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THE NATIONAL RENEWABLE ENERGY STRATEGIC PLANNING USINGBUFE METHOD

Bambang Sugiyono Agus Purwono(Doctorate Program in Management Science)

Ubud Salim(Faculty of Economics – University of Brawijaya – Indonesia)

Djumahir(Faculty of Economics – University of Brawijaya – Indonesia)

Solimun(Lecturer – State Polytechnics of Malang – Indonesia)

Abstract

Purpose – The purpose of this paper are to introduce and develop the BUFE methodsor eight steps for designing the Strategic PlanningDesign/methodology/approach – The two types of research variables are internaland external environments. Internal environments including strengths and weaknessesand external environments including opportunities and threats. The variables ofstrengths consist of inbound logistics, operations, outbound logistics, marketing andsales, service. The variables of weaknesses consist of firm infrastructure, humanresources management, technological development, and procurement. The externalenvironments consist of technology, demographic trends, economic trends, politicaland legal environment, and socio-cultural environment. Participants were regulators,providers or producers, researchers, and end users who concern with the renewableenergy. The method of analysis used qualitative approach. The qualitative approachwere interviewed twenty five participants. The interviews were recorded by audio-visual or handy-cam.Findings – The paper finds that, the qualitative approach arranged the eight steps fordesigning the Strategic Planning are Vision, Missions, Objectives, Strategies, Policy,Program, Budgets, and Procedures.Practical implications – The findings of the study are useful for lecturers,administrators, project managers, and practitioners easily.Limitations - The findings of the study did not discuss about business ethics, andvalues.Original/value – The paper was a part of a dissertation resulting the eight steps fordesigning the Strategic Planning.

Keywords Strategic Planning, Renewable Energy, Eight Steps.

1. IntroductionAn interesting phenomena in Indonesia (in some provinces) in the middle of

the year 2005 was the longest queuing at the Gas Station (SPBU/Stasiun PengisianBahan Bakar Umum). Some cars have waited for a half day, because there was notenough fuel at the Gas Station. If there is any gasoline or diesel oil in the SPBU, the

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fuel price increases very highly and the volume was very limited. The problemsolution is to substitute the fossil fuel or non- renewable energy (the gasoline anddiesel oil) with the non-fossil oil or bio-fuel or alternative energy or renewable energy(e.g. Straight Jatropha Curcas Oil/SJC Oil, Cassava, Algae, sugar cane, CoconutPalm/Cocos nucifera, African Oil Palm/Elaeis guineensis, cassava/manihot esculenta,Zea mays L., Arenga pinnata, etc).

The Economic PotentialThe average diesel oil consumption level in Indonesia is up to 14 million

kiloliter or 88,000 barrel (1 barrel = 159,25 liter) every year. For making asubstitution of 5% only, it needs about 700 thousand kiloliter (4.400.000 barrel) ofbio-diesel every year. That bio-diesel demand actually can be obtained easily inIndonesia, because Indonesia is rich enough with a lot of plants that can produce bio-diesel mixture. The main source of bio-diesel is the cheap CPO (Crude Palm Oil) andSJC oil.

The bio-fuel specialist from ITB, Manurung, R, stated that 1 Ha of SJC plantcan produce about 4.3 tons of oil per year or can produced about 4.7 kiloliter of bio-fuel per year. Remembering that the SJC plant can grow in non-productive/dry/criticsareas and Indonesia has extensive dry areas, castor planting is expected to give anexcess for society.

Besides, the planting SJC plants for bio-diesel supply is also good forincreasing the productivity of the dry areas and later can increase the land owner’sincome. This dry area exploitation also will not affect the food supply. According tothe data from Centre Beaurau of Statistics (BPS/Badan Pusat Statistik), in 2003 thecritical area in Indonesia is up to 22 million Ha. Based on the estimation ofManurung, R, above, the planting of SJC plant in the critic area is only 10% canobtain 10.3 million kiloliter of bio fuel every year.

After the realization and distribution of the bio-fuel or bio-energy, thegovernment and the people will receive:

1. The reduction of the operating cost in industries, because the price of the bio-fuel is lower compared to gasoline and diesel oil.

2. Fishermen will be able to fish and sail their boats (fueling the bio-diesel oil)which will allow them to produce for the domestic and export commodities.

3. The involvement of the people who live around the bio-fuel factories asworkers (a creating new jobs).

4. The reducing of the operating cost of the factories because the bio-fuel price islower than the gasoline and diesel oil.

5. The increasing knowledge and skill of the people who live around the bio-fuel oil factories.

6. The increasing revenues or tax for the regional government.

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Government Commitment

There are many of the Government commitments such as the PresidentialRegulation No. 5 (2006), about National Energy Policy, the Presidential DirectiveNo. 1 (2006), about supplying and exploiting of bio-fuel as an alternative energy, theGovernment will plan to mix diesel oil with bio-diesel up to 10% in 2010, PTPertamina’s target to change 400,000 kiloliter of diesel oil with bio-fuel from SJC oilin three years and later will be marketed through more than 200 gas Station inJakarta, Surabaya and Denpasar (Hanung Budya, Vice Director of Commercial of PTPertamina, Ltd), LoC (Letter of Commitment) between Eco-Securities with 11Indonesian companies to guarantee bio-diesel market (November 22, 2005), theforming of the National Team to Bio-fuel Program, which is recognized by Al-HilalHamdi, Director General of Oil and nature Gas (Tubagus Haryono) decree no.3674K/24/DJM/2006 dated on March 17, 2006 about allowing the mixing gasolinewith 10% ethanol/alcohol, and the Government has determined SNI 04-7182-2006,that is standard for substitution of fuel of diesel motor (B10). With these Letters, itmeans the using of B10 and E10 can be used legally by the society.

2. Literature Review

Strategic Management ProcessStephens P Robbins (Robbins, 2009: 276) stated that Strategic Management

Process defined as a six-step process that encompasses strategic planning,implementation, and evaluation (Figue 1). The six-step are:

1. Indentifying the organisation’s current mission, goals and strategies,2. External analysis,3. Analysing the organisation’s resources and capabilities (internal analysis),4. Formulating strategies (SWOT analysis),5. Implementing strategies, and6. Evaluating results.

In other words, the strategic management process is gathering the quantitativedata and qualitative data for designing the matrix SWOT and SWOT analysis anddesigning the strategic planning for formulation strategy, and the next step areimplementation strategy and evaluation and measure (Figure 2).

Strategic PlanningThe function of management consist of planning, organizing, actuating, and

controlling (POAC). Strategic planning is a part of the planning function.

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Figure 1 Strategic Management Process

Figure 2 Strategic management process for formulation strategy

Harold Koontz and Heinz Weihrich (Koontz, 1988: 62, 82) stated that thestrategic planning steps are Purposes or missions, Objectives, Strategies, Policies,Procedures, Rules, Programs, and Budgets (Figure 3).

Bititci’s observation (Lee, 1998: 527, 531) stated that hoshin kanri (policydeployment) is not a solution to all planning problems but a process which enablesmanagers to plan effectively and translate those plans into actions. And the steps fordesigning strategic planning are vision, Business Objectives, Strategic goals, Criticalsuccess factors, Critical task action plan, and Performance measure (Figure 4).In other words, the writer defined the strategic planning steps as Vision, Missions,Objectives, Strategies, Policy, Program, Budgets, and Procedures (Figure 6).

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Figure 3 Hierarchy of plans

Figure 4 Steps in Strategic Planning

Internal and External EnvironmentKulwant Singh (Singh, 2004: A9) stated that strategy intent and strategic

mission influenced by external environment consist of opportunities (possibilities)and threats (constraints) and internal environment consist of strengths andweaknesses. The variables of strengths consist of inbound logistics, operations,outbound logistics, marketing and sales, service. The variables of weaknesses consist

of firm infrastructure, human resources management, technological development,and procurement.

The other approach for determine the external environment/variables usingMichael E Porter’s Value Chain Analysis (Hitt, 2005: 89) and the externalenvironments consist of technology, demographic trends, economic trends, politicaland legal environment, and

Figure 5 Michael E Porter’s Value Chain Analysis

Fries (2006: 6) stated that the relationship betweenenvironment factors impact to

of firm infrastructure, human resources management, technological development,

other approach for determine the external environment/variables usingMichael E Porter’s Value Chain Analysis (Hitt, 2005: 89) and the externalenvironments consist of technology, demographic trends, economic trends, politicaland legal environment, and socio-cultural environment (Figure 5).

igure 5 Michael E Porter’s Value Chain Analysis

Fries (2006: 6) stated that the relationship betweenenvironment factors impact to the factors of strategy (Figure 6).

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of firm infrastructure, human resources management, technological development,

other approach for determine the external environment/variables usingMichael E Porter’s Value Chain Analysis (Hitt, 2005: 89) and the externalenvironments consist of technology, demographic trends, economic trends, political

cultural environment (Figure 5).

igure 5 Michael E Porter’s Value Chain Analysis

Fries (2006: 6) stated that the relationship between organisation and

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Figure 6. Factors that influenced the Strategy

3. Analysis And Interpretation

Qualitative Methods of Analysis

The BUFE methods for designing the Strategic PlanningHitt (2005: 7) stated that the strategy is an integrated and coordinated set of

commitments and actions designed to exploit core competencies and gain acompetitive advantage. Koontz and Weihrich (Koontz, 1988: 58) stated that StrategicPlanning can be used as a set of concepts or statements that integrates theorganizations’ goals, policies, and action in order to fulfill the organizations’ futuremission. Strategic planning can help the organizations to achieve their long-termobjectives. Strategic planning is the systematic identification of opportunities andthreats that lie in the future. Strategic planning can build expected future trends, data,and assumptions. Strategic planning is much more action oriented than long rangeplanning. And the Strategic planning will improve the company performance.

In this paper the writer will discuss the BUFE methods or eight steps thatanyone can design their own strategic planning using these eight steps. The steps are:Vision, Missions, Objectives, Strategies, Policy, Program, Budgets, and Procedures.

Figure 6 presents the BUFE (Brawijaya University – Faculty of Economics) methodsor eight steps designing the strategic planning.

Figure 7 presents the definition of every step in the eight steps designing the strategicplanning.

For the purpose of this discussion some of the steps will be taken separately.

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Figure 6 The eight steps designing the strategic planning

The eight (8) Step discussion

Step 1 - Vision

Determining the strategic direction of a firm involves developing a long-term visionof the firm’s strategic intent. A long-term vision seems typically at least five to tenyears into the future. A philosophy with goals consist of the image and character ofthe firm. The ideal long-term vision has two parts: a core ideology and an envisionedfuture. While the core ideology motivates employees through the company heritage,the envisioned future encourages employees to stretch beyond their expectations ofaccomplishment and requires significant change and progress in order to be realized.The envisioned future serves as a guide to many aspects of a firm’s strategyimplementation process, including motivation, leadership, employee empowerment,and organizational design (Hitt, 2005: 385).

Figure 7 The definition of each steps in the strategic planning

A vision describes what the organization would like to become (Wheelen,2004: 11). A vision involves looking to the future, attempting to assess what isneeded and the best ways to supply those needs (Murphy, 2004: 87, 98). A visiondefined as an almost “impossible dream” that provides a direction for the companyfor the next 10 to 20 years (Kotler, 2009: 82). All members of the organization shouldbe able to identify themselves with it and it should help them to feel proud, excited,and be part of something that is much bigger than themselves. A vision should stretchthe organization’s capabilities and image of itself. It gives shape and direction to theorganization’s future.

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Vision ranges in length from a couple of words to several pages, the shortestis, the easiest to remember. Effective vision statements are clear, concise, catchy, andmemorable.

In another word, a vision is defined by realizing the impossible dreams in the future.

The ministry of energy and mineral resources (2007) stated that

The Indonesian government set up the Autonomous Village Energy(Desa Mandiri Energi/DME) program, the aim of which is to provide2000 poor, remote villages with modern energy systems based onrenewable that can be sustainably operated by the local community. ByJanuary 2009, however, only 430 villages had been electrified.

The purpose of the project is to improve the rate of implementation ofthe DME program and thus to contribute to the dissemination ofrenewable energy sources in rural regions of Indonesia. The quality ofthe implementation process is to be improved through a structureddialogue between all the involved parties including self-evaluations andindependent evaluations. As a support, several studies will be preparedin order both to identify examples of good practice and also to develop auniform implementation structure as well as proposals for suitabletechnologies. The dialogue will be accompanied by a training programdesigned to boost the technological capacities of the implementationstructures.

Implementation of the measures will speed up the realization of theDME program and thus the dissemination of renewable energies.Electrification of the villages will contribute to the economicdevelopment of the affected regions and will also create jobs.

Another participants – SUT - expressed:

You (the people in the villages) will learn and operate the sophisticatedtechnology if you have the mindset “doing the things right” and able tocarry out the appropriate training program, so in the future you canoperate the (high tech) processors efficiently.

The vision of National Renewable Energy Strategy (Figure 8) is empowering thecommunities (the people in the villages) to sustain and to produce the bio-fuelsefficiently also to maintain the environment.

Step 2 - Mission

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When properly constructed, a mission statement should provide a clear, concisedescription of an organization’s overall purpose. A mission statement should answerthree questions (Thompson, 2003: 32):

1. Who we are?2. What do we do?3. Where we are now?

The mission can enable large groups of individuals to work in a unified directiontoward a common cause. A good mission statement is compelling, passionate, andenergizing. It should be risky and challenging, but also achievable.

The definition of the mission statements broadly describe an organization’s presentcapabilities, customer focus, activities, and business make-up (Thompson, 2003: 7).Hitt (2005: 22) stated that strategic mission is a statement of a firm’s unique purposeand the scope of its operations in product and market terms. Wheelen (2004: 10)stated that an organization’s mission is the purpose or reason for the organization’sexistence. Fred R David (David, 2003: 10) stated that misson statements are enduringstatements of purpose that distinguish one business from other similar firms.

Figure 8 The Vision statement

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Figure 9 The Mission statements

The prerequisite of the mission (Armstrong, 2007: 38-39) are Marketoriented, Realistic, Specific, Market environment, Distinctive competencies, andMotivating.

Another participants - AB - expressed:

The regional government have to support for producing the bio-fuels oralternative energy related to the budgets, human resources trainingprogram (the people in the vilagges) and commercialize the products.Regional government design a small group activities (SGA) in thevillages and arrange the cooperation between regional government,people in the villages and universities. The SGA will produce the bio-fuels, distribute to the people in local villages and the rest should becommercialize, and the Pertamina company should be purchased theproducts as a national stock.

Figure 9 presents the mission statements of National Renewable Energy Strategy.

Step 3 - Goals/Objectives

Mission and vision, although frequently short statements, are broad,encompassing and far-reaching. They can often seem overwhelming and perhapseven impossible to achieve. Goals and objectives create the bite size pieces, the roadmap and manageable stepping stones to achieve the mission, make the vision areality, and navigate the course we have set for our business, or for ourselves.

Goals are the bigger fuzzy things and objectives are the SMART (Amstrong, 2007:38-39): Specific, Measurable, Attainable (accountable), Rewarding (realistic), andTimed (timeliness).

To be effective goals and objectives they must be written. If they aren’t writtenthey’re merely ideas with no real power or conviction behind them. Written goals andobjectives provide motivation to achieve them and can then be used as reminder toyou and others. Clearly and specifically written, they also eliminate confusion andmisunderstanding.

The definition of the objectives are:

1. The desired results (Murphy, 2004: 87).

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2. A desirable direction in which we want to move (Dervitsiotis, 1981: 9).

3. The ends toward which activity is aimed (Koontz 1988: 62).

4. The end results of planned activity (Wheelen, 2004: 12).

The prerequisite of the objectives should be as specific as possible.

Figure 10 presents the objectives statement of National Renewable Energy Strategy.

Step 4 - Strategy

For years the military used the word “strategies” to mean grand plans made in thelight of what is believed and adversary might or might not do. While the term“strategies” still usually has a competitive implication, managers increasingly use itto reflect broad areas of an enterprise operation.

Figure 10 The Objectives statements

The definitions of the strategy are:

1. As plan, play, pattern, position, and perspective (5 P’s Mintzberg) (Hubbard,2004: 11).

2. The broad program for defining and achieving an organization’s objectives;the organization’s response to its environment over time (Stoner, 1995: 266).

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3. The decisions and actions that determine the long-run performance of anorganization (Robbins, 2009: 273).

4. The act of the general or plan the destruction of one’s enemies througheffective use resources (Calingo, 1997: 5).

5. The act of the general or a general leading an army (Calingo, 1997: 5).6. Both proactive/planned (intended and deliberate) and reactive (adaptive)

(Thompson, 2001: 12).7. Strategy is the skill in managing or planning (Feurer, 1995:11).

H Igor Ansoff (Kotler, 2009: 85) stated that the prerequisite of the strategy areMarket penetration, Product development, Market development, and Productdiversification.

Another participants - YO - expressed:

Nusa Tenggara Timur is one of the potential region to produce analternative energy using raw materials such as the sorghum, andBorassus flabellifer or palmyra (lontar or siwalan). There are many non-productive field. The regional government look like expressed notseriously – sometimes is very boombastics but the other side nothing todo, so the people in the villages always ask – how will the alternativeenergy continue? The regional govenment concern about the alternativeenergy but did not focus, always talk about the equipments ortechnology selection. The contraint is water supply. The regionalgovenment is not talk only – using political will –say nothing – have todo the reality.

Figure 11 presents the strategy statement of National Renewable Energy Strategy.

Figure 11 The strategy statements

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5 - PolicyPolicies also are plans in that they are general statements or understandings whichguide or channel thinking in decision making.

The definitions of the policy are:

1. A standing plan that establishes general guidelines for decision making.(Stoner, 1995: 296). And a standing plan is an established set of decisionsused by managers to deal with recurring or organizational activities; majortype are policies, procedures, and rules.

2. Plans in that they are general statements or understanding which guide orchannel thinking in decision making (Koontz, 1988: 64).

3. A broad guideline for decision making that links formulation of strategy withits implementation (Wheelen, 2004: 14).

Another participants - AB - expressed:

The lecturers in universities should provide their working time toobserve this product till 15%.

Another participants - RSj - expressed:

This alternative energy will create a new jobs. The government shouldarrange the condusive rules, or give the tax holiday for the investors.

Figure 12 presents the policy statements of National Renewable Energy Strategy.

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Figure 12 The policy statements

Step 6 - Program

Program are a complex of goals, policies, procedures, task assignments, stepsto be taken, resources to be employed, and other elements necessary to carry out agiven course of action; they are ordinarily supported by budgets.

The definition of the program is activities needed to accomplish the plan.

Figure 13 presents the program statements of National Renewable Energy Strategy.

Step 7 - Budgets

A budget is a statement of expected results expressed in numerical terms. Itmay be referred to as a “numberized” program. In fact, the financial operating budgetis often called a “profit plan.” It may be expressed either in financial terms or in termsof labor-hours, unit of product, machine-hours, or any other numerically measurableterm. It may deal with operations, as the expense budget does; it may reflect capitaloutlays, as the capital expenditures budget does; or it may show cash flow, as thecash budget does.

Another participants – Har - expressed:

We can invite the foreign investors, but if we can use the local investorsis better than the first.

The definition of the budgets is the cost of programs or some budgets are also controldevices.

Figure 14 presents the budgets statement of National Renewable Energy Strategy.

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Figure 13 The program statements

Step 8 - Procedures

Procedures are plans that establish a required method of handling future activities.They are guides to action, rather than to thinking, and they detail the exact manner inwhich certain activities must be accomplished. They are chronological sequences ofrequired actions.

Another participants – CY - expressed:

Be carefull, use the equipment in good procedures, the highestefficiency, prepare the every raw materials and equipment wiil be used,sequence the processes. And concerning the environment or ecology.

The definition of the procedures is sequence of steps needed to do the job.

Figure 15 presents the procedures statement of National Renewable Energy Strategy.

Figure 14 The budgets statements

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Figure 15 The Procedures statements

4. Conclusions

The eight steps designing the strategic planning are Vision, Missions, Objectives,Strategies, Policy, Program, Budgets, and Procedures.

Implications

There are two implications of the research are theoretical implications andpractical implications.

Theoretical implications

The research findings is the steps for designing the strategic planning areVision, Purposes or missions, Objectives, Strategies, Policies, Programs, Budgets,and Procedures. This finding will improve the statements of the past researchers -Harold Koontz and Heinz Weihrich (Koontz, 1988: 62, 82) stated that the hierarchyof the plans are Purposes or missions, Objectives, Strategies, Policies, Procedures,Rules, Programs, and Budgets. This finding is supported by the Bititci’s observation(Lee, 1998: 527, 531) stated that hoshin kanri (policy deployment) is not a solutionto all planning problems but a process which enables managers to plan effectively andtranslate those plans into actions. And the steps for designing strategic planning arevision, Business Objectives, Strategic goals, Critical success factors, Critical taskaction plan, and Performance measure. The findings provided the statements ofThomas L Wheelen and J David Hunger (Wheelen, 2004: 9-10) stated that StrategicManagement Process consist of four basic elements: Environmental scanning,strategy formulation (missions, Objectives, Strategies, Policies), Strategyimplementation (Programs, Budgets, and Procedures), and Evaluation and Control(Performance). Environmental scanning is the monitoring, evaluating, anddisseminating fo information from the external and internal environments to the keypeople within the corporation.

Practical Implications

The findings of the study are useful for lecturers, administrators, projectmanagers, and practitioners easily.

Limitations

The findings of the study did not discuss about business ethics, and values.

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