Salim Group

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Table of Contents
Executive Summary1
1. History of the Salim Group2
1.1 Phase One: Introduction of a Conglomerate2
1.2 Phase Two: Transition to the Second Generation4
1.3 Phase Three: Financial Crisis and Reform5
2. Competitive Environment6
3. Features7
3.1 Ownership and Organizational Structure7
3.2 Leadership and Decision Making9
3.3 Connections and Relationships10
3.4 Social Capital11
3.4.1 Public Perception Related to Corruption12
3.4.2 Reputation as a Source of Financing12
3.4.3 Leveraging Relationships with Western MNCs13
4. Future Strategy14
5. Future Challenges and Opportunities15
5.1 Changes in the Institutional Environment15
5.2 Succession Planning16
5.3 Centralization of Control17
5.4 Axis of Prosperity18
6. Conclusion20
Appendices21
References:27

Executive Summary
The Indonesian-based conglomerate Salim Group was founded by Liem Sioe Liong prior to World War Two. The Salim Group began as a small trading company and received favourable attention from Indonesia’s nationalist government. The focus of the Salim Group’s operations adapted to Indonesia’s economic policies and shifted from trading to manufacturing, and ultimately diversified into a series of unrelated sectors. Following the fall of Suharto and the 1997 Asian financial crisis, the Salim Group has continued to internationalize its portfolio with Liem’s son, Anthony Salim, as the group’s chief executive. Currently, the Salim Group’s main holdings are in food, media, automotive, property and telecom with aggregated revenues estimated at 14 billion USD in 2012. The biggest companies in the portfolio include First Pacific Ltd., Indofood and Indomobil. The competitive landscape consists of other multinational companies and Indonesian conglomerates on a group level, and industry specific competitors in each distinct business field.

Although certain elements of the Salim Group are comparable to the traditional Chinese family business, such as its extensive network of relationships, through adaptations to this model, including the professionalization of management and business, an open and informal culture, and a decision-making process supported by strict internal monitoring procedures, the group has been able to achieve significantly greater scale and success. Anthony Salim has already dictated the firm’s future strategy, which entails an expansion throughout Australia-ASEAN-China (‘Axis of Prosperity’), a portfolio focus on industries known to the group, and the development of local managers for regional adaptation. Going forward, the Salim Group should closely consider changes in the institutional environment of ASEAN countries, succession planning, and the centralization of control, as well as both the benefits and concerns associated with its Axis of Prosperity expansion. 1. History of the Salim Group

1.1 Phase One: Introduction of a Conglomerate

The historical events of the Salim Group can be classified into three phases that the Indonesian conglomerate experienced. These phases are broadly grouped time periods that share characteristics and observe similar trends. We begin by examining the first phase of the Salim Group’s accomplished history, which includes the actions that led to the creation of the company and its earliest business activities. Prior to the Second World War, Liem Sioe Liong immigrated to Indonesia from China’s Fujian province. When Liem arrived in Central Java, there was already an existing and organized Chinese community. This is a direct reflection of the increase in Indonesia’s Chinese immigrant population, a group considered to be economically higher than the local Javanese as they were used by the colonists as intermediaries and traders. The importance of Liem’s ethnicity will be discussed in later sections. Liem began trading and lending in the early 1940’s before the Japanese occupation. Similar to many Chinese immigrants, Liem abandoned his...
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