Ifp Indonesia and the Business Model

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NTRODUCTION

Indonesia is a rich country with its resources. Not only oil and gas, but Indonesia also had been a producer of mining and agricultural products such as rubber, tin, tea, coffee, spices and timber. In 2002, timber is one of the key export for “non-migas” (non oil and gas) commodities to provide foreign trades.

IFP, Indonesia is one of foreign timber logging operate in Kalimantan (Borneo) island. With Kristin Daniel as the planner manager since 2001. IFP Ltd did business more than 25 countries in the world but Indonesia is the only one country it has business in South East Asia.

The company has original business in trading coal, metals and shipping industry.

SWOT ANALYSIS

Strength
The company use simplest technology and labour work intensive. Where support government program, to increase more workforce.

Weakness
IFP only can transfer timber in a small vessel in order able to crossed Indonesian river from forest to open sea. The forest in Kalimantan are old long period vegetation which the form of the trees are no longer similar each other. These conditions reduce the commercial yield rates and increase the cost. In Europe common hardwood resources are no longer able to compete with domestic and African products.

Opportunity
Low worker cost as much as USD 4 per day
The location of trade: ocean trade going from Far East to west part of Asia always gone trough Indonesia straits. Indonesia as a big supplier to western countries, with nearer distance compare to China and Japan.

Threat
Local population increasingly pressing the government to give sanction against foreign lumber companies Indonesian government and its corruption make it a very difficult Nation to do business. Weak local government, corruption and harassment at the local were not uncommon. This situation make the investor have no confident to invest their money to expand the business. Infrastructure investment is highly required in order the company able to run the business. Kalimantan is a least develop island, where transportations facility are very poor. In order IFP Ltd able to ship their timber from forest to the nearest port, IFP has to build its own road.

FINANCIAL ANALYSIS

CURRENT RATIO

Current Ratio= Current Assets / Current Liabilities
= 4,720.00 / 2,460.00
= 1.92

For logging company, current ratio 1.5 is acceptable. Which is mean the company still have positive working capital? General we could say, the company does not have a serious long term debt, but in other hand we can see that the company do not borrow enough money to expand the business faster.

QUICK RATIO

Quick Ratio= (Current Assets – Inventories) / Current Liabilities
= (4,720.00 – 4,940.00) / 2,460.00
= - 0.09
Average Company = 2.1 times

Quick ratio is a measurement of the liquidity in the company, it shows how quick the company able to “cash” in a short term from the current assets. IPF, Indonesia quick ratio shows that the company unable to give cash over the assets in immediate term. In case the company need cash immediately, company has to sell some of its assets.

ASSETS MANAGEMENT RATIO

INVENTORY TURNOVER RATIO

= Sales / Inventories
= 11,420.00 – 1,940.00
= 5.89

Average Company = 9.0 times

Each product from IFP, Indonesia is sold and the restocked. The turnover each year is 5.89 times a year where average company should able to make turnover about 9.0 times a year. This condition could happen for long shipping and transportation of wood from Indonesia to Europe, and a poor shipping condition where make IFP stocked the product too much rather than rotate it in a sales circulation.

TOTAL ASSETS TURNOVER RATIO
= Sales / Total Assets
= 11,420.00 / 10,080.00
= 1.13

Average Logging Company = 1.8 times

IFP, Indonesia's ratio (1.13 times) is below the industry average (1.8 times), indicating that the company is not generating a sufficient volume of business given...
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