Strategy of Wooden craft industry development in Gianyar regency.
STRATEGY FOR WOODEN CRAFT INDUSTRY DEVELOPMENT IN GIANYAR REGENCY
I Gusti Ayu Ketut Giantari1), Ni Wayan Ekawati2). I Komang Ardana3) and I Made Jatra4)
1234)
Management Department, Faculty of Economic and Business, Udayana University
Bukit Jimbaran Campus, Badung, Phone: (0361) 224133
ayugiantari@gmail
ABSTRACT
The purpose of this study was to determine 1) the internal and external factors affecting the company's
performance, 2) the company's business position and 3) strategy forwooden craft industry development in Gianyar
Regency. The study was conducted by taking 22 respondents through purposive sampling. The respondents are 10
mask and barong craftsmen from Batuan District of Sukawati, 10 eagle sculpture craftsmen from Pakudui District
of Tegalalang and two barong expert barong and eagle sculpture in Gianyar. Sampling using purposive sampling.
Analysis technique used SWOT and Matrix Internal-External (IE). The analysis shows the company's business
position in IE Matrix is currently in quadrant IV while the future of it is in quadrant I (grow and build). The proper
strategy is by implemented differentiation strategy, spesifically on the image, distribution, and promotion of the
product. Implications of this result on marketing strategy is by creating unique innovation on the product,
competitive pricing, as well as strategic distribution and promotion. Promotion can be conducted through printed,
electronic, and social media.
Keywords: development strategic, wooden craft industry, differentiation
INTRODUCTION
Gianyar is one of regions in Bali which has a variety of art works and artists. Half of the population depend on art
work. This society actively create a variety of works of art and craft that can provide a source of life. Many
companies have started to run the business and develop it through the creative industries (Chaston, 2008). One of
craft products which based on local wisdom is wooden craft, in the form of garuda and barong statue (Atmojo,
2013). Adaptation of local wisdom into cultural and religious ethos can be packed into a creativity that crafts.
Business management is need to be implemented in this community activitiy (Kahane, 2012).
Baswir in Suweca (2011) states that the creative economy can not only be seen in the context of economics, but
also in the cultural dimension. Creative ideas that emerged are cultural products. Therefore, the cultural strategy
determined the direction of creative economy development. Openness to innovation is enabling the business
leadership by exploring the ability of the organization (Lee and Ko, 2000). It is an application of creative economy
as welll. Innovation that focuses on the consumer is able to create an orientation to face the market competition
(Lewrick et al., 2012). Established companies have a notion that it is important to develop their creativity and
ensure capability of leading innovation (Johannessen and Hugo, 2013).
One of the sectors that contribute in increasing the GDP of Gianyar Regency is the craft industry sector (Son and
Aswitari, 2012). The good reputation of the organization on the domestic market is able to generate income
(Ahmed et al., 2006). Barong and wood sculpture artists are one of the SME sector in Gianyar. SMEs are
recognized to have a very vital role in the economic development of the region, as supported by previous studies
(Kalpande et al., 2010). The objectives of this study were 1) to identify opportunities and threats from external
environment that may affect the business of wooden craft in Gianyar, 2) to identify the strengths and weaknesses
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from the internal environment of wooden craft in Gianyar, 3) design the best strategy for wooden craft industries in
Gianyar and 4) implement marketing strategies for wooden craft industries in Gianyar.
THEORITICAL REVIEW
Strategy Definition
Definition of a strategy first proposed by Chandler (Rangkuti, 2003: 3) which states that strategy is a long-term
goal of an enterprise, as well as the utilization and allocation of all necessary resources to achieve its goals.
Strategy is a tool to create competitive advantage. According to Hitt et al. (2011: 1), strategy is an integrated and
coordinated set through designed commitment and actions to improve core competencies and achieve competitive
advantage. Strategy of an organization is enable to identify a condition that can potentially provide the best benefits
and help to achieve the expected goals and direct all resources toward a managerial system.
Vision, Mision, and Objectives
Vision and mission statements are defined as means to communicate an attitude, ethos, and work culture that will
be applied by each individual. Hoping to achieve the objectives of the organization. Developing a vision and
mission is an initial step in strategic planning related to the achievement of organizational goals in the future
(Darbi, 2012).
David (2011: 36) stated that a vision is presented briefly about the system description of its target due to changes in
science and unpredictable situations during this long period. Vision is the early process in the development of an
organization's mission. In other words, the vision is an expectation to be achieved in the future by an organization
or company. Vision which is owned by a corporation is an ideal state in the future to be realized by the entire
personnel of the company, starting from the top level to the bottom.
Company Environment
Company environment consists of the internal and external environment. External environment greatly affects the
survival of the company. David (2011) divides the external environment into three interrelated categories, namely
remote environment, industry environment, and operate environment. The entire environmental factors provide a
number of opportunities and threats for the company. The linkage between the environment and the company can
be described as follows.
Figure 2.1
Company Environment
Remote Environment
Industry
Operat ion
Com pany
Source : Pierce & Robinson (2000:94)
2
Internal Environment
Umar (2001: 84) expressed the understanding to the company's internal conditions is a line factor in the use of an
effective strategy. The formulation of corporate strategy must consider the strengths and weaknesses of the
company. In order to understand the company's internal condition, strategic internal factors through a functional
approach and a "value chain" of Porter and evaluation of internal factors strategic approach can be identified by
steps as follows: comparing these factors with the achievement of the company's competitors; assessing the
importance of each factor on industry life cycle; assessing these factors compared to the existing competitors; and
assessing these factors by comparing the key success factors in the industry.
Strategic Planning
Strategic planning is defined as activities of the company to seek compatibility between internal or external forces
of companies in a market. The activities include observation of the competition carefully, regulations inflation,
business cycles, desires and expectations of consumers, as well as other factors that can identify opportunities and
threats (Rangkuti, 2003: 2). To determine the main strategy, made use of several matrixes with three stages of
implementation; the data collection phase, analysisphase, and decision-making stage.
Strategic Levels
In a company, basically there are three levels of strategies, which will be described in the following sections.
According to Andrews (in Rangkuti, 2003: 10)
Corporate strategy is strategy in a business, where the company will compete by altering the distinctive
competence into competitive advantage. This strategy formulated by the top management that regulate the
activities and operations in the organization which has more than one lines or business units. At this level, it is
important to determine the corporate mission, what business is being cultivated by the company, what goals and
expectations regarding the business, and how to allocate resources.
The strategy at this level is more focused on the management of the activities and operations of a business. Charles
et al. (2012) and David (2011: 10) stated that business-level strategy is critical to an organization. The
implementation of a strategy covering all lines within the organization, from managerial to operational role. Porter
(2007: 71) in Hitt et al. (2011: 107) states that each company must develop and implement business-level strategy
that aims to achieve a strategic market position. This can be done through the creation of different products or
services among all competitors. There are three methods of business-level strategies, which are the low-cost
strategy, differentiation, and focus strategies.
According to Umar (2003: 25), the strategy of functional levels is a strategy that is more operational and lead to a
framework of corporate functions (traditionally it is consisting of research and development, finance, production
and operations, marketing, personnel or human resources) that can supports the strategy at the business unit level.
At this level, more specifically formulated strategy relies on the functional activity of the management.
RESEARCH METHOD
Research Design
This research uses descriptive analysis, which attempts to search and disclosure relevant information contained in
the data through more concise and simpler presentation. This ultimately leads to the need for explanation and
interpretation (Simamora, 2004). Analysis of the company's internal environment is described in the matrix of the
Internal Factor Evaluation (IFE) and the external environment analysis outlined in the matrix of External Factor
Evaluation (EFE). Based on the IFE and EFE matrix, various combinations of the SWOT matrix can be identified.
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IFE matrix is used to determine the factors associated with the company's internal strengths and weaknesses that
are considered important and affect the performance of the company, for example, from the aspect of management,
finance, human resources, marketing, information systems, and production (Umar, 2003). Internal analysis is
important to note so that the company can exploit to the maximize the strength and identify wether there is a source
of weakness to be corrected by the management company.
Matrix EFE (External Evaluation factor) was used to analyze matters relating to issue of economic, social, cultural,
demographic, political environment, government, law, technology, competition in the industrial market where the
company located, as well as other relevant external data. This is important because of external factors impact
directly or indirectly on the company. This identification is very important for companies to be aware of the
opportunities and threats for the company either currently or in the future. SWOT analysis is based on the logic that
maximizes the strengths and opportunities, but simultaneously to minimize weaknesses and threats. Strategic
decision making process is always associated with the development of the mission, goals and policy strategy.
According to Koo (2004), the formulation of a framework is developed based on the capabilities that the company
is on the right track.
Location and Scope of Research
Research will be conducted on the wooden craft industries in Gianyar. Object of research is the development
strategy of the wooden craft industry. The scope of the research is focused on the identification and analysis of
internal and external environmental conditions on wooden craft industries in Gianyar. Considering the tight current
competition, it is important to design wooden craft business development strategies for the future.
Research Sample and Population
The population in this study are business owners and decision makers in the company and experts of wooden craft
and barong mask-making in Bali. Wooden craft industry center in the form of a mask (tapel), Rangda and Barong
are in Banjar Puaya, Batuan Village, District Sukawati, Gianyar where there are about 200 artisans. There are
around 100 craftsmen of Garuda statue in the village Pakudui, District Tegalalang. Samples for craftsmen and
barong mask is 10 people. Samples for eagle sculpture artisans is 10 people and as many as two-person expert.
Therefore, the total respondents were 22 people. Selection of the craftsmen who chose sample was using purposive
sampling, which is based on certain considerations. The considerations are 1) a wood carving craftsmen in
Gianyar, especially for craft barong and statue of Garuda, 2) policy makers in the company, and 3) have extensive
insight about the condition of the internal and external environment.
RESULT AND DISCUSSION
Wooden Craft Industries in Gianyar Regency
Wooden craft industry in Gianyar has been around since 1980 but the number of craftsmen is not so many. In 2003
the number of craftsmen who started wooden craft grown to 20.9 percent. This is in line with the development of
tourism in Bali to meet the both home and abroad both (Lestari, 2012). Potential of wooden craft in Gianyar mostly
are private companies. This showed people's interest in wooden crafts entrepreneurship Gianyar regency quite high
and opening opportunities for other communities. Wooden crafts can be considered as the transformation of social
and cultural life in the middle of the advancement of tourism so as to provide confidence and motivation for the
craftsmen to pursue the wooden craft entrepreneurship. Wooden craft industry in Gianyar still constrained by still
many industries that do not have a patent on craft products. It proved to be only 40.78 per cent of craftsmen who
have registered a patent on the ownership of product innovation. The role of government is needed to improve data
collection and re-registration of patents on the wooden craft products.
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Analysis and Diagnosis on Existing External Strategic Environment
To conduct an analysis on the external environment including opportunities and threats, we then conducted
interviews with policy makers in crafting company located in the village of Puaya and Pakudui. We identified 10
external variables lock, namely national economic conditions, the rate of inflation, the rate of growth of population
income, government regulation, government assistance, changes in consumer tastes, infrastructure,
communications and information easily accessible, competitors, bargaining power with the buyer and bargaining
power with suppliers.
Further analysis is to determine the weight of each variable and the rate that reflects the condition of each variable.
Lastly, the incorporation of weight with a rate that describes the general condition of wooden craft business in
Gianyar that have an opportunity or a threat.
By the weighting of each variable, it appears that there are three indicators that have the greatest influence and
affect the performance of the company, the weight communication infrastructure and information that easily
accessible indicator indicator is 0.13 (13 percent), weight of competitor existence is 12 percent, andthe weight
ofbargaining power to buyers indicator is11 percent, while the seven other factors that influence varies between 6
percent to 8 percent.
Rate represents the respondents' perceptions to the level of importance of each factor affecting the performance of
companies which value is between 1 and 4. In Table 4.1 it can be seen that there are six factors that represent an
opportunity, namely the economy, the rate of revenue growth, government regulation, government assistance,
changes in consumer tastes and communication infrastructure and information. There are four factors that became
threat that is, the rate of inflation, competitors, bargaining power with buyers, and bargaining power with
suppliers.Further calculations determined the score of each indicator by multiplying the weight and rate.
Calculation of the overall score indicator showed the value of 2.74.
Table 4.1 Existing External Factor Analysis Summary
No Opportunity / Threat Factor
Opportunities
1
National economy condition
2
Income growth in Bali
3
Government regulation
4
Government aid
5
Change of consumer desire
6
Easy access of communication and information infrastructure
Threats
7
Inflation rate
8
Competitior existence
9
Bargaining power with buyer
10 Bargaining power with distributor
Total
Source : processed data
Weight
Rate
Score
0,10
0,08
0,10
0,08
0,09
0,13
3,00
3,10
3,00
3,50
3,00
3,40
0,30
0,25
0,30
0,28
0,27
0,44
0,09
0,12
0,11
0,10
1,00
2,10
2,00
2,20
2,25
0,24
0,19
0,24
0,23
2,74
This figure shows that the external condition of wooden craft industry in Gianyar today in general is an opportunity
because it is greater than 2.50. Total score between 1.00 to 2.50 are considering as threats and score from 2.51 to
4.00 are considering as opportunities. The result of the weighting, rate, and scores are presented in Table 4.1 EFAS
(External Factor Analysis Summary).
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Analysis and Diagnosis on the Future External Strategic Environment
In accordance with the predictions made by the respondents, it can be explained that the variables of competitors
and bargaining power with buyers has the greatest effect on the company's performance, which amounted to 0.12
(Table 4.2). While the second most influential variable is the power to bargain with suppliers as well as
information and communication infrastructure by the weight of 0.11. Variable that have the third greatest influence
are aid from the government, economic conditions and changes in consumer tastes by the weight of 0.10.
Indicators that has the highest rate is the information and communication infrastructure which is 4.00, while the
second is consumer tastes with rate 3.80 and revenue growth rate of the population of Bali with rate of 3.70. From
the calculation of the overall score of existing indicators, the results of the calculations showed a value of 3.02.
This figure shows that the external conditions in Gianyar wooden craft industry in general is an opportunity
because it is greater than 2.50. Total score between 1.00 to 2.50 is considering as threats and from 2.51 to 4.00 is
considering as opportunities. Results of prediction weights, rates and weighted values are presented in Table 4.2
EFAS (External Factor Analysis Summary) for the future is as follows.
Analysis and Diagnosis on Existing Internal Strategic Environment
Through interviews with respondents, we identified 12 indicators that are the elaboration of five functions
contained in the company. Those function is a function of marketing (product quality, has unique features,
promotions and product prices which are relatively stable), production function (quality of raw materials and low
productivity), the human resources function (abundant labor, the quality of human resources and labor skills), and
function of Research and Development (lack of support and lack of innovation).
Indicators of lack of access to sources of capital has the greatest influence on the performance of companies with a
weight of 0.12 (12 percent). While the second most influenced indicators is a unique feature with the weight of 11
percent, followed by quality of raw materials with a weight of 10 percent. Other indicators have a weight with
variation between 0.07 to 0.09.
Table 4.2 Future External Factor Analysis Summary
No
Opportunity / Threat Factor
Opportunities
1
National economy condition
2
Income growth in Bali
3
Government regulation
4
Government aid
5
Change of consumer desire
Easy access of communication and
6
infrastructure
Threats
7
Inflation rate
8
Competitior existence
9
Bargaining power with buyer
10
Bargaining power with distributor
Total
Source: processed data
information
Weight
Rate
Score
0,10
0,08
0,08
0,10
0,10
3,20
3,70
3,65
3,50
3,80
0,35
0,30
0,29
0,35
0,38
0,11
4,00
0,44
Threats
0,08
0,12
0,12
0,11
1,00
2,30
2,20
2,00
2,00
0,18
0,26
0,24
0,22
3,02
Indicator of product has unique features has a rate of 3.75, the second biggest rate second rate is the quality of the
product (3.73), and the third one is abundant labor with rate of 3.65. The rate indicates that those three indicators
were considered important by respondents. While other indicators are in the value range of rate between 2.20 to
3.60.
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The last stage is the determination of the score is done multiplying the weight with the rate. The highest score was
3:15 which is owned by indicator of product innovation. This figure shows that the internal conditions in Gianyar's
wooden craft business in general is strong because the score is greater than 2.50. Calculation results of the weight,
rate, and scores are presented in Table 4.3 Internal Factor Analysis Summary.
Table 4.3 Existing Internal Factor Analysis Summary (IFAS)
No
Strength / Weakness Factor
Strengths
1
Product quality
2
Unique feature
3
Promotion
4
Relatively stable product’s price
5
Low productivity
6
Abundance workforce
7
Human resource quality
8
Workforce skill
Weaknesses
9
Access to financial capital
10
Research and development support
11
Raw materials quality
12
Product innovation
Total
Source: processed data
Weight
Rate
Score
0,08
0,11
0,07
0,06
0,08
0,09
0,08
0,07
3,73
3,75
3,50
3,50
3,60
3,65
3,50
3,55
0,30
0,41
0,25
0,21
0,29
0,33
0,28
0,25
0,12
0,07
0,10
0,07
1,00
2,30
2,40
2,20
2,50
0,28
0,17
0,22
0,18
3,15
Analysis and Diagnosis on the Future Internal Strategic Environment
Table 4.4 shows the weight calculation, rate, and scores of key internal strategic factors that affect the company's
performance. The indicators that have the highest weight is a quality product with a weight of 0.12. This means
that this indicator has a 12 percent influence on corporate performance. While indicators of access to venture
capital has the second highest weight of 0.11, which means that this indicator has the effect of 11 percent on
company performance. Indicators which has the third highest weight is an indicator of the unique features with a
weight of 0.10. This indicator has the effect of respectively 10 percent of the company's performance. Meanwhile,
other indicators have a weight in the range of 0.06 to 0.09 so that the total weight of these indicators is 1.
The perception of respondents is then analyzed to rate each indicator. Indicator of has unique features has the
highest rate of 3.85. Indicator of abundant labor has the second highest rate, at 3.75, while the indicators of quality
of products has the third highest rate with a rate of 3.73.
Calculation result of the overall indicator score indicates the value of 3.22. This value shows that the internal
condition of the wooden craftindustries in Gianyar in the future in general is strong because it is greater than 2.50.
More detail are shown in Table 4.4
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Table 4.4 Future Internal Factor Analysis Summary
No
Indicator
Strengths
1
Product quality
2
Unique feature
3
Promotion
4
Relatively stable product’s price
5
Low productivity
6
Abundance workforce
7
Human resource quality
8
Workforce skill
Weaknesses
9
Access to financial capital
10
Research and development support
11
Raw materials quality
12
Product innovation
Total
Source : processed primary data
Weight
Rate
Score
0,12
0,10
0,07
0,08
0,08
0,07
0,06
0,06
3,73
3,85
3,6
3,5
3,65
3,75
3,65
3,55
0,45
0,39
0,25
0,28
0,29
0,26
0,22
0,21
0,11
0,09
0,08
0,08
1,00
2,4
2,4
2,45
2,45
0,26
0,22
0,20
0,20
3,22
Strategic Position of Wooden Craft Industries in Gianyar Regency
The company's strategic positioning is done after analyzing the internal and external environment, by moving the
total score into the Matrix of Market Attractiveness - Corporate Competitiveness. At the present time, the total
weight of EFAS score is 2.74, while for IFAs is 3.14 for the present (2014). Thus, the company's position in the
matrix is in Cells II (A). In the future (year 2015-2020), total score IFAS EFAS is 3.02 and 3.22, so that its position
is increased in cells I (B). Depiction as shown in Figure 4.1.
Figure 4.1
Strategic Position of Wooden craft Industries in Gianyar Regency on Market Attraction – Company
Competitiveness Matrix (2015 – 2020)
Source: Processed data
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Strategy Formulation on Wooden Craft Industries Development in Gianyar Regency
If the product of a company has a unique value or considered unique in the market, it can be said these products
have the advantage of differentiation. This strategy can be an effective strategy to maintain market
position.Differentiation strategy requires wooden craft industry to offer something different, especially in terms of:
product differentiation, is a corporate strategy to offer products of different wooden craft product in terms of shape,
size, color, and physical structure in comparison to other companies; differentiation of the image, where the
wooden craft industry can build an image that appeals to consumers based on the good name of the company,
promotion which done by advertising, interesting company logos, and unique product design; differentiation of
services, where the craft industry of barong and eagle statue can create differences among its competitors by
providing good quality services, such as hospitality, speed of service, and accuracy of the services; differentiation
of distribution channels, by putting its industry in a strategic location that is easily accessible to customers;
differentiation personnel, which the company may have employees who are well trained and able to provide the
best performance in products produced and hospitality in serving consumers.
Marketing Strategy Formulation on Wooden Craft Industries Development in Gianyar Regency
Based on the proper competitive strategy, in this case the differentiation strategy, and when applied to the
marketing mix strategy, it can be formulated as follows: product strategy should offer productswhich innovative
and different, such as barong craft products with unique features that further emphasize local culture. Likewise, the
eagle statue should be designed with a more attractive design; pricing strategies offer competitive price level
according to the quality of the resulting wooden crafts. Each of these craftsmen is unique so the price will be very
varied; distribution strategy, more emphasis on strategic locations to offer wooden crafts. The strategic location
should be taken into consideration in determining the store where the product was offered, making it easier for
consumers to get it; promotion strategy, which communicates the various types of products to the public through
print and electronic media. This can be done also through social media (facebook, twitter or instagram) for cost
efficiency, in order to reach a wider and not spend any cost.
Research Limitation and Future Orientation
The limitations of this study are: this study only conducted in wooden craft industry in Gianyar thus limiting the
ability to generalize the findings of this study in a larger area; this study used a survey method in which the data
collection process in a particular point in time or in cross section while the environment is change quickly, that so
important to do this research in the future.
Future research directions can be: future researchers can conduct studies on different craft industry, such as ikat
fabric industries (endek) in Bali Province; for future studies, it is necessary to add some new variables, such as
competitive advantage and company performance were used as basis for the formulation of corporate strategy.
CONCLUSION AND RECOMMENDATION
Conclusion
Based on the analysis in the previous sections of the internal and external strategic environment of wooden craft
industry in Gianyar, it can be drawn some conclusions as follows:
Key external strategic variables which are good opportunities in the present and in the future, namely national
economic conditions, the growth rate of population incomes in Bali, government regulation, government
assistance, changes in consumer tastes, as well as communications infrastructure and the information easily
accessible. Key external strategic variables which are a threat to both in the present and in the future, namely
inflation, competitors, bargaining power with buyers, and bargaining power with suppliers.
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The key internal strategic variables which are the strength of both the present and the future, namely the quality of
the products, unique features, promotions, relatively stable, low productivity product prices, abundant labor, the
quality of human resources, and labor skills. While the key internal strategic variables that is a weakness are access
to venture capital, support research and development, raw material quality and product innovation;
Based on the business position of the wooden craft industry in Gianyar at the present time is in Quadrant IV, while
in the future are condition in quadrant I, then the proper strategy to apply is to grow and build strategy.
Proper competitive strategy implemented by wooden craft industry in Gianyar is a differentiation strategy. This
strategy can be an effective strategy to maintain market position. Differentiation strategy requires companies to
offer different products, especially in terms of: Differentiation of products, by givin uniqueness and accommodate
the local culture; Differentiation image, by giving a good image to customers; Differentiation of services, by
providing the best service to customers; Differentiation channel, by determining strategic business location; and
Differentiation personnel, by hiring well-trained employees so as to provide the best performance both in the
products produced and hospitality in serving consumers.
Based on the appropriate competitive strategy in this case is the strategy of differentiation and applied to the
marketing mix are product, price, promotion and distribution.
Recommendation
For wooden crafts owner / employeer: Innovate new products that emphasize culture of Bali so unique and
different from other wooden crafts business; Have partnership other wooden craft industry to strengthen the
promotional efforts in order to be better known by people all over Indonesia; Participate in the training carried out
by government-sponsored mainly by state-owned enterprises and local owned-enterprises to obtain information on
the management of associated related to access to financial resources; Working with suppliers of raw materials so
as to produce a barong, tapel and eagle statue with the best quality; Providing the best service to customers.
For the Government: Provide ease of access to financial resources, allowing the company to further develop;
Provide training in management sector in order make adequate financial statements; Provide means of
communication and information to promote their products to a wider area.
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K.,
(2011).
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lokal,
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(Edisi 3). Jakarta : Penerbit Gramedia.
12
I Gusti Ayu Ketut Giantari1), Ni Wayan Ekawati2). I Komang Ardana3) and I Made Jatra4)
1234)
Management Department, Faculty of Economic and Business, Udayana University
Bukit Jimbaran Campus, Badung, Phone: (0361) 224133
ayugiantari@gmail
ABSTRACT
The purpose of this study was to determine 1) the internal and external factors affecting the company's
performance, 2) the company's business position and 3) strategy forwooden craft industry development in Gianyar
Regency. The study was conducted by taking 22 respondents through purposive sampling. The respondents are 10
mask and barong craftsmen from Batuan District of Sukawati, 10 eagle sculpture craftsmen from Pakudui District
of Tegalalang and two barong expert barong and eagle sculpture in Gianyar. Sampling using purposive sampling.
Analysis technique used SWOT and Matrix Internal-External (IE). The analysis shows the company's business
position in IE Matrix is currently in quadrant IV while the future of it is in quadrant I (grow and build). The proper
strategy is by implemented differentiation strategy, spesifically on the image, distribution, and promotion of the
product. Implications of this result on marketing strategy is by creating unique innovation on the product,
competitive pricing, as well as strategic distribution and promotion. Promotion can be conducted through printed,
electronic, and social media.
Keywords: development strategic, wooden craft industry, differentiation
INTRODUCTION
Gianyar is one of regions in Bali which has a variety of art works and artists. Half of the population depend on art
work. This society actively create a variety of works of art and craft that can provide a source of life. Many
companies have started to run the business and develop it through the creative industries (Chaston, 2008). One of
craft products which based on local wisdom is wooden craft, in the form of garuda and barong statue (Atmojo,
2013). Adaptation of local wisdom into cultural and religious ethos can be packed into a creativity that crafts.
Business management is need to be implemented in this community activitiy (Kahane, 2012).
Baswir in Suweca (2011) states that the creative economy can not only be seen in the context of economics, but
also in the cultural dimension. Creative ideas that emerged are cultural products. Therefore, the cultural strategy
determined the direction of creative economy development. Openness to innovation is enabling the business
leadership by exploring the ability of the organization (Lee and Ko, 2000). It is an application of creative economy
as welll. Innovation that focuses on the consumer is able to create an orientation to face the market competition
(Lewrick et al., 2012). Established companies have a notion that it is important to develop their creativity and
ensure capability of leading innovation (Johannessen and Hugo, 2013).
One of the sectors that contribute in increasing the GDP of Gianyar Regency is the craft industry sector (Son and
Aswitari, 2012). The good reputation of the organization on the domestic market is able to generate income
(Ahmed et al., 2006). Barong and wood sculpture artists are one of the SME sector in Gianyar. SMEs are
recognized to have a very vital role in the economic development of the region, as supported by previous studies
(Kalpande et al., 2010). The objectives of this study were 1) to identify opportunities and threats from external
environment that may affect the business of wooden craft in Gianyar, 2) to identify the strengths and weaknesses
1
from the internal environment of wooden craft in Gianyar, 3) design the best strategy for wooden craft industries in
Gianyar and 4) implement marketing strategies for wooden craft industries in Gianyar.
THEORITICAL REVIEW
Strategy Definition
Definition of a strategy first proposed by Chandler (Rangkuti, 2003: 3) which states that strategy is a long-term
goal of an enterprise, as well as the utilization and allocation of all necessary resources to achieve its goals.
Strategy is a tool to create competitive advantage. According to Hitt et al. (2011: 1), strategy is an integrated and
coordinated set through designed commitment and actions to improve core competencies and achieve competitive
advantage. Strategy of an organization is enable to identify a condition that can potentially provide the best benefits
and help to achieve the expected goals and direct all resources toward a managerial system.
Vision, Mision, and Objectives
Vision and mission statements are defined as means to communicate an attitude, ethos, and work culture that will
be applied by each individual. Hoping to achieve the objectives of the organization. Developing a vision and
mission is an initial step in strategic planning related to the achievement of organizational goals in the future
(Darbi, 2012).
David (2011: 36) stated that a vision is presented briefly about the system description of its target due to changes in
science and unpredictable situations during this long period. Vision is the early process in the development of an
organization's mission. In other words, the vision is an expectation to be achieved in the future by an organization
or company. Vision which is owned by a corporation is an ideal state in the future to be realized by the entire
personnel of the company, starting from the top level to the bottom.
Company Environment
Company environment consists of the internal and external environment. External environment greatly affects the
survival of the company. David (2011) divides the external environment into three interrelated categories, namely
remote environment, industry environment, and operate environment. The entire environmental factors provide a
number of opportunities and threats for the company. The linkage between the environment and the company can
be described as follows.
Figure 2.1
Company Environment
Remote Environment
Industry
Operat ion
Com pany
Source : Pierce & Robinson (2000:94)
2
Internal Environment
Umar (2001: 84) expressed the understanding to the company's internal conditions is a line factor in the use of an
effective strategy. The formulation of corporate strategy must consider the strengths and weaknesses of the
company. In order to understand the company's internal condition, strategic internal factors through a functional
approach and a "value chain" of Porter and evaluation of internal factors strategic approach can be identified by
steps as follows: comparing these factors with the achievement of the company's competitors; assessing the
importance of each factor on industry life cycle; assessing these factors compared to the existing competitors; and
assessing these factors by comparing the key success factors in the industry.
Strategic Planning
Strategic planning is defined as activities of the company to seek compatibility between internal or external forces
of companies in a market. The activities include observation of the competition carefully, regulations inflation,
business cycles, desires and expectations of consumers, as well as other factors that can identify opportunities and
threats (Rangkuti, 2003: 2). To determine the main strategy, made use of several matrixes with three stages of
implementation; the data collection phase, analysisphase, and decision-making stage.
Strategic Levels
In a company, basically there are three levels of strategies, which will be described in the following sections.
According to Andrews (in Rangkuti, 2003: 10)
Corporate strategy is strategy in a business, where the company will compete by altering the distinctive
competence into competitive advantage. This strategy formulated by the top management that regulate the
activities and operations in the organization which has more than one lines or business units. At this level, it is
important to determine the corporate mission, what business is being cultivated by the company, what goals and
expectations regarding the business, and how to allocate resources.
The strategy at this level is more focused on the management of the activities and operations of a business. Charles
et al. (2012) and David (2011: 10) stated that business-level strategy is critical to an organization. The
implementation of a strategy covering all lines within the organization, from managerial to operational role. Porter
(2007: 71) in Hitt et al. (2011: 107) states that each company must develop and implement business-level strategy
that aims to achieve a strategic market position. This can be done through the creation of different products or
services among all competitors. There are three methods of business-level strategies, which are the low-cost
strategy, differentiation, and focus strategies.
According to Umar (2003: 25), the strategy of functional levels is a strategy that is more operational and lead to a
framework of corporate functions (traditionally it is consisting of research and development, finance, production
and operations, marketing, personnel or human resources) that can supports the strategy at the business unit level.
At this level, more specifically formulated strategy relies on the functional activity of the management.
RESEARCH METHOD
Research Design
This research uses descriptive analysis, which attempts to search and disclosure relevant information contained in
the data through more concise and simpler presentation. This ultimately leads to the need for explanation and
interpretation (Simamora, 2004). Analysis of the company's internal environment is described in the matrix of the
Internal Factor Evaluation (IFE) and the external environment analysis outlined in the matrix of External Factor
Evaluation (EFE). Based on the IFE and EFE matrix, various combinations of the SWOT matrix can be identified.
3
IFE matrix is used to determine the factors associated with the company's internal strengths and weaknesses that
are considered important and affect the performance of the company, for example, from the aspect of management,
finance, human resources, marketing, information systems, and production (Umar, 2003). Internal analysis is
important to note so that the company can exploit to the maximize the strength and identify wether there is a source
of weakness to be corrected by the management company.
Matrix EFE (External Evaluation factor) was used to analyze matters relating to issue of economic, social, cultural,
demographic, political environment, government, law, technology, competition in the industrial market where the
company located, as well as other relevant external data. This is important because of external factors impact
directly or indirectly on the company. This identification is very important for companies to be aware of the
opportunities and threats for the company either currently or in the future. SWOT analysis is based on the logic that
maximizes the strengths and opportunities, but simultaneously to minimize weaknesses and threats. Strategic
decision making process is always associated with the development of the mission, goals and policy strategy.
According to Koo (2004), the formulation of a framework is developed based on the capabilities that the company
is on the right track.
Location and Scope of Research
Research will be conducted on the wooden craft industries in Gianyar. Object of research is the development
strategy of the wooden craft industry. The scope of the research is focused on the identification and analysis of
internal and external environmental conditions on wooden craft industries in Gianyar. Considering the tight current
competition, it is important to design wooden craft business development strategies for the future.
Research Sample and Population
The population in this study are business owners and decision makers in the company and experts of wooden craft
and barong mask-making in Bali. Wooden craft industry center in the form of a mask (tapel), Rangda and Barong
are in Banjar Puaya, Batuan Village, District Sukawati, Gianyar where there are about 200 artisans. There are
around 100 craftsmen of Garuda statue in the village Pakudui, District Tegalalang. Samples for craftsmen and
barong mask is 10 people. Samples for eagle sculpture artisans is 10 people and as many as two-person expert.
Therefore, the total respondents were 22 people. Selection of the craftsmen who chose sample was using purposive
sampling, which is based on certain considerations. The considerations are 1) a wood carving craftsmen in
Gianyar, especially for craft barong and statue of Garuda, 2) policy makers in the company, and 3) have extensive
insight about the condition of the internal and external environment.
RESULT AND DISCUSSION
Wooden Craft Industries in Gianyar Regency
Wooden craft industry in Gianyar has been around since 1980 but the number of craftsmen is not so many. In 2003
the number of craftsmen who started wooden craft grown to 20.9 percent. This is in line with the development of
tourism in Bali to meet the both home and abroad both (Lestari, 2012). Potential of wooden craft in Gianyar mostly
are private companies. This showed people's interest in wooden crafts entrepreneurship Gianyar regency quite high
and opening opportunities for other communities. Wooden crafts can be considered as the transformation of social
and cultural life in the middle of the advancement of tourism so as to provide confidence and motivation for the
craftsmen to pursue the wooden craft entrepreneurship. Wooden craft industry in Gianyar still constrained by still
many industries that do not have a patent on craft products. It proved to be only 40.78 per cent of craftsmen who
have registered a patent on the ownership of product innovation. The role of government is needed to improve data
collection and re-registration of patents on the wooden craft products.
4
Analysis and Diagnosis on Existing External Strategic Environment
To conduct an analysis on the external environment including opportunities and threats, we then conducted
interviews with policy makers in crafting company located in the village of Puaya and Pakudui. We identified 10
external variables lock, namely national economic conditions, the rate of inflation, the rate of growth of population
income, government regulation, government assistance, changes in consumer tastes, infrastructure,
communications and information easily accessible, competitors, bargaining power with the buyer and bargaining
power with suppliers.
Further analysis is to determine the weight of each variable and the rate that reflects the condition of each variable.
Lastly, the incorporation of weight with a rate that describes the general condition of wooden craft business in
Gianyar that have an opportunity or a threat.
By the weighting of each variable, it appears that there are three indicators that have the greatest influence and
affect the performance of the company, the weight communication infrastructure and information that easily
accessible indicator indicator is 0.13 (13 percent), weight of competitor existence is 12 percent, andthe weight
ofbargaining power to buyers indicator is11 percent, while the seven other factors that influence varies between 6
percent to 8 percent.
Rate represents the respondents' perceptions to the level of importance of each factor affecting the performance of
companies which value is between 1 and 4. In Table 4.1 it can be seen that there are six factors that represent an
opportunity, namely the economy, the rate of revenue growth, government regulation, government assistance,
changes in consumer tastes and communication infrastructure and information. There are four factors that became
threat that is, the rate of inflation, competitors, bargaining power with buyers, and bargaining power with
suppliers.Further calculations determined the score of each indicator by multiplying the weight and rate.
Calculation of the overall score indicator showed the value of 2.74.
Table 4.1 Existing External Factor Analysis Summary
No Opportunity / Threat Factor
Opportunities
1
National economy condition
2
Income growth in Bali
3
Government regulation
4
Government aid
5
Change of consumer desire
6
Easy access of communication and information infrastructure
Threats
7
Inflation rate
8
Competitior existence
9
Bargaining power with buyer
10 Bargaining power with distributor
Total
Source : processed data
Weight
Rate
Score
0,10
0,08
0,10
0,08
0,09
0,13
3,00
3,10
3,00
3,50
3,00
3,40
0,30
0,25
0,30
0,28
0,27
0,44
0,09
0,12
0,11
0,10
1,00
2,10
2,00
2,20
2,25
0,24
0,19
0,24
0,23
2,74
This figure shows that the external condition of wooden craft industry in Gianyar today in general is an opportunity
because it is greater than 2.50. Total score between 1.00 to 2.50 are considering as threats and score from 2.51 to
4.00 are considering as opportunities. The result of the weighting, rate, and scores are presented in Table 4.1 EFAS
(External Factor Analysis Summary).
5
Analysis and Diagnosis on the Future External Strategic Environment
In accordance with the predictions made by the respondents, it can be explained that the variables of competitors
and bargaining power with buyers has the greatest effect on the company's performance, which amounted to 0.12
(Table 4.2). While the second most influential variable is the power to bargain with suppliers as well as
information and communication infrastructure by the weight of 0.11. Variable that have the third greatest influence
are aid from the government, economic conditions and changes in consumer tastes by the weight of 0.10.
Indicators that has the highest rate is the information and communication infrastructure which is 4.00, while the
second is consumer tastes with rate 3.80 and revenue growth rate of the population of Bali with rate of 3.70. From
the calculation of the overall score of existing indicators, the results of the calculations showed a value of 3.02.
This figure shows that the external conditions in Gianyar wooden craft industry in general is an opportunity
because it is greater than 2.50. Total score between 1.00 to 2.50 is considering as threats and from 2.51 to 4.00 is
considering as opportunities. Results of prediction weights, rates and weighted values are presented in Table 4.2
EFAS (External Factor Analysis Summary) for the future is as follows.
Analysis and Diagnosis on Existing Internal Strategic Environment
Through interviews with respondents, we identified 12 indicators that are the elaboration of five functions
contained in the company. Those function is a function of marketing (product quality, has unique features,
promotions and product prices which are relatively stable), production function (quality of raw materials and low
productivity), the human resources function (abundant labor, the quality of human resources and labor skills), and
function of Research and Development (lack of support and lack of innovation).
Indicators of lack of access to sources of capital has the greatest influence on the performance of companies with a
weight of 0.12 (12 percent). While the second most influenced indicators is a unique feature with the weight of 11
percent, followed by quality of raw materials with a weight of 10 percent. Other indicators have a weight with
variation between 0.07 to 0.09.
Table 4.2 Future External Factor Analysis Summary
No
Opportunity / Threat Factor
Opportunities
1
National economy condition
2
Income growth in Bali
3
Government regulation
4
Government aid
5
Change of consumer desire
Easy access of communication and
6
infrastructure
Threats
7
Inflation rate
8
Competitior existence
9
Bargaining power with buyer
10
Bargaining power with distributor
Total
Source: processed data
information
Weight
Rate
Score
0,10
0,08
0,08
0,10
0,10
3,20
3,70
3,65
3,50
3,80
0,35
0,30
0,29
0,35
0,38
0,11
4,00
0,44
Threats
0,08
0,12
0,12
0,11
1,00
2,30
2,20
2,00
2,00
0,18
0,26
0,24
0,22
3,02
Indicator of product has unique features has a rate of 3.75, the second biggest rate second rate is the quality of the
product (3.73), and the third one is abundant labor with rate of 3.65. The rate indicates that those three indicators
were considered important by respondents. While other indicators are in the value range of rate between 2.20 to
3.60.
6
The last stage is the determination of the score is done multiplying the weight with the rate. The highest score was
3:15 which is owned by indicator of product innovation. This figure shows that the internal conditions in Gianyar's
wooden craft business in general is strong because the score is greater than 2.50. Calculation results of the weight,
rate, and scores are presented in Table 4.3 Internal Factor Analysis Summary.
Table 4.3 Existing Internal Factor Analysis Summary (IFAS)
No
Strength / Weakness Factor
Strengths
1
Product quality
2
Unique feature
3
Promotion
4
Relatively stable product’s price
5
Low productivity
6
Abundance workforce
7
Human resource quality
8
Workforce skill
Weaknesses
9
Access to financial capital
10
Research and development support
11
Raw materials quality
12
Product innovation
Total
Source: processed data
Weight
Rate
Score
0,08
0,11
0,07
0,06
0,08
0,09
0,08
0,07
3,73
3,75
3,50
3,50
3,60
3,65
3,50
3,55
0,30
0,41
0,25
0,21
0,29
0,33
0,28
0,25
0,12
0,07
0,10
0,07
1,00
2,30
2,40
2,20
2,50
0,28
0,17
0,22
0,18
3,15
Analysis and Diagnosis on the Future Internal Strategic Environment
Table 4.4 shows the weight calculation, rate, and scores of key internal strategic factors that affect the company's
performance. The indicators that have the highest weight is a quality product with a weight of 0.12. This means
that this indicator has a 12 percent influence on corporate performance. While indicators of access to venture
capital has the second highest weight of 0.11, which means that this indicator has the effect of 11 percent on
company performance. Indicators which has the third highest weight is an indicator of the unique features with a
weight of 0.10. This indicator has the effect of respectively 10 percent of the company's performance. Meanwhile,
other indicators have a weight in the range of 0.06 to 0.09 so that the total weight of these indicators is 1.
The perception of respondents is then analyzed to rate each indicator. Indicator of has unique features has the
highest rate of 3.85. Indicator of abundant labor has the second highest rate, at 3.75, while the indicators of quality
of products has the third highest rate with a rate of 3.73.
Calculation result of the overall indicator score indicates the value of 3.22. This value shows that the internal
condition of the wooden craftindustries in Gianyar in the future in general is strong because it is greater than 2.50.
More detail are shown in Table 4.4
7
Table 4.4 Future Internal Factor Analysis Summary
No
Indicator
Strengths
1
Product quality
2
Unique feature
3
Promotion
4
Relatively stable product’s price
5
Low productivity
6
Abundance workforce
7
Human resource quality
8
Workforce skill
Weaknesses
9
Access to financial capital
10
Research and development support
11
Raw materials quality
12
Product innovation
Total
Source : processed primary data
Weight
Rate
Score
0,12
0,10
0,07
0,08
0,08
0,07
0,06
0,06
3,73
3,85
3,6
3,5
3,65
3,75
3,65
3,55
0,45
0,39
0,25
0,28
0,29
0,26
0,22
0,21
0,11
0,09
0,08
0,08
1,00
2,4
2,4
2,45
2,45
0,26
0,22
0,20
0,20
3,22
Strategic Position of Wooden Craft Industries in Gianyar Regency
The company's strategic positioning is done after analyzing the internal and external environment, by moving the
total score into the Matrix of Market Attractiveness - Corporate Competitiveness. At the present time, the total
weight of EFAS score is 2.74, while for IFAs is 3.14 for the present (2014). Thus, the company's position in the
matrix is in Cells II (A). In the future (year 2015-2020), total score IFAS EFAS is 3.02 and 3.22, so that its position
is increased in cells I (B). Depiction as shown in Figure 4.1.
Figure 4.1
Strategic Position of Wooden craft Industries in Gianyar Regency on Market Attraction – Company
Competitiveness Matrix (2015 – 2020)
Source: Processed data
8
Strategy Formulation on Wooden Craft Industries Development in Gianyar Regency
If the product of a company has a unique value or considered unique in the market, it can be said these products
have the advantage of differentiation. This strategy can be an effective strategy to maintain market
position.Differentiation strategy requires wooden craft industry to offer something different, especially in terms of:
product differentiation, is a corporate strategy to offer products of different wooden craft product in terms of shape,
size, color, and physical structure in comparison to other companies; differentiation of the image, where the
wooden craft industry can build an image that appeals to consumers based on the good name of the company,
promotion which done by advertising, interesting company logos, and unique product design; differentiation of
services, where the craft industry of barong and eagle statue can create differences among its competitors by
providing good quality services, such as hospitality, speed of service, and accuracy of the services; differentiation
of distribution channels, by putting its industry in a strategic location that is easily accessible to customers;
differentiation personnel, which the company may have employees who are well trained and able to provide the
best performance in products produced and hospitality in serving consumers.
Marketing Strategy Formulation on Wooden Craft Industries Development in Gianyar Regency
Based on the proper competitive strategy, in this case the differentiation strategy, and when applied to the
marketing mix strategy, it can be formulated as follows: product strategy should offer productswhich innovative
and different, such as barong craft products with unique features that further emphasize local culture. Likewise, the
eagle statue should be designed with a more attractive design; pricing strategies offer competitive price level
according to the quality of the resulting wooden crafts. Each of these craftsmen is unique so the price will be very
varied; distribution strategy, more emphasis on strategic locations to offer wooden crafts. The strategic location
should be taken into consideration in determining the store where the product was offered, making it easier for
consumers to get it; promotion strategy, which communicates the various types of products to the public through
print and electronic media. This can be done also through social media (facebook, twitter or instagram) for cost
efficiency, in order to reach a wider and not spend any cost.
Research Limitation and Future Orientation
The limitations of this study are: this study only conducted in wooden craft industry in Gianyar thus limiting the
ability to generalize the findings of this study in a larger area; this study used a survey method in which the data
collection process in a particular point in time or in cross section while the environment is change quickly, that so
important to do this research in the future.
Future research directions can be: future researchers can conduct studies on different craft industry, such as ikat
fabric industries (endek) in Bali Province; for future studies, it is necessary to add some new variables, such as
competitive advantage and company performance were used as basis for the formulation of corporate strategy.
CONCLUSION AND RECOMMENDATION
Conclusion
Based on the analysis in the previous sections of the internal and external strategic environment of wooden craft
industry in Gianyar, it can be drawn some conclusions as follows:
Key external strategic variables which are good opportunities in the present and in the future, namely national
economic conditions, the growth rate of population incomes in Bali, government regulation, government
assistance, changes in consumer tastes, as well as communications infrastructure and the information easily
accessible. Key external strategic variables which are a threat to both in the present and in the future, namely
inflation, competitors, bargaining power with buyers, and bargaining power with suppliers.
9
The key internal strategic variables which are the strength of both the present and the future, namely the quality of
the products, unique features, promotions, relatively stable, low productivity product prices, abundant labor, the
quality of human resources, and labor skills. While the key internal strategic variables that is a weakness are access
to venture capital, support research and development, raw material quality and product innovation;
Based on the business position of the wooden craft industry in Gianyar at the present time is in Quadrant IV, while
in the future are condition in quadrant I, then the proper strategy to apply is to grow and build strategy.
Proper competitive strategy implemented by wooden craft industry in Gianyar is a differentiation strategy. This
strategy can be an effective strategy to maintain market position. Differentiation strategy requires companies to
offer different products, especially in terms of: Differentiation of products, by givin uniqueness and accommodate
the local culture; Differentiation image, by giving a good image to customers; Differentiation of services, by
providing the best service to customers; Differentiation channel, by determining strategic business location; and
Differentiation personnel, by hiring well-trained employees so as to provide the best performance both in the
products produced and hospitality in serving consumers.
Based on the appropriate competitive strategy in this case is the strategy of differentiation and applied to the
marketing mix are product, price, promotion and distribution.
Recommendation
For wooden crafts owner / employeer: Innovate new products that emphasize culture of Bali so unique and
different from other wooden crafts business; Have partnership other wooden craft industry to strengthen the
promotional efforts in order to be better known by people all over Indonesia; Participate in the training carried out
by government-sponsored mainly by state-owned enterprises and local owned-enterprises to obtain information on
the management of associated related to access to financial resources; Working with suppliers of raw materials so
as to produce a barong, tapel and eagle statue with the best quality; Providing the best service to customers.
For the Government: Provide ease of access to financial resources, allowing the company to further develop;
Provide training in management sector in order make adequate financial statements; Provide means of
communication and information to promote their products to a wider area.
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