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CHAPTER II

THEORITICAL FRAMEWORK

2.1 Definition of Women and Health

The needs of men and women body are different. From metabolism,

hormonal, body type, physical growth, psychological and so on. Therefor, the

needs of the workout, food, product and service are different. Here are the

difference of mens and women body:

2.1.1 Gender

Based on American Psychological Association (2011), gender refers to

the attitudes, feelings, and behaviors that a given culture associates with a

person‟s biological sex. Behavior that is compatible with cultural expectations

is referred to as gender-normative; behaviors that are viewed as incompatible

with these expectations constitute gender non-conformity.

Another definition by Puspitawati (2013), the word "gender" can be

interpreted as differences in the role, function, status and responsibilities of

men and women as a result of the formation (construction) embedded social

culture through the socialization process from one generation to the next.

Thus gender is the result of an agreement between people who are not natural.

Gender therefore varies from one place to another and from one time to the

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next time. Gender is not natural; it can be changed and can be exchanged on a

human to another human being depending on time and culture.

Sex is different with gender. Sex defined to a person‟s biological

status and is typically categorized as male, female, or intersex (i.e., atypical

combinations of features that usually distinguish male from female). There are

a number of indicators of biological sex, including sex chromosomes, gonads,

internal reproductive organs, and external genitalia.

Herien Puspitawati (2012) also explained, gender equality is the

condition of women and men enjoying the equivalent status and have the

same condition for realizing full rights and potentials for development in all

areas of life. USAID states that the definition of "Gender Equality permits

women and men equal enjoyment of human rights, socially valued goods,

opportunities, resources and the benefits from development results (gender

equality allow both women and men to be equal / same / comparable enjoy

their rights as human beings, have social objects, opportunities, resources, and

enjoy the benefits of the result of development).

2.1.2 The Physical Growth of Women

According to Human Body Book by Steve Parker (2013), for girls,

physical changes of puberty start at the age of about 10 or 11 years. Most

showed some signs of progress in the age of 13 years and no further changes

are likely after the age of 16 years.

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Puberty occurs earlier than in the past. In 1980, most of the girls have

their first menstruation at the age of 15 years, currently menstruation began at

the age of 12-13 years.

Changes in a woman's body caused by two hormones, estrogen and

progesterone. Not yet known what causes the hypothalamus by removing

GmRH, hormones trigger puberty, but the social and psychological factors,

and diet play a role. The first sign of puberty is breast development, and the

hair starts to grow in the armpits and pubic area. Thickened leg hair and body

shape changes, with the addition of body fat. Oily hair and skin begin, which

can cause acne. Finally menstruation (menses) begins. Girls may feel tired and

have mood changing, and sensitive feelings.

Girls reach half the height of an adult right before their second

birthday; rapid growth at puberty began two years earlier in girls than boys.

Breast are starting to develop where the area around the nipple enlarged with a

small amount of breast tissue in it. A change in hips landscape where pelvis

and hips widened and narrowed waist due to fat distribution, influenced by

female hormones. And also pubic hairs and armpit hairs are growing.

The growth rate is faster at the beginning of puberty, before the start of

menstruation, and reached its peak at around 12 years of age, when growth

reached 9 cm in a year. But the growth slows, usually stops at age 14 and 16,

when the hormones made in the epiphyseal growth of long bones transformed

so that is no longer affected by growth hormone.

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2.1.3 Woman Body

According to Kristen Wolfe, Women Body Types (2010) there are 3 types

of woman body, which are:

1) Pear Body Type

Pears have larger lower bodies and smaller upper, it means that this

body type is wider in the bottom. Therefor, storing fat on the hips, thighs

and butt are the big challenge for women whose has a pears body type.

Another way to slim hips and thighs is by focus on aerobic activities like

running and biking that work on lower body and torch calories. At least

three 30-minute cardio sessions a week mixed with two strength-training

workouts to build the upper body, which will balance the appearance of a

bottom-heavy figure. (Plus, the more muscle mass they have, the higher

their metabolism is.)

2) Apple Body Type

Apples carry fat around their middle but generally have a slim lower

body. Therefor the best workout by doing a lot of crunches, while great

for strengthening ab muscles, isn't going to get rid of any extra inches

around your middle. At least three 40-minute cardio sessions a week --

running, biking, or swimming are really recommended for Apple body

type. The objective is to help build lean muscles by focus in lower body

and balance the top half. Twice a week, do some total-body strength

training to help tighten the core and burn flab.

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3) The Chili Pepper Body Type

Chili peppers have a narrow shape with no real difference between the

size of their hips, waists, and shoulder. When peppers gain weight, it's

usually around the middle, putting them at an increased risk for heart

disease and diabetes. For this type, strength training can help to create

curves and definition by building muscle. Two weight-training sessions a

week involving heavier weights and low repetitions, which will help to

tone and shape THE entire body. Mix up the lifting routines with a few

days of moderate-intensity cardio to keep a heart healthy and boost

endurance.

2.1.4 Five Stages Through Women Life

According to The Patient Education Institute, Inc. (2012), in terms of

menstrual periods and estrogen levels, women pass through 5 stages

throughout life, which are:

1) Pre-puberty

During this stage, a girl does not have periods because her ovaries are

not releasing eggs yet. She also does not have breast or rounded hips

and thighs

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2) Puberty

At puberty, a young girl begins to have a monthly period. This usually

occurs around 12-13 years of age. The body makes more estrogen,

which causes breast, pubic and axillary hair and rounded contours of

hips and thighs.

With puberty, woman enters the reproductive stage of her life. This

stage lasts for 20-4- years. During this stage, a woman can become

pregnant if the egg is fertilized after ovulation.

3) Peri-menopause

Perimenopause is the stage before the last menstrual period. This stage

starts 3-5 years before the last menstrual period and ends about a year

after the final period. Some signs or symptoms of menopause may

appear during perimenopause. A woman can become pregnant during

perimenopause. Even if periods are irregular during perimenopause, it

is best to take precautions if pregnancy is unwanted.

4) Menopause

The time when a woman stops having a monthly menstrual period is

called Menopause that usually go through between the ages of 40 and

55. It causes periods to become irregular and eventually stop. It occurs

when the ovaries quit making hormones and releasing eggs. When a

woman is in her mid 30s, the ovaries begin to change the amount of

estrogen and progesterone they make. Although it is very rare for a

woman to have menopause before the age of 40, it can happen anytime

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between the ages of 30 to mid-50s or later. Bad lifestyle often being

one of the reason to begin menopause earlier.

5) Post-menopause

Post menopause, the last stage after menopause. During this stage of

menopause diminish and go away. During this stage, a woman does

not have menstrual periods and cannot get pregnant. However, there is

greater risk for some health problems during post menopause.

From the definition above, women have a different need in every

stages of their life. When women start facing a puberty, they body will change

either will have a pear body type or apple. Women with different body type

will need a different need of clothes, food and how they keep their body to be

ideal. After that, women will face menopause chapter, which is will have a

different needs too, because menopause woman will has different

psychological needs and different hormone.

Also, based on that conclusion, women in different stage will have a

different point of view in choosing, purchasing and deciding every needs of

product and service. Consumer Behavior theory will be guidance of how

people usually choose to use product or service.

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2.2 Consumer Behavior

According to Solomon (2012), consumer behavior is the study of how

individuals, groups and organization select, buy, use and dispose of goods,

services, ideas, or experiences to satisfy their needs and wants. A customer‟s

buying behavior is influenced by cultural, social, and personal factors.

2.2.1 Cultural Factors

Culture, subculture and social class are particularly important

influences on consumer buying behavior. Culture is the fundamental

determinant of a person wants and behavior. Through family or other key

intuition, a child growing up in United States is exposed to values such as

achievement and success, activity, efficiency and practicality, progress,

material comfort, individualism, freedom, external comfort,

humanitarianism, and youthfulness. A child growing up in another country

might have a different view of self, relationship to others, and rituals.

Each culture consists of smaller subcultures that provide more

specific identification and socialization for their members. Subcultures

include nationalities, religions, racial groups, and geographic regions.

Virtually human societies exhibit social stratification, most often in the

form of social classes, relatively homogeneous and enduring divisions in a

society, hierarchically ordered and with members who share similar

values, interests, and behavior. One classic depiction of social classes

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defined in seven ascending levels: (1) lower lowers, (2) upper lowers, (3)

working class, (4) middle class, (5) upper middles, (6) lower uppers, and

(7) upper uppers.

2.2.2 Social Factors

1) Reference Groups

Reference groups are all the groups that have a direct (face-to-

face) or indirect influence on their attitudes or behavior. Groups

having a direct influence are called membership groups. Some of

these are primary groups with whom the person interacts fairly

continuously and informally, such as family, friends, neighbors

and coworkers. People also belong to secondary groups, such as

religious, professional and trade-union groups, which tend to be

more formal and require less continuous interaction. Reference

group influence members in at least three ways. (1) They expose

an individual to new behaviors and lifestyles, (2) they influence

attitudes and self-concept, and (3) they create pressures for

conformity that may affect product and brand choices. People also

influenced by groups to which they „do not belong’. Aspirational

groups are those a person hopes to join; dissociative groups are

those whose values or behavior an individual rejects.

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Where reference group influence is strong, marketers must

determine how to reach and influence the group‟s opinion leaders.

Opinion leader is the person who offers informal advice or

information about specific product or product category, such as

which of several brands is best or how particular product maybe

used.

2) Family

The family is the most important consumer buying organization in

society, and family members constitute the most influential primary

reference group. There are two families in the buyer‟s life:

The family of orientation consists of parents and siblings. From

parents a person acquires an orientation toward religion, politics, and

economics and a sense of personal ambition, self-worth, and love.

Even if the buyer no longer interacts very much with his or her

parents, parental influence on behavior can be significant.

Family of procreation or usually named as the person‟s spouse and

children. In the United States, husband-wife engagement in purchases

has traditionally varied widely by product category. The wife has

usually acted as the family‟s main purchasing agent, especially for

food, sundries, and staple clothing items. Now traditional purchasing

roles are changing, and marketers would be wise to see both men and

women as possible targets.

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3) Roles and Status

Groups often are an important source of information and help to define

norms for behavior. We can define a person‟s position in each group

in terms of role and status. A role consists of the activities a person is

expected to perform. Each role in turn connotes a status. People

choose products that reflect and communicate their role and their

actual or desired status in society. Marketers must be aware of the

status-symbol potential of products and brands.

2.2.3 Personal Factors

Personal characteristic that influence a buyer‟s decision include age and

stage in the life cycle, occupation and economy circumstances, personality

and self concept, and lifestyle and values.

1) Age and Stage in The Life Cycle

People‟s taste in food, clothes, furniture and recreation is often related

to our age. Consumptions are also shaped by the family life cycle and

the number, age, and gender of people in the household at any points

in time. In additions, psychological life-cycle stages may matter.

Adults experience certain “passages” or “transformations” as they go

through life. Their behavior as they go through these passages, such as

becoming a parent, is not necessarily fixed but changes with the times.

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Also consider critical life events or transition such as marriage,

childbirth, illness, relocation, divorce, as giving rise to new needs.

2) Occupation and Economic Circumstances

Occupation also influences consumption patterns by identify the

occupational groups that have above-average interest in their products

and services and even tailor products for certain occupational groups.

3) Personality and Self-concept

Each person has personality characteristic that influence his or her

buying behavior. By personality, means that a set of distinguishing

human psychological traits that lead relatively consistent and enduring

responses to environmental stimuli (including buying behavior).

Personality can be a useful variable in analyzing consumer brand

choices. Brands also have personalities, and consumers are likely to

choose brands whose personalities match their own.

Brand personality is the specific mix of human traits that we can

attribute to a particular brand. Stanford‟s Jennifer Aaker researched

brand personalities and identified the following traits

Sincerity (down-to-earth, honest, wholesome, and cheerful)

Excitement (darling, spirited, imaginative, and up-to-date)

Competence (reliable, intelligent, and successful)

Sophistication (upper-class and charming)

Ruggedness (outdoorsy and tough)

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4) Lifestyle and Values

People from the same subculture, social class and occupation may lead

quite different lifestyles. A lifestyle is a person‟s pattern of living in the

world as expressed in activities, interests, and opinions.

Consumer decisions are also influenced by core values, the belief systems

that underlie attitudes and behaviors. Core values go much deeper than

behavior or attitude and determine, at a basic level, people‟s choices and

desires over the long term.

2.3 Motivation: Maslow’s Theory

According to Solomon (2012), Abraham Maslow sought to explain

why people are driven by particular needs at particular times. Maslow answers

that human needs are arranged in a hierarchy from most to least pressing such

as physiological needs, safety needs, social needs, esteem needs, and self-

actualization needs. People will try to satisfy their most important need first

and then try to satisfy the next most important.

Abraham Maslow formulated a hierarchy of needs which divides

motives according to five levels of significance. The basic needs are at the

bottom of the hierarchy and the highest needs in its top part. However, they do

not have to be fully satisfied. The higher we get, the lower the percentage of

satisfaction is which is necessary for a higher need to emerge.

AbrahamMaslow believed that provision of physiological needs and feelings

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of safety is not sufficient for universal motivation of a person. Maslow‟s

hierarchy of needs can be adapted successfully to the market segmentation

and preparation of advertising statements as there are goods intended for

satisfaction of each level of needs and most needs are shared by large

segments of consumers. Solomon et al. (2006) therefore applied the Maslow‟s

pyramid of needs for understanding of motives of buyer behavior of

consumers and subsequent efficient application of marketing communication

with potential customers, as human needs – needs of the consumer – are the

basis of modern marketing, the core of the marketing conception which is

related to the goal of the article:

Figure 2.1 Maslow’s Theory

Source: Solomon, 2012

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1) Physiological needs – basic needs (their satisfaction is necessary for

survival), such as water, sleep, food, also medicine and goods of everyday

use. KFC – “Life Tastes Great!”

2) Needs of safety and security – feeling of safety, absence of fear,

provision and maintenance of existence for future. This degree of

hierarchy is described well by the insurance, alarm or pension insurance

scheme markets. AXA – “Be Life Confident.

3) Social needs – communication with other people, existence of friends

(solidarity and love) and building of a position in a certain group. This

need can be satisfy by the market such as clothes, body care, drinks or

clubs. Pepsi – “You Are the Pepsi Generation!”

4) Need of recognition – needs of the ego, prestige, status and success. It

includes the mar4ket with cars, furniture, credit cards, transactions or

exclusive drinks. Honda – “The True Definition of Luxury. Yours.”

5) Self-Actualization– implementation of your own possibilities, how to

become all you are able to become, implementation of all your abilities

and talents, satisfaction of possibility of education and development, self-

fulfillment, enriching experience. US Army – “Be All You Can Be.”

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2.4 Fitness Center

In English, Fitness Centre stand from Fitness and Centre, which in Indonesian

means to wellness and fitness center means the center, so fitness is the fitness

center. Fitness center became one of the places that provide and implement

programs of physical fitness training, which not only provide direct benefits such

as an increase in the degree of physical fitness and health, but also provides the

flexibility to re-express any needs such as socialization, actualization, the

utilization of spare time, business and so on. (Yelia, 2012)

2.5 Business Model Creation

According to Osterwalder and Pigneur (2010), a business model describes the

base concept of how an organization creates, give and capture the value. The

challenge is: the concept should be simple, relevant, easy to understand, but not

simplify the complexity of how a business runs. The business model will divide

into nine building blocks that show how a company raising money. The nine

building blocks consist of four main ideas in a business: customers, offers,

infrastructure, and financial continuity. A business model is like a strategy

blueprint that applied through organization structure, process, and system.

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Figure 2.2 The Business Model Canvas

Source: Business Model Generation website

The nine building blocks consist of:

1) Customer Segmentation

Customer is the core of every business. Without customers, who can give

revenue to the company, the company cannot survive and exist. To make

the customers satisfied, a company can grouping the customers into

several segments depends on the same needs, behavior, or another

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attribute. A business model can describe one or more customer segments,

small or big. An organization should decide which segment to serve and

which one to decline. After that, the organization can design the business

model carefully and with proper information about the customer needs.

The customer groups represent some separate segment, if:

The customer needs and allow different offers.

The customers come from Distribution Channel.

The customers need different relationship.

The customers basically have different profitability.

The customers willing to pay for different aspect offers.

There are some customer‟s segment types:

Mass market: this business model focused on mass market, not

distinguish between different Customer Segments. Value Proposition,

Distribution Channels, and Customer Relationships focused on one big

customer group with similar needs and problems.

Niche market: the business model serving niche market that has

Customer Segments more specific and specialization. The Value

Proposition, Distribution Channels and Customer Relationships

specially made for the specific needs of niche market. This kind of

business model often find in buyer-supplier relationship.

Segmented: some of the business model distinguished the market

segment from its problems and needs. This two segments have similar

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problems and needs but with more variation. This business model

affect – for example, in Credit Suisse- Value Proposition, Distribution

Channels, Customer Relationships, and Revenue Streams.

Diversified: organization with diversified customers serve two

customer segments that not related to each other with different needs

and different problems.

Multi-sided Platform: some organizations serve two or more

Customer Segments that depends on each other.

2) Value Prepositions

Value Propositions are the reason why the customers turned from one

company to other company. It can resolve the customer problems or

satisfying the customer needs. Every Value Propositions consist of the

combination of products or services that serve the specific needs of

Customer Segments. In this case, Value Propositions is a unity, or

combination of the advantage that offer by the company to the customers.

Some Value Propositions become innovative and represent of a new offers

or just changing the existing offers. The other Value Propositions may be

the same of the existing one, but with additional feature and attributes.

There are some elements that can contribute to the creation of new Value

Propositions:

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Newness: some Value Propositions are granting the customer needs

that they never got before.

Performance: increasing the products or services performance is the

common way to create a value.

Customization: adjust the products or services to fulfilled the customer

specific needs individually or in Customer Segments also create the

value.

“Getting the Job Done”: value can be created through helping the

customers finished their jobs.

Design: design was important, but hard to measure. A product can

look stunning because of its superior design, and can be the part of

very important Value Propositions.

Brand/Status: customers can find the value through a simple act

because using or installing certain brands.

Price: offering same value through lower price sometimes done to

satisfy the Customer Segments need whose sensitive about the price.

But, cheap Value Proposition givesimportant implication to the

business model.

Cost Reduction: helping the customer reduce the cost was an

important way to creating value.

Risk Reduction: customers appreciate the risk reduction that appeared

when they buy a product or services.

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Accessibility: provide product or service to the former customers who

difficultly access a product or service was the other way to create a

value.

Convenience or Usability: make everything more comfortable and

easy to use can create a meaningful value.

3) Channel

Communication channel, distribution channel and sales were a connection

between a company and the customers. Channels were a touching spots

for customers that have important roles in every moment they had.

Channels run some function, including:

Increase the customer awareness of company products and services.

Helping the customers evaluate the company‟s Value Propositions.

Allow the customers to buy products and services specifically.

Give the Value Propositions to the customers.

Give the after-sales support to the customers.

Channel has five different phases and two different types:

The Channel type:

a. Own by the company

o Sales force

o Web store

b. Partnerships

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o Own store

o Partnership store

o Wholesale selling

The Channel phase:

1) Awareness: how do the company raise awareness about the

company‟s product and services?

2) Evaluation: how do the company help customers evaluate the

company‟s organization Value Propositions?

3) Purchase: how do the company allow customers to purchase

specific products and services?

4) Delivery: how do the company deliver a Value Proposition to

customers?

5) After sales: how does the company provide post-purchase

customer support?

4) Customer Relationships

A company should explain the type of relationship that they want to build

with the Customer Segments. A relationship can be varied from the

private one until automatically. A Customer Relationships can be driven

by below motivation.

Customers acquisition

Retention (maintaining the existing) customers

Sales increasement (upselling)

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We can differentiate some of Customer Relationships categories:

Personal assistance

Dedicated Personal Assistance

Self-Service

Automated Services

Communities

Co-creation

5) Revenue Stream

Revenue Streams is the business model veins. A company should ask to

themselves, for what value do each Customer Segments are willing to

pay? Each Revenue Streams may have different pricing mechanism, for

example: fixed cost list price, product feature dependent, customer

segment dependent, volume dependent, negotiation (bargaining), yield

management and real-time-market.

Business model involves two types of Revenue Streams:

i. Transactional revenue that comes from customer‟s one-time

payment.

ii. Repeated revenue that comes from the continuity payment to give

Value Proposition to the customers or giving after-sales support to

the customers.

There are some ways to build the Revenue Streams:

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Asset sale: selling the ownership rights of a physical product.

Usage fee: Revenue Streams got from several kind of service. The

more the service were use, the more the customer will pay.

Subscriptions fee: Revenue Streams can be earned from the

continuity access sales of a service. For example: gym membership.

Lending or Renting or Leasing: Revenue Streams earned because of

giving someone a temporary exclusive rights to use some assets as the

charge of the payment that been made.

Licensing: this Revenue Streams come because the customers are got

the permission to use the protected intellectual property as the result of

licensing fee.

Brokerage fee: this Revenue Streams come from brokerage service

that done between two parties or more.

Advertising: this Revenue Streams earned from the advertisement fee

of products, services, or several brands.

6) Key Resources

Every business model needs Key Resources. This resources allow the

company create and offer the Value Propositions, reaching the market,

maintaining the relationship with the Customer Segments, and got the

revenue. The needs of Key Resources were different depends on business

model.

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The main resources can be physically, financial, intellectual, or human.

The main resources can be owned or rent by the company or from the

partners.

The Key Resources can be categorized as below:

Physical: this category includes all physical assets like factory facility,

building, vehicles, machines, system, selling point system and

distribution channel.

Intellectual (brand patents, copyrights, data): intellectual resources

like brand patents, and copyright, partnerships and customer database

were important components for a strong business mode. Intellectual

resources were not easy to developed, but once it succeed, will give a

meaningful value.

Human: every company needs human resources, but some people will

look stunning on some kind of business model. For example, human

resources were very important on creative industry and solid

knowledge.

Financial: some business model needs financial resource with or

financial assurance, like cash money, credits, or stock option for

recruiting mainstay employees.

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7) Key Activities

Every business model needs some Key Activities, some important actions

that a company have to take so the company can operated. Same like Key

Resources, Key Activities also needed to create and give Value

Proposition, reaching the market, maintaining the Customer Relationships,

and earning revenue. And also like Key Resources, Key Activities were

different depends on the business model types.

Key Activities categorized into:

Production: this activities related with designing, creating and

delivering the product in big numbers or best quality. Production

activity dominating the factory business model type.

Problem Solving: this Key Activities related to offering new solution

for customer individual problems. This kind of business model

organization needs activity like knowledge management or continuity

training.

Platform or Network: a business model that design with platform for

Key Resources dominated by platform or Key Activities that related

with the channel. Channel, platform matchmaking, software or even

brands can used as a platform. The Key Activities in this category

related with platform management, terms and conditions, and platform

promotions.

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8) Key Partnership

A company creates partnerships for some reason, and partnerships can be

the based for every kind of business model. The company build the

alliance to optimizing the business model, reduce the risk, or to get their

own resources.

We can differentiate the partnership into four kinds:

a. Strategic alliance between the non-competitors.

b. Competition: strategic partnership between the competitors.

c. Joint venture business to develop new product.

d. Supplier and buyer relationship to guarantee the stock that can rely

on.

To build a meaningful partnership, herewith the three motivation that can

be our consideration when building the partnership:

Optimization and economy: the fundamental shapes of partnership or

supplier-buyer relationships designed to optimalize the resources

allocation and activities. Optimization and economic scale usually

made for cost reduction, and sometimes it‟s involving the outsourcing

or the utilization of shared infrastructure.

Reduction of risk and uncertainty: partnership helps to reduce the

risk in competitive environment with uncertainty. It is not

extraordinary for the competitors to create a strategic alliance in one

are and still competing in other areas.

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Acquisition of particular resources and activities: only a few

companies that have all of the resources or do every activities that

shown on their business model. Most of them like to expanding their

ability by counting on other company to complete their resources or

doing some activities. This kind of partnership appears to get

knowledge, license or access to the customers.

9) Cost Structure

This building block explains the most important cost that appears when

operating a certain business model. Creating and giving value,

maintaining the Customer Relationships, and earning the revenue, caused

the cost. This kind of cost calculation was easier after the Key Resources,

Key Activities, and Key Partnership determined. But, some business

model was motivated on cost rather that other kind of business model.

There are two classes in Cost Structure:

1. Cost Driven: the cost driven business model focused on minimizing

the cost. This approach were aims to create and maintain the Cost

Structure keep lean, using low price Value Proposition, maximum

automation and extensive outsourcing.

2. Value Driven: some company was not too care of the business model

cost implication design, and focused on value creation. Premium

Value Proposition and high-level private service was the

characteristics of business model that using the value driven.

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Cost Structure has below characteristic:

Fixed Costs: the fixed cost are same even the products or services

volume that produce are different. For example: salary, rent fee, and

factory physical facility.

Variable costs: variable cost were proportional with the products or

services volume that been produce.

Economies of scale: the advantage of the cost that enjoyed by a

business when the production was developing.

Economies of scope: the advantage of this cost is related with bigger

operational scope. In a big company, for example, the same marketing

activities or distribution channel can support some products at once.

2.6 Internal and External Analysis

According to Kottler and Keller (2013), in order to remove a gap between our

business strategy with the Internal and external environment, a throughout

research regarding the real market condition is needed. This action would help us

to make a basis for our business strategy. The research would identify opposition

for a new venture or strategy, opportunities and threats that would later on we

would face.

In order to perform an analysis on Internal and external environment, a SWOT

analysis (Strength, Weakness, Opportunities and Threat Analysis) need to be

done. Performing a SWOT analysis would be enable us to create a clear view

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regarding the strength of the idea, weaknesses of the idea, opportunities in the

market, and threats for the idea.

Strengths: These are the internal factors that aides the idea to reach the goals

set. It could be in the form of the business itself, project manager, team,

resources or even connections that give an advantage over competitors in the

industry.

Weaknesses: These are the internal factors that could become obstacles for

the idea to reach the goals set. It could be in a form the business itself, project

manager, team, resources and connection that place the idea at a competitive

disadvantage.

Opportunities: These are the external environmental factors that create in

roads to achieving success either for the company generally or with respect to

the specific project undertaken. It could be in a form of future change of

regulation, new regulations, change of technology, change of demands or even

a better new supplier that would be an opportunity for the idea.

Threats: These are the external elements that can cause trouble for the

company or which serve as barriers to the end goal. The threats could be in a

form of a new incoming competitor, new disadvantaging regulation, slow

economic growth or even a change of trends.

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2.7 Marketing Strategy

According to Kottler and Keller (2013), marketing strategy is a

strategy that combines all of its marketing goals into one comprehensive plan.

A good marketing strategy should be drawn from market research and focus

on the right product mix in order to achieve the maximum profit potential and

sustain the business. The marketing strategy is the foundation of a marketing

plan.

In this paper we would utilize two marketing strategy, the first strategy

would be STP analysis, and followed by Marketing Mix tools.

2.7.1 STP Analysis

The market for each product and service is very fast, therefore we as a

marketer required to divide the market into segments, by examining the

demographic, psychographic and behavioral differences among customer

it would help the company to target which market would present the

greatest opportunities. The company should also position their product or

service into their consumer‟s mind when delivering their product. STP

analysis is divided into three parts, Market Segmentation, Target Market

and Positioning of the service. Each part would determine how the

company offers their service to the public. (Kottler and Keller, 2013).

o Segmentation:

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Segmentation Identifies all segments available for the service, where

its objective is to find attractive market for the service. Market

segments are defined into 4 descriptive characteristics: Geographic,

Demographic, Psychographic and Behavioral segmentations.

Geographic Segmentation:

Geographic segmentation divides the market into geographical

units such as nations, states, regions, countries, cities or

neighborhoods.

Demographic Segmentation:

Demographic segmentations divides the market on variables

such as age, family size, family lifecycle, gender, income

occupation, education, religion, race, generation, nationality

and social class.

Psychographic Segmentation:

Psychographic segmentation divide consumers into groups of

the basis of psychological / personality traits, lifestyle or

values. This includes psychographic lifestyle and personality.

Behavioral Segmentation:

Behavioral segmentation divide consumers into groups on the

basis of their knowledge of, attitude toward, use of or response

to a product. This includes segmentation by behavioral

occasions, and segmentation based on benefits.

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o Targeting:

Targeting is the actual goal and objective in market that marketer

would like to reach.

o Positioning:

Positioning is an analysis to know the position of the service compared

to other similar service.

2.7.2 Marketing Mix

According to Brian Tracy (2004), marketing mix is a planned

mix of the controllable elements of a product's marketing plan. In this

paper we would utilize 7Ps marketing mix, which are: Product, Price,

Place, Promotion, People, Physical Evidence and Process.

These seven controllable elements need to be set to serve the needs

of the customer to attain an optimum income.

Product

Product defines the type of product and services that the company

offers, whether the products and services, appropriate and suitable

for the market.

Price

Price defines the price set to purchase the product or service,

whether the prices of the products and services set make sure

they're still appropriate to the realities of the current market.

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Place

Place explains regarding the location, and the place where your

product or service is actually sold.

Promotion

Promotions explain all the ways you tell your customers about

your products or services and how you then market and sell to

them.

People

People define the people inside and outside of your business who

are responsible for every element of your sales and marketing

strategy and activities.

Physical Evidence

Physical evidence explains the way the company presents their

product or service to the customers.

Process

Process explains the way the company processes their service, how to

deliver the product or service to the customer.

2.8 Business Plan

Business plan is final output of business planning process. A business plan

sometimes called as “a living document”. It helps the entrepreneurs shape their

original vision into a better opportunity by raising critical questions, researching

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answers for those questions and answering them. When the business has been

launched, the pre-startup work saves untold effort and money that an entrepreneur

might spend trying to reshape the product. (Bygrave and Zacharakis, 2014).

There are thirteen points that become the business plan outline:

1) The Cover

In the cover of the plan, it should include the following information:

company, tagline, contact person, address, phone, fax, e-mail, date,

disclaimer, and copy number. Most of the information is self-explanatory,

but few things should be pointed out. The president or some other

founding team member should be the contact person of a new venture. It

also should have a disclaimer, to protect the plan if someone else might do

something with it. The cover should have a line stating which number

copy it is, to keep a log of who has copies so that the entrepreneur can

control for unexpected distribution. Last but not least, the cover should be

eye-catching, for example, with a catchy tagline draws attention and

encourage reader to look further.

2) Executive Summary

Executive summary is the most important part on a business plan. It is like

a book‟s jacket notes. The aim is to hit the readers with the most

compelling aspects of the business opportunity right up front. Write the

executive summary in the last when all of the business plan parts were

done, because it is the main idea of all of the outline.

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Below are the compelling information that need to be provided in this

section:

a. Description of Opportunity

b. Business Concept

c. Industry Overview

d. Target Market

e. Competitive Adventage

f. Business Model and Economics

g. Team and Offering

h. Financial Snapshot

3) Table of Content

Table of content provides readers a road map to business plan. It helps

readers to easily understand the document. It should include major

sections, subsections, exhibits.

4) Industry, Customer, and Competitor Analysis

Industry

This section is to illustrate the opportunity and how you intend to capture

it. It is important to provide a setting or context before developing the plot

and illustrate a theme. Overall market such as in terms of revenues,

growth, and future trends that are pertinent need to describe in this section.

Focus on how the market is segmented now and how it will be segmented

into the future.

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Customer

When defining the market space that plan to enter, examine the target

customer in details. An accurate customer profile is essential to

developing a product that customers truly want and marketing campaigns

that they will actualy respond to. Use demographic and psychographic

information to define who is the customers.

Competition

It is important to research about the direct and indirect competitors to meet

the needs. The basis of comparison will be the different product features

and attributes that each competitor uses to differentiate itself from the

pack.

5) Company and Product Description

In this section, covered overview the concept of company: is there any

branch or joint venture. It describes business opportunity and strategy to

pursue the opportunity. Entrepreneurs need to identify their market entry

and growth strategy. Highlight how product fits into customer‟s value

proposition: what is the value add to customers.

6) Marketing Plan

In marketing plan sections, there are five main point to be considered.

First, target market strategy describes product or service is differentiated

from competitors. Second, product attribute map can be utilized to

understand the product in the market. Third, marketing mix provides

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guides to develop marketing strategy. Fourth, marketing communication

strategy requires media selection and them to deliver to customer. And the

last is sales and marketing forecast: comparable method versus build up

method.

7) Operations Plan

Scope of operation describes production process for product or service.

It‟s include the description toward suppliers, distribution or warehousing.

Parameter are determined for day-to-day activities for ongoing operations.

8) Development Plan

The development plan highlights the development strategy and also

provides a detailed development timeline. Development strategy conduct

to know what work remains to be completed, what factors need to come

together for development to be successful and what risk to development

does the firm face. After laid out this details, continue to assemble a

development timeline. Development timeline is a schedule that use to

highlight major milestone and to monitor progress and make changes.

9) Team

This section consist of team bios and roles; advisory board, board of

directors, strategic partners, external members; and compensation and

ownership. In team bios and roles, describe the cast of characters and the

best place to start is by identifying the key team members and their titles.

Advisory boards, board of directors, strategic partners and external

members are one of the attractive things to investor. In building advisory

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board, a team with diverse skills and experience are need to be created.

And by law, most types of organization require a board of directors. The

board of directors primary role is to oversee the company on behalf of the

investors, and to that end, the board has the power to replace top

executives if it feels doing so would be in the best interests of the

company. Strategic partners provide credibility to the venture. For

example, accounting firm or law firm.

10) Critical Risk

Critical risk description should be presented in positive way. In common

risk, are include the market interest (customer interest), growth potential,

competitor action and retailitation. Operation expense and time of

financing become risk to business establishment.

11) Offering

In the offering section, using the vision for the business and the estimates

of the capital required, needs to develop the “sources and uses” schedule.

This sources section details how much capital you need and the types of

financing, such as equity investment and debt infusions.

12) Financial Plan

Financial plan illustrates how to construct the pro-forma financials, but

also need verbal description of these financials.

13) Appendices

In appendices, its include anything and everything that you think adds

further validation to concept but that doesn‟t fit or is too large to insert in

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the main parts of the plan. Common inclusions would be one-page

resumes of key team members, articles that feature your venture, and

technical specifications.

2.9 PESTLE Analysis

According to Team Free Management E-books (2013), all organization need

to identify external factors within their environment that could have an impact on

their operations. To identify this external factors, there is a popular tool call PESTLE

analysis. This tool can help to considering Political, Economic, Social,

Technological, Legal and Environmental issues.

PESTLE Analysis used when an organization are:

Launching a new product or service

Entering a new region or country

Considering a new route to the market

Working as part of a strategic project team

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Figure 2.3: PESTLE breakdown

Source: Team Free Management E-Book (2013)

2.9.1. Political Factors

Keep abreast of potential policy changes in a government because

even where the political situation is relatively stable there may be

changes in policy at the highest level and these can have serious

implications is always advisable to keep abreast.

This may result in changes in government priorities, which in turn

can result in new initiatives being introduced as well as changes to

trade regulations or taxation. These include changes in:

Employment laws

Consumer protection laws

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Environmental regulations

Taxation regulations

Trade restrictions or reforms

Health and safety requirements

2.9.2 Economic Factors

For the organization operational efficiency, it is important to

consider such factors as skills levels, availability of expertise, wage

patterns, working practices and labor cost trends. Current cost of living

for your target market as well as the availability of credit or finance is

one of the point when trying to determine the economic viability of a

market.

Official economic indicators, such as GDP (Gross Domestic

Product), GNP (Gross National Product) and consumer-based indices

often highlight areas where more detailed information is required.

2.9.3 Social Factors

Social factors and cross-cultural communication play a critical

role in international and global markets, and the success will depend

on the depth of the research in this area.

There are numbers of social factors that need to be considered

that have an impact to the market:

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Age distribution

Population growth rate

Employment levels

Income statistics

Education and career trends

Religious beliefs

Cultural and social conventions

Things like health, career, and environmental issues also need to be

considered. Because getting this wrong is costly and may not come to

light until considerable investment been made by the organization.

2.9.4 Technological Factors

The pace of change in technology is becoming more rapid, and often

changes that impact the market come from unexpected sources.

Technological Factors can be divided into two areas: manufacture and

infrastructure. A strong competitive adventage can be attained by

exploiting opportunities to update or alter their production an organization

can gain market share. The activities include:

Automation

Improve quality of parts and end product

Incentives

Significant cost savings

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Use of outsourcing to control costs and offer great flexibility

2.9.5 Legal Factors

Anticipated change in legislation in the main trading partner

countries should be investigated. The list of legal factor that should be

considered includes current and impending legislation that may affect

the industry in areas such as employment, competition, health and

safety.

The PESTLE analysis should consider the impact of the

national laws as well as those originating in other countries that could

have implications, for example global accounting regulations, safety

complience, etc.

2.9.6 Environmental Factors

Issues related with environmental protection become

increasingly important in recent years as the implications of under-

regulated economic activity are seen today. This has become more

significant with globalization as the impact of an organization‟s

actions may be felt outside of its native country and may incur

unquantifiable financial penalties.

As with the other PESTLE factors the organization should look

how the potential changes to weather patterns and climate cycles could

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have implications for the organization‟s operations. This ecological

and environmental aspects can have consequences that are felt both on

an economic and a social level.

2.10 Accounting and Financial Theory

According to Horngren, Sundem, Elliot and Philbrick (2006), accounting is

the language of business. It is the method companies use to communicate financial

information to their employees and to the public. Accounting is a process of

identifying, recording, and summarizing economic information and reporting it to

decision makers. Financial accounting focuses on the specific needs of decision

makers external to the organization, such as stockholders, suppliers, banks, and

government agencies.

The most common source of financial information used by investors and

others outside the company is the annual report. The annual report is a document

prepared by management and distributed to current and potential investors to inform

them about the company‟s past performance and future prospects. Firms distribute

their annual reports to stockholders automatically. Potential investors may request the

report by calling the investor relations department of the company.

Most large company use their annual report to promote the company, using

pleasing photographs extensively to communicate their message. Also, in addition to

the financial statements, annual reports include:

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A letter from corporate

A discussion and analysis by management of recent economic events

Footnotes that explain many elements of the financial statement in

more detail

The report of the independent auditors

A statement of management‟s responsibility for preparation of the

financial statements

Other corporate information

2.10.1 The Balance Sheet

One of the major financial statements prepared by the

accounting system is the balance sheet, also called the statement of

financial position. The balance sheet shows the financial status of a

company at a particular instant time. It is essentially a snapshot of the

organization at a given date. It has two counterbalancing sections. The

left side lists the resources of the firm (everything the firm owns and

control – from cash to buildings, etc). The right side lists the claims

against the resources. The resources and claims form the balance sheet

equation:

Assets = Liabilities + Owners’ Equity

We define the terms in this equation as follows:

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Assets are economic resources that the company expected to

help generate future cash inflows or reduce or prevent future cash

outflows. Examples are cash, inventories, and equipment.

Liabilities are economic obligations of the obligation to

outsiders, or claims against its assets by outsiders. An example is a

debt to a bank. When a company takes out a loan or other type of

liability, it generally signs a promissory note that states the terms of

repayment. Accountants use the term notes payable to describe the

existence of promissory notes.

Owners’ equity is the claim on the organization‟s assets.

Because debt holders have first claim on the asset, the owners‟ claim

is equal to the assets less the liabilities.

Every transaction entered into by a company, or an entity,

affects the balance sheet. An entity is an organization or a section of

an organization that stands apart from other organizations and

individuals as a seperate economic unit. A transaction is any event that

affects the financial position of an entity and that an accountant can

reliably record in money terms. When accountants record a

transaction, they make at least two entries so the total assets always

equal the total liabilities plus owners‟ equity. Thus, it is important to

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maintain the equality of the balance sheet equation for every

transaction.

2.10.2 The Income Statement

Measuring income is important to everyone, from individuals

to business, because people need to know how well what a company

doing economically. Income is like the number on the scoreboard that

tells how well the home team is performing.

An income statement (also called statement of earnings or

operating statement) is a report of all revenues and expenses pertaining

to a specific time period. Net income (or net earnings) is the famous

bottom line on an income statement, the reminder after deducting all

expenses from revenues.

Relationship between income statement and balance sheet is,

the income statement is the major link between two balance sheets.

The balance sheets show the financial position of the company at

discrete points in time, and the income statement explain the changes

that have taken place between those points.

2.10.3 Statement of Cash Flows

The statement of cash flows (or cash flow statement) reports

the cash receipts and cash payments of an entity during a particular

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period and classifies them as financing, investing, and operating flows.

Like the income statement, it summarizes activities over a span of

time, and it labeled with the exact period cover.

The purpose of cash flow statements are:

It helps them understand the relationship of net income to changes

in cash balances. Cash balances can decline despite positive net

income and vise versa.

It identifies specific increases and decreases in a firm‟s productive

assets

It reports past cash flows as an aid to:

- Predicting future cash flows.

- Evaluating how management generates and uses cash

- Determining a company‟s ability to pay interest, dividends, and

debts when they are due

Balance sheets show the status of a company at a single point in

time. In contrast, statement of cash flows and income statements show

the performance of a company over a period of time. Both explain why

the balance sheet items have changed. The statement of cash flows

explains where cash came from during a period and where it went.

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2.10.4 Valuating The Business

According to Noreen, Brewer and Garrison (2014), to

valuating the business, it is important to considering investment

opportunities. It divides into screening decisions and preference

decisions. Screening decisions, which come first, pertain to whether or

not a proposed investment is acceptable. While preference decisions

are called rationing decisions, or ranking decisions. Limited

investment funds must be rationed among many competing

alternatives.

Investment decisions should take into account the time value of

money because a dollar today is more valuable than a dollar received

in the future. The net present value and internal rate of return

methods both reflect this fact. In the net present value method, future

cash flows are discounted to their present value. The difference

between the present value of the cash inflows and the present of the

cash outflows is called a project‟s net present value. If the net present

value of a project is negative, the project is rejected. The discount rate

in the net present value of usually based on a minimum required rate

of return such as a company‟s cost of capital.

The internal rate of return is the rate of return that equates the

equates the present value of the cash inflows and the present value of

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the outflows, resulting in a zero net present value. If the internal rate of

return is less than a company‟s minimum required rate of return, the

project is rejected.

To evaluate the investment proposal, some companies prefer to

use either payback method. The payback period is the number of

periods that are required to fully recover the initial investment in the

project.