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[ Rattan Agency]. Business Plan. Investment Summary. Vision, Mission and Objectives. Corporate Mission. “ To develop and sell consistently high value and eco-friendly rattan products and to recognize that commitment to social responsibility is a long term competitive advantage ”. - PowerPoint PPT Presentation
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[Rattan Agency]
Business Plan
(c) Ade Cahyat 2003 2
Investment Summary
(c) Ade Cahyat 2003 3
Vision, Mission andObjectives
(c) Ade Cahyat 2003 4
Corporate Mission
“To develop and sell consistently high value and eco-friendly rattan products and to recognize that
commitment to social responsibility is a long term competitive advantage”
(c) Ade Cahyat 2003 5
Company Aims and Objectives
1. SEP is committed to pursuing commercial rattan opportunities
2. SEP will co-operate with its partner, P3R to obtain its supply of resources from sustainably managed rattan gardens
3. SEP will reward honesty, hard work and achievement, placing a strong emphasis on unity, professionalism and respect for others
4. SEP will work closely with its partner, P3R, on research and development projects to optimise the cost of its rattan products, to reduce dangerous chemical residues produced by existing processing techniques and to raise average product quality
5. SEP is committed to becoming an asset of the rattan farmers and craftsmen by providing long-term corporate shareholding opportunities once sustained profitability has been secured
(c) Ade Cahyat 2003 6
SEP PositioningWhat role are we playing in the industry?
Resource BaseForest Land Garden
Harvesting
Local VillageCollector
Local LargeTrader
Furniture Factory
Exporter
Samarinda Trader
Rattan Product Trader
Java/Bali Product Trader
(Processing)
ProcessingSemi-Finished
Manufacturing
End User
Distribution
JavaTrader
Local Craft Maker & Subsistent Use
Home Industry
Ikea
Overseas ConsumerDomestic Consumer
SEPRattan Farmer
(c) Ade Cahyat 2003 7
SEP Positioning
SEP will assume the role of processor, aggregator, marketer and distributor and buy directly from farmers and sell directly to furniture manufacturers and craftsmen. Initially SEP will purchase wet rattan directly from farmers, process
(wash, smoke and dry) the wet rattan and sell the dry rattan directly to domestic and oversea customers.
SEP will also process/split dry rattan into core and peel (semi-finished rattan) and sell it to craftsmen and furniture makers.
In the long term, SEP will contract craftsmen to make and sell crafts to rattan product traders.
What role are we playing in the industry?
(c) Ade Cahyat 2003 8
StakeholdersWho has a stake in the company?
Financial
InstitutionsPartners/ Advisors
Contractors
Traders Employees
Customers
Farmers
Media
Local Communitie
s
Funders
Government
SHK
P3R
SEP
Major stake-holders
Minor influences
Direct link
In-direct link
Potential shareholders
(c) Ade Cahyat 2003 9
Stakeholders
There are many stakeholders in SEP aside from the obvious customers and suppliers
Some stakeholders such as customers and the farmer suppliers have direct contact with the company and have a high degree of influence on the future success of the company
Others have in-direct contact and either relatively high influence on SEP such as funders and NGO partners, while some such as local financial institutions are of lower importance but still warrant consideration
Who has a stake in the company?
(c) Ade Cahyat 2003 10
Marketing Plan
(c) Ade Cahyat 2003 11
Product OverviewWhat is rattan?
Unpeeled rattan
Rattan garden harvesting
(c) Ade Cahyat 2003 12
Product OverviewWhat is rattan?
Rattan crafts Rattan furniture
(c) Ade Cahyat 2003 13
Product OverviewWhat is rattan?
Baskets
Lampit
Stool
Hanging chair
(c) Ade Cahyat 2003 14
Product Overview
Rattans are climbing palms that grow throughout the Southeast Asian region, with 160 species on the island of Borneo.
Since the plant needs trees to survive, rattan products offer significant advantages over timber products in terms of sustainable development in the Indonesian forest.
Rattan can be cultivated or harvested from the wild. Cultivated rattan (from “rattan gardens”) accounts for less than 15% of total Indonesian commercial production but 100% of SEP’s product line.
Raw (wet) rattan is washed, dried, and smoked to produce round rattan (dry). This is then put through a machine to produce rattan core and peel, which are called semi-finished products.
Rattan’s finished products include furniture, baskets, lampit (mats), and wicker.
What is rattan?
(c) Ade Cahyat 2003 15
0
500
1,000
1,500
2,000
2,500
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1997
1998
1999
2000
Rp
Rattan Soap Rice
Situation Analysis
Unit Price of Wet Rattan (per kg) Compared with Soap (per piece) and Rice (per kg)
Market Size and Trends
Export ban on round Rattan lifted
Indonesia bans the export of raw & semi-finished rattan
(c) Ade Cahyat 2003 16
Situation Analysis
Comparing rattan prices with those of other basic goods like soap and rice, rattan prices are decreasing.
The price of rattan is not rising as fast as inflation, and has been falling in real terms for more than ten years.
Farmers are forced to move from rattan production to other businesses that currently exist on their farms with higher yielding products (timber, palm-oil, etc.) to provide for their basic needs.
Market Size and Trends
(c) Ade Cahyat 2003 17
Situation AnalysisMarket Size and Trends
Wood
OtherFurniture
Basket 16%
Rattan
OtherLampit
2002 Indonesian Furniture Exports by Volume
77%
6%
16%
4%0.5%
79%
Rattan Exports
All Furniture Exports
*Rattan includes all finished products
(c) Ade Cahyat 2003 18
Situation Analysis
Furniture is the major use for rattan and accounts for nearly 80% of total rattan-based product exports from Indonesia.
Baskets are the second most important finished product while Lampit mats are relatively insignificant.
SEP will focus on furniture manufacturers as the major customer segment to align itself with the industry, and will consider focusing its craft production on baskets.
Market Size and Trends
(c) Ade Cahyat 2003 19
0
200
400
600
800
1,000
1,200
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002In
done
sian
Fur
nitu
re E
xpor
ts (
US
$m
)
Rattan Wood Bamboo Metal Plastic
Situation AnalysisMarket Size and Trends
Indonesia bans the export of raw & semi-finished rattan
*Rattan includes all finished products
Indonesian Furniture Export Value (US $m)
Export ban on round Rattan lifted
Indonesian Economic Crisis
(c) Ade Cahyat 2003 20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Uni
t Val
ue p
er k
g (U
S $
)
Rattan Wood Bamboo Metal Plastic
Situation AnalysisMarket Size and Trends
Unit Value of Indonesian Export Furniture
*Rattan includes all finished products
Indonesia bans the export of raw & semi-finished rattan
Export ban on round Rattan lifted
Indonesian Economic Crisis
(c) Ade Cahyat 2003 21
Situation Analysis
Rattan and wood products are the most important raw materials for Indonesian furniture in both volume and value. Rattan led the market until 1994, but since then, wood has been the market leader and the gap between the two has widened.
The majority of Indonesian furniture that is produced is exported, so this sector plays a dominant role in defining market opportunities for unfinished and semi-finished rattan products.
Both rattan and wood furniture exports are growing slowly on an annual basis.
There is a strong correlation between the volume and value of wood and rattan-based furniture Indonesian exports.
The unit price of rattan has been declining since 1997.
Compared with the unit price of wood, rattan prices are much more sensitive to market forces.
Market Size and Trends
(c) Ade Cahyat 2003 22
Situation Analysis
Farmer
• Own multiple rattan gardens• Farmers own on average
2.25ha of Sega and can produce 4 wet tonnes every 36 months
• Plant and maintain • Decide what rattan species
to plant based on land• Big & small harvests• Hire helpers to harvest
rattan (pay out 50% of revenue)
• Ask traders for price and quantity before harvest to decide when/how much to harvest
• Timing of pmt by collector depend on market
• Have other sources income (breakdown unclear)
LocalCollector
• Buy rattan from farmers• Wash, smoke and dry
rattan• Transport rattan to
large local traders• Compare prices of
Large Traders and sell to highest bid (limited bargaining power)
• Need to sell all inventory Transport via boat or truck
• Sell 1 - 4 tonnes/trip• Freq. of trading
depends on distance from Large Traders
• Buy in mix• Paid 20% on delivery
and 80% 2 wks later (may make a trip just for money collection)
Large Traders
• Buy rattan from Local collectors or farmers
• Wash, smoke and dry rattan
• Sometimes re-processing is needed if upstream processing has been poor
• Transport and sell rattan to Samarinda traders
• Use combination of truck and boat for transportation
• Frequency of trading depends on distance from Samarinda
• Don’t keep track of how long inventory has been there
Samarinda Traders
• 6 Samarinda traders• Buy based on
warehouse capacity• Sometimes do
processing
Some disintermediation
Current Local Value-chain
(c) Ade Cahyat 2003 23
Situation Analysis
LocalCollectors
LargeTraders
SamarindaTraders
Rp. 700-9002,200t wet
Rp. 2,6001,270t dry
Rp. 2,200550t dry
Rp. 2,6001,730t dry
Rp. 3,930
3,000t dry5,
500t
wet
ProcessingHolding
Processing
Rp. 500-7003,300t wet
Price per kgMonthly volume
Average Sega Price in Surabaya per kg
LocalCraft Makers
SubsistentUses
Farmers
Rp. 1,000<4%
Current Local Value-chain
(c) Ade Cahyat 2003 24
Situation Analysis
The current local value-chain begins with the farmers who command a price of between Rp. 500-900 per kg for wet round rattan
Approximately 3,300 tonnes is washed, smoked and dried through small local processing units per month while around 2,200 tonnes pass through large local traders
Local traders sell either to larger local traders or direct to the Samarinda traders
The street price for dry round rattan per kg in Surabaya is approximately Rp. 3,930
Farmers also sell wet round rattan to local craft makers at Rp. 1,000 per kg. Farmers also use the rattan for their own use. However, the volume is small and less than 4% of the harvest volume.
Current Local Value-chain
(c) Ade Cahyat 2003 25
Situation AnalysisIndustry Distribution Chain
Resource BaseForest Land Garden
HarvestingRattan Farmer
Local VillageCollector
Local LargeTrader
Furniture Factory
Exporter
Samarinda Trader
Rattan Product Trader
Java/Bali Product Trader
(Processing)
ProcessingSemi-Finished
Manufacturing
End User
Distribution
Java Trader
Local Craft Maker & Subsistent Use
Home Industry
Ikea
Overseas Consumer Domestic Consumer
(c) Ade Cahyat 2003 26
Situation Analysis
Raw rattan can be harvested from “rattan garden” plantations as well as natural forests
Rattan is processed by either local village collectors or local large traders
The chain between harvest and manufacturing may involve as many as four actors mainly due to the long distance and high transportation costs between the supply to customer base
Java traders sell dry rattan to home-based and large furniture manufacturing companies in Java as well as overseas customers
Trade to overseas customers may also involve export specialists
Farmers also sell wet round rattan and/or semi-finished rattan to local craft makers. They also farm rattan for subsistent use.
Industry Distribution Chain
(c) Ade Cahyat 2003 27
Product OverviewWhat products are we selling and when?
Product Advantages Disadvantages
Round Sega Rattan
(Rp. 3,777 in Surabaya)
Can be harvested year roundHigh quality – strongMature sega needed for lampit
More difficult to package (ship)
Semi-finished Sega Rattan
(Rp. 8,500-13,500 in Surabaya)
Easy to package (ship)Clean (lambang has a lot of surface hair,
which sega does not)Diameter flexibility
Competes against lambang rattan (jelayan) produced in Sulawesi which is flexible, absorbs color, cheaper
Core competes with Red PulutDifficult to produce consistent color when
painted
Round Red Pulut Rattan
(Rp. 19,000-21,000 in Surabaya)
Kedang Pahu only supplierNatural color (filtrit must be painted)Strong and durableEasier to package than round sega
Competes with filtrit (same size)High costLimited proven marketNo technology to semi-finish
Crafts Possible use for low quality sega & jahabHandmadeAchieves social mission through employment
opportunities
Difficult to compete with mass productionMore difficult to package (ship)
Eco Labeled goods SEP the only supplier of eco-rattan Difficult FSC certification processUnclear understanding of customersUnclear value to customers
Other Rattan Garden Products
Medicinal plants, cosmetics ingredients and other natural herbs could be high margin
Unclear products and customers
Sh
ort
Te
rmL
on
g T
erm
Products at launch
(c) Ade Cahyat 2003 28
Product Overview
Short Term
Round Sega is advantageous because of its strength, quality, and abundance in the Kedang Pahu area.
Semi-Finished Sega is easy to pack and offers a much higher price in Surabaya. SEP will focus on producing as much of this product as possible given capacity constraints in the short term.
Round Red Pulut is only produced in Kedang Pahu, so SEP will be one of the few suppliers. The product is known for its high quality and natural color. However, red pulut cannot produce semi-finished products due to a lack of technology, so the potential to add future value is low unless SEP can design a process.
What products are we selling and when?
(c) Ade Cahyat 2003 29
Product Overview
Mid Term
Crafts will be an important product for SEP after two years. Crafts offer the advantage of a use for low quality sega and jahab and are handmade, making the products unique to SEP. The downside is that crafts like baskets are more expensive to ship and are disadvantaged when directly competing with low cost mass production.
Eco-Labeling will offer SEP a unique opportunity with rattan. As the only certified supplier, SEP will be able to differentiate its rattan. However, the value associated with this product relative to its costs and the possible customers remain unclear.
Long Term
Other products that grow in rattan gardens such as medicinal plants, cosmetics ingredients and other natural herbs could be a possibility for SEP in the long term, but the variety and value of these products still needs to be researched.
What products are we selling and when?
(c) Ade Cahyat 2003 30
CompetitionCompetitors and Profiles
Attribute Local Traders Large Traders
Strengths Existing relationship Experience Local Pays cash Can buy from non-P3R members
Volume Existing relationship Experience Local Pays cash Can buy from non-P3R members
Weaknesses Competitive price Cash flow Limited inventory/processing capacity Depend on seasonality for river transportation Weak relationship with farmers (no
transportation assistance) Buy and sell in mix (low focus on quality) Low focus on business Limited knowledge on customers and market
trend Poor tracking of data No contracts create uncertainty
Limited supply choice Limited knowledge on customers and market
trends Weak relationship with farmers (no
transportation assistance) No contracts (higher risk) Poor tracking of data No customer loyalty
(c) Ade Cahyat 2003 31
CompetitionCompetitors and Profiles
Attribute Samarinda Traders Surabaya
Traders
Strengths Volume Existing relationship Experience Can buy from non-P3R members Warehouse in Samarinda Existing relationship w/ transporters Close to the sea as a main port
Closer to the customer Do not manage transportation across Java sea Lower labour cost, but higher skill Sufficient energy sources Ability to mass produce and replicate designs Ability to buy from multiple geographic
suppliers Close to the main port More product diversity Easy to deliver to customer Cheap machinery maintenance due to easy
access to spare parts
Weaknesses Weak customer service Inconsistent product Lack of quality control Lack of business ethic Limited knowledge on customers and market
trends Inconsistent supply volume Lack of rattan focus due to diverse product lines
Far away from up resources area (lack of quality control)
Limited skills to make cultural products Higher material cost (due limited vertical
integration) Lack of business ethics
(c) Ade Cahyat 2003 32
Competition
Local Traders and Large Local Traders present similar challenges in terms of competitors. Each has experience and existing relationships in Kedang Pahu. With an organized and coordinated approach, SEP can take advantage of their cash flow problems, weak relationships, high uncertainty, and low focus on the rattan business.
SEP will also compete with Samarinda Traders. Although these competitors offer greater volume than local traders and stronger existing relationships with transportation companies, they are generally inconsistent in product quality and supply volume, offer limited customer service, and have little knowledge of their customers.
Competitors and Profiles
(c) Ade Cahyat 2003 33
Competition
SEP’s primary competitors are the Surabaya Traders. These traders have experience in high volume, are close in proximity to their customers, and can purchase from suppliers from different geographic locations (which is a significant advantage over SEP). SEP will need to capitalize on these competitors’ lack of quality control due to distance from production areas, high material costs due to lack of vertical integration, and lack of customer knowledge.
Competitors and Profiles
(c) Ade Cahyat 2003 34
Customer Targeting
High
HighLow
IKEA
Small-to-Medium SizedFurniture Makers
Low Quality Furniture Co.
High QualityFurniture Co.
Attractiveness
Eas
e of
E
ngag
emen
t
1
3
2
4
Which will be our first target customer segment?
(c) Ade Cahyat 2003 35
Customer Targeting
Assessing market attractiveness and ease of engagement suggests that for initial revenue generation purposes, the best customer targets are the small-to-medium sized furniture manufacturing businesses
High quality large furniture manufacturers and IKEA are attractive but are harder to engage in the early stages of company operation since volume, quality and price stability will be hard to achieve before the company reaches critical mass
Low quality furniture manufacturers are easier to engage since they are less demanding on product quality but are likely to squeeze prices as low as possible
Which will be our first target customer segment?
(c) Ade Cahyat 2003 36
Customer Roll-out PlanHow will our customer mix change over time?
Year
Small-Mediumsized
Low Quality
High Quality
IKEA
Relationshipdevelopment
Bulk sales
Customer Roll-out plan Sales Mix
100%
Customer
Year
0%
Small-to-Medium
Low Quality
Ikea
High Quality
1 2 3 1 2 3
(c) Ade Cahyat 2003 37
Customer Roll-out Plan
The first customers are the small-to-medium sized furniture manufacturers. These customers buy in relatively low volumes and will provide an initial revenue flow.
As volume grows, low and high quality large furniture manufacturers will be targeted to shift larger volumes of rattan and drive revenue growth to prove the business model.
Once sufficient quality in supply can be guaranteed, SEP will aggressively target high quality large furniture manufacturers as the primary revenue stream.
IKEA will be a focus of relationship development from company inception but revenue from this customer is unlikely to be generated until company operations are stable and sustainable.
How will our customer mix change over time?
(c) Ade Cahyat 2003 38
Customer Roll-out PlanHow will our customer mix change over time in terms of product quality?
Low Quality Large Low Quality LargeLow Quality Large Low Quality Large
Small to Medium
Small to Medium & IKEA Suppliers
IKEA SuppliersIKEA Suppliers
Small to Medium
Small to Medium & IKEA Suppliers
High Quality Large High Quality Large
Phase 1 Phase 2 Phase 3 Long Term
Vo
lum
e
Low Quality Medium Quality High Quality
High
Low
(c) Ade Cahyat 2003 39
Customer Roll-out Plan
In phase 1, SEP will sell medium to high quality product to small and medium furniture manufacturers, and lower quality product to low quality furniture manufacturers
In phase 2, as quality mix improves and supply volume grows SEP will focus on developing relationships with IKEA and its suppliers, and sell them medium to high quality products.
In phase 3, as quality mix and supply volume stablizes, SEP will focus on developing relationships with high quality large furniture manufacturers and sell them high quality products. At the same time, SEP will sell to IKEA suppliers medium quality products at a reduced price.
In the long term, SEP will focus on selling high quality product to high quality large furniture manufacturers, and medium quality product to IKEA suppliers but with less emphasis and low quality products to low quality furniture manufacturers.
How will our customer mix change over time in terms of product quality?
(c) Ade Cahyat 2003 40
Customer Value PropositionWhy will customer segments want to buy from us?
Possible Value Proposition
Selected attributes Value Proposition
Ikea
FSC labeling, stable quality, low residue, legal, on-time, long term contracting, P3R visit, consistency
FSC labeling Consistency Supplier Relationship Low residue?
SEP provides a sustainably harvested rattan product of consistent quality and volume and low chemical residue to its valued clients
High Quality
Stable supply, quality, on-time delivery, long-term contracting, co-branding, consistency
Co-branding Consistency Stable supply High quality
SEP can provide a stable supply of consistently high quality rattan and the co-branding opportunities that stem from association with an FSC certified producer
Low Quality
Volume, on-time delivery, consistency
Volume Competitive price
SEP provides stable rattan volumes at competitive prices
Small-to-Medium Sized
Quality, FSC labeling, precut & prepared, consistency
FSC labeling Flexibility Co-branding
SEP is the only flexible, FSC certified provider of rattan that can help differentiate furniture products through co-branding
(c) Ade Cahyat 2003 41
Customer Value Proposition
Customer value-propositions vary depending on the specific requirements of customer segments
The most important target segment, which is the high quality furniture supplier, values consistent supply in terms of quality and volume as well as the potential co-branding opportunities that exist when sourcing from an FSC certified supplier
IKEA has specifically identified a low chemical residue as important to its purchasing of SEP products
Why will customer segments want to buy from us?
(c) Ade Cahyat 2003 42
Sustainable Competitive AdvantageHow can we sustain a differentiated position?
Consistency of Product
Cus
tom
er S
ervi
ceLow High
High Competitors will rely on price
to undermine SEP’s market position
SEP will create a sustainable competitive advantage by:
1. Producing a rattan product of consistent quality and volume
2. Provide high levels of customer service 1. On-time and accurate
delivery 2. Stable contracts3. Potential co-branding
opportunities created by FSC labeling and socially responsible production
Price-basedcompetitors
SEP
(c) Ade Cahyat 2003 43
Sustainable Competitive Advantage
The current basis of competition in the supply of rattan in Surabaya is price and quality
SEP will provide high quality products at market competitive prices to match existing market demand
SEP will differentiate itself by improving client customer service levels and by providing a consistency of product
SEP has an advantage in consistency of supply due to its close relationship with its suppliers (P3R farmers) and its vertical integration across the distribution chain from Kedang Pahu to Surabaya
This differentiated position will help SEP first capture and then grow market share due to a stronger value proposition than its competitors
How can we sustain a differentiated position?
(c) Ade Cahyat 2003 44
PricingWhat is our pricing strategy?
Costs (per kg) Round Sega Semi-Finished Sega Red Pulut
Purchase 900 1530 dry 900 1530 dry 6500 13,400
Wash 150 250 dry 150 250 dry 150 300 dry
Dry/Smoke 150 250 dry 150 250 dry 150 300 dry
Transport (Kedang Pahu – Boat Point – Samarinda)
150 150 150
Transport (Ssmarinda-Surabaya)
600 ship + 75 fee = 675 600 ship + 75 fee = 675 600 ship + 155 fee = 755
Transport (Surabaya-Customers)
100 100 100
Load/Unload (7 times) 105 105 105
Inventory 100 100 200
Semi Finish none 625 + 550 + 300 +150 + 275 = 1900 2780
none
Sorting 100 100 100
Overhead Cost 200 200 200
Total Rp. 3,460 3,900 Rp. 6,240 11,000 Rp. 15,610 19,200
(c) Ade Cahyat 2003 45
Pricing
SEP will have an average cost of Rp.3,460 per kg for round Sega, Rp.6,240 per kg for semi-finished Sega and Rp. 15,610 per kg for Red Pulut.
Taking competitive considerations into account, SEP will aim to achieve an average price of Rp.3,897 per kg across its raw Sega product lines
SEP has considerable pricing flexibility for semi-finished products and will be able to support an average price of Rp.11,000 per kg
Red-Pulut is a niche opportunity for SEP, so the company will be able to support an average price of Rp.19,200 per kg and will still have significant pricing flexibility
What is our pricing strategy?
(c) Ade Cahyat 2003 46
PricingWhat is our pricing strategy with respect to quality?
Kubu 1 Kubu 2 Soft 1 Soft 2 Tiger
Typical Production Mix
27% 42% 22% 3% 6%
Current Industry Price
4,150 4,150 3,800 3,500 2,000
SEP Price 4,200 4,000 3,900 3,500 2,000
Average SEP Price: Rp.3,897
Surabaya Prices for Round Sega by Quality Category
(c) Ade Cahyat 2003 47
Pricing
SEP will price higher quality rattan at a premium to its customers
Kubu rattan (1 and 2) will average Rp.4,080 per kg – a discount of Rp.100 per kg over current industry prices
Soft rattan will be priced slightly higher than the industry average to reflect the enhanced value that consistent quality and stability of supply will bring to customers
Tiger rattan will be priced at Rp.2,000 per kg with the aim of clearing the rattan from the warehouse in Kedang Pahu as quickly as possible
As the company grows and potentially evolves its product line to include rattan crafts, it will phase out Tiger sales and channel Tiger into crafts production
What is our pricing strategy with respect to quality?
(c) Ade Cahyat 2003 48
PricingWhat is our discount or cash-back strategy for specific customerswith respect to volume?
Dis
coun
t
High
None
Volume per customer per month
Low Quality
High Quality
IKEA
Small-to-medium
High discount to large volume low quality
purchasers
Very little discount for low volume
customers
SEP will discount based on who the
customer is and how much they buy
(c) Ade Cahyat 2003 49
Pricing
SEP will discount to incentivize volume purchases and long-term contracts to stabilize demand volatility
High quality rattan will be discounted less than low quality to reflect the higher value placed on quality and FSC certification of this customer segment
Low quality rattan furniture manufacturers that purchase in high volumes will receive the largest discounts as SEP will strive to sell its low quality rattan in high volumes to a small number of regular customers
Small-to-medium sized furniture manufacturers will receive lower levels of discounts due to their higher cost of sales but will be encouraged to buy in large volumes if appropriate
What is our discount or cash-back strategy for specific customerswith respect to volume?
(c) Ade Cahyat 2003 50
Distribution Channel DesignHow do we get our products to market?
SamarindaKadang Pahu
Customer Channel
IKEA Direct using executive management & SHK business development officer
High-quality large furniture manufacturers
Direct using executive management & SHK business development officer
Low-quality large furniture manufacturers
Direct using the sales director
Small-to-medium sized manufacturers
Direct using Surabaya warehouse
Crafts Direct sales to crafts traders in Kalimantan and Surabaya
(c) Ade Cahyat 2003 51
Distribution Channel Design
SEP executive management will work directly to develop relationship with and sell to IKEA and its suppliers
SEP will hire or contract sales agents to develop relationships with and sell to high and low quality furniture manufacturers if the initial direct sales strategy proves to be ineffective
SEP sales agent based in Surabaya warehouse will directly sell to small and medium sized furniture manufacturers
SEP agent will directly sell to craftsmen in Kalimantan and Surabaya?
How do we get our products to market?
(c) Ade Cahyat 2003 52
Promotional StrategyHow do we get our message out to customers?
Vehicle Ikea High Quality Low QualitySmall-to-medium
Journals x x
Exhibitions x x
Sales People x x x
Local Paper ½ ½ ½
Word of Mouth x x x
Radio
Website x
Objectives Say “hello” Get people to buy Raise SEP awareness
Consistent with the Value Proposition Push consistency of supply and quality Promote FSC/green-ness/social
responsibility Use Red Pulut to drive sales & awareness On time delivery
(c) Ade Cahyat 2003 53
Promotional Strategy
The major aims of the promotional efforts in the early stages of company operation are to support market entry and rapidly raise awareness of SEP operations
The most important messaging channel for SEP will be the sales agents channel
Exhibitions will be useful to show-case SEP products but should use red-pulut as a leading attraction in order to differentiate the company from other rattan traders
How do we get our message out to customers?
(c) Ade Cahyat 2003 54
Five Year Sales ForecastsHow much do we expect to sell?
Forecast Value of Sales (m Rp.)
0
1,000
2,000
3,000
4,000
5,000
6,000
Year 1 Year 2 Year 3 Year 4 Year 5
Yea
rly s
ales
fore
cast
(m
Rp.
)
Semi-finished ProductsRed-PulutSega TigerSega Soft IISega Soft ISega Kubu IISega Kubu I
(c) Ade Cahyat 2003 55
Five Year Sales ForecastsHow much do we expect to sell?
Forecast Volume of Sales (tonnes)
0
100
200
300
400
500
600
700
Year 1 Year 2 Year 3 Year 4 Year 5
Yea
rly s
ales
fore
cast
(to
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Semi-finished productsRed-PulutSega TigerSega Soft IISega Soft ISega Kubu IISega Kubu I
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Total sales volume in the first year of operation is expected to be 18 tonnes, generating Rp.94m in sales
In year 5 SEP expects to be handling 660 tonnes per year and generating Rp.5.5bn in sales
SEP forecasts that it will maintain a consistent product mix over the first five years of operation since product mix can not be changed due to natural plant yield
SEP limits five year growth opportunities due to supply-side constraints on P3R farmer membership, logistical costs and desired management overhead
The low-value products, Tiger and Soft II will be sold directly to Samarinda traders in Kedang Pahu since the marginal cost of transportation to Surabaya per kg is greater than the price for which they can be sold
How much do we expect to sell?Five Year Sales Forecasts
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Marketing Plan Summary
Market Trends
Although the market for rattan is growing slightly in volume, the unit price is not rising as fast as other basic need goods prices.
The major finished product use for rattan is furniture (it accounts for about 80% of the market by volume), so rattan is highly dependent on the furniture industry.
Customers
SEP’s initial target customers are the low quality and small-to-medium sized furniture makers based in Surabaya and other Java cities.
The customer mix will evolve as the company matures with IKEA and high quality furniture manufacturers being the long-term focus.
What are the major marketing take-aways?
(c) Ade Cahyat 2003 58
Marketing Plan Summary
Value Proposition
SEP will offer a value proposition tailored to each customer incorporating consistency, high quality, possible co-branding and environmental sustainability benefits.
Market Tactics
Semi-finished product volume will be maximized to capacity constraints as they yield high marginal profits.
SEP will sell directly to customers in Surabaya as far as possible and ideally sell based on complete container units.
Pricing will be based on product and grade. The sales team will be the most important marketing
communications channel.
What are the major marketing take-aways?
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