Porter’s Generic Strategy The overall cost leadership is the most appropriate strategy for Indomie (mie goreng) as the dominant market leader in response to the price war competition in the market with their follower and challenger. To compete effect effective ively ly in priceprice-sen sensit sitive ive market market such such as instan instantt noo noodle dles, s, Indofoo Indofood d concentrates upon achieving the lowest costs of production and distribution costs with setting its prices at a lower level than its competitors (Kotler, 2003 2003). ). This This is the the choi choice ce of gene generi ric c stra strate tegy gy in orde orderr to main mainta tain inin ing g Indofo Indofood od as the market market leader leader in instan instantt noo noodle dles s indust industry ry with with slight slightly ly increase according to the objective in year of 2006, which is 40 percent Indomie as the highest sales percentage brand in Indofood. Acco Ac cord rdin ing g to what what stat stated ed in Wilso Wilson n (199 (1997, 7, p.329 p.329), ), “rat “rathe herr it provi provide des s manage managemen mentt with with an opport opportuni unity ty to learn learn how the triad of techno technolog logy, y, management and labor can be used effectively”. Therefore, instead of the large scale economies of Indomie production, stricter controls also are being implemented including better production management to reduce cash tied up in inve invent ntor ory y and and othe others rs of oper operat atin ing g cost costs. s. Afte Afterr rest restru ruct ctur urin ing g the the operations, from focus on divisional profitability to core product profitability, the manage managemen mentt will will work work in better better coo coordi rdinat nation ion.. In additi addition, on, foc focusi using ng distributio distribution n in potential area also will help the cost cutting but still capture the wide market coverage.
Market Targeting Indomie in general or Indomie (Mie goreng) fried noodle as the substitute prod produc uctt of stap staple le food food,, has has conc concen entr trat ated ed its its prod produc uctt base based d on the the demo demogr grap aphi hic c segme segment ntat atio ion n of peop people le aged aged olde olderr than than 5 year years s old old we categorized for all ages, from children, teenager to older. This flavour of Indomie has an extremely wide range of segment’s overall attractiveness, because because of the full market market coverage coverage in undifferentiate undifferentiated d marketing marketing strategy with its mass production product, mass distribution, and mass promotion of one product for all consumers (Kotler, 2003). It is the approach carried out in the cost leadership strategy of Porter (1980). Comp Compan any y set set abou aboutt broa broade deni ning ng the the cons consum umer er base base for for the the prod produc uctt (Broadbent, 1981), such as Indomie (mie goreng) can be targeted for all ages, from segment with lower income to high income people. But looking
back to the market trend of 2004, the competitors win from narrowing the market segment with the low price. Therefore, the next year 2005-2006 market will be more targeted for lower income class. In addition, it is targeted for people’s consumption who lives in urban city and rural, especially with high level of consumption in urban city with having the meal between the busy times, for student and working people audience. Besides that, in global market, main target is the Asian countries which noodles as the choices as the staples food.
Positioning Strategy Indomie has benefited nature in the consumer’s heart and mind, because its existence as the jargon of the instant noodles as a household name in Indonesia since 20 years ago. Thus, Indomie (Mie goreng) fried noodles offering the instant noodle with the strong and emotional message with customer to occupy a distinctive place in the mind of the target market (Kotler, 2003). In order to build the positioning strategy, Indomie (Mie goreng) fried noodle will come with a worthwhile difference to promote, with the benefit and communicable of the brand positioning, which is “Smart Price for Anywhere, Anytime, and Anyone”. In the year of 2005-2006, Indomie uses prices and functional as its basis for its dominant in the market place. As competition increases and the product already know well by Indonesian’s consumers, an elaboration associate themselves more clearly and an introduction of a new price (Hooley & Saunders, 1993). Elaboration of Indomie in appreciating the loyalty consumer with concerned about the social wellbeing of consumers that Indomie (mie goreng) can be functioned in various occasion/festival, time and consumers. Introduction also becomes important for establishing the new valuable price of product in the market. For example, the campaign promotion in occasions such as Mother's Day or religious festival, for example people can buy more Indomie (mie goreng) because of low price during fasting month and Hari Raya, it shows that Indomie can exist in all of this special time.
Marketing Mix Product Strategy
In the level of SBU strategies, we identify the products/markets competitive advantage and attractiveness using two of the portfolio analysis. This BCG portfolio (see Figure 1) analysis will shows the current position on the growth share of Indofood (mie goreng) fried noodle based on market growth rate to measure market attractiveness, and market share as company strength in the market (Jain, 2000, pp. 249-50). The next analysis is the product life cycle (PLC) to see the competitive condition from the stage based on the time, sales and profit in order to decide the marketing strategies ( Jaim, 2000).
Figure 1 The BCG Portfolio Matrix of Indomie (Mie Goreng) Fried Noodle
As we can see from the Fig.1 & 2, the product of Indomie (Mie goreng) Fried Noodle has been achieve the maturity stage, since facing the new growing number of competitors, the position has been shifting from stars to cash cow, because the sales and market growth has been decrease. Based on Kotler (2004), the strategy that will be appropriate is the product modification, thus we are going to change the product’s characteristics. There are two strategies that we are focusing, firstly, the strategy of quality improvement of the raw material such as high quality wheat flavour with the implementation of the food fortification such as protein, severe malnutrition and vitamin A in Indomie (mie goreng) fried noodles. Secondly is the strategy of the style improvement to increase the attractiveness of the product. We still keep on our original flavour. The additional ingredients
and health food label will be added in the packaging. The extra ingredients such as small pieces fish crackers will make the instant noodles more attractively served.
Figure 2 The Stage of Indomie (Mie Goreng) Fried Noodle in Product Life Cycle (PLC)
Pricing Strategy The competition price becomes big challenge for Indomie to make price strategy for next year marketing plan. The company is competing with rivals especially Wings food, whose Mie Sedap noodle brand is 20 percent cheaper than Indofood's main Indomie. For the same brand and flavour of fried noodle, Indomie selling price is Rp. 910 and Mie Sedap is Rp. 650. There are others competitors such as Salami or Mie Selera Rakyat who penetrate the market in lower price. Our market in maturity stage characterized by pricing defensively in order to protect our market share, thus we are going to introduce lower priced fighting brand than our competitors (Kennedy & Kiel, 2000). Related to our quality product, we will offer the greater benefit for consumers with the super-value strategy (see Figure 3). The price will be cut for 30%, so that the new price will be set Rp.625 in the market. Based on the market research and other’s health
food issues, Indomie (Mie-goreng) fried noodle more valuable based on the quality, reliability, and availability.
Figure 3 The Price-Quality Strategy
In addition, Indomie (Mie goreng) fried noodle also use the priceadjustment strategy to regulate the prices, for low-cost shoppers or in other words who lives in poverty line and still can afford the Indomie product for consumption. Some of the strategies are quantity discount such as buy 5, 1 free and with special offer valuable pricing for household in eye-catching package and seasonings from that alluring pricing strategy plan, we are optimistic to achieve the objectives for increase the minimum 2% sales, and gross profit.
Placing Strategy Distribution plays big role to make the brand positioning market strategy for the high availability in anywhere and anytime to be realized. The availability can be achieved by ensuring the freshness and availability of its products across the country, through instead of strategic manufacturing locations and extensive distribution network. The structure will be the same for indirect channel through the division of Indofood’s distribution intensively (Kotler, 2003). The strategy is more focus in developing the distribution network to work more closely with retailers, responding faster to their feedback. Based on the growing numbers of modern retail market shops in urban city, we are going to develop the channel distribution to the hypermarkets, supermarket, mini market, such as new entrants retailer Giant supermarket
and 24 hours shops Circle K. However, developing and get closely channels of distribution for low income segment people in urban areas and rural areas in particular also important, with thewarung (kiosks) and toko kelontongan (independent food stores or provision stores) remain the backbone of Indonesia’s processed food distribution, servicing 65% of the population. Looking forward based on the demographic trend opportunities, to support the distribution, we are going to expand the division’s sales force focusing on a wider spread of retailers on Java Island, but still expand into the wide region in all around Indonesia. In addition, we also develop the service food capabilities for institutional customers including restaurant and small warung food (small local restaurant).
Promotion Strategy Response to the issues, opportunities and threats, start from the mid-year 2005 and 2006 will be full of intensively of promotion and advertising. Indofood will spend big budget for support the Indomie (Mie-goreng) fried noodle promotion strategy. It will be allocated with the promotion mix strategy, using the methods of advertising through the television, mass media, billboards, signs and posters, the other is the sales promotion with demonstration and exhibits (Jain, 2000). With the largest market share and product quality of instant noodles, Indomie (Mie goreng) fried noodle must generally spend more on advertising to maintain its share and the need to convince the consumer that the product is unique and reliable (Worked book, 1984). The most important in doing the promotion is the message that we want to deliver to our target market. In order to capture the target market and positioning of our brand, we choose to use the slogan “Smart price for anywhere, anytime and anyone”. This is so due to the fact that adverts are done smart choice for consumers benefited from more valuable price that can be present in any occasions and festivals. In this line of commercials, consumers and target customers are made to see ever so glaringly that Indomie noodles is concerned about the social wellbeing of consumers and the consumer itself. Such as, in the commercial TV of the Valentine period shows an availability of delicious Indomie noodles
as a lovers' delight, or during the Moslem’s fasting month festival, people have more lists in their household budget, Indomie (mie goreng) fried noodle will be the smart choice for the consumers. Indomie (mie goreng) fried noodle also attempt to use comparative advertising, which is Indomie will be compared with the most competing brands, not to mention. Moreover, sponsorship advertising corporate with the media TV show will be considered as the functional image publicity. Moreover, the tools than Indomie will use for the sales promotion is the premium offer, as already stated in the pricing strategy. The consumer can buy some packs of Indomie in one attractive package with offering others Indofood’s household in low-valuable price. All of these will be supported by outdoor advertising in the form of billboards.
Controls Indofood has high awareness to the controlling and evaluating , because it is a large company. In controlling and evaluating the marketing plan of 2005-2006, Indofood generally do all the types of controls, those are annual plan control, in sales analysis, market share and financial analysis. Also others are the profitability control, efficiency control and strategic control (Kotler, 2003, p.685). All the control is integrated with all the division inside Indomie, supported by the SAP software system and management system that can analysis the situation market and sales among all the region. In order to measure effectiveness of the plan, a measurement should be made and performed against the objectives set, example, profit and sales. (Band & Scanlan, 1995, pp102-104) Quantitative and Qualitative measure should be made with consideration came from customer on company image and perception. Moreover, during 1 year period of marketing year 20052006, the analysis and report will generate the quantitative measure based consideration on: 1. Total unit sales by monthly sales report 2. New customer per four quarters (every 3 months) 3. Market share movement per four quarters 4. Profit and Profitability per four quarters, integrated prepared by sales and accounting division. 5. Product sales differentiate by market segment per four quarters
The qualitative measure will include consideration on: 1. Brand loyalty 2. Brand Equity (brand awareness and product image) 3. Customer service enquiries volume 4. Technical support 5. Retailer Promotion Moreover
beside
performance
on
our
evaluating
product,
we
on
the
must
qualitative
also
analyze
and the
quantitative competitor
performance, especially Mie Sedap, who steals 10% of the market share of Indomie in 2004. This is in order to meet with our objectives we must not lost the battle in the next term year of marketing.
Contingency Plans Contingency plan is proposed according to the issues that might be happen in range time of the marketing year of 2005 – 2006. First, the foreign currency risk. With the terrorism terror attack and the unstable of economic, if the exchange rate of US to Rupiah become more drop. We are getting complicated in make the marketing plan, because the budget allocation for the marketing mix must be reduced. The other issue is about the oil prices, because after climbing about 40 percent last year, oil prices have continued to gyrate widely over the past two weeks. Even, the government would not increase the oil price, but we have to do prepare with the prevention plan (Sumual, 2004).Thus, if the macro environment situation become more complicated that we forecasted before in the marketing plan. There are some strategy changes in our contingency plan that we have to consider according to the marketing plan. In case of the raw material and operating cost will increase significantly. We will cut the budget for production cost, especially from the raw material such as wheat flour and packaging. The improvement of product’s attractiveness still set in the plan. The Tangible strategy will be the priority. Regarding pricing strategy Indofood in general and Indomie in particular, we must sustain the price below market rate which can’t be compromise also which set in Rp. 625. But, we can consider looking for others quality raw material which is cost below the fixed cost has settled before. It become difficult for keep on the reducing the price strategy. Automatically,
the others household products will increase also include the instant noodles products. So that, looking to our competitor, especially Mie Sedap (wings Food) obviously can not maintain their low price in the market. Eventually, the distribution has to be selective in developing the channel distributions consider to the region. And, for the promotion strategy we can reduce the intensity and frequently of the advertising and sales promotion.
Conclusion Looking to the market trend, there are significant of market growth and volume.
Through
the
macro
environment
analysis,
the
price
legal
environment and economic both giving some opportunities and also challenges. In the year 2005-2006, we are going to face threats from competitors, the product of Mie Sedap from Wings Food become more highlighted, because of the prices 20% below Indomie, and able to take chances 10% in the market share. However, Indomie have many strength and opportunities as the market leader and its experience able to attack back the competitors. Meanwhile, the increase of wheat price and health consciousness also becomes issues. Based
on the SWOT analysis looking
into
the
market
and
macro
environment, the product of Indomie (Mie goreng) fried noodle will combine all the marketing mix strategy in a year ahead. Indomie still win in emotional image and brand loyalty through their target market. Develop the quality product, Reducing the price, develop on distribution channel, aggressive advertising and premium offer become the strategy for next year. With this strategy, Indomie (Mie goreng) fried noodle optimist to increase the sales and profits at 2% rate minimum, besides stealing back the market share that has fell down in 2004. For the prevention and evaluation, the contingency plan and control has been prepared for the marketing plan 2005- 2006.
