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CHAPTER 2
LITERATURE REVIEW
ON THEORITICAL FRAMEWORK
Regarding the literatur e review for this thesis research project about Cussons baby
products, I would like to discuss on our significant findings through Interview, survey
questionnaire on informal interview with the users of baby products by mothers and
comprehensive observational behaviors through Cussons and its distribution channels
such as Hypermart, Carrefour, Lawson, Indomaret and Alfamart, online research
study and from Binus librar y research study.
Furthermore, in order to understand more about external and internal environment
theories related to the Cussons baby products study, we will explain more in the
following pages using Micheal porter five forces analysis, Pest analysis and Value
chain analysis.
2.1 External Analysis : Macro, Industry competitive Environment
On circumstances to the baby product consumer products, we should be looking
towards the macro factor or external analysis towards almost similar products in their
trend of consumption in the year 2012 and 2013.
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 As for the Chinese people, the year 2012 is the golden dragon year and year 2013 is
the water snake year; therefore there are a lot of newborn babies in the Asia countries
society. Of course, with the more babies in the world, actually they will stimulate the
purchase of baby products especially the milk from Dancow nestle S.A, S26 Wyeth
and Enfa Johnson & Johnson products.
On the similar advancement, the other baby consumer products such as Cussons baby
wipe tissues, Zwistal baby oil, Pigeon baby products, Johnson Baby Powder and
Mamy poko pamper & baby tissues wipes will be increasing significantly in their
demand and supply chain.
Wyeth
Johnson
100
150
200
250
Nestle
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0
Year 2010 (Mil) Year 2011 (Mil) Year 2012 (Mil) Year 2013 (Mil)
Figure 2.1 Sales of Baby Milk Products as External Macro Analysis
Source: Wyeth Google search
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 In the year 2010-2011, the increment of sales for baby milk products for all brands
were only the range of 15 up to 20% yearly. However, due to the year of dragon in
2012 and the year of snake in 2013, the baby milk products are significantly
increasing up to 30% on the forecasting estimated due to a lot of baby being born in
Asia region as a result they cause increasing purchase and consumption of baby milk
products during the year 2012 and 2013.
In the external factor of analysis, we would like to use the theory of five porte
analysis to identify the possible new entrants, buyer power, supplier power, new
substitutes products and rivalry being displayed in the below model.
Low
High
Low
High
High
Figure 2.2 Five Porter analysis of Cussons Indonesia
Source: Corporate Business Strategy, Gamble & Thompson, 2013
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1. Bargaining power of buyers related to Purchase Intention, Product and
Promotion Marketing is high because they are easier switching to other
products such as Pigeon, Mamypoko and Sweety of baby wet tissues
products. There are a lot of choices of baby products so that they can easy
change their brands.
2. The threat of new entr y barrier related to Price Marketing is high due to high
entry bar rier to need a lot of capital to build the baby products company and
pay for the overseas company license with limitation of foreign entry laws.
The new entry of the market will be Sweety from PT Gajah Tunggal Tbk.
3. The Bargaining powers of the suppliers related to Price and Place Marketing
are Low due to the laws protection to the limitation of the competitiveness.
Several providers such as Cussons and Pigeon who have the standard level
control over the supplier power due to the huge demand and supply of baby
products production process. The possible suppliers of baby products
companies will be the chemical company, the plastic packaging company, the
paper and Pulp Company.
4. The threat of substitute’s products related to Product and Promotion
Marketing will be low because there are only several substitutes products for
the baby wet tissues such as normal fragrance tissues, alcohol water cleaner,
and antiseptic powder.
5. The existing competitors and rivalry related to Price and Product Marketing
will be high. It is because the license permits easily for the Pigeon and Mamy
poko to import the production of baby wet tissues from overseas
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 manufacturing company. Moreover, the distortion regulation of the
government to allow the operation of new brand Sweety baby wet tissues.
Moreover, we are using the theory of PEST analysis to analysis the external
macro environment that are affecting the business processes of Cussons Company
as follows:
Friendly Indoneisan
political situation and
laws to operate
production. Therefore ,
Cussons Baby Wet
Tissues are produced
in several variances of
colors
Cheaper price to
promote through
facebook and twitter
social media, it will lower
the cost of the goods
Economical will be TV,
website and counter
promotion and several
creative marketing
strategies that enable
the customer to have
feeling to buy it well
Social situation will be
Indonesia huge market
of baby birth place
leading to better
market share and
distribution places
Figure 2.3 PEST Analysis of Cussons Indonesia
Source: Corporate Business Strategy, Gamble & Thompson,2013
1. Political situation of the government in Indonesia will be affecting the supply
chain product of Cussons Company. As the Indonesian political situation, the
baby products are not limited due to no restriction on KB program. With the
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friendly political environment in Indonesia, It will actually support the
licensing of PZ Cussons product marketing and production well as a result
there are many varieties of Cussons product being produced in Indonesian
market.
2. Economic situation will enable better promotion marketing of Cussons
product. Promotion of Cussons product are widely being done by using TV
advertisement, website and counter in hypermarket. The stable economic
conditions of the Indonesian citizens are allowing the better consumption of
Cussons product well after being promoted using creative marketing strategies
of Buy 1 get 1 free, cheaper price smaller content and reasonable price bigger
content.
3. Social situation will see the prosperous market place of marketing in
Indonesia because Indonesia market share are very big especially for baby wet
tissues product and other baby products due to the high population place in
Indonesia and a lot of mother giving birth also. And, there ar e many large
distribution places such as Carrefour and Hypermart and there are many small
distribution places such as Lawson, Indomaret and Alfamart
4. Technological situation will support the better pricing of marketing towards
Cussons products. Cussons products should be widely offering through social
media (Facebook and twitter),forum, website and TV advertisement . In order
to lower its cost of goods production, we can save cost by having the
promotion through face book social media technology.
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 2.2 Internal Analysis of Cussons company
In the internal analysis of Cussons Company, we would like to discuss the company
resources, capabilities and core competencies. There are two types of company
resources described as follows:
Tangible resources
Tangible resources will be having link to Product and Place of distribution in
Marketing mix in showing the physical, financial, technological and
organizational resources for example the location in cyber building of PT PZ
Cussons Indonesia HQ, company credit rating A, patents of Baby Cussons
Products and the network with Carrefour, Hypermart, Lawson, Indomaret and
Alfamart distribution channel
Intangible resources
Intangible resources will be having link to Price and Promotion of cussons
products in Marketing mix towards Human assets, intellectual capital, brand,
image and reputational assets, relationships and company culture.
For instance, the intangible resources will be brand image of Cussons, the
joint venture with the famous palm oil company products will be able to
access the technology of several fragrance resear ch technologies of colorful
baby wet tissues products in 2010.
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 After we are doing the proper and detail analysis from interview and
questionnaire the Cussons company, we are actually able to draft out the
capabilities processes of the Cussons company on the below diagram.
Distribution
License Production
&
Feedback
Figure 2.4 Diagram of PT PZ Cussons Indonesia Capabilities Processes
Source: Corporate Business Strategy, Gamble & Thompson,2013
License
PT PZ Cussons Indonesia has consideration of several factors due to license
with PZ Cussons overseas in England. Several reasons for its licensing ar e
high tariff import, less foreign control from the government regulations and
the protection of licensing contract on the quality and price control of the
products being made.
Production
Production of PT PZ Cussons Indonesia capabilities to supply cussons
Products of Marketing mix is located in the Tangerang area whereby the area
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 near airport in which it will support for the export of the products also. The
production capacity will be distributed well managed to Jabodetabek
Carrefour, Hypermart, Lawson, Indomaret and Alfamart.
Distribution & Feedback
PT PZ Cussons Indonesia will use the Place of Marketing mix channel of
Carrefour, Hypermart as its main distribution channel. There are having 28
sub distributor/wholesalers around in Indonesia however they are still not
maximize the distribution using the more-focused distribution channel via
Indomaret ,Alf amart and Lawson. The customer feedback are available
through call center, email from website and feedback application form from
the Cussons website.
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 2.2.1 Cussons Micheal Porter Value Chain Analysis
Figure 2.5 Micheal Porter Value chain Analysis
Source: Competitive Dynamics and Rivalry, Lee.H & Smith, K.G,2006
From Micheal Porter Value chain analysis, we can divide the Cussons
Indonesia into 2 processes such as support process and core process. Support process
will be the business processes being supported directly or indirectly so that the
Cussons company can perform well after having the following:
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 Firm Infrastructure
Cussons Firm Infrastructure under licensing of PZ Cussons Ltd in UK will
produce variances of cussons baby products with better price and product quality
in marketing mix line such as Cussons Baby Tissues, Baby Shampoo, Baby Oil
and baby powder as well as adult shampoo in imperial brand and bar soap of
Asoka and Seventeen cosmetics product.
Human resource Management
Cussons Human resource is well managed by using rewards and punishment and
balance scorecards of its employees’ performance. Human resource will be link to
place of better distribution and production of cussons product efficiency and
effectiveness located at Tangerang near the harbor and airport to be faster in
supply the demand of market share for the cussons baby products.
Technology Development
Cussons Indonesia has using website services to liaise with its prosperous
customers and follow the trends of social media Facebook and Twitter to get in
touch with customers’ needs and values. Technology department will help to
boost the Purchase intention and save cost in Promotion of Marketing mix.
Procurement
Cussons procurement will actually have place and standard price of the supplier
to support the raw materials of cussons baby products from the normal tissues
paper and pulp and chemical company to support and supply their fragrances of
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 the baby wet tissues extraction of excellent smells and hygiene. The Cussons
Company also has procurement suppliers to supply ingr edients for making its
Cussosn Baby Wet Tissues chemical companies.
We have the core process that has been identified as the main stream that support
the work flow of the Cussons companies consisting of:
Inbound Logistics ( Place and Product of Marketing Mix)
Chemical Suppliers
Tissue Suppliers
Product Plant Capacity
Plant scheduling
Operations ( Product and Price of Marketing Mix)
Product Quality control
Service of Date and Voice quality control
Order fulfillment of Item purchase
Customer store and stand visit as well as website
Outbound logistics ( Place of Marketing Mix )
Ordering process
Ordering fulfillment
Delivery service
Inventor y Management
Transaction Management
Marketing & Sales ( Promotion and Price of Marketing Mix)
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 Account Management
Creative Marketing Strategies bundling and discount given
Invoicing
Customer needs and values offering such as discount and buy 1 get one free,
discount 20-30% of Cussons baby products, bundle with other Cussons baby
products and bundle with kid education products as well as participate in CSR
program for Cussons Company social welfare support.
Service ( Promotion and Purchase Intention of Marketing Mix)
Customer call center
Customer satisfaction level survey
Problem resolution
2.3 Cussons 4 Ps Marketing mix strategy
Cussons Company will have its generic strategy for competitive advantages such as
Broad differentiation marketing competitive strategies. The Cussons baby products
have its unique products that are appealing the buyers and worth paying for in big
distribution channel such as Hypermart and Carrefour.
Therefore, the Cussons baby products have premium price, better volume of sales of
various types features or attributes of baby products and always gain buyer loyalty of
its Cussons brand. Cussons company should focus on wider marketing strategy by
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selling more Cussons baby products in smaller distribution channels such as
Indomaret and Alfamart so that the Cussons Company can optimize their market
share positions and better profitability being reached in year 2013 and so on.
There are several ways Cussons company practices in better differentiation such as:
1. Control supplier and purchasing activities well for its raw materials quality in
several supplier of Cussons Baby Wet tissues chemical companies such as PT
Indah Kiat Smart Tbk and Palm oil Fragrance Research Chemical Companies.
2. Enhance Product R &D activities to add more attributes towards its baby
products with more fragrances such as tea tree oil, almond oil, cucumber and
chamomile .
3. Enhance Production R & D and technology using highly automation control
system to be effective and efficient cost saving to produce Cussons baby wet
tissues, powder and oil.
4. Ensure the better manufacturing activities by having less defects, extending
product life time and enhancing product appear ance using six sigma theories
of supply chain management production strategy
5. Save the distribution and shipping activities by lowering its costs, fewer
warehouse and integrated inventory system management and going to serve
better for products availability in large department stores such as Hypermart
and Carrefour and small stores such as Indomaret and Alfamart.
6. Enhance better marketing, sales and customer service activities such as better
online shopping through websites to add value to customer satisfaction level,
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High technology web services to serve the customer and future research study
enabling forum, mobile services in BB, Iphone and Android.
We would like to also discuss about STP (Segmentation, Targeting and Positioning)
as well as 4Ps Marketing mix theories applied to PT PZ Cussons Indonesia in the
below discussion.
Segmentation
Segmentation: Identifying al segments for the product/service. Many of the resources
listed in module 3 will be helpful to you when you develop segments. To be useful,
segments should be: Measurable, Accessible (can you reach them), Profitable and
Distinct from one another
The objective of segmentation is to find attractive markets. Strategies include
breaking market into components, regrouping into market segments and selecting
which segment to target
Targeting.
Targeting is the real goal/objective in market that marketer want to reach.
As a simple questions are :
What percent of the population uses the product at all?
What percent uses your brand?
How does that compare to competing brands?
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What is the demographic profile of the product category?
Which media reach the users of this category?
Positioning.
Positioning is an essential component -- and skill - in good marketing. Perceptual
maps are used to determine the position of a product, firm, person, service or idea.
Positioning maps, or perceptual maps can be simple, yet very effective marketing
tools. One definition of Positioning Theory is: the science of perceptual strategy. It is
based on a theory that strategy can only be planned in the mind of the consumer, not
the marketplace*.
It is important to understand the levels of competition because positioning applies at
all levels of competition. For example:
Product Level (e.g., Pepsi vs. Coke)
Category Level (e.g., Cola vs. Root beer)
Corporate Level (e.g., Pepsi Inc. vs. Coca Cola Company)
Industry Level (e.g., Beverage Industry vs. Snack food Industry)
The marketer Kotler Keller in Marketing Management proposed a 4 Ps classification
in 2012, which has since been used by marketers throughout the world.
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 Product - A product is seen as an item that satisfies what a consumer needs or
wants. It is a tangible good or an intangible service. Intangible products are
service based like the tourism industry, the hotel industry and the financial
industry. Tangible products are those that have an independent physical
existence. Typical examples of mass-produced, tangible objects are the motor
car and the disposable razor. A less obvious but ubiquitous mass produced
service is a computer operating system
Ever y product is subject to a life-cycle including a growth phase followed by
a maturity phase and finally an eventual period of decline as sales falls.
Marketers must do careful research on how long the life cycle of the product
they are marketing is likely to be and focus their attention on different
challenges that arise as the product moves through each stage.
The marketer must also consider the product mix. Marketers can expand the
current product mix by increasing a certain product line's depth or by
increasing the number of product lines. Marketers should consider how to
position the product, how to exploit the brand, how to exploit the company's
resources and how to configure the product mix so that each product
complements the other. The marketer must also consider product development
strategies.
Price – The price is the amount a customer pays for the product. The price is
very important as it determines the company's profit and hence, survival.
Adjusting the price has a profound impact on the marketing strategy, and
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 depending on the price elasticity of the product, often it will affect the demand
and sales as well. The marketer should set a price that complements the other
elements of the marketing mix.
When setting a price, the marketer must be aware of the customer perceived
value for the product. Three basic pricing strategies are: market skimming
pricing, market penetration pricing and neutral pricing. The 'reference value'
(where the consumer refers to the prices of competing products) and the
'differential value' (the consumer's view of this product's attributes versus the
attributes of other products) must be taken into account.
Promotion - represents all of the methods of communication that a marketer
may use to provide information to different parties about the product.
Promotion comprises elements such as: advertising, public relations, personal
selling and sales promotion.
Advertising covers any communication that is paid for, f rom cinema
commercials, radio and Internet advertisements through print media and
billboards. Public relations is where the communication is not directly paid for
and includes press releases, sponsorship deals, exhibitions, conferences,
seminars or trade fairs and events. Word-of-mouth is any apparently informal
communication about the product by ordinary individuals, satisfied customers
or people specifically engaged to create word of mouth momentum. Sales
staff often plays an important role in word of mouth and public relations.
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 Place - refers to providing the product at a place which is convenient for
consumers to access. Place is synonymous with distribution. Various
strategies such as intensive distribution, selective distribution, exclusive
distribution and franchising can be used by the marketer to complement the
other aspects of the marketing mix.
The seven Ps is an additional marketing model that refers to the already mentioned
four Ps, plus 'Physical evidence', 'People', and 'Process'. 'Physical evidence' refers to
elements within the store -- the store front, the uniforms employees wear, signboards,
etc. 'People' refers to the employees of the organization with whom customers come
into contact. 'Process' refers to the processes and systems within the organization that
affects its marketing process. These latter three factors are not cited nearly as often as
the first four outlined in depth above.
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 2.4 Cussons Business Model Theory with its value propo sitions
Figure 2.6 Component of Cussons Business Model
Source: Essential of Strategic Management, Gamble & Thompson,2013
There ar e 5 major components of business model of Cussons Company as follows in
order to obtain its profitability.
1. Industry factors ( Key Competitors of Product and Price)
2. Resources (Place of Supply and Demand Distribution)
3. Activities (4Ps Marketing Strategies)
4. Cost ( Efficient Price of Cussons Baby Wet Tissues)
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 5. Positions( Market Share)
Figure 2.7 Elements of Successful Cussons Business Model
Source: Essential of Strategic Management, Gamble & Thompson,2013
In the Cussons company, The key successful elements of its business model will
enable to generate profit will be additional customer value proposition to support
Promotion and Purchase Intention such as variations of colorful baby wet tissues
products, bundling with kid education cd and promotion through augmented reality in
the future time. Besides that, the key processes should be efficiently and effectively
manufacturing and distribution and marketing processes to involving 4Ps marketing
mix in order to maximize profits. Ultimately, Cussons Company should maintain its
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 key resour ces with its supplier by having JIT (Just In Time) process after forecasting
of demand supply for Purchase Intention in Sales of baby products being discussed.
Figure 2.8 Shifts in the Basis of Competitive Innovation
Source: Essential of Strategic Management, Gamble & Thompson,2013
After the depth analysis of Cussons company, we are able to draft out the proposed
business model that will benefit to have
more profitable business processes for the
Cussons company as described in the below business model.
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In this Cussons Baby Wet Tissues research project, we would like to demonstrate the
processes of Product innovation of Cussons premium hand glove baby wet tissues
production, processes price innovation in JIT production, convenience of larger place
of distribution at Carrefour and Hypermart and Marketing mix and Business model
innovation in creative promotion marketing strategies such as augmented reality
promotion and pricing strategies lower cost when promotion on facebook and twitter
social media so that the pricing of the baby products will be better and efficient in
getting better profits and market share among its competitors.
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