CHAPTER 1 INTRODUCTION 1.1 Research Background In today s marketplace, competitions among companies have increased due to the expansion in the global market. More than ever it has become extremely important to meet customers needs and demands in order to stay competitive on the increasing market competition. To analyze the specific activities through which firms can create a competitive advantage, it is useful to model the firm as a chain of value-creating activities. Michael Porter identified a set of interrelated generic activities common to a wide range of firms. The resulting model is known as the Value Chain and it consists of Inbound Logistics, Operations, Outbound logistics, Marketing and Sales, and the last one is Service. These are the aspects which the companies need to exploit and to analyze in order to get the core competencies so that it can be able to survive among all competitors. Core competencies are the issue which is the base and which lead the company to be better in performance. Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so 1
2 its core competencies will have to adapt and change. In the 1990s managers will be judged on their ability to identify, cultivate, and exploit the core competencies that make growth possible - indeed, they'll have to rethink the concept of the corporation it self. (Hamel and Prahalad, 1990) According to Porter (1998), even reit is well-known in manufacturing company, this model is also applicable for service company. Make a Wish Party Consultant and Organizer (which later will be called CV Cipta Dinamika Bersama) is one of the objects which the paper is going to analyze using the components of value chain model. Any or all of the previously mentioned primary activities may be vital in developing a competitive advantage for this company. The analysis deemed that this company needs the insight about value chain model because it discovers the difficulties in competition with the other event-organizing firms, and also this company found that the funding as the capital for developing this company is adequate but they figure out that that money is not employed effectively to give better return to the company s reputation. An analysis about whatever aspect should be regarded in deciding the strategy needed to make the company s profit can be maximized. There were no certain analysis which the management of Make a Wish Event Organizer has done to determine how to apply the value chain model, and it results to some unsatisfied clients, bad performance workers, and some useless expenses which pull the company away from the better direction.
3 Beside those keys (the Primary Value Chain Activities described above), the research also intends to research about the components of Support Activities, applied to CV Cipta Dinamika Bersama. Porter (1998) identified four generic categories of support activities, the details of which are industry-specific. They are Procurement, Technology Development, Human Resource Management, and Firm Infrastructure. These Support Activities often are viewed as "overhead", but some firms successfully have used them to develop a competitive advantage, for example, to develop a cost advantage through innovative management of information systems. In the vast depiction, in order to better understand the activities leading to a competitive advantage, this analysis is going to be applied start from the generic value chain and then identify the relevant firmspecific activities. Process flows then be mapped, and these flows used to isolate the individual value-creating activities. The aspects in the primary activities of the value chain will not be exactly the same with what Porter model said because each company will have their own distinctive model of primary activities according to the pattern of their business. This research is also going to look for any possibility of finding benefit in applying value chain model for any outsourcing decisions. Understanding the relations between activities can lead to more optimal
4 make-or-buy decisions that can result in either a cost advantage or a differentiation advantage. Creative industry is now becoming more advanced in Indonesia. As stated in the data of Bank Indonesia, the growth of economy in this country is 6,3% and it cause Indonesia gains the second rank of the best economy growing index in the world (number one is China). And according to the researcher of creative economy Erika Asdi (2011), in indonesiakreatif.com, the constant price of creative industry is 345 trillion in 2008 and it is becoming 468 trillion in 2010. The increase of economy value also exists in employment rate and export of creative industry. Erika also reports her research result in which the creative industry is able to endure in economic crisis 2008. As the comparison, she mentioned about the growth of creative industry in other countries: in England, according to DCMS in 2008, the level of growth of creative industry reaches 17.3 billion with the contribution of 4.1% from this sector in the national export and with employment growth of 1.1 billion new workers. While in China, the growth of creative industry is 85.5 billion Yuan from 2004 until 2010. So, the contribution of creative industry is increasing from 5.8% until 7.9% in 2010 in China. While according to Lilik Oetama in kompas.com, the owner of 80% market of MICE (Meeting, Incentive, Conference, and Exhibition) in Indonesia is PT Dyandra Media International (DMI), which is the company who put their focus of business in professional exhibition/event organizer and support. Thus, the creative industry is now massively growing and it is important to research the detail of one of this business unit which is event organizer business.
5 The competition of event organizer is also becoming tight nowadays. As we can see in the growing of the exhibition in this country, there are a lot of events lasted, for example, the wedding fair and the other kinds of events fairs. According to Semarang Wedding, there will be conducted 19 grand wedding fair in capital cities in Java in 2013, excluding the local (small scale) fair and excluding the fairs to come in this year. Depends on the research conducted by Dyah Ayu (2011), the researcher from Universitas Diponegoro, the number of events in Mahkota Wedding which is one of the leading event organizer company in Semarang is averagely 110 events in a year. While according to winnerorganizer.com, the total number of the event of Winner Event Organizer Surabaya which was established in 2002 is approximately 800 events. The number of events of CV Cipta Dinamika Bersama itself (according to the interview done with the officer of CV Cipta Dinamika Bersama) is about 60 up to 100 events per year. All level of society is now minded with hiring event organizing company for their events (personal events or corporate events). Besides, the value chain analysis in service company is somehow attractive to be done in order to figure out how the analysis must be done in detail because not many literature books about value chain mentions the detail information about how to analyze a service company (mostly about the manufacturing companies). CV Cipta Dinamika Bersama is taken as the company to be analyzed because this company has been settled as a legal entity for these last 7 years in Surabaya. As an event organizer company, the job description of CV Cipta Dinamika Bersama is to help the clients-which are couples who is arranging a marriage party, or girls and kids who is arranging their birthday party (under
6 supervision of their parents), or the corporate which is launching a product and doing any kind of promotion or gathering which need the help of expertise in setting the whole event from a to z, from the booking of the venue until the accommodation of the special effect or lighting and sound system needed during the event. It can be called one stop entertainment because the clients can ask CV Cipta Dinamika Bersama to set everything and they just have to have the event run well without any business to looking for each vendor who supports their events. Relationship among all the suppliers (commonly known with the vendors) and the customers (clients) is the object in which the value chain focuses on. Besides, the analysis toward better management is also done by observing the internal management system of the company through interview and observation done in this paper. Due to the above explanation, the research picks the title The Analysis of Value Chain Model for Better Quality Management in CV Cipta Dinamika Bersama Surabaya 1.2 Problem Formulation According to the above passage, the problems which will be discussed along this undergraduate thesis are: 1.2.1.How does value chain model help the management of CV Cipta Dinamika Bersama to be a better quality in management? 1.2.2.How does value chain model be a tool for the management of CV Cipta Dinamika Bersama to achieve competitive advantage?
7 1.3 Research Objectives With such problem formulation, the purposes of this research are: 1.3.1.To know the application of value chain model in service company especially in the event organizing business 1.3.2.To figure out the possible impacts of application of value chain model in service company and to suggest the company about how to use the parameters which has been built by this research in the daily activity of all the workers 1.3.3.To make a new effort for a company in maximizing its potential 1.4 Research Contribution The contribution of this undergraduate thesis are: 1.4.1.Adding more perspective and knowledge for researcher about the value chain model by applying this method in CV Cipta Dinamika Bersama 1.4.2.Bring insight and new point of view for the management of CV Cipta Dinamika Bersama to implement a more specific effective way to develop its management toward better direction 1.4.3.Becoming the reference for the further research in this scope of research
8 1.5 Research Systematics CHAPTER 1: INTRODUCTION This chapter contains the background of the problem which is the basis of delivering the major problem that the researcher is going to solve, followed by the problem statement, purpose of the research, contribution, and the systematic of undergraduate thesis CHAPTER 2 : THEORETICAL REVIEW This chapter explains all the theory which is the guidance to solve the existing problem. The theories are from books, articles from internet, journal, and many more. The theories are the value chain theory and the competitive advantage theory CHAPTER 3 : RESEARCH METHODS This chapter explains the research methodology which is applied, that is qualitative method. The research data collection is done by the field study which contains of interview with the stakeholders of the company, observation in the daily activities of the officers and the last is by the documentation (data given by the company). CHAPTER 4 : RESULT AND DISCUSSION This chapter contains the general review of the research subject, the description of the research s result and also the discussion to solve the problem formulation in this undergraduate thesis.
9 CHAPTER 5 : CONCLUSION AND SUGGESTION This chapter consists of two parts, the conclusion based on the analysis from the previous chapter, then the suggestions given to solve the problems and supporting materials for the next research about it.