VALUE CHAIN ANALYSIS

COST LEADERSHIP & DIFFERENTIATION STRATEGY

SYNDICATE 10
Elizabeth Elvienna – 29118060 | Gema Rendrahadi – 29118194
I Made Devantara – 29118149 | Soraya Rizka K. – 29117527 | Salla Schmoekel - 29118903
Every company’s business consists of a collection of activities undertaken in the
course of producing, marketing, delivering, and supporting its product or service. All
the various activities that a company performs internally combine to form a value
chain—so called because the underlying intent of a company’s activities is ultimately
to create value for buyers.

Value Chain Analysis are essential tools in determining whether the company is
performing particular functions and activities well, whether its costs are in line with
those of competitors, whether it is differentiating in ways that really enhance
customer value, and whether particular internal activities and business processes
need improvement.
 PT AIR ASIA INDONESIA Tbk

Value Chain for Cost Leadership

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 OVERVIEW

PT Air Asia Indonesia Tbk is the subsidiary of

AirAsia Berhad, Malaysian low-cost airline
headquartered near Kuala Lumpur, Malaysia. AirAsia
was first initiated by Tony Fernandes when he looked
the first true low cost airline called Ryanair (Irish
Airline) which was founded in 1985.

The main idea of Air Asia is to make flying possible to

everyone. Since 2001, Air Asia has begin to rise to
the top of the ladder flying to more than 20 routes.
This including 15 destinations in Malaysia alone and
more than 50 other destinations around the globe.
Adopting Ryanair concept to promote airline lower
fare tickets, Air Asia had become the first low cost
fare airline in Asia.
The Five Generic Competitive Strategies
The Principal Stages of Value Chain Analysis

1.Disaggregate the firm into separate activities

2.Establish the relative importance of different activities in the total costs of the
product.
3.Identify cost drivers
4.Identify linkages
5.Identify opportunities for reducing costs
1. Disaggregate the firm into separate activities

Purchasing
Components R&D and Operational
and Engineering Process
Materials

Maintenance
Sales and Partnerships
& Quality
Marketing support
Control

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 2. Established the relative importance of different activities
in the total costs of the product

Department Cost (IDR) %

Purchasing Components & Materials 1,921,301,403,249 43.1%

R&D, Design & Engineering 87,468,126,056 1.9%

Operational Process 1,415,327,478,416 31.7%

Maintenance & QC 620,513,714,280 13.9%

Sales & Marketing 290,993,541,763 6.5%

Source:
Partnership Support 121,013,753,265 2.7%
PT AirAsia Indonesia Tbk
2017 financial statement Total 4,456,618,017,029 100%

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2. Established the relative importance of different activities
in the total costs of the product

43.1%
Purchasing
1.9% 31.7%
Components and
R&D and Operational
Materials Engineering Process
Lore Lore Lore

13.9% 6.5% 2.7%

Maintenance Sales and Partnership
and QC Marketing Support
Lore
Lore Lore

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 3. Identify the Cost Drivers

Aircraft Lease
Rotable Asset and
Engineering Tool

Purchasing Components Numbers of aircraft engines

R&D Engineering
and Materials and inflight equipment

Efficiency of R&D Process

Fuels Usage
 Office Expenses
Size of Marketing and
advertising Budget

Salaries and allowance

Competitive price in
Sales and Marketing comparison with other LCC Operational Process

Insurance Expense

Sales volume for tickets

Volume of catering
(Food & Beverages )
 Repair and maintenance
Airport Services

Maintenance and Quality Frequency of accident

Partnership Support
Control happened
Number of Partners
(Traveloka, Ticket.com,
Ticket.com, etc)
Quality of Engines &
Component
4. Identify Linkages

- Maintenance and quality control for

Quality Control aircraft and also the engines periodically
will reduce the probability of accidents
happened.
- More effective and efficient operational
Operational process and capacity utilization may
lead to more cost savings

- Effective advertising and promotion to

Sales and Marketing the potential market may reduce
unnecessary marketing activity and
increase the ticket sales volume.
 5. Identify Opportunities for Reducing Costs

OPERATIONAL PROCESSES -Eliminate complementary flight services (eg: free meal/drinks, blanket,
and toys for children)

SALES AND MARKETING Reduce physical advertising (newspaper/billboard) and focus more on
digital advertisement online.

-Avoid overusing the engines to minimize technical damage & increase

machine’s life time.
MAINTENANCE & QC
-Periodically check the aircraft and engines condition to ensure the best
performance

PARTNERSHIPS SUPPORT Choose the headquarter in airports Low Cost Carrier (LCC) terminal
 CONCLUSION

PT Air Asia Indonesia choose to be cost-efficient in performing value chain activities to provide
competitive low-cost flight service.

The majority of costs are needed in purchasing components/material and operational process. But
company try to reduce its cost by implementing the strategy to optimize flight schedule to get
maximum number of passenger, eliminate complementary services, and operates in the Low Cost
Carrier (LCC) Airport Terminal.

This results in cheaper tickets fare and exceptional service that gives the company superiority over
rivals in performing and produce an attractive competitive edge over rivals.
 INDONESIA-PRODUCT GROUP

Value Chain for Differentiation Strategy - B2B Market

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OVERVIEW

Indonesia-Product.com is an Indonesian leading

B2B Directory website. Indonesia-Product was
founded to help Indonesian company
(manufacturer, wholesale, and Small Medium
Enterprise) to promote their website globally for
export. Nowadays, Indonesia-Product.com has
more than 1000 member consist of both
manufacturing and wholesale company also micro
small business (UKM / Usaha Kecil Menengah)
who entrust their website and their products to be
promoted. Indonesia-Product presenting on a vast
variety ranging from furniture products, garment,
paper, handicraft, food, and other products original
from Indonesia which can be found here at ease.
The Five Generic Competitive Strategies
Value Chain Analysis of Producer Goods - B2B Market

1. Construct a value chain for the firm and the customer

2. Identify the drivers of uniqueness in each activity
3. Select the most promising differentiation variables for the
firm
4. Locate linkages between the value chain of the firm and
that of the buyers
 1. Construct a Value Chain for
the firm and customer

Firm Seller & Supplier

● Indonesia-product provide online marketplace
● Consumer could easily find what they need
platforms for our user to search millions original
Marketing products from Indonesia (Connect Supplier &
(Business Seller) & supplying demand
(Supplier)
Business Seller)

● Providing a platform and gains profit from

● Gains Sales from business networks that
Sales promoting Indonesian company & their products
globally and locally
Indonesia-product provide

● Provide photos of their own product to

Design ● Providing an decent interface through its
website to help Seller & supplier to find what
Indonesia Product Website so the client may
easily see them. (for example: the supplier
Engineering they need
wants to be on the first page of the website).

● Make sure that the website works well (not

Technical ● Provide Supplier and Business seller support
regarding to website, advertising and business
lagging) so that it may works smoothly when
customer visit it.
Support networking. ● Ensure that the website content is as it’s
required.
 2. Identify the drivers of uniqueness
in each activity
● Indonesia Product can provide better & larger global
and or local marketing exposure to all the supplier
01 Marketing
and seller (differ from tokopedia/bukalapak that
provide local marketing)

● Indonesia Product help every scale of business

02 Sales (Small to Big Enterprise) to expand the seller’s
business in local and global market

● Provide great product features and

03 Design Engineering performances (User Interface and User
Experience) for customers.

● Maximizing search and find on the site, supplier

04 Technical Support and seller are allowed getting closer, connected
each others to hold further business.
 Tangible Differentiation Indonesia Product concern with the tangible
differentiation which includes the performance
of the product or service in terms of reliability,
consistency, and speed.

Supporting facts:
1. Performance (24/30): Website has
increasing traffic, improving conversion
rates, generating more leads, and
increasing revenue.
2. Mobile (30/30): User-friendly when we
open the website through our mobile
phone.
3. SEO (30/30): Website is easy for users to
discover—and easy for search bots to
understand—with better page titles,
headings, and meta descriptions.
4. Security (10/10): websites is free from
attacks and give visitors confidence that
website is authentic and trustworthy.
Source: website.grader.com
 3. Select the most promising
differentiation variables for
the firm

Technical Support
Marketing Capabilities
Capabilities

Indonesia Product’s worldwide marketing Indonesia Product’s maximized search

is important for business development for and act as a media to connect business
its client and the firm itself. buyers and supplier to find their need
regarding to business development
 4. Locate linkages between
the value chain of the firm and
that of the buyers

Supplier’s Product Distribution Indonesia Product’s marketing can help to

Indonesia Product’s
increase global or local market exposure of its
Marketing
client (supplier) in selling their product to the
consumer (another business).

Indonesia Product’s Supplier’s Purchasing Indonesia Product’s maximized search and

Technical Support finds could help client’s need for purchasing
Capabilities and production requirement material.
 CONCLUSION

Indonesia Product is a leading B2B platform to connect business owner

to find their supplier and customer.

Their differentiation strategy focus on developing search engine

optimization, so their client could easily find what they need on the
website to help their business activity. Indonesia product’s provide
thousands of option for their client in choosing their supplier from food
and beverages until textile and leathers.

Moreover, they also provide wider exposure for their client not only in
local market but also global market.
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