The retail business in Indonesia is on the move again after being hampered by the regional financial crisis in 1997, which was followed by domestic social and political crisis. In the period where investments are relatively low in most of the industries, consumption level in the country was proven to be a major contributor to the movement of the Indonesia economy. This was recognized as an opportunity for the retail players to push their market share by opening more stores, going into more cities and offering more competitive advantage to the customers. All of these factors gave more challenges for the business to conquer and suNival of the fittest will be tested.



The presence of the modern retail business in Indonesia is considered new, not more than three decades ago. The first establishment of modern department store was located in Jakarta as the capital of Indonesia and has been spreading limitedly to a few other big cities. Number of players in the early days was less than a hand-full in the form of shopping centre and moderate size supermarket. In the same time the traditional retail markets were still favourable in the business and the existence is relevant until today. There is a shift in shopping behaviour towards a more convenience, easy access and family entertainment premises. Nevertheless, the huge market size with 210 million of population is of great consequence to ignore with simple strategies.



One of the retail sectors that have been recently facing fiercer competition is supermarket business. Due to globalisation pressure, more and more global players are entering into the market. These global players not only possess huge capital to develop the business but also sound operations knowledge and techniques to provide the best to the customers. Whilst national players have been also improving seNice in the operations to compete with an advantage of knowing local customers better and having access to regency cities which currently forbidden for foreign investment to enter into. PT Alfa Retailindo Tbk. is one of the national players that has grown significantly with its first store established in 1989. Currently, it has 29 stores located in the big cities and regencies across Indonesia and it is still expanding with more to come in the near future.



The success of Alfa, as one of the subsidiaries of Sampoerna -one of the largest cigarettes producers in Indonesia, is contributed by the network of its affiliated companies as well as workable strategies Alfa deployed into their operations. Alfa has been showing healthy financial achievement from year to year with average return to the stockholders of 9% for the last three years (2000 to 2002). Its stores are located mainly in the company-owned lands that reduces rental cost pressures that keep surging as to what happened to other retailers. The combination of those advantages has put Alfa in a front liner position to be one of the prime retailers among the players.



The requirement for improvement of the existing operations is noticed in many strategic business issues. Although the main business caters the segment of middle to low earners is Alfa's target market, in some instances Alfa is lured to serve wider segmentation. The decision to focus on which segment is extremely important for Alfa to apply in other related aspects. Justifying the proper value proposition is necessary in gaining the long run competitive advantage. Handling the operational excellence will be undoubtedly becoming expertise to the future of Alfa, emphasizing efficiency in anywhere possible within its operations will add up to the profitability of the Company's performance. There are many considerations to fit the essential strategy of Alfa. The Company should look after in its corporate level to make it able to direct the whole forces to win the challenge of the retail business.





Research Location: P. T. Alfa Retailindo, Tbk.

Supervisor: Liza Felicia Wulandari, MBA, Ph. D.

Accepted: 26 August 2003



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