IN3N – ORGANIZATION DEVELOPMENT AND

CHANGE MANAGEMENT

SAMPOERNA
CHANGE THROUGH ACQUISITION

KOKOH RONALD (2009 02 3000)

WIJAWIYATA MANAJEMEN BATCH LXI

PPM SCHOOL OF MANAGEMENT
JALAN MENTENG RAYA NO. 9
JAKARTA
2009
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SAMPOERNA: CHANGES THROUGH ACQUISITION

Dated May 18, 2005 is a new era in the long and successful history
of PT. Hanjaya Mandala Sampoerna (Sampoerna). Philip Morris
International (PMI) acquired one of the largest cigarette producers
in Indonesia by buying 98% stake in the company at a price of
Rp.10.600 per share or in total value of 18.58 trillion rupiah1. This is not only
surprising for the company's internal community but throughout Indonesia.
Products such as A Mild, Dji Sam Soe, and various kinds of cigarettes that already
had a very strong brand position in Indonesian customer, that is also identical to
the Sampoerna family business which was commanded by Putera Sampoerna.
Beside, acquisition was done when company’s financial performance continued to
rise [Exhibit 1].

Sampoerna, one of the icons in the national tobacco industry, has now been
acquired by a company which is also the global tobacco industry icon. This is quite
a rare event in the Indonesian industry. Therefore, this paper will examine the
acquisition of Sampoerna by PMI from the view of strategic change management.
The discussion will begin with the identification of the pressures that became the
ground of the decision. Furthermore, will be briefly discussed what kind of change
is happening and what actions are performed by the company. The writer will also
try to assess the effectiveness of such actions and provide recommendations
based on the theory in change management.

The Story of Change Begins

Sampoerna traces its origin to Liem Seeng Tee, a Chinese immigrant who founded
the Company in 1913. At his home in Surabaya, Indonesia, he began producing
and selling hand-rolled kretek cigarettes, named after the crackling sound they
make as they burn. His small company was among the first to manufacture and
market kretek as well as non-clove cigarettes on a commercial basis. Kretek
cigarettes quickly grew in popularity. By the early 1930’s, Liem Seeng Tee had
changed his family name and the name of his company to Sampoerna (Indonesian
for ‘perfect’).

However, by 1959, three years after the passing of Seeng Tee, and in the
aftermath of Indonesia’s struggle for independence, Sampoerna was once more on
the verge of closure. In that year, Aga Sampoerna (Seeng Tee’s second son) was
14

appointed to lead the company, and succeeded in reestablishing and rebuilding

the company. Aga’s second son, Putera took over the helm of PT. HM Sampoerna
in 1978. During Putera Sampoerna’s tenure, the company established itself as a
public company with a modern corporate structure, and embarked on a period of
investment and expansion. In the process, Sampoerna consolidated its position as
one of Indonesia’s top-tier companies2.

1
Cited from http://berita.liputan6.com/ekbis/200503/97974/class='vidico'; accessed at October 27,
2009; 15:30 PM
2
Cited from company’s website; http://www.sampoerna.com; accessed at October 27, 2009; 16.40
PM

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Sampoerna’s cigarette is a very popular product in Indonesia and has become the
identity of one of the richest families in Indonesia. No one ever predicts that this
company will be put up for sale by the family. Putera Sampoerna took this bold
decision because he considered the tobacco industry will not stay profitable in the
future. According to Adrian Rusmana, BNI Securities’ Head of Research, in the last
three years, the revenue growth of tobacco companies in Jakarta Stock Exchange
(JSE) is under the level of 10% (Kurniawan, 2009). The industry is
PRESSURES also experiencing great pressure as the increasing public
For Sampoerna, awareness of the dangers of cigarettes and regulations about it,
uniqueness of family – such as laws that regulate tobacco control, legislation Prov. DKI
owned business,
pressures is felt by the
No 2 / 2005 on the control of air, even the UN Conventions - 2
owner directly, creating Framework Convention on Tobacco Control / FCTC. (Tempo, June
decision to change 22, 2009). When referring to the theory, the Pressure is
without any specific
reasons. But we can categorized as a geopolitical pressure (Palmer et al, 2009: 55).
conclude that geopolitical
pressure and combination The high competition market is also convinced Sampoerna to let
with opportunities in
go off the businesses. Although famous for being innovative, the
company highest bid,
made acquisition is the company is not able to pursue the domination of Gudang Garam
best solution based on its in the industry of clove cigarettes. They have to settle for second
owner (internal pressure
in the market share rankings of national tobacco industry
[Exhibit 3] with only 19.91% compared with Gudang Garam
30.25% (GAPPRI in Agnes, 2009). Putera’s decision to sell the company also
strengthened by the opportunity in high sale price - selling at the right moment
(ibid, 2009). Interestingly, these companies are family-owned so that the pressure
is felt by the owner directly. Even until today, the company's internal do not know
accurately the in-depth reason why Putera Sampoerna sold this company. Refer to
Palmer, so we can called that in this case, most of pressure come from vision of its
owner which is directly influenced by environmental pressure.

In the company's official statement, this acquisition provides an opportunity for

companies to take advantage of PMI's knowledge and experience from various
countries over decades. In addition, the acquisition also brings resources, as well
as new methods and procedures in the company's management (HM Sampoerna's
Annual Report, 2005). For PMI, their acquisition could increase
market power, avoiding the cost of new product development, AVOIDING
increase the speed of penetrating the market, and avoid the barriers RESISTANCE

to entry (Agnes, 2009). Just promising the

employee there will be
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no radical change;
When Two Cultures Collide provide with job
The acquisition decision brings fears to Sampoerna’s employee. For
most employees, the figure of Putera Sampoerna is not only perceived as a
corporate leader, but also as a parent that is worthy enough to be considered as
role. The acquisition feared would damage the harmonious atmosphere that had
been created. Most of Sampoerna’s management was concerned in the decreasing
of employee’s motivation. The reason is one thing that will come to people's
minds when multinationals acquire local firms is efficiency. They were worried that
there will be a reduction of employees (Yos Adiguna in SWA, 2007). Manual
(production by hand) can produce 350 cigarettes / hour, while the machine is able

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to produce 8000 cigarettes / min. Thus, one machine is approximately equal to

1,500 people. Another concern is the existence of culture shock in a company that
can lead to resistance.

Putera Sampoerna aware of this latent danger if the unrest is allowed. Putera
Sampoerna summoned all the leaders and gathered them in one big room to
announce the acquisition decision. The Uniqueness of this meeting is not to build a
sense of urgency. When referring to the Kotter’s change management model
(1996: 21), Sampoerna directly build coalitions to notify changes. All the people
obey the Sampoerna family and no one questioned the reasons behind the
decision. Putera directly coordinate all these leaders, calling them as ‘change
agents’ to transmit the spirit as change agents to all Sampoerna’s internal parties,
and ordered them to spread the information to the lowest level within the
organization (SWA, 2007).

When the information has spread, there was resistance from some parties,
although a small number, including several directors. Some of them even chose to
resign. Most workers accept the decision because management
promised no changes in operations; all will still be working as
CULTURE
usual. The resistance does not occur because of all the elements TREATMENT
felt the certainty of their fate. Kotter (2009: 163) stated that
Change in culture
resistance can occur because of fears of status uncertainty. come last. Easiest
Besides, the lack of resistance is also due to the factors of good thing to do, when
acquisition, is begin
communication. with selecting
company with
Leadership was then moved to PMI, Martin Kings pointed as strong good culture
president. He is entrusted as a leader in the change in Sampoerna.
At the top management, some of PMI's name is now in control, mixed with local
former potential executive [Exhibit 5]. Once elected in the Extraordinary General
Meeting of Shareholders, Martin Kings and Angky Camaro immediately conduct a
town-hall meeting attended by the entire management and staff. On that occasion
Martin announced that there would be no changes, ranging from corporate law,
business planning, and certainly no layoffs.

Martin realized that the culture is one of the critical factors in the acquisition of
the company. This will hamper the achievement of goals if the accumulation of it
not at the right proportion. Therefore, he will not intervene in the existing culture
and prefers to focus on the company's strategic plan forward. Sampoerna’s
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cultural remains will be preserved as such because prior to the acquisition, Martin
considered that the culture in Sampoerna is already very good and strong – a local
company with international workings (ibid, 2007) [Exhibit 6]. This is also the
reason why he only brought 14 of his staff and entrust some of the top
management to the the previous leaders of Sampoerna.

Interestingly, Javanese culture will be maintained by PMI. One is in terms of

product launch time, raising the selling price, and a meeting with the Javanese
calendar system. Other culture, such as it’s a tradition that Sampoerna always
budget cost for the “pawang hujan” at the launch of its products. PMI which is a
foreign company, although did not understand, still follows these tradition. This

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made the PMI headquarters confused when auditing the financial statements
because of the 'unique' cost. Martin, as PMI representative in Indonesia must
explain that this is common in Indonesia.

PMI‘s culture was also signed to strengthen the existing Sampoerna culture. The
style of American in being outspoken at giving opinion is very different to Javanese
culture that tends do the contradictory. The use of English is increasingly common
not only in top management but also in the middle management; both oral and
written. In lingual matters, Martin did not have problem because he can speak
Indonesian and Sampoerna himself always recommend English to be used by
every employee (Hidayat, 2007). Culture acculturation can be seen in Exhibit 4.

Referring to Lewin’s theory of cultural formation (Kurt Lewin in Schein, 2004: 319-
329), there are four phases required in the merger of cultures, especially in the
merger or acquisition, the exploration phase, unfreezing, merge, and stabilization.
The first phase, exploration, should already be identified where the cultural
similarities and differences between the parties, and goodwill to achieve the best
should remain preserved. The second phase is to dilute the old culture to the
parties in the merger. The third phase is merging cultures, or the forming of
cultural synergy, usually by defining a new culture, through education or training,
coaching, mentoring, and so on. The fourth phase or stabilization is realized by
various artifacts such as logos, colors, physical appearances of the building, and
so forth, as well as organization’s system such as regulation, the definition of a
new culture, reward & punishment, and furthermore, the stabilization is continue
done by gathering activities, and so on.

The first and second phase faced wisely by PMI so Sampoerna is now in the third
stage, and was relatively easy to be done, because the critical point is in the
second phase. PMI as the new owners did not implement their culture to be
dominant. Similarly Sampoerna with the Javanese culture, that has a desire to
become more globally.

Another Strategic Action: Eight Step Process – Kotter Model

Returning to Kotter’s perspective, next thing to do is for Martin to create the vision
of Sampoerna in the future. He demanded Sampoerna to improve acceleration,
starting from the quantity and quality of products, as well as human resources,
considering the very dynamic business changes. This is a key strategy of the
future development of Sampoerna. Continuous improvement being implemented
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by the Sampoerna with employee development systems, management and control

report, reward & punishment, as well as information technology systems / IT (PT.
HM Sampoerna Annual Report, 2005).

In addition, PMI is also restructuring the Sampoerna’s business portfolio. Currently,

there are approximately 31 companies subordinate under the HMS. According to
the Surabaya Stock Exchange data, 18 still associated with the core business
(Agnes, 2009). The rest is a company engaged in various sectors, ranging from
trade services, information technology, investments, property, processed food and
beverage, printing, to transportation. These companies are threatened to be
removed from Sampoerna’s portfolio. It may occurs, the plan to release of

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Sampoerna's child companies is caused by its lowly performance, or because the

PMI wants to return to its core business [Exhibit 7].

In the early days of the acquisition, Martin insisted the spirit of change in
Sampoerna and convinced all to pursue the same vision [Exhibit 8]. Vision and
mission are translated into the main target. One of the targets that best describes
the spirit of change in Sampoerna is to become a market leader in the national
tobacco industry in the next five years. After building a vision and make
measurable targets, then for all elements to work harder than before (ibid, 2007).

Short-term win was obtained rapidly; within 1.5 years achieved number one in the
national tobacco industry with 28.3% market share in the year 2007. In the same
year on November 2007, The Indonesian credit rating agency PT. Pefindo
upgraded the Company's credit ratings from id AA+ to id AAA with a stable
outlook. This is the first time the Company achieve an id AAA rating. Revenue also
showed a growing trend, accompanied by increased EPS and net income of the
company (PT. HM Sampoerna Annual Report, 2007) [Exhibit 2]. The acquisition
also speed the company's business acceleration. In 2008, Sampoerna add more
than 8 Cigarette Production Partners, 15.000 new employees, build a new factory
in Jakarta, then “pelintingan” through partners increased by 8.000 (PT. HM
Sampoerna Annual Report, 2008). From those facts we know that the
management did the right so that achieving success. Their action seems to be
effective based on result they achieved. Refer to Kotter, their approach really
considered this model [Exhibit 9].

What Next? Writer’s Recommendation for Sampoerna in Future

Overall action designed and implemented to manage changes in
Sampoerna are congruent with all elements in Kotter’s model. So,
when all possible steps have been taken, what else needs to be EFFECTIVITY
considered by Sampoerna in paving the way for better future? The acquisition
Here is a list of suggestions that really are worth a try: achieve it success.
Considering Kotter
• Sustainable Development of Company Culture; Model, the
One of the key success factors in the acquisition of Sampoerna management
followed that
was: culture change came last, not first. According to Kotter pattern and not
(1996:155), the organizational culture tends to be extremely only doing the right
things but also
difficult to change, because it has underlying assumptions which
consist of values, beliefs and goals that have been long held in
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the organization. Underlying assumptions that drive “how things are done
around here” at every level of the organization can’t be change suddenly. So, it
is reasonable that at the beginning of acquisition, the organizational culture is
ensured to stay the same. It is best to choose a more subtle acculturation. PMI
as the new owner of Sampoerna needs to ascertain the sustainable
development of company culture really happens. Of course, it also requires
good communication and a lot of dialog among groups of people in the
organization. Finally, PMI is able to show that its new approaches work and that
it’s worthwhile to change.
• Maintaining and Improving Leadership Role in Company

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Sampoerna has a very strong corporate culture. Its employees have ‘a can-do’
and ‘make things happen’ attitude, which treasured so much by PMI. Those
attitudes were cultivated by the role of firm leader, Putra Sampoerna. When
Putra Sampoerna is no longer the leader, the new figure who replaces him has
to be able to maintain the existence of those culture and attitudes. New leaders
should be compatible with the existing culture and keep improving good
leadership and management to take the company to the next level. This
responsibility lies in management’s hand at every level in the company.
• Expanding Company Globally
For Sampoerna, there are still significant goals to be achieved in the coming
years. Sampoerna must not be complacent about its success. The philosophy
Anggardha Paramita, which means ‘toward perfection’, underlies every action
taken by the company. National market, indeed, has been properly managed,
so that the company can move forward to expand into multinational companies.
PMI as the new owner has to make a way for Sampoerna to enter the highly
competitive international environment and market the kretek cigarette into one
of the world's cigarettes icon. Continuing to set the bar high is the best
motivation for employees to move toward perfection.

Lesson Learned
When acquisition happens, chaos ensues. There might be much stress, confusion,
uncertainty, and even culture shock in the company. PMI Indonesia cleverly paid
attention to prevent those negative impacts by choosing Sampoerna, a well run
company with very strong corporate culture. PMI decisively ensure the
Sampoerna’s employee that their culture and shared values, as product of many
years of experience, will not be changed. Frequent communication before and
after acquisition with the already existing employees about the change, the new
vision, mission, and also the strategic decision, seem to play important role. This
carried the acquisition success. Moreover, figure as parent, which was presented
by Putra Sampoerna, considered by Martin Kings and PMI, as determining factor to
cultivate strong corporate culture. From this case study of change management,
we learn that with the right strategy, PMI has found the way to cope with the
potential negative impact of an acquisition. Not only that, PMI is also able to
maintain Sampoerna’s position as industry leader by continuing to focus on
building the existing brands through ongoing quality improvements, developing
and expanding to the international market.
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Bibliography

Books
Kotter, J.P. 1996. Leading Change. Boston: Harvard Business School Press
Palmer, Ian., Richard Dunford, and Gib Akin. 2009. Managing Organizational
Change. New York: McGraw-Hill
Schein, Edgar R. 2004. Organizational Culture and Leadership. USA: John Wiley &
Sons.

Newspaper and Magazine

SWA Magazine. HM Sampoerna: Padukan Budaya Lokal dan Multinasional. Kamis,
01 Februari 2007.
____________. Ketika Timur dan Barat Menyatu. Rabu, 06 Februari 2008.
Tempo Magazine. Indonesia Pasar yang Menggiurkan Bagi Industri Rokok Asing.
Senin, 22 Juni 2009.

Electronic Reference
Sampoerna’s website. http://www.sampoerna.com. Accessed at October 27, 2009.
16.40 PM
http://berita.liputan6.com/ekbis/200503/97974/class='vidico'. Accessed at October
27, 2009. 15:30 PM
Kurniawan, Agnes. 2009. Why Putera sold his Sampoerna. Accessed at October 27,
2009. 15:30 PM.
______________. 2009. Analisis Industri Rokok Nasional 2007-2008. Accessed at
October 27, 2009. 16:38 PM.
______________. 2009. Kenapa Philip Meminang Sampoerna dengan Mas Kawin
Sedemikian Besar. Accessed at October 27, 2009. 16:30 PM.
______________. 2009. Perubahan Sampoerna di Tangan Philip Morris. Accessed at
October 27, 2009. 16:22 PM.

Institution
PT. HM Sampoerna Tbk. Annual Report 2005. Jakarta. 2006.
___________________. Annual Report 2007. Jakarta. 2008.
___________________. Annual Report 2008. Jakarta. 2009.
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Exhibit 1
PT. HANJAYA MANDALA SAMPOERNA TBK FINANCIAL HIGHLIGHT
BEFORE ACQUISITION
(in billion rupiah)

YEARS ENDED 31 DECEMBER 2004 2003 2002 2001

KEY BALANCE SHEET FIGURES
Current Assets 8,835 6,956 6,984 6,762
Property, Plant and Equipment 2,176 1,982 1,745 1,943
Investments 179 154 101 22
Land For Development 352 333 175 113
Other Assets 157 180 505 295
Total Assets 11,699 10,198 9,817 9,471
Current Liabilities 3,872 174 2,084 2,673
Non-Current Liabilities 2,651 4,014 2,338 2,407
Total Liabilities 6,523 4,198 4,422 5,080
Minority Interests 317 232 134 229
Stakeholders’ Equity 4,859 5,768 5,201 4,162
OPERATING PERFORMANCE – Consolidated
Net Sales 17,647 14,675 15,129 14,067
Gross Profit 5,807 4,522 4,587 4,073
Net Operating Income 3,183 2,393 2,727 2,653
Profit Before Income Tax 3,059 2,199 2,567 2,218
Net Income 1,992 1,407 1,671 955
Basic Earnings per Share (in full Rupiah) 454 321 374 208
LIQUIDITY RATIOS
Current Ratio 2.28 4.07 3,29 2,53
Debt to Equity Ratio 0.71 0.40 0,43 0,78
Total Liabilities to Total Assets Ratio 0.56 0.41 0.45 0,54
OPERATING RATIOS
Gross Profit to Sales 32.9% 30.8% 30,3% 29,0%
Gross Profit to Sales (Domestic Cigs.) 33.5% 31.3% 32,5% 34,1%
Net Operating Income to Sales 18.0% 16.3% 18,0% 18,9%
Net Operating Income to Sales 20.7% 19.7% 22,5% 25,5%
(Domestic Cigs.)
Net Income to Sales 11.3% 9.6% 11,0% 6,8%
Net Income to Sales (Domestic Cigs.) 13.2% 10.8% 13,2% 8,9%
Return On Assets 18.2% 14.1% 17,3% 10,6%
Return On Equity 37.5% 25.7% 35,7% 23,9%
Net Working Capital 4,963 5,246
AUTHORIZED CAPITAL
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Number of shares authorized (billions) 6.3 6.3 6.3 6.3

Authorized share capital 630 630 630 630
Par value per share (in full Rupiah) 100 100 100 100
ISSUE AND FULLY PAID CAPITAL
Number of shares issued and fully paid 4.383 4.500 4.500 4.500
(billions)
Issued and paid up share capital 438.3 450.0 450.0 450.0
Par value per share (in Rupiah) 100 100 100 100
Source: PT. HM Sampoerna Tbk Annual Report, 2005

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Exhibit 2
PT. HANJAYA MANDALA SAMPOERNA TBK FINANCIAL HIGHLIGHT
AFTER ACQUISITION
(in billion rupiah)

YEARS ENDED 31 DECEMBER 2008 2007 2006 2005

KEY BALANCE SHEET FIGURES
Current Assets 11,037 11,056 9,432 8,729
Property, Plant and Equipment 4,330 3,522 2,391 2,399
Investments 22 21 59 176
Land For Development 176 344 344 352
Other Assets 569 738 434 279
Total Assets 16,134 15,681 12,660 11,935
Current Liabilities 7,642 6,213 5,613 5,117
Non-Current Liabilities 441 1,401 1,260 1,996
Total Liabilities 8,084 7,614 6,873 7,113
Minority Interests 2 3 93 246
Stakeholders’ Equity 8,048 8,064 5,694 4,576
OPERATING PERFORMANCE – Consolidated
Net Sales 34,680 29,788 29,545 24,660
Gross Profit 9,985 8,762 8,453 7,311
Net Operating Income 6,225 5,585 5,175 3,940
Profit Before Income Tax 5,797 5,345 5,345 3,725
Net Income 3,895 3,624 3,530 2,383
Basic Earnings per Share (in full Rupiah) 889 827 805 544
LIQUIDITY RATIOS
Current Ratio 1.44 1.78 1.68 1.71
Debt to Equity Ratio 0.27 0.28 0.28 0.66
Total Liabilities to Total Assets Ratio 0.50 0.49 0.54 0.60
OPERATING RATIOS
Gross Profit to Sales 28.8% 29.4% 28.6% 29.6%
Gross Profit to Sales (Domestic Cigs.) 28.2% 28.6% 29.3% 30.3%
Net Operating Income to Sales 18.0% 18.7% 17.5% 16.0%
Net Operating Income to Sales 17.5% 18.4% 19.3% 18.4%
(Domestic Cigs.)
Net Income to Sales 11.2% 12.2% 11.9% 9.7%
Net Income to Sales (Domestic Cigs.) 11.5% 12.4% 13.5% 11.3%
Return On Assets 24.5% 25.6% 28.7% 20.2%
Return On Equity 48.4% 52.7% 68.8% 50.5%
Net Working Capital 3,395 4,843 3,819 3,612
AUTHORIZED CAPITAL
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Number of shares authorized (billions) 6.3 6.3 6.3 6.3

Authorized share capital 630 630 630 630
Par value per share (in full Rupiah) 100 100 100 100
ISSUE AND FULLY PAID CAPITAL
Number of shares issued and fully paid 4.383 4.383 4.383 4.383
(billions)
Issued and paid up share capital 438.3 438.3 438.3 438.3
Par value per share (in Rupiah) 100 100 100 100
Source: PT. HM Sampoerna Tbk Annual Report, 2008

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Exhibit 3

NATIONAL CIGARETTE INDUSTRY MARKET SHARE

2003-2004
(in percent)
COMPANY 2004 2003
Gudang Garam 30,25 32,79
HM Sampoerna 19,91 18,33
Djarum 18,26 18,71
Phillip Morris Indonesia 3,91 4,69
BAT Indonesia 2,54 2,86
Bentoel 1,93 1,99
Others 23,20 20,63
Source: GAPPRI in Kurniawan, 2009

Exhibit 4

CULTURE ACCULTURATION IN SAMPOERNA BEFORE AND AFTER

ACQUISITION
BEFORE
Batik uniform, black dress.
Meeting date: 9, 17, 29.
“Pawang hujan” when launching
products.
Employee rather reluctant to talk
with the boss.
Javanese preferred manners.
AFTER
Batik uniform, black dress.
Meeting date: 9, 17, 29.
“Pawang hujan” when launching
products.
Employee more outspoken
sharing their opinion.
Straight to the point, provoked
more sales-oriented, more
creative, and more initiatives with
a global outlook.
At managerial level, everyday
conversations in English
People are encouraged to become
14

more high-achiever, with

opportunity in carreer
development, to branches of PMI
in another country.
Source: SWA Magazine, February 6, 2008.

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Exhibit 5

BOARD OF COMMISSIONER AND BOARD OF DIRECTOR

PT. HANJAYA MANDALA SAMPOERNA TBK
After Acquisition

NAME POSITION PROFILE

Board of Commissioner
Mr. Camaro started his career with Volkswagen AG
Wolfsburg, spending two years at its Overseas
Production Department. He then joined German
Motor Mfg., a joint venture corporation between
Daimler Benz and Volkswagen AG in Jakarta where
his career progressed from Production Manager to
Procurement Manager and then Assistant to the
Finance Director until 1981.
Mr. Camaro continued to pursue his automotive
President expertise with a move to Indomobil Group in 1982
Commissioner as a Vice President Director - a position he held for
Angky Kamaro almost 20 years. Mr. Camaro maintains a seat on
the Board of Commissioners, Indomobil Group.
In April 2002, Mr. Camaro joined PT HM Sampoerna
Tbk. as Managing Director in charge of the
Company’s Indonesian Cigarette Business.
Mr. Camaro graduated from Technische
Fachhochshule in Hamburg, Germany where he
studied Aeronautical Engineering.
Matteo Pellegrini Vice President Commissioner
Douglas Walter Werth Commissioner
Eunice Carol Hamilton Commissioner
Phang Cheow Hock Independent Commissioner
Ekadharmajanto Kasih Independent Commissioner
Board of Director
Mr. King joined PMI in 2003 as Managing Director,
Philip Morris Tabaqueira SA in Portugal. In March
2004, Mr. King moved to Beijing to become
Managing Director, Philip Morris (China)
Management Co. Ltd, where he developed the
business in the important Chinese market. He
moved to Jakarta in 2005 to lead PT HM
Sampoerna Tbk.
Prior to joining PMI, Mr. King worked for Philip
Morris USA, since 1991. He joined the company as
President Manager, Manufacturing in Richmond, Virginia. By
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Director 1997 he was Director of Primary Processing at the

Cabarrus, North Carolina Manufacturing Center and
Martin Gray two years later he was appointed Director of
Cigarette Manufacturing.
King
In 2000, Mr. King became Director, Business
Planning, Philip Morris USA, and in 2001 he was
promoted to Vice President, Regional Sales. Mr.
King graduated from Harvard University with a
bachelor’s degree in Government and received a
master’s degree in business administration from
Darden School, University of Virginia.
Paul Janelle Director (Financial)
Shea Lih Goh Director (Marketing)
Yos Adiguna Ginting Director (HR)

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Wayan Mertasana Tantra Director (Sales)

Source: PT. HM Sampoerna Annual Report, 2008

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Exhibit 6

Martin’s Statement about Culture in Sampoerna

(Cited from: SWA Magazine, February 6, 2008)

• Sampoerna Culture’s in Common

"Sampoerna has adaptive culture, the people are very dynamic with
entrepreneurial spirit, dare to try and learn something new, innovative, and
also friendly," he explained about the characters of Sampoerna’s HR that he
felt. In addition, when facing a business problem, the former Director of
Business Planning at Philip Morris USA added, the Sampoerna just does not
give up easily. "They do not know the word 'cannot', they only know 'sure can'.
This is a culture we learn before we buy Sampoerna," he said surely.

• Similarity Between PMI and Sampoerna

The fundamental similarity is that both companies have a passion to become
the market leader. Also, both have a behavior and a willingness to improve
themselves to perfection. "Sampoerna holds Anggardha Paramita values very
highly, which means to perfection," he explained. It is also important, he
continued, both sides make consumers as a major benchmark in developing
the product. "The desire of our customers is listened to be applied. Sampoerna
very understands what the consumer wants," he said enthusiastically.

• Maintaining Sampoerna’s Culture

“The most important thing for the PMI is to integrate the advantages that it
can generate synergies that improve overall performance. Image and pride in
the brand from a local flavor need not be disturbed, because that's exactly
what we bought. We came to buy this treasure. So, we will not let ourselves
ruin it. We, on the other hand, will do our best to increase its value. Further
improve what is already good"

• Another Perspective in Culture Acculturation

Martin explained, PMI people have the character to be straight to the point and
open in expressing opinions. Something that is often called the American
style. "Criticism is usually thrown straightforward and sometimes spicy. But
still in the context of work, not personal," he said. He will not blame if the
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employees Sampoerna judge PMI people being too aggressive and overly to
the point. "PMI People prefers to convey directly, they do not like to whispers
in the back," he asserted. On the other hand, he sees, Sampoerna’s staff is
very polite, lack of courage in conveying thoughts in mind, and not
straightforward. In his view, this is not talking about right or wrong, but rather
to complement each other. "The PMI could learn about patience and
willingness to listen more to others. Meanwhile, Sampoerna people can learn
about the openness of expression, to separate business from personal affairs,
not easily offended, and productive," he explained.

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Exhibit 7

Consideration of Release Some Strategic Business Unit

• PT. Taman Dayu, developer which is located in Malang, East Java. Since
established in 1990, company still suffering loss. PMI’S board of director seems
not happy in the performance and will release it as soon as possible.

• PT. Sampoerna Food Product Nusantara (compete in food and beverage

industry). Same as PT. Taman Dayu reason to release.

• PT. Wahana Sampoerna (compete in construction industry) seems to

release because it financial performance.

• PT. Agasam manages a number of restaurants/cafes and shops with the label
merchandise A Store™. Currently, the store was established in 2003, already
has 8 branches in Jakarta and Surabaya. Various merchandise such as shirts,
hats, ashtrays, purses, bags (with logo “A“ letter) selling here. Although the
contribution of the parent company very small, this is very profitable outlets.
But may also be released by PMI because want to direct focus in cigarette
industry.

• In trade industry, Sampoerna has a lot of portfolio in various countries, such

as: Bursa Tobacco Corporation, Sampoerna Investment Corporation, Vinasa
Investment Corporation, and Sampoerna Latin America based in British Virgin
Islands which may also be removed.

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Exhibit 8

Corporate Vision and Mission

The vision of Sampoerna is embodied in the “Three Hands philosophy”. The

philosophy embodies the business environment and Sampoerna’s role in this
context. The Hands, which represent adult smokers, employees and business
partners, and society at large, are the three key stakeholders the Company must
embrace to reach its goal of becoming the most respected company in Indonesia.
They address each group through:

• Delivering high quality cigarettes with fair value to adult smokers

The Company is fully committed to delivering the highest quality and fair-
value products to adult consumers. This is achieved through creating relevant
and innovative brand offerings that meet changing preferences.

• Providing good compensation and working conditions to employees

and building a good relationship with business partners
Employees are the Company’s most important asset. Good compensation,
working conditions, and opportunities for advancement are keys for employee
motivation and productivity. Concurrently, our business partners play an
essential role in contributing to our success, and we seek to work closely with
them to ensure their longevity and vitality.

• Giving back to the society at large

The Company owes its success to the support of communities throughout the
country. In giving back, the focus is on poverty alleviation, education,
environment protection, disaster relief, and employee volunteerism.

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Exhibit 9

Kotter Model Perspective: Sampoerna’s Change

Management Step by Step and Recommendation

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SAMPOERNA: CHANGES THROUGH ACQUISITION