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STRATEGY FOR WOODEN CRAFT INDUSTRY DEVELOPMENT IN GIANYAR REGENCY
I Gusti Ayu Ketut Giantari1), Ni Wayan Ekawati2). I Komang Ardana3) and I Made Jatra4) 1234)
Management Department, Faculty of Economic and Business, Udayana University Bukit Jimbaran Campus, Badung, Phone: (0361) 224133
ayugiantari@gmail
ABSTRACT
The purpose of this study was to determine 1) the internal and external factors affecting the company's performance, 2) the company's business position and 3) strategy forwooden craft industry development in Gianyar Regency. The study was conducted by taking 22 respondents through purposive sampling. The respondents are 10 mask and barong craftsmen from Batuan District of Sukawati, 10 eagle sculpture craftsmen from Pakudui District of Tegalalang and two barong expert barong and eagle sculpture in Gianyar. Sampling using purposive sampling. Analysis technique used SWOT and Matrix Internal-External (IE). The analysis shows the company's business position in IE Matrix is currently in quadrant IV while the future of it is in quadrant I (grow and build). The proper strategy is by implemented differentiation strategy, spesifically on the image, distribution, and promotion of the product. Implications of this result on marketing strategy is by creating unique innovation on the product, competitive pricing, as well as strategic distribution and promotion. Promotion can be conducted through printed, electronic, and social media.
Keywords: development strategic, wooden craft industry, differentiation
INTRODUCTION
Gianyar is one of regions in Bali which has a variety of art works and artists. Half of the population depend on art work. This society actively create a variety of works of art and craft that can provide a source of life. Many companies have started to run the business and develop it through the creative industries (Chaston, 2008). One of craft products which based on local wisdom is wooden craft, in the form of garuda and barong statue (Atmojo, 2013). Adaptation of local wisdom into cultural and religious ethos can be packed into a creativity that crafts. Business management is need to be implemented in this community activitiy (Kahane, 2012).
Baswir in Suweca (2011) states that the creative economy can not only be seen in the context of economics, but also in the cultural dimension. Creative ideas that emerged are cultural products. Therefore, the cultural strategy determined the direction of creative economy development. Openness to innovation is enabling the business leadership by exploring the ability of the organization (Lee and Ko, 2000). It is an application of creative economy as welll. Innovation that focuses on the consumer is able to create an orientation to face the market competition (Lewrick et al., 2012). Established companies have a notion that it is important to develop their creativity and ensure capability of leading innovation (Johannessen and Hugo, 2013).
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from the internal environment of wooden craft in Gianyar, 3) design the best strategy for wooden craft industries in Gianyar and 4) implement marketing strategies for wooden craft industries in Gianyar.
THEORITICAL REVIEW
Strategy Definition
Definition of a strategy first proposed by Chandler (Rangkuti, 2003: 3) which states that strategy is a long-term goal of an enterprise, as well as the utilization and allocation of all necessary resources to achieve its goals. Strategy is a tool to create competitive advantage. According to Hitt et al. (2011: 1), strategy is an integrated and coordinated set through designed commitment and actions to improve core competencies and achieve competitive advantage. Strategy of an organization is enable to identify a condition that can potentially provide the best benefits and help to achieve the expected goals and direct all resources toward a managerial system.
Vision, Mision, and Objectives
Vision and mission statements are defined as means to communicate an attitude, ethos, and work culture that will be applied by each individual. Hoping to achieve the objectives of the organization. Developing a vision and mission is an initial step in strategic planning related to the achievement of organizational goals in the future (Darbi, 2012).
David (2011: 36) stated that a vision is presented briefly about the system description of its target due to changes in science and unpredictable situations during this long period. Vision is the early process in the development of an organization's mission. In other words, the vision is an expectation to be achieved in the future by an organization or company. Vision which is owned by a corporation is an ideal state in the future to be realized by the entire personnel of the company, starting from the top level to the bottom.
Company Environment
Company environment consists of the internal and external environment. External environment greatly affects the survival of the company. David (2011) divides the external environment into three interrelated categories, namely remote environment, industry environment, and operate environment. The entire environmental factors provide a number of opportunities and threats for the company. The linkage between the environment and the company can be described as follows.
Figure 2.1
Company Environment
Source : Pierce & Robinson (2000:94) Remote Environment
Industry
3 Internal Environment
Umar (2001: 84) expressed the understanding to the company's internal conditions is a line factor in the use of an effective strategy. The formulation of corporate strategy must consider the strengths and weaknesses of the company. In order to understand the company's internal condition, strategic internal factors through a functional approach and a "value chain" of Porter and evaluation of internal factors strategic approach can be identified by steps as follows: comparing these factors with the achievement of the company's competitors; assessing the importance of each factor on industry life cycle; assessing these factors compared to the existing competitors; and assessing these factors by comparing the key success factors in the industry.
Strategic Planning
Strategic planning is defined as activities of the company to seek compatibility between internal or external forces of companies in a market. The activities include observation of the competition carefully, regulations inflation, business cycles, desires and expectations of consumers, as well as other factors that can identify opportunities and threats (Rangkuti, 2003: 2). To determine the main strategy, made use of several matrixes with three stages of implementation; the data collection phase, analysisphase, and decision-making stage.
Strategic Levels
In a company, basically there are three levels of strategies, which will be described in the following sections. According to Andrews (in Rangkuti, 2003: 10)
Corporate strategy is strategy in a business, where the company will compete by altering the distinctive competence into competitive advantage. This strategy formulated by the top management that regulate the activities and operations in the organization which has more than one lines or business units. At this level, it is important to determine the corporate mission, what business is being cultivated by the company, what goals and expectations regarding the business, and how to allocate resources.
The strategy at this level is more focused on the management of the activities and operations of a business. Charles et al. (2012) and David (2011: 10) stated that business-level strategy is critical to an organization. The implementation of a strategy covering all lines within the organization, from managerial to operational role. Porter (2007: 71) in Hitt et al. (2011: 107) states that each company must develop and implement business-level strategy that aims to achieve a strategic market position. This can be done through the creation of different products or services among all competitors. There are three methods of business-level strategies, which are the low-cost strategy, differentiation, and focus strategies.
According to Umar (2003: 25), the strategy of functional levels is a strategy that is more operational and lead to a framework of corporate functions (traditionally it is consisting of research and development, finance, production and operations, marketing, personnel or human resources) that can supports the strategy at the business unit level. At this level, more specifically formulated strategy relies on the functional activity of the management.
RESEARCH METHOD
Research Design
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IFE matrix is used to determine the factors associated with the company's internal strengths and weaknesses that are considered important and affect the performance of the company, for example, from the aspect of management, finance, human resources, marketing, information systems, and production (Umar, 2003). Internal analysis is important to note so that the company can exploit to the maximize the strength and identify wether there is a source of weakness to be corrected by the management company.
Matrix EFE (External Evaluation factor) was used to analyze matters relating to issue of economic, social, cultural, demographic, political environment, government, law, technology, competition in the industrial market where the company located, as well as other relevant external data. This is important because of external factors impact directly or indirectly on the company. This identification is very important for companies to be aware of the opportunities and threats for the company either currently or in the future. SWOT analysis is based on the logic that maximizes the strengths and opportunities, but simultaneously to minimize weaknesses and threats. Strategic decision making process is always associated with the development of the mission, goals and policy strategy. According to Koo (2004), the formulation of a framework is developed based on the capabilities that the company is on the right track.
Location and Scope of Research
Research will be conducted on the wooden craft industries in Gianyar. Object of research is the development strategy of the wooden craft industry. The scope of the research is focused on the identification and analysis of internal and external environmental conditions on wooden craft industries in Gianyar. Considering the tight current competition, it is important to design wooden craft business development strategies for the future.
Research Sample and Population
The population in this study are business owners and decision makers in the company and experts of wooden craft and barong mask-making in Bali. Wooden craft industry center in the form of a mask (tapel), Rangda and Barong are in Banjar Puaya, Batuan Village, District Sukawati, Gianyar where there are about 200 artisans. There are around 100 craftsmen of Garuda statue in the village Pakudui, District Tegalalang. Samples for craftsmen and barong mask is 10 people. Samples for eagle sculpture artisans is 10 people and as many as two-person expert. Therefore, the total respondents were 22 people. Selection of the craftsmen who chose sample was using purposive sampling, which is based on certain considerations. The considerations are 1) a wood carving craftsmen in Gianyar, especially for craft barong and statue of Garuda, 2) policy makers in the company, and 3) have extensive insight about the condition of the internal and external environment.
RESULT AND DISCUSSION
Wooden Craft Industries in Gianyar Regency
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Analysis and Diagnosis on Existing External Strategic Environment
To conduct an analysis on the external environment including opportunities and threats, we then conducted interviews with policy makers in crafting company located in the village of Puaya and Pakudui. We identified 10 external variables lock, namely national economic conditions, the rate of inflation, the rate of growth of population income, government regulation, government assistance, changes in consumer tastes, infrastructure, communications and information easily accessible, competitors, bargaining power with the buyer and bargaining power with suppliers.
Further analysis is to determine the weight of each variable and the rate that reflects the condition of each variable. Lastly, the incorporation of weight with a rate that describes the general condition of wooden craft business in Gianyar that have an opportunity or a threat.
By the weighting of each variable, it appears that there are three indicators that have the greatest influence and affect the performance of the company, the weight communication infrastructure and information that easily accessible indicator indicator is 0.13 (13 percent), weight of competitor existence is 12 percent, andthe weight ofbargaining power to buyers indicator is11 percent, while the seven other factors that influence varies between 6 percent to 8 percent.
Rate represents the respondents' perceptions to the level of importance of each factor affecting the performance of companies which value is between 1 and 4. In Table 4.1 it can be seen that there are six factors that represent an opportunity, namely the economy, the rate of revenue growth, government regulation, government assistance, changes in consumer tastes and communication infrastructure and information. There are four factors that became threat that is, the rate of inflation, competitors, bargaining power with buyers, and bargaining power with suppliers.Further calculations determined the score of each indicator by multiplying the weight and rate. Calculation of the overall score indicator showed the value of 2.74.
Table 4.1 Existing External Factor Analysis Summary
No Opportunity / Threat Factor Weight Rate Score
Opportunities
1 National economy condition 0,10 3,00 0,30
2 Income growth in Bali 0,08 3,10 0,25
3 Government regulation 0,10 3,00 0,30
4 Government aid 0,08 3,50 0,28
5 Change of consumer desire 0,09 3,00 0,27
6 Easy access of communication and information infrastructure 0,13 3,40 0,44 Threats
7 Inflation rate 0,09 2,10 0,24
8 Competitior existence 0,12 2,00 0,19
9 Bargaining power with buyer 0,11 2,20 0,24
10 Bargaining power with distributor 0,10 2,25 0,23
Total 1,00 2,74
Source : processed data
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Analysis and Diagnosis on the Future External Strategic Environment
In accordance with the predictions made by the respondents, it can be explained that the variables of competitors and bargaining power with buyers has the greatest effect on the company's performance, which amounted to 0.12 (Table 4.2). While the second most influential variable is the power to bargain with suppliers as well as information and communication infrastructure by the weight of 0.11. Variable that have the third greatest influence are aid from the government, economic conditions and changes in consumer tastes by the weight of 0.10.
Indicators that has the highest rate is the information and communication infrastructure which is 4.00, while the second is consumer tastes with rate 3.80 and revenue growth rate of the population of Bali with rate of 3.70. From the calculation of the overall score of existing indicators, the results of the calculations showed a value of 3.02. This figure shows that the external conditions in Gianyar wooden craft industry in general is an opportunity because it is greater than 2.50. Total score between 1.00 to 2.50 is considering as threats and from 2.51 to 4.00 is considering as opportunities. Results of prediction weights, rates and weighted values are presented in Table 4.2 EFAS (External Factor Analysis Summary) for the future is as follows.
Analysis and Diagnosis on Existing Internal Strategic Environment
Through interviews with respondents, we identified 12 indicators that are the elaboration of five functions contained in the company. Those function is a function of marketing (product quality, has unique features, promotions and product prices which are relatively stable), production function (quality of raw materials and low productivity), the human resources function (abundant labor, the quality of human resources and labor skills), and function of Research and Development (lack of support and lack of innovation).
Indicators of lack of access to sources of capital has the greatest influence on the performance of companies with a weight of 0.12 (12 percent). While the second most influenced indicators is a unique feature with the weight of 11 percent, followed by quality of raw materials with a weight of 10 percent. Other indicators have a weight with variation between 0.07 to 0.09.
Table 4.2 Future External Factor Analysis Summary
No Opportunity / Threat Factor Weight Rate Score
Opportunities
1 National economy condition 0,10 3,20 0,35
2 Income growth in Bali 0,08 3,70 0,30
3 Government regulation 0,08 3,65 0,29
4 Government aid 0,10 3,50 0,35
5 Change of consumer desire 0,10 3,80 0,38
6 Easy access of communication and information
infrastructure 0,11 4,00 0,44
Threats Threats
7 Inflation rate 0,08 2,30 0,18
8 Competitior existence 0,12 2,20 0,26
9 Bargaining power with buyer 0,12 2,00 0,24
10 Bargaining power with distributor 0,11 2,00 0,22
Total 1,00 3,02
Source: processed data
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The last stage is the determination of the score is done multiplying the weight with the rate. The highest score was 3:15 which is owned by indicator of product innovation. This figure shows that the internal conditions in Gianyar's wooden craft business in general is strong because the score is greater than 2.50. Calculation results of the weight, rate, and scores are presented in Table 4.3 Internal Factor Analysis Summary.
Table 4.3 Existing Internal Factor Analysis Summary (IFAS)
No Strength / Weakness Factor Weight Rate Score
Strengths
1 Product quality 0,08 3,73 0,30
2 Unique feature 0,11 3,75 0,41
3 Promotion 0,07 3,50 0,25
4 Relatively stable product’s price 0,06 3,50 0,21
5 Low productivity 0,08 3,60 0,29
6 Abundance workforce 0,09 3,65 0,33
7 Human resource quality 0,08 3,50 0,28
8 Workforce skill 0,07 3,55 0,25
Weaknesses
9 Access to financial capital 0,12 2,30 0,28
10 Research and development support 0,07 2,40 0,17
11 Raw materials quality 0,10 2,20 0,22
12 Product innovation 0,07 2,50 0,18
Total 1,00 3,15
Source: processed data
Analysis and Diagnosis on the Future Internal Strategic Environment
Table 4.4 shows the weight calculation, rate, and scores of key internal strategic factors that affect the company's performance. The indicators that have the highest weight is a quality product with a weight of 0.12. This means that this indicator has a 12 percent influence on corporate performance. While indicators of access to venture capital has the second highest weight of 0.11, which means that this indicator has the effect of 11 percent on company performance. Indicators which has the third highest weight is an indicator of the unique features with a weight of 0.10. This indicator has the effect of respectively 10 percent of the company's performance. Meanwhile, other indicators have a weight in the range of 0.06 to 0.09 so that the total weight of these indicators is 1.
The perception of respondents is then analyzed to rate each indicator. Indicator of has unique features has the highest rate of 3.85. Indicator of abundant labor has the second highest rate, at 3.75, while the indicators of quality of products has the third highest rate with a rate of 3.73.
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No Indicator Weight Rate Score
Strengths
1 Product quality 0,12 3,73 0,45
2 Unique feature 0,10 3,85 0,39
3 Promotion 0,07 3,6 0,25
4 Relatively stable product’s price 0,08 3,5 0,28
5 Low productivity 0,08 3,65 0,29
6 Abundance workforce 0,07 3,75 0,26
7 Human resource quality 0,06 3,65 0,22
8 Workforce skill 0,06 3,55 0,21
Weaknesses
9 Access to financial capital 0,11 2,4 0,26
10 Research and development support 0,09 2,4 0,22
11 Raw materials quality 0,08 2,45 0,20
12 Product innovation 0,08 2,45 0,20
Total 1,00 3,22
Source : processed primary data
Strategic Position of Wooden Craft Industries in Gianyar Regency
The company's strategic positioning is done after analyzing the internal and external environment, by moving the total score into the Matrix of Market Attractiveness - Corporate Competitiveness. At the present time, the total weight of EFAS score is 2.74, while for IFAs is 3.14 for the present (2014). Thus, the company's position in the matrix is in Cells II (A). In the future (year 2015-2020), total score IFAS EFAS is 3.02 and 3.22, so that its position is increased in cells I (B). Depiction as shown in Figure 4.1.
Figure 4.1
Strategic Position of Wooden craft Industries in Gianyar Regency on Market Attraction – Company Competitiveness Matrix (2015 – 2020)
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Strategy Formulation on Wooden Craft Industries Development in Gianyar Regency
If the product of a company has a unique value or considered unique in the market, it can be said these products have the advantage of differentiation. This strategy can be an effective strategy to maintain market position.Differentiation strategy requires wooden craft industry to offer something different, especially in terms of: product differentiation, is a corporate strategy to offer products of different wooden craft product in terms of shape, size, color, and physical structure in comparison to other companies; differentiation of the image, where the wooden craft industry can build an image that appeals to consumers based on the good name of the company, promotion which done by advertising, interesting company logos, and unique product design; differentiation of services, where the craft industry of barong and eagle statue can create differences among its competitors by providing good quality services, such as hospitality, speed of service, and accuracy of the services; differentiation of distribution channels, by putting its industry in a strategic location that is easily accessible to customers; differentiation personnel, which the company may have employees who are well trained and able to provide the best performance in products produced and hospitality in serving consumers.
Marketing Strategy Formulation on Wooden Craft Industries Development in Gianyar Regency
Based on the proper competitive strategy, in this case the differentiation strategy, and when applied to the marketing mix strategy, it can be formulated as follows: product strategy should offer productswhich innovative and different, such as barong craft products with unique features that further emphasize local culture. Likewise, the eagle statue should be designed with a more attractive design; pricing strategies offer competitive price level according to the quality of the resulting wooden crafts. Each of these craftsmen is unique so the price will be very varied; distribution strategy, more emphasis on strategic locations to offer wooden crafts. The strategic location should be taken into consideration in determining the store where the product was offered, making it easier for consumers to get it; promotion strategy, which communicates the various types of products to the public through print and electronic media. This can be done also through social media (facebook, twitter or instagram) for cost efficiency, in order to reach a wider and not spend any cost.
Research Limitation and Future Orientation
The limitations of this study are: this study only conducted in wooden craft industry in Gianyar thus limiting the ability to generalize the findings of this study in a larger area; this study used a survey method in which the data collection process in a particular point in time or in cross section while the environment is change quickly, that so important to do this research in the future.
Future research directions can be: future researchers can conduct studies on different craft industry, such as ikat fabric industries (endek) in Bali Province; for future studies, it is necessary to add some new variables, such as competitive advantage and company performance were used as basis for the formulation of corporate strategy.
CONCLUSION AND RECOMMENDATION
Conclusion
Based on the analysis in the previous sections of the internal and external strategic environment of wooden craft industry in Gianyar, it can be drawn some conclusions as follows:
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The key internal strategic variables which are the strength of both the present and the future, namely the quality of the products, unique features, promotions, relatively stable, low productivity product prices, abundant labor, the quality of human resources, and labor skills. While the key internal strategic variables that is a weakness are access to venture capital, support research and development, raw material quality and product innovation;
Based on the business position of the wooden craft industry in Gianyar at the present time is in Quadrant IV, while in the future are condition in quadrant I, then the proper strategy to apply is to grow and build strategy.
Proper competitive strategy implemented by wooden craft industry in Gianyar is a differentiation strategy. This strategy can be an effective strategy to maintain market position. Differentiation strategy requires companies to offer different products, especially in terms of: Differentiation of products, by givin uniqueness and accommodate the local culture; Differentiation image, by giving a good image to customers; Differentiation of services, by providing the best service to customers; Differentiation channel, by determining strategic business location; and Differentiation personnel, by hiring well-trained employees so as to provide the best performance both in the products produced and hospitality in serving consumers.
Based on the appropriate competitive strategy in this case is the strategy of differentiation and applied to the marketing mix are product, price, promotion and distribution.
Recommendation
For wooden crafts owner / employeer: Innovate new products that emphasize culture of Bali so unique and different from other wooden crafts business; Have partnership other wooden craft industry to strengthen the promotional efforts in order to be better known by people all over Indonesia; Participate in the training carried out by government-sponsored mainly by state-owned enterprises and local owned-enterprises to obtain information on the management of associated related to access to financial resources; Working with suppliers of raw materials so as to produce a barong, tapel and eagle statue with the best quality; Providing the best service to customers.
For the Government: Provide ease of access to financial resources, allowing the company to further develop; Provide training in management sector in order make adequate financial statements; Provide means of communication and information to promote their products to a wider area.
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