rebranding indonesian culinary product in small medium enterprises through "sme's...

Proceedings of the 14th Indonesian Scholars International Convention, 25-26 October 2014

REBRANDING INDONESIAN CULINARY PRODUCT IN SMALL MEDIUMENTERPRISES THROUGH “SME’S INDOTASTE CENTRE”

Muhammad Miqdad RobbaniAbdurrahman AfifMuhammad Zuhdi

Department of Management

Muhammad IqbalDepartment of AccountingUniversity of Indonesia

Depok, INDONESIAUniversity of Indonesia [email protected]

Depok, [email protected]@[email protected]

ABSTRACT

In the face of ASEAN Economic Community (AEC) 2015, Indonesia has apotency in culinary small and medium businesses. Indonesian cuisinehas been proven to have a special value because its basicingredients are spices which are unique and quite hard to be foundin another hemisphere due to climatic differences. At the same time,Small and Medium Enterprises (SME) also has a strategic role to dealwith AEC because they can absorb unskilled labour which dominatingIndonesian’s labour. The problem that arises is many products ownedby the SME which are not structured as a high-value products, whileits culinary value is very high when compared to the products fromMalaysia and Singapore. Therefore, it needs a new legal entitycalled "SME’s Indotaste Centre" which cooperate withmany institutions to initiate rebrand of Indonesian culinaryproducts for later known by foreign countries, especially the ASEANcommunity, as a world-class product.

Keywords: SME, Culinary, AEC.

1 INTRODUCTIONThis study emphasizes and focuses on the benefit and the threatfrom the ASEAN Economic Community (AEC) that will be faced byIndonesia in 2015. One of the biggest potentials arises from thelabour sector. Indonesia’s population reaches more than 250 millionpeople and definitely has a lot of human resources who are ready tobe labour. However, Firmanzah (2011) said that to face the AEC in2015, the Indonesian workforce is still dominated by unskilledlabour. Unskilled labour itself is people who are under college

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ROBBANI, AFIF, RAMADHAN and ZUHDI

education.. Here are the data of Indonesian workers based on theirlast education.

Table 1 : Show the population over 15 who is working based ontheir last education, 2010-2011 (millions people)

Education2010 2011

February

August February August

Under elementaryschool

55,31 54,51 55,12 54,18

Junior High School 20,30 20,63 21,22 20,70Senior High School 15,63 15,92 16,35 17,11Vocational School 8,34 8,88 9,73 8,86Diploma 2,89 3,02 3,32 3,17University 4,94 5,25 5,54 5,65Total 107,41 108,21 111,28 109,67

Based on data from the Central of Statistics Bureau above, itappears that in August 2011 Indonesian skilled labour is only 8%,consist of 3, 17 million graduated from Diploma and 5, 65 milliongraduated from University. This condition is far compared withunskilled labour that dominates the 92% figure. The difficulty,Firmanzah (2011) says that geographical boundaries precisely removalpolicy applies only to skilled labour. To make it difficult,Firmanzah (2011) says that geographical boundaries removal policyapplies only to skilled labour. This condition makes the majority ofIndonesian workers could not take advantage on the moment of the AECin 2015.

In this study, we see the development of small and mediumenterprises are quite convincing. Hasan (2013) said that the SMEsector contributes as much as 57% in Indonesia's GDP. This businessunit has the potential to take unskilled labour who has notbenefited directly from the AEC 2015. In the small and mediumenterprise sector, culinary sector promises the greatest potential.Supriyadi (2014) says that Indonesia's foods occupies the first andsecond position on the list of the most delicious foods referred toCNN's poll. However, small and medium enterprises have flaws thathave not been repaired, which the serious one is poor packaging andmarketing of the products.

The purpose of this study is to analyse the relevant initiator inorder to rebrand the products of small and medium enterprises,especially in the culinary sector, to be able to offer packaging andmarketing of world class. The present study will try to analyzefurther to the movement that can be done and at the same timeexposing the conditions that must be possessed by analysing the


constraints of small and medium businesses that exist today. Theinitiator was then referred to as SME's Indotaste Centre.

To run this movement, it requires a special organization to be afacilitator for the implementation of the initiator at the sametime. Meisari (2014) says that a movement such as SME's IndotasteCentre will be effective when done with a down-top structure. Down-top structure means this movement must be led by the community.Moreover, bureaucratic process in Indonesia is still very difficult.The government only acts as a regulator, catalyst and facilitator,not the executor. Still according to her, the institution for theinitiator of this movement must be managed professionally like abusiness form in order to survive and sustain.

Alexander Osterwalder (2004) provide a master plan for theestablishment of a business that can be used as the basis of theformation. He proposes a Business Model that consists of NineBuilding Blocks. This model is reviewing the four main pillars,namely: product, customer interface, infrastructure management andfinancial aspect. Each pillar consists of several blocks below.

Table 2 : The nine business model building blocks

Based on the table above, it appears that each pillar has thebuilding blocks respectively. By identifying ninth building above,this research will be able to formulate an appropriate form forinitiator movement, named as SME's Indotaste Centre.


2 RESEARCH METHODSThe current study aims to create a new model in initiatingactivities of small and medium enterprises in the rebranding of themedium through the SME Indotaste Centre sector’s. In formulating themodel, it took a collection of theories and deep perspective ontheir own small and medium businesses. Therefore, we used adeductive pattern. We want to implement the concept of nine buildingblocks to make a model for SME's Indotaste Centre.

Based on the goal, our research was included as action research.Because the purpose of the research was still developable and werenot final, we did more research in exploratory. (Kuncoro, 2003) Inthe implementation phase, the research used modelling technic toensure the reliability of the generated hypotheses.

2.1 Sampling logicIn search of data, we used key-informant technique and secondaryanalysis of data (Kuncoro, 2003). Due to the data searching method,this study used a very small sample to specify the incominginformation. Samples were taken to be representative of each of theelements involved in the world of small business in the culinarysector. The elements of our survey consisted of: (1) Lecturer ineconomics, which provided a view of the condition of a rule or macroaspects (2) Small and Medium Enterprises Centre UI, as arepresentative of small and medium businesses and observe in themicro aspects.

2.2 Data collectionAs mentioned previously, the data search focused on key informantsand review of secondary data. We only took one speaker from eachelement for our sample. Each informant was interviewed about thestate of small business and its potential, and the ideal form ofSME's Indotaste Centre.

Table 3 : Sample overviewAspect

SME Condition andPotential SME’s Indotaste Centre

Macro The attention thatgovernment gave for theSME’s which have bigpotential is notmaximum especially inabsorbing labour

This unit would be successful whenmanaged to build relationships andwork closely with many agencies. Itwould make their work moresustainable. In addition, it mustbe ensured that the professionalswere paid at the right price

Micro SMEs currently had ahuge potential for

Good form was shaped like amovement that was both down top.


growth. However, therewere biggestconstraints on thedifficulty in thegovernment bureaucracyand the limitedknowledge of the smalland medium businesses

This was because the biggestproblem at this time, however, liedin the government. The institution must offer aposition as a sustainable andcontinuous service provider. Thiscould be done by keeping in touchwith SMEs. Form of funding can be charged tothe price of SME products intocustomer

Based on the data above, both agreed that the SME sector had bigpotential. However, the government would be quite difficult ifcharged with forming a new unit to initiate movement in the form ofSME's Indotaste Centre. In the matter of innovation, SME's IndotasteCentre should be able to resolve the difficult problems ofbureaucracy and licensing into a formal business unit and is able tostimulate the spread of knowledge and innovation. Furthermore, thisstudy classifies information from a sample taken into nine blocks ofbusiness models.

In addition to the survey results based on key informant methodtechnique, secondary data is also collected through a review of theliterature. This data consisted of internal data obtained fromagency information portal that led into the present study. From theresults of this literature review we find institutions like theInternational Finance Corporation which also moved to empower smalland medium businesses

2.3 Modelling techniquesAs mentioned earlier, this study used modelling technique tostrengthen the reliability of SME's Indotaste Centre proposed. Theprocedure was the procedure that will be used to control matchingmethod, where the unrelated data directly linked to certain elements(Kuncoro, 2003). The data used were secondary data from theliterature, which consisted of a body of data that had the samefunction as SME's Indotaste Centre. This data could be eitherinternal data or external data.

2.4 Data AnalysisFor the data that we have found, we classify them into severalcategories, consisting of SMEs, culinary, culinary potential of SMEsand SME's Indotaste Centre must-have.

Table 4 : Data analysis framework


Category DescriptionCulinary SME’sProblems

The difficulty of standardize if through the government

Need to learn more about marketing and it is costly

Culinary SME’sPotencies

Need assistant to innovate the product

Able to absorb many labour Have distinctive taste High salary Charge the cost of goods sold to the

customer directlySME’s IndotasteCentre must have

Have good relationship with many organization in Indonesia whether from government or independent

3 RESULTS

According to the resulting research, we categorize the informationinto the theory of nine blocks building that have been discussed inthe introduction. In this part, we will discuss more about SME’sIndotaste Centre based on each pillar.

3.1 ProductIn the first pillar is a product that will identify the block valueproposition. In this block value proposition, the products to beoffered by the SME's Indotaste Centre will be described. Aspreviously described, this product will try to resolve the problemsexisting in the current SME. Accordingly the solution could be foundas the value proposition of the products to be offered by the SME'sIndotaste Centre consists of:

• Provide an unofficial quality licensing as the tool forsolving the difficult problem of standardization throughofficial institutions. In this case, SME's Indotaste Centrewill try to cooperate with other agencies that will bediscussed on the block partners.

• Provide a compelling sales tool for SME customers. SME'sIndotaste Centre should be able to make attractive marketingtools for SME as customers, consist of the means of productionand sales tools. For example, SME's Indotaste Centre can makea meatball vendor cart to appear very attractive.

• Provide business consulting with professionals. It is a formof sustainable services offered by the SME's Indotaste Centre.


3.2 Costumer InterfaceThis pillar will identify the three blocks, the target customer,relationship, and distribution channel. The block of the targetcustomer is clear that SMEs in culinary sector are the target ofSME's Indotaste Centre. Meanwhile, to build relationships withcustomers, SME's Indotaste Centre should be able to do:

• Build relations with the customer by informal activities • Always keep contact with the SME• Controlling SME spontaneouslyTo distribution channels, SME's Indotaste Centre does not have

something special. The customer can contact SME's Indotaste Centreby telephone or by visiting the office.

3.3 Infrastructure ManagementIn this third pillar there are three blocks, or capability of keyactivities, key resources or configuration value, and partnerships.Block activities filled with activities that can provide a valueproposition for the product offered. Due to SME's Indotaste provideservices, the activities performed by the product that gives valueproposition. Key activities consist of:

Make an unofficial licensing standards with universities Make marketing tools for customer Make a business consulting for each customer In the key block resources, SME's Indotaste Centre has many needs

on intangible assets such as marketing understanding, knowledge, andlaboratories for quality testing. All of this must be owned by humanresources owned by the SME's Indotaste Centre.

At block partnerships, SME's Indotaste Centre must be able towork closely with the following stakeholders:

Institutions that have the same mission in international andnational, such as: International Finance Corporation, Aku CintaMasakan Indonesia (ACMI Community), UKM Center FEUI and so on.These institution’s role such as consultant at the same alsoas distribution network and cooperation partners in theexpansion of the market.

Universities which have good quality research. Theseuniversities play a role in standardization activities in foodquality assurance will be assisted by the SME's IndotasteCentre.

Government, national and local. Collaboration with thegovernment is needed to increase the confidence of SME inpartnership with SME's Indotaste Centre. This collaboration isexpected to be a form of government facilitator to thedevelopment of SME.


3.4 Financial AspectIn this last pillar, there are two blocks, namely the coststructure, and revenue models. SME's Indotaste Centre is aninstitution that emphasizes innovation so that the cost model usedis value-driven. Costs used by SME's Indotaste Fixed Cost Centre aremostly due to offer services. However, there is a variable cost inthe manufacture of marketing tools for SME. At block revenue models,payments are received from the service continuously and thusclassified as subscription fees. SME's Indotaste Centre receivesrevenue from SME assisted to make both marketing and packagingimprovements. SME's Indotaste Centre itself incorporates the costsas a direct cost of the production activities of the SME. It willfurther offset SME because the cost will be charged at the price.Fee charged to SME using differential pricing method, whereby theprice charged to each SME can be different, according to thecapabilities of SME and the type of SME's Indotaste Centre serviceswhich are used

Figure 1 : SME’s Indotaste Centre Business Model

3.5 Feasibility TestingSME's Indotaste Centre is a newly proposed institution. Therefore,there are reliability and feasibility issues that must be testedfirst. With those considerations, we tried to test the feasibilityof the establishment of the SME's Indotaste Centre by matchingagainst the institution.


International Finance Corporation (IFC) is actually one exampleof an institution that has a similar role. IFC has a similar role inSouth Asia with the appointment of three key drivers that consistof: improving access to finance, improving access to markets andimproving inclusion and growth.

Technical has undertaken by IFC also similar in improving accessto market. They maximize information technology. In fact they makethe SME Toolkit and Business Edge as an online tool to facilitatecreating sustainable marketing system. On the other hand, in theeffort to improving inclusion and growth, they also facilitate theprocess of standardization of SME products.

Based on the data above, there are many similarities between theSME's Indotaste Centre with IFC which has been established.Therefore, SME’s Indotaste Centre is feasible and reliable toestablish.

4 DISCUSSIONSME’s Indotaste Centre will be established with the aim to make SMEin Indonesia’s culinary sector able to utilize AEC 2015. However,the results above still have not touched yet on the aspects ofmarket expansion that should be utilized by culinary SME. Whereas inthe AEC by 2015, tariff and non-cost barriers will be eliminated onthe goods market.

4.1 Market expansion aspectsSME's Indotaste Centre must also be able to assist SME to expand

the culinary market. In fact, it would be quite difficult for SME'sIndotaste Centre to help culinary SME to physically and directlyexpand to ASEAN countries. However, developments in technology haveimproved the ability of the accessibility of the business to be ableto reach remote areas. One of the real form is e-commerce. With thee-commerce local products can be widely known.

However, other problems arise because of the need for individualknowledge related to the use of e-commerce related technologies.Therefore, SME's Indotaste Centre should able to also facilitatethis development.

With the use of e-commerce, then the culinary SME target consumergrow and become more widespread. The point is, culinary SME targetconsumer can be divided into two, namely: consumer short distanceand long distance. This division is very appropriate, because someculinary SME products have limited time before being consumed.Therefore, culinary SME products are divided into two, which aredurable food and fast food.

Fast food needs more assistance because it’s difficult to bemarketed through e-commerce. SME's Indotaste Centre can establishplaces for selling Indonesian culinary SME abroad by selecting the


best culinary SME in Indonesia. However, these activities are verylimited in small amounts in accordance with the funding obtained bySME's Indotaste Centre. For durable food, such as chips and severalclose-similar product, then marketing through e-commerce will bevery precise.

4.2 Limitation and future researchIn the present study, because this study is a form of researchdevelopment, the feasibility testing by very similar data is alimitation. The main problem is collecting the very similar data.Searching for data that is really similar is very difficult. So wetry to make a matching between our SME’s Indotaste Centre model withthe similar one institution which has been established.

In the result section, we have mentioned the IFC as one of theinstitutions that have a similar role with the SME's IndotasteCentre. However, the most striking difference is in the source offunding. IFC, which is under the supervision of the World BankGroup, has funding from other official institutions. NeverthelessSME's Indotaste Centre which stands as an initiator of the movement,must seek funding by charging to offer its services.

Actually, the difference of this system isn’t without reason. Wehave explained in the introduction that this condition arisesbecause of the complicated bureaucracy in Indonesia’s government, asan institution that can supervise the sustainable funding. Politicalaspects which are still very complicated in the government canactually complicate SME to develop if SME's Indotaste Centre isunder the direct supervision of the government.

In future studies, we hope that the data used are much morespecific. In addition, further research can be done by usingquantitative research to measure the effects of institutions such asSME's Indotaste Centre to benefit the SME are empowered.

5 CONCLUSIONSME in culinary has a great potential if it well utilized and wellmaximized. However, the biggest problem appears on the readiness ofthe product quality in terms of marketing as well as the ability toaccess the market. SME's Indotaste Centre may be the solution, andbecome an institution that offers services in marketing aspect ofSME in culinary, especially in product rebranding. By using theapproach in the nine business model building blocks, SME's IndotasteCentre can effectively provide solutions of challenges that SMEfaces.


Figure 2 : SME’s Indotaste Centre Final Business Model

ACKNOWLEDGMENTS

We would to thank Head of SME Centre UI, Dewi Meisari, and ourlecturer, Fithra Faisal, for their comments and suggestionsregarding the SMEs in Indonesia and SME’s Indotaste Centre.

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