Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
_______________________
In Partial Fulfilment
of the Requirements for the Course
BUSINESS POLICY AND DECISION MAKING
(Strategic Management)
(BA13)
____________________
by
MATTHEW JOSELIN I. BARRAQUIAS
PATRICK G. DABLIO
MARY ANN G. EMANO
JEMSON F. YANDUG
JULIENE MARIE L. MAGBANUA
and introducing Visit Indonesia Air Pass with three different packages. Also the
following are integrated to enhance the operation system; owning 77 aircrafts, in-flight
immigration inspection on Tokyo-Jakarta Bali flights, the agreement with Continental
Airlines, and the process of purchasing tickets by using American Express cards. Lastly,
the company extended the financial condition through leasing training facilities to other
airline companies then recorded a net income of 300 million rupiah from its activities.
Problems:
A. Minor:
1. Garudas lack of competitiveness in service aircraft technology, computer and
communication technology.
2. Heavy debt burden resulting to high interest payments, consequently low
operating income.
3. Inheritance of a weak system from prior administration.
4. Cost disadvantage in almost all operational aspects.
5. Poor asset management.
B. Major:
1. Whether to formulate new policies or to continue using existing policies.
2. Long-chain bureaucratic decision-making structure inherent in being a stateowned enterprise.
Main Problem:
In what way can Garuda Indonesia increase its operational success in order to
gain back its good reputation in the industry is it by formulating new set of policies or
by continuing proven-and-tested existing policies?
Alternative Solutions
A. Minor Problems:
All of the minor problems stemmed from inheriting the weaknesses of the past
administration. Garudas lack of competitiveness in service aircraft technology,
computer and communication technology could be addressed by raising more capital
through its acquired subsidiaries enough to update its technology as it was lagging
behind most of the airline companies. But, since they are heavily burdened with debt
with high interest payments each year, and with the income from its subsidiaries with
its own slight income, this solution may not materialize. Merging with other private
airlines with the support of the Government will be an aggressive yet practical
alternative.
Since most of the development needed to improve the operations of the airlines is
hindered by the heavy debt burden, it would be advisable for the company in
cooperation with its sole owner the Government of Indonesia to try to have a
meeting with its creditors proposing a debt restructuring to ease its debt burden to be
able for the company to start its improvement.
Cost disadvantages and poor asset management were among the weaknesses
inherited from past management. Policies need to be formulated regarding utilization
of their assets well enough to maximize its worth to profits and minimization of costs.
An insignificant income in its first income after years of losses could be higher if it
were not for these cost inefficiencies.
System overhaul is needed for the company changing its operating system,
training of employees and updating technology - in order to be competitive.
B. Major Problems:
If Mr. Soeparno were to continue using the existing policies, it might bring about
desirable effects since these policies are already proven effective since there were
used by the previous administration which yield the first profits after years of losses.
If he were to formulate new set of policies, scrapping out the policies used by the
prior administration, it might not still be the best policies needed to improve the
company. The right approach in formulating policies would be having an active and
intensive assessment of the weaknesses of the existing policies and improving it.
Also, decision making in Garuda is a more tedious process compared with most
private airlines. Decisions have to go through a long chain of bureaucratic procedures
Main Problem:
Objectives in this case are needed to guide ones answer to the problem and this is
to establish a policy which could change the companys bad reputation by the end of the
quarter, to be more professional in commercial air transport by the end of the year and
also to increase the financial condition by reaching at most 10% profit before tax. With
these objectives, the company can become one of the worlds top 10 airline company and
gain back its reputation they once had decades ago.
There are three possible courses of action where assured conditions might be
accomplished although coupled with disadvantages. The first one is to continue the
previous successful policies which the company can be supported financially from the
government and generate profit but probable government interference may occur. The
company can also formulate new set of policies, then recover and improve certain areas
with the low cost but high quality of services. However, limited funds might be available,
as well as time, and the government may not approve thereof. Another alternative
solution would be privatization. From this, the matters apprehended after are improved;
decision-making, profit-sharing, and approval for future proposals. In addition, there
would be potential investors and the company would assert maturity and independence.
Conclusion
The best solution for the problem is for Garuda Indonesia to fully privatize after
analysing the alternatives. This solution could screen up loopholes and improve previous
policy then take the opportunity to come up with a more effective promotional strategy in
order to endorse to prospective customers their airline. Unlike choosing the second
alternative, there might be a slow growth rate and ineffective implementation of new
policies that could result to low operational output. While in the first alternative, the
enterprise might not have a room for improvement and may affect its operation.
Also, by fully privatizing, Garuda would be able formulate new policies that best
suits for the company comes easier. Second, they can now enforce decisions for itself for
the advancement of the company. Third, the company would be able to raise capital on its
own through its subsidiaries or issuing new stock or bonds. Fourth, given the capital they
have obtained, they would be able to overhaul their entire operating system. Aircraft
technology and communication technology could be updated and their ticketing and
reservation system could then be in computerized structure. Employees should also be
trained in order for Garuda to overcome their poor pre-flight, in flight and post-flight
services. Fifth, through formulation of new policies regarding its costs and asset
utilization, Garuda will be able to reduce cost and manage its assets effectively and
efficiently.
To be able to achieve this plan, the company should conduct a meeting with the
government regarding the plan and prepare a written contract of agreement. After that, a
presentation of a business plan is created to attract potential investors. In addition, an
expansion of business operations would also be good by establishing business relation
with other international airlines and make a network with related industry to strengthen
marketing strategies. Furthermore, a self-analysis every now and then could
accommodate the companys prosperity and resiliency.