THE EFFECT OF RELATIONSHIP AND COMPETITIVE STRATEGY ON BUSINESS PERFORMANCE OF RATTAN INDUSTRY IN JAVA.

Author:Suryatini, Dwi
Position:Report
 
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INTRODUCTION

Research Background

Rattan industry is one sector in the processing industry in Indonesia, which is during January-December 2015 non-oil exports of processing industry products contributed to 70.97%. Here Table 1 shows the FOB Value (million US$) of Indonesian export by sector and percentage of change.

The production growth of large and medium manufacturing industries in the first quarter of 2015 decreased by 0.71 percent (q-to-q) against the fourth quarter-2014. The types of industries that experienced a decrease in production were non-metallic minerals down 6.64 percent, the electrical equipment industry fell 4.74 percent and the wood industry and cork goods (excluding furniture) and wickerwork from bamboo, rattan down 4.38 percent.

China dominates the export value of rattan furniture products to Japan in the period 2011 to 2013 (ITPC, OSAKA, 2014), as seen in Table 2 below.

Table 2 shows that Indonesia ranks fifth of rattan furniture exporting country to Japan, which is the first order is occupied by China. While the export of rattan products is still dominated by large companies, whereas they are vulnerable to the world economic crisis. Therefore the potential of small-scale enterprises to be a mainstay sector for Indonesia. The existence of small business craftsmen from rattan goods most widely spread on the island of Java. Small rattan craft industry in Java still dominates compared to other provinces in Indonesia, but the decline from 2014 to 2015 is very significant, therefore small rattan craft industry in Java becomes interesting to be studied.

Small-scale rattan-based furniture in Java is still experiencing difficulties in expanding their business, especially in facing competition in the global market. There is even a decline in export value over the last three years, while China's toughest competitor has increased by 20.72% market share, while Indonesia as the owner of Rattan raw material is only 7.68%. This can be seen in Table 3 below.

Based on Table 3 above, it appears that the decline in the value of sales and market share is an indication of the tendency of the business performance of small-scale rattan furniture on the Java Island is relatively decreased. David (2013) describes the financial ratios used to evaluate strategies consisting of: Return on Investment (ROI), Return on Equity (ROE), Profit Margin, Market Share and Debt to Equity, Earnings per share, Sales growth and Assets growth. In addition, in the opinion of Wheelen et al. (2015) performance related to profitability, market share and cost reduction.

The alleged aspect related to the decline in the performance of small-scale rattan furniture business in Java is due to the fact that the competing strategy has not been formulated precisely. Their business in Java Island is in the position of weak-moderate strength. The national rattan processing industry has difficulty in obtaining raw materials caused by the existence of the export policy of rattan raw materials and the rampant smuggling of rattan abroad. In addition, the production of mastery of finishing technology is still behind and the design of processed rattan products is still determined by the buyer from overseas (job order). On the other hand, there is still weak market intelligence, resulting in limited export market information. (http://www.kemenperin.go.id/artikel/471/Development-Industry-Processing-Rotan- Indonesia).

On the other hand, Wheelen et al. (2015) argue for a generic strategy that aims to outperform other companies in an industry, including: cost leadership, differentiation and focus.

In addition to issues related to competitive strategy, the rattan furniture industry in Java Island is also faced with the problem related to business relationship including the access to funding. Business relationships are not built well. Conceptually, based on Hubbard & Beamish's opinion (2011) the cooperation made by two or more organizations aims to secure a competitive advantage. The broader concept of relationship is developed by Cravens & Piercy (2013), who argue that the relationship is an effort to collaborate with stakeholders, including vertical relationships consisting of relationships with suppliers and customers and horizontal relationships consisting of lateral partnerships And internal.

Based on this background, the authors are interested to examine the influence of relationship and competitive strategy on the performance of the rattan industry in Java.

Research Goal

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