Exploring a Business Model for a Sustainable Stingray leather Industry in Rembang
EXPLORING A BUSINESS MODEL FOR A SUSTAINABLE
STINGRAY LEATHER INDUSTRY IN REMBANG
IWAN FAJ AR PAHLAWAN
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
DECLARATION
I hereby declare that the thesis titled Exploring a Business Model for a
Sustainable Stingray Leather Industry in Rembang is true of my work with the
direction of the supervisor commission and has not been submitted in any form to
any university. Resources, originating or quoted from published and unpublished
works published from other authors, have been mentioned in the text and listed in
the Bibliography at the end of this thesis.
I hereby assign the copyright of my paper to the Bogor Agricultural
University (IPB).
Bogor, August 2015
Iwan Fajar Pahlawan
NRP F351137191
SUMMARY
IWAN FAJAR PAHLAWAN. Exploring a Business Model for a Sustainable
Stingray Leather Industry in Rembang. Supervised by SUKARDI and YANDRA
ARKEMAN.
Rembang is rich in marine fishing resources. As the largest marine fishing
producers, Rembang has the potential to develop the stingray leather industry.
This research attempts to explore a business model that can support the stingray
leather industry and its sustainability. Developing a suitable business model is
needed for the emerging Rembang stingray leather industry in order to support its
sustainability by creating, delivering and adding value. The research looks to
answer following questions: (1) What is the nature of the stingray leather industry
in Rembang? (2) What is the current business model applied to the Rembang
stingray leather industry? (3) What are the barriers in applying this business
model? (4) What kind of business model can support the sustainability of the
Rembang stingray leather industry? The research used frameworks of SWOT
analysis, Porter’s five forces analysis and Business Model Canvas analysis to
explore the stingray leather industry and the business within it.
The research was conducted in Rembang. The research design is an
exploratory study with qualitative approach. The research used a purposive
sampling with a snowball sampling techniques to invite respondents. The
techniques led to five respondents who have knowledge and experiences in the
Rembang stingray leather Industry. The respondents are stingray leather
entrepreneur, government officials, researcher and stingray skins supplier. The
data collection consists of literature/document review, observation and interview.
Interviews were conducted in a semi-structured format using an interview
protocols with an open-ended questions.
The stingray leather industry depends on several parties, such as
governments, stingray skins providers and stingray leather goods manufacturers.
The strengths of stingray leather industry in Rembang lies on its location,
resources and the human resources capability. The weaknesses include lack of
supporting industries, lack of human resources availability and weak business
infrastructure. The industry does not free from threats that come from outside the
region, such unfair trade in the Yogyakarta market and the penetration of big
stingray leather ventures to obtain stingray skins in Rembang. However, Rembang
has its customers segment that gradually improved, and the local government
provides full support for the entrepreneurs to develop the industry. It is essential
to develop the competitiveness of the industry with several advantages. The
collaboration among stakeholders in Rembang stingray leather industry could
strengthen the industry and encourage new entrepreneurs in the region to do the
business.
A successful entrepreneur needs a business model to reach the financial
viability of the venture. Moreover, a business should consider social and
environmental aspect to achieve its sustainability. A business model for the
stingray leather business in Rembang should focus on partnerships. The
partnerships will create better value propositions for customers and surroundings.
In addition, an innovative stingray leather business model will develop the
stingray leather industry in Rembang.
Keywords: Business model, Rembang Regency, stingray leather industry,
sustainability.
RINGKASAN
IWAN FAJAR PAHLAWAN. Eksplorasi Model Bisnis bagi Industri Kulit Ikan
pari yang Berkelanjutan di Rembang. Dibimbing oleh SUKARDI dan YANDRA
ARKEMAN.
Rembang merupakan kabupaten yang kaya akan sumber daya perikanan
laut. Sebagai produsen perikanan laut terbesar, Rembang memiliki potensi untuk
mengembangkan industri kulit ikan pari. Penelitian ini berusaha mengeksplorasi
sebuah model bisnis yang dapat mendukung pengembangan industri kulit ikan
pari dan keberlanjutannya. Mengembangkan sebuah model bisnis yang tepat
diperlukan bagi industri kulit ikan pari di Rembang yang sedang menggeliat
dalam rangka mendukung keberlanjutannya dengan menciptakan, memberikan
dan menambahkan suatu nilai. Peneilitian ini berusaha menjawab pertanyaanpertanyaan berikut: (1) Bagaimana gambaran industri kulit ikan pari di Rembang?
(2) Model bisnis apa yang saat ini diterapkan oleh industry kulit ikan pari di
Rembang? (3) Halangan apa saja yang dihadapi dalam penerapan model bisnis
tersebut? (4) Model bisnis apa yang dapat mendukung keberlanjutan industry kulit
ikan pari di Rembang? Penelitian ini menggunakan kerangka analisa SWOT,
Porter’s five forces dan Bisnis Model Canvas dalam mengeksplorasi industri dan
bisnis kulit ikan pari.
Penelitian ini berlokasi di Rembang. Penelitian ini didesain sebagai studi
eksploratori dengan pendekatan kualitatif. Pemilihan contoh dilakukan secara
purposive dengan menggunakan teknik snowball untuk memperoleh responden.
Lima responden diperoleh dimana yang bersangkutan memiliki pengetahuan dan
pengalaman dalam industri kulit ikan pari di Rembang. Responden tersebut terdiri
dari pengusaha kulit ikan pari, aparat pemerintahan, peneliti dan pemasok kulit
ikan pari mentah. Pengumpulan data meliputi peninjauan literature/dokumen,
observasi dan wawancara. Wawancara dilaksanakan secara semi-terstruktur
menggunakan protokol wawancara dengan pertanyaan yang terbuka-tertutup.
Industry kulit ikan pari bergantung pada beberapa pihak, seperti pemerintah,
penyedia kulit ikan pari mentah dan pembuat barang kulit ikan pari. Industry kulit
ikan pari di Rembang memiliki kekuatan pada lokasi, sumber daya, dan
kemampuan sumber daya manusia. Kelemahannya mencakup kurangnya industry
pendukung dan ketersediaan sember daya manusia, serta infrastruktur bisnis yang
lemah. Industry tersebut juga tidak lepas dari ancaman yang datang dari luar
daerah, seperti perdagangan yang tidak sehat di Yogyakarta dan penetrasi
perusahaan besar untuk memperoleh kulit ikan pari mentah. Akan tetapi, industry
kulit ikan pari di Rembang memiliki segmen pelanggannya sendiri yang secara
bertahap meningkat, dan pemerintah lokalnya mendukung penuh pengembangan
para wirausaha dalam industri tersebut. Mengembangkan daya saing industri
melalui beberapa keunggulan adalah penting. Kolaborasi diantara pemangku
kepentingan dalam industri kulit ikan pari di Rembang dapat memperkuat industri
dan mendorong wirausahawan baru di daerah tersebut untuk terlibat dalam bisnis
kulit ikan pari.
Seorang wirausahawan yang sukses membutuhkan sebuah model bisnis
untuk memperoleh suatu kondisi keuangan perusahaan yang layak. Lebih lanjut,
suatu bisnis perlu memperhatikan aspek social dan lingkunagn untuk menuju
usaha yang berkelanjutan. Model bisnis untuk bisnis kulit ikan pari di Rembang
harus fokus pada hubungan kerjasama. Hubungan kerjasama akan menciptakan
keuntungan yang lebih baik bagi pelanggan dan lingkungan sekitar. Lebih dari itu,
suatu model bisnis kulit ikan pari yang inovatif akan mengembangkan industri
kulit ikan pari di Rembang.
Kata kunci : Industri kulit ikan pari, Kabupaten Rembang, keberlanjutan, model
bisnis.
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EXPLORING A BUSINESS MODEL FOR A SUSTAINABLE
STINGRAY LEATHER INDUSTRY IN REMBANG
IWAN FAJ AR PAHLAWAN
Thesis
as a requirement for the degree of
Magister Sains
at
the Study Program of Agroindustrial Technology
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
External Examiner: Prof Dr-Ing Ir Suprihatin
Thesis Title : Exploring a Business Model for a Sustainable Stingray leather
Industry in Rembang
Name
: Iwan Fajar Pahlawan
NIM
: F351137191
Approved by
Supervisor Commission
Prof Dr Ir Sukardi, MM
Head
Dr Ir Yandra Arkeman, M.Eng
Member
Acknowledged by
Head of Graduate Program
Agroindustrial Technology
Dean of Graduate School
Prof Dr Ir Machfud, MS
Dr Ir Dahrul Syah, MScAgr
Date of Examination: 10 June 2015
Date of Graduation:
PREFACE
Praise and gratitude I pray to Allah subhanahu wa ta'ala for all His gifts so
that this thesis is successfully completed. The topic in this research, which is
conducted since June 2014, is business model innovation, with the title of
Exploring a Business Model for a Sustainable Stingray Leather Industry in
Rembang. This research was a research project to fulfil the requirement for
obtaining a double degree master program from Bogor Agricultural University
and the University of Adelaide.
I would like to thank Prof. Dr. Ir. Sukardi, MM, Dr. Ir. Yandra Arkeman,
M.Eng and Prof. Noel Lindsay as supervisor who has provided me guidance and
advice. I also would like to thank Prof. Dr-Ing. Ir. Suprihatin, as examiner, for all
suggestions during the examination. In addition, the authors convey appreciation
to Dr. Barry Elsey, Ms. Amina Omarova, all staffs of ECIC Adelaide University
and all staffs of TIP IPB which has helped me during my study in Bogor and
Adelaide. Thanks to Mr. Anshari Bukhari, Mr. Mujiono and Mr. Ramelan
Subagyo who has provided supports for me to study in the master degree.
Expression of thanks is also extended to all fellows of Double Degree
Master Program TIP IPB – MAIE Adelaide University for all sharing and caring
throughout the study. Hopefully, this thesis will be useful.
Bogor, August 2015
Iwan Fajar Pahlawan
TABLE OF CONTENTS
LIST OF TABLES
vi
LIST OF FIGURES
vi
LIST OF APPENDICES
vi
1 INTRODUCTION
Research Background
Research Questions
Research Objective
Research Benefits
Scope of the Research
1
1
4
4
4
5
2 LITERATURE REVIEW
Introduction
Stingray Leather Industry
Business Model
Sustainability Concept
Summary
6
6
7
8
9
10
3 METHOD
Introduction
Setting
Participants
Measurement Instruments
Procedure
Data Analysis
11
11
11
11
12
12
13
4 FINDINGS AND DISCUSSION
The Stingray Leather Industry in Rembang
Barriers in the Stingray Leather Business in Rembang
Analysis of the Stingray Leather Industry and Business in Rembang
A Business Model for the Stingray Leather Business in Rembang
14
14
16
16
27
5 CONCLUSION
Conclusion
Limitations
Implications
Futher Researches Direction
29
29
29
29
30
REFERENCES
31
APPENDIX
33
BIOGRAPHY
37
LIST OF TABLES
Table 1. Marine fishing production in the Jawa Tengah Province
Table 2. Marine fishing production by species in the Rembang Regency
2
3
LIST OF FIGURES
Figure 1.
Figure 2.
Figure 3.
Figure 4.
Figure 5.
Figure 6.
Growth of leather goods export value (in million USD)
Stingray leather and leather products
Business model framwork (Osterwalder and Pigneur 2002)
Map of the Rembang Regency
Stingray leather value chain in Rembang
Porter’s five forces framework on the Rembang stingray leather
industry
Figure 7. The stingray leather business model in Rembang
Figure 8. A proposed business model for a sustainable stingray leather
business
1
2
8
14
15
23
24
28
LIST OF APPENDICES
Appendix 1. List of respondents
Appendix 2. Interview protocols on internal and external factors exploration
Appendix 3. Interview questions in industrial competitive advantages
exploration
Appendix 4. Interview questions in Business Model Canvas
33
34
35
36
1
1 INTRODUCTION
Research Background
Export Value (million USD)
The leather industry is one of a number of well-developed industries in
Indonesia, which has existed for a long time. There are a number of parties
involved in the leather industry sector, such as raw hides/skins suppliers, chemical
producers and suppliers, leather tanners, leather goods manufacturers and also
leather and leather goods merchants. According to recent trade performance, the
Indonesian Ministry of Trade recorded that there was a gradual rise in leather
goods export values from 2009 to 2013. The export value stood at 178.4 million
USD in 2009 and increased gradually to reach 338.1 million USD in 2013. In
general, the export value experienced an upward trend of 16.81% and occupied
0.23% of Indonesia non-gas and oil export share in 2013 (see Figure 1).
400.00
350.00
300.00
250.00
200.00
150.00
324.70
338.10
292.10
246.40
178.40
100.00
50.00
2009
2010
2011
2012
2013
Year
Figure 1. Growth of leather goods export value (in million USD)
Indonesian leather tanneries have processed hides/skins from cow, sheep
and goat. Furthermore, they differentiate the product by using other kinds of skins.
They have processed several types of skin, such as crocodile, ostrich, reptiles,
rabbit, frog, shark, tilapia, and stingray into good quality leather. Stingray leather,
which is the focus of this research, is known for its beauty and durability. Stingray
leather is made from the skin at the back of the stingray. The stingray skin is
composed of little hard beads which look like pearls. Through a tanning process,
the hard and stiff stingray skin is transformed into soft and unique stingray leather.
There are several products that have been made from stingray leather. These
include wallets, bags, purses, belts, and furniture (Figure 2). Stingray leather is
traded based on its width which is measured across the centre of the crown. It is
divided into 5 sizes, i.e. small (5-6 in.), medium (7-9 in.), large (10-12 in.), extralarge (13-14 in.) and double extra-large (15 in. and up) (Roje leather 2015).
2
Figure 2. Stingray leather and leather products
Rembang Regency is one of the regencies in Indonesia which has the
potential for developing the stingray leather industry. Rembang, located on the
North Coast of the Province of Jawa Tengah, covers an area of approximately
1,014 km2 with a 63.5 km long coastline. Rembang Regency is well-known as the
largest producer of marine fishing products in the Province of Jawa Tengah with
production exceeding 40,000 tonnes during 2009 to 2013 (see Table 1).
Table 1. Marine fishing production in Jawa Tengah Province (in tonnes)
Year
No
Description
2009
2010
2011
2012
2013
1
City of Pekalongan
33,045 35,679 19,356 19,559.0 18,290.7
2
City of Semarang
175
336
568
856.7
505.0
3
City of Tegal
25,231 29,226 35,206 28,189.3 22,436.6
4
Regency of Batang
23,296 29,932 31,244 29,847.6 32,716.5
5
Regency of Brebes
2,504
5,975
7,967
4,442.5
2,522.9
6
Regency of Cilacap
14,667
4,833 19,921 22,963.1 18,121.7
7
Regency of Demak
1,904
1,758
3,134
3,749.7
2,436.2
8
Regency of Jepara
5,993
6,906
7,223
6,429.2
6,015.0
9
Regency of Kebumen
2,249
601
3,742
3,692.9
1,538.1
10 Regency of Kendal
1,531
1,550
1,835
2,031.8
1,811.0
11 Regency of Pati
31,132 38,717 44,041 47,576.4 32,170.9
12 Regency of Pekalongan
1,764
1,974
2,060
2,128.1
1,395.5
13 Regency of Pemalang
11,014 14,065 17,108 18,126.0 19,299.1
14 Regency of Purworejo
67
77
61
68.2
61.8
15 Regency of Rembang
40,449 40,567 56,731 64,941.7 63,797.7
16 Regency of Tegal
588
415
1,270
1,432.2
1,080.5
17 Regency of Wonogiri
24
25
55
58.7
68.1
Source: Statistics Indonesia of Jawa Tengah Province (2014).
As the largest marine fishing producer, Rembang produces several species
of marine fishing products such as squid, mackerel tuna, grouper and stingray.
Stingray is a commodity that has the potential to be developed in Rembang,
especially contributing to the leather industry. There was an upward trend in
stingray caught in Rembang from 2009 to 2013. Starting the period at 63 tonnes
3
and finishing at 995.8 tonnes (see Table 2). In addition, the value of stingray
production was more than 2.5 billion IDR in 2012. The volume of stingray caught
indicates the availability of stingray skins for the stingray leather industry. In
Rembang, stingray is caught for its meat and the skins are not needed and
discarded as a waste. Thus, stingray leather is a by-product of stingray meat
industry.
Table 2. Marine fishing production by species in Rembang Regency (in tonnes)
Year
Species
No
2009
2010
2011
2012
2013
1
Layang
13,475.05 8,773.79 14,501.18 18,746.70 16,796.23
2
Tembang/Jui
5,718.30 5,168.37 5,203.01
513.14 5,062.52
3
Kembung
3,617.00 3,444.39 3,577.60 3,536.28 2,804.95
4
Demang/Swangi
682.42 1,325.38 3,381.16 2,142.60 3,913.44
5
Selar
3,668.43 3,225.44 3,014.02 3,237.19 3,825.86
6
Petek
983.66 1,952.53 2,448.79 1,960.51 2,360.54
7
Tongkol
2,298.85 2,477.01 2,269.41 3,212.86 3,535.23
8
Bentong
- 1,013.46
528.76
887.15
9
Kwee
228.89
266.26
984.53 1,867.59
935.36
10 Cumi-cumi
768.87
536.65
970.77 1,073.47
595.73
11 Kerapu
12.19
179.55
774.30
638.47
920.20
12 Bawal hitam
638.57
498.20
721.47
916.07
902.40
13 Pari
359.94
698.85
752.35
995.80
63.06
14 Biji nangka
465.97
678.73
211.34
308.08
15 Balak/Beloso
270.70
245.72
630.51
978.41 1,016.37
Source: Statistics Indonesia of Rembang Regency (2014).
These facts show that there is an opportunity to develop the stingray leather
industry in Rembang for domestic and international markets, as well as an
encouragement for new entrepreneurs to start businesses in stingray leather. There
are a few entrepreneurs in this type of business in Rembang. However, these are
not well-developed. These require more effort to develop. The local government
has sent representatives to be educated at the Academy of Leather Technology.
The main purpose of this action was to gain knowledge in leather tanning
technology and leather goods design and production, so that those participating
could process stingray skins into leather goods. In addition, the local government
initiated several actions to start the project to develop the Rembang stingray
leather industry. A small-scale leather processing site was built to support the
project. The local government collaborated with the Centre for Leather, Rubber
and Plastics to conduct technology transfer training to develop human resource
competencies in mastering the leather tanning technology. As a result, some
entrepreneurs emerged and started their own stingray leather businesses.
The government of Rembang believes that the development of the stingray
leather industry will positively affect the economy of the regency as well as its
people. However, a sustainable industry needs to be founded upon three
principles: Economic, social and environmental. The Brundtland Commission of
the United Nations (1987), as cited by Khan et al. (2013), explains that
sustainable development will only be achieved by meeting the needs of the
4
present without compromising the ability of future generations to meet their
needs. Economic, social and environmental principles need to underpin any
development for it to be sustainable. However, addressing these three pillars of
sustainability introduce potential complications to the original, simple definition
of economic development. The objectives expressed are multidimensional, and
raise the issue of how to balance goals and how to determine the success (Harris
2003).
This research attempts to explore a business model that can support the
stingray leather industry and its sustainability. Developing a suitable business
model is needed for the emerging Rembang stingray leather industry in order to
support its sustainability by creating, delivering and adding value.
Research Questions
Based on this background context, the research emphasizes the formulation
of a business model to support the sustainability of the Rembang stingray leather
industry. The research looks to answer following questions.
1. What is the nature of the stingray leather industry in Rembang?
2. What is the current business model applied to the Rembang stingray leather
industry?
3. What are the barriers in applying this business model?
4. What kind of business model can support the sustainability of the Rembang
stingray leather industry?
Research Objective
This research aims to formulate a suitable business model for a sustainable
stingray leather industry in Rembang by identifying relevant internal and external
factors.
Research Benefits
The research is expected to provide the following benefits.
1. Identify a sustainable business model for stingray leather industry in
Rembang.
2. Help people in understanding the business model and its innovation in a
particular industry, which is stingray leather industry.
3. Encourage new entrepreneurs to use this information as a reference for
establishing new stingray leather product businesses.
4. Broaden the knowledge of those interested in researching a business model
innovation in the leather business.
5
Scope of the Research
The scope of this research consists of (1) analysing internal and external
factors of the stingray leather industry in Rembang, (2) analysing the
competitiveness of the industry, (3) analysing elements of the business model
canvas in stingray leather businesses, (4) formulating a business model that can
supports the sustainability of the stingray leather industry in Rembang.
The business model proposed focus on the modification of business model
canvas elements. Business Model Canvas (BMC) is a widely tool used that
underlie the model driving the firm’s business. Even though firms use BMC,
every firm has specific points on each elements of BMC that differ in the way
firms create, deliver and retain value. According to Osterwalder and Pineur (2010),
modifying the business model can lead a business to set new standards for an
industry.
6
2 LITERATURE REVIEW
Introduction
The leather industry is one of the more promising industries in Indonesia.
There are several parties involved in the leather industry sector, such as raw
hides/skins providers, chemical producers and distributors, leather tanneries,
leather goods manufacturers and also leather and leather goods sellers. According
to the Indonesian Ministry of Trade, there are 10 commodities in Indonesia that
have the potential in the global market, and one of them is leather and leather
products commodity. In addition, the Indonesian Ministry of Industry has set the
leather industry as one of the top priority industries to be developed.
The Indonesian leather industry has developed in terms of production and
product diversification. Nowadays, Indonesian tanners can process not only cow
hides but also unconventional skins, such as crocodile, snake, frog, fish, etc., in
good quality. For fish skins, stingray skin is the most famous material that can be
produced into a high-value product. Stingray leather is well-known for its strength,
durability, and beauty. Stingray leather utilizes the back part of the stingray skin
(Purnomo 2002). Stingray skin tanning is similar to the common tanning process.
Tanning is a process that aims to bring about an irreversible stabilization of the
skin substance which is prone to putrefaction. There are four types of tanning
methods. These are vegetable tanning, mineral tanning, other tanning, and
combination tanning methods. Vegetable tanning is a process that uses a tanning
agent derived from bark, wood, fruit, leaves or roots. Mineral tanning may use
chromium, aluminium or zirconium. Other tanning methods use aldehyde and/or
oil. All tanning methods can be used in various combinations with one another
and in different intensities to produce special leather properties. The selected
tanning method generally determines the final leather character (BASF 1995).
Leather tanners usually use vegetable tanning agents and chromium to tan
skins/hides. These kinds of tanning agents result in specific tanned-skin colours
(brown for vegetable tanning and blue for chromium tanning). Stingray leather is
usually processed using the aldehyde tanning method because its pearl-like texture
is more attractive in a “natural look”. Indonesian stingray leather and leather
goods have reached and in Australia.
The stingray leather industry has been established for more than 20 years,
with one venture established in Yogyakarta. This owner was inspired by the
stingray leather industry in Thailand and intended to develop it in Indonesia. The
establishment of that first venture encouraged many entrepreneurs to start
businesses in stingray leather and leather goods (Ibrahim 2003). There are a
number of strategies needed to develop the leather industry. The development and
adoption of suitable of technology and production processes are a priority in
developing the leather industry. Also important is the improvement of raw
material quality and quantity, the development of human resources, and the
development of the market and supporting industries (Purwaningsih 2003). Using
this approach, the stingray leather industry can be developed by adopting these
strategies in every region that have the appropriate supporting resources.
7
It is important to develop new regions in order to improve the quality of life
of the local people. The Rembang government has commenced developing the
industry by improving the skills and knowledge of local people in the
technological aspects of stingray leather processing. These efforts have
encouraged some to start their own stingray leather businesses. They have
mastered the technology and explored potential customer demand for stingray
leather and leather goods. However, technology alone is not enough to ensure a
successful business. The business model is as important as the technological
aspects in providing value to customers. The business model deals with the
infrastructure of a venture in delivering the value proposition to the customer
(Morris et al. 2005).
Stingray Leather Industry
There is limited information regarding when exactly stingray leather should
be tanned. Craftsmen and artisans in ancient Egypt valued stingray leather for its
strength, durability and beauty. The ancient Egyptians used stingray leather for
armour and decorative items as well as the Japanese where samurais would use
the skins for the handles of their swords. In 18th century France, Louis XV had
many items made from stingray leather; such as wig cases, snuff boxes, and
sheaths. John Paul Cooper, the famous English artisan, had produced several
items such as frames, vases, decorative boxes, and even candlesticks, which were
covered by stingray leather (Tom Barrington 2012).
Stingray leather is acknowledged as exotic leather in the market. According
to Ingram and Dixon (1994), the fish-based leather provides the basis for a large
and profitable industry. The industry had turned into a multi-billion dollar
business in 1989, when approximately 2-10 million skins of fish were used to
produce leather. Grey et al. (2006) discovered that the import value of USA’s
fish-based leather products reached USD$6 million annually. Stingray is one of
the species’ that trades in the USA fish-based leather industry. Southeast Asia
countries such as Thailand, Indonesia, and the Philippines dominate the export of
stingrays to the USA. Thailand contributed 78% of the total export to the USA
while Indonesia only 12%. Members of the genus Dasyatis sp., Mobulidae sp. and
Rajidae sp. are usually traded and used for leather (Purnomo 2002; Grey et al.
2006).
As with other industries, the stingray leather industry has a big impact on
wildlife conservation. Grey et al. (2006) notes that most of stingrays (99%) traded
in the USA were caught from the ocean. An expansion in stingray leather markets,
and unmonitored fishing activities could endanger the species and threaten the
sustainability of the stingray leather industry. Therefore, Smith et al. (2008) alert
industry stakeholders and suggest a conservative management approach for the
stingrays. The stingray leather industry has to be sustained to bring benefits
equally for humans as well as the environment.
8
Business Model
There are a number of business model definitions. Balan-Vnuk (2014)
summaries the business model as an architecture, a statement, a structure, an
abstraction, a blue-print, a representation, a design, and a set. Osterwalder and
Pigneur (2010) define a business model as the rationale of how an organization
creates, delivers and retains value. In a simple word, a business model explains
the operation of a venture (Magretta 2002) in establishing value (Zott et al. 2011)
and achieving profits (Scott-Kemmis 2012). Osterwalder and Pigneur (2002)
propose a business model framework that consists of four pillars: Product
innovation, customer relationship, infrastructure operation, and financial aspects
(Figure 3). These pillars express what a firm proposes, who it targets, how this
can be realised, and how much can be earned by doing it.
Figure 3. Business model framework (Osterwalder and Pigneur 2002)
A new business model can support the ownership and utility of existing
products/technologies while considering environmental and social aspects. This
means that a business model that aligns user incentives with the environmental
impact of the utilization of resources can make existing products and technologies
more sustainable (Teece 2010). According to Harper (2014), a sustainable
business often focuses on the “value creation” side of the business which includes
stakeholders, the environment and society.
Morris et al. (2005) explain that a suitable business model may make a
venture sustainable over time. A sustainable business model contributes to the
economy, society, and the environment (Bocken et al. 2014). The sustainability
related to these three pillars provides benefits for all stakeholders. Corporate
Social Responsibility (CSR) is one of the activities that underpin a sustainable
business model. Most of big companies use CSR to share the benefits with the
community. Bocken et al. (2014) promote archetypes that accelerate the
development of a sustainable business model through maximizing materials and
energy efficiencies, creating value from waste, substituting with renewable and
natural processes, delivering functionality rather than ownership, adopting a
stewardship role, encouraging sufficiency, re-purposing the business for
9
society/environment, and developing scale-up solutions. However, it seems that
not all of the archetypes are suitable for all industries, since every industry has its
unique characteristics. For instance, applying processing technology with
renewable and natural resources cannot be fully implemented in the leather
industry due to product quality issues. Nevertheless, all efforts for continuous
improvement are essential to ensure venture sustainability over time and to
maintain competitiveness.
Sustainability Concept
Sustainability is an important issue. According to Schumpeter (1936), as
cited by Morris et al. (2005), value is created from unique combinations of
resources that produce innovations, while transaction cost economics identifies
transaction efficiency and boundary decisions as a value source. Positioning
within the larger value network can be a critical factor in value creation. As part
of its positioning, a firm must establish appropriate relationships with suppliers,
partners, and customers. Stivers (1976) explains that sustainability was employed
as early as the 1970s to describe the economy in equilibrium with basic ecological
support systems. Sustainable development holds together concerns for the
carrying capacity of natural systems with the social and economic challenges
faced by humanity (Khan et al. 2013) and involves the three essential elements of
sustainable development: economic, environmental and social. These goals
expressed or implied are multidimensional, raising the issue of how to balance
objectives and how to judge success or failure (Harris 2003).
Harris (2003) explains in detail these three elements. Economic aspects are
defined as an economically sustainable system that must be able to produce goods
and services on a continuing basis, to maintain manageable levels of government
and external debt, and to avoid extreme sectoral imbalances which may damage
agricultural or industrial production. Although environmental aspects assume that
an environmentally sustainable system must maintain a stable resource base, there
must be an avoidance of the over-exploitation of renewable resource systems or
environmental sink functions, and the depletion of non-renewable resources to the
extent that investment is made in adequate substitutes. This includes maintenance
of biodiversity, atmospheric stability, and other ecosystem functions not
ordinarily classed as economic resources. And, in term of social aspects, a socially
sustainable system must achieve fairness in distribution and opportunity, adequate
provision of social services including health and education, gender equity, and
political accountability and participation.
However, Bogliott et al. (2007), as cited by Khan et al. (2013), argue that it
does not seem enough to cope with the needs and complexity of modern society,
which seeks a balance between material and non-material values. They present a
model for the development and evaluation of goals for sustainable development
by combining explicit notions of governance and ethics in the complex field of
sustainability. They explore the inter-linkages among sustainability, governance,
and ethical variables. These variables, although dependent on each other, are
systematized in distinct and discrete fields. Their framework represents a back-tobasics approach, transferable to any condition, in which the function aims are: (1)
10
sustainability (S), a field of macro-variables underlying normative targets and
criteria to enhance social, economic and environmental sustainability; (2)
governance (G), a field of macro-variables pertinent to the organization of civil
society and influencing the organization of the social system to ensure
sustainability; and (3) ethics (E), a field of principles used to explicitly orient
goals and targets of sustainable development toward a higher level of values that
clearly determine the future parts of sustainability.
Summary
The research explores a sustainable business model for the stingray leather
industry. Stingray leather businesses with their unique characteristics can create a
unique way in delivering value to customers. When most of the ways to create
sustainable business models is undertaken by big companies, it is challenging to
provide a model for small or medium scale companies. However, a business
model framework developed by Osterwalder and Pigneur (2010) can be used as
guidance to identify opportunities to create a sustainable business model for small
or medium scale company, especially for stingray leather ventures in Rembang.
11
3 METHOD
Introduction
This research presents a sustainable business model for the stingray leather
venture in Rembang. In developing the model, a SWOT analysis was undertaken
as a starting point, followed by using Porter’s Five Forces framework. The
research applies a qualitative approach to answer the research questions.
According to Bui (2014), qualitative research is defined as a study that obtains
data in a non-numerical form. Qualitative research embraces several data
collection methods: Interviewing, observing, collecting, and feeling. The types of
data from these methods can be obtained by person’s explanation, social
interactions, physical environment, documents, and feelings (Yin 2011).
According to Ragin (1987, 1999), as cited by Balan-Vnuk (2014), a quantitative
approach uses variable-oriented techniques. It aims to drag conclusions from a
sample taken from a population, based on relationships across a large sample of
observations, and to identify common patterns underpinning a specific population.
This research uses an exploratory study design. The research subjects who
participated in the research have experience and knowledge relating to the
Rembang stingray leather industry. The research used a purposive sampling
approach and snowball sampling. Through snowball sampling, the research
identified key persons who have knowledge and experience in the Rembang
stingray leather industry. Data collection involved observations and interviews.
Setting
Most of the research activities took place in the Rembang Regency, Jawa
Tengah Province, Indonesia. It is conducted on June 2014 and March 2015. The
research followed and observed the business operations of a particular venture.
The study observed several things, including the processing site and processing
procedures, the suppliers, the business infrastructures, offers, customers, and
financial aspects. The research conducted several interviews with selected
respondents.
Participants
The researcher engaged with several parties who had pertinent knowledge
and experiences about the Rembang stingray leather industry to obtain related
information about industry (Appendix 1). Participants consisted of a stingray
leather venture owner, a supplier, government officials, and a researcher. The
government officials were from the Centre for Leather, Rubber and Plastics, and
the Department of Industry, Trade, Cooperatives, and Micro, Small and Medium
Enterprises of the Rembang Regency. They are acknowledged as having direct
involvement in the development of the Rembang stingray leather industry. The
official from the Center for Leather, Rubber and Plastics has involvement in the
development of human competencies as an instructor of the intensive training
12
program and actively provides consultation for the industry in Rembang. The
official from the Department of Industry, Trade, Cooperatives, and Micro, Small
and Medium Enterprises of the Rembang Regency has involved in developing the
stingray leather industry in Rembang. A researcher from the Leather Technology
Academy is selected as a respondent because he has knowledge and experience in
the Rembang fish-based leather industry. A stingray skins supplier was also
interviewed to provide additional information about the Rembang stingray leather
business.
Measurement Instruments
The data used in this study was primary and secondary sources. The study
used primary data from observations and interviews while secondary data was
obtained from literature and document reviews. The interviews were conducted in
a semi-structured format to explore all information about a stingray leather
business model. In general, the interview questions asked about the strengths,
weaknesses, opportunities and threats in the Rembang stingray leather industry to
all respondents. For the stingray leather business owner, the questions focused on
how the business model was applied and the obstacles in applying the business
model. An open-ended questionnaire was used with interviews being recorded and
noted during the session for further analysis.
The interviews focused on using the protocols of Osterwalder and Pigneur’s
book of Business Model Generation. These were used to structure the interviews
and to provide insights for later analysis. It cannot be readily assumed that
interviewees will have prior knowledge of Business Model Canvas which has
been used to explore and co-create an understanding of business models. The
interview technique and design applied needed the researcher’s ability to collect
meaningful data with knowledge of the Business Model Canvas from the
interviewees so that it could be analysed.
Procedure
The researcher organised the data collection through observations and semistructured interviews. The literature review explored relevant theories and recent
information on business model issues and the leather business and this informed
the data collection process. Some data focused on regional demography and
statistics. For the theoretical foundations, most of the literature was taken from
publications in peer-reviewed journals which were accessed online. The
observations were conducted to explore the business process of a stingray leather
venture from processing to marketing. The observations also covered the business’
infrastructure, including business channels, raw and supporting materials
acquisitions, and partnerships. The interviews involved a face-to-face
conversation with the respondents for 60-90 minutes each. The interview with the
entrepreneur was conducted during the observation period. All interviews
followed the protocol as a guide to ensure the feedback could answer the research
questions.
13
Data Analysis
The data obtained are initially analysed to look the common themes from
the respondent’s feedback. The data was, then, analysed descriptively using the
SWOT analysis framework and Porter’s Five Forces analysis. A SWOT analysis
is a common tool used in formulating a business. It is used as a prelude to setting
long-term strategic plans for a firm. The SWOT analysis explores the internal and
external factors of a venture in order to create a better strategy to beat the
competition (Rangkuti 1997). The internal factors define the strengths and
weaknesses of a venture while the external factors comprise the threats and
opportunities faced by a firm. Porter’s Five Forces framework was employed to
assess the competitiveness of the industry in Rembang. Slater and Olson (2008),
as cited by Dälken (2014), present the framework with five factors in the
microenvironment that influence the competition and impact a venture’s ability to
generate profits. The five forces in the Porter’s framework consist of: rivalry
among competitors, bargaining power of the supplier, bargaining power of the
buyer, threat of substitutes, and threat of new entrants. Osterwalder and Pigneur
(2010) modify the forces as industry forces which change the term of buyers into
stakeholders. The framework of the business model canvas was used to analyse
the model of the stingray leather business. Data validation is conducted through
triangulation. Triangulation is one method for increasing validity of findings,
through deliberately seeking evidence from a wide range of sources and
comparing findings from those different sources.
14
4 FINDINGS AND DISCUSSION
The Stingray Leather Industry in Rembang
Rembang is one of the regencies in the Province of Jawa Tengah. It is
situated on the Gulf of Rembang, on the northern coast of Java Island (see Figure
4). According to the Statistics Indonesia, Rembang’s total population reached
611,495 of people in 2013, with 14.3% of them are concentrated in the sub-district
of Rembang. The fisheries industry is the leading industry that contributes to the
economics of Rembang. Fisheries activities consist of marine fisheries and
aquaculture. Fishermen and fish merchants are the key players in the industry.
There were 20,482 fishermen and 1,486 fish merchants recorded in Rembang in
2013. These figures increased slightly from the previous year, where there were
19,842 fishermen and 1,477 fish merchants in 2012. According to Hariyanti
(2009), the sub-district of Rembang contributes to 60% of fisheries’ products in
Rembang Regency.
Figure 4. Map of the Rembang Regency
The Stingray leather industry has emerged in Rembang due to the
availability of raw materials. Stingray is one of the commodities caught by the
fishermen there. These products are traded at the fish auction points. There are
several fish auction points in Rembang, the biggest of which is the fish auction
point of Tasik Agung. The fish auction point trades fish products caught by
fishermen. Stingray is one of the food commodities in Rembang and its
surrounding regions. Local people consume stingray in the form of smoked meat.
They process the smoked meat into several dishes. The most popular is “mangut”
soup. The producer of stingray smoked meat said, “I sell the stingray smoked
meat in the local market and also supply the product to some restaurants in Pati”.
The stingray leather producer in Rembang relies on the supply of the raw
materials to the stingray smoked meat producers. It seems that there is a mutual
partnership between the stingray leather producer and the smoked meat producers.
Previously, the smoked meat producers only used the meat by taking the skin off
15
and discarding the skin. After that, when the leather producer came and explained
that the skin could be processed into leather accessories, they started to provide
the skin to the leather producer. The leather producer said, “The availability of the
skins depends on the smoked meat business”. The mutual partnership built
between the leather producer and the smoked meat producer means that the
smoked meat producer can earn profits from the business by supplying the skins
to the leather producer, as they buy the fish wholesale. The smoked meat producer
said, “It is more profitable for me when someone wants to buy the skins”.
There are several parties involved in the Rembang stingray leather industry
(Figure 5). They consist of the supplier, the leather goods producer, and the
government. The leather goods producer processes the skins into leather. The
leather producer in Rembang utilizes small scale production facilities. It uses
modern machinery and traditional manual works in processing the skins. The
machinery consists of a tanning drum, compressor, and spray paint gun. Large
buckets are still used by the producer who processes the skins in small quantities.
Recently, there was one tanning drum used in Rembang, which can load up to 10
kg of skins. The leather producer in Rembang applies the white-tanning method to
produce the stingray leather. In the white-tanning method, the producer uses
formaldehyde as the tanning agent. According to Purnomo (2002), the used of the
white-tanning method exposes the natural appearance of the stingray nerves. It
also can give flexibility to the producer to colour the leather as requested.
The leather producer in Rembang does not produce leather good products –
only leather. Thus, the producer employs a person outside the venture to produce
the products. The producer said, “I used to send the leather to a person in
Yogyakarta to manufacture the leather into stingray leather products”. Most of the
stingray leather goods sold by the business in Rembang are manufactured in
Yogyakarta.
Figure 5. Stingray leather value chain in Rembang
The stingray leather industry in Rembang would not be well-developed
without local government support. The Department of Trade, Industry,
16
Cooperatives, and Micro, Small and Medium Enterprises has initiated the
development of the industry through several activities. The official of the
department who cares about the development of the industry said, “I would like to
develop the industry where Rembang can be acknowledged for its stingray
leather”. In order to support the industry, the official provides his property as the
site of stingray leather production. The official also helps promote the industry by
showing the products in several local and national exhibitions. The official
encourages the venture to keep the business, and the industry will give benefits to
the region. The development of the industry involves the Centre for Leather,
Rubber and Plastics (CLRP) as well. CLRP is a government research institute that
has responsibilities for developing the industry for commodities of leather, rubber
and plastics. CLRP has involved the development of human resources for stingray
leather production. It also provides technical consultation and several types of
processing machinery for the industry. The official of CLRP said, “The stingray
leather industry in Rembang has a promising development in the future due to the
availability of the raw materials, human resources, and the supporting institutions,
such as the Department of Trade, Industry, Cooperatives, and Micro, Small and
Medium Enterprises and other related institutions”.
The author sees that the industry is new in the region. It needs more people
to involve in the industry. There is only an entrepreneur involve full-time in the
stingray leather industry. The entrepreneur sources the raw materials from small
supplier. There is lack of supporting parties, such as leather goods producers and
chemicals suppliers. The entrepreneur operates the business in a small scale.
Those influence the business operation and hinder the industry to develop in the
region. Therefore, the stingray leather industry in Rembang could be classified as
a nascent industry. An industry, which is in the earliest phase of development, is
often categorized as a nascent industry. Therefore, it lacks of understanding,
endorsement and the support of external stakeholders (Zuzul and Edmondson
2013). However, the local government has important role in developing and
promoting the industry. This external stakeholder initiates several activities, such
as training and promoting the stingray leather products, and encourages new
entrepreneur in the business by providing the grant.
Bar riers in the Stingray leather Business in Rembang
As a nascent industry, it is no surprise that there are several obstacles that
may impede development of the industry. It also faces the fact that its sales is
relatively low (Angelis and Levésque 2010). The research showed that human
resource availability and the access to raw materials are barriers to developing the
industry in Rembang. The owner of the stingray leather venture has difficulty in
enga
STINGRAY LEATHER INDUSTRY IN REMBANG
IWAN FAJ AR PAHLAWAN
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
DECLARATION
I hereby declare that the thesis titled Exploring a Business Model for a
Sustainable Stingray Leather Industry in Rembang is true of my work with the
direction of the supervisor commission and has not been submitted in any form to
any university. Resources, originating or quoted from published and unpublished
works published from other authors, have been mentioned in the text and listed in
the Bibliography at the end of this thesis.
I hereby assign the copyright of my paper to the Bogor Agricultural
University (IPB).
Bogor, August 2015
Iwan Fajar Pahlawan
NRP F351137191
SUMMARY
IWAN FAJAR PAHLAWAN. Exploring a Business Model for a Sustainable
Stingray Leather Industry in Rembang. Supervised by SUKARDI and YANDRA
ARKEMAN.
Rembang is rich in marine fishing resources. As the largest marine fishing
producers, Rembang has the potential to develop the stingray leather industry.
This research attempts to explore a business model that can support the stingray
leather industry and its sustainability. Developing a suitable business model is
needed for the emerging Rembang stingray leather industry in order to support its
sustainability by creating, delivering and adding value. The research looks to
answer following questions: (1) What is the nature of the stingray leather industry
in Rembang? (2) What is the current business model applied to the Rembang
stingray leather industry? (3) What are the barriers in applying this business
model? (4) What kind of business model can support the sustainability of the
Rembang stingray leather industry? The research used frameworks of SWOT
analysis, Porter’s five forces analysis and Business Model Canvas analysis to
explore the stingray leather industry and the business within it.
The research was conducted in Rembang. The research design is an
exploratory study with qualitative approach. The research used a purposive
sampling with a snowball sampling techniques to invite respondents. The
techniques led to five respondents who have knowledge and experiences in the
Rembang stingray leather Industry. The respondents are stingray leather
entrepreneur, government officials, researcher and stingray skins supplier. The
data collection consists of literature/document review, observation and interview.
Interviews were conducted in a semi-structured format using an interview
protocols with an open-ended questions.
The stingray leather industry depends on several parties, such as
governments, stingray skins providers and stingray leather goods manufacturers.
The strengths of stingray leather industry in Rembang lies on its location,
resources and the human resources capability. The weaknesses include lack of
supporting industries, lack of human resources availability and weak business
infrastructure. The industry does not free from threats that come from outside the
region, such unfair trade in the Yogyakarta market and the penetration of big
stingray leather ventures to obtain stingray skins in Rembang. However, Rembang
has its customers segment that gradually improved, and the local government
provides full support for the entrepreneurs to develop the industry. It is essential
to develop the competitiveness of the industry with several advantages. The
collaboration among stakeholders in Rembang stingray leather industry could
strengthen the industry and encourage new entrepreneurs in the region to do the
business.
A successful entrepreneur needs a business model to reach the financial
viability of the venture. Moreover, a business should consider social and
environmental aspect to achieve its sustainability. A business model for the
stingray leather business in Rembang should focus on partnerships. The
partnerships will create better value propositions for customers and surroundings.
In addition, an innovative stingray leather business model will develop the
stingray leather industry in Rembang.
Keywords: Business model, Rembang Regency, stingray leather industry,
sustainability.
RINGKASAN
IWAN FAJAR PAHLAWAN. Eksplorasi Model Bisnis bagi Industri Kulit Ikan
pari yang Berkelanjutan di Rembang. Dibimbing oleh SUKARDI dan YANDRA
ARKEMAN.
Rembang merupakan kabupaten yang kaya akan sumber daya perikanan
laut. Sebagai produsen perikanan laut terbesar, Rembang memiliki potensi untuk
mengembangkan industri kulit ikan pari. Penelitian ini berusaha mengeksplorasi
sebuah model bisnis yang dapat mendukung pengembangan industri kulit ikan
pari dan keberlanjutannya. Mengembangkan sebuah model bisnis yang tepat
diperlukan bagi industri kulit ikan pari di Rembang yang sedang menggeliat
dalam rangka mendukung keberlanjutannya dengan menciptakan, memberikan
dan menambahkan suatu nilai. Peneilitian ini berusaha menjawab pertanyaanpertanyaan berikut: (1) Bagaimana gambaran industri kulit ikan pari di Rembang?
(2) Model bisnis apa yang saat ini diterapkan oleh industry kulit ikan pari di
Rembang? (3) Halangan apa saja yang dihadapi dalam penerapan model bisnis
tersebut? (4) Model bisnis apa yang dapat mendukung keberlanjutan industry kulit
ikan pari di Rembang? Penelitian ini menggunakan kerangka analisa SWOT,
Porter’s five forces dan Bisnis Model Canvas dalam mengeksplorasi industri dan
bisnis kulit ikan pari.
Penelitian ini berlokasi di Rembang. Penelitian ini didesain sebagai studi
eksploratori dengan pendekatan kualitatif. Pemilihan contoh dilakukan secara
purposive dengan menggunakan teknik snowball untuk memperoleh responden.
Lima responden diperoleh dimana yang bersangkutan memiliki pengetahuan dan
pengalaman dalam industri kulit ikan pari di Rembang. Responden tersebut terdiri
dari pengusaha kulit ikan pari, aparat pemerintahan, peneliti dan pemasok kulit
ikan pari mentah. Pengumpulan data meliputi peninjauan literature/dokumen,
observasi dan wawancara. Wawancara dilaksanakan secara semi-terstruktur
menggunakan protokol wawancara dengan pertanyaan yang terbuka-tertutup.
Industry kulit ikan pari bergantung pada beberapa pihak, seperti pemerintah,
penyedia kulit ikan pari mentah dan pembuat barang kulit ikan pari. Industry kulit
ikan pari di Rembang memiliki kekuatan pada lokasi, sumber daya, dan
kemampuan sumber daya manusia. Kelemahannya mencakup kurangnya industry
pendukung dan ketersediaan sember daya manusia, serta infrastruktur bisnis yang
lemah. Industry tersebut juga tidak lepas dari ancaman yang datang dari luar
daerah, seperti perdagangan yang tidak sehat di Yogyakarta dan penetrasi
perusahaan besar untuk memperoleh kulit ikan pari mentah. Akan tetapi, industry
kulit ikan pari di Rembang memiliki segmen pelanggannya sendiri yang secara
bertahap meningkat, dan pemerintah lokalnya mendukung penuh pengembangan
para wirausaha dalam industri tersebut. Mengembangkan daya saing industri
melalui beberapa keunggulan adalah penting. Kolaborasi diantara pemangku
kepentingan dalam industri kulit ikan pari di Rembang dapat memperkuat industri
dan mendorong wirausahawan baru di daerah tersebut untuk terlibat dalam bisnis
kulit ikan pari.
Seorang wirausahawan yang sukses membutuhkan sebuah model bisnis
untuk memperoleh suatu kondisi keuangan perusahaan yang layak. Lebih lanjut,
suatu bisnis perlu memperhatikan aspek social dan lingkunagn untuk menuju
usaha yang berkelanjutan. Model bisnis untuk bisnis kulit ikan pari di Rembang
harus fokus pada hubungan kerjasama. Hubungan kerjasama akan menciptakan
keuntungan yang lebih baik bagi pelanggan dan lingkungan sekitar. Lebih dari itu,
suatu model bisnis kulit ikan pari yang inovatif akan mengembangkan industri
kulit ikan pari di Rembang.
Kata kunci : Industri kulit ikan pari, Kabupaten Rembang, keberlanjutan, model
bisnis.
© Copyright of IPB, Year 2015
All Rights Reserved
It is prohibited to quote some or all of this paper without including or mentioning
the source. Quoting is only for educational purposes, research, scientific writing,
report writing, criticism, or reviewing an issue; and citations are not detrimental
to the interests of IPB
It is prohibited to announce and reproduce part or all of this paper in any form
without permission from IPB
EXPLORING A BUSINESS MODEL FOR A SUSTAINABLE
STINGRAY LEATHER INDUSTRY IN REMBANG
IWAN FAJ AR PAHLAWAN
Thesis
as a requirement for the degree of
Magister Sains
at
the Study Program of Agroindustrial Technology
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
External Examiner: Prof Dr-Ing Ir Suprihatin
Thesis Title : Exploring a Business Model for a Sustainable Stingray leather
Industry in Rembang
Name
: Iwan Fajar Pahlawan
NIM
: F351137191
Approved by
Supervisor Commission
Prof Dr Ir Sukardi, MM
Head
Dr Ir Yandra Arkeman, M.Eng
Member
Acknowledged by
Head of Graduate Program
Agroindustrial Technology
Dean of Graduate School
Prof Dr Ir Machfud, MS
Dr Ir Dahrul Syah, MScAgr
Date of Examination: 10 June 2015
Date of Graduation:
PREFACE
Praise and gratitude I pray to Allah subhanahu wa ta'ala for all His gifts so
that this thesis is successfully completed. The topic in this research, which is
conducted since June 2014, is business model innovation, with the title of
Exploring a Business Model for a Sustainable Stingray Leather Industry in
Rembang. This research was a research project to fulfil the requirement for
obtaining a double degree master program from Bogor Agricultural University
and the University of Adelaide.
I would like to thank Prof. Dr. Ir. Sukardi, MM, Dr. Ir. Yandra Arkeman,
M.Eng and Prof. Noel Lindsay as supervisor who has provided me guidance and
advice. I also would like to thank Prof. Dr-Ing. Ir. Suprihatin, as examiner, for all
suggestions during the examination. In addition, the authors convey appreciation
to Dr. Barry Elsey, Ms. Amina Omarova, all staffs of ECIC Adelaide University
and all staffs of TIP IPB which has helped me during my study in Bogor and
Adelaide. Thanks to Mr. Anshari Bukhari, Mr. Mujiono and Mr. Ramelan
Subagyo who has provided supports for me to study in the master degree.
Expression of thanks is also extended to all fellows of Double Degree
Master Program TIP IPB – MAIE Adelaide University for all sharing and caring
throughout the study. Hopefully, this thesis will be useful.
Bogor, August 2015
Iwan Fajar Pahlawan
TABLE OF CONTENTS
LIST OF TABLES
vi
LIST OF FIGURES
vi
LIST OF APPENDICES
vi
1 INTRODUCTION
Research Background
Research Questions
Research Objective
Research Benefits
Scope of the Research
1
1
4
4
4
5
2 LITERATURE REVIEW
Introduction
Stingray Leather Industry
Business Model
Sustainability Concept
Summary
6
6
7
8
9
10
3 METHOD
Introduction
Setting
Participants
Measurement Instruments
Procedure
Data Analysis
11
11
11
11
12
12
13
4 FINDINGS AND DISCUSSION
The Stingray Leather Industry in Rembang
Barriers in the Stingray Leather Business in Rembang
Analysis of the Stingray Leather Industry and Business in Rembang
A Business Model for the Stingray Leather Business in Rembang
14
14
16
16
27
5 CONCLUSION
Conclusion
Limitations
Implications
Futher Researches Direction
29
29
29
29
30
REFERENCES
31
APPENDIX
33
BIOGRAPHY
37
LIST OF TABLES
Table 1. Marine fishing production in the Jawa Tengah Province
Table 2. Marine fishing production by species in the Rembang Regency
2
3
LIST OF FIGURES
Figure 1.
Figure 2.
Figure 3.
Figure 4.
Figure 5.
Figure 6.
Growth of leather goods export value (in million USD)
Stingray leather and leather products
Business model framwork (Osterwalder and Pigneur 2002)
Map of the Rembang Regency
Stingray leather value chain in Rembang
Porter’s five forces framework on the Rembang stingray leather
industry
Figure 7. The stingray leather business model in Rembang
Figure 8. A proposed business model for a sustainable stingray leather
business
1
2
8
14
15
23
24
28
LIST OF APPENDICES
Appendix 1. List of respondents
Appendix 2. Interview protocols on internal and external factors exploration
Appendix 3. Interview questions in industrial competitive advantages
exploration
Appendix 4. Interview questions in Business Model Canvas
33
34
35
36
1
1 INTRODUCTION
Research Background
Export Value (million USD)
The leather industry is one of a number of well-developed industries in
Indonesia, which has existed for a long time. There are a number of parties
involved in the leather industry sector, such as raw hides/skins suppliers, chemical
producers and suppliers, leather tanners, leather goods manufacturers and also
leather and leather goods merchants. According to recent trade performance, the
Indonesian Ministry of Trade recorded that there was a gradual rise in leather
goods export values from 2009 to 2013. The export value stood at 178.4 million
USD in 2009 and increased gradually to reach 338.1 million USD in 2013. In
general, the export value experienced an upward trend of 16.81% and occupied
0.23% of Indonesia non-gas and oil export share in 2013 (see Figure 1).
400.00
350.00
300.00
250.00
200.00
150.00
324.70
338.10
292.10
246.40
178.40
100.00
50.00
2009
2010
2011
2012
2013
Year
Figure 1. Growth of leather goods export value (in million USD)
Indonesian leather tanneries have processed hides/skins from cow, sheep
and goat. Furthermore, they differentiate the product by using other kinds of skins.
They have processed several types of skin, such as crocodile, ostrich, reptiles,
rabbit, frog, shark, tilapia, and stingray into good quality leather. Stingray leather,
which is the focus of this research, is known for its beauty and durability. Stingray
leather is made from the skin at the back of the stingray. The stingray skin is
composed of little hard beads which look like pearls. Through a tanning process,
the hard and stiff stingray skin is transformed into soft and unique stingray leather.
There are several products that have been made from stingray leather. These
include wallets, bags, purses, belts, and furniture (Figure 2). Stingray leather is
traded based on its width which is measured across the centre of the crown. It is
divided into 5 sizes, i.e. small (5-6 in.), medium (7-9 in.), large (10-12 in.), extralarge (13-14 in.) and double extra-large (15 in. and up) (Roje leather 2015).
2
Figure 2. Stingray leather and leather products
Rembang Regency is one of the regencies in Indonesia which has the
potential for developing the stingray leather industry. Rembang, located on the
North Coast of the Province of Jawa Tengah, covers an area of approximately
1,014 km2 with a 63.5 km long coastline. Rembang Regency is well-known as the
largest producer of marine fishing products in the Province of Jawa Tengah with
production exceeding 40,000 tonnes during 2009 to 2013 (see Table 1).
Table 1. Marine fishing production in Jawa Tengah Province (in tonnes)
Year
No
Description
2009
2010
2011
2012
2013
1
City of Pekalongan
33,045 35,679 19,356 19,559.0 18,290.7
2
City of Semarang
175
336
568
856.7
505.0
3
City of Tegal
25,231 29,226 35,206 28,189.3 22,436.6
4
Regency of Batang
23,296 29,932 31,244 29,847.6 32,716.5
5
Regency of Brebes
2,504
5,975
7,967
4,442.5
2,522.9
6
Regency of Cilacap
14,667
4,833 19,921 22,963.1 18,121.7
7
Regency of Demak
1,904
1,758
3,134
3,749.7
2,436.2
8
Regency of Jepara
5,993
6,906
7,223
6,429.2
6,015.0
9
Regency of Kebumen
2,249
601
3,742
3,692.9
1,538.1
10 Regency of Kendal
1,531
1,550
1,835
2,031.8
1,811.0
11 Regency of Pati
31,132 38,717 44,041 47,576.4 32,170.9
12 Regency of Pekalongan
1,764
1,974
2,060
2,128.1
1,395.5
13 Regency of Pemalang
11,014 14,065 17,108 18,126.0 19,299.1
14 Regency of Purworejo
67
77
61
68.2
61.8
15 Regency of Rembang
40,449 40,567 56,731 64,941.7 63,797.7
16 Regency of Tegal
588
415
1,270
1,432.2
1,080.5
17 Regency of Wonogiri
24
25
55
58.7
68.1
Source: Statistics Indonesia of Jawa Tengah Province (2014).
As the largest marine fishing producer, Rembang produces several species
of marine fishing products such as squid, mackerel tuna, grouper and stingray.
Stingray is a commodity that has the potential to be developed in Rembang,
especially contributing to the leather industry. There was an upward trend in
stingray caught in Rembang from 2009 to 2013. Starting the period at 63 tonnes
3
and finishing at 995.8 tonnes (see Table 2). In addition, the value of stingray
production was more than 2.5 billion IDR in 2012. The volume of stingray caught
indicates the availability of stingray skins for the stingray leather industry. In
Rembang, stingray is caught for its meat and the skins are not needed and
discarded as a waste. Thus, stingray leather is a by-product of stingray meat
industry.
Table 2. Marine fishing production by species in Rembang Regency (in tonnes)
Year
Species
No
2009
2010
2011
2012
2013
1
Layang
13,475.05 8,773.79 14,501.18 18,746.70 16,796.23
2
Tembang/Jui
5,718.30 5,168.37 5,203.01
513.14 5,062.52
3
Kembung
3,617.00 3,444.39 3,577.60 3,536.28 2,804.95
4
Demang/Swangi
682.42 1,325.38 3,381.16 2,142.60 3,913.44
5
Selar
3,668.43 3,225.44 3,014.02 3,237.19 3,825.86
6
Petek
983.66 1,952.53 2,448.79 1,960.51 2,360.54
7
Tongkol
2,298.85 2,477.01 2,269.41 3,212.86 3,535.23
8
Bentong
- 1,013.46
528.76
887.15
9
Kwee
228.89
266.26
984.53 1,867.59
935.36
10 Cumi-cumi
768.87
536.65
970.77 1,073.47
595.73
11 Kerapu
12.19
179.55
774.30
638.47
920.20
12 Bawal hitam
638.57
498.20
721.47
916.07
902.40
13 Pari
359.94
698.85
752.35
995.80
63.06
14 Biji nangka
465.97
678.73
211.34
308.08
15 Balak/Beloso
270.70
245.72
630.51
978.41 1,016.37
Source: Statistics Indonesia of Rembang Regency (2014).
These facts show that there is an opportunity to develop the stingray leather
industry in Rembang for domestic and international markets, as well as an
encouragement for new entrepreneurs to start businesses in stingray leather. There
are a few entrepreneurs in this type of business in Rembang. However, these are
not well-developed. These require more effort to develop. The local government
has sent representatives to be educated at the Academy of Leather Technology.
The main purpose of this action was to gain knowledge in leather tanning
technology and leather goods design and production, so that those participating
could process stingray skins into leather goods. In addition, the local government
initiated several actions to start the project to develop the Rembang stingray
leather industry. A small-scale leather processing site was built to support the
project. The local government collaborated with the Centre for Leather, Rubber
and Plastics to conduct technology transfer training to develop human resource
competencies in mastering the leather tanning technology. As a result, some
entrepreneurs emerged and started their own stingray leather businesses.
The government of Rembang believes that the development of the stingray
leather industry will positively affect the economy of the regency as well as its
people. However, a sustainable industry needs to be founded upon three
principles: Economic, social and environmental. The Brundtland Commission of
the United Nations (1987), as cited by Khan et al. (2013), explains that
sustainable development will only be achieved by meeting the needs of the
4
present without compromising the ability of future generations to meet their
needs. Economic, social and environmental principles need to underpin any
development for it to be sustainable. However, addressing these three pillars of
sustainability introduce potential complications to the original, simple definition
of economic development. The objectives expressed are multidimensional, and
raise the issue of how to balance goals and how to determine the success (Harris
2003).
This research attempts to explore a business model that can support the
stingray leather industry and its sustainability. Developing a suitable business
model is needed for the emerging Rembang stingray leather industry in order to
support its sustainability by creating, delivering and adding value.
Research Questions
Based on this background context, the research emphasizes the formulation
of a business model to support the sustainability of the Rembang stingray leather
industry. The research looks to answer following questions.
1. What is the nature of the stingray leather industry in Rembang?
2. What is the current business model applied to the Rembang stingray leather
industry?
3. What are the barriers in applying this business model?
4. What kind of business model can support the sustainability of the Rembang
stingray leather industry?
Research Objective
This research aims to formulate a suitable business model for a sustainable
stingray leather industry in Rembang by identifying relevant internal and external
factors.
Research Benefits
The research is expected to provide the following benefits.
1. Identify a sustainable business model for stingray leather industry in
Rembang.
2. Help people in understanding the business model and its innovation in a
particular industry, which is stingray leather industry.
3. Encourage new entrepreneurs to use this information as a reference for
establishing new stingray leather product businesses.
4. Broaden the knowledge of those interested in researching a business model
innovation in the leather business.
5
Scope of the Research
The scope of this research consists of (1) analysing internal and external
factors of the stingray leather industry in Rembang, (2) analysing the
competitiveness of the industry, (3) analysing elements of the business model
canvas in stingray leather businesses, (4) formulating a business model that can
supports the sustainability of the stingray leather industry in Rembang.
The business model proposed focus on the modification of business model
canvas elements. Business Model Canvas (BMC) is a widely tool used that
underlie the model driving the firm’s business. Even though firms use BMC,
every firm has specific points on each elements of BMC that differ in the way
firms create, deliver and retain value. According to Osterwalder and Pineur (2010),
modifying the business model can lead a business to set new standards for an
industry.
6
2 LITERATURE REVIEW
Introduction
The leather industry is one of the more promising industries in Indonesia.
There are several parties involved in the leather industry sector, such as raw
hides/skins providers, chemical producers and distributors, leather tanneries,
leather goods manufacturers and also leather and leather goods sellers. According
to the Indonesian Ministry of Trade, there are 10 commodities in Indonesia that
have the potential in the global market, and one of them is leather and leather
products commodity. In addition, the Indonesian Ministry of Industry has set the
leather industry as one of the top priority industries to be developed.
The Indonesian leather industry has developed in terms of production and
product diversification. Nowadays, Indonesian tanners can process not only cow
hides but also unconventional skins, such as crocodile, snake, frog, fish, etc., in
good quality. For fish skins, stingray skin is the most famous material that can be
produced into a high-value product. Stingray leather is well-known for its strength,
durability, and beauty. Stingray leather utilizes the back part of the stingray skin
(Purnomo 2002). Stingray skin tanning is similar to the common tanning process.
Tanning is a process that aims to bring about an irreversible stabilization of the
skin substance which is prone to putrefaction. There are four types of tanning
methods. These are vegetable tanning, mineral tanning, other tanning, and
combination tanning methods. Vegetable tanning is a process that uses a tanning
agent derived from bark, wood, fruit, leaves or roots. Mineral tanning may use
chromium, aluminium or zirconium. Other tanning methods use aldehyde and/or
oil. All tanning methods can be used in various combinations with one another
and in different intensities to produce special leather properties. The selected
tanning method generally determines the final leather character (BASF 1995).
Leather tanners usually use vegetable tanning agents and chromium to tan
skins/hides. These kinds of tanning agents result in specific tanned-skin colours
(brown for vegetable tanning and blue for chromium tanning). Stingray leather is
usually processed using the aldehyde tanning method because its pearl-like texture
is more attractive in a “natural look”. Indonesian stingray leather and leather
goods have reached and in Australia.
The stingray leather industry has been established for more than 20 years,
with one venture established in Yogyakarta. This owner was inspired by the
stingray leather industry in Thailand and intended to develop it in Indonesia. The
establishment of that first venture encouraged many entrepreneurs to start
businesses in stingray leather and leather goods (Ibrahim 2003). There are a
number of strategies needed to develop the leather industry. The development and
adoption of suitable of technology and production processes are a priority in
developing the leather industry. Also important is the improvement of raw
material quality and quantity, the development of human resources, and the
development of the market and supporting industries (Purwaningsih 2003). Using
this approach, the stingray leather industry can be developed by adopting these
strategies in every region that have the appropriate supporting resources.
7
It is important to develop new regions in order to improve the quality of life
of the local people. The Rembang government has commenced developing the
industry by improving the skills and knowledge of local people in the
technological aspects of stingray leather processing. These efforts have
encouraged some to start their own stingray leather businesses. They have
mastered the technology and explored potential customer demand for stingray
leather and leather goods. However, technology alone is not enough to ensure a
successful business. The business model is as important as the technological
aspects in providing value to customers. The business model deals with the
infrastructure of a venture in delivering the value proposition to the customer
(Morris et al. 2005).
Stingray Leather Industry
There is limited information regarding when exactly stingray leather should
be tanned. Craftsmen and artisans in ancient Egypt valued stingray leather for its
strength, durability and beauty. The ancient Egyptians used stingray leather for
armour and decorative items as well as the Japanese where samurais would use
the skins for the handles of their swords. In 18th century France, Louis XV had
many items made from stingray leather; such as wig cases, snuff boxes, and
sheaths. John Paul Cooper, the famous English artisan, had produced several
items such as frames, vases, decorative boxes, and even candlesticks, which were
covered by stingray leather (Tom Barrington 2012).
Stingray leather is acknowledged as exotic leather in the market. According
to Ingram and Dixon (1994), the fish-based leather provides the basis for a large
and profitable industry. The industry had turned into a multi-billion dollar
business in 1989, when approximately 2-10 million skins of fish were used to
produce leather. Grey et al. (2006) discovered that the import value of USA’s
fish-based leather products reached USD$6 million annually. Stingray is one of
the species’ that trades in the USA fish-based leather industry. Southeast Asia
countries such as Thailand, Indonesia, and the Philippines dominate the export of
stingrays to the USA. Thailand contributed 78% of the total export to the USA
while Indonesia only 12%. Members of the genus Dasyatis sp., Mobulidae sp. and
Rajidae sp. are usually traded and used for leather (Purnomo 2002; Grey et al.
2006).
As with other industries, the stingray leather industry has a big impact on
wildlife conservation. Grey et al. (2006) notes that most of stingrays (99%) traded
in the USA were caught from the ocean. An expansion in stingray leather markets,
and unmonitored fishing activities could endanger the species and threaten the
sustainability of the stingray leather industry. Therefore, Smith et al. (2008) alert
industry stakeholders and suggest a conservative management approach for the
stingrays. The stingray leather industry has to be sustained to bring benefits
equally for humans as well as the environment.
8
Business Model
There are a number of business model definitions. Balan-Vnuk (2014)
summaries the business model as an architecture, a statement, a structure, an
abstraction, a blue-print, a representation, a design, and a set. Osterwalder and
Pigneur (2010) define a business model as the rationale of how an organization
creates, delivers and retains value. In a simple word, a business model explains
the operation of a venture (Magretta 2002) in establishing value (Zott et al. 2011)
and achieving profits (Scott-Kemmis 2012). Osterwalder and Pigneur (2002)
propose a business model framework that consists of four pillars: Product
innovation, customer relationship, infrastructure operation, and financial aspects
(Figure 3). These pillars express what a firm proposes, who it targets, how this
can be realised, and how much can be earned by doing it.
Figure 3. Business model framework (Osterwalder and Pigneur 2002)
A new business model can support the ownership and utility of existing
products/technologies while considering environmental and social aspects. This
means that a business model that aligns user incentives with the environmental
impact of the utilization of resources can make existing products and technologies
more sustainable (Teece 2010). According to Harper (2014), a sustainable
business often focuses on the “value creation” side of the business which includes
stakeholders, the environment and society.
Morris et al. (2005) explain that a suitable business model may make a
venture sustainable over time. A sustainable business model contributes to the
economy, society, and the environment (Bocken et al. 2014). The sustainability
related to these three pillars provides benefits for all stakeholders. Corporate
Social Responsibility (CSR) is one of the activities that underpin a sustainable
business model. Most of big companies use CSR to share the benefits with the
community. Bocken et al. (2014) promote archetypes that accelerate the
development of a sustainable business model through maximizing materials and
energy efficiencies, creating value from waste, substituting with renewable and
natural processes, delivering functionality rather than ownership, adopting a
stewardship role, encouraging sufficiency, re-purposing the business for
9
society/environment, and developing scale-up solutions. However, it seems that
not all of the archetypes are suitable for all industries, since every industry has its
unique characteristics. For instance, applying processing technology with
renewable and natural resources cannot be fully implemented in the leather
industry due to product quality issues. Nevertheless, all efforts for continuous
improvement are essential to ensure venture sustainability over time and to
maintain competitiveness.
Sustainability Concept
Sustainability is an important issue. According to Schumpeter (1936), as
cited by Morris et al. (2005), value is created from unique combinations of
resources that produce innovations, while transaction cost economics identifies
transaction efficiency and boundary decisions as a value source. Positioning
within the larger value network can be a critical factor in value creation. As part
of its positioning, a firm must establish appropriate relationships with suppliers,
partners, and customers. Stivers (1976) explains that sustainability was employed
as early as the 1970s to describe the economy in equilibrium with basic ecological
support systems. Sustainable development holds together concerns for the
carrying capacity of natural systems with the social and economic challenges
faced by humanity (Khan et al. 2013) and involves the three essential elements of
sustainable development: economic, environmental and social. These goals
expressed or implied are multidimensional, raising the issue of how to balance
objectives and how to judge success or failure (Harris 2003).
Harris (2003) explains in detail these three elements. Economic aspects are
defined as an economically sustainable system that must be able to produce goods
and services on a continuing basis, to maintain manageable levels of government
and external debt, and to avoid extreme sectoral imbalances which may damage
agricultural or industrial production. Although environmental aspects assume that
an environmentally sustainable system must maintain a stable resource base, there
must be an avoidance of the over-exploitation of renewable resource systems or
environmental sink functions, and the depletion of non-renewable resources to the
extent that investment is made in adequate substitutes. This includes maintenance
of biodiversity, atmospheric stability, and other ecosystem functions not
ordinarily classed as economic resources. And, in term of social aspects, a socially
sustainable system must achieve fairness in distribution and opportunity, adequate
provision of social services including health and education, gender equity, and
political accountability and participation.
However, Bogliott et al. (2007), as cited by Khan et al. (2013), argue that it
does not seem enough to cope with the needs and complexity of modern society,
which seeks a balance between material and non-material values. They present a
model for the development and evaluation of goals for sustainable development
by combining explicit notions of governance and ethics in the complex field of
sustainability. They explore the inter-linkages among sustainability, governance,
and ethical variables. These variables, although dependent on each other, are
systematized in distinct and discrete fields. Their framework represents a back-tobasics approach, transferable to any condition, in which the function aims are: (1)
10
sustainability (S), a field of macro-variables underlying normative targets and
criteria to enhance social, economic and environmental sustainability; (2)
governance (G), a field of macro-variables pertinent to the organization of civil
society and influencing the organization of the social system to ensure
sustainability; and (3) ethics (E), a field of principles used to explicitly orient
goals and targets of sustainable development toward a higher level of values that
clearly determine the future parts of sustainability.
Summary
The research explores a sustainable business model for the stingray leather
industry. Stingray leather businesses with their unique characteristics can create a
unique way in delivering value to customers. When most of the ways to create
sustainable business models is undertaken by big companies, it is challenging to
provide a model for small or medium scale companies. However, a business
model framework developed by Osterwalder and Pigneur (2010) can be used as
guidance to identify opportunities to create a sustainable business model for small
or medium scale company, especially for stingray leather ventures in Rembang.
11
3 METHOD
Introduction
This research presents a sustainable business model for the stingray leather
venture in Rembang. In developing the model, a SWOT analysis was undertaken
as a starting point, followed by using Porter’s Five Forces framework. The
research applies a qualitative approach to answer the research questions.
According to Bui (2014), qualitative research is defined as a study that obtains
data in a non-numerical form. Qualitative research embraces several data
collection methods: Interviewing, observing, collecting, and feeling. The types of
data from these methods can be obtained by person’s explanation, social
interactions, physical environment, documents, and feelings (Yin 2011).
According to Ragin (1987, 1999), as cited by Balan-Vnuk (2014), a quantitative
approach uses variable-oriented techniques. It aims to drag conclusions from a
sample taken from a population, based on relationships across a large sample of
observations, and to identify common patterns underpinning a specific population.
This research uses an exploratory study design. The research subjects who
participated in the research have experience and knowledge relating to the
Rembang stingray leather industry. The research used a purposive sampling
approach and snowball sampling. Through snowball sampling, the research
identified key persons who have knowledge and experience in the Rembang
stingray leather industry. Data collection involved observations and interviews.
Setting
Most of the research activities took place in the Rembang Regency, Jawa
Tengah Province, Indonesia. It is conducted on June 2014 and March 2015. The
research followed and observed the business operations of a particular venture.
The study observed several things, including the processing site and processing
procedures, the suppliers, the business infrastructures, offers, customers, and
financial aspects. The research conducted several interviews with selected
respondents.
Participants
The researcher engaged with several parties who had pertinent knowledge
and experiences about the Rembang stingray leather industry to obtain related
information about industry (Appendix 1). Participants consisted of a stingray
leather venture owner, a supplier, government officials, and a researcher. The
government officials were from the Centre for Leather, Rubber and Plastics, and
the Department of Industry, Trade, Cooperatives, and Micro, Small and Medium
Enterprises of the Rembang Regency. They are acknowledged as having direct
involvement in the development of the Rembang stingray leather industry. The
official from the Center for Leather, Rubber and Plastics has involvement in the
development of human competencies as an instructor of the intensive training
12
program and actively provides consultation for the industry in Rembang. The
official from the Department of Industry, Trade, Cooperatives, and Micro, Small
and Medium Enterprises of the Rembang Regency has involved in developing the
stingray leather industry in Rembang. A researcher from the Leather Technology
Academy is selected as a respondent because he has knowledge and experience in
the Rembang fish-based leather industry. A stingray skins supplier was also
interviewed to provide additional information about the Rembang stingray leather
business.
Measurement Instruments
The data used in this study was primary and secondary sources. The study
used primary data from observations and interviews while secondary data was
obtained from literature and document reviews. The interviews were conducted in
a semi-structured format to explore all information about a stingray leather
business model. In general, the interview questions asked about the strengths,
weaknesses, opportunities and threats in the Rembang stingray leather industry to
all respondents. For the stingray leather business owner, the questions focused on
how the business model was applied and the obstacles in applying the business
model. An open-ended questionnaire was used with interviews being recorded and
noted during the session for further analysis.
The interviews focused on using the protocols of Osterwalder and Pigneur’s
book of Business Model Generation. These were used to structure the interviews
and to provide insights for later analysis. It cannot be readily assumed that
interviewees will have prior knowledge of Business Model Canvas which has
been used to explore and co-create an understanding of business models. The
interview technique and design applied needed the researcher’s ability to collect
meaningful data with knowledge of the Business Model Canvas from the
interviewees so that it could be analysed.
Procedure
The researcher organised the data collection through observations and semistructured interviews. The literature review explored relevant theories and recent
information on business model issues and the leather business and this informed
the data collection process. Some data focused on regional demography and
statistics. For the theoretical foundations, most of the literature was taken from
publications in peer-reviewed journals which were accessed online. The
observations were conducted to explore the business process of a stingray leather
venture from processing to marketing. The observations also covered the business’
infrastructure, including business channels, raw and supporting materials
acquisitions, and partnerships. The interviews involved a face-to-face
conversation with the respondents for 60-90 minutes each. The interview with the
entrepreneur was conducted during the observation period. All interviews
followed the protocol as a guide to ensure the feedback could answer the research
questions.
13
Data Analysis
The data obtained are initially analysed to look the common themes from
the respondent’s feedback. The data was, then, analysed descriptively using the
SWOT analysis framework and Porter’s Five Forces analysis. A SWOT analysis
is a common tool used in formulating a business. It is used as a prelude to setting
long-term strategic plans for a firm. The SWOT analysis explores the internal and
external factors of a venture in order to create a better strategy to beat the
competition (Rangkuti 1997). The internal factors define the strengths and
weaknesses of a venture while the external factors comprise the threats and
opportunities faced by a firm. Porter’s Five Forces framework was employed to
assess the competitiveness of the industry in Rembang. Slater and Olson (2008),
as cited by Dälken (2014), present the framework with five factors in the
microenvironment that influence the competition and impact a venture’s ability to
generate profits. The five forces in the Porter’s framework consist of: rivalry
among competitors, bargaining power of the supplier, bargaining power of the
buyer, threat of substitutes, and threat of new entrants. Osterwalder and Pigneur
(2010) modify the forces as industry forces which change the term of buyers into
stakeholders. The framework of the business model canvas was used to analyse
the model of the stingray leather business. Data validation is conducted through
triangulation. Triangulation is one method for increasing validity of findings,
through deliberately seeking evidence from a wide range of sources and
comparing findings from those different sources.
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4 FINDINGS AND DISCUSSION
The Stingray Leather Industry in Rembang
Rembang is one of the regencies in the Province of Jawa Tengah. It is
situated on the Gulf of Rembang, on the northern coast of Java Island (see Figure
4). According to the Statistics Indonesia, Rembang’s total population reached
611,495 of people in 2013, with 14.3% of them are concentrated in the sub-district
of Rembang. The fisheries industry is the leading industry that contributes to the
economics of Rembang. Fisheries activities consist of marine fisheries and
aquaculture. Fishermen and fish merchants are the key players in the industry.
There were 20,482 fishermen and 1,486 fish merchants recorded in Rembang in
2013. These figures increased slightly from the previous year, where there were
19,842 fishermen and 1,477 fish merchants in 2012. According to Hariyanti
(2009), the sub-district of Rembang contributes to 60% of fisheries’ products in
Rembang Regency.
Figure 4. Map of the Rembang Regency
The Stingray leather industry has emerged in Rembang due to the
availability of raw materials. Stingray is one of the commodities caught by the
fishermen there. These products are traded at the fish auction points. There are
several fish auction points in Rembang, the biggest of which is the fish auction
point of Tasik Agung. The fish auction point trades fish products caught by
fishermen. Stingray is one of the food commodities in Rembang and its
surrounding regions. Local people consume stingray in the form of smoked meat.
They process the smoked meat into several dishes. The most popular is “mangut”
soup. The producer of stingray smoked meat said, “I sell the stingray smoked
meat in the local market and also supply the product to some restaurants in Pati”.
The stingray leather producer in Rembang relies on the supply of the raw
materials to the stingray smoked meat producers. It seems that there is a mutual
partnership between the stingray leather producer and the smoked meat producers.
Previously, the smoked meat producers only used the meat by taking the skin off
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and discarding the skin. After that, when the leather producer came and explained
that the skin could be processed into leather accessories, they started to provide
the skin to the leather producer. The leather producer said, “The availability of the
skins depends on the smoked meat business”. The mutual partnership built
between the leather producer and the smoked meat producer means that the
smoked meat producer can earn profits from the business by supplying the skins
to the leather producer, as they buy the fish wholesale. The smoked meat producer
said, “It is more profitable for me when someone wants to buy the skins”.
There are several parties involved in the Rembang stingray leather industry
(Figure 5). They consist of the supplier, the leather goods producer, and the
government. The leather goods producer processes the skins into leather. The
leather producer in Rembang utilizes small scale production facilities. It uses
modern machinery and traditional manual works in processing the skins. The
machinery consists of a tanning drum, compressor, and spray paint gun. Large
buckets are still used by the producer who processes the skins in small quantities.
Recently, there was one tanning drum used in Rembang, which can load up to 10
kg of skins. The leather producer in Rembang applies the white-tanning method to
produce the stingray leather. In the white-tanning method, the producer uses
formaldehyde as the tanning agent. According to Purnomo (2002), the used of the
white-tanning method exposes the natural appearance of the stingray nerves. It
also can give flexibility to the producer to colour the leather as requested.
The leather producer in Rembang does not produce leather good products –
only leather. Thus, the producer employs a person outside the venture to produce
the products. The producer said, “I used to send the leather to a person in
Yogyakarta to manufacture the leather into stingray leather products”. Most of the
stingray leather goods sold by the business in Rembang are manufactured in
Yogyakarta.
Figure 5. Stingray leather value chain in Rembang
The stingray leather industry in Rembang would not be well-developed
without local government support. The Department of Trade, Industry,
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Cooperatives, and Micro, Small and Medium Enterprises has initiated the
development of the industry through several activities. The official of the
department who cares about the development of the industry said, “I would like to
develop the industry where Rembang can be acknowledged for its stingray
leather”. In order to support the industry, the official provides his property as the
site of stingray leather production. The official also helps promote the industry by
showing the products in several local and national exhibitions. The official
encourages the venture to keep the business, and the industry will give benefits to
the region. The development of the industry involves the Centre for Leather,
Rubber and Plastics (CLRP) as well. CLRP is a government research institute that
has responsibilities for developing the industry for commodities of leather, rubber
and plastics. CLRP has involved the development of human resources for stingray
leather production. It also provides technical consultation and several types of
processing machinery for the industry. The official of CLRP said, “The stingray
leather industry in Rembang has a promising development in the future due to the
availability of the raw materials, human resources, and the supporting institutions,
such as the Department of Trade, Industry, Cooperatives, and Micro, Small and
Medium Enterprises and other related institutions”.
The author sees that the industry is new in the region. It needs more people
to involve in the industry. There is only an entrepreneur involve full-time in the
stingray leather industry. The entrepreneur sources the raw materials from small
supplier. There is lack of supporting parties, such as leather goods producers and
chemicals suppliers. The entrepreneur operates the business in a small scale.
Those influence the business operation and hinder the industry to develop in the
region. Therefore, the stingray leather industry in Rembang could be classified as
a nascent industry. An industry, which is in the earliest phase of development, is
often categorized as a nascent industry. Therefore, it lacks of understanding,
endorsement and the support of external stakeholders (Zuzul and Edmondson
2013). However, the local government has important role in developing and
promoting the industry. This external stakeholder initiates several activities, such
as training and promoting the stingray leather products, and encourages new
entrepreneur in the business by providing the grant.
Bar riers in the Stingray leather Business in Rembang
As a nascent industry, it is no surprise that there are several obstacles that
may impede development of the industry. It also faces the fact that its sales is
relatively low (Angelis and Levésque 2010). The research showed that human
resource availability and the access to raw materials are barriers to developing the
industry in Rembang. The owner of the stingray leather venture has difficulty in
enga