INTRODUCTION
The Development of SMEs in Indonesia
A country's export competitiveness depends on its domestic enterprises, including small and medium-sized enterprises (hereinafter "SMEs"). President University | 2012 International Business Thesis 2 In the development of economy in Indonesia, SMEs have played an important role. As can be seen from the above quote, the SMEs in Indonesia currently contributed to GDP up to 59%.
However, the good story did not come to satisfactory results, that in reality, the progress of SMEs in Indonesia is relatively slow compared to large industries. President of the University | International Business Thesis 3 2012 In his statement, he emphasized that small and medium-sized enterprises have become one of the strongest carriers of the national economy, which play a key role in Indonesia and will certainly endure the current crisis. In Indonesia, SMEs have historically been major players in domestic economic activities, providing a large number of jobs and thus generating a primary or secondary source of income for many poor rural households.
The table below shows the development of the number of micro, small, medium and large industries in Indonesia during the year. In the latter sector, the enterprises are mainly involved in simple, traditional activities such as the production of wooden products, including furniture, textiles, garments, shoes and food and beverages (Tambunan, 2008).
The Development of Footwear Industries in Indonesia
The Potential of Footwear Industries in Bali
Berdasarkan gambar di atas, ekspor produk alas kaki dalam negeri menunjukkan perbaikan bertahap dan mencapai hampir US$2,3 miliar pada tahun 2010. Simpel namun elegan” adalah kata yang tepat untuk menggambarkan citra sandal Bali karena model sandal lokal yang membuat konsumen tampil anggun dengan desain yang simpel dan tradisional. Pengusaha asal AS itu kemudian menguji kualitas ketiga pasang sandal tersebut dengan cara merendamnya dalam air selama sepuluh hari dan menggosoknya dengan sikat dalam jangka waktu tertentu.
Natalya painting tangan yang ada pada produkt sandal iriran Ketut itu tidak luntur evenak sudah digosok dan direndam di dalam air selama 10 hari”. President University | 2012 International Business Thesis 7 certain manufacturers have been tested by American entrepreneurs that local products have high durability and resistance to water. Based on the preliminary study conducted by interviewing three local sandal manufacturers, the researcher found that there are three main characteristics of local products that make them potentially exportable, which are design, style and repairability.
The researcher sees that the differentiation strategy seems to work in Balinese sandal products and it makes the products have their own characteristics compared to other products.
The Essence of Competitive strategy
The researcher mainly relies on both Porter's theory of differentiation and Kotler's types of differentiation, as well as various studies done previously.
Why The Research is Important
Problems identified
Statement of Problems
Research Objectives
Chairman University | 2012 International Business Thesis 10 The following problem statements are used to guide this research work and are formulated in a question-oriented manner: . 1) What are the dominant factors of the product differentiation strategy of local sandals in Bali for the export potential of sandals in Bali.
Significance of Study
The research is expected to help students gain more insight knowledge about the differentiation strategy of SMEs in sandal industries in Bali. The research is expected to help next group of students who are willing to understand more about SMEs' differentiation strategy in local sandal industries in Bali.
Theoretical Framework
Scope and limitations of the study
Definition of Terms
Product Differentiation: Product differentiation is the process by which a product is distinguished from others (competitors' products, or the firm's own products), making it more attractive to a particular target market.
Differentiation
- Product differentiation
This can be achieved through both existing and created opportunities in a certain industry, or the ability of a firm to take advantage of them. In addition, when products differ according to characteristics that cannot be ordered in an objective way, a horizontal differentiation arises in the market. Moreover, vertical differentiation occurs in a market where the various goods present can be ordered from highest to lowest according to their objective quality.
Shape also enhances a product to show its originality, as it is the first tangible thing customers see. A product can be offered with various functions and features that can complete its functional aspects. The first aspect of a feature differentiation is the structure of the product and can be adapted to a newer version by adding more updated features.
Most products can be categorized into four quality levels: low, average, high, very high. Design is the totality of the function that affects the appearance and function of a product to meet customer needs.
Previous researches done on Differentiation Strategy
In addition, packaging is becoming one of the most decisive factors in style differentiation, especially for food, cosmetics and small supplies. From a company's point of view, a well-designed product will be easy to carry, use and repair. More than just creating product or service attributes, it involves shaping the customer's product usage experience.
Just as good design can improve customer value, reduce costs and create a strong competitive advantage, bad design can result in lost sales and embarrassment. Most research examines the impact of differentiation strategy on sustainable competitive advantage, but with various additional variables. The field of research is also relatively different, but no one has ever done a research on the differentiation strategy in the sandal industry in Bali.
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The researcher implemented both qualitative and quantitative research and used factor analysis to process the data. The researcher also implemented quantitative research due to the research question posed by the researcher included in one of six main types of research questions that quantitative research is particularly suited to find an answer to (Sukamolson). President University | 2012 International Business Thesis 26 Qualitative research conducted by the researcher was on the personal interview for the preliminary research.
The researcher decided to conduct an interview to understand the overview of sandal producing conditions in Bali. While, quantitative research conducted by the researcher was on the questionnaire spread towards local sandal manufacturers. In this section, the researcher will explain the procedure of how he conducted the research.
Once all the data was collected, the researcher began converting the ordinal data into numerical data. The researcher distributed the questionnaire by coming to the shop of local sandal manufacturers around Denpasar, Badung and Gianyar and asked the owner or person in charge of the office to complete the questionnaire.
Research Instruments
- Data Collection
- Preliminary In-person Interview
- Literature Review
- Questionnaire
The tool used by the researcher was Successive Interval Method (MSI) which was downloaded in (Juliandi). In this research, the researcher used Exploratory Factor Analysis (EFA) as the purpose of the research is to determine the number of common factors that influence a set of measures. President University | 2012 International Business Thesis 40 From the above table the researcher could determine that the minimum factor loading for this research was 0.75 as the sample size used by the researcher was 50 respondents.
President University | 2012 International Business Thesis 45 From the above figure, the researcher concludes that local producers who mostly operate export activities have been establishing the company for five to ten years. The researcher focuses on four dimensions of product differentiation which are durability, repairability, style and design. The researcher concludes that most respondents feel agree with the statements in durability dimension which shows that the durability of local sandals becomes one of the most important strengths.
The researcher found five construct variables as the dominant factors of product differentiation strategy that increase export potential to local sandal producers in Bali. By understanding the dominant factors of the local products, the researcher expects that the research can help local producers to improve and optimize the superior characteristics of local sandals.
