Proceedings of the International Conference on Industrial Engineering and Operations Management

Rome, Italy, August 2-5, 2021

Porter’s Five Generic Strategies: A Case Study from

Indonesia Automotive Industry Against Covid-19
Wirawan Pratama Suwardi, Timotius Candra Kusuma, Bagas Muhamad Kartiko
Department of Industrial Engineering, Faculty of Engineering
Universitas Indonesia
Kampus UI Depok, 16424, Indonesia
[email protected], [email protected], [email protected]

Abstract
The automotive industry is one of the largest and most complex industries around the world. The automotive industry
needs to implement a long-term strategy for the company. Before the COVID-19 pandemic emerged, the automotive
industry was projected to witness steady growth through the course of this decade. To restore the demand for the
automotive industry in Indonesia, the Government will provide financial incentives in the form of a reduction in Sales
Tax on Luxury Goods rates. The research methodology in this article uses Analytical Hierarchy Process (AHP), and
Qualitative Analysis (Segmentation and SWOT). In addition, Porter’s Strategy was utilized in this article to analyze
automotive industry attractiveness from an outside-in perspective during the COVID-19 pandemic. To do so, a case
study approach on Indonesia's automotive industry firms, e.g., Toyota and Daihatsu were employed. The analysis
result acknowledged the application of Porter's generic strategies to automotive industry firms to achieve competitive
advantage and proved the positive impact of generic strategies on firms' financial performance. This research
contributes to existing research by suggesting Porter's generic strategies in the Indonesian automotive industry.

Keywords
Automotive Industry, Analytical Hierarchy Process, Covid-19, Porter’s Strategy

1. Introduction
The automotive industry is one of the most complicated sectors. (Orsato and Wells 2007; Kannegiesser and Günther
2014). Although the automotive sector is a critical industrial sector affecting the global economic system
sustainability, car manufacturers and other companies in the automotive supply network's environmental and social
output do not always meet the expectations of customers. (Koplin et al 2007; Orsato and Wells 2007). In response to
this practical challenge, the automotive industry needs to implement a long-term strategy for the company. According
to Michael Porter, company strategy can be divided into 3 types: cost leadership, differentiation, and focus. There are
two types of cost leadership strategies and focus, namely low-cost and best value. So that there are 5 company
strategies according to Porter, Porter's Five Generic Strategies (Gorondutse and Gawuna 2017). Cost leadership and
differentiation strategies can lead to organizational success according to Porter by understanding cost advantages and
differentiation as discrete alternatives (Porter 1980). If the company has a competitive advantage in the market, it will
support the success factors in the organization.
Before the COVID-19 pandemic hit, the auto industry was projected to experience steady growth during this decade.
The automotive industry is an important contributor to income in developing and developed countries in the world.
The auto industry is often seen as the backbone of countries' Gross Domestic Product (GDP). Therefore, solid
economic growth depends to a large extent on how well the automotive industry is performing in a region. Increasing
consumer income is one of the main drivers of growth in the automotive industry. (Kaitwade 2020). Whether it's
increasing demand for electric vehicles or fast innovation, the auto industry has been booming before it was hit by the
COVID-19 outbreak. Automotive manufacturing also appears to be affected by the negative impact of COVID-19.
The coronavirus pandemic has caused a sharp drop in demand for automotive vehicles. The pandemic has hit the
automotive world during 2020. A survey of 46 companies in the automotive supply chain, showed that nearly two-
thirds of respondents wanted a delay in implementing technology for the upcoming industrial launch. Nearly 65
percent of companies put off implementing technology projects after the pandemic was over. Meanwhile, some of
these auto companies have faced critical challenges even before the pandemic began.

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To restore the demand for the automotive industry in Indonesia, the Government has pushed for an industrial
localization policy that must be fully implemented by all OEMs (original equipment manufacturers) by 2019.
Government action is to support all content to be produced locally in Indonesia. Future challenges and opportunities
will determine the fate of the automotive industry in Indonesia. To increase the purchase and production of Motorized
Vehicles, the Government will provide financial incentives in the form of reducing the Sales Tax on Luxury Goods
rates for motor vehicles. Relaxation can increase people's purchasing power and provide a jump start for the economy.
With the relaxation scenario that is carried out in stages, based on data from the Ministry of Industry, it is calculated
that there can be an increase in production which reaches 81,752 units. The estimated additional output of the
automotive industry is also estimated to be able to contribute to state revenue of IDR 1.4 trillion. This policy will also
have an impact on state revenues, which are projected to experience a revenue surplus of Rp1.62 trillion.
Previous research on the automotive industry related to Manufacturing Strategy in the automotive industry (Nurcahyo
and Dwi 2015) with the research methodology used was using Structural Equation Modeling (SEM). This study states
that there is a manufacturing strategy relationship with manufacturing capabilities. In addition, there is research on
Quality Management Strategy (QMS) which uses the Kano Model, QFD Matrix, and AHP as research methodologies
(Azka and Nurcahyo 2018). The study discusses QMS using quantitative analysis, namely AHP, and qualitative
analysis, namely the kano model. From the research that has been mentioned, it is felt that further research is needed
to examine the manufacturing strategy in the automotive industry by combining quantitative analysis and qualitative
analysis.

1.1 Objectives
There are at least a few research articles that combine the Analytical Hierarchy Process method with Qualitative
Analysis (Segmentation and SWOT) in company strategy according to Porter. Hence, the objective of this research is
to identify challenges and opportunities for the automotive industry using SWOT Analysis. In addition, Porter’s
Strategy was utilized in this article to analyze automotive industry attractiveness from an outside-inside perspective
during the Covid-19 pandemic.
In the first part of this paper, Porter’s generic competitive strategies are described, focusing on the most important
aspects of each type of strategy. The second part of the study is a literature review of Porter’s Strategy. The last part
of the study analyses a case study of Toyota and Daihatsu, the market leader in Indonesia's automotive industry,
focusing on its competitive strategy. Research methodology: using a case study for Analytical Hierarchy Process,
Segmentation Analysis, SWOT Analysis. The study analyses various aspects of the case study car brand, price gap,
quality gap, and brand segmentation, outside-inside perspective of Indonesia automotive industry such as the effect
of reducing the Sales Tax on Luxury Goods rates for motor vehicles and results are analyzed to determine whether it
is true that Toyota and Daihatsu have implemented Porter's strategy in the company's business and what strategy is
being used.

2. Literature Review
2.1 Cost Leadership
A company must have a strategy to place its products on the market. Companies must be smart in finding ways to
direct customers to buy the company's products compared to competing companies (Barney, 2002; Birjandi et al.,
2014). One of them is a cost leadership strategy. This strategy can compete when the price of a product is cheaper
than its competitors. The low-cost strategy reflects the desire of the customer to get the product at the lowest possible
price but with not bad service quality or even more (Gorondutse and Gawuna 2017).
An example of the use of a cost leadership strategy is found in 45 companies listed in the Tehran Security Exchange
(TSE) (Valipour et al 2012). According to (Valipour et al 2012) there is a positive relationship between the cost
leadership strategy and a company's performance. This is also supported by Kiprotic 2018 regarding cost leadership
in the procurement sector. The study discusses the relationship between the cost-leadership strategy of procurement
and the performance of manufacturing companies in Kenya. The results showed that there was a significant positive
relationship between cost leadership and manufacturing company performance. In the world of manufacturing, supply
chain systems provide opportunities for companies and organizations to contribute to a competitive advantage by
reducing prices, administrative costs, and transaction costs associated with the purchase of goods and services.

2.2 Differentiation
The differentiation strategy reflects the way of making and marketing a product that is relatively unique compared to
many other industries (Porter 1980). Differentiation can limit itself to direct competitors (head to head) by having
brand loyalty to customers and having little effect on price changes. For example, IKEA is in the household furniture

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sector (Baraldi, E. and Ratajczak-Mrozek 2019), Harley Davidson in the vehicle sector (Schembri 2009), Huawei in
the field of mobile technology (Zhelun et al 2021), etc. Companies can carry out a differentiation strategy by providing
a more luxurious brand image, more unique product designs, more sophisticated technology, etc. Companies that
implement a differentiation strategy can get greater profits than the tendency to compete to produce products at lower
prices (Porter 1980).
Differentiation can be applied in various fields of the company, such as human resource management (Kariuki et al
2018). Differentiation strategies can enhance a company's competitive advantage when they are aligned with HRM
practices. HR systems that produce employee behavior that is focused on key business strategies, which in turn drive
profits, resulting in competitive advantage. In other fields, namely the differentiation strategy for SMEs (Gary et al
2020), the differentiation strategy, encourages SMEs to be able to find their own uniqueness in the target market.

2.3 Focus
To remain competitive with competitors, a company must think and find a strategy to provide an advantage in market
competition. The focus strategy can increase the company's competitive advantage because the competitive conditions
in today's industrial world are getting tougher. This strategy takes a focused and effective market share and only meets
the needs of customers in certain segments (Odunayo 2018).
An example of implementing a focus strategy is that the National Hospital Insurance Fund (NHIF) is used to enable
all Kenyans to access quality and affordable services. As a result, NHIF accredited hospitals are positioned so that
they have a competitive advantage (Ochodo et al 2020). In addition, it has been implemented in technology companies
in Nigeria (Odunayo 2018). This research is focused on the relationship between market focus strategy and
organizational performance of telecommunication companies in Port Harcourt. The empirical results confirm that
there is a very positive and significant relationship between market focus strategy and organizational performance in
telecommunications companies in Port Harcourt.

2.4 Decoy Effect

The process in which consumers make their purchase decisions has long been of great interest to researchers and
practitioners (Burnett and Lundford 1994). Determining competitive prices is crucial for every company. Since
customers usually perceive competitiveness by comparing price to value or price among the products, some companies
use the decoy effect to increase their perceived competitiveness. When it is hard to compare two products, maybe
because they have many attributes or are just very different from each other, introducing a product that similar, but
slightly worse, than one of the options can shift our preference. (Spencer 2018).
If two brands of a product are available in a market, brand A and brand B, consumers have to choose between the two.
If brand A has a superior quality but its price is much higher than that of brand B, consumers face a price/quality trade-
off. If however, a third brand C (usually called a decoy), which is inferior to brand B in both price and quality, appears
on the market, this may affect consumer choice. Various experiments have shown that, although no consumer will
choose brand C its mere appearance causes a substantial shift of preference from A to B. Marketing researchers call
this effect the decoy effect (Zhang and Zhang 2007). Although these decoys differ in terms of their relationship with
other options in a choice set of products, their availability and the underlying mechanisms proposed to account for
their impact all have a positive effect on the target product (Min 2003)

2.5 Product Development

Product Development is the process of converting needs into a technical solution and each product development is
unique, but the process shares common features or elements (Whitney 1990). The success of a new product strongly
depends on the formulation and implementation strategy (Murthy et al 2008). According to (Fairlie-Clarke and Muller
2003), new product development needs some key strategies and consist of three stages: set objective and plan
development, execute plan development, and control product development. This strategy is done in almost every
sector, including the automotive industry. Ray and Ray 2011 in their research show how frugal use of resources
through a new combination of existing component technologies created a new modular product to achieve the unique
price–performance requirements demanded by the BoP (based on the pyramid). Moreover, they find that collaboration
with suppliers for component design and their early integration in the design phase substantially lowered costs and
helped eliminate unnecessary frills whilst incorporating features valued by mass markets.

3. Methods
The research methodology in this article uses Analytical Hierarchy Process (AHP) and Qualitative Analysis
(Segmentation and SWOT). AHP is a method for solving a complex unstructured situation into several components

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in a hierarchical arrangement, by giving subjective values about the relative importance of each variable, and
determining which variables have the highest priority to influence the outcome in that situation. The AHP stages
consist of problem definition, hierarchy, pairwise weighting criteria, check consistency, sensitivity analysis, and
evaluation of alternatives (Zimmer et al 2012). AHP is here to prove that the Toyota and Daihatsu brands use a cost
leadership strategy. In addition, it determines what parameters determine the quality of the car.
After obtaining evidence from AHP, scoring will be carried out and proven by segmentation analysis to validate the
results of the AHP. After that, a SWOT analysis was carried out to determine the strengths, weaknesses, opportunities,
and challenges of the automotive industry in Indonesia during Pandemic COVID-19. According to (Rangkuti 2002),
in conducting a SWOT analysis, three stages must be carried out, namely, the data collection stage, the analysis stage,
and the decision-making stage, which are detailed as follows: The data collection stage includes: data collection,
classification, and pre-analysis activities. Data can be divided into external data such as market analysis, analysis of
competitors, communities, suppliers, government, and certain interest groups) and internal data such as; financial
reports, HR activity reports, operational activity reports, and marketing activity reports. The analysis phase is the
analysis stage using quantitative models of strategy formulation, which are based on all the data and information that
has been obtained. So that this analysis can be carried out as objectively as possible. Decision-making stage, is the act
of determining the results of the study and strategic decisions taken based on the results of the analysis that has been
carried out.

Figure 1. Workflow Research

4. Data Collection

4. 1. Segmentation
Daihatsu seriously develops its business in Indonesia, a southeast Asian developing country with the biggest
population, 270,2 million people (BPS population census 2020), as a car production center and the market as well. By
its country and population’s uniqueness and characteristics, it is critical to select the correct and relevant target market
segments for Daihatsu. Daihatsu brand itself in global is a regular car, not a premium car. So in Indonesia, it will
mostly compete with other Asian car manufacturers, Japan (Toyota, Honda, Mitsubishi, Nissan, Suzuki, Mazda),
China (Wuling, DFSK), and South Korea (Hyundai and Kia).
We research by evaluating the price range of cars that are marketed via ATPM (sole agent for brand holders). The on
the road price was obtained from the official website of each car manufacturer in April. It is clearly seen that Daihatsu
is targeted low-medium cost market. It sold in low range between USD 7,271 (Daihatsu Ayla) – USD 17,724 (Daihatsu

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Terios). Comparing with other car manufacturers, Daihatsu segmented a relatively cheaper car market with the
smallest price range. It is indicating that Daihatsu focuses on a very specific market, in terms of price as in figure 2.

Figure 2. Brand Segmentation Indonesia Automotive Industry

Daihatsu’s focus segmentation is also evaluated have a strong focus on the type of car that they produce. Table 1
shows what types of cars that is marketed in Indonesia by every car manufacturer. It is aligned with the previous
discussion that Daihatsu focuses only on a specific segment. In passenger cars, Daihatsu only provides a low level of
each car category. They do not have any medium, big, or a luxury car. Each specific products are LCGC (Ayla), City
Car (Sirion), Low MPV/Van (Sigra, Xenia, and Luxio), and Low SUV (Rocky). Moreover, Daihatsu also plays in a
commercial car (Grand Max) as in Table 1. This is also supported by the principle of the Decoy effect, a phenomenon
in which consumers tend to switch between 2 options if given an unbalanced third option. By staying focus on
developing the targeted segment, Daihatsu successfully becomes a second car producer in Indonesia, after Toyota.

Table 1. Brand Segmentation in Every Vehicle Type

LCGC Sedan MPV SUV Commercial Sports/
(low cost City Car Hatchback Double Semi
Small Medium Large Low Medium Large/Lux Low/Small Compact Medium Large Pick Up Compact
green car) Cabin Sports
Daihatsu V V V V V V
DFSK V V V
Honda V V V V V V V V V V V V
Hyundai V V V V V V V
Kia V V V V
Mazda V V V V V V
Mitsubishi V V V V V V V
Nissan V V V V
Suzuki V V V V V V V
Toyota V V V V V V V V V V V V
Wuling V V V V
.

4. 2. Cost Leadership in Toyota Avanza and Daihatsu Xenia

Data is taken from the oto.com website as of 7th May 2021. Data taken is for the Toyota Avanza 1.3E MT, Daihatsu
Grand Xenia 1.3X MT. Suzuki Ertiga GA MT, Mobilio S MT and Nissan Livina E MT. Some examples of car
specifications are taken with the same fuel type and vehicle type, namely petrol fuel and the vehicle type is MPV. For
the price of Toyota Avanza 1.3E MT, Daihatsu Grand Xenia 1.3X MT. Suzuki Ertiga GA MT, Mobilio S MT and
Nissan Livina E MT in sequence are as follows $13,371.85, $12,998.45, $14,048.19, $13,921.38, $14,675.21. So that
the most expensive petrol-fueled MPV class car is the Nissan Livina E MT and the cheapest is the Daihatsu Grand
Xenia 1.3X MT.
Parameters taken are performance (1), capacity (2), transmission (3), suspension & brakes (4), engine details (5),
wheel & tire (6), steering (7), safety (8), security (9), and comfort (10). Of the 10 parameters, a pairwise comparison
was performed so that there were 45 pairwise comparisons. Of the 45 pairwise comparisons, a scale of 1-9 was filled
with AHP Scale: 1- Equal Importance, 3- Moderate importance, 5- Strong importance, 7- Very strong importance, 9-

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Extreme importance. The AHP score is filled by three experts from the automotive industry, namely a Quality
Engineer from an automatic company with a ten-year working period in the automotive industry, a business
management officer from an automotive company with a working period of 3 years, and a supplier quality specialist
from an automatic company with a working period of 5 years. The results obtained are in the form of a Decision
Matrix as shown in Figure 3.

Figure 3. Decision Matrix from 10 Parameters

From the Decision Matrix, we can know the weight of each parameter. The resulting weights are based on the principal
eigenvector of the decision matrix, with a principal eigen value of 11,490 and a Consistency Ratio CR of 11.2%. CR
depends mainly on the matrix size following the recommendations of Wedley, 1993. In addition, it depends on the
sample characteristics and the analysis (group and/or individual), for individual’s experts, CR is restricted to 10% or
15%. The weight value of each parameter is attached in table 2.
Table 2. Weight value of each parameter
Parameter Weight
Performance 22.15%
Capacity 18.45%
Transmission 15.25%
Suspension & Brakes 13.80%
Engine Details 7.75%
Wheel & Tyre 9.30%
Steering 8%
Safety 2.20%
Security 1.80%
Comfort 1.30%
Total 100.00%

4. 3. SWOT Analysis
The results of the Internal Factor Analysis Summary (IFAS) which are compiled based on the identification results
of the internal environmental conditions in the form of strengths and weaknesses that are owned by companies in the
automotive industry, obtained a total weighted value of 5.4 so that from the weighted total it can be concluded that
the company is in a strong position. This condition shows that the internal factors of the company have been able to

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take advantage of its strengths and overcome its weaknesses properly. While the External Factor Analysis Summary
(EFAS) is used to determine how big the role of external factors influencing the automotive industry during the Covid
19 pandemic. EFAS is prepared based on the identification results of the company's external environmental conditions
in the form of opportunities and threats that the company has. Based on the results of IFAS, the total weighted value
is 5.1. This shows that the company can respond to external factors by taking advantage of existing opportunities to
overcome threats.
Based on the IFAS and EFAS analysis, the company can then determine the position of the company in the SWOT
analysis diagram to find out the right strategy based on the position in the quadrant. The SWOT analysis matrix
diagram is as follows:
Based on the SWOT analysis, it shows that the Automotive Industry during the Covid-19 pandemic was in
quadrant I, which is the position of companies that support aggressive strategies. According to Rangkuti, 2014 when
the vector direction is in the aggressive quadrant (upper right quadrant) then the company is in a good position to use
its internal strengths to be able to take advantage of existing opportunities so that the strategy that must be implemented
in this condition is to support aggressive policy growth (growth-oriented strategy).
The aggressive strategy is a company strategy that aims to expand the market. The method used is the market
penetration strategy and market development. Where the market penetration strategy (Market Penetration Strategy)
can be implemented by carrying out intensive and effective sales promotion activities by utilizing a digital basis.
Meanwhile, the market development strategy is implemented by enhancing and maintaining the brand image of the
product itself. Brand image is very important for a company to find out whether its products are accepted by society.
Brand image is a description of the success of a company in marketing activities. If the product can be well received
by the community, the company can develop a wider market even though it faces the challenges of the Covid 19
pandemic.
Based on the position of determining the marketing strategy using the SWOT matrix, market penetration strategies
and market development that can be used include:
a) Strengthen and maintain in providing after-sales service, namely the maximum service after purchasing a
car to consumers. This service improvement can be in the form of car service services such as digital
booking services, online media consultations, and the ease of buying spare parts digitally.
b) Intensifying promotions in targeted consumer markets. Focus on consumers so that the right target for the
product to be marketed.
c) Always innovate on the products offered. Companies must always innovate products to seize existing
opportunities according to consumer needs. The innovations that are created can indirectly benefit or
facilitate future product development.
d) Using social media optimally for marketing activities. Nowadays, the development of social media has
sprung up with various features that can be used as a means for promotion. Promotion using social media
can be said to be more effective because it removes distance and time.
e) Improving human resource capabilities can be done through providing training for employees to improve
employee skills to improve sales mechanisms and improve service quality to consumers.
f) For example, personal selling training, namely direct communication between sellers and prospective
customers to introduce a product to potential customers and form a customer's understanding of the product
so that the customer has an interest in buying.
g) Improve relationships both with customers and prospective customers. In the midst of intense competition
during this pandemic, one must be able to provide the best service for customers to remain loyal, one of
which is by providing services via telephone / SMS or virtual interactive to customers regarding product
information offered, information on purchasing procedures through leasing or cash.
The right marketing strategy applied for now is an aggressive strategy or growth-oriented strategy. The choice of
this strategy is believed to be able to increase sales and further increase the existing market share so that companies
can attract consumers to buy cars and be able to compete with other automotive industries.

5. Results and Discussion

5.1 Cost Leadership
The results obtained in Table 2 are that the quality of the car is determined by the parameters of performance,
capacity, and transmission, namely 22.15%, 18.45%, and 15.25% respectively. Meanwhile, the parameters that do not
determine the quality of the car are safety, security, and comfort, namely 2.2%, 1.8%, and 1.3%. It can be concluded
that each type of car must have these three basic parameters.

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Each parameter has a sub-parameter of assessment, namely for Performance (1), which are: Fuel Type,
Vehicle Type, Engine Displacement (cc), Power (hp), and Torque (Nm). The Capacity (2) sub-parameters are Seating
Capacity, No of Doors, Length (mm), Width (mm), Height (mm), Ground Clearance (mm), Wheel Base (mm). The
Transmission sub-parameter (3) is the Gear Box and Transmission Type. The sub-parameter of Suspension & Brakes
(4) is Front Suspension and Rear Suspension. The Engine Details (5) sub-parameters are Amount of Cylinder, Valves
Per Cylinders, and Engine. For Wheel & Tire (6) sub-parameters are Tire Size, Tire Type, and Wheel Size. The
Steering (7) sub-parameters are Steering Gear Type, Adjustable Steering Column, and Steering Type. The Safety sub-
parameters (8) are Anti-Lock Braking System, Airbag Driver, Passenger Airbag, Rear Seat Belts, Seat Belt Warning,
Door Teach Warning, Crash Sensor, Child Safety Locks, Side Impact Beams, and Engine Check Warning. The
Security (9) sub-parameters are Smart Access Card Entry and Engine Immobilizer. For comfort, sub-parameters (10)
are Air Conditioner, Power Steering, Accessory Power Outlet, Foldable Rear Seat, and Adjustable Seats. Scores for
each car brand are filled in by three experts from the automotive industry as in table 3.

Table 3. Scores for each car brand

Toyota Avanza Daihatsu Grand Suzuki Ertiga Mobilio S Nissan
Parameter Weight
1.3E MT Xenia 1.3 X MT GA MT MT Livina E MT
Performance 22.15% 1 0.222 1 0.222 3 0.665 4 0.886 5 1.108
Capacity 18.45% 1 0.185 1 0.185 4 0.738 3 0.554 5 0.923
Transmission 15.25% 5 0.763 5 0.763 5 0.763 5 0.763 5 0.763
Suspension &
3 0.414 3 0.414 5 0.690 5 0.690 3 0.414
Brakes 13.80%
Engine Details 7.75% 5 0.388 5 0.388 5 0.388 5 0.388 5 0.388
Wheel & Tyre 9.30% 5 0.465 5 0.465 5 0.465 5 0.465 5 0.465
Steering 8% 3 0.240 3 0.240 5 0.400 3 0.240 5 0.400
Safety 2.20% 5 0.110 5 0.110 5 0.110 5 0.110 5 0.110
Security 1.80% 5 0.090 5 0.090 5 0.090 5 0.090 5 0.090
Comfort 1.30% 5 0.065 5 0.065 5 0.065 5 0.065 5 0.065
Total 100.00% 2.940 2.940 4.373 4.250 4.724

Table 4. Quality and Price Gap of Each Car Brand

Daihatsu
Toyota Avanza Suzuki Ertiga Nissan Livina
Grand Xenia Mobilio S MT
1.3E MT GA MT E MT
Car Brand 1.3 X MT
Price (OTR) in
$13,371.85 $12,998.45 $14,048.19 $13,921.38 $14,675.21
USD
Price Gap in
$373.40 $0.00 $1,049.74 $922.93 $1,676.76
Rupiah
Price Gap in
2.87% 0.00% 8.08% 7.10% 12.90%
Percentage
Quality 2.940 2.940 4.373 4.250 4.724
Gap Quality 0 0 1.433 1.310 1.784
Gap Quality in
0 0 49% 45% 61%
Percentage

The highest score for MPV car quality was achieved by Nissan Livina E MT, amounting to 4,724, while the
quality of the Toyota Avanza 1.3E MT and Daihatsu Grand Xenia 1.3 X MT was 2,940. This is quite far in quality
between the Toyota Avanza 1.3E MT and the Daihatsu Grand Xenia 1.3 X MT when compared to the Nissan Livina
E MT. However, if you look at the price of the Toyota Avanza 1.3E MT and the Daihatsu Grand Xenia, it is the
cheapest among its peers, but the price gap is not much different as in Table 4 and Figure 4. So that the strategy of
Toyota and Daihatsu in the Toyota Avanza 1.3E MT and Daihatsu Grand Xenia 1.3 X MT is a Cost Leadership

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strategy. Cost leadership is a mechanism to build a competitive advantage by having the lowest operating costs in the
industry regardless of quality.

70%

60%

50%

40%

30%

20%

10%

0%
Toyota Avanza Daihatsu Grand Suzuki Ertiga GA Mobilio S MT Nissan Livina E
1.3E MT Xenia 1.3 X MT MT MT

Price Gap in Percentage Gap Quality in Percentage

Figure 4. Graph of Quality and Price Gap of Each Car Brand

5.2 Proposed Improvements

This research is limited to 5 car brands in Indonesia with gasoline and MPV types. Then for the use of expert choice
only use 1 expert. Future research may be able to hold a Focus Group Discussion with more than 3 experts to
determine the score when compiling pair-wise comparisons. In addition, it is necessary to hold a more in-depth
study using Soft Systems Methodology (SSM) to explain the objectives and then design the automotive industry
activity system to achieve these goals.

6. Conclusion
By using the Analytical Hierarchy Process (AHP) tool, Toyota and Daihatsu in Indonesia are concluded using a Cost
Leadership strategy. This conclusion is proven by the segmentation analysis which stated that Daihatsu segmented a
relatively cheaper car market with the smallest price range. It is indicating that Daihatsu using focuses on a very
specific market. It can conclude that the strategy used by Daihatsu is Cost Leadership Low-Cost. Meanwhile, Toyota
is on the top brand. So that the strategy used by Toyota is Cost Leadership Best Value. Based on the SWOT analysis,
it shows that the Automotive Industry during the Covid-19 pandemic was in quadrant I, which is the position of
companies that support aggressive strategies. So, in general, the automotive industry still has many opportunities to
reach the target market and the number of automotive sales in Indonesia.

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Biography / Biographies

Bagas Muhamad Kartiko is a Master's Degree student in the Industrial Engineering Department, Faculty of
Engineering Universitas Indonesia, and R&D Process Engineering Manager in PT. Nutrifood Indonesia. He earned
B.Eng from the Department of Chemical Engineering Universitas Indonesia, majoring in bioprocess technology. By

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Proceedings of the International Conference on Industrial Engineering and Operations Management
Rome, Italy, August 2-5, 2021

experiencing in designing and improving the process of some FMCG manufacturing facilities, his interest is focused
on plant design, eco-efficiency and sustainable strategy, and agile and lean continuous improvement.

Timotius Candra Kusuma is a Master's Degree student in the Industrial Engineering Department, Faculty of
Engineering Universitas Indonesia. He holds a Bachelor of Engineering in Chemical Engineering from Institut
Teknologi Sepuluh Nopember Surabaya. Mr. Timotius Candra currently works in Chandra Asri Petrochemical as Risk
Management Officer. He has published conference papers. His research and job area are strategy management, project
management, and vendor evaluation. He is an ambitious person who has strong desires to upgrade his skills not only
in engineering fields but also how to manage complex projects such as Butene-1 and MTBE Project Development.

Wirawan Pratama Suwardi is a Master's Degree student in the Industrial Engineering Department, Faculty of
Engineering Universitas Indonesia. He holds a Bachelor of Engineering from the Faculty of Engineering, Universitas
Pancasila - Jakarta, majoring in Mechanical Engineering in the Energy Conversion specialist program. Previously, he
completed his diplomacy program at Universitas Sebelas Maret, Surakarta with a major in Mechanical Engineering,
specializing in Production Mechanical Engineering. He currently works in PT Astra Daihatsu Motor as Quality
Engineering Senior Staff. His job area is strategy management control, problem-solving analysis, supplier
performance control, people development, budget planning, and control. With experience as an ISO 9001 auditor on
the quality management committee, further, development is focused on supplier development and improving the
efficiency process of the Slim, Simple and Compact manufacturing process.

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