Competitive Dynamics and Rivalry

[Final Paper Assignment]

~~~~~~~~~~~~~~~~~~~~~~~~~~~`

PT. Metrodata e-Business

VS

PT. Computrade Technology International

(CTI)

Created by:

Annisa Nurrachman – 1040002023

Business Management – Strategic Management

Post Graduate Program

Binus Business School

I. Executive Summary

The IT stores of dealers or resellers where usually customers look for to find their

hardware or software products are depending much on the representative distributor.

The customers will not get the products without distributor which is strong and reliable to

supply the products demand. Therefore several IT distributors are competing each other

to attract the dealers or resellers to use them as the suppliers of the IT products they

sell to the customers.

In this case, the writer will discuss about two IT distributor industry players that

have their own way to optimizing their products sales. These two industry players are

Metrodata and Computrade Technology International (CTI).

According to diverse preferences from buyers in the market, Metrodata uses

products diversification to deliver its competitive advantage and to differentiate it out of

the rivals’ offerings by providing customers flexibility in various choices of products to

embrace customers’ loyalty. Metrodata has many various concentrations in distributing

and delivering various IT products to many kind of industries clients.

While in deliver a competitive advantage, CTI tries to focusing one of its

subsidiaries to distribute IBM products, in this case is specifically in the banking industry

that helps to deliver stable system and mostly used in leading banks and insurance

companies. This aim to satisfy customers better than other rivals offerings.

Metrodata complements the efforts of providing flexibility on various products

range, by opening several new branch offices or distribution centers in development

areas outside Java island to grab more market share. Moreover, Metrodata is opening

some new warehouses in several other big cities to accelerate the distribution process.
Where other rivals are only busy with finding good partners to distributing their partners’

products, Metrodata beside aggressively do the partnerships it has also found new way

to enhance its competitive ability by creating its own local brand product of ION PC and

Notebook that is proven sold nicely in the market.

II. Introduction

II.1 Background

However the factor of competition may threatened the capability and profitability

of distribution business, the margin in the distribution business in year-to-year is

declining due to increasing technology development at the same time entry barriers are

become reduced then there are even more players entering the industry. It affects the

distribution business competition become harder and market share of one player cannot

be easily more than certain limit. Therefore, METRODATA and CTI must maintain and

attempting to increase their own market share.

II.2 Objectives

The objective of this writing is to implement the theories obtained in the

Competitive Dynamics and Rivalry course into the real life application in the related

company and industry. Therefore, the student will get comprehensive understanding

about what has been learnt in the course.

II.3 Scope of Work

The limitation of this writing is only focus on the IT Distribution Business industry,

which the involved industry’s key players will be discussed in here are METRODATA,
PT. Computrade Technology Internasional (CTI). METRODATA is chosen as the main

target company that faces competition from CTI as its rival.

II.4 Methodology

The methodology used in this writing is through research on the data and

information collection which is available for the writer, such as: article, internet

searching, Annual Report, the written and published of speaker’s speech in the events

or exhibition conducted by the company.

III. Analysis on External Environment

In general, the economic condition in Indonesia has been improving in recent

years, and at the same time the global trading is even more occurred in many ways

within many industries. This makes any industry frequently establishing partnership with

the world-class companies from many countries, supported by the availability and easy

to access transportation (air, sea) as well as the regulation from the government that

enabling this trading can be realized within more rapidly time duration than ever before.

The huge amount of population in Indonesia which is as the time being their

lifestyle becomes more technology-conscious that integrate into their daily life. Certainly,

this indication is perceived as the potential target market for many IT companies

worldwide to expand their business in Indonesia to distribute their qualified products.

This one of the reasons many partnership established between world-class IT

companies and local IT companies.

 Moreover, the better economic condition nowadays is also shown by the banking

industry in Asia including Indonesia is currently relative more stable than other countries

outside Asia. This condition will continuously open up many new opportunities for IT

industry to take the role in enhancing banking performance by providing reliable IT

system especially from world-class brand name products, which is now indicated

several IT distributor companies emerge in the related industry.

IV. Industry Analysis

The margin in the distribution business in year-to-year is declining due to

increasing technology development at the same time there are even more players

entering the industry, it makes this business competition become harder and market

share of one player cannot be more than certain limit.

Nowadays is the era where people like using technology the most. The

development of Information Technology now is felt being convergent and integrating

with the telecommunication and consumer electronics technology. Then in delivering

content to customers can be done anytime, anywhere, through any device. The trend of

this technology convergence is enabling people who have high mobility to access the

content they need, such as:

- In entertainment area, people can watch movie via their hand-phones with video

streaming technology.
- In business area, professionals can do teleconference meeting by using their

hand-phones, access business data in ERP system by their hand-phone. For

example: a salesman who need data to create accurate and real-time YTD (year

to date) sales report to submit to his manager while during business traveling.
 Only by his hand-phone, the salesman is already able to get the expected data

accurately. A TV user at home when watching TV, it can be very helpful if there is

an important e-mail showing up through the incoming email alert in the TV screen

that is being watched. By the split screen then the email can be opened, without

have to turn off the TV channel being watched. When the product is being

advertised in a TV channel does attract us, and then we can also do surfing at

the same time in parallel to do online shopping. It will be such a great

experience. Therefore it is needed to make those three technologies

convergence.

The key players within this industry are:

1. METRODATA

P.T. Metrodata Electronics, Tbk (Metrodata) was established on February,

1983 which is belonging to METRODATA business group that run in Information

and Communication Technology (ICT) industry since 1975.

Vision: maximzing value for shareholders and building ideal environment to work

Philosophy:

 We believe that the free feeling of arguing and discussing idea, opinion

and recommendation is a key for the best decision.

 We talk and act based on data.

 We growing fastly because of integrity and always attempting of

excellent result in anything that we produce.

The activity run by Metrodata is currently divided into 4 main business units:

 IT Distribution Business (PT. Metrodata E Bisnis) handling the

distribution business in IT field

 IT Solution Business (PT. Mitra Integrasi Informatika) providing

integrated and complete solution starting from design, implementation,

support, managed services and training

 IT Consulting Business (PT. Soltius Indonesia) offering skills in the

field of transformational and consulting services solution business

 Information & Communication Technology Retail Business (PT.

My Icon Technology) providing ICT products in retailers and direct for

consumers as end-users.
 Struktur Organisasi Metrodata

This leading ICT business group in Indonesia has partnership with many Word-

Class IT companies which are as follow:

 Adobe, Alcatel-Lucent, Altiris, APC, ASUS, Autodesk,

 Bank Trade, BigFix, Blue Coat, BMC Software,

 CheckPoint, Cisco Systems, Citrix Systems,

 DELL, EMC, Emerson Network Power, EPSON, F5, Fujitsu,

 Hitachi Data Systems, Hewlett-Packard, ISS, IBM, Infor Global

Solutions, Ironport, JDA Software,

 K2, Lenovo, Microsoft, mySPSSolution, Netscout, NetApp, Nucleus

Software,

 Oracle-Sun, Pearson VUE, Prometric, RSA Security,

  SAP, Salesforce.Com, Strategic Partner Solution, Symantec, Software

AG-webMethods, S1 Postilion,

 Trend Micro, vmWare, dan WebMethods.

That is the reason METRODATA tries to entering into telecommunication

or consumer electronics business. METRODATA sees the changing trend in the

market. METRODATA should take its role.

2. Computrade Technology International (CTI)

CTI was established since 2003, which is a company that run in IT

infrastructure solution distributor that is now has hold 15 brands and has

distributed hundreds of products. Its permanent business partners up till now are

reaching 200 companies.

In this IT distribution business, CTI has achieved a significant increment in

revenue from USD 10 million (in 2003) become into USD 90 million (in 2010).

The successfulness obtained by CTI up this time has made CTI becoming the

potential rival of METRODATA in this IT products distributor industry.

V. Analysis on the target company’s internal environment

Beside of the offerings the world-class products that coming from world-class

vendors like Dell, Epson, HP, IBM, Microsoft, SAP Business One, and Computer

Associate, Metrodata also has other internal capability that is able to innovate and

inventing its own local brand of ION PC and Notebook with a low-cost, affordable price

and have nice design.

 To maximizing value creation and minimizing cost, Metrodata through its

distribution business of PT. Metrodata e-Business (MEB) has a value chain. This value

chain consists of these following:

1. Primary activities (five categories):

 Inbound Logistics → The activities of receiving, storing, and disseminating

incoming goods or material for use

1. 3PL (third party logistics): integrated logistics services that use transportation,

warehousing, packaging, and freight forwarding

2. Planning and inventory management
3. Replenishment issue
4. Order management
5. Export import
6. National Distribution

MEB distribute IT, telecommunication, and consumer electronic products for

commercial and consumer ranging with so many brands.

In Commercial, MEB provide:

o Server  ION, DELL

o UPS  EMERSON Network Power
o Dot Matrix  Epson
o Design Software  Autodesk
o Notebook  Lenovo
o PC  Lenovo, ION
o Software  Symantec
o Switch / Router  Huawei-3Com

In Consumer, MEB provide:

o Printer  EPSON, Hewlett-Packard
o Desktop PC  Fuijtsu
o Notebook  HP-Compaq, ASUS, Fujitsu, Lenovo
o Scanner  EPSON
o Inkjet  EPSON
o Netbook  ASUS
o Software  Microsoft
 Operation → the processes of transforming inputs into finished products and

services

Beside of distributing those world-class IT products, MEB also offers ION, its own

local brand of Metrodata. Set of ION products being offered are ION Personal

Computers (PC), notebook, servers and media center. These ION products has

obtained NSTL (National Software Testing Laboratories) certificate to prove its

compatibility with several application software. Other than that, ION has obtained

certificate of ISO 9001:2008 for quality standard and management system, ISO

14001:2004 for environment management system, and OHSAS 18001:2007 for

work safety and healthy.

 Outbound Logistics → the warehousing and distribution of finished goods

MEB distribute IT, telecommunication, and consumer electronic products for

commercial and consumer ranging with so many brands. In order to fulfill the

demand and make customers easy to reach it, especially they are who live

outside Jakarta, MEB open up 6 sales offices and logistics centre which are

located in Medan, Jakarta, Bandung, Daerah Istimewa Yogyakarta, Surabaya

and Makassar.

 Marketing & Sales → the identification of customer needs and the generation of

sales

In order to strengthen this distribution business marketing and sales, MEB do

these following actions:

  MEB focuses on its dealers and principals by listening their problems, to

help MEB to enhance many improvements to generating sales

 MEB has applied loyalty program to increase the number of dealers

through appreciation
 Establishing the communities of reseller to maintain its closeness

relationship with resellers

 MEB puts effort to meet the existing customers and new customers

demand, by providing the efficient and effective services which supported

by dealers and resellers

 Strengthen its distribution network in terms of more in the quality instead

of quantity.
 Providing training and education routinely for their dealers to enhance

their capabilities, skills and abilities. Thus, they have better human

resources.
 Services → the support of customers after the products and services are sold to

them

The service is conducted by MEB is available in the dealers and resellers. Other

added value offered through MEB is that the user of Huawei-3Com product will

get comprehensive services, ranging from purchasing product up to repairing

services and after sales support that make MEB as one stop service and is also

supported by the strong distribution network owned by METRODATA spread in

Indonesia.

2. Supporting activities (four categories):

 Firm's Infrastructure → organizational structure, control systems, company

culture, etc
 MEB puts trust and respect in the highest level as the company’s internal culture,

because get trust built from its all partners and clients can help the company to

grow and develop more sustainable.

As the company that provides flexibility of product choices, METRODATA is

maintaining an effective cooperation and give mutual-benefit with its business

partners through alliances. METRODATA will continuously build new alliances

with many other world-class IT producers and owners.

Corporate culture is directed to strengthen outstanding service culture,

cooperation and trust that has been developed all this time. Those culture values

are as follows:

o Outstanding service  strong commitment and motivation to give best

service for customers more than expected

o Cooperation  active participation in maintaining solid teamwork in order

to reach specified performance target

o Trust  strong commitment to keep maintain trust that successfully

achieved, in interaction with customers and among the other peers of

employees

 Human Resources Management → employee recruiting, hiring, training,

development and compensation

In order to build great, qualified and reliable leadership in human resources,

METRODATA do these following:

o Building a system named of 360 Degree: HRD continuously conducts

evaluation and assessment of the employees by involving the assessment

 from supervisor, peers and subordinates
o Fully integrating the employees of PT. Soltius Indonesia (in 2010): in order

to adjusting with work rhythm and corporate culture to be blended as a

team in achieving the same objective

o HRD runs motivation training program for all employees and do the talent

mapping to obtain skilled, performed human resources with excellent

mentality, so they have maximum contribution for company while

enhancing their own careers.

By giving same opportunity to all employees to improve the competence in line

with business need to give best service to customers. The methods to develop

employees' competence and development are through several programs:

o Certification Program → to achieve high quality standard and to meet

requirements for business development: IT Certification to support the

staff, Product Specialist certification

o Training of New Employees → to equip new employees for Sales, System

Analyst, Customer Engineer, and other staff before their postings:

 Introduction to company organization
 Products and strategies
 Product knowledge relevant to their tasks
 Basic Marketing
o Managerial Program → To build managerial competences for supervisor

level: Management Development Program (MDP)

o Train the Trainer Program → To build internal trainer competences through

Principal’s training center: based on Training ISO 9001:2008

Requirements
o Sustainable competencies improvement program → To improve the

capabilities of operational staff

 Information Technology → technologies to support value-creating activities

The company is using internet technology to support information flow integration

between internal business process as well as the customers and suppliers. The

company uses world-wide-web, intranet, and extranet as a standard technology

in cross-functional and cross-companies information system. METRODATA use

e-business that is known as the usage if internet, network and other IT to support

e-commerce, communication, cooperation between companies and other

processes that run through web, within the company, or among clients and

partners. This e-business covers e-commerce involving purchasing and selling,

marketing and product services.

Because technology is employed to some degree in every value creating activity,

changes in technology can impact competitive advantage by incrementally

changing the activities or by making possible new configurations.

METRODATA has the initiatives to optimizing the values indicated by the

improvement and reorganizing of internal system to increase the rate of providing

service to customers.

Actually, various processes in both primary and support activities are using

technologies, such as:

o Inbound Logistics Technologies: Material handling, Material storage,

Communications, Testing, Information systems

o Operations Technologies: Process, Materials, Machine tools, Material

handling, Packaging, Maintenance, Testing, Building design & operation,

Information systems
 o Outbound Logistics Technologies: Material handling, Packaging,

Communications, Information systems

o Marketing & Sales Technologies: Media, Audio/video, Communications,

Information systems

o Service Technologies: Testing, Communications, Information systems

Many of these technologies used in every activity are similarly used in support

activities. These technologies related to training, computer-aided design, and

software development. To the extent that these technologies affect cost drivers or

uniqueness, they can lead to a competitive advantage.

 Procurement → purchasing inputs such as materials, supplies, and equipment

In implementing distribution processes works to customers and to meet

internal requirements, Metrodata considers world-class suppliers for

partnerships. Lenovo, EPSON, DELL, IBM, Oracle, and SAP are Metrodata

partners in supplying products the products to dealers and resellers.

In equality towards customers, Metrodata sets competitive sale prices,

unless the costs of sending goods or installation services have to be included. All

procedures related to the selection of suppliers and dealing with dealers and

resellers in Metrodata have obtained the certification

VI. Competitive Strategic Movements Analysis

To pursuing a competitive advantage over rivals, there are competitive strategic

movement can be done by the companies.

METRODATA

Metrodata do strategies to maintain and attempting to increase its market share. The

efforts conducted by METRODATA are:

- By adding and enlarging its portfolio products through products diversification

while keep following the trend of convergence in computer technology,

telecommunication and consumer electronics.

- By developing its own local brand of IT hardware product named ION since 2003.

The ION products consist of PC Desktop, Notebook, Peripherals, and Server.

- By deciding to do joint venture through its distribution business unit of PT

Metrodata E Bisnis (MEB) with Synnex Technology International Corporation.

Synnex is a matured IT and telecommunication company from Taiwan. This

strategy is obtained with equal portion of fifty-fifty in the management side.

Beside to expanding the IT market in Indonesia, this strategy is done to getting

more chance grabbing into Asia market share as well.

Regarding to the competition with other player within this industry is considered

as a necessary in the business world, of there is no competition the company tends to

feel stronger than the real condition. Competition is also a way for the company to learn

a lot more. Thus, METRODATA is conducting business services mapping to its

competitors, through evaluation what METRODATA does but the competitor does not do

and what the competitor does but METRODATA does not do. So the company can learn

much from the competitor.

CTI
 In order to help the company to be more focus in developing its partner’s

products to cover better and wider market, CTI establish five new subsidiaries: Virtus,

Central Data Tech, Blue Power, NPP, and Xsis. This breaking down of several

subsidiaries has made CTI’s position as a holding-group. CTI treats all their subsidiaries

fairly, thus each of them has its own portion of duties and responsibilities to handle and

tackle distribution for each of vendor product that has partner with CTI, such as:

 Virtus specifically handling IT Network solution

 Central Data Tech specifically handling Oracle brand distribution
 Blue Power is focusing handling IBM brand distribution
 NPP handling IT security management solution
 Xsis handling IT outsourcing solution
In July 2011, CTI is appointed by IBM to be its local partner as the first and the

only one distributor of IBM System-i (formerly named as AS/400) in Indonesia. As we

have known that IBM AS/400 is well fitted in the financial or banking industries, which

many banks or financial companies require for and use this system to support their daily

customer-transaction operational. This system has been known as a robust, stable and

fast in operating huge number of transactions within mostly at the same time. Other

than that, this action done by IBM is surprisingly enough, because since IBM AS/400

was launched at the first time in 1988 up to June 2011, IBM had been handling this

masterpiece product distribution by itself, from marketing, implementation to after-sales

service.
Consequently, this means that CTI capability and capacity has been approved by

IBM to support IBM customers and partners in Indonesia in developing the best IT

infrastructure system that fit with their requirements. Therefore, by holding this pride CTI

can provide services through:

 Skillful professionals
 Ready-to-use and IBM-certified facility, place, and infrastructure
  Technology facility for various needs such as demo, to update the up-to-date

technology knowledge on IBM System-i product

 Being valid reference for IBM customers and business partners
 Routinely conducting training for IBM business partners
 Providing certificated technicians / IT engineers, and consulting services

In order to increase the demand of this product, CTI also does these actions:
 Education and promotion activity  demand generation, promotion program,

advertising, and marketing workshop. This action is to support IBM customers

and partners in Indonesia in developing the best IT infrastructure system that fit

with their requirements, and help their business growing.

All this time, IBM System-i system users have got limitation in obtaining

reference sources for implementing this IBM System-i system. Therefore, this IBM-CTI

partnership in the IBM System-i product enable them to get more reference sources, so

they get more supports and services quality. Other than that, these accessible additional

sources of IBM System-i from CTI can accelerate this reliable system adoption in many

new companies within banking industry in Indonesia.

The strategies of the key industry players (Attacks and Defense Strategies Made

by each player):

1. METRODATA vs CTI
According to Metrodata sees in the market is filled with diverse

preferences from buyers along with the experiences and so many partnerships it

has gained by now, Metrodata uses products diversification to deliver its

competitive advantage and to differentiate it out of the rivals offerings (that has

limited variations in product offerings) by providing customers flexibility in various

choices of products. This is perceiveid as broad differentiation, as customers

 perceive as valuable and worth to make Metrodata as one stop shopping, and

they are encouraged to be loyal customers for Metrodata.

CTI uses focused-differentiation to deliver a competitive advantage

through focusing one of its subsidiaries to distribute IBM products specifically in

the banking industry as its target market niche. The product that is being

delivered is IBM System-i (known as AS/400) that is a well-known stable system

and mostly used in banks such as Mandiri, BCA, BRI, Mega Bank, Niaga Bank,

and BNI. Other than that, other leading insurance companies like Allainz,

Prudential, and ING also relying on this IBM AS/400. CTI as the only one

distributor of this product has proved it provide unique products/services appeal

to satisfy customers better than other rivals offerings. This kind of approach also

indicates that CTI uses a guerillas attack strategy against Metrodata, because of

while Metrodata has many various concentrations in distributing and delivering

various IT products to many kind of industries clients (manufacturing,

telecommunication, consumer electronics, financial, UKM / small medium

enterprise) and variety of products include IBM Server and storage, then CTI see

this gap to take the opportunity to be more focus on certain industry (banking

clients) and certain IBM product (IBM hardware-software infrastructure system:

AS/400 or System-i) that is commonly needed in the banking core business

transactions.
2. METRODATA vs CTI
Next, in order to defense its position, Metrodata complements the efforts

of providing flexibility on various products range, by opening several new branch

offices or distribution centers in development areas outside Java island to grab

more market share there, such as in Pontianak, Balikpapan, Banjarmasin,

 Pekanbaru, Palembang, and Lampung. This defense strategy is called a global

service, where Metrodata is continuously enlarging its product portfolio because

mostly the customers prefer to buy from a single global supplier. Other defense

strategy made by Metrodata is using holding the ground strategy by enhancing

its distribution business. Thus to emphasize this, Metrodata tries to accelerate

the delivery process from customer product orders up to product delivery to

customers. Therefore, Metrodata is on progress to opening some new

warehouses in several other big cities in Indonesia to enable serving this easily.
While, CTI is still has limitation in expanding its market share into outside

Java, because to serve its customers its processing is still managed through

offices which are located only in Jakarta.

3. METRODATA vs CTI
The other unique competitive advantage offered by Metrodata to defense

its position is that, it has its own local brand of ION products of PC and Notebook

with low-cost, affordable price and has nice design, where other rivals do not

offer this. These products get great response in the market. This kind of defense

strategy is called as barriers to entry specifically perceived as mobile barriers that

has active defense. This strategy is creating obstacles that are difficult to

overcome thus discourage the competitor’s entry into this kind of Metrodata

distribution market segment.

Even though CTI has intention to create its own product after this long-

term experiencing distribute products owned by other parties, but until now CTI is

still not yet dare to make it into realization and still be not sure when it is going to

be made, regarding to the risks may involved in the production.

VII. Review of the target company’s past/current competitive strategies

 During more than 31 years, this position of distribution business is in the heart

business of METRODATA and it gives biggest contribution to the company’s revenue.

This distribution business however still grows in relatively faster than other businesses

within the company. METRODATA is trusted to distribute the telecommunication product

made in China whose brand name is Huawei, and distributes additional products of

Fujitsu, Lenovo and consumer electronics products. Moreover, there are many dealers,

resellers and end-users who have experienced and having business or partner with the

competitive products provided by METRODATA. In short, the position of METRODATA

is currently known as the biggest IT (IT, Telco and Consumer Electronics) products

distributor.
METRODATA’s own local brand IT product named ION has been showing to get

great response in the market, which is proven according to “Investor Daily” that the

sales of PC ION has significant increment year-by-year.

VIII. Conclusion & Recommendation: Proposed Improvements &

Implementation issues

Two main factors that should be paid attention by METRODATA are the need of

both change and adaptability. With a vision to be a leader in distributor for IT, Telco and

Consumer Electronics products, METRODATA should be able to adapting very fast to

face those changes in organization, customers demand on new quality and solutions,

and other inevitable changes. Is METRODATA capable to be sustainable and grow to

answer this tighter business competition? Time will answer it.

IX. References
1. www.metrodata.co.id
2. www.computradetech.com
3. www.bluepower-tech.com