds by establishing a factory with an annual capacity of 40,000 tons in 1988 in Medan. Subsequently, corresponding with the firm's efforts to strengthen its market position in poultry feeds, the stockholders agreed on taking over 80% of the shares of Charoen Pokphand Jaya Farm Ltd, a company based in Jakarta and engaged in poultry and other animal husbandry, in 1990. The organization is managed in five di- visions. The following figure depicts the compa- ny’s structure. Figure 1: CPI’s Organizational Structure Source:
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The Journal of Global Business Issues – Volume 6 Issue 1 23 Although the company’s sales show an increasing trend from 2000 to 2005, the net in- comes indicate a reverse pattern, with net losses in two consecutive years. Management as well as analysts argue that the avian influenza (bird flu) virus has rendered the business unprofitable besides other internal inefficiencies. Surprising- ly, 2003 was the year the company began to re- structure its businesses, especially the large scale introduction of ICT in the business model, whilst the year also initiated the net losses suffered by the company. The figure below summarises CPI’s financial information Figure 2: CPI’s Financial Highlights Information gathered from CPI Annual Report 2004 on CPI Value Systems and ICT Applications For the purpose of analysis, we are fo- cused on poultry and poultry feeds businesses.
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