Asia Pulp and Paper
A short strategy analysis of APP mission , vision and strategy Indonesian Economy
Asia Pulp and Paper
A short strategy analysis of APP mission , vision and strategy
APP’s financials, environment issues and mattel
The challenges and recomanded strategy
APP, a company to watch
Corporate governance refers to the control of the firm, its ownership structure, and the disclosure quality. It was widely discussed in relation to the Asian crisis in 1997-98, because poor firm performance was assumed to be related to bad corporate governance .
In particular, the East Asian economic model was said to reveal a "crony capitalism", with the presence of numerous family-controlled groups, a high ownership concentration, a weak public governance, and poor monitoring of bank loans .
The group Asia Pulp & Paper (APP) expanded impressively in the 1990s and became the largest pulp and paper producer in Asia outside Japan, and one of the top ten producers in the world. It attracted investors from all over the world in a context of "Asian miracle", and because the giant pulp mills built in Indonesia were assumed to produce at the lowest cost in the world .Surprisingly, the group announced a debt standstill on $13 billion in 2001, the largest default for a private group in an emerging country At the same time, it was revealed that the industrial capacities had expanded at a much faster pace than the forest plantations, thus representing a high risk that operations would not be sustainable. Available studies showed the apparent lack of rationality in the decisions of the group, and the critical situation it faces from both financial and wood supply points of view. However, another explanation would be more convincing, which is based on the very rational behaviour of the ultimate owners of the group. This rationality being related to their ability: to increase their control of the decisions and accounts compared to their direct financial investments, to finance the expansion mainly with debts in order to reduce their own risks and to maximize their short-term profits, ,to benefit from a lax public governance context and a free access to natural forests for supplying fiber to the pulp mills.
APP's trajectory has not been clean of obstacles , so with the tools provided by the theory strategy and organizational management we ‘re going to try to find the « good » way to manage that company . This is important because APP's default has attracted much attention so far, and the resolution of the case will impact on the willingness of foreigners to invest back in Indonesia.
I. Company overview
Asia Pulp and Paper (APP) has its roots in 1972, when the company Tjiwi Kimia was founded by Eka Tjipta Widjaja as a small caustic soda manufacturer. In 1978, Tjiwi Kimia commenced paper production of 12,000 tons/year. In December 1976, Indah Kiat was formed as a joint venture between CV Berkat (an Indonesian company), Chung Hwa Pulp Corporation and Yuen Foong Yu Paper Manufacturing Company Ltd. from Taiwan. In April 1979 Indah Kiat Tangerang mill’s Paper Machine 1 and 2 started with a production of 100 tons/day of wood free paper. By March 1984 Indah Kiat Perawang mill’s Pulp Machine 1 started producing bleached hardwood kraft pulp with an initial capacity of 250 tons/day. In May 1986 Sinar Mas Group acquired 67% of Indah Kiat’s total shares. Chung Hwa and Yuen Foong Yu had 23% and 10% shares respectively. In 1987 the first cast coating machine installed at Tjiwi Kimia, and in April 1990 Tjiwi Kimia was listed on the Jakarta and Surabaya Stock Exchange. In 1991 Tjiwi...
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