Strategic Assessment of Indonesian E-Commerce Fashion Business

Journal of Entrepreneurship, Business and Economics
ISSN 2345-4695
2018, 6(1), 1–35
STRATEGIC ASSESSMENT OF INDONESIAN E-COMMERCE

FASHION BUSINESS
Selva Natalie, Harimukti Wandebori

1
School of Business and Management, Institut Teknologi Bandung, Indonesia
E-mail: [email protected]
Received August 2017; accepted October 2017
Abstracts
With the increasing number of Internet users in Indonesia, the number of Fashion E-Commerce Busi-
ness also grows rapidly along with the fact that this industry has contributed greatly to the economic
growth. However, the growing number of the incumbents apparently creates a major problem of com-
petition within them and result in many challenges and obstacles to survive in the industry. In order to
overcome these issues, a qualitative case study research was completed using a strategic management
approach to aim at contributing a generalization theory in business strategy of SMEs. Both external
and internal environmental scanning were made through secondary data, observation, and interviews
to four businesses which assumed to represent the Fashion E-Commerce Business in Indonesia. EFAS
and IFAS matrices were used, which followed by SFAS matrix that resulted in some strategies to be
pursued and a conclusion suggesting a differentiation business strategy. It will result in uniquely
owned strategies, complex external and internal linkages which are difficult to imitate by other play-
ers. With this, the business will have a sustainable competitive advantage to survive in the long term.
Research paper
Keywords: Business Strategy, Environmental Analysis, Fashion, SFAS, SMEs, Strategic Manage-
ment
Reference to this paper should be made as follows: Natalie, S., & Wandebori, H. (2018). Strategic
Assessment of Indonesian E-Commerce Fashion Business, Journal of Entrepreneurship, Business and
Economics, 6(1), 1–35.
32
Natalie, S., & Wandebori, H. 2018. Strategic Assessment of Indonesian E-Commerce Fashion Busi-
ness
Introduction
The Internet and the development of technology have never stopped in

place, yet it is always rapidly evolving, new technologies and social plat-
forms are introduced over time and information system has always been im-
proving. Internet users in Indonesia also follow the same trend, a data from
We Are Social (Kemp, 2016) stated that it increased by 15% from the year
of 2015 to 2016. The number of active social media users and active mobile
phone users also increased accordingly.
This dynamic phenomenon has greatly impacted the world today in
every area, especially in the business sector. Internet usage in Indonesia for
business purposes has reached 43%, indicating some companies have been
using the Internet to do business, known as e-Business or e-Commerce (Yu-
liana, 2000). They have recognized the advantages of using digital market-
ing as their business strategy. Fashion E-Commerce is known to contribute
the most revenue and forecasted to be always increasing in the upcoming
years (Statista, 2016). The revenue from the E-commerce Fashion segment
has been growing throughout the years and amounts US$2,471 million in
2017, and it is expected to show an annual growth rate of 21.2% (CAGR
2017-2021). From this data, it cannot be neglected that the number of Fash-
ion E-Commerce Business in Indonesia is also increasing. The more incum-
bents of an industry, the higher the competition among the players be. This
happens in Indonesia fashion industry. There are large numbers of similar
businesses entering this industry, especially independent business or entre-
preneurs. As competition continues to escalate, many other obstacles ap-
2
Journal of Entrepreneurship, Business, and Economics, 2018, 6(1), 1–35
peared and players are seeking strategies to survive and compete in the in-
dustry.
Moreover, with the development of technology and internet, it is be-
lieved that it could benefit to gain a more effective and sustainable business
strategy. Whether an entrepreneur wants to embrace or defend this digital
phenomenon, the challenges to face in this competitive market will always
be there to be faced, thus it would be better to have a clear strategy to be
able to survive.
Therefore, this research aims to contribute in giving a generalization
theory and knowledge contribution about the best practice business strategy
for E-Commerce Fashion Business and to recommend some strategies that
can be used by incumbents. To do so, the researcher used qualitative meth-
odology research. Observation, interviews, and secondary literature were
used in order to have a better understanding of the environment and ana-
lyzed them using strategic management approach, which assessed by Strate-
gic Factor Analyses Summary (SFAS).
In order to have a good research paper, a systematic structure is
needed. This paper started from the Introduction, which described the back-
ground of this paper. Followed by some Literature Review that underlies the
related theories used as the foundation of this research. Methodology ex-
plaining the steps in conducting the research. Findings and Arguments
which then followed by Conclusions and Recommendations at the end of
this paper.
LITERATURE REVIEW
Strategic Management
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Strategic management is strongly associated with the survival and

growth of the organizations. “Strategic management is a set of managerial
decisions and actions which determine the long-run performance of a corpo-
ration” (Wheelen & Hunger, 2012). They describe four elements that are
used in the strategic management process, those are environmental scanning
(both internal and external), strategy formulation, strategy implementation,
and evaluation and control. However, this research covered the first two
steps of strategic management. However, this doesn’t neglect the im-
portance of the next two steps as the implementation of strategic manage-
ment plays an important role in the success of the organization (Salamzadeh
et. al, 2016 a, b). The research framework can be seen below, the main point
is to emphasize the assessment of external opportunities and threats in con-
sideration of the strengths and weaknesses of the business.
Figure1. Conceptual Framework
4
Environmental scanning is controlling, criticizing, and disseminating

information from the external and internal environment. Research has found
that there is a positive interaction between environmental scanning and
earnings (Thomas, Clark, & Gioia, 1993).
External environmental refers to the environment in which the busi-
ness is operating, it consists of macro environment, Porter’s five forces in-
dustry analysis, and competitor analysis. Macro environment is the outer-
most area, which always changes and affects all of the companies without
any exception, it is analyzed using a framework called PESTEL analysis. It
provides a list of potentially crucial issues influencing strategy (Wheelen &
Hunger, 2012). It is used to identify the specific factors which impact on the
industry, current market, and company and in the future; analyzed trends
and most of all is to determine the opportunities and threats of the environ-
ment. This framework categorizes the environmental factors into six basic
categories: Political, Economic, Socio-cultural, Technological, Ecological,
and Legal.
According to Porter (1985), industry is a group of companies which
their products or services are necessarily look-alike, as for example trans-
portation and fashion industries. To identify the attractiveness of an industry
or to assess the importance of the company’s success within the industry,
Porter suggests a framework called as Porter’s five forces framework. It
consists of the threat of new entrants, rivalry among existing firms, substi-
tute, bargaining power of buyers, and bargaining power of suppliers.
The last external environment is competitor analysis. According to
CIMA official terminology guide 2005, it is defined as the ‘identification
and quantification of the relative strengths and weaknesses, which could be
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of significance in the development of a successful competitive strategy’. It

is to reveal and compare the competitive advantage and disadvantage be-
tween the E-Commerce Fashion Business and Offline Fashion Business.
On the other hand, internal environment refers to the business strate-
gic capabilities, value chain activities and also customer analysis. Strategic
capabilities of an organization consist of resources and capabilities, accord-
ing to Johnson, G. et al. in their book of Fundamentals of Strategy (2014).
These have to be unique to provide a competitive advantage for the compa-
ny. Resources are the assets that company has and are the basic foundations
of the company. They include physical assets, human assets, organizational
assets, and financial asset. Capabilities are what the company do well and
how resources are deployed. Dynamic capabilities refer to the company’s
ability to renew and recreate its strategic capabilities in order to meet the
needs of changing environments. Threshold capabilities are needed for a
company to meet the necessary requirements, such as the customers’ re-
quirements, to compete in a market and obtain parity with competitors in the
market. While distinctive capabilities imply to the methods for doing things
that are unique and viably utilized to be valuable to customers and challeng-
ing to duplicate by competitors to achieve competitive advantage.
Value chain is the classification of activities inside a company
which, together create a product or service. Porter (1985, p. 36; Radovic
Markovic & Salamzadeh, 2018) said that “Differences among competitor
value chains are a key source of competitive advantage”. Thus it is neces-
sary for companies to use this framework in order to understand the strate-
gic position, analyses strategic capabilities, and searching for approaches to
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enhance value or decrease cost in value activities. The primary activities

include inbound logistics, operations, outbound logistics, marketing and
sales, and service. While support activities include procurement, technologi-
cal development, human resource management, and infrastructure.
Last, customer analysis to distinguish the best customers, generating
further purchasing from existing customers, enhance customers benefit, ex-
panding market share, effective campaign planning, and increasing overall
profitability (Bhasin, 2016)
EFAS, IFAS, and SFAS

External Factors Analysis Summary (EFAS) is a table that organizes
the external environment factors into opportunities and threats likewise to
evaluate how the businesses respond to these precise factors in considera-
tion of the perceived importance (weight) of these factors (Wheelen & Hun-
ger, 2012). While Internal Factors Analysis Summary (IFAS) is identified
similarly with EFAS but to the internal environment. These matrices are
then used in the Strategic Factors Analysis Summary (SFAS). It summarizes
the highest weighted scores from EFAS and IFAS, to know the strategic fac-
tors in which the most significant factors between the external opportunities
and threats facing a business can be matched with the internal strength and
weakness. There could be four different strategies, which are:
a. SO strategies : Use strength to take advantage of opportunities
b. WO strategies : Take advantage of opportunities by overcoming
weaknesses
c. ST strategies : Use the strengths to avoid threats
d. WT strategies : Minimize weaknesses and avoid threats
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Business Strategy in the Digital Age

Business strategy focuses on how to compete and retain the competi-
tive position of a company’s products in a particular industry or market
segment that the company or business unit serves (Wheelen & Hunger,
2012). Michael Porter (1985) proposed a competitive strategy that is called
as the generic competitive strategy. This strategy is non-specific as it can be
sought after by any sort or size of businesses (Radovic Markovic & Salam-
zadeh, 2012; Salamzadeh, 2015 a). This is to achieve its competitive ad-
vantage, outperforming other competitors in its domain of activity or in the
particular industry, stated as lower cost and differentiation:
- Lower cost strategy: the ability to design, produce, and mar-
ket similar product in a more efficient way
- Differentiation strategy: the ability to provide unique and su-
perior value in terms of quality, special features, or after-sale service
through products or services.
Furthermore, Porter proposed that these strategies should be deter-
mined by its competitive scope, the broadness of the company’s target mar-
ket. A broader target aims to the middle or mass market; or a narrow market
aims to niche market.
Referring to the background of this research, it is stated that the era
has now shifted to a digital era with the help of the development and Inter-
net. This digital evolution is believed to change the business world, whether
the players embrace or defend this phenomenon, it will impact the business
in a certain way (Salamzadeh, 2014; Jafari Moghadam et al., 2014). There
will always be challenges and new opportunities to be gained. Thus, players
8
should be able to have a clear business strategy in order to compete and sur-
vive in the industry. Strauss & Frost in their book of E-Marketing (2014, p.
51) defined a digital business strategy as “the deployment of enterprise re-
sources to capitalize on technologies for reaching specified objectives that
ultimately improve performance and create sustainable competitive ad-
vantage”. Sorescu et al. (2011) defined that there are two business strategy
models in the digital age, which are value creation and value appropriation.
Value creation is for its customers, which is about innovating, producing,
and delivering products to the market. While value appropriation is for
themselves and its partners to extract profits in the marketplace.
METHODOLOGY
This is a case study research which explores and investigate contemporary
real-life experience through detailed contextual analysis of a limited number
of events, conditions, and relationship. It is a unique way of observing any
natural phenomenon in its real-world context, which exists in a set of a
small number of subjects of interest that examined in detail (Yin, 2014).
This is a qualitative research in which it was utilized to gain comprehensive
fundamental reasons and sentiments. It provides the insights into the issue
and creates thoughts or hypothesis. Below is the research design:
Figure 2. Research Design
Exploratory
reseach Conclusion &
Problem Strategic Strategic
Recommendati
Identification (Data Analysis Formulation
on
collection)
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Problem identification was the first step conducted which was identi-
fying some common problems and challenges faced by the E-Commerce
Fashion Industry. This was identified by interviewing some representatives
of four fashion businesses which based in Bandung and by some observa-
tions of the current environment.
In order to collect the data for this research, several methods were
done. For the external environmental scanning, observations and secondary
literature were used. Secondary data were taken from some reports made by
the government, official consultant groups, website documents and journals,
which were listed down in Table 1 below. This was due to gather the valid
data which accurately happened in Indonesia at the time this research was
conducted. This environmental scanning identified the factors which affect-
ed directly to the fashion industry in Indonesia.
Table 1. List of references for secondary data
Type Author(s) Title Retrieved from Used as ref-
erences for
Report APJII (Aso- Penetrasi dan General En-
siasi Penye- Perilaku vironment,
lenggara Jasa Pengguna Customer
Internet Indo- Internet Indo- analysis
nesia) nesia
Report Deloitte The Evolution General En-
of the Indone- vironment,
sian Consum- Competitor
er Analysis
Report MarketLine Apparel & General en-
Non-Apparel vironment,
Manufactur- Industry
ing in Indone- Analysis
sia
Report Shekhawat, P. Rising Middle General En-
MarkPlus Class Incomes vironment,
Insight Spur Multi- Industry
Industry Analysis,
10
Growth in Customer
Indonesia Analysis
Journal Sunil, D. Trends and Customer
practices of Analysis
consumers
buying online
and offline:
An Analysis
of factors
influencing
consumers’
buying
Website Trading Eco- Indonesia www.tradingeconomics.inf General En-
docu- nomics GDP Annual o vironment,
ments Growth Rate Industry
Analysis
Website Worldometers Countries in www.worldometers.info General En-
docu- the World by vironment,
ments population Industry
Analysis
Reference: author
On the other hand, for analyzing the internal environment, the data
used was primary data. This was done by a qualitative research using an in-
depth interview to all of the four fashion businesses which were being ana-
lyzed in this research. An in-depth interview in a semi-structured way,
which allows the interviewee to explore different thoughts but controlled to
be still on the main topic, was chosen as the most suitable method to gener-
ate a more detailed and thorough data and deeper insights about the prob-
lem.
This research uses multiple cases in order to strengthen the findings
as it creates replications of each other resulting similar results (a literal rep-
lication) or deliberate and contrasting comparisons for anticipatable reasons
(a theoretical replication) (Yin, 2014). Thus, these 4 businesses were chosen
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because they likely to provide useful data for the research and assumed to be
the representatives for online fashion SMEs in Indonesia. Moreover, they
were included in some characteristics which were considered at first before
choosing the informants, which are:
1. Small Medium Enterprise with annual sales below IDR 50 bil-
lion
2. Players in women apparel fashion products
3. The business has already used digital marketing platform to do
their promotion
The respondents for the interview were the owner of each business
and the interview covered the background of the business, the marketing
mix, resources and capabilities owned by the business, value chain activi-
ties, and the obstacles faced by each of the owners. The results of these in-
terviews can be considered as valid as they were from experts’ opinions
which were analyzed in order to have the results. Below are the interview
respondents:
Table 2. Interviewee background
Interviewee Position Date of Business ex- Issues covered
Interview planation
Mrs. Na- Owner of March 14, Women pa- - Background of
tasya Fe- AMTOPM 2017 jamas with the business
brina real Japan - Target Market
cotton fabric - Competitive ad-
Mrs. Vili Su Owner of VS March 31, Ready to wear vantage
The Label 2017 women - Marketing mix
clothes - Resources and
Ms. Desy Owner of April 4, Women casu- capabilities
Kusuma Kirei.Indonesia 2017 al daily outfit - Value chain ac-
Mrs. Yelly Owner of April 21, Ready to wear tivities
De_Batique 2017 women Batik - Challenges and
obstacles
- Business perfor-
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mance
Reference: author
The data collected was analyzed to first identify the factors that af-
fect the E-Commerce Fashion Industry using the SWOT matrix, which as-
sessed by EFAS and IFAS matrix to minimize the criticism of these anal-
yses. The weight and the rating for these matrices were taken from the per-
spective of the four entrepreneurs who were interviewed in this research.
Then, to know which factors that affect significantly to the environment,
SFAS matrix was used. The factors which affect greatly were then become
the based on formulating the strategies, especially the business strategy in
this digital age. Conclusion and recommendation were the last part of this
research.
FINDINGS AND ARGUMENT

External Environmental Scanning
General Environment Analysis
Political: There was political instability in Indonesia which could
increase the political risk and affect the economy condition indirectly due to
investors who are mostly do not want to take the risk. IHSG (Indeks Harga
Saham Gabungan) decreased sharply, and weaken Rupiah. Kementerian
Koperasi dan Usaha Kecil Menengah has programs which help many SMEs
in Indonesia to help the growth of Indonesia GDP. Thus, it can be inferred
that there no complex bureaucracy to open a business as the government
provides assistance in helping start-up businesses.
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Economy: For the whole year of 2017, Indonesian economy is esti-

mated to grow by 5.2%, increasing from a 5.02% expansion in 2016 (Trad-
ing Economics, 2017). Indonesia is incorporated to be the third developing
markets with the best middle-class potential. Not only because of its huge
populace but also the fact that middle-class buying power in Indonesia is set
to rise emphatically. This gives Indonesian middle class to have an extra
disposable income for optional spending. The country’s middle class is re-
lied upon to achieve 20 million households by 2030, and create a critical
shopper base to drive demand and spending in the country (Hodgson, 2017).
Social: Indonesia ranked in the fourth the most populated countries

in the world which has 263,510,146 (accessed on May 9, 2017), and has a
population growth of 1.12% (Worldometers, 2017). The urban population
consists of 53.4% of the whole population. According to the index national
culture of Geert Hofstede, Indonesia has a score of 14 which refers to a col-
lectivist culture. This refers to a high preference for a strongly defined social
framework in which individuals are expected to conform to the in-group to
which they belong.
Technology: The number of active Internet users in Indonesia has

been increasing from the previous year, which also leads to the increasing
number of social media users and active mobile social users, supported by a
survey done by APJII (Asosiasi Penyelenggara Jasa Internet Indonesia)
about the internet users in Indonesia in 2016. Internet users in Indonesia
have reached a number of 132.7 million or around 51.5% of the whole
14
population in 2016. The most Internet users are in the age of 25-34 which is
accounted for 24.4%. While the profession is mostly workers or entrepre-
neurs that accounted for 62%. It demonstrates a major number of entrepre-
neurs who utilize the Internet for their business. The rank followed by
housewives which is 16.6%, this number refers to a good prospect for fash-
ion businesses who have women as their target market. These Internet users
are known to visit online shop the most, as it is 62% from the whole Internet
users in Indonesia (Kyaruzi et al., 2018). Moreover, the most visited social
media content is Facebook for 54% and followed by Instagram for 15%
from all of the Internet users.
On the other hand, there are still Indonesian who do not prefer to
buy online. This is mostly due to the perception of lack of security transac-
tions, the incapability to try the product first, delivery time and cost.
Environment: This country has a very interesting geographical lo-

cation that is mostly comprised of thousands of the islands and it is located
between Indian and Pacific Oceans (Salamzadeh et al., 2015, 2018). This
leads to a challenge in which delivery across islands will require water
transportation and it will take a longer time to deliver products. Indonesia to
have many cultures which introduce many different fabrics and textile
across Indonesia and become the characteristics of each region. As an ex-
ample, Indonesia is known for its Batik, and it has different motives in every
area. Indonesia has a profound pool of skilled gifted workers who proficient
at embroidery, sewing, and hand-craving.
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Legal: According to the Government Regulation number 46 of

2013, SMEs acquire a half duty markdown of the standard tax rate which is
imposed relatively on taxable income of the part of gross turnover of not
more than IDR 4.8 billion. Some enterprises with gross turnover up to IDR
4.8 billion are subject to Final Tax at 1% of turnover.
Porter’s Five Forces Industry Analysis

Buyer Power: high
Clothing is considered to be people primary needs which make the
industry to have a concentrated buyer and increase the buyer power. Buyer
power is enhanced by a high level of choices within the industry, but those
choices are weakly differentiated. In addition, because of the absence of
switching cost, this makes customers easily shift brands, not being loyal to a
brand.
Supplier Power: low

The key suppliers in this industry are fabric stores and machinery for
those who do their own production. Mostly, fashion business has several
suppliers as they can switch suppliers easily. Moreover, the high numbers of
fabric stores which weakens the supplier power. For machinery suppliers,
there are considered to be found easily in Indonesia, thus weaken the suppli-
er power.
Threats of New Entrants: high
16
The high GDP development rates, rising consumer spending and a

thriving middle class have added to the engaging quality of this market. Bar-
riers to entry, particularly the capital prerequisites are sufficiently low for
individuals to enter. The rising competition which makes sellers compete to
win more customers make many entrepreneurs vying lower prices and dis-
counting products, which leads new entrants hard to compete if their prod-
ucts are similar to the others. This emphasized the fact that the industry has
weak differentiated clothing lines in which increase the threat of entry and
lower customer loyalty toward a brand. Indonesian government, provide
many assistances and support for entrepreneurs to have their businesses op-
erating, thus indicating the little regulation for new entrants.
Threats of Substitute: moderate

One option is to buy clothing through retails, which now has been
facilitated also by the internet as an alternative shopping channel. Offline
stores could also be an alternative to the fashion online business. However,
an online fashion business can still have the portion of the market if they
consistently offer their value through the products in its own unique way.
Degree of Rivalry: moderate to high

Small to medium business is known to have lack of resources that
makes it hard to expand, it tends to have a balanced size which makes busi-
nesses attempt to dominate each other. The similarity of players, lack of di-
versity, and low switching cost makes the rivalry to be in a high state. How-
ever, the low exit barriers and low fixed cost as companies do not have to
spread the cost by increasing volume could reduce the rivalry.
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Competitor Analysis
In this research, the competitor for E-Commerce Fashion Business is
the offline Fashion Business. According to a research which evaluated the
patterns and practices of buyers purchasing online and offline, there are sev-
eral factors which can be compared to assess the strengths and weaknesses
of online and offline fashion businesses (Sunil, 2015; Salamzadeh, 2015 b).
Some highlights were identified as the advantages and disadvantages of
online shop in the table below.
Table 3. Advantages and Disadvantages of E-commerce business
Advantages Disadvantages
Provide a more convenient way to shop, as Customers could not examine the product
it never closes. Customers could see the before purchasing, which could lead to cus-
products anytime and anywhere. tomers unsatisfied with the products
They do not need to stock a lot of products There are costs, such as shipping and han-
at it can be made after orders dling charges and the time needed to deliver
the products to the customers
Less budget needed to open the business
Customers’ trust issues of unsecured online
A broader range of marketing promotion transaction
accessibility
Reference: (Sunil, 2015)
Internal Environmental Scanning

Strategic Capabilities Analysis: Resources and Capabilities
There are some common patterns of the resources owned by the four
businesses which assumed to be representative of the other fashion business.
Tangible resources: They only have the necessary basic equipment

to do the production. There are no high technology machines which require
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high skill and maintenance services. A business which requires high-quality

materials depends on more to their suppliers leading to a high supplier pow-
er in this case. However, for business who only uses common quality, do
not really depend on one supplier as they could switch easily to the other
suppliers who provide the similar materials leading to low supplier power.
Furthermore, the places used for production and inventory are still the own-
er’s property not the asset of the company.
Human resources: For those businesses who need employees are

mostly hired those people who already have the abilities to perform the nec-
essary tasks. There is no formal training made by the owners but expected
the employees can do the job well. The owners do not have any written
agreements and policies about hiring and staffing to their employees. How-
ever, those businesses who have their employees doing the business activi-
ties, the owners are still fully involved in the businesses, as they control and
being responsible to all of the functions and decision making which will af-
fect the business performance.
Organizational resources: Most of online businesses are lack of

organizational structure, resulting in the unclear job description for the em-
ployees, but each of them knows the roles in the business. They are also
lack of marketing research, which makes the owners to just make assump-
tions and observations about their target market’s wants and needs. Sensing
new opportunities or novel ideas for the business’ innovation while main-
taining their brand image and character also become the challenges. There
are no clear written business policies, such as for exchange and refund pro-
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cedures. Even though owners have their own chosen platforms to promote
the products, they still depend a lot on personal connections. This makes the
owners have to be able to build good relationships to those near them.
Financial resources: Although the budget to make the business dif-

fer from the other businesses, each of the owners has their own target and all
of the owners still considered their financials to be limited. Most of them
priorities their financials for the production function first, then to the mar-
keting as now they can use the social media with no or low costs.
Capabilities
In order to keep up with the changing environment, businesses have
to be able to renew and recreate their strategies. Most of the online fashion
businesses follow the current clothing style trends by observing the chang-
ing fashion trends. Moreover, to meet the customers’ necessities and con-
tend in an offered market to accomplish equality, businesses should have
what it is called as threshold capabilities. This is done by providing the
products which are needed by the customers, deliver the value added, and
being there when the customers need. Nowadays, most businesses provide
customizable products which the clothes are being made according to the
customer’s preferences. Having good relations toward the customers to be
able to gain their trust. In order to fulfill some other requirements, all of the
business functions have to be able to work together in a synergy so that the
business could perform all of their activities correctly without any interrup-
tions.
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Every business must have their own distinctive capabilities, which

identify their own unique and effectively utilized to be valuable to custom-
ers and difficult to imitate. These four businesses also have different capa-
bilities. AMTOPM offers the use of 100% cotton fabric from Japan which
gives comfort to those who wear the pajamas. VS The Label uses good
quality and comfortable fabric which also added by the unique clothes de-
sign which brings confidence for those who wear it. The making of the
clothes is also done well. It is different from Kirei that, they have the capa-
bility in providing good and interesting photo products to attract customers
in their social media. The owner has good connections to those people who
have the capability to help the business. While de_Batique uses originally
Batik fabrics which are made by Batik craftsmen.
Value Chain Activities Analysis

There are some common patterns pursued by the business. First, the
place needed to store the raw materials, manufacturing processes, and in-
ventory is mostly in the area of the owner or in the owner’s place, so it is an
easy access for the owners and could be controlled by the owners easily.
The machines or equipment they need are just basic so it is easily available
and used by those people who have the basic capability. Those businesses
who do the production themselves have the benefits of less production cost,
greater control over the products, and greater flexibility. While those who
outsource the production function will have the benefit of lower risk of
failed production, but they depend other parties to be involved in the activi-
ties of the business. All of the fashion business use intermediaries to deliver
the products, the further the distance the more fees the customers will be
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charged. The intermediaries used are able to deliver the products across In-
donesia, it is also open for them to ship it worldwide. For the sales and mar-
keting, there are two types which go through online and offline. As in this
research focus on the online shop, the entrepreneurs will already familiar
with the digital marketing platform. The most used platforms are Instagram
and Facebook; to contact and broadcast messages to customers, they use
LINE and WhatsApp. The owners usually maintain these platforms and up-
load photos in a repeated frequency to increase the brand awareness and as a
way to build good relationships with customers. However, they still depend
on personal connections to increase their sales. Owners will always try their
best to upload good quality and interesting pictures of their product to at-
tract customers, they usually photographed the product themselves due to
the limited financial resources. However, for those who have the capabili-
ties, they will use photographers or models to promote the products.
Owners have full control and responsibility for all of the activities,
innovation and development, decision making and the management of the
business. They are lack of business policy, in which if something happens,
owners will always decide on how to respond. Owners will apologize for
any wrong orders and exchange the products if it was the company’s mis-
take. Moreover, Owners have to have the ability to sense new opportunities
and novel ideas to always innovate the business, but stick to their brand im-
age and characters. Most businesses find this to be the challenges that they
have to deal with in order to still achieve parity and being able to compete in
the market.
22
Customer Analysis
This analysis helped to identify the target market of E-Commerce
Fashion Business in Indonesia, as shown in Table 4 below.
Table 4. E-Commerce Fashion Business Target Market
Target Market
Demographic
Age 17-30 years old
Gender Female
Income IDR 1-5 million per month
Occupation Workers or entrepreneurs, housewives, and students
Psychographic
Personality type Expressive
Value and Lifestyle Experiencers
Behavioral
Buying on occasions 2 to 3 times per month
Benefits sought Quality and convenience
Reference: author
Strategic Analysis: SWOT, EFAS, and IFAS matrix

From the collected data, the author identified and summarized some
significant factors which affect the E-Commerce Fashion Business in a
SWOT table below, and assessed with EFAS and IFAS matrix.
Table 5. SWOT Matrix

Strengths Weaknesses
Owners’ involvement Low level of innovativeness
Value added awareness Lack capability to sense new ideas
Good customer relationship man- Lack of marketing research,
agement knowledge
Embrace the digital era Limited resources
Qualified employees Lack of written business agreement
and policy
Lack of report and the integration of
data
23
ness
Opportunities Threats
Increasing of potential Internet us- Increasing competitors
ers Imported clothing
Online and the digital era Avoid online transactions
Increasing middle class purchasing High buyer power
power
Collectivist culture
Rich in garment and skilled
craftsmen
Reference: author
In order to assess these external and internal factors, EFAS and

IFAS matrix were used. The weight and rating were obtained from the aver-
age of the 4 interviewed business’ owners opinions. Weight is the im-
portance of the factors, while the rating is how well the business respond to
that factor. The weight has a range of 0 to 1, showing the importance level.
The total of this weight should be no more than 1. The rating used a range of
1 to 5, showing the lowest to the highest rating.
Table 6. EFAS Matrix of the E-Commerce Fashion Industry

External Factors Weight RatingWeighted Comments
score
OPPORTUNITIES
Increasing middle- 0.15 2 0.3 People are willing to spend
class purchasing money on fashion products
power more.
Collectivist culture 0.1 3 0.3 Use this culture as a way to in-
crease promotion through mouth
to mouth.
Increasing of poten- 0.12 4 0.48 Use the social media to connect
tial Internet users with customers
Rich in cultural 0.02 2 0.04 Use unique garments to add val-
garments and ue to the products
skilled craftsmen
24
Online and the digi- 0.2 3 0.6 Use technology to capitalized

tal era resources.
THREATS
Imported clothing 0.1 -3 -0.3 Increasing players who sold im-
ported clothing.
Increasing competi- 0.15 -3 -0.45 Increasing players who target
tors the same customers, yet still
undifferentiated products made.
High buyer power 0.06 -2 -0.12 Customers have control to the
business.
Avoid online trans- 0.1 -3 -0.3 Have to gain customers’ trust.
action
TOTAL SCORES 1 0.55
Reference: author
The total score of EFAS is 0.55, this refers that the opportunity fac-
tors have a bigger impact on E-Commerce Fashion Business. Factors which
affect the most are the era shift to digital, increasing of potential internet
users and the increasing of competitors.
Table 7. IFAS Matrix of the E-Commerce Fashion Industry

Internal Factors Weight Rating Weighted Comments
score
STRENGTHS
Owners’ involvement 0.09 2.8 0.25 Owners have the full respon-
sibility for the overall busi-
ness activities.
Value added aware- 0.13 3.5 0.45 Owners aware that value add-
ness ed is needed to create sustain-
able competitive advantage.
Qualified employees 0.09 3 0.27 Hired those who are qualified.
Embrace the digital 0.12 3 0.36 The use of social media.
era
25
ness
Good customers’ rela- 0.12 3.5 0.42 Maintain customers through

tionship communication.
WEAKNESSES
Lack of written busi- 0.05 -2.1 -0.105 Unclear business agreement
ness agreement and and policy.
policy
Lack of marketing 0.07 -2.4 -0.168 Do not have are marketing
research, knowledge research, all based on as-
and awareness sumptions.
Lack of report and the 0.05 -2 -0.1 Difficult to assess the busi-
integration of data ness performance.
Low level of innova- 0.12 -3.5 -0.42 Hardly there are product and
tiveness process development.
Lack of capability to 0.08 -2.2 -0.176 Difficult to sense new oppor-
sense new ideas tunities.
Limited resources 0.08 -2 -0.16 Constraint the business activi-
ties
TOTAL SCORE 1 0.621
Reference: author
Overall, the strengths owned by E-Commerce Fashion Business

dominate its weaknesses as it can be seen from the positive total score. The
most significant factors are value added awareness, good customer relation-
ship management, and low level of innovativeness. Business should be able
to utilize and keep developing its strengths to overcome the weaknesses.
Strategy Formulation: SFAS matrix
26
This matrix identified some strategies which were taken from the re-
sult of the IFAS and EFAS analysis, can be seen in Table 7 below. The To-
tal Weighted Score on table EFAS and IFAS show positive numbers (EFAS
0.55 and IFAS 0.625), which means that the Internal Strengths and External
Opportunities are stronger than the Internal Weaknesses and External
Threats. It can be said that the Indonesian E-Commerce Fashion Business
has done a pretty good performance. From this matrix, it is seen that from
most of the strategies, the SO strategies (3.022) are the most significant as it
has highest scores compared to the WO, ST, and WT strategies as all of the
negative numbers are set to be positive numbers. Thus, players are recom-
mended to implement these SO strategies by pursuing the opportunities by
using their superiority.
The most significant strategies can be formulated by using Value
Added Awareness (S2) to exploit the opportunity of Online and Digital Era
(O5). Players aware that in order to survive and compete in the industry they
need to have a value added whether in their products or the linkages of the
activities they have. In this digital era, businesses could make use of the op-
portunity in having value added as well as a digital business strategy to en-
hance performance and have a sustainable competitive advantage. Not only
the use of social media as a tool to promote their products which actually
could add value to the products by having good quality photos, but a new
method of production or other supply chains can also be used to cut costs.
Creating added value by manufacturing the same or better product using
more effective and efficient methods. New suppliers who can meet or ex-
ceed the requirements at a lower cost. This added value could certainly
make the whole supply chain more efficient. Other than that with the capa-
27
ness
bility of the owners to sense new opportunities and ideas to create innova-
tiveness to the products accelerate this process of value creation.
Meanwhile, this digital era could also add value appropriation for
their own and partners. For example, players could gather as much as they
can by studying and observing their customers’ behavior through the social
media they use. Obtaining information about their wants and needs to have
better products and know the right way on how to approach them. The tech-
nology can also support the business by having all of the data regarding the
production, inventory, sales, and financials to be integrating that will ease
the business on having information about the performance of the business.
The other significant strategies can also be taken from the opportuni-
ty of the Online and Digital Era (O5) to take advantage Good Customer Re-
lationship (S5) and cope with the Low Level of Innovation (W4). Digital
platforms have a huge role related to relationships with customers. Every-
thing was much easier to be in touch with customers or the other way
around. Customers could easily ask the seller if they need something, and
seller could easily reply to them. Moreover, some people have trust issues in
doing the online transaction due to the unsecured transactions.
This can be overcome the strength of good customer relationship as
well. Players could educate them about the online transaction and build trust
towards customers. In this way, customers could be more willing to shop
more using online transaction. Other than that, the digital platform also pro-
vides a lot of new ideas, knowledge, and information which can be used as
inspiration to formulate new ideas, innovations, or development towards the
products or the activities.
28
Business Strategy Formulation

By seeing some strategies formulated above, there are more strate-
gies which refer to the differentiation business strategies. This means that
in order to compete and survive within the industry of E-Commerce Fashion
Business in Indonesia, incumbents should be able to apply this type of busi-
ness strategy. This involves uniqueness along some dimensions in the prod-
ucts offered that is adequately esteemed by customers to allow a price pre-
mium resulting higher benefits as well. It requires to identify the strategic
customers whose needs to differentiation is based on and create boundaries
for comparison with the competitors. This value added differentiation
should also be difficult to imitate or substitute. This can be achieved by hav-
ing complexity linkages and causal ambiguity of some of the business capa-
bilities.
29
OPPORTUNITIES THREATS
Increasing middle Increasing of Rich in cultural Online and High Avoid
class purchasing Collectivist potential garments and the digital Imported Increasing buyer online
power culture Internet users skilled craftsmen era clothing competitors power transaction
TOTAL
0.150 0.100 0.120 0.020 0.200 0.100 0.150 0.060 0.100 WEIGHTED
SFAS EXTERNAL 2.000 3.000 4.000 2.000 3.000 -3.000 -3.000 -2.000 -3.000 SCORE
INTERNAL Weighted Score 0.300 0.300 0.480 0.040 0.600 -0.300 -0.450 -0.120 -0.300 0.550
Owners’ involvement 0.090 2.800 0.252 0.076 0.076 0.121 0.010 0.151 -0.076 -0.113 -0.030 -0.076
Value added
STRENGTHS
awareness 0.130 3.500 0.455 0.137 0.137 0.218 0.018 0.273 -0.137 -0.205 -0.055 -0.137
Qualified employees 0.090 3.000 0.270 0.081 0.081 0.130 0.011 0.162 -0.081 -0.122 -0.032 -0.081
Embrace the digital era 0.120 3.000 0.360 0.108 0.108 0.173 0.014 0.216 -0.108 -0.162 -0.043 -0.108
Good customers’
relationship 0.120 3.500 0.420 0.126 0.126 0.202 0.017 0.252 -0.126 -0.189 -0.050 -0.126
Lack of written
business agreement 0.050 -2.100 -0.105 -0.032 -0.032 -0.050 -0.004 -0.063 0.032 0.047 0.013 0.032
Lack of marketing
research, knowledge
WEAKNESSES
and awareness 0.070 -2.400 -0.168 -0.050 -0.050 -0.081 -0.007 -0.101 0.050 0.076 0.020 0.050
Lack of report and the
integration of data 0.050 -2.000 -0.100 -0.030 -0.030 -0.048 -0.004 -0.060 0.030 0.045 0.012 0.030
Low level of
innovativeness 0.120 -3.500 -0.420 -0.126 -0.126 -0.202 -0.017 -0.252 0.126 0.189 0.050 0.126
Lack of capability to
sense new ideas 0.080 -2.200 -0.176 -0.053 -0.053 -0.084 -0.007 -0.106 0.053 0.079 0.021 0.053
Limited resources 0.080 -2.000 -0.160 -0.048 -0.048 -0.077 -0.006 -0.096 0.048 0.072 0.019 0.048
TOTAL WEIGHTED SCORE 0.628
SO STRATEGY WO STRATEGY
3.022 -2.056
ST STRATEGY WT STRATEGY
-1.942 1.321 Table 8. SFAS Matrix
30
CONCLUSION
Formulating strategy through environmental scanning is essential
and necessary to be the base of strategic implementation for the growth of
every business to be successful or at least being able to compete and achieve
parity in the industry. As competition continues to escalate for E-Commerce
Fashion Business in Indonesia, incumbents should aware which business
strategy to use, therefore this research was done in this regards. The result
suggested that a differentiation business strategy is the most suitable for
them to be able to survive and compete in the industry whether the broad or
narrow target market. It is the ability to offer unique and superior value in
some features to allow price premium to customers. Differentiation could
also lead to a sustainable competitive advantage for the business which is
hard to be imitated by others. By focusing on creating differentiation, it will
lead to a higher performance level, but it has to be together with the effec-
tive management of assets to generate profit. However, due to the lack of
research for Indonesian Fashion SMEs, Moreover, in this digital era, they
should also be able to embrace the opportunities offered in order to increase
performance and create sustainable competitive advantage using value crea-
tion and value appropriation for the business.
This finding is also supported by some previous studies. However,
there is limited research in this area, especially in Indonesia. One case study
research which based in Indonesia stated that product differentiation has a
significant effect on the performance of SMEs (Sukesti, Nurhayati, & Ka-
rim, 2014). Moreover, other studies outside Indonesia support this finding in
which saying that differentiation strategies are adequately used by SMEs to
gain a competitive advantage by standing out uniquely to their customers
31
ness
(Njuguna, Ochieng, & Odida, 2015). Fairhust (2003), also suggested for
business to focus on differentiation in the marketplace, as higher perfor-
mance level is gained through higher capabilities associated with marketing
differentiation. However, one study outside Indonesia revealed that a com-
bination of generic business strategy achieves higher profitability than com-
panies that follow a differentiation strategy (Leitner & Güldenberg, 2010).
One stated reason is that modern technology and management practices al-
low businesses to simultaneously reduce costs and differentiation products,
thus a combination strategy could reduce market risk and maximize long-
term performance. However, this study was conducted in Austria and in dif-
ferent industry sectors, thus a future research which covers the area of E-
Commerce Fashion Business in Indonesia is needed to assess this gap.
The major limitation of this research is that the finding was devel-
oped based on the analysis of four firms who are based in Bandung do not
represent some other cities. The validity of this research should be assessed
through further research efforts that compare cases in some other cities aside
Bandung. It can also be a better research if includes the assessment of the
performance of each case to have a better view of the real cases. Moreover,
a future research could also include the formulation of digital marketing
strategy which can help the E-Commerce Fashion Business to create sus-
tainable competitive advantage, competing in the industry and to develop.
32
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Journal of Entrepreneurship, Business and Economics

STRATEGIC ASSESSMENT OF INDONESIAN E-COMMERCE

Selva Natalie, Harimukti Wandebori

The Internet and the development of technology have never stopped in

Strategic management is strongly associated with the survival and

Environmental scanning is controlling, criticizing, and disseminating

of significance in the development of a successful competitive strategy’. It

enhance value or decrease cost in value activities. The primary activities

EFAS, IFAS, and SFAS

Business Strategy in the Digital Age

FINDINGS AND ARGUMENT

Economy: For the whole year of 2017, Indonesian economy is esti-

Social: Indonesia ranked in the fourth the most populated countries

Technology: The number of active Internet users in Indonesia has

Environment: This country has a very interesting geographical lo-

Legal: According to the Government Regulation number 46 of

Porter’s Five Forces Industry Analysis

Supplier Power: low

Threats of New Entrants: high

The high GDP development rates, rising consumer spending and a

Threats of Substitute: moderate

Degree of Rivalry: moderate to high

Internal Environmental Scanning

Tangible resources: They only have the necessary basic equipment

high skill and maintenance services. A business which requires high-quality

Human resources: For those businesses who need employees are

Organizational resources: Most of online businesses are lack of

Financial resources: Although the budget to make the business dif-

Every business must have their own distinctive capabilities, which

Value Chain Activities Analysis

Strategic Analysis: SWOT, EFAS, and IFAS matrix

Table 5. SWOT Matrix

In order to assess these external and internal factors, EFAS and

Table 6. EFAS Matrix of the E-Commerce Fashion Industry

Online and the digi- 0.2 3 0.6 Use technology to capitalized

Table 7. IFAS Matrix of the E-Commerce Fashion Industry

Good customers’ rela- 0.12 3.5 0.42 Maintain customers through

Overall, the strengths owned by E-Commerce Fashion Business

Strategy Formulation: SFAS matrix

Business Strategy Formulation

16. Salamzadeh, A. (2014, May). Youth Entrepreneurship in Developing Countries: Do Young

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