KnE Social Sciences | The First International Research Conference on Economics and Business (IRCEB) | pages: 254–269

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1. Introduction

Never Get Old Company is one brand of jeans clothing located in the city of Malang. Jeans convection business was established in 2011, consequently, it is still relatively new compared to other similar businesses. Although the business is still a home-based business, Never Get Old Company is resilient in creating competitive advantage.

Based on the preliminary study, a gap discovered in the initial study is the remaining unused material discharged by the owner. In fact, if the owner can read market opportunities, the rest of this material can be used as different products or in other words, create differentiation products with jeans materials.

Product differentiation can be in the form of a bag, jacket, or shoes made from remnants of jeans material. This is in line with the broad market segment, which is young people, especially students. As is known, students are consumers who are concerned with looks, especially in the field of fashion. This means that students assume that the cost incurred to buy clothing needs is a priority.

With product differentiation at Never Get Old Company, buyers not only buy jeans, which are the main product, but also other products that have been made by the owner. The buyer does not need to move elsewhere to choose or purchase other products because they are already available on the owner's premises.

Never Get Old Company as a manufacturer of jeans must also be able to compete with its competitors by producing excellent products. This is done so that they are wanted by consumers and in the end, have loyal customers and able to create competitive advantage in the face of the global market.

2. LITERATURE REVIEW

Differentiation

Porter (1994: 14) states that in the differentiation strategy, the company tries to be unique in its industry in several dimensions generally appreciated by buyers. The company selects one or more attributes that are seen important by many buyers within an industry and uniquely puts itself to meet those needs. The company is rewarded with a premium price because of its uniqueness.

The way to differentiate is dissimilar for each industry. Differentiation can be based on the product itself, the product delivery system used to sell, the marketing approach, and various other factors.

Competitive Advantages

According to Porter in Rangkuti (2015: 6), there are three strategies that can be done by companies to gain competitive advantage:

  • Cost leadership

  • Differentiation

  • Focus

The company can gain a higher competitive advantage compared to its competitors if it can provide a cheaper price than the price given by its competitors, of course with the same product value or quality. The lower selling price can be achieved by the company because it utilizes economies of scale, production efficiency, the technology used, ease of access to raw materials, and so on.

The company also undertakes a differentiation strategy by creating a perception of a certain value to its customers. For example, perceptions of product performance excellence, product innovation, excellent service, and superior brand image.

Every company that competes in an industrial environment basically has a desire to be superior to its competitors. Generally, companies apply this competitive strategy explicitly through the activities of various existing company functional departments.

The basic idea of the creation of a competitive strategy begins with the development of a general formula on how a business will be developed, what its objectives are and what policies will be needed to achieve those goals.

The notion of competitive advantage alone has two different but related meanings. The first sense emphasizes superiority in terms of resources and expertise of the company. Companies that have competence in marketing, manufacturing, and innovating can make these factors as sources to achieve competitive advantage. Through these three areas of competence, the company can develop strategies so as to produce products that sell well in the market.

The second understanding emphasizes the superiority in achieving performance. This understanding is related to the company's position compared to its competitors. If a company continues to pay attention to its performance and strives to improve its performance so as to have a good competitive position, the company has the strong capital to continue to compete with other companies (Dogre and Vickrey in [7]).

This strategy should be designed to realize continuous competitive advantage so that the company can dominate both the current market and the new market. Competitive advantage basically grows from the values or benefits created by the company for its buyers.

3. Methodology

This research uses qualitative descriptive approach and is included in the case study research. Data is obtained from interviews, documentation, and observation sheet. Subjects in this study are the owner, employees, consumers, and business partners of the Never Get Old Company jeans convection business. The researchers' role in this research is a key instrument. Researchers conduct research at the production site on the grounds because of other than as a place of production, production location also serves as a place to sell jeans products.

Informants in this study are two: (1) Key informants, who are the owner of the business brand convection Never Get Old Company and employees. They were chosen because they are considered as the most knowledgeable on the information needed in this study. (2) The supporting informants in this research are business partners and consumers. Data analysis conducted in this research is SWOT analysis by using SWOT matrix. The goal is to find out whether the differentiation strategy is appropriate or not to be used as a medium to create competitive advantage in the Never Get Old Company brand denim brand in the face of global markets.

Interpretation of data is done by discussing the results of research conducted by reviewing the results of research obtained in the field. According to Miles and Huberman (Sugiyono, 2011: 247), there are two methods of data analysis, namely: (1) Flow analysis models, in which the components (data reduction, data presentation, and conclusion or verification) are carried out by the process of collecting data simultaneously. (2) Interactive analysis models, where data reduction components, data presentation, and conclusions or verification are done by data collection process after the data has been collected. This study uses an interactive analysis model with the steps described in the following scheme:

Figure 1

Components in Interactive Data Analysis Source: Miles dan Huberman (Sugiyono, 2011).

fig-1.jpg

Miles and Huberman in (Sugiyono, 2011: 247) stated that there are three kinds of qualitative data analysis activities namely: (1) data reduction. The amount of data obtained in the field is quite a lot, for it should be noted carefully and detailed. Reducing data means summarizing, choosing the essentials, focusing on the things that matter, looking for themes and patterns and removing unnecessary ones. Reduced data will provide a clear picture and this makes it easier for researchers to do further data collection, and look for it when necessary. (2) Presentation of data. After the data is reduced, the next step is to present the data.

The presentation of data in the form of qualitative can be done in the form of brief description, chart, the relationship between categories, flowchart, and the most frequently used, narrative text. Besides in narrative form, data presentation can also be graph, matrix, network. (3) Conclusion. The third step is the conclusion and verification.

The preliminary conclusions raised are temporary and will change if there is no strong evidence to support the next stage of data collection. Nevertheless, if the conclusion has indeed been supported by valid and consistent evidence when the researcher returns to the field to collect the data, then the conclusion put forward is a credible conclusion.

The conclusion in qualitative research is expected to be a new finding that has not previously existed. The findings can be a description of an object that was previously still unclear so that once examined, it becomes clear. For the sake of the validity of the data, triangulation techniques in the form of data sources and methods are used. The findings are then processed using SWOT analysis and preceded by EFAS and IFAS analysis to make the data more accurate.

4. Results and discussion

SWOT analysis

Matrix of Internal and External Strategy Factor

Rangkuti (2015: 24) states that once internal strategic factors and external strategic factors of a firm are certified, an IFAS table and an EFAS (External Strategic Factors Analysis Summary) are structured to formulate internal factors and external factors within the framework of strengths and weakness, opportunities and threats.

Internal Factor Analysis

This analysis is structured to calculate internal corporate strategy factors consisting of strengths and weakness. This is done to obtain the weight and rating of the internal strategy factors of strength and weakness. In this case, the differentiation strategy goes into the strengths of the Never Get Old Company brand convention business. The identification in the IFAS table is as follows:

Table 1

The Calculation Results of IFAS (Internal Strategic Factors Analysis Summary).


Internal strategy factors Weight Rating Score
(Weight x rating)
Strengths
1. Qualified raw material 0.1 4 0.4
2. Product innovation 0.05 4 0.2
3. On time order 0.05 0.2
4. Variety of jeans model 0.05 4 0.2
5. Free shipping cost Malang area 0.05 4 0.2
6. Complete sewing machine specification 0.1 0.3
7. Custom order system 0.1 3 0.3
8. Experienced human resources 0.05 3 0.15
9. Competitive price 0.05 3 0.15
10. Typical product 0.05 3 0.15
Weakness
1. Not having a store 0.15 1 0.15
2. Small business capital 0.05 1 0.05
3. Not having a patent 0.05 1 0.05
4. Less strategic location 0.05 1 0.05
5. Not having a website 0.05 2 0.1
Total 1 2.65
Source: data processed by researchers (2016)

Based on IFAS calculations, the excellence of the Never Get Old Company brand denim jeans business is: (1) Qualified raw material with a score of 0.40, where this qualified raw material is included in product differentiation indicator in the form of durability and reliability. (2) Complete sewing machine specification with a score of 0.30, wherein the complete sewing machine specification is included in the product differentiation indicator in the form of performance quality. (3) Custom order system with a score of 0.30, which custom order systems is included into service differentiation. (4) Product innovation with a score of 0.20, where innovation is included in the product differentiation indicator in the form of features. (5) On time order execution with a score of 0.20, where on time order execution is included in the service differentiation. (6) Variety of jeans model with a score of 0.20, where the Variety of jeans model is included into the product differentiation indicator in the form of style and design. (7) Free shipping cost with a score of 0.20, which is included in the service differentiation. (8) Experienced human resources with a score of 0.15, where experienced HR includes into service differentiation. (9) Competitive price with a score of 0.15, where competitive pricing is included in price differentiation. (10) Typical product with a score of 0.15, where the characteristic of the product is included in the brand differentiation. The highest score on internal strengths factor is 0.40, which is quality raw material.

Internal factors of weakness based on IFAS on the business of brand election of Never Get Old Company jeans are as follows: (1) Not having a store with a score of 0.15. (2) Not having a website with a score of 0.10. (3) Small business capital with a score of 0.05. (4) Not having a patent with a score of 0.05. (5) Less strategic location with a score of 0.05. The highest score on the internal weakness factor is 0.15, which is not having its own store.

External Factor Analysis

This analysis is structured to calculate the value of opportunities and threats that aim to maximize opportunities and minimize threats. Alliance strategies are included in external factors of opportunity. The analysis is a weighting and rating external factors of opportunity and threats. The identification is in the EFAS table below:

Table 2

The Calculation Results of EFAS (External Strategic Factors Analysis Summary).


External strategy factors Weight Rating Score
(Weight × rating)
Opportunities
1. Marketing alliance with the owner of the distro 0.20 4 0.80
2. Accessories in the form of belts 0.10 4 0.40
3. Loyal consumers 0.10 4 0.40
4. Stock of durable goods 0.10 3 0.30
5. Changes in people's lifestyles 0.10 3 0.30
6. Participation in fashion exhibition 0.05 3 0.15
Threats
1. Long-standing competitor 0.15 1 0.15
2. Huge number of competitors for the same product 0.05 2 0.10
3. Huge number of foreign products that enter Indonesia, both original and pirated 0.05 1 0.05
4. Unresponsive responses from consumers in Indonesia to new brands 0.05 1 0.05
5. Higher sensitivity of consumers to the price 0.05 1 0.05
Total 1.00 2.75
Source: data processed by researchers (2016)
Figure 2

SWOT Analysis Diagram for Never Get Old Company Jeans Convection. Source: data processed by researchers (2016).

fig-2.jpg

External factors based on EFAS calculation on the Never Made Old Company brand at the opportunity factor are as follows: (1) Existence of marketing alliance with the owner of the distro with a score of 0.80. (2) Accessories in the form of belts with a score of 0.40. (3) Loyal consumers with a score of 0.40. (4). The stock of durable goods with a score of 0.30. (5) Changes in people's lifestyles with a score of 0.30. (6) Participation in fashion exhibition with a score of 0.15. The highest score on the external factor of opportunity is 0.80 which is an alliance with the owner of the distro.

External threats factor in the business of Never Get Old Company is as follows: (1) Long-standing competitor a score of 0.15. (2) A huge number of competitors on the same product a score of 0.10. (3) A huge number of foreign products that enter Indonesia, both original and pirated, with a score of 0.05. (4) Unresponsive responses from consumers in Indonesia to new brands with a score of 0.05. (5) The Higher sensitivity of consumers to the price with a score of 0.05. The highest score on external threat factor is 0.15, that is a long-standing competitor.

The result of IFAS table analysis above shows that strength factor got 2.25 and weakness a score of 0.40 with score difference (+) 1.85. The EFAS table shows that the probability factor got a score of 2.35 and the threat of 0.40 with score difference (+) 1.95. The results of identification of internal and external factors can then be described in the following SWOT diagram:

Based on the above SWOT diagram, it is known that the results of quadrant 1 are a very favorable situation. The business has the opportunity and power so that it can take advantage of existing opportunities. The strategy that must be applied in this condition is to support the policy of growth-oriented strategy. The SWOT analysis of differentiation and alliance strategies is an appropriate analytical tool to create competitive advantage in the Never Get Old Company brand denim business in the face of global markets.

5. Matriks SWOT

Figure 3

SWOT Matrix for Never Get Old Company Jeans Convection. Source: data processed by researchers (2016).

IFAS STRENGTHS (S) WEAKNESS (W)
1. Qualified raw material 1. Not having a store
2. Product innovation 2. Small business capital
3. On time order 3. Not having a patent
4. Variety of jeans model 4. Less strategic location
5. Free shipping cost Malang area 5. Not having a website
6. Complete sewing machine specification
EFAS 7. Custom order system
8. Experienced human resources
9. Competitive price
10. Typical product
OPPORTUNITIES (O) Strategy (SO) Strategy (WO)
1. Marketing alliance with the owner of the distro 1. Make innovations on the products by including the characteristics of products with competitive prices 1. Improve the cooperation of marketing alliances with distributors
2. Accessories in the form of belts 2. Cooperate alliances not only in the field of marketing but also with providers of raw materials for maintained and good quality of raw materials 2. Make efficiency in producing the product
3. Loyal consumers
4. Stock of durable goods 3. Improve the quality of service to consumers at the time of purchase and after-purchase, in addition to establishing a good relationship with consumers
5. Changes in people's lifestyles
6. Participation in fashion exhibition
THREATS (T) Strategy (ST) Strategy (WT)
1. Long-standing competitor 1. Create products with characteristics that are difficult to imitate by competitors 1. Make patent right away so as not to be claimed by another party
2. Huge number of competitors for the same product
3. Huge number of foreign products that enter Indonesia, both original and pirated 2. Provide competitive price for the product with qualified materials 2. Create a web to make the brand of the product more known
4. Unresponsive responses from consumers in Indonesia to new brands
5. Higher sensitivity of consumers to the price

The results of SWOT matrix analysis table of Never Get Old Company brand convection business show that the convection business has an alternative strategy, which is SO strategy. That is a strength that can be used to exploit the existing opportunities and reduce the weakness and can avoid the threats that exist today.

6. Discussion

The rapid development of the era of globalization and technology has been the driving force of convection entrepreneurs to produce quality clothing products. In this case, the use of advanced technology can increase the productivity of a production. With the advances in technology used, the resulting product can be made different from other products, ranging from the complexity of the design to the resulting model.

Implementation of marketing and promotion strategy is needed in a business, so its application also cannot be regarded as trivial. A properly used marketing and promotional strategy can make a product sell easily. Similarly, the business of jeans convection also requires marketing and promotion strategies so that the goods produced can be sold.

Jean's convection businessmen who already have their own stores or outlets in their business will have no difficulty in distributing and marketing their products. This is different from entrepreneurs who do not have their own store or outlet. They will have little difficulty in distributing or marketing their products.

Due to these obstacles, many convection entrepreneurs are working with distros to market their products. They hope that cooperation with distro can improve product marketing. This method is considered more efficient by convection entrepreneurs because the entrepreneur does not need to think about the costs of marketing and promotion. Entrepreneurs do not need to think about how to form a brand image to consumers, which will take a long time, especially for new businesses. In addition, it costs a lot to form a brand image to consumers.

Distros are also not harmed by this kind of cooperation system. This is because they simply pay the products produced by convection entrepreneurs at a cheaper cost. This is in accordance with the agreement agreed by both parties so that both parties need each other.

Consignment system is what makes the price of clothing in the distro more expensive than in the conventional clothing store. This is because the system of cooperation made by convection entrepreneurs by selling their products without a brand label. While the distro, after buying clothes from convection businessman, put a brand label distro on the clothes.

This kind of cooperation system will eventually create a convection businessman who does not cooperate out of business. This is because of the fact that production and operation costs are high, especially if the convection business does not have its own store or outlet. As a result, this is the difficult process of marketing.

Porter (1994: 3) states that competitive advantage essentially evolves from the value that a company can afford to buy, where this value exceeds the cost of the company in creating it. Companies that have a competitive advantage always have the ability to understand changes in market structure and choose effective marketing strategies.

Porter's study then sets out generic strategies in three categories, namely cost leadership, differentiation, and focus. The choice of each firm against the generic strategy above will depend on the business environment analysis to determine opportunities and threats.

Porter (1994: 14) states that in the differentiation strategy, the company tries to be unique in its industry in several dimensions generally appreciated by buyers. The company selects one or more attributes that are seen as important by many buyers within an industry and uniquely puts itself to meet those needs. The company is rewarded with a premium price because of its uniqueness.

The way to differentiate products is different for each industry. Differentiation can be based on the product itself, the product delivery system used to sell it, the marketing approach, and various other factors.

  • Product differentiation. In product differentiation, the product is when the company creates a new product perceived by the customer as a unique and different product. Physical products are potential to be differentiated. Companies can differentiate their products based on features, performance quality, quality of conformity, durability, reliability, ease of repair, style, and design. The selection of products among the many offers in the market is always based on the difference, either implicitly or explicitly. Psychology literature refers to the fact that striking differences associated with a product will stimulate memory because the difference will be appreciated intellectually (Hasan, 2009: 274).

  • Service differentiation. According to Tjiptono (2000: 51), another way to differentiate is to consistently deliver better service quality than competitors. This can be accomplished by fulfilling or even exceeding the quality of services customers expect.

  • Brand differentiation. According to Zyman (2000: 141), many companies are successful in selling products because their products have a clear image. It determines their position at a point that is potentially attractive among the many consumer choices. The various concepts that developed today imply how important the brand as a means to achieve competitive advantage in the market. Once the company has clearly defined its image to customers, the next step is to communicate that image to make it a source of competitive advantage that the company has in the long term.

The research findings of the Never Get Old Company brand convection business show that the owner has applied a differentiation strategy to his business, which means that the business creates something different, both product differentiation, service differentiation and brand differentiation. This is done to add value to consumers. The added value will gradually become embedded in the minds of consumers, so that later consumers will become customers in the product jeans brand Never Get Old Company is. Differentiations that have been done by the owner of the business are:

  • Product differentiation. Differentiation is done by innovating the remaining material. Brand Label made of the leftover material that can be used as the key chain of jeans which varies in several designs and materials. Tote bags from canvas instead of plastic bags and the making of a limited number of jackets and bags are also several differentiation steps.

  • Differentiation of service. Differentiation is done by receiving jeans orders in accordance with the design ordered by consumers. The process is on time, which is completed within four days after ordering. Other services made to consumers is to eliminate the cost of postage for consumers of Malang area.

  • Brand differentiation. Differentiation is done by giving the brand name of the jeans with the name Never Get Old Company. The owner's hope is that his company can continue to innovate in its products. Although using a foreign language, but the word has a meaning in accordance with the expectations of the owner, namely that his company never grow old in innovating and creating. It is expected that consumers who remember this name will be directly on jeans products from Never Get Old Company.

The results of this study support some of the results of previous studies, namely that differentiation strategies can create competitive advantage. The study included:

Jummaini, (2013) who found that product differentiation, service differentiation, brand differentiation and price differentiation have an effect on the competitive advantage in distribution and boutique. These findings indicate that to be a successful entrepreneur in the distribution and boutique business, the company must be able to maintain competitive advantage, that is by differentiation.

Haq, (2012) which concludes that the competitive strategy of the three Porter generic strategies has been done by UD. Larasati. The strategy of cost advantage is done through low-cost raw materials, wholesale labor, self-owned production tools, direct selling marketing, and wage systems that make the selling price of products relatively affordable. Differentiation strategy is done through product diversity and product design, product exclusivity, and customer service. The focus strategy is done by UD. Larasati through the focus of the company on the middle to lower market segments, as well as services to wholesale consumer groups.

Budi, (2015) concluded that the differentiation strategy is used by a company to gain uniqueness. This can deliver more value than customer expectations. With these advantages, the company will offer products at prices above other competitors.

7. Conclusion

Based on the findings of research and discussion, it can be drawn conclusions as follows: (1) Never Get Old Company has done differentiation strategy that is product differentiation, service differentiation, and brand differentiation. (2) The result of SWOT analysis is known IFAS value equal to 1.85 and EFAS value equal to 1.95. Of the two values, the firm is located in quadrant 1 in the SWOT analysis diagram that supports the policy of growth-oriented strategy. The alternative strategy used by SO is by utilizing all the power to seize and exploit the greatest opportunity through innovation in the product by including the characteristic of product with competitive price, improving service quality to the consumer at the time of purchase and after-purchase, and good relationship with consumers. Thus, a differentiation strategy using SWOT analysis is the right strategy used to create competitive advantage in the Never Get Old Company jeans convection business. (3) There are constraints in doing differentiation strategy, those are capital, not having a distribution channel, mindset in doing business, and not having a website. While the solution in doing differentiation strategy is establishing the relationship or cooperating with raw material producer, and changing the mindset that taking care of a business license, patent or capital is always complicated and convoluted. The next solution that can be applied by the owner is to create an official website on his business so that consumers from various places can access the resulting product.

8. RECOMMENDATION

Based on the research findings, the researcher gives suggestions as a follow-up related to this research, among others: (1) To the owner, to innovate on bag product made from canvas material by using the remaining pieces of cloth unused. This will increase the usage value of the remaining unused material and make the production cost incurred more efficient when compared to using canvas materials. (2) To the owner, to create or develop a web that can assist in the process of product promotion or marketing. This needs to be done so that consumers can access products that are promoted more quickly and easily. This will be different if only using social media because on social media, people who can see the product is only people who already know the owner. The use of the website can also boost sales of the product. This is because of the fact that not only local consumers who can access the product, but also foreign consumers can access the product because the interest of jeans comes from various countries. (3) To the owner, to use or complete simple financial software to assist the bookkeeping process. This is necessary because the bookkeeping is still not organized neatly and systematically. It is also important to implement to avoid confusion related to the finances of the jeans convection business. (4) To the owner, to arrange licenses and register patent rights to the relevant authorities. After that, the manufactured products can be recognized and have SNI as a condition for the goods to be traded in the domestic market and abroad. In addition, this is done in anticipation of things that are not desirable, such as claims from foreign business who use the same brand name or product logo. In addition, with the enactment of the MEA and the start of the global market, patents are indispensable for every entrepreneur so that the products can compete in both the domestic market and the global market. (5) For the next researcher, due to the limited time in this study, to conduct in-depth interviews in more detail so that the resulting research can be refined again.

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Susanti, Rizki Aprilia Dewi, Peran Social Entrepreneurship Dalam Menciptakan Keunggulan Bersaing Guna Memajukan Usaha Batik Madura (Studi Pada Sentra Batik “Melati” Di Pekandangan Sumenep) (Tesis) Universitas Negeri Malang, 2014.

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