1.

Lock-In Suppliers or Buyers

1.1. Grab
Grab is a location-based application that makes hiring an on-demand private
driver easily. It main function is like conventional taxi, but with an application
and more structured system to do the transactions. Established in 2012, Grab now
present in six countries across the region, mainly in South East Asia such as
Malaysia, Singapore, Indonesia, Thailand, Vietnam, and the Philippines.

Grab had been given some privileges to attract more customers to use its service
by giving free rides, discount price, and even voucher when a customer send a
referral link to new customers. These actions had been proven successful because
Grab drivers is estimated with more than 75,000 in South East Asia (exact number
is unknown). This huge number of Grab drivers is only possible because there are
a lot of demanding customers who using Grab services. However, these
promotional actions are only temporary. It will only benefit new customers only.
Besides, Grab has several competitive rivals such as Uber and Gojek (Indonesia).
Therefore, in 2017, Grab released a new feature in their services to attract new
customers and give rewards to old customers because of their loyalty.

Based on an article titled ‘Grab Beta Launches GrabRewards to Make Rides Even
More Rewarding’, we can assume that this new feature by Grab, commonly called
as a loyalty program is a strategy by the company to lock-in their customers. A
loyalty program is a rewards program offered by a company to customers who
frequently make purchases. A loyalty program may give a customer advanced
access to new products, special sales coupons or free merchandise. GrabRewards
works when a customer ride with Grab and when they finished its services, the
customer will automatically receive a Grab Point that can be collected until it can
be exchangeable with some benefits such as a free ride, RM 10 off in one ride, or
even a discount voucher in some local stores in Malaysia. GrabRewards and any
loyalty programs work when a customer offer their loyalty and consistent
patronage to a business, and in exchange the company will reward them with
better prices, discounts, special offers, and other things that make customers feel
like a valued customer. It will result on customers are incentivized to spend more
with the company, continuing the cycle.
 Advantages and Disadvantages of Customer Loyalty Program
Customer loyalty program has an important role in a company, retain them
means enhance financial performance and maintain the viability of the company.
This has been the main reason for a company to attract and retain customers. Two
things that major companies taken as consideration in maintaining customer
loyalty program is 1) because it will cost them more expensive in acquisition of
new customers in such tight competition, and 2) the fact that the level of
profitability of the company is directly proportional to the growth of relations
between the company and its customers permanently.

The advantage of the existence of customer loyalty program is reduce the

influence of competitors' attacks. Not only competition in terms of product, but
also the competition in terms of perception. In this case, Grab has several
powerful competitors such as Uber that has been widely known as the strongest
one in its field. Recently, Uber has been spread in South East Asia countries,
where Grab has its power in that region. If Grab has no special offer to attract its
customers, they will lose to Uber who offers a cheaper price than Grab.

Meanwhile, one of disadvantage of loyalty program is that this is not a new

concept anymore. Major businesses have jumped on the customer loyalty program
bandwagon, establishing hundreds of programs nationwide. Customers can be
overwhelmed so it is harder for businesses to create excitement for theirs.

Given the importance of customer loyalty, then the management of the company
should expect and understand well the concept of loyalty. However, understanding
alone is not enough, more importantly is the application and implementation of
actions or programs that can enhance customer loyalty. Improvement against
product quality is also very determining loyalty, hence the need for control of all
aspects that exist within the company.

1.2. IKEA
IKEA is a multinational company that designs and sells ready-to-assemble
furniture, kitchen appliances, and home accessories. It has been the world’s largest
furniture retailer since at least 2008. As of December 2016, IKEA owns and
operates 392 stores in 48 countries. In addition, the firm is known for its attention
to cost control, operational details, and continuous product development,
corporate attributes that allowed IKEA to lower its prices by an average of two to
three percent over the decade to 2010 during a period of global expansion.

As stated in an article titled ‘IKEA Supply Chain—How Does IKEA Manage Its
Inventory’, a key part of IKEA’s success is determined by its communications and
relationship management with materials suppliers and manufacturers. In this case,
IKEA is known as a very high volume retailer because of their worldwide stores
and demanding customers around the world, they can manage to buys products
from more than 1,800 suppliers in 50 countries. To keep the stock of the products
are available in each store, IKEA has no other option rather than purchasing
supplies in bulk or wholesale. In general, purchasing in bulk will affect on cost-
saving and supply management. Besides, purchase in bulk will also lock-in
suppliers because this situation is where everyone wins. IKEA can get a cheaper
price per unit, and on the other side, the suppliers can sell in huge number of
products.

The major advantage of purchasing in bulk is obviously cost-saving. When a

company buy in bulk, typically the suppliers will cost way less expensive per unit.
If IKEA purchase their products in bulk, they will get cheaper prices and it will
affect on market sale. IKEA then will be able to sell their items lower than any
other furniture retailer and automatically will attract customers. In addition, when
a company buy items in bulk, they will less expect on running out of items
because the stocks will be able to satisfy demand in the market.

However, the disadvantage of purchasing in bulk is storage. The company must

make sure that they have the necessary space for it. If you go to IKEA, you would
be surprised because their store is generally huge and large because they store
their items right on the store itself. In my opinion, IKEA can handle this
disadvantage very well because once they purchased a product, they will later
distribute the product around the world and store it in each store. In the store,
 itself, because of the large space, they can manage it properly without making
customers uncomfortable.

In conclusion, companies that spend billions of dollars purchasing parts and

services have the power to force their suppliers to conform to their methods of
operation, and even to shift some costs onto suppliers as part of the business
arrangement.

2. Reduce Cost
2.1. Malaysia Airlines
Malaysia Airlines is a major airline operating flights and the flag carrier of
Malaysia and a member of the one world airline alliance. After the MH370
(March 8, 2014) and MH17 (July 17, 2014) incidents, MAS must suffer greatly
loss up to 2 billion ringgit ($511 million) in a year. Per Business Insider, even
before the disasters, the national carrier was ailing from mismanagement that
saddled it with at least $1.7 billion in losses since 2011. This may be supported by
the mass existence of cheap flights that have been widely promoted across
Malaysia such as Air Asia Airlines, JetStar Airlines, and Lion Air. After the great
suffer, MAS is trying to reduce its costs because they had suffered loss so greatly
and the incidents affect on customer’s trust where everyone is questioning MAS’
safety. They did two major change in its internal management. First, MAS is
sending termination letters to all its roughly 20,000 employees which almost one-
third staff as restructuring the management. They also cut back its global route
network that expected to be unprofitable and more focusing on Asia region.

However, gain consumer’s trust is not a piece of cake. The two devastating
jetliner disasters are spread all over the media mass, attracting all eyes to focus on
the news and creating a fear to travel with Malaysia Airlines because of its safety.
In the situation where MAS must improve the quality of their service and safety,
yet they also need to market a special offer to attract customer after the incidents,
MAS has come up to an idea in which they hire German consultant to reduce costs
and manage all direct operating costs, as said in an article titled ‘Malaysia Airlines
hires German consultant to cut costs’.
 In the article, it stated that MAS is hiring a German specialist consultant to help
them cut costs in which they would use the software solution provided by Airpas
Aviation. The software is explained in its website as a unique cost management
and route profitability solution. The immediate effect is greater control of costs for
flight related services and improved visibility of revenues and direct operating
costs. Airpas has served more than 10 airlines across the globe such as Flydubai,
KLM, and Emirates. By looking at its customer, MAS and MAS Cargo has no
worry to use Airpas as their cut-costs solution.

Using a specialized software like Airpas Aviation that designed to help company
to maximize the efficiency and effectiveness in managing operation costs directly.
One of the advantage of using this kind of software is the availability of tracking.
With tracking provided, company could control any changes happened
automatically. In addition, by tracking, it can be seen when an error occurs and
can be corrected gradually. Long term, companies can use this software as a
benchmark to measure their internal strengths and weaknesses.

However, Airpas Aviation is created to be used by airlines either public or private

ones. A generally made software sometimes tend to make even simple projects
very complicated. For instance, when a company only needs three or four features
in the software but they (software) provides a complex one with ten features on it.
Nevertheless, it all comes back to how company can maximize the usage of the
software.

2.2. Traveloka
Back to 2000s, when a customer wants to buy a flight ticket from point A to
point B, it is a long way transaction. He needs to go to a flight ticket counter
nearby or at the airport and he will get an airline ticket which is a document,
issued by an airline or a travel agency, to confirm that an individual has purchased
a seat on a flight on an aircraft. The document itself is made from papers and
inconvenient to bring along when travelling and will damage the environment
because of mass cutting trees as a raw material to create papers. However, as of
June 1, 2008, IATA (International Air Transport Association) announced that their
member airlines will no longer issue any paper tickets.
 Along with the improvement of technology, paper ticket become the older
style of airline tickets because there is an existence of electronic ticket usually
referred to as an e-ticket. E-ticket exists together with online travel booking site
that enables customer to purchase flight ticket and reserve a hotel from their
computer at home. One of the company that provides this kind of service is
Traveloka.
Traveloka is using technology to change the game of buying ticket. From
conventional way that needs a long way and inconvenient to bring paper ticket
along the travel to web-based booking ticket that can be access by everyone on the
spot. This can be identified that Traveloka is using automation as their
competitive advantage. Even though there are several companies that provides the
same service as Traveloka. But Traveloka had chosen as number one online
booking site in Indonesia because they can maintain their performance very well
and beats other similar companies.
The main advantages of using automation from conventional or traditional
way is improving effectiveness and efficiency in both sides—customers and
sellers. Customer will save time and money; besides, seller will also save time
because automation will directly record each transaction and reducing costs for
services.

3. Enhance Products and Services

3.1. Iflix
Iflix is an on-demand video service that provides movie and TV shows
streaming by internet established in 2014 in Malaysia. Iflix is the biggest Internet
TV service in Asia that has been reached the Philippines, Thailand, Vietnam, Sri
Lanka, and Indonesia.
Iflix may not be the first-mover who create the on-demand video service. Say
Netflix, its biggest competitor because Netflix (a US company) was started this
business since 2007 and decided to reach globally in 2014, letting everyone to
access Netflix everywhere, including Asia where Iflix has a dominant market
power in the region. Along with newcomer such as Hooq and Genfix, making the
competition in Asia market is tighter.
However, in my opinion, Iflix can manage their performance well by offering
services different from other companies, but keeping the quality at its best. For
 example, Iflix monthly subscription price started at RM 10 per month, meanwhile
Netflix has more wider options with least price is RM 33 per month. This huge
price gap may give Iflix disadvantage because customer will expect that Iflix may
not have much TV shows collections as much as Netflix does. However, Iflix
have stated that they have more than 24,000 hours TV shows and movies that can
satisfy its customers.
Another enhancement that done by Iflix to increase its value to the customers
are 1) the availability of five devices in one account, making it cheaper if
customers wants a shared-account. Meanwhile one Netflix account can only up to
four devices. 2) The availability of child mode with passcode, making it safer for
children to use and is different with Netflix whom also has child mode but without
passcode access. Making it less safe. 3) Iflix video contents, however, is focusing
on mostly Asian preference such as Korean, Chinese, Malay, Filipino, and Tamil
content on it without reducing the Western TV shows and Hollywood movies. 4)
Iflix also put censorship as their concern. For example, they did remove the
“Hallelujah” scene from the Watchmen movie, for Malaysian viewers.
These enhancements are important for a company, in this case, Iflix to
compete with their competitors. With enhancing their services in which they add
to the service to increase its value, customers will be attracted by its features that
are different from others.

3.2. Perodua
Perodua is an automobile company based in Malaysia. Widely known as
Proton’s biggest competitor in local market. This statement was based on Perodua
overtook Proton as the country’s dominant car brand some years ago and last year
its domestic sales amounted to 195,000 units.

Perodua has made strong gains primarily because of its offers more attractive and
better quality products than Proton, it also benefits from tax advantages not
available to non-national brands. Therefore, it can price its cars at a huge discount
to similar products from Toyota and Honda.

Perodua has made some enhancement both in their products and their marketing
management. There is some enhancement that making them different from Proton,
 such as 1) Perodua focused mainly on entry level cars with lower engine
capacities. Their marketing was consistent, and their pricing structure was
attractive to the relevant target segment. Compare it to Proton who marketing their
four models car—Waja, Gen2, Persona, and the Preve—that basically competing
in pretty much the same segment. And when they try to produce a cheap car, it
didn’t work out as the Saga BLM came with a fuel consuming engine. 2) Besides,
Perodua strengthened their alliance with Daihatsu since 2001 by maintaining their
equity as the holding company and sales, but allowed Daihatsu to take a majority
stake in its manufacturing plant.

In conclusion, to have a competitive advantage, one of the way to reach it is by

enhancing the product and service to create its value to the consumer. Because by
enhancing the product, customer will likely be able to compare between two or
more similar products and choosing the best of them.

4. Create Alliances
4.1. Blue Bird and Gojek
In the past four years, online-based transportation system has been increasing
significantly. In Jakarta, Indonesia, there are three major companies that
competing to provides 1.3 million people who commuting into Jakarta and other
areas near it such as Grab, Uber, and local company, Gojek. Gojek has started its
service since 2012 and focus on using private-owned scooter rather than Grab and
Uber whom using private car as their medium of services. However, Gojek also
following its competitors to using car as part of their services. It also known as
Go-Car.

However, there are some conflicts between online taxi and conventional taxi. In
Indonesia, Blue Bird as the major taxi operator company has the largest voice to
urge the government to ban online taxi operations because it is making the
competition become tighter and claimed it as illegal entities. If we are looking at
the news, almost every month there will be a conflict between Blue Bird and
Gojek, it even become worse when the drivers attack each other, leaving some
physical victims and traffic congestion aftermath. The biggest conflict was
breaking in March last year, when Blue Bird taxi’s drivers were brutally attacks
 Uber, Grab, and Gojek drivers in Jakarta. Resulting in the decrease of consumer
trust in Blue Bird.

To minimize the conflict, in May 2016, Gojek released a statement that they have
teamed up with Blue Bird. “The two companies have decided to join forces and
form a partnership involving technology, payment and promotion to help
accelerate the digital revolution in Indonesia and empower passengers” (The
Jakarta Post, 2016). The new alliance between Gojek and Blue Bird left some
changes in Gojek application where they add Blue Bird as one of option of
transportation, resulting that Gojek now has three different option of
transportation that customers can choose freely based on their preference such as
Gojek (scooter), Go-Car, and Blue Bird (taxi).

In my opinion, by creating alliance, the company can lessen their competitors and
gain double profit. Creating alliance will also increasing consumer’s trust on Blue
Bird that have been decreased since the attacks broke. Meanwhile in Gojek sides,
customer’s loyalty will grow even greater because only Gojek that can come up
with this helpful solution when Uber and Grab had remained silent to this
problem. In addition, consumer will feel at ease because of one-stop service in one
application rather than separately.

4.2. Gojek and Line

Line as an instant messaging application originally from Japan has more than 30
million users in Indonesia. Making it as the second biggest country outside of its
native, Japan, and the most famous instant messaging application in Indonesia.
With a great number of its user, Line has affiliate with some companies to gain
more profit. Such as Qoo10, a web-based shopping mall that merge with Line to
promoting their products to Line users.

Gojek sees Line as an opportunity to create a bigger market and to attract new
customers. Therefore, Gojek decided to teams up with Line as a partner to market
their services with some special features on Line. For example, Line has released
a feature where a customer can book a ride with Gojek by chat, no need to open
Gojek application. This alliance between two different company, one is an online-
based transportation system and one is an instant messaging and social media
complete each other.
References

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