Analysing The Wood Industry In Indonesia Commerce Essay

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Indonesia, as world's largest archipelago, has lots of natural resources. Among those natural resources, wood is one of the biggest natural resources products of Indonesia, which also contributes a great sum of income for Indonesia. Wood is one of the most important natural products and approximately one third of world's land areas are covered by forests that contain a total growth in the supply of wood around 300,000 million m3. (Steinlin, 1979).

The Ministry of Forestry has classified 75% of the land area as being within forest boundaries. This equates to 144 million hectares, where 34% is designated for protection and National Parks, and 21% is designated for conversion to other uses. The remaining 45% is managed for timber and other forest product production.

Indonesia has at least 19 different forest types including coastal forests on beaches and dunes; tidal forests such as mangroves, nipah, and palm; heath forests associated with poor sandy soils; and peat, swamp, wetland, evergreen, bamboo, savanna and montane forests. Of the 4,000 species of trees in Indonesia, only 120 hardwood species are recognized as being suitable for commercial use. Of these, about 48 are used in the plywood industry.

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Indonesia has 10% of the world's tropical forests, 60% of Asia's tropical forests, and a significant proportion of the world's remaining virgin stands. These forests are home to vast numbers of animal and plant species and people. Thus their value is substantially greater than simply their ability to produce wood and associated forest products.

Thousand years ago, people were using wood only for fuel and tools but nowadays its function has grown into an even more valuable part of human's lives. For instance, wood is now used as: raw materials for manufacturing charcoal (used in iron smelting), potassium (in the manufacture of glass) and also raw materials for paper, film and other products. In this modern area, wood also utilized as furniture.

PT Barito Pacific Tbk is an Indonesia-based integrated wood company. It holds more than 400.000 hectare of Forest Concessions Rights and over a 100.000 hectare Concessions for Industrial Forest in various region in Indonesia. Since its presence in 1983, Barito Pacific become widely recognized and has a reputable name in the forestry sector in Indonesia. The Company's products include plywood, block boards, particleboards, phenolic film-faced plywood, sawn timbers, woodworking, panels, process panels, doors, furniture parts and handicraft.

The Company has 17 subsidiaries which are engaged in the petrochemical, wood manufacturing, wood plantation, glue, and plantation industries. The Company is supported by production facilities located in Banjarmasin.

KettenWulf GmbH is a mid-sized company which has been owned by the same family for three generations. It has grown and become one of the world's leading manufacturers of conveyor chain, drive chains and sprockets. This company was established in Kückelheim, Germany in 1925.

Kettenwulf GmbH products are used in various industries worldwide and one of its industries is wood industry. Range of products offered by KettenWulf in wood industry are log transport, plank transport and sawing line, woodchips handling, and wood processing. Currently, this company has more than 10 production and distribution location world wide such as: Germany, Austria, Belgium, People Republic of China, Japan, Poland, USA, France and India.

After acknowledging the growth of wood industry, the company has planned to expand its business in Indonesia. Hence, this research study is intended to assist the company in analyzing Indonesia's wood industry through expanding strategy creation and market entry analysis.

1.2 Research Purpose

The purpose of this research paper is to provide a complete segmentation analysis including SWOT analysis, competitor analysis wood segmentation industry analysis and market analysis to develop the appropriate business strategy.

1.3 Research Problem

There are three problems to be addressed:

1.3.1 Current market and competitor analysis, which is explored using the environmental analysis, i.e. SWOT Analysis

1.3.2 Segmentation situation

1.3.3 Obtain complete information regarding appliances used within wood industry in Indonesia

1.4 Significance of Study

This thesis will provide a necessary guidance for KettenWulf GmbH to create the appropriate expand strategy in Indonesia.

1.5 Research Questions

Question # 1: What is the situation and condition of the wood industry users in Indonesia?

Question # 2: What type of appliances used by wood industry in Indonesia? Its competitors

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Question # 3: What are the users' expectations regarding to the KettenWulf product appliances?

Question # 4: What might be the Risk Management needed by the company to explore this segment market? So do the financial model?

1.6 Research Limitations

In conducting this research, there are some limitations that occur and may be needed to be considered towards the final result. Firstly, this thesis is a research project, therefore there will be no hypothesis, only answering the research questions. Secondly, there is only few wood industry users in Indonesia, for this reason, the researcher will only choose 10 wood industry users to be interview, which are 5 from large industry and the rest, will be from intermediate industry.

The last one is regarding the data. Since this thesis is a research study, the data will be obtained from interview the representative from each industry or company and sometimes the representative rarely tell the truth answer and the location of most of wood industry are located in Kalimantan Island.

CHAPTER 2 - LITERATURE REVIEW

Marketing Research

Definition

Marketing Research plays an essential role in translating data into useful information and also helps managers make better decisions in any of their areas of responsibility. Market research is defined as the collection and examination of information about things that people buy or might buy and their feelings about things that they have bought. (Cambridge Advanced Learner's Dictionary)

In order to know the needs and wants of customer, consumer and public, market research must be conducted, so that marketers would not miss their business opportunity as they get the information they need. Information is useful to identify market opportunities and problem, hence to notify the marketers what to do and also to monitor marketing performance. Information is generated through market research, which will be passed to the marketer.

Thus, overall, it can be known that market research is taking an essential part as it would act as a bridge between customer, consumer, public and the marketer (Churchill and Iacobucci, 2005).

Burns and Bush (2005) also defined marketing research as a tool to solve problems by designing, gathering, analyzing and reporting information.

According to Kotler and Armstrong (2008) marketing research is used to help marketers understand customer satisfaction and purchase behavior.

Purposes

The purposes of marketing research are:

1. To obtain a detailed and better understanding of the consumers' needs

2. Reduce the risk of business failure

3. Forecast future trends

2.1.3 Marketing research offer several benefits such as:

1. Market research provides detailed information about the customers in a various ways such as age, gender, and demographic information.

2. By doing market research, we can identify our target market and also the products and services that fit into our target market.

3. Market Research will assist you to compete with you competitors. Then it helps us to identify our strengths and weaknesses and also our competitors.

2.1.4 Marketing Research can be used to discover information about:

Market size and consumer tastes and trends.

The product and its perceived strengths and weaknesses.

Competitors and their claimed unique selling propositions.

SWOT Analysis

SWOT, which is an abbreviation of Strengths, Weaknesses, Opportunities, and Threats, is a methodology used to identifying the company's position, compared to its competitors. This analysis can also help investors to decide whether their investments are well placed. To achieve the company's objective, SWOT analysis involved two factors, which are internal and external factors. Internal factors consist of the strengths and weaknesses of the organization. On the other side, the opportunities and threats are including in external factors.

2.2.1 SWOT process

This type of analysis is specifying the objective of the business or company's objectives and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Internal factors include the strengths and weaknesses internal to the organization.

External factors include the opportunities and threats presented by the external environment to the organization.

2.2.2 Conduct SWOT analysis

The basic technique to conduct SWOT Analysis is by drawing four columns or boxes, each for Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis must first start with defining a desired end state or objective. It analysis may be incorporated into the strategic planning model.

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Strengths: attributes of the person or company that is helpful to achieving the objective(s).

Weaknesses: attributes of the person or company that is harmful to achieving the objective(s).

Opportunities: external conditions that is helpful to achieving the objective(s).

Threats: external conditions which could do damage to the objective(s).

Figure 2.2.2. SWOT Analysis diagram

Souce: http://www.excelsia.ch/htmlgb/blog/images/swot-analysis-image.png

2.2.2.1 Strengths

As it shows in Figure 2.2.2, the first column is Strengths. This includes internal capabilities, resources, and positive situational factors that will assist the company to achieve their goals. (Kotler, Armstrong, 2008). This factor will help the company to compete with their competitors by identifying what are their potency and superiority that their competitors don't have.

2.2.2.2 Weaknesses

This internal factor can be seen as negative factors. Kotler and Armstrong defined this factor as an internal limitations and negative situational factors that may hamper the company's performance. It is not easy to accept that the company has weaknesses but it is important in the business thus the management can overcome the weaknesses by doing some improvement. Reuvid, 2006, said that "It's a good idea to get an outside perspective on what your weaknesses are as your own perceptions may not always align with reality."

2.2.2.3 Opportunities

This factor is the potential areas for expansion of the business. Figure 2.2.2 shows that this factor will help the company but from outside or company's environment. For example: technological developments, changes in market trends.

2.2.2.4 Threats

The last factor is analyzing threats. Some threats are tangible such as a new competitor near company's area. This factor comes from external factors and harmful for the company. A change in government economic policy is one of the examples of business' threat. Threats present challenges to company's performance.

The Goal of SWOT analysis is to match the company's strengths to attractive opportunities in the environment, while eliminating or overcoming the weaknesses and minimizing the threats. (Kotler, Armstrong, 2008)

2.3 Indonesia Forestry Policies

The National Forest Policy of Indonesia, in common with all development, is based on:

Pancasila, the Five Philosophical Principles of the nation;

The 1945 Constitution;

Guidelines of state policy set out each five years under the National Development Plans;

The directives of the President; and

The Kaliurang declaration of 1966 on sustained yield.

The aim of these protections is to develop and protect Indonesia's forest for national development, ecological balance, promotion of industry and conservation of the environment. The goal is to guide forestry activities in supporting national development.

National Forestry Action Plan (NFAP) was developed by The Ministry of Forestry to manage and direct the forestry goals with the five years economic plans (Repelitas). For example, from Repelita I through IV (1969-1989), the long term national goals were:

To open up the outer islands for forestry development;

Rapid development of forest-based industries;

To achieve market power in its forest products.

Repelita V (1989-1994) saw emphasis move more towards sustainable development, including the following provisions:

Limits on log extraction to 31-32 million m3 per year;

Improved forest inspections, including the use of aerial photography and satellite technology;

No new sawmill or plywood mill licenses;

Logging and processing activities to be integrated - as concessionaires with large investments in processing equipment have greater incentive for sustainable management;

Reforestation taxes increased by 150%, and a new export tax on sawn timber has reduced sawn timber exports and forced the closure of inefficient industries;

Establishment of a new Directorate of Extension to encourage citizen participation in conservation management in conjunction with forestry officials;

Improved training of forestry personnel in conservation and forestry management.

Repelita VI (1995-1999) further modified the focus of forestry which is expressed in the country's Forest Action Plan. The Plan proposes 9 programmes which include:

Conservation of living natural resources and their ecosystems;

Land use and forest inventory;

Forest protection;

Soil and water conservation; improvement of natural forest management;

Improvement of forest land productivity and establishment of industrial plantations;

Improvement of the efficiency of forest based industries;

Promotion of people's participation in forestry development;

Institutional and human resources development.

The 1945 Constitution

Law No. 5 of 1990 concerning Conservation of Living Resources and their Ecosystems

Law No. 24 of 1992 concerning Spatial Planning

Law No. 5 of 1994 concerning the Ratification of the United Nations Convention on Biological Diversity

Law No. 23 of 1997 concerning Environment Management

Law No. 41 of 1999 concerning Forestry (this law replaces Act No. 5 of 1967 on Basic Forestry Law)

Law No. 22 of 1999 concerning Regional Governance

Law No. 25 of 1999 concerning Fiscal Balance Between the Centre and the Regions

Government Regulation No. 33 of 1970 concerning Forest Planning

Government Regulation No. 25 of 2000 concerning Government Authority and Provincial Authority as an Autonomous Region

Government Regulation No. 51 of 1993 concerning Environmental Impact Analysis

Government Regulation No. 28 of 1985 concerning Forest Protection

Government Regulation No. 7 of 1999 concerning Preservation of Flora and Fauna Species

Government Regulation No. 8 of 1999 concerning the Utilization of Species of Flora and Fauna

Government Regulation No. 25 of 2000 concerning Government Authority and Provincial Authority as an Autonomous Region

Government Regulation No. 84 of 2000 concerning Guidelines for Regional Organization

Government Regulation No. 39 of 2001 concerning Execution of De-concentration

Government Regulation No. 4 of 2001 concerning Control of Environmental Degradation and Pollution in Correlation with Forest &Land Fires

Presidential Decree No. 32 of 1990 concerning the Management of Protected Areas

Government Regulation No. 34 of 2002 concerning Forest Compartment and Forest Management Plan, Forest Exploitation and Forest Area Utilization

Government Regulation No. 35 of 2002 concerning Reforestation Funds

Table 2.3 Relevant laws and regulations for the Indonesian forest policy.

Source: Chrystanto, Justianto, Ministry of Forestry Indonesia.

2.3.1 Problems

The recent problem regarding to Indonesia forest are illegal logging and illegal trade. Both are the result of various human interactions in managing forest resources. Therefore, in order to combating both illegal logging and illegal trade, integrated approaches and the involvement of all stakeholders and concerned parties are essential.

2.3.2 International Responsibilities

Indonesia has ratified a number of international agreements related to forestry such as the Convention on Climate Change (CCC), the Kyoto Protocol, the Convention on Biological Diversity (CBD), etc.

2.4 United Nations Framework Convention on Climate Change

The United Nations Framework Convention on Climate Change (UNFCCC) is also known as the Earth Summit. It was initiated in 1990 by the United Nations. In 1992, 154 countries signed the UNFCCC in Rio de Janeiro from 3 to 14 June 1992, but now the members of UNFCCC are increasing to 192 countries. The objective of the treaty is to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. (http://unfccc.int/essential_background/convention/background/items/1353.php.)

The members of this convention have annually meeting since 1995. This meeting called Conferences of Parties (COP) and the aim is to review the progress in dealing with climate change. In 1997, the Kyoto Protocol was concluded and established legally binding obligations for developed countries to reduce their greenhouse gas emissions. (http://www.climate-leaders.org/climate-change-resources/india-at-cop-15/unfccc-cop.

2.4.1 Conferences of the Parties

Delegates from all the members' countries gathered in this convention, which is the Conference of the Parties (COP) annually to review the effects of the initiatives taken by Parties and discuss how the convention's objectives can best be implemented. COP is responsible to keep the international efforts to deal with climate change. Moreover, it also examines the national communications and emission accounts submitted by the Parties.

Kyoto Protocol, which negotiated for developed countries to reduce their greenhouse gas emissions, is the first agreement that the Parties have agreed upon. The Conferences have met in conjunction with Meetings of Parties of the Kyoto Protocol (MOP), and parties to the Convention that are not parties to the Protocol can participate in Protocol-related meetings as observers. COP Presidency will change among the five recognized UN regions, so doest the COP venue.

1995 - COP 1, The Berlin Mandate

This is the first UNFCCC Conference of Parties that held in 1995 in Berlin, Germany. It voiced concerns about the adequacy of countries' abilities to meet commitments under the Convention, which is known as the "Berlin Mandate". It established a 2-year Analytical and Assessment Phase (AAP), to negotiate a "comprehensive menu of actions" for countries to pick from and choose future options to address climate change which for them, individually, made the best economic and environmental sense.

1996 - COP 2, Geneva, Switzerland

1997 - COP 3, The Kyoto Protocol on Climate Change

In December 1997, the third COP 3 took place in Kyoto, Japan, and came into force on February 16, 2005. As of November 2009, 187 states have signed and ratified the protocol. (http://unfccc.int/files/kyoto_protocol/status_of_ratification/application/pdf/kp_ratification.pdf).

It is also known as Kyoto Protocol. The main goal of Kyoto Protocol is that it sets targets for the 37 industrialized countries and the European Union countries to decrease their emissions from six greenhouse gases (carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydro fluorocarbons and perfluorocarbons)

To help the Parties meet their emission target in a cost-effective way and stimulate green investment, Kyoto Protocol offers them three market-based mechanism, they are:

Emissions trading

Clean development mechanism (CDM)

Joint implementation (JI).

1998 - COP 4, Buenos Aires

1999 - COP 5, Bonn, Germany

2000 - COP 6, The Hague, Netherlands

2001 - COP 6, Bonn, Germany

2001 - COP 7, Marrakech, Morocco

2002 - COP 8, New Delhi, India

2003 - COP 9, Milan, Italy

2004 - COP 10, Buenos Aires, Argentina

2005 - COP 11, Montreal, Canada

2006 - COP 12, Nairobi, Kenya

2007 - COP 13, Bali, Indonesia

As the member of UNFCCC, Indonesia got an honor to become the host of 13th COP that took place in Bali, Indonesia. It was held on December 3 until December 15, 2007. This convention talked about the timeline and structured negotiation on the post 2012 framework that was achieved with the adoption of the Bali Action Plan. In this convention, The Ad Hoc Working Group on Long-term Cooperative Action (AWG-LCA) was form as a new subsidiary body to conduct the negotiations aimed at urgently enhancing the implementation of the convention up to and beyond 2012. These negotiations took place during 2008 (leading to COP 14 in Poland) and 2009 (leading to COP 15 in Denmark)

2008 - COP 14, Poznań, Poland

2009 - COP 15, Copenhagen, Denmark

The recent COP was held in Copenhagen, Denmark from 7 December to 18 December 2009. The COP 15 goal was to renew the global climate agreement for the period from 2012 since the first agreement under the Kyoto Protocol expires.

In order to prevent global warming and climate, the UNFCCC and Danish Government was putting big effort to success this convention because this Climate Conference in Copenhagen is essential for the world's climate. The 15th COP was an extraordinary event that that involved numbers of participation and resulted in:

Attendance by 120 Heads of State and Government, raising climate discussions to a new level.

Record numbers of participants including 10,500 delegates, 13,500 observers, and coverage by more than 3,000 media representatives

Intensive negotiations characterized by over 1,000 officials, informal and group meetings among Parties. Observers discussed climate change in more than 400 meetings and media attended over 300 press conferences.

A vibrant programme of over 200 side events.

Over 220 exhibits from Parties, UN, IGOs and civil society

A total of 23 decisions adopted by the COP and the CMP

The delegates from each participant's country have to state what actions they will propose to take if the agreement was achieved. And so does Indonesia, it stated that Indonesia will try reduce carbon emissions by 26% by 2020, based on business-as-usual levels. With enhanced international assistance, President of Indonesia Dr. Yudhoyono offered an increased reduction of 41% by 2020, based on business-as-usual levels. (Nicholas Stern, 2009)

The Climate Conference in Copenhagen is organized in cooperation between the Ministry of Climate and Energy, Ministry of Foreign Affairs, Ministry of Science, Technology and Innovation, Ministry of Finance and the Prime Minister's Office.

2010 - COP 16, Mexico

COP 16 is expected to be held in Cancun, Mexico from 29 November 2010 to 10 December 2010.

2.5 The Forest Dialogue (TFD's Dialogue on Practical Actions to Combat Illegal Logging, 7-10 March 2005 - Hong Kong, P.R. China)

The Forest Dialogue is the first Dialogue that can gather 120 leaders from business, civil society and government to make an agreement to fight against illegal logging in Asia and around the world. Both companies and government are agreed to take responsibility to ensure that the wood and paper that they purchase are legal.

The highest priority of this Dialogue is to ensure that no wood is sourced illegally from National Parks and reserves or stolen from local communities and private landowners. Priority actions emerging from the Dialogue include the following:

Collaborate to strengthen important existing alliances to combat illegal logging, such as:

The Conservation International/ American Forest and Paper Association Alliance to Combat Illegal Logging in Protected Areas.

The Global Forest and Trade Network led by WWF.

The World Business Council for Sustainable Development / WWF joint agenda to combat illegal logging

Use experience gained from ongoing partnership to develop agreed, auditable, practical national legality standards to accelerate progress toward similar standards in other countries with a high-risk of illegal logging.

Create a simple, credible, independent and objective ratings system that can be applied to identify high-risk countries and three species. Such a system would help forest products companies, retailers and customers, as well as investors, creditors and insurers, to reduce risk of supporting illegally sourced, harvested or traded forest products through their wood and paper buying and financial services. This could in turn lead to development of a rating system for companies.

Encourage companies to use innovative technology for wood tracking and share best practices to improve their supply chain management, reduce costs, and assist them to in ensuring that illegal sourced, harvested or traded wood does enter their supply chains.

The participates of this Dialogue came from Companies and Non-Governmental groups such as IKEA, Axel Springer Verlag, APRIL, International Paper, Weyerhaeuser, HSBC, ASRIA, Sumalindo, SGS, Stora Enso, Mondi, Tetra Pak, Nippon Paper, Oji Paper, The Nature Conservancy, WWF, World Business Council for Sustainable Development, Conservation International, Greenpeace, Environmental Investigation Agency, Friends of the Earth, Telapak, Tropical Forest Trust, WALHI, CIFOR, and The World Resources Institute.

The topic of this meeting was about the hamper efforts to combat illegal logging such as weak governance, corruption, poor law enforcement, conflict, unclear property rights and low investment in training and management of public agencies. The meeting called on Governments Urgently to Lead Efforts.

To help build governmental leadership there are several priority actions agreed:

The Forest Dialogue will send a small delegation of business and civil society leaders to meet with Ministers and other top officials in key capitals in Asia, Europe and beyond to share the result of this meeting and urge concerted effort.

Calls for action will be communicated at important upcoming intergovernmental meetings including this following:

G8 Meeting of Ministers of environment and development in England March 17-18.

The United Nations Food and Agriculture Organization's Committee on Forestry March 14-18.

The United Nations Forum on Forests in New York May 16-27.

The G8 Heads of State Summit in Scotland in June.

The East Asia FLEG Task Force meeting in September in Manila, and the North Asia and Russia FLEG Ministerial meeting in November in St. Petersburg.

Key government officials who participated in the dialogue called for greater partnership with industry and civil society. All governments present committed to follow up to strengthen such partnership soon.

Government represented at the meeting included the Peoples Republic of China, Malaysia, Japan, Indonesia, the Philippines, United States of America, United Kingdom, Sweden, Russia and the European Union. During this meeting, the officials from China, Indonesia and Malaysia agreed to work more closely together to reduce the trade in illegal wood between their countries. (www.theforestdialogue.org)

CHAPTER 3 - METHODOLOGY

3.1 Research Process and Problem Formulation

In designing any research project, researcher needs to define a sequence of steps, which is called research process. These steps in research process can be seen in the following figure:

Figure 3.1 Relationships among the Stages in the Research Process

Source: Churchill, Jr. A. & Iacobucci, D. 2005, Marketing Research: Methodological Foundation, Thomson - South-Western, Ohio.

As it shown in the figure 3.1 above, the research process starts with formulate the problem, and then determines the research design. After those two steps, the research process continues with designing the data collection methods and forms, designing the sample and collect data and of course analyzing and interpreting the data. Finally, prepare the research report.

The basic step in the research process is to formulate the problem to be solved. In this study, the problem to be solved is to facilitate KettenWulf GmbH in terms of expand their business and find out the condition and situation of wood industry in Indonesia. This study will also provide a necessary guidance for KettenWulf GmbH to create the appropriate expand strategy in Indonesia.

After formulate the problem, then this problem formulation can be used to develop the second steps of research process, which is determining the research design.

3.2 Research Design

Research design is a framework for a research as a guide to gather and analyze data. Research design is classified into three categories: Exploratory research, Descriptive research and Causal research.

Research Objective

Appropriate Design

To gain background information, to define terms, to clarify problems and hypothesis, to establish research priorities

Exploratory

To describe and measure marketing phenomena

Descriptive

To determine causality, to make "if-then" statements

Causal

Table: 3.2.1 the Basic Research Objective and Research Design

Source: Burns, Alvin C. & Bush, Ronald F. 2005, Marketing Research: International edition.

3.2.1 Exploratory Research

Most researchers are commonly use exploratory research to gain information regarding the research problem. Exploratory research helps to define terms and concepts.

The types of exploratory research used in this research are in depth interview, literature research and observation.

In Depth Interview

In Depth Interview involves number of individuals who will be assigned as the respondents. The job of respondents is not difficult actually, because they just have to sit down and act honestly on particular idea, program or situation offered by researcher. After that, researcher would explore the reaction, attitude, perspective, and behavior of them which would represent the target customers in the market. Through doing this intensive interview, marketer would lessen the chance of misinterpreting the perspective of customer, so they can consider carefully whether this idea would be successful or not in the market.

Normally, it is a face-to-face interview which involves one interviewer and one correspondent. In Depth Interview offers several benefits, such as detailed information and also relaxed atmosphere to collect information. This interview is appropriate to collect detailed information about a person's thoughts and behaviors or explore some problem in depth.

In this research, researcher will do an in depth interview with KettenWulf representative to get company's detail information and data, also reasons why this company want to expand their business in Indonesia. In other way, researcher will also do an in depth interview also with the wood industry users in Indonesia.

There will be ten industries to be interviewed, where five industries from big industry and the other five is from middle industry. The purpose is to identify the condition and situation of wood industry in Indonesia. As it explains before, by doing this interview, researcher will gain lot and detail information regarding the research.

Literature Research

The external data collected from The Ministry of Indonesia Forestry, libraries, book stores and also internet such as books, article and other related written information. These data will support this research by provide the background and basic information of the research problem. For instance, Indonesia Forestry Ministry provides information about the natural resources in Indonesia, especially in this research is wood. As well book and articles that related to wood industry and KettenWulf GmbH.

3.2.1.3 Observation

To complete this research, relevant data are necessary needed to support this research. Therefore, researcher will obtain data from both KettenWulf GmbH and also the users of wood industry in Indonesia. Besides in depth interview, to support the data and know more about the situation and condition of wood industry in Indonesia, researcher will do an observation by visits five big wood industry and five middle wood industry users in Indonesia.

3.3 Data Collection Method

3.3.1 Primary Data

Primary data is an original data gathering from people within the target market. These people are called 'first-hand' data as they are being collected by the organization for the first time for its own needs. To gathered primary information for this research, the researcher will do an in depth interview to several parties, in this case, players in wood industry. The user of wood industry's satisfaction and expectation regarding their company's appliances will be analyzing through the interview.

3.3.2 Secondary Data

Secondary data are referred as 'second hand' data which means that the use and analysis of data already exist but for a different purpose. The secondary sources for the research are obtained from books, newspaper, and company's records to support the primary data. These data will include the current market condition of wood industry and the users' background in Indonesia. Besides supporting the primary data, secondary data also time and cost economies.

Sample Design for Data Collection

There are six steps in drawing a sample as it explains in the figure 3.4 below. The first step is defining the target population. In this research, the target population used to collect the primary data is individuals who are the representative of wood industry users in Indonesia.

This study will use the sampling frame of ten wood industry users, where five of it is from big industry and the other five is from middle industry. The next step until end is called validation and at the end there will be a list of question to be asked in the in depth interview between researcher and the representative of the wood industry to collect the primary data.

Figure 3.4 Six-Step Procedures for Drawing a Sample

Source: Churchill, Jr. A. & Iacobucci, D. 2005, Marketing Research: Methodological Foundation, Thomson - South-Western, Ohio.

Data Analysis

The data to be analyzed in this step is the wood industry user's satisfaction and expectation regarding the appliances that they use now. The data are processed using likert scales.

Figure 3.5 Likert Scales

Source: www.hkadesigns.co.uk

Likert scale is a method of interpreting quantitative data into qualitative data. Usually, likert scale has five potential choices which are strongly agree, disagree, neutral, agree and strongly agree. According to figure 3.5, the choices goes up from number one, which is strongly disagree to number 7, strongly agree.