ANALYSIS FIVE COMPETITIVE FORCES MODEL: STUDY FISHERIES INDUSTRY IN AND JEPARA -

1MUHAMMAD YUSUF, 2ANANG M. LEGOWO, 3TRI WINARNI AGUSTINI

1Department of Food Technology, University of Muhammadiyah Semarang, Indonesia 2Department of Food Technology, , Indonesia 3Department of Fishery Product Technology, Diponegoro University, Indonesia E-mail:[email protected], [email protected], [email protected]

Abstract - Industry performance is an important factor in competition and survival to maintain the sustainability. This research is intended to review the current position and how to build industrial excellence with innovative orientation in the future. A primary focus on quality-based innovation is to promote the industry's ability to enter the export market. The case study is the Indonesian Fisheries Industry (IFI) in Semarang and Jepara District, Central Province which has the potential to be developed by improves the performance and capacity according to market demands. This study attempts to evaluate more deeply with a direct approach to the main source of business actors and policy makers. To provide a competitive advantage concept is used analysis of five competitive forces (FCF) method adopted Porter’s theory (1980; 2008). Key factor of the competitiveness was answer (F1) Performance of Producers, (F2) Market/buyers demand, (F3) New potential entrance, (F4) Product substitute trends, (F5) Rivalry among producers.

Keywords - fisheries industries, competitive advantage, performance, innovation

I. INTRODUCTION dependent on the total market power of the value chain and its distribution among the participants in Performance is an important force in the global the chain (Porter, 1980). Industries’ innovation and industrial competition, survival and sustainability performance is main question in this paper which (Salais, and Storper, 1992; Johnson, Scholes, and analyzed and viewed in a broader perspective. Whittington, 2008; Hult, Hurley, and Knight, 2004). Producer demanded have a competitive advantage to Competitions in the international fisheries market are match the interests of buyers and have uniqueness increasingly moved into innovation with numerous among existing competitors. The Porter’s theory innovative products are provided. However, stringent (FCF method) is used to see what position of IFI. quality is a main concern as well. Indonesian Fishery The measurement of the performance will be adapted Industries (IFI) has the potential to be further from concept of Verhess, (2005) with a framework developed, if it can improve the performance and approach to evaluate the ability of the internal capacity according to market preferences and management and their competence. The research of demands. This perspective is intended to review the value chains with a qualitative approach and current position and how to build industrial empirically based conceptual framework has been excellence with market oriented innovation in the established, it can guide future quantitative studies future. We investigate the main focus on quality- (Grunert et al., 2005). based innovation for the industry's ability to enter the export market. Further, we also study the industry’s The IFI’s long-term competitiveness and its value capability to reorient the strategic vision of market chain can be analyzed through the Value, Rareness, oriented innovation in order to adjust demand trends. Imitational and Organizational VRIO-framework This research is aimed to study the potential for (Barney, 2002), which characterizes four important Indonesian Fisheries Industries (IFI) and their competitive factors: (1) Product value for customers, capability in competitiveness. The orientation for (2) Product rareness for customers, (3) Imitable export fisheries product is dealing with competitive resources and (4) Unique organizational resources. rivalry and marketing strategy. Review of Five The competitive strength of the value chain can be Competitive Forces (FCF) methods are expected to measured by the products’ and marketing services’ give a proper perspective for fisheries actors transaction value to its customers, their rarity in the particularly for IFI. To enter the International market, market place, their possibilities for imitation or their the product and marketing services must be matched dependency on specific organizational structures and to the current consumption trends recent progress in the difficulty of imitation (Trondsen, 2003). seafood marketing and preference in market place. III. METHODOLOGY II. THEORETICAL BACKGROUND The aim of the research is to build a knowledge Performance in terms of value adding as a margin platform for developing concrete strategies for the between sales value and production costs is Indonesian fish marketing into the export market. In order to build supporting concepts performed by

Proceedings of Academicsera International Conference, Philadelphia ,USA, 28th-29th May 2018 5 Analysis Five Competitive Forces Model: Study Fisheries Industry in Semarang and Jepara - Indonesia comparing between FCF literature reviews and result strategies closely related with innovative products can investigation, the data collections through interviews be an alternative for the buyer. Either the supplier or and discussion were conducted with fishermen, buyer will be influence the pressure of market processors and government officers. Fieldwork environment condition. The relations are also mainly relate to the value chain of the factories and developed through intensive exchanges of statistic data from Ministry Marine Affairs Fisheries information in order to mutually understanding of (MMAF) of Indonesia. The observations and buyers preferences for different product attributes. discussion with numerous fisheries experts Research development strategies through FCF model (Supervisor and manager) are sources of primary data will help them finding stability supply demand for research. fisheries product. Such information might be generated through the studies, experimentation and The FCF method analysis used as a tool for trial and error, in order to find the optimal business answering five factors which determine product-market concepts for the fisheries trade. competitiveness. Data from fieldwork will be analyzed to determine the strategy to enter the export Panel surveys involve the random selection of a small market. The key to create the strategies to compete in number of representative individuals from a group, the marketplace will be successful by understood the who agree to be available over an extended for status and current conditions. Important variables are certain period (FAO, 1999). A panel survey considered to obtain a proper review of the fisheries conducted during January - June 2017. It was export market. Based on that insight, IFI can gain involved 12 fisheries processing plants and mini market share and be involved in the International plants in area Jepara and Semarang of competition, measure the effectiveness and marketing Province of Indonesia. IFI who participated in the channels, measure the competitors that come to play survey is representative of 13% of the Central Java in competition and product offerings, analyze market production capacity. The interviews in each of the 12 trends and the positions between fisheries products, processing plants and mini plants were made by panel identify the needs of the market including the popular managers (1 to 5 respondents). The questionnaire is trend and many products found in supermarkets. designed according to Porter’s (2008) five competitive forces model. A five-point (1–5) scoring TABLE I: FCF METHOD ANALYSIS system is implemented for each question was Approach FCF Method Goal provided. Measure IFI Analyze the Identification performance bargaining potential and IV. RESULT AND DISCUSSION power of position suppliers industries The five competitive forces method used as a basis Identify for Analyze the Get the for answering questions (F1) trends and product the fisheries bargaining evaluation substitute, (F2) Distribution system and buyers buyers power of demand and demand, (F3) IFI Performance and new potential buyers characteristic of entrance, (F4) Barrier factor and Rivalry among the buyer competitor, (F5) rivalry among competitors. The Identify new Analyze the Finding fisheries Strategy is a broad based formula for how business is potential threats of new trade stability going to compete, what its goals should be, and what entrance entrants with loyalty policies will be needed to carry out those goals. The market essence of formulating competitive strategy is Observe Analyze the Acquire relating a company to its environment. Marketing product trends threats of consumer strategy perspective on the international trade may be substitute preference for seen as value adding transactions conducted over products fisheries product national borders between businesses in value chains Examine Analyze the Know strategy where fish products and money are exchanged strategy intensity of for competitive (Trondsen, 2003). The industries that are profitable marketing competitive advantage are more attractive as industries in which to invest. rivalry Porter (1980; 2008) has suggested that in any industry there are five competitive forces, the strength of The research deals with processor strategies, so that which determines industry profitability. These forces the importance is know-how to build competitive are mapped in Fig. 1 and discussed further as below: advantage for the export market. IFI performance and

Proceedings of Academicsera International Conference, Philadelphia ,USA, 28th-29th May 2018 6 Analysis Five Competitive Forces Model: Study Fisheries Industry in Semarang and Jepara - Indonesia

Fig. 1 The five forces for Indonesian Fisheries Industry (After Porter, 1980; 2008)

TABLE II : ASSESSMENT OF FCF- IFI STRENGTH FCF Factor Description of analysis Level of strength Bargaining Product uniqueness Level of advantages in product innovation and product ++ Power uniqueness Producers Raw material access Level of advantages in access to sustainability raw – (F1) materials for volume production Market network Level of advantages in access to buyer network and 0 market intelligence Infrastructure assets Level of advantages in good infrastructure, quality – – control system and human resource Rivalry Competitive strategy Level of effectiveness in competition strategy ++ Among Competition advantage Level of effectiveness cost and diversification + Producers advantage (F2) Value chain evaluation Level of effectiveness of system to evaluate + inefficiency and ability to optimize its resources Adaption to regulations Level of capability to meet new regulations, standard – and trade conventions Bargaining Customer basis Level of adequacy customers and stable product orders ++ Power 10. Customer control Level of control over the purchasing input and 0 Importers alternative suppliers (F3) 11. Access to markets Level of ability to direct access to the end market + 12. Distribution control Level of control of the product distribution ++ Threat of 13. Brand protection Level of brand protection against new entrants + New 14. Adaption market trends Level of adapt to market trends + Producers 15. Advantage against new Level of capacity advantage against new entrants ++ (F4) entrants 16. Sufficient capital to grow Level of sufficient capital and profits to grow + Threat of 17. Market segmentation Level of diversify offers to extensive market segments 0 Substitute 18. Innovation protection Level of innovation strategy against substitute products 0 Products 19. Competitive prices Level of offer affordability products compared to ++ (F5) substitute products 20. Product protection Level of anticipate differentiation against imitation + products

Proceedings of Academicsera International Conference, Philadelphia ,USA, 28th-29th May 2018 7 Analysis Five Competitive Forces Model: Study Fisheries Industry in Semarang and Jepara - Indonesia A. Bargaining Power Producers Based on field data can be stated that the buyer's The bargaining power of the suppliers and value bargaining position depends on (1) velocity of adding strength may be analyzed as the degree of payments (2) provide certain orders (3) have an applied marketing means the offering additional obviously of shipping schedule (4) has a target interesting and preferred product or service values monthly purchases (5) able to maintain brand that are satisfying the customers better than the reputation. competitors. In essence, IFI’ bargaining power do not only reflect short term profit but also other C. Threat of New Producers aspects such as providing new alternative and more The bargaining power meets also threats from new attractive offers superior in competition in the entrants which are competing about the same market. Competitive IFI will serve and pay attention customers with the same kinds of fish products. to all marketing means the improving from the Fisheries exporter as new comers are especially a bargaining power towards their customers in the threat when they offer a cheaper or even better target markets. products and services, but such competition are thus also motivating improvement in all competitors Discussions with Indonesian exporters was showed marketing means and the offering of consumer the expectation, the results of investigations showed values. Competition can be fair and attractive in a IFI bargaining power is significantly influenced by more distant perspective. Studies of the competition (1) the sustainability of raw material (2) the volume intensity caused by new entrants may determine how of production (3) manufacturing facility (4) the marketing offering of cheaper or better higher consistency of quality (5) service complaints quickly. quality products are influencing the markets. However, in many cases, exporters are required Identification threats of new entrants not only come capable of controlling the final product according to from the internal Indonesia, but any pressure from standard requirements. It is to maintain buyer other countries. How is the development and confidence and cooperation that has existed. perspective in the countries that produce fish product In general, assessment of the bargaining position of significantly, among others; China, Philippine, exporters is still sufficient good currently. Bargaining Thailand, and Vietnam. China is known by a variety power of suppliers to IFI could be viewed from two of breakthrough and be able to provide cheap goods. perspectives including: Chinese fish products also compete rigorously,  Exporter's bargaining position to supplier of raw however, for Indonesia analysis it is a threat of materials: large exporters are better able to entrance. Obviously, the ability of IFI is still limited control the supply of more material because it by skill of worker and technological advancement. gives a higher price.  Exporter's bargaining position to importer: they D. Threat of Substitute Products build confidence by guaranteeing to give priority The IFI bargaining power is also influenced by to buyers who have cooperated continuously. alternative fish product and competitor services which are satisfied the same market needs. Almost B. Bargaining Power Importers every item of products or services in the market place Consumers who have freedom of choice are the tends to open and free markets met by competing “king” in the market place and when they acting substitute products, which is an alternative way to collectively they have power and influence all aspects satisfy the same basic needs and could be a threat of the policy from the parties relating to the provision because the customers always can choose different of services or products. Analyses of the buyers solutions to meet their basic needs. Large companies bargaining power are focusing of their purchasing are usually implementing cheaper substitution of power and alternative ways to satisfy their demand, products are shown to be successful in the markets. needs and wishes. Understanding the buyers Fisheries product uniqueness and affordable price bargaining potential becomes a source of innovation, may give more valuable than new substitute products creative thinking, and breakthroughs that require in the market place. In this case, IFI still have limited special strategies. perspective for EU trend product.

In many facts, every buyer cooperated with several In particular, the threat of substitute products today is suppliers (minimum two suppliers). It is actually one a product by similar quality but at a lower price. of strategy to build buyer’s bargaining power so that Development of innovative seafood, by a variety of they do not depend on one supplier and can switch to species, and also varied the offer, it was felt as a another supplier whenever they want. Purchasing pressure for the industry. The main problem is how power and provides certain payment is the most fisheries product is not less interesting than other significant competitive forces that are considered by substitute products (imitation fisheries product with supplier. However, the element of trust still plays an the taste on shrimp, crab and lobster mainly and important role in the continuity of their business. product from animal husbandry). However fortunately, the fish product has a special customer.

Proceedings of Academicsera International Conference, Philadelphia ,USA, 28th-29th May 2018 8 Analysis Five Competitive Forces Model: Study Fisheries Industry in Semarang and Jepara - Indonesia Fish become fanatical since the primary menu at a  Competition among fish processors is more specific event. Possible some consumer shift to other directed to the purchase of raw materials. IFI's products is unavoidable. The threat of substitute performance in general shows the stability and products may become more significant if the has a good bargaining position. The strategy to producers were not able to offer solutions at facing barriers with increasing performance affordable prices, innovation and better products continuously. more attractive. ACKNOWLEDGEMENTS E. Rivalry among Producers Assessing the intensity of competition and I am grateful to University of Muhammadiyah participants’ market power related to “five Semarang and the Indonesian Ministry of Research, competitive forces” are becoming the most central Technology and Higher Education part to the FCF method. All sides including suppliers, (KEMENRISTEKDIKTI) for financial support consumers, the potential entrants and substitutes are through Postdoctoral Research grant scheme in period contributing to the allocation of market power 2017-2018. through competitive rivalry among competitor. Strategy is a broad based formula for the way REFERENCES business is competing, their goals and what policies are followed to carry out those goals. Strategy [1] Barney, J.B. (2002) Gaining and sustaining competitive analyses are the scientific basis for formulating new advantage, 2nd edition, Prentice-Hall, New Jersey. [2] Dhanani, S. (2000) Indonesia: Strategy for Manufacturing strategies. 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