Question

Complete a SWOT analysis for the below case study:

• SWOT analysis using SWOT diagrams or matrices is a key part of any business planning or analysis.
• SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors and opportunities and threats are external factors. A SWOT diagram analyzes a project or business venture by focusing on each of these factors. It typically consists of four boxes, one for each area, but the exact shape may vary depending on the design.
• SWOT diagrams can be especially useful when trying to decide whether or not to embark on a certain venture or strategy by visualizing the pros and cons. By clearly outlining all positives and negatives of a project, SWOT analysis makes it easier to decide whether or not to move forward.

Case study: Bavarian Auto Works in Indonesia (Germany/Indonesia) Dennis R. Briscoe, PhD, University of San Diego The organizations involved: Bavarian Auto Werks GMBH (BAW) Jakarta Electro-Assembly Ltd (JEA) The IJV: Jakarta-Bavarian Auto Works Ltd (JBAW)

It has been one month since management at Bavarian Auto Werks in Germany had increased its stake in the Indonesian firm, Jakarta Electro-Assembly Ltd, to just over 50 percent. The initial negotiations for this joint venture had been lengthy and difficult, but finally there had been an agreement to move ahead with joint manufacturing on a limited scale, with BAW providing limited equity, technology and equipment, and managerial expertise. The initial collaboration seemed to work out, so now BAW was increasing its ownership. At the conclusion of the original negotiations, BAW had sent a team of managers and engineers to Jakarta to provide some management assistance to the ailing Indonesian firm. The head of that team, Stephan Ritter, had been a member of the original team that performed the due diligence to analyze the condition of Jakarta Electro-Assembly (JEA) and had headed the team that had negotiated the joint venture agreement. This was the first joint venture that either BAW or JEA had entered into, so both were inexperienced in this process of international negotiations. The joint venture was named Jakarta-Bavarian Auto Works Ltd (JBAW). Stephan and his wife, Nicole, were the first Germans to arrive in Indonesia. The pace of change had been incredibly rapid and now Stephan was wondering what could be done to ensure the success of the new restructuring, based on BAW’s new majority ownership (now at 52 percent). With the exception of a few of the most senior managers, employees at JEA (now JBAW) had no direct way to receive information about the negotiations or its results. Initially, JEA employees were quite supportive of a deal with BAW. But soon after the deal was completed, and the new team of additional Germans had arrived (six specialists: an accountant and five manufacturing engineers), the high expectations were gradually replaced with fear of the actions the Germans were likely to take as they assumed their management and operational roles. The existing senior Indonesian managers were afraid that they would be replaced by younger managers who spoke English. And the other Indonesian employees were afraid they would be laid off as the Germans sought higher productivity and lower costs. Rumors, supported by inaccurate reports in local newspapers, ran rampant. One newspaper even reported that many Germans would be imported to Indonesia from BAW in Germany. Anxiety mounted as speculation increased about the magnitude of downsizing that BAW would implement as it restructured the Jakarta Electro-Assembly business, now that they were majority owners of the joint venture operation. In general, since the Indonesians did not have much experience with Germans, they expected them to take the same sorts of actions that other foreign firms had taken, such as the American firms in Indonesia, with heavy layoffs and replacement of top management with expatriates. However, since only a few managers from BAW had been involved in the due diligence and negotiations, the Germans were also well aware that they had gained only limited knowledge and insight into the Indonesian culture. As a result, Stephan and Nicole had spent a month prior to relocating to Jakarta in intensive study of Indonesian culture and in language training, trying to pick up some fluency in Bahasa Indonesian, the official language, influenced by Dutch, from the Netherlands, which was the governing colonial power for a long time. The team of six Germans who has recently arrived expects to also spend at least one month learning about the Indonesian culture and Indonesia itself before they begin to make changes in the manufacturing equipment and processes. They recognize that this process of adapting to the local culture will be an ongoing one that will not end at the end of the first month. Even though most high-level communication in the new company is expected to take place in English (a common language for the Germans and for at least some of the Indonesian managers, as well as for most prospective customers), the Germans realize the importance of gaining some ability to communicate with their counterparts and other employees in their own language. The Situation Indonesia is the fourth most populous country (over 253 million people as of mid-2014) and the most populous Islamic country, with a per person annual GDP (Purchasing Power Parity) of about US $5,200 (2013 estimate).1 The JEA is located on the outskirts of Jakarta, the capital and largest city, located on the island of Java. The IJV agreement is based on the continuation of JEA’s business of making auto parts for the Indonesian after-market (for sale in auto parts stores and garages) and to add to this as soon as possible the manufacturing as a sub-contractor original equipment (OEM) auto parts for four German auto firms, Volkswagen, BMW, Opel (General Motors in Europe), and Ford Europe, who are all customers of BAW in Germany. The hope is that the IJV can eventually expand to other OEM business, such as for American and Japanese automobile manufacturers. One of the issues that Stephan and BAW are concerned about is the type of organizational culture that will evolve in the new joint venture. In essence, as of now, there are three different possibilities, and it is not clear which would be best: ■ The culture that is already present, from JEA (which was founded originally as a government-owned enterprise, but was sold to a group of Indonesian businessmen four years ago). This culture is that of a typical Indonesian business. ■ A second possibility would be to implement a more traditional German culture, as exists in BAW. ■ Or, as a third alternative, the new combined joint venture could work to create a new culture, a hybrid of some kind, using characteristics of both the Indonesian culture and the German culture. The joint venture is still in formation and is as yet largely undefined. The primary objectives that BAW initially wants to achieve include the following: ■ Develop an organization focused on the customer. ■ Improve the productivity and efficiency of all operations and activities. ■ Improve the firm’s profitability. ■ Improve the integrity and accuracy of the financial information. Other issues that need to be addressed include managerial control issues (sharing of top management positions between BAW and JEA managers); schedule for transfer of technology from Germany to Indonesia; protection of intellectual property; sharing of revenues and distribution of costs; downsizing (amount and scheduling); performance management (use of performance appraisals, setting work goals and performance standards); health and safety concerns; and hiring standards. Stephan realizes that there are a number of communication challenges for the Germans. These include the overriding importance in Indonesia of family and friends and the nature of interpersonal relations and respect for “face” in all dealings. Since only a couple of the Indonesians in JEA speak German while a number of the managers (and a few of the lower-level employees) speak some English, it was decided that English would be the language for managerial meetings, including the ongoing negotiations to determine the nature of the new joint venture and to address the above objectives and concerns. However, it was also clear that there would be a need to use a translator for these meetings. Indeed, Stephan thought it would be best to use two translators, one for the Indonesians and one for the Germans. In the end, Stephan wanted to establish a culture within JBAW that would achieve and sustain world-class quality and world-class productivity in all operations and in all interactions with current and potential customers. So, Stephan now had to prepare for the negotiations and he needed to develop a plan for the ongoing operations of the joint venture that would move them toward his and BAW’s hopes for JBAW. The question he needed to address was: how do I proceed? Indonesian Negotiation Style Indonesians do business typically only with persons they know and like. Establishing this personal relationship takes time and is vital for success. Establishing a successful business relationship hinges on establishing a social relationship as well, and this may take some time. The pace of business negotiations is quite slow, such that one needs to be quite patient and not rush or push for quick decisions. Foreigners should expect few decisions from Indonesians at the negotiation table. Indonesians expect to examine copious amounts of information, so negotiators in Indonesia need to always provide as much information and detail as possible, in response to their questions and in anticipation of their needs. Presentations should be well prepared and simply presented. Details are best left to questions and backup material, which should be translated into Bahasa Indonesian and left behind. Ideally, foreign negotiators should present their material to the Indonesians for study, along with a proposed agenda, prior to the meeting. Extra copies of the agenda should be made available, as it is likely that more people are likely to be present than are expected. Foreigners should negotiate with a well-organized team, whose roles have been clearly thought out and defined. Members of this team should never disagree with each other in front of the Indonesians, or appear uncertain, unsure, not authorized to make a decision, or out of control in any way. Indonesians generally do not like to bargain, but when they do, they approach it as a win/win possibility (something should be in the agreement for both sides). In general, negotiations are viewed as time to build relationships. Although any negotiated contract must be legal down to the dotted i’s, to the Indonesians it is a piece of paper that merely signifies that an agreement has been reached and which will be followed because of the trust and commitment that has been built between the parties. The deal should be finalized with a celebratory meal or round of drinks, and the actual signing might be delayed until an auspicious or lucky day: this is likely to affect the schedule. Communications need to be kept open, especially when at a distance, and foreigners need to stay in touch often with their Indonesian associates: foreign negotiators should share more information than they normally would, not less; and because business is so intimately connected with the government and because the political situation is so fluid, foreign negotiators should try to have a source of information “on the ground” in Indonesia who can always keep them informed about what is really going on, if at all possible. All communications should be very formal and respectful of rank and hierarchy. Indonesians show great deference to superiors (even protective) and they expect other people to do the same. Thus, disagreeing with high-ranking Indonesians just is not done, and this can make negotiating with them quite difficult (as well as understanding or interpreting words like “no” or “yes, but”). Politeness is one of the most important attributes for successful relationships in Indonesia. But this politeness in no way hinders the determination of Indonesian businesspeople to get their own way. Always, decision making in Indonesia is a group process, so don’t expect individuals in negotiation to make decisions quickly. Decisions will have to be discussed in private before agreement can be reached. German Negotiation Style Germans respect people who come to negotiations with established knowledge and experience. No detail is unimportant, and a carefully planned, logically organized proposal is key. Even from the beginning, Germans are very matter-of-fact. It would not be uncommon for Germans to get right down to business, without any socializing first (after introductions and greetings). Time is very important and is expected to be managed carefully, with meetings planned well in advance and a detailed agenda circulated prior to the scheduled date of the meeting. However, the pace of German decision-making can be quite slow. This is often because German companies have a parallel “hidden” series of advisors and decision-makers who must give their approval of any decisions. Germans dislike exaggeration, and they expect people in negotiations to be able to back up their claims with lots of data and examples—and studies, if possible. German firms have a well-deserved reputation for superior quality, which is based in part on slow, methodical planning. Every aspect of a deal will be pored over by many executives and specialists, which can slow down negotiations. Germans believe that it takes time to do a job properly and well. Germans consider the contract to be sacred; once it is decided it determines the nature of the business relationship. If either party wants to change anything in a contract (or circumstances require the need for a change), it would be expected that there be a formal renegotiation of the contract. Contracts are considered enforceable in law, so Germans pay very close attention to the exact wording and punctuation of their contracts. Germans can take a long time to establish close business relationships. Their apparent coldness at the beginning will vanish over time. Once they get to know you, they are quite gregarious.

Answer 1

A SWOT analysis is an incredibly simple, yet powerful tool to help you develop your business strategy, whether you’re building a startup or guiding an existing company.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths and weaknesses are internal to your company—things that you have some control over and can change. Examples include who is on your team, your patents and intellectual property, and your location.

Opportunities and threats are external—things that are going on outside your company, in the larger market. You can take advantage of opportunities and protect against threats, but you can’t change them. Examples include competitors, prices of raw materials, and customer shopping trends.

SWOT ANALYSIS OF Jakarta-Bavarian Auto Works Ltd (JBAW)

STRENGTH 1. Availability of human resources in Indonesia 2. Customer Perceived higher quality for germen products 3. Experienced top managers in JEA 4. Both the countries looking for win/win situation 5. Better decision making power of German companies	WEEKNESS 1. Inexperienced managers at BAW 2. Communication gap between German and Indonesian language. 3. JEA top managers are unaware of negotiations 4. Management control issues
OPPORTUNITY 1. Use of maximum resources in Indonesia 2. Expand to Larger market portion in Indonesia 3. Advanced technology utilisation	THREATS 1. Cultural barrier in Indonesia 2. Management Control issues 3. Political issues and law in Indonesia