Sari Organik: A Case Study

Carmi conceptualized Sari Organik as an organic demonstration farm in 1997 (Alon & Misati, 2011); Carmi’s intention was to meet the local market demand while benefiting the entire community and providing vital lessons to small-scale farmers interested in establishing a green Bali. Nevertheless, farmers and landholders have not yet embraced organic farming, thereby impeding the long overdue diversification of food production that had been expected. This paper analyzes the case of Sari Organik, with a particular focus of the options available to Carmi in his effort to replicate the success of his business across Bali and later throughout Indonesia. The case study analysis will also explore what Carmi needs to provide to his franchisees supposing he decides to adopt the micro-franchising model, how he will control the quality of his organic farming model, and the steps he must consider in the process. Eventually, this analysis will also explore the manner in which Carmi will handle competition from rival established organic farmers such as the Big Tree Farms while suggesting other viable options that might work for Sari Organik.

 Case Analysis

In order for Carmi to successfully expand his business across Bali and in the long run throughout Indonesia, he should consider adopting the micro-franchising model rather than growing on his own. Franchising will allow Carmi to grow his business without the need to spend huge amounts of his money in the establishment of new units; furthermore, franchising involves a reduced risk of failure, especially because a vast proportion of the risk will be transferred to franchisees. On the other hand, franchising will provide the inexperienced farmers a tested and proven business model to follow, and this will significantly reduce the uncertainty associated with establishing new businesses from scratch. Sari Organik’s present production scale exceeds local demand (Alon & Misati, 2011), which is indicative of his success in turning his farm into a socially responsible and profitable venture; franchising is also suitable for Carmi since it will enable him to rebuild the severed relationship between consumers and farmers. Indicatively, already many farmers have expressed an interest to going back to traditional rice-farming practices, and this gives Carmi leverage in attracting franchisees; furthermore, Bali being a collective community, it would be easy for Carmi to convince small scale farmers to become his franchisees. The promise of greater returns and knowledge transfer would greatly entice franchisees, thereby not only yielding positive gains for the farmers, but also for the community as a whole.

Should Carmi consider adopting the micro-franchising model, he would be expected to give his micro-franchisees the rights to use his brand and to continue supporting them in areas such as marketing, business operations, as well as in gaining financing. The franchisees, on the other hand, will be obligated to follow Carmi’s business model and to pay him fees and royalties on a % of unit sales; the fees and royalties will be used to finance operations at the headquarters. Similarly, the fees and royalties will be used to train and support franchisees, to market and advertise the brand as well as to enhance quality of the goods and services, and to grow the brand in the marketplace. To ensure quality of products and profitability, Carmi should ensure that all the local farmers are committed to following his tried and tested system of farming practices to the letter (Alon & Misati, 2011); ensuring that all farmers adopt and abide by his system of farming practices will enable Carmi to maintain control over the quality of his organic farming model. Should Carmi decide to adopt the franchising model, his next logical and practical steps would be to first evaluate the readiness of his business by revisiting his concept, checking his financials, conducting market research, preparing for change and weighing other options. Carmi should revisit his concept to ensure that it appeals not only to consumers alone, but also to prospective franchisees; for instance, Carmi should be sure that more units will derive economies of scale and enhanced profits and that his business can be systematized and replicated successfully. Checking his financials is particularly necessary since successful franchises are established out of businesses that are already profitable while market research is mandatory to confirm that actually there’s prevalent consumer demand for his range of product offerings. Most significantly, franchising will require that Carmi prepares adequately for change, especially because it will call for certain trade-offs on Carmi’s part, including relinquishing part of his control over Sari Organik’s farming concept. Evaluating other available options would enable Carmi to evaluate the overall suitability of the franchising model over the rest, thereby enabling him to make a more informed decision.

Carmi should prepare to handle competition from other established organic farmers such as Big Tree Farms in the region by coming up with a compelling franchise concept that is unique to that of its rivals, to gain competitive advantage in the market. To remain profitable in the longer term, Sari Organik must device ingenuous ways of encouraging consumption of his products that are sold at a price higher than what the expatriate MNCs such as The Big Tree Farms are already offering (Alon & Misati, 2011). This appears an arduous task for Carmi but can be achieved through a cultural argument for change; given that the community’s culture is at the core of religion and tradition in Bali, Carmi can use a cultural appeal to gain the consumers’ trust in his locally manufactured products and cut himself a niche in organic farming products. Beating the intense competition from expatriate MNCs will call for the adoption of the best practice of sustainable development; by establishing a sustainable responsible business, Carmi will enhance Sari Organik’s current and future capacity to meet consumer needs and aspirations (Alon & Misati, 2011). Most importantly, building the capacity of its people through training and development will greatly increase their potential to establish key competencies and capabilities that would result to high quality produce.  Evidently, human resources are any organization’s most critical asset, since they are the single most significant source of competitive advantage that defines winning corporations. Training and supporting franchisees, marketing and advertising the brand while maintaining a high quality of goods and services, and growing the brand in the marketplace would enable Carmi to gain a significant return on investments, thereby remaining profitable in the longer term.

The next available option for Carmi is to exploit the village system and its religious and civil governance to raise the community’s awareness of the many advantages of organic farming practices, and to rejuvenate people’s interest in Sari Organik’s model (Alon & Misati, 2011). While civilian leaders in Bali are elected or appointed by the villagers, the religious leader is appointed by village elders; religious leaders and elders make critical decisions and settle disputes in the community. Elders exert significant authority in a vast majority of the villages in Bali while religious leaders are more influential in those communities that predominantly practice Hinduism. The Balinese have been known to have an immense respect for power and authority and have also established a reputation for abiding by the orders issued by their leaders, whether religious or elected. Significantly, a large proportion of the Bali’s population embraces Balinese Hinduism, which strongly dictates the Balinese way of life; at the core of the Balinese Hinduism is the concept of Tri Hita Karana, which seeks to encourage a harmonious relationship among the spiritual, social and natural surroundings. Indeed, the Balinese strongly believe that achieving a harmony among these three yields the greatest benefit possible for the spiritual, mental and physical wellbeing of the individual (Alon & Misati, 2011). Granted that Carmi’s organic farming promotes a relationship that is more or less closer to Balinese Hinduism’s Tri Hita Karana concept, it is quite likely that the community would embrace it whole-heartedly if they were urged by their leaders to do so. In that respect, Bali’s community leaders could potentially encourage the whole community to embrace organic farming by increasing their awareness of the primary benefits of organic farming, especially in relation to its contribution to the promotion of a harmonious relationship among the spiritual, social and natural environments. There is no doubt that the harmony promoted by organic farming will eventually yield the maximum possible benefits for the optimum wellbeing of individuals, not just physically, but also spiritually and mentally.

Furthermore, Bali should consider going into a joint venture with some of the existing organic rice farmers in the region; there are a number of Balinese rice farmers that still practice some of the traditional farming techniques such as the use of hand tools in tilling their lands. Similarly, there is a great chance this approach will work, especially given that a vast majority of the Balinese farmers have already expressed a strong desire to go back to their traditional ways of farming (Alon & Misati, 2011). In view of the significantly reduced production, as a result of the gradual depravation of the soil with the heightened use of chemicals and fertilizers, many farmers are slowly coming to terms with the fact that organic rice farming is probably the best. This implies that it is still possible for Carmi to practice organic rice farming with some of these farmers that are willing to embrace his model all the way, precisely because it would lead to increased yields and profits, thereby restoring honor to both the farmer and the farming activity respectively.

Overall, Carmi’s most promising option in replicating the success of his business in Bali and later across Indonesia is by adopting the micro-franchising model rather than growing on his own, because it will allow him to grow his business without spending huge amounts of his own money in establishing new units. In case Carmi decides to adopt the micro-franchising model, he will be required to give his micro-franchisees the rights to use his brand and to continue supporting them in areas such as marketing, business operations, as well as in gaining financing. Carmi should prepare to handle competition from other established organic farmers such as Big Tree Farms in the region by pioneering a compelling franchise concept that is unique to that of its rivals, to gain competitive advantage in the market. Carmi should also consider exploiting the village system and its religious and civil governance to raise the community’s awareness of the many advantages of organic farming practices, and to rejuvenate people’s interest in organic rice farming. Going into a joint venture with some of the existing organic rice farmers in the region would also bring Carmi’s vision to life, especially because some have already expressed desire to revert to organic rice farming.

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