INSTITUT TEKNOLOGI BANDUNG

SCHOOL OF BUSINESS AND MANAGEMENT

INDONESIA BUSINESS CASE CENTER (IBCC)

xxx-xx-xx-xx

Wealth Creation for All: Inclusive Business Ecosystem for Managing Actors
in Fisheries Business. The Case of KUD Minasari, Pangandaran, West Java.

Declining Fish Production in KUD Minasari, Pangandaran

Indonesia has 95.181 km of coastal area with about 5.4 million km 2 of sea. According
to FAO data in 2014, Indonesia is the third largest fish producer in the world, as
measured by the amount of fish captured and sold at auction. This means the
auction place plays a vital role to support the fishing industry in Indonesia.
According to Pangandaran data, in 2012 the number of captured fish reached 2,220
tons, amounting to 43.03 billion rupiahs. The data described the fishery potentials of
Pangandaran that could leverage the income of the local people. Pangandaran
contributes 18.67% of fish production in Java Island according to KKP data in 2015
and contributes 3.376% to the total Indonesian fishery production.

KUD Minasari owns one of the biggest fish auctions in Pangandaran. The total fish
production and sales of KUD Minasari continued to increase between 2012 and 2015.
However, since 2016, the fish production has experienced a major decline (Exhibit 1),
which has impacted the welfare of its members whose main income comes from the
cooperative's production. Until now, KUD Minasari has been unable to increase the
welfare of its fishermen members. There has was a decrease in income each month in
2016. The average daily income of fishermen is Rp. 31,448.22. This greatly affects the
life and welfare of its members. Based on the main task of the cooperative, which is
promoting the welfare of its members, KUD Minasari still cannot fulfill its main task
of avoiding poverty and low income of the fishermen.

Company Background

Minasari Cooperative is increasingly large and widely known through its

achievements. It started with Marine Fisheries Cooperative (MPA), which was
founded by five people—Mr. Sasmita, Mr. Ahman, Mr. Jaedi, and Mr. Atang—on
January 2, 1962. The purpose of this cooperative was to provide solutions for
fishermen who have difficulty in marketing their catch. All this time they are
trapped by the debt bondage system (ijon system), where their catch is weighed and
the buyer determines the price without any price competition (auction). This

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cooperative also provides fishing gear that the fishermen need, such as nets and
fishing lines.

KUD Minasari is the only KUD Mina located in Pangandaran district. His working
area includes six whole villages located in Pangandaran District: Desa Pangandaran,
Pananjung Village, Babakan Village, Wonoharjo Village, Cikembulan Village, and
Sukaresik Village.

In carrying out its activities, KUD Minasari has a foundation law, namely (1) Law
No. 25 tahun 1992 on Cooperatives, (2) INPRES No.4 of 1984 on Pembinaan and
KUD Development, (3) PERDA No. 10 of 1998 concerning Fish Auction, (4) Regional
Regulation (PERDA) no. 5 of 2005 about TPI, (5) Articles of Association and KUD
Household Budget, and (6) Special Rules of KUD Minasari.

KUD Minasari provides membership protection guarantee in the form of managing

social funds for marine accidents, death funds, famine funds, and Asuransi Bumi
Putera. The social unit is a business unit of KUD intended to help the welfare of its
members.

The source of such funds is social funds, famine funds, insurance funds and saving
funds whose magnitudes are 0.10%, 0.20%, 0.15%, and 0.35% of retribution,
respectively. The source of capital of KUD Minasari Pangandaran is grouped into
own capital, capital temporary, and external capital. Capital itself consists of
principal savings, mandatory savings, reserves and other deposits. KUD Minasari
members pay the capital. The KUD Minasari economic business unit consists of a
Savings and Loans Unit (USP), fish auction place (TPI) business unit, a merchandise
business unit (fishing inventory means supplies), and service business unit
(electricity, wartel, tractor rental, and transport services).

The cooperative acts as an appropriate training provider to help improve the welfare
of the fishermen in Pangandaran. These trainings are the result of collaboration from
both government and private agencies. Cooperatives also serve as a bridge between
fishermen and the government. The cooperative builds fish auction sites aimed at
increasing the selling price rather than the production of fishermen. Usually
fishermen sell their catch to the middleman, which causes their selling price to be
very low. They can suffer a loss and continue to be indebted to the middleman.

Therefore, the existence of the fish auction place will cause basket to compete price
and raise the price of those fish that will have positive effect on fisherman welfare
and become a solution to release bond from fisherman to middleman. With the place
of the fish auction, the record of Pangandaran fish production becomes better
because the result of the auction is held every day. This helps the government to
assess the business situation of fishery commodities. Otherwise, if the fisherman
sells his fish to the middleman, it will be difficult for the government to track the
sale because the transaction is done in a place that cannot be reached by the
government.

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Cooperatives also serve as a container to accommodate the aspirations of its
members who are fishermen. All aspirations will be delivered by the chairman of the
cooperative in a looplarge cooperative in the region.

The mina cooperative in Pangandaran has contributed to the marketing of fish by

fishery production. There are two fishery production lines that have been applied.
The first is the sale of fish and processed products in his KUD shop. Then the second
is to create a restaurant that utilizes fish caught by fishermen.

Then there are two lines of business that helped the welfare of fishermen, the
cooperative build lodging for the public. The two cooperatives build a heavy
equipment rental business for local development

The most important role of the cooperative to the fishermen is the cooperative,
which serves as a provider of health insurance to fishermen. This is an important
government policy to fishermen who will maintain the continuity of the fishing
profession. Some guarantees offered are social funds for broken net, sick person, and
broken ship.

The role of the cooperative is to provide training, provide information from the
government and other parties, manage the fish auction place, bridge the service and
fisherman, guarantor, aspirant, fisherman financial manager, fish price balancer, fish
production recorder, and processed business idea maker.

Fisheries Business in Pangandaran

As a maritime country, Indonesia has a huge potential for marine products.

Occupying second place in seafood production, Indonesia must be able to compete
in the international market. In West Java, particularly in the Pangandaran area, there
are 1,400 households who still depend on fishing and fisheries business. Indonesia
has 95.181 km of coastal area with about 5.4 million km 2 of sea. According to FAO
data in 2014, Indonesia is the third largest fish producer in the world, as measured
by the amount of fish captured and sold at auction. This means the auction place
plays a vital role to support the fishing industry in Indonesia. According to the
Pangandaran data, in 2012, the number of captured fish reached 2,220 tons,
amounting to 43.03 billion rupiahs. It described the fishery potentials of
Pangandaran that could leverage the income of Pangandaran people. KUD Minasari
owns one of biggest auction in Pangandaran.

In the Pangandaran fishery business, the threat of new entrants is low because the
party organizes the fish sale legally and the fish auction is only the place managed
by the cooperative that is protected by law. There is moderate rivalry among existing
firms because there is a competitor's auction place from other regions. The
Pangandaran area is TPI and managed by a Minasari cooperative. Supplier
bargaining power is low because the fish auction site already provides a selling
place for fish whose sale value is higher than competitors. Buyer bargaining power
is also low because the government has set sale and purchase transactions conducted

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at the fish auction. They inevitably buy the fish at the auction organized by the
cooperative.

The problem faced by Pangandaran fishermen is that they have declining

production capacities (Exhibit 2), but their operational costs remain high. The
problem faced by Minasari Cooperatives is that they have difficulties to meet market
demand, which includes existing and potential markets. The main problem details of
KUD Minasari are summarized in Exhibits 3 and 4. Based on the previous chapter,
the internal and external analysis can be concluded in one root cause diagram. There
are 12 attributes for KUD Minasari that need improvement:

1. Customers are limited to the cooperative members

2. High operational cost
3. No storage
4. Unfair measurement
5. No proper storage
6. Transportation not yet fully utilized
7. Customer is not representative of the selling company
8. The price is too high for customers
9. There are debts from previous management
10. No written contract
11. Few fishermen have technology
12. Technology not yet implemented

KUD Minasari has created a business model based on an inclusive business model
that focuses on creating shared value among stakeholders. The business model
shows some attributes of weakness that cause their business to not reach the ideal.
The problem can be solved by completing some attributes that are still not good
value and with the help of all relevant stakeholders. The main objective of
improving the current inclusive business model is to improve the business
environment and provide innovations in the business model to create sustainable
relationships among stakeholders.

To formulate a strategy, cooperation and contribution of all stakeholders is required.

Analyzing their importance and contribution can be done through the business
process from the fishery industry that exists in KUD Minasari.

Creating an inclusive business system does not mean increasing the income of those
who have low income only based on the help of other stakeholders. They must
improve their performance as well and provide benefits to other stakeholders for
stronger relationships. Exhibit 5 summarizes the details of the fisheries business in
Pangandaran.

Stakeholder of Fisheries Business in Pangandaran

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The Pangandaran fisheries industry involves many stakeholders, such as fishermen,
fishermen associations, fishermen associations throughout Indonesia, universities,
research institutions, government, NGOs, small tradesman, and customers. Each
stakeholder has its own role in the value chain depending on its capacity.
The process related to stakeholders starts from the preparation stage. The fishermen
get information about the fish they captured today from friends in their fishermen
group or cooperatives. Some fishermen still use intuition to catch fish. This has the
potential to make fishermen become losers because the accuracy of intuition is very
low and the dynamics that occur in Indonesian waters make sea conditions of today
not the same as those of tomorrow.
Fishermen also have to experience losses that are not slight because sailing requires
millions of rupiahs of capital. Gasoline used by fishermen is also affected by
government policy in terms of pricing. The expensive gasoline prices are one of the
toughest problems experienced by fishermen. The equipment used while sailing also
depends on government policy. The government does not permit some fishing gear
and fish types. This reveals how big a role the government has in this fishery
industry.
Furthermore, from the licensing stage to setting sail, the fishermen must report when
they want to sail in the ocean more than four miles. There is an exception for the
fishermen who only use the two GT boat below and only sail within four miles’
radius.
When sailing, fishermen need technology that can show the fish under water in real
time. Stakeholders such as meteorology agencies, universities and other research
organizations can support this. The technology used by a little fisherman in
Pangandaran is Fish Finder, which serves as the radar of the number of fish in the
water.
When the fishermen finish sailing, the catch will be assisted and lifted by the
auctioneer. Then the seafood will be sorted and auctioned at the fish auction. All the
catches are sold on that one day. The place of fish auction serves as a fish price
controller to occur a fair transaction between fishermen and small tradesmen and
also record local fish sales.
At the auction place there is competition between small tradesmen, which will raise
questions about the price of the fish. The sale of the fish will be made to fulfill its
quota contract to the company in which they have entered into an agreement. As for
some types of fish that are not intended to be exported, those will be sold in the local
market to meet market needs in the Pangandaran area. The largest exporter in
Pangandaran is Budi Dharma. However, the auction place in Pangandaran has a price
that tends to be high and stable. This triggers the fishermen who come from Cilacap
and around Pangandaran to sell in Pangandaran and who make the supply of fish in
Pangandaran become high. There are 12 stakeholders of Fisheries Business in
Pangandaran.
A. Fisherman

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Fishermen are the main actors of the fishery business as they are the main supplier
of products. They have many limitations, particularly capital. However, many
fishermen who are not from Pangandaran or noncooperative members sell their
catch in Pangandaran. This is good because it increases the supply of fish that
inflows at the Pangandaran fish auction. Fishermen also get some help from the
government, such as the addition of fishing equipment, some applied technology,
and training on technology, management, and catching fish. Fishermen at least can
increase the amount of production from year to year although not too much. They
can also borrow money to the cooperative and can be returned after getting the
catch. But fishermen are still difficult to find capital to buy sailing equipment whose
price can reach hundreds of millions of rupiahs. So not all fishermen can make
fishing with a satisfactory amount.
There are many fishermen in the Pangandaran area. Many are registered as
cooperative members, but there are also those who have not become members of the
cooperative because it has trust issues. All fishermen are required to sell to the fish
auction. There are fishermen who make sales to the middlemen who will actually
harm themselves because it is sold at a price below, which helps the average.
Fishermen are stakeholders who have a role as a major supplier in this industry.
Fishermen produce raw materials that will be processed, used, and delivered to
consumers. But fishermen have limited capital that will affect their income and
production amount. In addition, the limitations of capital also make them unable to
feel the technology that will help them in the search for fish. This shows less synergy
between stakeholders to advance the Indonesian fishery industry.
B. Local Fishermen Association
Groups of fishermen have a role to shelter all fishermen, either members of the
cooperative or non-cooperative members, both ship owners, as well as crew
members. They choose positions based on their own ranking system. The purpose of
making a fishing group is to exchange pertinent information about fish seasons,
fishing spots, government policies, family of fishermen, fish prices, and so on.
Groups of fishermen also facilitate communication between fishermen and
cooperatives.
All aspirations of members of fishermen groups will be delivered by the cooperative.
All socialization and assistance related to fisheries will be submitted by the head of a
group of fishermen to its members. This research focuses on existing fishermen
groups in Pananjung Village in Pangandaran. Fishermen groups serve as a container
of aspirations for fishermen. This group also functions to establish a close
relationship between the fishermen.
C. University
The role of universities in the fishing industry is to conduct research that will be
used as a support for fisheries ministry research, which will be used as a reference
for government decision making on the fishery industry. Students from various
universities conducted much research for the fishery industry Pangandaran. In
reality, the role of universities for the fishing industry is still very small because the

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university needs government intervention to interact directly to fishermen who are
in Pangandaran. In addition, the validity of research conducted by university
students must be tested to assist the results of the research conducted by the
ministry of fisheries and marine. Now universities cooperate with cooperatives in
conducting research and training members, especially Minasari cooperatives
engaged in fisheries.
The role of the university is as a research organizer that will support the results of
research by the fisheries and marine ministries. Universities work together with
cooperatives to advance fisheries by conducting joint training and research. The
existence of the university will provide opportunities to the fishing industry
D. Government
The role of government in the fishery industry in Pangandaran is as an entity that
monitors the dynamics of the fishery industry in Pangandaran. After conducting
monitoring, the government makes appropriate regulations to improve the welfare
of fishermen with regard to technology, fishing gear, catch type, sailing license,
fishing area, and the role of each government-related institution. The government
also provides appropriate assistance to the fishermen to continue to produce fish
and contribute to the export of state commodities. The government also provides
appropriate training for fishermen to have better capabilities in sailing.
In fact, in 2014 when Susi Pudjiastuti was appointed head of maritime affairs and
fisheries, the fisheries industry, particularly Pangandaran, received more attention
than before. Many policies were enforced to further restrict foreign interference in
fishing in Indonesian seas, such as the destruction of foreign fishing vessels.
According to some fishermen, this has led to a decline in exports because it is
usually illegal vessels that sell their products abroad. Many also argue that the
destruction of these ships make potential Pangandaran fishery intact back to the
people of Pangandaran because usually illegal ship is causing overfishing.
The government also made a regulation of the minimum size of captured of sea
creatures. This is done to maintain the sustainability of natural resources in the
Pangandaran sea. Certain kinds of fishing gear are not allowed for catching fish for
causing overfishing. Coral reef maintenance is encouraged to provide food and
habitat for the fish in Pangandaran that will maintain the potential fishery in
Pangandaran, which is the main livelihood for the local population. While the
budgets set by the ministry of fisheries and marine in 2017 are attached in appendix
1. From the budget plan of the ministry, it can be seen that Pangandaran is included
in the areas that receive assistance for fishing vessels under 5 GT, but does not get
ship assistance with capacity of 30 GT, 70 GT, or 100 GT. Pangandaran also receives
assistance in the form of fishing gear and fishing insurance.
The assistance from related governments, such as the government of West Java,
West Bandung District, department of estate, department of industry and trades,
department of cooperatives, and SMEs, Indonesian cooperative council of West Java
area, and the Indonesian cooperative council of West Bandung area. Nevertheless,
the assistance does not mean the government can intervene in the internal affairs of
the cooperative. The cooperative’s freedom is assured in accordance with economic

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principles. The government is only to establish the policies, provide guidance and
facilities, and protect and control all cooperative activity. The role of the government
is important to develop the cooperative and improve the economy of the local
people; the government cannot realize this itself. The role of the community is also
needed so that the government's plans can be realized well.
In brief, the role of the government is to monitor the dynamics of the fishing
industry, create regulations that help to promote the welfare of the Pangandaran
community, provide assistance related to technology and information, and provide
training useful for fishermen to hone their ability to raise production capacity via
cooperative the legal entity.
E. Customers
Existing customers in the fishing industry can be categorized as direct or indirect.
Direct customers are tradesmen registered as members of the cooperative who buy
fish directly at the fish auction. These tradesmen are businessmen who will sell fish
fisherman products to third parties who are bound by agreement. There also are
tradesmen who make transactions for sale in their own restaurant. Customers at the
fish auction will price competition to get the fish they need to meet their contract
quota. Those tradesmen are agents of fish suppliers for fish exporting companies.
There are also tradesmen who sell their fish in the local fish market.
As for customers who are not directly related to the fish auction, they. are customers
of restaurants made by cooperatives, customers who buy processed products from
cooperatives, and the fishermen who are registered members of the cooperative and
who feel the benefits.
Customers are the spearhead of fishery marketing. Tradesmen in fish auctions are
the main customers because they buy directly and spend the fish produced by
fishermen on the day they sell the fish products.
F. Bakul/Juragan/Middleman
Bakul plays an important role in this industry because they are the only ones who
pay for the fish auctioned by the cooperative. So the only buyer owned by the
cooperative is the bakul. Bakul must be registered as a member of the cooperative
and must agree to any form of regulation issued by the cooperative. Bakul have the
right to market the results of fish auction to the domestic market or international
market. Some options owned by bakul after the interviews are restaurants, local
markets (western Java), and international markets. In the international market, bakul
have adequate capital and information because most exporters are in other areas,
such as Cilacap and Jakarta.
The difference in selling price is quite high, between Rp.50.000 / kg up to
Rp.75.000 / kg for tiger shrimp and Rp.83.000 / kg up to Rp.105.000 / kg for white
pomfret species. It is the best price received because of the quality and quantity of
the order.
Bakul instantly distribute the results of the auction because the quality does not go
down; fish and shrimp are sensitive products in their freshness. Compared with the

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local market, which only gets a margin of about Rp.5.000 / kg up to Rp.12.000 / kg
for Pangandaran and the surrounding area. Too far a distribution will affect the cost
of logistics and freshness of the catch.
G. Exporter
The exporter is a channel of bakul to the international market. In this business, the
exporter also provides financial services for bakul. Exporters buy fish and shrimp
from bakul and then sell to buyers (importer). For the international market, the
exporter distributed the products via a big port (Jakarta), and the distribution used
ships. Usually exporters already have MoUs/contracts with bakul, and their
contents of quantity and quality are mutually agreed upon. Exporters have a large
cooling system to maintain the quality of the fish that will be sent; after the products
sent by the bakul are checked, they are packed and sent through the port of Tanjung
Priuk. In the harbor there are additional checks of catch documents and permits
related to fishery export. Usually exporters send orders to various countries such as
Thailand, Japan and the United States.
The management team at KUD Minasari is facing pressures to turn things around:
What is the stakeholder analysis of fisheries business in Pangandaran? To provide
information role and influence of each stakeholder to fishery business, analyzing
and mapping each strength and role can help to assess whether the stakeholder
should be incorporated into the collaboration list or to be aware of, or should be
ignored. What would be the strategy that KUD Minasari formulated to improve the
business condition? The KUD Minasari’s management certainly has its challenges
cut out for it.

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 Exhibit 1. KUD Minasari’s Production Record

Year 2012 2013 2014 2015 2016

Productio 1,147,207.90 1,223,211.20 1,218,117.10 1,425,730.30 551,727.70
ns (in Kg)
Value 22,019,680,26 37,819,813,91 40,390,589,21 42,110,121,73 24,220,175,60
(Rp) 8 6 4 4 4

Exhibit 2. Monthly Fish Products (Source: Minasari, 2017)

Species 1 2 3 4 5 6 7 8 9 10 11 12
Lobster EL L EL EL EL EL EL - EL - - -
Jerbung M M H M H M M M M M M M
Prawns
Dogol M M M H H M M H H H H M
Shrimp
Rebon EL - L L L H M EH M H EH EH
Green H EH H H EH H M M M H EH H
Tiger
Prawn
Snapper / EL L L EL L L L L L L L L
Gerit
Manyung L L L L M L M M M M L L
Petek / M M M L M L EL EL L EL EL EL
Trongtong
Stingray L L L L L EL L L L L L L
Pompano L L L L L L L M M M L L
Pomfret EH M M M L L L L L L L L
Mackerel - M M M L EL L L L L M L L
Tenggiri
Swordfish EH H M M L L L L L L L L
Bambangan EL EL L EL L L L L L L L L
Layaran L L L EL - EL L L EL EL L EL
Grouper EL EL EL EL L L EL L L L L L

EL = Extremely Low (< 100 kg); L = Low (100–1,000 kg); M = Medium (1,001–5,000
kg); H = High (5,001–10,000 kg); EH = Extremely High (> 10,000 kg)

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 Exhibit 3. KUD Minasari Main Lowest Competency Area
Capability Area Minasari Lack of Reason
Competency Area

Strategic Management Customer and supplier Customers are limited to the

portfolio (2.9) cooperative members

Procurement Supply Capacity (1.3) High operational cost & lack of

proper fishing gear and
technology

Premises Storage Quality (2.0) No storage

Production and Processing Unfair measurement

Quality and efficiency (2.7)

Capacity (2.5) No proper storage

Distribution and Capacity (2.5) Transportation is not yet fully

Transportation utilized

Product Quality Quality mindset and No proper standard of quality

communication (2.1)

Interaction with Customer Relationship Customer is not the

Customer Management (1.8) representative of the selling
company

Pricing (2.8) The price is high for customers

Finance Current Financial Strength There are debts from previous

(2.8) management

Leadership - -

HR Documentation (2.5) No written contract

IT Ownership of IT tools (2.0) Few fishermen have the

technology

Use of it for transactional The technology is not yet

process (2.2) implemented

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Exhibit 4. KUD Minasari’s Root Cause

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INDONESIA BUSINESS CASE CENTER (IBCC)
xxx-xx-xx-xx

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