Name : Aldiansyar Mugia Utomo

NIM : 29119134 (YP 61-B)

Course : Business Strategy and Enterprise Modelling

SUMMARY OF BANK NIAGA’S CASE STUDY

A. A Glance of Bank Niaga

Bank Niaga was established in 1955. It was listed on Jakarta Stock Exchange in 1989.
It was considered as one of the best private banks with good performance, however in 2000
the bank was restructured by government due to monetary crisis impacts. After the
restructured period, the bank improved its performance. But in 2002 it was divested through
an IEPSA together with Bank Central Asia (BCA)’s IEPSA. IEPSA (International Equity
Placement Strategic Alliances) itself is an alliances between partners of different nationalities
which shared ownership. The objective was to help the Indonesian economy out of the crisis
through recapitalized, restructured, divest and also take over.
While the divestment process through the IEPSA was on-going, the government was
selling 18.22% of its shares in 2002. After the completion of these sales and the IEPSA, the
government had sold 51% of shares to CAHB (Malaysia) and 18.22% of shares to public in
the stock exchange. Hence, the government's shares declined from 97.2% to 27.98%. The
Public's shares increased from 2.8% to 21.02% and CAHB possessed ownership of 51%. By
April 2005, the remaining government’s shares in Bank Niaga as much as 21.53% were sold
to the stock exchange where CAHB bought additional 1.6% of the shares. By this the
government had no longer any stake at Bank Niaga, and CAHB have a majority of ownership
by 52,6%, the foreign partner bought additional 1,6%, and public have 47,4%.

B. Analysis
1. Stakeholders Support
The support come up from internal and society. Bank Niaga had prior restructured
and the government had already planned for Bank Niaga’s privatization before the
intended IEPSA which was permitted by the representative. Thus, internal
organization support was positive. Also there was a change in the ownership structure,
i.e. the government gave up its majority stake. The process of IEPSA planning was
transparent. Thus, society support was positive.
2. Strategic Match
The strategic match in this case consist of capacity, complementarity, and strategic
importance. The capacity factors consist of attractiveness of market, alliance track
record, attractiveness of product or services, attractiveness of technology, and
attractiveness of financial performance. Complementarity and strategic importance’s
aspect consists of pressure on continuity (both partners shows commitment to
continue the alliance as reflected in the SPA), pressure of time in alliance (both
partners treated the alliance as an important opportunity to grasp for the sake of their
existences), and alternative to cooperation (both partners had other alternatives to
forming IEPSA).
 3. Cultural Understanding
The aspects of cultural understanding are trust and commitment. Trust is occurred
in the planning phase of the alliance, the share of communication between the partners
and stakeholders was frequent. Commitment is occurred when the partners were
willing to nurture the alliance by developing, supporting, and enhancing the
performance
4. International Organization Support
International organization support in this case occurred when the entire stakeholder
in the organizations of the alliance participated in the implementation of strategic
planning. The objectives in 2007 were socialized to the stakeholder in the internal
organization.
5. Human Resource Management
The alliance established training centre and Learning and Management Group. The
trainings were facilitated to extend the optimum potential value of every employee.
The objectives of training and learning activities are improving intellectual capital in
achieving CIMB Niaga's competitive advantage, and developing a learning
organization.
6. Organizational Arrangement
The aspect of organization arrangement is decentralization of decision making.
The alliance decentralized its decision making to the regional area
7. Management Control System
Management control system consists of planning, control structure, and control
process. Planning aspects occurred when each division committed to ensure that the
alliance objectives could be achieved. Control structure occurred when the audit
committee conducted process feedback on performance by auditing on the divisional
performances within the alliance. Control process occurred when each individual
established and deployed control level.
8. Internal and External Driver
Internal driver consists of expectancy and corporate leadership. Expectancy
occurred when the alliance improved its performance so that missed of expectancy
was not the cause of the termination of the alliance. Corporate leadership occurred
when there were no changes in corporate leadership so that it was not the cause of the
termination of the alliance. Meanwhile external driver related on external
environment, which there were no changes in the external environment regarding the
regulations and politics so that external environment was not the cause of the alliance
termination.

C. Additional Insights
There are few additional insights that can be provided concerning with stakeholder
support, internal organization support, strategic plan and management control system. These
additional insights are aimed to present additional perspectives and information about the
IEPSA
 1. Insights on the stakeholder support
Motivation of budget deficit reduction in 2002 when the GDP growth was 4.5%
and inflation rate of 11.88% affected negatively to the share price since the
government seemed to hastily divest the bank. However, there was existence of high
share price in the bourse (as the benchmarked price) due to the limited amount of
shares in the bourse influenced positively to the share price of Bank Niaga.
As such, government decided of not following the high share price in the bourse
but deciding the share price in accordance with the fair value of the bank which was
below the share price in the bourse.
2. Insights on the internal organization support
There were no lay-offs to be undertaken. Coupled with the existence of fit in
objective to achieve vision 2007 (became 5th ranked in terms of asset number), the
situation in the planning phase motivated internal stakeholder to participate in the
implementation of strategic plan in such a way they were secured and enthusiastic
with the IEPSA.
3. Insights on the strategic plan
Informal meeting between two alliances had encouraged the commitment which in
turn affect to the successful strategic plan. This occurred since actually the strategic
plan was established within a longer period of time (5.5 months compared to normally
1-2 months) and commitment had already been acquired during the period to enhance
the successful strategic plan.
4. Insights on the management control system
Control structure established by the new owners was in compliance with Bank of
Indonesia regulation. Likewise, it was set up in a purpose to anticipate and avoid the
occurrence of past mistakes when during the economic crisis, the banking collapsed
due to the non-existence of Good Corporate Governance.

D. Conclusion
Several relationships between the factors in the model were observed:
1. Stakeholder support influence on cultural understanding. The communication and
socialization of the intended IEPSA was intensive to the stakeholder and was
accelerated by a good relationship between management and employee in the
alliance. This intensive communication and socialization was vital to express
partners’ commitment to the alliance and variable which positively influenced trust
between partners.
2. Cultural understanding influence on internal organization support. Positive influence
on trust and commitment in the alliance had ensured the participation of the internal
organization in the implementation of strategic planning, therefore, enhancing the
internal organization support. There were no oppositions from the internal
organization to the IEPSA.
3. Internal organization support influence on strategic planning. Participation of internal
organization support had supported the successful implementation of strategic
planning.
4. Human resource management influence on management control system. The alliance
enhanced the quality of human resources by providing training inside and outside the
alliance, especially to the foreign partner’s office in Malaysia, and aligned interest
between the IEPSA and employee by establishing ESOP program. Therefore, it
helped implement the control process of the IEPSA and thus supported the
management control system.
5. Organizational arrangement influence on management control system. The alliance
enhanced the organizational arrangement by delegating and thus increased the speed
of decision making to the regional branches. Therefore, it helped implement the
control process of the IEPSA and thus supported the management control system.
6. Management control system on evolved cultural understanding. Positive management
control system in the alliance had improved the performance of the alliance and thus
together with the commitment and intensive communication to the stakeholder had
influenced positively to the evolved cultural understanding in the alliance.