The Strategy Development of SMEs Metal

Diah Setyorini Gunawan 1 , Neni Widayaningsih 2 , Barokatuminalloh 3

1,2,3 Jenderal Soedirman University, Indonesia

Permalink/DOI: http://dx.doi.org/10.15294/jejak.v10i1.9131

Received: October 2016; Accepted: December 2016; Published: March 2017

Abstract

This research aimed to identify the profile of SMEs metal and to analyze the predictors that differentiate the performance achievement of metalworkers in Pasir Wetan Village, Karanglewas Sub-District, Banyumas Regency using primary data obtained from direct interviews with metalworkers in Pasir Wetan Village, Karanglewas Sub-District, Banyumas Regency. Primary data included the data of net income rate, the amount of labor used, the amount of bank credit received, business duration, education level, and the amount of production. The data were analyzed using descriptive analysis and discriminant analysis. The analysis results indicated that the increase in the amount of production and the amount of labor used were the predictors that differentiate the revenue achievement between superior metalworkers group and non-superior metalworkers group. In addition, the amount of production was the best predictor to differentiate the revenue achievement between superior metalworkers group and non-superiors metalworker group.

Key words : SMEs, Performance, Banking Credit, SMEs Predictors, SMEs Development Strategy.

How to Cite: Gunawan, D., Widayaningsih, N., & Barokatuminalloh, B. (2017). The Strategy Development of SMEs Metal. JEJAK: Jurnal Ekonomi Dan Kebijakan, 10(1), 121-137. doi:http://dx.doi.org/10.15294/jejak.v10i1.9131

ISSN 1979-715X

Address: Jl. HR Boenyamin 708, Grendeng, Purwokerto Utara, Grendeng, Purwokerto Utara, Kabupaten Banyumas, Jawa Tengah 53122 E-mail: diahsetyorini943@gmail.com

122 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

INTRODUCTION

region. Therefore, it is vitally important for Asia’s economic success to have fully functioning

Small and Medium Enterprises (SMEs) support measures for SMEs. As for the

play an important role in economy of importance of SMEs in Asia, according to a

Indonesia. SMEs have contributed 97 percent survey conducted by the Asian Development

of the employment in Indonesia. In addition, Bank (ADB) on 14 economies from the five ADB

data in 2013 showed that SMEs accounted for regions: 1) Kazakhstan (Central Asia); 2) the

56 percent of the total Gross Domestic People’s Republic of China and the Republic of Product (GDP) in Indonesia (Ministry of Korea (East Asia); 3) Bangladesh, India, and Sri

Cooperatives and Small and Medium Lanka (South Asia); 4) Cambodia, Indonesia,

Enterprises, 2013). Malaysia, the Phillipines, Thailand, and Vietnam

SMEs have become an important (Southeast Asia); and 5) Papua New Guinea and

component of economic development, the Solomon Islands (the Pacific), SMEs account

representing a substantial proportion of for more than 90 percent of total enterprises in

national economies worldwide. SMEs can be each country (Yoshino and Taghizadeh-Hesary,

characterized as a major of economic growth.

Some studies indicate that the OECD estimates the total number of SMEs

development of SMEs have a close worldwide reached 90 percent of the total

relationship with economic growth. For number of companies in the world. In addition,

example, a study conducted by Beck et al. the number of people working in SMEs

(2005) found the fact that there is a positive worldwide reached 63 percent of the total

relationship between SMEs and economic workforce in the world (Berisha and Pula, 2015).

growth. Studies conducted by Ayyagari et al. International Labour Organization (2015)

(2007) found that SMEs in high-income also stated that SMEs are a major source of job

countries contribute 50 percent to the GDP. creation. Sectors within the SME are varies. In

Post global financial crisis that occurred addition, SMEs include productive companies or

in 2008-2009, the attention to the role of unproductive companies. It is a challenge for the

SMEs was increased. SMEs have an important

development of SMEs.

role for the economy. The role includes a role SMEs has various definitions. Organisation

in job creation and role in increasing for Economic Co-operation and Development

economic growth (Ardic et al., 2011). (OECD) defines SMEs as independent

Kristiyanti (2012) examines the strategic companies which employs a workforce of less

role of SMEs in national development. The than a certain amount. The specific amount

findings of this study, SMEs have a strategic varies from country to country. Countries that

role in national development. SMEs play a joined the European Union set the Small and

role in economic growth and employment, as Medium Enterprises as companies that have a

well as in the distribution of development workforce under 200 people, while the United

outcomes. SMEs also proved more resilient to States imposed Small and Medium Enterprises as

the economic crisis that occurred in companies that have a workforce under 500

Indonesia. people. Financial assets are also used to define

SMEs are the backbone of the Asian small and medium enterprises. For example, the

economy. They make up more than 98 countries that joined the EU defines small and

percent of all Asian businesses that provide medium enterprises as companies that have

two out of three private sector jobs in the

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 123

annual sales up to 40 million euros information about the financial condition and (Organisation for Economic Co-operation

business of SMEs. This can cause difficulties in and Development, 2000).

the bank to minimize the default risk on credit The Central Bureau of Statistics (Badan

that can be distributed to SMEs. In addition, the Pusat Statistik) also provide a definition of

characteristics of SMEs associated with the SMEs by the quantity of labor. Small

limited assets that can be pledged as collateral, businesses are businesses that have a

business uncertainty in the future, and weak workforce of five to 19 people, while medium

financial management are the constraints of enterprises are businesses that have a

SMEs to access bank credit (Bank Indonesia, workforce of 20 to 99 people (Bank Indonesia,

2011). Sukidjo (2004) examines the strategy of Winarni (2006) stated that in general,

empowerment of SMEs in Indonesia, period SMEs have the feature are as follows: 1) usually

1997-2001. The research reveals the problems the form of individual business and has not

faced by SMEs, both from within and from been incorporated companies; 2) legality

outside SMEs. The problems include: 1) a aspects are weak; 3) the organizational

shortage of funds for working capital and structure is simple; 4) no separation between

investment; 2) difficulties in marketing; 3) his personal wealth with the wealth of the

difficulties in the procurement of raw materials; company; 5) quality management are low and

4) the skills of human resources is still low; 5) rarely have a business plan; 6) the main

The technology used is still low; and 6) sources of venture capital is private capital; 7)

difficulties in the administration of SMEs. In human resources are limited; and 8) the

addition, this study also suggests a strategy for owners have a strong bond with the company

empowerment of SMEs covering system so that all the company's obligation is also the

development strategy, growth policy strategies duty of the owner.

which support business climate, as well as the SMEs is a business activity that is able

strategies to strengthen policy support for to expand employment, provide economic

cooperatives and SMEs.

services widely to the public, play a role in the Sihono (2005) research on SMEs process of equalization and improvement of

contribution to overcome unemployment in people’s income, stimulate economic growth,

Indonesia, period 1996-2001. The finding of this and play a role in bringing about national

study is SMEs can overcome the problem of stability (Hidayat and Fadillah, 2009). The

to overcome government tries to develop SMEs to improve

employment,

especially

unemployment. The role played by SMEs is quite the performance of this sector. The

indications of development of SMEs is still facing many

strengthening the spatial concentration of SMEs obstacles, especially in accessing cost of the

in Java since the economic crisis hit Indonesia. banking sector (Bank Indonesia, 2011).

Mulyati (2010) conducted a research on The obstacles of SMEs to bank credit is

SMEs leather jacket in Garut Regency, West Java due SMEs have unique characteristics and

Province. The result indicated that there is a SMEs generally do not have the transparent

weak linkage between SMEs leather jacket, and well organized financial information

banking, research and development institute and causing lenders to have difficulty in obtaining

universities. This supports the fact that the

124 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

government’s efforts to develop SMEs are still services. The findings of this study is the large facing obstacles, especially in accessing cost

companies have greater access to financial from the banking sector.

services compared with SMEs. SMEs' access to Other research on SMEs conducted by

financial services remains limited. Taufiq (2006) examines the use of SMEs credit

Belas et al. (2015) examines the SME funds on the increasing business in SMEs

business environment in the Czech Republic and slippers and shoes in Wedoro Waru Village,

Slovakia. This study focuses on motivating Sidoarjo. The result indicates that there is a

factors, status in society, the level of corruption, difference between the respondents of credit

business risk at the present time, credit for users and respondents of non-credit users in

funding, the ability to manage financial risk, and the increase of their business. 95 percent of

business optimism. The findings of this study, respondents of credit users have increased

namely the right perception of entrepreneurs in their own capital and 78 percent of

society play an important role for the economic respondent of non-credit users have increased

growth of a country. These perceptions affect their business.

motives to start a business that ultimately affect Arregui (2012) conducted a research on

entrepreneurial behavior. The areas with the entrepreneurship and SMEs in Mexico.

perceptions that both have a supportive business Arregui identify strategies to accelerate the

environment for the development of SMEs. growth of SMEs in Mexico. These strategies

This research aimed to identify the profile include: 1) providing access to capital, 2) SMEs

of SMEs metal and to analyze the predictors that get equal treatment with the larger

differentiate the performance achievement of companies, 3) reducing frictions in the supply

Wetan Village, chain, and 4) facilitate SMEs to access

metalworkers in

Pasir

Karanglewas Sub-District, Banyumas Regency. performance bond.

Pasir Wetan Village is known as the SMEs metal Irmawati, Damelia, and Puspita (2013)

center in Banyumas. SMEs metal in Pasir Wetan conducted a research on SMEs batik in Klaten

Village is a hereditary business where the skill Regency. This research identified the

level owned by the metalworkers is also acquired application of financial inclusion in rural-

hereditary, not acquired from the training based batik SMEs. The results revealed that

activities. This indicates that the performance of the form of the model of financial inclusion

metalworkers in Pasir Wetan Village can be for SMEs batik in Klaten Regency is financial

further optimized through the appropriate institutions in terms of capital. This is in the

development strategy. In conducting this form of low interest loans and KUR (Business

research, the researchers partnered with Satria Credit for Society). Then, there is a provision

Metal Industry Group in Pasir Wetan Village, of assistance from financial institutions. In

Karanglewas Sub-District, Banyumas Regency. terms of marketing, it is necessary for SMEs in

The research results are expected to be the having intensive assistance, participating in

basis for the government to formulate batik exhibition and advertisement. Having

development strategy of SMEs metal in Pasir applied this model, it is expected that SMEs

Wetan Village, Karanglewas Sub-District, batik in Klaten Regency will be well-

Banyumas Regency. Ideally, development improved.

strategy of SMEs metal is not only based on a Beck and Cull (2014) examines the SMEs

policy or local in Africa by identifying SMEs' access to

central

government’s

government’s policy but also based on the

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 125

conditions of the SMEs metal in Pasir Wetan development strategy of SMEs metal in Pasir Village, Karanglewas Sub-District, Banyumas

Wetan Village, Karanglewas Sub-District, Regency.

Banyumas Regency.

Descriptive analysis is used to group data

RESEARCH METHODS

so that the data can be managed easily. The setting and grouping of data can provide

This research is the application of the descriptive information related to SMEs metal in

discipline of economic development that Pasir Wetan Village, Karanglewas Sub-District,

addresses issues related to SMEs in Pasir Banyumas Regency. In this analysis, SMEs metal

Wetan Village, Karanglewas Sub-District, profiles in Pasir Wetan Village, Karanglewas Sub-

Banyumas Regency. The selection of location District, Banyumas Regency are identified based

is based on the consideration that there is a on the amount of labor used, the amount of bank

metal industry center in the village. credit received, business duration, education

The research method used in this level and the amount of production.

research is census method. The census Discriminant analysis is used to help

conducted by visiting metalworkers in Pasir formulating the development strategy of SMEs

Wetan Village, Karanglewas Sub-District, metal in Pasir Wetan Village, Karanglewas Sub-

Banyumas Regency. District, Banyumas Regency. This analysis is a

This research uses primary and

for classifying secondary data. Primary data are obtained

statistical

analysis

individuals/objects into separate groups based from direct interview with the metalworkers

on the number of independent variables in Pasir Wetan Village, Karanglewas Sub-

(Kuncoro, 2001). In the discriminant analysis, the District, Banyumas Regency. Primary data

includes superior include the data of net income rate, the

groups

separation

and non-superior amount of labor used, the amount of bank

metalworkers

group

metalworkers group.

credit received, business duration, education The classification of the superior

level, and the amount of production.

and non-superior Secondary data include monographs of Pasir

metalworkers

group

metalworkers group is based on income level Wetan Village, Karanglewas Sub-District,

indicators of metalworkers in Pasir Wetan Banyumas Regency.

Village, Karanglewas Sub-District, Banyumas Based on data obtained from the

Regency. Furthermore, the average value of the management of metalworkers community in

indicators is used as a determinant of the Pasir Wetan Village, Karanglewas Sub-

classification between superior metalworkers District, Banyumas Regency (Satria Metal

group and non-superior metalworkers group. Industry Group), the number of metalworkers

The classification with using the indicator of are 28 workers. In this research, the

income level is as follows:

respondents are 28 metalworkers.

The analytical method used in this Superior metalworkers group

This group consists of metalworkers with a research includes descriptive analysis and

net income level above the average level of net discriminant analysis. These analyses are used

income of metalworkers in Pasir Wetan to answer research questions. The answers

Village, Karanglewas Sub-district, Banyumas generated in this research are the

Regency.

126 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

2. Non-superior metalworkers group

Increasing the amount of labor This group consists of metalworkers with a

The

amount of used is expected to increase net income level below the average level of

probability of net income of metalworkers in Pasir

labor used the

metalworkers to be classified Wetan Village, Karanglewas Sub-district,

(TK)

as superior metalworkers. Banyumas Regency.

Increasing the amount of bank the role of a set of predictors so that it can be

Then, it is performed the assessment of

The

amount of credit received is expected to determined the important predictors that

increase the probability of differentiate the achievement of income

bank

metalworkers to be classified between superior metalworkers group and

credit

as superior metalworkers. non-superior metalworkers group. The

received

(CRE)

predictors include the amount of labor used, the amount of bank credit received, business duration, education level and the amount of

Increasing business duration production.

Business

is expected to increase the The discriminant function is based on

duration

probability of metalworkers to the following equation:

(LS)

be classified as superior

D i =d i1 TK + d i2 CRE + d i3 LS + d i4 TP + metalworkers.

d i5 OMZET ...................... (1)

Increasing education level is Where:

Education

expected to increase the TK

level (TP)

= the amount of labor used probability of metalworkers to CRE

be classified as superior LS

= the amount of bank credit received

= business duration metalworkers. TP

= education level

OMZET = the amount of production

Increasing the amount of Discriminant function (D i ) is applied

The

amount of production is expected to with a point of view to estimate the role of a

production increase the probability of set of predictors. The predictors used in this

metalworkers to be classified analysis include the amount of labor used

(OMZET)

as superior metalworkers. (TK), the amount of bank credit received

(CRE), business duration (LS), education level

(TP), and the amount of production

RESULTS AND DISCUSSION

(OMZET).

Metal SMEs in Pasir Wetan Village,

The hypotheses related to the predictors

Karanglewas Sub-District, Banyumas Regency

used in the discriminant analysis are Metal processing industry in Pasir Wetan presented in Table 1. Village, Karanglewas Sub-District, Banyumas

Regency began in 1970 or could be called the first Table 1. Predictors and Hypotheses Used in

generation. Communities in Pasir Wetan Village Discriminant Analysis especially the men have expertise in making the Predictor

Hypothesis craft of metal, brass, and the other to hold

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 127

various kinds of equipment such as household Table 2. Characteristics of Respondents by Age appliances, machinery and other tools.

Percentage (%) Metal processing industry employers

Age Group

Total

2 7.14 still use traditional technologies and manual

6 21.43 include iron manual cutting machines,

8 28.57 welding carbide, iron scissors, metal printing

8 28.57 tool using stone molds and other tools. To

4 14.29 overcome the limitations of the technology,

28 100 Satria Metal Industry Group got local

Total

Source: Primary Data (Processed) government aid in 2002 in the form of

automatic cutting machine and machine for Table 2 indicates that the minimum age of bending iron.

respondents is 35 years old and the maximum Metal SMEs in Pasir Wetan Village,

age is 65 years old with the average of 50.93 years Karanglewas Sub-District, Banyumas Regency

old. The age of respondents included in the is a potential industry. Economic activity that

productive age makes it possible for the occupied the community is expected to

respondents to work optimally, even though a increase the level of prosperity and strengthen

14.29 percent of respondents are in the older age the empowerment of local autonomy. The

group of 59 – 65 years old. This is because the production of metal SMEs in Pasir Wetan

respondents are business owners. The majority Village marketed around Banyumas Regency,

of the respondents are in the age group of 47 – 58 West Java, Jakarta and outside Java Island.

years old.

Identification of Metal SMEs Profile in Pasir

The next characteristic is education level.

Wetan Village, Karanglewas Sub-District,

Education level means the formal education that

ever been taken by the respondents. A person’s Respondents in this research are

Banyumas Regency

education level in general may affect the abilities business owners in the metal processing of

in running business, such as managerial ability Metalworker Group (Kelompok Perajin

and the ability to get information and new Logam ) “Satria” in Pasir Wetan Village,

knowledge from outside that are useful for Karanglewas

developing the businesses owned. The education Regency. The number of respondents is 28

Sub-District,

Banyumas

level of respondents in general remains low. It people. The interview with respondents is

can be seen in Table 3.

conducted for two weeks in March 2016. In Table 3, it can be seen that the education Based on the research conducted, it can be

level of the respondents is still low, 50 percent explained that the characteristics of the

have only finished primary school, there are respondent are as follows:

event two respondents who did not finish The first characteristic of the

primary school, and only one respondent who respondent is based on age; it is because age

has higher education. The type of work owned by is related to a person’s productivity, especially

the respondents did not give priority to formal when the work performed requires a lot of

education; skills that can be acquired by energy and thought. Seeing from the age, all

practicing or training are preferred, as one of the respondents are in the productive age, it can

respondents who do not complete primary

be seen in Table 2. education but following the non-formal

128 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

education, such as courses and training so as Table 4 indicates that the respondents who to run the business.

have the longest business duration are in the group of 3-11 years with a percentage of 39.29

Table 3. Characteristics of Respondent percent, while the least business duration is in by Education Level

the group of 30-47 years with a percentage of 7.14 Education

years, respectively. This business requires skill Level

Total

Percentage

and the ability to process the metal into goods to Did not finish

meet the demand of consumer, so it is not easy Primary

for people to open business of metal processing. School

2 7.14 This provides the advantages for employers, Primary

including the ability to survive in running a School

14 50.00 business, some of the respondents are even able Junior High

to survive for 46 years. This condition is an School

5 17.86 achievement that is not easy to be achieved. The Senior High

next challenge is competition particularly with School

6 21.43 larger companies with stronger capital and the Bachelor

1 3.57 use of more modern technology.

Metal processing business that requires Source: Primary Data (Processed)

skill and ability to manage the metal is not always the primary work of the respondents;

Based on the interview, most of the some of them work as police and welding worker businesses are hereditary and there are

as their primary work. Even though metal entrepreneurs, who were labor, but they can

processing business is a sideline, but it does not open their own business and even absorbs

lessen the seriousness of the respondents in labor because they have a good ability.

managing their business. In addition, there are The next characteristic to be discussed

respondents who have a sideline in addition to is business duration that has been run by the

the metal processing as the main livelihood, respondents. The average business duration

including making school uniforms, servicing is 17.43 years with minimum business

hand phone, land selling and purchasing and duration of 3 years and maximum of 46 years.

marketing the results. The sideline is performed More details can be seen in Table 4.

in their spare time, especially when the respondents do not have many orders. The

Table 4. Characteristic of Respondents amount of labor used by the respondent in the by Business Duration

metal processing business varies with an average Business

of 5 workers, the minimum labor is one and the Duration

maximum labor is 25 workers. Detailed

11 39.29 information related to the amount of labor can

9 32.14 be seen in Table 5.

The highest ownership of workers is in the

2 7.14 group of 1-5 workers or 67.86%, while the lowest ownership of worker is in the group of 11-15

workers or 3.57 percent, and there is a group of Source: Primary Data (Processed)

Total

16-20 workers with no respondent. The source of

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 129

labor is largely derived from non-family by

0 0.00 ownership of large number of workers, while

71.15 percent, especially for business with the

28.85 percent are from families.

28 100.00 Table 5. Characteristics of Respondents

Total

Source: Primary Data (Processed) by Amount of Labor Amount of Total

Table 6 indicates that the highest turnover Labor

Percentage (%)

of respondents is in the group of Rp4,400,000.00

19 67.86 – Rp103,520,000.00 by 82.14 percent, there are no

6 21.43 respondents in the turnover group of

1 3.57 Rp301,760,000.00 – Rp400,880,000.00, the other

turnover group is only 3.57 percent except for the

Rp103,520,001.00 – Total

Rp202,640,000.00 by 10.71 percent. Because the Source: Primary Data (Processed)

turnover range is fairly wide among the groups that is Rp99,120,000.00 and most of the

Data collection in this research is respondents are in the first turnover group, then conducted in March. Based on respondent

in adding the information, Table 7 shows data on information, it is not a peak period so that the

turnover in 23 respondents.

metal processing business turnover has not been optimal; the turnover is still possible to

Table 7. Characteristic of Respondent by increase, especially in one or two months

Business Turnover in March 2016 (23 before the new school year. A lot of

Respondents) respondents received many orders in one or

Total Percentag two months before the new school year. The

Total Turnover

e (%) turnover ranged between Rp4,400,000.00 up

17 73.91 to Rp500,000,000.00. Detailed information

4,400,000 - 24,224,000

24,224,001 - 44,048,000 4 17.39 on the amount of turnover can be seen in

4.35 Table 6. Characteristic of Respondent

23 100.00 by Business Turnover in March 2016

Source: Primary Data (Processed) (28 Respondents) Total Turnover Total

Table 7 indicates that most of the 4,400,000

Percentage (%)

- respondents have a turnover in the range 103,520,000

23 82.14 between Rp4,400,000.00 – Rp24,224,000.00 by 103,520,001

17.39 percent, the other group is only 4.35 202,640,000

3 10.71 percent, only the group of Rp24,224,001.00 – 202,640,001 -

Rp44,048,000.00 which has 17.39 percent of 301,760,000

1 3.57 respondents. This is because the period of data collection is not a peak period.

130 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

Seeing from the amount of turnover group of Rp28,520,201.00 - Rp34,875,000.00 by owned by metal business, most of the

6.67 percent. After receiving credit, the average turnover are still not optimal, only a few

net income increases to Rp16,431,260.00; further respondents who have a turnover of more

information can be seen in Table 9. than one hundred million. There are some things that cause these conditions, such as the

Table 9. Net Income after Receiving Credit limitations of the technology and the ability

Total Percentage of the entrepreneur. To help metal processing

Net Income

(%) business,

6 40.00 assistances, such as training and tools. The

10,230,801 - 17,360,600 2 13.33 training includes entrepreneurship and SMEs

20.00 training as well as production training such as

17,360,601 - 24,490,400 3

13.33 training of cutting iron, metal casting and the

24,490,401 - 31,620,200 2

31,620,201 - 38,750,000 2 13.33 manufacture of agricultural tools. Some of the

15 100.00 respondents still do not receive the aid, there

Total

Source: Primary Data (Processed) are only 16 out of 28 respondents who already

had it. Table 9 indicates that there is an increase The limitation of turnover is also caused

in net income after receiving credit even though by the lack of capital. Thus, the entrepreneurs

there is no change in minimum income, but apply for credit from bank to increase the

there is an increase in maximum income to capital. The purpose of the credit application

Rp38,750,000.00. The average net income also is to increase turnover and revenue, the

increased by Rp2,816,660.00. The data indicates average income received by the respondents

that there are respondents who have benefit of before receiving credit is Rp13,614,600.00.

the credit requested to the bank. Detailed information can be seen in Table 8.

Predictors That Differentiate Revenue

Achievement between Superior Metalworkers

Table 8. Net Income before Receiving Credit

Group and Non-Superior Metalworkers Group

Net Income

Total Percentage

Discriminant analysis is used to help

formulating the development strategy of SMEs 3,101,000 - 9,455,800

6 40.00 metal in Pasir Wetan Village, Karanglewas Sub- 9,455,801 - 15,810,600

4 26.67 District, Banyumas Regency in classifying 15,810,601 - 22,165,400

individuals/objects into separate groups based 22,165,401 - 28,520,200

2 13.33 on the number of predictors. In discriminant 28,520,201 - 34,875,000

1 6.67 analysis, it is performed a separation of group Total

consisting of superior metalworkers group and Source: Primary Data (Processed)

non-superior metalworkers group. The classification between superior and

Net income before receiving credit is non-superior metalworkers group is based on minimally Rp3,101,000.00 and maximally

income level indicators of the metalworkers in Rp34,875,000.00. Most of the respondents

Pasir Wetan Village, Karanglewas Sub-District, have net income in the group of

Banyumas Regency. Based on the result of the Rp3,101,000.00 – Rp9,455,800.00 by 40

classification, it can be determined that 36 percent and the least respondents are in the

percent of metalworkers in Pasir Wetan Village,

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 131

Karanglewas Sub-District, Banyumas Regency Test of equality of group means provides are classified as superior metalworkers group.

Wilks’ Lambda value for each predictor. By The remaining 64 percent of metalworkers in

seeing at the significant level, it can be concluded Pasir Wetan Village, Karanglewas Sub-

that the amount of labor used (TK) and the District, Banyumas Regency are classified as

amount of production (OMZET) are significant, non-superior metalworkers group.

meaning that the predictors are able to The stage after classifying between

differentiate the revenue achievement between superior metalworkers group and non-

superior metalworkers group and non-superior superior metalworkers group is performing

metalworkers group.

discriminant analysis. The results of discriminant analysis are shown in Table 10,

Table 11. Summary of Discriminant Model Table 11 and Table 12. Table 10 shows the result

Classification of test of equality of group means, Table 11

Predicted Group shows a summary of discriminant model

Membership classification and Table 12 shows the results of

Dt 0 1 Total discriminant function analysis using five

explanatory variables (discriminant function Original Count 0 18 0 18 coefficients).

0 100,0 Table 10. Test of Equality of Group Means

Source : Primary Data (Processed) The amount of labor used 0.720*

* 85,7% of original grouped cases correctly

classified

** 0 = non-superior metalworkers group The amount of bank credit (0.286)

1 = superior metalworkers group received (CRE)

Based on Table 11, in general this Business duration (LS)

discriminant model is able to correctly classify more than 85.7% cases. The group membership

is correctly predicted at 100% for non-superior Education level (TP)

metalworkers group and 60% for superior metalworkers group.

The amount of production (0.000) Table 12. Coefficient of Discriminant Function (OMZET)

Coefficient* The amount of production 1,000 Source : Primary Data (Processed)

The amount of labor used * Significant at α = 1%

(TK) Source : Data Processed 2016.

132 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

Description : cutting iron, metal casting and manufacture of * Chi-square = 12.850; significant at α=

agricultural tools.

1% Related to human resource development, Significant Chi-square value at α=1%

the government should intensify its support for shows statistically significant discriminant

firms sending their workers to short-term function which means that the means

vocational training course. The government (average) value of discriminant scores for the

should also raise entrepreneur’s awareness of the two groups of metalworkers are different

importance of human resource development and significantly.

support SMEs owners efforts to develop their **The predictors, such as the amount of

own human resources.

bank credit received (CRE), business duration In order to increase SME owners about (LS) and education level (TP), are not

knowledge of domestic and export markets, the significant and are unable to differentiate the

government should: 1) enlighten entrepreneurs revenue achievement between superior

about the importance of demand orientation, metalworkers group and non-superior

market knowledge, and product quality; 2) metalworkers group.

provide free information on markets and recent Based on Table 12, it can be determined

market development; 3) assist SME owners with that the amount of production (OMZET) is

their own market research; and 4) foster co- the best predictor to differentiate between the

operation with international firms within global revenue achievement between superior

value chains and other co-operative forms metalworkers group and non-superior

(Loewe et al, 2013).

metalworkers group. Table 12 also indicates In addition, the banking credit is also that the increasing amount of production and

needed in order to increase the amount of the amount of labor used may increase the

production because one of the causes of the probability of metalworkers to be classified as

limited amount of production is the lack of superior metalworkers group.

capital. This condition as proposed by the Related to the development strategy of

International Finance Corporation (IFC)-World SMEs metal in Pasir Wetan Village,

Bank in Micro, Small, and Medium Enterprise Karanglewas

Country Indicators that the biggest problems of Regency, the framers of the strategy should

Sub-District,

Banyumas

SMEs in 132 countries including Indonesia are ideally focus on increasing the amount of

difficult to access capital (IFC-World Bank, production. The increasing amount of

production can further increase the amount Anggraeni, Hardjanto, and Hayat (2013) of labor used. The amount of production and

examines the development of SMEs through the the amount of labor used are the predictors

facilitation of external and internal potential in that differentiate revenue achievement

the business group cornflakes in Pandanwangi, between superior metalworkers group and

Blimbing Sub-District, Malang. Development non-superior metalworkers group.

internally done in several ways, among others: 1) The strategies to increase the amount of

the procurement of capital; 2) innovation of production of SMEs metal are training and

production; 3) expansion of marketing network; tools aid. The training provided includes

and 4) the provision of facilities and training in entrepreneurship and SMEs as well

infrastructure. While external development as production trainings, such as training of

include: 1) access to capital assistance from the

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 133

relevant institutions; 2) coaching and training franchising, and joint ventures. Government activities; 3) help in promoting the products;

policy initiatives should take account of regional

4) assistance in the expansion of product and local factors which affect entrepreneurship marketing network; and 5) the provision of

and build on these particularities to foster small- facilities and infrastructures as supporting the

firm partnerships. Policies should use local advancement of SMEs.

institutions, groups of industries and inter-firm Another strategy that can be done to

linkages to create and strengthen the micro-level increase the number of SMEs production of

underpin global metal, namely strengthening the linkages

competitiveness. Building on local strengths, between SMEs. This strategy is done by

SMEs policies need to address the new dynamics setting up a framework for partnerships with

of entrepreneurship and small-firm clusters to government or private companies and

meet the challenges posed by globalizing partnerships between SMEs. The government

economies (Organisation for Economic Co- is a facilitator to initiate partnerships with big

operation and Development, 2000). companies.

Farsi and Toghraee (2014) examines the Organisation

SMEs in Iran by identifying the key challenges operation and Development (2000) stated

for Economic

Co-

faced by SMEs. Findings from the study showed that small firms need to upgrade their

that managerial and human resources, research management skills, their capacity to gather

and development, technology, national policies, information and their technology base.

environmental bureaucracy and limitation of Governments need to improve SMEs access to

market information are the main challenges financing, information infrastructures and

faced by SMEs in Iran.

international markets. Providing regulatory, World Bank (2005) stated that efforts to legal and financial frameworks conducive to

develop SMEs includes reduction of local entrepreneurship and small firm start-up and

legislation and regulation of business, the growth is a priority.

establishment of a new funding for SMEs, tax Fostering public-private partnerships

reform and tax refund appropriately, actively and small-firm networks and clusters may be

support business education, increase access to the most expeditious path to a dynamic SMEs

micro-finance services, and search other sector. Grouped in local systems of

opportunities to develop better communication production, SMEs can often be more flexible

infrastructure.

and responsive to customer needs than large The framers of the strategy should give an integrated firms. They can pool resources and

attention to the competitive performance. The share the cost of training, research, and

competitiveness refers to the ability of firms to marketing. Clustering facilitates exchange of

compete for markets, resources, and revenues as personnel and diffusion of technology and

measured by indicators such as relative market creates new possibilities for efficiency gains.

share, growth, profitability or innovation Importantly, these local networks and

(Roberts, 2004). The competitiveness of an support systems can help SMEs meet the

economy is seen as ultimately reflecting its challenges of globalization. Whether alone or

productivity. This depends on the value of in clusters, SMEs are seeking international

nation’s products and services, supplied by its opportunities through strategic alliances,

enterprises, as measured by the prices the

134 Diah Setyorini Gunawan, et al., The Strategy Development of SMEs Metal

command on international markets, and the associated with innovation (product, process, efficiency with which these products and

and organization); and 5) weak entrepreneurial services are produced (Porter et al, 2008). An

spirit and capacity (Yoshino and Taghizadeh- economy becomes more competitive through

Hesary, 2016).

the ability of its enterprises to increase It is possible to identify a range of activities productivity by using assets (human

that can contribute to strengthening the resources, capital, physical assets, among

prospects for the competitiveness of SMEs. The others) more efficiently.

framers of the strategy have to pick the United Nations-Economic and Social

appropriate mix of policies, programmes, and Commission for Asia and the Pacific (2009)

institution-building initiatives to be undertaken stated that competitiveness is fundamentally

by the government and private sector, and and enterprise level concept, referring to the

supported by international development relative performance of firms in particular

partners. Specific policies, programmes, and product

institutional frameworks are seen as needed to performance of enterprises is shaped by a

increase the competitiveness of SMEs. A public country’s:

policy or publicly financed programme to conditions (including a country’s policy and

endowment,

macroeconomic

support SMEs must be anchored in a sound institutional

environment),

and

economic rationale.

A generally supportive macroeconomic of a country’s business environment, the

microeconomic factors (including the quality

environment for enterprise development relative sophistication of a firm’s operations,

includes low budget deficits, appropriate and the state of enterprise cluster

competitive real development in a particular economy).

inflation

management,

exchange rates, and an outward-oriented trade

regime. The macroeconomic environment needs requirements of enterprise linkages and

Attention must be focused on the

to be particularly stable and predictable from the network efficiencies, and on upgrading

perspective of small firms, as fundamental options (for example: product and process

unexpected policy changes may threaten the innovation) as key dimensions of the

viability of SMEs more readily than that of larger competitiveness.

firms (United Nations-Economic and Social SMEs facing the challenges related to

Commission for Asia and the Pacific, 2009). the competition, the ability to adapt to rapidly

According to the Indonesian Government changing market demand, technological

Regulation (Peraturan Pemerintah Republik change, and the limitations associated with

Indonesia) Number 17 Year 2013 on the science, innovation, and creativity. Factors

implementation of Law (Undang-Undang) associated with the Small and Medium

Number 20 Year 2008 on Micro, Small and Enterprise includes: 1) resources limitations

Medium Enterprises, governments and local (financial, technology, skilled labor, and

governments should prioritize the development access to markets); 2) the high transaction

of micro, small and medium-sized businesses costs compared to large companies; 3)

through: 1) giving the opportunity to participate networks limitations that lead to lack of

in the procurement of government goods and information and limitations related to

services; 2) backup for micro enterprises, small domestic markets as well as internationally; 4)

businesses, and medium-sized businesses inability to compete with companies larger

through restrictions for large businesses; 3)

JEJAK Journal of Economics and Policy Vol 10 (1) (2017): 121-137 135

simplify bureaucracy; 4) provision of source of labor is largely derived from non-family financing in accordance with the provisions of

by 71.15 percent, especially for the business with the legislation; and 5) facilitating technology

the ownership of quite a lot of labor, while 28.25 and information.

percent are from families.

Seeing from the amount of turnover owned

CONCLUSION

by metal business, most of the turnover are still not optimal, only a few respondents who have a

From the results of research and turnover of more than one hundred million.

discussion about the strategy development of There are some things that cause these

SMEs metal in Pasir Wetan Village conditions, including the limitation of the

Karanglewas Sub District Banyumas Regency, technology and the ability of the entrepreneur.

it can be concluded as follows: The limitation of turnover is also caused by

Identification of SMEs metal profile in the lack of capital. Thus, the entrepreneurs apply

Pasir Wetan Village, Karanglewas Sub- for credit from bank to increase the capital. The

District, Banyumas Regency indicates that the purpose of the credit application is to increase

minimum age of respondent is 35 years old turnover and revenue, the average income

and the maximum age is 65 years old, and the received by the respondents before receiving

average age is 50.93 years old. The age of credit is Rp13,614,600.00. After receiving credit,

respondents included in the productive age the average net income increases to

make it possible for them to work optimally.

Rp16,431,260.00

The education level of respondents is The result of discriminant analysis

still low, 50 percent of the respondents have indicates that the amount of production is the

only finished primary school, there are even best predictor to differentiate the revenue

two respondents who did not finish primary achievement between superior metalworkers

school, and only one respondent who have group and non-superior metalworkers group.

higher education. The type of work owned by The amount of labor used is also a predictor of

the respondent did not give priority to formal revenue achievement that differentiates between

education. superior metalworkers group and non-superior

There are 39.29 percent of the metalworkers group. While the other predictors,

respondents who run the business with the such as the amount of bank credit aid received,

business duration of 3-11 years, while the least business duration and education level, are not

respondents are in the group of 30-47 years the predictor of revenue achievement between

with the percentage of 7.14 years, respectively. superior metalworkers group and non-superior

This business requires skill and ability to

metalworkers group.

process the metal into goods according to Related to the development strategy of

consumer demand, so that it is not easy for SMEs metal in Pasir Wetan Village, Karanglewas

people to open the metal processing business. Sub-District, Banyumas Regency, the framers of

The Strategy Development of SMEs Metal