Resources Based Mapping out on the Capability of Micro Small Medium Enterprises (MSMES) to Leverage the Industrial Products

International Journal of Advanced Science and Technology Vol. 29, No. 7, (2020), pp. 13295 - 13305

Zuwina Miraza1, Tengku Lyza Tahura Ch2, Sarah Imelda3

Universitas Harapan Medan e-mail:[email protected]

Abstract

Small businesses are required to have high competitiveness in order to survive and develop. For this reason, clustering needs to be carried out based on the type of products. This survey study sought the recourses and capability of Micro Small Medium Businesses to leverage the Industrial products; it administered a number of interviewees, including small business actors in Medan, Binjai and Serdang Bedagai. It was used quantitative research type, and the data collected through questionnaires and FGD. The result shows that, there are 361 small businesses in Medan with 24 types of industries spread in 21 sub-districts. The distribution of industries in Binjai is divided into 5 sub-districts, namely East Binjai District, West Binjai, South Binjai, North Binjai and Binjai Kota. The mapping was carried out on 467 small businesses with 23 types of industries. Sergai is divided into 12 sub- districts namely Perbaungan, Pegajahan, Sei Rampah, Dolok Masihul, Sipispis, Sei Bamban, Kotari, Pantai Cermin, Teluk Mengkudu, Tanjung Beringin, Tebing Syahbandar, and Tebing Tinggi. Mapping was carried out on 55 small businesses with 12 types of industries.

Keywords:MSMEs; Mapping out; cluster; resources; competitive advantage

1. INTRODUCTION

The less competitive of Micro Small Medium Enterprises (MSMEs) is due the incompetence of owners to manage business resources such as human, financial, equipment and material resources. Resources and products are like two sides of a coin, in other words if the performance of a company is directly driven by the product produced, indirectly the performance is driven by resources that lead to production. The sheer competition and consumers, who are becoming picky to choose products, require MSMEs to be more innovative in producing a product. In other words MSMEs must be able to create new products and be able to maintain them. Weerawardena (in Jeronimo et al., 2019) argues that marketing capabilities can lead to export performance. A product will be considered by consumers, whether the product has other advantages compared to similar competitor products on the market. Improving and increasing the competitiveness of Micro, Small and Medium Enterprises (MSMEs) is a salient factor to be resilient in facing challenges and taking advantage of opportunities from MEA implementation. North Sumatra as one of the biggest potential provinces in Indonesia, possesses small business that is difficult to grow due to external and internal problems. The potential possessed by North Sumatra derives from the plantation, forestry, horticulture, fisheries and livestock sectors (BPS.go.id). North Sumatra has 33 districts and cities with an area of 72,981.23 Km2 and a population of 13,766,851 people. The number of MSMEs in North Sumatra has reached 2.8 million from 2013 to 2017 (depkop.go.id). Theory of Resources Based View covers the resources of the organisational strategies to serve and facilitate the implementation process towards attaining higher competitive advantage (Aziz, 2019). The theory of Resource Based View (RBV) can be utilized to comprehend the problem of competitiveness (Rithaisong et. Al., 2012). Thus, RBV firmly believes that the formulation of strategies and the success of their implementation are strongly influenced by the resources owned by the company (Prahalad and Hamel in Solihin, 2012). The Resource-based View (RBV) is a strategic management theory that is widely used in project management; it examines how resources can drive competitive advantage (Almarri & Gardiner, 2014). Competitive advantages based on the RBV's point

13295 ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC International Journal of Advanced Science and Technology Vol. 29, No. 7, (2020), pp. 13295 - 13305 of view can be seen from the indicators of Valuable, Rare, Imperfect amiability and Non- substitutability (VRIN), (Talaja, 2012). Resources that meet VRIN criteria will create distinctive competencies managed productively through the exactness of organizational structure, organizational processes, and organizational control systems (Otolla et al, 2013).

A strategy formulation and successful implementation of strategies are strongly influenced by the company's resources in the form of distinctive competencies or core competencies (Prahalad and Hamel in Solihin, 2012). Distinctive competencies are specific advantages that the company possesses that allow companies to vary products against competing products and impose lower costs (lower costs) than competitors, so that the company will get a competitive and competitive advantage profitability that is greater than the average profitability of competitors in an industry (Hill and Jones, 2004). Grant in Raduan, et. al (2009) view that human resources and capabilities hold four characteristics in relation to competitive advantages, namely durability, transparency, tranferability, and replicability. Resources are viewed as sources of capability, capability as a source of competitive advantage. This means that the organization's resources must have strength and durability in order to face the competition, sustainability, and flexibility to be absorbed in the organization and can be processed.

For gaining sustainable competitive advantage, a firm has to optimally utilize its internal resources and capabilities to exploit external opportunities at the same time, gauging the external threats (Ayankeng & Antonque, 2016). According to the theory of RBV, the resources of an organization, which in this case, the organizational strategies, serve to facilitate the implementation process of the organizational strategies towards attaining higher competitive advantage (Aziz, 2019). Traditional methods such as the growth of market share or the five forces developed by Michael Porter aren't likely to help companies to meet their performance targets. Resource Based View (RBV) analyzes and interprets resources of the organizations to understand how organizations achieve sustainable competitive advantage. A sustained competitive advantage may only be made when resources are strategic and valuable, are heterogeneously distributed and imperfectly mobile and firms should sustain the advantage notwithstanding periods of Schumpeterian Shock (Madhani, 2010). Corporate environmental strategy by promoting green marketing has positive relationship with competitive advantage (Papadas et al., 2018). Market-oriented firms can gain benefit from positive impact on competitive advantage by integrating their sustainability activities into their business strategies (Pantouvakis in Protono et al, 2019). Competitive advantage is associated with companies’ choice in applying generic strategies into practice. All parts in the organization, whether in the form of resources or activities can be a competitive advantage. The attention of management is important to help create a source of competitive advantage that stems from the exploitation of sustainable opportunities (Parida & Wincent, 2019). Competitive advantage can be measured by the company's ability to surpass competitors, company size, product quality, competitive response, company reputation, and market freedom. A product is believed to possess a competitive advantage when it has valuable characteristics, rare, not easily emulated and not easily replaced. This is in accordance with Talaja (2012) who elaborated that the indicators used to measure competitive advantage are product quality, product prices, production costs, customer satisfaction. Companies have to build on strategies to reflect the tendency of a firm to enhance, appreciate and acquire new ideas, novelty, experimentation and creative processes that may result in new products, services and a saver and quicker means to deliver the products to the final consumers (Nkemkiafu et al, 2019). According to Solihin (2012) the company is believed to have a sustainable competitive advantage if the company is able to maintain its capability or profitability compared to the industry average profitability for years. Distinctive competencies owned by a company come from two things that complement one another, namely: resources and capabilities.

Small and Medium Enterprises (SMEs)

Small and Medium Enterprises or abbreviated as SMEs is a term that refers to a type of small business that has a net worth of at most IDR 200,000,000 excluding land and buildings of business premises. Criteria for Small Businesses stipulated in Article 5 of the Law of the Republic of Indonesia Number 9 of 1995 are as follows:

a. Possess a net worth of at most IDR. 200,000,000 (two hundred million rupiahs) does not include land and buildings of a business place, or b. Possess annual sales of at most IDR. 1,000,000,000 (one billion rupiah) c. Owned by Indonesian citizens. d. Stand alone, not a subsidiary or branch of a company owned, controlled or affiliated directly or indirectly with a Medium or Large Business. e. The firm of business is individuals, or business entities that are not incorporated or legal entities including cooperatives.

2. RESEARCH METHOD This research used a survey method. It probed the information from samples through administered questionnaires and observation. Survey research has historically included large population-based data collection. The primary purpose of this type of survey research was to obtain information describing characteristics of a large sample of individuals of interest relatively quickly. Large census surveys obtaining information reflecting demographic and personal characteristics and consumer feedback surveys are prime examples. These surveys were often provided through the mail and were intended to describe demographic characteristics of individuals or obtain opinions on which to base programs or products for a population or group (Ponto, 2015).This research focused on Medan Municipality, Langkat Regency, Binjai Municipality and Serdang Bedagai Regency. The data source utilized is primary data, namely data obtained directly from the speakers to identify industrial clusters and the resources and capabilities of small businesses. Data collection was done through filling the questionnaires and focus group discussions (FGD).Interviewees: The sources of this research were small business people in Medan, Binjai and Serdang Bedagai (Sergai), practitioners, academics, banking and financial institutions, government, and society. Data Analysis : The data analysis technique applied in this study is Cluster analysis in order to obtain a small industry cluster map.

3. RESULTS AND DISCUSSION

Age of Respondents

Age is related to someone's motivation in entrepreneurship, young entrepreneurs will be more energetic and familiar with technology, so that it will make easy in business development. The age of business actors is grouped into 4 parts, namely 1 - 30 years, 31 - 40 years, 41 - 50 years and ≥ 50 years.

Based on Figure 5.1, it can be seen that the distribution of the age of small-scale business actors in Medan and Binjai is evenly compared to Sergai District.

1 – 30 Y.O 31 – 40 Y.O 41 – 50 Y.O > 50 Y.O International Journal of Advanced Science and Technology Vol. 29, No. 7, (2020), pp. 13295 - 13305

Figure 5.1. Age Characteristics of Respondents

In Medan, businessmen aged 1 - 30 years as many as 22%, 31 - 40 years 24%, 41 - 50 years 26%, and those with the most age above 50 years. In the Municipality of Binjai the highest percentage of small- scale entrepreneurs is aged 31-40 years, and the least are aged 41-50 years. Similar to the distribution of business operators in Sergai, the dominant age is 31-40 years (34%) and the minor ones are 41-50 years old (16%).

Education

O J Senio Di Bac t Figure. r H.S 5.2. Respondents'pl hel Recent Educational Characteristics h H o or The level of educatione . has a real influencem on the perspective of one's thinking. The higher the level of education, the wiserrs theS person willa be in managing emotions and finance. The level of education in this study is distinguished in the categories of Senior High School (SMP) / equivalent, Diploma, Bachelor, and others.

In theory, the higher level of education of a businessman, the higher of ability to increase income. The low quality of human resources can be seen from the level of education it has. Sometimes, a low level of education is the reason for the inability of businesses to advance their business and increase productivity. Compared to the three research areas, the perpetrators of the crime in Medan and Sergai were dominated by SMA / equivalent graduates, namely 58% and 52% respectively.

It is clearly seen in Figure 4.3 that in the two research sites, namely Medan and Sergai, very few business actors prioritize the level of Bachelor education. Only in Binjai the number of small scale undergraduate educated businesses reaching around 32% and 24% at Diploma scale. Even in Sergai there are still 14% of business people who are only educated Junior High School (SMP). The limited educational background affects the limitations of business productivity. This is due to a lack of experience, knowledge and skills of business actors.

Gender

Woman

Man Figure 5.3. Respondent's Sex Characteristics

Some studies reveal that there is no difference in entrepreneurial skills between men and women, but gender stereotypes are still very strong in Indonesia, especially in Sumatera Utara. There are differences between female entrepreneurs and male entrepreneurs, which are determined primarily by culture and touching aspects such as social / general public assessment of career development, dual burden (as housewives and business people) and limitations mobility. In this study, gender was divided into two groups, namely female entrepreneurs, both single and married, and men.

Referring to figure 4.2, 90% of small scale business actors who are respondents in Medan are women. Likewise in Sergai, women entrepreneurs are dominated by women as much as 62%. While in Binjai it is dominated by men, which is as much as 60% and women as much as 40%.

Duration of Business

10-12 1-3 1-3 Year Year 1-3 Year 20% 12% Year 10 – 12 Year 32% 4-6 Year 12% 38% 40% 10-12 Year 52% 7-9 Year 7-9 4-6 7 – 9 30% 4-6 Year Year Year Year 24% 20% 10% 10%

Figure 5.4 Business Duration

Another factor that contributes to the ability of small businesses to increase their business productivity is the business age. Duration of business has a direct effect on increasing income and business efficiency. Indeed, the longer a business actor pursues his business, and then his knowledge will increase as well and will affect the level of income. The length of business will also have an impact on increasing the number of customers and market share. Duration in this case is divided into 4 groups, namely 1-3 years, 4-6 years, 7-9 years, and 10-12 years.

As many as 38% of businesses in Medan have started their businesses 10 to 12 years ago, 20% have started 7 to 9 years, 10% have started 4 to 6 years ago, and 32% have only started 1 to 3 years. It can be seen in figure 5.3 that most businesses have been established since 2008, only a small portion of which are new businesses, as if describing a climate of small business that is less attractive. Identical to the city of Medan, the business climate in Binjai is very interesting, marked by the number of new businesses that have emerged in the past 1-3 years (40% of the total respondents).

Business Status

Business status is a form of business legality, which is grouped into businesses that are already incorporated or not yet incorporated. In order to be able to compete, the main thing that small businesses must have is business legality. Small businesses that do not have business legality will later have difficulty facing MEA, because to carry out export-import activities, a business must have business legality first. One form of business legality is legal entity. Some of the benefits obtained by business entities with legal entities include: as a means of legal protection, means of promotion, proof of compliance with the rule of law and making it easier to get projects.

Evenly in the three places, generally small businesses in North Sumatra have not yet been incorporated (figure 5.5). Business actors have not been aware of the importance of legal status of business status for the continuity and improvement of their business. Agree with what was disclosed at detik.com that 47.16 million UMKM have not been incorporated (80% of the total UMKM in Indonesia)

Non-incorporated Incorporated

Figure.5.5. Characteristics of Respondents’ Business Status

Form of Ownership

Figure 5.6 shows that, almost all small businesses in Sergai and Medan who are respondents, still individual businesses. The importance of forming an alliance is to increase business leverage. Increased leverage is needed in increasing production and investment capacity. So aware of this, it is very possible that small businesses increase their wealth to develop into medium sized businesses later.

Organization Individual

Figure.5.6. Characteristics of Forms of Business Ownership

Based on the results of this study, found that small businesses are still individual businesses in Medan, Binjai and Sergai, around 98%, 84%, and 100% respectively. Only a small percentage already has partners to form partnerships, namely 2% in Medan, 16% in Binjai, and 0% in Sergai. This is not a good situation, given the many benefits that business people can get when they have partners in running their businesses.

In addition to increasing business leverage, partnership companies have the following advantages: joint management and longer survival. The partnership business management enables several parties to explore and combine their skills and knowledge in the field of management, so that parties can practice knowledge sharing to produce innovation. Ownership of more than one person is likely to succeed when compared to single ownership, because the parties will monitor each other's performance.

On the other hand, small businesses in the form of alliances will cause conflict if the parties do not support each other in decision making and business management. For this reason, there must be legal contracts in an effort to bind the parties, so as to minimize potential misunderstandings.

Type of business

Creative Industry Services Processing Agriculture Product Retail

Figure.5.7. Characteristics of Respondents' Business Types

Small business types in Medan are 38% in retail / shipping, 30% in a service / service business, 18% in processing industry, 8% in creative industries and 6% in business related to agricultural products, livestock and fisheries. The distribution of business types in Municipality of Binjai is almost evenly distributed, namely 20% in the creative industry, 24% in service, 20% in processing industry, 20% in agriculture-based industry, and 16% in retail / shipping business.

It is clear that there are differences in the characteristics of industries in these three regions, in Medan small businesses mainly in retail / shipping, while in Sergai small businesses tend to move

13301 ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC International Journal of Advanced Science and Technology Vol. 29, No. 7, (2020), pp. 13295 - 13305 towards the processing industry. While in Binjai, many small businesses are in services, but the difference is not very real.

Annual Turnover and Profit

One of the criteria for small businesses according to law number 20 of 2008 concerning Micro, Small and Medium Enterprises (MSMEs), is seen through business turnover, in the amount of IDR. 300,000,000 to IDR. 2,500,000,000.

Table 1. Overview of Turnover and Small Business Profit Per Year

Category Medan Binjai Sergai Turnover/ Year

300 M - 699 M 1 32% 28% 30% 700 M - 1,199 M 2 22% 18% 58% 1,2 M - 1,799 M 3 16% 24% 12% 1,8 M - 2,5 M 4 30% 30% 0% Profit/ Year

≤ 99 M 1 6% 2% 8% 100 M - 499 M 2 60% 42% 78% 500 M - 999 M 3 32% 44% 0% ≥ 1 M 4 2% 12% 14% Source: data processed, 2018

Small business turnover in Medan can be interpreted according to figure 5.8, which is 32% for category 1, 22% for category 2, 16% for category 3 and 30% category 4. Overview of turnover of small business actors in Binjai is namely 30% of respondents in category 1, 24 % of respondents in category 2, 18% of respondents in category 3 and 28% of respondents in category 4. In the series, there were 30% of respondents in category 1, 58% of respondents in category 2, 12% of respondents in category 3, and no respondents included in category 4.

When compared between turnover and year with annual profits, it can be said that not always high turnover produces high profits as well. For example in Medan, business actors whose turnover is included in category 4 (high) reaches 30%, but business actors whose profits into the category 4 only 2%. In Binjai, respondents whose turnover was in category 1 (high) amounted to 28%, but respondents whose profits were included in category 1 were only 2%. Whereas in Sergai, respondents whose turnover was included in category 4 were 0%, but respondents whose profits were included in category 4 amounted to 14%. This condition illustrates, there are some respondents who are able to generate relatively high profits with relatively low turnover. Conversely there are also respondents who produce relatively high turnover, but the benefits are relatively low. Because of that, it is expected that small-scale business people can do cost efficiency, so they can produce high profits.

Small Business Distribution in North Sumatra In addition to using primary data obtained through FGDs and questionnaires, this study also uses secondary data obtained from the Department of Industry of North Sumatra Province. The data is to get a map of industrial clusters in North Sumatra. Here the Maps of Micro Small Businesses of Medan, Binjai and Sergai.

Medan City: The distribution of industries in Medan Municipality divided by sub-districts. In Medan Municipality there are 361 small businesses with 24 types of industries spread across 21 sub-districts. In Medan Helvetia, there are 12 small businesses dominated by the bakery and cake industries. In Medan Kota, there are 32 small businesses in textiles, refill drinking water, herb, bread, furniture, snacks and beverages, general equipment, printing, foodstuffs, livestock, leather, and workshops, most of small industry is in printing. In Medan Tembung, there are 30 small businesses, businesses that dominate the petrochemical industry and its processed products. In Medan Baru, there are 7 small business actors in the textile, bread, snack and beverage, printing and foodstuff industries. In Medan 13302 ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC International Journal of Advanced Science and Technology Vol. 29, No. 7, (2020), pp. 13295 - 13305

Polonia, there are 23 small business actors dominated by the petrochemicals and processed products. In Medan Deli, there are 38 small businesses that are dominated by the general equipment industry. In Medan Perjuangan, there are 11 small businesses spread in various industries and no industry dominates.

In Medan Denai, there are 16 small businesses dominated by the textile and petrochemical industries. In Medan Area, there are 27 small businesses spread in the textile, bread, petrochemical, motor vehicle, printing, canopy, food, livestock, cosmetic and building materials industries. In Medan Timur, there are 38 small businesses that are dominated by the printing and general equipment industries. In Medan Amplas, there are 11 small businesses that are dominated by the general equipment industry. In Medan Belawan, there are 6 small business actors dominated by the marine products industry. In Medan Barat, there are 21 small businesses that are highly dominated by the printing industry. In Medan Sunggal, there are 16 small-scale business actors spread in the herb industry, bread, furniture, snacks, petrochemicals, marine products, printing, foodstuffs, livestock, and building materials. In Medan Maimun, there are 12 small businesses spread in the textile, herb, bread, snacks, general equipment, printing, food, livestock and icebox industries. In Medan Labuhan, there are 11 small businesses spread in industries such as dump trucks, bread, petrochemicals, general equipment, and canopies. In Medan Marelan, there are 15 small businesses that are dominated by the food and marine products industry. In Medan Petisah, there are 15 small businesses dominated by textile and bread businesses. In Medan Tuntungan, there are 5 small businesses in the drinking water, textile and canopy industries. Finally in Medan Selayang, there are 3 small businesses, namely in the textile industry, canopy, and cosmetic.

Binjai City : The industrial distribution in Binjai City is divided into 5 sub-districts, namely East Binjai District, West Binjai, South Binjai, North Binjai and center Binjai. The mapping was carried out on 467 small businesses with 23 types of industries. In East Binjai Subdistrict there are 120 small businesses which are dominated by bamboo handicrafts and woven businesses. In addition, in this sub-district there are also many textile, cracker, and drinking water businesses. In west Binjai subdistrict there are 174 small businesses dominated by crackers and the like, and handicrafts industries and woven bamboo. South Binjai is dominated by bakeries and bamboo handicrafts and plaits. In North Binjai there are 115 small businesses that are dominated by textile, bread, footwear, and bamboo handicrafts and plaits. In center Binjai there are only 9 small businesses spread in the food industry, tofu, and snacks and drinks. Based on the data above, it can be concluded that small businesses in Binjai are dominated by handicraft industries and woven bamboo i, which are as many as 90 businesses, followed by the textile industry with 64 businesses, and 58 similar crackers, as well as bread foods and kuih muih for 40 businesses.

The industry sustainability has been enhanced by the local government ; it makes the designated North Binjai and East Binjai Subdistricts as large industrial development areas, West Binjai and South Binjai Subdistricts as development areas for agriculture and livestock industries, and all locations (Districts) for medium scale industrial development. On the othe hand, the Binjai City area is for industrial estates. The trading centers are almost evenly distributed in each sub-district, with the trade center in Binjai Kota District. The number of trading businesses in this city reached 2,064, with a dominance of small trading businesses totaling 1,729 (83.7%). Meanwhile, the number of industrial businesses reached 462 non-formal industrial units and 305 formal industrial units. Leading industrial products are bamboo matting, convection, crackers, bamboo furniture, jam, flour, fruit sweets, shrimp paste, shoes / sandals, and tofu or tempe (Javanese).

Sergai Regency : The industrial distribution in Sergai Regency is divided into 12 sub-districts, namely Perbaungan, Pegajahan, Sei Rampah, Dolok Masihul, Sipispis, Sei Bamban, Kotari, Pantai Cermin, Teluk Mengkudu, Tanjung Beringin, Tebing Syahbandar and Tebing Tinggi. The mapping was carried out on 55 small businesses with 12 types of industries. In Perbaungan Subdistrict, there are 16 small businesses which are dominated by snacks and drinks. In Pegajahan there are 3 small 13303 ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC International Journal of Advanced Science and Technology Vol. 29, No. 7, (2020), pp. 13295 - 13305 businesses spread in the snack and beverage industry, liquid soap, and bricks. In Sei Rampah there are 9 small businesses spread in the snack and beverage industries, processed soybeans, textiles, coconut fiber, tapioca flour, liquid soap and bricks. In Dolok Masihul there are 4 small businesses spread in the snack and beverage industry, soybean processing, and textiles. In Sipispis there are 4 small businesses spread in the snack and beverage industry, soybean processing, and weaving. In Sei Bamban there are 6 small businesses spread in the snack and beverage industry, processed soybeans, herbs and medicines, textiles, and bricks.

In Kotari there are 3 small businesses spread in the snack and beverage industry, and soybean land. On Pantai Cermin there are 3 small businesses that are spread on processed seafood, as well as woven plaits and pandanus. In Teluk Mengkudu there are 4 small businesses spread in the snack and beverage industry, textiles, as well as herbs and medicines. In Tanjung Beringin there is 1 small business engaged in the herbal medicine industry. In Tebing Syahbandar there is 1 small business engaged in the tapioca flour industry. Lastly in Tebing Tinggi there is 1 small business engaged in the liquid soap industry.

5. CONCLUSIONS

Data analysis gives two conclusions: 1. Based on the results of the study, it was found the distribution of small businesses in the city of Medan, namely there were 361 small businesses with 24 types of industries spread across 21 sub- districts. 2. The distribution of industries in Binjai City is divided into 5 sub-districts, namely East Binjai District, West Binjai, South Binjai, North Binjai and Binjai Kota. The mapping was carried out on 467 small businesses with 23 types of industries. 3. Sergai Regency is divided into 12 sub-districts namely Perbaungan, Pegajahan, Sei Rampah, Dolok Masihul, Sipispis, Sei Bamban, Kotari, Pantai Cermin, Teluk Mengkudu, Tanjung Beringin, Tebing Syahbandar, and Tebing Tinggi. Mapping is carried out on 55 small businesses with 12 types of industries.

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