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Rattan Agency

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Ikea. Overseas Consumer. Domestic Consumer (c) Ade Cahyat 2003. 26. Situation Analysis ... (c) Ade Cahyat 2003. 34. Customer Targeting. High. High. Low. IKEA ... – PowerPoint PPT presentation

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Title: Rattan Agency


1
Rattan Agency
  • Business Plan

2
Investment Summary
3
Vision, Mission and Objectives
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

5
Company Aims and Objectives
  • SEP is committed to pursuing commercial rattan
    opportunities
  • SEP will co-operate with its partner, P3R to
    obtain its supply of resources from sustainably
    managed rattan gardens
  • SEP will reward honesty, hard work and
    achievement, placing a strong emphasis on unity,
    professionalism and respect for others
  • 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
  • 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

6
SEP Positioning
What role are we playing in the industry?
Forest Land
Garden
Resource Base
SEP
Rattan Farmer
Harvesting
Local Village Collector
Local Large Trader
Samarinda Trader
Java Trader
Processing Semi-Finished
Furniture Factory
Local Craft Maker Subsistent Use
Home Industry
Manufacturing
Exporter
Rattan Product Trader
Java/Bali Product Trader (Processing)
Ikea
Distribution
Domestic Consumer
Overseas Consumer
End User
7
SEP Positioning
What role are we playing in the industry?
  • 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.

8
Stakeholders
Who has a stake in the company?
9
Stakeholders
Who has a stake in the company?
  • 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

10
Marketing Plan
11
Product Overview
What is rattan?
Unpeeled rattan
Rattan garden harvesting
12
Product Overview
What is rattan?
Rattan crafts
Rattan furniture
13
Product Overview
What is rattan?
Lampit
Hanging chair
Stool
Baskets
14
Product Overview
What is rattan?
  • 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 SEPs 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.
  • Rattans finished products include furniture,
    baskets, lampit (mats), and wicker.

15
Situation Analysis
Market Size and Trends
Unit Price of Wet Rattan (per kg) Compared with
Soap (per piece) and Rice (per kg)
Indonesia bans the export of raw semi-finished
rattan
Export ban on round Rattan lifted
16
Situation Analysis
Market Size and Trends
  • 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.

17
Situation Analysis
Market Size and Trends
18
Situation Analysis
Market Size and Trends
  • 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.

19
Situation Analysis
Market Size and Trends
Indonesian Furniture Export Value (US m)
Export ban on round Rattan lifted
Indonesia bans the export of raw semi-finished
rattan
Indonesian Economic Crisis
Rattan includes all finished products
20
Situation Analysis
Market Size and Trends
Unit Value of Indonesian Export Furniture
Indonesia bans the export of raw semi-finished
rattan
Export ban on round Rattan lifted
Indonesian Economic Crisis
Rattan includes all finished products
21
Situation Analysis
Market Size and Trends
  • 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.

22
Situation Analysis
Current Local Value-chain
Some disintermediation
Farmer
Local Collector
Large Traders
Samarinda Traders
  • 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)
  • 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)
  • 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
  • Dont keep track of how long inventory has been
    there
  • 6 Samarinda traders
  • Buy based on warehouse capacity
  • Sometimes do processing

23
Situation Analysis
Current Local Value-chain
Local Craft Makers
Processing
Average Sega Price in Surabaya per kg
Rp. 2,600 1,270t dry
Local Collectors
Rp. 500-700 3,300t wet
Rp. 1,000 Rp. 2,200 550t dry
Samarinda Traders
Farmers
Rp. 3,930 3,000t dry
5,500t wet
Large Traders
Rp. 700-900 2,200t wet
Rp. 2,600 1,730t dry
Subsistent Uses
Processing Holding
Price per kg Monthly volume
24
Situation Analysis
Current Local Value-chain
  • 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.

25
Situation Analysis
Industry Distribution Chain
Forest Land
Garden
Resource Base
Rattan Farmer
Harvesting
Local Village Collector
Local Large Trader
Samarinda Trader
Java Trader
Processing Semi-Finished
Furniture Factory
Local Craft Maker Subsistent Use
Home Industry
Manufacturing
Exporter
Rattan Product Trader
Java/Bali Product Trader (Processing)
Ikea
Distribution
Overseas Consumer
Domestic Consumer
End User
26
Situation Analysis
Industry Distribution Chain
  • 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.

27
Product Overview
What products are we selling and when?
Short Term
Long Term
Products at launch
28
Product Overview
What products are we selling and when?
  • 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.

29
Product Overview
What products are we selling and when?
  • 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.

30
Competition
Competitors and Profiles
31
Competition
Competitors and Profiles
32
Competition
Competitors and Profiles
  • 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.

33
Competition
Competitors and Profiles
  • SEPs 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.

34
Customer Targeting
Which will be our first target customer segment?
High
Ease of Engagement
Low Quality Furniture Co.
Small-to-Medium Sized Furniture Makers
1
2
IKEA
High Quality Furniture Co.
3
4
High
Low
Attractiveness
35
Customer Targeting
Which will be our first target customer segment?
  • 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

36
Customer Roll-out Plan
How will our customer mix change over time?
Customer Roll-out plan
Sales Mix
Relationship development
Bulk sales
Customer
100
Small-to-Medium
IKEA
High Quality
Low Quality
Ikea
Low Quality
Small-Medium sized
High Quality
0
1
2
3
1
2
3
Year
Year
37
Customer Roll-out Plan
How will our customer mix change over time?
  • 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.

38
Customer Roll-out Plan
How will our customer mix change over time in
terms of product quality?
39
Customer Roll-out Plan
How will our customer mix change over time in
terms of product quality?
  • 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.

40
Customer Value Proposition
Why will customer segments want to buy from us?
41
Customer Value Proposition
Why will customer segments want to buy from us?
  • 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

42
Sustainable Competitive Advantage
How can we sustain a differentiated position?
  • Competitors will rely on price to undermine SEPs
    market position
  • SEP will create a sustainable competitive
    advantage by
  • Producing a rattan product of consistent quality
    and volume
  • Provide high levels of customer service
  • On-time and accurate delivery
  • Stable contracts
  • Potential co-branding opportunities created by
    FSC labeling and socially responsible production

High
Customer Service
SEP
Price-based competitors
Low
High
Consistency of Product
43
Sustainable Competitive Advantage
How can we sustain a differentiated position?
  • 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

44
Pricing
What is our pricing strategy?
45
Pricing
What is our pricing strategy?
  • 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

46
Pricing
What is our pricing strategy with respect to
quality?
Surabaya Prices for Round Sega by Quality Category
Average SEP Price Rp.3,897
47
Pricing
What is our pricing strategy with respect to
quality?
  • 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

48
Pricing
What is our discount or cash-back strategy for
specific customers with respect to volume?
High discount to large volume low quality
purchasers
High
Low Quality
SEP will discount based on who the customer is
and how much they buy
IKEA
Small-to-medium
Discount
High Quality
None
Volume per customer per month
49
Pricing
What is our discount or cash-back strategy for
specific customers with respect to volume?
  • 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

50
Distribution Channel Design
How do we get our products to market?
51
Distribution Channel Design
How do we get our products to market?
  • 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?

52
Promotional Strategy
How do we get our message out to customers?
  • 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

53
Promotional Strategy
How do we get our message out to customers?
  • 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

54
Five Year Sales Forecasts
How much do we expect to sell?
Forecast Value of Sales (m Rp.)
55
Five Year Sales Forecasts
How much do we expect to sell?
Forecast Volume of Sales (tonnes)
56
Five Year Sales Forecasts
How much do we expect to sell?
  • 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

57
Marketing Plan Summary
What are the major marketing take-aways?
  • 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
  • SEPs 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.

58
Marketing Plan Summary
What are the major marketing take-aways?
  • 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.
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