Business Unit Management Performance Analysis in PT. Perkebunan Nusantara II
Medan-North Sumatra
Albert Einstein PAKPAHAN
1*, Arlina Nurbaity LUBIS
2, Endang Sulistiya RINI
3, Beby Karina Fawzeea SEMBIRING
41Doctoral Program of Management Science, Universitas Sumatera Utara, Medan, Indonesia
2,3,4Faculty of Economy and Business Universitas Sumatera Utara, Medan, Indonesia Email: pat.math@yahoo.co.id
*Corresponding Author
Received: 17.06.2022 Accepted: 10.09.2022 Published: 06.02.2023 DOI: 10.47750/QAS/24.193.17
Abstract
The goal of this research was to look at how market orientation and corporate innovation affected the success of PT Perkebunan Nusantara II, a state-owned corporation. PT Perkebunan Nusantara II is currently facing a challenge in achieving the Health Assessment Level of State-Owned Enterprises in categories B and BB (Unhealthy). Digital change acts as a mediator, while competitive advantage acts as a moderator. The study population consists of business unit leaders from Top Management, Middle Management, and Lower Management. A total of 255 people were included in the study, one from each of the 25 business divisions. The sample strategies employed were Proportional Cluster Sampling and Stratified Random Sampling. SmartPLS as an analytical tool for structural equation modeling. With a total effect coefficient of 0.547 and 0.310, the findings demonstrate that market orientation and corporate innovation have a positive and significant impact on competitive advantage. With a total coefficient of influence of 0.343 and 0.108, market orientation and corporate innovation have a positive but not significant impact on business unit performance. With a total coefficient of influence of 0.570, competitive advantage has a positive and significant impact on the performance of business units. With a total influence coefficient of 0.090, digital transformation is able to reduce the impact of market orientation on business unit performance. With a total effect coefficient of -0.087, digital transformation is unable to control the impact of the company's innovation on business unit performance. At PT Perkebunan Nusantara II in Medan, North Sumatra, competitive advantage can mediate the impact of market orientation on business unit performance with an influence coefficient of 0.311, while corporate innovation through competitive advantage has a positive and significant impact on business unit performance with an influence coefficient of 0.177.
Keywords: Market Orientation; Corporate Innovation; Competitive Advantage; Digital Transformation; Business Unit Performance.
1. Introduction
The growing global demand for industrial raw materials, particularly goods derived from palm oil, sugar cane, and tobacco, has fueled significant growth in the business that processes these plantation commodities. There were massive movements and changes in the corporate environment as the twentieth century began. Companies must constantly be prepared for global rivalry as competition in diverse industries develops into a highly developed global competition. Due to the stream of globalization, which is increasingly wide open for every business person, the development of this business world has been colored by competition. Companies compete to achieve a competitive advantage as a result of the advent of this competition. All present and potential rivals' offers and alternative products are included in the competition, (kompasiana.com, 2016).
In the business world, competition forces companies to adapt to any changes that may arise. This encourages businesses to have dependable and competitive resources that can contribute to the company's success, Kajalo dan Lindblom (2015). The demand for improved business unit performance is a significant concern, particularly in the state-owned plantation sector. On the other hand, because the plantation sector is so competitive, the level of complexity affecting the performance of plantation business units must also rise, (Shalshabill et al., 2021).
The issue that PT Perkebunan Nusantara II Medan-North Sumatra is dealing with is that the performance of each business unit under PT Perkebunan Nusantara II Medan-North Sumatra has not fulfilled expectations. Each business unit's performance in 2021 has declined as compared to previous years. As a result, the company's health took a turn for the worst. The performance of the PT Perkebunan Nusantara II business unit in Medan, North Sumatra, is shown in Table 1:
Description 2015 2016 2017 2018 2019 2020 Mean Production (Tons) 456.764 364.388 494.688 534.453 543.472 512.882
Production (Tons) Production based on Work Plan and Company Budget (Tons)
598.704 435.000 527.245 624.315 650.571 698.870
Comparison with previous year (%)
-25.35 26.34 7.44 1.66 -5.96
Achievement of the Company's Work Plan and Budget Target (%)
76.29 83.77 93.83 85.61 83.54 73.39 82,73
Production (Tons) 500.870 29.284 190.838 312.400 298.550 268.919 Production based on Work
Plan and Company Budget (Tons)
502.376 298.284 268.514 441.369 480.430 380.731
Comparison with previous year (%)
-1610.4 84.66 38.91 -4.64 -11.02
Achievement of the Company's Work Plan and Budget Target (%)
99.7 9.82 71.07 70.78 62.14 70.63 76,94
Table 1. Realization of Management Performance of PT. Perkebunan Nusantara II Medan Business Unit Medan-North Sumatra Source: Human Resources Data, PT Perkebunan Nusantara II Medan-North Sumatra, 2022
According to Table 1, the PT Perkebunan Nusantara II Medan-North Sumatra Business Unit's Realization of Management Performance fell short of the 2015-2020 average.
The achievement of the 2019 Work Plan Target is categorized as category B (unhealthy), and the performance achieved in 2018 is categorized as BB (unhealthy). This company's health is defined by the Minister of State-Owned Enterprises Decree Number: KEP-100/MBU/2002, which is in effect in Indonesia.
The State-Owned Enterprises Health Assessment is broken into three categories: a) Healthy, consisting of: AAA if the total (Unhealthy) is larger than 95, AA if the total (Unhealthy) is less than 95, A if the total (Unhealthy) is less than 65, and A if the total (Unhealthy) is less than 95. b) Unhealthy, which includes BBB if 50 is less than 65, BB if 40 is less than 40, B if 30 is less than 40, and B if 30 is less than 40. c) Unhealthy, which includes CCC if the number is less than 30, CC if the number is less than 10, and C if the number is less than 10.
A healthy firm state is indicated by the integrity of the company's performance, which includes external components and a stable level of profitability, which can be understood as the performance of business unit management. To increase business unit management effectiveness, companies must use the information technology paradigm across the board. Using internet-based solutions is one technique to assist management in developing a more productive and efficient work system. This is because agricultural technology innovation is critical for increasing productivity, particularly in North Sumatra, where increasing production through land expansion is currently challenging (extensification), (Fatchiya et al, 2016).
Furthermore, because the upstream business (palm plantations) still relies on human labor, the use of internet- based digital technology can prevent fraud by employing traditional management in the upstream industry (palm plantations) if fraud happens (labor intensive). One of the issues in the productivity of palm oil that does not meet the standards/targets is the act of fraud on the plantation or production site in the process of delivering commodities to the market. Plantation surveillance, both upstream and
downstream operations, can benefit from digital transformation.
Because it uses artificial intelligence-based technology whose data can be accessed in real time, this method is thought to provide several benefits, including saving Human Resources (HR) for operations, producing more well-documented and neat reports, and preventing other fraud in the manual reporting system, (sawitindonesia.com, 2021)
One of the aims that the management team must attain in order to boost company success is market innovation. Market orientation refers to a company's decision-making process based on current market conditions, as well as how it approaches the market through researching and comprehending current values (Pertiwi and Siswoyo, 2016).
Market orientation refers to a company's tendency to gain a competitive edge by satisfying the demands and ambitions of its customers (Pramesti and Giantari, 2016). Market orientation, according to Hartini (2012) has a major impact on corporate performance. Gede and Jay (2018) stated the same idea, stating that market orientation has a positive and significant effect on performance. According to Kajalo and Lindblom (2015) market-oriented businesses can gain a competitive edge and improve performanvce in terms of increased profitability. Unlike Taufik (2020) market orientation has little impact on improving corporate performance, but it can be increased through competitive advantage.
Corporate innovation is another aspect that influences company performance. When measured by financial success, corporate innovation can affect firm performance (Zahra et al.
1993), Ellitan (2006), Tewal (2010), Kafetzopoulos and Psomas (2013), Susdiani, (2020). In contrast to Bayus et al.
(1997), Chaney and Winer (1991), which claim that if human resources are insufficient in skills and knowledge, firm innovation has no substantial impact on company performance.
Syamsuri et al., (2022) discovered the same thing, as a process, innovation entails being open to new ideas and methods of doing things, as well as having operational inventiveness. As a result, innovation is defined as the ability and capability to develop various sorts of invention. Individual innovation talents become intertwined and have a bearing on
performance. Managers can use innovation skills to improve the company's ability to innovate. The researchers used competitive advantage mediating variables and digital transformation moderating variables to close the difference as the novelty of this research. This variable was chosen because it is critical for a company to have a competitive advantage in order to boost competitiveness, which in turn increases performance. Digital transformation, on the other hand, is a critical component for businesses in the present digital era.
2. Literature Review 2.1. Market Orientation
The biggest predictor of location advantage, according to Hult and Ketchen (2001), is market orientation. According to Lonial and Carter (2015) and Jogaratnam (2017) market orientation, which comprises entrepreneurial orientation and learning orientation, is the best positioning advantage among strategic competences. Market orientation is one of the most significant strategic qualities for firms, (Cano et al. 2004), especially in a business context where sensitivity to the market is critical. Market orientation, according to Liao, et al., (2011), is a company's strategic competence from a valuable, rare, and imperfectly substitutable standpoint. Raaij and Stoelhorst, (2008), believe that in general, market orientation is related to the creation of greater customer value through the formation, dissemination and use of market information. The main idea of market orientation is to look at the company from the customer's perspective with the aim of satisfying them. In a stable technology and market context, a responsive market orientation is favored, but in a more dynamic technology and market environment, a proactive market orientation is preferable. According to Song and Parry (2009), the targeted level of market orientation has a beneficial impact on the level of market orientation attained.
Customer orientation, competitor orientation, and inter- functional coordination are three sub-constructions that act as variable dimensions in market orientation development (Narver and Slater 1990). Customer orientation, according to Taleghani, et al., (2013) is an organizational value that considers current consumers' potential requirements and wishes. This means that customer-focused businesses use knowledge about their customers' requirements and desires to provide higher value-added services. According to Mavondo, et al., (2005) improving customer orientation can be accomplished through boosting customer orientation indicators.
The indicators utilized in this study were then tailored to the study's purpose and conditions. The indicators of this research include: 1) customer needs understanding, 2) customer complaints response, and 3) customer conditions understanding.
Competitor orientation refers to the ability to detect a competitor's short-term strengths and weaknesses, as well as long-term skills and tactics, in order to achieve a competitive advantage within the company. According to Lopez, et., al (2005) firms can increase their competitive performance by having a collaborative corporate culture. As a result, it is critical for the business to comprehend its current and anticipated future competitors. Companies that place too much emphasis on competitor orientation, on the other hand, may limit their own innovation (Lukas and Ferrell, 2000) because they tend to follow their competitors' lead by manufacturing identical items in order to compete in the market. In this study, the Competitor Orientation Indicators (Kirca, Jayachandran, and Bearden, 2005) serve as benchmarks, which include: 1)
Recognize your competitors' advantages, 2) Recognize your competitors' methods for enhancing their performance, and 3) Recognize your competitors' uniqueness.
The third market orientation measurement component is inter-functional coordination, which is described as a coordinated effort of organizational resources aimed at providing higher value to customers by fostering cooperation among all divisions (Wooldridge and Minsky, 2002).
Coordination, according to (Handayaningrat, 2002), is a synchronous effort to provide the appropriate amount and time in directing the implementation in order to achieve a homogenous and harmonic action on a set aim. The following are the indications of function coordination employed in this study: 1) availability of information between business units, 2) availability of standard methods for coordination between business units, and 3) clarity of each business unit's core tasks and functions.
2.2. Corporate Innovation
During this stage of the business cycle, enterprise innovation refers to the ability of high-level innovation to develop innovative services and products in response to environmental changes. Increased innovation can inspire businesses to identify both explicit and implicit client needs (Narver et al., 2004). The application of organizational methods in a company's business activities is known as corporate innovation. At its most basic level, innovation can be defined as the act of developing and combining ideas in order to create connections between present achievements and previous problem-solving experience.
The four elements of business innovation explored in this study are product innovation, process innovation, marketing innovation, and organizational innovation. 1) Development of new products/services that are distinct from earlier ones, 2) Development of products/services using new technologies/methods, and 3) Modification of existing products/services are all examples of product innovation.
Process innovation entails 1) the creation of new work processes, 2) the elimination of unproductive work processes, and 3) the acceleration of service. Enterprise logistics delivery techniques include equipment, software, and strategies for receiving inputs, assigning supplies within the company, and delivering final goods. Marketing innovation refers to the use of novel marketing tactics in terms of packaging, design, product placement and promotion, and pricing. The following are the marketing innovation indicators considered in this study: 1) Renewing distribution, 2) Renewing market targeting, and 3) Renewing promotion strategy. The product's function and features are unaffected by the changes in form and appearance. The goal of this invention is to boost sales, market share, and expand into new markets. 1) Renewal of organizational structure, 2) Renewal of coordination system, and 3) Renewal of HR development system are all examples of organizational innovation. Organizational innovation can increase business performance by cutting administrative or transaction costs, boosting employee happiness, and lowering supply prices, (OECD Oslo Manual, 2005).
2.3. Competitive Advantage
The correct approach will give the organization a competitive advantage. Of course, the ability of a corporation to generate a competitive edge is a determining factor in its ability
to win a market competition. Because it is a plan aimed to increase corporate value, competitive advantage is also critical to the company's strategic management concept's success.
When acts in an industry or market provide economic value and numerous competing firms participate in comparable behaviors, firms gain a competitive advantage, (Kadarningsih, 2013). If a corporation uses the proper market analysis strategy, it can easily gain a competitive advantage in that market. In order to get a competitive advantage in the global market, a company must increase its current capabilities. The capability in question is the ability to sustain market share while also gaining market share from competitors.
According to Grawe et al., (2009) a company's competitive edge will lead to a superior strategy that competitors will be unable to duplicate, and the company will reap long-term benefits. Competitive advantage is measured on three dimensions: 1) quality service, 2) innovative products and services, and 3) relationship excellence. The following factors are used to assess service quality: 1) service speed, 2) fast and accurate information system, and 3) digital-based service system. Innovative products and services include: 1) product and service updates, 2) change-adaptive products and services, and 3) products and services that are differentiated from competitors. Customer connection benefits include 1) an effective communication system with customers, 2) the intensity of customer interactions, and 3) the expansion of the customer network.
2.4. Digital Transformation
Digital transformation generates innovations that enable businesses to become more successful and efficient in their operations. The use of technology to dramatically improve the performance or achievement of corporate goals is also known as digital transformation (Westerman et al., 2014). Because competitors are constantly adapting new technologies, the pace of technological development is increasing the pressure on organizations to carry out digital transformations.
Technology has also empowered consumers to be more demanding and set higher standards of satisfaction than usual, for example, better and faster service anytime and anywhere, on any device.
There are various characteristics that explain digital transformation in businesses, according to Kaufman and Horton (2015). These dimensions are as follows: Indicators for a digital-based information system: 1) Information dissemination via digital systems; 2) Database management systems; and 3) Digital-based reporting systems. The second dimension is digital-based operations, which includes the following indicators: 1) use of digital-based administration systems, 2) decision-making support from information systems, and 3) use of digital-based technologies. Another aspect of digital transformation is the readiness of supporting elements, which includes indications such as: 1) resource competency in using information technology, 2) readiness of digital-based technology tools, and 3) readiness of organizational structures in using digital technology.
2.5. Business Unit Performance
The amount of achievement of an activity, program, or policy in attaining the organization's goals, objectives, mission, and vision contained in the creation of the strategic scheme of
an organization is measured by performance. In general, performance can be defined as an accomplishment that an organization can complete within a specific time frame. A company's performance can be used as a barometer of an organization's or company's capacity to achieve its objectives.
Because performance measurement is a procedure of measuring the extent to which a firm works to reach its goals, it is one of the most significant variables for an organization or corporation. By analyzing the successes that have been obtained through the set strategy, performance measurement is used to determine the achievement of company goals on the performance of business units.
According to Saeed et al., (2010), different components can result in varying performance outcomes. According to the majority of empirical studies, client orientation and business unit performance have a favorable association. Financial performance, operational performance, organizational performance, and marketing performance are the four dimensions of business unit performance measurement.
Financial performance indicators include: 1) budget usage optimization, 2) work productivity, and 3) operational cost efficiency. The following are examples of operational performance: 1) meeting work targets, 2) improving service quality, and 3) resource efficiency. The dimensions of organizational performance are comprised of indicators such as: 1) work unit coordination, 2) major task and function implementation, 3) workload balance, 4) sales/service volume, and 5) target market/customers, 6) achieving marketing/service objectives.
3. Research Method
This study is quantitative and causative in nature, with the goal of determining the relationship between variables, (Ferdinand, 2016). Market orientation and firm innovation make up the free construct. The use of an intermediary or liaison is a competitive advantage. Digital transformation is the construct of moderation. The Business Unit's performance is the bound construct. The descriptive and explanatory survey methods were utilized in the investigation. Because this study will look at the causative relationship between these factors, it will be classified as a causal investigation. In this study, the time horizon is cross-sectional. The company PT. Perkebunan Nusantara II Medan-North Sumatra is the unit of analysis in this study. The term "population" refers to groupings of people, events, or items that academics are interested in, (Sekaran and Bougie, 2016). Based on this understanding, the population (unit of analysis) in this study consists of 390 persons who are leaders at Level 1, Level 2, and Level 3 in the Business Unit of PT. Perkebunan Nusantara II Medan-North Sumatra.
Proportional cluster sampling was used in this study, with each group of respondents for each business unit at PT Perkebunan Nusantara II being taken proportionally. Purposive sampling was used to choose respondents from each position category, with Level I leaders in each business unit being required to be represented, and Levels 2 and 3 being picked proportionally by random sample. As a result, the study's sample was limited to business unit executives in Top Management, Middle Management, and Lower Management, with 255 participants from each of the 25 business divisions.
Table 2 shows the demographics of the population and the
research sample:
No Unit of Work/Business Population Sample
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
1 Directors' Office 16 32 57 10 21 37
2 District 4 13 19 3 9 12
3 Garden 16 35 124 10 23 80
4 Oil palm plantation 2 3 18 1 2 12
5 Sugar factory 2 3 23 1 2 15
6 Hospital 2 2 0 1 1 0
7 Central Workshop 1 4 1 0 3
8 Investing in research and development 1 4 1 0 3
9 Subsidiary 4 4 1 3 3 1
Amount 48 92 250 31 61 163
Combined Total 390 255
Table 2. Population and Research Sample Composition Source: Human Resources Data PT. Perkebunan Nusantara II, 2022
The researchers employed observation and questionnaires to obtain data for this study. Primary and secondary data are used to determine the effect of observed research variables
utilizing the SmartPS analysis approach. Figure 1 illustrates the conceptual framework used in this research:
Information:
→ : Effect of Variable X to Variable Y
--> : Effect of Variable X to Variable Y with Variable Z as Mediation Figure 1. Conceptual Framework
4. Research result
The value of R-Square (R2) on the variables is used in structural model testing (Inner Model). If R2 is greater than 0,
the model is deemed to have an effect (zero). Table 3 shows the R2 value for each variable (Second Order) and its dimensions (First Order):
H6
H9 H8
H3
H5
H7
H2 H1
Digital Transformation
n
Business Unit Performance Market
Orientation
Competitive Advantage
Corporate H4
Innovation
R Square Adjusted R Square
Customer Orientation 0.790 0.789
Competitor Orientation 0.876 0.875
Inter-Function Coordination 0.770 0.769
Organizational Innovation 0.743 0.742
Marketing Innovation 0.650 0.648
Product Innovation 0.598 0.596
Process Innovation 0.603 0.601
Quality Service 0.669 0.668
Innovative Products and Services 0.849 0.848
Excellent Relationship 0.889 0.888
Digital-Based Management Information System
0.842 0.841
Digital Based Operations 0.826 0.826
Readiness of Supporting Elements 0.752 0.751
Financial performance 0.824 0.823
Operational Performance 0.756 0.755
Organizational Performance 0.284 0.281
Marketing Performance 0.224 0.221
Competitive Advantage 0.648 0.645
Business Unit Performance 0.733 0.727
Table 3. Results of R-Square Source: Processing Results, (2022)
Table 3 demonstrates that the R2 value for all dimensions and variables is greater than zero. The competitive advantage R2 value is 0.648, which suggests that Market Orientation and Company Innovation can explain 64.8 percent of the competitive advantage. The R2 value for business unit performance is 0.733, indicating that Market Orientation, Company Innovation, Competitive Advantage, and Digital Transformation can all explain 73.3 percent of the variance in Business Unit Performance.
The direct influence between variables describes whether or not a variable has a direct effect on other variables. The p- value can be used to perform the test. If the p-value is less than 0.05, the effect is considered significant; if the p-value is greater than 0.05, the effect is considered non-significant.
Table 4 shows the results of testing the direct influence of each variable:
Original Sample (O)
Sample Mean (M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P Values Market Orientation →
Competitive Advantage 0.547 0.548 0.073 7.541 0.000
Enterprise Innovation→
Competitive Advantage 0.310 0.312 0.075 4.122 0.000
Market Orientation → Business
Unit Performance 0.032 0.034 0.064 0.491 0.623
Enterprise Innovation →
Business Unit Performance -0.069 -0.062 0.055 1.261 0.208
Competitive Advantage →
Business Unit Performance 0.570 0.566 0.078 7.266 0.000
Market Orientation → Digital Transformation → Business Unit Performance
0.090 0.088 0.046 1.961 0.049
Enterprise Innovation → Digital Transformation → Business Unit Performance
-0.087 -0.085 0.047 1.856 0.064
Table 4. Direct Effect of Variables S Source: Processing Results, (2022)
Table 4 demonstrates the following: 1) Market Orientation significantly and positively influences Competitive Advantage, with a coefficient of influence of 0.547. Previous research by Arraniri (2019) demonstrated that improving and enhancing market orientation as behavior may be done to increase competitive advantage by ensuring that it becomes a common set of values and attitudes of all organization personnel. 2) With an influence coefficient of 0.310, company innovation has a positive and significant impact on Competitive Advantage.
The research by Farhas et al. (2016) found that the company's competitive advantage increases in direct proportion to the amount of effort put into fostering innovation. 3) With a score of 0.032, Market Orientation has a positive but insignifivant impact on Business Unit Performance. This demonstrates the necessity for improving Perkebunan Nusantara II Medan-North Sumatra's competitor orientation process by raising awareness of how to put competitor advantages into practice. Manek (2018) suggests that a business implement a process of product adaption to enhance its marketing effectiveness.
Market orientation can have a reasonable impact on how products are modified to acquire a competitive edge in the marketplace.
4) Business Unit Performance is negatively and insignificantly impacted by company innovation, with an influence coefficient of -0.069. According to Farhas et al.
(2016) study, competitive advantage increases with the intensity of market orientation improvement efforts, but has a
smaller impact overall. 5) With a score of 0.570, competitive advantage has a positive and significant effect on business unit performance. Merakati, et al. (2017) claim that sustaining market share while gaining a competitive edge and the ability to conduct business profitably can be accomplished. 6) With a score of 0.090, digital transformation moderates the impact of market orientation on business unit performance. According to Lestari and Warmika (2019) a company will operate better the more market-oriented it is. It has been demonstrated that market orientation, as gauged by customer orientation, competitor orientation, and cross-functional cooperation, can enhance performance. 7) With a value of -0.087, digital transformation does not reduce the impact of corporate innovation on business unit performance. The findings of this study suggest that PT Perkebunan Nusantara II Medan-North Sumatra's supporting elements still need to be more prepared for the digital transformation. Additionally, according to researches' views, people over the age of forty are not interested in learning how to use or operate digital technology.
The term "indirect influence" refers to how a variable affects or does not affect other variables via other variables. The p- value can be used to perform the test. If the p-value is less than 0.05, the effect is considered significant; if the p-value is greater than 0.05, the effect is considered non-significant.
Table 6 shows the findings of examining the direct influence of study variables:
Original Sample (O)
Sample Mean (M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P Values Market Orientation→
Competitive Advantage→
Business Unit Performance
0.311 0.310 0.059 5.256 0.000
Company Innovation→
Competitive Advantage→
Business Unit Performance
0.177 0.176 0.048 3.668 0.000
Table 6. Variables' Indirect Effects Source: Processing Results, (2022)
According to Table 6, Market Orientation through Competitive Advantage has an influence coefficient of 0.311 and a positive and significant impact on Business Unit Performance. With an influence coefficient of 0.177, Company Innovation through Competitive Advantage positively and significantly influences Business Unit Performance. The two findings of this study demonstrate the strength of PT Perkebunan Nusantara II Medan-North Sumatra's competitive edge. The benefits of connections, such as efficient methods for customer communication, the depth of customer
relationships, and the expansion of customer networks, have been put into practice. According to research by Brahmanthara and Yasa (2017), changes in innovation will create competitive advantage and have an impact on marketing performance, meaning that if competitive advantage changes, marketing performance will also change. As a result, competitive advantage mediates the effect of corporate innovation on business unit performance. Table 7 shows the
overall impact of the variables.
Original Sample (O)
Sample Mean (M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P Values
Market Orientation→
Competitive Advantage 0.547 0.548 0.073 7.541 0.000
Enterprise Innovation→
Competitive Advantage 0.310 0.312 0.075 4.122 0.000
Market Orientation→ Business
Unit Performance 0.343 0.344 0.067 5.112 0.000
Enterprise Innovation→
Business Unit Performance 0.108 0.114 0.073 1.478 0.140
Competitive Advantage →
Business Unit Performance 0.570 0.566 0.078 7.266 0.000
Market Orientation → Digital Transformation → Business Unit Performance
0.090 0.088 0.046 1.961 0.049
Enterprise Innovation → Digital Transformation → Business Unit Performance
-0.087 -0.085 0.047 1.856 0.064
Table 7. Total Variables' Effect Source: Processing Results, (2022)
The following is a summary of the findings in Table 7: 1) With a total impact coefficient of 0.547, Market Orientation has a positive and significant effect on Competitive Advantage. 2) With a total effect coefficient of 0.310, company innovation has a positive and significant effect on competitive advantage. 3) With a total coefficient of influence of 0.343, Market Orientation has a positive and significant effect on Business Unit Performance. 4) With a total coefficient of influence of 0.108, company innovation has a positive and insignificant effect on Business Unit Performance. 5) With a total influence coefficient of 0.570, Competitive Advantage has a positive and significant effect on Business Unit Performance.
5. Conclusion
With a total coefficient of influence of 0.547, market orientation significantly and positively influences competitive advantage. These findings demonstrate how improving market orientation as behavior can lead to a set of shared values and attitudes across all employees at PT. Perkebunan Nusantara II Medan-North Sumatra, which will strengthen the company's competitive edge.
Company innovation affects Competitive Advantage positively and significantly, with a total effect coefficient of 0.310. This demonstrates how well Perkebunan Nusantara II Medan-North Sumatra has innovated. The company's competitive edge will be stronger the more effort it puts into increasing innovation.
With a total effect coefficient of 0.343, market orientation has no significant but positive impact on business unit performance. This demonstrates that a better knowledge of the use of competitor advantages is still needed to improve competitor orientation.
With a total coefficient of influence of 0.108, corporate innovation has a weakly negative impact on business unit performance. This demonstrates that greater market orientation improvement efforts result in greater competitive
advantage, but less competitive advantage effect.
With a total coefficient of influence of 0.570, competitive advantage has a positive and significant impact on business unit performance. These findings demonstrate how sustaining market share through a value creation strategy can give an organization a competitive edge and the ability to conduct profitable operations.
With a total effect coefficient of 0.090, digital transformation moderates the impact of market orientation on business unit performance. Business unit performance has been shown to be enhanced by market orientation as assessed by customer orientation, competitor orientation, and inter-functional coordination through digitalization.
With a total effect coefficient of -0.087, digital transformation does not reduce the impact of corporate innovation on business unit performance. The findings of this study suggest that PT Perkebunan Nusantara II Medan-North Sumatra's supporting elements still need to be more prepared for the digital transformation. Another reason is people over forty who are uninterested in learning how to utilize or operate digital technology.
With an effect coefficient of 0.311, competitive advantage mediates the relationship between market orientation and business unit performance. These findings show that PT Perkebunan Nusantara II Medan-North Sumatra has a strong competitive advantage. The benefits of connections, such as efficient methods for customer communication, the depth of customer relationships, and the expansion of customer networks, have been put into practice.
With an influence coefficient of 0.177, Company Innovation through Competitive Advantage positively and significantly influences Business Unit Performance. This demonstrates how changes in innovation will effect marketing performance and produce competitive advantage, demonstrating that if competitive advantage changes, marketing performance will as well.
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