DECISION ANALYSIS ON CORPORATE STRUCTURE TO MAINTAIN THE FINANCIAL SUSTAINABILITY: A CASE STUDY OF AN INDONESIAN STEEL COMPANY

• Main Author: Alhamdi, Fadil
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/74720
• Institution: Institut Teknologi Bandung

PT Krakatau Steel (Persero) Tbk (“PTKS”) had an unsatisfactory financial performance for seven consecutive years, starting from 2013 until 2019. To overcome the situation, PTKS has conducted a company transformation, as well as the restructuring of the company debt in 2020. As a result, PTKS successfully gain profit in 2020 and 2021. However, the effect of PTKS’s transformation is not adequate to solve one of the root causes of PTKS’s problem, which is the abundant amount of the company’s debt. To solve the root cause of PTKS’s problem, the management of the company has planned to change PTKS’s corporate structure from an operating company to a holding company. The corporate structure’s change aims to maintain the financial sustainability of the company which is endangered due to the incapability of the company to solve the debt. To justify the company’s management plan, research using Analytical Hierarchy Process (“AHP”) method is being conducted in this Final Project to choose the suitable corporate structure for PTKS to maintain its financial sustainability. The objectives of the research are to explore the criteria that should be considered to determine the suitable corporate structure for PTKS to maintain its financial sustainability, to determine the more preferred option for PTKS between staying as an operating company or changing to a holding company and to recommend the implementation of the selected decision to ensure the company’s financial sustainability. From interviews with PTKS management, it is obtained that there are 5 criteria (Finance, Operational, Human Resources, Marketing, and Business Development) and further 14 sub-criteria (Financial Performance, Ability to Pay the Debt, Subsidiaries’ Synergy, Operational Complexity, Efficiency, Talent Development, Organization Size, Organization Productivity, Integrated Marketing, Brand Image, Market Share, Business Size Growth, Business Portfolio Development, and Product Development) that being considered to determine the suitable corporate structure for PTKS. Based on the result of AHP weight calculation from questionnaires, the most important sub-criteria to determine the suitable corporate structure is the Ability to Pay the Debt, followed by Business Size Growth and Business Portfolio Development. On the other hand, the least important sub-criteria is Organization Size, followed by Operational Complexity and Integrated Marketing. After obtaining the weights of the sub-criteria, the process then continued by giving ratings to the business alternatives, which are Operating Corporate Structure and Holding Corporate Structure, on each sub-criterion. As the final step, the weights of the sub-criteria are multiplied by the ratings of business alternatives. By observing the result of the final calculation using the AHP method, it is determined that the Holding Corporate Structure is the more suitable corporate structure for PTKS to maintain its financial sustainability. To implement the plan, PTKS will conduct the In-kind Contribution of its operating facilities to one of its sub-holding companies, therefore PTKS will not have any asset or facility to be operated. Without having any assets or facilities to be operated, PTKS has officially become a holding company that will focus to develop the business of its sub-holding companies. By changing to a holding company, PTKS is expected to be more agile and could generate more cash to pay its debt.