Source: Journal of Marketing Channel
Author: Sendy Thahir
Year: 2009
2. Executive Summary
The report consist of several analysis that needed in accomplishing the objectives, the case background followed by introducing the channel design decision paradigm, major case issue that the company are facing with, situational analysis with additional analysis that also comprises the distribution objectives and the distribution task. the most important thing in recommending the alternative channel structure will also be explained for the success of the company, the plan implementation are also included starting from 2009 to 2010, with the company vision that have already sighed by the operational director of PT Data Utama Net, not forgot to put the conclusion for overall analysis.
To obtain the information, the researcher make an interview from the operational director of the company and analyse the company from its official website, other books and journals help a lot in giving some idea in supporting the report.
The company offer the Internet broadband dedicated as their core services. Internet broadband dedicated means that the internet services subscribe by flat rate with quota/ volume traffic data unlimited.
the major case issue experienced by the company comes from the bigger competitor that threaten their performance in distribution their services to the customer, The problem experienced would really influenced the position of the company at the future, where as the customers would really expect the satisfaction, because ‘Negative perceptions of service may ultimately damage the reputation and profitability of the business’.(Hensley, Rhonda L & Sulek, J 2007).
The internal analysis explain the thing that the company can be proud of as their strength and an anticipation for their weaknesses, that was the company was Supported by IT Professional that skilled and experienced in networking and internet system and their Internet services that can fight against viruses.
The weaknesses that the company are experiencing are they are still new in the eye of society and have small scope of operation.
For the external analysis the need of people to obtain information and communication and the increase number of infrastructure built to cover the bigger network area, can be an opportunities for the success of the company in the future. the threats that occur have to be prevented by their own strategy, that is the competitor are launching heavy promotion that attract more customer, more over the government intervention result the declining level of customer satisfaction.
For the alternative channel structure, The Company can use the "Subnet" method. On this cases, the company sell their capacity of their bandwidth to the institution that needs and will be responsible by their own to distribute the service in the regional area, they will responsible in distributing the services in the area, without the intervention with Data Utama anymore.
for the implementation plan, the company will create the sales force that offer most of institution in every part of Jakarta starting from 2009, and look for institutions that wants to be the whole seller at selected area for the effective of the distribution.
The success of the organization highly depended on improving the distribution system for the satisfaction of the customer. By recognizing what factors to improve, the marketers, entrepreneurs and owners may have different strategies to improve their distribution performance for the success of the organization in the future.
Table of Content
1. Letter of transmittal 2
2. Executive Summary 3
3. Formal Introduction 6
4. Case Background 7
4.2 Introduction of channel design decision paradigm 8
5. Major case issue 8
5.1 Channel Design 10
6. Situational Analysis 11
6.1 Internal analysis 11
6.1.1 Strength 11
6.1.2 Weaknesses 13
6.2 External Analysis 13
6.2.1 Opportunities 13
6.2.2 Threats 14
6. 3 Distribution objectives 16
6.3.1 Product Objectives 16
6.3.2 Price Objectives 16
6.3.3 Promotion Objectives 16
6.3.4 Distribution Objectives 16
6.4 Distribution Task 17
6.4.1 Selling 17
6.4.2 Channel support 17
6.4.3 Physical distribution 17
6.4.4 Product modification and after sale service 18
6.4.5 Risk Assumption 18
7. Alternative channel structure 20
8. Implementation Plan 21
9. Conclusion 21
10. Referencing 25
List of tables
Table 4.1 7
Table 6.2.3 15
List of pictures
Picture 5.1 10
Picture 7.1 19
Picture 7.2 20
3. Formal Introduction
Internet has been a solution for obtaining information and communication facilities unlimited from time and space. That’s the reason why the internet connection services searched by all institution, company, students and all departments that need it. In the fast development of information technology the needs of communication and information line increase. At the past the need of communication limited for only a place but now the communication are needed to reach another place or even to other part of countries. The report covers the major case issue, situational analysis, the company distribution objectives and distribution task, alternative structure, implementation plan and the conclusion. The data’s are obtained by making a direct interview from the operational director of PT Data Utama Net, internet sites, journal and books. Data Utama Net is connected to the Global Internet through the fibre network beneath the sea (submarine) and satellite also have the local inter connection of Indonesia Internet. Data Utama net was build as the answer to the challenge and big opportunities to build the infrastructure in fulfilling the needs of internet in Indonesia. With the experience of human resources that are professional in the sector. Data Utama can provide the best solution and commitment in fulfilling the need of communication and information in the Internet world. In this opportunity, the researcher mostly would like to examine the things that are related in the internet connection service distribution, where as distribution has been a very important factor in the competitive situation. The effective distribution can spread the product or services more effectively.
4. Case Background
PT Data Utama Net was built on 11 august 2005 to fulfil the need of internet services in Indonesia. The main office was located at Wisma Pesisi 2nd floor – Jl. Taman Aries A1 No.1 MeruyaUtara Kembangan, West Jakarta 11620.
The company offer the Internet broadband dedicated as their core services. Internet broadband dedicated means that the internet services subscribe by flat rate with quota/ volume traffic data unlimited. The company also offer the hosting and hotspot facility for the customer. The company have built some reputation proving their commitment on their mission. The company / institution that used the services are:
Table 4.1
(Data Utama 2008)
| SUPRA SCHOOL | Menara Peninsula | PT. Interpanca Kharisma Engineering, Jakarta | Hotel Acasia, Jakarta |
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| PT. Asuransi Purna Artanugraha (Asuransi Aspan), Jakarta | PT. Hafele, Jakarta | PT. LDE, Jakarta | PT. Sefar Singapore, Jakarta |
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| PRAISINDO, Jakarta | Taman Puri Townhouse, Jakarta | Grand Candi Hotel, Semarang | PT. Hartono Istana Teknologi ( Polytron ) |
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| PT. Samudera Indonesia | PT. Nayati | PT INTI SUKSES GARMINDO | PT Morich Indo Fashion |
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| | |
| PT. Uni-Enlarge Industry Indonesia | PT. RODEO | | |
4.2 Introduction of channel design decision paradigm
On channel design paradigm, there are seven steps that aim to create the new channel structure, that is:
1. Recognize the need for channel design decision
2. Set and coordinates distribution objectives
3. Specify distribution task
4. Develop alternative channel structure
5. Evaluate relevant variables
6. Choose the best channel structure
7. Select channel members
(Rosenbloom, B 2004, pp.184-187)
The seven step op the process will be explained further on the next part.
The new channel structure will be explained on the alternative channel structure part.
5. Major case issue
The major case issue for PT. Data Utama comes from the internal and external factor. The problem experienced would really influenced the position of the company at the future, where as the customers would really expect the satisfaction, because ‘Negative perceptions of service may ultimately damage the reputation and profitability of the business’ (Hensley, Rhonda L & Sulek, J 2007). To prevent the bad perceptions of the company, the company must first identify the problem and then seek an alternative for the future improvements.
The case issues in the PT. Data Utama case could have been phrased in order of priority as:
1. How can the company compete against the competitor?
There are many Internet Service Provider that provide the same service with Data Utama net, they are Speedy, Indosat M2, Exelcomindo, Telkomsel and many more, the company that PT Data Utama Net are competing with the big company that are well known among the society members.
2. What can be done to build trust in the eye of society where as the company is the new comer?
The new comer often have to experience in struggling to achieve their mission, the society might doubt the company that are new offering their service, where as the society would prefer much to the things that have a good reputation.
3. What way of prevention to maintain the satisfaction of customer due to intervention from the government?
The government regulation force the internet service provider to block a Porn site, the block from the service provider will result the dissatisfaction of the customer.
4. How can the company reach the bigger scope of operation due to be ahead from the competitor to serve the customers that need the service?
The company have already covered Jakarta, Cirebon, Surabaya, Pasuruan and Semarang. The company now is seeking the other places as their point to serve other prices to provide the bigger scope of operation.
5.1 Channel Design
Below is the current design for the structure :
Table 5.1
(Berman, B 1996, pp.7)
The structure from Data utama net is very good and effective to cover the segment of society. Data Utama obtain their bandwidth from Indosat Net, then Data Utama, distribute it again to the end customer or the retailer that need the quota to re-sell it again to the end customer. For the retailer part, data utama need to seek an alternatives, beside distribute it to educational institution, office or apartment. Data Utama need to expand their distribution channel larger to cover the larger geographical area to be a head from the competitor in distributing the services. The alternative channel structure, will be explained at alternative channel structure part.
6. Situational Analysis
6.1 Internal analysis
6.1.1 Strength
The company that is supported by competent employees help a lot in performing their task effectively, this has become the strength of the company that can be proud of. ‘When employees' beliefs about what they are supposed to be accomplishing on the job and how well they are doing are accurate, they behave more effectively’ (Gilbert, G Ronald 2000). The internal system of the company was build based on ITIL structure, as an international standard for business that related to the networking services. This is the structure of Information Technology Infrastructures Library (ITIL): The customer service handle every complain from the customer, then she directly report it to the problem management to be handle, so that the technical support can directly make the reparation, after the reparation or handling the need of customer, the technical support have to confirm that they have done well in their task. All of the cases are recorded in the Data Bases to identify, whether the problem has been solved or not.
Preventing the virus is the competitive advantage had by PT Data Utama Net, the consumer that use the service can be more relax in facing the virus threat, because the service given can protect the user from the virus that attack the customers that are on lining in the internet.
The company highly focused on the customer satisfaction, where as they know, they are competing with larger firms, where as the customer that are satisfied, will have higher tendency to have the service again. ‘Building rapport, trust, and relationships with customers may be essential’ (Rodie, A, R & Martin, C, L 2001). When the customers have a problem about their networking or occurrence of an error or even the customer need an IT solution, the company will immediately handle their complaint, the company have a technical support that directly come to the customer prentice. The company would not let the customer wait for several days to have the reparation, because ‘Service customers frequently view waiting as a waste of their time’ (Hensley, Rhonda L & Sulek, J 2007). This is the characteristic of PT Data Utama Net in obtaining the customer satisfaction.
The journal from Emerald Insight explaining that ‘Consumers may also judge the price paid relative to the consistency of the performance of the product or service’ (Herman, A, Xia, L, Monroe, Kent B, Huber, F 2007). This resulted the company have to review whether their price offered are appropriate with the service given. PT Data Utama net offer Rp14 million/Mb. If the customer need bigger amount of bytes, for governmental/educational institutions or any other, the institution need to make a negotiation regarding the price. The price offered can be the strength for the internal analysis.
6.1.2 Weaknesses
Every company cannot escape from their own weaknesses where as the company has their strength in competing in the market, PT Data Utama Net was built on 11 August 2005, the company realize that they are new, and they have to make an extra effort in building trust in the eye of society members. The small scope of operation, where as the company are still new, result the company can only provide the services in the limited number of area, this means the distribution strategy are still inefficient and ineffective, and the alternative channel structure will be explained further.
6.2 External Analysis
6.2.1 Opportunities
To cover the larger and bigger area, the company need to build an infrastructure (ISP Tower). There are many areas that have not been covered yet as the opportunities for the company to make a new distribution channel to cover that area. Where as there are also many people that need the internet service for obtaining information, ‘e-mail was seen as a key communication feature’. (Callison, R, Dobson, M & Marshall Graham Logan, I M 1996). They use very much to make a communication.
The trend in playing internet in the public area, resulted most of restaurant and internet cafe offered the internet services, which they have to obtain it from the (ISP) Internet Service Provider in example: PT Data Utama Net. We can see it as a prospect for the company in the present and in the future.
The customer that are satisfied will tell others to have the same brand with him/her, this resulted the increase number of customer that result higher profit to the company.
6.2.2 Threats
The heavy promotion done by bigger competitor such as Speedy that positioned themselves as "The Cheapest", XL as "Vast coverage", E-media as the Cheapest and any other company that done a heavy promotion as their promotional strategy, this have threaten the company that move in the Internet Services. ‘Successful competitiveness often is the result of the ability to determine rational capability.’(Zairi, M 1996). This means, the company that are standing in the competitive market, have to determine their own strength and weaknesses for improving their performance, so that they can compete against the other competitors. It results PT Data Utama Net to review their strategy and especially their distribution strategy, for the success of the company.
Due to the economical crisis that strike Indonesia, the purchasing power are decreasing, most of the customer have to focussed first on their basic and daily need, rather than having an internet services for their want. This has been an obstruction for the company that provide internet services to cover all segments of society. More over, the government intervention have resulted the customer feel dissatisfied with the service offered. They feel that their privacy is disturbed by the Internet services, “Punishments for distributing porn would be up to 15 years jail or a fine of 2 billion Rupiah” (Indonesia Matters 2008). This resulted the service provider have to block the adult and restricted sites. But in fact the government that force the Internet services company, to block several restricted sites and porn sites. The company can't do anything instead of following the government regulation. This result the level of Customer satisfaction declined.
Strengths Weaknesses
High Med High Med
High Importance - Supported by IT Professional that skilled and experienced in networking and internet system.
- Internet services that can fight against viruses - The services can be delivered to the customer prentice
(immediately 24 hours)
- Can provide IT solution for the customer -Smaller scope of operation - New in the eyes of society
Medium importance -Focused on customer satisfaction
(quicker response) -Competitive prices
-Supported by mobile 8
Table 6.2.3
Probability of success
High Medium
Potential
Attractiveness
High
-The need of people to obtain information and communication.
- The increase number of infrastructure built to cover the bigger network area.
Internet Service sector growing.
Medium
The increase number of hot spot area and internet café Positive word of mouth
Probability of occurrence
High Medium
Potential severity
High The heavy promotion from bigger competition Low purchasing power of the society
Medium Government intervention towards the Internet service
Recession
6. 3 Distribution objectives
6.3.1 Product Objectives
The company develop the services that can fight against spam, virus, mall ware and any other threats. They also prepare the collocation and hosing facility that are dependable. The most importance thing to fulfil the demand of the customer is that the company would add an additional quota and ISP tower.
6.3.2 Price Objectives
Offering the price that is appropriate with the service provided.
6.3.3 Promotion Objectives
The company promote their services by doing the direct selling to the institution that need the services, since the company are still new and have limited resources, they just promoting the company by creating a website that can be access by people that are seeking the information about the internet connection. This can be an effective solution to attract the new customer without spending an extra expense for doing the promotion.
6.3.4 Distribution Objectives
The company have a mission to expand their services to whole of Indonesia, starting from the Regency, Sub District and Administrative Unit. They seek to expand their connection services to the educational institution, mall, hotel, apartment, restaurant, café, hospital, airport and any other places that need the internet access services.
6.4 Distribution Task
6.4.1 Selling
The company will promote its core and supplementary services to the customer. When the customer wants the product, they can have it through negotiating the price. The company also have to offer its services to the retailers, so that the retailers can resell the product again as the sales of the company to distribute the services to the end consumer.
6.4.2 Channel support
The increase numbers of people that need the internet connection services push Data Utama to expand their scope of operation. Data utama net have to build ISP tower to cover the new market area and of course they have to look towards an additional number of intermediaries. By concentrating on the channel structure, it would be very good for the success of the distribution. The alternative channel structure will be explained further.
6.4.3 Physical distribution
The company have storage of bandwidth & modem to serve the people that need it. It would be distributed through the retailers and end customer that need it. When they need the services they can buy it, with the modem rented freely to support the internet connection services provided by the company to their clients.
6.4.4 Product modification and after sale service
The company are responsible if their clients have a complaint about the connection or the occurrences of an error, the company will send the technical support to solve the entire problem.
6.4.5 Risk Assumption
When the modems that support the services of internet are broken, the company have to change it with the new one; because the modems are rented to the clients are very useful to support the services from the company.
(E, Raymond Corey 1989, p.7)
7. Alternative Channel structure
for the success of the distribution channel, the researcher examine two types of alternative, the one is concentrating more on the effectiveness of the retailers, as retailer is the ‘sales person of the whole sellers’.(Berman, B, p.15-17) and the second is to develop the new type of distribution to cover the larger scope of operation.
For the first alternative channel structure, the company have to concentrate more on the retailer, where as retailer ‘Source of supply for certain group of customer’ (Berman, B 1996, pp.15-17). In this situation, Data Utama has already covered some educational institution, apartment. It would be best to expand the services to the hotel, mall, hospital, internet café, restaurant or cafe and even more to the governmental institution.
This is the alternative channel structure for developing the effectiveness of the retailers:
Picture 7.1
(Berman, B 1996, pp.7)
To cover larger geographical market, the business has to build the longer channel or indirect distribution, because ‘each independent channel members take on specified channel responsibility’ (Berman, B 1996, pp.482-483). The Manufacturers, Wholesalers, and retailers, can focussed more effectively with their task. More over by having the long channel, the financial cost can be reduced. For the effectiveness of the distribution, Data Utama Net has to focus on the alternative channel structure. The company can use the "Subnet" method. Subnet method is ‘the method used to define the limit of range IP address used in a specific network’ (Green, T 2005)
On this cases, the company sell their capacity of their bandwidth to the institution that needs and will be responsible by their own to distribute the service in the regional area, they will responsible in distributing the services in the area, without the intervention with Data Utama anymore. With this strategy, Data Utama net can share the responsibility to the other independent channel members, with the purpose to cover the larger area of distribution more effectively. Example: Data Utama Net sell their bandwidth to the Regency, Regency sell it again to sub district, from sub district sell it again to the administrative unit. On this structure, Data Utama Net would not responsible anymore with the distribution until the end customer. Data Utama will only responsible in selling their bandwidth to the Regency according to their agreement, where as “unique strengths of the firm are key requirements for creating and marketing winning new services”(Brentani, U D 1991)
Below is the Alternative of the channel structure:
Picture 7.2
8. Implementation Plan
During the interview with operational director of PT Data Utama, he mention about the company vision in the future. That is, “Becoming one of the operator of telecommunication base on Protocols IP, to reduce the problem of digital in whole of Indonesia” (Pribadi , H 2008)
Semarang, Cirebon, Surabaya and Pasuruan have already been covered by Data Utama, the company need to expand their services to bigger area for their development. “The majority of the broadband suppliers now appear to be concentrating mostly on selling their services to existing tenants within large, multi-occupied office buildings, rather than targeting vacant office schemes prior to the letting” (Spurge, V & Almond, N 2004) this means, it would be better focused on the prospective market rather than the contrary, because the affectivity can highly be performed. The company would be best to focused more on the institution that will responsible very much in distributing the bandwidth/internet services.
The company had already targeted to build the infrastructure (ISP tower) and distribution channel at the area targeted:
1. February 2009, the company will expand their branch to Bandung
2. October 2009, the company will expand their services to Lombok
3. February 2010, the company will expand their services to Bali
Building infrastructures will not be easy, because it is costly, hopefully with the alternative channel structure mentioned before, it would reduce the cost and especially the task of channel members can be highly accomplished by each of them.
To increase the number of retailer, Data Utama will create the sales force, to offer their services at an area starting from next year, to expand the coverage of the company, starting on:
1. January 2009 - March 2009, the company will focus on offering their internet connection services at restaurant, Café and educational institution at west Jakarta.
2. April 2009 – June 2009, the company will focus on offering their internet connection services at restaurant, Café and educational institution at North Jakarta.
3. July 2009 – August 2009, the company will focus on offering their internet connection services at restaurant, Café and educational institution at South Jakarta.
4. September-October, the company will focus on offering their internet connection services at restaurant, Café and educational institution at east Jakarta.
5. November- December, the company will focus on offering their internet connection services at restaurant, Café and educational institution at centre Jakarta.
9. Conclusion
Some changes in the current strategies need to be applied for the success of the organization, the alternative channel structure explained. Starting distributes the bandwidth to Regency, continued to Sub district, administrative unit and to end customer can be an effective ways to cover the larger area. Beside the efficient cost for the distribution, each intermediaries can highly focussed on performing their task. More over the plan that will be implemented to create the bigger area covered by the services of company can be very effective, by creating sales force to offer most of institution in Jakarta that need internet services and offering big institution that wants to make a business together via subnet method, it would be possible that sooner, the company will be a well known company and of course the company will soon be grown up. The success of the organization highly depended on improving the distribution system for the satisfaction of the customer. By recognizing what factors to improve, the marketers, entrepreneurs and owners may have different strategies to improve their distribution performance for the success of the organization in the future.
10. Referencing
Berman, B, 1996, Marketing Channels, John Willey & sons, New York
Brentani, U D 1991, ‘Success Factors in Developing New Business Services’, ‘European Journal of marketing’, Vol.25, No.2, pp. 33-59.
Callison, R, Dobson, M & Marshall Graham Logan, I M, 1996, ‘Tay net: establishing and evaluating a local Internet service provider’, ‘Electronic Networking Applications and Policy’, Vol.6, no.1, pp. 48-63.
Data Utama: about-us (n.d), viewed 10 October 2008,
E, Raymond Corey 1989, Industrial Distribution System (Boston: Harvard business school).
Gilbert, G Ronald 2000, 'Measuring Internal Customer Satisfaction ', 'Managing Service Quality', Vol.10, No.3, pp. 178-186.
Green, T 2005, Subnet method’, viewed 1 October 2008,
Hensley, Rhonda L & Sulek, J 2007, 'Customer Satisfaction With Waits in Multi Stage Services' , 'Managing Service Quality', Vol.17, No.2, pp. 152-173.
Herman, A, X, I, Monroe,B & Huber, F 2007, 'The Influence Of Price Fairness on Customer Satisfaction' , ‘Journal Of Product And Brand Management’, Vol.16, No.1, pp. 49-58.
Pribadi, H 2008, pers. Comm., 15 October.
Rodie, A, R & Martin, C, L 2001, ‘Competing in the Service Sector-Entrepreneurial Challenge’, ‘Entrepreneurial Behaviour and Research’, Vol.7, No.1, pp.5-21.
Rosenbloom, B 2004, Marketing Channels: a management view, 7th edn, Dryden Press, Fort Worth, Texas.
Spurge, V & Almond, N 2004, ‘How Developers Are Responding To Office Occupiers Need’, ‘Property Management’, vol.22, No.2, pp.108-126.
Zairi, M 1996, ‘Competition: what does it mean’, ‘Total Quality Management Magazine’, Vol.8, No.1, pp.54-59.
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