Blue Ocean Strategy and Smallholder Tea Value Innovation: Empirical Evidence from Batang Regency, Indonesia

Author (s)

Fathurrohman, Endang Siti Rahayu, & Sri Marwanti

Abstract

Smallholder tea farmers in Batang Regency receive only Rp1,600 (~USD 0.0894)–2,000/kg for wet tea shoots against a viable production cost of Rp3,050 (~USD 0.1704)/kg, confined to raw material roles within the Nucleus Estate Smallholder (PIR) scheme. Yet farmers who have exited this system already achieve Rp75,000 (~USD 4.19)/kg through artisan direct trade, a 44-fold premium that signals the scale of untapped value innovation available. This study aims to identify value innovation opportunities for Batang smallholder tea farmers through Blue Ocean Strategy (BOS) formulation. Using a qualitative approach, the study integrates in-depth interviews with 10 key informants (thematic coding), a strategy canvas perception questionnaire mapping competitive positioning of PR against PBN and PBS across eight competition factors, and the Eliminate–Reduce–Raise–Create (ERRC) framework. The strategy canvas reveals PR scores lowest on all eight factors (grand average 2.25 vs PBN 3.18 and PBS 3.35), with the largest gap in branding and product identity, precisely the dimension where PR’s high-altitude “sweet honey” terroir, equivalent to Rp300,000 (~USD 16.8)/kg reference products, gives it an unreplicable advantage. The ERRC formulation translates this into a value innovation resting on three pillars, namely authentic terroir-based product identity anchored by a collective brand and Geographical Indication, new distribution channels bypassing middlemen through direct trade and digital platforms, and untapped consumer segments no competitor currently serves. Value innovation for Batang smallholder tea is empirically accessible, not merely theoretical, with collective cooperative formation as the critical enabling condition.

Key words: Blue Ocean Strategy, Smallholder tea plantation, Value innovation, Strategy canvas, ERRC framework, Batang Regency.

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Cite This Article:

Fathurrohman. Rahayu, E. S., & Marwanti, S. (2026). Blue Ocean Strategy and Smallholder Tea Value Innovation: Empirical Evidence from Batang Regency, Indonesia, Journal of Scientific Reports, 14(1), 274-289. DOI: https://doi.org/10.58970/JSR.1216

About Author (s)

Fathurrohman (Corresponding Author), Master’s Study Program in Agribusiness, Faculty of Agriculture, Sebelas Maret University, Surakarta 57126, Indonesia. ORCID: https://orcid.org/0009-0009-9016-5039

Endang Siti Rahayu, Master’s Study Program in Agribusiness, Faculty of Agriculture, Sebelas Maret University, Surakarta 57126, Indonesia. ORCID: https://orcid.org/0000-0002-4967-0780

Sri Marwanti, Master’s Study Program in Agribusiness, Faculty of Agriculture, Sebelas Maret University, Surakarta 57126, Indonesia. ORCID: https://orcid.org/0000-0003-2741-9656

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DOI: https://doi.org/10.58970/JSR.1216

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