PT INDOFOOD (INDOMIE) BASED ON PORTER’S FIVE FORCE ANALYSIS

MANAGEMENT INFORMATION SYSTEM

BILINGUAL CLASS

QUIZ 1 - BUILDING CASE

PT INDOFOOD (INDOMIE)

BASED ON PORTER’S FIVE FORCE ANALYSIS

BY :

FELICIA MONIKA

1511011032

S1 MANAGEMENT

ECONOMICS AND BUSINESS FACULTY

UNIVERSITY OF LAMPUNG

2016/2017

ANALYSIS

INTRODUCTION OF INDOFOOD (INDOMIE)

PT. Indofood CBP Sukses Makmur Tbk., better known as Indofood, is a major Indonesian company involved in the food industry. The company's headquarters are in Jakarta. Instant noodles business first founded in 1968, to produce Indomie since 1972. Indofood was founded on 14 August 1990 as Panganjaya Intikusuma till 1993, before changing to its current name in 1994. It is one of the companies owned by the family of Sudono Salim under the Salim Group.

In January 2013 when filing on the Indonesia Stock Exchange, Indofood said it is planning to buy 50% of Brazilian sugar-cane processor Cia Mineira de Acucar e Alcool Participacoes, (CMAA) for $72 million. In January 2015, Indofood built an instant noodles factory in Morocco and it is to be opened in Q3 2015. It is the sixth plant in Africa after Nigeria, Egypt, Sudan, Kenya and Ethiopia, and is the biggest overseas Indomie factory. The first plant in Africa was built in 2013.

PT Indofood Sukses Makmur Tbk engages in the food manufacturing and processing industry. It operates through the following segments:

-          Consumer Branded Products

-          Bogasari

-          Agribusiness

-          Distribution

-          Cultivation and Processed Vegetables.

• Consumer Branded Products Group

The consumer branded products group comprises five separate divisions, namely noodles, food seasonings, dairy, snack foods, and nutrition & special foods. Its operations are conducted by subsidiary Indofood CBP Sukses Makmur (ICBP), which was listed on the Indonesia stock exchange (IDX) on 7 October 2010.

• Bogasari

Bogasari is the largest integrated flour miller in Indonesia. Its two mills are located in Jakarta and Surabaya (Java). Its operations are supported by shipping operations (for wheat transport) and a textile facility (for the production of bags). Bogasari not only produces a variety of wheat flour for different purposes under prominent brands but is also the largest pasta producer in South East Asia (the La Fonte brand). Its pasta products are exported to various countries, including the Philippines, Korea and Japan.

• Agribusiness Group

Indofood's Agribusiness Group is a vertically integrated operation chain that owns a number of leading brands derived from palm oil. Its operations cover the whole value chain from research and development, oil palm seed breeding and cultivation to milling, refining, branding and marketing of cooking oil, margarine, shortening and other palm oil derivative products. In addition, the group also engages in rubber, cocoa, sugar cane as well as tea plantations.

• Distribution Group

The Distribution Group (which also distributes third-party products) has one of the most extensive distribution networks of Indonesia, penetrating almost every corner of the archipelago. The number of stock points has been expanded aggressively since 2005. Stock points are located in areas with a high density of retail outlets, including traditional markets.

• Cultivation & Processed Vegetables

In 2013, the company added the Cultivation and Processed Vegetables business segment to its corporate structure. Activities in this segment are conducted by China Minzhong Food Corporation Limited (CMFC), an integrated vegetable processing company in China which is listed on the Singapore stock exchange (SGX).

International Aspirations

Indofood is one of the (relatively) few companies in Indonesia that looks beyond the domestic market. Its aspirations to become a global player can be seen in the establishment of joint venture companies with Singapore-based Asahi Group Holdings Southeast Asia Pte. Ltd. (to enter the fast growing non-alcoholic beverage market) and a Memorandum of Understanding with Japan's Tsukishima Food Industry, Co., Ltd. (to engage in the production of value-added oil and fats for the food service industry).

In 2013, Indofood acquired 50 percent of the shares in Companhia Mineira de Acucar e Alcool Participacoes (CMAA), a Brasilian sugar and ethanol producer, and expanded its stake in CMFC to 29.33 percent.

Future Perspectives of the Indonesian Consumer Goods Sector

Indonesia's recent economic growth is to a large extent due to Indonesia's robust domestic consumption. Not only does Indonesia contain one of the world's most populous populations, but it also constitutes a population that is burgeoning; the country's middle class is expanding rapidly and it shows in their consuming habits.

A larger portion of people's disposable income can be spent on consumer products. As such, businesses that largely rely on Indonesia's consumer base have good prospects. McKinsey expects that Indonesia will move from its current position as the world’s 16th largest economy to the 7th largest economy in the year 2030, partly supported by domestic consumption as income per capita continues to rise in combination with rapid urbanization.

The size of Indonesia's consuming class is expected to more than triple over the same period, from 45 million in 2012 to 135 million in 2030. As one of the largest food companies in Indonesia, Indofood is well-positioned to capture these opportunities.

FIVE FORCES INFLUENCE THE LEVEL OF COMPETITIVENESS IN INDOFOOD (INDOMIE)

1.      RIVALRY AMONG EXISTING FIRMS

Very high: There is a lot of competitors increase, because the demand of instant food is increasing.

Business Competition in Industry In view of the competition, PT. Indofood is included in Perfect Competition (Competition where other companies are forced to become followers included in product pricing). This is probably because PT. Indofood has been very popular in every area, market share of PT. Indofood has also been quite extensive.

The development of instant noodle products that have been considered as fast food and even as a staple food, causing the level of competition in this instant noodle industry higher. In each Company has its own product advantages. PT. Indofood CBP Sukses Makmur itself has 19 products with different taste variants. In this competition, should always develop the quality and quality of products produced, always provide the best for society and society that will assess whether the company can survive in the competitive market or not. Factors affecting the level of competition, among others:

A.    Number of competitors Total: Number of competitors instant noodle production sdah pretty much, for example, companies producing Mie Sedap.

B.     Size: In the market nation, competition can be seen with the existence of other instant noodle production business such as PT. Main Mas Wing producing Mie Sedap.

C.     Industrial growth rate The growth rate of the industry will shift the position of existing companies, then instant noodle products made by PT. Indofood must be able to compete with existing noodle products by generating price wars, or in the form of product promotion.

D.    Products produced The resulting product must be able to guarantee security and give a sense of satisfaction to customers or consumers. Repairing or redesigning a package may cause a new competitor to also warn the quality of its product packaging.

E.     Fixed costs are large Fixed costs include the cost of maintenance of production machinery that must be issued every month or every year then PT. Indofood should still spend these expenses as expenses.\

INDOFOOD VS WINGSFOOD

Currently, the competition of Indonesian products is getting tighter, one of which is shown by Indofood products with Wingsfood products especially in the field of instant noodles by utilizing the dependency of Indonesian people on fast food. No wonder the new companies glance at the market in this field.

The emergence of new comer producers of instant noodles PT Sayap Mas Utama with its products Mi Sedap quite surprising. Some marketing experts reminded that PT Indofood Sukses Makmur Tbk which has been the market leader of instant noodles more vigilant.

Although not as aggressive as Mie Sedap, there are some instant noodle products that are also worth noting. The company, go into the noodle business by hooking people ex Indofood. They enter by targeting a special segment. Salami, for example, uses the religious segment. Unilever targets the middle teen market. While the market segment of Mie Sedap is middle to lower.

The initial target of Mie Sedap is for the consumption of drivers and housemaids. But because the taste is delicious, they then recommend to the employer. That's what's happening now. Now Mie Sedap began to undermine the market share of noodles Indofood products.

With so many requests for this product, shop owners and outlets will think twice about not providing it. Why refuse a product that many consumers are looking for would think of them. Finally, Indofood uses strategies such as attached ads to match the price & popularity of Mie Sedap that skyrocketed, besides also launching the Mie Sayaap match brand and changing Supermie Sedaaap and Sarimi Besaar to make the brand name 'delicious' as it becomes drowned.

However, until now Indomie produced PT Indofood Sukses Makmur Tbk still dominate the market. Domination is so strong despite a shift. If 2002 Indomie controls about 90% market share of instant noodles, last year decreased to 75%. The remaining 25% were beaten by other instant noodle brands. The setback is worth watching out for. Moreover, recently appeared Mie Sedap of PT Sayap Mas Utama which is a group of Wings group. Although this product was only launched in May 2003 and newly distributed in Java and Bali, but its name has begun to be discussed among buyers in stalls, even supermarket.

The tight competition of instant noodle product is realized by PT Indofood management. The unnamed source acknowledges that currently Indofood's control of the instant noodle market has declined from 90% to 75%.

About the strategy to face competition, Indofood will apply the Mastering the Present, Pre-empting the Future strategy. These strategies include focusing on organic growth, utilizing competitive advantage through scale, scope, span, and speed. In addition it will run the program cost efficiency and cost cutting. In addition it continues to segment its consumers by introducing products with higher price and higher margin.

Now the Wings and Indofood wars are playing. The two giants are seen not to play in defending themselves as well as attacking the core business of competitors in order to maintain the existence of his business empire. Of course the beneficiary in this case is the consumer. Because enjoying the products with better quality and price, could be, cheaper.

Mie sedaap itself has the advantage of more cheap price, if the taste of each consumer has its own assessment. Because of course have different taste. What's interesting about the fight between indomie vs noodle is because the fight is part of the fight between Indofood vs wingfood.

INDOFOOD VS MAYORA

Mayora, re-expand its wings by launching its newest instant noodle product with the brand of Bakmi Luxury. As we know, Mayora is one of the most respected food and beverage company (FMCG / Fast Moving Consumer Goods) in Indonesia with some of its flagship products like Tea Pucuk, Torabika , Beng-Beng, and Roma biscuits.

The entry of Mayora into instant noodles can be spelled out new, with its products Bakmi Luxury became the first noodle in Indonesia that presents the topping chicken and real wet mushrooms and with the first tagline in Indonesia, chicken noodles with real chicken meat. As always, product launches from Mayora are always massive with ATL and BTL activity strategies, TV ads appear almost in all channels with brand ambassador Raffi Ahmad and sampling activities in supermarkets and hypermakets are very lively.

Indomie as the market leader of instant noodles in Indonesia certainly will not stay silent with Luxury Bakmi products. Indomie will always try to convince the market that there is no other brand of instant noodles more delicious and better quality than Indomie. So if people want to eat instant noodles, they will not look left again, and will immediately choose Indomie.

It did not take long for Indomie to release competitor Bakmi Luxury products and as if not to be outdone by Bakmi Luxury, Indomie issued a new product under the name Real Meat and with additional tagline with Original chicken meat just like tagline Bakmi Mewah.

Here are some differences between fancy noodles and Real Meat:

-          From the form of packaging Real Meat and Bakmi Luxury look similar because both have the contents of 110g, but from the side of the color and packaging Real Meat look more premium.

-          In terms of content, as a market leader and experienced company in the field of Instant noodles, Indomie Real Meat has the advantage that there are Vitamin A, B1, B6 and B12

-          Problem taste may be very subjective but this is the differentiating factor between Real Meat and Bakmi Luxury. Real Meat that brings the name of Instant Fried Nood when after stirring it looks like a fried noodle in general with the majority of soy sauce and has a sweet taste whereas Bakmi Luxury is more impressed as Bakmi or Mie Ayam Bangka with a more savory taste. For yanag likes sweetness and with Real Meat java tongue may be more suitable while who likes salty and savory taste may be more like Bakmi Mewah.

2.      BARGAINING POWER OF SUPPLIERS

Low: because all ingredients are owned by PT indofood

The Indofood Group is a "Total Food Solutions" company, with business activities covering all stages of the food production process, from raw materials production and processing to final product available in the market. As a leading company in the processed food industry in Indonesia. The Indofood Group is supported by an extensive distribution system so that its products are well known throughout the archipelago.

Indofood Group products include instant noodles, dairy, seasonings, food snacks, baby food, wheat flour, pasta, biscuits, cooking oil, margarine and shortening. Indofood Group product brands are the leading brands in the domestic market, known to consumers as quality products at affordable prices and available in various corners of Indonesia.

Bargain power supplier supplier PT Indofood CBP Sukses Makmur Tbk always pay attention to quality and quantity aspects of its products. This is seen from the materials used are the material of choice. Wheat flour used is the best quality of Bogasari Flour Mils. In quantity PT Indofood CBP Sukses Makmur Tbk is a company that has a demand of high instant noodle products. The development of noodle production in Indonesia showed a positive increase, although in 2006 decreased production.

3.      THREATS OF SUBTITUTE PRODUCTS

High: The innovation on substitute products and another kind of healthy noodles has appeared

Community involvement is very necessary in a business. The higher the appetite of the community, the more increase the result of product. But when the product decrease, it happen when people are bored and no longer interested to buy it again.

This problem is caused by a better replacement products from previous products, such as Indomie instant noodle products, people enthusiastically want to buy because it feels good but over time people feel bored because the product is not given new innovations to attract customers again and the emergence of replacement products such as Sedap noodle Which offer other products than others.

Maybe the packaging is interesting and consumer can make a profit after eating it, or there is a lottery prize after eating a pack of Mie Sedap. This is what should be aware of by PT. Indofood because not always produced product can attract consumer interest. Although until now Indomie produced by PT Indofood Sukses Makmur Tbk still dominate the market and its dominance is so strong despite the shift, the development of its big competitor must remain in the beware.

The next thing to be aware of is the quality of noodles. Nowadays people are getting smarter, they will choose healthy noodles. Therefore, PT Indofood should be able to ensure that the noodles they produce are healthy foods.

4.      THREAT OF NEW ENTRANTS

High: Because demand of noodles in Indonesia is high. Even Indomie dominates the market and has a high capital, they have to be careful.

Entry of new companies as competitors that will affect the changes that exist, such as PT products. Indofood because it has been known where will emerge a new competitor who will try to compete with products made by PT. Indofood, the new competitor will probably make the latest product innovation that may be better than the product of PT. Indofood.

Indofood products can be said that the growing day gradually will recede if there is a new competitor is much smarter to make innovation and develop business. Examples of products from PT. Indofood like Indomie may be outdone by other products like Sedap. The emergence of new companies such as PT Sayap Mas Utama with Mi Sedap products will be the biggest competitor for PT. Indofood CBP Sukses Makmur. To be able to dominate the market required a mature strategy so as not to be easily displaced by other noodle products.

5.      BARGAINING POWER OF BUYERS

Low : Indomie dominates the market and the end-users are mostly loyal

The most often in the mind of a buyer is to buy a product that has the best quality, has the lowest price and if you can get the best service as well. But for the industry is not too worried when many products are expected and interested by buyers.

Indomie consumers are not only in Indonesia but are in Australia. Indomie is a favorite food in asutralia, it can be seen from stores that always run out of stock because demand for indomie in australia pretty much. It is also supported by the habits of australian people who need fast food because of the density of working hours and the number of netizens. In Australia, in 2009 indomie sold for 25 cents per pack or AUD 10 for one box containing 40 packs of indomie, whereas in the United States in 2009, indomie usually sold for 1 dollar per 3 packs.

The increasing demand for noodles in the market has made the production level of noodles higher, with many competitors emerging to make PT Indofood Sukses Makmur Tbk must find the right solution so as not to leave the consumers. By maintaining the quality of the product and making the price cheaper than others will make consumers feel satisfied.

CONCLUSION

From this analysis, we know that there are many kind of thing that can threat PT Indofood. Even Indomie dominates the market, it cannot guarantee the sustainability of it businesses. Because, without innovation and with that kind of threat, it is possible for Indomie to lose their market.  

Indomie should recognize what is their advantage and disadvantage, so they can solve any problem that they might have. The demand of noodles in Indonesia is very high. This rate make the other company would like to get in this market of noodles. Because they already see how potential this market is.

SUGGESTION

The solutions to these threats are:

1.       PT. Indofood Sukses Makmur Tbk must add superior to the products to be marketed, pay attention to the quality of products that want to be marketed, see the needs of consumers and perform various buzz that will be the consumer appeal to the marketed product.

2.       PT. Indofood Sukses Makmur Tbk must do aggressive promotion so as not to lose with other companies that also do aggressive promotion. And also make product prices cheaper than other products while maintaining the quality so that the production can increase.

3.       PT. Indofood Sukses Makmur Tbk must have the ability to identify recognize the needs and wants of heterogeneous consumers, given the changing consumer's desire to know clearly the needs and desires of consumers. It is done so that production activities in accordance with the desired target.

BIBLIOGRAPHY

https://en.wikipedia.org/wiki/Indofood

http://dutapraja.blogspot.co.id/2016/05/mayora-vs-indomie-bakmi-mewah-real-meat.html

http://makalahmahasiswariau.blogspot.co.id/2015/05/lingkungan-bisnis-pt-indofood-sukses.html


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