Bandung- A new study by Erlin Trisna Sanjaya, Putu Nina Madiawati, and Agus Maolana Hidayat from the Faculty of Economics and Business, Telkom University, finds that a focused market growth strategy offers the most realistic path to restore profitability and competitiveness in Indonesia’s railway signaling industry. Published in 2026 in the East Asian Journal of Multidisciplinary Research, the research analyzes the recent decline of a formerly dominant national railway signaling company and explains why targeted expansion, not aggressive diversification, is better suited to today’s market conditions.
The findings matter because railway signaling systems play a critical role in rail safety, efficiency, and national infrastructure reliability. When companies operating in this sector face prolonged financial stress, the impact extends beyond business performance to public transportation services and long-term infrastructure development.
Industry Under Pressure
Indonesia’s railway signaling industry is highly regulated, capital intensive, and technologically complex. For many years, the company examined in the study—referred to as PT XYZ—held a dominant position in the domestic market. That advantage, however, began to erode between 2021 and 2024.
During this period, the company experienced sharp fluctuations in revenue and a sustained decline in profitability. After strong revenue growth in 2021, performance stagnated in 2022 and collapsed in 2023, followed by a partial recovery in 2024. Despite that rebound, profit margins remained negative.
According to the Telkom University researchers, the core problem lies in cost structure rigidity. Production and project costs consistently exceeded 87 percent of revenue, leaving little room for resilience when market demand weakened. As competition increased, the company struggled to defend margins in government-dominated procurement processes where price pressure is intense.
Why the Market Has Become Tougher
The study places PT XYZ’s challenges within broader industry dynamics. Competition in railway signaling has intensified due to technology diffusion, the entry of new contractors, and stronger bargaining power held by both buyers and suppliers.
Government agencies, which dominate procurement, exert strong control over pricing and project terms. At the same time, dependence on foreign technology providers limits cost flexibility. Rivalry among state-owned and private firms has become increasingly aggressive, squeezing margins across the sector.
The authors note that such conditions are typical of infrastructure industries where projects are long-term, highly regulated, and politically influenced. In these markets, operational inefficiency quickly translates into financial decline.
How the Study Was Conducted
Rather than relying on surveys or statistical modeling alone, the researchers used a qualitative case study approach. They combined:
- Interviews with senior managers involved in strategy, finance, and project management
- Analysis of audited financial statements from 2021–2024
- Reviews of industry reports, government railway plans, and bidding data
To interpret this information, the authors applied widely used strategic analysis tools in a practical way. They assessed external pressures, evaluated internal capabilities, mapped strategic positioning, and then compared alternative strategies to identify which option best matched the company’s actual capacity.
This step-by-step evaluation allowed the researchers to judge not only what strategy looked attractive on paper, but which one could realistically be implemented.
Key Findings at a Glance
The analysis produced several clear conclusions:
- Profit decline is structural, not temporary, driven by high costs and intense competition.
- Internal weaknesses outweigh strengths, particularly in cost control, liquidity management, and project execution.
- The company’s strategic position requires stabilization, not risky expansion.
When three strategic options were compared—market growth, diversification, and strategic alliances—market growth strategy ranked highest in overall feasibility and impact.
The recommended approach emphasizes:
- Deeper penetration of the existing railway signaling market
- Streamlined operations and tighter cost management
- Expansion of higher-margin operation and maintenance (O&M) services
This strategy leverages existing technical expertise while avoiding the high risks associated with entering new business areas.
Why Market Growth Makes Sense
The researchers argue that market growth is the most logical choice given current constraints. Diversification would require significant capital and new capabilities, while large-scale alliances could dilute control and increase coordination risks.
“Strategic alignment and execution feasibility are more critical than ambition during periods of financial stress,” explain Sanjaya, Madiawati, and Hidayat of Telkom University. By focusing on services the company already understands well, management can stabilize performance and gradually rebuild competitiveness.
The study highlights O&M services as particularly promising. These services provide recurring revenue, strengthen client relationships, and reduce dependence on one-off project wins.
Implications for Business and Policy
Beyond one company, the findings offer lessons for Indonesia’s broader infrastructure sector. Many firms operate under similar conditions: limited buyers, heavy regulation, and thin margins. The study underscores that technical capability alone is not enough to ensure long-term success.
For policymakers, the research raises questions about procurement systems that prioritize low prices without considering supplier sustainability. Persistent margin pressure can weaken domestic industry players, potentially increasing long-term dependence on foreign firms.
For business leaders, the message is clear: efficiency, cost discipline, and service-based value creation are essential in state-driven infrastructure markets.
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