Economic Development

1. Introduction

Nowadays, global economy has evolved rapidly. It affects many facets, and one of them is business entities. In order to sustain profitability and competitiveness, business entities have to carefully scrutinize business environments – both external and internal, because it influences business entities in crafting their strategies. While external factors create opportunities for and threats to business, internal factors establish the strengths and weaknesses of the firms. Kelly and Ashwin (2013) posit that business organizations should be aware of these changing factors to be able to maintain their position in markets, to take advantage of new opportunities, and to improve the effectiveness and efficiency of their decision-making process.

In addition, Thompson et al. (2010) posits that every company operates in a broad macro-environment that comprises six principal components: political factors, economic conditions in the firm's general environment (local, country, regional, worldwide), sociocultural forces, technological factors, environmental factors (concerning the natural environment), and legal/regulatory conditions. They state the PESTLE framework analysis as a common technique for analyzing the general external environment of an organization.

This paper will elaborate merely on a sub aspect of economic environment, which is economic development in Indonesia.

1. Company Profile

PT. Bumi Serpong Damai Tbk (PT. BSD) is the property company of an independent city in which has approximately 5.950 hectares and located in the southwest Jakarta i.e. BSD City. BSD City is one of the first planned cities in Indonesia where a suitable place to live, work and play. PT. BSD is an independent city that is ideal for reducing the burden of Jakarta. In addition, PT. BSD generated satisfying financial performance. PT. BSD develop green building and areas as their value added to consumers and society.

Before analyzing the impact of Indonesia economic development which is external environment to PT. BSD business, we analyze the internal (strengths and weaknesses) factors.

1. Strengths:

• The competitiveness of the five pillars. BSD City is an independent city that is equipped with central offices, shopping malls, hospitals, universities, and others at one location. Pillar of strength PT. BSD is accessibility, facilities, infrastructure, environment, and size.
• The biggest land bank. Appendix 1 shows that PT. BSD is a property company that has the largest land bank among other property companies, which is about 4.000 hectars.
• Financial performance. Appendix 1 also displays that the average growth in sales from 2007 to 2013 amounted to 28,8%, net income amounted to 80%, and EPS amounted to 38,5%. Their performance is above industry average.
• PT. BSD implements Enterprise Resource Planning (ERP) to manage and integrate all the business functions within an organization, and Geographical Information System (GIS) to map and analyze the various objects and events that occur on location.

1. Weaknesses:

• Although the PT. BSD has the largest land bank, the price per meter of land being sold is quite expensive at Rp190.000 per meter2, and also the price of property is highly expensive.
• Although the accessibility to or from BSD City is relatively easy, but still quite far from the city center so that people with high mobility in Jakarta is rather difficult in deciding to have a place to stay in BSD.
• BSD City still has limitations to be developed to sustainable development because it has not met as the principles of engagement - with communities, governments, and NGOs - and the principle of equity – provides a home for the lower middle class.

1. Analysis

Economic conditions include the general economic climate and specific factors such as interest rates, exchange rates, the inflation rate, and the unemployment rate, the rate of economic growth, trade deficits or surpluses, savings rates, and per capita domestic product (Thompson et al., 2010).

Some people think that the economic development can be attained through the economic growth. However, the economic development and economic growth are not similar. Growth may be required but not sufficient for development. Nafziger (2006) asserts economic growth refers to increases in a country’s production (output) or income per capita, whilst economic development refers to economic growth accompanied by changes in output distribution and economic structure. It means that the economic development broader than economic growth.