Sulianto, Anwar and Handayani, Elis Sari Maila and Machri, Suvina Farouk and Reynaldo, Yohanes Saut (2008) BP ECM Franchise in Indonesia : Providing Safer and Affordable Energy Through a Profitable Business Model. Technical Report. Sekolah Tinggi Manajemen IPMI, Jakarta Selatan. (Unpublished)

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Abstract

Worldwide, over 3.6 billion people lack access In clean, vale end alffordable energy. a emerging consumers aspire to move from recressive fuel usage (negative fuel usage rat negative impact on health, is unsale or camapes the environment) to progress ve erey solutlons. To provide a better le for the Emeroco Consumers who are stil using regressive fuel, BP has developed an allernative energy solution. BP found a cut that this is a huge market opportunity and BP started in September 204r Inda to explore this opportunity. he company goal is to develop a maternal and profitable business that provides cleaner, saler. accessible, and affordable energy solutions ataring with cooking) to fulfill this unmet consumer demand, leveraging local resources Because of the above mentioned reasons, BP wants to expand the market by introducing in another country. The countries among them choose is Indonesia Despite the successful launching in India, BP has never had the experience of launching this program in Indonesia by franchising scheme. Proceeding with the initiative, BP is about to set up S master franchise agreements with Mercy Corps Indonesia, a well-known multi-national Non-Government Organization (NGO) in Indonesia One of the essential components to be prepared in the agreement is regarding the franchising cost component (i. initial franchise fee and royalty fee). This study has been conducted to facilitate by BP and Mercy Corps to grab the whole picture of this unique scheme and apply those facts and findings to gauge understanding of tranchising scenarios in using daily energy for cooking activities among rural areas in Indonesia To generate a better recommendation , the IPMI's GFP team had developed the methodology on how to setup the franchising cost components for the BP Master Franchisee Agreement in Indonesia. We have discussed several major issues prior to the decision making. First of all we construct a study of the project. Launching of this stove is a big opportunity for BP to rate and expand the existing market to the huge potential low class segment. Not only the launching of this product would make BP as a pioneer in this segment, but also make PB able to create a more sustainable basis for the company's future revenue and profit's stream. BP stove and Its bio fuel Is a new product not only in terms of modol but also in the term of characleristic product. The stove is differen medieval with LPG and Koroseno slovo. Tho lour no made from agriculture residue, The Important considoratlon lo launch this unlquo product in how to introduce the product to consumers. In the distribution aspect, the main consideration is using Mercy Corps as a distributor of BPPOM third party to become a distributor. Looking eYperience of Mercy Corps is better for uso third party as the distributor. In addition to this strategy. Mercy Corps should maintain and build a better relationship with the distributor as the major sourcing goods for most retailers. In order to have a successful launch of this product, we suggest some expansion plan. When we choose an area for expansion, it should be based on the density of that area. After ward we use financial approach such as break even analysis, not present foreign exchange, payback period and internal rate of roturn. The objective of oven break analysis is determining the break even quanity of output by studying the relationships among the firm's cost structure, volume of output, and profit. The payback period is the number of years needed to recover the initial cash outlay, As this criterion measures how quickly the project will return its original investment, it deals with free cash flows, which measure the true timing of the benefits, rather than accounting profits . The net present value of an investment proposal is equal to the present value of its annual after-tax net cash flows less the investment's initial outlay. The internal rate of return (IRR) calculate the rate of return on the project earn. From the analysis of the break even point and payback period, we recommend the master franchise agreement to be set within 10 years to reach a win-win solution between BP as a franchisor and Mercy Corps as a franchisee. Due to gross margins for the first two years still negative, we recommend that the franchise fee which is normally to be paid up front, should be pending until the years gross margin becomes positive. Otherwise the franchisee will have a problem in managing its cash flow. Government is currently pushing for conversion to LPG and this will impact current conditions. This conversion has been pushed by the provision of free LPG stoves and distributing LPG in small 3-kg cylinders, supported by quite heavy above-the-line communication, At the same time, there is currently a plan to disappear kerosene subsidies in Jakarta. Although currently the focus is on the Jakarta area, chances are that these efforts will likely to spread to other regions as well. The use of LPG might increase in the future and it Due to gross margins for the first two years still negative, we recommend that the franchise fee which is normally to be paid up front, should be pending until the years gross margin becomes positive. Otherwise the franchisee will have a problem in managing its cash flow. Government is currently pushing for conversion to LPG and this will impact current conditions. This conversion has been pushed by the provision of free LPG stoves and distributing LPG in small 3-kg cylinders, supported by quite heavy above-the-line communication, At the same time, there is currently a plan to disappear kerosene subsidies in Jakarta. Although currently the focus is on the Jakarta area, chances are that these efforts will likely to spread to other regions as well. The use of LPG might increase in the future and it

Item Type:	Monograph (Technical Report)
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	Library > GFP (Group Field Project)
Depositing User:	Elza Christina Nur Ramadani
Date Deposited:	16 Jan 2020 11:01
Last Modified:	16 Jan 2020 11:01
URI:	http://repository.ipmi.ac.id/id/eprint/291

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