Balebat - Member of Telkom Indonesia - Corporate Innovation
Name of Organization / Company: Balebat - Member of Telkom Indonesia
Category: B01 - B09 - Award for Excellence in Corporate Innovation > B05A. Award for Excellence in Innovation in Manufacturing Industries - Up to 100 Employees
Entry Title: Turn Around Strategy of Balebat
PT Balebat Dedikasi Prima (Balebat) is a printing Yellow Pages company. The decrease in advertising spending on conventional media, has a significant impact on the growth of advertisers in the Yellow Pages. It made Balebat’s profitability decreased for 3 consecutive years (2014 - 2016) and became negative during year 2015 and 2016.
In 2016, Balebat's financial condition was poor with a loss of IDR 11.6 billion while the printing business growth is still relatively attractive. Due to poor financial performance, Telkom classified it as a Red Alert Company which needs assistance under the supervision of Red to Green (R2G) Task Force. R2G Task force performs a series of diagnostic assesment to the company's condition thoroughly. Diagnosis includes external and internal analysis of the business environment, crisis management needs and the establishment of Red to Green operation team to execute Turn Around Strategy.
R2G team found two major factors affecting Balebat's business performance i.e.
• low capability to capture business opportunities in new markets. From the beginning, Balebat relied on a yellow page printing captive market and forgot the development of new markets in printing business
• poor financial conditions both profitability and financial liquidity. In year 2015, Balebat suffered enormous financial losses as a result of the cancellation of an already-running school book project.
Based on the above conditions, Team decided to take a Turnaround Strategy to fix Balebat performance. This strategy covers some areas of improvement i.e. financial restructuring, new market penetration, capacity improvement and other resource management capability.
Balebat, supported by its parents company, has taken some fundamental financial restructuring to improve its financial condition by:
• converting debt to equity of shareholders loan,
• shortening the disbursement of accounts receivable time periode,
• accelerating debt payments to creditors and
• provision of working capital for new projects.
Balebat also developed new marketing strategy for penetrating new market. Its strategy is based on synergy with Telkom Group's marketing program such as:
• Go to market alignment with holding company & Telkom Group which has acquired succesfully new customers from banking & retail segment
• Market synergy with state-owned printing company PT Balai Pustaka which has acquired new customers from government segment
Balebat has improved production capacity through rearrangement internal business process. These rearrangement allowed Balebat to find new ways to increase production capacity. It also identified new opportunities through business cooperation with similar company, PT. Balai Pustaka. Cooperation developed through the optimization of each resource capability into their common competitive advantage. They decided to use joint production for some new projects to overcome lack of resource capability and agreed to use profit sharing scheme from these projects. This partnership strategy enables both parties boost up their revenue and also increased the machine utilization.
Balebat also found new opportunity to enter card & security printing business. Entering this new market, Balebat is collaborating with PNRI (state owned printing company that owned a licenses for security printing in Indonesia), and is providing them with raw material and packaging for their printing product, as a first stage entering the market. They agreed to use profit sharing sheme for this partnership.
Those turnaround strategies succeeded in getting Balebat out of the red alert zone by 2017. The impact is astonishing.
Debt to equity swap and project financing schemes has improved cash flow performance and improve the company's debt to equity ratio. Balebat also succeeded in increasing its production and penetrated new markets, that led to 445% revenue growth and obtained positive profit income amount IDR 10,5 Billion in year 2017. The turnaround strategy has successfully made Balebat won several awards namely The Successful Turn Around Company (TelkomMetra), The Great Turn Around Company (Telkom Indonesia) and The Rising Star (TelkomMetra).