MULTI-CRITERIA DECISION-MAKING MODEL ON INVESTMENT PORTFOLIO PRIORITIZATION IN PT KRAKATAU STEEL (PERSERO), TBK: AN ANALYTIC HIERARCHY PROCESS APPROACH

• Main Author: Tejo Widagdo, Aditya
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/47611
• Institution: Institut Teknologi Bandung

PT Krakatau Steel (Persero) Tbk (PTKS) has less-lucrative financial performance for the seven consecutive years (PTKS, 2013 – 2019). The root-causes analysis of this situation leads to the necessity of strategic decision-making on investment activity. PTKS requires a breakthrough in investment strategy to create a one-shot quick-win action to support the turnaround process of PTKS. By observing the external and internal environment analysis, as well as the general outlook of steel industry and PTKS, it could be derived that PTKS requires a breakthrough in investment strategy to create a one-shot quick-win action to support the turnaround process of PTKS. Therefore, the capital investment should be made carefully to ensure the quick return for leveraging PTKS performance. To achieve the breakthrough in investment strategy, the selection of investment portfolio should be comprehensively evaluated to make the prioritization before entering to the execution phase. By creating the investment portfolio prioritization method, the company budget will be better-allocated and the value creation will be more optimum. The objectives of this research are to explore the criteria which should be considered on prioritizing the investment portfolio in PTKS, to determine the degree of urgency of each criterion on prioritizing the investment portfolio in PTKS, and to develop and exercise the AHP-based multi-criteria decision support system in accordance with the criteria of investment portfolio prioritization in PTKS. In solving the problem obtaining the best investment portfolio to be applied by PTKS, the Multi-Criteria Decision-Making (MCDM) needs to be applied in investment portfolio prioritization. Analytic Hierarchy Process (AHP) approach is chosen in the problem solving of investment portfolio prioritization by observing that AHP has the most benefit in comparison to Borda Count and Simple Multi-Attribute Rating Technique (SMART) in terms of method of ranking determination, number of respondents, ease of usage, complexity, criteria covered, rating of alternatives, calculation comprehensiveness, bias potential, and accountability. The AHP is executed by applying the pairwise comparison to assign the weight to 14 selected sub-criteria (strategic alignment and urgency, internal process improvements, HSE, legal, and compliance, technological sufficiency, market capability improvements, product and quality leadership, corporate reputation, project-attributed risk, duration of execution, organizational readiness, investment amount: capex, investment profitability – Net Present Value (NPV), Investment Returns – Internal Rate of Return (IRR), and Investment Periods – Pay Back Period (PBP)) as the elaboration from the main criteria namely strategy and governance, marketing and sales, project management, and financial feasibility. According to weight calculation result, the market capability improvements is the most preferred criteria to prioritize the investment portfolio, followed by IRR. On the other hand, the HSE, legal, and compliance is the least preferred criteria in considering the prioritization, followed by technological sufficiency. The process is further continued by quantifying the parameter of the alternatives according to each respective rating range. The final step is to calculate the priority index by multiplying each sub-criteria weight with each respective rating for each alternative. There are three alternatives taken into example those are The Molten Iron Project, The Black Steel Project and The White Steel Project. By observing the result of the calculation as well as comparing the figures of the weights and ratings, it is recommended to PTKS to take The White Steel Project as the priority of investment portfolio to be executed, followed by The Black Steel Project and The Molten Iron Project. By executing the White Steel Project, it is expected that PTKS could boost it sales, collecting more profits due to the accumulated margin brought by additional revenue stream, and get quick pay back from the project due to the shorter project duration.