Ijmet 10 02_017

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International Journal of Mechanical Engineering and Technology (IJMET)
Volume 10, Issue 02, February 2019, pp. 137–144, Article ID: IJMET_10_02_017
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=10&IType=2
ISSN Print: 0976-6340 and ISSN Online: 0976-6359
© IAEME Publication Scopus Indexed
MARKET STRUCTURE AND DISTRIBUTION
PATTERNS OF STRATEGIC COMMODITIES
DRIVING REGIONAL INFLATION IN
INDONESIA
Suhardi
Master of Management Program,
Sekolah Tinggi Ilmu Ekonomi Pertiba Pangkalpinang, Indonesia
Afrizal
Amri
Ahmad Yani
Hamdan
ABSTRACT
This research aims to identify the structure of commodity markets strategic
contributor to inflation, patterns of distribution and formation mechanism of market
prices of strategic goods that contribute to inflation. The study was conducted in the
province of Bangka Belitung, Indonesia by considering some things namely inflation
rates of Bangka Belitung, food commodities and the entrance in Bangka Belitung.
The study concluded that the structure of the market of all commodities in the
object of the research is indicated as a market with high concentration levels.
Commodity markets for agriculture, industrial, and livestock were shown to have
build oligopoly market structure, while the retailer level is indicated by the market
very competitive markets. Distribution patterns tend to vary and do not stick to one
line standard, allowing lower-level traders to acquire products from a variety of
distribution channels. Costs that dominate almost the entire structure of the

Suhardi, Afrizal, Amri, Ahmad Yani, Hamdan
commodity cost object of research is the purchase cost of goods and cost of
transportation.
Key words: inflation, distribution channels, strategic commodities, market structures.
Cite this Article: Suhardi, Afrizal, Amri, Ahmad Yani, Hamdan, Market Structure
and Distribution Patterns of Strategic Commodities Driving Regional Inflation in
Indonesia, International Journal of Mechanical Engineering and Technology 10(2),
2019, pp. 137–144.
http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=10&IType=2
1. INTRODUCTION
Food products generally followed the pattern of seasonal produce, while food needs must be
met throughout the year. Besides agricultural products in General, quickly busted
(perishable). In the case of processing and storage aspect then becomes important in the effort
of providing food continuously. In Indonesia, food production dispersed according to
agroecosystem and geography, while the location of the consumer is scattered in all corners of
the country, both of which were left behind in rural as well as urban areas.
Inflation is basically formed by the interaction of demand and supply side of the side so
that the real inflation-control efforts can be done from both sides. During this time the Bank
Indonesia is already actively controlling the inflation side of the demand through monetary
policy. But a close watch on the movement of national and regional inflation especially
Pangkalpinang which was strongly influenced by the side of the quote, then controlling
inflation from side deals are also important to do.
Price received the consumer depending on the price specified by the manufacturer and
trader. When traced farther, the formation of prices by manufacturers and merchants affected
by the structure of the market and the pattern of distribution of the commodities concerned on
the various levels of trade. Moving on from there, then it needs to be done surgically to the
structure of the market and the distribution pattern to see a price formation mechanism of
some strategic commodities Shaper inflation in Pangkalpinang. Strategic commodities
referred to among other agricultural commodities (medium rice, garlic, onions, kale, mustard
greens, red chilies), commodity farm (eggs, chicken meat), fisheries commodities (tuna fish,
momar), and commodities industry (sugar, cooking oil, sweet bread, zinc, and cement).
Sectoral inflation in Pangkalpinang, food became the biggest contributor to inflation in the
past 10 years with an average of 11.43% followed by the education sector amounted to
10.85%, followed by foodstuffs of 9.99%. The health sector became a contributor to the low
of 5.36%. the highest inflation occurred in the year i.e. 2008 amounting to 18.40 percent,
while the lowest inflation occurred in the year 2009 amounted to 2.17 percent. Inflation is 2
digits occur twice during last year's in ten years 2005 and 2008. The year 2005 amounted to
17.45 percent and 2008 amounting to 18.40 percent. Commodities have participation in
inflation in the year 2003-2011 is rice as much as 7 times, followed by a home contract as
much as 5 times, and the lowest contribution is the cayenne pepper.
Cities Pangkalpinang inflation historically higher and fluctuation than national inflation.
Average annual inflation of cities Pangkalpinang year 2011 to May 2013 of 7.40% or much
higher than the average national annual inflation of 4.92%. In addition to that of the
fluctuation reflected from the standard deviation, the city also recorded Pangkalpinang
inflation higher. The standard deviation of annual inflation of cities Pangkalpinang recorded
2.08% while inflation nationally is only 0.94%. Further along the last three years than any
other province of Bangka Belitung, inflation (calculated from inflation of cities

Market Structure and Distribution Patterns of Strategic Commodities Driving Regional Inflation in
Indonesia
Pangkalpinang) is the highest compared to other provinces in Indonesia, followed by West
Nusa Tenggara, East Kalimantan.
High inflation in Pangkalpinang makes the need for efforts to do inflation in the area and
adapted to the characteristics of the islands of the province. Therefore, it requires accurate
information about inflation in Pangkalpinang characteristics and factors that affected it,
especially from the side of the supply. This is due to the price formed in consumer level is
closely related to the determination of prices by producers and traders. The formation of
prices by producers and traders is influenced by the behavior of a company that is also deeply
connected with the structure of the market. In looking closely at the potential inflation of the
supply side of the problem, not just the amount of availability of goods, but also the behavior
of the distribution of such goods.
Threats to the pattern of distribution will have an impact on the availability of the scarcity
of goods/will eventually be able to influence the level of prices. This research aims to identify
the structure of the market and the distribution pattern of strategic commodities contributor to
inflation as well as area knowing the behavior of producers, distributors, and retailers in the
price formation mechanism of strategic goods contributing inflation.
As one of the efforts in the control of inflation, the area needs to be done identification of
market structure and distribution pattern of following behaviors of manufacturers,
wholesalers, retail traders in the formation of prices and distribution channels of the goods in
the city Pangkalpinang, especially to commodities is the main contributor to inflation in the
region.
2. LITERATURE REVIEW
2.1. Inflation
Inflation is a symptom which shows a rise in the general price level which takes place
continuously. Of the understanding in the event of a price increase is only temporary, then the
price rises while nature cannot be said to be inflation. All countries in the world have always
faced the problem of inflation. Therefore, the level of inflation that occurs in a country is one
measure for good measure as bad economic problems facing the country.
Inflation is urging costs (Cost-push Inflation) or inflation of the supply (supply side
inflation) is the inflation that occurs as a result of the rapid increase in the cost of production
compared with the level of productivity and efficiency so that the company reduced the
supply of goods and services. Reel-other production costs will push companies to raise prices
of goods and services, even though they had to accept the risk will face a decrease in demand
for their goods and services production. While inflation is due to the influence of imports is
the inflation that occurs because of a rise in the price of goods in the countries of origin of the
goods, the general price increase occurred in the country. Other inflation indicators based on
international best practice, among others: (1) Large Trade price index (IHPB). The trading
price of a commodity is the price of the transaction that occurs between sellers/merchants first
with buyer/next big traders in large numbers on the first market of a commodity. [More
detailed Explanation regarding the IHPB can be seen on the Central Bureau of statistics web
site (www.bps.go.id). (2) the Deflator gross domestic product (GDP) illustrates the final item
price level measurement (final goods) and services produced in an economy (the country).
Deflator GDP generated by dividing the GDP on the basis of nominal prices with GDP on the
basis of constant prices.
Inflation, as measured by CPI in Indonesia, are grouped into 7 groups expenses (based on
the Classification of individual consumption by purpose-COICOP), namely: (a) groups of
foodstuffs, (b) food group So, drinks and tobacco, (c) Group housing, (d) the Group's

Clothing, Health Group (d), (e) education and Sport Groups, and (f) of the Group of transport
and communication.
The stability of inflation is a prerequisite for sustainable economic growth, which in turn
provide benefits to an increase in the welfare of society. The importance of controlling
inflation is based on the consideration that the high inflation and volatile give negative effects
to the socio-economic conditions of the community. First, the high inflation will lead to a real
Community income will continue to come down so that the standard of living of the
community down and finally making all people, especially the poor, growing poor. Second,
unstable inflation would create uncertainty (uncertainty) for the economy in taking decisions.
Empirical experience shows that unstable inflation will complicate the decision of society in
doing the consumption, investment, and production, which in turn will lower economic
growth. And third, the domestic inflation rate higher than the inflation rate in neighboring
countries made the domestic real interest rate be not competitive so that it can put pressure on
the value of the rupiah. In addition to grouping based on COICOP, the BPS also publishes
inflation based on grouping of the other named disaggregation of inflation. Disaggregation of
inflation was committed to producing an inflation indicator that further illustrates the
influence of factors that are fundamental.
2.2. The Structure of the Market
The structure of the market is its producers to some form of market-based on characteristics
such as the type of product produced, the number of companies in the industry, whether or not
the easy out or come into the industry and the role of advertising in the activities the industry.
Market structure can also be described as a collection of a variety of factors that affect the
level of competence in the market. The structure of the market is affected by various factors
such as the level of mastery of technology, the elasticity of demand for a product, location, the
barrier to entry to the market and the level of efficiency.
Economic analysis of the differentiated structure of the market into four types, namely:
Perfect Competition Market, market Monopoly, competition, and market Monopolistic build
oligopoly. Much literature has been categorizing the type of market structure based on
determinants and characteristics of each market as the number of firms, the nature of the
product, the barrier to entry to the market, control over price, and others. Machmud (2008)
classified the types of markets are as follows:
Table 1. Characteristics Of Trade According To The Structure Of The Market
Characteristic PPS PP MonopolisticOligopoly Monopoly
The number of companies Large Many A little One
The nature of the product Standard
(homogeneous)
Diverse Standard (various) Unique (no substitute
goods)
The barrier to entry/exit nothing nothing High The blockade
Control of prices nothing Small Is being Substantial
In the meantime, Worthington and Britton (1994) describe the behavior and performance
of the company as the implications of the market structure in the table as follows:

Indonesia
Table 2 Strategy and performance implications of Trade according to the structure of the market
Market Structures Market Power Price Strategy Advertising
Strategy
Profitability
Perfect Competition None One price None Only normal profit
Monopoly Absolute Price discrimination
possible
None Abnormal profit
Oligopoly High One price High Abnormal profit
Monopolistic
Competition
Little Small differences in
price
High Only normal profit
in the long run
2.3. Distribution Channel
Keegan (2003) explains that distribution channels are channels that are used by manufacturers
to channel goods from the manufacturer to the consumer or to the user industries. Distribution
lines will have an effect on the formation of prices, so it's important for elaboration in this
research. For each of the major contributor to inflation, commodities will be identified the
distribution path, do follow simple patterns such as:
Producer Large Trader  Retail Traders  The end consumer
According to Stanton (1993) and Sudiyono (2004) in the Goddess (2012), that
distinguishes the institution of food products, with distribution channels is that the food
agency is an agency or business or individual that organizes food and distributes the services
and commodities from the manufacturer to the consumer. Agricultural products marketing
agencies have a lot of variety. Marketing agencies that can be identified are as follows:
 The middleman is a marketing agency is directly related to the farmer.
 Traders collecting are an institution that buys commodities from the middleman.
 Large traders are institutions that perform the process of concentration (gathering) of
commodity traders; collectors do the distribution to sales agents or retailers.
 Sales agents are the agencies that buy commodities belonging to traders in large quantities
with a relatively inexpensive price compared to retailers.
 The retailer is an institution dealing directly with consumers.
The task of this marketing agency is running the functions of marketing as well as
fulfilling the wishes of most consumers. Consumers provide retribution to this form of
marketing margins of marketing. Research publications based on the Food and Agriculture
Organization (FAO) conducted by Schalke (1995), there are a few ways to market agricultural
products that are commonly done by Indonesia farmers, these ways adapted to the conditions
in each province varies. Ways to market agricultural products to the consumers of the most
common are:
 The farmer directly distributes its products to the local market and sell them to merchants who
will transmit to the wholesale dealers
 Farmers sell to wholesalers in middleman and resell it to wholesalers
 Farmers sell directly to wholesalers for resale to wholesalers
 The farmer distributes its products to collectors for sale to wholesalers to sell to wholesalers or
aggregators will sell directly to retail traders
 Farmers sell directly, or through an agent, to the packing House for sale to international
traders, through the supermarket or export.

3. RESEARCH METHODS
3.1. Surveys and Sampling Techniques
The sampling method used is a nonprobabilistic method i.e. a combination of purposive
sampling and quota sampling. Explanation of the sample selection shall be made as follows:
 Merchants and wholesalers will be at each sampling five traders every commodity, labored all
wholesalers and wholesale can survey.
 Market traders sampling will be conducted on a market located in Pangkalpinang with every
type of commodity in sampling two traders.
 Pangkalpinang in 7 districts, so it is assumed there is a traditional market in each sub-district.
Then, the required sampling of three retail traders each commodity in five different markets.
Market surveyed should include the entire market tattooed by BPS.
 Every commodity in sampling two modern retailers. Market surveyed should include the
entire market tattooed by BPS.
Questionnaire results tabulated in excel and SPSS software, so it will be able to answer
research purposes including distribution patterns include (i) the pattern and distribution chain
(principals and area), (ii) logistics (warehousing), (iii) transport and infrastructure, (iv)
obstacles (infrastructure, rules, etc. It also answers questions related the price formation
mechanism include (i) the mechanism of the formation of prices in each of the distribution
chains, (ii) the fee structure, and (iii) margin (determination of the criteria and changes).
Quantitative approaches to the structure of the market include:
Herfindahl Hirschman Index (HHI)
HHI is the sum of the squares of the market shares of all firms in an industry.
HHI =
where:
si = the market share of the company to-i (%)
m= the largest number of companies
n= the amount of all companies in an industry
If the company mastered 100% of industrial sales, then the HHI would be worth 1.
Merger Guidelines § 1.51 released by the U.S. Department of Justice and the Federal
Trade Commission, classify the magnitudes of HHI within the following criteria:
HHI < 0.01 : highly competitive index.
HHI < 0.1 : unconcentrated index.
HHI = 0.1 to 0.18 : moderate concentration.
HHI > 0.18 : high concentration
Concentration Ratio (CR)
CR is a measure of the market share of the largest firm in an industry or a company's relative
share of the total industry. CR can be calculated by summing the market share of each
company. For example, CR3 is the sum of the market shares of the three largest firms in an
industry. The larger the number, the larger the CR concentration of industry. If the CR
reached 100% then it can be said that the market is a market monopoly
Minimum Efficiency Scale (MES)
MES is the size of a barrier to entry for a company to enter into an industry. If a company can
easily enter the market, then it can be said that the barriers to entry to the market are small.

n
i
ims
1
2

Indonesia
MES = output/output biggest companies total
According to Lubis (1997), MES > 10% described the high entry barriers into an industry.
These approaches have been used in various studies related to the structure of the market,
particularly in some industrial sectors to assess the structure of the market in the banking
industry, trade or wholesale.
4. RESULTS AND DISCUSSIONS
Study results get some conclusion as follows:
 Based on the calculation by using the method of the Hirschman-Herfindahl Index,
Concentration Ratio (CR), and Minimum Efficiency Scale (MES) shows the structure of the
market throughout the commodity into the market as they research objects with high
concentration levels. In General, the supply of products of industrial and agricultural
commodities, livestock is concentrated in large merchant/wholesaler present given when
viewed from the side the number of perpetrators, the number of large traders. These conditions
indicate a large trader and wholesaler have an impact on the supply and price of the market.
Agricultural commodities markets, industrial and livestock market structure build oligopoly
has indicated, while the level of retailers indicated a perfect competition market. The trader
involved between two chains of the majority they would have build oligopoly market
structure.
 The structure of the industry is concentrated in commodity markets the level of large traders
and wholesalers. The level of large traders and wholesalers indicated to build oligopoly
markets, while the retailer as a perfect competition market.
 Distribution patterns tend to vary and not fixated on one track official, this allows the present
lower merchant can obtain product from multiple channels of distribution. This condition
allows the minimum cartel behavior. Nevertheless, the risk of this cartel behavior can emerge
through the existence of reference price information from one of the market participants are
then used as a reference for other market participants.
 Costs that dominated almost throughout the commodity cost structure of the object of research
are the purchase cost of merchandise and transport costs.
 Pricing behavior in general good present manufacturers or traders, dominated by the pricing
based on the highest prices on the market and the level of price competition, with more
considering the conditions of the supply-demand compared to their cost structure and
compensation responsibilities of the desired profit margin. Coupled with the fact that the cost
of living becomes a consideration in the determination of prices, then it can be said that
market participants enter into inflation expectations of selling pricing.
 As the region of Bangka Belitung Islands has Constraints to weathering in the incoming goods
flow out, it will result in a disruption of supply if unfriendly weather.
5. CONCLUSIONS
Based on research results, there is some policy implications are important for controlling
inflation through Pangkalpinang side deals, which are:
 The high cost of purchasing merchandise and transport on commodity research, fuelled by
supply, among others, to be met from outside the region as it did on commodities of onion,
meat chickens, granulated sugar, rice, and Red Chilies. Support for the cultivation of the
above commodities to developed local Bangka Belitung, surely by considering business
feasibility-level aquaculture is expected to minimize the cost of purchasing merchandise and
transport as well as compliance imposes a price on the market.

 Improvements to the quality of the infrastructure and the transport fleet support resources need
to be done continuously in order to suppress the cost of distribution. On the other hand,
improving the infrastructure of roads and ports should also be able to improve connectivity
with another area Pangkalpinang so as to streamline the distribution of goods.
 Need for improvements against the network market in Pangkalpinang, among others, by
forming the market so as to clarify the flow out of the entry of commodities. In addition, the
existence of a market may also serve as a monitoring tool and control inflation.
 To prevent excessive price speculation traders present due to the fluctuation of inventory
supply, hence the need to establish a transparent price information network and disseminated
in General is good for the present price of the manufacturer or retail level.
REFFERENCES
[1] Brooks R (1998), ‘Inflation and Monetary Policy Reform’, in J Hayden (ed), Australia:
Benefiting from Economic Reform, IMF, Washington DC, pp 63–94.
[2] Kuncoro, Mudrajad. 2013. Mudah memahami & menganalisis Indikator Ekonomi. UPP
STIM YKPN.
[3] Mahmud, Z. (2008). Bahan Tayangan Focus Group Discussion Outlook Ekonomi
Indonesia 2008-2013. Lembaga Penyelidikan Ekonomi dan Masyarakat. Universitas
Indonesia.
[4] Pohan, Aulia. 2008. Kerangka Kebijakan Moneter Dan Implementasinya Di Indonesia.
Jakarta: PT. Raja Grafindo Persada.
[5] Suhardi. 2011. Refleksi Pembangunan Bangka Belitung 2000—2011. Paper Delivered in
the Information Session of Eleven Bangka Belitung Years in Statistics. Wednesday,
December 28, 2011, Aston Bangka Hotel.
[6] Shepherd, A.W., Schalke, A. J. (1995). An Assessment of The Indonesian Horticultural
Market Information Service. Rome: Food and Agriculture Organization of The United
Nations.
[7] Samuelson, Nordhaus. 2004. Macroeconomics 17th
edition. McGraw Hill.
[8] Stiglitz, Joseph E, and Greenwald, Bruce, 2003. Towards a New Paradigm in Monetary
Economics. London: Cambridge University Press
[9] Worthington, I., Britton, C. (1994). The Business Environment. Pitman Publishing.
London.
[10] Marius Agustinus Welliken K. and Edy H.P. Melmambessy, Distribution Patterns of
Chlorofil-A and Sea Surface Temperature Using Aqua-Modis Satellite Images in the
Arafura Sea, International Journal of Civil Engineering and Technology, 9(12), 2018, pp.
939–948

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