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Asian Journal of Agriculture and Development (AJAD) - Call for papers!

Competitive Strategies for the Green Coffee beans Produced by the Interland Government Estate 12, Indonesia

(Indonesia), Master of Management in Agribusiness Management (University of the Philippines Los Baños)

Field Study Abstract:

Coffee is one of Indonesia’s most competitive export commodities because of input factors, demand factors, and industry-related and government support. The government, through its companies, continuously encourages this sub-sector to develop.

Perseroan Terbatas Perkebunan Nusantara (PTPN) 12 or the Interland Government Estate 12 Indonesia is the biggest government estate, which supports the other estates in Indonesia to take competitive advantage in the global market besides supplying the local demand. Coffee production covers 40 percent of PTPN 12’s total land area of 22,602 hectares where coffee beans produced contribute 79 percent of the total revenue. The commodity has image pricing especially for export in differentiated product quality. PTPN 12 adopts focus differentiated strategy to take competitive advantage for 75-80 percent of its product sales. Since its market share was relatively low in the existing target market, it still needs to optimize existing distribution channels by setting up a marketing plan. The remaining product was sold domestically at a lower price to encourage other competitors to take advantage of the export market.

There was a potential market for coffee, but the bargaining power of buyer was so high to easily affect the fluctuated price. Fluctuated domestic prices were affected by export price. An excess supply over demand in Indonesia, at the range of 335,642 tons in 1992 to 341,822 tons in 1997, was a potential export. The competitive advantage recommended was focus differentiated strategy. This included setting up an image pricing for target market and stressing on optimizing the existing distribution channels to capture the bigger market share in domestic importing countries such as Japan, Morocco, USA, Italy, and the Netherlands. Based on the calculation on the marketing plan, PTPN 12 should invest in these countries amounting to USD1.3M.

The coffee producers should strengthen producer institutions, which can control price or compete among producing countries. SWOT analysis generated strategy grids, as follows: (a) establish and forge partnership to run in direct selling for intensive promotion in the target market as well as optimize distribution channels, (b) apply training program on modern management know-how and effective technology, (c) expand Arabica in new concession areas using new hybrids combined with new technology to meet consumers’ expectations; d) forge partnership with coffee research and development to achieve good quality seeds, (e) hire technicians or horticulturists, and (f) increase equity, retain earnings and schedule loans.