173 destinations. The price fell from 0.59 US per kg in 2008 to 0.43 US per kg in 2009. The
drop in CPO price led to a decrease in export value of minus 11.2.
TABLE 2. GROWTH OF EXPORT VALUE OF INDONESIAN AGRIBUSINESS PRODUCTS, 2005-2010
HS Commodity
2006-05 2007-06
2008-07 Average
2000-05 2009-08
2010-09
a
15 Vegetable and animal oil and fat
22.61 68.48
52.78 47.96
-21.79 32.46
40 Rubber and its fractions
55.23 13.07
22.22 30.18
-35.67 10.19
44 Wood and its fractions
7.85 -6.78
-7.94 -2.29
-18.70 50.21
3 Fish and shrimp
7.91 4.88
14.12 8.97
-13.06 1.51
18 Cocoa
27.99 8.09
37.30 24.46
11.39 3.41
9 Coffee, tea and pepper
16.98 12.63
40.09 23.23
-13.74 -11.97
47 Pulp
20.57 -5.18
33.44 16.28
-39.04 14.89
24 Tobacco
4.97 24.99
19.80 16.59
17.06 30.04
16 Meat and its fractions
13.73 19.96
33.17 22.29
6.67 1.19
52 Cotton
3.03 -10.44
-5.31 -4.24
-20.45 29.67
19 Powder and its fractions
5.90 13.20
27.85 15.65
6.52 48.65
8 Fruits
9.56 23.96
7.93 13.82
-13.54 5.56
23 Food waste products
15.78 90.15
34.01 46.64
-42.88 12.61
21 Other food processing products
24.23 40.86
39.97 35.02
6.76 43.69
31 Fertilizer
13.64 12.46
-25.81 0.10
36.94 53.12
4 Milk, margarine and eggs
-4.50 13.27
111.57 40.11
-28.20 -3.12
Average 16.17
20.19 25.67
20.68 -10.61
20.13
Note: a. Data on January-February 2010 and 2009 Source: Ministry of Trade and Central Statistical Agency 2010
The trend of export volume and price of rubber from 2005 up to 2009 in 15 destination countries are presented in Table 3. In this case, US is the main destination of Indonesian
rubber, followed by Japan. The volume of exports of rubber grew at a positive 5.41 from 2005 to 2008 in all destinations, but at minus 2 in the US market. From 2008 to 2009, both
volume and price of export of rubber in 15 countries decreased. The drop in both volume and price of rubber led to a significant decrease in export value of minus 11.2.
TABLE 3. TREND OF EXPORT VOLUME AND PRICE OF INDONESIAN CPO, 2005-2009
Year Weight Ton
Price US Kg Value US
2005 8,714,615.2
0.30 2,618,303,088.3
2006 9,744,791.0
0.31 3,055,144,123.3
2007 9,838,661.5
0.50 4,878,718,116.3
174
2008 12,537,379.3
0.59 7,434,458,193.8
2009 15,221,215.8
0.43 6,600,788,532.4
Growth 15 countries
2005-2008 13.4
27.4 42.9
2008-2009 21.4
-26.9 -11.2
India
2005-2008 25.0
26.3 60.3
2008-2009 14.8
-27.6 -16.9
US 2005-2008
81.9 30.5
116.4 2008-2009
32.5 -28.9
-5.7
Note: The rests of destination are: China, Netherland, Pakistan, Malaysia, Singapore, Bangladesh, Germany, Ukraine, Egypt, Italy, Spain and South Africa
Source: Ministry of Trade and Central Statistical Agency 2010
TABLE 4. TREND OF EXPORT VOLUME AND PRICE OF INDONESIAN RUBBER, 2005-2009
Year Weight Ton
Price US Kg Value US
2005 1,738,270.5
1.09 1,887,762,721.5
2006 1,933,162.6
1.56 3,013,733,618.0
2007 2,099,535.9
1.62 3,396,639,075.2
2008 2,024,328.0
2.03 4,116,875,511.4
2009 1,724,476.8
1.27 2,189,476,662.5
Growth 15 countries
2005-2008 5.4
24.3 31.2
2008-2009 -14.8
-37.6 -46.8
US 2005-2008
-2.0 24.2
20.4 2008-2009
-36.8 -37.1
-60.2
Japan
2005-2008 16.4
27.9 50.5
2008-2009 -31.9
-35.9 -56.3
Note: The rests of destination are: China, Singapore, Korea, Canada, Germany, Brazil, French, Spain, Netherland, Italy, India, Turkey and South Africa
Source: Ministry of Trade and Central Statistical Agency 2010 Table 4 shows the development of export volume and price of coffee from 2005 up to 2009 in
15 destination countries. US is the main destination, followed by Germany. Overall the volume of export of CPO increased from 2005 to 2008 in all destinations at the rate of 7.18
and at the rate of 1.11 from 2008 to 2009. The price and value of coffee exports experienced the same trend with CPO. The coffee price decreased from 2008 to 2009 which
175 led to a significant decrease in export value. In the US market, the trend of export volume of
coffee from 2005 to 2008 was minus, because there was huge drop of export volume from 2006 to 2007. From the figures in Tables 2, 3 and 4, it can be concluded that there were
significant decreases in the values of main Indonesian agricultural exports CPO, rubber and coffee from 2008 to 2009. This drop was mainly cause by a decrease in export prices rather
than export volumes. As mentioned in the previous section, the global economic crisis led to a lower demand for agricultural products which decreased the world commodity prices.
TABLE 5. TREND OF EXPORT VOLUME AND PRICE OF INDONESIAN COFFEE, 2005-2009
Year Weight Ton
Price US Kg Value US
2005 366,520.8
0.94 344730431.8
2006 345,880.5
1.11 384638732.6
2007 268,016.6
1.43 384008500.2
2008 401,185.9
1.54 619553759.5
2009 405,654.5
1.16 469436244.2
Growth 15 Countries
2005-2008 7.18
18.29 24.25
2008-2009 1.11
-25.06 -24.23
US 2005-2008
-7.4 14.6
4.7 2008-2009
9.0 -15.7
-8.1
Germany
2005-2008 18.7
23.0 38.7
2008-2009 -12.0
-29.0 -37.5
Note: The rests of destination are: Japan, Italy, Algeria, UK, Belgium, India, Egypt, Malaysia, Philippines, Georgia, Rumania, Australia
Source: Ministry of Trade and Central Statistical Agency 2010
Determinants of Indonesian Agricultural Exports and Effects of Global Economic Crisis
The results of estimation of the panel data model for each of the commodities are presented in
Table 5. The diagnostic test indicated that the Random-effects model was the most robust one for all commodities observed. For the CPO model, the global economic crisis reduced the
exports of Indonesian CPO statistically. This is indicated by the minus coefficient of crisis dummy with p-value less than 0.05. The effect of global economic crisis was also negative on
the exports of Indonesian rubber and coffee. The coefficients of that effect have p-value of 0.085 and 0.111 for rubber and coffee.
176 The estimation of panel data indicated that the main determinant of export values of CPO,
rubber and coffee is price. For CPO and rubber, 1 decrease in export price will reduce export values of 1.50 and 1.56. This means that export value is elastic to changes in
export price. As mentioned in the previous section, the global economic crisis lowered the commodity prices. Thus even though the export volumes increased from 2008 to 2009, the
lower price decreased the export value of CPO, rubber and coffee. The gravity model used in this study included the distance among exporter and destination
countries. The panel data model showed that economic distance affected the export value significantly. An increase of 1 in transportation cost reduced the export value of CPO
0.03 and the export value of rubber 0.73. The effect of transportation cost on CPO was relatively small because of very high demand for Indonesian CPO. Based on UN-
Comtrade data, in 2009 Indonesia was the largest exporter of CPO in the world. The effect of the real exchange rate on export value was positive. However, the coefficient of the real
exchange rate effect is statistically significant only in the coffee model. This may be related to high competition in the world coffee market. For the other two commodities, CPO and
rubber, Indonesia still dominated the world exports. An increase of 1 in the real exchange rate of a destination country would increase by 0.18 the export values of coffee, because
the demand for coffee in that country.
TABLE 6. RESULTS OF ESTIMATION OF PANEL DATA MODEL
Variable CPO
Rubber Coffee
Price 1.4950
a
.0.000
b
1.5607 .0.000
.7581 .0.000
GDP -.0311
.0.872 .6726
.0.000 .2846
.0.001 Er
.0610 .0.630
.0281 .0.749
.1835 .0.014
Distance -.0285
.0.006 -.7342
.0.009 .4907
.0.006 Crisis
-.3222 .0.018
-.1268 .0.111
-.1354 .0.085
R-sq: within
between overall
Wald chi2 5 Prob chi2
0.6194 0.7898
0.7748
134.91 0.0000
0.6194 0.7898
0.7748
97.19 0.0000
0.6194 0.7898
0.7748
129.36 0.0000
Note: a. Estimated parameter b. P-value
177
CONCLUSIONS
The global economic crisis had a significant effect on Indonesian agribusiness exports. This was indicated by a significant decrease in export values of agribusiness products from 2008
to 2009 and a significant increase from 2009 to 2010. The change in export values related to a fluctuation in export prices in 2009 and 2010. The effect of global economic crisis on
Indonesian exports of CPO, rubber and coffee was negative and statistically significant. The panel data model found that the main determinant of Indonesian exports of CPO, rubber and
coffee was export price. The coefficient of economic distance was negative and statistically significant in CPO and rubber models.
178
REFERENCES
Anderson, J. E., E. V. Wincoop, 2004, Trade Costs, Journal of Economic Literature, Vol. XLII, No. 3, pp. 691-751.
Central Statistical Agency. 2005-2010. Export Import Data. Jakarta. De, P., 2009, Global Economic and Financial Crisis, RTNeT Working Paper Series No.6.
Hsiao, C., 2004, Analysis of Panel Data, Cambridge University Press, UK. Linnemann, H, 1966, An Econometric Study of International Trade Flows. Amsterdam:
North, Holland. Massa, I., D. W. te Velde, 2008, The Global Fincancial Crisis: Will Successful African
Countries be Affected? Background Note, December. UN-Comtrade. 2009. World Trade Data.
Verbeek, M., 2007, Modern Econometrics, John Wiley and Sons Inc., US. Wiggins, S., S. Keats and M. Vigneri, 2009, Impact of the Gobal Financial and Economic
Situation on Agricultural Markets and Food Security, Overseas Development Institute Working Papers No. 314, February.
179
Appendix 1. Export of Indonesian Agribusiness Products, 2005-2009 US Million
HS Commodity
Share
a
2005 2006
2007 2008
2009
15 Vegetable oil and fat
12.53 4,950.6
6,069.9 10,226.8
15,624.0 12,219.5
40 Rubber and its fractions
5.04 3,560.0
5,526.2 6,248.7
7,637.3 4,912.8
44 Wood and its fractions
2.40 3,111.3
3,355.6 3,128.2
2,879.8 2,341.2
3 Fish and shrimp
1.75 1,522.5
1,642.9 1,723.0
1,966.3 1,709.5
18 Cocoa
1.45 668.0
855.0 924.2
1,268.9 1,413.4
9 Coffee, tea and pepper
1.29 787.0
920.6 1,036.9
1,452.6 1,253.0
47 Pulp
0.89 934.2
1,126.4 1,068.1
1,425.3 868.8
24 Tobacco
0.61 323.7
339.8 424.7
508.8 595.6
16 Meat and its fractions
0.55 278.9
317.2 380.5
506.7 540.5
52 Cotton
0.54 755.0
777.9 696.7
659.7 524.8
19 Powder and its fractions
0.32 188.1
199.2 225.5
288.3 307.1
8 Fruits
0.27 206.1
225.8 279.9
302.1 261.2
23 Food waste products
0.25 146.4
169.5 322.3
431.9 246.7
21 Other food processing products
0.24 91.2
113.3 159.6
223.4 238.5
31 Fertilizer
0.23 171.6
195.0 219.3
162.7 222.8
4 Milk, margarine and eggs
0.22 133.4
127.4 144.3
305.3 219.2
Total Agribusiness Products 28.6
17,828.0 21,961.7
27,208.7 35,643.1
27,874.6 Total Non Agribusiness Products
71.4 48,600.4
57,627.4 64,803.6
72,251.1 69,617.1
Note: a. Share on total Indonesian non-oil and gas exports at 2009 Source: Ministry of Trade and Central Statistical Agency
180
STRATEGY FORMULATION TO TRANSFORM COMPARATIVE ADVANTAGE INTO COMPETITIVE ADVANTAGE AS A RESPONSE OF GLOBAL CRISIS:
CASE STUDY AT EMPING MELINJO BUSINESS IN SARI SONO COOPERATIVE , INDONESIA.
Firdiyansyah Romadhona and Adeline Puspitasiwi Agribusiness Department
Bogor Agriculture University West Java
Phone +6285691522731 Firdiansyah_romayahoo.com
ABSTRACT
Changes in the strategic environment caused by the economic crisis engulfing the world in 2007-2008 requires a change on how to operate a business. Business that can
survive is a local resource-based business that has a comparative advantage. One potential commodity is melinjo. Generally melinjo commodities in Indonesia have a comparative
advantage due to abundant production and low level of product prices compared to other countries. In fact, comparative advantage needs to be transformed into competitive
advantage by paying attention to quality, continuity of supply and diversity of products. Business development strategies that are based on the principle of cooperatives is expected to
help realize the comparative advantage into competitive advantage. Keywords: Economic Crisis , Comparative Asvantage, Competitive Advantage,
Cooperatives, Strategic Business Development, Emping Melinjo.
INTRODUCTION
The global crisis shook the world in 2007-2008. Starting from the United States, then having an effect on various countries, including Indonesia. The world economic recession was
marked by an increasing level of unemployment, reduced purchasing power, and declining net exports. Net exports of Indonesia were only 8 percent of GDP, so the impact is relatively
small compared to countries with greater levels of export dependence
1
. As a tropical country, Indonesia has a wealth of natural resources and comparative advantage to produce a variety
of tropical agricultural products that cannot be generated by non-tropical countries Saptana, et al., 2009.
According to Law No. 25 year 1992, the basic understanding of a cooperative is a business entity consisting of the person or legal entity with the bases of cooperative activities based on
cooperative principles as well as a popular economic movement based on the basic principle of kinship. It was explained that members of cooperatives are the owners as well as
customers of those institutions. This difference was seen with the economic units that are owned and democratically controlled together with the sole aim of serving the needs of
members Hanel, 1992, pp.33-42 in Baga M. Luqman, 2005. Therefore, the Cooperative has the advantage of facing a global crisis, related to self-sufficiency in the supply of raw
materials, capital, and business. One of the surviving cooperative that can face a global crisis is Sono Sari Cooperative located in Village Warunggunung, Rangkasbitung. This cooperative
181 focuses on the production of emping melinjo. Gnetum Gnemon LINN, also called a tulip
tree, is found throughtout the islands of the Indonesian archipelago. Locally, this tree is known as the melinjo tree. Ripe fruits are used in a traditional dish. The seeds of the ripe
fruits are eaten after roasting. The seeds may also be processed in household-food industries into flattened and dried emping flake called emping melinjo Geertruide SIH, 1992.
Raw materials of emping melinjo come from melinjo which are native plants of the tropics. This plant is widely available in Indonesia, especially in the province of Banten. Melinjo
which have a different utility and can become food industry raw materials, pharmacy and dressings Indonesian Directore of Horticulture, 2010. In Indonesia, the added value
generated from emping melinjo is only restricted because of limited technology, research and development.
Emping melinjo from the Province of Banten has penetrated the European market, the Middle East and southeast Asia Department of Industry of Banten, 2010. This business could
survive through the crisis years of 2007-2008 because the local commodity-base and has its own local market. Total raw materials in production of emping melinjo are derived from
domestic production and consumption. In addition, this business has a permanent customer base in the country thus ensuring continuity of product demand. The economic crisis has only
a small impact for businesses, because the cooperative has a comparative advantage in business, in the use of local raw materials.
Howeverr, comparative advantage alone will not guarantee sustainability in the long term. Innovation is needed to create a competitive advantage in the business to create higher added
value than emping melinjo Saptana, 2008. Consumers will get another added value of melinjo, not only produced from the emping, but also innovative food products for industry,
pharmacies and dressings. To transform the comparative advantages into competitive advantage it needs the right business development strategy. Formulation of a strategy is done
by considering the internal and external business conditions.
METHODOLOGY
The study uses descriptive methods that explain research explanatory. Sugiyono 1999 describes that explanatory research is to solve a problem with respect to the variable itself.
Descriptive analysis is used to determine the condition of Sono Sari Cooperative business processing of emping melinjo.
The data used are primary and secondary data from the internal and external environment of the cooperative. Data types are classified into primary data and secondary data. Primary data
is data derived from original sources and was specifically collected to answer the research questions Soeratno and Arsyad, 2003. The primary data was obtained through direct
observation, interviews with cooperative stakeholders members of Sari Sono Cooperative and melinjo farmers, and the completion of questionnaires by the chairman and manager of
production. Secondary data was obtained through the agency-related information providers, among others, previous research reports, literature, books and websites that were relevant.
Internal analysis was done by using value chain analysis. The macro environment was analyzed using a PEST analysis. While the industry environment analysis was based on
Porters theory.
182 Respondents for the questionnaire were selected purposively on the basis that the respondent
is a person who knows and understands clearly about the conditions of the cooperative. Data obtained from questionnaires were analyzed using a matrix analysis tool IFE, EFE, IE, and
SWOT.
RESULT AND DISCUSSION FIGURE 1. MELINJO INDUSTRY TREE
Usefulness Melinjo Figure Picture above explained that each section has its uses melinjo tree. The leaves are used
for consumption, on young leaves and seeds Indonesian young melinjo is used to make a vegetable. Melinjo wood is used for building materials, melinjo seeds have benefits for the
pharmaceutical, food industry, and dressing. Melinjo seeds contain substances that could be useful for stiilbenoid antioxidants and antimikroba
2
. In Japan, the development melinjo is at the the stage of developing into capsules and tablets which are used as supplements. Melinjo
seeds produce flour used as raw materials and produce snack cake makers, emping melinjo Melinjo chips. Emping melinjo melinjo chips in Indonesia are a traditional food liked by
all levels of society. The development of the food industry, making the melinjo seeds have added value can be made with tea, soy, and saous.
Sari Sono’s Cooperative Profile The focus business of Sari Sono cooperative is efforts on processing melinjo into emping
melinjo. Raw materials of melinjo, processing equipment, all labor are from domestic production so that businesses are not affected by the global crisis. Melinjo is a tropical plant,
so it is suitable to grow in Indonesia which is in the tropics. Among the industrial centers of emping melinjo, Banten Province is relatively large in Indonesia. Centers are scattered in
almost all districts in Banten. By the end of 2004, the overall land area in Banten Province melinjo was approximately 6.610 ha with 14.011 tonnes of fruit production of melinjo.
Approximately 48 of the land was in Pandeglang, the rest is scattered in Lebak and Serang. Sari Sono Cooperative is located in Banten province which is the center of production of
melinjo Plantation Office Banten, 2010. Indonesia has a comparative advantage for melinjo. Leaves
Melinjo Steam
Seeds Pharmacy
Food Industry
Dressing Stilbenoi
d Capsul
Tablet Flour
Sauce
For vegetable
Emping Melinjo
183 Commodity-based business will be relatively resistant to external shocks, particularly of the
economic crisis. However, a comparative advantage in business is not enough to guarantee long-term business
success. To be able to survive, then the employer needs to transform comparative advantage into competitive advantage with innovation in both product and process. In general, the
problems of agribusiness in Indonesia are that there is not yet realization of the continuity of supply, and quantity in accordance with market demand or consumer preferences. In other
words, a business transformation is required to turn a comparative advantage into a competitive advantage. Saptana et al., 2004.
Internal Environmental Analysis of Cooperative Sari Sono Internal activities of cooperatives were analyzed by using the value chain concept. The value
chain of a company and the activities in it represents all corporate activities such as design, production, marketing, product delivery and product support activities. Differences between
value chains of competitors is a source of strength in the competition Advantage Competitive. Value activities can be divided into two general groups of Primary Activities
and Support Activities Porter, 1994. a. Primary Activity
Inbound logistic associated with the procurement of production inputs. The input for emping product is melinjo fruit that is sold at Rp 4500-6000 per kilogram.
FIGURE 2. PROVISION OF LOGISTICS FOR BUSINESS GROOVE EMPING MELINJO COOPERATIVE SARI SONO
TABLE 1. FARMER COST FOR CULTURE, MAINTENANCE, AND HARVEST MELINJO PLANT
Farmer Cost Cost Rp
Seeds 800.000Ha
Fertilizer 50.000Ha
Total Of Culture and Maintenance 850.000Ha
Harvest 800Kg
Peeling 500Kg
Basket Bamboo Sack 1.000Kg
Total Cost of Harvest Time 2.300Kg
Sari Sono Cooperatives operations can be evaluated in terms of production, packaging, equipment maintenance and quality assurance.
FIGURE 3. PRODUCTION FLOW OF EMPING MELINJO IN COOPERATIVE SARI SONO
Melinjo Maintenance Harvest
Sorting Peeling Skin
Melinjo Member Of Sari Sono
Sari Sono Melinjo Seed
Member and Farmer
184 Production of a emping melinjo requires 4-5 melinjo seeds. This sum is higher than its
competitors, which consists of 2-3 melinjo seeds. The production process has not applied the best operational standards..
TABLE 2. TOTAL COST OF MAKING EMPING MELINJO Cost Component
Cost RpKg
Cost Labour Rp 3.000 Seeds Melinjo Rp 6.000
6.000 12.000
Total 18.000
Packaging is still simple in the form of plastic with just a paper label of Sari Sono cooperative emping melinjo super. Packaging is not neat and labels do not include
information and is incomplete, nutrient values and food security numbers are not included.. Packaging costs per kilogram are Rp 466. The equipment used is simple. The price of Rp
50.000 talenan wood USD 4.5, ironhalu bat Rp 75.000 USD 8, hammer shell for peeling Rp 15.000 USD 1.5, fiber Rp 1.000 110 cent, and firewood. Fiber is replaced every once
a week to maintain the flatness emping. Almost all entrepreneurs in emping melinjo do not care for the equipment.
Production of emping melinjo Sari Sono Cooperative has obtained a health certificate from BPOM with registration number No HK. 00.05.5.1640 and Health license fees - No IRT. 215
360 1080 05. Raw materials used in the production are of good quality and the age of melinjo is quite old and the outer skin is red.
Logistics activities are associated with storage, shipping operations and promotions. Ready- to-sell emping melinjo that are put in the store and warehouse are owned by each member of
Melinjo Seed Warming with Sand
Put in Anyak Peeling Melinjo Skin
Take From The Umpak
Pounded Dried
Emping Melinjo
185 the cooperative Sari Sono. Sales are made directly or indirectly. The direct mode occurs when
the buyer comes directly and transacts with the cooperative with the purchase amount of less than 1 quintals. Indirect purchases occur when the prospective buyer orders by phone with a
minimum purchase of one quintals. Delivery of goods is done by car or cars losbak customers. Promotion is done but is still not effective enough, by relying on the business
board. b. Supporting Activities
Sono Sari business is incorporated in the form of cooperatives approved by the legal entity registration number, SKU Operating Certificate, SIUP Permit Trading, TIN tax payer
registration number, SITU place of business permit, TDP company registration number, health department permits and licenses of BPOM. Financial recording has not been managed
well. Workforce which is owned by a well-trained labor force numbering 124 men. Each employee undergoes training for one week to produce emping melinjo with standard quality.
Most manufacturers in Banten did not use production process technology and focus on product quality assurance, as well as product design and packaging. Sari Sono Cooperative
does not have advantages, especially in packaging products. External Environment Analysis Of Coop Sarisono
Melinjo is included in the category of plantations. NTP average plantation crops tend to increase, in October 2008 to October 2009 this has increased from 96.03 9.87 to 105.9. This
is supported by a declining inflation rate in October 2008 to October 2009. In early 2010 the inflation rate increased from December 2009, so that the NTP was reduced from 105.36 to
104.79 BPS Banten province, in 2009 and
www.bi.go.id .
Melinjo have a lot of good nutrients for health. Unfortunately, many people do not realize melinjo nutritional content. Stigma negative says that melinjo causes uric acid and this makes
many people reluctant to consume emping melinjo. Purine content in melinjo is the trigger, if consumed excessively. Melinjo efficacy has not been widely known to the public so that
socialization and effective marketing is necessary. During the period 2005-2009 the population of Indonesia is constantly increasing CBS,
2009. This is a business opportunity for the food businesses such as emping melinjo. Besides, with Asean-China Free Trade Agreement in 2010, then the boundary trade between
countries to have zero protection. As a result of domestic competition increases because of influx of products from abroad, local entrepreneurs are required to produce innovative
products in order to compete with foreign products. Indonesia benefits from its abundant natural resources. Many Indonesian products that have comparative advantages are not
owned by other countries. Local producers of emping melinjo are scattered in the areas of Menes, Serang, Cilegon, and
Rangkasbitung with household scale production. Most production is by an individual producer that has a low production capacity. Sari Sono Cooperatives has strength because it
combines people, bringing total capacity to be a greater amount. However, the possible entry of new entrants of competitor is high. Barriers to entry of emping melinjo industry almost do
not exist, in terms of economies of scale. Product substitution is kerupuk common cracker. Emping melinjo has separate segments when compared with the common crackers, so there is
no threat of substitute products for businesses. Suppliers of raw material are farmer melinjo
186 members and non members of the Sari Sono Cooperative. A large number of suppliers will
ensure business continuity. Formulation strategies
Strategic management is a set of managerial decisions and actions that determine the long- term performance of an organization [Hunger and Wheelen, 1996]. In terms of strategy
formulation. David 1996 divided the process into three phases of activity, namely: input stage, matching stage, ande decision stage.
Input Stage Using EFE IFE Matrix Analysis of the EFE Matrix of Sari Sono Cooperative generates a value 2.283 which shows
that the average cooperative capabilities to respond to external situations that exist. TABLE 3. EFE MATRIX OF SARI SONO COOPERATIVE
VARIABLES Weight
Rating Score
Opportunities A
Number of local market potential for marketing emping melinjo
0.076 2.5
0.196 B
Improved National Economy 0.058
2 0.116
C Supports
governments policy-based
Business Cooperation with Local Commodities
0.062 1.5
0.092 D
The existence of loyal customers 0.079
2 0.157
E Public awareness on food safety
0.084 2
0.167 F
Availability of Suppliers to business 0.08
2.5 0.2
G Number of potential consumers domestic and
international 0.064
3.5 0.224
H Export opportunities are still open wide with the
enactment ACFTA 0.081
3.5 0.284
I Cooperation in melinjo development between Japan and
Indonesia 0.069
2 0.138
J Existence of many different varieties of melinjo with
higher productivity 0.052
3.5 0.18
Threats K
Negative opinion of society to melinjo 0.072
2 0.143
L Competitors that applying packaging technology
0.06 1.5
0.091 M
Fluctuations of raw material availability due to tree melinjo felling
0.048 2
0.095 N
Ease newcomers into the industry 0.061
1.5 0.092
O The Increase of Raw Material Price
0.054 2
0.108
TOTAL 1
2.283
IFE matrix analysis showed the results of which show Sari Sono Cooperative 2.546 has a normal internal conditions
187
TABLE 4. IFE INTERNAL FACTOR EVALUATION MATRIX SARI SONO COOPERATIVE
VARIABLES Weight
Rating Score
Strengths A
Specific vision and mission of cooperative business emping melinjo
0.041 3.5
0.144 B
Production has traditionally been carried out by trained manpower
0.053 3
0.161 C
The quality of raw materials and products 0.095
4 0.38
D Production focus only on emping melinjo
0.062 3.5
0.215 E
Production capacity emping melinjo is big enough because it is a combination of members
0.055 3.5
0.193 F
Loyalty members in developing the sari sono cooperative
0.07 4
0.28 G
Access to raw materials and adequate availability of melinjo seeds
0.077 3
0.231 H
Legality completeness of business trade, tax, and healthy license
0.057 3
0.169
Weakness J
Financial recording which is still simple 0.079
2 0.157
K Limited distribution of network marketing
0.075 1.5
0.112 L
Limitations on venture capital 0.097
1 0.098
M Lack of customer service
0.089 2
0.179 N
Packaging products does not standart yet 0.078
2 0.157
O Lack of promotional activities
0.072 1
0.072
Total 1
2.546
188 2,0
FIGURE 4. POSITION MAPPING SARI SONO COOPERATIVE USING IE MATRIX
Matching Steps Use IE Internal-Ekternal matrix and SWOT analysis.
The mapping of with IE matrix indicates the cooperative is in the fifth cell matrix. This position shows the cooperative is in the hold and maintain area, so it is appropriate to
apply market penetration and product development strategy.
TABEL 5. SWOT MATRIX OF SARI SONO COOPERATIVE 1,0
2,283
3,0
2,546
4,0 3,0
2,0
Strong 3,0 - 4,0
1,0
Strong 1,0 - 1,99
High 3,0 - 4,0
Middle 2,0
– 2,99
Low 1,0
– 1,99
I III
IV VI
II
VIII VII
IX V
Average 2,0
– 2,99
189
Strengths – S
1. The quality of raw materials and products
2. Loyalty members in developing the Sari Sono
Cooperative 3. Access to raw materials and
adequate availability of seeds melinjo
4. Product focus only on emping melinjo
5. Production capacity emping melinjo big enough because
it is a combination of members
Weakness – W
1. Lack of customer service
2. Packaging products doen not standart yet
3. Financial recording which is still simple
4. Network marketing is still limited distribution
Opportunities - O
1. Export pportunities are still open wide with ACFTA
enactment 2. Number
of potential
consumers domestic
and international
3. Availability of raw material suppliers
4. Number of local market potential
for marketing
emping melinjo 5. Many different varieties of
melinjo with
higher productivity
Strategi S-O
1. Market penetration
and increase
the distribution
network to
expand its
market reach S1, S2, O1, O2, O4, O5
2. Increase the promotion and strengthening brand image
as a super-product emping S1,,O1,O2,O4
Strategi W-O
3. Improving the quality of packaging W2, O1,
O2, O4, O5 4. Increasing serve to
consumers to
get potential
consumers W1, W2, O2
Threaths - T
1. Negative opinion of society to melinjo
2. Increase of raw material price
3. Fluctuations availability of raw material due to melinjo
tree felling
Strategi S-T
5. Provide education regarding melinjo and emping to
consumers S3, S4, T1
Strategi W-T
6. Effectiveness network distribution
to get
potential profit W4, O1,O2,O4
S-O Strategy Market Penetration and Increase The Distribution Network To Expand Its Market
Reach Legality completeness of business trade, tax, and healthy license will make it easier for
product emping melinjo to enter into the modern market. A distribution network is very important so that the level of production can be increased by Sari Sono Cooperative, so that
the local society and the economy can increase too. Market scope can be expanded by increasing the promotion, as an example, by attending various exhibitions, socializing
through internet media, in cooperation with relevant government institutions such as Offices EXTERNA
INTERNA
190 of Small Medium Enterprises, the Official Industry and Trade Province of Banten in
developing a marketing strategy.. Increase the Promotion and Strengthen the Brand Image As A Superior -Product
Emping Product emping melinjo Sari Sono Cooperatives is well-known as superior emping melinjo
with large size and high quality production. Product positioning should be maintained in order to reach a larger market. Strengthening positioning can be done through increased
promotion of products, by attending various exhibitions, socializing through internet media, in cooperation with relevant government institutions such as The Official of Small Medium
Enterprises, the Official Industry and Trade Province Banten in developing marketing W-O Strategy
Improvement Of Packaging Quality The main function of packaging is to provide protection to the food since packaging is a
marketing tool that can increase the value-added products and as a means of providing information about the packaged product Suyitno, in B. Rahardjo 1993. Improving the
quality of the product packaging of emping melinjo lies in two areas. The first field is the use of technology to protect the best product. The second field is product labeling to provide
accurate information for consumers. Increasing of service to consumers to get potential customers.
Consumers do not only just buy the product but also buy service. Therefore with the strength of Sari Sono, there are opportunities to get potential consumers, big opportunities to export
products . Increasing service with delivery of orders so that consumers can just order by phone and receive home delivery..
S-T Strategy Provide Education About Melinjo And Emping To Consumers
The first objective is to educate consumers about the quality of the product produced by Sari Sono Cooperative. The second objective is to provide an understanding of the benefits that
are contained in emping melinjo to eliminate the negative opinions about melinjo that exist in todays society. The ultimate goal of providing education to consumers is the act of
purchasing Sari Sono cooperatives emping melinjo. W-T Strategy
Effectiveness network distribution to get potential profit The purpose of the strategy is to provide an effectiveness distribution to get potential profit.
In this W-T situation, Sari Sono needs a defensive strategy like an effective distribution network to get potential profit. Surveillance carried out by maximizing the cooperative
management of resources for the cooperative is needed to achieve optimum profit. First, cooperatives need to fix the financing record so it can be used as a reference for cooperative
development in the future, like proposing bank loans.Second, the cooperative need management of raw materials to ensure continuity of supply. This is related to the issue of
limiting the number of melinjo trees caused by felling so that the raw material is fluctuates and can threaten the business.
CONCLUSIONS
191 A business that can survive in an economic crisis is a local resource-based business
that has a comparative advantage. Indonesia has a wealth of natural resources and comparative advantage to produce a variety of tropical agricultural products that can not be
generated by non-tropical countries. One potential commodity is melinjo. This plant is widely available in Indonesia, especially in the province of Banten. One of the producers that
produces emping melinjo is Sari Sono Cooperative. This cooperative has strengths, weaknesses, opportunities, and threats in its business. To face a global crisis, comparative
advantage needs to be transformed into competitive advantage by paying attention to quality, continuity of supply input and product diversity with right formulation of a business
strategy. Position mapping of Sari Sono Cooperative using an IE Matrix indicates that the cooperative is in the fifth cell matrix 2,546; 2,283. This position shows that the cooperative
is in the hold and maintain area, so it is appropriate to apply a market penetration and product development strategy. Sari Sono Cooperative has average internal conditions, and average
capabilities to respond to external situations that exist. .A SWOT matrix is used to formulate business strategy. The most appropriate strategy for Sari Sono Cooperative are market
penetration and increasing the distribution network to expand its market reach S-O, increase the promotion and strengthening brand image as a super-product emping S-O, improving
the quality of packaging W-O, Increasing serve to consumers to get potential consumers W-O, provide education regarding melinjo and emping to consumers S-T and an
Effectiveness network distribution to get potential profit W-T.
192
REFERENCES
[BI] Bank Indonesia. 2010. Pembiayaan Usaha Emping Melinjo. www.bi.go.id
[4 Juni 2010] David, Fred R. 1996. Strategic Management, Prentice Hall International, Inc., the
Philippines. Hunger, J. David, dan Thomas L. Wheelen. 1996. Strategic Management, Addison-Wesley
Publishing Company, Reading, Massachusetts. Porter, Michael. E., 1994, Keunggulan Bersaing; Menciptakan dan Mempertahankan Kinerja
Unggul, alih bahasa: Agus Maulana, Penerbit Erlangga, Jakarta. Rahardjo. B, Setyowati. P, dkk. Model Perubahan Kadar Air Emping Selama Dalam
Kemasan Plastik Polipropelin. www.scrib.com
. [1 Juni 2010] Republik Indonesia. Undang-Undang Nomor 25 Tahun 1992 Tentang Perkoperasian
Saptana, S. Friyatno Dan T.B.H. Purwantini. 2004. Efisiensi dan Daya Saing Usahatani Tebu dan Tembakau Dalam Efisiensi dan Daya Saing Sistem Usahatani Beberapa
Komoditas Pertanian Di Ladang Sawah. Pusat Penelitian Dan Pengembangan Sosial Ekonomi Pertanian. Badan Penelitian Dan Pengembangan Pertanian Bogor.
Saptana, S. 2008. Keragaman Pakis Indonesia. http:www.pustaka-deptan.go.idpublikasi.
[10 Januari 2010]
Saptana, S. 2009. Keunggulan Komparatif- Kompetitif dan Strategi Kemitraan. Pusat Penelitian Dan Pengembangan Sosial Ekonomi Pertanian. Badan Penelitian Dan
Pengembangan Pertanian Bogor. Soeratno Arsyad, L. 2003. Metode Penlitian: Untuk Ekonomi dan Bisnis. Yogyakarta: Unit
Penerbit dan Percetakan Akademi dan Manajemen Perusahaan YKPN. Sugiyono. 1999. Statistika untuk Mahasiswa. Bandung: CV Alfabeta.
193
APPENDIX
194
195
STUDENTS’ SATISFACTION LEVEL ON THE ENTREPRENEURSHIP EDUCATION PROGRAMS AT THE BENGKULU UNIVERSITY, INDONESIA.
Muhamad Abduh Master Program of Management
Economic Faculty – Bengkulu University, Indonesia.
PhoneFax: 61 736 21396, Email:
m.abduhunib.ac.id ,
m.abduhgmail.com Roosemarina A. Rambe
Master Program of Development Planning Economic Faculty
– Bengkulu University, Indonesia. PhoneFax: 61 736 21396,
ABSTRACT
This paper presents the results of a study d esigned to investigate students’ opinions and
satisfaction on an entrepreneurship education program at Bengkulu University. The data collected from 150 students using a questionnaire were analyzed using descriptive analysis
techniques and the SatMat model developed by Abduh et al 2007. The results indicated that students varied on their satisfaction on the program. The study also identified several useful
teaching methods as perceived by the students. This paper also discusses the implications of the findings and then provides several recommendations aimed at improving the
entrepreneurship education program as well as topics for future research.
INTRODUCTION
One of the significant economic development issues currently faced by Indonesia including Bengkulu Province is an increasing rate of unemployment especially the unemployment of
educated people. In 1994, the unemployment rate of educated people those with University degreeswas 17 and increased to be 26 in 2004. This economic development problem
became even worse in 2008 as more than half 50,3 of educated people at that time were unemployed theindonesianinstitute.com, 15 September 2008. The unemployment rate of
educated people in the Bengkulu Province also increased every year and became 30 in 2008 BPS, 2008.
As a response to the increasing unemployment rate of educated people, relevant institutions including Bengkulu University have promoted a number of entrepreneurship development
programs aimed at encouraging the community including university students to be self- employed. The rationale of the programs lays in the fact that the more people create their
their own jobs the less their dependency on the employment market and hence the unemployment rate is assumed to decrease. A strategy used by higher education including the
Bengkulu University in encouraging students to be self-employed is through entrpreneurship education by providing entrepreneurship subjects.
Entrepreneurship Education at Bengkulu University
196 Entrepreneurship education at the Bengkulu University has been introduced since the 1990s
through several types of activities such as seminars, workshops, training, short courses and community services of entrepreneurship. In 2003, Bengkulu University offered its students
the entreprenership course as an elective subject. Due to an increasing awareness on the importance of self employment, entrepreneurship was then decided to be a compulsary
subject in 2006. As a compulsary subject, entrepreneurship has currently been taught in all seven faculties and must be taken by every student of the Bengkulu University. Since the
entreprenurship subject has been offered as a compulsary subject for about three years , it is considered to be the right time to review the development of the implementation of the
entrepreneurship subject in terms of the growth of the number of students interested to be self employed and related aspects of the entrepreneurship education such as contents of the
subject, teaching methods and expected outcomes. Research Objectives
This research was designed to evaluate the development of entrepreneurship education at Bengkulu University. It has several research objectives including the following:
1. to explore the results of entrepreneurship education in Bengkulu University in terms of students‘ motivation to be self employed,
2. to identify students‘ expectation on the entrepreneurship education in terms of subject
materials, teaching methods, and outcomes to be achieved, 3.
to investigate students‘ opinions on the performance of the practice of the entrepreneurship in terms of subject materials, teaching methods, and achievement of
expected outcomes, and
4. to classify the level of students‘ satisfaction on the practice of entrepreneurship in
terms of subeject materials, teaching methods, and achievement of expected outcomes.
CONCEPTUAL FRAMEWORK
Entrepreneurship Entrepreneurship is the process in which one or more people undertake economic risk to
create a new organization that will exploit a new technology or innovative process that generates value to others Schramm, 2006. Organizations resulting from the entrepreneurial
process are among other small and medium enterprises SME. The growth and development of SME have long been regarded as the backbone of the economy in most countries including
Indonesia. As a matter of fact, the majority of business units are SMEs, providing significant contribution to jobs creation, and contributing to the formation of nationalregional income.
Accordingly, stimulating the formation, growth and development of new enterprises is regarded as a strategic policy to strengthen the economic backbone. The strategic policy can
be undertaken by many ways including motivating university students to be entrepreneurs through entrepreneurship education.
Entrepreneurship Education
Entrepreneurship education, according to Katz β00γ in an paper entitled ―The Chronology and Intellectual Trajectory of American Entrepreneurship Education‖, was first taught at
Harvard Business School in 1947. Since then, other universities followed offering
197 entrepreneurship courses. For example, New York University offered Entrepreneurship and
Innovation by Peter Drucker in 195γ, the University of Illinois offered ―Small Business or Entrepreneurship Developme
nt‖ in 195γ, Stanford University offered Small Business Management in 1954, and MIT offered an entrepreneurship course in 1958. In 1975 there
were already more than a hundred collegesuniversities offering entrepreneurship courses. Nowadays more than one thousand institutions in the United States offer entrepreneurship
courses Cone, 2007; Kuratko, 2005; Solomon, Duffy, Tarabishy, 2002; Vesper 1998. Entrepreneurship education has also currently been offered by most universities in Indonesia
including Bengkulu University.
Entrepreneurship education at universities has several objectives. In general, the objectives among others include: enhancing students‘ understanding about entrepreneurial concepts and
contributions of SMEs into the economy; developing the entrepreneurial mindset of students; motivating students to be entrepreneurs; providing students with entrepreneurial concepts and
skills relevant to formation and development of new businesses; and providing circumstances conducive for students to start new businesses. Entrepreneurship has been found to be a
popular subject and recent data from the US Small Business Administration shows that two thirds of college students intend to become entrepreneurs at some point in their careers
Shinnar, Pruett, Toney, 2009. Despite the emergence of entrepreneurship education at universities, there has been no
consensus among universities or experts about what the contents of entrepreneurship subjects should be to be taught as different universities offer different contents of entrepreneurship
subjects. Also, different experts also suggest different contents of entrepreneurship subjects Kuratko 2005; Schramm, 2006; Solomon et al, 2002. It appears that the entrepreneurship is
a multidisciplinary subject in nature and should be able to accommodate many relevant aspects. However, as suggested by
Ronstadt 1987 ―in time, the question that are asked if entrepreneurship can be taught or should be taught will be replaced increasingly by what
should be taught and how it should be taught‖. Solomon 2007 found some common
elements in entrepreneurship courses, including: venture plan writing, case studies, readings and lectures by guest speakers and faculty. The typical elements of small business
management courses include class work, tests and a major project such as the development of business plans; student business start-ups, consultation with practicing entrepreneurs;
computer simulations; and behavioral simulations. Other popular activities include interviews with entrepreneurs,
environmental scans, ―live‖ cases, field trips and the use of video and films Solomon, 2007.
RESEARCH METHOD
This study is an exploratory research on the development of entrepreneurship education in the Bengkulu University including st
udents‘ satifaction of the subject materials, teahing methods and expected outcomes of the entrepreneurship subject. This research used primary data
collected from the students in the entrepreneurship subject and students who had undertaken the subject at Bengkulu University using a combination of two data collection technniques
198 namely interviews and a questionnaire. The collected data include: lecturers‘ opinion on the
development of entrepreneurship education; students‘ ‗expectations‘ and ‗assessment‘ on the implementation of the entrepreneurship subject in terms of subject materialscontents,
teaching methods, and outcomes expected from undertaking this subject. The collected data were analyzed using descriptive analysis and SatMat model developed by
Abduh et al 2007. The descriptive analysis was used to explain the development of entrepreneurship education by using some indicators including the percentage of students
interested in starting a new business. The SatMat model was used to identify and classify the
level of sudents‘ satisfaction on the implementation of the entrepreneurship course in terms of subject materials, teaching methods, and expected outcomes from undertaking the subject.
Students were asked to express their opinions on the ‘importance‘ of individual components of the subject materials, the teaching methods and the expected outcomes by using a Likert
scale ranging from 1 representing ―very unimportant‖ to 5 representing very important. The students were then asked to express their opinions on the performance of the implementation
of the entrepreneurship subject on individual components of the subject materials, the teaching methods and the expected outcomes by using a Likert scale rangging from 1
representing ―very poor‖ to 5 representing ―very good‖. Students‘ satisfaction on the implementation of the entrepreneurship subject were estimated
by comparing the students perceptions on ―the importance‖ and ―the performance‖ of individual components of subject materials, teching methods, and expected outcomes by
using a T-test. To classify the students‘ satisfacion level, the results of the comparison were
plotted onto the satisfaction matrix SatMat consisting of 4 cells as indicated in Figure 1 Abduh et al, 2007. Cell 1 reflects a situation where students are assumed to be highly
satisfied because the level of performance is greater than the importance expectation level. This means that the performance of the entrepreneurship education exceeds the level of
expectations. Cell 2 represents a situation where students are assumed to be moderately satisfied because their perception on performance is within the acceptable domain of
satisfaction. Cell 3 represents a peculiar situation where clients are assumed to have a lower level of dissatisfaction because their perception of the performance is low but their
expectation level from the respected component is also low. Cell 4 refers to situations where students are assumed to be highly dissatisfied because the perceived performance is much
lower than their expectation.
199
FIGURE 1: SATISFACTION MATRIX SATMAT SHOWING THE LEVEL OF STUDENTS’ SATISFACTION DISSATISFACTION WITH THE
IMPLEMENTATION OF THE ENTREPRENEURSHIP EDUCATION.
Pe rfo
rm a
n c
e
L o
w H
ig h
Cell 1 Higher level of satisfaction
Performance is HIGH and
Expectation is LOW
Cell 2 Satisfaction
Performance is HIGH and
Expectation are HIGH
Cell 3 Dissatisfaction
Performance is LOW and
Expectation is LOW
Cell 4 Higher level of dissatisfaction
Performance is LOW and
Expectation is HIGH
Low High
Expectation
Source: Adapted from Abduh et al 2007
RESEARCH RESULTS AND DISCUSSION
Fifteen entrepreneurship lecturers participated in the study and 144 students from seven faculties in Bengkulu University. Those students had undertaken and passed the
entrepreneurship subject. The reserach participants were interviewed and asked to complete a questionnaire designed to explore their opinions about the implementation of the
entrepreneurship subject at their own faculty. Varian in Entrepreneurship Education
The results obtained from interviews with the entrepreneurship lecturers showed that initially Bengkulu University offered the entreprenership course as an elective subject. Due to an
increasing awareness on the importance of being self-employed, entrepreneurship was then introduced as a compulsary subject in 2006. As a compulsary subject, the entrepreneurship
has currently been tought at all seven faculties and must be taken by every student of the Bengkulu University. This indicates that the entrepreneurship education in Bengkulu
University has developed over time.
Despite the significant progress of entrepreneurship education several weaknesses still remain. Among others, these include: a there were some variances between
entrepreneurship classes in terms of subject materials and teaching methods; b the existing entrepreneurship education programs were conducted on a temporary basis c a continual
mechanism for sustainable entrepreneurship education has not been available d no regular and comperehensive evaluation had been undertaken to assess the impact of entrepreneurship
education on the development of student entrepreneurship, and e no record was available on the number of students that became entrepreneurs.
200
Students’ Interests in Entrepreneurship The majority of the entrepreneurship lecturers 77 suggested that the number of students
interested in to be entrepreneurs has increased over time. They estimated that about ―5-10‖
of students in their classes were interested in to start their own businesses. Two of the lecturers believed that ―11-15‖ of their entrepreneurship students intended to be
entrepreneurs. Compared to a study conducted by the Job Placement Center of The Bengkulu University in 1993, the percentage of students interested in operating a business in 2008 was
much higher than that in 1993 as this was onlyabout 1 . This significant improvement in the number of student entrepreneurs can be regarded as a strength of the existing and future
development of entrepreneurship education in the University.
Students’ Satisfaction on Subject Materials Stud
ents‘ satisfaction on the materials of the entrepreneurship subject was specified by using
the technique of SatMax Satisfaction Matrix developed by Abduh et al 2007. Students
were initially asked to express their perceptions on the ―importance‖ expectations of 11 sections commonly provided in the the entrepreneurship subject at Bengkulu University. The
students were then also asked to express their perceptions on the performance of the practice of the 11 sections as they experienced them during undertaking the subject. The results of
data analysis are presented in Table 1 and Figure 1 below.
TABLE 1. STUDENTS’ PERCEPTIONS ON THE IMPORTANCE AND PERFORMANCE OF SUBJECT MATERIALS
No. Subject Materials
Mean of Perceived
Importance Expectation
Mean of Perceived
Performance Mean
Difference T-test
a. Introduction of Entrepreneurship
4.28 3.69
-0.59 Sig
b. Entrepreneurs‘ Characteristics
4.44 2.97
-1.47 Sig
c. Business Environment Analaysis
4.48 3.48
-1.00 Sig
d. Bus. Opportunities Identification
4.58 3.35
-1.23 Sig
e. Business Plan
4.67 3.35
-1.32 Sig
f. Business Management
4.42 3.26
-1.16 Sig
g. Marketing
4.49 3.43
-1.06 Sig
h. Financial Analysis
4.56 3.31
-1.25 Sig
i. Financial Report
4.46 3.20
-1.26 Sig
j. Business Evaluation
4.47 3.24
-1.23 Sig
K Business Development Strategy
4.58 3.28
-1.30 Sig
The mean value of the students‘ perceptions of the importance of each of the 11 components of the subject materials was so high greater than 4 on a five-point scale representing that
students‘ expectations on those subject components. Business plan, business opportunities recognition, business development strategy and financial analysis were found to be the most
importance sections as perceived by the students.
The mean values of students‘ assessment on the performance of individual subject materials ranged from 2,97 as the lowest to 3,69 as the highest. These suggest that the performance
in delivering all subject materials was regarded as ‗moderate‘ as perceived by the participating students. The introduction of entrepreneurship was found to have a higher mean
201 value of performance while the knowledge about entrepreneurship characteristics had the
lowest one. The level of students‘ satisfaction on each of the 11 subject materials was estimated by
comparing the mean value of students‘ expectations and performance of the materials. The results, as presented in Table 1, show that the sign of the mean difference for each sub-
subject is negative and statistically significant. This suggests that stu dents‘ expectations
exceeded the performance of delivering the sections. The results imply that the students were not satisfied with the delivering of all of the materials of the entrepreneurship subject. Since
the value of all differences was negative for all of the sections, all of the sections were classified into Cell 4 suggesting that the students experienced a higher level of dissatisfaction
with all of the subject materials.
FIGURE 2 SATISFACTION MATRIX SATMAT OF SUBJECT MATERIALS
Pe rfo
rm a
n c
e
L o
w H
ig h
Cell 1 Higher level of satisfaction
None
Cell 2 Satisfaction
None
Cell 3 Dissatisfaction
None
Cell 4 Higher level of dissatisfaction
Entrepreneurs‘ Characteristics
Business Plan Business Development Strategy Financial
Report Financial Analysis Bus. Opportunities Identification Business
Evaluation Business Management
Marketing Business
Environment Analaysis
Introduction of Entrepreneurship
Low High
Expectation
Students’ Satisfaction on Teaching Methods Students‘ satisfaction on teaching methods of entrepreneurship subjects was assessed by
applying the same research methods applied to the students‘ satisfaction on the subject
materials. Student participants were asked to express their opinions on the importance expectations and performance of nine types of teaching methods commonly used in the
Bengkulu University. The results of data analysis are presented in Table 2 and Figure 2.
202
TABLE 2. STUDENTS’ PERCEPTIONS ON THE IMPORTANCE AND PERFORMANCE OF TEACHING METHODS
No. Teaching Methods
Mean of Perceived
Importance Expectation
Mean of Perceived
Performance Mean
Difference T-test
a Facilitator:
i. Entrepreneurship Lecturer 3.88
3.38 -0.50
Sig. ii. Guess Lecturer
4.04 2.72
-1.32 Sig.
b Class Discussion
4.01 3.32
-0.69 Sig.
c Group Discussion
3.94 3.30
-0.64 Sig.
d Study group
3.67 3.13
-0.54 Sig.
e Self directed studying
4.05 3.42
-0.63 Sig.
f Individual tasks: making a plan
for an own business 4.27
3.51 -0.76
Sig. G
Group tasks: making a plan for a business owned by group and
prepaing for a field practice 4.15
3.37 -0.78
Sig. H
Conducting field research 4.45
3.06 -1.39
Sig. I
Bus. field practice market days 4.51
3.15 -1.36
Sig.
The mean values of students‘ perceptions on the teaching method range from γ.67 to 4.51 on a five point scale suggesting that all types of teaching method were perceived as important by
the students. The teaching method of ―business field practice‖ was found to be the most important method of entrepreneurship education, followed by ‗conducting field research‘ and
‗individual tasks in making ―a plan of your own business‖. The business field is an activity where the students create a market for two days termed as ―market days‖. However, ‗study
group‘ had the lowest mean value suggesting that this method was not really preferable compared to others as perceived by students.
Students‘ perceptions on the performance of the practice of the teaching methods varied among the method types. However, none of them had a value above 4 on a five point scale.
Among others, ―Individual tasks making a plan for your own business‖, ―self directed studyi
ng‖ and ―facilitation by an entrepreneurship lecturer‖ were found to be the first three methods which were perceiced as having better performance by students. These methods
were ―group tasks‖, ―class discussion‖ and ―study group‖, suggesting that ‗working together with others‘ was viewed as a good method of learning by students. However, facilitation by a
guest lecturer was found to have the lowest score of performance.
The results on the estimation of students‘ satisfaction levels with the achievement of the expected outcomes are presented in Figure 2. Facilitation by an entrepreneurship lecturer was
found to have the lowest mean difference between expectations and performance as perceived by students. This suggest that students were moderately satisfied with that method of
learning. It was then followed by class discussion, group discussion, study group, self- directed studying, individual tasks and group tasks. However, students were found to be
highly dissatisfied with the rest of the three existing methods namely facilitation by guest lecturer, field observation and business field practice. The results indicate that the practice of
the existing teaching methods for the entrepreneurship subject were moderately satisfactory.
203 However, since no method had b
een found in Cell 1 indicating ‗higher level of satisfaction, much more improvements were needed to provide better methods in the practice of
entrepreneurship education.
FIGURE 3. STUDENTS’ SATISFACTION LEVEL ON THE METHODS OF ENTREPRENEURSHIP EDUCATION
P e
rfo rm
a n
c e
L o
w
H ig
h Cell 1
Higher level of satisfaction
None
Cell 2 Satisfaction
Facilitation by entrepreneurship lecture Class discussion;
Group discussion; Study group;
Self directed studying; Individual tasks;
Group Tasks.
Cell 3 Dissatisfaction
None
Cell 4 Higher level of dissatisfaction
Faciltation by guess lecture
;
Field observation;
Business field practice.
Low High
Importance expectation
Students’ Satisfaction on Expected Outcomes There are several outcomes which were expected to be gained by students from undertaking
an entrepreneurship subject. In general, these include: an understanding of entrepreneurship
and its roles and contributions to economic development; an understanding of entrepreneurs‘ characteristics; ability to find out business opportunities; capable of preparing a business
plan; ability in designing business strategies; ability in financial management and recognition of capital sources; ability to get capital; ability in preparing financial reports; and ability in
evaluating performance of a business and providing relevant recommendations. The results of data analysis on the expected outcomes are presented in Table 5 and Figure 5.
TABLE 4. STUDENTS’ PERCEPTIONS ON THE IMPORTANCE AND PERFORMANCE OF EXPECTED OUTCOMES
No. Expected Outcomes
Mean of Perceived
Importance Expectation
Mean of Perceived
Performance Mean
Differ ence
T-test
a. Better understanding of entrepreneurship and its
oles and contributions into economy 4.20
3.57 -0.63
Sig.
204
b. Understanding of entrepreneurs
‘ characteristics 4.15
3.49 -0.66
Sig. c.
Ability in recognizing business opportunities 4.44
3.51 -0.93
Sig. d.
Capability in preparing a business plan 4.38
3.51 -0.87
Sig. e.
Ability in formulating marketing strategies 4.35
3.33 -1.02
Sig. f.
Ability in recognizing capital sources 4.33
3.28 -1.05
Sig. g.
Ability in obtaining initial and additional capital 4.22
3.15 -1.07
Sig. h.
Ability in financial planning and reporting 4.35
3.33 -1.02
Sig. i.
Ability in evaluating performance of a business and providing relevant recommendations
4.44 3.36
-1.08 Sig.
All of the mean values of students‘ responses on the importance of individual expected outcomes are above 4 on a five-point scale suggesting that the students show their intentions
to have a good capability or ability in all common skills needed by an entrepreneur. Among others, ability in recognizing business opportunities, ability in evaluating performance and
providing relevant recommendations, and capability in preparing a business plan were found to be the first three outcomes which were mostly expected by students.
The mean values of students ‘ perceptions on the performance representing the achievement
of individual expected outcomes, as seen in Table 3, range from 3.15 to 3.57 on a five-point scale. These suggest that the performance of the outcomes achievement was good. ―Better
understanding of entrepreneurship and its roles and contributions into economic development‖, ―ability in recognizing business opportunities‖ and ―capability in preparing a
business plan‖ were found to be the best three among the expected outcomes. ―Ability in obtaini
ng initial and additional capital‖ was found to be the lowest rank of the performance. This suggests that the students might have experienced some difficulties in obtaining initial
and additional capital for running their proposed businesses during the pro gram of ―business
field practice‖. The results of students‘ satisfaction level in Table 5 indicate that there were gaps between
students‘ expectations and performance of the achievement of the expected outcomes. The value of each gap was negative meaning that the expectations were greater than performance,
suggesting that students were not satisfied with the achievement of the expected outcomes. The gaps range from -0.63 to -
1.08 for ―better understanding of entrepreneurship and its roles and con
tributions to economic development‖ and ―Ability in evaluating performance of a business and providing relevant recommendations‖ respectively. As seen in Figure 4, all
types of those achievements were classified into Cell 4 of the SatMax indicating a high level of dissatisfaction. The results suggest that the achievement of all types of the expected
outcomes need to be improved in the future and accordingly relevant strategies should be formulated and developed to enhance the existing achievements.
FIGURE 4. STUDENTS’ SATISFACTION ON THE ACHIEVEMENT OF
EXPECTED OUTCOMES
205
R e
a li
za ti
o n
p e
rfo rm
a n
c e
L o
w H
ig h
Cell 1 Higher level of satisfaction
None
Cell 2 Satisfaction
None
Cell 3 Dissatisfaction
None
Cell 4 Higher level of dissatisfaction
All types of the expected outcomes
gained by students from taking the course of the entrepreneurship
subject
Low High Importance expectation
CONCLUSIONS
As a response to an increasing rate of unemployment especially employment of educated people, a number of entrepreneurship programs have been conducted in Bengkulu University.
Since 2006, entrepreneurship has been a compulsay subject and accordingly every student must complete this subject. This study is aimed at reviewing the practice of that compulsary
subject. Based on the results of the study, there are several conclusions that can be drawn as follows:
a. The entrepreneurship education in Bengkulu University is progressing over time. Among
others, the progress was indicated by an increasing number of students who were interested in to be entrepreneurs.
b. The majority of students perceived that all types of materials provided in the entrepreneurship subject were important. Business plan, business opportunities
recognition, business development strategy and financial analysis were found to be the most importance sections as perceived by the students. However, students‘ perceptions on
the performance of providing the subject materials was lower than expected and according to the results of SatMat, those students experienced a higher level of
dissatisfaction.
c. Students‘ perception on teaching metods indicated that business field practice, conducting
field research, and preparing a business plan were three methods that they perceived as more important. The students were found to be moderately statisfied with the methods of
facilitation by the entrepreneurhip lecturer, class discussion, group discussion, individual and group tasks. However, the students were not satisfied with the business field pactice,
fasilitation by guest lecturers and field observation.
d. Students perceived a higher expectations on all types of expected outcomes which could be gained fom doing an entrepreneurship subject such as ability in reconizing business
opportunities, capability in preparing a business plan, ability in evaluating performance of a business and providing relevant recomendations. However, students‘ perceptions on the
performance of the achievement of the expected outcomes were much lower than they expected. This resulted in the students being not satisfied with the existing achievements.
206
RECOMMENDATIONS
This study has tried to shed some light on several areas of the practice of the entrepreneurship subject, such as students‘ perceptions on the importance of the existing subject materials,
teaching methods, and expected outcomes from the entrepreneurship subject. However, several important aspects relating to the findings have not been examined yet. Accordingly,
future research should be focussed on investigating factors affecting the variation of students‘ perceptions in terms of their preferences in subject materials, teaching methods, and level of
satisfaction. Future studies should also be focused on formulating relevant strategies to enhance the effectiveness of entrepreneurship education in the future.
207
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209
PREVENTING THE GROWTH OF CHILD TRAFFICKING: RAISING PUBLIC AWARENESS OF THE IMPORTANCE OF EDUCATION
FOR STREET CHILDREN IN INDONESIA
Tsuroyya Tsuroyy, Brian Pranata, and Wahdi S. A. Yudhi Bureau of Planning and International Cooperation, Ministry of National Education,
Republic of Indonesia, E-mail Addresses :
amz.tsuroyyagmail.com brian_arieskayahoo.co.id
wyudhigmail.com
ABSTRACT
Leisure can be employed as a strategic intervention to address social issues. Serving as a function of leisure, entertainment has been an interesting medium to attract audiences. In
those entertainment products, some educational and social messages are implicitly inserted. Even though there are many kinds of entertainment products, public theater tends to stand
out to the extent that it embeds local cultures, values, and religious rituals. This is prevalent in the growth of traditional public theater in Indonesia which has more appeal to the local
community. Its appeal contains informal education in which people learn about social issues that take place in their community.
Working on narratives, this paper seeks to employ traditional public theater as a medium to raise public awareness of the importance of education for street children. What forms the
backgrounds this alternative is that the growth in the number of street children in Indonesia has led to several complicated social issues such as child trafficking, HIVAIDS prevention,
drug use, lower people economy, and child’s environment sustainability. One way to slow down the growth of these problems is by rais
ing the public’s consciousness to prioritize child safety, education, and healthcare. The authors believe that child’s public theater could be a
good alternative because public theater has the richness of local cultures and the capability of attracting audiences.
210
INTRODUCTION
Global child trafficking in the form of street children shares the same urgency as other social problems that occur in Indonesia. As reported by the Ministry of Social Affairs Jaya, 2008,
the number of street children reached 46, 800, spread across 21 provinces in the country in 2005. This issue has become extremely critical and the government seeks to resolve it. For
instance, the Ministry of Social Affairs reported that in 2006 the number of street children increased to144, 889, half of them active drug users. Further, HIV infected around 8,581 of
the total number Ministry of Public Health, 2007.
This reality suggests that the government has not fully protected abandoned children, especially street children. In fact, the 1945 National Constitution states that the government is
responsible for protecting abandoned children and poor people. As the abandoned group, street children specifically have some characteristics that are embedded in their identity.
According to the Social Affairs Office in Sumatra PMKS, street children are defined as children of five to 18 years of age who spend most of their time on the street or in public
spaces to earn some money. One characteristic is they are working various irregular jobs such as street vendors, singers on public transportation, car cleaners, and so forth.
In addition to irregular jobs, street children often work illegally and encounter dangers on the street. Their illegal jobs are prostitution, selling drugs, picking pockets, and shoplifting. The
children do not even care that they risk their lives and freedom because they are the breadwinners for their families. Furthermore, the nature of the streets, which enforces rough
ways of living, endangers street children‘s safety. They are often the victims of traffic accidents. It is not just traffic that causes deaths and injuries of street children; street crimes
also endanger their safety. For instance, it has been observed that many street children have to pay some money to a group of people who claim that they protect street children. In fact,
the street children actually work without this so-called protection in order to survive.
Because of working in the streets, these children do not have time to go to school and enjoy their childhood. Going to school becomes the least priority and causes a wide range in their
educational backgrounds. Most street children cannot meet K-12 12 years of primary education. Some of them go to school until the third or the fourth grades, and others have
dropped out from junior high school. In addition to the lack of educational access, these kids hardly have time to enjoy playing with their friends in the same way most children have.
Working in the street encourages them to be mature too early. They become too serious and sarcastic in communicating with their community.
Assessing the background of the condition of street children in Indonesia previously, the authors argue that there is a necessity to raise awareness of the importance of education and
child trafficking. Both issues need several in-depth research projects to seek the best strategic communication intervention that can be implemented. To fulfill the demand of extensive
research, the authors would like to examine if the public theater that implements education- entertainment framework as a form of leisure could be an effective medium to address both
issues. However, it is important to note that this paper would serve as semi-formative research in the way that it will assess the strengths and weaknesses of the public theater and
offer the best alternative to address the issues.
LEISURE AND ENTERTAINMENT
211 Leisure has been widely defined and its functions change over time. In general, leisure serves
as relaxation, self-actualization, fun or pleasure, non-serious activities, spiritual tradition, and games. The use of leisure varies depending on the type that someone has. It ranges from
family relationships, sports, and friendships, to entertainment notes on class of Entertainment, Leisure, and Strategic Social Change, 2009. Leisure becomes an official field
which gets more attention as it adapts to the needs of communities in the 21
st
Century. In terms of community‘s needs, Ngai β005 suggests leisure satisfaction and quality of life
serve as pivotal aspects. In his study of leisure in Macao, he notes that Macao was built to be a tourism destination for international tourists, yet it fails to fulfill the needs of the Macao
community. This issue creates a gap between leisure opportunities and leisure places. This gap means most people in Macao seek opportunities in the neighborhood city. Ngai 2005
recommends that the Macao government build some entertainment places in the form of leisure activities for the community. These places would be built based on local values which
aim at providing equal opportunities and attracting tourists both from domestic and international population regardless of their gender, age, group, or race Ngai, 2005.
Shogan 2002, however, tends not to oversimplify the holistic concept of leisure by arguing there are a lot of important aspects needed for activities to be called leisure. She views
unequal opportunities of conducting leisure activities as leisure constraints. One of the causes of these constraints is the lack of skill acq
uisition. Using Foucault‘s theory, Shogan β00β argues that in order to acquire essential skills for leisure activities, people have to embrace
leisure constraints. The ways the community characterizes these constraints and looks for the best alternatives to create a positive participation from the community. Therefore,
policymakers and practitioners are responsible for eliminating constraints, but also making possible constraints which result in community involvement Shogan, 2002.
Discussing community involvement, entertainment as part of leisure activities can attract large crowds. Entertainment does not only offer fun and pleasure, it also generates profits for
entertainment practitioners and the local community. In the entertainment field, the United States entertainment industry has earned approximately 8 billion annually. This is due to the
United States‘ role as a model and center of entertainment industries in the world. The popularity of the TV series The Bold and the Beautiful reached 500 million viewers in 98
countries Lancaster, 1998. In addition to the film industry, the United States also exports reality shows such as Who Wants to Be a Millionaire and has become the trend setter of the
media industries.
The growth of the entertainment industries cannot be separated from the growth of technology in the 21
st
Century. Therefore, the way these industries shift so quickly has made them a global business which attracts great masses from different countries throughout the
world. For instance, the Indian movie industry, as the largest movie industry in the world, produces 800 films each year and they have been viewed by 3.5 million people every day
Merchant, 1998. Indian movies attract viewers from South Asia, Southeast Asia, Australia, Europe and North America.
Speaking about the global entertainment industries, Blakley β001 suggests that ―the current situation for global entertainment is as conceptually complex as it is economically vibrant. In
a world of converging media, the potential value of tapping into transnational subsets of the global market
—that is, audiences that reside in different regions and countries but share a common identity, language, affinity
—is greater than ever before.‖ In short, Blakley β001 views the current global entertainment as growing significantly as more and more people
share common values, languages and cultures. Thousands of miles of distance do not limit
212 any interactions that occur in the global community as the Internet facilitates international
communication regardless of country borders and time differences. In addition, the Internet allows a revolutionary way of distributing entertainment products faster than ever before.
The growth of entertainment industries has attracted communication practitioners and social workers to use them as strategic tools for social change. The idea of combining entertainment
with education has been a strong focal point in the communication and leisure studies. According to Singhal, Cody, Rogers, and Sabido 2004, there are several aspects needed for
an entertainment product to be called an E-E product. One of them is that it has to be a research-based product that includes an active participatory method. In addition, it should aim
at entertaining people as well as raising their awareness of certain social issues. Furthermore, the long-term objectives of an education-entertainment E-E product will be to promote
behavior changes and to create favorable attitudes.
Several studies in the E-E field have shown that this intervention has been successful in several countries in the world. What makes E-E intervention successful compared to others is
that it has various types of entertainment products which enable it to reach the target audience more easily Singhal and Rogers, 2002. For example, Soul City, a South African TV soap
opera was successful in addressing domestic violence. Other examples are Sixto Sentido, a
popular Nicaraguan soap opera that promotes youth and women‘s rights; and Is this Justice?, popular multi-media campaigns in India that focus on preventing the stigma and
discrimination against women with HIV AIDS Singhal and Lacayo, 2007. In addition to various types of E-E, Singhal and Rogers 2002 propose other agendas in the field of
education-entertainment. They ar
e ―attention to resistances to E-E; attention to the rhetorical play and affective aspects of E-E; rethinking the old conceptualization of behavior change;
and employing methodological pluralism and measurement ingenuity.‖ Grounding in an active participatory method, an E-E product should have abilities to endure any kind of
resistance as well as to persuade audiences to change their behaviors. To achieve its long- term objectives, an E-E product will then need various nimble approaches and techniques
which represent local cultures, and contain creativity, innovation and originality.
The ability of an E-E product to persuade audiences varies depending on its degree and flexibility to engage with the target audiences. Tufte 2005 classifies E-E products into three
categories: first, second, and third generation. He suggests that what makes the third generation different from the previous ones is that it empowers people to generate a structural
change. In other words, it encourages people to improve their ability for problem solving both individually and collectively. Currently, there are many E-E products that are classified as
third generation which address different social issues.
NARRATIVES, PUBLIC THEATER, AND LOCAL VALUES
From the narrative theorists‘ perspectives, the world is all about storytelling in a way that its existence is essential for people to communicate and understand the world. They argue that
media industries, including entertainment, also work at telling stories. However, it is also interesting to note that this theory seeks common elements across stories Williams, 2003.
As a part of the narratives, public theater is also meant to tell stories with various themes by showing interesting and unique characters. Harris 2005 indirectly discusses the relationship
between narratives and themes for public theater. He notes that ―…individual signs gain in meanings by being organized in sequences, running over time
‖. Some sequences become narratives. We are well used to constructing and reading particular sequences in order to
213 deliver a meaning, and thus pleasure as the meaning unfolds. A classic example of the
general structure of narrative is one that is widely found in a number of folk tales and myths.
‖In Indonesia for example, folk tales and myths, such as Bawang Merah Bawang Putih and Kancil, tend to be the themes for public theater because these two narrative products
share common values that exist in the Indonesian community. In order to provide a brief background of folk tales and myths in Indonesia, we will narrate
stories of Bawang Merah Bawang Putih and Kancil and discuss how the two stories play an important role in the community. Bawang Merah translates as red onions, but the more
faithful translation is shallots. In contrast, Bawang Putih ‘s faithful translation is garlic. This
story tells about different characters Shallots and Garlic. Shallot is famous for her evil character and always does something bad to Garlic. Playing the opposite character, Garlic is
always nice, kind, friendly and likes to help people. She does not like to fight even though her foster sister, Shallot, is always mean to her. As the story goes, Garlic serves as a heroine who
later lives happily ever after. Unlike the Western version of Garlic and Shallot Cinderella,
this story does not include a fairy godmother who grants Garlic‘s wishes. Different from Garlic and Shallot, Kancil is a story about an animal which is very smart and
usually wins any battles with other animals. Kancil looks like a male deer, but he does not have antlers. He likes cucumbers so much that he sometimes has to steal them from farmers.
Once, Kancil was in a battle with a group of crocodiles which wanted to eat him. With a stroke of genius, Kancil promised to be their supper if they gathered at the river to help him
go to another island. So, the crocodiles formed a line across the river and Kancil jumped over them to cross the river. When he got to the other island, he said farewell and left the
crocodiles angry. From these two folk tales, it is important to note that some educational messages can be learned. They teach people to do good things and be smart so that they
cannot be easily defeated. In addition, it is interesting to see the power of narratives in helping people to understand and make sense of the world.
In making sense of the world, theater, as a part of narratives, is seen as a source of entertainment and social criticism which promotes certain educational messages and
propaganda in contemporary Western society Hatley, 1971. Most of the time, theater‘s
function has been replaced by media industries which can reach massive target audiences and deliver the messages in more engaging ways. In contrast, Hatley 1971 argues that public
theater apparently is not being replaced by media industries as in Indonesia; public theater not only functions as entertainment or social criticism, but it also reinforces religious traditions.
Its role is still pivotal to the community for people still consider public theater as a teacher. The most popular public theater in Indonesia, especially in Java is the puppet shadow play.
This shadow play is usually performed when someone celebrates good news such as a birth, a wedding, and so forth. However, sometimes this shadow play serves as a religious ritual
when it is performed to throw away bad luck for someone. Up to now it has been believed that if someone got a long-term illness, something evil surrounded him or her. In order to
diminish the evil spirit, this person would hold a puppet shadow play wayang. The ritual of this type of the puppet shadow play is called ruwatan. In the performance, the dalang, the
one who operates the puppets and narrates the story, usually has various themes such as Mahabarata and Ramayana which come from the Indian epics. Just as the folk tales of
Shallot and Garlic, these Indian epics also contain ―a sociopolitical message and a set of moral qualities, embodied in the characteristics of particular wayang figures, as standards of
social behavior‖ Hatley, 1971. Even though a wayang performance is able to engage the community to get the sense of being commoners or merakyat, there is still a gap in the social
214 structure of the community as the front seats are always reserved for leaders in the
community Hatley, 1971. The current wayang performance is also broadcast on several television channels and radio stations. Through these channels, urban people can also enjoy
the richness of the cultures that is offered by the wayang performance.
The other form of public theater popular in the Javanese community is ludruk, a type of cultural drama comedy which incorporates both traditional and modern cultures. At the
beginning of the performance, one performer will sing in the Javanese language to address the audiences and introduces the theme of the performance. In certain ludruk, an educational
message is introduced at the beginning, such as the importance of respecting others‘ differences and living with high tolerance. Then, the story continues as what it has been
narrated previously. The modern touch in this traditional drama comedy is that all of the performers are dressed in semi-formal clothes. Unlike the wayang performance, the dalang
and the traditional singers are dressed in traditional Javanese wardrobes. Another modern touch in ludruk is that it mixes the Javanese dialect with the national language, Bahasa
Indonesia. However, ludruk was once seen as a communist public theater as its target audiences and performers are from lower class people. Like wayang performances, ludruk
nowadays is also broadcast on television and radio Hatley, 1971. To wrap up, both Javanese public theaters have their own strengths and weaknesses. Both are able to engage the
audience, yet it seems there is a hierarchical structure in wayang performances. In contrast, ludruk seems much more attractive to people as it upholds high tolerance among individuals,
yet it was once accused of being a communist public theater.
The popularity of ludruk and ketoprak, a more elaborate form of ludruk, in Central and East Java influenced other parts of Indonesia and the east coast of Sumatra in the 1920s and early
1930s. One of the results of the popularity of traditional public theater in Java was lenong, an indigenous drama comedy in the Betawi ethnic group. Lenong was originally formed in
public theaters, called tonil and bangsawan. Lenong was and is still popular across Jakarta, especially for the indigenous people there, the Betawi ethnic group. Like ludruk, there is no
strict formula for performing lenong. Its theme varies from historical tales of Betawi folklore, adaptation of films, print narratives, to comic stories. Just as other public theaters in
Indonesia, lenong is also performed with an orchestra, called Gambang Kromong. This orchestra was originally a mixture of Javanese and Sundanese gamelan, a flute, and some
stringed Chinese instruments. As lenong is a traditional heritage of the Betawi ethnic group, it uses the Betawi language as a medium to preserve Betawi cultures Foulcher, 2004.
During the 1990s, lenong turned out to be very popular as it brought a fresh entertainment for audiences. One of the first private TV channel broadcast a special program for lenong, called
Lenong Rumpi. The performers were from different provinces across Indonesia. They were Batak, Chinese, Betawi, and Minang people; this program actually represented Jakarta, the
capital city of Indonesia, where different ethnic groups mingle together. The stories usually covered problems that were faced by a Betawi household. However, this program tended to
be a situation comedy sitcom which sometimes also dealt with social issues. Each time one of the performers made jokes, the orchestra would perform to exaggerate the jokes. This
program was so successful that the same TV channel produced the motion picture of this program. The movie achieved the same success as the TV series did. In order to fulfill the
demand of the audiences at that time, the same TV channel launched another version of lenong, called Lenong Bocah. The difference between Lenong Rumpi and Lenong Bocah was
the target audience; that is the latter was designed for child audiences. Lenong Bocah
215 performers were cast from several communities of public theater, and most were little more
than teenagers personal notes, 2009. To summarize, the growth of public theater in Indonesia offers a different type of leisure for
the society as it provides local culture, values, and religious rituals. Even though its growth achieves a lot of support from media industries, its existence remains irreplaceable. It is its
various roles of public theater that cause it to last longer than public theater in the Western contemporary society. The ability of public theater to engage and persuade the community
has been tremendously effective for certain types of public theater serving as educational institutions for the audiences. Moreover, to flourish, the existence of traditional public theater
has become a means to preserve local cultures, so that its tradition will perpetuate over time and generations.
PROPOSAL
Grounding in the previous discussion about leisure, entertainment, and public theater in Indonesia, this paper proposes to create a public theater which addresses the importance of
education for street children in Indonesia. The following are sequences of objectives, expected outcomes, description, and production program.
OBJECTIVES The objectives of public theater for street children are to:
1. Promote the importance of education for street children, leading to reduction of the number of child trafficking cases and a decrease in the numbers of street children in urban
areas; 2. Share positive messages related to starting and implementing entrepreneurship, leading to
increased small businesses in the community; 3. Create entertaining and complex narratives capable of addressing social issues involved
in creating a sustainable environment for street children; 4.
Create favorable behavior among parents and adults in prioritizing a child‘s education, security, and health; and
5. Remain flexible to any possible educational messages during the implementation. EXPECTED OUTCOMES
The outcomes of this project can be measured by several variables involving a number of issues that have been addressed. The first is that whether or not the number of street children
decreases. During performances in several targeted areas, the production team will work with a Monitoring and Evaluation Team to assess, evaluate, and create some changes depending
on the research, based on the target audience‘s responses. The second variable is the number of child trafficking cases, especially of street children. Consequently, a decrease in the
number of street children will lead to a reduced number of child trafficking cases. The last variable that can be measured is the growth of small businesses owned by lower income
people. If this growth does not show a significant increase, alternative strategies should be proposed in order to meet the objective of this project.
DESCRIPTION Child‘s public theater is a public entertainment that deals with the lives of street children. The
main objective is to raise the awareness of the life of street children which covers
216 complicated social issues such as child trafficking, education, healthcare, economy, and
family relationships. The format of child‘s public theater will be influenced by the areas of the target audiences for this project. It also seeks to involve local cultures, values, and
communities. For example, lenong, a traditional public theater from the Betawi ethnic group, will be employed as the format
of child‘s public theater that will be performing in Jakarta. The performance will be held once and the response will be evaluated. If it is seen as
favorable, performances will then be held twice a month in an urban area. There will be two different stor
ies in addressing child‘s issues. The theater will be performed in public places and will be open to all. Each performance will last approximately 1
– 1.5 hours and be hosted by local stakeholders such as the local government, NGOs, community leaders, and other
members of the community. After each performance, there will be a short session to get the audience‘s responses in the form of questionnaires and interviews. The data then will be used
as the basis of the story‘s development. PRODUCTION PROGRAM
Borrowing the models of project- based leisure by Stebbins β005, child‘s public theater will
be formatted as a one-shot project and occasional projects. A one-shot project refers to a spontaneous project that does not depend on a specific time. Its purpose is to maximize the
use of free time to do something fun Stebbins, β005. As the pilot project, child‘s public theater will be performed when street children and community gather casually. Then, if it gets
the expected response, the format will shift to occasional leisure which will be performed twice a month.
Emphasizing an active participatory method, ideas for the play will involve street children and the local community in the process of production which includes child actors and a
creative team. The theme will vary from fairy tales and historical stories, to local folklore. The local community and the researcher will serve as facilitators and committees in the
production process. The development of the stories is flexible, open to any suggestions from the local government, NGOs, and donors depending on the results of formative research and
ongoing evaluation.
CONCLUSION
Leisure can be employed as a strategic intervention to address social issues. Serving as a function of leisure, entertainment has been an interesting medium to attract audiences. In
those entertainment products, some educational and social messages are implicitly inserted. Even though there are many kinds of entertainment products, public theater tends to stand out
to the extent that it embeds local cultures, values, and religious rituals. This is prevalent in the growth of traditional public theater in Indonesia which has more appeal to the local
community. Its appeal contains informal education in which people learn about social issues that take place in their community.
Working on narratives, this paper seeks to employ traditional public theater as a medium to raise public awareness of the importance of education for street children. What forms the
backgrounds this alternative is that the growth in the number of street children in Indonesia has led to several complicated social issues such as child trafficking, HIVAIDS prevention,
drug use, lower people economy, and child‘s environment sustainability. One way to slow down the growth of these
problems is by raising the public‘s consciousness to prioritize child safety, education, and healthcare. The authors
believe that child‘s public theater could be a
217 good alternative because public theater has the richness of local cultures and the capability of
attracting audiences.
REFERENCES
Harris, D. 2005.Key concepts in Liesure Studies. London , Sage Publications Ltd. Hatley,B. 1971.Wayang and ludrul: Priorities in Java . The Drama Review, 152 88-101.
Jaya, Himpsi. 2008. Potret buram anak Indonesia, 166 juta jadi buruh. Retrieved from
http:himpsijaya.org20080724potret-buram-anak-indonesia-166-juta-jadi-buruh on 18 November 2008.
KIC Project. 2007. Engaging and mobilizing society through edutainment: Experience- sharing and cross-learning among four pioneering organizations. Singhal, A.,
Lacayo, V. Lancaster, J. 1998, October 27. Barbie, Titanic show food side of Great Satan. The
Washington Post. Merchant, I. 1998, November 22. Kitschy as ever, Bollywood is branching out. The New
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http:www.depkes.go.idindex.php?option=newstask=viewarticlesid=2727Itemi d=2
on 18 November 2008. National University of Singapore NUS. 2004. Community and the metropolis: Lenong,
Nyai Dasima, and the New Order. Singapore: Foulcher, K. Ngai, V. T. 2005. Leisure satisfaction and quality of life in Macao, China.
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Mahwah, NJ: Lawrence Erlbaum Associates.
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Stebbins, R. A. 2005. Project-based leisure: Theoretical neglect of a common use free time.
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, 1-11. The Norman Lear Center. 2001. Entertainment goes global: Mass culture in a transforming
world. Annenberg: Blakley, J. Tufte. T. 2005. Entertainment-education in development communication between
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Williams, K. 2003. Understanding media theory. London: Hodder Education, Part of Hachette Livre UK.
218
A GLANCE OF KATHOEY LABORS: IN THE MIDST OF THAI’S TRADITIONS AND LEGAL AUTHORITIES
Ms Tsuroyya Tsuroyya, Mr Brian Pranata, and Wahdi S. A. Yudhi Bureau of Planning and International Cooperation, Ministry of
National Education, Indonesia
Telephone : +62 21 5711144 ext 2603 E-mail Addresses: amz.tsuroyyagmail.com
brian_arieskayahoo.co.id wyudhigmail.com
ABSTRACT
Gays, lesbians, and transgender have always been major issues in Southeast Asian countries where various ethnicities, religions, cultures and traditions are determinant for many aspects
of life for its people. To some extent, people generally cannot accept ideas of gays, lesbians, or even transgender people who wish to deny what has been given by birth by transforming
their bodies into female bodies. Considering there is a gap between a belief that transgender is part of the Thai tradition and religion and a prejudice that kathoey have been
discriminated against in the workforce, this paper seeks to investigate how these aspects are
interconnected based on Thai students’ perspectives who continue their studies in the United States. They are Thai students’ perspectives about transgender labor roles, discrimination
and improvement in the future. These points were investigated by conducting interview sessions with the respondents, sending the designed questions via e-mail, gathering
information from related references, and transcribing the results of the interviews. Based on collaborative information from both references and respondents, the authors conclude that
transgender labor roles are invincible in which their mobility is restricted by public companies and government institutions. Concerning transgender labor discrimination, there
was only a small number of incidents that the respondents practically noticed. Yet, the authors argue that this is somewhat irrelevant logic for the government to not support them
by implementing labor regulations consistently. Lastly, both Thai society and Thai
government are two important factors that can help improve kathoey’s lives. In fact, Thai society’s role is significant for this community improvement—especially better respect of
kathoey’s differences in a plural community—as people in general have got along well with this group.
INTRODUCTION
Gays, lesbians, and transgenders have always been major issues in Southeast Asian countries where various ethnicities, religions, cultures and traditions are determinant to many aspects of
life for its people. To some extents, people generally cannot accept ideas of gays, lesbians, or even transgender people who wish to deny what has been given by birth by transforming their
bodies into female bodies. In southeast Asia, Thailand provides advanced facilities for enhancing those who choose to be transgender people. Even though there are some
219 transgender communities in the Philippines bakla, and Indonesia waria, Thailand remains the
most famous country in southeast Asia for its transgender people since these people successfully undergo sexual organ surgery. In fact, Thai kathoey
, ―a second type of female‖ who used to be a male is often more beautiful than a real woman. It really seems that people
in Thailand generally get along with kathoey well. To get up-close to kathoey
‘s home country, Thailand is a special country because it has never been colonized. Another special factor is that Thailand was successful in making a quick
recovery of its economic sector after suffering from the financial crisis in July 1997. Currently, its economy is that of a lower middle income country, the same as Indonesia and
the Philippines Kim, 2008. In terms of geographical conditions, Thailand is different from the two neighboring countries. The Thai embassy in the United States notes that its
country‘s shape is similar to a head of elephant. As it is shown in Figure 1. Thailand shares a border
with Cambodia to the east, Lao to the northeast, Myanmar to the west and Malaysia to the south retrieved June 6, 2008, from
http:www.thaiembdc.orgindex.htm . According to the
Asian Development Bank ADB, with a size of 198,114 square miles, Thailand was inhabited by 65.23 million people as at July 1, 2006. As ADB recorded in 2006, the number
of the Thai labor force was 36.429 million people, consisting of 35.686 million employment and 552,000 unemployment labor force. Male employees were still dominant as its
percentage was bigger than female employees: 80.9 : 64 .
FIGURE 1 . MAP OF THAILAND
source: http:www.divetheworldthailand.commap-of-thailand.htm
Regarding the Thai labor force, it is interesting that transgender people seem excluded from much of the Thai workforce. In fact, some of them work in either entertainment industries or
cosmetics-related industries. Whether there is a record or not, transgender labor have given a certain contributio
n to the Thai‘s economy. εany assumptions have been made concerning why transgender roles in the economic sector are invincible. Some say that kathoey are not
appropriate representatives for official institutions. Others state that they are actually included as either female or male employees since the government looks at their physical gender.
Lastly, kathoey appears to be normal in Thai society so that the government often does not pay so much attention to them.
RESEARCH BACKGROUND
220 Tracing back to the history of kathoey, originally its meaning is hermaphrodites, but people
have used it to label Thai male transgenders at present Jackson 1998. However, this term is perceived as a reference to depict a female gender. In Thailand, there are different kinds of
kathoey including long-haired kathoey who dress as women. The Western society may
describe this term as ―ladymen‖ or ―ladyboys.‖ There are several studies that show the relationship between kathoey and Thai tradition as well as parts of religion, especially
Buddhism. One of them is by Jackson 1998, who notes that ―a code of conduct for monks, Vinaya
,‖ classifies four different kinds of sexes: ―males, females, ubhatobyanjanaka hermaphrodites and pandaka males displaying a variety of other non-normative anatomies
or sexual preference.‖ In Jackson‘s Performative Genders, Preverse Desires: A Bio-History of Thailand’s Same-Sex and Transgender Cultures, he argues that Thai Buddhism does not
consider a same-sex sexual activity as sinful 2003. Therefore, this argument presumes an idea that gays, lesbians, and transgenders are part of traditions in which the religion,
Buddhism, enables these communities to perpetuate in the Thai‘s mainstream society— straight people with normal lives.
Even though the basis of kathoey ‘s growth is a tradition and recognized in its religion, it does
not mean that legal authorities officially accept transgenders‘ presence. There is an on-going issue of transgender people treatment in the workforce. Due to the stigma that kathoey must
bear, it is difficult for them, even university graduates to make money from either government institutions or public companies. Most of them are hired by private companies in
the entertainment industries to perform cabaret shows for instance. Furthermore, affected by their sexual desire to present themselves as females, some of them work in sectors that relate
to beauty and female clothing by being designers, make-up artists, and hairdressers. Besides, one can find kathoey who work as waitresses, sales women, and store clerks in family-owned
small businesses Taywaditep et al., 1997; Peracca et al., 1998.
Considering there is a gap between a belief that transgender is part of the Thai tradition and religion and a prejudice that kathoey have been discriminated against in the workforce, this
paper seeks to investigate how these aspects are interconnected based on Thai students‘ perspectives who continue their studies in the United States. There are three main concerns
that will be discussed in this paper regarding Thai transgender labor discrimination. The first
is Thai students‘ perspectives about kathoey, especially their roles in the workforce. In addition to transgenders‘ labor roles, it discussed from the students‘ points-of-view
concerning an issue of transgender labor discrimination. The last concern, which is the most important, is their expectations for the government to improve kathoey
‘s lives to have better employment.
RESEARCH METHODS
In order to investigate three main points of transgender labor discrimination in Thailand, the authors gathered information from articles, books and interviewees. The authors adopted an
interview method and picked five Thai students who are continuing their studies in the United States. According to Maricopa Community College, an interview-based survey requires the
authors to draw an inference from interviewees because he or she does not participate directly with the community that is discussed in his her topic. In this paper, due to difficulties of
observing kathoey
‘s lives directly, the authors designed questions in the form of an interview, which included a non-
experimental descriptive approach. However, this method‘s weakness is that the interviews‘ results will be self-reliant in which the authors may experience
personal problems or attitudes , such as ―misunderstanding, poor memory, and intentional
deception‖.
221 In conducting the interviews, the authors designed five questions that cover Thai students‘
general knowledge about kathoey, the issue of kathoey ‘s labor discrimination, and
suggestions of law improvement concerning kathoey ‘s labor. There were five Thai
respondents who were studying in the United States. Two of them answered the questions through e-mails due to their tight schedules. The others were interviewed by the authors
equipped with a digital recorder .The authors experienced different ways to approach the interviewees and to explore broader knowledge about Thailand transgender discrimination. In
doing so, the authors did not strictly follow the research questions that had been prepared prior to the interview sessions. The authors then transcribed the interview sessions. The
authors realized that there were several weaknesses in processing the interviews. One of them was difficulties in finding a
n appropriate style of transcribing informal words such as ―like you know.‖ Besides, there was not any proofreader to match the recording and the transcribed
versions. The authors took effort to transcribe all materials that had been recorded even though intentionally leaving out some informal expressions, which did not have direct
relationship with the questions.
RESULTS
Based on the interviews and answers from the respondents, most of them did not have any objection with Thailand‘s brand as the country that is most famous for transgender people.
Two respondents actually were proud of Thai‘s brand because they knew that some foreign people came to Thailand for transgender surgeries. Meanwhile, one of them even did not
realize that Thailand is indeed famous in southeast Asian countries with its advanced facilities for transgender surgery. One respondent explained how Thai people can get along
well with kathoey. Moreover, this correspondent compared transgender people in Thailand and in the United States, and concluded Thailand has better acceptance toward transgender
people.
Unlike the first question with various answers, most respondents did not know the answers for the second question concerning the percentage of transgender labors. They were not
certain about the exact number of kathoey ‘s labor. However, one of them predicted that it was
about 2-5, and most transgender labor lived in the capital city of Thailand, Bangkok. Kathoey mostly work in entertainment industries, bars, clubs, salons, and companies that are
related to arts and beauty. Based on the respondent‘s points-of-view, most of them were seen in big cities.
In addition to the number of kathoey ‘s labor, respondents were asked to answer whether or
not they had seen a case of transgender labor discrimination. Most of them basically had not seen a certain discrimination case directly. They heard about this issue from television,
newspaper, and their friends. The types of discrimination cases were various. One explained that a big company once clearly stated that it did not accept transgender people as employees.
Another respondent described that kathoey had been marginalized in terms of a specific occupation
—transgender people could only work in the entertainment industries. The other respondent once saw the news that an insurance company refused to pay a transgender
person‘s claim last year. Unlike other respondents, there was one that totally disagreed with transgender labor discrimination. This respondent even saw that some kathoey, which
happened to be university students, working as engineers, architects, administrators in the university, secretaries and one who was a famous singer.
In regards to a controversial statement of whether or not the government has been ignoring transgender people, two respondents admitted that there was a period of time when the
222 government did not pay attention to them. However, the government currently treats kathoey
better as more and more people accept kathoey, excluding conservative people. In terms of limiting kathoey
‘s access to work in public companies and government offices, one respondent y agreed that the government has been ignoring these people. Another respondent
did not find that work seemed to be so difficult for transgender people because transgender people found that their expertise was in entertainment. In response to the issue of the
government‘s ignorance of katheoy, the last respondent claimed that the government should allow these people to present themselves as what they wanted to be.
Continuing to the next question about a specific law for transgender labor, most respondents noted that there was not any specific law that protected transgender labors as the government
saw their physical gender. Thailand‘s labor regulation automatically covers its citizens once they get employment. In the case of transgender labor, they are included in the female gender
and the law has covered their rights. Nevertheless, there is no specific policy for companies whether they want to hire transgender labor or not. More importantly, there are not any labor
regulations that mentions penalties or sanctions for companies that do not accept transgender labor. The authors argue that this inadequate regulation presumes that the government does
not fully protect transgender labo
r‘s rights. The last main question that was discussed was
respondents‘ expectations toward the government‘s actions to improve kathoey‘s lives was countered unanimously with a huge
support to better accept kathoey ‘s differences. The respondents also expected that the
government could provide equal opportunities for kathoey to work in public companies. Even though one of the respondents complained of kathoey
‘s overreacting behaviors, all respondents agreed that people should not treat them differently. The most important point
was not the policy that could guarantee transgender rights of security and equality based on one respondent
‘s view. Yet, the implementation to better tolerate and accept kathoey‘s presence in any sector was exactly the point that transgender people wished to achieve.
DISCUSSIONS
In observing the respondent‘s perspectives about transgender labor‘s roles, the authors note
that there are several reasons why transgenders are being put into a certain box of environment. First, either Thai society or the
Thai government limits transgender labor‘s mobility in the workforce. They can only earn money by doing some work that are related to
entertainment and beauty. Even though one respondent argued that some of kathoey work outside entertainment industries, it is difficult for them to work as public servants and clerks
in public companies. The authors argue that the main cause is the society‘s reluctance to
depict them as Thai representatives of governmental institutions. In some ways, both the government and the society do not truly accept their presence.
In addition to the limitation of transgender labor‘s mobility, the absence of regulation that covers every Thai citizen at work is a possible cause of marginalizing transgender labor. This
argument fosters an idea that the government is inconsistent to guarantee Thai labor to work in various kinds of industries including transgender labors. A concrete example is that there is
no sanction for companies that obviously state that they refuse to hire kathoey. Furthermore, kathoey
‘s inabilities to have good career development presume how obvious is the society‘s treatment in taking this group out of what the mainstream calls as a
―normal life.‖ Even though, most respondents were convinced that the situation of transgender people is better
than in any other country. Also, they can get along well with normal people..
223 There is a close relationship between consistent labor regulation implementation and
transgender labor discrimination. One shares a role as a guarantee toward transgender labor and a means of enhancement to their roles in the Thai economic sector. Meanwhile,
discrimination cases of these people will encourage both Thai government and society to fully comprehend and accept their presence as part
of pluralism in the country. In ―Sisterhood is Powerful,‖ a chapter in Bell Hooks‘ Feminism Is for Everybody 2000, she discussed the
importance of unity among women in the feminist movement in order to better confront the notions of a patriarchy system. Hooks theorized that together, young and old women would
be able to resist systems that oppress and keep women disenfranchised 2000, p. 14. Even though Hooks is referring to Western feminism about the togetherness among Western
women, the authors consider that her comment can be implemented to the case of transgender people in Thailand because of a solid organization movement of kathoey will provide them
with equalities as well as opportunities in broader kinds of occupations.
The last main concern abou t respondents‘ suggestions regarding transgender labor
improvement, is that most respondents felt uneasy to criticize the government directly. It was shown when most respondents took some time before answering the question. They preferred
to deliver their suggestions in a very polite and soft way —by intentionally choosing
appropriate diction so that they would not feel as if they were blaming the government in some ways. In fact, they convinced the authors that the most essential part was that the
society did not have any problems with transgender people. Moreover, the Thai government focused more on their physical gender, rather their sexual orientation. They were certain that
work was fine for transgender people. However, the authors argue that with greater support from the government and Thai society, transgender people can better improve their lives and
be able to compete with normal people in contributing their skills at both government offices and public companies.
To summarize, three main points have b een highlighted in this paper. They are Thai students‘
perspectives about transgender labor roles, discrimination and improvement in the future. These points were investigated by conducting interview sessions with the respondents,
sending the designed questions via e-mail, gathering information from related references, and transcribing the results of the interviews. Based on collaborative information from both
references and respondents, the authors conclude that transgender labor roles are invincible in which their mobility is restricted by public companies and government institutions.
Concerning transgender labor discrimination, there was only small number of incidents that the respondents practically noticed. Yet, the authors argue that this is somewhat irrelevant
logic for the government to not support them by implementing labor regulations consistently. Lastly, both Thai society and Thai government are two important factors that can help
improve kathoey
‘s lives. In fact, Thai society‘s role is significant for this community improvement
—especially better respect of kathoey‘s differences in a plural community—as people in general get along well with this group.
224
REFERENCES
adb.org: Key indicators 2007: Inequality in Asia. 2007. Retrieved April 27, 2008, from http:www.adb.orgDocumentsBooksKey_Indicators2007default.asp
Hooks, B. 2000. Feminism is for everybody
.
Cambridge, MA: South End Press. Kim,Y. 2008, Geography SE Asia 538. Class of Spring 2008, Athens, Ohio University.
Jackson, P. A. 1998. Male homosexuality and transgenderism in the Thai buddhist tradition. In Leyland, W. Ed., Queer dharma: Voices of gay buddhists. San Francisco, CA:
Gay Sunshine Press. Jackson, P. A. 2003. Performative genders, perverse desires: A bio-history of Thailands
same-sex and transgender cultures. Intersections: Gender, History and culture in the Asian context, 9. Retrieved May 15, 2008, from
http:intersections.anu.edu.auissue9jackson. html.
Peracca, S. et al. 1998. Can prostitutes marry? Thai attitudes toward female sex workers. Social Science and Medicine, 472: 255-267.
Taywaditep, K. J. et al. 1997 Thailand. In R. Francoeur, Ed.. International Encyclopedia of Sexuality, New York: Continuum.
225
THE REAL SECTOR EFFECTS OF THE ECONOMIC CRISIS AND GLOBAL HEALTH IN SOUTHEAST ASIA: STUDY CASE: INSURANCE MANAGEMENT IN
INDONESIA
Suciati Mega Wardani PT. Askes Persero
Pasar Minggu Street No 117 South Jakarta Indonesia Phone +6221 7943239
Fax +6221 7946315 sucimoet_okeyahoo.com
ABSTRACT
The global financial crisis started to show its effects in the middle of 2007 and into 2008. around the world, including Southeast Asia, stock markets have fallen, large financial
institutions have collapsed or been bought out, and governments have had to come up with rescue packages to bail out their financial systems. Economic growth protection in Southeast
Asia fell from 2007 until 2009.based on IMF version-November 2008, The possible downside effects of the financial sector crisis are much more direct and substantial from the
real economy implications. These will work through trade, remittances, and investments.
INTRODUCTION
Background and Problem
The global financial crisis evolved from the bursting of the speculative bubble in the US housing market, as well as the failure of regulation and the lack of adherence to strict
corporate governance principles in the United States. The crisis came to a head around
226 September 2008 and rapidly spread to other developed countries. The effect of the global
economic crisis started to show its effect in the middle of 2007 and into 2008 on a worldwide basis, including in southeast Asia. The crisis first became evident in developing countries in
the form of a decline in export volumes, a fall in commodity prices, and drastically reduced inflows of foreign capital and remittances.
While the downturn has largely occurred in wealthier nations, the poor in low-income countries are likely victims. The financial crisis, which was triggered by difficulties within
the sub-prime mortgage market in the USA, and which has seen the near collapse of the international banking system, still continues to spread. Many countries are known to be
facing severe financial problems and world trade is shrinking. The recession is now virtually global as a knock-on effect in low-income and middle-income countries occurs. As richer
countries buy less from low- income countries, revenues decrease, which lowers workers‘
incomes and raises unemployment. Health and social programs targeting the poor are often the first victims of budget cuts.
Experience with past crises in southeast Asia and other regions shows that they may harm human development in four ways-by 1 increasing poverty, 2 worsening nutrition, 3
reducing the quality and supply of education and health service, 4 wiping out the meager savings and wages of poor people.
The following are documented threats to children and families in each country: - Decline in family income as formal sector jobs disappear and workers take lower-
wage employment in the informal sector. - Erosion of real wages through inflation sparked by currency depreciation, with a
particular impact on the prices of food and medical supplies. - Declines in government revenue as the tax base - particularly imports and company
profits – contracts severely limiting government capacity to maintain social
expenditures. - The devastating effects of high costs of food and lower family incomes on early
childhood nutrition, including poorer health. Lower cognitive abilities, less learning, and lower lifetime earnings.
Total health spending in countries that has been affected by an economic downturn tends to fall, but not consistently. Some governments have protected health spending or even
227 increased it, but others have done the reverse. Policy in this sphere is thus vitally important.
In contrast to public spending, private out-of-pocket expenditures usually tend to decline in a recession, particularly if services are available at lower cost in the public sector.
Regarding the duration of the crisis, the current crisis has rapidly spread to the global economy. The actual duration of the recession depends on the speed and effectiveness of
policies in the developed countries. The most immediate effects are likely to be through the scissors of rising health costs and diminished resources. The cost of imported health inputs
rise because of depreciating currencies, resources shrink as lower incomes depress private spending on health and slower growth cuts into tax revenues that would otherwise be
available for public health expenditure.
In responses to questions raised on the impact of the crisis on global health, the purpose of the research paper are:
1. To build awareness of the ways in which an economic downturn may affect health spending, health services, health seeking behaviour and health outcomes.
2. To make the case for sustaining investments in health. 3. To identify actions
– including monitoring of early warning signs – that can help to mitigate the negative impact of economic downturns.
THE IMPACT OF CRISIS IN GLOBAL HEALTH
Relationship Between Economic Growth and Health
The reduction in poverty improves affordability and accessibility to health care. Improved health leads to enhanced productivity. Healthier people live longer and are more motivated to
develop their skills. Increased life expectancy will encourage people to save more money for retirement which will then increase public investment.
Economic Crisis and the Poor
The poor in all countries will be the first and hardest hit. It is shown by the increasing in food prices which causes food crises. The other is the reduction of demand for commodities which
228 causes more unemployment, loss of income, and reduction of household spending on health.
The effects of a financial crises are a fall in private financial flows, decreases in foreign direct investment and remittances, and exports from developing countries are down in price and
volume.
FIGURE 1. THE PROJECTION OF WORLD TRADE GROWTH
Data source: World Bank
The crisis undoubtedly has an impact on health in developing countries, with the most immediate effects through lower private spending on health as income growth slows and
through tighter national budgets that constrains public health expenditures. Slower growth potentially affects the health sector. The crisis puts health systems in the scissors of rising
costs and diminishing resources. Costs are likely to rise as currency devaluations occur in many countries as an unavoidable side effect of the crisis. Devaluations increase the costs in
local currencies of all imported health expenditures: medicines, autoclaves, syringes, X-ray machines, and other hospital equipment.
The degree of how this affects the various economies throughout the world depends on how well and how skillfully each country manages its available resources in terms of manpower,
finance, equipment, facilities, and supplies. Policies can offset these effects. The level of available health resources should be accurately determined and thus should be equitable,
efficiently and properly allocated and distributed based on available information and data on
229 the needs levels of care. Those that have proven most effective include: policies aimed at
financing specific services used by the poor vaccines, primary health care and nutrition programs, and policies expanding the coverage of safety net programs through low-cost
insurance mechanism.
Medicines and Health Care Commodities
Where recession is accompanied by inflation and devaluation of domestic currencies, the price of imported medicines, raw materials and medical equipment will increase. There is
evidence that the rise in the cost of care to patients can be controlled, particularly through public subsidies.
Falling Remittance
Income from remittances has held up well through some past economic downturns. How much is spent on health is uncertain, although remitters covering health expenses was the
primary purpose of the money sent home. However these moneys are often used to meet the cost of long term or terminal illness or even funeral expenses. Thus a decline in remittance
income may not be reflected in levels of population health, these expenses still have to be met. Borrowing locally at high rates of interest can lead to impoverishment or increasing
levels of debt.
Reductions in Household Income
The economies of many low-income and middle-income countries have benefited from the rapid growth of export industries in areas such as ready-made garments, food and flowers,
and business processing. As demand declines in developed economies, job loses are likely with consequences for family income and the ability to pay for health care.
Utilization of Health Services
Decreasing health spending, increased costs of treatment, and reduced family income affects use of health services and their quality. The most common effect is to lower demand for
private care with a consequent transfer of demand to the public sector. If public services are
230 also compromised, they may not be adequately equipped to cope, and overall quality may
decline.
Health Outcomes
The current food crisis in particular has been estimated as being responsible for pushing more people back into poverty with serious consequences for health outcomes and nutritional
status. Shortages of food and consequent malnutrition predispose individuals to disease and thus act in vicious concert with the economic downturn.
HOW TO OVERCOME THE CRISIS
Mitigating the Health Impact of the Financial Crisis
In the face of declining revenues and income, health care should be made as visible as possible. Health is an entitlement to which people have a basic right, as well as making a
significant contribution to economic growth, poverty reduction, social development and human security. The financial crisis has provoked an examination of the values that underpin
societies. The health response should also aim to be transformative and should be used to promote a greater focus on social justice.
TABLE 1. ECONOMIC GROWTH IN SOUTHEAST ASIAN COUNTRIES, 2009 Country
2006 2007
2008 2009
Change of 2007-2008
Indonesia 5,5
6,3 6
6,4 4,8
Malaysia 5,9
6,3 5,5
5,9 12,7
Filipina 5,4
7,3 5,9
6,1 19,1
Thailand 5,1
4,8 5
5,4 4,2
Vietnam 8,2
8,5 8
8,5 5,9
Data Source: World Bank, 2009
231 From table1 we can see that economic growth in some South East Asian countries are in
downturn except for Thailand. The importance of health for economic growth and reduction of poverty is reflected. To ensure universal and equitable access to quality health services,
governments must provide a sufficient share of public revenues for health. A key characteristic of the current crisis is the speed with which it continues to evolve and
consequently the uncertainty facing policy-makers. Partnerships will be critical. Rapid assessments, effective communications, exchanges of experience, effective and flexible
working arrangements will all be essential to success.
Monitoring the Impact of the Crisis.
Given the rapid evolution of the crisis and the uncertainty surrounding its impact in different countries, monitoring its effect is a priority. The purpose of monitoring is to identify the most
vulnerable countries and populations before people are exposed to risks that will affect their health. Specific efforts to monitor the impact of the crisis will complement existing, and
longer term efforts to monitor health outcomes.
Saving Lives and Protecting Incomes
The first priority in any country facing an economic downturn is to protect the lives and livelihoods of those most at risk. In term of policy actions, social safety nets which support
the poor will be a priority. The more serious the downturn, the greater the priority should be given in this area.
Increasing the Effectiveness of Spending for Health
Economic recession makes the tasks of defending health budgets more difficult. In countries affected by the financial crisis, recapitalizing banks and other financial institutions may be
given priority. In countries affected by economic recession, sectors that generate employment or increasing agricultural production will seek additional funding. Strategies need to take into
account spending outside as well as within the health sector.
Where resources for a significant fiscal stimulus are available, counter cyclical public spending is seen as vital for reviving the economy. Although the primary aim of such
232 programs is to create or maintain employment, it is important to seek ways in which they can
positively influence health. Health-policy makers should be assertive in seeking a seat at the table when public spending plans in these areas are being developed.
There is no doubt that primary health care, and its central objective of moving towards universal coverage, remains compelling as an approach to health policy at a time of economic
crisis. Primary health care requires a focus on equity, solidarity and gender. It reminds policy-makers, for example, that the high burden of maternal mortality is a result of many
factors including poor access to care, failure to p revent unwanted pregnancy and women‘s
low status in some societies.
Primary health care gives direction to work on health systems, reinforcing the idea of solidarity through progress towards the goal of universal coverage. This is particularly
important given the increasing pressures on public services and the need for ways of reducing exclusions. Pooling risk and resource-central to the notion of universal coverage. Because it
is not only protect people from catastrophic expenditures, it also facilitates greater allocative efficiency and more effective resource use.
In times of economic hardship a more joined up approach to health and public policy is essential. Health is an outcome of actions across many sectors of society. Primary health care
stresses the importance of the social, economic, and environmental determinants of health, such as essential medicines and technologies, and the restriction on the movement of peoples
or goods to prevent the spread of epidemics.
Primary health care does not focus exclusively on the public sector, but acknowledges the role that non-state providers-private, voluntary, faith, and community-based play in providing
a significant proportion of services in many countries. Public involvement and transparency are central to the primary health care approach. If the public, civil society and parliaments are
involved, decisions on how to make health spending more effective are more likely to be rational and accepted than if they are left to bureaucracies alone.
Health Finance Policy and Insurance Management in Indonesia
233 As in other developing countries, Indonesia is facing problems of access, equity, efficiency,
quality of health services and approximately 70 per cent of health care expenditure is currently ―out of pocket‖. These problems have been exacerbated by the economic crisis. The
most vulnerable and affected group during the struggling finance phase is the poor. For the poor, the risk of severe illness and earlier death from disease is considerably higher than for
those who are financially better off. They are also less able to recover from the financial consequences of ―out of pocket‖
payments and loss of incomes associated with ill health. For most people illness still represents a permanent threat to their income earning capacity. Besides the direct costs for
treatment and drugs, indirect costs resulting from the lost labor of the ill have to be shouldered by the household. The poor do not just undergo the high risk in their environment,
they actively try to manage risk and cope with its consequences. Delayed treatment, self medication or even doing nothing are among their choices.
The emergence of the Indonesian health insurance systems was influenced by the above mentioned problems. The crisis has raised awareness and concern over sustainable health
care financing in Indonesia. Government is increasingly realizing the value of developing health systems that provide health care while financially protecting the people in the fairest
way possible. To protect the poor a nd by reducing ―out of pocket‖ payments, the central
government started in 1998 with the development of pro-poor policy such as social safety net for health JPS-BK. The government has also developed a health financing scheme namely
the Jaminan Pemeliharaan Kesehatan JPK. In 2003, a pilot project started in 15 districts and three provinces in Indonesia, and the following year was expanded to some additional
regions. The name of this program has changed several times. In 2005, it was known as Health Care Security for the Poor JPK-MM, then became Health Insurance for the Poor
Askeskin and it was also known as Community Health Security Jamkesmas since 2008. Government‘s commitment to ensure that health care is accessible for the poor through this
sche me is much appreciated.with a slogan ―health for the people‖ and funded by central
government budget APBN, JPK-MM Askeskin has implemented as a step toward universal coverage
. A question that remains of paramount importance in a majority of the world‘s countries is how their health financing systems can provide sufficient financial risk protection
to all of the population against the costs of health care. Increasing utilization of health care
234 will increase the cost of a health insurance scheme. While the spending is increasing the
health provider is unable to provide this within the Jamkesmas budget, and local government has a responsibility to finance the gap. It can be a burden for a local government APBD in a
low fiscal area.
Health care programs in Indonesia through social health insurance are provided by PT. Askes Persero. Askes is a compulsory health insurance scheme for active and retired civil
servants, retired military and police officers, veterans and national patriots, and their families. The Ministry of Health and local authorities run public health care systems for the uninsured
through Jamkesmas and Jamkesda local government initiatives which is handled also by PT. Askes Persero.
All the health insurance companies in the world were facing the same condition when the economic crisis happened, that is the rapid increase of health care costs and PT. Askes
Persero is also doing the same. Providing equal access to high quality care is one of the main objectives of the company. The aim is to achieve the highest possible standards of
health, which implies that the system is able to respond to the expectations of the population, to reduce the differences between individuals and groups to a minimum, and to guarantee the
same quality of treatment for all people. The issues at stake are the quality of treatment and access to health service in the face of scarce resources, essential needs, and control of the
trend towards ever increasing costs.
All of those conditions have influenced the increase of health cost, access to health service in the matter of affordability of the people, quality and effectiveness of the health care provided
. Facing that reality, as the biggest health insurance company with more than forty years experience, PT. Askes has to try to create reliable policies and strategies in order to survive
and be a growing company and also to support the achievement of the health insurance with universal coverage as well as avoiding the liberalism of the health sector.
Health Reformation in Indonesia Indonesia is transitioning through major reform ―the implementation of universal health
insurance coverage‖. The ultimate goals of health reform are to improve health care
accessibility, quality, sustainability, and efficiency. Within this framework, the purpose of the
235 reform is to improve health outcomes, to provide Indonesians with financial protection from
impoverishment resulting from large, unexpected health care costs, and ensure responsiveness of the system to consumers.
The health insurance scheme for the poor has made a significant impact on reducing financial barriers of the poor. The national health insurance scheme provides the free access to health
facilities without any co-sharing even of part of the benefit package. It has marked a commitment of the Indonesian government to provide its entire population with health
insurance coverage through a mandatory health insurance scheme. In scaling up to achieve universal coverage through a mandatory contributory health insurance scheme, government
needs to design a policy to facilitate the aim. To allow eligible members access to health care, membership management needs to be improved. Validation of data on those who are eligible
for the scheme is needed and criteria should be clearly defined.
PT. Askes Persero is a state-owned enterprise, which was established in 1968 by the Indonesian government for administering a mandatory health insurance scheme for civil
servants, veterans, national independence pioneers, military, and police retirees along with their dependents. Up to now the numbers of the compulsory membership have reached 16.3
million people. In its development period, the company is also allowed to run commercial voluntary insurance for the employees of private companies, state-owned enterprises, local
government-owned enterprises and other institutions which at present account for a membership of 1 million people. Besides the number of Jamkesmas membership has reached
72 million people. This means that more than 89 million Indonesian people are currently covered by health insurance.
The health insurance program provided by PT. Askes Persero is based on the concept of ―managed care‖ where it applies an integrated system of financing and delivery of
appropriate health care services in order to produce quality care and efficiency. The characteristic of PT. Askes Persero managed care in carrying out the health insurance is as
follows: - Comprehensive health care based on the medical needs.
- Structural services and referral system, which provide the primary health care at the family doctor or at the public health centers, are regarded as the ―gate keeper‖
236 - Selected health provider for PT. Askes Persero members is the health care provider
contracted by PT. Askes Persero. - Selected drug is the drug listed in the drug and ceiling price list DPHO of PT. Askes
Persero - Together with the hospitals PT. Askes Persero is undertaking programs of
management improvement.
The benefit for PT. Askes Persero compulsory members is comprehensive based on the medical needs covering the promotive, preventive, curative, and rehabilitative areas. The
services given are provided structurally and gradually apply the regional and referral concept. The package is equal for all members and there is no limitation in the medical services, costs
as well as the length of stay in hospitals. The benefits extended to the voluntary members varies according to the agreement between PT. Askes Persero and the appropriate member‘s
employer.
The premium for PT. Askes Persero compulsory members is decided by the government at the amount of 2 percent of basic salary. While the premium for the voluntary members is
decided by conformity with the benefits package purchased being determined based on the community rating. There is no difference on the services for the compulsory and voluntary
members in principle, that is managed care approach. Social Askes Program
TABLE 2. PRODUCTIVITY OF SOCIAL ASKES PROGRAM
million
Description 2003
2004 2005
2006 2007
2008
Premium Income 1,912,603
2,072,849 2,549,885 3,307,614
4,313,311 5,622,611 Health Service Cost 1,185,861
1,469,789 1,928,278 2,351,822
2,941,272 3,095,353 Returned Income
313,836 2,445,445 181,931
402,400 663,642
1,136,882 Data source: management report of PT. Askes Persero, 2008
From table 2, we can see that the realization of Social Askes premium of 2007 was Rp 4,331,311 million, increasing Rp 1,005,697 million or 30,41 from 2006. The realization of
Social Askes premium of 2008 was Rp 5,622,611 million, increasing by Rp 1,309,300
237 million or 33,63 from 2007. The data shows that global economic crisis has not affected
premium income of Social Askes Program, besides the prospective of health prosperity received by the members increased through health insurance. The data shown that the impact
of global economic crisis has not affected the compulsory members program.
Commercial Askes Program
TABLE 3. PRODUCTIVITY OF COMMERCIAL ASKES PROGRAM Description
2006 2007
2008
Member 1,909,662
2,133,369 1,271,082
Enterprise 2,577
2,417 2,121
Member Lapse 502,846
392,153 974,703
Data source: management report of PT. Askes Persero, 2008
From table3 above, we can see that the number of Commercial Askes Program voluntary members from 2006 to 2007 increased by 223,707 people or 11,7. In the meanwhile the
number of Commercial Askes Program voluntary members from 2007 to 2008 decreased by 862,287 people or 40,4. The number of enterprises cooperating with PT. Askes Persero
in health insurance coverage from 2006 to 2007 decreased by 160 or 6,2 . Moreover the number of enterprises cooperating with PT. Askes Persero in health insurance coverage
from 2007 to 2008 decreased by 296 or 12,2 .
The data shows that the impact of global economic crisis has affected the voluntary members program. This was caused by the inability in the private sector to pay the premiums. This
must be considered by the government in implementing universal coverage for all Indonesian citizen.
CONCLUSION
Experience with past crises in southeast Asia and other regions shows that they may harm human development in four ways-by 1 increasing poverty, 2 worsening nutrition, 3
reducing the quality and supply of education and health service, 4 wiping out the meager savings and wages of poor people. The crisis undoubtedly has an impact on health in
developing countries, with the most immediate effects being through lower private spending
238 on health as income growth slows and through tighter national budgets that constrain public
health expenditures. Slower growth will affect the health sector. The crisis has put health systems in the scissors of rising costs and diminishing resources. Costs are likely to rise as
currency devaluations occur in many countries as an unavoidable side effect of the crisis.
The degree of how it will affect the various economies throughout the world will depend on how well each country will manage its available resources in terms of manpower, finance,
equipment, facilities, and supplies. Policies can offset these effects. Indonesia is transitioning through major reform to ―the implementation of universal health insurance coverage‖. The
ultimate goals of health reform are to improve health care accessibility, quality, sustainability, and effectiveness. Within this framework, the purpose of the reform is to
improve health outcomes, provide Indonesians with financial protection from impoverishment resulting from large, unexpected health care costs, and ensure
responsiveness of the system to consumers.
PT. Askes Persero is a state-owned enterprise, which was established in 1968 by the Indonesian government for administering a mandatory health insurance with universal
coverage. PT. Askes Persero implements and support the policies and programs of the government in the area of the economy and national development in general. To attain this,
the company has to implement a comprehensive health insurance with health managed care programs in accordance with medical needs to increase the benefits to all stakeholders and to
support the socio-economic growth of the nation.
239
REFERENCES
Pain L.H.W and F Siem Tjam. 1988. Hospital and The Health Care Revolution, Geneva.
PT. Askes Persero. 2007. Annual Report 2007. Jakarta
PT. Askes Persero. 2008. Annual Report 2008. Jakarta
Ridha, Kechrid Mohamed. 2001. Improving Access to Efficient Health Care in Developing Countries: Telemedicines and Other Possibilities. France
Sutadji, Orie Andari. 2002. The Impact of Private Sector Involvement on Health Insurance in Indonesia. Jakarta
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APPENDIX
What health facilities provide the services? - Health center and other primary health facilities
- Government hospitals - Military, police and private hospitals
- Pharmacies - Optical
What health services are provided by PT. Askes Persero? 1. Primary care
2. Hospital outpatient or ambulatory care 3. Hospital inpatient care
4. Birth delivery 5. Drugs
6. Health equipment covering: - Eyeglasses
- Dentures - Hearing aids
- Prosthesis - Implant
7. Surgery including heart and lung surgery 8. Haemodialysis
9. Kidney transplantation 10. Supporting diagnostic measures USG, CT scan, MRI
241
THE ROLE OF BANJARESE CULTURE TO IMPROVE PERFORMANCE AND COMPETITIVE ADVANTAGE THROUGH ISLAMIC ENTREPRENEURSHIP AND
STRATEGY - SMALL AND MEDIUM ENTERPRISES IN JEWELLERY AND GEM STONES AT MARTAPURA, SOUTH KALIMANTAN, INDONESIA
Hastin Umi Anisah Brawijaya University
Malang Indonesia
hastin_umiyahoo.com
ABSTRACT Purpose
– The purpose of this
paper
is to study and examine the relationship between Banjarese culture, Islamic entrepreneurship, strategy, performance, and competitive advantage on small-to-
medium sized enterprises SMEs in one part of Indonesia, which produces jewellery and gem stones. Theoretically, this study sees unification between Banjarese culture, Islamic entrepreneurship, and
strategy. This study focuses exclusively on two specific strategy types: quality strategy and innovation strategy, and their relationship to performance and competitive advantage.
Designmethodologyapproach –The method of analysis uses both quantitative and qualitative
approaches known as mixed methods or the pragmatism paradigm. Participants are owners, leaders, and entrepreneurs who have had businesses in jewellery and gem stones, and also the researcher. In
the quantitative approach 112 respondents were interviewed using questionnaires and identifying nineteen research variables and these were analysed using SEM. In the qualitative approach ten
participants were interviewed .These were key persons who had experience in the jewellery and gem stones business and this analysis used the phenomenology approach.
Findings
– The research findings demonstrate that Banjarese culture, Islamic entrepreneurship, and
strategy have influenced and improved performa nce and competitive advantage of SME’s. The
Banjarese culture has improved performance and competitive advantage through Islamic entrepreneurship and strategy. Performance has a significant impact on competitive advantage and
competitive advantage has no significant impact to performance. Practical implications
– The findings of the study are useful for lecturers, owners, and practitioners. Limitations - The findings of the study only discuss Islamic entrepreneurship and Banjarese culture.
Originalvalue
– The paper is a part of a study indicating that Banjarese culture has improved
performance and competitive advantage through islamic entrepreneurship and strategy.
Keywords: Banjarese culture, islamic entrepreneurship, strategy, performance, competitive advantage.
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INTRODUCTION
The economic structure of Indonesia entered a new phase in which small and medium micro enterprises SMEs became the main pillar of economic strength that proved resilient in the global
economic crisis. According to the Office of Observation Depperindag 2003, the Indonesian economy during 2000 was less profitable. The global economic crisis that occurred in 2008 that began
in the United States is different from the crisis of 1998. Small-to-medium enterprises SMEs must have an early strategy to be able to compete. According to Kasali 2008 sooner or later the impact of
the economic crisis will be felt by Indonesian SεE‘s. Kasali further suggested that it is necessary for SMEs to have a proactive strategy to deal with this crisis once it occurs. This proactive strategy
includes 1 Public Health needs to find substitutes or alternative raw materials, especially imports in order to obtain a more affordable price. However, the quality must be maintained so the added value
of products does not decline, 2 making a breakthrough in the purchase of raw materials as cheaper alternatives. SMEs should avoid brokers who do not offer competitive prices, 3 efficiency strategy,
namely by conducting large-scale efficiency by evaluating company s‘ operational costs. For example
the efficient use of electric energy or other fuel, 4 marketing strategy, namely to expand the marketing strategy, by reducing reliance on large numbers of buyers or large buyers. Implementing a
retail market cash and carry market is usually a more secure payment risk, and 5 inviting retailers to review trading terms so that business can be effectively and more equally developed.
SεE‘s development is a complex and dynamic problem because it involves many factors both internal and external changes from time-to-time. Management of environmental factors has to achieve
high performance and developing competitive advantage requires a specific strategy. Porter 1992 suggests that there are two theoretical views on the relationship between environmental factors and
strategies, namely the deterministic environment and environmental management. The deterministic perspective indicates that environmental management has a deterministic influence and the strategic
decisions that companies make must be adapted to the opportunities and threats in the environment. The SεE‘s sub-sector is the sector where democracy is important and this sector has a strategic
role in economic development in Indonesia. The strategic position of SεE‘s is important because it has several advantages over big businesses, among others, it is able to absorb more workers and uses
local resources, and efforts are relatively flexible. BPS 2004 and the Ministry of Cooperatives and SMEs, in Indonesia indicated there were 42.39 million SME units or a total of 99.9 of the existing
business units. δabor was absorbed in the efforts of SεE‘s amounted to 79.04 million people or 99.4 of the total work force there and contributed 56.72 of total GDP.
Competition is basically the core of the success or failure of a company. It can determine the accuracy of company activities that can sustain performance, by innovation, cultural cohesiveness, or
execution. Competitive strategy is searching for a favorable competitive position in an industry, the fundamental arena where the competition occurs. Competitive strategy aims to establish a profitable
position and it can be defended against the forces that determine industry competition. There are two
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basic types of competitive advantage which are; cost advantage and differentiation. Porter 1994 argues that competitive advantage in an industry can be strongly enhanced by interrelationships with
business units competing in related industries. Bacon and Hofer 2003 stated that the new company should adopt low-cost strategy to develop the competencies to achieve competitive advantage against
competitors. Achievement of performance is largely determined by the effectiveness of managerial actions
through capability in the development of a strategy to neutralize the negative effects of industry competitive forces Metts, 2007. Organizational resources, combined with a strategy are necessary
to strengthen the quality of corporate performance Edelman et al., 2002. SMEs play an important role in the Indonesian national economy especially with respect to
labor absorption, nevertheless in exports and in value-added, SMEs are lower than that of medium and large-scale enterprises. Low performance of Indonesian SMEs is caused by many factors that are
basically systemic from the external environment, firm resources, entrepreneurial skills, culture and strategy in Indonesian SMEs. These factors also affect the competitive advantage of SMEs in the
international market. It is very important to improve the performance and competitive advantage of SMEs in facing competition especially from free trade agreements.
The purposes of the study are to analyze and examine: 1 the impact of Banjarese culture on performance and competitive advantage, 2 the impact of Islamic entrepreneurship on performance of
SMEs, 3 the impact of strategy on competitive advantage of SMEs, 4 the impact of Banjarese culture on Islamic entrepreneurship, 5 the impact of Islamic entrepreneurship on strategy, 6 the
impact of Banjarese culture on strategy, 7 Have Islamic entrepreneurship and strategy mediated relation between Banjarese culture, performance, and competitive advantage? 8 the impact of
performance of SMEs on competitive advantage, and 9 the impact of competitive advantage on performance of SMEs.
THEORETICAL FOUNDATIONS Banjarese Culture
Ethnic Banjar is the tenth major ethnic area in Indonesia Syarifuddin , 2000, which in 2000 amounted to 3.496 million people with an average population growth of 1.94, higher than the
growth rate of ethnic Javanese, Bugis and Chinese. Banjar ethnics live in almost every province in Indonesia except in the Province of West Sumatra. Ethnicity is the largest group of approximately
76.34 of all Indonesian citizens in South Kalimantan province. Banjarese ethnics are divided into 3 sub tribes, namely: Pahuluan Banjarese, Banjarese Batang Banyu and Kwala. Their main work is
farming and trading. Developing a commercial character is considered necessary because for people who live in the Banjarese valley of the river Nagra Batang Banyu, it is not possible to farm, so they
have developed and marketed craft products.
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This is also in line with their needs as various products are not already produced in this region. Thus, their efforts have led to a market-orientation so that there has been the gradual formation of a
merchant class of entrepreneurs. Because of their culture, the Banjar society does not only, however, demonstrate a commercial or materialistic character but also a spiritual character .
Alfani 2000 stated that the ethnic Banjar has the following characteristics: 1. Believes that he must fight to stay alive and to work to live well. They are hardworking and work
hard to achieve prosperity. But because of the orientation , their future emphasis is on the Last Day, then the hard work is limited to a moment they achieve quite a prosperous life, and since
then they begin to live in a more relaxed fashion and are more engaged in the practices of religion.
2. Banjarese people of more traditional societies, have not perceived a view of requiring them to escape the confines of a spiritually-based culture and they accept the notion that honesty is the
mainstay. Among the Banjar , personal satisfaction is not seen as a function of work, so they are quite
happy if people appreciate their work or even selling it, the quality of work could be improved.. Banjarese are individualistic, competitive, overrate their own abilities and look down on other
peoples role to the success of their businesses. Maintaining good relations with other people is not very important, so it is difficult to foster cooperation. Future orientation or the pressure of the next
day sometimes results in someone who actually still has the potential to expand his business, because his life is prosperous enough, he they may actually reduce his worldly activities in order to pursue the
practices of religion. In fact there is a fatalistic attitude failing to accept reality that it is necessary to adjust his life because of these spiritual values. This is a means of avoiding responsibility and decision
making. For communities with low incomes, individuals tend to be individualistic, life is a challenge
and there is skill in maintaining good relations with other people. This type of attitude may detract from commercial activity.
Strategy, Performance and Competitive Advantage
Firms build competitive advantage by utilizing unique sets of resources and strategies Wernerfelt, 1984; Barney, 1991. Resources are heterogeneous, and typically include all assets,
capabilities, processes, and knowledge controlled by a firm that enable it to conceive and implement strategies to improve effectiveness Barney, 1991; Grant, 1991. In contrast, strategies are the ways in
which firms relate to their environment Porter, 1985. They are the building blocks of managerial decisions and actions that determine the long run performance of an organization Wheelen
Hunger, 2000. Small firms have insufficient or inaccessible resources, which may limit the range of feasible strategic alternatives Hofer Sandberg, 1987; Porter 1985. In addition, small firms
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competing in highly populated industrial sectors may be unable to differentiate their strategies due to low barriers to entry Wright, Smart McMahan, 1995.
Porter 1992 provides strategies in the face of competition known as the generic competitive strategies Generic Competitive Strategies. Generic competitive strategies are based on the analysis
of a companys position in the industry, whether corporate profits are above or below the industry average. A good company will have high income levels, although a less favorable industry structure
usually means that the average industrial profit level is only medium. To achieve higher levels of commercial success,, companies can have two basic types of competitive advantage, namely low cost
or differentiation. Two basic types of competitive advantage combined with a field of activity sought to be achieved by a company may lead to achieve performance above the industry average with cost
leadership, differentiation, or focus. The strengths or weaknesses that are a feature of a company are ultimately functions of the relative costs and effects of differentiation. Implications of Porters generic
strategies in small industries, are how small businesses operate with low cost or differentiation in terms of service.
Cultural Relations with Entrepreneurship
Culture is the actualization of the business behavior of a businessperson, because the decisions made by a person are affected by their cultural identity. Pragantha 1995 mentions that the company
backgrounds of different cultures have an affect on management of different business. The elements are the differences in cultural patterns that are typical in management. This condition is determined by
ethnic, religious teaching, the diversity of language and geographical factors. This is consistent also with the statement by Waldinger et al, 1990 Masurel et al., 2002 that some ethnic groups have
cultural norms that define some understanding of economic behavior and the appropriate expectations in the background of a job.
Researchers such as McGrath, McMillan, Yang and Tsai, 1992; Mueller and Thomas, 2001 Kreiser, 2002 state that cultural attributes can have a strong impact on the formation of
entrepreneurial behavior, in addition, research by Knight, 1977 shows that only countries with specific cultural tendencies will produce a strong entrepreneurial orientation and therefore will have
more entrepreneurial activity and global competitiveness. Also Geletkanycz 1997 argues that differences in views and assumptions that are embedded in a national culture are not only reflected in
managerial attitudes and beliefs, but also in behaviors and activities that every member of the organization play in their respective roles.
Mueller and Thomas 2001 also theorized that national culture may be responsible for encouraging a person to engage in unusual or different behavior from in other countries. If national
culture affects the strategic orientation displayed by this organization, then the possibility of national
culture determines the level of entrepreneurial orientation of a company as a whole.
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METHODOLOGY
This research was conducted using two methodologiess, qualitative and quantitative. It was conducted in two phases. Initially an exporatory study was undertaken of 6γ4 SεE‘s. In this phase of
the study, SMEs were identified as having less than 100 employees, in accordance with accepted operationalization of Small to Medium Enterprises SMEs. Then quantitative methods using SEM
Structural Equation Modeling were analysed. Qualitative methods using a phenomenological approach were used to analyse in depth interviews.
RESEARCH FINDINGS
This study emphasizes the role of the local culture of Banjar in improving the performance and competitive advantage of SMEs by Islamic entrepreneurship and strategy. The results of the analysis
of hypothesis testing is described as follows: 1. Banjar Cultural Influence on Performance and Competitive Advantage: Culture improved
Performance and Ability to Increase the Competitive Advantage of SMEs. Culture is the actualization of the business behavior of a businessperson, because the
decisions made by a person are affected by cultural identity. Pragantha 1995 mentions that the company backgrounds of different cultures have an affect on the management of different
businesses. The elements are differences in cultural patterns that are typical in management. This condition is determined by ethnic, religious teaching, the diversity of language and geographical
factors. This is consistent also with the research by Waldinger et al, 1990 Masurel et al., 2002 that some ethnic groups have cultural norms that define some understanding of economic behavior
and the appropriate expectations in the background of a job. These results show that the Banjarese culture has not had the ability directly in improving
the performance of direct and competitive advantage. The results are consistent with the characteristics of more traditional Banjarese culture which has not perceived a view of requiring
them to escape the confines of a spiritually-based culture and accept the notion that honesty and integrity in business is the mainstay. Daud, 2000.
Chrisman 2002 studied national culture and is applied this to the representatives of small firms in various States of the USA and he studied performance at the entry level .and local cultural
differences.. 2. Entrepreneurship Islamic influence on Performance and Competitive Advantage: Increasing
Application of Islamic Entrepreneurship can Improve Performance and Competitive Advantage of SMEs
Islamic entrepreneurship in Indonesia has not had the ability to directly in improve the performance of SMEs. This is different when the Islamic entrepreneurship has the ability to
improve competitive advantage of SεE‘s indicating that Islamic entrepreneurship has the ability to improve competitive advantage. This means that the influence of the Islamic entrepreneurship
247
variable of competitive advantage of the higher Islamic entrepreneurship will directly enhance competitive advantage.
3. Influence Strategies for Performance and Competitive Advantage: Increasing Implementation of Strategy can improve Performan
ce and Competitive Advantage SεE‘s. These findings show that a stronger perception of strategy will directly improve
performance. Similarly, with competitive advantage, the stronger the perception of the strategy will directly enhance competitive advantage. The results of this study are consistent with research
conducted by Snow and Hrebiniak 1980 who found a significant relationship between corporate strategy and business performance. The same thing is also found in studies conducted by Kudla
1980 and Robinson and Pearce 1983 which state that strategy is useful to keep, maintain, improve performance and competitive advantage an organizations.
This studys findings also support the results of research conducted by Terziovski 2002 that examined the relationship between an integrated strategy, Bottom-Up strategy, and Top-Down
strategy with performance, where performance excellence is characterized by customer satisfaction, productivity, and technological competition. The results of these studies concluded
that the bottom-up continuous improvement strategy is the most appropriate strategy to increase customer satisfaction and productivity of companies in Australia and New Zealand. The results of
this study indicate that a continuous incremental improvement strategy is the main controlling strategy in an effort to improve and radical innovations should be used to make the leap to the
products, services, and critical processes. 4. Banjarese Cultural Influence on Islamic Entrepreneurship: Increasing Application of Banjarese
Can Improve the Culture of Islamic Entrepreneurship. Culture is the actualization of the business behavior of a businessperson, because the
decisions made by a person are affected by cultural identity. Pragantha 1995: 33 mentions that the company backgrounds of different cultures may have a bad affect on management of different
businesses. The elements are differences in cultural patterns that are typical in management. This condition is determined by ethnic, religious teaching, the diversity of language and geographical
factors. This is consistent also with the research of Waldinger et al, 1990 Masurel et al., 2002 that some ethnic groups have cultural norms that define some understanding of economic behavior and
the appropriate expectations in the background of a job. Researchers such as McGrath, McMillan, Yang and Tsai, 1992; Mueller and Thomas, 2001
Kreiser, 2002 state that cultural attributes can have a strong impact on the formation and entrepreneurial behavior, in addition, research by Knight 1977 showed that only countries with
specific cultural tendencies will produce a strong entrepreneurial orientation and therefore will have more entrepreneurial activity and global competitiveness.
This study shows that the Banjarese culture has the ability to improve Islamic entrepreneurship. This means that the stronger the Banjar culture will enhance the Islamic
248
entrepreneurship. In other words, the stronger the cultural values of the Banjarese present in a Muslim entrepreneur owner of an SME is to further improve the Islamic entrepreneurial activity
because of the values in Banjarese culture which contain the values of Islamic teaching. These results are consistent with studies conducted by several researchers such as McGrath,
McMillan, Yang and Tsai, 1992; Mueller and Thomas, 2001 Kreiser, 2002 which indicate that cultural attributes can have a strong impact on the formation of entrepreneurial behavior, in
addition, research by Knight 1977 indicated that only countries with specific cultural tendencies will produce a strong entrepreneurial orientation and therefore will have more entrepreneurial
activity and global competitiveness. In this study, the culture studied is a very strong Banjarese one with Islamic values so that
the Banjarese culture is very influential and produces an Islamic contribution to entrepreneurship which is applied by the owners of Gem and Jewelery SMEs in Martapura.
5. The influence of Islamic Entrepreneurship Strategy: Increasing Application of Islamic Entrepreneurship can improve Strategy.
Entrepreneurship has always existed since humans began to roam the earth and then have continued throughout history. Even the Prophet Muhammad was known as an entrepreneur.
Muhammad was a true entrepreneurial figures. Prophet Muhammad is a model for Muslims, he was a trader who was very tough and professional, honest, trustworthy, and reliable. Even his
personal credibility and integrity as a trader gained recognition, not only from Muslims but also from Jews and Christians. He wanted others to trust Muslem people. Honesty and loyalty has its
meaning from the Arabic word al amin, a nickname given to the Arabs at the time to Muhammad. These findings show that there is a strong direct influence of Islamic entrepreneurship and
this will improve strategy. On the other hand a decrease in Islamic entrepreneurship will lower the level of strategy. The results of this study are consistent with research conducted by Covin
Slevin 1990 which states that the stronger the human resources, these will be incorporated in the innovation strategy.
In addition this study also shows that the Islamic entrepreneurship among others consists of daring to take risks, and that creativity and innovation are necessary to achieve the strategy. This is
in line with research conducted by Chandler and Hanks 1994 which states that small companies need to try to develop a strategy that requires workers creative and innovative activities to
maintain relationships with customers and to have strong marketing and technical skills. 6. Banjarese Cultural Influence on Strategy: The increasing application of Banjarese culture can
improve the strategy. Banjarese culture can improve strategy. These findings show that there is a direct influence
of cultural variables of Banjarese culture on the strategy variables which will enhance the strategy. Source strategies of small firms appear more from the sources of human capital, capabilities and
competencies Hitt and Reed, 2000. Critical resources, especially in small companies held
249
conducted by individual entrepreneurs or their organizations Mosakowski, 1993. The same aspect is also expressed by Miller and Friesen, 1984 who states that all human resources have a
direct impact on product strategy market. The results of this study show that the culture of the Banjar people can be an agent in
improving entrepreneurship and business strategy.. 7. Banjarese Cultural Influence on Performance and Competitive Advantage through Islamic
Entrepreneurship and Strategy: Entrepreneurship and Strategy Mediating Islamic Relations between the Culture on Banjarese, Performance and Competitive Advantage.
The research findings show that when the variables include Islamic entrepreneurship and strategies for intervening variables, it has a different impact on different aspects of Banjarese
culture, performance and competitive advantage. The results indicate the need for further discussion and research further discussion as follows: Increased Banjarese culture can improve
strategy. While indirect effects through intervening variables of Islamic entrepreneurship also produce a significant point.
Banjarese culture has no direct ability to improve performance, and it cannot directly improve performance through Islamic entrepreneurship and competitive advantage, while indirect
effects through intervening variables strategy can indirectly improve the performance of SMEs. Banjarese culture cannot directly increase competitive advantage. While indirect effects
through intervening variables of Islamic entrepreneurship, strategy and performance can do so. Judging from the amount of produced coefficients it can be concluded that the indirect effect
through intervening variables of Islamic entrepreneurship is stronger than strategy and performance. This means that the entrepreneurial culture with Islamic Banjarese can increase
competitive advantage SMEs. Islamic entrepreneurship cannot directly improve performance. While indirect effects
through intervening variables of strategy and competitive advantage can do so. On the other hand the indirect effect through intervening variables is competitive advantage.
The increasing application of Islamic entrepreneurship can enhance competitive advantage. This means that there is a significant positive influence of the Islamic entrepreneurship variable of
competitive advantage that is higher then the Islamic entrepreneurship can enhance competitive advantage. While indirect effects through intervening variables do influence strategy. and
performance.
CONCLUSIONS AND RECOMMENDATIONS
Based on the answers to the research question and taking into account the results of the analysis and discussion, the conclusion can be drawn that the increased application of Banjarese culture cannot
directly improve the performance of SMEs, but the impact can indirectly affect strategy. Increased
250
application of Banjarese culture cannot directly increase the competitive advantage of SMEs, but there is an impact indirectly through Islamic entrepreneurship, strategy, and competitive advantage.
251
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253 MODEL OF KNOWLEDGE CREATION IN A COMPANY:
STUDY AT MODERN COSMETICS COMPANIES IN INDONESIA
Ningky Sasanti Munir Sekolah Tinggi Manajemen PPM
Jl. Menteng Raya 9 Jakarta 10340 Indonesia Ph. 021 2300313
Fax. 021 3909311 Email.
nkyppm-manajemen.ac.id
ABSTRACT
A study has been conducted to identify, analyze and elucidate the structure of knowledge creation model in 43 fully-fledged Indonesian companies that develop,
produce and sell their proprietary - not licensed – cosmetics. The research revealed
that the commercial benefits enjoyed by a company from innovative outputs are directly affected by new knowledge creation. In addition, in order to create new
knowledge, a company conducts not only exploitation but also exploration through information and knowledge acquisition activities from an external information source
network. As `learning entities, cosmetic companies change and actualize their
actions after critically challenging their products and routines based on newly acquired information and knowledge. This research demonstrates that there is a link
between knowledge and information acquisition, problem solving and decision making activity and knowledge creation. It means that the innovative outputs of
national private cosmetics companies in Indonesia are the fruits of not only the ideas of the founders or owners but also the organizational learning.
Keywords:: knowledge creation, cosmetics industry, organizational learning
INTRODUCTION: KNOWLEDGE CREATION MODEL
254 Based on the rapid development of knowledge-based competitive advantage theories, in of
2000, Soo, Midgley, and Devinney 2001 conducted an exploratory study to identify influencing variables of the knowledge creation processes in a company. The study indicated
the presence of 11 factors that were considered significant in the process of knowledge creation within a company. Relationship of the eleven factors is described in a model, which
is called by Soo, Midgley, and Devinney 2001 a general model of knowledge creation process in companies of four industries where the study was conducted.
According to Nonaka and Takeuchi 1995 one of the other indicators of the creation process or knowledge creation in a company is the apparent innovations . Those innovations can be
observed from new products created, new product packaging, new production methods, or any positive changes in product quality Q or quality, production cost C or cost, speed of
product delivery to customers D or delivery, safety during production S or safety, as well as eagerness of the employees in conducting their jobs and morale-obligations M or morale.
Therefore, research on company knowledge creation is performed in an industry that has an innovation-based competitive characteristic. The industry that was selected to study object
was the cosmetics industry in Indonesia, an industry that was regarded as innovative and was not affected by the economical crisis.
Cosmetics Industry in Indonesia Derived from the Indonesia Industry Report and Market Research: Cosmetics Manufacturing
in Indonesia published by Digital Information Services, it is known that the cosmetic producer industry in Indonesia has 744 member companies. From that 744 companies, 66,67
percent are characterized as home-industry, while the rest or approximately 180 companies are cosmetic companies that have applied modern approaches technology, machinery,
devices to its production or it is regarded as a full-industry company. Refering to data of the Indonesia Investment Coordinating Board for 2006, number indicated
that there were 91 large-scale cosmetic companies in Indonesia.. However, data of the Directorate of Traditional Medicine, Supplement, and Cosmetic Certification, particularly the
Sub-Directorate of Cosmetic showed that of the 91 cosmetic producer companies, which registered their products more than once within the period 1997-2002, ther were 51
companies. From those 51 companies, only 43 companies were willing to be studied. Soo, Midgley, and Devinney 2001 have conducted a study that produced factors or
variables that have roles in the knowledge creation process. They studied 317 companies in four industries: finance, health, manufacturing, and the mining industry. Correlation among
the factors or variables then was described in a ‗model‘. In their research, Soo, εidgley, and Devinney applied the partial least squares PLS statistical approach for data processing 26.
Refering to Hox 1995, PLS is definitely is more appropriate for study which explores variables that determine a condition, in a situation where supporting theory is insufficient.
Nevertheless, the PLS approach is not suited to be applied for identifying a model that contains correlations among the variables that posses mediated prediction characteristics,
because the PLS approach is unable to simultaneously conduct estimation toward a series of multiple regression equations that are separate but interdependent. When significant variables
255 for the knowledge
creation process or ―what matters‖ have been found, then it requires a more appropriate approach for a confirmatory study, in order to identify the model of
knowledge creation. Therefore, by means of this research, it is desirable to find out what is the structure of the knowledge creation model in a company.
It is shown that national private cosmetic companies that develop, produce, and market their cosmetic products in Indonesia are companies that compete based on innovation. At the time
when the crisis affected the violently Indonesian economy significantly, the selling performance of cosmetic products was not significantly affected. According to PERKOSMI
or the Indonesian Cosmetics Association the average market growth of the cosmetics industry in Indonesia in the period 2000-2005 was 15-20, and it was predicted to grow above 20
over the next five years. The contribution of cosmetic products to the non oil and gas export value during 2007-2010
is continuing to increase. Also surveys conducted by a leading business magazine in Indonesia, SWA magazine, in cooperation with Frontiers and Markplus Research Institutes
indicated that from 1996 until 2006, local cosmetics products were able to become main competitors of well-known cosmetic products of multinational companies. In some sub-
preparations of skin care, lip and eye makeup preparations, cosmetic products of national private companies were able to exceed the products of multinational companies. Therefore, it
would be appropriate to try to ascertain what is the model of knowledge creation at these Indonesian cosmetic companies, whether the structure of the knowledge creation model in the
Indonesian cosmetics
industry is identical with the ‗model structure‘ of knowledge creation that was developed by Soo, Midgley, and Devinney 2001?.
II. RESEARCH OBJECTIVES
In reference to the main aspect of the study, this research is conducted with its objective to identify, analyse, and give meaning to a model structure of knowledge creation at national
private cosmetic companies in Indonesia. Questions asked in the research are : 1. What is the model structure of knowledge creation at large-scale cosmetic companies
in Indonesia? 2. Whether the model structure of companies knowledge creation in the Indonesian
cosmetic industry are identical with the model structure of knowledge creation that was developed by Soo, Midgley, and Devinney 2000?.
Knowledge Creation Process Soo, Midgley, and Devinney 2001 developed and tested a knowledge creation model in
organizations comprised of three aspects:
256 1.
First , is knowledge source that afterwards is called input, is part of the knowledge creation process that consists of knowledge and the information acquisition process
from the external environment.
2. Second , is knowledge application that is called process, is part of the knowledge
creation process that consists of activities that utilize knowledge from the external environment in order to solve problems and make decision.
3. Third, is the result that later is called output, is part of the knowledge creation process
that emphasizes the result of knowledge creation in terms of innovations and its impact on the output of the company as a whole.
Input in the Knowledge Creation Process
As described by Mowery, Oxley, and Silverman 1996, a perspective on knowledge as a basis of competitive advantage emphasizes the importance of obtaining new knowledge
through organization-learning . Also knowledge creation is determined by access to information and beneficial knowledge that occurs outside the company. Only utilizing
existing knowledge within the company exploitation, how good the knowledge is, will not be sufficient to give competitive advantage. According to Kaplan, et al. 2001, a company
should extend its knowledge boundaries or perform boundary spanning by means of acquiring new knowledge from outside the company exploration. Another study by
Levinthal and March 1993 that also supported by Preiss 1999 indicates that the larger amount of information and knowledge flow into a company, the bigger also the new
knowledge pool of new knowledge that is created. The essence of the Levinthal and March 1993 study actually concerns the needs of significant knowledge creation activities by a
company in order to improve the new knowledge being created. A study conducted by Echeverri-Carroll 1999, showed that explicit and implicit knowledge
can be ‗caught‘ by the company through an innovation network that consists of formal and informal networks. The network is formed or being formed as a response to a company
‘s need for knowledge. For example, knowledge that is required by a company in particular to
produce an innovation in terms of new products, processes, or services. Within research that involves a network in the process of knowledge creation, network
terminology is widely used and covers all forms or relationship mechanisms between organizations Krebs, 2001. In practice, the network consists of formal and informal
networks, which the study by Soo, Midgley, and Devinney 2001 is described as follows
: 1.
Formal collaboration is a formal network that refers to relationships between two or more companies, where the relationship is arranged by a formal
agreement. Formal collaboration for example, is a cooperation to develop and market a new product, or conduct a joint project research, or other developments.
Forms of formal collaboration can vary, e.g. strategic alliances joint ventures, licensing, and many others. Nevertheless, things need to be considered, daily
transactions between customers and the company are not included within this formal collaboration;
2. Informal interactions are an informal network that refers to relationships among
people that is not arranged by a formal agreement. This informal network
257 includes informal meetings that are related or indirectly related with the
company ‘s business activities. Interactions that often called social networking
can occur such as social meetings, conferences, seminars, work place meetings or through electronic communication media.
The Problem Solving Process and Decision Making in Knowledge Creation As indicated by Kaplan, et al. 2001, knowledge cannot be observed and measured directly,
therefore the most logical place to find the presence of knowledge is by means of measuring activities or actions that are undertaken by individuals or companies as a whole. Refering to
the studies of Kolb Starkey, 1996, the process of problem solving and decision making are utilized as a process to identify the presence of knowledge, or knowledge creation. As
mentioned by Nonaka and Takeuchi 1995 and Kolb Starkey, 1996 knowledge creation is performed in particular when individuals face situations that are not usual Kolb in Starkey,
1996 or a situation when an irregular action should be taken Nonaka and Takeuchi, 1995. Later, Von Krogh, Ichiyo, and Nonaka 2000 ndicated that knowledge creation in a company
is based on how to manage conversation among individuals within the company. There is a need to be sure the purpose of the conversation is not only to confirm the presence of the
knowledge, e.g. between a supervisor and a subordinate, but it is used to solve problems. In case the conversation or interaction between individuals, if it is only proposed to confirm the
presence of knowledge, then this is control over routine activities. In an organization-learning cycle, a critical e part of the collective mental model has not been touched Senge, 1990.
Innovation and Knowledge Creation Process
Perspective concerning dynamical competence as a basis of competitive advantage as indicated by Teece et al. 1997 who emphasize that knowledge, in particular renewal of
knowledge possessed by a company, is a resource of innovation and competitive advantage. While a study of Swan et al. 1999 showed that the faster inflow of knowledge to the
company, the bigger also is innovative outputs from the company. Therefore, in their model Soo, Midgley, and Devinney 2001 place innovation as an output of the knowledge creation
process. Soo, Midgley, and Devinney 2001 also conducted a test of correlation between a
company‘s innovative outputs with its company performance. This hypothetis that was being tested by Soo, Midgley, and Devinney. 2001 is referred to in a study of Banbury and
Mitchell 1995, in Soo, Midgley, and Devinney, 2001 this concerns incremental product innovation that seriously influences a market segment of the companies that applied it. A
study of Chaney and Devinney 1992, in Soo, Midgley, and Devinney, 2001 concerns company innovative outputs that affect performance in forms of price of stock on a stock
exchange, as well as the
company‘s profit.
258
Company’s Absorptive Capacity Senker and Senker 1994, in Jones and Craven 2001 confirmed that access of a company to
beneficial knowledge is not enough for the company to enable it to create new knowledge. This requires required a systematic way so that the new knowledge can be diffused, to make
sure that the newly obtained knowledge from external environment can be communicated and utilized effectively in the company. Therefore, in this research the most important factor in
knowledge creation is the is company
‘s absorptive capacity. Company absorptive capacity, according to Cohen and Levinthal 1990 refers to capacity of the company to assimilate new
knowledge and skills. Along with the study concerning learning in organization, a study by Dussauge et al. 2000,
in Jones and Craven, 2001 showed that a company will be easier to obtain new knowledge or competence if they already possess a part of the knowledge or competence. Hamel 1991
also stated that the presence of an overlapping dominant logic in a company with its partner or even its competitor, will make it easier for the company to obtain new knowledge or
competence from that partner or competitor. A study of Cohen and Levinthal 1990 reconfirms that in the case of a company possessing knowledge or skill within an area that is
correlated with the knowledge or skill of its partner competitor, then the company possesses a competence to identify value from new information, ability to assimilate it, as well as to
utilize it for commercial purposes 101. In a study conducted by Hamel 1991,in Jones and Craven, 2001 concerning collaboration, it
is mentioned that the possibility for learning is greater for those companies that compete with each other because they operate in a similar context and possess dominant logic that overlaps
with each other. A study of Dussauge et al. 2000 also showed that companies will be easier to obtain new capabilities if they have competence in similar field. This confirms the study
of Cohen and Levinthal 1990, which defines that when companies possessed knowledge or skills in a correlated field, then this will improve company capability to identify the benefits
of new knowledge, assimilate, and utilize it for commercial purposes . A study of Cohen and Levinthal 1990 showed that a company with high investment on
research and development R D will have a capability to absorb new knowledge and skill. As well as high investment on R D, other factors that are influential to the absorptive
capacity of the company are cumulative experience and a central position within the network. For example, a study that was conducted by Robertson, Scarbrough, and Swan 2000
considered cumulative experience and indicated that the longer a company stays in its industry and the more experience in collaboration it has with other companies, then the
higher capability of the company to absorb new knowledge. A study conducted by Tsai 2001 indicated that a central position within a network showed that a working unit in a
company can produce more innovation due to absorbing new knowledge better than other working units . A study by Gupta and Govindarajan 2000 also showed that within a multi
business network inside a multinational company, then the strategic business unit SBU that occupies a central position within the business network is a strategic business unit that is
most innovative due to its possessed capability to absorb new knowledge relatively better than other strategic business units. Jones and Craven 2001 also brought forward several
organizational factors with general characteristic that are
able to bear on the company‘s absorptive capacity such as organizational structure and human resource policy .
259 In addition, a study concerning organization learning by means of strategic alliances such as
conducted by Doz and Hamel 1998 supported efforts for comprehending a company‘s
absorptive capacity. According to Mowery, Oxley, and Silverman 1996, this strategic alliance can be exploited by the company, not only to gain new knowledge but also to obtain
access toward capabilities that are possessed by other companies. In this study to recognize a strategic alliance, the indicator of knowledge absorption is the increase in the overlapping
level of technological capabilities between partnering companies, as well as an increase in the similarity of their technology portfolios.
According to εowery, Oxley, and Silverman 1996 companies‘ intention to make strategic alliances is to share the risk of cost and innovation 78. The increase in cost and innovation
risks generally takes place in industries that require large amounts of cost for performing innovation, such as pharmacy, telecommunication, and the commercial flight industries.
Development cost and risks that get higher or increase, supplemented with a product life cycle that get shorter causes a need toward rapid market penetration and attracts the
companies to strategic alliances There is also an alliance that focused on collaboration between new users and vendors as a way to coordinate and formulate technical standards and
develop a dominant design. However, in general the purpose of companies to conduct strategic alliances, which is correlated with purposes already indicated is to obtain new
information, knowledge, skill, and technology from its partner companies. A strategic alliance has more benefits than a cooperation agreement between organizations
because in the perspective of knowledge as a basis for competitive advantage, a companys capability is based on knowledge, mainly implicit knowledge Doz and Hamel, 1998.
Whereas implicit knowledge is very difficult to spread due to its specific characteristics which depend on the context, therefore a partnership contract cannot become a mechanism
for new knowledge absorption. According to Mowery, Oxley, and Silverman, 1996 alliance structure is influential to a
company‘s opportunities for obtaining new knowledge. The form of strategic alliance that is most effective for organizational learning is an equity joint venture
then a joint development agreement. While forms of strategic alliance such as a license agreement is considered less valuable With the joining of a
company‘s absorptive capacity factor, hence the complete model structure of knowledge creation is as indicated in Figure 1..
RESEARCH METHOD
Variables that have been identified by means of a literature study are 1 formal collaboration, 2 informal interaction, 3 information acquisition, 4 knowledge
acquisition, 5 creativity in problem solving and decision making, 6 completion in problem solving and decision making activities, 7 consensus in problem solving and decision
making activities, 8 new knowledge, 9 innovation in company, 10 company absorptive capacity, and 11 individual absorptive capacity. While, correlation between variables have
been described in Figure 1.
Research Hypothesis In this research, there are 27 hypotheses that will be tested, viz.:
A. Collaboration and interaction activities with information and knowledge acquisition:
1. There is positive correlation between formal collaboration with information acquisition; 2. There is positive correlation between formal collaboration with knowledge acquisition;
260 3. There is positive correlation between informal interaction activities with information
acquisition; 4. There is positive correlation between informal interaction activities with knowledge
acquisition; 5. There is positive correlation between information acquisition and knowledge acquisition;
261
FIGURE 1: THE COMPLETE MODEL STRUCTURE OF KNOWLEDGE CREATION
INFORMATION ACQUISITION
KNOWLEDGE ACQUISITION
COMPLETION
CREATIVITY NEW
KNOWLEDGE
INNOVATION
INDIVIDUAL ABSORPTIVE CAPACITY
ORGANIZATIONAL ABSORPTIVE CAPACITY
FORMAL COLLABORATION
INFORMAL INTERACTION
CONSENSUS
262 B.
Problem solving and decision making activities with information and knowledge acquisition:
6. There is positive correlation between information acquisition with level of level of completion in problem soling and decision making activities;
7. There is positive correlation between information acquisition with level of creativity in problem solving and decision making activities;
8. There is positive correlation between information acquisition with level of consensus in problem solving and decision making activities;
9. There is positive correlation between knowledge acquisition with level of completion in problem solving and decision making activities;
10. There is positive correlation between knowledge acquisition with level of creativity in problem solving and decision making activities;
11. There is positive correlation between knowledge acquisition with level of consensus in problem solving and decision making activities;
C. Problem solving and decision making activities with creation of new knowledge:
12. There is positive correlation between level of completion with level of creativity in problem solving and decision making activities;
13. There is positive correlation between level of consensus with level of creativity in problem solving and decision making activities;
14. There is positive correlation between level of completion in problem solving and decision making activities with new knowledge creation;
15. There is positive correlation between level of creativity in problem solving and decision making activities with new knowledge creation;
16. There is positive correlation between level of consensus in problem solving and decision making activities with new knowledge creation;
D. New knowledge creation with innovation in the company:
17. There is positive correlation between new knowledge that is created with performance of company innovation;
E. Absorptive capacity with information and knowledge acquisition:
18. There is positive correlation between individual absorptive capacity with information acquisition;
19. There is positive correlation between individual absorptive capacity with knowledge acquisition;
20. There is positive correlation between organization absorptive capacity with information acquisition;
21. There is positive correlation between organization absorptive capacity with knowledge acquisition;
F. Absorptive capacity with problem solving and decision making activities:
263 22. There is positive correlation between individual absorptive capacity with level of
completion in problem solving and decision making activities; 23. There is positive correlation between individual absorptive capacity with level of
creativity in problem solving and decision making activities; 24. There is positive correlation between individual absorptive capacity with level of
consensus in problem solving and decision making activities; 25. There is positive correlation between organization absorptive capacity with level of
completion in problem solving and decision making activities; 26. There is positive correlation between organization absorptive capacity with level of
creativity in problem solving and decision making activities; 27. There is positive correlation between organization absorptive capacity with level of
consensus in problem solving and decision making activities; Population and Sampling Target
In this research, the sample to be analysed is a group of national private companies that manufacture cosmetic products. These companies develop, produce, and sell their products,
unlicensed and utilize modern systems or technology full-industry. This research does not cover companies with foreign-investment status because of who makesdecisions concerning
1 innovation in product field, 2 production process, as well as 3 management is at the authority of the parent company. This research also does not cover small and medium sized
companies. Sampling design in this research is stratified random sampling for the reason of limited time
and to assure the representation of each group sub population. The sample is persons who are responsible for decision making concerning innovative outputs at the organization level.
Therefore, the sample is:: Managing Director or Chief Executive Officer CEO that is the highest leader in a
company; Member of upper management group below Managing Director or CEO Director,
Division Manager, General Manager, and other that equal; Member of functional level management group marketing manager, production manager,
research and innovationdevelopment manager, human resource manager, financial manager, information system manager, and other that equal.
Statistical Analysis Data was collected by means of a questionnaire and interviews. The results are tabulated,
calculated, and analysed. Several statistical techniques are used to analyse the data, while LISREL LInear Structural RElations version 8.53 software is used. This is different from
the research conducted by Soo, Midgley and Devinney 2000, 2002, model as this study in this research is not investigated using partial least square PLS approach, but instead uses
Structural Equation Modeling SEM.
SEM is selected as an analytical tool in this research because of its two advantages of SEM compared to other multivariate approaches, these are:
264 1. SEM is capable of simultaneously making estimations of a series of multiple regression
equations that are separate but interdependent. 2. SEM is capable to handle latent variables; therefore, it requires manifest variables or
indicators that are able to visualize the latent variables.
IV. MODEL FITNESS TEST
According to the Maruyama model of fitness test model specification; model fitting it is an evaluation of difference between matrices variancecovariance that is predicted by a model,
with variancecovariance matrices from samples or actual data . The difference of the two matrices is called with fit
or ‗goodness of fit‘ GOF. Thus, if the hypothesized model is close to the actual data, it can be said that the model possesses a high fitness degree or almost fit.
As explained by Schumacker and Lomax, to avoid problems in identifying or testing the model of fitness, a researcher should start the model testing from the most simple form or
parts of the model. Also, added by Maruyama is
that by ‗starting small and simple‘ then the researcher can identify which relation or what part of the model is is become source of
problems Therefore, in this research tests are performed sequentially at MODEL II that is the original model of Soo, Midgley, and Devinney 2001 which is most simple, followed by
MODEL III that adds the complexity of MODEL I with the presence of additional correlations between latent variables. Subsequently, at MODEL IV, model complexity is
increaswd by means of the permission of covariance occurrence between latent variables not dependent or exogenous variables. Finally, MODEL 1 is tested as the hypothesized model
and as the most complex model. Model developing and testing also considers a modification index that is given by LISREL 8.53. Table 1 provides a comparison of GOF size from the
four models.
TABLE 1: GOODNESS OF FIT
NO MEASURES Criteria
Model II Model III
Model IV Model I
ABSOLUTE FITMODEL FIT
1.
2
df: 3712 t non
significant df: 3707
t non significant
df: 3705 t non
significant df: 3700
t non significant
2. GFI
0 = no fit 1 = perfect fit
1
0.858 0.88
0.92 0.808
3. RMR or
RMSR The closer RMR
is to 0, the better the model fit. The
smaller the SRMR, the better
the model fit. SRMR = 0
indicates perfect fit
2
0.0452 0.021
0.012 0.0655
265 Table 1 continued.
4. RMSEA
0.05
3
0.0414 0.044
0.017 0.087
INCREMENTAL FIT
5. AGFI
AGFI 1.0 is associated with
just-identified models and
models with almost perfect
fit. AGFI 0 is associated with
models with extremely poor
fit, or based on small sample
size. AGFI should also be at
least .90.
1
0.817 0.859
0.899 0.806
6. NFI
NFI values above .95 are
good, between .90 and .95
acceptable, and below .90
indicates a need to respecify the
model.
4
0.856 0.88
0.898 0.801
PARSIMONIOUS FIT
7. PGFI
Higher, better
5
0.38 0.29
0.489 0.495
8. PNFI
Higher, better
6
0.53 0.35
0.611 0.613
Notes:
1
Baldwin 1989 and Bentler Bonnet 1980;
2
Schumacker Lomax 1996: 126
3
Steiger 1990
4
Bentler Bonnet 1980;
5
James, Mulaik, and Brett 1982
6
Mulaik, James, and Brett 1989
From Table 1, it can be observed that the four models sufficiently meet the criteria of fitness of each group. As described by Hair et al. to compare more than one model, one should
consider relative size value of one model to another In the case when all models show good fitness, then Hair et al give four criteria to select model that its:
1.
2
not significant at least p0.05 or 0.10 or 0.20 : MODEL I, II, III, IV are qualified; 2. Size of incremental fit : NFI 0.9 : MODEL IV is the closest;
3. Size of absolute fit RMRRMSR and RMSEA relatively low : MODEL IV is the lowest; 4. Size of parsimony fit model that is
being hypothesized is more ‗parsimonious‘ or relatively higher compared to other models : MODEL I and IV with a degree of freedom
MODEL IV is higher than the degree of freedom MODEL I. The testing result showed that from the series of tests thatto be sure that MODEL I as the
hypothesized model encounters as the lowest fitness level, while the model with the highest
266 fitness level is MODEL IV Figure 2. Referring to the explanation in the beginning of this
chapter, the selected model should be a plausible model with sufficient theoretical support. Because the four models possess sufficient theoretical support, therefore MODEL IV is
chosen as the closest to the actual model. In other words MODEL IV describes correlation between determining factors in new knowledge creation that provide innovation to large-
scale cosmetic companies in Indonesia. Consequently, this research is shows that the model structure of knowledge creation in the
cosmetics producers and sellers in Indonesia is different from the knowledge creation model that was developed by Soo, Midgley, and Devinney 2000. In relation with the proposed
hypotheses, 22 of 27 hypotheses are proven. There are five possibilities of causes why the confirmed model in this research is different
from the model of Soo, Midgley, and Devinney 2000. Possibilities of the cause are entirely derived from differences of data sources, methods of data acquisition, and analytical tools or
data processing. First, the study conducted by Soo Midgley, and Devinney 2000 is an explorative study. The
purpose of the study is to find variables that have a significant role in the knowledge creation process that take place in a company. While this study is more confirmatory, where the
confirmed model consists of identified variables in the previous study, for example study by Soo, Midgley, and Devinney 2000. Different study purposes may cause differences in the
analytical tools used. Second, because of purpose of the study is relatively different, therefore the analytical tool
being used is different. Soo, Midgley, and Devinney 2000 used Partial Least Squares or the PLS analytical tools to process the data, while this study utilizes Structural Equation
Modelling or SEM. Though both are categorized as complex multivariate statistical analysis, however, as explained by Hox, PLS is more appropriate for a study that is objective to
explore variables in a situation where supporting theory is insufficient, while SEM is more appropriate to be utilized for a confirmatory study, where variables have been identified and
supported by sufficient theory 14. In SEM, the structural coefficient can be analogized with path coefficient that visualizes total
effect between a direct effect and an indirect effect of one variable to another. While, in PLS, because the characteristic is to overview partial correlation, therefore that is the direct effect.
Third, the study by Soo, Midgley, and Devinney 2000 was conducted on 317 companies that operate in manufacturing and the service field of four Industries. This study is focused on
the Indonesian cosmetics industry only, an interesting industry in Indonesia because the companies in that industry compete tightly, has innovation-based competition, and is not too
impacted by the economical crisis.. With a high consumer bidding capacity, low supplier bidding capacity, low product substitution level, only average impact from overseas
products,, and the level of local competition is high, that is s why the attractiveness of the cosmetics industry in Indonesia can be said to be middle-high.
267
FIGURE 2: MODEL IV
INFORMATION ACQUISITION
KNOWLEDGE ACQUISITION
COMPLETION
CREATIVITY NEW
KNOWLEDGE
INNOVATION
INDIVIDUAL ABSORPTIVE CAPACITY
ORGANIZATIONAL ABSORPTIVE CAPACITY
FORMAL COLLABORATION
INFORMAL INTERACTION
CONSENSUS
Similar with the study of Soo, Midgley, and Devinney 2001
Findings of this study
268 Porter 1985 said that each industry is unique and also possesses a unique structure . He also stated that industry attractiveness indicates
industry profitability, where the industry profitability is a function of a balance between supply and demand, while the balance between supply and demand is determined by the industry structure. .
Soo, Midgley, and Devinney 2001 did not give any detailed explanation concerning structure or characteristic of the banking, health, manufacturing, and mining industries in Australia from which the data was taken, also did not explain specifically the similarity or difference
among those four industries. However, data from various industrial sites in Australia shows that the banking industry in Australia during the period 1998 to 2000
– the period of data acquisition by them– is perceived as a very attractive industry. This is different from the manufacturing and mining industries that are perceived as low attractive industries. While health industry was relatively stable during 1990-2000 and is an
industry with a middle attractiveness level. Hence, there is nothing that specifically can be identified among the four industries where Soo, Midgley, and Devinney 2000 acquired the data to compare them directly with the cosmetics industry in Indonesia.
Fourth, distribution of the questionnaire and in-depth interviews in the study of Soo, Midgley, and Devinney 2000 is conducted with the head of 317 companies CEOs or member of the upper management team where each one represents a company, while this current study is more
comprehensive because it is being conducted on the three level of management, those are CEOs, teams of upper management level, and teams of middle management or functional level. This respondent group is identifying those who were responsible for decisions concerning innovation on
organization or company level. Later discussion is conducted using difference tests of the three respondents to observe specifically if there is any perspective difference among each group. However, because of the small number of samples it does not qualify to utilize LISREL, therefore,
it cannot be seen whether there is any difference of knowledge creation model among the three groups. Nevertheless, various studies have showed that there are difference perspectives between executives from different levels of management, in decision making in certain fields.
Therefore, differences of position level variation of the respondents might influence differences between model structure of Soo, Midgley, and Devinney 2000 with this current study.
Fifth, there is a different instrument that was used in the study conducted by Soo, Midgley, and Devinney 2001 and this study, in particular on the instrument that records responses of respondents on problem-solving and decision-making. In a further study, Soo, Midgley, and Devinney
2002 explained that the instrument from Berkelloway 1978 that was used in the former study consisted of more indicators than the instrument referred to by Eisendhart 1998 and Ginsberg 1994. However, those indicators are actually less capable to explain latent variables
consisting within the model.
269
SIGNIFICANCE OF THE RESEARCH RESULT
Priority Level of Information and Knowledge Sources
This study indicates cosmetic companies in Indonesia manage information and knowledge acquisition directly from 13 parties with a level of frequency rank of seven parties as follows: 1 distributor, 2 research service organization, 3 supplier, 4 partner company, 5 education and
training provider organization, 6 advertising and promotion service organization, and 7 customer or cosmetic user end-user.
Mode Alternatives of Information and knowledge acquisition
This research indicates that: knowledge acquisition activity should be initiated first by an information acquisition activity,
formal collaboration is the most frequently applied form of activities of a company to manage information acquisition than informal
interaction, and both information and knowledge acquisition activities are affected by individual and organization absorptive capacity.
Therefore, for information and knowledge acquisition of a , large scale cosmetic company in Indonesia prefers activities that are undertaken by a formal agreement.
Individual and Organization Absorptive Capacity
270 This research indicates that individual and organization absorptive capacity is affected by both information and knowledge acquisition activities
However, as indicated,, in large scale cosmetic companies in Indonesia, individual absorptive capacity has a greater role than organization absorptive capacity. It means, executive and employees actively seek, note and record information, take action based on information, share
information, participate actively in sharing at meetings, and actively improves knowledge by means of formal efforts such as education and training, or by self-study.
Role of Problem Solving and Decision Making Activities
This research indicates that completeness, creativity, and, consensus factors in problem solving and decision making activities, are affected by knowledge acquisition activity, individual absorptive capacity, and organization absorptive capacity. This research also indicates that the
creativity factor in problem solving and decision making activities are affected by completeness and consensus factors.
Innovation and New Knowledge Creation
The research indicates that projects concerning new products and new methods for managing something are two things that are the most frequently found in a company. Ideas or projects concerning new products can include both new raw material and concept of new products.
271 While new methods to manage something include machines operation in producing products and methods for improving employee motivation.
For innovation, the most frequently found indicators by the respondents are commercial benefits that are gained from new products.
Centralized new knowledge in the context of new products and methods can be connected with the effort to obtain information and knowledge acquisition that is managed by the company, which also range only in the context of product, method, and market. The company gets
information and knowledge in general ranging between product and market. This research is focused on the product development and method for product production. Strategic alliance with various partners are mostly product-link in nature. While, alliances of knowledge-link in nature is
also intended to improve competences in terms of development, production and product marketing. From in-depth interviews, development of marketing strategy as well as the development of competence-based human resource management are two groups of knowledge that indirectly
relate to the product, but are more related to management knowledge.
Network Pattern of Cosmetic industry Knowledge Creation
Dundon explained that one of the applied innovation patterns for companies in the toiletries business is the pattern of: distribution network that strong and spread- recognized product - new product It means, to produce innovation in forms of new products, companies in the toiletries
business started with developing distribution networks that are strong and spread, which are used to distribute a
company‘s products that has been recognized in the community customers. Later by means of information and knowledge concerning custoumers that are being collected
through its distribution network management, company is producing new product. These new products can be delivered soon to the customer due to support of the distribution network. This pattern seems appropriate to a company in Indonesia, in particular a company that operates in
the toiletries industry, cosmetics, as well as consumer products .
CONTRIBUTION TO THE BUSINESS PRACTICE
272 In the early part of this study, what is the contribution that can be provided by the research concerning knowledge creation To develop its
competition strategy, what are the factors that should be closely considered by cosmetic companies in Indonesia?. Figure 3 indicated factors that should be noticed by the decision makers in national private cosmetic companes in Indonesia in order to be able produce innovative outputs.
However, in order to be more specific in this research contribution it can be explained by means of theory and concepts concerning the learning organization and knowledge management. In his book that entitled is Learning in Action 2000, David Garvin gave a definition concerning
learning organization as the following:
A learning organization is an organization skilled at creating, acquiring, interpreting, transferring, and retaining knowledge, and at purposefully modifying its behaviour to reflect new knowledge and insight.
From the above definition, it is known that modification of company behaviour that is shown among others by new product innovation, new technology process, development of new markets, or a combination of both, are reflections of the new knowledge presence. The new
knowledge can be obtained as the company is trained in terms of creation, acquisition, signification, transferring, and preserving knowledge. Where, creation, acquisition, signification, transferring, and preserving knowledge activities basically is essential activities in knowledge
management. Therefore, there are three main activities that need to be managed well by the company. First is knowledge acqusition activity. Figure 4 indicates
that before manage a knowledge acquisition; a company need to determine what knowledge that required by its acquisition with considering its vision and business strategy.
FIGURE 3: FACTORS THAT FREQUENTLY FOUND IN A COMPANY
273
INFORMATION ACQUISITION
KNOWLEDGE ACQUISITION
COMPLETENESS
CREATIVITY NEW
KNOWLEDGE
INNOVATION
INDIVIDUAL ABSORPTIVE
CAPACITY
ORGANIZATION ABSORPTIVE
CAPACITY FORMAL
COLLABORATION
INFORMAL INTERACTION
CONSENSUS
New knowledge in
the field of product and
method to perform
something Openness of
executives to accept new and innovative
idea Mainly with parties:
Distributor Supplier
Advertising Company Research Company
Partner Company Practice to seek and utilize
information for performing task
Company support for Maintain to improve knowledge and skill
Seek for information that required to performing task
Work pattern that caused problem solving and decision making activities are managed by
parties with various backgrounds
Work pattern that caused problem solving and decision making activities are managed in the
harmonious atmosphere and there is mutual commitment to achieve objectives
Commercial benefit of
innovative application in
forms of product and
market
274
FIGURE 4: ADVICE FOR NATIONAL PRIVATE COSMETIC COMPANY TO MANAGE AN IDENTIFICATION OF PRIORITY KNOWLEDGE
After required knowledge is identified, the company needs to consider main source of the knowledge as well as modus or alternative method for its acquisition.
On knowledge acquisition activity, it is very important for the company to consider its absorptive capacity and individual absorptive capacity-of individual that conduct acquisition.
This knowledge creation research support study of Collins 2000 underlined that to improve
effectiveness of knowledge acquisition, both company‘s employee and executive that managing knowledge acquisition activity:
must recognize the objective of knowledge acquisition activity why is need for acquisition?; what is function of the knowledge?,
must possess sufficient knowledge to manage acquisition of new knowledge, must has opportunity to manage knowledge acquisition,
must has perspective that that knowledge acquisition activity is essential Second is knowledge sharing and distribution. Three important things here are 1 the
presence of task forces, 2 the presence of practices that supported by company policy, as well as 3 the presence of information and communication technology infrastructures ICT
that make easier knowledge sharing and distribution activities. Practices of problem solving and decision making in general have been routinely run within cosmetic company is
necessary to be preserved. Similarly, company‘s support on activities that is able to improve Analysis of external factors in
KNOWLEDGE ECONOMY
Development of Business Objectives
and Strategies
Development of Objectives and
KNOWLEDGE MANAGEMENT Strategy Knowledge acquisition
Knowledge sharing and distribution Knowledge utilization
Priority Knowledge
Knowledge Identification Innovative knowledge strategic;
innovative Advance knowledge advanced
Basic knowledge basic
275 organization absorptive capacity such as internal training and inter department organization
policies such as implementation of total quality management, ISO principles, CPOB principles or GMF.
The last is knowledge utilization activity. After knowledge being acquired and distributed, later on the important activity is utilization of the knowledge so that new knowledge being
produced that will award innovation. Knowledge utilization activity particularly occurred within problem solver and decision maker groups Probst, Raub, and Romhardt, 2000.
Research showed there are five important matters that need to be considered by the company: 1. There are practices for problem solving and decision making within group with various
background; 2. Trained group for managing problem solving and decision making activities;
3. Problem solving and decision making activities are managed in a harmonious atmosphere; 4. The executives show openness attitude for accepting new ideas, and
5. The executives become example in terms of commitment for the implementation of the
agreed decision. In addition, from this research it is known that national private cosmetics companies in
Indonesia mostly obtained commercial benefit from its innovative output in terms of new product and market. This is in concurrence with the invented new knowledge, which is new
knowledge in the field of products and the method to perform something. Analysis of the global cosmetics industry showed that in its early development, global cosmetic companies
also were those who obtained commercial benefits of its product and market innovations.
However, in their life path, global cosmetic companies such as P G, δ‘Oreal, Estee δauder and Unilever obtained significant commercial benefit from their innovation in the field of
management and technology. Observing this pattern, hence apart from the capital that needs to be invested, cosmetic companies in Indonesia must develop capability for producing
management and technology innovations as both type of innovations will cause improvement in a
company‘s competence for producing product innovation. Need also to be taken that currently cosmetic companies in Indonesia irely on distributor and
suppliers more than their effort on research for the importance of information and knowledge acquisition. This is different with the practice of global cosmetic companies that rely on
research. Apart from their business strategies, global cosmetic companes put research and innovation as centralized activities only in several locations. Because global cosmetic
companies have broader geographical scope than local cosmetic companies, hence the companies tend to apply product-out concepts to its market, not market-in. However, this
concept has succeeded because global cosmetics companies possess prior knowledge as an accumulation result of their learning. New knowledge that is being produced is not limited to
products and methods to perform something, however, is more towards knowledge that have developed over a long period and is often based on industry cooperation., so that the obtained
commercial benefits not only come from its products and markets. Even, innovative outputs in the form of product that can give commercial benefit to the company, are placed at a
higher innovation level compared with local cosmetic products.
276
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279
THE IMPACT OF FISCAL AND MONETARY POLICY ON INDUSTRY AND INDONESIAN ECONOMY: A COMPUTABLE GENERAL EQUILIBRIUM
ANALYSIS
Rina Oktaviani, Tony Irawan, and Lukytawati Anggraeni
1
Department of Economics, Faculty of Economic and Management, Bogor Agricultural University
rina_oktavianiyahoo.com
ABSTRACT
Manufacturing Industry has important role in Indonesian economy in terms of its contribution to national output and employment. However, it is very fragile from internal
and external shock. Thus, government intervention is substantially needed to offset the negative impact that might be occurred due to internal and external shocks. In this paper
we will analyze the impact of both government fiscal policy and central bank monetary policy on industry and Indonesian economic performance by using the Computable General
Equilibrium CGE model. Fiscal and monetary policy will have a positive impact on Indonesian macroeconomic performance in terms of change in real GDP, investment,
consumption, and capital rate of return, with the biggest impact of fiscal policy. However, the result is expected to vary at the sector level and Indonesian industry is not so responsive
to changes in interest rates that represent monetary policy.
Keywords: industry, fiscal policy, monetary policy
1
The authors are Lecturers the Economics Department, Faculty of Economics and Management, Bogor Agricutural University. The assistance of Heri A Firdaus is highly appreciated
280
INTRODUCTION
Manufacturing industry makes a large contribution to Indonesian national output which is measured by the Gross Domestic Product GDP. Figure 1 suggests that the contribution of
manufacturing industry in the period of 2004-2009 was always the largest relative to other sectors with a range of between 26 to 28 percent of total GDP. The second largest was the
agricultural sector which contributed nearly half of the industry contribution.
FIGURE 1, CONTRIBUTION OF NINE SECTORS TO NATIONAL OUTPUT
Note: interim data Source: Central Bureau of Statistic BPS
The contribution of industry to Indonesian national output had fluctuated during the period of 2004-2009. It always dropped in odd years. The reason is not due to a cyclical problem but in
2005, 2007 and 2009 external and internal shocks on Indonesian industry occurred. The Indonesian government increased the oil price by 126 in October 2005 and in March, June
and November 2007, the government increased the oil price for industrial uses in order to adjust to the international oil price. Meanwhile in 2009, Indonesian industry suffered from
the global economic recession which affected Indonesian exports of manufacturing
281 commodities. These conditions created an external shock to Indonesian industry and caused a
negative impact to manufacturing output. These simply meant that Indonesian industry is still fragile to external shocks.
There are many literature that analyzes the fragility of Indonesian industry or the manufacturing sector to external and internal shocks. Al-Amin 2008 analyzes the impact of
external shocks and vulnerability to the Malaysian economy focusing on the manufacturing sector. By using the CGE Model, it is shown that manufacturing is very sensitive to external
shocks which is represented by an import price shock. Another report by Cui and Syed 2007 suggested that Chinese industry currently is more exposed to external fluctuations since the
shifting of China‘s production structure. Guidi 2009 investigates the impact of changes in oil prices on the United Kingdom‘s manufacturing sector. By using variance decomposition
in the Vector Autoregressive VAR model, the study suggests that changes in oil prices external shock
are quite important to determine fluctuations in the UK‘s manufacturing output. These three empirical findings suggest that external shocks do have impact on the
manufacturing sector both in developing and in developed countries.
The Indonesian government is very concerned with the fragility of the manufacturing sector. Theoretically, if industry is the most important sector in the economy and there is a
significant decrease in industrial output, national output will also drop. These will create a threat for the overall economy. Thus, the government should intervene through its policies in
order to boost industrial output. The Centre for Development and Integration 2006 suggests that an external shock that is represented by trade liberalization of Vietn
am‘s garment and footwear industry should be responded to by extensive government support.
In order to minimize the possible negative impact of the global economic crisis, the Indonesian government implemented some fiscal stimulus. The aim of the stimulus was to
support domestic industry facing the threat of the global crisis. Some of the policies were reduction of corporate tax from 30 percent to 28 percent, reduction of individual income tax
from 35 percent to 30 percent and reducing the electricity price for industry. Moreover, the Central Bank of Indonesia also supported government policies by lowering the interest rate in
282 order to reduce corporate obligations based on interest rate payments and give incentives to
expand their businesses.
In this study, we analyze the impact of both fiscal and monetary policies on Indonesian industry and Indonesian macroeconomic performance. The study employs a Computable
General Equilibrium CGE to simulate both fiscal and monetary policies options. The details of the CGE model is presented in Section II. Section III presents results and discussion.
Finally, conclusions are drawn in Section IV.
CGE MODEL
This study uses an updated version of the Wayang general equilibrium model of the
Indonesian economy Warr et al. 1998; Wittwer 1999; Warr 2005. The model is subsequently described as Wayang 2005 and is based on the 2005 Indonesian Input-output
Tables IO and the 2005 Social Accounting Matrix SAM published by the Indonesian Central Bureau of Statistics. It identifies ten different types of households, representing ten
socio-economic groups as defined in the 2005 SAM.
As well as disaggregating households, it also has a disaggregated industry and commodity structure, with 52 production sectors. The mapped sectors are focused on manufacturing
industries, particularly the ―priority‖ industries for Indonesia. The microeconomic behaviour assumed within it is competitive profit maximisation on the part of all firms and competitive
utility maximisation on the part of consumers. In the simulations reported in this paper, the markets for final outputs, intermediate goods and factors of production are all assumed to
clear at prices that are determined endogenously within the model. Variations to this assumption are possible. For example, the possibility of unemployment can be introduced by
varying the closure to make either real or nominal wages exogenous, thereby allowing the level of employment to be endogenously determined by demand. The nominal exchange rate
between the rupiah and the US dollar can be thought of as being fixed exogenously. The role within the model of the exogenous nominal exchange rate is to determine, along with
international prices, the nominal domestic price level. Given that prices adjust flexibly to clear markets, a 1 percent increase in the rupiahdollar exchange rate will result in a 1 percent
283 increase in all nominal domestic prices, leaving all real variables unchanged. In this case, the
nominal exchange rate rupiahdollar is a numerary price in the model.
THEORETICAL STRUCTURE OF THE MODEL
The structure of the model itself is relatively conventional. The CGE model in this study belongs to the class of general equilibrium models that are linear in proportional changes and
shares many structural features with the highly influential ORANI general equilibrium model of the Australian economy Dixon, et al. 1982, with numerous adaptation and modification
to reflect the realities of the Indonesian economy.
The analytical structure includes the following major components: Household consumption demands, of each of the 10 broad household types, for 52
categories of consumer goods are derived from the linear expenditure system. The household supplies of labor that are assumed to be exogenous.
A factor demand system, based on the assumption of CES production technology that
relates the demand for each primary factor to industry outputs and prices of each of the primary factors. This reflects the assumption that factors of production may be substituted
for one another in ways that depend on factor prices and on the elasticity of substitution between the factors.
A distinction between skilled and unskilled labor, which are ‗nested‘ within the sectoral
production functions. In each non-agricultural sector, skilled and unskilled labor enter a CES production function to produce ‗effective labor‘. Effective labor, variable capital and
fixed capital then enter the production functions for domestic output. Leontief assumptions are made for the demand for intermediate goods. Each intermediate
good in each sector is assumed to be demanded in fixed proportion to the gross output of the sector.
Demands for imported and domestically produced versions of each good, incorporating Armington elasticity of substitution between the two.
A set of equations determining the incomes of the 10 household types from their exogenous ownership of factors of production, the endogenous rates of return to these
factors, and any net transfers from elsewhere in the system.
284 Rates of import tariffs and excise taxes across commodities, rates of business taxes, value
added taxes and corporate income taxes across industries, and rates of personal income taxes across household types which reflect the structure of the Indonesian tax system,
using data from the Indonesian Ministry of Finance. A set of macroeconomic identities which ensures that standard macroeconomic accounting
conventions are observed.
EMPIRICAL FEATURES OF THE MODEL
Industries The national model contains 52 producer goods and services produced by 52 corresponding
industries - 5 agricultural and mining industries, 36 classifications of manufacturing industries, 11 utilities and service industries. Each industry produces a single output, so the
set of commodities coincides with the set of industries.
Commodities
Wayang 2005 contains two types of commodities - producer goods and consumer goods.
Producer goods come from two sources: domestically-produced and imported. All 52 producer goods are in principle capable of being imported.
Factors of production The mobility of factors of production is a critical feature of any general equilibrium system.
Mobility is used here to mean mobility across economic activities industries, rather than geographical mobility. The greater the factor mobility that is built into the model, the greater
is the economys simulated capacity to respond to changes in the economic environment. It is clearly essential that assumptions about the mobility of factors of production be consistent
with the length of run that the model is intended to represent.
Four types of labor are identified: farmers, operators, administrator and professional. All four types of labor are assumed to be fully mobile across all sectors. The four types are partially
substitutable for one another but the proportions in which they are employed in the various sectors vary greatly. These assumptions imply that for each of the four categories of labor
285 wages must be equal in all sectors, though wages for the four types of labour will differ and
need not move together.
In every sector, it is assumed that there is constant elasticity of substitution CES production technology with diminishing returns to scale to variable factors alone. However, we introduce
a sector specific fixed factor in every sector to assure that there are constant returns to scale in production to all factors. We refer to the set of specific factors in the agricultural sectors as
‗land‘, and to the set of those in the non-agricultural sectors as ‗fixed capital‘. The assumption of constant returns means that all factor demand functions are homogeneous of
degree one in output. In each sector, there is a zero profit condition, which equates the price of output to the minimum unit cost of production. This condition can be thought of
determining the price of the fixed factor in that sector.
Length of run The model can be operated in the short-run. In the short-run model there are two kinds of
mobile capital - one that is mobile among agricultural sectors, and another that is mobile among non-agricultural industries. It is assumed that mobile agricultural capital cannot be
used outside agriculture and mobile non-agricultural capital cannot be used in agriculture. In this treatment, agricultural capital is thought of as machinery such as tractors of various
kinds, which can be used in a variety of agricultural activities. Non-agricultural mobile capital is thought of as industrial machinery and buildings.
Households The model contains ten major household categories - seven rural and three urban -
differentiated by socio-economic group, as identified in the 2005 SAM. The sources of income of each of these household types depend on their ownership of factors of production
and are estimated from the household income and expenditure survey called SUSENAS. The households are described as follows:
1. Agricultural employees- Agricultural workers who do not own land. 2. Small farmers - Agricultural workers with land 0.5 ha.
3. Medium farmers - Agricultural workers with land 0.5 ~ 1 ha. 4. Large farmers - Agricultural workers with land 1 ha.
286 5. Rural low income - non-agricultural households, consisting of small retail store
owners, small entrepreneurs, small personal service providers, and clerical and manual workers in rural areas.
6. Rural non-labor households, consisting of non-labor force and unclassified households in rural areas.
7. Rural high-income - non-agricultural households consisting of managers technicians, professionals, military officers, teachers, large income entrepreneurs,
large income retail store owners, large income personal service providers, and skilled clerical workers in rural areas.
8. Urban low-income households, consisting of small income retail store owners, small income entrepreneurs, small income personal service providers, and clerical
and manual workers in urban areas. 9. Urban non-labor households, consisting of non-labor force and unclassified
households in urban areas. 10. Urban high income households, consisting of managers, technicians, professionals,
military officers, teachers, large income entrepreneurs, large income personal service providers, and skilled clerical workers in urban areas
POLICY SIMULATIONS
In response to the global economic crisis in 2009, the Indonesian government introduced some policies to strengthen the structure of industry in Indonesia. The government cut income tax
for corporations and individuals by 6.67 percent and 3.37 percent respectively. Moreover, the government also reduced the electricity price for industry by 3 percent. These government
interventions are also supported by the Central Bank of Indonesia by lowering the interest rate as much as 300 basic points. It is expected that all of these policies would be enough to
minimize the impact of the global economic crisis on Indonesian industry. In order to measure the possible impact of such stimulus policies both fiscal and monetary policies, we introduce
three scenariossimulations on the CGE model. Those scenarios are reduction of the interest rate by 3 percent SIM 1, reducing income tax for corporations and individuals by 6.67
287 percent and 3.37 percent respectively SIM 2, and an electricity price discount for the
industry sector by 5 percent SIM 3.
Short-run closure The current account deficit is assumed to be endogenous, meaning that its size can change
with the impact of the shocks. The short run thus depicts a period short enough that imbalances in the external account of Indonesia can occur without the necessity of
adjustments aimed at eliminating them. Corresponding capital inflows or outflows are implied by this assumption. If there is an increased current account deficit, for example, there
must be an increased capital inflow in the form of the debt instruments needed to finance the external deficit. The treatment of the capital stock and the stock of land are as described
under ‗length of run‘. Each of the four categories of labor is mobile among all industries but the total stock of labor is exogenously fixed. Government expenditure is exogenously
determined.
RESULTS AND DISCUSSION
In general, Table 1 shows that all simulations are expected to improve Indonesian macroeconomic performance. National output, average capital rental, real wages, investment
and consumption are expected to increase. Even though nominal Gross Domestic Product GDP is expected to be negatively affected by the reduction of electricity price SIM 3, but
in terms of real GDP, SIM 3 has a positive impact. The negative impact on nominal GDP is caused by a negative Consumer Price Index CPI. Electricity price discount is expected to
decrease CPI by a very small magnitude.
TABLE 1. THE IMPACT ON MACROECONOMIC INDICATORS
Description SIM 1
SIM 2 SIM 3
GDP price index, expenditure side 0.3678
4.2312 -0.0002
Average capital rental 0.3942
8.0317 0.0004
Average real wage of administration labor 0.4913
7.7621 0.2478
Average real wage of farmer labor -0.1498
5.5410 0.1665
288 Average real wage of operator labor
-0.0982 7.2679
0.1261 Average real wage of professional labor
0.1907 8.7141
0.2775 Consumer price index
0.2144 3.5412
-0.0227 Aggregate payments to land
0.0589 9.0242
0.1437 Real GDP from expenditure side
0.0323 1.3334
0.1102 Import volume index, duty-paid weights
0.5094 12.508
0.0667 Aggregate real investment expenditure
1.3734 6.9826
0.1162 Real household consumption
0.0810 5.6204
0.1099 Export volume index
-0.6507 -2.8218
0.0676
Note:
SIM 1 : interest rate reduction by 3 percent SIM 2 : Corporate tax rate and Individual income tax reduction by 6.67 percent and 3.37 percent respectively
SIM 3 : electricity price discount for industry sector by 5 percent
In terms of magnitude, reduction of the corporate tax rate and individual income tax will have a larger positive impact than other simulations. By introducing a tax reduction policy, real
GDP will grow by 1.33 percent which is much larger than SIM 1 by 0.03 percent and SIM 3 by 0.11 percent. The result is relevant since tax is one of the biggest burdens for corporations
and households. If the government decreases the tax rate, household real wage for all categories of factors will rise higher than inflation CPI. These conditions will make
households have greater purchasing power and so will increase their real consumption. Moreover, a lower tax rate will also improve the investment climate which will increase
imports and reduce exports. Thus, net exports will be negatively affected but the magnitude is still smaller than other GDP components changes. The Indonesian government should
anticipate the negative response of net exports by increasing industrial efficiency so Indonesian industry could produce commodities with cheaper production costs per unit.
Therefore industry competitiveness will increase both in the domestic and international market.
TABLE 2. THE IMPACT ON INDUSTRIAL OUTPUT
No Industry
SIM 1 SIM 2
SIM 3 1
Cooking oil made of animal and vegetables oil -0.156
0.283 -0.072
2 Rice
0.057 4.122
0.051 3
All kinds of flour made of other grains and -0.079
3.267 0.049
289 roots
4 Macaroni, spaghetti, noodle and the like
0.041 6.125
0.072 5
Sugar -0.193
-5.223 -0.027
6 chocolate and sugar confectionery
-0.090 0.550
-0.017 7
Peeling and cleaning of coffee 0.023
3.079 0.034
8 Processed tea
-0.072 0.815
0.062 9
Processed soybean 0.055
4.624 0.061
10 Prepared animal feeds
-0.037 -0.663
0.002 11
Other foods -0.136
-0.465 -0.006
12 Beverages
-0.005 3.496
0.073 13
Tobacco and Cigarettes 0.033
5.197 0.073
14 Yarn and cloth
-0.309 7.257
0.511 15
Wearing Apparel -0.219
2.008 0.095
16 Products of leather
-0.339 3.746
0.101 17
Footwear -0.349
3.284 0.144
18 Products of wood
-0.078 0.656
0.016 19
Pulp and paper -0.275
7.437 0.236
20 Printed product
-0.052 0.512
0.028 21
Basic chemical -0.225
8.142 0.093
22 Fertilizer
-0.091 0.021
0.004 23
Pesticide -0.170
2.403 0.103
24 Oil Refinery
0.033 -3.055
-0.135 25
LNG -0.153
-5.169 0.029
26 Products of rubber
-0.295 2.789
0.004 27
Products of plastic -0.057
5.773 0.169
28 Ceramic, Glass and products of glass
0.324 3.957
0.271 29
Cement 0.987
5.339 0.240
30 Products of iron and steel
0.046 -1.015
0.407 31
Products made of other than iron and steel -0.259
8.913 0.130
32 Other product made of iron and steel
0.352 0.656
0.254 Tabel 2. Continued
No Industry
SIM 1 SIM 2
SIM 3 33
Machinery and Equipment -0.087
14.415 0.068
34 Electrical product, communication and
equipment -0.145
18.554 0.298
290 35
MachToolOpt -0.180
-7.959 0.012
36 Ship and Repair of Ship
-0.151 -1.578
0.020 37
Motor cycles 0.025
3.110 0.102
38 Automotive except motor cycles
-0.145 9.867
0.037 39
Other industry -0.258
-4.752 0.276
Note:
SIM 1 : interest rate reduction by 3 percent SIM 2 : Corporate tax rate and Individual income tax reduction by 6.67 percent and 3.37 percent respectively
SIM 3 : electricity price discount for industry sector by 5 percent
Table 2 shows the impact of the three stimulus policies on industrial output. In general, the reduction of interest rate is expected to decrease output of most sectors. Meanwhile, tax
reductions and the electricity price discount policy is expected to increase output of most industries. This means that Indonesian industry is not responsive to interest rate changes.
Lower interest rates should be responded to by higher incentives for industry to borrow more money from banks in order to expand their businesses. Thus, output of industry should
increase. However, these transmissions do not exist in Indonesian industry because most industries are using more labor relative to capital. In other words, most Indonesian industries
are labor intensive industries.
Next, the impact of tax cuts and the electricity price discount is expected to increase output of most sectors. In line with the previous argument, both tax payments and electricity prices are
burdens for enterprises thus these two policies will increase the performance of industry. However, there are some sectors that experience negative impacts due to factor mobility to a
sector that has higher output. It is important to note that in this CGE model we assume that factors are fully employed and mobile. Moreover, the table only covers 39 out of 52 sectors
that are used in the model including agriculture, mining and minerals, trade, transportation and services.
TABLE 3. THE IMPACT ON OUTPUT PRICE
No Industry
SIM 1 SIM 2
SIM 3 1 Cooking oil made of animal and vegetables oil
0.043 6.313
0.025 2 Rice
0.155 9.064
0.107 3 All kinds of flour made of other grains and roots
0.116 4.675
0.023
291 4 Macaroni, spaghetti, noodle and the like
0.171 5.671
0.034 5 Sugar
0.119 6.762
0.051 6 chocolate and sugar confectionery
0.104 5.736
0.053 7 Peeling and cleaning of coffee
0.182 9.383
0.108 8 Processed tea
0.141 7.823
0.002 9 Processed soybean
0.179 8.253
0.081 10 Prepared animal feeds
0.150 6.185
0.073 11 Other foods
0.131 6.754
0.045 12 Beverages
0.183 6.038
0.015 13 Tobacco and Cigarettes
0.199 6.964
0.032 14 Yarn and cloth
0.091 4.519
-0.135 15 Wearing Apparel
0.066 6.791
-0.010 16 Products of leather
0.128 4.983
0.007 17 Footwear
0.082 6.290
-0.019 18 Products of wood
0.123 6.938
0.009 19 Pulp and paper
0.089 3.097
-0.063 20 Printed product
0.087 7.173
0.042 21 Basic chemical
0.051 3.834
0.000 22 Fertilizer
0.060 4.819
0.014 23 Pesticide
0.082 2.902
-0.045 24 Oil Refinery
0.160 4.837
-0.126 25 LNG
0.027 0.912
-0.005 26 Products of rubber
0.084 6.036
0.011 27 Products of plastic
0.109 4.383
-0.050 28 Ceramic, Glass and products of glass
0.265 5.537
-0.102 29 Cement
0.496 7.442
-0.349 30 Products of iron and steel
0.173 4.400
-0.087 31 Products made of other than iron and steel
0.068 4.872
-0.013 32 Other product made of iron and steel
0.226 2.361
-0.082 33 Machinery and Equipment
0.111 1.951
-0.006 34 Electrical product, communication and equipment
0.134 -0.073
-0.085 35 MachToolOpt
0.067 2.340
0.012 36 Ship and Repair of Ship
0.040 6.045
0.002 37 Motor cycles
0.195 3.837
-0.014 Tabel 3. Continued
No
Industry SIM 1
SIM 2 SIM 3
38 Automotive except motor cycles 0.119
1.519 0.014
39 Other industry 0.080
2.676 -0.044
Note:
SIM 1 : interest rate reduction by 3 percent SIM 2 : Corporate tax rate and Individual income tax reduction by 6.67 percent and 3.37 percent respectively
SIM 3 : electricity price discount for industry sector by 5 percent
292 Table 3 shows the impact of simulations on output prices. It is expected that nearly all output
prices will increase as a response to interest rate reduction and tax cut policy. Consequently, both simulation 1 and simulation 2 will result in a higher Consumer Price Index inflation.
Oppositely, reduction of electricity price for all sectors by 5 percent will result in a negative impact on output price for most sectors. Therefore, simulation 3 will result in negative
inflation deflation as we can see in the previous table.
TABLE 4. THE IMPACT ON LABOR ABSORPTION
No Industry
SIM 1 SIM 2
SIM 3 1
Cooking oil made of animal and vegetables oil -0.292
0.347 -0.151
2 Rice
0.092 5.989
0.030 3
All kinds of flour made of other grains and roots -0.123
4.369 0.020
4 Macaroni, spaghetti, noodle and the like
0.061 7.641
0.066 5
Sugar -0.252
-7.613 -0.077
6 chocolate and sugar confectionery
-0.160 0.782
-0.046 7
Peeling and cleaning of coffee 0.045
5.376 0.047
8 Processed tea
-0.127 1.265
0.098 9
Processed soybean 0.099
7.872 0.093
10 Prepared animal feeds
-0.080 -1.748
-0.018 11
Other foods -0.197
-1.272 -0.052
12 Beverages
0.002 4.079
0.062 13
Tobacco and Cigarettes 0.051
6.563 0.056
14 Yarn and cloth
-0.423 9.494
0.667 15
Wearing Apparel -0.281
2.031 0.081
16 Products of leather
-0.389 4.058
0.097 17
Footwear -0.420
3.609 0.150
18 Products of wood
-0.131 0.942
0.011 19
Pulp and paper -0.437
11.704 0.365
20 Printed product
-0.117 0.852
0.041 Tabel 4. Continued
No Industry
SIM 1 SIM 2
SIM 3 21
Basic chemical -0.277
9.759 0.078
22 Fertilizer
-0.122 -0.506
-0.030 23
Pesticide -0.238
2.515 0.078
24 Oil Refinery
0.058 -5.453
-0.263 25
LNG -0.299
-10.070 -0.054
293 26
Products of rubber -0.388
3.141 -0.037
27 Products of plastic
-0.069 7.346
0.189 28
Ceramic, Glass and products of glass 0.460
4.765 0.326
29 Cement
1.432 6.965
0.295 30
Products of iron and steel 0.067
-1.979 0.509
31 Products made of other than iron and steel
-0.332 11.123
0.133 32
Other product made of iron and steel 0.526
0.198 0.316
33 Machinery and Equipment
-0.103 17.736
0.054 34
Electrical product, communication and equipment -0.187
24.237 0.356
35 MachToolOpt
-0.258 -12.227
-0.042 36
Ship and Repair of Ship -0.232
-3.368 -0.027
37 Motor cycles
0.048 4.083
0.103 38
Automotive except motor cycles -0.158
10.671 0.031
39 Other industry
-0.337 -7.022
0.324
Note:
SIM 1 : interest rate reduction by 3 percent SIM 2 : Corporate tax rate and Individual income tax reduction by 6.67 percent and 3.37 percent respectively
SIM 3 : electricity price discount for industry sector by 5 percent
Next, we analyze the impact of both monetary and fiscal policies on labor. Expansionary monetary policy is expected to decrease labor absorption in the sectors that are negatively
affected in terms of output, for instance. rice, peeling and cleaning of coffee, processed soybean and tobacco and cigarettes. The result is relevant since the reduction of output will
force sectors to reduce their factor utilization. Consequently, a sector will demand less labor and this distorts the labor market. However, labor from these sectors will be utilized by other
sectors that are positively affected by the policy. Previously, it was already mentioned that in the analysis it only only presents 39 out of 52 sectors that are used in the model. Thus, even
though labor absorption in the industry sector is expected to decrease labor absorption for other sectors, for instance, services will increase. In simulation 2, the tax cut is expected to
increase labor absorption in almost all sectors with significant magnitude. In aggregate, these results indicate a relatively larger impact on national output to other simulations.
In this CGE model, it is also possible to analyze the impact of both fiscal and monetary policies on imports and exports for specific sectors. Table 5 shows the impact of three
simulations on the export for 39 commodities. Reduction of interest rate is expected to decrease exports of all manufacturing commodities. The result is relevant since the previous
result Table 3 suggests that monetary policy will increase prices of output which will reduce
294 the competitiveness of domestic commodities. The impact of the other two simulations on
exports is expected to vary across sectors. There are some sectors that have better export performance and some others that experience negative impact. These result by interaction
between changes in the production and output prices,
TABLE 5. THE IMPACT ON EXPORTS
No Industry
SIM 1 SIM 2
SIM 3 1
Cooking oil made of animal and vegetables oil -0.248
2.058 -0.141 2
Rice -0.800
-12.354 -0.553 3
All kinds of flour made of other grains and roots -1.031
17.738 -0.207 4
Macaroni, spaghetti, noodle and the like -1.522
8.879 -0.300 5
Sugar -0.641
-0.494 -0.275 6
chocolate and sugar confectionery -0.234
2.091 -0.118 7
Peeling and cleaning of coffee -0.407
-6.076 -0.243 8
Processed tea -0.316
-2.583 -0.004 9
Processed soybean -0.690
-6.109 -0.313 10
Prepared animal feeds -0.578
1.873 -0.281 11
Other foods -0.506
-0.326 -0.175 12
Beverages -0.409
1.415 -0.034 13
Tobacco and Cigarettes -0.767
-1.136 -0.125 14
Yarn and cloth -0.659
15.617 0.979
15 Wearing Apparel
-0.481 -0.875
0.074 16
Products of leather -0.989
12.987 -0.055 17
Footwear -0.634
2.929 0.149
18 Products of wood
-0.738 -1.609 -0.055
19 Pulp and paper
-0.492 19.651
0.349 20
Printed product -0.477
-2.765 -0.229 21
Basic chemical -0.334
18.403 -0.002 Tabel 5. Continued
No Industry
SIM 1 SIM 2
SIM 3 22
Fertilizer -0.390
12.013 -0.091 23
Pesticide -0.534
24.452 0.294
24 Oil Refinery
-0.656 -19.784
0.513 25
LNG -0.153
-5.169 0.029
26 Products of rubber
-0.625 4.703 -0.081
27 Products of plastic
-0.805 16.969
0.375 28
Ceramic, Glass and products of glass -1.963
8.407 0.755
29 Cement
-3.677 -5.730
2.588 30
Products of iron and steel -1.280
16.841 0.648
295 31
Products made of other than iron and steel -0.508
13.339 0.099
32 Other product made of iron and steel
-1.680 -17.520
0.608 33
Machinery and Equipment -0.887
37.655 0.050
34 Electrical product, communication and equipment
-0.752 37.759
0.478 35
MachToolOpt -0.532
-18.673 -0.095 36
Ship and Repair of Ship -0.344
5.335 -0.018 37
Motor cycles -1.665
24.162 0.120
38 Automotive except motor cycles
-1.019 43.940 -0.122
39 Other industry
-0.595 -19.858
0.324
Note:
SIM 1 : interest rate reduction by 3 percent SIM 2 : Corporate tax rate and Individual income tax reduction by 6.67 percent and 3.37 percent respectively
SIM 3 : electricity price discount for industry sector by 5 percent
Table 6 suggests that both monetary and fiscal policies will increase imports of manufacturing sectors. It is expected that an increase in real household consumption will
result in higher demand of manufacturing commodities. However, the increasing demand of commodities cannot fully be supplied by domestic commodities which are reflected in the
small increase of output in Table 2. As a result, Indonesia must import more manufacturing commodities to satisfy the demand. In terms of magnitude, simulation 2 will result in a higher
impact on imports which is an increase by 4 percent up to 58 percent for specific commodites.
296
TABLE 6. THE IMPACT ON IMPORTS
No Industry
SIM 1 SIM 2
SIM 3 1
Cooking oil made of animal and vegetables oil 0.3282
33.6886 0.1945
2 Rice
0.6354 36.6517
0.4327 3
All kinds of flour made of other grains and roots 0.6393
28.1725 0.1944
4 Macaroni, spaghetti, noodle and the like
1.0960 39.5387
0.2834 5
Sugar 0.2458
14.4022 0.1415
6 chocolate and sugar confectionery
0.5926 32.7133
0.3200 7
Peeling and cleaning of coffee 1.1343
58.9046 0.6819
8 Processed tea
0.8314 46.1669
0.1047 9
Processed soybean 1.1445
53.9746 0.5452
10 Prepared animal feeds 0.3008
12.7559 0.1505
11 Other foods 0.6928
36.3147 0.2885
12 Beverages 1.0625
38.4170 0.1713
13 Tobacco and Cigarettes 0.4163
18.3799 0.1369
14 Yarn and cloth 0.5294
28.2213 -0.4903
15 Wearing Apparel 0.5263
46.4698 0.0684
16 Products of leather 0.3029
21.4787 0.1346
17 Footwear 0.5316
39.7775 0.0344
18 Products of wood 1.1189
28.8471 0.1098
19 Pulp and paper 0.0999
12.4891 0.0019
20 Printed product 0.4105
34.4668 0.2475
21 Basic chemical -0.1205
4.1670 0.2259
22 Fertilizer 0.1650
14.5442 0.0698
23 Pesticide 0.1934
7.7580 -0.0767
24 Oil Refinery 0.2557
6.3367 -0.2139
25 LNG -0.0781
-2.6460 0.0146
26 Products of rubber 0.3131
16.1818 0.1008
27 Products of plastic 0.5791
24.2653 -0.0743
28 Ceramic, Glass and products of glass 1.6126
24.4689 -0.2089
29 Cement 3.0683
33.9412 -1.1777
30 Products of iron and steel 0.9364
11.2462 0.0592
31 Products made of other than iron and steel 0.1255
15.7614 0.1421
32 Other product made of iron and steel 1.4974
12.6457 -0.1114
33 Machinery and Equipment 0.7518
11.1433 0.0850
34 Electrical product, communication and equipment 0.4662
11.8753 -0.0176
35 MachToolOpt 0.3168
10.5057 0.1582
Tabel 6. Continued
297 No
Industry SIM 1
SIM 2 SIM 3
36 Ship and Repair of Ship 0.5177
4.6759 0.0813
37 Motor cycles 0.6589
15.5777 0.0491
38 Automotive except motor cycles 0.4953
8.8923 0.0975
39 Other industry 0.2325
9.9354 0.0556
CONCLUSSION AND POLICY RECOMMENDATION
The government and Central Bank intervention through fiscal and monetary policy is expected to increase Indonesian economic performance. This means that both fiscal and
monetary policies are quite powerful to minimize the impact of external and internal shocks. However, there are some issues that need to be considered by the policy- makers based on the
results of the CGE model simulation. The first issue is regarding scale or magnitude of intervention. If the impact of internal or external shocks on Indonesian economy is quite big,
the government should intervene at a reasonable scale as well. The second issue is the types of policy tools that are used. Simulation 2 and Simulation 3 show that fiscal policy with
different tools will result in different impacts. It will depend on the transmissions that have occurred. Third, the result of simulation 1 suggests that Indonesian industry is not so
responsive to changes in the interest rate. This means that fiscal policy is still preferable to improve the real sector relative to monetary policy. Finally, government should be aware of
Indonesian industry competitiveness. Most industrial sectors respond negatively in terms of exports and imports. Moreover, it is also expected that the domestic market will have many
more imported commodities as Indonesian real household consumption increase.
298
REFERENCES
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299
THE ROLE OF SUPPLY CHAIN FLEXIBILITY AND ITS ANTECEDENT VARIABLE IN INCREASING COMPETITIVE ADVANTAGE OF
MANUFACTURING INDUSTRIES IN EAST JAVA
Sahnaz Ubud Sekolah Tinggi Ilmu Komputer Indonesia STIKI
– Malang, Indonesia sahnaz.ubudyahoo.com
Marthin Nanere Latrobe University, Bendigo, Australia
m.nanerelatrobe.edu.au
ABSTRACT
Manufacturing companies today seem to pay considerable attention to overall chain and distribution systems. These systems start from the supply of raw materials to the end
consumer. Current research on supply chains has mainly focused on the internal supply chain and ignored the element of environmental change flexibility, which can significantly
influence the overall supply chain system.Due to constant changes in global competitive environments, an organisation is required to implement a supply chain system in order to
improve its capabilities in producing and offering low price, high quality, and innovative products to its customers in a timely and cost-effective manner. Using the theory of Resource
Based View RBV as its basis, this research investigated the relationships between the uncertainties of supply chain environments, interorganisational relationships, information
sharing and supply chain flexibility in order to increase competitive advantage of manufacturing companies in East Java. Competitive advantage can be achieved if both
company flexibility and supply chain flexibility is considered. Data was collected from 71 large-scale manufacturing companies registered by the Industrial and Trading Department of
East Java. Partial Least Squares PLS analysis was employed. The findings suggest that environmental uncertainties significantly influence interorganisation relationships;
interorganisation relationships in turn, influence information sharing, and supply chain flexibility significantly influences competitive advantage. It was also found that there is an
indirect effect of environmental uncertainties toward competitive advantage through the influence of interorganisation relationships, information sharing and supply chain flexibility.
These findings support the RBV theory. Finally, supply chain flexibility is not only determined by environmental uncertainties, but also by elements in the interorganisation
relationships such as trust, commitment and conflict and information sharing among manufacturing companies. This flexibility increases competitive advantage.
Keywords: Supply chain flexibility, Envronmental uncertainty, Interorganisational relationship, Information sharing, Competitive advantage..
INTRODUCTION
Along with the increasingly globalised market competition the business world is complex Basu Siems, 2004. Customers demand more and more. Customers have started
demanding aspects of the response speed, innovation and flexibility. Iindustries began to
300 realise that in order to provide cheaper products with good quality, internal improvements in
a manufacturing company are not sufficient Indrajit Djokopranoto, 2002; Pujawan, 2005; Simchi levi, 2003. Tight competition today occurs among companies from many different
countries Easton Zhang, 2003. Particularly, as a result of globalisation and the free market economic, many countries search for cooperation to set up organizations such as the
WTO World Trade Organization, AFTA ASEAN Free Trade Area and APEC Asia- Pacific Economic Cooperation. Companies are responsible for the entire chain process from
product design, demand forecasting, material procurement, production, inventory control, storage, distributiontransportation to the nearest distributor, wholesaler, small traders,
retailers, customer service, process payments, until the final consumers Simchi Levi, 2003. Awareness of the importance of all parties to create a cheap product, good quality, and fast
process is known as supply chain management Chopra Meindl, 2001; Pujawan 2005. Supply chain management is a network of companies that together work to create and deliver
a product into the hands of end users Indrajit, 2002; Simchi-Levi, 2003; Pujawan, 2005. Supply chain management is one of the competitive strategies in the 21st century
Gunasekaran Ngai, 2003; Narayanan Raman, 2004; Gunasekaran et al., 2004; Koh et al., 2006. One very important strategy in conducting supply chain management is to foster a
good and improving daily communication among all supply chain partners, ranging from downstream to upstream Chopra Meindl, 2001; Simchi Levi, 2003; Pujawan, 2005.
However, in practice there are so many obstacles that many doubt that it can successfully be achieved. This is done through a long process and between the parties knowing each other.
Thus, supply chain partners must be dependent on each other in the long term. Optimisation is not possible to be accomplish if suppliers are constantly different and changing Indrajit
Djokopranoto, 2002. Leading companies in the world have been successful in implementing the concepts of supply
chain management. Names such as P G, Wal-Mart, Hewlett Packard, IBM, Chrysler, Dell Computers, and Sun Microsystems are among those big companies that have successfully
made a fortune on their success to implement the concept of supply chain management. There are several companies in Indonesia that are fully aware that supply chain management is a
necessity. Supply chain management helps companies achieve effectiveness. This phenomenon has become a common understanding in recent years, especially when
associated with an open market. Especially as 2008 is the deadline for the six ASEAN
301 countries in order to enforce the ASEAN Single Window ASW in their respective countries.
ASEAN countries will be able to improve performance based on the supply chain management approach, such as shortening the process and procedures for the desired trade
efficiency and reducing costs and creating a positive competitiveness in Southeast Asia. East Java is one of the biggest contributors of the Indonesian national economy with national
output of 15.51 after DKI Jakarta 17.12. In 2004 the economic growth rate of East Java reached 5.80, higher than that of the nation, 4.63 BPS, 2005. East Javas economy is
dominated by the manufacturing industry sector 29.61, trade, hotels restaurants 26.7 and agriculture 17.5. East Java currently has an important role in the
manufacturing sector in Indonesia. Manufacturing industries in East Java accounted for roughly 20 of the value added generated by manufacturing industries in Indonesia and 25
of workers working in Indonesian manufacturing sector BPS, 2005. This contribution to GDP is quite large. Since the manufacturing sector is now a mainstay for the economy in East
Java, this sector has been chosen for this study. Following the advice from some researchers namely, Lummus et al. 2003, Pujawan 2004,
Sanchez Perez 2005, Kumar et al. 2006 and Stevenson Spring 2007, there is a need to undertake empirical research on supply chain flexibility. This research focuses on supply
chain flexibility associated with the uncertainty of the supply chain environment. Supply chain flexibility arises to improve the manufacturing flexibility concept that only focused on
the internal aspects of a company Duclos et al., 2003; Pujawan, 2004; Sanchez Perez, 2005; Kumar et al., 2006. Supply chain flexibility should be integrated and customer-
oriented. Duclos et al. 2003 stated that the previous literature on flexibility is quite limited in considering the function of cross-functional, cross-businesses from the nature of supply
chain management. Pujawan 2004 proposed a framework of the concept of supply chain flexibility, which is the adjustment between the concept of supply chain management and
manufacturing flexibility. The framework is expected to represent the concept of supply chain flexibility at the start of the flow upstream to downstream. Pujawan 2004 also states
that supply chain flexibility should be considered as a major determinant in a companys competitive advantage.
Increased competition in the supply chain, free trade and globalisation, complex customer demands and the importance of conservation of time, supply chain flexibility have become
critical issues in modern organisations Kumar et al., 2006. Supply chain flexibility should
302 represent a potential resource to improve significantly the efficiency and company
performance measures Sanchez Perez, 2005. Flexibility can improve the companys competitive advantage and decision-making process of the implementation of technology
Chang et al., 2003; Zhang et al., 2003. According to Li et al. 2005, a company has advantages in the competition if the price, quality, delivery, innovation and new product
launches are better than its competitors. Competition among companies today is very tight. Supply chain flexibility and the antecedent variable in creating competitive advantage is still
a matter for debate in the research. Therefore, this study attempts to clarify the relationship between supply chain flexibility and its antecedent variable to competitive advantage. From
the description on the background and research gap indicated, the problems of the theoretical contradictions of the anticipated research results in an environment of uncertainty in the
supply chain through supply chain flexibility and competitiveness., are examined. Formulation of the problem is the absence of clarity of the relationship between
environmental uncertainty, interorganisational relationships, and information sharing to both supply chain flexibility and also to competitiveness.
RESEARCH HYPOTHESES
The ability to share powerful information can ensure that companies continuously manage and improve supply chain networks which indirectly means to control the information
network continuously so that further contributions to improving the long-term value occur.. If the company is able to share information with business partners, they will be able to increase
firm competitiveness Li et al., 2005; Zhou Benton, 2007; Carr Kaynak, 2007; Thatte, 2007. The ability to share powerful information means the ability to process more powerful
information which can contribute to the control of information and control of electronic trading networks being implemented properly. The ability to use information technology in
the organisation will provide the option of controlling the operating environment Saas, 2006. Without the use of information technology, the organisation will be threatened in the
control systems, and operations cannot exploit the companys resource potential. Organisations with the ability to share powerful information can be associated with business
partners without limit, which is much closer and faster in dealing with business networks. Information sharing can provide flexibility and be able to improve corporate response in the
implementation of a supply chain Stevenson Spring, 2007. The information shared includes information on end customer demand, sales forecasting, order status, inventory
303 levels of the company, availability of capacity, waiting time, and quality. Information sharing
in the supply chain flexibility can improve transparency, avoid lost sales, accelerate the payment cycle, create and build trust, avoid excessive production, and reduce excess
inventory. From these arguments, the hypothesis was developed as follows:
H1: Information sharing is positively related to supply chain flexibility
Environmental uncertainty in the supply chain is an important thing to control the supply chain flexibility Li Lin, 2006. The highly environmental uncertainty would change the
market so that the organization is required to build a partnership strategy with supply chain members to increase flexibility in the organisation and reduce the risks associated with
uncertainty Prater Smith, 2001; Liao, 2006. The relationship between uncertainty and flexibility are critical issues if flexibility is seen as a response capable of adapting to an
uncertain envronment Vickery et al., 1999; Das Malek, 2003; Graves Tomlin, 2003 ; Pujawan, 2004; Sanchez Perez, 2005; Liao, 2006. Flexibility should enable manufacturers
to respond quickly and efficiently to dynamic market changes Pagell Krause, 1999. Increased flexibility in the logistics system should be able to respond to strategies in
uncertain environments Pagell Krause, 2004. Liao 2006states that flexibility is created by connecting the uncertainty with manufacturing operations. Liao 2006 suggested that a
higher level of acceptance of environmental uncertainty will require the application of supply chain flexibility. So the uncertainty in the supply chain environment has a very close
relationship, if analyzed with the concept of supply chain flexibility Vickery et al., 1999; Pujawan, 2004; Sanchez Perez, 2005; Kumar et al., 2006; Fantazy, 2007.
H2: Environmental uncertainty is positively related to supply chain flexibility
Interorganizational relationships in an organization should be well established. Without a strong commitment from the company to improving relationships with business partners will
lead to organizational difficulties developing. Companies can improve the ability to compete. According to Patrakosol 2006, an interorganizational relationship is a challenge in applying
the concept of organizational supply chain flexibility, to produce cost-effectiveness and to achieve high profits. This becomes important for some companies to connect with business
partners. Lack of trust between suppliers and manufacturers will hinder a good relationship with business partners. The flow of accurate and real information is needed in collaboration
with business partners. Interorganisational relationships with information technology facilities are needed to share information Perez Sanchez, 2001; Backstrand Safsten,
304 2005; Sass, 2006. Information sharing with business partners will make the company more
effective in coordinating the supply network chains Shore Venkatachalam, 2003. The system can include electronic data interchange EDI systems, advanced planning and
scheduling APS, a system of collaborative planning, forecasting and replenishment CPFR and the customer and supplier relationship management CSRM and module packages
enterprise resource planning ERP Stevenson Spring, 2007. Interorganizational relationships also have implications for how to design and manage supply chain flexibility in
firms Perez Sanchez, 2001; Das Malek, 2003; Stevenson Spring, 2007; Wang Wei, 2007. One example is to use of the system vendor managed inventory VMI. Using the
system supplier is located in the upstream network capable of responding directly to provide information on demand. Stevenson Spring 2007 and Wang Wei 2007 ; it requires that
flexibility can be achieved if the entire supply chain network is to share data to all business partners.
H3: Interorganizational relationship is positively related to supply chain flexibility
The research directly connects the supply chain flexibility and competitive advantage. Flexibility is the ability to adapt to change, and it is important for the company to maintain its
superiority in the future Zhang et al., 2003; Chang et al., 2003. In the long run, supply chain flexibility is used to improve enterprise competitiveness and should affect the overall profits.
Companies are capable of carrying out production processes with suppliers in a different place if the management can overcome the problems both internally and externally. Besides,
the emphasis on various dimensions of supply chain flexibility should be connected directly to competitive advantage Fantazy, 2007. As a consequence, supply chain flexibility can
affect the shape of competition and should affect the overall profits. Companies need to know to what extent supply chain flexibility is applied in order to achieve competitive
advantage, in terms of cost, quality, innovation and the time it takes to the market Kumar et al., 2006. The main characteristic of supply chain management is the coordination of
activities among interdependent organizations that are dependently woven from suppliers to end customers to create sustainable value with minimal cost. To develop a competitive
advantage, managers need to coordinate supply chain relationships and increase the flow of information and effort in communicating Stevenson Spring, 2007. Chang et al., 2003
suggested a model that will help organizations to select supply chain strategies based on the customers at the time of entering the market in an increasingly competitive global market. If
305 the supply chain is to take advantage of the partner companys core competencies, it should
also be prepared to manage the uncertainty that might occur because in practice the company partners are associated with the environment and with ethics. Zhang Lim 2003 suggested
that in global competition, technological change must be considered in reaching a competitive advantage which is the main motivation behind the companys supply chain.
From these arguments the following hypothesis is formed.
H4: Supply chain flexibility is positively related to competitive advantage
METHODOLOGY Data Collection
The population for the research was the big scale manufacturing industries registered in industrial departments in the north
– south corridor of East Java, because that corridor gives greater contribution than the other corridors, and have websites to support their supply chain
management. Thus this research is concentrated in the region of Gresik, Surabaya, Sidoarjo, Mojokerto, Pasuruan and Malang, with a population of 177 companies Deperin, 2008. The
questionnaire was distributed directly to the companies included in the list of respondents. The sample for this research was based on the following formula:
n = 2
. 1
d N
N
n = the sum of sample N = the measurement of population
=
2 10
. 177
1 177
= 64 respondents From the slovin formula the mínimum sampel was 64 and from the field study, the sample
collected was 71 respondents. The respondents were the managements of companies involved in the implementation of the companys supply chain. Respondents were selected
consisting of departments involved in the implementation of a supply chain. The department is the supply chain, production, operations, PPIC, product development, procurement or
distribution function.
The Operationalization Variable
306 The operationalization of environmental uncertainty in this study was how much companies
are able to anticipate the changes but are not sure of the supplier and the customer both internally and externally that may influence the strategy, structure and supply chain
performance.
TABLE 1: VARIABLE, DIMENSION, INDICATOR OF AEU AND SUPPORTING REFERENCES
Variable Dimension
Indicator References
The Anticipation of
Environmental uncertainty
AEU The
Anticipation of Supplier
uncertainty 1. The Anticipation of raw
material prices that are not consistent
2. The Anticipation of quality raw materials that are not
consistent 3. The Anticipation of the
amount of raw materials that are not consistent
Pujawan 2004, Bhatnagar Sohal 2005, Prater Smith
2001, Li Lin 2006, Liao 2006.
The Anticipation
of Customer uncertainty
1. The Anticipation of the information of the
products sales that are not consistent
2. The Anticipation of fluctuating demand for
products 3. The Anticipation of the
product orders that are not consistent
Vickery et al. 1999, Pagell Krause 1999, Prater Smith
2001, Das Malek 2003, Graves Tomlin 2003,
Bhatnagar Sohal 2005, Sanchez Perez 2005, Li Lin
2006, Liao 2006
The operationalisation of an interorganizational relationship in this study was the level of trust, commitment and help to solve common problems that occur between
companies and business partners.
TABLE 2: VARIABLE, DIMENSION, INDICATOR OF IR AND SUPPORTING REFERENCES
Variable Dimension
Indicators References
Interorganizational Relationship
IR Trust
1. Honesty 2. nondisclosure
3. Agreements meet Perez Sanchez 2001,
Shore Venkatachalam 2003, Backstrand Safsten
2005, Li Lin 2006, Sass 2006, Patrakosol 2006,
Wang Wei 2007.
307
Commitment
1.
Keeping the Covenant made
2.
Maintaining long-term relationship
3.
Maintaining collaboration Perez Sanchez 2001,
Shore Venkatachalam 2003, Backstrand
Safsten 2005, Li Lin 2006, Patrakosol 2006,
Wang Wei 2007.
Problem Solving
1. The difficulty in making the product
2. Performance does not match the expectation
3. Conflict resolution Wang Wei 2007
The operationalisation of information sharing in this study was the sharing of information between suppliers, companies and customers by using information technology used by the
company with its business partners. This is to eliminate problems that may occur between supply chain partners.
TABLE 3: VARIABLE, DIMENSION, INDICATOR OF IS AND SUPPORTING REFERENCES
Variable Dimension
Indicators References
Information Sharing
IS Information
sharing with supplier
1. Information sharing about the next product planning.
2. Information sharing about the change of product design
3. Information sharing about the change of product volume.
Shore Venkachalam 2003, Li et al. 2005, Li
Lin 2006, Sass 2006, Liao 2006, Patrakosol
2006, Zhou Benton 2007, Carr Kaynak
2007, Thatte 2007
Pembagian informasi
didalam perusahaan
manufaktur 1. Information sharing about product
capacity 2. Information sharing about the
status of product demand 3. Information sharing about the
waiting time of product. 4. Information sharing about product
delivery. Perez Sanchez 2001,
Shore Venkatachalam 2003, Li et al. 2005,
Backstrand Safsten 2005, Sass 2006, Liao 2006,
Patrakosol 2006, Zhou Benton 2007, Thatte
2007.
Information sharing with
customer 1. Information sharing about the
product which customers want 2. Information sharing about the
product quality. Li et al. 2005, Li Lin
2006, Sass 2006, Liao 2006, Zhou Benton
2007, Carr Kaynak 2007, Thatte 2007
The operationalisation of supply chain flexibility in this study was the ability of supply chain partners to respond to market changes in achieving or maintaining competitive advantage.
The ability to respond from the supply chain partners must be built primarily from parts suppliers, the development of new products, product processing and shipping the product.
TABLE 4: VARIABLE, DIMENSION, INDICATOR OF SCF AND SUPPORTING REFERENCES
308
Variabel Dimensi
Indikator References
Supply chain flexibility
SCF Supply
flexibility 1. The supplier availability
2. The supplier capability 3. The supplier quality
Duclos et al. 2003, Das Malek 2003, Pujawan
2004, Sanchez Perez 2005, Kumar et al.
2006, Liao 2006, Wang Wei 2007, Fantazy
2007
Product development
flexibility 1.
The confirmation about new raw material
2. The communication about
new product. 3.
The capability create new product
Vickery et al. 1999, Chang et al., 2003,
Pujawan 2004, Sanchez Perez 2005, Kumar et al.
2006, Fantazy 2007
Production flexibility
1. Production capability
2. The capability of product
machine 3.
Outsourcing 4.
The capability of worker Vickery et al. 1999, Prater
et al. 2001, Zhang et al. 2003, Duclos et al. 2003,
Graves Tomlin 2003, Pujawan 2004, Sanchez
Perez 2005, Kumar et al. 2006, Liao 2006,
Fantazy 2007
Delivery flexibility
1. Delivery Product
2. Transportation
3. The date of Delivery
Prater et al. 2001, Chang 2003, Pujawan 2004,
Sanchez Perez 2005, Kumar et al. 2006, Liao
2006, Fantazy 2007
The operationalisation of competitive advantage in this study was how much the company was able to create a defence over its competitors in terms of customer service, product
innovation, marketing innovation, price, time to market and quality. To measure this variable, indicators were developed from the research.
TABLE 5: VARIABLE, DIMENSION, INDICATOR OF CA AND SUPPORTING REFERENCES
Variabel Indikator
References Competitive
advantage CA
1.Customer service 2. Product innovation
3.Cycle time 4.Price
5.Time to market 6.Quality
Zhang et al. 2003, Chang et al. 2003, Li et al. 2005, Bhatnagar Sohal 2005,
Carr Kaynak 2007, Thatte 2007
RESULTS
309
TABLE 6: DEMOGRAPHIC DISTRIBUTION OF RESPONDENTS Industrial Area
Number Percentage
Gresik 11
15,40 Surabaya
18 25,35
Sidoarjo 16
22,54 Mojokerto
5 7,04
Pasuruan 15
21,13 Malang Raya
6 8,45
Jumlah 71
100
Type of Product Number
Percentage
Food and drink 12
16,90 Cigarette
7 9,86
Textile 6
8,45 Sandal
2 2,82
Packaging 7
9,86 Fertiliser
3 4,23
Pharmacy 9
12,68 Cement
1 1,41
Metal pipe 2
2,82 Heavy metal
2 2,82
Metal products 3
4,23 Plastic products
2 2,82
Electronic 2
2,82 Car
2 2,82
Ship 3
4,23 Furniture
8 11,27
Number 71
100
The years in operation Number
Percentage
Less 10 years Between 11
– 14 years 7
9,86 Between 15
– 19 years 13
18,31 Between 20
– 24 years 21
29,58 Lebih dari 25 years
30 42,25
Total 71
100
Information Technology is used Number
Percentage
MRP II 40 from 71 respondent
56,33 ERP Enterprise Resource Planning
47 from 71 respondent 66,19
WMS Warehousing Management System 25 from 71 respondent 35,21
CRM Customer Relationship Managemet 30 from 71 respondent 42,25
SRM Supplier Relationship Management 26 from 71 respondent 36,62
DSS Desicion Support System 28 from 71 respondent
39,43 EDI Electronic Data Interchange
23 from 71 respondent 32,39
Bar Coding 19 from 71 respondent
26,76 RFID Radio Frequency Identification
1 from 71 respondent 1,41
310 Table 6 shows manufacturing industries in East Java are concentrated in Surabaya which
gave the largest proportion of value. Mojokerto has the smallest number of proportion. Implementation of supply chain management has been conducted in various manufacturing
industries in East Java. Sectors that contribute most to the companys value added is the food and beverage industry. Table 6 also shows ERP is an information technology mostly used by
companies in implementing supply chains. While RFID is a technology used by most small manufacturing companies who were respondents.
Construct Measurement
Construct measurement involves assessing the validity and reliability of the scales. A validity test is intended to determine whether the measure actually used just to measure objects
instruments are measured. There are many methods used to test the validity. This research used test of discriminant validity and convergent validity. The reliability test can be
interpreted as the level of confidence in the results of a measurement. Validity and reliability are considered in this study by using the principle of second order confirmatory factor
analysis.
TABLE 7 : LOADING FACTOR, VALIDITY AND RELIABILITY VALUE
Loading Factor
T- Statistic
Average variance extracted AVE
Internal Consistency
R- Square
Sharing 0.826
0.934 X1.1
0.948 48.890
X1.2 0.909
38.272 X1.3
0.868 20.492
uncertainty 0.943
0.970 X2.1
0.972 122.561
X2.2 0.970
104.464
inter 0.862
0.949 X3.1
0.952 59.108
X3.2 0.946
62.117 X3.3
0.887 31.507
SCF 0.876
0.966 0.548
Y1.1 0.967
116.966 Y1.2
0.955 77.207
Y1.3 0.944
60.360 Y1.4
0.876 27.945
competitive 0.638
0.912 0.511
Y2.1 0.691
9.616 Y2.2
0.786 12.856
Y2.3 0.610
6.089 Y2.4
0.793 16.868
Y2.5 0.934
60.839
311 Y2.6
0.927 35.182
Disciminant validity is based on the value of cross-loading and the value of variance Extracted AVE . The indicator has good reliability when its value is greater than 0.70. while
if the factor loading was 0.50 to 0.60 ,it can be maintained for a model which is still in development. Table 7 shows that the value of cross loading was more than 0.5. Thus in this
research the instruments are appropriate for further analysis. Table 7 shows that average value of variance Extracted AVE has a value of more than 0.5. The value of AVE is above
what is appropriate for the criteria for further analysis. The reliability test which is used in this study is the internal consistency. The Limitation
value is received for the composite reliability is 0.7, although this is not an absolute standard. Table 7 shows the composite score reliability requirements have been met by all variables
with a value above 0.70.so the instrument is feasible for further analysis.
The Evaluation of Structural Model
All hypotheses in the research were tested simultaneously using the Partial Least Squares PLS. The research used the second order confirmatory factor analysis model.
FIGURE 1 : THE OUTPUT OF CONSTRUCT MODEL
TABLE 8: THE SIGNIFICANCE OF THE VARIABLE.
original sample
estimate T-Statistic
Statement
312 uncertainty -
SCF 0.431
4.111 Significant
inter - SCF 0.031
0.307 Not significant
Sharing - SCF 0.396
3.182 Significant
SCF - competitive
0.715 11.590
Significant
DISCUSSION AND CONCLUSIONS
This study results in a significant effect of information sharing with supply chain flexibility. These results support the proposition from Spring Stevenson 2007. According to Spring
Stevenson 2007 the flow of accurate and real nformation in the supply chain flexibility needs to consider the sharing of information as one of the most important factors. According
to Lummus Vokurka 2003 who indicate that the sharing of information can also provide the flexibility and improvements in responding to supply chain and shared information
includes the end consumer demand, sales forecasting, order status, inventory levels, the capacity, waiting time and quality. This is because by sharing information we can improve
the transparency in the company, to avoid losing sales, expedite payments, create trust, to avoid excess production and reduce inventories.
Manufacturing companies in East Java was important that by sharing information, they can increase the flexibility in the supply chain. Manufacturing industry is utilizing information
technology available today to share information by utilization of the Internet with the e- business concept. There were more manufacturing industries to facilitate the sharing of
information to make business partners. Especially in terms of the cost of the internet today that is more affordable. So that the manufacturing industry began to leave the conventional
methods such as telephone or fax. It is support for other information technology like EDI, SRM, SCM, ERP which have good facilities that are used intra-firm or extra-firm. When it is
growing information technology in Indonesia will be familiar, but which needs to be considered and the anticipation is a lack of skilled human resources to manage or share
information to business partners. Most companies outsource all of their information technology and lack of training is occurs as it is still very dependent on outsourcing.
This research produced a significant effect between the anticipated supply chain environmental uncertainty on supply chain flexibility directly. The higher the firms ability to
anticipate supply chain environmental uncertainty, the higher the companys supply chain flexibility. This indicates that the current market changes which tend not to be due to the
313 growing customer demand leading to uncertainty as the critical supply chain environments
grows, so the company must implement supply chain strategies that are flexible to changes that occur in a business environment.
Manufacturing industries in East Java should consider uncertainty in supply chain management, especially in supply chain flexibility. Uncertainty is the main factor that must
be considered so a flexible supply chain can be realized. Because uncertainty can lead to distrust in the plan are made. In anticipation of this, a company often creates an effective
security along the supply chain as was usually done by several respondents in this study according to interviews. This security may be a safety stock, or safey time production and
transportation capacity. The results show that there is no significant effect between interorganization relationships
with supply chain flexibility. This is because the relationship that exists between interorganization manufacturing industry with its business partners are still weak in
implementing supply chain flexibility. Interorganization relationships in manufacturing industries in East Java has not shown encouraging results. This can be seen from the results
of this research output. Indeed in Indonesia are still weak to trust, have commitment and sit together with business partners to solve the problems that occur in the manufacturing
industry. This is because of the fears of the manufacturing industry if the business partners were not able to maintain confidentiality. Moreover, often between the partners business and
manufacturing industry failed to meet contractual agreements that had already been agreed. Suppose that at the time also they will launch a new product then the company should choose
the supplier before the product design process begins. So that these suppliers can be involved in product design. Of course, not all suppliers need to be involved early in the design of new
products. This research produced a significant influence between supply chain flexibility with
competitive advantage. This is supported by what is suggested by Sanchez Perez 2005 who indicate that supply chain flexibility can improve the companys advantage, especially in
the decision-making process of the implementation of technology and can become an important source of competitive advantage. Vickery et al. 1999 produced a significant
relationship between supply chain flexibility in supply chain performance which is used to achieve competitive advantage. Pujawan 2004 states that flexibility is seen as the main
determinant of competition in the growing market intensity. With the companys supply chain
314 they are able to develop competitive advantages, such as in delivery, innovation and
flexibility. Vokurka et al. 2003, suggests the main trends in supply chain management are the globalization of markets and supply sources and must focus on the competition from the
company with a competitive advantage of the entire supply chain. Vickey et al. 1999 observed that for companies to compete through flexibility in applying procurement practices
or the supply chain for the current global conditions are very important. Supply chain flexibility in the manufacturing industry in East Java was very important in improving
competitive advantage. Performance of the manufacturing sector in Indonesia is currently trying to improve the competitiveness of industrial manufacturing, although the ability is still
low. Competitive advantage in the current era is not only determined by the ability of an industry to create a lot of output unity of time. Productivity is important, but not quite as
important to compete on the market. Customers began to differentiate products based on quality. Even realizing that product quality is highly dependent on the process, people and the
system as a whole. The quality of control is no longer enough just to operate with the product inspection model, but more fundamentally with the process. Even the industry began
to realize that product quality is also not free from quality raw materials sent by the suppliers .
CONTRIBUTION AND LIMITATIONS
The Theoretical contribution of this research is the development of conceptual knowledge about the increased flexibility in the supply chain which is based on the grand theory of the
resource-based view. This research contributes to the view of the supply chain flexibility to explore the relationship with the information sharing, interorganizational relationships which
currently received less attention than other research. Because the concept of supply chain flexibility is always associated with the anticipation of supply chain environmental
uncertainty. In this study it also explores the competitive advantage and more expanded dimensions of competitive advantage. So far, the concept of competitive advantage is still
referring to the price, innovation and quality. In this study we looked more at the time to market, because time to market is now a major consideration in analyzing the competitive
advantage in the supply chain Pujawan, 2005. The practicalcontribution of this research is expected to result from this study can provide
managerial implications in managing the supply chain flexibility in the manufacturing industry. In the supply chain flexibility applied in this study suggests that supply chain
315 flexibility is not just enough uncertainty with respect to anticipate the supply chain
environment alone, but also in the sharing of information interorganizational relationship. So by looking at factors other competitive advantages to be gained can be realized by the
company.. This research is expected to contribute to the manufacturing industry in applying the concept of supply chain flexibility and give attention to the factors that must be
considered by companies when implementing these concepts. The limitation of this study is that it did not distinguish the companys position in the product
life cycle. Companies that produce innovative products have product life cycles for different types of functional products. And each different product life cycle requires different
flexibility strategies. The other limitation is that only three main factors to be considered in implementing supply chain flexibility in manufacturing companies in East Java were
observed.
316
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319
THE SOCIAL-CULTURAL AND ECONOMIC IMPLICATIONS OF THE PRESENCE OF MOBILE PHONES
AMONG OVERSEAS MIGRANT WORKER FAMILIES IN KECOPOKAN HAMLET, EAST JAVA, INDONESIA
Brian Arieska Pranata, Ms. Tsuroyya, Wahdi. S. A. Yudhi Bureau for Planning and International Cooperation,
Ministry of National Education, Indonesia brian_arieskayahoo.co.id
tsuroyya18yahoo.com wyudhigmail.com
ABSTRACT
The mobile phone has become a catalyst for a social change. When the overseas migrant workers OMWs from Kecopokan were buying and using mobile phones to open their
interpersonal communication opportunities, they were exposing themselves and their families to impacts that may accompany the technology and service. Family ties are built and
maintained in the many phone calls and text messages circulated. In fact, some overseas migrant workers use mobile phones to parent their children. In its intense usage, while text
messaging has been perceived as a replacement of direct communication, the unconstrained voice calls can be disrupting. As a commodity, mobile phones have become a symbol of
newfound wealth and a perceived way to acquire higher social status. Such phones have become a new household necessity, and people are learning how to creatively manipulate the
system to make the service more affordable. With mobile phones, transfer of knowledge from OMWs to their families has become possible. People have also able to increase their incomes
because mobile phones can be a tool for managing business and a commodity for trading. Last but not least, mobile phones assist information exchange in ways that can provide
benefits.
INTRODUCTION
Telecommunication technology development, with mobile phone service as one of its results, surely has become a catalyst for social change. Since a mobile phone has the potential to give
benefits as well as detriments, users have to be ready for change in their lives, no matter if it is good or bad. Nowadays, the mobile phone has become one of the most ubiquitous and
utilized products of telecommunication technology. Billions of people in the world own mobile phones and use them in their daily lives. According to the International
320 Telecommunication Union ITU 2009b, in 1997 there were only approximately 215
million mobile phone subscribers in the world. However, as it can be seen in Table 1, the figure swelled to 1.157 billion in 2002 and, amazingly, to 3,305 billion in 2007.
TABLE 1 KEY GLOBAL TELECOM INDICATORS FOR THE WORLD
MOBILE PHONE SECTOR 1997
– 2007
Mobile phone subscribers Year
millions 1997
215 1998
318 1999
490 2000
738 2001
961 2002
1157 2003
1417 2004
1763 2005
2219 2006
2757 2007
3305
Source: International Telecommunication Union 2009b
More specifical ly, Asia hosts 709 million of the world‘s mobile phone subscribers, compared
to 573 million in Europe, 373 million in the Americas, 77 million in Africa, and 20 million in Oceania ITU, 2009a.
In its distribution, the mobile phone exists not only in the developed countries but also in developing countries where numbers of subscribers are surpassing fixed-line customers
Glotz, Bertschi, Locke, 2005. Mobile phone subscriptions in developing countries flourish mainly because the technology is able to overcome the problem of developing
countries lack of fixed telephone infrastructure while demand for the service keeps increasing.
Indonesia is one of those developing countries, where multiple populations are benefiting from the availability of mobile phones. Indonesians benefit not only because they do not have
access to land line telephones but also because they are able to take advantage of mobile
phone‘s social and psychological benefits. According to Vincent β005, mobile phones help people maintain their relationships with family and friends. Considering those two factors,
this study examines the family behavior of Indonesian overseas migrant workers OMWs, an illustrative social setting wherein participants benefit from mobile phone adoption. The
purpose of the study is to better understand the social-cultural and economic phenomena that occur in the OMW families as the result of the presence of mobile phones.
RESEARCH METHODS AND STUDY AREA
321 We conducted this research from December 8 to December 28, 2008. During this time, we
visited the Kecopokan hamlet in the southern part of Malang, East Java province, Indonesia. Kecopokan, along with Krajan and Ngrancah, is one of the hamlets in Senggreng village
known to have individuals who work as OMWs. Kecopokan can be reached from Malang by a 40-minute minibus ride, followed by a 10-minute ride on an ojeg, a motorcycle used as a
taxi. Transportation service from Malang to the hamlet is available daily and costs around US 2 for one round trip. Although a bad road connects Kecopokan and the main road and
there is no landline telephone infrastructure, there are some mobile phone signal towers in the vicinity of the hamlet, so it is well-covered by a mobile phone network.
To gain the data that we needed, we spent most of our research period visiting Kecopokan to talk to residents. We spent a few days early on visiting the village office to get consent from
the village officials and to collect general data about the hamlet and its people. Unfortunately, we were not able to actually live in the village, though that probably would have given us a
chance to gain more data.
Hammersley and Atkinson 198γ explain that ―ethnographers participate, overtly or covertly, in peoples daily lives for an extended period of time, watching what happens, listening to
what is said, asking questions.‖ An ethnographer‘s main goal is to observe human interactions in social settings and activities. Therefore, in this research, using an ethnographic
approach, we tried to understa nd people‘s interactions with their mobile phones within the
existing social setting in order to find out what implications are resulted in that interaction. Due to our inability to stay in the hamlet, our method involved conducting a series of visits to
carry out unstructured and semi-structured interviews with several adult individuals. Russell 1999 argues that a semi-structured interview is very reliable in ethnography to gain
in-depth data. Thus, due to the time limitations that we faced in conducting the research and our wish to collect as much data as possible, we mainly used semi-structured interviews
during our two first weeks in Kecopokan. Interviews were conducted primarily in homes of the families of overseas migrant workers, except for the interviews with village officials
which were held in the village office. We did not have any preferences about time and situations for interviews, but since we were not able to stay in the hamlet, interviews were
mostly conducted during the daytime. One benefit of the unstructured interview is that it is informal and makes people feel
comfortable. The interview can only be done if the participants and the interviewers feel comfortable with each other. We and our participants obviously needed time to get to know
each other and build trust. Therefore, we used the unstructured interviews during our last week in the hamlet. The interviews were spontaneous, involving no specific questions, and
similar to any light conversation. Sometimes the interviews took place even while we were enjoying lunch or sitting by the nearby river. We allowed our research participants to talk
freely rather than limiting them to interaction with our list of questions.
322 To record the information that our participants delivered, we mostly depended on our
recorder and notebook. The combination of those two tools helped us to note what our participants implicitly and explicitly wanted to say. We mostly communicated with our
participants directly using Indonesian, the national language. However, when it seemed that our recipients felt more comfortable if we used the local Javanese language Boso Jowo, we
used that language. Finally, but importantly, this research was supported by historical data to provide a
background of Indonesias history of overseas migrant employment along with information
about the country‘s telecommunication sector. A separate discussion about the use of remittances in Indonesia and the mobile phone‘s impact on the society has been used to
elucidate this research. The literature study was carried out using resources obtained from Alden Library at Ohio University.
STUDY AREA a. The physical setting
Senggreng village is located in Malang, East Java province, Indonesia. It is about 30 kilometers south of Malang city. The village covers 584,520 hectares of land, comprising the
three hamlets of Kecopokan, Krajan, and Ngrancah. Senggreng is bordered by Ngebruk village to the north, the Brantas River to the south, on the west by Sambigede village, and on
the south Trenyang village. Kecopokan, the place where we did our research, is in the southern part of Senggreng, bordered by the Brantas River. The river is the main water
supply for the nearby Java
– Bali hydroelectric power plant located at Sutami Dam in Karangkates village.
MAP 1 RESEARCH SITE AS SEEN IN MALANG CITY MAP SOURCE: ATLAS, JAWA TIMUR 2004
323 Geographically, Senggreng is a lowland area 297 meters above sea level with an average
temperature of 23 – 32 C
o
. The climate is generally dry, with heavy rains in December through March, and long dry seasons with several light rains during the remaining months of
the year. The annual rainfall averages above 200 mm with very little variation. The Senggreng village area is generally fertile and has decent agricultural potential.
PHOTO 1 ENTRANCE TO SENGGRENG VILLAGE
324
PHOTO 2 ENTRANCE TO KECOPOKAN HAMLET
b. Population In 2008, Senggreng village had a population of 8,933 people, which was composed of 4,707
males and 4,226 females. The original inhabitants of this village were Javanese, with later immigrants from the island of Madura. People in Senggreng are mainly engaged in
agricultural activities. However, since the land in the village is owned by several rich people, most of the farmers are sharecroppers, though fish cultivation on the Brantas River offers
hope and expectations of additional employment. Fish cultivated in the river are sold at markets in Malang and Blitar. Some men in the area have motorcycles and can make a living
providing taxi service. In Senggreng, as elsewhere, television has proved to be the mass communication technology
most familiar to the population. Currently, there are 1,471 television sets owned by individuals, and the one in the village public hall is available to everyone. On average, there
is one television for every six villagers. This figure contrasts with the number of landline telephones in the village: only 129 wired phones are owned by individuals with no public
325 telephone available. This averages one telephone for every 70 villagers. Unfortunately, there
is no exact data about the number of mobile phones owned by the village residents. While by the end of 2008 the three largest Indonesian mobile phone service providers have had about
108 million subscribers, it is likely that mobile phones probably also constitute a high level of use in Senggreng. It is undoubtedly time for the village officials to conduct data gathering
similar to the data they have for television and landline telephone to determine the significance
of mobile phone technology in the village. In addition to the country‘s overall statistical data, one clear indication of how fast the mobile phone has entered the village is
that almost all of the village officials themselves have at least one mobile phone each.
RESEARCH PARTICIPANTS
c.1. Mr. Paujianto and Mrs. Sriatun Mrs. Sriatun started working as a Tenaga Kerja Wanita, the common name for female
OMWs, in 1989 in Saudi Arabia. She was inspired to work overseas by her neighbor, Mrs. Poniyah, known as the first Kecopokan citizen who worked abroad in Saudi Arabia. Mrs.
Sriatun believed that by taking the same path that Mrs. Poniyah took, she would be able to make her life condition better, something that would have been impossible to achieve if she
kept staying in the village.
After four years working in Saudi Arabia, Mrs. Sriatun decided to return to Indonesia and work as a farmer. She married Mr. Paujianto in 1998, but realized that her family
‘s need for money kept increasing. So, in 2001 she decided to go to Hong Kong to take up her old
occupation as a pembantu or domestic worker again. Mrs. Sriatun sent most of her wages back to her family in Senggreng.
PHOTO 3 MRS. SRIATUN IN PRESENT DAY
326
PHOTO 4 MR. PAUJIANTO’S FAMILY
Though she was single when she worked in Saudi Arabia, while working in Hong Kong Mrs. Sriatun had a husband and a two-year-old son about whom she wanted news. For the first 12
months she was away, she contacted her family primarily through letters. This process could take up to a month, or she could communicate through friends who went home for visits.
Back then, telephones were rare in Mrs. Sriatun
‘s hamlet. Only rich people could afford the installation fee. Mr. Paujianto had to borrow a telephone from his rich neighbors or relatives;
the date and the time of the call had to be arranged in advance. In 2002, Mrs. Sriatun decided that she and her husband should each own mobile phones. That way, they could communicate
frequently. She bought two mobile phones in Hong Kong. The first, a Samsung SGHX-200, cost her around US 125. The second phone, a Nokia 2100, cost around US 147.72 based
on Rupiah exchange rates to US Dollar in May 2002 informed by the World Bank, Rp 8,800 = US 1. Mrs. Sriatun then asked a neighbor who was also working in Hong Kong to take
the Nokia mobile phone to Mr. Paujianto when the neighbor went back to Indonesia, and once Mr. Paujianto received the device, all he needed to do every month was to buy the credit
voucher
. With the mobile phone, contact between Mrs. Sriatun and her family became faster
and more frequent.
327
c.2. Mr. Karijono and Mrs. Nawiyah
In εr. Karijono‘s family, the OεW was his daughter, εs. δuluk Dewi εaslukah. She worked in Hong Kong from 2002 to 2004 and then moved to Singapore, where she still is.
During her six years abroad, Ms. Luluk worked mainly as a baby sitter. Although Mr. Karijono, as the head of the family, is still actively working at Malang University and
receives monthly wages
, Ms. Luluk, like other OMWs, never forgets to send back some of
her wages to help her family meet their needs. In fact, Ms. Luluk now is partially supporting the school fees of her younger brother, Opik.
PHOTO 5 MS. LULUK IN SINGAPORE
When Ms. Luluk was still in Hong Kong, Mr. Karijono maintained communication with his daughter by letter with all of its limitations. But since she started to work in Singapore, Mr.
Karijono and Ms. Luluk have communicated principally via mobile phones.
Communication before they started using mobile phones was not easy. Although Mr. Karjiono and Mrs.
Nawiyah‘s desire for a mobile phone was high, it only happened when εs. δuluk sent one home. She sent a Motorola mobile phone to Indonesia so she could call her family and talk
with them when she liked. Mr. Karjiono was hestitant to buy a mobile phone which he perceived to be a luxury that he could not afford.
PHOTO 6 MRS. NAWIYAH AND MR. KARIJONO
328 In communicating, Ms. Luluk and her family used both voice and text messaging services.
Since Ms. Luluk preferred actual conversations rather than sending text messages, once Mr. Karijono even decided to buy a CDMA mobile phone because based on what he saw in
commercials he believed that it was going to be cheaper for her to call to CDMA mobile phone. Ms. Luluk
sent text messages as well as called the family‘s wireless fixed line mobile phone almost every day. However, for conversations that were longer than an hour, she called
once every three days. She called when she took her boss‘s child to the park or during her off time. Mr. Karijono said that whenever his daughter calls, it seems impossible to end the
conversation. This is true because the mobile phone for them is really engaging. It was a
partial cure for the family‘s longing for each other because it has been four years since Ms. Luluk left to work abroad.
c.3. Mr. Subari Mr. Subari was working as the head of the Kecopokan hamlet as well as fish cultivation
businessman. His wife was an OMW who worked in Hong Kong. Mr. Subari told us that he used to be a migrant worker too, but more like a domestic one. Working for plantation sites
for several years, he went from one island to another in Indonesia. In his capacity as the head of the Kecopokan, Mr. Subari helped us a lot in finding statistical data about the Senggreng
village as well as Kecopokan.
PHOTO 7 MR. SUBARI
329 Mr. Subari believed that mobile phone has become important for him for at least in three
different reasons. First, it was the device that enables him to stay in touch with his wife in Hong Kong. Second, mobile phone helped him to coordinate with his fellow workers both in
the village office and in the fish cultivation business. Third, mobile phone assisted Mr. Subari to be connected to the market as well as to his investors so he could effectively run his fish
cultivation business.
DISCUSSION
On a different scale, remittances sent back by Indonesian OMWs have been contributing to the country, to provinces, and to households. Among those three, remittances have a
significant effect on households. Few OMW families use the remittances to increase household productivity, but, their expenditure patterns are still reasonable in the sense that
they know they have to prioritize their primary needs. First of all, they buy their subsistence supplies; if there is any money left, they use it for luxury goods that apparently open the way
to modernization. Nowadays, among other modern luxury goods in the market, one purchase that is likely to be present in most OMW families is the mobile phone. As the OMW families
are exposed to the technology, the mobile phone impacts those who decided to obtain and use it. The mobile phone currently has a broader function than just as a device for voice calls. It
has become
a part of people‘s culture that helps them to find new ways of living. To improve their meager family incomes, people from Kecopokan, especially the women,
have worked overseas since the middle of the 1980s. They were mainly sent to Saudi Arabia to work as housemaids or domestic workers. During the 1990s, the number of migrant
workers gradually increased. Labor brokers arranged work for them in various destinations such as Malaysia, Hong Kong, Singapore, South Korea and Taiwan. The remittances that
were sent home were used to cover subsistence needs such as food, shelter, and school fees. Although there have been various development programs in the hamlet of Kecopokan,
including electrification projects, neither telephone landlines nor decent road access exists in
330 the area. As an example, between 2005 and 2006, whenever Mr. Karijono asked Perseroan
Terbatas Telkom – Perseroan Terbatas is a company owned by two or more people with its
capital comes from stoke – PT. Telkom in Malang about the availability of new landline
telephone service, the company always told him that their stocks were empty. Further, as Mr. Karijono explained, there used to be several landline telephone poles in the village, including
in Kecopokan. After PT. Telkom apparently abandoned those poles, several teenagers dismantled and sold them.
Initiated mostly by the overseas migrant workers, mobile phones have become a revolutionary new means for families to communicate with their overseas breadwinners. As
expected, the presence of mobile phones and their complementary equipment in Kecopokan were increasingly common in the community. Based on the information that we got from our
participants, it was primarily the OMWs who bought the devices in the countries where they were working. They were the ones who knew what type of mobile phone they should buy
whereas their families had no idea, and there were few people in the hamlet who could give advice about it. The OMWs, on the other hand, were able to discuss the matter with their
fellow workers and their bosses. With the assistance of neighbors or friends who were returning home, the OMWs sent the purchased mobile phones to their families.
PHOTO 8 A GUARDHOUSE PAINTED WITH CELLULAR SERVICE PROVIDER ADVERTISEMENT
Remittances received by the OMW families were then used to regularly purchase the credit vouchers in order to maintain the services. Mostly, the families would allocate US 5 or US
10 to buying the vouchers. US 5 worth of credit would give about a months worth of service. Most of the OMW families saw purchasing the credit as a burden yet an important
thing to do. It was a burden since they had to regularly spend a sizeable amount of money
which could otherwise be used to fulfill the family‘s substantial needs, but it was also impossible for the family to ignore continuation of the mobile phone service since they were
growing dependent on it.
PHOTO 9 A MOTORCYCLE REPAIRING SHOP WITH CELLULAR SERVICE PROVIDER ADVERTISEMENT
331 Donner 2005 states that the mobile phone has the potential to give economic and social
benefits. Indeed, our research found that as the people in Kecopokan became familiar with using mobile phones, they became attached to them. The interaction between people and
mobile phones has some social-cultural and economic implications as can be seen in the findings below:
A. Social-cultural implications a. Families are able to maintain relationships with their relatives abroad and within
Indonesia with the use of mobile phones. Kecopokan hamlet is among the many rural areas in Indonesia that have not been equipped
with landline telephone infrastructures. Thus, the families of OMWs in the hamlet had no choice but rely on the time-consuming process of mailing letters and the rare access to
landline telephones if they wanted news of their family members abroad. Mr. Paujianto and Mr. Karijono, for example, each had to deal with the fact that it was hard to get
telecommunication access and, consequently, had difficulty maintaining relationships with their wife and daughter respectively.
Mr. Paujianto
said that, in the past, sometimes he felt that ―he had no wife.‖ When a problem occurred in the family and it was hard for him to communicate with Mrs. Sriatun, he felt he
had nobody with whom to share the problem, to talk to, or to help him to find a solution. Further, although Mr. Paujianto knew very well that his wife was working hard earning
money for the family, sometimes he still felt that it was only he who had to take care of the family. When he or their son needed extra money, Mr. Paujianto sometimes still ended up
borrowing money from neighbors or relatives because he could not request it from Mrs.
Sriatun because it was so hard to contact her. Without good communication, εr. Paujianto‘s relationship with Mrs. Sriatun became troubled.
332 Mr. Karijono, likewise, was bothered when his daughter, Ms. Luluk, went abroad for the first
time and he rarely received any news from her. Since Mr. Karijono and his wife considered their daughter an extrovert who always shared her stories with them, the lack of
telecommunication services caused a misunderstanding. Mr. Karijono thought that his daughter had become distant. He thought that his daughter had changed and was not opening
herself anymore to her parents, an accusation that proved to be wrong. Ms. Luluk apparently just could not maintain communication because the ways were limited. Mailed letters
sometimes went missing during the delivery process, and as a new worker, she spent most of her time learning about her job.
In regard to the above two relationship problems, the mobile phone became a partial solution. We found that there are two reasons why the OMWs and their families think that mobile
phones help them to maintain their relationships. First, the mobile phone gives them access when their families need them. With a mobile phone, Mrs. Sriatun is reassured that whenever
her family needs her, in her position as breadwinner and as wife, she can easily be contacted. Mr. Paujianto responded positively to the change, as he believed that the mobile phone has
assisted Mrs. Sriatun to maintain her role as a wife. Second, mobile phones help to ensure continuous communication which in the end also helps OMWs and their families maintain
their relationships. In using mobile phone communication, Mr. Karijono realized that nothing
had changed in his daughter‘s personality; she was still assertive. Whenever εs. δuluk called they spent hours talking on the mobile phone. Mr. Karijono even said that it is hard to stop
his daughter when she starts to talk, something he is really thankful about. Mr. Karijono was also relieved that he could update the news of other member of the family to Ms. Luluk. One
positive effect of their good communication is that εr. Karijono agreed to εs. δuluk‘s request to stay longer in Singapore. As he believed that the mobile phone would ensure
communication between them, he allowed Ms. Luluk to extend her contract that in December 2008, had reached its fourth consecutive year.
Hjorth 2005 argued that mobile phones were mostly used to maintain the already existing relations rather than to establish new ones. The above two anecdotes obviously affirmed
Hjorth‘s opinion. Further, regarding the above problems, it seems that the mobile phone‘s role in maintaining relationships between OWMs and their families is definitely the most
noticeable and may be the most important application of the technology. In Mr. Paujianto‘s
story about Mrs. Sriatun, having a mobile phone seemed to have a positive impact on their cross-border marital relations, as he felt
her presence. In εr. Karijono‘s story about εs. Luluk, the mobile phone improved their cross-border parental relations, as Mr. Karijono felt
εs. δuluk‘s affection. In addition, the spillover effect of the existence of mobile phone in the OMW families is also
apparent at the domestic level. By using mobile phones, the OMW families are able to reestablish and maintain their relationships with relatives and families in different cities, and
even provinces. Before the mobile phones, they did not know each other
‘s news since they could not visit. With the device, although they are still not visiting each other due to the
distance and cost, at least they can regularly communicate.
333
b. Mobile phones have become a tool for parenting children. As mobile phones have become ubiquitous, they have also become tools of control for
individual users and for larger social institutions Bell, β005. In the context of the OεWs‘ families in Kecopokan, we will discuss the mobile phone as a means of control for individual
users. Our participants told us that in using their mobile telephones, their feelings were firmly
attached to the information delivered via those phones. To know the condition of their beloved family member working abroad, for example, the OMW families depended heavily
on communication via this device. They believed that the same thing was true for the OMWs. Based on the strong feelings that the OMWs and their families are able to develop, both sides
seemed to agree on one positive function that mobile phones have for them. Remote parenting could be done using the mobile phone.
Mrs. Sriatun told us that when she was working in Hong Kong, her mobile phone enabled her to communicate continuously with her son with the help of Mr. Paujianto. Through daily text
messages Indonesians tend to use the term SMS, an abbreviation of Short Message Services, to describe text messages and routinely calls Mrs. Sriatun was able to ask her son about his
school, to remind him about the importance of praying and reciting Al-Quran, and to deliver some advice about how important it is to be a good son. She was grateful that she could
maintain her role as a mother although she was separated by great geographical distance from her son.
Mr. Karijono, on the other hand, used to feel that he had failed to look after the only daughter among his three children and used to regret his decision to allow her to work as an OMW.
Whenever he read news about mistreatment cases encountered by Indonesian OMWs, he felt that he has failed as a father. However, since he and his daughter decided to use mobile
phones, Mr. Karijono felt that at least as a father he could be better informed about his daughters situation and regularly give her advice about what she should be aware of based on
the news that he read. In this sense, the information being sent from Indonesia had empowered the OMW. Ms. Luluk was less isolated and more alert to potential problems of
abuse that could be done by brokers as well as employers. Mr. Nawiyah was also delighted that the mobile phone had allowed her to take her role as a mother in terms of teaching Ms.
Luluk how to cook. Since Ms. Luluk was working as a baby sitter, her main skills gained from her training program related to taking care of children. Ms. Luluk could not really cook,
but Ms. Nawiyah believed that a woman, in relation to her role as a wife and a mother, must be able to cook. Mrs. Nawiyah believed that it is her obligation to make sure that Ms. Luluk
can cook so in the future she will be well-prepared for marriage. c. Text messaging on mobile phones often replaces more direct forms of communication
such as conversation and discussion.
334 ―For at least one and a half million years, until about ten thousand years ago, human
communication was invariably face-to-face, restricted to communication among people inhabiting a common physical space‖ Nyiri, β005, p. 161. As letters, telegraph, radio,
television, landline telephones, and computer technology have taken their role in improving people‘s means of communication, ending the face-to-face necessity, the mobile phone has
also made an exponential share in the improvement. One of the features the mobile phone offers to its users is text messaging. With this relatively
cheap function, people are replacing face-to-face communication and more direct form of communication such as conversation and discussion with short form electronic writing.
During my research, some participants were actively using the text message features on their mobile phones, illustrating of how
OεWs‘ families replaced direct communication with texting.
One day, as we visited εr. Karijono‘s house to talk to his wife, we found Mr. Karijono
himself was at home. He told us that he was not feeling well and decided not to go to office. When we asked him how he would tell his boss about his absence, Mr. Karijono said he had
already sent a text message to his boss. When we asked him why he did not just call his boss, Mr. Karijono said to us that, in this matter, he thought that a text message was a better option
for several reasons. Text messages
, according to εr. Karijono, provides some kind of ―proof‖ of him informing about his condition using the sent message in the outbox feature, just like a
letter. He felt that by sending text messages rather than calling his boss, he was actually taking the polite way of communicating. He argued that if he chose the option to call, he
would seem to be demanding that his boss pick up his call, regardless of what his boss was doing at that time. By using a text messages, he believed that he gave his boss the option of
reading and responding at his convenience. Further, he felt that if he explained his absence verbally, he might end up using inappropriate words since the communication is direct. By
using text messages, he could choose the appropriate wording before he sent it. Thus, Mr. Karijono believed that a text message is a better way to communicate in his subordinate to
superior relationship with his boss. Mr. Subari provides a different example of a person who considered text messages as an
alternative to direct communication. It all started when he decided to buy a mobile phone that he could dedicate only to working matters. The new mobile phone gave him instant access
when he needed to coordinate with the kepala desa head of the village and his fellow
workers. δasen as cited in δan, β006, p. 179 stated that ―SMS not only facilitate communication on a person-to-person basis but also provides a broadcasting tool for rapid,
wide, and cheap distribution of pub lic information.‖ Thus, any time εr. Subari wanted to
communicate with his fellow workers regarding working matters, he needed only to type a brief text messages
, choose the ―send it to many‖ option, and his text messages would automatically go to the intended people. By using text messages, no papers were needed and
there was obviously less bureaucracy.
335
d. Mobile phones can be a disruptive technology for an individual and a social setting. Haddon 2005 states that various studies have shown that mobile phones can be disruptive
for people in public spaces. In our research we
found that the OεWs‘ families in Kecopokan who owned mobile phones and the hamlet society, overall, apparently could not avoid
disruption as a result of the technology. Mobile phones, from one perspective, are considered a technology that breaks down time and space constraints, connecting people in different
times and places. Its handy characteristic To indicate its handy characteristic, in Indonesia, Korea, as well as several other
countries in the world, a mobile phone is called ‗Hand Phone unconsciously ‗forced‘ users to have it close to them whenever and wherever they go.
However, since a caller can reach a mobile phone number directly to its owner in any given place and time zone, incoming calls can disrupt a situation that already exists. Thus, during
family time, prayer time, rest time, and other important moments, a mobile phone call can be unwelcome. Mr. Karijono said he hates to deal with a very late night or very early morning
call from his office, asking him work-related things, as if the matter could not be handled during office hours. Additionally, most of our participants also felt annoyed when someone
called them during the Maghrib time. They are bothered by how people can be so ignorant as to call during a time widely understand to be set aside for prayer Different from other times
of prayer, during Maghrib most Indonesians will try to pray together with their family at home or with others in the mosque.
Bell 2005 explained that, in Indonesia, many people obtain two mobile phones, each for a different purpose. One is usually dedicated for work and the other for social life. The
motivation behind this practice is clear: they want to have a separation between their private and public lives, limiting the disruptions that might occur.
Mr. Karijono falls into the category of Indonesians mentioned by Bell. He had one GSM mobile phone, with GSM cards from two different service providers, and one CDMA mobile
phone. In his mobile phone usage, Mr. Karijono wanted to separate his private and public lives, which later helped him to solve the disruption problem. When he only had one GSM
card, Mr. Karijono always left his mobile phone on except when he was sleeping, so his daughter could call him from Hong Kong whenever she wanted. Unfortunately, this decision
had unpleasant results since people in his office could access him just as readily. When Mr. Karijono decided to buy another GSM card and even a different mobile phone, he could
manage which phone should be turned on or off. After work, he changed his office contact card number with the other one. With that strategy, he could cut the telephone access from his
office while still having a connection for his daughter. Another disruptive aspect of mobile phone technology is related to its multimedia capability
which allows owners to store illustrations and videos in the device. The problem can occur when underage children use mobile phones to store porn illustrations and videos. Thus,
336 parents are becoming worried about what their children are storing in their mobile phones.
εrs. Nawiyah, for instance, always asked εr. Karijono to check regularly their son‘s mobile phone just to make sure that he is not storing any hurtful material.
The mobile phone has proved its disruptive potential not only to individuals but also in broader social settings. We found during our research that mobile phones are considered a
nuisance in a mosque. Remaja masjid custodians at several mosques in Kecopokan and the other two hamlets observed in this research have posted signs asking that mobile phones be
turned off see Illustration 3.3. As one remaja masjid
said, ―Often, people forget to turn off their mobile phones and they suddenly ring in the middle of the sermon, prayers, or Al-Quran
recitals. The sound disrupts other people‘s contemplation.‖ Although the posting of the sign has reduced the nuisance factor of mobile phones, unfortunately, sometimes people still
forget to turn off or silence their mobile phones, so the remaja masjid decided just to leave the sign permanently up.
PHOTO 10 A SIGN IN BAHASA INDONESIA THAT IN ENGLISH MEANS ―PLEASE TURN OFF YOUR MOBILE PHONES INSIDE THE MOSQUE‖
A different example of how mobile phone can be disruptive for society is illustrated by a case that happened in 2008. In many areas of Indonesia, people were frightened about the
phenomenon of SMS santet or black magic text messages. The rumor spread across the country that a text message received from numbers starting with 0866 and 0666 could turn
the cell phones screen red and kill the person who received it. This issue, concerning mobile phone usage, caused some civic concerns. Mr. Karijono explained that the issue also made
several people in Kecopokan uneasy, especially since the mass media were blowing it up. Although the issue did not affect hamlet security, people were making some adjustments
regarding their mobile phone practices. Mr. Subari, for instance, asked his family members to turn-off their mobile phones after maghrib. Mr. Karijono asked Ms. Luluk to change her call
schedule to earlier in the day.
337
e. Mobile phones have become a symbol of newfound wealth and a perceived way to acquire higher social status.
There is a distinctive factor that differentiates Kecopokan and other hamlets in Senggreng village. That factor is housing. Based on our observation, several houses in Kecopokan stand
out from others in the village. Mr. Subari told us that those beautiful houses are generally owned by the OMWs in the area. For OMWs, a house is the greatest symbol of the newfound
wealth. It is a symbol of their success in working abroad, their achievement after having sacrificed precious time that they could have spent with their families. Other factors that Mr.
Subari believed OMWs use to symbolize their newfound wealth are motorcycles and the newest one, the mobile phone.
Lan 2006 explained that OMWs consider consumption as an important way to express themselves and marked their identity. As an item that can be easily displayed, the purchase of
a mobile phone becomes a medium for migrant workers and their families in showing off their spending power. Mobile phones slowly but surely have become one of the symbols of
OεW‘s newfound wealth. Although the price of a mobile phone is well below that of a motorcycle and far less than the total price of a house, it is still considered a prestigious item.
This is because, in its early presence in the village, mobile phones followed a pattern similar to that of expensive houses and motorcycles-- mobile phones were owned only by people
with high status. Simply put, the status itself was mainly related to a person‘s wealth: the richer a man is, the higher his status.
When an OεW‘s family received a mobile phone sent by their breadwinner abroad or when they decided to buy it using the remittances, the neighbors assumed there had been an
improvement in their economic condition. If that family had previously been considered poor, after acquisition of a mobile phone, that status would likely change. Without taking the actual
economic condition of the family into consideration since the mobile phone is more visible
than the family‘s actual financial condition, the neighbors will regard the family as occupying a higher status. Thus, owning a mobile phone has become perceived as a way to
acquire higher social status. f. As mobile phones have become a new household necessity, people are learning how to
creatively manipulate the service to make it affordable. Peters Hulme as cited in Katz, 2005, p. 173 stated that users consider the mobile phone
more than just a material object; it is an extension of the self. If they lose their mobile phones,
it is like losing one of their physical parts. OεWs‘ families indeed consider mobile phones to be important parts of themselves. As Mr. Karijono told us, without the mobile phone he could
not imagine how he could maintain good communication with his daughter. Mr. Subari
338 argued that if he went to work without his mobile phone, he would have a strong sense that
something was missing. As the families of OMWs in Kecopokan realized that they had become attached to their
mobile phones, they also found that they had to maintain not only the device but also the service that they need. To ensure that they can always use the service, they have to buy GSM
or CDMA phone credits. The voucher credits are sold almost everywhere in the country for various systems and at various prices. The credit availability in Indonesia is not an issue but
the ability to purchase the credit is. Donners 2005 shows how the use of mobile phones in poor areas is different than that in
more prosperous settings. He illustrated how mobile phone use differs from one society to another. In our field research we found that there are several types of mobile phone usage in
Kecopokan that may differentiate the people of Kecopokan from wealthier outsider, while, in fact, representing the use of mobile phone for poor people. In terms of the phone device, we
found that as each person in the family of a Kecopokan OMW realized how useful it is to own a mobile phone, each wanted his or her own phone even when the family could not
afford to buy more than one. To deal with this, εr. Paujianto‘s family all agreed to share not only the mobile phone but the number as well. Bell 2005 explains that although the
dominant model of mobile phone ownership seems to be at an individual level, it was also the case that among many households, people shared mobile phone; parents, children, siblings,
spouses, and members of an extended household jointly used one mobile phone. In terms of the phone services, we found out that the families of OMWs have found several
ways to reduce their expenses. For domestic communication, OMWs families prefered to use text messages rather than direct calling because it is much cheaper. In fact, in some situations,
users have made the communication free by having an agreement of missed calls. One example is the agreement Mr. Paujianto has with Mrs. Sriatun regarding what she should do
when she gets to the village: ―When you have arrived at the village market, just give me a missed call so I know when to pick you up. Thus you dont need to pay to use the ojeg
.‖ By having this kind of agreement Mr. Paujianto and Mrs. Sriatun have save money in two
different ways; the ojeg cost and telecommunication cost. g. Mobile phone has become a medium for the transfer of knowledge.
It seems that by working overseas, Mr. Sriatun, as well as other OMWs, had a better opportunity to become familiar with communication technology. At first, Mr. Paujianto
absolutely did not know how to use mobile phone. With the help of Mrs. Sriatun, Mr. Paujianto who once was only able to receive calls and open text messages was at last able to
call and sent text messages back to Mrs. Sriatun. In fact, from the instruction that he got from Mrs. Sriatun, Mr. Paujianto was able to use other features from the mobile phone such as the
339 alarm and the phone book. In other words, there was a transfer of knowledge process from
Mrs. Sriatun to Mr. Paujianto with the mobile phone as its medium.
B. ECONOMIC IMPLICATIONS People are able to increase their income by using mobile phones
The services that the mobile phone technology offers come at a significant price. Most OMWs and their families spend a considerable amount of money on phone calls and text
messaging to fulfill their desire for communication. However, based on my observation, the
OεW families‘ decision to maintain mobile phone services increased rather than decreased their earnings. At first, it was hard to believe; yet we learned that it is actually true that
mobile phones have helped the OMW families in Kecopokan to increase their income. We managed to find several pieces of evidence related to that matter.
In some cases, as Mr. Subari explained, when an OMW comes home because his or her
contract has expired, the family will sell its‘ mobile phones. As they are together again, they feel they need the money more than they need telecommunication tools. Mr. Paujianto and
Mrs. Sriatun took a different approach. Instead of selling both of their mobile phones, they maintained only one. Though voucher credit is an expensive obligation every month, Mr.
Paujianto told us that his mobile phone had helped him to find extra jobs, which means more income to augment his wages as a sharecropper. He used the phone to work as a broker and
middleman, offering to facilitate getting commodities people need, such as buying a goat for a thanksgiving ceremony, materials for building a house, and related work.
Mr. Subari had his own way of reaping the benefits of mobile phone ownership for the sake of his fish cultivation business. Since the boom in fish cultivation began in the village, people
who own shares in the business have used mobile phones to find more capital to expand the business. Mr. Subari and other fish farmers use mobile phones to solicit capital from their
relatives working overseas and then use the same device to report progress to their investors. Although he is managing five different fish cultivation groups, M
r. Subari‘s main profession is head of Kecopokan hamlet. His mobile phone has allowed him to efficiently and
effectively coordinate the fish cultivation endeavor while he is at the village office or even at home.
According to Mr. Subari, there are also OMWs who benefit from mobile phones not for communication but as a market commodity. One of his friends working in Saudi Arabia once
brought back 10 Nokia 6600 mobile phones which he then sold for a tidy profit since they
