Balancing Stakeholder interests at the Indonesian Railways Ivey Publishing National University of Singapore Marleen Dieleman The Important Role of Indonesias State-Owned Enterprises Indonesia as the largest market in Southeast Asia and the
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Balancing Stakeholder interests at the Indonesian Railways Ivey Publishing
National University of Singapore Marleen Dieleman<br>
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The Important Role of Indonesia’s State-Owned Enterprises Indonesia as the largest market in Southeast Asia and the growth had naturally led to an increase in demand for the transportation of people and cargo.
The country's existing infrastructure, including airports, roads, ports, and railroads, operated at or above capacity
The city of approximately 10 million inhabitants did not yet have a subway despite decades of planning
Indonesia did not score well on the Logistics Performance Index
The president of Indonesia was pushing for greater infrastructure development.
State-owned enterprises (SOEs) played an important role in the economy, in particular in the areas of infrastructure and transportation<br>
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Kereta Api Indonesia Kereta Api Indonesia (KAI) was the Indonesian SOE tasked with providing rail transportation
The first railway track in 1867 (during the Dutch colonizers)
Emerged as a SEO after Indonesia’s independence in 1945
In 1991, KAI introduced more comfortable and faster trains, their first profit
In 1995, more luxurious executive class trains were introduced
In 2009, Jonan joined KAI and identified KAI’s main problem
KAI had much potential to contribute to the Indonesian people, to provide cheap transport and help resolve the country's transportation bottlenecks.
KAI's public image was not very favorable due to safety and corruption concerns.
Customers were complained about overcrowded trains, delays and low service levels<br>
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KAI’s Business Model In 2009, start to a customer-focus and KAI’s vision was to be “the best railway provider through its focus on customer service and meeting stakeholders’ expectations”
2011, Jonan initiated a new logo to accentuate the desired cultural shift toward customer service and professionalism
Consisted mainly of passenger transport and freight transport
To increase comfort, KAI was attempting to both phase out the non-air-conditioned economy class and upgrade its remaining trains<br>
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DOES KAI FINANCIALLY HEALTHY? KAI’s Profit And Loss Summary (In Rp. Millions) KAI’s Balance Sheet Summary (in Rp. Millions)<br>
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KAI’s Financial Indicators<br>
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Several problem hindered the punctuality of the passenger trains, such as the arrangement of the trains, obstruction due to accidents and natural disasters, rolling stock failures and overdue maintenance work. KAI’s Operational Indicators<br>
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KAI’s Political Stakeholders In the beginning, the government provided a subsidy for economy-class fares and capped its ticket prices, although this subsidy was insufficient to operate this part of business or to maintain the company's infrastructure assets
In 2011, KAI had tried to improve the quality of the workforce by raising salaries and recruiting only those people with at least high-school qualifications, in attempt to improve the service level
In 1998, the government had been resisted drastic increases subsidy for KAI
In 2012 KAI implemented a substantial price increase for the business class
Prioritizing the business class over the economy class invited resistance from the government
The Ministry of State-Owned Enterprises had requested that all SOEs return a profit and contribute to the state budget, with a long-term goal of privatizing them and turning them into global champions.
The challenge is to change an ordinary government institution into a corporate system: financially, operationally, and in terms of culture<br>
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KAI’s Multi-layered Customers HOW TO SERVE MULTI-LAYERED CUSTOMER SEGMENTS?
the government subsidy for poor people
the increasingly vocal and affluent middle classes that demanded better services
WHATS THE STRATEGY
For middle path = balancing different interests<br>
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PREPARING FOR KAI’S FUTURE Would the public accept a price increase?
In the media, many complaints are showed up. Yet, the Jonan’s customer surveys showed a slow but steadily improving satisfaction with KAI’s services.
Prepare a plan that clearly stated how transform KAI into a competent SOE and balance different interests along the way<br>
