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The First International Conference on Entrepreneurship

Book One I

FOREWORD

Welcome to the 1st International Conference on Entrepreneurship

(2014 ICOEN, INDONESIA)

On behalf of The Honorable Keynote Speakers,

Conference Co Host, Rector of Ciputra University.

Organizational Committee, Steering Committee, and

distinguished Presenters and Participants.

It is my great pleasure to welcome you to this

International Conference on Entrepreneurship (ICOEN)

2014 in Indonesia.

The conference is held on September 18th and 19th;

moreover. It attracts educators, researchers, and

entrepreneurs which related with scientific disciplines of

practitioners.

On this occasion, let me give special thanks to the

Keynote Speakers (1) Prof. Parimal Merchant, Director

Center for Family Manager Business SP Jain

Institute of Management & Research, India, (2) Prof. Greg Barton, Director of the

Center for Islam and the Modern World (CIMOW), Australia, (3) Ir. Harun Hajadi,

MBA Managing Director of Ciputra Group, Indonesia, (4) Tanadi Santoso, MBA.,

Founder of SAM Design, Indonesia, (5) Antonius Tanan, MBA, President of UCEC

(University Ciputra Entrepreneurship Center), Indonesia, (6) Prof. Dr. Lucas da Costa,

SE., M.Si, Rector of Universidade Da Paz, Timur Leste, (7) Norashidah Hashim, PhD,

Deputy Director of Training and Consultation Department. Co – operative and

Entrepreneurship Development Institute (CEDI) Universiti Utara Malaysia, Malaysia.

Your contribution to this seminar as reviewers and keynote speakers make this event

more meaningful and evaluable. We are also thankful to all reviewers, for their

commitment, effort and dedication in understanding the task of reviewing all of the full

paper.

We would like to thank to all authors who have submitted their papers to be reviewed,

those whose paper were chosen to be presented in the seminar, and those who have

submitted manuscripts to be publishes in proceeding

Last but not least, we would like to express our sincere gratitude to everyone who has

contributed and made the joint conference a success.

Best wishes,

2014 ICOEN Organizing Committee Chair

Dr. J.E.Sutanto, MM.

Graduate School, Ciputra University Surabaya, Indonesia


Book One II

COMMITTEE

Steering Committee

1. Dr. David Sukardi Kodrat, MM., CPM. (Asia) (Ciputra University)

2. Prof. Dr. F. Danardana Murwani, MM. (Ciputra University)

3. Ir. Hendrasmoro, M.D.M. (Ciputra University)

Organizing Committee

Chair Dr. J.E. Sutanto, MM (Ciputra University)

Secretary Dr. Christina Whidya Utami, MM. (Ciputra University)

Co-Secretary Natalia Christiani Djahi, S.Pd., M.Pd. (Ciputra University)

Treasury Maria Assumpta Evi Marlina, SE, MM. (Ciputra University)

Co-Treasury Eko Budi Santoso, SE., M.Si.Ak. (Ciputra University)

HELD BY CIPUTRA UNIVERSITY COLLABORATED WITH

1. UIN Sunan Ampel Surabaya, INDONESIA

2. Universitas Negeri Surabaya, INDONESIA

3. Sekolah Tinggi Ilmu Ekonomi Indonesia Surabaya, INDONESIA

4. Universitas Katolik Darma Cendika Surabaya, INDONESIA

5. IBMT International University Surabaya, INDONESIA

6. Ikatan Doktor Ekonomi Indonesia (IDEI) Surabaya, INDONESIA

7. Universitas Abdurachman Saleh Situbondo, INDONESIA

8. Universitas W.R. Supratman Surabaya, INDONESIA


Book One III

REVIEWER

1. Prof. Dr. Ir. Hening Widi Oetomo, M.M., Ph.D.

(Sekolah Tinggi Ilmu Ekonomi Indonesia Surabaya)

2. Dr. Tina Melinda, Dra., M.M. (Ciputra University Surabaya)

3. Dr. Christina Whidya Utami, M.M.

(Ciputra University Surabaya)

4. Dr. Hermeindito, SE, MM.


5. Dr. Yusak Anshori, M.M. (Ciputra University Surabaya)

6. Jimmy Ellya Kurniawan, S.Psi., M.Si., Psikolog


7. Wirawan Endro Dwi Radianto, S.E., M.Sc.Ak.


8. Dr. Christian Herdinata, S.E., M.M. (Ciputra University Surabaya)

9. Adi Suryaputra Paramita, S.Kom., M.Kom. (Ciputra University Surabaya)

10. Trianggoro Wiradinata, S.T., M.Eng.Sc., Ph.D. (Ciputra University Surabaya)

11. Tommy Christian Efrata, S.E., M.Sc. (Ciputra University Surabaya)

12. Agoes Tinus Lis Indrianto, S.S.,M.Tourism. (Ciputra University Surabaya)

13. Dra. Juliuska Sahertian, M.Sc. (Ciputra University Surabaya)


Book One IV

KEYNOTE SPEAKERS

1. Prof. Parimal Merchant

Director Center for Family Manager Business SP Jain Institute of Management &

Research, INDIA

2. Prof. Greg Barton

Director of the Center for Islam and the Modern World (CIMOW),

AUSTRALIA

3. Ir. Harun Hajadi, MBA

Managing Director of Ciputra Group, INDONESIA

4. Tanadi Santoso, MBA

Founder of SAM Design, INDONESIA

5. Antonius Tanan, MBA

President of UCEC (Universitas Ciputra Enterpreneurship Center),

INDONESIA.

6. Prof. Dr. Lucas da Costa, SE., M.Si

Rector of Universidade Da Paz, TIMOR LESTE

7. Norashidah Hashim, PhD

Deputy Director of Training and Consultation Department .

Co – operative and Entrepreneurship Development Institute (CEDI)

Universiti Utara Malaysia, MALAYSIA


Book One V

TABLE OF CONTENTS

Evi Thelia Sari1 The Effect of Entrepreneurial Corporate

Culture to Create The Entrepreneurial

Personality Characteristics: Comparing Male

And Female Employees In Surabaya

1

Ristanti Akseptori1,

Marya Mujayana2

Cointegration of Indonesia’s Stock Market

And America At The Period of And Recovery

From Global Financial Crisis

19

Nila K Hidayat1, Dibia

Abduh2, Fiter Abadi3

Competence Development Strategy Resources

Actors Creative Industry Through Education,

Skills And Culture In The Creative Industries

Regional South Tangerang

29

Christina Whidya Utami1,

Hendrasmoro2,

Danardana Murwani3

Model Application Mentoring Pegg (5c) to

Improve The Entrepreneur Learning Quality

E4 Ciputra University

45

Ivana Alim1, Deddy

Marciano2, James Bartle3

Asymmetry Information And Credit Risk

Effect on Loan Pricing In Asia Pacific 2006-

2010

59

Dean Michael Reyhan1,

David Sukardi Kodrat2

R Trading Company Development Feasibility

Study

70

Nurmawati1 Planning And Controlling of Raw Material In

Accumulator Production At The Pt Xx

80

Rendy Iswanto1, Tina

Melinda2

The Effect of Price And Product Quality on

Buying Decision of Photo Cabin Services

88

Jeffry1, Christina Whidya

Utami2

The Influence of Intrinsic Motivation And

Extrinsic Motivation Towards Player

Performance In Knights Management

98

Kirwani Susanti1, Made

Dudy Satyawan2, Renny

Dwijayanti3

The Internalization of Entrepreneurial

Learning In An Effort to Develop

Entrepreneurial Spirit on Vocational High

School Students

108

Bachtiar Jusuf Helmy Effect of Sources of Competitive Advantage

of Marketing on The Performance of Fish

Processing Industry In Tambak Wedi,

Surabaya

119

Tina Melinda1, Meidiahna

Kusuma2, Liliani3

The Factors Shaping The Spirit of

Entrepreneurship (A Study In Small And

Medium Enterprises)

128


Book One VI

Nekky Rahmiyati1 The Effects of Fiscal Decentralitation And

Investment Growth on Economic Growth In

East Java

136

Arif Firmansyah1, Dina

Ratna Furi2

The Role of Entrepreneurial Orientation on

The Relationship Between Personal

Characteristics And Business Performance

145

Wiwin Purnomowati1,

Ismini2

Ibk Program For Creating Student

Entrepreneurs At The Widyagama University

162

Kevyn Hadianto Setijo1,

Denny Bernardus2,

Christina Whidya Utami3

Design Strategy For Property Developer

Addressing The Policy of Bank Indonesia

No.15/40/Dkmp On 24 September 2013 (Case

Study: Citraland Surabaya)

169

Daniel Kurniawan1,

J. E. Sutanto2

The Influence of Price, Product Quality,

Service Quality on Customer Satisfaction And

Customer Loyalty of Dck Surabaya

185

Sri Sutrismi1 The Implementation of Students’ Entrepreneur

Through The Cooperative-Based Entrepreneur

Instructional Model

204

Bambang Purwoko1 The Influence Perceived Stimulation And

Perceived Crowding Against Impulse Buying

And Customer Satisfaction Ramayana

Department Store In Surabaya

211

Wayan Sukesedana1,

J.E. Sutanto2

Effect of Internal And External Factors of

Against Sugarcane Farmers Income In

Ngimbang Lamongan

225

Jaya Adi Gama

Tengtarto1, David

Sukardi Kodrat2

Fleasibility Study For Development Business

PT. J

239

Kevin Alexander

Ongkowidjojo1, Damelina

Tambunan2

The Succession Program Planning of Damai

Sejahtera Family Business

250

Wulandari Harjanti1 Creating Comfort Zone With

Entrepreneurship

257


Book One 1

THE EFFECT OF ENTREPRENEURIAL CORPORATE CULTURE

TO CREATE THE ENTREPRENEURIAL PERSONALITY

CHARACTERISTICS: COMPARING MALE AND FEMALE

EMPLOYEES IN SURABAYA

Evi Thelia Sari1

STIE Mahardhika Surabaya

INDONESIA

E-mails: [email protected]

ABSTRACT

This study is to examine the effect of entrepreneurial corporate culture in

creating the entrepreneurial personality characteristics and to compare the

effect on entrepreneurial personality between male and female employees in

Surabaya, Indonesia. Using the multiple regression analysis and independent t-

test, the results of the study are simultaneously all the components of

entrepreneurial corporate cultures (X1 to X6) which are: creative innovation,

cooperation, open-communication, organizational risk-taking, tolerance of the

creative talents, and acceptance to the criticism, bring the effect to create the

entrepreneurial personality characteristics (Y) of the employees. Partially, each

of components (X1 to X6) influences the entrepreneurial personality

characteristics (Y) of the employees, except “cooperation” component brings

the negative influence to the entrepreneurial personality characteristics. The

“open-communication” brings the highest regression value to Y variable while

R2value is less than 50% so Y variable might be influenced by other factors not

discussed in this paper. The result of independent t-test shows the difference

between male and female employees in Surabaya on the effect of

entrepreneurial corporate culture to the entrepreneurial personality

characteristics with coefficient 0.422.

Keywords: Entrepreneurial Corporate Culture, Corporate Culture,

Entrepreneurial Personality Characteristics

INTRODUCTION

There are so many topics about entrepreneurship and most of these propose the term

“innovation”, “creativity” and “risk-taking”, besides the culture either national or

company level cultures which could have influences to create and enhance

entrepreneurship among the people. Indonesian government has been focusing to

support entrepreneurship since 2000 and the growth of entrepreneurship is amazingly

proven by huge numbers of new ventures established.

The globalization, however, is bringing more investments to Indonesia, many

manufactures, service industries, finance and banking industry, education institutions

and retail industries are invested and operated .especially in Surabaya as the capital of

East Java Province with about 3 million population in it and 1.35 million people are


Book One 2

working in either private or state-owned companies/institutions in Surabaya city. This

population is mixed of originates and urbanized people from counties or towns around

Surabaya and even from other provinces and islands. This mixture brings more

complication to define its basic culture. In addition to this, the global companies

investing in Surabaya enrich this city with many cultures introduced to society through

its employees.

Companies are not static, yet they are continually changing (Morris & Kuratko, 2002).

They must adapt their traditional paradigm and even value to the changing global

environment, demand and also values. Thus, the companies have to change to be more

innovative and then they need to support their people within with the eagerness and

readiness to change and do something different than they used to do. Study by Shihab,

et al.(2011) found the significant relationship between organizational culture and

entrepreneurial orientation among its employees. Many years ago, basically, male and

female characteristics in Indonesia differed by the conditions of its independences, risk-

taking, ability to perceive failures and other personality characteristics of an

entrepreneurship. Yet, the culture in national level is currently changing, indeed.

Surabaya, the second largest city in Indonesia, currently indicated to have some changes

in cultures and even values and norms. While in the past, the basic culture of Indonesian

characteristics are masculinity, high context and collectivist as those in some other

Asian countries and Latin America, but the globalization brings a lot of changes not

only to the economy, technology, political, but also to social and culture life.

This paper will examine the effect of entrepreneurial corporate culture to create the

employees’ entrepreneurial characteristics in Surabaya and then try to see whether the

effect is different to male and female employees.

LITERATURE REVIEW

Corporate Culture

Organizational culture is a system of common definitions which are preserved by the

members of an organization and it creates distinction between organizations

(Pardakhtchi, 2006). Robbins (1990) identified ten key characteristics composing

organizational culture. They include individual initiative, risk tolerance, direction,

integration, management support, control, identity, reward system, conflict tolerance

and communication patterns. (Sepehri and Khayati, 2013).

Defining the term “corporate culture” needs an introduction of culture in its existence

within an organization or corporate (later, it will be mentioned as “corporate”). Schein

(2010), stated that the concepts about culture are: Structural stability: implies that it is

not only shared but also stable because it defines the group; depth: culture is the deepest,

often unconscious part of a group and is therefore less tangible and less visible; breadth:

after characteristic of culture is that after it has developed, it covers all of a group’s

functioning. Thus, culture is pervasive and influences all aspects of how an organization

deals with its primary task, its various environments, and its internal operations and the

last concept is; patterning or integration which is implied by the concept of culture and

that further lends stability is patterning or integration that ties together the various

elements and resides at a deeper level. Culture, based on Schein (2002), then implies

that rituals, climate, values and behaviors tie together into a coherent whole and this

pattern or integration is the essence of what we mean by culture. Disorder or


Book One 3

senselessness makes anxiety and hard work to reduce that anxiety by developing a more

consistent and predictable view of how things are and how they should be.

Thus, in a corporate, culture will affect the way how the strategy is determined, goals

are established and organization operates. Finally, Schein (2010) defined formally that

an organization culture (this paper refers to it) is “A pattern of shared basic

assumptions that a group has learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and

therefore, to be taught to new members as the correct way to perceive, think, and feel in

relation to those problems.” The cultures somehow, affecting the corporate ways come from macro level (laws and

economic institutions) and micro level (the organization is influenced through a number

of cultural elements relating to employer-employee relationships and behaviour among

employees).

Entrepreneurial Corporate Culture

The understanding of basic culture concepts within a corporate will support the better

idea to the entrepreneurial corporate culture. Kotter (1996) in Morris & Kuratko (2002)

noted that “ culture changes only after you have successfully altered people’s actions,

after the new behavior produces some group benefit for a period of time, and after

people see the connection between the new actions and the performance improvement”.

This statement then brings us the paradigm that management even does not change the

culture so that entrepreneurship begins, but a corporate must create an entrepreneurial

culture through a transformation process including innovation, continuous

reinforcement, result, and extensive internal communication (Morris & Kuratko, 2002).

Definition of entrepreneurial corporate culture is not clearly described, but its core

meaning refers to corporate which is consistent with entrepreneurship and most

conducive to entrepreneurship (Morris & Kuratko, 2002) and seems to have the

following elements:

- People and empowerment focused;

- Value creation through innovation and change;

- Attention to the basics;

- Hands-on management;

- Doing the right things;

- Freedom to grow and to fail;

- Commitment and personal responsibility;

- Emphasis on the future and a sense of urgency

The basic thing of entrepreneurial corporate culture is about the people within it. They

must champion a concept, persevere in the face of resistance and rejection, make

adaptations, and keep the idea alive, but still need teams. A motivated, coordinated team

is critical for moving an entrepreneurial event through what can be a lengthy process

filled with obstacles (Morris & Kuratko, 2002).

The other important thing in entrepreneurial corporate is about the people view about

failure. Failure is then perceived in the entrepreneurial corporate because the executives

recognize that failure goes hand in hand with innovating. Failure is considered a trial

toward an innovation and sometimes it brings extra cost to try. Then avoiding failure in

no way ensures success but experiencing failures can enhance the possibility of success


Book One 4

if learning is taking place. So, the real problem with failure point of view is how a

corporate conceptualizes failure. (Morris & Kuratko, 2002). However, the study by

Sepehri & Khayati (2013) indicates that there is a significant relationship between the

components of organizational culture and corporate entrepreneurship.

Stevenson (1983) in Gathungu, et al. (2014) conceptualized entrepreneurship as a

management approach that has at its heart an all-consuming passion for the pursuit and

exploitation of opportunity without regard to resources currently controlled and

contrasted entrepreneurial behavior with administrative behavior.

Razavi et al. (2012) in their study used McGuire components of entrepreneurial

organization culture those will be also used in this paper. The six components used to

describe the entrepreneurial corporate culture are: creative innovation, cooperation,

open communication, organizational risk-taking, tolerance of the creative talents, and

criticism acceptance.

Creative innovation has many definitions and indicators but basically it is characterized

by dynamic environment with its new product or procedure or a new management

strategy to an enterprise (Razavi et al., 2012). The product development is one of the

duties of research and development in the institution, organization or corporate.

Cooperation tends to be defined as the teamwork dynamic and collaboration among

employees within organization. Open communication is clearly seen as the easy access

to information and sharing ideas at all levels and sections in organization/corporate.

Organizational risk-taking is defined as the ability of the organization members to

believe reasonable risk-taking and learning from mistakes and even failures (Razavi et

al., 2012). Open-minded and informal culture perhaps is easier to adjust with mistakes.

The other component is tolerance of creative talents which refers to supports that given

to the creativity of the employees in doing their tasks. The last component proposed by

Mc Guire as cited in Razavi et al (2012) is criticism acceptance which needs the open-

minded leaders in organization or corporate because it refers to acceptance to the

comment from dissatisfied employees and the cooperation between management and

employee to resolve their dissatisfaction. This paper uses those term based on Razavi’s

with some adaptation to the proper situation.

Mars (2008) in his study shows four distinct environment about corporate cultures;

piazzas, modules, pyramids and keeps. To each “corporate culture” he equated an

appropriate form of enterprise: piazza to entrepreneurialism, modules to projects,

pyramids to institutional hierarchies and keeps to specialist pursuits. For those

entrepreneurial, networking and innovating individualist, there is no division between

internal and external space (time) and for them it is about competitive arena. So, in the

entrepreneurial corporate culture, competition and innovation must be encouraged

among the employees.

Cakar & Erturk (2010) concluded in their study that innovative culture is a way of

thinking and behaving that creates, develops and establishes values and attitudes within

a firm that may require rising, accepting, and supporting new ideas involving an

improvement in the functioning and management of the firm. They considered that

empowerment is an antecedent of innovation capability and a consequence of

organizational culture. Their findings are meaningful that the more employees tend to

avoid uncertainty, the more they participate in the decisions affecting their tasks. They


Book One 5

usually ask feedback from their supervisors and motivated by the praise from the

supervisors.

Small firms have their managers more concerned with and involved in the professional

as well as personal lives of their subordinates and this setting makes employees become

more positive to the managers’ decisions on innovations and increase their participation

in the innovation process (Cakar & Erturk, 2010).

Entrepreneurial Orientation

Although in this paper, entrepreneurial orientation specifically is not discussed, but this

term seems to be the other effect of entrepreneurial corporate culture. Some empirical

studies suggest that EO is a multi-dimensional construct and can be evaluated from

different perspectives. Miller’s (1983) work, which views the EO construct as

innovation, risk-taking, and proactiveness, is the basis for several studies. Later, a

number of studies have established innovation, risk-taking, and proactiveness as EO

dimensions. Lumpkin and Dess (1996) in Shihab et al., (2011), defined each EO

construct as follows:

1. Autonomy is one of the most important stimuli for the entrepreneurs in running

ventures and described as an independency of an individual or a team to

develop business vision and carry it through

2. Completion here is defined as the strong autonomy whenever the entrepreneurs

supported with cultures that endorse them to be independently and

opportunities seekers.

3. Innovativeness refers to willingness to support new ideas, creativity, novelty,

technological leadership, experimentation, and R&D in the development of

new processes. It also gives large contribution to the presence of

entrepreneurship. If there is supporting culture which supports the creation of

new ideas, experimentation, original solutions to problem, and creative process

then innovativeness will give the positive results.

4. Risk taking is defined as willingness to accept uncertainty, seizing opportunity

in the marketplace by making large resource commitment with expectation to

achieve high returns. Risk-taking behavior and commitment to resource will

bring an entrepreneur to harvest the benefits.

5. Competitive aggressiveness is about firm’s tendency to compete with its

rivals/competitors directly and intensely. It also refers to entrepreneurs who

live in culture of achievement oriented. This dimension is becoming an

important component of EO because without competitive aggressiveness, firm

would not be able to survive and success in starting up a new venture. Since

proactiveness dimension is identical to competitive aggressiveness and

therefore is excluded in this present paper.

An organization’s culture represents the coherent pattern of values and beliefs that have

evolved as successful solutions to past challenges (Schein, 1990). Culture represents an

important contextual factor that can foster discretionary knowledge-sharing behaviors

(Burgelman, 1983; Morris et al., 1993; Zahra et al., 2004). A significant aspect of

organizational culture is the way in which the organization relates to employees and

employees to one another (e.g., Baron, Hannan & Burton, 1999; Schein, 1990). The

values regarding relationships with employees that underlie organizational culture can


Book One 6

exert a significant influence upon the types of HRM practices selected (Baron et al.,

1999). The dominant values of an organization are expected to exert a direct and

indirect influence on knowledge processes. (Hayton & Macchitella, 2013).

Entrepreneurial Personality Characteristics

There are a lot of versions to describe characteristics associated with entrepreneurs.

John Kao (Kuratko & Hodgetts, 2007) proposed eleven common characteristics to

identify the entrepreneurial characteristics, such as: total commitment, determination

and perseverance; drive o achieve and grow; opportunity and goal orientation; taking

initiative and personal responsibility; persistent problem solving; realism and a sense of

humor; seeking and using feedback; internal locus of control; calculated risk taking and

risk seeking; low need for statuts and power; integrity and reliability. Hornaday (1982)

in his “Research about Living Entrepreneurs” (Kuratko & Hodgetts, 2007) found 42

characteristics often attributed to entrepreneurs, some of them are: confidence, creativity,

initiative, intelligence, flexibility, efficacy, commitment, and ability to take calculated

risks, etc.

Based on the article of Soo Ji Min in 1999 (Kuratko & Hodgetts, 2007), there are the

top ten of twenty-first century characteristics of entrepreneurs such as: recognize and

take advantage of opportunities; resourceful; creative; visionary; independent thinker;

hard worker; optimistic; innovator; risk taker; leader.

In this paper, the characteristics to define entrepreneurial personality are based on the

components studied by Razavi et al. (2012) whose definitions adapted to this research

topic and use other reference too. Those eight characteristics are:

1. Risk-Taking, in this paper considered as calculated risk taking, as the extent

to which a person takes the solving complex issues and offering a variety of

ways to reasonable risks and has the power to face great risks and problems.

The ‘risk’ term here is considered calculated and carefully thought-out

manner (Kuratko & Hodgetts, 2007).

2. Internal Locus of Control, as Kuratko & Hodgetts (2007), is the belief that

either success or failure of their business is not governed by fate, luck or

similar forces. It is about their accomplishments in controlling and

influencing their business’ outcomes after their actions.

3. Success-Seeking, as Razavi et al (2012) proposed it as an individual’s

motivation to succeed and try to achieve goals.

4. Expressiveness of thought: It is the amount of a person’s ability to convey

complex concepts. It is more clearly to be defined in term of communication

skill, used in sharing ideas or policy.

5. Pragmatism, Razavi et al (2012) stated this term as the extent to which an

individual cares about doing work and achieving results. Kuratko & Hodgetts

(2007) stated in other term with similar definition to it as “drive to achieve”

that appears to others to be internally driven by a strong desire to compete,

excel against self-imposed standards, pursue and attain challenging goals.

6. Tolerance of Ambiguity is defined as the extent to which a person

entrepreneurs’ personality characteristics to accept instability and change and

works in conditions of uncertainty and ambiguity (Razavi et al., 2012).


Book One 7

7. Dreaming is also characteristics attached to entrepreneur because it refers to

the amount of a person’s imagination of organization belief in working with

others to achieve the different issues and the power of mental imagery.

(Razavi et al., 2012). Later on, this term is more known as vision, to develop

over time as the individual begins to realize what the firm is and what it can

become (Kuratko & Hodgetts, 2007).

8. Challenge-seeking is defined as the amount of interest in taking challenges

and the ability to deal with difficult and complicated issues (Razavi et al.,

2012). It is similar to the opportunity orientation as they are goal oriented in

their pursuit of opportunities (Kuratko & Hodgetts, 2007). This situation will

challenge them to accomplish their dream, goal and desired-result.

However, to be an entrepreneur does not need any extraordinary talent. It needs some

skills such as initiative, imagination, a clear vision and confidence. Most entrepreneurs

want to make the world a more pleasant place to live. (Kume, et al., 2013)

Gender Issues in Entrepreneurial Characteristics

There are also some other important differences which distinguish women from men in

this profession. The following are the most dominant (Radović-Marković, 2009):

1. Women start businesses to accomplish flexibility, independence and to free

themselves from corporative boundaries. Besides that, many women look

for personal satisfaction through running a business independently, to create

space for advancing in a career, to create a safe future and the possibility of

a choice of life style and work style.

2. Women are often motivated to start their own business because of the

dissatisfaction with their status in their jobs.

3. More than half of women owners (53%) are guided by intuition when they

start and run a business, while men (71%) are guided only by logic.

4. Two thirds of women (60%) compared to male business owners, examine

all possibilities before they make a decision and start some action, gather

information from their consultants and entrepreneurial associations more

than men do, successfully weigh up every possibility and balance different

tasks and priorities as well. (Radović-Marković, 2013):

The paper of Radović-Marković (2009) elaborated some main issues in the literature of

female entrepreneurship. Future studies should follow the changes in the roles and tasks

of women as entrepreneurs as the main conductors of these activities, influenced by new

flows of economic operation in the age of globalization. That is, the recognition of the

capacity of women entrepreneurs in our global community is no longer a matter of

debate. (Radović-Marković, 2013).

Gender differences, for Spain case, in entrepreneurial intentions and agentic traits

frequently linked to entrepreneurship (locus of control, entrepreneurial self-efficacy,

risk-taking propensity, and proactiveness) were examined and the result showed gender

differences in entrepreneurial intention and entrepreneurial self-efficacy, in the sense

that men felt themselves more efficient and oriented to create a new venture than

women. Nevertheless, major area and age explained differences in the variables studied

better than gender. (Jose & Licciardello, 2012).


Book One 8

Relationship between Corporate Culture and Entrepreneurial Personal

Characteristics

In other words, there is no significant difference between employees’ viewpoints on

corporate entrepreneurship and organizational culture, in terms of gender. (Sepehri &

Khayati, 2013). Hian Chi Koo (1996) in Razavi et al. (2012) found that success-seeking,

internal locus of control, risk-taking, ambiguity tolerance, self-reliance and innovation

as factors to lead people get tendency to entrepreneurial activities.

Razavi et al (2012) in their study found the negative correlation between creative

innovation, cooperation and tolerance of creative talents the personality characteristics,

open communications and organizational risk-taking. The result also showed that the

criticism acceptance has no meaningful correlation to the personality characteristics.

But the other part of the result shows that organizational risk-taking and open

communication have positive correlation between organizational risk-taking and open

communication with the personality characteristics of the respondents, so they

recommended the institution to improve the communications and performance by

workshop to educate the skill of risk-taking tolerance, creating thought and so on.

Based on the paper background and literature review along with the previous research

linked to the similar topics, then the hypothesis generated in this paper are:

I. There is simultaneous effect of Entrepreneurial Corporate Culture to the

Entrepreneurial Personality Culture among the employees

II. There is partially effect of Entrepreneurial Corporate Culture to the

Entrepreneurial Personality Culture among the employees

III. There is a difference in the effect of Entrepreneurial Corporate Culture to

the Entrepreneurial Personality Characteristic between male and female

employees

Figure 1. Research Model

Cooperation

Open Communication

Organizational Risk-

Taking

Tolerance of the Creative

Talents

Criticism Acceptance

Entrepreneurial

Personality Characteristics

Creative Innovation


Book One 9

RESEARCH METHODOLOGY

This quantitative research is conducted by purposive non random sampling method

using questionnaires and measured in Likert Scale (1-5). The sample size is 100

respondents collected from 15 June-21 June 2014. The analysis techniques are multiple

linear regressions to examine the effects of components in Entrepreneurial Corporate

Culture to the Entrepreneurial Personality Characteristics and also independent t-test for

comparing the gender (male and female).

Figure 2. Research Framework

The measurement tools used in this research is questionnaires given to the respondents.

The items in the questionnaire are based on Razavi et al.(2012) with some adaptation

and translated into Indonesian. The operational variables used along with their

indicators are as shown in Table 1.

Entrepreneurial

Corporate Culture

Entrepreneurial

Personality

Characteristics

Female

Employees

Entrepreneurial

Corporate Culture

Entrepreneurial

Personality

Characteristics

Male

Employees

Comparing the Effect of Entrepreneurial Corporate Culture to Create the

Entrepreneurial Personality Characteristics between Male and Female

Employees


Book One 10

Table 1. Operational Variable Definition

Research

Variable

Definition Indicators Measurement

Creative

Innovation (X1)

Based on

Razavi et al.

(2012)

- Corporate always does the innovation

- R&D operates well

Likert Scale:

1= strongly disagree

2 = disagree

3 = neutral

4 = agree

5 = strongly agree

Cooperation (x2) Based on

Razavi et al.

(2012)

- The corporate encourages team-work

among the employees

- The corporate motivates employees

to work in team

- Collaborative environment through

team-work is created within the

corporate

Open

communication

(X3)

Based on

Razavi et al.

(2012)

- The freedom for every employee to

share his/her ideas openly

- Management communicates openly

and transparently to its employees

- There is two-ways communication

within the corporate

Organizational

risk-

taking (X4)

Based on

Razavi et al.

(2012)

- The corporate dares to take risks

- The corporate gives opportunity to

try new ideas.

- The corporate appreciates every new

idea

Tolerance of

the creative

talents (X5)

Based on

Razavi et al.

(2012)

- The corporate motivates its

employees’ creation in doing their

tasks.

- The corporate motivates its

employees to solve the task problems

in different ways

Acceptance to

Critics (X6)

Based on

Razavi et al.

(2012)

- the corporate (management) accepts

the critics from employees positively

- - The disputes between corporate and

employees is solved by themselves

Entrepreneurial

Characteristics

(Y)

Based on

Razavi et al.

(2012)

- Risk-taking

- Internal locus of control

- Success – seeking

- Expressiveness of thought

- pragmatism

- Tolerance of ambiguity

- Dreaming

- Challenge-seeking


Book One 11

FINDINGS

The respondents description in this study shows that from 100 respondents purposively

taken are 41% male and 59% female employees in many institutions/companies in

Surabaya. Most of them (54%) is 22-28 years old, 31% is 15-21 years old, 12% is 29-35

years old and only 2% aged 36-42 years old while only 1% above 42 years old. Among

the respondents only 12% is married and the rest 88% is single (not widowed/divorced).

Based on their job positions and tenures, 86% of respondents work in local private

company, 6% in State-owned companies (SOE companies) and 8% work in foreign

private companies in Surabaya. Their corporate/institutions have various number of

employees. Less than 50 employees is the most based on the respondents’ information

(45%). Only 17% of respondents work in companies employing more than 300 people,

23% ranged 51-100 employees and only 15% work in companies which employ 101-

300 people.

The fields of business also matters in this study to provide better and deeper analysis

since different field of business requires different characteristics of jobs and people but

this case is not intensively discussed in this study. Table 2 shows the variety of business

fields gathered from respondents’ workplaces.

Table 2. Business Fields of Respondents’ Workplace

Frequency Percent

Valid

Percent

Cumulative

Percent

Valid Education 8 8.0 8.0 8.0

Manufacture 18 18.0 18.0 26.0

Public service 8 8.0 8.0 34.0

Information

Technology/Engineering 10 10.0 10.0 44.0

Retail 17 17.0 17.0 61.0

Finance 3 3.0 3.0 64.0

Hospitality 3 3.0 3.0 67.0

Consultant 1 1.0 1.0 68.0

Pharmacy 3 3.0 3.0 71.0

Food and Beverages 11 11.0 11.0 82.0

Construction 11 11.0 11.0 93.0

Creative Industry 3 3.0 3.0 96.0

Health and Medical 3 3.0 3.0 99.0

Agriculture, Farming 1 1.0 1.0 100.0

Total 100 100.0 100.0

Source: Primary data

The average year of working done by respondents is 1-3 years. Only 1 respondent has

been working in the same current company more than 6 years, 26% has been working

less than 1 year in the same companies and 15% has been working for 4-6 years.

Towards the questionnaires as the measurement tool, the validity test shows that Item 1,

Item 19, Item 24 are not valid because their value is less than 0.361 (N =30,

significance= 5%) so they must be removed from the item list and re-tested. After re-

test, all the items are valid and no more item rest after round 1 is removed. Reliability


Book One 12

test to the items is done and the item 18 and item 20 must be removed and the other test

must be executed. The second round of reliability test shows that all rest items are

reliable after those two items removed. In the column “Corrected Item-Total

Correlation” all the items’ values are more than 0.361 (based on the r table for N =30,

and significance= 5%). The Cronbach’s Alpha value is 0.925 and it exceeds the

minimum value 0.6.

So, five statements in questionnaires must be deleted in prior to the process of linear

regression analysis, are “your workplace always does the product innovations”, “you do

your job with responsibility”, “You are driven to reach the target”, you don’t have

difficulties to explain and express your thoughts in your workplace”, “You have the

ideas about your company/institution’s future”. The last four statements refer to internal

locus of control, success-seeking, expressiveness of thought, and dreaming as the

indicators of entrepreneurial personality characteristics. Other indicators of this

dependent variable are measured by other five indicators: risk-taking, pragmatism,

tolerance of ambiguity and challenge-seeking.

Table 3. Correlation

Entrepr

e

neurial

Charac

te

ristics

Creative

Innovati

on

Cooperati

on

Open

Commu

ni

cation

Organizatio

nal Risk-

Taking

Toleran

ce to

Creativ

e

Talents

Accep

tance to

Criticis

m

Pearson

Correlati

on

Entrepreneur

ial

Characteristi

cs

1.000 .310 .401 .454 .472 .421 .407

Creative

Innovation .310 1.000 .422 .379 .347 .255 .289

Cooperation .401 .422 1.000 .769 .538 .541 .473

Open

Communicati

on

.454 .379 .769 1.000 .400 .390 .333

Organization

al Risk-

Taking

.472 .347 .538 .400 1.000 .474 .620

Tolerance to

Creative

Talents

.421 .255 .541 .390 .474 1.000 .502

Acceptance

to Criticism .407 .289 .473 .333 .620 .502 1.000

Source: primary data processing

The correlation between organizational risk-taking and entrepreneurial personality

characteristics is the highest correlation value (0.421), while the creative innovation is

the least (0.310). The other components of entrepreneurial corporate culture such as

cooperation, open communication, tolerance to creative talents and acceptance to

criticism have similar correlation value (0.401; 0.454; 0.421; and 0.407). These

correlation values show the moderate correlation of independent variables and

dependent variable (Entrepreneurial Characteristics). It is also noticed that the value of


Book One 13

R2 is 0.354, means that the independent variables are not strong enough to influence the

dependent variable.

The low correlation value of creative innovation to the entrepreneurial characteristics

can be understood since most of respondents have been working 1-3 years in the same

(current) companies and their average age is ranging from 22-28 years old and still

single. In this age and marital status, most of them look for comfort when working.

They still strive to be themselves and less responsibility to family than older ages and

married people. The term creative innovation here refers to company’s culture to

innovate and use its R&D effectively. Seemingly, most employees do not pay intention

to R&D’s job.

However, all indicators of “organization risk-taking” are valid and reliable to be used in

the analysis and this variable is correlated to entrepreneurial personality characteristics

of the employees. Company welcomes new ideas from its employees and this attitude

towards new ideas correlates to entrepreneurial characteristic personality.

Table 4. Regression Analysis

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B

Std.

Error Beta B

Std.

Error

1 (Constant) 10.881 1.729 6.292 .000

Creative Innovation .356 .357 .093 .996 .322

Cooperation -.710 .505 -.212 -1.406 .163

Open

Communication 1.230 .435 .371 2.826 .006

Organizational

Risk-Taking .366 .171 .247 2.143 .035

Tolerance to

Creative Talents .721 .384 .198 1.875 .064

Acceptance to

Criticism .410 .442 .104 .928 .356

Source: primary data processing

Then the regression analysis result shows F value = 8.503, then the F table = 2.198.

Because F value > F table = 8.503 > 2.198, it means that simultaneously, all the

independent variables have the effect to the dependent variable it means that we accept

hypothesis I. Regression equation is Y= 10.881+ 0.356 X1 – 0.710 X2 + 1.230 X3 +

0.366 X4 + 0.721 X5 + 0.410 X6. It means that components altogether if exist within the

culture of corporate will influence positively to the entrepreneurial personality

characteristics of its employees, no matter what the basic values of the employees

personally is. This simultaneous result ignores the gender differences, working periods,

field of business, marital status and the number of employees within companies the

respondents work in. however, the low value of R2 (0.354) indicates that the

independent variable (entrepreneurial personality characteristics) might be influenced

by the other factors not described in this paper. So, linked to Schein (2010), thus, in a

corporate, culture will affect the way how the strategy is determined, goals are


Book One 14

established and organization operates because it is a pattern of shared basic assumptions

that a group has learned as it solved its problems of external adaptation and internal

integrationand somehow, affecting the corporate ways in employer-employee

relationships and behaviour among employees.

The result of regression analysis shows that t test value = 6.292 and t table = 1.986.

Because t value > t table or 6.292 > 1.986, all the independent variables partially have

the effect to the dependent variable, so hypothesis II is accepted. But partially, it is

surprising that cooperation has the negative influence to the entrepreneurial personality

characteristics, and creative innovation is very low but positively effecting

entrepreneurial personality characteristics. It is oppositely to “tolerance to creative

talents” variable which effects the characteristic positively (highest value compared to

the other positive effects).

The negative effect of cooperation can be explained based on definition as the

teamwork dynamic and collaboration among employees within organization (Razavi et

al., 2012). The teamwork dynamic is not common for most of our respondents and

negatively considered as the barrier to compete with the other employees in the same

company. The basic culture of Indonesian people perhaps influences this result since the

high context culture will be not easily to be aggressive in team work. Marks et al (2001)

in Lepine (2008) argued that teams orchestrate interpersonal processes both during and

between episodes, so it needs the interpersonal skills of its members. It then also

depends on task interdependence proposed by Thompson (1967) as cited in Lepine

(2008) which stated that when task interdependence in a work unit is lower, members

work more independently, requisite interpersonal interaction is more limited and then

member contributions are pooled rather than integrated. Lepine et al. (2008) found that

task interdependence and team size affected relationships between teamwork processes

and performance. In terms of entrepreneurship, we more concern in being independent,

than it makes sense when cooperation and collaboration decrease the spirit of

entrepreneurship due to its interdependence.

Kimbrough & Componation (2009), in their study, combined a culture measurement

instrument with gauges of Enterprise Risk Management (ERM) implementation and the

result shows the correlation. They summarized that the organic cultures tend to make

greater progress in their ERM programs. The organization culture in this study refers to

how quickly the organization can react to market changes and whether or not the

organization can successfully steer major changes of its environment. Linking to

entrepreneurial corporate culture, Razavi et al. (2012) defined organizational risk-taking

for their study as the ability of the organization members to believe reasonable risk-

taking and learning from mistakes and even failures. The organization (this term is

always considered as corporate) which accustomed to react and be brave in taking risks

will influence their employees’ entrepreneurial personality and the result of this study

shows the positive influence. It means that the higher intensity of corporate in taking

risk in the management decisions towards the business environment, will bring

employees to be more ready and easily to react to any risks.

Creative innovation, defined as characterized by dynamic environment with its new

product or procedure or a new management strategy to an enterprise and tolerance to

creative talents, defined as supports that given to the creativity of the employees in

doing their tasks. (Razavi et al., 2012) are positively influence the entrepreneurial


Book One 15

personality. But technically, both components cannot be separated from open-minded

and informal culture. Open-mindedness and informal culture are supported by open

communication and acceptance to criticism as well within the organization. Supported

by Mars (2008), piazza corporate culture will support and encourage the innovation

among the employees. innovative culture is a way of thinking and behaving that creates,

develops and establishes values and attitudes within a firm that may require rising,

accepting, and supporting new ideas involving an improvement in the functioning and

management of the firm and feedback and praise from their supervisors motivate the

employees to be involved in creating their new way of work (Cakar & Erturk, 2010).

The low effect of creative innovation and the acceptance of talents could be due to the

field of business where the respondents work. Some of them do not require the rapid

innovation or multitalented employees such as banking/finance, construction and retail

because all jobs have standardized rule and procedures. But if both of them implied in

manufactures, services or creative industry only, the result must be different.

One thing to be noticed is that the highest effect to entrepreneurial personality is open

communication. Basic culture of population is high context and collectivism so that

every one needs communication with others and considered communication as best way

to solve problems, and could be understood by the range of ages the most respondents

are. Cakar & Erturk (2010) found that small firms have their managers more concerned

with and involved in the professional as well as personal lives of their subordinates and

this setting makes employees become more positive to the managers’ decisions on

innovations and increase their participation in the innovation process, relating this

finding to the respondents characteristics in this paper that most of them are in the

productive age, so they tend to ask for more information and be active in information

seeking by communicating more, and also, most respondents work in medium corporate

with less than 50 employees that brings easier condition to communicate and know each

other even with the superiors.

After answering two hypotheses regarding regression analysis, the other hypothesis is

answered using independent t-test to compare the entrepreneurial personality

characteristics between male and female employees. Based on respondent description

this study gets 47 males and 53 females to be analyzed.

Table 5. Chi-Square Tests

Value df

Asymp. Sig.

(2-sided)

Pearson Chi-Square 21.629(a) 13 .061

Likelihood Ratio 26.880 13 .013

Linear-by-Linear Association .949 1 .330

N of Valid Cases 100

Source: Primary Data Processing

From Table 5, X2 value= 21.629 and X2 table= 22.36203. Due to X2 value < X2 table, in

this case, there is a difference in entrepreneurial characteristics between male and

female employees so the hypothesis III is accepted.


Book One 16

Table 6. Symmetric Measures

Value Approx. Sig.

Nominal by Nominal Contingency Coefficient .422 .061

N of Valid Cases 100

Source: Primary Data Processing

The symmetric measures (Table 6) show the contingency coefficient is 0.422 and it

tends to 0 rather than to 1. It indicates that although there is difference in entrepreneurial

characteristic between male and female employees in Surabaya, the relationship of

entrepreneurial characteristic and gender is not very strong. However, the differences is

mostly caused by the basic culture of Indonesians which is high context and masculinity

that differ the gender regarding their positions in family and society and their functions

in their daily life and work. Although the difference is not so strong but entrepreneurial

personality such as challenge-seeking, although not described in this paper, seems to be

stronger in male employees than females because the paradigms that females should

stay more at home, taking care of family and not work too much.

Gender differences, for Spain case, in entrepreneurial intentions were examined and

there is gender difference, in entrepreneurial intention and entrepreneurial self-efficacy,

in the sense that men felt themselves more efficient and oriented to create a new venture

than women but however, major area and age explained differences in the variables

studied better than gender. (Jose & Licciardello, 2012). In this study, the slight

differences between male and females could be influenced by the age and years of

working. Most of the respondents are in the same age and years of working. Their

paradigm and perceptions towards entrepreneurial corporate culture are relatively the

same. The study of Radović-Marković (2013) also concluded that the recognition of the

capacity of women entrepreneurs in our global community is no longer a matter of

debate. It gives the other understanding that in terms of entrepreneurial discussion,

especially within corporate-setting, gender issues are not the big problem and more

equal than before.

CONCLUSIONS AND RECOMMENDATION

This study has some findings regarding the hypothesis proposed. Simultaneously all the

components of entrepreneurial corporate cultures bring the effect to create the

entrepreneurial personality characteristics of the employees. Partially, each of

components influences the entrepreneurial personality characteristics of the employees,

but only “cooperation” component bring the negative influence to it. The highest

influence comes from open communication compared to other independent variables as

the components of entrepreneurial corporate culture. The independent t-test is to

compare the effects between male and female employees. The result shows the

difference between male and female employees about the entrepreneurial personality


Book One 17

characteristic affected by the entrepreneurial corporate culture. All hypothesis assumed

in this study are accepted and answered.

LIMITATION OF STUDY

This study has some limitations apart of the small number of respondents. This study

does not include the education background and positions of the respondents to support

the analysis. This study is also limited in analyzing data in terms of culture theories. In

the further study, the comparison based on gender must be deeper examined along with

the psychological theories to strengthen the personality differences.

It is also better if in the future study, the corporate analyzed has identically size, field of

business and ownership to be more focus in analysis, and if necessary to compare, it

should be three types of corporate or organizations, so the differences can be clearly

seen.

REFERENCES

Belousova, Olga. 2009. Factors Affecting Employees’ Intentions to and Adoption of

Entrepreneurial Behaviors: A Role for Entrepreneurial Orientation?. Proceeding of The

ESU Conference on Entrepreneurship, p.14

Cakar, Nigar Demircan & Alper Erturk. 2010. Comparing Innovation Capability of Small and

Medium-Sized Enterprises: Examining the Effects of Organizational Culture and

Empowerment. Journal of Small Business Management 2010 48 (3), pp. 325-359

Gathungu, James M, et al. 2014. Entrepreneurial Orientation, Networking, External

Environment, and Firm Performance: A Critical Literature Review. European Scientific

Journal, March 2014, Edition Vol. 10, No. 7.

Hayton, James & Ubaldo Macchitella. 2013. HRM, Organizational Culture and Entrepreneurial

Capabilities: The Role of Individual and Collective Knowledge Processes. ERC

Research Paper, No.5, June 2013. www.enterprisereseach.ac.uk.

Halim, Muhammad Abi Sofian Abdul, et al. 2013. Entrepreneurial Intentions As A Factor To

Job Performance in Public Organization. Global Advanced Research Journal of

Management and Business Studies (ISSN: 2315-5086) Vol. 2(6) pp. 349-355, June,

2013. Available online http://garj.org/garjmbs/index.htm. Copyright © 2013 Global

Advanced Research Journals

Jose, Sanchez, C. & Licciardello Orazio. 2012. Gender Differences and Attitudes in

Entrepreneurial Intentions: the Role of Career Choice. Journal of Women’s

Entrepreneurship and Education 2012, No. 1-2, 7-27.

Kimbrough, R.L & P.J. Componation. 2009. The Relationship Between Organizational Culture

and Enterprise Risk Management. Engineering ManagementJournal Vol. 21 No.2, June

2009.

http://www.enterprisereseach.ac.uk/

http://garj.org/garjmbs/index.htm


Book One 18

Kume, Anisa, et al. 2013. Entrepreneurial Characteristics Amongst University Students in

Albania. European Scientific Journal, June 2013 Edition Vol. 9., No. 16.

Kuratko, Donald F & Richard M.Hodgetts. 2007. Entrepreneurship: Theory, Process, Practice.

7th Edition. Thomson.

LePine, Jeffery A., et al. 2008. A Meta-Analysis of Teamwork Processes: Tests of A

Multidimensional Model and Relationships with Team Effectiveness Criteria.

Personnel Psychology, 2008, 61, 273-307

Mars, Gerald. 2008. Corporate Cultures and the Use of Space: An Approach from Cultural

Theory. Innovation: the European Journal of Social Science Research. Vol. 21, No. 3,

September 2008, 185-204.

Morris, Michael H & Donald F. Kuratko. 2002. Corporate Entrepreneurship. 1st Edition.

Thomson: USA

Radović-Marković, Mirjana. 2013. Female Entrepreneurship: Theoretical Approaches. Journal

of Women’s Entrepreneurship and Education. No. 1-2, 1-9

Razavi, Seyed Mohammad Hosein, et al. 2012. Analysis of the Relationship Between

Entrepreneurial Organizational Culture & Personality Attributes of Sport Teachers:

Evidence from Mazandaran Province in Iran. Middle-East Journal of Scientific

Research 11 (2): 201-208, 2012, ISSN 1990-9233. IDOSI Publications

Schein, Edgar H. 2010. Organizational Culture and Leadership.(4th Edition). San Francisco:

Jossey-Bass

Sepehri, Somayyeh & Emad Khayati. 2013. The Relationship between Organizational Culture

and Corporate Entrepreneurship in Food and Beverage Industries. Asian Journal of

Management Sciences and Education. Vol. 2 no. 3, July 2013

Shihab, Muchsin Saggaff, et al. 2011. Relationship between Organisational Culture and

Entrepreneurial Orientation: Indonesian SMEs Context. 2nd International Conference

on Business, Economics and Tourism Management IPEDR vol.24 (2011) © (2011)

IACSIT Press, Singapore


Book One 19

COINTEGRATION OF INDONESIA’S STOCK MARKET AND

AMERICA AT THE PERIOD OF AND RECOVERY FROM

GLOBAL FINANCIAL CRISIS

Ristanti Akseptori1, Marya Mujayana2

STMIK STIKOM

SURABAYA, INDONESIA.

E-mails: [email protected], [email protected]

ABSTRACT This study aims to investigate the integration of capital market of Indonesia and

America as a result of the global financial crisis. Indonesia capital market is

represented by the Composite Stock Price Index, while the American stock

market is represented by the S&P500. In addition to the influence of foreign

capital market condition, (S&P500) as the external factor of country’s economy,

the Indonesia capital market is influenced by economic conditions in the

country, including the exchange rate and foreign transaction (net foreign flow).

External and internal factors can affect the stability of the financial system of a

country. To find the integration of world capital markets and Indonesia

financial system stability due to the global financial crisis, this study was

conducted in two periods, they are the period of global financial crisis (July

2007-December 2010) and the period of recovery after global financial crisis

(January 2011- December 2013).

This study used a quantitative approach using the Johansen Cointegration Test.

Monthly data were analyzed using the method of Ordinary Least Square (OLS).

The result of this study showed that there is no cointegration between Jakarta

Composite Index and S&P500 in the period of crisis and recovery. It means

there is short term relationship. This prove showed that there is integration

between Jakarta Composite Index and S&P500. When there is collapse in

S&P500, so did the Indonesia stock market. While internal factors, net foreign

flow, showed the stability in the long relationship to the Indonesia Stock Market.

Keywords: Integration, Stock Market, Cointegration Test, Global

Financial Crisis.

INTRODUCTION Capital market has a role as a source of long-term financing for corporations and

investors. Integrated world capital markets will provide opportunities for companies and

investors to raise capital efficiently. Investors can make investments with broader

diversification (not only between industries, but also between countries). The capital

costs which are borne by the investor gets smaller, so the investment gets more

profitable. Thus, there are more investments done so that creates greater employment.

Integrated capital markets are geared to achieve the most optimal level of functionality

that supports the achievement level of welfare between countries. Thereby it increases

mailto:[email protected]



Book One 20

economic development in many countries.

World capital market activity must be influenced by conditions that occur in the world.

Instability from the crisis could lead to high costs of economic, politic, and social.

Stability of the financial system of a country is influenced by external and internal

factors. Trihadmini (2011) mentions that the external factor could be the world liquidity

shock that encourages the flow into or out of capital in the short term, the global

financial instability and the contagion effect. While internal factors may include interest

rates, exchange rates, inflation, and high dependence on banks. External conditions such

as the global crisis in 2007 proved that the activity of the world stock market is severe

affected. Bloomberg Database (2008) reported that from 25 July 2007 until 31

December 2008, a decrease in the S&P 500 is 40.50%. FTSE100 (UK stock market

index) fell by 31.30%, the Nikkei 225 (Japan stock market index) plunged by 50.39%,

the KLSE (Malaysia stock market index) fell by 36.45%, and the Jakarta Composite

Index fell by 43.39%. This proves how external conditions affect the country's economy

activities of the country.

The integration of world capital markets is a topic that has been studied since the world

stock market crash in October 1987. Preliminary studies carried out on the stock market

were developed by countries like the United States, European countries, Japan. After the

Asian crisis, many studies began to focus their research on the emerging markets of

Asia. With the background of the global financial crisis, previous research concerning

the integration of America with the Malaysian stock market has been studied by Khalifa

and Gallato (2012). The findings showed that when the American stock market

collapsed, so did the Malaysian stock market, but the exchange rate (forex) as a

country's macroeconomic variables, did not significantly affect the Malaysian stock

market during the global financial crisis. This finding proves the existence of a country's

capital market integration with other countries, while the domestic capital market

conditions are formed as a result of macro-economic aggregates.

This study focuses on the integration of capital markets of Indonesia and America as the

country of the crisis origin to determine how much Indonesia is affected by the crisis

shock. In addition, macro-economic variables such as exchange rate and foreign

transaction are considered as variables to determine the resilience of the domestic

capital market conditions. This research was carried out using Johansen Cointegration

Test in two periods, namely the period of the global crisis and the recovery from the

crisis.

CONTEXT AND REVIEW OF LITERATURE

Capital Market Integration

Integrated international capital market is a condition in which there are no barriers

whatsoever to have any securities in the capital markets, and also there are no obstacles

in the capital inflow/outflow). In this case, the stability of the world financial system

needs to be in good shape to be able to support the smooth capital inflow/outflow. The

presence of shock that occurs in the world's financial system can have an impact on the

capital inflow/outflow. The occurrence of shock can lead to negative market sentiment,

the condition in which many investors withdraw their funds in the stock market due to

the concerns about the security of their investment. In an integrated market, the

breakdown of the capital inflow/outflow in a market can impact the overall market


Book One 21

conditions. This occurs in the period of the global crisis 2008, where the American

financial system crash impact capital inflow/outflow to other countries such as Britain,

Japan, Malaysia, Indonesia, etc. This is proved from the decrease of stock index

movements in the stock market. The results of the research supporting this analysis is

Koh and Mayasami (1996) using a trivariate vector error-correlation model (VECM) on

the effect of the global market shares of the cointegration in the Singapore Stock

Exchange, that at the level of the market, America, Japan and Singapore are

significantly cointegrated in positive.

Study on integration of stock exchanges in Jakarta, Kuala Lumpur, Manila, Singapore

and Bangkok was conducted by Kiang-Ping et al (2003) using monthly data from 1998

to 2002. Conclusion of the results of study suggests that there is a common force that

drives the stock market of five ASEAN countries which are moving together in the long

term, mutually dependent (interdependent) and highly integrated and will move as part

of integrated market.

Johansen Cointegration Test

Mobarek states several tests which can be used to test the integration of the stock

markets are multivariate GARCH, vector auto regression (VAR), Unit root test, and

various cointegration tests. Johansen Cointegration Test is used to look at the long term

relationship of the variables under study so that the estimation of this research can be

used to look at the long-term equilibrium relationship of the two variables studied. The

two variables which are not stationary before differenced but stationary at first

difference, it is possible for cointegration (there is a long-term relationship between the

two). Cointegration hypothesis is widely used by researchers to test the integration of

international financial markets. Bekaert and Harvey (1995) emphasizes that a stock

market is integrated with the world stock market if the asset has a value corresponding

to the expected return of asset markets that have the identical level of risk that is listed

in the world market. In this case, it is applied the law of one price. The nature and

degree of integration of financial markets are very helpful for international investors in

influencing the decision of potential asset allocation on portfolio diversification. Majid

and Kassim (2009) explored the standard time series vector autoregressive technique to

determine whether cross-market relations of Indonesia and Malaysia stock market

change in the period of before and during the crisis. Research results support the general

view that the stock market tends to show a greater degree of integration or co-movement

increased during periods of crisis.

Research Framework Capital market integration is a relationship between two or more capital markets of

countries. If one market is experiencing shocks, such as a change in the stock price

index, it will give effect in the long term as well as short-term on capital markets on

integrated country. Its effects can be positive or negative. If there is capital market

integration, the results of the analysis will show a trend of increase or decrease with the

same for each country. The integration of capital markets provides an opportunity for

investors to make a profit, which in turn boost the economy of the countries. However,

the integration of capital markets can overwhelm the fragile capital markets. This occurs


Book One 22

because the capital markets are susceptible easily affected by capital market volatility

that occurred in other countries. Investors become reluctant to invest in a volatile market.

METHOD This study is a descriptive and conclusive study. Dependent variable in this study is

Jakarta Composite Index (www.finance.yahoo.com), while the independent variables

are the S&P500 (www.finance.yahoo.com), exchange rate (www.bi.go.id), and foreign

transactions (www .idx.co.id). The data analyzed is quantitative data analysis. The

period of study was divided into two, namely the global crisis period (July 2007-

December 2010) and the period of recovery from global financial crisis (January 2011-

December 2013).

The first step is to test the classical assumptions (normality, multicolinearity,

autocorrelation, and heteroskedastisitas) to ensure that the data used meet assumptions

of classical test. The next is to determine the stationary of data by conducting unit root

test to determine the degree of stationary of the variables used in the study. Unit root

test is done using Augmented Dickey Fuller test (ADF). Furthermore, partial

cointegration test is done between the independent variables (one by one) and the

dependent variable to determine the possibility of a long-term relationship between the

variables. In this study, it is conducted by the Johansen Cointegration Test. Basic

operational model for this study is:

JCI = α0 + α 1GSPC + α2kurs + α3NF + ε.......... (1)

Where JCI is a monthly index of stock price index (Composite Stock Price Index) in

Indonesia Stock Exchange, GSPC is S&P500 as one of the American stock index, kurs

is the exchange rate, and NF is foreign transaction or Nett Foreign Flow/buy-sell). Tests

were carried out using Eviews 4.

FINDINGS

Classical Test Assumptions

a. Normality Test

Normality test is done by Jarque-Berra testing. The results show that in the period of

July 2007-December 2010 and January 2011 – December 2013, research variables are

normally distributed with Jarque-Berra value greater than 0.05.

Table 1. Normality Test Result Period Dependent

Variable

Independent

Variable

Jarque

Berra

Probability Conclusion

July2007-Dec2010 JCI GSPC, kurs, NF 4.4236 0.109503 Normal

Distribution

Jan2011-Dec2013 JCI GSPC, kurs, NF 0.766107 0.681776 Normal

Distribution


Book One 23

b. Multicollinearity Test

To know whether the data used are free from multicollinearity or not, auxiliary

regression is performed. The followings are the results of multicollinearity test using a

correlation matrix.

Table 2. Multicolinearity Test Result Period of July2007-December2010 Period of January2011-

December2013

Variab

le

GSPC Kurs NF GSPC Kurs NF

GSPC 1 -

0.72380037956

7

0.08456173792

27 1 0.8962092

87

-

0.2977774

58

Kurs -

0.72380037956

7

1 0.02490261974

86

0.8962092

87

1 -

0.3009499

67

NF 0.08456173792

27

0.02490261974

86

1 -

0.2977774

58

-

0.3009499

67

1

From the correlation matrix above, it is known that in the period of July 2007 -

December 2010 and the period of January 2011 - December 2013, there are

multicollinearity disturbance in the presence of serial correlation on the exchange rate

and GSPC variables. Correlation values in the correlation matrix that is more than 50%

indicated a correlation between the independent variables. Prediction models will be

allowed to contain multicollinearity because the estimator can still be BLUE (Best

Linear Unbiased Estimator). Winarno (2009) states that BLUE characteristics are not

affected by the presence or absence of correlation between the independent variables.

c. Autocorrelation Test Testing autocorrelation in this study was performed using the Durbin-Watson test.

Winarno (2009) states that the value of d which describes the DW coefficient is in the

range of 0 to 4. If the value of d is in between 1.54 and 2.46 then there is no

autocorrelation, and if the value of d is in between 0 to 1.10, it means that the data

contains positive autocorrelation . Below is a table of autocorrelation test results of the

two periods used in this study.

Table 3. Autocorrelation Test Result Period Dependent

Variable

Independent

Variable

Durbin Watson Conclusion

July2007-December

2010

JCI GSPC, KURS,

NF

0.543032 Positive

autocorrelation

January2011-

December 2013

JCI GSPC, KURS,

NF

0.563547 Positive

autocorrelation

d. Heteroscedasticity Test The following table shows the value of Obs*R-squared probability using White

Heteroscedasticity Test in EViews. If the probability value is smaller than α = 5%, it is


Book One 24

concluded that the data are heteroscedastic. To ensure that the model equations used are

free from the problem of heteroscedasticity, we use GLS (generalized least squares)

method that has been provided by EViews. This method has weighting criteria based on

cross section weights and activates White heteroscedasticity consistent covariance.

Table 4. Heteroscedasticity Test Result Dependent

Variable

Independent

Variable

Obs*R-squared

Probability

Conclusion

JCI GSPC, KURS, NF 0.831711 Non heteroskedastic

JCI GSPC, KURS, NF 0.766914 Non heteroskedastic

Unit Root Test

To test the degree of stationary of data as a prerequisite for co-integration test, a method

unit root test is done by using Augmented Dickey Fuller test (ADF) testing models.

Winarno (2009) states that a stationary variable has a value of Prob. smaller than 5%.

The results show that all study variables are stationary at first different levels except the

variable of exchange rate for the period of January 2011 to December 2013. That’s why,

for the next cointegration test, the variable of exchange rate is not included in the test.

The results of the unit root test are presented in the following table.

Table 5. Unit Root Test Result No Variable Period of July2007–Dec 2010 Period of Jan2011-Dec2013

Level 1st Difference Level 1st Difference

ADF ADF ADF ADF

1 JCI 0,202646 -4.683338*** -1,93829 -5.239263***

Independent Variable

1 GSPC -2,366957 -4.503631*** 0.645668 -7.555875***

2 Kurs -1.436343 -5.002358*** 3.690280 -2.935020*

3 NF -6.239045*** -8.479691*** -5.241735*** -9.851169***

*** signifikant at 1% ; ** significant at 5% ; * significant at 10%

Cointegration test Cointegration test is done partially between the dependent and independent variables

using the Johansen Cointegration Test. The results show that in the period of July 2007

- December 2010, JCI and GSPC variables are not cointegrated or do not have a long-

term relationship. JCI - Exchange Rate variables deal in the short term. JCI - Net

Foreign Flow variables have cointegration or there is a equilibrium in the long term

between the variables. Table of cointegration test results are presented as follows:


Book One 25

Table 6. Cointegration Test of JCI – GSPC July2007 – December -2010 Date: 07/22/14 Time: 16:06

Sample(adjusted): 2007:09 2010:12

Included observations: 40 after adjusting endpoints

Trend assumption: Linear deterministic trend

Series: JCI GSPC

Lags interval (in first differences): 1 to 1

Unrestricted Cointegration Rank Test

Hypothesized Trace 5 Percent 1 Percent

No. of CE(s) Eigenvalue Statistic Critical Value Critical Value

None 0.144634 7.304512 15.41 20.04

At most 1 0.026042 1.055472 3.76 6.65

*(**) denotes rejection of the hypothesis at the 5%(1%) level

Trace test indicates no cointegration at both 5% and 1% levels

Table 7. Cointegration Test of JCI – Kurs July2007 – December 2010 Date: 07/22/14 Time: 16:06




Series: JCI KURS





None 0.174201 7.682903 15.41 20.04

At most 1 0.000668 0.026734 3.76 6.65



Table 8. Cointegration Test of JCI – Net Foreign Flow July2007 – December 2010 Date: 07/22/14 Time: 16:07




Series: JCI NF





None ** 0.633894 40.32023 15.41 20.04

At most 1 0.003169 0.126963 3.76 6.65


Trace test indicates 1 cointegrating equation(s) at both 5% and 1% levels


Book One 26

Variable JCI – Exchange Rate is not involved in the cointegration testing for the period

of January 2011- December 2013 because these variables are not stationary.

Cointegration test results after the period of January 2011-December 2013 show a

cointegration between JCI - Net Foreign Flow, whereas JCI – GSPC variables are not

cointegrated. Cointegration test results are presented in the following table:

Table 9. Cointegration Test of JCI – GSPC January2011- December 2013 Date: 07/22/14 Time: 16:08




Series: JCI GSPC





None 0.162038 6.190580 15.41 20.04

At most 1 0.005279 0.179962 3.76 6.65



Table 10. Cointegration Test of JCI – Net Foreign Flow January2011- December 2013 Date: 07/22/14 Time: 16:08




Series: JCI NF





None ** 0.516563 28.92317 15.41 20.04

At most 1 * 0.116486 4.210838 3.76 6.65


Trace test indicates 2 cointegrating equation(s) at the 5% level

Trace test indicates 1 cointegrating equation(s) at the 1% level

DISCUSION

Series of analysis test on monthly time series data for the period of July 2007-December

2010 and January 2011-December 2013 show that the variables are not stationary at

level but stationary at level one (first difference), except for the variable of exchange

rate for the period of January 2011-December 2011, so the variable of exchange rate is

not included in the modeling. Although it has the same order of integration, at the first

difference, by using the Johansen Cointegration Test, there is no cointegration at JCI -

GSPC, and JCI - Exchange rate (for the period of July 2007 - December 2010).

Similarly to JCI - GSPC for the period of January 2011 - December 2013. This means


Book One 27

that there is no equilibrium in the long-term on the variable relationship of JCI - GSPC

and JCI - Exchange in the period of July 2007 - December 2010, JCI - GSPC January

2011- December 2013. Cointegration relationships found in JCI - Net Foreign Flow in

two periods of the study. It is claimed that there is equilibrium in the long-term in the

relation of JCI-Net Foreign Flow in the period of crisis and the recovery from the crisis.

The absence of long-term equilibrium in the relationship between JCI - GSPC in the

period of crisis and the recovery period show that the Indonesian capital market

conditions are affected quite strongly due to shock at the S&P500 stock market. This is

indicated by the movement in the short-term due to the shock that occurs. This proves

that Indonesian capital markets are in a vulnerable position. If the Indonesian capital

market is quite strong to face the shock, long-term equilibrium relationship is still

occurs. Unfortunately this is not happen to JCI in the period of crisis and recovery

period.

The vulnerability of Indonesian capital market condition is possible because the

transaction occurred in the Indonesian capital market is dominated by foreign investors.

www.datacon.co.id reported that realization of foreign direct investment projects in

Indonesia has increased since 2007, foreign investment realization has decreased due to

the global financial crisis on 2009, in 2010 foreign investment into Indonesia increased

with the increasing of Indonesia's economic growth that reach 6,3%. Nurhayati (2012)

states that registered foreign investors hold about 60% of the total market capitalization.

If there is a negative sentiment towards the market, where the investors withdrew their

funds, then there is a crash by significant decrease in Composite Stock Price Index.

There is a large capital outflow and also will affect Indonesia's balance of payments.

Capital market conditions that are vulnerable in the capital market integration can sink

the stock market itself. In this case, the concern is the investors are reluctant to invest.

CONCLUSION

Based on the Johansen Cointegration test, it is concluded that there is no cointegration

at JCI-GSPC relationship at the period of crisis and recovery periods, and the

relationship of JCI- exchange rate at the period of crisis. Cointegration relationships

found in JCI-Net Foreign Flow in the two periods studied. These results indicate that the

Indonesian capital market is not strong enough to face the shock of S&P500 as a result

of the global financial crisis. While net foreign flow as macroeconomic variable, does

not significantly affect the Indonesia capital market. It is evident from the existence of

equilibrium in the long-run relationship.

REFERENCES

Bekaert, G and Harvey, C. 1995. Time Varying World Market Integration. Journal of Finance

Vol. 50 403-444.

Khalifa, Gawi Mohammed and Gallato, Christina A. Gervacio 2012. The Contagion Effect of

The 2007 Global Financial Crisis on The Malaysian Stock Market. Indonesia

International Conference on Innovation, Entrepreneurship, and Small Business. Surabaya:

Ciputra University.


Book One 28

Kian-Ping Lim. Hock-Ann Lee and L. Khim-Sen Liew. 2003. International Diversification

Benefits in ASEAN Stock Markets: A Revisit. Labuan School of International Business and

Finance. University Malaysia, University Putra Malaysia.

Koh, Tiong Sim and Ramin Cooper Maysami. 1996. A Cointegration Analysis of the Impact of

Economic Forces and Global Market Integration on the Singapore Stock Market.

Nanyang Business School. Nanyang Technological University, Singapore.

Majid, M. and Kassim, S. 2009. Impact of the 2007 US Financial Crisis on the Emerging Equity

Markets. International Journal of Emerging Markets Vol 4 (4), 341-357.

Mobarek, Asma. Global Stock Market Integration and the Determinants of Co-movements:

Evidence from developed and emerging countries. Stockholm University: NASDAQ

OMX Foundation.

Nurhayati, Mafizatun. 2012. Analisis Integrasi Pasar Modal Asean Dalam Rangka Menuju

Masyarakat Ekonomi Asean. http://eprints.unisbank.ac.id/205/1/artikel-38.pdf.

Trihadmini, Nuning. 2011. Contagion dan Spillover Effect Pasar Keuangan Global Sebagai

Early Warning System. Finance and Banking Journal, Vol. 13.

Winarno. 2009. Analsis Ekonometri dan Statistika dengan EViews. Yogyakarta: UPP STIM

YKPN.

http://www.datacon.co.id/ColdStorage-2011Fokus.html

www.nasdaqomx.com/.../76057_globalstockmarketintegra

http://eprints.unisbank.ac.id/205/1/artikel-38.pdf

http://www.datacon.co.id/ColdStorage-2011Fokus.html

http://www.nasdaqomx.com/.../76057_globalstockmarketintegra


Book One 29

COMPETENCE DEVELOPMENT STRATEGY RESOURCES

INDUSTRY PLAYERS THROUGH CREATIVE EDUCATION,

SKILLS AND CULTURE IN THE CREATIVE INDUSTRIES IN

SOUTH TANGERANG

Nila K Hidayat1, Dibia Abduh2, Fiter Abadi 3

SWISS GERMAN UNIVERSITY, TANGERANG INDONESIA

E-mails: [email protected]; [email protected]; [email protected]

ABSTRACT

The long-term aim of this research is to develop a concept and model

to optimize the maintenance and development of SME’s in creative

industry. The other aim is to identify and to analyze the influence

factors of human resources to successful of SME’s. this research will

focus on one of the subsectors of creative industry namely craft.

Geographic area which will be covered for this research are 7

districts in South Tangerang: Serpong, Pamulang, Ciputat, Ciputat

Timur dan Pondok Aren. The result of this research are a model of

human resource competence development for craft subsector;strategic

program and activity plan to performace the competence in creative

industry and development of SME’s in Tangerang Selatan.

Variables which will be analyzed in this research are education, skill;

culture, competence and performance of SME’s. This research has

been done by doing survey, interviews with related persons and

institutions, questionnaires and Forum Group Discussion (FGD).

Moreover, the data is analyzed by using Spearman correlation to

figure out how significant the impact of education, skill, culture and

competence of human resource for creative industry’s actor; and do

these variables will influence competence performance of SME’s in

South Tangerang.

The result of this research showed that skill has strong influence to

performance of creative industry SME’s in South Tangerang.

Keywords: Competence, Education, Skill, Culture, Performance

In SME’s.

INTRODUCTION

Creative economy has significant role in Indonesian economic and and reality creative

economy is one of mail economic pillar to create jobs, increase economic per capita and

sustainable development. Moreover creative economy could develop patriotism thru

domestic products created by creative economic. Based on data from Trade Ministerium,

in year 2006 creative industry donated Rp. 104.4 trilliun or about 6,28% of Indonesian


Book One 30

GDP. The biggest contribution of creative industry comes from subsectors such as

fashion (44.18%), craft (27.72%) and advertisement (7.03%). These subsectors could

absorb 5.4 jobs with growth rate of 17.6% in 2006 while in national scale the average

new job grows in 0.54%.

Indonesian Trade Ministerium devides creative industry into 14 subsectors, namely

fashion, advertisement, craft, research and development, music, printing and publication,

computer service and software, television and radio, interactive game, art performance,

design, art product market and antique, film, video and photography.

The blueprint of national economy creative for 2009-2015 which was made in 2008 is:

”economic new era after agriculture economy, industry economy and information

economy which intensify information and creativity with idea and knowledge of human

resource as main production factor in economic activity”

Industry creative consists of many industries which focus on creative idea or intellectual

property of someone. However in the other side, the availability of human resource in

term of quantity or quality becomes main issue in developing creative industry. This

issue should become concern of everyone since it contributes significantly to national

economic. This issue can be solved thru education and therefore it is needed to have an

education system which can produce creative people in the future.(Boediono,2012).

(I.D.K.R. Ardiana, et all. ,2011) Developing creative industry including SME’s should

include development of human resource in many aspects. A result of one of the

researches showed that education level of an SME’s entrepreneur is high school

(44.1%), vocational training graduate (7.4%) and bachelor (17.9%) , the rest have

educational background under high school. This fact showed that it is untrue if

educational background of Indonesian entrepreneurs is relatively low. However,

increasing human resource quality especially in knowledge, skill, ability and attitude in

entrepreneurship is highly needed. Human ability is defined as human potential in doing

things, to achieve those things well with their ability. (Bryson & O'neil, 2008).

South Tangerang consists of 7 districts and has 5 MSME’s (micro, small, medium

enterprise) which covers 4 craft categories: wood and woven craft 40 units, Kota

Tangerang Selatan yang terdiri dari tujuh kecamatan, memiliki lima jenis UMKM yang

meliputi empat katagori kerajinan yaitu kerajinan kayu dan anyaman 40 unit, clay craft

1 unit, textile 243 unit, shoes 6 units and food ad beverages 143 units. The table below

shows the potential of creative industry in South Tangerang.


Book One 31

Tabel 1 Data of Creative Industries in South Tangerang

No Distric

Woven

bamboo,

rattan,

wood

Clay Textile

Food

and

beverage

Shoes

1 Setu 7 0 2 19 0

2 Serpong 3 0 20 40 1

3 Pamulang 6 0 1 7 1

4 Ciputat 11 0 12 24 2

5 Ciputat Timur 7 0 8 8 0

6 Pondok Aren 4 1 189 28 2

7 Serpong Utara 2 0 11 17 0

Total 40 1 243 143 6

Source: Trade and Industry Department, South Tangerang, 2011

Based on the table above, it could be concluded that the amount of creative industry in

South Tangerang is still limited. This is a contrarily to (Saputra, 2010), said that high

ability and capability of human resource are a basic potential of availability of creative

industry. Other phenomenon said by Human Resource and Transmigration Department

that high educational background population in South Tangerang does not support them

to open a new business. Culture becomes one of the aspects which has never analyzed

in previous research regarding competence development of entrepreneur in creative

industry. For that reason, researcher would like to use it as one variable in this research.

Based on the analyst above, developing entrepreneur’s competences is important to

create a competitive SME’s entrepreneur in a global market. Development of

competences will be focused on education, skill, and culture. The analysis of data

gathered will examine the influence of entrepreneur’s profile competence and it impacts

to performance

LITERATURE REVIEW

Micro, Small and Medium Enterprise (MSME’S)

Based on Regulation No 20, 2008 regarding MSME’s:

a) Micro enterprise is productive business owned by a person and/or a personal

organization which fulfills the category of micro enterprise as regulated in this

regulation.

b) Small enterprise is an independent productive business, which is run by a person or

an organization which is not a daughter enterprise or a branch of a company which

is directly or indirectly part of a medium enterprise which fulfills the criteria of

small enterprise as it is regulated in the regulation.

c) Medium enterprise is an independent productive busiess, which is run by a person,

which is not a daughter enterprise or a branch of a company which is directly or

indirectly part of a small enterprise or big enterprise with total net asset or yearly

sales as regulated in the regulation.


Book One 32

MSME’s in Indonesia covers broad understanding in all economic sectors including

agriculture and measured by asset and sales as classification category as in Regulation

No 9/1995about small enterprise and President Instruction No 10/1999 about training

for medium enterprise.

Tabel 2 Criteria for MSME’s

Source:: http://www.depkop.go.id, 2012

Creative Industry

Indonesian Trade Ministerial stated that creative industry is an industry which comes

from utilizing creativity, skill and individual talent to create prosperity and employment

with create and result in individual creativity and ability to create. Creative industry is

defined as industry which focus on creation and exploitation of intellectual property

such as art, film, games or fashion design and including creative service among

companies such as advertisement (Simatupang, 2007). Creative industry, in other word

can be said that it is an activity based idea, art and technology for the use of the

performer.

Jones (2006) said that creative industry is an activity which has originality in individual,

talent, skill and has potential to create jobs and prosperity thru generation and

exploitation of intellectual right.

Figure 1 Creative Industry Potential in Indonesia

Source : indonesiakreatif.net (2012)

http://www.depkop.go.id/


Book One 33

Based on Holsz (2005) , creative industry has characteristics and differences as follow:

a. Creative industry product is a product from experience in which the success is

dependent to the one who consumes it.

b. Creative industry product is mostly a symbolic product which content cultural

values to differentiate with other product.

c. The difference from every consumer in valuing the level of quality is hard to

predict.

d. Creative industry is mostly recognized by having high diversification.

e. Most of creative industry product is durable and can be use many more than one

time.

f. Some industries are categorized as a specific technology development.

Competence

Competence shows a proper quality or having a proper quality to accomplish a certain

task. One could receive compensation thru education, trainings, experiences or natural

ability. Even though there are many definition of compensation, they have these 2

general components::

a. Competence is behavior which can be monitored or measured, knowledge and

ability.

b. Requirements (knowledge, skill, and attitude) should differentiate between a

winning player and the others.

Competence is behavior and monitored, since competence is based on someone

behavior. The result of one competence is effective or even excellent in work

achievement. Developing competence model needs process to identify a successful

performance or responsible in work situation, and further to identify knowledge, skill

and attitude which is related to work (Kompetensi dan Kinerja , access on May 28,

2011 ).

Knowledge is defined by Davenport and Prusak (1998) as combination between

experience, contextual information, values and heritages which give form to evaluate

and combine new experience and information. Skill is defined as ability and capacity

which are achieved thru accidentally, systematically and sustainability to do effort and

adaptive to carry out a complex activity or job function which involve ideas (cognitive

skill), others (technical skill), and /or persons (interpersonal skill). Based on Sims

(2002), attitude is a positive or negative feeling or mental situation, to bow and

organized thru experience which gives certain influence to respond to a person, an item

or to a situation. Breckler (1984) identified that attitude has 3 separate but connected

parts:

a. Cognitive; perception and believe about attitude object,

b. Affective; evaluation and feeling toward attitude object; one’s feeling to like or not

to like an object.

c. Behavior; how one wants to behave and what to say about behavior toward the

object. This is not always the same with the monitored behavior follow by attitude

expression.


Book One 34

Creative Industry Entrepreneur Performance And SME’s The availability of qualified human resource will influence the target achievement of

SME’s, even more when the human resource has strong motivation and commitment to

target achievement.

In order to improve the performance of SME’s, Haerum (2000) said that challenges for

entrepreneur in development covers some factors such as:

1. Improvement of human resource quality in term of management, organization and

technology

2. Entrepreneurship competences

3. Wide access to capital

4. Transparency of market information

5. Other production input

6. Healthy entrepreneur atmosphere which will support innovation, entrepreneurship,

and business practice as well as healthy competition

Tambunan (2002) said the strength and wekness factors for SME’s are: (1) human

resource which consist of strong motivation, job offer, work ethics, productivity and

quality of human resource, (2) economic factor which consisits of access to raw material,

access to financial resource, ecnomic value, served target market. Those two factors has

to be anticipated inorder to improve work performance of SME’s.

Human Development Index

Based on UNDP report that human development can be measured based on the three

aspects. This measurement called Human Development Index (HDI) which consists of

“ a long and healthy life, access to knowledge and a decent standard of living”. Along

and healthy life is measured by life expectancy while access to knowledge is the

average number of school years people over 25 years age received and the average

number of school years children received. Meanwhile the standard of living is assessed

by Gross National Income (GNI). Further, the report explained that Indonesia ranks 121

which shows that Indonesia performance lower than the average of MIST country

(Mexico, Indonesia, Korea and Turkey) and CIVETS country (Columbia, Indonesia,

Vietna, Eygpt, Turkey, and South Africa) as shown in the below table. However, the

UNDP report stated that over the years, Indonesia’s life expectancy at birth increased by

12.3 years, average years of schooling increased by 2.7 years, expected years of

schooling increased by 4.6 years, and GNI per capita increased by about 225 percent.

Cited by Tomi Soetjipto, a spokesperson from UNDP that “Indonesia is to be among the

developing countries that had done particulary well and demonstrated rapid people

centered development” (Aritonang, 2013).


Book One 35

Tabel 3 : Indonesia’s HDI indicators for 2012 relative to countries from the MIST and CIVETS

group

Source : UNDP Report

In relation to development of creative industry, it showed that Indonesia’s human

development which part of human resource has increased over the year. The creative

industry is a promising sector in Indonesia.

Characteristics of Creative Workers

Based on research Setiadi et all (2012) that twenty-seven (27) behavioral characteristics

of creative people are determined in influencing the performance of creative workers.

The results of the research were categorized into five dimensions of creative workers’

characteristics behavior as shown on the table below. Further, Setiadi et all research on

2012 characteristics behavior were grouping based on NEO-FFI personality

dimensions discovered by Costa & McCrae’s (1992) in which consists of dimension

emotional , extraversion, conscientiousness, agreeableness, and openness to experience.

Setiadi et all identified “the most important elements determining the characteristics of

creative people are enthusiasm, a low depression level, self-discipline, trust and ideas”

(2012).

Tabel 4: Five Dimensions of Creative Worker Characteristics

Source : Setiadi et all (2012)


Book One 36

PREVIOUS RESERACH

A research done by Rahmani dan Siyamtinah (2007) in Semarang found out that

internal factors such as availability of research and development, adjustment between

ability and skilled worker to workers’ jobs desk, training program, human resource

development and utilization of new machine and technology. Other empirical study has

resulted that intellectual capital in term of knowledge toward enterprise performance

(Nonaka and Takeuchi, 1994; Zahra and George, 2002). Zahra dan George (2002) gave

a recapitualisation model which shows the relationship among source of knowledge,

absorptive capacity and enterprise ability in creating competitive advantage.

Purpose And Advantage Of Research

The purposes of this research are:

i. To identify the influence of education, skill and culture toward competeces of

entrepreneurs in South Tangerang.

ii. To investigate the correlation between competences of entrepreneurs to performance

of SME’s in creative industry in South Tangerang.

iii. To analyze variables such as education, skill and culture which has significant

influence toward SME’s in creative industry in South Tangerang.

Benefits of this research

This research could contribute to local government of South Tangerang in developing a

strategic training or improvement for creative industry’s entrepreneurs in its area.

Moreover, thru this research, entrepreneurs could develop an effective program to

improve their competences, especially for craft subsector.

RESEARCH METHOD

Type of Research

Type of this research is descriptive. Descriptive research will be proceeding thru

qualitative and quantitative approach. Qualitative approach in this research is to

formulize a competence development strategy in human resource. Quantitative approach

in this research is to measure the correlation of education, skill and culture toward

SME’s performance in South Tangerang.

Type of Data

This research will use primary and secondary data to support the findings.

Primary data’s for this research are gathered thru surveys, questioners, FGD and

interviews with government’s institutions. In order to get deeper understanding from

South Tangerang’s entrepreneurs, quantitative data’s are gathered thru questionnaire

In order to support this research, secondary data’s are gathered thru e-journals, online

articles and related books.

Focus Group Discussion (FGD). FGD is used as a methodology to answer qualitative

questions. The audience of this FGD is the craft entrepreneurs of SME’s in South

Tangerang.


Book One 37

Questionnaire. This will be spread to creative industry in South Tangerang as primary

data to analyze correlation between competence of human resource and development in

creative industry.

Depth Interview. The interview was done in February 2014 untik July 2014 in order to

gain depth information regarding respondents’ business, their experiences and

competences.

Population and Sample. Population used for this research are all listed SME’s in

South Tangerang which are 433 SMES’s, however after the survey is done most of

SME’s are in food and beverage industry which is not categorized in creative industry.

And as the result of the survey, there are 100 SME’s in craft subsector.

Tabel 5 Amount of SME’s in South Tangerang

No Distric

Woven

bamboo,

rattan,

wood

Clay Textile Food and

beverage Shoes

1 Setu 7 0 2 19 0

2 Serpong 3 0 20 40 1

3 Pamulang 6 0 1 7 1

4 Ciputat 11 0 12 24 2

5 Ciputat Timur 7 0 8 8 0

6 Pondok Aren 4 1 189 28 2

7 Serpong Utara 2 0 11 17 0

Total 40 1 243 143 6

Source: Dinas Koperasi dan UKM Tangerang Selatan 2014

Tabel 6 Sample allocation

Data

Estimate of True Proportion 0.9

Sampling Error 0.05

Confidence Level 95%

Finite Populations

Population Size 144

Calculated Sample Size 70.7951

Sample Size Needed 71

Operational Variable

The independent variable on this research is Human Resource Competences, and the

dependent variable is performance of entrepreneurs.


Book One 38

Research Model

Analysis Data

Tabel 7 Normality Test Tests of Normality

Kolmogorov-Smirnova Shapiro-Wilk

Statistic df Sig. Statistic df Sig.

PERFORMANCE .438 100 .000 .469 100 .000

EDUCATION .110 100 .005 .966 100 .012

SKILL .465 100 .000 .523 100 .000

CULTURE .167 100 .000 .895 100 .000

a. Lilliefors Significance Correction

The table above showed that Significant level scores are below 0.05 (alpha 5%), it

means that all variables are abnormal and therefore parametric analysis (regression,

SEM) cannot be used but should be analyzed as non parametric to examine 2 variables

with spearman correlation.

FINDINGS

From 100 respondents in 5 districts, there is some information regarding respondents

profile such as:

No Questions Choices

Percentage

(%)

1 Usia a 25 year old 34

b 25,1 - 30 year old 28

c 30,1 - 35 year old 13

d 35,1 - 40 year old 8

e 40,1 - 45 year old 10

f 45,1 - 50 year old 4

g above 50 year old 3

Total 100

From the data above it can be concluded that entrepreneurs of SME’s in craft subsector

are below 35 years old (75%).

EDUCATION

SKILL

CULTURE

COMPETENCE OF ENTREPRENEUR IN

CREATIVE INDUSTRY

INDUSTRI KREATIVE

KINERJA PELAKU

INDUSTRI KREATIF


Book One 39

Gender

2 Gender a Laki-laki 26

b Perempuan 74

Total 100

From the data above, it shows that 74% of the respondents are wamen. And only 26%

are men.

Education Background

3

Last

Education

Background a Elementary school

b

Junior High

School

c

Senior High

School 6

d Under Graduate 89

e Graduate 5

f Post Graduate

Total 100

From the table above, the average of educational background of entrepreneurs in

creative industry is under graduate.

Number of Employee

6

Number of

Employee a 1-5 persons 52

b 5-10 persons 31

c 10-15 persons 5

d 15-20 persons 6

e 20-25 persons 3

f Above 25 persons 3

Total 100

In average SME’s in South Tangerang has employee of 1-5 persons (52%), 5-10

persons (31%).

Length of Business

7

Length of

Business a

Less than 5

years 78

b 5,1-10 years 11

c 10,1-15 years 10

d 15,1-20 years

e 20,1-25 years

f above 25 years 1

Total 100


Book One 40

The length of enterprise in South Tangerang is mostly less than 5 years (78%), 5-10

years (11%).

Source of Capital

8 Capital a own capital 95

b Bank Loans 1

c

Combination with Non

Bank

d

Own capital + Non

Bank 4

Total 100

Capital for entrepreneurs comes mostly from won capital (95%) and only 4% said that

their capital comes from bank loans and own capital.

Mothly Sales

11

Mothly Sales in

Rupiah a < 1 million 5

b 1 - 10 million 21

c 10.1 - 50 million 55

e Above 50.1 million 14

f Company secrecy 3

g Not known 2

Total 100

Majority of SME’s entrepreneur has sales around 10.1-50 million rupiah (55%), 1-10

million rupiah sales by 21 %. Only 5% of SME’s said that their sales are below 1

million rupiah.

Correlation test 2 variables using Spearman Correlation

Seeing from the table below, the score of Significant level is higher than 0.05, it means

that there is no correlation between education to SME’s performance

Correlations

PENDIDIKAN KINERJA

Spearma

n's rho

Education Correlation Coefficient 1.000 -.110

Sig. (2-tailed) . .275

N 100 100

PERFORMANCE Correlation Coefficient -.110 1.000

Sig. (2-tailed) .275 .

N 100 100

Relationship between skill and performance

From the table below, the significant score is lower than 0.05, it means that there is

relationship between skill and performance. However the value is 0.359 which means

that the relationship is relatively low.


Book One 41

Correlations

PERFORMANCE KETERAMPILAN

Spearman's rho PERFORMANCE Correlation Coefficient 1.000 .359**


N 100 100

SKILL Correlation Coefficient .359** 1.000


N 100 100

Relationship between culture and performance.

Since the significant level is above 0.05, it means that there is no relationship between

culture and performance of SME’s.

Correlations

KINERJA BUDAYA

Spearman's rho PERFORMANCE Correlation Coefficient 1.000 .062


N 100 100

CULTURE Correlation Coefficient .062 1.000


N 100 100

From the three analyses, it is concluded that skill is the most influence variable for

SME’s performance especially in craft subsector in South Tangerang. This situation will

be a valuable input for strategic development to improve SME’s performance in the

future.

Development Model for SME’s performance thru Education, skill and culture.

Based on the result from FGD, there are some facts need to be explained such as:

Type of craft. The respondents believe that in craft products with value of innovation

and uniqueness will have potential market.

Human Resource availability. The respondents, who mostly have undergraduate

background, believe that availability of human resource as labor is important to

support their enterprise. Most of the respondents admitted their employees have

lower educational background. Moreover, they said that employee skill should be

improved since their market is based on creativity and innovation. All 100

respondents stated that skill is the barometer of the successes of SME’s.

Performance indicator. Almost all respondents said that sales are their indicator of

performance. Other indicator that respondents agreed is amount of invitation from

media as news material.

Enterprise performance development. The respondents said that the biggest

challenges in for their performance are human resource and capital. For this issue, is

the discussion there is an option of collaboration between SME’s and educational

institution in term of “business analysis” of an SME’s . Other collaboration could be

done between SME’s and financial institutions.

From the points above, the development model is based on Triple Helix which is found

by previous researcher. However, this research is focused on human resource

competence.


Book One 42

Figure 2 Model Triple Helix in Creative Industry

DISCUSSION AND CONCLUTION

Conclusion Since the craft industry only available in 5 disctrics namely: Serpong, Pamulang,

Ciputat, Ciputat Timur, Pondok Aren, these districs are chosen as the population areas.

From the data, it is concluded that skill is the most influence factor toward improvement

of SME’s human resource performance. Suggestion

Based on the research’s results, some suggestions for SME’s human research

performance are:

a. Educational institutions such as university should coordinate with local SME’s

for their CSR activities; the activities should help SME’s with their performance

and their financial management.

b. Activities such as “Entrepreneurship Analysis” between universities and local

SME’s has been done for 2 years and should be done continuously.

c. Banks and other financial institutions should give more detail information

regarding soft loans, so SME’s know exactly what they need and risks.

REFERENCES

Aritonang, M. 2013. RI makes progress in HDI, but still below regional average. Jakarta Post,

16 Maret 2013.

Bryson, J. & O'neil, P., 2008. Developing Human Capability: Employment institutions,

organisations and individuals. A research programme funded by the Foundation for

Research, Science & Technology, (Overview of findings on developing human

capability), p. 5.


Book One 43

Breckler, S. J. 1984. Empirical validation of affect, behavior, and cognition as distinct

components of attitude. Journal of Personality and Social Psychology , 47 , 1191-1205.

Boediono 2013, http://www.tribunnews.com, Rabu, 27 November 2013.

Cetak Biru Pengembangan Ekonomi Kreatif Nasional 2009-2015 2008.

Costa, P.T.Jr., & McCrae R.R., 1992. Revised NEO Personality Inventory (NEO-PI-R) and

NEO Five-Factor Inventory (NEO-FFI) manual. Psychological Assessment Resources,

Odessa, FL.

Davenport, T.H., & Prusak, L. 1998. Working knowledge: how organizations manage what

they know. Boston, MA: Harvard Business School Press.

Holzl, W. 2005, “Entrepreneurship, Entry and Exit Creative Industries ; An Exploratory

Survey”, Vienna University of Economics and Business Administration, Vol.1.pp.1-31.

Haeruman, H, 2000, Peningkatan Daya Saing UMKM untuk Mendukung Program PEL.

Makalah Seminar Peningkatan Daya Saing, Graha Sucofindo, Jakarta

Howkins,John, 2002 ; The Creative Economy : How People Make Money from Ideas, Penguin.

I.D.K.R. Ardiana, I.A. Brahmayanti, Subaedi 2012 : Kompetensi SDM UKM dan Pengaruhnya

Terhadap Kinerja UKM di Surabaya.

Jones, R. 2006 Seminar on the Creative Industries Development Krasnoyarsk, PACIFIC

STREAM Information CIC.

Nonaka, I., and Takeuchi, H., 1995. The Knowledge-Creating Company, Oxford University

Press, New York

Rahmani dan Siyamtinah 2009, Dampak Keragaman Pola Membangun Kapabilitas Inovasi

terhadap Kinerja UKM di Semarang, Laporan Penelitian Dosen Muda ,Dikti

Saputra, W., 2010. Industri Kreatif. 1 ed. Serdang: Badouse Media.

Setiadi, N. Et all 2012. Boosting Indonesia’s Creative Industries: Identification of People’s

Characteristics and Creative Behavior. Quaestiones Geographicae - Journal of the

Institute of Geography, Adam Mickiewicz University, Poznań, Poland, 31(4), 53-62.

Sim, Clyamond 2002 “Defining Competency”, The State of Queensland (Department of

Education and Training), 2002.

Simatupang, T,M. 2007, Konsep Kebijakan Membangun Industri Kreatif”, Pikiran Rakyat ,

Selasa 28 Agustus 2007.

Tambunan, Tulus T.H., 2002, Usaha Kecil dan Menengah di Indonesia: Beberapa Isu Penting,

Salemba Empat, Jakarta.

http://www.tribunnews.com/


Book One 44

UNDP Report. Human Development Report 2013. The Rise of the South: Human Progress in a

Diverse World. Indonesia – HDI values and rank changes in the 2013 Human

Development Report.

Zahra, S.A., and George, G., 2002. “Absorptive Capacity: A Review, Reconceptualization, and

Extension” dalam Academy of Management Review, Vol. 27

The Rule:

Undang-Undang Nomor 20 Tahun 2008 tentang Usaha Mikro, Kecil dan Menengah.

Peraturan Pemerintah Nomor 44 Tahun 1997 tentang Kemitraan;

Peraturan Presiden Nomor 5 Tahun 2010 tentang Rencana Pembangunan Jangka Menengah

Nasional 2010-2014;

Keputusan Presiden Nomor 127/2001 tentang Bidang/Jenis Usaha yang terbuka untuk Usaha

Menengah atau Besar dengan Syarat Kemitraan.

Internet

http://www.depkop.go.id

http://www.smecda.com

http://www.depkeu.go.id

http://www.depkop.go.id/

http://www.smecda.com/

http://www.depkeu.go.id/


Book One 45

MODEL APPLICATION MENTORING PEGG (5C) TO IMPROVE

THE ENTREPRENEUR LEARNING QUALITY E4 CIPUTRA

UNIVERSITY

Christina Whidya Utami1, Hendrasmoro2, Danardana Murwani3

(Lecturer at Ciputra University)

INDONESIA

E-mails: [email protected], [email protected],

[email protected]

ABSTRACT

The Mentoring application model that usually calls with “five c” which

contains: challanges, Choises, consequences, creative solution and conclusions

(pegg, 1999) can be implemented with the goals of competence improvement on

the Ciptura University graduate. The research goals are : 1) How can we

applicate the 5C mentoring model in the phase of discovery and planning,

resourcing, implementation, and evaluation in the E4 major course? 2) How the

student respond to the 5c model in the entrepreneurship major 4 (innovation)

The research respondend are 35 student that has been took the

entrepreneurship major 4 (innovation), got the mentoring proccess( the five c

mentoring) that continually did and repeated in every learning phase.

This research has dicovered that the application and the student respond in the

mentoring model implementation are great, showed by this 5C mentoring model

through the phase of discovery and planning,resourcing, implementation and

evaluation. the student respond about 5C model (challanges, choices,

consequenses, creative and conclusions) in the entrepreneurhip major 4

(innovation) are devided into 3 things that the facilitator believes, the mentoring

proccess, learning method, and facilitator.

Keywords: Entreprenership, Mentoring Pegg 5C, Challanges, Choices,

Consequenses

INTRODUCTION

The awareness about the importance of entrepreneurship education that should create a

good entrepreneur will motivate a lot of formal education institution that based in

entrepreneur. A lot of research has been developed to find the entrepreneurship learning

method that can grow the creaativity and entrepreneurial intention (Hamidi et., al.,

2008) with the big number of sks (satuan kredit smester) won’t be a guarantee that

graduate student will be a master of entrepreneurship if the learning proccess are not

managed well. The future learning concept must be oriented to the effort of the learn to

think, learn to act, learn to realize what you are becoming, learn to live together.

Therefor in the learning proccess, it needs an approach that can connecting the science

concept with the factual concept in the reality, so the student involvement in the

learning proccess will be bigger. This facts made the Ciputra University realized to




Book One 46

develop their entrepreneur competence from its student. Therefore Ciputra university

has developed the entrepreneurship tiered curriculum from the first semester until 5

calls E1, E2, E3, E4, and E5. Where in every E will have the different competence

subject. For example for the E4 competence what we expecting is the student should

develop the innovation from the business project that they develop. This E4 major has

been prepared for the student in the 4 semester near the end of entrepreneur study.

Remembering the last step is E5 which is the phase to the entrepreneur study that the

student has to take in the 5 semester. So the project that the students are developing in

the E4 subject is expected to be great and not in the phase of start up. Because of that

Ciputra University has set the goals of E4 subject are building the innovative business.

However, in the reality there are a lot of student projects that not quite developed in the

E4 subject, based on the context or the business models. It showed by some student that

still not having a big profit, with the range of rebuying number that is low, and making

the concerns that the business won’t be able to survive in the long term.

This E4 subject, has its road map that contains discovery, planning, resourcing,

actualization, and evaluation (curriculum team E4,2012) where in every phase contains

the concept material about business and entrepreneurship with the mentoring method.

The mentoring application has done by 3 facilitator with 2 academic lecturer

qualification and 1 ER entrepreneur residence or someone who has the experience as

an entrepreneur.the mentoring activity can be held inside the classroom, but in some

cases its not possible to visit the students project because of the limited time and

energy,or involving the outsourcing to as a mentor or even a family member to get

involve for giving the guide and direction for their business while the mentor that

should hep the student to controll a person life and guide it to fill their lifes. What

happened in the mentoring session? You can see the basic mentoring model that

usually calls with “five c” which contain : challanges, choices, consequences, creative

solution and conclusion (Pegg, 1999) therefore the problem formulation, 1) how’s the

application ofentoring model 5C in the ohase of discovery and planning2) how the

students respond with the application and implementation of 5c with this subject?

Literature Review

According to Pegg, (1999) a mentor must have credibility individually as follows:

Through age it means to have wisdom, Through books means not listen to other people's

know-how, through success means someone’s success experience is the best teacher,

Through street wisdom means being able to choose the way / manner others as

allternatif, through chemestry means should be able to establish a good relationship so it

can be considered as an advisor, being a truth teller through it means to be a leading

employee who listen to customer complaints, through expertise means that experience is

very important, through presence means giving presence in the middle-central actors.

According to Pegg (1999) mentoring is help people to bild on Reviews their strengths,

find solutions and Achieve ongoing success. Thus the actual mentoring will have the

following goals. The purpose of the mentorship learning methods are: 1) Experiencing

the phenomenon itself and find its own practice of entrepreneurship where it is expected

to build confidence, self-esteem and self-awareness that is fundamental in solving

problems (Nurachmach, 2007). 2) Integrate all existing sources into a form of learning

systems more effective in achieving competence, ie which has the basic principles of


Book One 47

active and independent learning. One of the methods that meet these criteria are

mentorship (Nurachmach, 2007)

Furthermore according to Pegg, 1999 mentors play a variety of roles with a variety of

approaches. Several approaches can be done by a mentor are: 1) .Classic mentor:

mentor is a wise and trusted counselor. They must have credibility and willingness to

assist the mentee wisely. 2). Leader: As the leader, mentor should be an inspiration to

do their best. 3). Models: a model of a mentor should get a sense of awe from people

around them.4). Coaches: as coaches should assist in daily business activities. They

must be well-educated person with good skills. A Coaches must offer 3 stages namely:

they increase the strength in terms of building, Pushing for improvement (improvement)

and has the ability to improve the achievement of success, 5). Teacher: to act as a

mentor as well as teachers who share their knowledge and create a learning atmosphere

menyenangkan.6) Adviser: as an advisor to a mentor should be someone who can help

find the specialist / expert in knowledge to find a way out, 7) .Counsellor : mentor who

acts as a counselor should be able to provide an alternative solution to provide a

professional insights .8). Buddies: Buddies system is used by many organizations,

where employees are long lead new employees to show where the good and the bad, to

develop good habits and minimizing bad habits. Buddies is a longtime employee in this

organization their focus to help new employees to feel right at home. A mentor should

act as buddies. Good mentor should help to control one's life and lead to fill their lives.

What happens in the mentoring session, following the model of mentoring are

commonly referred to as the "five C" namely: Challenges, Choices, Consequences,

creative solutions and conclusions. The model can be shown in Figure 1 below.

Figure 1 The Mentoring Model.

Source: Pegg, 1999

Research Methods

The design of learning, learning design will be implemented using several stages of

mentoring models 5 C the challenges, choices, Consequences, creative solutions,

conclusions. This cycle will continue to repeat. Where after the conclusion of the

problems typically arise and new ideas to keep in mind that encourage re-planning, re-

action, observation and reflection over again. The fourth of these activities will continue

to be repeated in accordance with the new findings in practice.


Book One 48

Learning Implementation Steps: Lesson with mentoring and participatory action

learning can generally be divided into two (2) first stage is the pre learning activities

including the preparation and planning activities, the second stage of the details of

learning activities include material conveying, and mentoring. Following these two

stages can be described as follows:

While the details of the learning activities described in detail in Table 1 below:

Table 1 Details of Learning Activities

Fase E4 The Five C

Mentoring

Model

Fase I: Discovery

and Planning

Fase II:

Resourcing

Fase III:

Implementation

Fase IV:

Evaluation

Challenges Directing the student

how to design a

potential business

that accepted in

global market

Directing the

student how to

identify and realize

resource-based for

potential business

in the global

market .

Directing the

student how to

actualize the

design a business

model that

potentially

accepted in the

global market.

Directing the

student how to

justify the

business design

that can be

accepted in the

global market .

justification

contains strategic

point innovation

from its

implementation of

business desgin

Choices Directing the student

to analyze the

positives and

negatives avery

alternatives that

connected with a

potential business in

the global market.

Directing the

student for

arranging the

alternatives that

connected with the

resourcebased for

th ebusiness design

that potentially

accepted in the

global market.

Directing the

student to

arranging a

realistic

alternatives that

connected with

business design

that potentially

accepted in the

global market

Directing the

student to

assemble

alternatives that

realistic with the

strategic point

from the

implementation of

the model.

Consequences Directing the student

to analyze the

positives and

negatives avery

alternatives that

connected with a

potential business in

the global market.

. Directing the

student for

arranging the

alternatives that

connected with the

resourcebased for

th ebusiness design

that potentially

accepted in the

global market.

Directing the

student in

analyzing the

positives and

negatives on every

alternatives that

connected to the

critical point

implementation

from the business

design that

potentially

accepted in the

global market

Directing the

student to

assemble

alternatives that

realistic with the

strategic point

from the

implementation of

the model.

Creative

Solutions

Directing the student

to choose the best

alternative based on

its consequences that

Directing the

student to choose

the best alternative

based on its

Directing the

student to choose

the best alternative

based on its

Directing the

student to choose

the best

alternative based


Book One 49

conneced with the

business design that

potentially accepted

in the global market.

The best means the

most realistic that

they can get

consequences that

connected with

resource based for

the potential

business in the

global market

consequences that

connected with

critical point for

the potential

business in the

global market

on its

consequences that

connected with

strategic point for

the potential

business in the

global market

Conclusions Directing the student

to take the conclusion

which say 1. how big

is the student will to

run the alternatives

that they has chose 2.

How big was the

choosen alternatives

posibility to be

treated successly.

Directing the

student to take the

conclusion which

say 1. how big is

the student will to


that they has chose

2. How big was the

choosen

alternatives

posibility to be

treated successly.

Directing the

student to take the

conclusion which

say 1. how big is

the student will to


that they has chose

2. How big was the

choosen

alternatives

posibility to be

treated successly.

Directing the

student to take the

conclusion which

say 1. how big is

the student will to

run the

alternatives that

they has chose 2.

How big was the

choosen

alternatives

posibility to be

treated successly.

Finding

On the determining the student respond about the application of mentoring models 5c,

the researcher has spread a questioner with the questioner instrument that direct to the

Dreher George Fand Ronal A Ash, 1990. The questioner is spreaded to some

respondend which assessing in Table 2

Table 2 Working Indicator Given or recommended you for challenging assignments that present opportunities to learn new skills

Given or recommended you for assignments that required personal contact with managers in different

parts of the company

Given or recommended you for assignments that increased your contact with higher level managers

Given or Recommended you for assignment that helped you meet new colleagues

Helped you finish assignments/task pr meet deadlines that otherwise would have been difficult to

complete

Protected you from working with other managers or work units before you knew about their likes/dislikes,

opinions on controversial topics, and the nature of the political environment

Gone out of his/her way to promote your career interests

Kept your informed about what is going on at higher levels in the company or how external condition are

influencing the company

Conveyed feeling of respect for you as an individual?

Conveyed empathy for the concerns and feelings you have discussed with him/her

Encouraged you to talk openly about anxiety and fears that detract from your work

Shared personal experiences as an alternative perspective to your problems

Discussed your questions or concerns regarding feelings of competence, commitment to advancement,

relationship with peers and supervisors or work/family conflicts

Shared history of his/her career with you

Encouraged you to prepare for advancement

Encouraged you to try new ways of behaving on the job

Served as role model

Displayed attitude and values similar to your own

Source: Pegg, M. 2003


Book One 50

Respondend Description

Respondents of this study were all students of Class B E4 Ciputra University program.

The following is a list of names and their respondent with group business project. As

described in Chapter 1 that while the goal is student learning rabuan entrepreneurial

experience and can create new ventures (business and social), or be able to develop the

family business (family business) can sustainable global challenges as well as having a

good impact for the community (ethical) and accepted by society. While learning

entrepreneurship rabuan structure consists of five semesters (3 credits each) except the

old forces before and including the year 2010, which is still taking the 2 credits with the

Global Player Advance (E6).

While the learning objectives E4 are Innovators (3sks) learning emphasis on innovation

from a student venture development with market / community there. Innovations related

to product diversification, market, network, process, finance, business models, brand or

completeness of others with permission and legal status needed to reach the global stage

player. For E4 class is divided into three broad categories namely business venture,

social venture that puts the social impact of a family or a business venture. Forms of

business venture or project for social ventures. Students continue to build his own team

or a team with a maximum of five people. Maximum capital or additional capital per

person is allowed is five million dollars, more than it had to get special permission. The

form of the project for the family business, the project is individual. Terms family

business: a). family business that has been running for more than 5 years, b). The

student will be appointed to carry on the family business and c). the student is willing to

continue these efforts. Family Business for the provision of capital is determined by the

consent of the family or a parent company or a maximum of 5 million dollars per person.

E4 subjects prepared for a 4th semester student at stage approaches the final stage of

learning Entrepreneur, considering the stage again the E5 is the final stage of learning

entrepreneurial students who have taken in semester 5. Thus projects developed by

students in the course are expected to have sufficient E4 mature and no longer in the

start up phase. For the achievement of specified learning courses E4 is to build

innovative business, where design and business innovation strategies should be

measurable. However, in reality many student projects developed in the class E4 is not

yet well established in the context of its business model. It is evident from the many

projects the students who still have a very low turnover, with the level of customer

rebuying is still very low frequency, resulting in fear of this student project business

will not survive in the long term.The students prepared to e4 to the final stage in the 4th

to the entrepreneur, as another step to e5 is a step that must be taken of the entrepreneur

in the five students.The projects are being developed by the students at this college are

mature enough to e4 and no longer on the stage is set for starting up. to e4 the lesson is

that business, build an innovative business innovation and design strategies in which it

should be measured.In fact, however, that is a lot of students in the class project e4 has

been established in terms of its business model.It is seen from many projects that have a

business turnover of a student who is very low level of customer rebuying it is very low

frequency, to take part in business worry about the students that would not survive in

the long term.Your eyes have a road map to e4 that


Book One 51

The result of all of the 5c

To address this problem on the draft is in the process of all the discovery and planning,

resourching stage, the actualization, and the evaluation and doing some research in the

process of data for any stage.The evaluation conducted in the process of all done every

facilitator / mentor to each individual student as members of a group or groups in the

following:

In Phase / Phase 1 Discovery and Planning, the respondents in this case are

all students of class B E4 get the mentoring process (The Five C Mentoring) by

the following process:

Challenges: Directs students on how to design a business that has the potential to

be accepted in the global market. Choice: Directs students to develop realistic

alternatives associated with potentially acceptable design business in the global

market, Consequences: Directing the student to assess strengths and weaknesses

of each alternative with regard to the design of potential business received in the

global market, Creative Solution: Directing students to choose the best

alternative based on the consequences of each alternative with regard to the

design of potential business received in the global market. The most realistic

best meaningful and / or best to be grabbed and Conclusion; Directing students

to draw conclusions regarding: (1) how much the desire of students to run the

chosen alternative; and (2) how likely alternative is chosen to be achieved

successfully.Challenges: Directs students on how to design a business that has

the potential to be accepted in the global market. Choice: Directs students to

develop realistic alternatives associated with potentially acceptable design

business in the global market, Consequences: Directing the student to assess

strengths and weaknesses of each alternative with regard to the design of

potential business received in the global market, Creative Solution: Directing

students to choose the best alternative based on the consequences of each

alternative with regard to the design of potential business received in the global

market. The most realistic best meaningful and / or best to be grabbed and

Conclusion; Directing students to draw conclusions regarding: (1) how much the

desire of students to run the chosen alternative; and (2) how likely alternative is

chosen to be achieved successfully.

In Phase / Phase 2 Resourcing, the respondents in this case were all

students E4

class B get the mentoring process (The Five C Mentoring) by the following

process:

Challenges: Directs students on how to identify and realize resource-based

businesses that have the potential to be accepted in the global market. Directing

:, Choice students to develop realistic alternatives related to the resource-based

businesses that have the potential to be accepted in the market

global.Consequences: Directing the student to assess strengths and weaknesses

of each alternative with regard to resource-based businesses that have the

potential to be accepted in the global market .Creative Solution: Directs students

to choose the best alternative based on the consequences of each alternative with

regard to resource-based businesses that have the potential to be accepted in the


Book One 52

global market and Conclusion; Directing students to draw conclusions

regarding: (1) how much the desire of students to run the chosen alternative; and

(2) how likely alternative is chosen to be achieved successfully.

On Stage / Phase 3 Implementation of the respondents in this case were all

students of class B E4 get the mentoring process (The Five C Mentoring) by the

following process: Challenges: Directs students on how to actualize the design /

business model that has the potential to be accepted in the global market.

Choice: Directs students to develop realistic alternatives related to the critical

point implementation of design / business model that has the potential to be

accepted in the global market. Consequences: Directing the student to assess

strengths and weaknesses of each alternative with regard to the critical point

implementation design / business model that has the potential to be accepted in

the market global.Creative Solution: Directs students to choose the best

alternative based on the consequences of each alternative with regard to the

critical point implementation design / business model potentially acceptable in

the market global.dan Conclusion; Directing students to draw conclusions

regarding: (1) how much the desire of students to run the chosen alternative; and

(2) how likely alternative is chosen to achieve with success .

in Phase / Phase 4 Evaluation of the respondents in this case were all

students of class B E4 get the mentoring process (The Five C Mentoring) by the

following process: Challenges: Directs students on how to justify the design /

business model that has the potential to be accepted in the global market.

Justification includes the invention of the strategic points of the implementation

of the design / business model .. Awards: Directing students to develop realistic

alternatives related to the strategic point of implementation design / business

model .. Consequences: Directing the student to assess strengths and weaknesses

of each alternative with regard to strategic point of implementation design /

business model. Creative Solution: Directs students to choose the best

alternative based on the consequences of each alternative related to the strategic

point of implementation design / model bisnis.dan Conclusion; Directing

students to draw conclusions regarding: (1) how much the desire of students to

run the chosen alternative; and (2) how likely alternative is chosen to be

achieved successfully.

The process of all the five ( c ) of all this was done consistently and over again,

or in any phase of the class b e4 learning, in studies conducted in the second

week and the fourth week of the twelve.An evaluation be made by the middle of

this process to the presentation sunday ( 8 ) eight uts ( a ) with the results of the

term examination of the facilitator is the following: those with the highest value

is the 21,1 80 % of the value of, as the next was 78 % 18,4 by the percentage of

the students of that is good enough


Book One 53

Table of the average facilitator result for the middle evaluation proccess

Frequency Percent Valid Percent

Cumulative

Percent

Valid 66 3 7.9 7.9 7.9

70 7 18.4 18.4 26.3

71 4 10.5 10.5 36.8

74 1 2.6 2.6 39.5

76 3 7.9 7.9 47.4

78 7 18.4 18.4 65.8

80 8 21.1 21.1 86.8

83 3 7.9 7.9 94.7

86 2 5.3 5.3 100.0

Total 38 100.0 100.0

To answer the research conducted by researchers, the researchers used qualitative

research with in-depth interview data collection methods (in-depth interviews).

Researchers conducted interviews with all members of the class. Where the results

of the interviews were described to 35 respondents, but only 31 respondents

involved in the interview and giving a written reflection

Based on the results of these interviews have obtained information about what

they feel from E4 learning process for one semester. Identified the things that

become the reflection points that can be grouped in three things namely;

facilitator, the process of mentoring, learning methods. Resume three things can

be seen in Table 5 as follows.


Book One 54

Table 5 shows the positive and negative resume of reflection topic

No Topik Keterangan

1 Facillitator (+)Facilitator of learning and development methods are very different, making the

confidence of our group increases. Facilitator position ourselves as our team and it

makes sense of confidence in the group increased.

(+) Facilitator gives the happy and comfort atmosphere

(+) Facilitator as the menthor, friends

(+) Facilitator gives the way out and great and useful ideas for the development of

the group product

(+)Frankly E2 and E4 only class that the professor wants students to understand

and want to go directly to the respective business students

(+)Facilitators provide positive feedback so that the student is more excited, the

input is realistic, does not provide a specific target or critical of you the way, but

the facilitator actually accompany and monitor any developments there

2 Mentoring

proccess

(+) the chance to share with the involvement of parent, mentor, facilitator

(+)Progress businesses are more important than the target

(+)mentoring that we get is also very helpful because in every mentoring issues

facing surely find a solution

3 Learning

method

(+)Innovations that benefit consumers be objective anyway

(+)parent gathering event, parents can speak to their business. Another great feature

is the parents / mentors / guardians are invited to contribute in the development of

business students, they know and be supportive of business development ananknya

(+)Mini exhibition, I have a lot more business associates from other departments

and other environmental

(+)using the method of learning and development are very different, making the

confidence of our group increased

(+)when invited to a brief lecture learning for our community and love the

opportunity to present our business to the next community

(-)gatherings with parents or guardians who dial held by E4, I think the event is not

helpful and should only be optional, so that only those who feel the need that is

required to follow the event

Has Done also questionnaires distributution to 35 respondents ie E4 class B students

with particular regard to evaluation of the mentoring process conducted by the

facilitator. Analysis of respondents' answers to the questionnaire in the form of the

results of such inquiries Tabulation of data in Table 6 below.


Book One 55

Table 6 the average score of respondend answer Nomor Question Average

1 Giving or recomending the chalanging projects that shows the opportunity to learn

in a new way and innovation?

3.771429

2 provide or recommend direct contact with businesses that support the group's

business partners?

3.257143

3 provide or recommend projects that help you to discuss / collaborate with fellow

students, siblings, parents / guardians?

3.771429

4 help you complete projects which if done by yourself would be very difficult to

resolve?

3.742857

5 initiative directs air-entrepreneur interest you? 4.028571

6 still gives you information about how external circumstances / conditions that

affect business in Indonesia your group business?

3.685714

7 express feelings / respect for you as an individual? 4.342857

8 expressing empathy for the concerns and feelings you experienced? 3.971429

9 encourage you to talk frankly about anxiety and fears that distract you in

completing the project / business?

4.142857

10 divide personal experience to you as an alternative solution to the problems that

you face?

4.085714

11 share the experience of entrepreneurship to you? 4.028571

12 encourage you prepare yourself to thrive? 4.285714

13 encourage you to try new ways of doing business your group? 4.342857

14 behave as someone who deserves to be an example for you? 4.114286

15 shows the values and attitudes as you expected? 4.4

Based on Table 6, the average response was 3.76 while the overall average of the lowest

answer is the answer to number 2 "give or recommend direct contact with business

partners who support the group's business?" With a score of 3.25. Overall, therefore,

indicates that respondents answer good enough for all the aspects in question in the

questionnaire, especially for question number 7 and number 13 that is the Facilitator

express feelings / respect for you as an individual as well as a facilitator to encourage

you to try new ways in running your group business? Both of these questions have

answers with the highest mean score of 4.34. While the answer to the question about the

facilitator encourages you to prepare developing also got average response is quite high

at 4.28. This indicates that it is true and consistent that the purpose of learning methods

mentorship according to Lowenstein & Bradshaw, (2011) is experiencing the

phenomenon itself and find its own nursing practice in which it is expected to build

confidence, self-esteem and self-awareness that is fundamental in the completion

problem. Similarly, the research results of Berglund and Wennberg (2006) states that

good mentorship efforts of the facilitator will boost your confidence and creativity in

solving problems mentee and business innovation. On the other hand the results of this

study are also in line with the opinion Pegg (1999) that the mentor is able to play


Book One 56

several roles namely Classic mentor: mentor is a wise and trusted counselor. They must

have credibility and willingness to assist the mentee wisely. Leader: As the leader of a

mentor should be an inspiration to do my best. Models: a model of a mentor should get

a sense of awe from the people around him. Coaches: as coaches should assist in daily

business activities. They must be well-educated person with good skills. A Coaches

must offer 3 stages namely: they increase the strength in terms of building, Pushing for

improvement (improvement) and has the ability to improve the achievement of success,

Teacher: as a mentor should act as well as teachers who share their knowledge and

make learning fun. Adviser: as an advisor to a mentor should be someone who can help

find the specialist / expert in knowledge to find a way out, Counsellor: mentor who acts

as a counselor should be able to provide an alternative solution by providing

professional insights, Buddies: Buddies system used by many organizations, where

employees are long lead new employees to show where the good and the bad, to

develop good habits and minimizing bad habits. Buddies is a longtime employee in this

organization their focus to help new employees to feel right at home. A mentor should

act as buddies. Good mentor should help to control one's life and lead to fill their lives.

What happens in the mentoring session, following the model of mentoring are

commonly referred to as the "five C" namely: Challenges, Choices, Consequences,

creative solutions and conclusions

CONCLUSION

Based on the data analysis and discussion, there are several conclusions that can be

presented in this study is

1. 5C Application of mentoring models on stage discovery and planning,

resourcing, implementation and evaluation on E4 is subject Challenges: students

more focused on how to design a business that has the potential to be accepted in

the global market. Choice students more focused to develop realistic alternatives

related to the design of potential business received in the global market,

Consequences: more focused student to assess strengths and weaknesses of each

alternative with regard to the design of potential business received in the global

market, Creative Solution: student more directed to choose the best alternative

based on the consequences of each alternative with regard to the design of

potential business received in the global market. The most realistic best

meaningful and / or best to be grabbed and Conclusion; students more directed

to interesting conclusions regarding: (1) how much the desire of students to run

the chosen alternative; and (2) how likely alternative is chosen to achieve a

successful

2. Student response to the application of the model 5C on 4 subjects

Entrepreneurship (Innovation) is divided into three terms of the facilitator, the

process of mentoring, learning methods. Facilitator: to empower students,

mentoring process: lead to the discovery of solutions and foster student self-

confidence, learning methods: fun.


Book One 57

SUGGESTION

Based on data analysis and discussion then there are some suggestions that can be

presented in this study are: The need for a mentor to provide or recommend direct

contact with business partners supporting the business group.

REFERENCE

Berglund H & Wennberg K , 2006. Creativity Among Entrepreneurship Students: Comparing Engineering and

Business Education, International Journal of Continuing Engineering Education, Vol 16. No. %., pp. 366-

79

Dreher Goerge F & Ronald A. Ash, 1990. A Comparative Study of Mentoring Among Men and

Woman in Managerial, Profesional and Technical Positions, Journal of Applied

Psychology Vol 75, No.5, 539-546.

Fuller SS. Enabling, 2000. Empowering. Inspiring: Research and Mentorship. Journal of Small

Business and Enterprise Development Vol 22 pp 88:l10.

Green BL. Rivers BM, Arekere DM. 2006. Mentoring: a Framework for Developing Health

Disparities Researchers. Journal of Health Promot Pract, Vol 7; 336-3 4 5.

Hamidi Yar Daniel, Karl Wennberg, Henrik Berglund, 2008. Creativity in Entrepreneurship

Education, Journal of Small Business and Enterprise Development, Vol 15. No.2., pp

304-320

http://www.scribd.com/doc/116217471/Perceptorship-Dan-Mentorship

Lowenstein & Bradshaw, 2011, Evaluating and Measuring Entrepreneurship and Enterprise

Education: Methods, Tools and Practises, International Journal of Entrepreneurship

Education, Vol., pp 5-24

Pegg, M. 2003. The Art of Mentoring, Management, Books 2000 Ltd., ISBN 1-85252-272-0

Pegg,M. 1999, The Art of Mentoring. Industrial and Commercial Training, 31, 136-141

Ramani S, fipen L, Kachur EK. 2010. Twelve Tips for Developing Mentoring. Med Teach., Vol.

28;404-408.

Rabionet, Silvia E. Rabionet, Ed, Lydia E. Santiago, and Carmen D. Zorrilla, MD, 2006. A

Multifaceted Mentoring Model for Minority Researchers to Address HIV Health

Disparitie, Journal of Health Promot Pract, Vol 6; 336-3 4 5

Sambunja D. Straus SF,, Manjsic A. 2009. Mentoring in Academic Medidne: a systematic

review. 296:1 103-1 115

Schnibbe KF, 2004. Mentoring: A Component For Professional Growth and Academic

6B(3}:324-328.

http://www.scribd.com/doc/116217471/Perceptorship-Dan-Mentorship


Book One 58

Sudjana, 2009, http://elsayangawi.wordpress.com/about-2/model-bermain-peran-dalam-

pembelajaran-partisipatif.

US Department of Eduealion. 2009. United States Departement of Education Lists of

postsecondary Minonty Institutions. Available at; http://www.ed.gov/ahout/ofñ ces/l

ist/ocr/ed lite-minorityinst.html. Acce.ssed January 3, 2009.

Winkelmaii M, 2005. Cultural Sensitivity and Competence, Peosta. IA: Eddie Bower Publishing,

Zambrano RE, Molnar C, Baras-Muñoz H, Salas-Lopez D. 2004. Cultural Competency as it

Ethnic, Linguistic, and Class Parities in Managed Health Organizations. 10 (siippl);37-

44.

http://elsayangawi.wordpress.com/about-2/model-bermain-peran-dalam-pembelajaran-partisipatif

http://elsayangawi.wordpress.com/about-2/model-bermain-peran-dalam-pembelajaran-partisipatif


Book One 59

ASYMMETRY INFORMATION AND CREDIT RISK EFFECT ON

LOAN PRICING IN ASIA PACIFIC 2006-2010

Ivana Alim1, Deddy Marciano2, James Bartle3

Alumny of Universitas Surabaya, Universitas Surabaya, University of New South

Wales (UNSW) INDONESIA, INDONESIA, WALES

Email: [email protected]

ABSTRACT

The purpose of this research is to test the relationship of the independent

variables (commercial bank, mix bank, country risk, CPI, foreign lender, log

amount, maturity, ticker, secure, senior, deal purpose, and sector industries) to

the dependent variables (loan spread). Key issues in this study consisted of

information asymmetry, moral hazard, adverse selection and country risk. The

results of this research shows the variable that significantly affect the loan

pricing decisions by lenders especially in Asia Pacific countries. Borrowers in

Asia Pacific can learn from the lender’s behavior in the loan pricing decision.

They also can have more knowledge on the determinants influence the

procedure of the loan pricing. Governments of the Asia Pacific countries can

use this study to gain more information about factors that influence the loan

pricing. They should make a regulation according loan pricing decisions and

they should monitored the process of the loans for the local banks so they

wouldn’t be bankrupt because loans in Asia Pacific contains high risk.

Keywords : Asymmetry Information, Credit Risk, Loan Pricing.

INTRODUCTION

Loan pricing is a critically important topic in the study of financial institutions (Swank,

1996).There are many research about loan pricing and what is considered in the loan

pricing, but this research is contributing on the behavior in Asia Pacific region while the

other research is conducting the research in the developing countries such as U.S and

Europe which are already well regulated. Researcher also focusing this study on the

country risk effect and the other credit risk that is considered by lenders in the loan

pricing.

The most substantial theories affecting variables in loan pricing decision are asymmetric

information and moral hazard theories (Sinkey, 2002; Heffernan, 1996). In Indonesia,

asymmetric information becomes a serious issue related to the insufficient monitoring

system from creditor and the weakness of financial system regulation. This situation

creates unique aspect for loan pricing research in Indonesia caused by high level of

asymmetric information, which is different from the previous research conducted in

USA and Europe with low level of asymmetric information.


Book One 60

Country characteristics has an important role in shaping the loan pricing despite the

availability of financial information related to borrower. This is because the risk of

asymmetry information in the Asia Pacific countries is greater than the U.S. or

Europe, so the lender need to assess the risks that could affect the ability of borrower to

repay the loan.Comparing risk assessment and loan pricing by domestic lenders and

foreign lenders are also conducted by Atmojo (2004). Atmojo (2004) explains that

domestic lenders are in a good position to easily obtain information and more cost

efficient than the foreign lenders.

Atmojo (2004) also categorize corporate lending based on listed and non listed

borrowers.For listed borrowers which shares traded on the stock exchange, the

information will be more easily obtained. (Booth, 1992) also explained that publicly

owned companies will reduce a lower asymmetric information and monitoring cost, as

well caused a lower risk, since the borrower maintain their transparency which results

in a lower/cheaper loan pricing.

For type of creditor, there are 2 kinds of banks which are commercial bank and

investment bank. Marciano (2008) explained that commercial bank have a better ability

to reduce assymmetric information compare to investment bank. Furthermore, the loan

size that the lenders give to the borrower is representing the quality of the borrower to

decide the spread given.

In finance, maturity or maturity date refers to the final payment date of a loan or other

financial instrument, at which point the principal (and all remaining interest) is due to

be paid. It represents that the riskier the company, lenders will tend to give shorter term

maturity so they can reevaluate it, thus lenders will give high spread to cover high risk

that the company have (Barclay and Smith, 1995; Stoch and Mauer, 1996).

Another variable that needs to be considered is whether the loan is secured with the

collateral or not. The definition of collateral in Winton and Rajan (1995) is as a

“specific assets pledged as security for a loan”. Bester (1985), Besanko and Thakor

(1987) stated that the borrower could have a good credit risk quality by offering a

collateral. While for seniority, if the loan is senior it means it will be paid first than the

subordinates loan. This suggests that senior loans will be charged lower loan spread by

lender.

LITERATURE REVIEW

Lasmono and Marciano (2010) explained that the high rate of corruption perception

index shows the common practice of bribe and misused fundings in the bureaucrat,

which could lead to borrower’s false action such as issuing a misleading financial report,

false tax report, etc. Country with high corruption perception index indicates that the

asymmetry information also greater, thus the lenders will enlarge the loan spread. H1 :

The higher the corruption rate will results in a higher loan spread. Listed company is monitored by the investors, public claimholders, analysts or bond

rating agencies all the time through cross monitoring. The situation where the

information is easier to obtain could reduce the level of asymmetry information between

lenders and borrowers (Marciano, 2008). Therefore, listed borrowers will have lower

loan spread compared with non listed borrowers (Booth, 1992). H2 : Listed company

makes lender gives lower loan spread.


Book One 61

There are findings from Goldberg, Dages, and Kinney (2000) who explained that

foreign banks will have better performance in lending to developing countries if the

foreign bank may cooperate with the domestic banks located in that country. Atmojo

(2004) explained that domestic lenders are in a good position to easily obtain

information and more cost efficient than the foreign lenders. Therefore, foreign lenders

will have higher loan spread than the domestic lenders. H3 : Foreign lenders gives

higher loan spread compare to domestic lenders. The result of the research conducted by Tanjung and Marciano (2012) shows that

investment bank has poor monitoring capabilities, so they will increase the lead share to

get a better monitoring ability. Drucker and Puri (2003) also explained that the

investment bank has a higher monitoring costs due to weak evaluation capability

compare to commercial bank. H4 : Commercial bank gives lower loan spread

compare to investment bank. Country risk is an an index measuring the risk of a country that is based on credit risk

and political risk (Tanjung, 2012). No matter how good the company's financial

performance, it will have a high risk if the country condition is unstable (Tanjung,

2012). This condition leads the lender to give higher loan spread to the country that

have high country risk. H5 : The higher the country risk will results in a higher loan

spread. There are negative relationship between maturity and loan spread.The riskier the

company, lenders will tend to give shorter term maturity so they can reevaluate it, thus

lenders will give higher spread to cover high risk that the company have. Lasmono

(2010) also explained that it is because a short term maturity will results in a more

frequent due time payment extension request by the borrower, and cause a more

frequent monitoring activities by the lenders. H6 : Longer maturity makes lender

gives lower loan spread. Smith and Warner (1979) shows that secured loans need more monitoring than

unsecured loans or loan without collateral. The existence of collateral assumed as a

signal of high risk loan (Harhoff and Korting, 1998). In conclusion, loan with collateral

is considered riskier thus lender will assigned higher loan spread to the borrower. H7 :

Secured loans makes lender gives higher loan spread. The findings of research conducted by Tanjung and Marciano (2012) are consistent with

research by Godlewski and Weill (2007) which stated that the existence of seniority

would lead a lower need of lead arranger to monitor the borrower, thus the loan spread

will be reduced. This suggests that senior loans will be charged lower loan spread by

lender. H8 : Senior loans makes lender gives lower loan spread.

RESEARCH METHOD

Data collection procedure begins with collecting all transactions data from the data of

all loan corporations that were recorded on Dealscan LPC (Loan Pricing Corporation).

From the data, this research sort it based on these characteristics: (1) loan contracts in

the period 2006 – 2010 (2) loans located in the Asia Pacific region, specifically in 17

countries, i.e. China, Japan, Australia, South Korea, Indonesia, Taiwan, Thailand,

Malaysia, Hong Kong, Singapore, Philippines, Sri Lanka, Vietnam, Bangladesh, Macau,

Cambodia and Laos (3) U.S. dollar denomination loans (4) loans with LIBOR base rate.

After following the characteristics, the sample have total 886 loan transactions.


Book One 62

This research used only two levels of measurement which is nominal and ratio level

measurements.The OLS regression (Ordinary Least Squares) to estimate the

determinants in loan spread with white correction method (White heteroscedasticity

correction).

RESULTS AND DISCUSSION

This research will be conducted in several groups of model, which are : (1) all sample

loan data (2) public loan data (3) non-public loan data (4) public loan data with financial

performance.

Table 1 shows the results for all four models, compare to the hypotheses explained in

the theory above. The number inside parenthesis [ ] is showing the t-Statistic value.

Table 1 Comparison of Hypotheses and Research Results (All Models)

VARIABLE Hypotheses Model 1 :

ALL SAMPLE

Model 2 : PUBLIC

Model 3 : NON

PUBLIC

Model 4 : PUBLIC WITH

FINANCIAL PERFORMANCE

Coefficient Coefficient Coefficient Coefficient

COMM_BANK Negative -64.4770*** -32.2409** -

123.0018*** -33.6570**

[-4.3505] [-1.9545] [-3.4945] [-1.8934]

MIXBANK Negative -65.9912*** -46.7062*** -

143.0787*** -41.0108***

[-5.0993] [-3.2736] [-4.6705] [-2.7031]

COUNTRYRISK Positive 14.9030*** 17.0724*** 18.0313*** 13.0256***

[5.7165] [5.5934] [2.6778] [3.7166]

CPI Positive 4.2061** 4.0641* 2.4685 1.7792

[2.0731] [1.7896] [0.4612] [0.7084]

LEN_FRGN Positive -9.7603 0.5369 22.7908 1.6075

[-1.2604] [0.0642] [1.2284] [0.1758]

LOGAMMOUNT Negative -5.6729 -13.5767* -11.0042 -1.8664

[-0.7376] [-1.5940] [-0.5969] [-0.1902]

MATURITY Negative -0.3203*** -0.0392*** 0.2780 -0.1067

[-3.0340] [-0.2989] [1.2584] [-0.7373]

TICKER Negative -50.5638*** ---------- ---------- ----------

[-6.9045] ---------- ---------- ----------

SECURE Positive 29.2366*** 46.7265*** 14.4531 43.1417***

[2.9842] [4.0591] [0.6998] [3.1728]

SENIOR Negative -114.3224*** -5.0083 -

413.1475*** -19.3969

[-3.2153] [-0.1358] [-3.4163] [-0.4704]

DEALPURPOSE Positive 10.6082 7.5459 -3.0431 5.7495

[1.3331] [0.8642] [-0.1545] [0.6003]

DEBTTOASSETS Positive ---------- ---------- ---------- 0.5031

---------- ---------- ---------- [0.0913]

LOGINCOME Negative ---------- ---------- ---------- -18.7793***

---------- ---------- ---------- [-3.8272]

ROA Negative ---------- ---------- ---------- -30.2482

---------- ---------- ---------- [-0.7988]


Book One 63

The test results showed negative and significant coefficient at 1% between loan spread

with commercial bank . This shows that commercial bank lender have the tendency to

give lower loan spread to the borrower. This happened because commercial bank have a

better ability to reduce asymmetric information compare to investment bank that will

lead to a cheaper loan pricing decision (Marciano, 2008). This research results is in

accordance with the research results conducted by Tanjung and Marciano (2012) that

conclude significant negative relationships between loan spread and commercial bank.

Mix bank variable showed negative and significant coeficient at 1%.The results of this

analysis is in accordance with the statement of Drucker and Puri (2003) which revealed

that the investment bank has a higher monitoring costs due to weak evaluation

capability compare to commercial bank. While Gupta, Singh, and Zebedee (2008) adds

that universal banks are more flexible than an investment bank because the bank

function are between investment banks and universal banks.

Countryrisk variable showed positive and significant coeficient at 1%. This suggests

that the riskier the country, the higher the loan spread. In their book, Jorion (2002),

Heffernan (2008), Eaton et al., (1894) stated that credit risk is a risk of borrower’s

incapability to perform their duties as stated in loan agreement, which means that the

borrower could not paid the loans because of bankruptcy, or late payment for loan’s

interest. This findings is in accordance with the findings of Lasmono and Marciano

(2010) who found that higher risk of loan will cause lender to require greater

monitoring capabilities.

CPI variable showed positive and significant coeficient at 5%. This suggests that the

higher the corruption index will lead the lender to assign higher spread. Because the

lenders will try to protect themselves by increasing its monitoring capabilities. This

finding is similar with the research done by Lasmono and Marciano (2010) which

explained that when the level of corruption of a country is very high, then the

asymmetry information also predicted to be greater, thus the lenders will enlarge its

share.

Maturity variable showed negative and significant coeficient at 1%. This shows that the

longer the maturity given, lender will assign lower spread because a long term maturity

indicates that the lender didn’t need to reevaluate or remonitoring oftenly. Shorter term

maturity rate will give a chance for creditor to reevaluate or remonitoring when the

loan is due, which mean there is positive coeficient between maturity rate with debtor’s

quality (Barclay and Smith, 1995; Stoch and Mauer, 1996). If the debtor’s quality is

good, it means that the risk of the company could not paid the loan is lower. Thus, the

lender will give lower loan spread to a long term maturity date.

Ticker variable showed negative and significant coeficient at 1%. The finding is

consistent with the results of Denis and Mulleneaux (2000) which revealed that if the

borrower is registered in the capital markets, it may reduce the lender’s monitoring

cost. It is also supported by the findings of Booth (1992) which explained that listed

borrowers will have lower loan spread because there are cross monitoring that

conducted by the public claimholders, analyst and bond rating agencies. Information is

easier to obtain in listed company than private or non listed company, the situation

where the information is easier to obtain could reduce the level of asymmetry

information between lenders and borrowers.


Book One 64

Secure variable showed positive and significant coeficient at 1%. This suggests that if

there is a guarantee / collateral in the loan, the loan spread will be higher. The findings

are consistent with the results from Tanjung and Marciano (2012). Berger, Udell (1990)

also associated collateral with a riskier loans, since collateral usually are found in a loan

transaction that need more monitoring. The existence of collateral assumed as a signal

of high risk loan (Harhoff and Korting, 1998). Smith and Warner (1979) shows that

secured loans need more monitoring than unsecured loans or loan without collateral. In

conclusion, loan with collateral is considered riskier thus lender will assign higher loan

spread to the borrower.

Senior variable showed negative and significant coeficient at 1%. This suggests that if

the loan is senior, the lender will assign lower spread because the existence of seniority

would lead a lower need of lenders to monitor the borrower (Godlewski and Weill,

2007). The findings are consistent with research by Tanjung and Marciano (2012)

which showed a negative and significant coeficient for seniority variable.

The test results for model 2 showed negative and significant coeficient at 5% between

loan spread with commercial bank . This shows that commercial bank lender have the

tendency to give lower loan spread to the borrower. This happened because commercial

bank have a better ability to reduce asymmetric information compare to investment

bank that will lead to a cheaper loan pricing decision (Marciano, 2008). This research

results is in accordance with the research results conducted by Tanjung and Marciano

(2012) that conclude significant negative relationships between loan spread and

commercial bank.

Mix bank variable showed negative and significant coeficient at 1%. The results of this














CPI variable showed positive and significant coeficient at 10%. This suggests that the

higher the corruption index will lead the lender to assign higher spread. Because the

lenders will try to protect themselves by increasing its monitoring capabilities. This

finding is similar with the research done by Lasmono and Marciano (2010) which

explained that when the level of corruption of a country is very high, then the

asymmetry information also predicted to be greater, thus the lenders will enlarge its

share.


there is a guarantee / collateral in the loan, the loan spread will increase. Berger, Udell

(1990) also associated collateral with a riskier loans, since collateral usually are found


Book One 65

in a loan transaction that need more monitoring. The existence of collateral assumed as

a signal of high risk loan (Harhoff and Korting, 1998). Smith and Warner (1979) shows

that secured loans need more monitoring than unsecured loans or loan without collateral.

In conclusion, loan with collateral is considered riskier thus lender will assign higher

loan spread to the borrower.

The test results for model 3 showed negative and significant coeficient at 1% between

loan spread with commercial bank . This shows that commercial bank lender have the

tendency to give lower loan spread to the borrower. This happened because commercial

bank have a better ability to reduce asymmetric information compare to investment

bank that will lead to a cheaper loan pricing decision (Marciano, 2008). This research

results is in accordance with the research results conducted by Tanjung and Marciano

(2012) that conclude significant negative relationships between loan spread and

commercial bank.

Mix bank variable showed negative and significant coeficient at 1%. This suggests that

the lender with mixed functions (commercial and investment banks) would have a better

monitoring capability compared to omitted variable (investment bank) so the spread

will be decline and credit risk exposure of the overall lenders will be reduced as well

(Tanjung and Marciano, 2012).The results of this analysis is in accordance with the

statement of Drucker and Puri (2003) which revealed that the investment bank has a

higher monitoring costs due to weak evaluation capability compare to commercial

bank. While Gupta, Singh, and Zebedee (2008) adds that universal banks are more

flexible than an investment bank because the bank function are between investment

banks and universal banks.









Senior variable showed negative and significant coeficient at 1%. This suggests that if

the loan is senior, the lender will assign lower spread because the existence of seniority

would lead a lower need of lenders to monitor the borrower (Godlewski and Weill,

2007). The findings are consistent with research by Tanjung and Marciano (2012)

which showed a negative and significant coeficient for seniority variable.

The test for model 4 results showed negative and significant coeficient at 5% between

loan spread with commercial bank. This happened because commercial bank have a

better ability to reduce asymmetric information compare to investment bank that will

lead to a cheaper loan pricing decision (Marciano, 2008). This research results is in

accordance with the research results conducted by Tanjung and Marciano (2012) that

conclude significant negative relationships between loan spread and commercial bank.

Mix bank variable showed negative and significant coeficient at 1%. The results of this





Book One 66












there is a guarantee / collateral in the loan, the loan spread will increase. Berger, Udell

(1990) also associated collateral with a riskier loans, since collateral usually are found

in a loan transaction that need more monitoring. The existence of collateral assumed as

a signal of high risk loan (Harhoff and Korting, 1998). Smith and Warner (1979) shows

that secured loans need more monitoring than unsecured loans or loan without collateral.

In conclusion, loan with collateral is considered riskier thus lender will assign higher

loan spread to the borrower.

Senior variable showed negative but not significant coeficient. This suggests that

whether the borrower’s company is senior or not, it would not affect the amount of

spread given to the borrower. The negative coeficient shows that if the loan is senior,

the lender will assign lower spread because the existence of seniority would lead a

lower need of lenders to monitor the borrower (Godlewski and Weill, 2007). Besides

that, the results is not significant because the data is grouped in different specification,

so for public with financial performance testing tend to have a more dominant data on

dummy 1 (senior loans).

Log income variable showed negative and significant coeficient at 1%. This suggests

that the higher the income of a company will lead to a lower spread. This happened

because high income indicates that the company have a good financial performance.

This findings is similar with the results of Tanjung and Marciano (2012) which explains

that the better the financial performance of the company will push the lenders to lose its

lead share, because good financial performance lead to a lower default risk, so

lenders may reduce the monitoring cost too.

CONCLUSION AND RECOMMENDATION

The purpose of this research is to know the relationship of the independent variables

(commercial bank, mix bank, country risk, CPI, foreign lender, log amount, maturity,

ticker, secure, senior, deal purpose, and sector industries) to the dependent variables

(loan spread).Based on the test with four models, it is concluded that some significant

factors are the type of creditor, the country risk, the corruption perception index,

maturity, the borrower’s companies whether they are listed or not, seniority and whether

their loan is secured or not.


Book One 67

REFERENCES

Atmojo, I., 2004, Penilaian Harga Pinjaman Korporasi : Studi Empiris di Indonesia,

unpublished.

Barclay, M., and Smith, C., 1995, The maturity structure of corporate debt, Journal of Finance,

50, 609-631.

Berger, A., and Udell, G., collateral, loan quality, and Bank Risk, job paper 25.

Berlin, M., and Mester, L.J., 1992, Debt Covenants and Renegotiation, Journal of Financial

Intermediation, Vol.2, No.2, pp.95-133.

Besanko, D., and Thakor, A., 1987, Collateral and Rationing: Shorting equilibrium in

Monopolistic and Competitive Credit Markets, International Economic Review, 671-

689.

Booth, J., 1992, Contract Costs, Bank Loans, and the cross-monitoring hypothesis, Journal of

Financial Economics, Vol.31, pp.25-41.

Booth, J.R. and Chua, L., 1995, Structure and Pricing of Large Bank Loans, Federal Research

Bank of San Fransisco, Working Paper, pp.52-62.

Carey, M., Post, M., and Sharpe, S.A., 1998, Does Corporate Lending by Banks and Finance

Companies Differ? Evidence on Specialization in Privatee Debt Contracting, Journal of

Finance, Vol.53, June, pp.845-878.

Carey, M. and Nini, G., 2003, Is the Corporate Loan Market Globally Integrated? A Pricing

Puzzle, Working Paper.

Chen, A.H., Mazumdar, S.C., Hung, M.W., 1996, Regulations, Lender Identity and Bank Loan

Pricing, Pacific-Basin Finance Journal, Vol.4, pp.1-1-14.

Chen, A.H., Mazumdar, S.C., Yan, Y., 2000, Monitoring and Bank Loan Pricing, Pacific-Basin

Finance Journal, Vol.8, pp.1-24.

Darmodaran, A., 2003, Measuring Company Exposure to Country Risk : Theory and Practice,

Working Paper.

Datta, S., Datta, M.I., and Patel, A., 1999, Bank Monitoring and the Pricing of Corporate

Public Debt, Journal of Financial Economics, Vol.51, pp.435-449.

Dennis, S.A., Mullineaux, D.J., 2000, Syndicated Loans, Journal of Financial Intermediation 9:

404-426.

Diamond, D., 1984, Financial Intermediation and Delegated Monitoring, Review of Economic

Studies, Vol.51, pp.393-414.

Drucker, P., and Puri, M., 2003, Typing Knots: Lending to Win Equity Underwriting Business,

Unpublished working paper.


Book One 68

Fama, E.F., Jensen, M.C., 1983, Separation of Ownership and Control, Journal of Law and

Economics (June), 301-325.

Eaton, J., Gersovitz, M., and Stiglitz, J.E.,1894, The Pure Theory of Country Risk, National

Bureau Economics of Research 1050.

Godlewski, C.J., Weill L., 2008, Syndicated Loans in Emerging Markets, working paper 28.

Hallak, I., 2002, Why Borrower Pay Premium to Larger Lenders: Empirical Evidence from

Sovereign Syndicated Loans, Center for Financial Studies, 2002/02, Working Paper.

Hanafi, M.M., 2009, Risk Management, 2nd edition, UPP STIM YKPN.

Harhoff, D., Korting, T., 1998, Lending Relationships in Germany:Empirical Results from

Survey Data, CEPR Discussion Paper No. 1917.

Harjoto, M., Mullineaux, D.J., and Yi, H.C., 2004, Loan Pricing at Investment Banks and

Commercial Banks, Working Paper, Unpublished.

Heffernan, S., 1966, Modern Banking in Theory and Practice, Jhon Wiley and Sons.

Syndications : Evidence for 1995 to 1999, Economic and Policy Analysis Working

Paper 10.

Husnan, S., 1998, Dasar-Dasar Teori Portfolio dan Analisis Sekuritas, UPP AMP YKPN, Edisi

ketiga.

Ivashina, V., 2009, Asymmetric Information Effects on Loan Spread, Journal of Financial

Economics 92, 300-319.

James, C., 1987, Some Evidence of the Uniqueness of Bank Loans, Journal of Financial

Economics, Vol.19, pp217-235.

Jorion, P., 2002, Value at Risk, 2nd edition, Mc Graw Hill.

La Porta, R., De-Silanes, F.L., Shleifer, A., and Vishny, R.W., 1997, Legal Determinants of

External Finance, Journal of Finance, Vol.52, No.3, pp.1131-1150.

Lasmono, D., 2010, Pengaruh Tingkat Korupsi dan Resiko Negara Terhadap Keputusan

Pembentukan Sindikasi Dan Struktur Sindikasi di Asia Pada Tahun 1999-2003,

UBAYA.

Marciano, D., 2004, Loan Pricing in United States, Europe and Asia, working paper.

Marciano, D., 2008, The Impact of Information Asymmetry, Moral Hazard and The Structure of

Funding on Corporate U.S. Dollars Loan Pricing : The Empirical Study in Indonesia

The Period 1990-1997, Gadjah Mada University.

Millon, M.H., and Thakor, A.V., 1985, Moral Hazard and Information Sharing: A Model of

Financial Information Gathering Agencies, Journal of Finance, (December), 1403-1422.


Book One 69

Petersen, M., and Rajan, R., 2002, Does Distance Still Matter: the Information Revolution in

Small Business Lending, Journal of Finance, Vol.57, pp.2533-2570.

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Industry, Prentice Hall, Sixth edition.

Smith, C., and Warner, J., 1979, On Financial Contracting : An Analysis of Bond Covenants,

Journal of Financial Economic 7, 117-161.

Stiglitz, J., and Weiss, A., 1981, Credit Rationing in Markets with Imperfect Information,

American Economic Review 71, 393-410.

Stochs, M., and Mauer, D., 1996, The Determinants of Corporate Debt Maturity Structure,

Journal of Business, Vol.69, pp.279-312.

Tanjung, Y., and Marciano, D., 2012, Asymmetry Information and Diversification Effect on

Loan Pricing in Asia Pacific Region 2006-2010, UBAYA.

White, H., 1980, A Heteroskedasticity- Consistent CovarianceEstimator and A Direct Test for

Heteroskedasticity, Econometrica 48, 817-838


Book One 70

R TRADING COMPANY DEVELOPMENT FEASIBILITY STUDY

Dean Michael Reyhan1, David Sukardi Kodrat2

INDONESIA


ABSTRACT

The purpose of this study was to increase R trading company turnover from

Rp500.000.000,00 per year to become Rp1.500.000.000,00 per year by business

environment aspect, industrial structure aspect, market and marketing aspect,

technical aspect, human resources and management aspect, also financial

aspect.

This study used feasibility study method by analyze many aspects of business. In

this study belong to the population from newcomer, supplier, customer,

substitute, competitor, use sampling method: purposive sampling, saturation

sampling, non-proportionated random sampling, accidental sampling,

purposive sampling. Data retrieval used with documentation, interview, and

observation.

The result of this study summarized that in market and marketing aspect,

technical aspect, human resources and management aspect this development

was feasible. For financial aspect this development was only feasible for

optimistic scenario analysis.

Keywords: Feasibility Study, Business Environment Aspect, Industrial

Structure Aspect, Market And Marketing Aspect, Technical Aspect,

INTRODUCTION

Food sector is one of the business that have sustainable life cycle because this business

provides basic human needs. East Java economics at 2013 supported by three main

sector, agriculture (14,91%), processing industry (26,60%), also trade, hotel, and

restaurants (31,34%). Indonesia’s national FMCG growth also shows that FMCG (Fast

Moving Consumer Goods) industry have a good growth from Q2 2012 until Q3 2013.

R trading company is established since 2010, however this family business actually

started at 1999, but the researcher have a little intervention of this business.



Book One 71

Figure 1. National Fast Moving Consumer Goods Q2 2012 VS Q2 2014

Source: Kantar World Panel 2013

According to the data shown in Figure 1 above, the growth of national FMCG growth

is quite interesting to develop. R trading company started when the researcher have

project from his university. Then this family business developed until now. The

researcher want to develop the distribution of this product both within Surabaya area,

also another city in Indonesia.

In this study there is to increase R trading company turnover from Rp500.000.000,00

per year become Rp1.500.000.000,00 per year. The aspects that will be examined are

business environment aspect, industrial structure aspect, market and marketing aspect,

technical aspect, human resources and management aspect, also financial aspect.


Business Environment Aspect

When running a business a businessman need to pay attention with the external factor.

The first aspect that need to pay attention is business environment aspect . According to

Ireland (2013) environment generally consists of segments which are outside the

company. This study use PEST Analysis which is contain political analysis, economy

analysis, social analysis, technology analysis.

In this PEST Analysis obtained results show opportunity and threat such as:

governments increasingly encourage the development of SMEs products, AFTA 2015

that can create new markets, the market that have stable growth and the increased

purchasing power, easy for newcomer to enter the market, technology competition.

Industrial Structure Aspect

The other external factor that must pay attention is industrial structure aspect. This

aspect contains the competition model within this industry. Ireland (2013) say that The

Five Forces Competition Model consists of threat of new entrants, bargaining power of

suppliers, bargaining power of buyers, threat of substitute products, and rivalry among

industries.

In this Five Forces Competition Model obtained results show strength and weaknesses

such as: have many variants of products, products established since 1999, the product

durability short enough, needs big storage for finished products, and limited capital.


Book One 72

Figure 2. R Trading Company Five Force of Competition Model

Source: Data were processed in 2014

Company Strategy

After analyze business environment aspect and industrial structure aspect this company

use SWOT Analysis. Kotler (2009) said that SWOT Analysis is a way to observe

external and internal marketing environment. After weighting internal and external

factors from this company results are: 0.90 for (Strength-Weaknesses) and 1.625 for

(Opportunity-Threat) which puts the company at stable growth strategy on SWOT

Matrix.

Figure 3. R Trading Company SWOT Matrix



Book One 73

According to the SWOT Analysis, R trading company included in 1st Quadrant which is

growth quadrant. Which strategies to use is stable growth strategy. This strategy done

by steady growth where development is done in stages and targets are determined in

accordance with current market conditions.

Market and Marketing Aspect

After decide the strategy that will be used for development of R trading company

researcher analyze the market and marketing aspect. Development of the industrial

output value of crackers in Indonesia 2006-2010 good enough with 4.21% increasing

per year. The industrial output value at 2006 is Rp1.778.266.714.000,00 become

Rp2.087.070.505.000,00 at 2010. With this rate of growth, the industrial output value of

crackers in Indonesia will be Rp3.152.325.678.000,00 at 2020.

Figure 4. Industrial Output Value Crackers in Indonesia

Source: BPS (Biro Pusat Statistik) data processed in 2014

According to STP (Segmentation, Targeting, and Positioning) and Marketing Mix

(Product, Price, Place, Promotion) R trading company summarized this aspects become:


Book One 74

Figure 5. R Trading Company Marketing Mix


The evaluation criteria for market and marketing aspects are: have potential market to

develop, have a specific target customer, and have STP and Marketing Mix. R trading

company has all of the criteria.

Technical Aspect

Technical aspect is also important in this business. The technical aspects contains:

product placement, product packing, and product delivery.

Right product placement at the vendor really affects the sales of crackers products.

Good and interesting product packaging can keep the product quality, also can attract

the buyers. At the end can increasing the sales turn over. The product delivery is also

important in R Trading Company businesses, the effective and efficient product

delivery can increase the sales turn over and satisfy the customer.

The evaluation criteria for technical aspects are: availability of telephone and internet

network, availability of tools, equipment, and transportation, ready supplier, and deft

employees. R trading company has all of the criteria.

Management and Human Resources Aspect

In R trading company business development plan concerning management and human

resources aspect there were some things to note, such as: business entity, organization

structure, and qualifications of the employees required.

The business entity of R trading company before and after research still same and not

change to other business entity. The organization of R Trading Company use line

organization. This organization structure used because of number of employees there is

still little.


Book One 75

Figure 5. R Trading Company Line Structure Organization

Source: Company data were processed in 2014

The development of organization structure is the additional employee from courier and

order taker division to handle the customer order. The condition and expertise for

general manager and marketing are: minimum undergraduate scholars, honest,

responsible, able to organize team, able to get new potential customer. Finance and

administration able to do finance and administration job, able to use social media and

do correspondence. Courier and order taker division able to pack the products, send the

products, and proactive at work.

Evaluation of management and human resources aspect are well formed organization

structure, well formed job analysis, well formed standard operational procedure, and

well formed employee management systems. According to evaluation of management

and human resources aspects, R trading company has completed all the criteria and

feasible for business development.

Financial Aspects

The last aspect discussed in R trading company development feasibility study is

financial aspects. In these financial aspects R trading company used Payback Period

(PP), Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI),

and scenario analysis (pessimistic, moderate, and optimistic).

Payback period method used to assess the return on investment period of a business.

This calculation uses the calculation of net cash each year. Net cash value is the sum of

profits after tax plus depreciation.

Net Present Value (NPV) is the ratio between the net cash PV and PV investment over

the life of the investment. The difference between these two values is often known as

the Net Present Value (NPV).

IRR is an indicator that is used to describe the percentage of profit generated from the

project. If the value of IRR is greater (>) of the interest loan, then the project is accepted.

If the IRR is less (<) than the loan rate, then the project is rejected.

Profitability Index (PI) or often referred to as the B / C ratio is the ratio of the activity of

total revenues net present value with the present value of investment expenditure over

the life of the investment. If the Profitability Index (PI) greater (>) than 1 then the

project is accepted. If the value of Profitability Index (PI) is smaller (<) than 1 then the

project is rejected.


Book One 76

Businesses pessimistic scenario of + 17% per year based on the growth of FMCG (Fast

Moving Consumer Goods) in Indonesia in quarter 2 of 2012 compared to Quarter 2

Year 2013 Scenario moderate business by + 25.8% per year based on a R trading

company turnover growth from the year 2012-2013. Meanwhile, businesses optimistic

scenario of + 33.8% per year based on a R trading company turnover growth 2012-

2013 amounted to 25.8% added to 8.014% inflation rate in Indonesia in 2006-2010 for

the food industry, beverages, cigarettes, and tobacco.

Table 1. Summary of Eligibility Criteria Investment Pessimistic Scenario

Source: The study results were processed in 2014

Table 2. Summary of Eligibility Criteria Investment Moderate Scenario


Table 3. Summary of Eligibility Criteria Investment Optimistic Scenario


From Table 1 to 3 show that NPV, IRR, and PI criteria are feasible for every scenario.

But, the Payback Period (PP) criteria only feasible for optimistic scenario.

CONCLUSION

Based on research results that have been discussed above, it can be concluded as

follows:

1. Based on the aspects of the business environment using PEST Analysis, it can be

said that the conditions in Indonesia supporting R trading company . In PEST

Analysis obtained results indicate that there are opportunities and threats as

follows: governments increasingly encourage the development of SMEs products,

the AFTA in 2015 that create new markets, growing market stability and increased

purchasing power, easy for newcomers to enter to markets, and technology

competition.

2. Based on the structural aspects of the industry that uses the Five Forces

Competition Model, it can be said that the position of R trading company in the

competition quite well. As for the Five Forces Competition Model shows the


Book One 77

results of the strengths and weaknesses such as: having a lot of variance / types of

products that are marketed, a product from a supplier that has been in existence

since 1999, the durability of the product is not too long / short enough, needed a

storage area large enough to finished products, as well as sufficient capital is

limited.

3. Based on the analysis of the environmental aspects and the business aspects of the

industry structure of companies applying SWOT Analysis of strengths, weaknesses,

opportunities, and threats owned by UD. R. The results obtained in the entrance

quadrant I particularly stable growth strategy where the strategy is done by means

of steady growth and a gradual manner specified targets according to the conditions

of the existing market.

4. In the aspect of the market and marketing indicates that market growth experienced

crackers industry average increase in turnover of 4.21% per year. This illustrates

the potential of this industry to achieve Rp3.152.325.678.000,00 turnover in 2020.

R trading company satisfy the criteria used in the market and marketing aspects

are: the market potential for development, having specifics customer, and has STP

and Marketing Mix.

5. The technical aspects of the company using product placement, product packaging,

and delivery of products. As for the R trading company has met the benchmark for

the evaluation of the technical aspects of the availability of telephone and internet,

the availability of tools and transportation, the supplier who is always ready and

agile workforce.

6. In the aspect of human resource management and R trading company still uses the

same business entity. As for the structure of organizations still use the simple form

of the line organization.

7. In the financial aspects of the company using indicators Payback Period (PP), Net

Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), as

well as risk analysis (pessimistic, moderate and optimistic). Based on the

calculation results of this feasibility study shows that the NPV, IRR, and PI feasible

for the third scenario analysis. As for the PP only feasible for the optimistic

scenario.


Book One 78

Managerial Implications

Table 4. Comparison Before and After Research in R trading company

Before Study After Study

1. Market and Marketing Aspect

Limited marketing Expand marketing area

No promotion budget Budget promotion cost

2. Technical Aspect

Product placement: plastic plastic and corrugated box

Product packing: plastik seal plastik seal and zipper

Product delivery: by phone by phone and taking order

3. Management and Human Resources Aspect

Using 3 employees Add 1 employee

at delivery and order division

4. Financial Aspect

Turnover Rp500.000.000,00 per year Turnover Rp1.500.000.000,00 per year

Pessimistic: 7 years later

Moderate: 5 years later

Optimistic: 4 years later


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Concepts and Cases, 10th edition. Canada: Nelson Education, Ltd.

Jumingan. 2009 Studi Kelayakan Bisnis. Cetakan Pertama. Jakarta: PT Bumi Aksara.

Kementrian Perindustrian Republik Indonesia,

2013, Available at: http://kemenperin.go.id/statistik, (Diaksespada: 3 November 2013).

Kartajaya, Hermawan. 2010 Grow with Character. Jakarta: PT Gramedia Pustaka Utama.

Kasmir, Jakfar. 2009 Studi Kelayakan Bisnis. Edisi Kedua. Jakarta: Prenada Media Group.

Kodrat, David Sukardi. 2009 Manajemen Distribusi. Edisi Pertama. Yogyakarta: GrhaI lmu.

Kotler, Philip dan Kevin Lane Keller. 2009 Manajemen Pemasaran. Edisi Ketiga belas. Jakarta:

PT. Gelora Aksara Pratama.

Kuncoro, Mudrajad. 2009 Metode Riset untuk Bisnis dan Ekonomi. Edisi Ketiga. Jakarta:

Erlangga.

Rangkuti, F. 2013 Teknik Membedah Kasus Bisnis Analisis SWOT (Edisi Revisi). Jakarta:

PT Gramedia Pustaka Utama.

Soegoto, Eddy Soeryanto. 2009 Entrepreneurship Menjadi Pebisnis Ulung. Cetakan Pertama.

Jakarta: PT Gramedia.

Suliyanto. 2010 Studi Kelayakan Bisnis. Yogyakarta: Penerbit Andi.

Sumarsono. 2010 Kewirausahaan. Cetakan Pertama. Yogyakarta: Graha Ilmu.

Swasembada. 2009 ‘Makanan dan Minuman: Merebut Peluang di Industri Kalis Krisis’,

Majalah SWA, XXV 19 Feb-14Mar 2009, pp.30.

Tjiptono, Fandy. 2008 Strategi Pemasaran. Edisi Ketiga. Yogyakarta: Penerbit Andi.

Yin, Robert K. 2009 Case Study Research Design and Methods: Fourth

Edition.California:Sage Publication.

http://www.antaranews.com/berita/429636/populasi-kelas-menengah-indonesia-meningkat-tajam

http://www.antaranews.com/berita/429636/populasi-kelas-menengah-indonesia-meningkat-tajam

http://kemenperin.go.id/statistik


Book One 80

PLANNING AND CONTROLLING OF RAW MATERIAL IN

ACCUMULATOR PRODUCTION AT THE PT XX

Nurmawati1

Engineering Faculty - Universitas 45 Surabaya

Jl. Mayjen Sungkono No. 106 Surabaya

INDONESIA

Email : [email protected]

ABSTRACT

In the industrial planning and controlling area, the production of raw material is

one of the factors that is important to the company. PT XX, the accumulator

company is a type of business that produces batteries in a variety of sizes. Up to

present, the company has produced batteries by conventional method but

sometimes there are problems of process production because of the lack of

material or raw material in the warehouse. There are excess of other raw

material and there are lack of another. Production and raw material did not

match well because the company still had the trouble in making planning and

controlling of raw materials, especially in determining the amount and time of

ordering.

To produce 1096 unit 12V 75 Ah batteries based on production planning in 2014,

the cost for raw material will be Rp. 1,521,357,600.00

Keywords : Planning and Controlling of Raw Material

INTRODUCTION

The most important thing for companies to win competition in the free market area is

how to be able to produce smoothly without undesirable delay so that companies will be

more efficient and will improve the competitiveness of products in the market.

Smooth production process is dependent on accurate production planning, if not it will

give very adverse impact to the company. Or it may be the cessation of the production

process.

Companies need to consider the factors supporting production activity such as raw

materials, production facilities, labors and others. Therefore it does scheduling,

production planning and raw material planning in order to support the smooth running

of the production process in determining the amount and time of ordering.

LITERATURE

Planning and Controlling of Materials

Inventories can be defined as material that is stored in the warehouse to be used in

production or sale. Inventories of raw materials are related to the role of management in

the company to succeed the goal of companies. In order to achieve the objectives of

companies in expediting the process of planning and control of production, raw



Book One 81

materials are required. Planning of raw material consists of Master Production Schedule

(JIP) into any required materials. This schedule includes when and how the amount of

raw material is required and ordered. The planning is a process to predict what will

happen in the future. Therefore the planning and controlling of raw materials is an

attempt to estimate the raw material requirements for the foreseeable future, and

determine the volume / amount of stock to ensure smooth production process.

Forecasting

Forecasting is an estimation of the expected level of demand for a product or multiple

products in a given period of time in the future. Forecasting is basically estimation.

However by using certain way of forecasting can be more than estimation. The results

of forecasting will affect the plan so production activities can be aligned with the

requests of consumer. Because of that they are important factors that will affect the

production plan on the future relating to the supply of raw materials required in the

production process. Several methods are used in forecasting trends such as Straight Line

and Trend Line Curves Method.

Material Requirement Planning

Material Requirement Planning is a method used to finish up the issue of raw materials

used to make products where the finished product depends on how much and when the

finished product is needed. Master Planning Schedule is a plan regarding how many

products are needed and when these products will be needed. Master Planning Schedule

is the first step of the MRP system by inputting Bill of Materials of the product

concerned, the above data can be processed by the MRP method given the circumstance

of existing inventory in the company.

There are two ways in determining the amount of required material in accordance with

the master planning schedule i.e. i) purchasing quantity based on Master Planning

Schedule and ii) purchasing quantity based on Economic Order Quantity.


Book One 82

METHOD

N

Ya

Y

ANALYSIS AND DISCUSSION

PT. XX is a small company producing batteries. The data obtained at 12V 75 Ah

batteries production in 2013 is as follows:

No. Month Amount ( Unit ) Raw Material Requirements ( per

accu )

1

2

3

4

5

6

7

8

9

10

11

12

January

February

March

April

May

June

July

August

September

October

November

December

90

92

93

91

92

90

93

92

92

91

91

90

Plate Sel –

Plate Sel +

Splitter

Deksel

Covering

Box

Asphalt

Lead

42

36

138

6

6

1

125

465

START

Collecting Data

The adequity of data

N’˂N

and uniformity test

a

Analysis and Discussion

Forecasting, Agregate Design, MRP

Conclusion

Finish

Problem Identification Study Literature Study Lapangan


Book One 83

For Test Data Adequacy assumed a 99% confidence level and the degree of accuracy of

5%, the number of observations that must be done is

N’ =

N’ =

N’ = 0,6809

N’ ≤ N, 0,6809 ≤ 12 ( The data assumed insufficient )

For the uniformity test data is as follows:

=

SD = 1,0836

BKA = + 3. SD = 91,42 + 3,2508 = 94,76

BKB = - 3. SD = 91,42 - 3,2508 = 88,1692

Forecasting using Straight-Line Method

d’t = a + b t for b as follows as :

b =

b =

b = 0,052445

a =

a =

a = 91,076

d’t = 91,076 + 0.052445 t


Book One 84

the forecasting gets following:

t Dt d’t (dt – d’t ) (dt - d’t )2

1

2

3

4

5

6

7

8

9

10

11

12

90

92

93

91

92

90

93

92

92

91

91

90

91.128445

91.18089

91.233335

91.28578

91.338225

91.39067

91.443115

91.49556

91.548005

91.60045

91.652895

91.70534

-1.128445

0.81911

1.766665

-0.28578

0.661775

-1.39067

1.556885

0.50444

0.451995

-0.60045

-0.652895

-1.70534

1.273388

0.90504696

1.329159509

0.0816702

0.913495544

1.93396

1.247751979

0.710239396

0.672305734

0.36054

0.42627

2.90818

Amount 3.558371442

Sdt =

Sdt = = 0.355837

Forecasting using Curve Line Method

d’t = a + b t + c t2

Where :

b = = 0.01543 , c = = -0.00746 , a = = 90.91

Curve Line Equation as follows

d’t = 90.91 + 0.01543 t - 0.00746 t2

t A b c dt d’t t2 (dt –d’t) (dt – d’t)2

1

2

3

4

5

6

7

8

9

10

11

12

90.91

90.91

90.91

90.91

90.91

90.91

90.91

90.91

90.91

90.91

90.91

90.91

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.01543

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

0.00746

90

92

93

91

92

90

93

92

92

91

91

90

90.91797

90.91102

90.88915

90.85236

90.80065

90.73402

90.65247

90.556

90.44461

90.3183

90.17707

90.02092

1

4

9

16

25

36

49

64

81

100

121

144

-0.91797

1.08898

2.11085

0.14764

1.19935

-0.73402

2.34753

1.444

1.55539

0.6817

0.82293

-0.02092

0.84266892

1.18587744

4.45568772

0.02179757

1.43844042

0.53878536

5.5108971

2.085136

2.41923805

0.46471489

0.67721378

0.00043765

19.6408949

Sdt = = 1.964089


Book One 85

Agregate Planning

Regular production capacity is 100 units per month, therefore no extra hour in the

production process.

Tabel 1. Agregate Planning

T Month Regular Time dt

1

2

3

4

5

6

7

8

9

10

11

12

January

February

March

April

May

Juny

July

August

September

October

November

December

100

100

100

100

100

100

100

100

100

100

100

100

91

91

91

91

91

91

91

91

92

92

92

92

Jumlah 1096

Raw Material Requirement Planning

Based on forecasting and production structure, raw material requirements planning is as

follows:

Month Plate

Sel -

Plate

Sel +

Splitter Deksel Coverage Box Asphalt Lead

January

February

March

April

May

June

July

August

September

October

November

December

3822

3822

3822

3822

3822

3822

3822

3822

3864

3864

3864

3864

3276

3276

3276

3276

3276

3276

3276

3276

3312

3312

3312

3312

12558

12558

12558

12558

12558

12558

12558

12558

12696

12696

12696

12696

546

546

546

546

546

546

546

546

552

552

552

552

546

546

546

546

546

546

546

546

552

552

552

552

91

91

91

91

91

91

91

91

92

92

92

92

11375

11375

11375

11375

11375

11375

11375

11375

11500

11500

11500

11500

42315

42315

42315

42315

42315

42315

42315

42315

42780

42780

42780

42780

Amount 46032 39456 151248 6576 6576 1096 137000 509640

1. Plate Sel –Planning

Requirement of Plate Sel – per year : 46032 sheets

Cost per ordering : Rp. 50.000,00

Price per sheet : Rp. 1.000,00


Book One 86

Holding percentage : 10 %

EOQ = 6785

2. Plate Sel + Planning

Kebutuhan Plate Sel + per year : 39456 sheets


Price per sheet : Rp. 1.250,00


EOQ = 5618

3. Splitter Planning

Requirement of Splitter per year : 151248 unit


Price per unit : Rp. 500,00


EOQ = 17393

4. Deksel Planning

Requirement of Deksel per year : 6576 sheets


Price per unit : Rp. 2.000,00


EOQ = 1813

5. Cover Planning

Requirement of cover per year : 6576 sheet


Price per unit : Rp. 500,00


EOQ = 3627

6. Box Planning

Requirement of Box per year : 1096 sheets


Price per unit : Rp. 7.500,00


EOQ = 382

7. Asphalt Planning

Requirement of Asphalt per year : 13700 Kg


Price per Kg : Rp. 3.000,00


EOQ = 2136


Book One 87

8. Lead Planning

Requirement of lead per year : 509640 Kg


Price per Kg : Rp. 2.500,00


EOQ = 14278

CONCLUSION

Based on the results of these calculations, the conclusions drawn are as follows:

1 For Production Planning of 12V 75 Ah batteries are 1096 in 2014

2 For Raw Material Planning in the following table:

Raw Material Ordering Price per unit Raw Material Cost

Plate Sel - 46032 1000 46.032.000

Plate sel + 39456 1350 53.265.600

Splitter 151248 500 75.624.000

Deksel 6576 3000 19.728.000

Coverage 6576 500 3.288.000

Box 1096 7500 8.220.000

Asphalt 13700 3000 41.100.000

Lead 509640 2500 1.274.100.000

Amount 1.521.357.600

Therefore the purchase of raw materials for the production of batteries 12V 75Ah is Rp.

1,521,357,600.00 per year

REFERENCES

Assauri, Sofyan. 2004,. Manajeman Produksi dan Operasi. Edisi Revisi. Jakarta: BPFE UI

Haning, Murfidin, 2007, Manajemen Produksi Modern, PT. Bumi Aksara, Jakarta

Kottler Philip, 2000, Manajemen Pemasaran, Analisis, Perencanaan, Implementasi dan

Pengendalian, Edisi Indonesia, Salemba Empat Prantice Hall

Pangestu, Drs. 2000. Perencanaan. Penerbit Andi Ofset. Bandung

Soemarsono. 1999. Manajemen persediaan. Jakarta : Raja Grafindo Persada

Rangkuti, Freddy, 2003, Riset Pemasaran, Penerbit PT. Gramedia Pustaka Utama, Jakarta


Book One 88

THE EFFECT OF PRICE AND PRODUCT QUALITY ON BUYING

DECISION OF PHOTO CABIN SERVICES

Rendy Iswanto1, Tina Melinda2

Ciputra University

INDONESIA


ABSTRACT

The main purpose of this research is to determine the effect of price, and

product quality on buying decision OF Photo Cabin services. The population in

this research are Surabaya people whose been a client to Photo Cabin during

April 2012 to November 2013 which is consist of 31 clients. This study uses

multiple regression analysis and uses the validity test and reliability test before

to test the validity and reliability of any statement filled. Hypothesis testing is

performed using F test, t test, correlation coefficient of determination. This

research used classical assumption test, which is consist of multicolinearity test,

normality test, heterokedastisity test, auto correlation tes, and linearity test

The result of this research shown that there were significant effect between

Price (X1), and Product Quality (X2) on buying decision of Photo Cabin (Y)).

Keywords: Price, Product Quality, Buying Decision of Photo Cabin

Services

INTRODUCTION

The digital revolution has brought tremendous development in the photographic

industry. Now thanks to advances in digital technology, it is no longer needed to wait

long to see the photos and to print the pictures. These technological advances lead to

innovations such as photo corner. According Sianipar (2012), the definition of Photo

Corner is a photographic services using a backdrop or background that placed in the

corner of a party, wether it is a birthday party, wedding, and etc, that are intended for

the guests of the party. To print the picture only takes about 10-20 seconds, so that the

guests who had been done taking a photo session at the photo corner, do not have to

wait long or wait until the event is over to get the result of the picture.

Photo Cabin is a company engaged in the photo corner business which started its

business on 1 April 2012 with a laptop, digital camera, studio lighting sets and a Kodak

605 printer as its first capital asset. The main threat that Photo Cabin faces in the photo

corner business is the high competitor rate. Photo Corner is a business with a low

barrier entry level which means it is not difficult for a newcomer to start a their own

photo corner business. This is definitely bring a negative impact on the sales volume of

Photo Cabin.

Based on interview with Andanu Samudra whom served as the regional manager of PT.

Samafitro on14-10-2013, as the supplier of HITI printer which are now widely used in

photo corner business, he stated that within a month HITI printers are sold 10 units per




Book One 89

month minimum in 2012-2013, in which the printers mostly sold to re-sellers and partly

are sold to the photo corner business player in Surabaya. Based on the data obtained

from the sales figures of PT. Samafitro, Andanu estimated there are ± 100 photo corner

business in Surabaya that uses the HITI printer, that number does not include the

number of photo corner businesses that uses apart from HITI printer, such as Kodak and

Photo Luxio.

To know what factors are taken into consideration by the prospective client of photo

corner in Surabaya, therefore conducted a pre-survey using 10 people. The respondent

of this pre-survey are people that lived on Surabaya,and already knew Photo Cabin as

one of the photo corner players in Surabaya, and this 10 peoples also who has been a

guest of an event or party that uses the Photo Cabin as its photo corner needs. Results of

pre-survey dictates that 10 of the 10 respondents concerned to the price factor and

product quality of a vendor photo corner.

PRICE’S DEFINITION

Price’s Understanding in according to Kotler (2012: 290) is the amount of money that

paid for a product or service, in which the amount of money by the consumer is other

the benefits of ownership or use of a product or service. This is consistent with the

proposed by Swastha on Sugiyanto (2012: 36) where the notion of price is the amount

of money paid in order to obtain some goods or services and their service. However, to

setting the price, to be cheapest is not always be the best option, because, quality of

products / services are also important in the purchase decision. Even if the products /

services at a higher price could be preferred by consumers than a lower price. (Owusu

2013: 181). This is explained by a Kottler on Owusu (2013: 182) in which consumers

use price as an indicator for the quality of a product / service and it also relates also to

the prestige of the consumer. Here there are the indicators that characterize the price

proposed by Stanton on Sagita (2013): Affordability of the price, Price’s conformance

on product quality, Price’s competitiveness, Price’s conformance with benefits

QUALITY PRODUCT’S DEFINITION According to Kotler and Keller (2012: 143) is the product quality is the totality of

features and characteristics of a product or service that related to its ability to satisfy

stated or implied the needs. Kotler said (2012: 4) Consumers will prefer products that

offer the best quality, performance and features, therefore it is necessary for producers

or organizations to further improve their product quality, because the quality of the

product plays an important role to attract consumers. According to Kottler and Keller

(2009: 8), the dimensions of the quality of the product include: Performance , refers to

the functional specifications of the products or services and is the primary factor being

taken into consideration by the consumer in the purchase and use of products or

services, Features, refers to the additional specifications, or specifications

complementary addition to the basic specifications, closely with a choice of products or

services and development, Reliability, refers to the probability of a product or service

when its success in carrying out the functions in a certain period of time, Conformance

to Specifications, referring to the specification of the product or service to what has

been previously defined or declared in accordance with the wishes of consumers,

Durability, refers to the durability or the life of a product, or the life of the operation of


Book One 90

a product that used under normal conditions, Aesthetics (Asthethic), refers to how

consumers feel about the existence of the products as quality, it is subjective as it relates

to individual preferences and personal consideration of aesthetic factors, Serviceability

refers to the services

BUYING DECISION DEFINITION

According to Peter (2010: 5), to defines consumer behavior as a process that involving

thoughts, experiences, and actions of a person to consume a product or service, and the

process is influenced by factors that exist around the person's environment, such as

comments from other consumers , advertising, pricing information, product packaging,

product appearance, etc.. Indicator purchasing decisions according to Kotler in Widodo

(2012: 14), namely: Stability on a product or service, Habits in purchasing a product or

service, Provide recommendations to others, Restate to purchase

THE INFLUENCES OF PRICE VARIABLE TO BUYING DECISION

VARIABLE According Tedjakusuma in S. R, Larosa (2010: 6) The result of the high competition

between companies or similar efforts, make consumers sensitive to price, so if the price

is raised, then the consumer will be inclined to move the other company or

manufacturers that provide products or similar services. This proves that the price factor

is important to the process of purchasing a product or service decisions. This is

supported in Utami Research (2012) which states that the application of the right pricing

strategy is crucial in an effort to attract consumers. If a consumer get the price is fitting

of they would prefer a store or vendor that provides goods or services at that price, and

if a consumer was not getting the price match, they will buy to the store or alternative

vendors which provide similar products or services. It can be concluded that the factor

price is an important factor in consumer buying decision process. And from the results

of previous studies by Purwati (2012) which is used as reference in this research also

states that the correlation between the price and the purchase decision factors tested

positive significant impact. If the price of a product or service is low, the demand will

be high, and if the price of a product or service is higher the demand will be low. Price

often becomes a major concern in the strategic purchasing decisions so that proper

pricing is considered essential, in order to increase the purchasing decision.

From research by Wahyudi (2012) found that the price factor has a positive influence in

the purchase decision, so it can be concluded that consumers somehow will consider

how much money must be spent to get the benefit or satisfaction of the products or

services that have been purchased, so it also affects consumers in making purchasing

decisions.

THE INFLUENCES OF QUALITY PRODUCT VARIABLE TO BUYING

DECISION VARIABLE According to research by Owusu (2013) stated that the quality of products have a

considerable influence on the value of a product or service. This is supported by

previous research that used as reference by the research Shaharudin et al (2011) where

in the research stated that the product quality is a factor that has positive influence on

purchasing decisions. Quality factor of the product is able to help consumers to


Book One 91

differentiate a product from a manufacturer with a producer the other one, and usually

senses are able to capture the quality factor of the product is the sense of sight or eye.

Good product quality must be able to drive the purchasing decisions of consumers.

Similar to previous research by Wahyudi (2012) which is used in this research, that the

quality of the product has a significant influence on purchasing decisions. Wahyudi

research suggests that consumers are generally spending money to buy a product or

service, will compare the quality of the product more than amount of money that spent.

RESEARCH FRAMEWORK CONCEPT Based on the discussion of the background to the INTRODUCTION, found high rates

of competition due to low entry barrier in the corner photo business. Based on the

results of pre-survey, obtained the price factor and product quality factors were

instrumental in the purchase decision process of vendor photo corner. It is also

consistent with previous research studies in which the factor of price and product

quality factors have a positive and significant impact on the buying decision process.

From the background and literature review, it can be formed in the framework of this

research, which there are three variables, namely the independent variables consisting of

the price variable that refers to how much influence the price in the purchase decision at

a Photo Cabin services, and a variable that refers to the quality of products to how much

influence the quality of the product in service purchasing decisions on Photo Cabin and

the dependent variable in the service purchase decision variables Photo Cabin. The

relationship between these variables variables can be seen in the following figure:

Figure 1 Relationship’s chart between variables

HYPOTHESIS In order to get a clear direction and guidance in the conduct of research and the

formulation of problems that have been formulated in this study, the proposed

hypothesis is as follows:

- Price has a positive influence on purchasing decisions on Photo Cabin services

-The quality of products has a positive influence on purchase decisions on the services

of Cabin Photos

-Price And quality of the products has a positive influence simultantly on purchase

decisions services at a Photo Cabin

- Quality products give a more dominant influence than the price of services to the

purchasing decision on a Photo Cabin


Book One 92

RESEARCH METHODS

In order to answer the problem formulation in the research "The Effect of Price and

Product Quality Services To Purchasing at Photo Cabin Service" is the method used is

causal comparative research methods with quantitative approaches. Definition of causal

comparative research methods are research that show the direction of the relationship

between the independent variables with the dependent variable or free or bound, in

addition to measuring the strength of relationship (Kuncoro, 2009: 15). This research

take place in Surabaya, where the Surabaya is the focus of the Photo Cabin market.

Time used for this research conducted in 2014 that at the time of data collection

research on the influence of price and product quality factors of the photo corner vendor

purchasing decisions. In this study, the population is the people who have become

clients Surabaya Photo Cabin in the period April 2012 to November 2013, a total of 31

clients, by using probability samples where each sample is selected based on the

selection procedure and have the same opportunities. Where is the technique that will be

used is random sampling technique samples which means that every element in the

population has the same chance to be selected. (Kuncoro 2009: 127) The method used

for data collection in this study is to use a questionnaire distributed to respondents. The

nature of the question is closed, using a Likert scale. In response to a question the

question on a Likert scale, respondents choose the level of agreement to a statement by

choosing one of the answer choices are available. Answer choices are as follows:

strongly disagree - disagree - agree - strongly agree -very agree completely.

RESULTS AND DISCUSSION Table 1 Descriptive Analysis Profile of Respondents by Gender

Category Respondents Percentage

(%)

Male 14 45.2

Female 17 54.8

Result 31 100

Based on Table 1 it can be seen that respondents with male gender as 14 people (45.2%)

of the total of 31 people who were respondents in the study, and respondents with

female gender as 17 people (54.8%). These results provide information that most

respondents were consumers with the female gender.

Table 2 Descriptive Analysis Profile of Respondents by Age

Category Respondent Percentage (%)

<20 Th 2 6.5

20-30 Th 14 45.2

31-40 Th 12 38.7

>40 Th 3 9.7

Result 31 100

Based on Table 2 it can be seen that the respondents were aged under 20 years were 2

(6.5%), respondents aged 20 to 30 years as many as 14 people (45.2%), respondents


Book One 93

aged 31 to 40 years as many as 12 people (38.7%) and respondents over the age of 40

years as much as 3 persons (9.7%). These results provide information that consumers

Cabin Photo services are becoming the majority of survey respondents aged between 20

and 30 years.

Validity Test Validity test is done to determine the extent to which the questionnaire measure what is

desired. Used to measure the validity of the Pearson product moment correlation. If the

Pearson product moment correlation between each of the questions with a total score

resulted in a significance value of <0.05 (α = 5%), then the item is declared valid

question. Validity testing performed with SPSS 13.0. Validity testing performed with

SPSS, using data from 30 respondents as the initial test. The validity test on all

indicators (question items) in the variable Price, Product Quality and Purchasing

Decision generate significant value less than 0.05, so that all of the items that make up

the questions the study variables can be declared invalid.

Reliability Test Reliability test was conducted to determine the extent to which the questionnaire can be

trusted or reliable. Used to measure the value of Cronbach alpha reliability. If the

Cronbach alpha values greater than 0.6, then the variable is said reliable. Reliability

testing performed with SPSS 13.0. Just as the validity of the test, before tested to the

respondents of this research it was tested to the first 30 respondents before the

instrument is used on the research respondents in this research. Reliability testing

performed with the SPSS program. The variables Price, Product Quality and Purchasing

Decision had Cronbach alpha values greater than 0.6, in addition to the value of

Cronbach alpha if item deleted on each indicator (item question) does not exceed the

value of Cronbach alpha for each variable. From these results it can be concluded that

the three variables can be declared reliable research

Regression Analysis

Multiple linear regression analysis was conducted to determine the effect of price and

product quality of the product purchase decision in Photo Cabin. Data processing is

performed using SPSS 13.0. The following are the results of multiple linear regression

analysis:

Table 3 The Analysis Result of Multiple Linear

Model Coefficient Beta Value t Sig. t

Constant 1.248 2.458 0.020

Price 0.441 0.499 3.176 0.004

Product Quality 0.343 0.353 2.246 0.033

R = 0.777

R² = 0.604

F = 21.392

Sig. F = 0.000

Dependent variable: Purchase Decision


Book One 94

Correlation Coefficient Table 3 shows that the value of the correlation coefficient (R) obtained at 0.777 which

indicates that the relationship between the variables Price and Product Quality with

Purchase Decisions at the Photo Cabin relatively strong (tightly).

Coefficient of Determination Based on Table 3 the coefficient of determination (R²) were produced by 0604, means

that the variable Price and Product Quality jointly affect the purchase decision at a

Photo Cabin products by 60.4%, while the remainder is equal to 39.6% influenced by

other variables in addition to the price and quality of the product.

THE HYPOTHESIS TESTING

Effect of Simultaneous (F Test) Based on Table 3 it can be seen that the F-test produces the F count of 21,392 with a

significance value of 0.000 whose value is less than 0.05 (α = 5%). From the results it

was concluded that the price and quality of products simultaneously significantly

influence the purchase decision at a Photo Cabin products. Based on these results, the

research hypothesis assumed no significant effect simultaneously between variables

Price and Product Quality Decision to Purchase a product in a Photo Cabin, proven true.

Effect of Partial (t test) Testing the effect of price on purchase decision in Table 3, produce of 3,176 with a

significance value of 0.004 whose value is less than 0.05. Thus concluded that the price

is partially significant effect on product purchase decision in Photo Cabin. Based on

these results, the first hypothesis of the study who suspect price variables significantly

influence the purchase decision of consumers, proven true. Testing the effect of product

quality on Purchase Decision generate t count of 2,246 with a significance value of

0.033 whose value is less than 0.05. So concluded that the Product Quality is partially

significant effect on product purchase decision in Photo Cabin. Based on these results,

two research hypotheses suspect variables significantly influence product quality to the

consumer purchase decision, proven true. To determine the most influential independent

variable on the dependent variable is to use the Beta value of the variable X. The

variable that has the largest Beta value is a variable that has dominant influence. Based

on the Table 3 it can be seen that the variable price (X1) is variable with the largest beta

value is 0.499, From these results it was concluded that the price is the most dominant

variable effect in influencing purchase decisions of consumers, when compared with

variable product quality.

CONCLUSIONS AND SUGGESTIONS Testing the effect of the price variable to variable purchase decisions in Table 3,

produce T count of 3,176 with a significance value of 0.004 whose value is less than

0.05. It concluded that the price is partially significant effect on product purchasing

decisions in Photo Cabin. Therefore, in order to attract better clients, then the Photo

Cabin that had set the price at the beginning of the turn of the year only, should more

often make adjustments and pricing that is in intervals shorter than 1 year, in order to set

a price that is competitive with photo corner another vendor. However, in order not to


Book One 95

get caught in a price war with competitors, Photo Cabin for the future are expected to be

able to maintain and improve the quality of the product or its service, and also need to

be able to communicate to the prospective clients about the quality of the product or

service they will receive. Testing the effect of product quality on Purchasing Decisions

in Table 3, produce t count of 2,246 with a significance value of 0.033 whose value is

less than 0.05. It can be concluded that the Product Quality is partially significant effect

on product purchase decision in Photo Cabin To be able to attract more clients then

Photo Cabin need to find a solution in order photo prints from Photo Cabin can last a

long time. If prior research prints photos directly inserted into the frame, then after this

study the Photo Cabin try to run the solution to protect the photo prints photo prints by

entering into mica pastik first before inserting into the frame so that the photo prints can

last more long. And also to maintain the print quality of photos, the Photo Cabin also

need to perform maintenance on the machine and the printer to print quality maintained

and also prevent damage to the printer in the midst of the event.

REFERENCES

Akhbar, A. 2012 Analisis Pengaruh Citra Merek, Harga, dan Kualitas Produk Terhadap

Keputusan Pembelian Notebook Toshiba. Jurusan Manajemen, Fakultas Ekonomi,

Universitas Gunadarma

Creswell, J.W. 2009 Research Design: Qualitative, Quantitative, and Mixed Methods

Approaches(Third Edition). Nebraska - Lincoln: SAGE Publications.

Kotler, P., Armstrong, G. 2012 Principles of marketing (14th Edition). New Jersey: Pearson

Education, Inc.

Kotler, P., Keller, K.L. 2009 Manajemen Pemasaran (edisi 13). Jilid 1. Jakarta: Penerbit

Erlangga

Kotler, P., Keller, K. L. 2012. Marketing Management (14th Edition). New Jersey : Pearson

Education, Inc

Kuncoro, M. 2009 Metode Riset untuk Bisnis & Ekonomi: Bagaimana Meneliti & Menulis

Tesis? (edisi 3). Jakarta: Penerbit Erlangga

Martono, N. 2011 Metode Penelitian Kuantitatif. Jakarta: PT. Rajagrafindo Persada.

Nawari. 2010 Analisis Regresi dengan MS Excel 2007 dan SPSS17. Jakarta: Elex Media

Komputindo

Owusu, A. 2013 Jurnal Influences of Price And Quality On Consumer Purchase Of Mobile

Phone In The Kumasi Metropolis In Ghana A Comparative Study. European Journal of

Business and Management, Vol.5, No.1, 2013, pp179 – 198.

Peter, P.J., Olson, J.C. 2010 Consumer Behavior & Marketing Strategy (Ninth edition). New

York: McGraw Hill.


Book One 96

Priyatno, D., 2013 “Mandiri Belajar Analisis Statistik Data dengan SPSS.” Yogyakarta:

Mediakom.

Purwati., Setiawan, H., Rohmawati. 2012 Pengaruh Harga dan Kualitas Produk Terhadap

Keputusan Pembelian Motor Honda Matic Beat (Studi Kasus Pada PT. Nusantara Solar

Sakti). Jurnal Ekonomi Dan Informasi Akuntansi (Jenius) Vol. 2 No. 3 Sept 2012,

pp260 - 277.

Sugiyono. 2009 Statistik Untuk Penelitian. Bandung: CV Alfa Beta.

Sugiyanto, F. 2012 Analisis Produk, Harga, Lokasi dan Pelayanan Mempengaruhi Kepuasan

Konsumen Pada Foodcourt “I Love Fruit” di DP Mall Semarang, Jurnal Dinamika

Manajemen Vol. 3 No. 1 April 2013, pp.33 – 48.

Sagita, F.E. 2013 Pengaruh Brand Image Dan Harga Terhadap Keputusan Pembelian Ulang

Produk Kentucky Fried Chicken (KFC) di Cabang Basko Grand Mall Oleh Mahasiswa

Negeri Padang. Jurnal Managemen Vol.2, No.2 (2013).

Sianipar, M. 2012 “Jasa Photobooth Profesional Di Pekanbaru”. Available at:

http://www.magiccorner.com/index.php?option=comcontent&view=article&id=77:jasa-

photobooth_profesional-di%20pekanbaru&catid=35: artikel&Itemid=156 (accessed at:

5 October 2013).

Setyadharma, A. 2010 Uji Asumsi Klasik Dengan SPSS 16.0. Fakultas Ekonomi Universitas

Negri Semarang.

Shaharudin, M.R., et al. 2011 The relationship between product quality and purchase intention:

The case of Malaysia’s national motorcycle/scooter manufacturer, African Journal of

Business Management Vol. 5(20), 16 September, 2011, pp. 8163 – 8176.

Larosa, S.R., Sugiarto, P.H. 2010 Analisis Pengaruh Harga, Kualitas Produk, dan Lokasi

Terhadap Keputusan Pembelian (Studi Kasus Pada Warung-Warung Makan di Sekitar

Simpang Lima Semarang). Jurusan Manajemen Fakultas Ekonomika dan Bisnis,

Universitas Diponegoro.

Schiffman, L.G. et al. 2010 Consumer Behavior (Tenth edition). New York: Prentice Hall.

Sunyoto, Danang. 2011 Analisis Regresi dan Uji Hipotesis. Yogyakarta: CAPS.

Swastha, B. 2009 Azas-Azas Marketing (cetakan ketujuh). Yogyakarta: Liberty Yogyakarta.

Utami, C.W. 2012. Manajemen Ritel (Strategi dan Implementasi Ritel Modern). Edisi ke 3.

Jakarta: Salemba Empat.

Wahyudi, S. 2012 Analisa Faktor-faktor yang Mempengaruhi Perilaku Konsumen Dalam

Keputusan Pembelian Sepeda Motor Honda Matik Pada CV. Kurnia Sakti Semarang,

Jurnal Dinamika Manajemen Vol. 3 No. 1 April 2013, pp.97 - 112.

Widodo, O.W. 2012 Analisis Pengaruh Kualitas Produk, Kualitas Layanan, Dan Promosi

Terhadap Keputusan Pembelian (Studi kasus pada 123 Design and Photography di

Semarang), Jurusan Manajemen Fakultas Ekonomika dan Bisnis, Universitas Diponegoro.

http://journal.usm.ac.id/jurnal/dinamika-manajemen.html


http://www.magic-corner.com/index.php?option=com_content&view=article&id=77:jasa-photobooth-profesional-di-pekanbaru&catid=35:artikel&Itemid=156

http://www.magic-corner.com/index.php?option=com_content&view=article&id=77:jasa-photobooth-profesional-di%20pekanbaru&catid=35:artikel&Itemid=156

http://www.magic-corner.com/index.php?option=com_content&view=article&id=77:jasa-photobooth-profesional-di%20pekanbaru&catid=35:artikel&Itemid=156



Book One 97

Wijaya, Tony. 2009 Analisis Data Penelitian Menggunakan SPSS. Yogyakarta: Universitas

Atma Jaya

Wikipedia. 2013 “Fotografi”. Available at: http://id.wikipedia.org/wiki/Fotografi (accessed at: 5

October 2013)

http://id.wikipedia.org/wiki/Fotografi


Book One 98

THE INFLUENCE OF INTRINSIC MOTIVATION AND

EXTRINSIC MOTIVATION TOWARDS PLAYER

PERFORMANCE IN KNIGHTS MANAGEMENT

Jeffry1, Christina Whidya Utami2

Universitas Ciputra

INDONESIA

E-mail: [email protected], [email protected]

ABSTRACT

The purpose of this study was to 1) determine the influence of intrinsic

motivation and extrinsic motivation on Knights management players

performance simultaneously; 2) determine the influence of intrinsic motivation

to Knights management players performance; 3) determine the influence of

exstrinsic motivation to Knights management players performance. This study used a quantitative approach with Regression Analysis aimed to

influence the intrinsic motivation (X1) dan extrinsic motivation (X2) on player

performance (Y). In this study belong to the population are Knights

management players as many as 34 people. The sample in this study was 34

respondents were obtained use sampel jenuh. Data retrieval technique using a

questionnaire. The results of this study indicate that the intrinsic motivation (X1) dan extrinsic

motivation (X2) simultaneously influence the player performance (Y), because

the obtained value of F 10,119 with significance level of 0.000. Partially,

intrinsic motivation (X1) significantly influence the player performance (Y), with

a value of 2,083 with a t-test significance level of 0,009. In addition, the

extrinsic motivation (X2) also has a significant influence player performance (Y),

where the value of 2,469 t-test with significance level of 0,019.

Keywords: Intrinsic Motivation, Extrinsic Motivation, Player

Performance

INTRODUCTION

Sports development in Indonesia has undergone a change. So much sport in Indonesia,

basketball is the number one sport for young people in Indonesia. Based on the survey

of teenager aged 13-17 years in 11 major cities which have hosted the Honda DBL at

least. The sample surveyed is random, youth are not only the school that became Honda

DBL. participants based on the survey, managed to become a favourite sport of

basketball.

CLS is one of the clubs that follow the NBL domiciled in Surabaya, joined the

management of the Knights in 2008 and renamed CLS Knights. With the formation of

the WNBL in 2011, the management of Knights formed the Surabaya Fever who is also

domiciled in Surabaya to follow the League's WNBL. Management of the Knights have



Book One 99

players who play in a professional league as much as 34 players consists of 17 players

CLS Knights Surabaya players 17 and Fever.

Table 1. Surabaya Fever Result 2007-2013

Season Target Finish at Regular Season Finish at Playoff Target Achievement

2011-2012 Champion 1st Champion Completed

2012-2013 Champion 1st Runner-up Failed


Table 2. CLS Knights Result 2007-2013 Season Target Finish at Regular

Season

Finish at Playoff Target Achievement

2007-2008 Road to playoff 9th Failed road to

playoff

Failed

2008-2009 Road to playoff 5th Failed in first round Completed

2009-2010 Final four 4th 4th Completed

2010-2011 Road to Final 4th Runner-up Completed

2011-2012 Champion 5th Failed in first round Failed

2012-2013 Champion 4th Failed in first round Failed


Performance assessment conducted by management Knights based on the achievement

was reached at the end of the season in the playoffs. Achievement of CLS Knights

season 2010-2011 successfully finish at runner up, but 2 2011-2013 does not qualify for

final four of the NBL. Surabaya Fever season 2011-2012 are champion of WNBL but

season 2012-2013 only became runner-up. Based on the achievement of CLS Knights

Surabaya and Fever management under Knights do not reach the target at last season

Achievement earned by CLS Knights Surabaya Fever and certainly will never be

separated from the aspect of motivation of team members. The 2013-2014 season CLS

Knights have become the target of the NBL champion. Surabaya Fever also has targeted

reclaim the Championship title last season is gone. Early stage become NBL and

WNBL are more vigorous exercise, which in turn will affect the performance of the

play. Therefore need the motivation that will encourage members of the management

team of Knights to achieve the goal of becoming champion to the NBL and WNBL.

Based on the desire of thought and arising researchers review deeper about intrinsic

motivations and extrinsic motivation. Therefore want to influence research and

researcher intrinsic motivation and motivation extrinsically on the performance of a

basketball player in the management of knights..

In this study there are three objectives, the first is to investigate the influence of intrinsic

motivation and extrinsic motivation simultaneously to player performance. The second

goal from this study is to determine the influence intrinsic motivation to player

performance. And the third goal is to investigate the influence of extrinsic motivation to

player performance.


Understanding the Intrinsic Motivation and Extrinsic Motivation

Understanding the attitudes and motivation of employees, Herzberg (Luthans, 2011:

165) did a study for the factors that can lead to the occurrence of satisfaction and


Book One 100

dissatisfaction by an employee in a work environment. According to Herzberg there are

two factors that motivate employees. Two of these factors are: motivation factor which

is called intrinsic motivation or satisfier, and keepers (maintenance factor) called

disatisfier or extrinsic motivation.

Herzberg in Hartati (2011) mention job satisfaction factors as internal motivation

factors sourced from within the person (intrinsic condition), it functions as a driving

factor for someone to Excel, or it can be said that the motivational factor (motivator)

needed to motivate employees to produce high performance, where those factors was

the result of an internal or comes from the inside of the employees. The factors that lead

to job satisfaction according to Herzberg (Robbins, 2012: 461) differ from the factors

that cause the dissatisfaction of work.

Herzberg in Schermerhorn (2008: 348) mentions factors that cause dissatisfaction as

factors keeping work coming from external or it can be said that the factor is hygiene

factors necessary to ascertain what the cause of disgruntled employees. This factor

cannot give rise to higher motivation of employees or may imply that employees

without any compulsion, this factor does not produce motivation but only movement. It

can be said that the factor hygiene only keeps job satisfaction does not decline so that

the motivation of the employees will not be decreased.

Herzberg in Hartati (2011) mention intrinsic motivation factors include: (1) job

satisfaction it self (the work it self), (2) chances to get ahead (advancement), (3) the

recognition of others (recognition), and (4) responsibility (responsibility). Job

satisfaction and responsibility can be said the need for self-actualization, whereas the

recognition of others is a requirement for the award.

Herzberg in Schermerhorn (2008: 348) mention the extrinsic motivation factors include:

(1) Compensation (compensation), (2) working conditions (working condition), (3) the

quality of supervision (quality supervisors), and (4) human relationships (interpersonal

relations).

Understanding the Performance

Rivai and Basri (Riani, 2011: 96) states that the performance is the result of someone's

overall during a certain period in the standard tasks, such as carrying out the work,

targets or goals or criteria have been determined in advance and agreed upon together.

In other words performance is the result of work that is a person in carrying out the task

assigned to him in accordance with the criteria set out and have a certain period.

Performance is the extent to which someone has to play its part in implementing the

strategy of the Organization (Riani, 2011: 50). Robbins (in Riani, 2011: 98) declares the

performance was as much an attempt individual issued on his work. Based on the

understanding of the performance can be defined as a person's results achieved

according to the measure that applies to the work in question. In addition to it's

performance can be defined as the role and efforts that have been made by a person or

group of people that is certain and is measured in units of time.

According to Prawirosentono (2008: 27), performance can be assessed or measured

with several indicators, namely: a) the effectiveness of the Group's objectives can be

achieved when needs are planned. b) responsibilities that are an integral part or as a

result of ownership of the work. c) Discipline that is obedient to the laws and rules in

force. Employee discipline employee concerned obedience is in honoring work


Book One 101

agreement with the company where he works. d) Initiative that is related to the intellect,

creativity in the form of an idea related to the purpose of the company. The nature of the

initiative should get attention or response company and a good supervisor. In other

words an employee initiative advances thrust will eventually affect the performance of

the employee.

Hypothesis

The hypotheses proposed in this study are as follows:

H1 : Intrinsic motivation and extrinsic motivation has to simultaneously influence

Knights management players performance.

H2 : intrinsic motivation has a significant influence Knights management players

performance.

H3 : Extrinsic motivation has a significant influence on Knights management

players performance.

RESEARCH METHODS

The research approach used in this study is quantitative approach. As for the type of

research used in this research is the explanatory research, that is research that outlines

the relationships between variables. According to Sugiyono (2012: 15) explanatory

research is intended to explain the position of the variables examined.

Total population in this study is determined from the number of Knights management

players 2013 is 34 people. In this study, for the collection of samples, the technique

used in this study is sampling jenuh. The technique of determination of the sample when

all members of a population is used as a sample.

Researchers chose sampling jenuh because of in this study because the number of total

population slightly (limited) so it is not possible to use the sample, so the researchers

took a number of samples of the same population or sampling jenuh called by basketball

players who are under the management of Knights that add up to 34 people consists of

17 players CLS Knights Surabaya players 17 and Fever.

The data used in this study is Data interval, which is associated with intrinsic motivation

and extrinsic motivation. Sources of data used in this study are divided into two, namely

internal and external. What is meant by the internal data is a data company. While

categorized into external data is data players and a wide range of literature review and

other sources such as previous studies, reference books, etc. Data collection methods

used in this study is through questionnaires.

Variables examined in this study can be divided into two. The first variable is called the

independent variable which consists of the intrinsic motivation () and extrinsic

motivation (). While the second variable is called the dependent variable is the player

performance (Y).

Data Analysis Techniques

1. Multiple Linear Regression Analysis

Multiple linear regression is a method used to determine whether there is influence

of independent variables on the dependent variable (Ghozali, 2011). Multiple linear

regression equation used in this study is as follows: Specification: Y : Dependent Variable (player performance)


Book One 102

: Numbers constant (indicating the influence of the independent variables the

dependent variable) : Error / Residual : Regression Coefficient X1 : 1st Independent Variable (intrinsic motivation) X2 : 2nd Independent Variable (extrinsic motivation)

2. Simultaneous Significance Test (F test)

F test was conducted in order to determine whether the independent variables have

a significant effect simultaneously on the dependent variable (Sutrisno in Istiarini

and Sukanti, 2012). The conclusion that can be drawn from the F test is if the value

of the F test of significance smaller than 0.05, it indicates that there is a significant

relationship between intrinsic motivation and extrinsic motivation simultaneously

to the Knights management players performance.

3. Individual Significance Test (t test)

T test conducted in order to determine the significance between the dependent variable

(Sugiyono in Istiarini and Sukanti, 2012). The conclusion that can be drawn from the t

test is if the value of the t test of significance smaller than 0.05, it indicates that there is

a significant relationship between intrinsic motivation and extrinsic motivation

simultaneously to the Knights management players performance.

RESULT

Characteristics of Respondents

Table 2. Characteristics of Respondents by Gender and Age

Attributes Category Number Percentage (%)

Club CLS Knights 17 50

Surabaya fever 17 50

Gender Male 17 50

Female 17 50

Age

18-25 years old 20 58,8

26-33 years old 11 32,3

> 33 years old 3 8,8

Since

2008 5 14,7

2009 3 8,8

2010 1 2,9

2011 8 23,5

2012 6 17,6

2013 11 32,4



Book One 103

From the table above, it can be seen that most of the respondents by gender is male as

many as 17 people (50%), the highest age category is age 18-25 years by the number of

20 people (58,8%).and the most joint since 2013 sby the number 11 people (32,4%).

Multiple Linear Regression Analysis Based on the research that has been done then obtained the following results:

Table 3. Result of Multiple Linear Regressions

Variable Regression Coefficients Constants Intrinsic Motivation (X1) Extrinsic Motivation (X2)

0,069 0,425 0,539


According to the table above, generated regression model is:

Y = 0,069 + 0,425 X1 + 0,539 X2

Regression equation above can be explained as follows:

1. Regression coefficient of variable intrinsic motivation () is 0.425, it means that

if the variable value is fixed extrinsic motivation and intrinsic motivation will go up

one point, then the player performance (Y) will increase by 0,425. The coefficient is

positive it means there is a positive relationship between intrinsic motivation with

the player performance, the higher the intrinsic motivation, the higher the player

performance.

2. Extrinsic motivation variable regression coefficient () pales 0,539 intrinsic

motivation variable value is fixed and the extrinsic motivation will go up one point,

then the player performance (Y) will increase by 0,539. The coefficient is positive it

means there is a positive relationship between exstrinsic motivation and player

performance, the higher the extrinsic motivation, the higher player performance.

F test Table 4. Result of F test

Variable Sig. R2

Intrinsic Motivation (X1) Extrinsic Motivation (X2)

0,000 0,395


Based on the F test in the table above shows that F Calculate the resulting value of

10,119 with a significant level of 0.000, which is smaller than 0.05, which means it is of

variable intrinsic motivation and extrinsic motivation simultaneously significantly

influence player performance.

t test Table 5. Result of t Test

Variable Sig. Intrinsic Motivation (X1) Extrinsic Motivation (X2)

0,009 0,019



Book One 104

t value in the variable service quality by 2,803 to 0,009 below the significant level of

0.05, have indicated that intrinsic motivation variable partially influence on player

performance. Similarly, the extrinsic motivation variable, the resulting value of t at

2,469 with a significant level of 0,019 below 0.05, it means the extrinsic motivation

variable partially influence on player performance.

CONCLUSION

Based on research results that have been discussed in the previous chapter, it can be

concluded as follows:

1. Intrinsic motivation and extrinsic motivation have simultaneous influence on

player performance. Intrinsic motivation and extrinsic motivation together can

result in the same spirit of the players, because aside from the motivation in

yourself arise extrinsic motivation comes from outside themselves in the form of

compensation, good working conditions, the quality of supervision, and a good

human relationships within the Organization will be able to create good

performance among its players. The players will practice more diligently and with

good practice when based on the existence of a family atmosphere and good

cooperation between players. Hence the need of the intrinsic motivation and

extrinsic motivation to improve the performance of employees.

2. Intrinsic motivation has a significant influence on player performance. A high

intrinsic motivation cause the player with their own accord without being forced to

improve performance in playing basketball. Players are motivated from within

himself will feel the work is very valuable so the players will work hard in

completing the appropriate target that has been set.

3. Extrinsic motivation has a significant influence on the player performance.

Extrinsic motivation is a factor that makes people dissatisfied. That is, the

fulfillment of the extrinsic motivation will not make people happy, he was only

able to minimize dissatisfaction. In contrast to intrinsic motivation, a factor that

makes people happy. It means the fulfillment of these needs will increasingly add

to the satisfaction in life. A player may carry out work that is given to him well

and there's not. Target management can be achieved if the player had a good

performance, the performance of players comprising efficiency, responsibility,

discipline, and initiative. But if not then management needs to know the cause.

Usually performance degradation may occur due to the decline in the motivation

of the players, the management should be able to give you the motivation to

players while reducing player discontent.


Book One 105

Managerial Implications

Table 6. Comparison Before and After Research in the Matter of intrinsic Motivation

Before Study

After Study

Players feel less like his work as a basketball athlete. Give a little bit of freedom players in doing other work

activities.

Players feel less like tasks as basketball athletes like

a boring exercise.

1. to provide a varied workout exercise but the goal is

the same.

2. Often do game situations at the time of exercise..

Chance players raise achievement still valued less by

the player.

Choose a coach who had the courage to try young players

with player evaluation.

The opportunity to develop the performance of

individual players are still valued less by the player.

Recruiting individual coaches to develop the performance of

individual players.

The lack of opportunity to add experience to the

young players.

Often doing tests with other teams and dare to try the free

trial of young players.

The good performance of the scant recognition from

management.

Bonuses will be performance.

A small sense of responsibility over the given

exercise.

Provide confidence and playing time to young players.

Players have a sense of responsibility for the health

of the body is quite high.

Increase awareness of the importance of players again body

health to improve performance.


Table 7. Comparison Before and After Research in the Matter of Extrinsic Motivation Before Study

After Study

The given salary management unable to meet daily

needs.

Evaluation of the need for players to meet the daily needs.

Salary provided less meet the expectations of the

players.

Salary offer by management not too pressed, looking upon

the player before.

The value of the contract was not materially in

accordance with the role players on the team.

The value of the contract is evaluated each year.

Bonus are met by the management but is often not

timely.

Communication management with players must be

reproduced in terms of awarding a bonus incentive.

The exercises place are quite clean. Improve hygiene practice.

The exercise is less comfortable because of the stuffy

field conditions.

Increase the number of exhouse and the fan.

The slippery field because field conditions which

have long caused a lack of security in the practice.

Repainted the field.

Managers have adequate behavior in support of

communication with the players, but the players are

low because rarely present in practice.

1. Manager are required to attend every practice session.

2. Manager doing briefings with the players once a month.

Coach lacking in providing technical assistance to

the player.

Add Assistant coaches, in order to reduce the burden of

coaches in terms of providing technical assistance to the

player.


Book One 106

Communication with the coaches sometimes

hampered by a sense of hesitate.

The Assistant should be more interactive with the player, so

it can be as people voice communication between players

and coaches.

Communication between players and management is

still lacking.

Adds meeting with management team.

Communication between players in one team is

already good enough.

Improve communication between players by holding

outbound activities.


REFERENCES Amabile, T. M. Hill, K.G. Hennessey, B. A, and Tighe, E.M. 1994 ’The work preference

inventory: assessing intrinsic and extrinsic motivational orientations’, Journal of

personality and social psychology, (66): 950-967.

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Book One 108

THE INTERNALIZATION OF ENTREPRENEURIAL LEARNING

IN AN EFFORT TO DEVELOP ENTREPRENEURIAL SPIRIT ON

VOCATIONAL HIGH SCHOOL STUDENTS

Kirwani Susanti1, Made Dudy Satyawan2, Renny Dwijayanti3

State University of Surabaya

INDONESIA

E-mail: [email protected]

ABSTRACT

The pedagogical challenge of entrepreneurial education lies on more holistic

entrepreneurial competence that covers three areas; cognitive, affective and

psychomotor areas, so the provision of material will be more effective when it

is accompanied with the sharpening of sense and eventually will develop

certain entrepreneurial behavior. The relatively high intention of becoming

entrepreneur is not always accompanied with entrepreneurial behaviors in the

forms of founding, managing and developing business. In this area there are

other factors that explain the reason why they only intend to do but not dare to

‘start’ or ‘realize’ Its relation to the direction of entrepreneurial education lies

on the demand that teacher as facilitator should have capability in

internalizing the spirit of entrepreneurship on students. Teacher plays

significant and decisive role in entrepreneurial learning. Teacher creativity

becomes the best model for students though methodologically it’s relatively

difficult to prove. Inviting students to practice entrepreneurial values turns out

to be actual way for teacher in implementing entrepreneurial values in their

daily life. Module based entrepreneurial learning provides specific facilitation

to students because module is managed in accordance with both student need

and characteristic. The comprehension is led to be more applicative with

objective to encourage the entrepreneurial interest on vocational high school

students.

Keywords: Entrepreneurial Learning, Entrepreneurial Spirit

INTRODUCTION

The recent increasing quantity of research on entrepreneurship indicates the growing

attention from various parties on the role of entrepreneurship in the national economy.

While developing countries such as Indonesia recognize the role of entrepreneurship as

providing significant contribution, developed countries in Europe recognize the role of

entrepreneurship in producing reliable entrepreneurs and impelling the national

economy growth. Such fact affirms McClelland statement (Wijaya, 2008) stating that

any country is moving to developed country when the amount of entrepreneur shows at

least 2% out of the total national population.



Book One 109

It is hard to deny that unemployment issue is one of critical issues for any country as

also found in Indonesia. Almost half of unemployment in Indonesia represents the

increasing amount of college graduates. The ironical phenomenon emerging from the

Indonesia education shows that the higher the education level of individual is, the

higher probability or chance of becoming unemployed will be. According to Statistic

Centre Office (BPS), in relation to education level, the amount of unemployed

workforce in Surabaya until the end of 2010 reaches 200 thousand people. It is

predicted that this figure is increasing unless new jobs are provided immediately.

The increasing number of unemployment deteriorates national condition and it will get

worse unless the situation is handled at once. Such problem along with the necessity to

increase refined fuel oil will urge vocational school students to graduate soon and get

personal income with the use of acquired knowledge and skill through entrepreneurship.

Entrepreneurship is rational choice due to its independent nature so entrepreneur will

not rely on the job availability.

Many parties in educational institutions seem to commence the effort to impel this

movement. The curriculum that includes entrepreneurial learning or entrepreneurial

subject is commonly found. However, the result is not evident. Based on the

preliminary study conducted by the author and the results of interview with subject

teacher on entrepreneurship in various Business and Management Vocational High

Schools in Surabaya, it is argued that the student enthusiasm on entrepreneurship during

the course of entrepreneurial field practice was very low. The result was known during

the final evaluation of entrepreneurship subject and in fact most students were reluctant

to start their own business because during the course of entrepreneurial field practice

they found many challenges and obstacles and they felt the anxiety of failure and risk

when they start new business. Such evidence reveals that the entrepreneurial spirit in the

form of courage to deal with the risk and audacity to meet failure are not formed yet.

Question often raised by many experts is “What makes some individuals have better

entrepreneurial spirit than others?”. Licht (Sarwoko, 2011).

Surabaya as one of big cities in Indonesia should provide its own opportunity for

Vocational High School graduates. Students have already had mindset that becoming

employee is more promising than becoming employer. Moreover Surabaya as a big city

becomes the target city that is under assault of new potential workers from other regions.

Considering the fact that job availability doesn’t match with the amount of new

potential workers, various opportunities must be developed with the use of skills

acquired by Vocational High School graduates. Potential businesses for Vocational

High School students vary according to the department they choose such as catering,

fashion, marketing, mechanic, multimedia and many other departments. Types of

business Vocational High School students could choose include selling food in food

stall, opening garage, and opening tailoring business.

The pedagogical challenge of entrepreneurial education lies on the more holistic

entrepreneurial competence that covers three areas; cognitive, affective, and

psychomotor areas so the provision of material will be more effective when it is

accompanied with the sharpening of sense and eventually will develop certain

entrepreneurial behavior (Tatiila, 2010). The relatively high intention of becoming

entrepreneur is not always accompanied with entrepreneurial behaviors in the forms of

founding, managing and developing business. In this area there are other factors that


Book One 110

explain the reason why they only intend to do but not dare to ‘start’ or ‘realize’ realize’

Its relation to the direction of entrepreneurial education lies on the demand that teacher

as facilitator should have capability in internalizing the spirit of entrepreneurship on

students. One of many ways teacher can implement is that in Teaching Learning

Activities teacher can always motivate students to develop independent and creative

attitude as well as courage to take risk. Gorman, et.al (Heinonen & Poikki, 2006) stated

that the objective of entrepreneurial education includes (1) learning to understand

entrepreneurship (2) learning to be entrepreneurial, and (3) learn to become

entrepreneur. The objective of entrepreneurial subject in Vocational High School covers

(1) and (2); learning to understand entrepreneurship and learning to be entrepreneurial.

One way to develop entrepreneurial spirit on Vocational High School students is

through the internalization of entrepreneurial learning itself. The real appearance of

such idea comes out through designing learning model that is based on entrepreneurial

interactive module. The material is designed to develop entrepreneurial spirit on

students and module is also designed in such a way so teaching and learning process can

be delivered interactively in which student activeness is sharpened through interesting

games. Afterward assignments are directed to form creative attitude and possess the

sharpness in seizing chance for example through the analysis of business chance based

on student skill. For students, such method will become interesting experience because

the method can turn student knowledge into tangible one and provoke their desire to

have their own business.

This article will describe the internalization of entrepreneurial learning in an effort to

develop the spirit of entrepreneurship on Vocational High School students. The

explanation in present article is based on literature study on previous studies that show

relation to entrepreneurial learning.

CONTEXT AND LITERATURE REVIEW

Entrepreneurial Learning

Entrepreneurial Education

Entrepreneurship is individual spirit that is expressed through creative and innovative

attitude and behavior to do any activity. As a result it can be emphasized here that

actually the objective of entrepreneurial learning is not only led to produce business

man or business entrepreneur but also covers all profession whose foundation is

entrepreneurial spirit or being entrepreneur.

According to Solomon and Fernald (1991) as well as Hisrich and Peters (2002) as cited

by Bell (2008), traditional entrepreneurial education focuses on the arrangement of

business plan, how to get financing, the process of business development and small

business management. The education also provides knowledge on entrepreneurial

principles and technical skills in relation to how to conduct business. However learners

who know the aforementioned entrepreneurial principles and business management are

not guaranteed to be successful entrepreneurs. Solomon and Fernald (1991). They need

to be provided with many attributes, skills, and behaviors that can improve their

entrepreneurial competence. It means that entrepreneurial subject must be designed in

special way in order to develop entrepreneurial characteristics such as creativity,

decision making, leadership, social network, time management, and team work. As

consequence, entrepreneurial education system must be changed from focusing to


Book One 111

functional control orientation such as finance, marketing, human resource, and

operation into focusing to the development of entrepreneurial spirit on learners. As a

result the challenge is shifted into the development of learning system that improves

learners in relation to skill, attribute and behavioral characteristic of businessman. In

this context Ciputra (2007:16) divides entrepreneurship into 4 groups named BAGS

after the modification of their order:

1) Business Entrepreneur, which is further divided into 2 groups: owner entrepreneur

and professional entrepreneur. Owner entrepreneur is the creator and owner of

business. While professional entrepreneur is an individual who has entrepreneurial

capacity but he/she practices it in company that belongs to someone else.

2) Academic Entrepreneur describes academician that teaches and manages

educational institution with pattern and style of entrepreneur but still maintains the

noble objective of education.

3) Government entrepreneur is an individual or a group of people that leads and

manages government institution with entrepreneurial spirit and proficiency.

4) Social Entrepreneur is a founder or a manager of social organization that

successfully gather community fund for social assignments.

The objective of entrepreneurial learning is how to transform entrepreneurial spirit,

attitude, and behavior from business entrepreneur group that becomes basic material to

explore other entrepreneurial environment; academic, government and social

entrepreneur.

Learning design that is provided is learning design that is oriented or led to generate

business entrepreneur especially owner entrepreneur or the candidate of independent

entrepreneur that has capability in founding, owning and managing companies as well

as capacity to enter business and industrial world professionally. As consequence the

basic pattern of education must be systemic that includes theory, practice and

implementation aspects. Furthermore the implementation of learning should be

accompanied with relatively integrated and comprehensive educational operation such

as through counseling, coaching, consultation and so on

According to Suherman (2008:29), entrepreneurial learning should be commenced with

preparation and provision of learning materials that fit to theory, practice and

implementation. After the preparation and provision of learning material is complete,

the process of entrepreneurial learning can be conducted with fulfilling cognitive,

affective and psychomotor areas as its main target. Afterward, along with the course of

learning process consultation media can be provided especially for pragmatic things in

order to complete learning process that is led to fulfill cognitive, affective and

psychomotor areas. Besides, consultation media hopefully can strengthen learner 4 Hs.

The first H is Head defined as thinking and in learning it is fulfilled with knowledge on

values, enthusiasm, spirit, attitude, and behavior so learners can gain entrepreneurial

thinking. The second H is Heart defined as feeling that is fulfilled with the

internalization of social economy empathy so learner can feel the emotional dynamic of

entrepreneurship and gain empirical experience from preceding entrepreneur. Then the

third H is hand defined as skill that must be acquired by learners to be entrepreneur. As

a result in this context entrepreneurial learning provides learners with production

technique with a purpose of preparing them to have competence in producing good

product such as goods, service or idea. And finally the fourth H is Health defined as


Book One 112

physical, mental and social health. In relation to this, learner should be provided with

techniques to anticipate various matters that can become apparent while engaging in

entrepreneurship such as problem, difficulty or other risks as entrepreneur. Learner in

terms of this area can be given through AMT (Achievement Motivation Training) or

Outbound Training. After learners learn four Hs above, it is expected that they can put

them into practice and become entrepreneurs. Therefore it is considered important to

add another impelling factor. Farzier and Niehm (2008) citing from Van Auken et.al

(2006) statement argued that role model has significant effect to impel learners to

become entrepreneur. In this area, Farzier and Niehm (2008) gave an example by

inviting entrepreneurial practitioner as guest speaker in lecture or as mentor in

apprenticeship.

Based on social cognitive career theory, career interest is formed through direct or

memorable experience that provides opportunity for individual to train, receive

feedback and develop skill that leads personal efficacy and expectation from satisfying

result. Lent, et.al (Farzier and Niehm, 2008). Kram (1983) and Shapero and Sokol

(1982) as cited in Farzier and Niehm (2008) found that education and training affect

people perception toward entrepreneurial career by providing opportunity to simulate

how to commence business and observing a role model. It means that it is not enough to

conduct entrepreneurial education only in class in the form of lecturing. It should

provide opportunity to learners to experience directly the difficulty while commencing

and running business and gain chance to observe a role model, an entrepreneur who has

run his/her business in the form of apprenticeship.

Entrepreneurship is a discipline that needs to be learned. Individual capability in

conducting entrepreneurship can be matured through education process. Individuals

who become entrepreneur are those who recognize their potential and eager to learn to

develop their potentials to seize opportunity and organize their business in bringing

their expectation into reality. The pattern of entrepreneurial learning is described as

follows:

1) Knowledge Opening can be accomplished through activities such as: lecturing,

discussion, invitation to Vocational High School successful graduates, invitation to

entrepreneurs who live near school to share success and failure they ever dealt with

or visit to companies, direct observation through apprenticeship or comparative

study.

2) Attitude Internalization. Attitude internalization is carried out through habituation

and encouragement in doing something. Sometimes it must be done through the use

of “pressure” or “involuntariness” in positive meaning such as applying deadline

3) Technical provision. It aims to give technical and useful provision to live life in

future, not a grandiose knowledge

4) Early experience provision. It aims to encourage learners to be bold in “taking

paces”, feel the enjoyment of success and learn from the bitterness of failure

(Sumarsono, 2009).


Book One 113

Components of Entrepreneurial Program

Entrepreneurship Education Program-EEP consists of various components designed to

achieve its objective. Figure 1 shows the correlations between components.

Figure 1 Components of Entrepreneurship Education Program

(source : Aberti et.al, 2004)

Figure 2.1 shows that there are 5 components and 8 correlations between components in.

Correlation 1 shows that the determination of objectives must consider audience need

and characteristic. For example, the objective of entrepreneurial subject will be different

from other business incubators in Vocational High School, such as business center

because learner need is to obtain certain qualification, while the learner need of business

incubator is to begin real business. Correlation 3 and 4 shows that content is determined

by objectives and audiences. The implemented Pedagogies must consider contents and

learner characteristics as shown in correlation 5 and 6. Correlation 2, 7, and 8 shows

that assessment is made to assess the achievability of the previously determined

objectives, the implemented pedagogies and contents.

Objectives of Entrepreneurial Education

Gorma et.al (Heinonen & Poikkijoki, 2006) stated that the objectives of entrepreneurial

education include: 1) learn to understand entrepreneurship, (2) learn to be

entrepreneurial and (3) learn to become entrepreneur.

The objectives of entrepreneurial subject are to provide entrepreneurial knowledge,

internalize entrepreneurial skill and behavior, and develop entrepreneurial spirit.

Considering that it is difficult to cover all aforementioned objectives, usually it covers 1

and 2 out of three objectives. Many experts argue that willingness to take risk becomes

the nature of entrepreneur in which risk is connected with chance. If different people see

it as risk, an entrepreneur sees it as chance (Heinonen & Poikkijoki, 2006). As a result

the main entrepreneur behavior is ability to seize, evaluate, and exploit chance (Shane &

Venkataraman, 2000).

The pedagogical challenge of entrepreneurial education lies on the more holistic

entrepreneurial competence (Tatiila, 2010). Consequently entrepreneurial education

must be centered on learners and provide opportunity to learners to learn from actual

case.

3

5

6

7

2

Objectives Audiences

Assesment Content Pedagogies

1

4

8 1


Book One 114

Module Based Learning

Module is printed teaching material designed to be learned independently by learners.

Module is also called media for self learning because module is completed with hints

for self learning. It means that readers can do learning activities without the direct

presence of teacher. Language, pattern, and other completing features found in module

is arranged in such way that it provides the impression of “instructor language” or

language of teacher who is teaching. Consequently, this media is often called as self

instructional material.

Modules functions as learning tool or media that contains material, method, limitations,

and evaluating way designed systematically and interestingly to achieve the expected

competence in accordance with its complexity level. Module can be considered a good

and interesting one is it has the following characteristics (Diknas, 2008):

1) Self Instructional; means that through the module someone or a learner is able to

learn independently, not dependent on other parties.

2) Self Contained; means that a module completely contains all learning materials of

a learned competency or sub competency unit.

3) Stand Alone; means that the developed module doesn’t rely on other media or is

necessarily used together with other learning media.

4) Adaptive; means that module should have high adaptive capacity toward the

development of knowledge and technology. It is regarded adaptive if module can

adapt to the development of knowledge and technology as well as being able to be

used in flexible.

5) User Friendly; means that module should be friendly to its users. Each instruction

and information description must he useful and friendly to its users, including the

easiness for its users in responding and accessing something in accordance with

their desire.

DISCUSSION

According to Government Regulation Number 19 2005, article 26 paragraph 3 stating

the graduate competence standard for vocational secondary education unit (SMK) aims

to improve intelligence, knowledge, personality, noble character, and skill for

independent living and continue to the next education level according to vocational

department. In the regulation of National Education Minister Number 23 2007 on

Graduate Competence Standard for Vocational Secondary Educational Unit

(SMK/MAK) states that acquiring the competence of expertise and entrepreneurship

program aims both to meet the employment demand and continue to high education

level according to the vocational department.

From the regulation described above it can be concluded that SMK (Vocational High

School) aims to prepare its graduate to enter employment and continue to higher

education level. In the context of preparation to employment, learners are prepared to be

intermediate level workers to meet the employment need or entrepreneur who starts

business and create occupational vacancy.

According to Regulation of National Education Minister Number 22 2007 on Content

Standard, the curriculum structure of SMK includes entrepreneurial subject with 192

hour time allocation. Graduate competence standard for entrepreneurial includes:


Book One 115

1) Able to identify business activities and chances in daily life, especially in local

community.

2) Implement entrepreneurial attitude and behavior in daily life in local community

3) Comprehend the principles of leadership and able to implement professional

achiever behavior in daily life

4) Able to design and manage small/micro business in his/her field

Vocational High School education is carried out in the form of industrial occupational

practice. Educational process starts from planning, implementation, and evaluation, the

process that is not only carried out by educational unit (SMK) but also involves

business and industry stakeholders. Learning load in Vocational High School

(SMK/MAK) consists of face-to-face learning activities, in school practices, and on site

practices in real location of business/industry equal in 36 lesson hours per week.

In the implementation of vocational high school education, there is division called as

Production Unit. The implementation of Production Unit functions as media for

productive learning in school that aims to assist the improvement of learning activities

in form of actual production for students so they can engage themselves in production

that is maintained to fit to employment standard, develop students entrepreneurial spirit

and aid the financial source for school.

The objective of Production Unit implementation follows the targets as stated in The

Ministerial Decree of National Education and Culture Number 0490/U/1992, Article 29,

paragraph (2) that reads as follows:

1) Provide opportunity to students and teachers to conduct practical activities oriented

to market.

2) Encourage students and teachers to develop economical and entrepreneurial insight.

3) Obtain additional fund to implement education

4) Improve the efficiency of educational resource in school.

5) Improve student and teacher creativity.

Internalization of Entrepreneurial Learning

Entrepreneurial Learning in Vocational High School (SMK) must be implemented

systematic and integrative fashion. Integration or any effort of integrating is a conscious

and structured attempt by teachers in order to integrate objectives between

entrepreneurial values into specific education and training program (inter discipline) in

learning process to accomplish the internalization and personalization of entrepreneurial

values intended to be known, understood, comprehended and implemented consistently.

The integration of entrepreneurial values should consider local potential in accordance

with location/place where students live. The other consideration must be given to the

heterogeneity of student background such as family life, school, community, and

developmental age level so as a result students will posses entrepreneurial spirit and

high consciousness to actualize their potential in intellectual way in society life.

The integration of entrepreneurial education and training subject must emphasize the

formation of entrepreneurial spirit found in teaching material under discussion so

teachers don’t need to find special material in order to shape entrepreneurial spirit in

education and training subject that is being taught.

In entrepreneurial learning, teachers play significant and decisive role. It is difficult to

describe methodologically but teacher creativity will become the best role model for


Book One 116

students. Inviting students to practice entrepreneurial values is one of actual examples

for teacher in implementing entrepreneurial values in his/her daily life.

The learning of entrepreneurial values integrated into education and training subject

uses various approaches and methods. Learning source is teaching material that comes

from various sources in specific education and training subject that meet educative

criteria, emphasize student competence both in individual or classroom area, and still

refer to student learning completion.

Module based entrepreneurial learning provides exceptional comfort for students in

which module is prepared according to student need and characteristic. Comprehension

is led to be more applicative with intention to encourage entrepreneurial career interest

on vocational high school students.

The core activities whose implementation aims to attract student attention and interest

must regard the following issues:

1) Entrepreneurial values that is successfully integrated into education and training

subject including those that are already understood and experienced by students in

their daily life, both directly or indirectly (contextual learning).

2) Provision of freedom and guidance to students in understanding (conceptualizing)

materials of entrepreneurial values under discussion (concept achievement and

constructivism learning).

3) Attempt to create activities that enable students to cooperate and collaborate in

understanding moral values under discussion (cooperative learning)

4) Opportunity provided to students to try and implement learnt materials.

5) Use of various learning media to facilitate students in sharpening and understanding

the learnt entrepreneurial values.

6) Preservation of student discipline and responsibility during learning process as well

as the prevention of activities that could generate boredom, deterioration of learning

motivation and finally interruption in student activity and creativity.

7) Learning directed to habituate students in conducting careful observation on

surrounding reality (local, regional, national and global)

8) Teacher who always functions as role model in thinking, attitude exposure, and

action in implementing proper entrepreneurial values.

CONCLUSION

Entrepreneur attitude and behavior gain more significance in society. Entrepreneur

attitude and behavior will grow and develop when characteristic from entrepreneur

personality has been internalized firmly within personality of individual student.

Consequently successful internalization of entrepreneur characteristic will give birth to

entrepreneur attitude and behavior and finally produce entrepreneur generation in

significant number. It must be preserved as attention focus because Indonesia still needs

more entrepreneurs in improving public welfare.

In an effort to produce tough entrepreneurs, educational institution (school) becomes

one of institutions that play significant role because school is expected to have capacity

in transforming entrepreneur characteristic to its students, especially Vocational High

School that aims to produce graduates who are prepared to enter employment, either

working in independent way or as employee. In the context of independent working, the

graduates must be able to become entrepreneur .


Book One 117

Education in this case Vocational High School plays significant role in producing

entrepreneur generation. Therefore Vocational High School must be prepared, managed

and controlled to achieve its objective, producing graduate with entrepreneurial mental.

To generate graduate with entrepreneurial mental, it is considered important to

familiarize students with entrepreneurial implementation. The familiarization of

entrepreneurial implementation in school can be carried out through teaching and

learning activities, implementation of entrepreneurial characteristic values in school and

entrepreneurial practices. Teaching and learning activities can be carried out through:

first, the implementation of entrepreneurial subject designed to open entrepreneurial

insight, the internalization of entrepreneurial attitude, the provision of preliminary

knowledge in conducting business; second, the integration of entrepreneurial

characteristic values into all subjects. Activities for entrepreneurial practice can be

implemented through: the student engagement in Production Unit activities and the

implementation of entrepreneurial extracurricular activities. By engaging students in

production unit, it is expected that such activities function as concept introduction,

attitude instilment, technical understanding development, and the provision of

entrepreneurial preliminary experience. Meanwhile by implementing extracurricular

activities, it is expected that such activities serve as attitude instilment and the provision

of both technical knowledge and entrepreneurial experience.

REFERENCES

Alberti e al., 2004. Entrepreneurship Education : Notes on a Ongoing Debate. Disajikan pada

14th Annual IntEnt Conference, Italy, 4-7 July 2004

Badan Pusat Statistik. 2011. Surabaya Dalam Angka 2011. Surabaya : Badan Pusat Statistik

Kota Surabaya.

Ciputra. 2008. Quantum Leap: Bagaimana Entrepreneurship Dapat Mengubah Masa Depan

Anda dan Masa Depan Bangsa. Jakarta : Elex Media Komputindo.

Frazier, B. & Niehm, L.S., 2008, “FCS Students’ Attitudes and Intentions Toward

Entrepreneurial Careers”, Journal of Family and Consumer Sciences, Vol. 100, No. 2,

April 2008, Academic Research library, pg 17.

Hisrich, et al., 2008. Kewirausahaan, Edisi 7, Jakarta : Penerbit Salemba Empat.

Heinonen, J. & Poikkijoki S. A. 2006. An Entrepreneurial Directed Approach to Entrepreneurial

Education: Mission Impossible ? Journal of Management Development, 25 (1).

Peraturan Pemerintah Nomor 19 tahun 2005 tentang Standar Nasional Pendidikan. Lembaran

Negara Republik Indonesia. Departemen Pendidikan Nasional

Peraturan Menteri Pendidikan Nasional Nomor 22 tahun 2007 tentang Standar Isi. Departemen

Pendidikan Nasional

Peraturan Menteri Pendidikan Nasional Nomor 23 tahun 2007 tentang Standar Kompetensi

Lulusan. Departemen Pendidikan Nasional


Book One 118

Shane, S & Venkataraman, S. 2000. The Promise of Entrepreneurship as a Feld of Research.

Academy of Management Review, 25 (1), 217-226

Sarwoko, Endi. 2011. Kajian Empiris Entreprenuer Intention Mahasiswa. Jurnal Ekonomi

Bisnis. 16(2): 126-134.

Undang-Undang Nomor 20 Tahun 2003 tentang Sistem Pendidikan Nasional. 2009. Tim

Nasional Implementasi KTSP. Departemen Pendidikan Nasional

Taatila. 2010. Learning Entrepreneurship in Higher Education. Education and Training.

(Online), 52 (1) : 48-61.

Wijaya, Toni. 2008. Kajian Model Empiris Perilaku Berwirausaha UKM DIY dan Jawa Tengah.

Jurnal Manajemen Dan Kewirausahaan, (Online), 10 (2) : 93-104.


Book One 119

EFFECT OF SOURCES OF COMPETITIVE ADVANTAGE OF

MARKETING ON THE PERFORMANCE OF FISH PROCESSING

INDUSTRY IN TAMBAK WEDI, SURABAYA

Bachtiar Jusuf Helmy1

Management, STIE Artha Bodhi Iswara Surabaya

INDONESIA


ABSTRACT

To improve the competitiveness of companies, one way that can be achieved is

by developing the capability or competence of the company (Tambunan, 2001).

This research attempts to see the impact of competence in marketing of

competitive advantage, especially seen from a comparison of the relative

market share and market share growth. It is expected that the results of this

study can be used as an alternative solution to the company in exploring the

sources of competitive advantage, especially in the field of marketing to be able

to improve the performance of small scale industries.

The population in this study is the overall industry owners and employees Small

Pond Village Fish Processing in Wedi. In this study, samples were taken from

the Small Fish Processing Industry in the Village Pond Wedi, with a total of 100

people. Hypothesis testing used in this study was multivariate analysis with

Structural Equation Modeling (SEM). Assessment of influence on each - each

independent variable on the dependent variable using path coefficient.

Based on the research that has been done to analyze the influence of the

sources of competitive advantage in marketing to the company's performance,

showed that these variables have positive and significant influence

Keywords: Sources Of Competitive Advantage And Performance Of

Small Industry

INTRODUCTION

Development and environmental changes so quickly and dramatically, including

changes in consumer tastes, technological advances and socio-economic changes, has

resulted in the emergence of business competition in various industries that are so tight.

Developments and changes occurring across geographic. The popular development is



Book One 120

known as globalization. Such a condition requires the company to be able to explore

and develop sources of competitive advantage in order to survive. Source of competitive

advantage can be found from the ability of management competency in tapping the

corporate functional areas: competence in marketing, development and product design

and production.

Field of functional competence represents a real knowledge and skills that are

specifically reflected in the expertise, capabilities and performance of marketing,

innovation, technology use and production. Competence held by the company should

not be easily imitated by competitors and sustain the achievement of sustainable

competitive advantage. Competitive advantage is not a new idea, but penekanaannya in

the field of new marketing is a trend in the decade of the 1980s (Tjiptono, 1997). While

the traditional view of marketing place as one of the members of the body corporate.

Marketing is generally regarded as a task to create, introduce and deliver goods and

services to consumers and companies. Competitive advantage should be viewed as a

dynamic process rather than as the final result.

Competency directing patterns of diversification and how the company entered the

market (market entry). Special competence is the competitive advantage of companies

owned or done that gave him the strength to deal with competitors (Tjiptono, 1997).

Marketing competency is the ability and performance level of marketing that supports

the achievement of corporate strategic objectives. The amount of marketing competence

is calculated by knowing the total value of the performance factors of competitive

advantage is multiplied by the relative importance of these factors and the percentage of

responsibility in marketing. (Purnama, 2003: 111)

Corporate performance is the level of achievement as measured company in the form of

employment outcomes or performance outcomes (Rue & Byard, 1997). Based on

research results Szimansky, et al. (1993) indicators of performance measurement and

competitive advantage of the most frequently used is the market share and profitability.

Market share is a measurement of marketing performance or operational performance

that can distinguish between winners and losers. Volume sales of the company did not

disclose how well the company's performance compared to its competitors. If the

company increased market share means the company can outperform its competitors, if

the models share the company declined, saying the company could lose to competitors.

The definition of market share here is the relative market share, the company's total

sales expressed as a percentage of sales to major competitors. Measurements with the

overall market share is widely used because it only requires information on total sales

(Kotler, 1997)

Surabaya as a maritime city has a natural resource that is very supportive. Territory

coupled with the Java Sea and the Strait of Madura makes Surabaya has a strategic

position in the field of maritime. To enhance the role kemaritimannya, Surabaya should

facilitate traffic to and from the Port of Tanjung Perak. Therefore, continued to pursue


Book One 121

Surabaya building of railroads and highways that are biased closer to Tanjung Perak

with the hinterland. Support land transport system is really a big role in the development

of Surabaya as a maritime city.

Fisheries sector as one of supporting the economic sector has a role in national

economic development, which provide added value and strategic value, and may

provide financial or economic benefits, particularly in the provision of protein food,

foreign exchange earnings and providing employment. So far, the development of

fisheries conducted has shown real results and positive impact on national development.

This can be seen from the contribution of Gross Domestic Product (GDP) National

fisheries sector to GDP continues to increase. The contribution of fisheries and marine

sector to the national GDP reached about 12.4%. Even the fishing industry to absorb

more than 16 million workers directly (Dahuri, 2009).

Fish processing activities in the Village Pond Wedi, Surabaya mostly still done the

traditional form of domestic industry (home industry), such as fresh fish processing

(cooling), salted (salting), fish pindang (pemindangan), fish fillets, smoked fish

(fumigation), crackers, fish / shrimp, and shrimp paste.

Based on data from Directorate General of Capture Fisheries (2009), judging from the

way of treatment include marketed fresh (31.37%), drying / salting (46.41%),

pemindangan (15.52%), shrimp paste (0.41%), bike (0.002%), smoking (2.88%),

freezing (0.82%), fish meal (0.08%), and others (2.45%), in the region of Central Java

Province, dominated by the marketing of fishery products in the form of drying / salting.

Fish processing performed by the coastal communities in the Village Pond Wedi to

circumvent their income that is formed through SMEs continued to decline, fishing

village looking ponds Wedi largely a side income by empowering the processing of fish,

because of the many tourists who come to the Bridge tour, therefore, in empower

coastal fishermen are to be utilized in an optimal and sustainable (Sustainability), for

fisheries and marine resources, especially fish is a source of nutrition for the community.

Revenue of SMEs in the Village Pond Fish Processing Wedi fluctuated from year 2008

up to 2010. In 2008 the average income of Rp. 11,900,000 whereas 2009 decreased by

USD. 6,828,900, and in 2010 also returned a decrease of Rp. 5,237,766. This indicates a

decline in the performance of the alleged lack of precision implement strategies that

made by the central office that less can be applied into practice by the employee

because the competitive advantage associated with how the company chooses and is

really a generic strategy to implement in practice.

Many research scientists who have proved that superior skills or expertise (superior

skills) will produce superior performance (superior performance). Superior skills are

unique competence (distinctive competence), which supports the company to achieve

positional advantage (positional advantage). Positional advantages the company stated

with performance outcomes (performance outcomes). While the indicator most often

used to evaluate or measure the results of performance is market share (market share)


Book One 122

and profitability (Szimansky, et al, 1993). Some research in the field of marketing has

also been proved that marketing competence has a positive influence on the results of

the company's performance. So if the marketing competence increases, the results of the

company's performance will also increase, and vice versa. This research attempts to

examine the concept of relationship in manufacturing firms in Indonesia.

To improve the competitiveness of companies, one way that can be achieved is by

developing the capability or competence of the company (Tambunan, 2001). This

research attempts to see the impact of competence in marketing of competitive

advantage, especially seen from a comparison of the relative market share and market

share growth. It is expected that the results of this study can be used as an alternative

solution to the company in exploring the sources of competitive advantage, especially in

the field of marketing to be able to improve industrial performance.

Literatur Review

The concept of Competitive Advantage (Competitive Advantage) Competitive

advantage relates to the way how the company memilihan really can implement a

generic strategy into practice (Porter, 1994). All parts are there in the organization,

either in the form of resources and activities, can be a competitive advantage through

three alternative strategies: Cost leadership, differentiation, or focus. By introducing a

tool known as value chain analysis, management is able to separate the basic activities

undertaken by the company, ranging from the activities of design, production processes,

marketing to after sales service and all supporting activities ranging from human

resource management, infrastructure , purchasing and technology development. Porter

gives a new perspective on competitive strategy and practical by showing how all the

basic activities and support activities can be combined to form a synergy which in turn

will bring a competitive advantage.

By using this value chain analysis, management can do the following activities:

- Understanding the behavior of costs

- Identify what is creating value for buyers

- Selecting a technology strategy that reflects the significance of corporate

technology for competitive advantage

Cravens (1996) argued that competitive advantage should be viewed as a dynamic

process rather than seen as the final result. Competitive advantage has stage process

consisting of a source of excellence, excellence and achievement of final results

position as well as investment income to sustain excellence.

Competitive advantage analysis showed the differences and uniqueness among its

competitors. Source of competitive advantage is skill, resources and superior control.

Superior skills that allow organizations to select and implement strategies that will

differentiate the organization from the competition. Skills include technical capabilities,


Book One 123

managerial and operational. For example, knowledge about the wishes and demands of

consumers helps firms to use its ability to satisfy consumers.

Meanwhile, the superior resources that enable the formation of the dimensions of

excellence. For example, a strong distribution network, manufacturing capabilities,

marketing strength (an experienced sales force), technology and natural resources.

Superior control includes the ability to monitor and analyze processes and business

results. For example, the superior cost control costs and inhibit the introduction of the

field where the assessment and management action is required. The control system also

provides the performance stakes guess (bench mark).

Monitoring efforts should be more than just internal operations, but also includes

consumers, competitors and distribution networks. Advantages position is the result of

production with low cost (cost leadership) or differentiation that delivers superior value

for consumers. Lower costs enable the company to provide superior value by providing

a lower price than its competitors for the same product. Differences appearance

products that comply with buyer preferences to produce unique benefits that can cover

the high price. Important factor in seeking excellence is how to make a decision to

compete.

Definition of Small Industry Performance

Orally and in writing, many sides use different terms to discuss this small industry. In

addition to use the term small scale industries (small industry), there are a number of

other terms that mean the same, such as: small business (small business), small

companies (small enterprise or a small firm), small-scale enterprises (small scale

busines) and others . Some claimed the small industry is the sector, while small industry

is the sub-sector. This assumption should be ignored just because of all the terms it

basically has the same content.

Based on research results Szimansky, et al. (1993) indicators of performance

measurement and competitive advantage of the most frequently used is the market share

and profitability. In this study the researcher only uses market share (market share) as

indicators of company performance measurement which is then fitted with the growth

of market share (market share growth). Market share is a measurement of marketing

performance or operational performance that can distinguish between winners and

losers. Volume sales of the company did not disclose how well the company's

performance compared to its competitors. If the company increased market share means

the company can outperform its competitors, if the models share the company declined,

saying the company could lose to competitors. The definition of market share here is the

relative market share, the company's total sales expressed as a percentage of sales to

major competitors. Measurements with the overall market share is widely used because

it only requires information on total sales (Kotler, 1997). This study also uses a


Book One 124

measurement relative market share by asking the comparison market share of

respondents with their main competitors.

Effect of Sources of Competitive Advantage The Performance Company

To improve the competitiveness of companies, one way this can be achieved is by

developing capabilities in order to improve company performance (Tambunan, 2001).

Competency directing patterns of diversification and how the company entered the

market (market entry). Special competence is the competitive advantage of companies

owned or done that gave him the strength to deal with competitors (Tjiptono, 1997).

Marketing competency is the ability and performance level of marketing that supports

the achievement of corporate strategic objectives. The amount of marketing competence

is calculated by knowing the total value of the performance factors of competitive

advantage is multiplied by the relative importance of these factors and the percentage of

responsibility in marketing. (Purnama, 2003: 11).

RESEARCH METHOD

MeasurementVariables

Sources ofCompetitive Advantage(X)

Isthe abilityand performance levelofmarketingthatsupportsthe achievement

ofstrategicobjectiveswithindicators(Sukarno, 2009, 568)

1) AdvertisingCampaign

2) AbilityMeetsTargetMarketDemands

3) Pricing

4) The extent ofProduct Line

5) The extent ofDistributionCoverage

6) SelectiveDistribution

7) SalesMastery

Boundvariables:

Performance ofSmall Industries(Y)

Is the level ofachievementSmallFish ProcessingIndustriesismeasured in terms

ofworkwith theindicator(Muljaningsih andSukarno, 2011:148):

a) SalesGrowth

b) Profitability

Population

The populationinthis studyis theoverallindustryownersandemployeesFish Processingin

Tambak Wedi.

Sample

In this study, samples were taken from the Small Fish Processing Industry in the Village

Pond Wedi, with a number of indicators at least 9x10=90 customers. And tomeet the


Book One 125

requirements of the SEM test which requires a sample of 100-200, then the sample in

this study of 100 people.

TechnicalAnalysis

Hypothesis testing used in this study was multi variate analysis with Structural Equation

Modeling (SEM). Assessment of influence on each-each independent variable on the

dependent variable using path coefficient.

RESULTS AND DISCUSSION

EvaluationModelOne-StepApproachtoSEM

In the SE Mmodel, measurement modelandstructuralmodelparametersestimatedjointly.

This method is some what experienced difficulty in meeting the demands of the

modelfit. Most likely caused by the interaction between measurement models and

structural models are estimated jointly (one-step approachtoSEM).

One-step approach to SEM is used when the model is believed that based on strong

theory and the validity and reliability data is very good. (Hair.et.al, 1998).

Table1. EvaluationCriteria forGoodnessofFitIndices

Criteria

Results Critical Value

Evaluation Model

Cmin/DF 0.810 ≤ 2,00 good

Probability 0.594 ≥ 0,05 good RMSEA 0.000 ≤ 0,08 good

GFI 0.982 ≥ 0,90 good AGFI 0.953 ≥ 0,90 good

TLI 1.054 ≥ 0,95 good CFI 1.000 ≥ 0,94 good

From the results of evaluation of the model was one step elimination nof all goodness of

fitcriteria are used, all showing good results of the evaluation model, the modelis

consistent with the data. That is, the conceptual model was develop dandis based

theories have been fully supported by facts.

Causality Test

Judging from the number determinant ofthe sample covarian cematrix:

2532933763>0indicates there multi colinierity or Singularity in this dataso that

assumptions are met. Thus there gression coefficientof each factor can betrust edas seen

in the causality test below.


Book One 126

Table2. EvaluationCriteria forGoodnessofFitIndices

Ustd Std

Prob. Faktor Faktor Estimate Estimate

Sources of Competitive Advantage

Performance of Small Industries 0.029 0.150 0.028

limit of significance ≤ 0,10

Judging from the level of Prob. direction of causal relationship, then the hypothesis

which states that: Factors Resources Competitive Advantage positive effect on company

performance, can be accepted [Prob. kausalnya 0.028 <0.10 [significant [positive].

Based on the results of research that has been done to analyze the influence of the

sources of competitive advantage in marketing to the company's performance, it is

known that these variables have positive and significant. This means increased

competence will enhance the performance of companies and enterprises with high

competence will achieve results better performance than the company's incompetent.

This finding is consistent with the results of previous studies that have shown a positive

relationship marketing competence of the products of the company's performance. The

study also found that when viewed from the level of importance of sources of

competitive advantage, brand image and reputation of the company is considered as a

source of competitive advantage is most important. Thus we can conclude that the

sources of advantage in marketing that are considered most important was indeed a

primary responsibility of the marketing function (percentage of major responsibilities.)

CONCLUSIONS

Conclusion

Based on the research that has been done to analyze the influence of the sources of

competitive advantage in marketing to the company's performance, showed that these

variables have positive and significant influence

Suggestion

By considering the limited-keterbatasam this research, this study's findings are expected

to remain useful for the manufacturing industry in Indonesia as well as for the

academics. Marketing competence can be used as a source of competitive advantage

that can improve corporate performance results. Thus the company can continue to

explore and develop competencies in marketing to survive in an era of increasing

competition this. The sources of competitive advantage that are considered less

important to be reconsidered. Because of the importance of the source of this advantage

was also affect both the poor performance. For example, the results of this research

resource advantages related to distribution, pricing, service before and after the sale of


Book One 127

the lowest ranks (considered less important). As a result the performance of resource-

advantage Sumner tersebutpun less good than the sources of other advantages.

REFERENCE

Cravens, D.W., 1996, Pemasaran Strategis, Alih Bahasa: Lina Salim,Edisi Keempat, Jilid Satu,

Penerbit Erlangga, Jakarta.

Handoko, T.H., 1995, Manajemen, Edisi Dua, BPFE, Yogyakarta.

Heene, A. & Sanchez, R., 1997, Competence Based Strategic Management, John Willey & Sons,

New York,.

Kotler, P.,1997, Manajemen Pemasaran: Analisis, Perencanaan, Implementasi dan

Pengendalian, Penerbit Erlangga, Jakarta.

_________, 2000, Marketing Management, The Millenium Edition, Prentice Hall International,

Inc., Mexico.

Muljaningsih dan Sukarno, 2011,Faktor Kunci Dalam Meningkatkan Kinerja Usaha Kecil Di

Jawa Timur. Jurnal Ekonomi dan Bisnis Vol 1 No. 3.

Nasir, M., 1988, Metode Penelitian, Ghalia Indonesia, Jakarta.

Nitisemito, A.S.,1992,Manajemen Pemasaran: Analisis, Perencanaan, Implementasi dan

Pengendalian, Penerbit Erlangga, Jakarta.

Pawitra, T., 1993, Kelemahan Praktek Manajemen Pemasaran di Indonesia, Majalah

Manajemen, no. 113.

Porter, M.E.,1994,Keunggulan Bersaing, Tim Penerjemah Binarupa Aksara, Binarupa Aksara,

Jakarta.

Purnama, 2003, Analisis Pengaruh Sumber-Sumber Keunggulan BersaingBidang Pemasaran

Terhadap Kinerja PerusahaanManufaktur Di Indonesia, JSB No. 8 Vol. 2, Desember

2003

Rue, L.W. & Byars, L.L, 1997, Management, Skill & Aplication, Mc. Graw Hill Companies,.

Siagian, S.P., Manajemen Stratejik, Bumi Aksara, Jakarta, 1995.

Sukarno, Gendut, 2009,Kontribusi Sumber-Sumber Keunggulan Bidang Pemasaran Terhadap

Kinerja Perusahaan Alfamart Surabaya, Jurnal Ekonomi dan Bisnis Vol 1 No. 3.

Szymansky, D.M., Badrawaj, S.G. & Varadarajan, P.R., 1993, An Analysis of the Market Share,

Profitability Relationship, Journal of Marketing, vol. 57 (July): p. 1-18,.

Tambunan, T., Kinerja Ekspor Industri Manufaktur Indonesia, KADIN, Jakarta, 2001.

Tjiptono, F., Strategi Pemasaran, Edisi Dua, Penerbit Andi, Yogyakarta, 1997.


Book One 128

THE FACTORS SHAPING THE SPIRIT OF

ENTREPRENEURSHIP

(A STUDY IN SMALL AND MEDIUM ENTERPRISES)

Tina Melinda1, Meidiahna Kusuma2, Liliani3

Universitas Ciputra

INDONESIA

E-mails :[email protected], [email protected], [email protected]

ABSTRACT

Small and medium enterprises, which are often referred to as SMEs, play a

significant role in the economic growth and employment rate. This role is

categorized as a strategic role in national economic development. Considering

the scale of the role, the government has tried to support it by training,

mentoring, developing, and financing the subject, but the performance of SMEs

in reality did not meet the expectation. It is believed that the spirit of

entrepreneurship is a big factor in the success of SMEs. The purpose of this

research is to determine the factors that shape the spirit of entrepreneurship.

The sample of this research consists of 48 respondents who own small and

medium enterprises. Factor analysis is used as a means of data analysis in this

study. The result of the study suggests that the dimensions of entrepreneurship

spirit, which consist of market sensitivity, risk taker, and creativity and

innovation, provide a massive contribution to the creation of entrepreneurship

spirit.

Keywords: Entrepreneurship Spirit, Market Sensitivity, Risk Taker,

Creativity And Innovation

INTRODUCTION

Small and medium enterprises play a significant role in economic growth and

employment rate. This role is also considered as a strategic role in national economic

growth. SMEs are better equipped to survive economical crisis compared to large scale

enterprises.

Considering the scale of the role, the government has tried to support it by training,

mentoring, developing, and financing the subject, but the performance of SMEs in

reality did not meet the expectation (Partomo, 2002). Several researchers attempt to

explain the reasons behind this condition; Pambudi and Rabanni (1995) in Nurhayati

(2004) mention about how the interaction of several contributing factors such as

marketing, financial, management, technical, location, human resources, and financial

structures affects the performance of small enterprises. Meanwhile, Idrus (1990) and

Scarborough & Zimmerer (1993) suggest that management incapability, weak decision




Book One 129

making process, lack in experience, and weak financial supervision are the factors

behind the unsuccessful business run by small enterprises. This research is funded by the Directorate of Research and Community Service (Dit.Litabmas) from the Directorate General of High Education of Ministry of Culture and Education with funding from University Research Grant in 2013

Baswir (1995) and Christian (2008) insist that the dominant use of traditional

technology, capital shortage, and weak managerial aspects are the factors leading to the

low performance level of small enterprises. This condition is closely related to several

internal and external problems faced by SMEs. Several internal problems include the

inability to capture market opportunity, capital shortage, and managerial wekness,

which includes the inability in acquiring market access. These factors then affect the

ability of SMEs to increase their business scale which require them to increase turnover,

meet demands, and adjust their quality to consumer taste, as well as dealing with the

difficulty in selling goods, accessing market information source, and dealing with the

small amount of market research studies (Sangen, 2005). On the external side, we can

see that the unconducive national economic and political system influences the growth

of SMEs (Budi, 2003)

The same condition also happens to the food manufacturing industry in East Java. The

food manufacturing industry is a field that absorbs an ample number of employees,

especially in East Java. It employed 114.815 people in 2003, 126.240 people in 2004,

and 126.318 people in 2005 (BPS, 2009). The food manufacturing industry in East Java

escalates in number in 2003 as many as 44.371 business units, 56.536 units in 2004, and

56.618 units in 2005 (BPS 2009). These statistics are based on the assumption that the

enterprises belong to local ethnics such as Javanese, Padangese, Sundanese and

Maduranese who have specific characteristics and different cultures in managing their

businesss. Additionally, the statistics are measured using the most commonly produced

raw materials from each area. As quoted by Sangen (2005), Pelkam and Welson (1996)

states that these differences can strengthen their ability in doing market orientation. The

process of becoming entrepreneurs is highly affected by the factors of human and their

intuition, as well as the society and culture they come from.

The essence of entrepreneurship according to Drucker (1959), as quoted by Suryana

(2006), is the ability to create something new and different by using creative thinking

and innovative action to create an opportunity. The creative and innovative process is

performed by entrepreneurs with creative and innovative characters. According to

Suryana (2006), the characteristics include: (1) confidence, with indicators of high

confidence, optimism, commitment, discipline, and responsibility; (2) initiative, with

indicators of enthusiasm, pace, and active behavior; (3) high achiever, with indicators of

result orientation and insight for the future; (4) leadership, with indicators of being

different, trustworthy, and tough; and (5) calculated risk taker.

Zimmerer (1996:51) in his book Entrepreneurship and The New Venture Formation

discloses that creativity is creating something from nothing, and is a result of combining

old and new ways to create a simpler and better alternative.

From this definition, we can conclude that creativity is important for an entrepreneur to

create something from nothing and combine old and new ways to create a simpler and


Book One 130

better alternative. Meanwhile, Baldacchino (2009) states that accurate decision making

in a corporation can be defined as the creative and innovative ability to come up with

tips and resources in seeking a success opportunity. Creativity and innovation becomes

the basis of accurate decision making in a corporation. Creativity is a character that an

entrepreneur must have (Karutko 2009). Creativity is an important factor in creating

competitive advantage and business sustainability (Alma, 2009). In conclusion,

creativity is the ability to develop new ideas and find new ways to spot an opportunity.

The willingness and the ability to take risks are one of the main values in

entrepreneurship. An entrepreneur who is not willing to take risk will find it hard to

start or initiate a business. The value of entrepreneurship is the courage to bear the

calculated and realistic risks (Suryana, 2006). Additionally, it is also the ability to

consider the possibility of success and failure in reaching the goal, as well as being able

to continue if the failure possibility is low. According to Drummond (2009), most

people see risk as a bad possibility or a potential disaster. Sofjan (2009, 52) states that

failure is not something shameful or something to avoid. Therefore, an entrepreneur

should deal with risk in a calm manner (Yudiantoro 2006: 86-88).

On the other hand, an entrepreneur should keep a close watch on the potential of other

competitors. An entrepreneur must analyze their chance of developing new products,

successful experience in developing new products, financial support, and other

advantages that the competitors have in the market (Suryana, 2006). Therefore, an

entrepreneur has to understand his own strength and weakness as well as the ones

possessed by his competitors. As Dan & Bradstreet (1993) suggests, our weaknesses

and strengths, as well as our competitors’, are an interesting subject for analysis. Every

entrepreneur is expected to own a strong attitude and market sensitivity in order to look

to the future and fulfill the demands of the market. An entrepreneur also needs to be

able to identify the size of the penetrated market (Susanto, 2009). This can be defined as

the ability to identify the market in terms of goods and services and providing added

values and benefits to customers.

Vitale, et al., (2002) conducted a research with the purpose of getting managerial

implications that would help us understand what a company should do to apply

entrepreneurial orientation. Entrepreneurial orientation has been proven to have a

positive and strong relation to the company’s ability to perform in many researches

(Matsuno et all., 2000; Atuahene-Gima dan Ko, 2001; Miles, Munilla dan Cavin, 2002).

If entrepreneurs, executives, and managers can understand the relationship between

their works and the entrepreneurship orientation, they will then be able to perform better

(Sangen, 2005). The purpose of this research is to analyze the factors that shape the

spirit of entrepreneurship.


Book One 131

METHODOLOGY

The population in this research is all small enterprise owners who are involved in food

manufacturing industry in Surabaya. The sample includes small enterprises in food

manufacturing industry which meet the criteria of having one to five employees and

have established their business for at least one year.

Sampling is based on Cluster Sampling technique. In getting the samples required, the

researchers utilize several considerations to obtain informations related to the

enterprises by choosing 148 business owners as the right respondents to provide

information based on the purposes and questions of the study.

DISCUSSION

The spirit of entrepreneurship is an entrepreneur's orientation to find a new market for

his product, as well as creating new products, providing customer services, beating

competitors in getting the best out of a business opportunity, and taking risky actions.

The dimensions of Entrepreneurship Spirit are creativity and innovation, market

sensitivity, and calculated risk taker (Suryana, 2006).

Validity and reliability tests are conducted to examine these dimensions. Validity tests

determine the extent of which the measurement scale can cooperate and measure what

needs to be measured (Kuncoro, 2009:172). The validity test is conducted by running a

convergent validity test using Amos18 program. An indicator is considered valid when

the CR value is bigger than 2.SE (Waluyo, 2011:79).

The Entrepreneurship Spirit variable is measured by three indicators which consist of

three statements. By using the Amos18 program, the validity test results in the

following:

Table 1 Convergent Validity Test of Entrepreneurship Spirit Estimate S.E. C.R. 2.SE

SE3 1

SE2 0,926 0,110 8,412 0.22

SE1 0,902 0,126 7,153 0.252

Source: processed data

Table 1 suggests that the overall value of CR is bigger than 2.SE. Therefore, every

estimated indicator is a valid measurement for the variable of Entrepreneurship Spirit.

Reliability testing is then conducted to see whether a regulation scale will be

consistent and stable in doing its job (Kuncoro, 2009:175). The reliability testing

used in this research is construct reliability test. This method will test the reliability

by measuring the index using construct reliability with a minimum cut-off value of

0,7 (Waluyo, 2011:113).


Book One 132

The following is the reliability test result of the Entrepreneurship Spirit variable

dimension

Table 2 Reliability Test of Entrepreneurship Spirit

Indicator Loading Loading2 (1-Loading2)

(Ʃ loading)2 +

Ʃ (1-loading2) CR Description

SE1 0.694 0.481636 0.518364

SE2 0.737 0.543169 0.456831

SE3 0.814 0.662596 0.337404

Total SE 2.245

1.312599 6.352624 0.793377 Reliable

(Total SE2) 5.040025


Table 2 suggests that the Construct Reliability (CR) value of Entrepreneurship Spirit is

0.79. This means that the Entrepreneurship Spirit variable can be classified as reliable

due to a higher cut-off value than 0.7.

The next part of the analysis discusses the loading factor value of each of the

Entrepreneurship Spirit dimension. Entrepreneurship Spirit is measured using three

indicators, namely Creativity and Innovation (SE1), Risk Taker (SE2), and Market

Sensitivity (SE3).

Table 3 Standardized Regression Weights: (Group number 1 - Default model)

Estimate

SE3 <--- Spirit_Entrepeneur .814




Table 3 describes the loading factor value for each indicator as follows:

a) The loading factor value for Creativity and Innovation (SE1) is 0.69.

This means that the indicator statistically measures the Entrepreneurship

Spirit as much as 0.69.

b) The loading factor value for Risk Taker (SE2) is 0.74. This means that

the indicator statistically measures the Entrepreneurship Spirit as much

as 0.74.

c) The loading factor value for Market Sensitivity (SE3) is 0.81. This

means that the indicator statistically measures the Entrepreneurship

Spirit as much as 0.81.

.


Book One 133

The data analysis result suggests that the three indicators shape the spirit of

entrepreneurship, and that market sensitivity is the biggest indicator of the three.

Therefore, it is essential that entrepreneurs pay good attention to these indicators in

order to maintain a good performance.

Companies with market sensitivity are market-oriented companies which constantly use

market information to fulfill their customers’ needs at present, as well as predict or

anticipate future needs. Therefore, companies must have quick access to market

information and respond to it. It is related to the adaptive ability of a company in the

available market (Jaworski & Kohli; 1993). Apart from these factors, every

entrepreneur is expected to have a strong market sensitivity attitude and character in

order to see the available opportunities and understand the unfulfilled needs of the

people at present time. An entrepreneur also needs to identify the size of the market he

will enter (Susanto 2009:126). This factor is strongly related to (1) the ability to identify

the market, (2) the ability to be sensitive to the market’s needs and movements, (3) the

ability to capture a market share, (4) the ability to be attractive, and (5) the need to

increase company capacity. Market-sensitive companies will apply marketing concepts

to fulfill the needs of the customers and are very effective and efficient in creating the

best value for their buyers while creating a productive company (Naver& Slater, 1990).

The dimension of calculated risk taker character is to calculate the possibility of success

and failure in fulfilling the set purpose, as well as being able to move on when the

possibility of a failure is low. Drummond (2009) finds that most people view risk as a

potential disaster. Another researcher suggests that failure is not an embarrassment that

should be avoided (Sofjan 2009, 52). Thus, an entrepreneur should not be afraid to take

risks and calmly deal with them (Yudiantoro 2006: 86-88). This idea is also applicable

to SME owners. They must consider failure as part of the process of being successful.

According to Suryana (2013:121), the risks often experienced are: (1) technical risks

related to expected product developments, (2) financial risks related to the financing and

development of new products, and (3) competition risk, which is can be defined as the

competitors’ ability to maintain their positions in the market.

Baldacchino (2009) states that accurate decision making in a corporation can be defined

as the creative and innovative ability to come up with tips and resources in seeking a

success opportunity. Creativity and innovation becomes the basis of accurate decision

making in a corporation. Creativity is a character that every entrepreneur must have

(Karutko 2009). Creativity is crucial for the establishment of competitive advantage and

business sustainability (Alma 2009). It is the ability to develop new ideas and find new

ways of looking at an opportunity. Fontana (2011) also suggests that SMEs are required

to innovate, because innovation is essential for financial success since it replaces old

methods with new ones in order to transform input into output that will lead to a

significant change in the value and price offered to consumers. Therefore, SMEs

entrepreneurs must be sensitive to the available market opportunity, ready to face any

risk, and able to create a breakthrough through creativity and innovation.


Book One 134

CONCLUSION

Fierce competition requires SMEs entrepreneurs to possess a spirit of entrepreneurship

in conducting their business. Data analysis suggests that the three dimensions of

entrepreneurship spirit contribute to the creation of entrepreneurship spirit. Market

Sensitivity becomes the biggest contributor, followed by Calculated Risk Taker and

Creativity and Innovation. By knowing the market sensitivity is the largest contribution

to the entrepreneurial spirit , the company should be oriented to the needs of the market ,

to find out information about the needs of the market and respond to the information.

Thus the company is required to be adaptive in responding to the needs of the market .

sensitivity to market will enable companies to create the best value for consumers as

well as to improve the performance of the company

REFERENCES

Alma, Buchari, 2009, Entrepreneurship for College Students and General Public, Bandung:

Alfabetha

Atuahene – Gima, K. 1996. Market Orientation and Innovation. Journal of Business

Research.35 (2), 93-104.

Arikunto, S. 1995. Research Management. Jakarta ; Rineka Cipta.

Baswir, Revrison. 1995. ”Small and Conglomeration Industry in Indonesia: Partnership

Prospect”, Prisma No.10 Tahun XXIV Oktober 1995. LP3ES. Jakarta.

Budi Santoso SJ., 2003. Manipulation in Economic Power (Indonesia 1800-1900): Strategis

Used by Chinese Entrepreneurs. Realino Studies Institute. Penerbit Kanisius

Yogyakarta, 7th Edition.

Christian Herdinata. 2008. Bank-Related Policies to Address the Fund Allocation Issues in the

Development of SMEs. Prosiding : UNAIR Surabaya.

Fontana,A,2011, Innovative We can!: How to Create Value through Innovation in Your

Organization and Society, Jakarta, Cipta Inovasi Sejahtera

Karutko, Hotggeds, 2009, Entrepreneurship, Theory Process Practice

Kuncoro, M, 2009, Research Methods for Business and Economy, Penerbit Erlangga

Matsuno, Ken., John T. Menzher, and Aysegul Ozsomer. 2002. The Effect of Entrepreneurial

Proclivily and on Business Performance, Journal of Marketing. 66 (July), 18-32.

Nurhayati.2004. Analysis on the Factors That Affect the Performance and Competitive

Advantage of Export-Oriented Small Enterprises in East Java. Postgraduate

Dissertation. Universitas Brawijaya Malang Unpublished.

Partomo, TitikSartika. 2002. Small and Medium Scale Economy and Cooperative. Penerbit

Ghalia Indonesia. Jakarta.


Book One 135

Sangen, Marijati. 2005. The Effect of Entrepreneurship Orientation, Market Orientation, and

Chinese, Bugis, and Banjar Ethnical Cultures Towards the Performance of Small

Enterprises. Postgraduate Dissertation. Universitas Brawijaya Malang. Unpublished.

Scarborough, N.M. and T.W. Zimmer.1993. The Effetive Small Management.Mac Millan. New

York.

Suryana. 2006. Practical Guide to Entrepreneurship: Success Tips and Process. Salemba

Empat : Jakarta.

Vitale, R.,J. Giglierano and M. Miles. 2002. Entrepreneurial Orientation, Market Orientation

and Performance in Established and Start up Firms, p. 1-12.


Book One 136

THE EFFECTS OF FISCAL DECENTRALITATION AND

INVESTMENT GROWTH ON ECONOMIC GROWTH IN EAST

JAVA

Nekky Rahmiyati 1

University of 17 Agustus 1945 Surabaya

INDONESIA


ABSTRACT

This research is conducted to : (1) identify fiscal decentralitation which have

been done by the East Java Government, (2) identify economic growth in East

Java Province, (3) identify investment growth in East Java Province, and (4)

analyze the effect of fiscal decentralitation and investment growth on economic

growth on East Java Province. The result of this analyst shows that fiscal

decentralitation and investment growth has significant influence upon the

economical growth of East Java Province.

Keywords : Fiscal Decentralitation, Investment Growth, Economic

Growth.

INTRODUCTION

After Indonesia’s Government applied UU number 22 Year 1999 about Regional

Government and UU number 25 Year 1999 about Financial Balance Between Central

Government and Regional Government, revised into UU number 32 Year 2004 about

Regional Government and UU number 33 Year 2004 about Financial Balance Between

Central Government and Regional Government, then Regency / City in Indonesia have

been executing regional autonomy policies.

As consequences of a broad autonomy jurisdiction, regional government has obliged to

increase community services and wellfares democrately, fair, evently and

simultaneously. This obligation can be fullfilled if regional government is able to

manage their local potentials which are natural resources potentials, human resources

and financial resources optimaly. As it is, regional government is given autonomy rights

to determine their own Regional Income and Spending Budget (APBD) due to their

local needs and potentials. Regional Income and Spending Budget (APBD) is written as

regional government financial policies which are one of several triggers of regional

economic growths.

Basically there are three variants of fiscal decentralitation which are linked to the grade

of independency in acquiring regional policy. (1) Releasing responsibilty from central

government circle into regional government instancy vertically (2) Connecting with a

situation which the regional government is conducted as government representation to

execute certain functions on behalf of the government. (3) devolution as connecting to

a spesific situation but also authority to decide what have to be done locally.



Book One 137

It is interesting to see that if a country is decentralitating larger spending responsibility

than the available resources, then the level of services will be decreasing or regional

government will pressure central government to give additional fund. And if there are

more fund than spend which are decentralitating, then regional fund mobilitation can be

decreased and imbalancing of macro economy could occure.

If the goodness of decentralitation is followed by increasing resources mobility and

depressure of central financial, increasing accountability, and increasing common

performance and responsibilty then decentralitation is something valuable.

With fiscal decentralitation, regional government is urged to increasing their economy

strenght, so that they can compete with other regional government through gaining

regional government capital into investment needs. So it is necessary to make a study

about fiscal decentralitation effect on economic growth and investment in East Java.

Based on the descriptions above, it can be formed several researches’ issues which are :

(1) How is the implementation of fiscal decentralitation in East Java Province? (2) How

are the economic growth of East Java Province? (3) How is the investment growth on

East Java Province? And (4) What is the effects of fiscal decentralitation on economic

and investment growth on East Java Province ?

THEORETICAL FRAMEWORK

FISCAL DECENTRALITATION

Fiscal Decentralitation is granting authority to regional government to dig up income

resources, rights to achieve transfer from higher rank of governments, and decide

routine spending and investments. In short term regional government is given

opportunity to decide the regulation of budgeting.

Regional autonomy and fiscal decentralitation, in formally legal, is written in Laws

(UU) number 32 Year 2004 about Regional Government and Laws (UU) number 33

Year 2004 about Financial Balance Between Central Government and Regional

Government. Both laws are regulating basics of hand over authority into regional

government and funding over implementation of that authority. Beside that, there is also

Laws number 28 Year 2009 about Regional Tax and Restribution which are regulating

basics about Regional Government’s authority to conduct funds collecting to the

regional society in order to earn income resource for regional development. Both basics

laws and laws about regional tax and retributions mentioned above, basically are linked

in one basic principal that is commonly named as money follows function. In this

principal, functions which are given to regional by Laws number 32 Year 2004 is

followed by funding to accomodating those functions.

In order to implementation of fiscal decentralitation, main instrument which is used is

giving authority to the regional government to collect taxes (taxing power) and transfer

into regionals. Although regional government authority to collect regional taxes is very

limited, nevertheless year by year there is increasing role of regional income (PAD)

upon Regional Income and Spend Budget (APBD).


Book One 138

ECONOMY GROWTH

According to Sadono Sukirno (1996:33), economic growth is process of accelerating

output per capita which is continously in long term. The economic growth is one of the

indicator of development’s success. Higher the economic growth usually is followed by

higher society wellfare, although there are other indicator which is income distribution.

Adam Smith’s Teory of Growth (1723-1790) mentioned there are two aspects of

economic growth which are (1) total output growth, measured by Gross Domestic

Products (GDP) or Gross National Products (GNP); (2) Population Growth.

Benefits of Economic Growth among others as follows : speed of growth is to measure

economic progress as the result of national developments, income per capita is used to

measure level prosperity of the population, as the higher income per capita with

constant work means higher level prosperity of the populations and their productivity.

INVESTMENT GROWTH

Investment can be define as nett addition to existing capital stock (Nanga,2005:123) or

investment is a relief fund acquired by an industrial field or others which is come from

overseas or domestic, conducted by the government to financing a project, or expanding

existing projects to fulfilled increasing needs of life of the population.

According to Dornbusch (1991:268) investment is spendings to increase or maintaining

capital stocks. While according to Samuelson (2004:137) investment growth has

increadibly major role in economic growth, because : (1) investment is a quite large and

dinamic spending components, thus major change in investment very influences

agregat’s demand and eventually also influences output and work opportunity (2)

Investment collects accumulations of capital, by develop a number of buildings and

usefull tools, potentials output of a nation increases and so will the long term economic

growth too. Therefor investment is playing two major roles which are determines

number of output and incomes.

RESEARCH METHOD

This research is a quantity descriptive research, which is a study to explain in detail

about certain phenomena and supported by data and quantitative analyze.

TYPE AND DATA SOURCE

Type and Data Source used in this study is secondary data. Secondary data is panel data

which is time series data from year 2005-2011 and cross section from 38 regencies or

cities in East Java Province.

RESEARCH PROCEDURE

This study has several main steps as follows : (a) Preparation and Making of Study

Instruments, (b) Implemantation of Data Collecting based from the instruments, (c)

Editing and Data Analysis, and (d) Making tje report.


Book One 139

RESEARCH VARIABLE

Table 1 Research Variable

Construct Variable Notation Manifestation Variable (Indicator)

1. Fiscal

Desentralitation X

1.1. PAD / Total Regional Income

1. 2. Balance Fund / Total Regional Income

1. 3. BalanceFund / Total Regional Income

1. 4. Public Allocation Fund / Total Regional Income

. 5. Spesific Allocation Fund / Total Regional

Income

2. Investment

Growth

X2

2.1 Growth PMA(X2.1)

2.2 Growth PMDN (X2..2)

2. Economic

Growth Y1

2.1 Regional Domestic Product Growth Bruto upon

constant basic price (Y)

CONCEPTUAL FRAMES :

ANALYSIS DATA AND DISCUSSION

Administratively, East Java are consisted of 29 regencies and 9 cities, making it the

province with largest amount of regencies/cities in Indonesia, consist of 30 regencies

and 8 cities.

Figure of Conceptual framework

FISCAL

DECENTRALITA

TION (X1)

INVESTMENT

GROWTH (X2)

ECONOMIC

GROWTH (Y)

X1.

1

X1.

2

X1.

3

X2.

1

X2.

2

X1.

4


Book One 140

ECONOMIC GROWTH

Economic data growth of East Java, while is compared with national economic growth,

shows that it is always higher than the national economic growth. It is showing that East

Java Province has strategic economical role in national scale. East Java Province is

having a significant economic growth compared with other regional economic growth.

The significant economic growth that East Java has, is marked with sectoral growth

which East Java has 3 leading sectors, that have become main thrust of economic

growth.Those sectors in succesively as follows trading, hotels and restaurants is

29,47%; processing industries is 27,49% and farming is 15,75%.

Regional that have economic growth rate above the average East Java economic growth

rate (5,9) are Tulung Agung Regency (6,43); Bojonegoro Regency (7,81); Tuban

Regency (6,01); Gresik Regency (6,87); Blitar City (6,58); Malang City (6,15);

Pasuruan City (6,42); Mojokerto City (6,63); Madiun City (6,02); Surabaya City (6,86);

and Batu City (7,13); while others which have the lowest economic growth rate is

Pacitan Regency (4,41).

From data that is showing in year 2002, 2006 and 2009 approximately 50% of regencies

and cities in East Java showed economic growth rate higher than East Java economic

growth. There are four factors that are influencing economic growth which are human

resources, natural resources, capital gain and technology.

Table 1 Numbers of Regencies/Cities which Have Higher Economic Growth Than East

Java Economic Growth

Year Number of

Regency/City procentage

2001 12 32 %

2002 18 47%

2003 11 29%

2004 8 21%

2005 10 26%

2006 24 63%

2007 13 34%

2008 12 32%

2009 22 58%

2010 9 24%

2011 8 21%

Source : BPS Jawa Timur,edited

FISCAL DECENTRALITATION

Region which has Regional Income by Total Regional Income Rate higher than

Regional Income by East Java Income Rate are Sidoarjo Regency (18,8%); Jombang

Regency (11,4%); Tuban Regency (11,6%); Kediri City (12,5%); Malang City (12%)

and Surabaya City (31%) while the lowest ones is Pacitan Regency (4,2%).

Regional Income (PAD) of East Java Regency contribution are only around 10% of

total regional income for the last ten years. While Surabaya City is placed in highest

rank because its income reaches 45% of total regional income. Then regional income of


Book One 141

Sidoarjo reaches 21% of its total regional income in 2011. Based on Relationship

Pattern of Regional Ability, most regencies and cities in East Java are still instructive

exclude Surabaya City which has consultative relationship.

From the financial side of the country, implementation of fiscal decentralitation policy

have brought consequences upon changing fiscal management maps substantially. But,

up until now, source of regional development funds in Indonesia is reflecting

dependency upon endowment and aid from central government.

For ten years, it is showed that contribution of balance funds rate in East Java Province

upon East Java Total Income is 89,3%. Regions which have less contribution of balance

funds rate than contribution balance funds rate of East Java are Kediri Regency (85%);

Sidoarjo Regency (79%); Gresik Regency (82,8%); Tuban Regency (88,9%); Kediri

City (88,4%); Blitar City (85,9%); Probolinggo City (86,2%); Surabaya City (61,4%);

Batu City (76,9%)

Balance fund of East Java Province for ten years showed that contribution balance funds

rate of East Java by Total Income of East Javais 89,3%. While regions which have

lower contribution balance funds rate than contribution balance funds rate of East Java

are Kediri Regency (85%); Sidoarjo Regency (79%); Gresik Regency (82,8%); Tuban

Regency (88,9%); Kediri City (88,4%); Blitar City (85,9%); Probolinggo City (86,2%);

Surabaya City (61,4%); Batu City (76,9%)

Balance funds from 2001 to 2011 tendenciously decreasing. As proved, East Java

Province in 2001 has balance funds of 88% from its total regional income. And it is

decreasing into 71% in 2011. It is also happening in regencies / cities, it is decreasing

significantly. It is showing that fiscal decentralitation will be implemented well.

Significant decreasing happens on Surabaya City. In 2001 its balance funds is 67% of

total regional income, becoming 34% in 2011. There have been 33% decreasing.

INVESTMENT GROWTH IN EAST JAVA

Based on data from Capital Investment Agency (BPM), business fields on East Java are

divided into three groups which are primary sector, secondary sector and tertiary sector.

In further studies in secondary sector, sub sector that is in large demands by domestic

investor are chemistry industry, foods industry, non metal mineral industry, metal

industry and textile industry. It is showed by the large amounts of companies proposing

for business expansion on that sub sector mentioned.

DATA ANALYSIS

As follows are processed data SPSS using all collected datas, blank datas is assumed

have zero value and included in calculation.

EFFECTS OF FISCAL DECENTRALITATION UPON ECONOMIC GROWTH

Calculation result with SPSS software shows that Adjusted R Square value is 0,203. It

means that 20,3% PE variant can be explained by variation of fourth independent

variables DAK, DP, PAD and DAU. While the rest (100% - 20,3% = 79,7%) is

explained by causes beside the models. While probability value (Sig.) is 0,000. This

value is lower than 0,05 (5%), then the fourth independent variables DAK, DP, PAD

and DAU all together influences significantly upon PE.


Book One 142

Partial test result shows that from fourth independent variables DAK, DP, PAD and

DAU, individually PAD and DAU variables influences significantly upon PE because

probability value (Sig.) below 0,05 (5%). While DP and DAK individually does not

have any significant influences upon PE.

EFFECTS OF FISCAL DECENTRALITATION UPON INVESTMENT

GROWTH (PMDN)

Calculation result with SPSS software shows that Adjusted R Square value is 0,038. It

means that 3,8% PMDN variant can be explained by variation of fourth independent

variables DAK, DP, PAD and DAU. While the rest (100% - 3,8% = 96,2%) is explained

by causes beside the models. While probability value (Sig.) is 0,002. This value is lower

than 0,05 (5%), then the fourth independent variables DAK, DP, PAD and DAU all

together influences significantly upon PMDN.

Partial test result shows that from fourth independent variables DAK, DP, PAD and

DAU, individually PAD and DAU variables influences significantly upon PMDN

because probability value (Sig.) below 0,05 (5%). While DP and DAK individually does

not have any significant influences upon PMDN.

EFFECTS OF FISCAL DECENTRALITATION UPON INVESTMENT

GROWTH (PMA)

Adjusted R Square value is 0,036. It means that 3,6% PMA variant can be explained by

variation of fourth independent variables DAK, DP, PAD and DAU. While the rest

(100% - 3,6% = 96,4%) is explained by causes beside the models. While probability

value (Sig.) is 0,002. This value is lower than 0,05 (5%), then the fourth independent

variables DAK, DP, PAD and DAU all together influences significantly upon PMA.

From fourth independent variables DAK, DP, PAD and DAU, individually PAD, DAU

and DAK variables influences significantly upon PMA because probability value (Sig.)

below 0,05 (5%). While DP individually does not have any significant influences upon

PMA

EFFECTS OF INVESTMENT GROWTH UPON ECONOMIC GROWTH

Adjusted R Square value is negative 0,003. Because it is negative then Adjusted R

Square value is assumed zero value. It means that variants PMA and PMD can not

explain variants of PE.

Probability value (Sig.) is 0,608 which is much larger than 0,05% (5%), then

independent variable PMA and PMD equally does not influence significantly upon PE.

From both independent variables, PMA and PMD, individually those variables does not

influence significantly upon PE because they have probability value (Sig.) much above

0,05% (5%).

EFFECTS OF FISCAL DECENTRALITATION AND INVESTMENT GROWTH

UPON ECONOMIC GROWTH

Adjusted R Square value is 0,218. It means that 21,8% variants PE can be explained by

variants of sixth independent variables DAK, DP, PAD, DAU, PMD and PMA. While

the rest (100% - 21,8% = 78,2%) is explained by causes beside the model. Probability


Book One 143

value (Sig.) is 0,000 which is smaller than 0,05% (5%), therefor sixth independent

variables DAK, BDH, PAD, DAU, PMD and PMA equally significantly influence PE.

Partial test result shows that from sixth independent variables DAK, DP, PAD, DAU,

PMD and PMA, individually PAD and DAU variables influence significantly upon PE

because have probability value (Sig.) below 0,05 (5%). While DP, DAK, PMD, and

PMA individually does not influence significantly upon PE.

CONCLUSION AND SUGGESTION

CONCLUSION

- Independent variables such as DAK, DP, PAD, DAU, PMD and PMA

equally have significant influences upon economic growth.

- From sixth independents variables DAK, DP, PAD, DAU, PMD and

PMA, individually variables PAD and DAU is significantly influencing upon

economic growth. Independents variables PMA and PMD equally does not

significantly influence upon PE.

- Management of balance funds need to be increase so it can contribute

significantly upon economic growth enhancement, which is influenced in

population welfare improvements.

SUGGESTION

- Efficient tax systems and restributions are needed and reduce the cost of tax

collecting or restributions

- Implementation of preparing human resources which can understand the rules

and systems of taxes and regional restributions

- Identification prospective superior regional sector and which becomes regional

core competence

REFERENCES

Dornbusch, Rudiger, 1991. Ekonomi Makro, Rineka Cipta, Jakarta.

Hakim, Abdul, 2004. Ekonomi Pembangunan, Ekonisia, Yogyakarta.

Hakim, Abdul, 2004. Bunga Rampai Manajemen Keuangan Daerah, UPP AMP YKPN,

Yogyakarta.

Imawan, Risnanda. 2005. Desentralisasi, Demokratisasi, dan Pembentukan Good Governance,

dalam Desentralisasi dan Otonomi Daerah: Desentralisasi, Demokratisasi &

Akuntabilitas Pemerintahan Daerah. Editor: Syamsuddin Haris, Jakarta: LIPI Press.

Nanga, Muana, 2005. Makro Ekonomi, Teori, Masalah dan Kebijakan, PT Raja Grafindo

Persada, Jakarta.

Litvack & Seddon, dalam Sadu Wasistiono. 2005. Desentralisasi, Demokratisasi, dan

Pembentukan Good Governance, dalam Desentralisasi dan Otonomi Daerah:

Desentralisasi, Demokratisasi & Akuntabilitas Pemerintahan Daerah. Editor:

Syamsuddin Haris, Jakarta: LIPI Press.


Book One 144

Rudini, 1995. Otonomi Daerah sebagai Otonomi Nyata dalam Perspektif Ekonomi dan Politik,

dalam Otonomi Daerah: Peluang dan Tantangan. Disusun oleh Tim Suara Pembaruan,

Jakarta: Pustaka Sinar Harapan.

Sadu Wasistiono, 2005. Desentralisasi, Demokratisasi, dan Pembentukan Good Governance,

dalam Desentralisasi dan Otonomi Daerah: Desentralisasi, Demokratisasi &

Akuntabilitas Pemerintah Daerah, Editor: Syamsuddin Haris, LIPI Press, Jakarta.

Samuelson, Paul A. dan William D. Nordhaus, 2004. Ilmu Makro Ekonomi, Edisi ketujuh belas,

PT. Media Global Edukasi, Jakarta.

Sukirno, Sadono, 2005. Makro Ekonomi Modern, PT Raja Grafindo Persada, Jakarta.

Undang-undang Republik Indonesia Nomor 32 Tahun 004 tentang Pemerintahan Daerah.

Undang-undang Republik Indonesia Nomor 33 Tahun 2004 tentang Perimbangan Keuangan

antara Pemerintah Pusat dan Pemerintah Daerah.

Waluyono, Joko. 2007. Dampak Desentralisasi Fiskal terhadap Pertumbuhan Ekonomi dan

Ketimpangan Pendapatan antar-Daerah di Indonesia. Parallel Session IA: Fiscal

Decentralization, Kampus UI-Depok.


Book One 145

THE ROLE OF ENTREPRENEURIAL ORIENTATION ON THE

RELATIONSHIP BETWEEN PERSONAL CHARACTERISTICS

AND BUSINESS PERFORMANCE

Arif Firmansyah1, Dina Ratna Furi2

Department of Management, Universitas Airlangga Indonesia

INDONESIA

Email : [email protected]

ABSTRACT

The successful of SMEs is depended a lot on the human capital, certainly

possessed by the business owners. Based on the theory of planned behavior, the

personal characteristics within each of business owners have an influence on

firm performance. And so the entrepreneurial orientation does. This paper

applied quantitative research method with the aim for investigating the

important role of entrepreneurial orientation mediating the personal

characteristics’ effect on business performance.

The sample of research derived from the SME’s owners in the Kediri City. For

the instrument in this research used questionnaire with 28 items. Partial Least

Square as a tool run the data for finding the result and test the hypothesis. This

study found the result that there are direct and indirect effects of personal

characteristics significantly on business performance. And also the

entrepreneurial orientation has an important role to mediate the personal

characteristic and the business performance. The results of the analysis of the

original sample estimate indicates that the indirect effect is equal to 0.438

greater than the indirect effect is equal to 0.287.

Keywords : SME, Kediri, Entrepreneurial Orientation, Personal

Characteristics, Business Performance

INTRODUCTION

It is inevitable that the current self-employment plays an important role in the

development process. A country is not possible growth and development of

infrastructure such as roads and buildings, as well as the goods and services required by

humans, in the absence of an entrepreneur. In addition it is not possible employment are

so many and the velocity of money are large and small that are appropriate, in the

absence of the role of entrepreneurs. This suggests that the role of the entrepreneur or

the business community is very important and strategic in triggering growth and

economic development of a country. According Buchari (1999), "a country will be able

to build the country's economy when entrepreneurs have as much as 2% of the

population". Entrepreneurship development in the country of Indonesia itself is not

easy.

Based on the research of Entrepreneurship Working Group (2004), it appears that only a

few entrepreneurs who managed to become a big businessman. Therefore, to foster



Book One 146

entrepreneurial behavior in the society, especially the job seekers will be very important

and strategic for the development of human resources in Indonesia are qualified, have

foresight in creating their own creative business opportunities such as opening a

business, ranging from the food business, garment, and various other business. This

pioneering effort is included in the Micro, Small and Medium Enterprises (SMEs).

Micro, Small and Medium Enterprises (SMEs) have a strategic role in national

economic development, because in addition to a role in economic growth and

employment also play a role in the distribution of development outcomes. In the

economic crisis that occurred in this country since some time ago, where many large-

scale enterprises stagnated even stop its activity, the Micro, Small and Medium

Enterprises (SMEs) proved to be more resilient in the face of the crisis. Given the

experience that has been faced by Indonesia during the crisis, would not be excessive if

the private sector is focused on the development of SMEs, especially business unit is

often overlooked simply because their production on a small scale and have not been

able to compete with other business units. SME business is itself a majority in

Indonesia. To create jobs and help the overall economic growth, more emphasis on the

study of small and micro enterprises, in particular, to find a growth-oriented

entrepreneurs. The term "growth", "success", and "performance" are very closely related

and sometimes even used as synonyms in entrepreneurship research. Traditionally, all

of the company's performance is measured by financial measures, such as sales

turnover, or by increasing the number of employees. But so far, the company's

performance measurement tends to be

more focused on the financial side alone. This tendency adversely affects the company's

business continuity. Because the result of performance measurement is likely to be

partially obscure even hide the fact the company's ability to achieve economic value in

the future. Many corporate leaders considered successful if it managed to achieve a

certain financial level. Therefore, many companies are trying to increase profits by any

means. This can lead to companies trapped in the short-term orientation and ignore the

long-term business viability of the company.

Application performance measurement in SMEs is less, whereas SMEs in Indonesia is

very significant in number and have a relatively large degree of contribution in the

Indonesian economy. In general, to date in Indonesia is still a lot of SMEs are doing

business without having a vision, mission, and a clear management strategy. Even some

of the SMEs have never done an assessment of the performance of its business. So

despite resistance to economic shocks proved robust, but its business competitiveness in

the domestic and international markets is low. These conditions are not favorable for the

development efforts of SMEs and SMEs realize the pillars of a strong economy to

support economic growth.

Under that condition, is necessary to the review of the business strategy of SMEs within

the framework of the development of SME-focused performance improvement of

competitiveness in the future. The success of an SME depends on its human capital,

mainly owned by the SME entrepreneurs. When an entrepreneur starts a business, he

brings a unique package that is the human capital to do business as part of the resources

for the company. Penrose (1959) argues that "human capital, such as business skills,

experience, and other personal characteristics are a key resource companies". Own

personal characteristics have a large direct impact on the performance of the company


Book One 147

(Switzerland and Huang, 2007; Adams et al., 2005), and indirect effects on performance

mediated by speed of decision making, types of decisions, and strategy formulation

(Karami et al. , 2006).

Every entrepreneur has a goal each in its efforts to meet the desired objectives it

requires a strong motivation to be performing well and will have an impact on the

desired goal. There would be no motivation if not felt the need and satisfaction is the

motivation that has grown into the motor and the drive to achieve fulfillment. The

experts suggested that a person has an interest in entrepreneurship because of the

existence of a motive, namely the achievement motive. Achievement motive is a social

value that emphasizes the desire to achieve the best results in order to gain personal

satisfaction. For people who have the need for achievement (n-Ach) is high, money is

not the motivation triggers, but rather act as a benchmark achievement of targets. In

addition to need for achievement, there is also an internal locus of control, which is

owned by a businessman. Lefcourt in Smet (1994) states that "internal locus of control

(ILOC) is the degree of the individual in view of the events in his life as a consequence

of his actions, so it can be controlled".

If put in the context of the concept ILOC entrepreneurs in a competitive business

environment, it is conceivable that an entrepreneur with a strong ILOC would believe

that entrepreneurs can make something that happened, and that the success or failure of

a business is the result of the entrepreneur's own actions. Managers and entrepreneurs

with high ILOC also tend to be more innovative (Miller and Toulouse, 1986) and

effective (Govindarajan, 1989).

Besides, there is also a need for cognition (NFC). Entrepreneurs with higher levels of

NFC has a positive attitude towards stimuli that require complex thinking (Cacioppo et

al., 1986). Moreover, entrepreneurs with higher levels of NFC also supports extensive

information search, whereas the low-level NFC prefer existing resources and are more

likely to act based on perceptions and feelings (Mourali et al., 2005).

This study investigated a sample of personal characteristics which consisted of need for

achievement, internal locus of control, and need for cognition with the organization's

strategic choice-oriented entrepreneurship (entrepreneurial orientation) to achieve the

business performance of SMEs. It is important that is often overlooked in any

discussion of SMEs, which are expected entrepreneurial orientation adopted by the

SME entrepreneurs. Entrepreneurial orientation in question here, among others

inovativeness, pro-activeness, and risk taking. Rural atmosphere into the background of

SMEs often have a stake also in the form of performance. For example, in the area of

SMEs working rhythm running with relaxed and less active so often the cause of the

loss of the opportunities that exist.

The research was conducted in the municipality of Kediri, East Java, where the

municipal government of Kediri is an integral part of the Republic of Indonesia.

Therefore, policies and programs of economic development in order to strengthen the

foundation populist economic development with emphasis on the priority scale. As is

known that since the onset of the economic crisis of 1998 caused a decline in economic

growth and rising inflation communities resulting in lower quality of life, increasing the

number of poor and the unemployed.

The presence of micro, small, and medium is in the municipality of Kediri is a strategic

industry that is an opportunity for improvement of the regional economy. Micro, small,


Book One 148

and medium enterprises (SMEs) that can absorb labor in addition to very many in

number, which means reducing the unemployment rate, are also carriers of life for the

economy.

Basic program of economic development in the region itself Kediri is increasing with

the growing economy of the people's business climate conducive to prioritize SMEs and

cooperatives as authorized capital to economic growth and drive private sector

nationwide and abroad as a financier.

THE LITERATURE REVIEW

The Personal Characteristics

There is a management literature that seeks to identify the specific rules of personal

characteristics desirable for entrepreneurs in starting new businesses and run the

company effectively. Most of the managerial characteristics have been studied in the

management literature. For example, previous research has identified that achievement

motivation has positive influence on the speed of an entrepreneur in making decisions

(Kauer et al., 2007), risk-taking attitude affect strategic decision of an entrepreneur in

forming alliances with other businesses (Pansiri, 2007). Entrepreneurs with higher

education levels are more likely to develop a formal strategic plan (Karami et al., 2006),

and intuition lead employers prefer prospector strategy (Gallen, 2006).

Entrepreneurs with internal locus of control tend to be more innovative (Miller and

Toulouse, 1986) and effective (Govindarajan, 1989). Previous research has considered

the achievement motivation and internal locus of control as an important characteristic

of a successful entrepreneur (Littenen, 2000; Hansemark, 1998). According to Zhang

and Bruning (2011), there are three personal characteristics possessed by entrepreneurs,

among others, need for achievement (n-Ach), internal locus of control (ILOC), and need

for cognition (NFC).

The Need For Achievement

Motivation according to Mc Clelland cited by Nisfiannoor (2002) is also often referred

to as motifs. Motifs are obtained in daily life for the learning outcomes and

socialization, and it can also be said that the motive arises because of the culture and its

shape is a natural hierarchy or not. One of the motivations that influence human

behavior is achievement motivation. Achievement motivation was first proposed by

David Mc Clelland based on research conducted in India. Mc Clelland found that

entrepreneurs, scientists, and professionals have this level of achievement motivation

above average. An entrepreneur is not motivated solely because they want to achieve a

profit, but because he has a strong desire to excel.

According to Mc Clelland, quoted by Westrek (1991), "if a strong need to be in a

person, then the effect is motivated to use the behavior that leads to satisfying those

needs". If someone who has a need for achievement that high, then this requirement will

encourage the person to set challenging goals, working hard to achieve that goal by

using the skills and abilities necessary to achieve it. Achievement motivation can be

defined as an impulse in a person to do a particular task or activity or task as well as

possible in order to achieve a commendable achievement by the predicate. This is in

accordance with the opinion Jhonson (1984) who argued that "Achievement motive is

impetus to do well relative to some standard of excellence ". Gunarsa (1995) cited


Book One 149

Ninawati (2002) reveals achievement motivation is "the tendency to achieve success

and obtain what is desired final destination".

The desire for success is considered driving as revealed by Mc Clelland and Atkinson in

Slavin (1997), achievement motivation is "a general tendency to strive to achieve

success and goal oriented, activity success or failure". Mc Clelland (1987) cited

Nisfiannoor (2002) states that achievement motivation is "motive which encourages

individuals to achieve success and aim to succeed in competition with some measure of

excellence.

The size of these advantages can be seen from the achievements of others, but also can

be seen from his own achievement in the previous period ". Individuals who have high

achievement boost will differ from others in terms of the individual's strong desire to do

things better, looking for an opportunity where the individual has a personal

responsibility in finding answers to the problem and did not like the success obtained by

chance. From the explanation above it can be concluded that the achievement motive

urge or need to do something better or more efficiently than previously undertaken and

the results achieved are trying to outperform others, and more oriented to the work or

tasks performed to achieve success. There are four items to measure the need for

achievement (Wu et al., 2007), among others:

1. The necessity for having a challenge

2. The necessity to continue studying

3. The need for personal development

4. The requirement to prove that he can be successful

The Internal Locus of Control

Definition of locus of control is the degree of an individual's belief about the source of a

determinant or events that occur in his life, which is distinguished by an external locus

of control and internal locus of control (Robbins, 2003). Individuals who think that

success and failure is due to the surrounding environment, it can be said that people

have an external locus of control. While individuals who have the confidence that he is

able to carry out and complete the task well as on his own then that person can be said

to have an internal locus of control. This is because individuals who have an internal

locus of control perceive themselves to have excellent ability and have an optimistic

attitude that is high in completing the task. Therefore, an internal locus of control are

preferred to be owned by an entrepreneur in running a business dibandikan external

locus of control.

In individuals who have an internal locus of control (ILOC), the capability and the

business looked dominant. If it is assumed that the ability factors are considered fixed

and can not be changed, then the other factors that can be manipulated is a business.

Therefore, if an individual with ILOC failure, then the individual will blame himself for

lack of effort. Conversely if you have success, individuals with ILOC will feel proud of

the results of his efforts.

According to Lefcourt in Smet (1994) states that an internal locus of control is "the

degree of the individual in view of the events in his life as a consequence of his actions,

so it can be controlled". Individuals can be said to have an internal locus of control if

someone has a belief that all the events in his life influenced by his own actions or

characteristics that tend to remain unchanged or not.


Book One 150

Meanwhile, according to Crider (1983), internal locus of control is considered as "the

personality of the individual and associated with the control that comes from within

itself". Individuals who have an internal locus of control will tend to show as much as

possible existing capabilities in him, and if you have a failure, that individual will blame

himself. So in other words, the subject-oriented internal locus of control has the

following characteristics (Crider, 1983):

1.Having a high initiative;

2.Hardworking;

3.Always find solutions, what it does and what caused the problem occurs and so on;

4.Always try to think as effectively as possible because of the belief that one's success is

based on the efforts and actions of oneself

5.Individuals were classified as internally oriented locus of control has always had the

perception that businesses are doing to be as good as possible so that the goal can be

achieved

The Need For Cognition

Contemporary research on individual differences starting from the suggestions proposed

by Cacioppo and Petty (1982) that "there are individual differences in the tendency of

people to get involved and enjoy the cognitive effort". Individuals who have a low

intrinsic motivation to engage in cognitive effort characterized as chronic cognitive

misers, whereas individuals who have a high intrinsic motivation to train the intellect

regarded as a chronic owned cognizers.

Individual differences is then understood as the origin of past experience, supported by

historical events and behaviors that are accessed in real experience at this time, and the

effect on the acquisition or processing of information relevant to a problem. Cacioppo

and Petty (1982) states that "the factor analysis studies showed that the many

differences between individuals of the tendency of many people to get involved and

enjoy the cognitive effort that can be represented by a single factor called the need for

cogniton".

Existing research related to need for cognition on personality variables or other

demographic. The study tested the convergent and discriminant validity to establish the

need to think and to provide information about the location of this requirement in the

landscape of the personality and individual differences. Many studies on the need for

thinking imposed on the hypothesis that individuals differ in terms of needs that will

think different in terms of the individual's tendency to seek detailed information about

the individual's own life, engaging in cognitive activities effectively, and enjoy more or

less to the effective cognitive problems. Need for cognition which has been

conceptualized by Cacioppo and Petty (1982) at the macro level to represent the

differences between individuals in the general tendency to engage and enjoy cognitive

efforts are effectively not as a chronic tendency toward processing the information in a

particular domain or as individual differences in cognitive complexity. According to

Cacioppo and Petty (1982) quoted Zhang and Bruning (2011) that "a need to think

(NFC) is a tendency to engage and enjoy a thought". Individuindividu

psychology literature indicates that naturally differ in the level of owned NFC

(Cacioppo et al., 1996). Individuals with higher levels of NFC has a positive attitude

towards complex stimuli that require some thought (Cacioppo et al., 1986). and


Book One 151

individuals with higher levels of NFC also supports extensive information search,

whereas individuals with lower levels of NFC prefer existing resources and are more

likely to act based on perception and feeling special (Mourali et al., 2005). Managers

and entrepreneurs with higher NFC would be more successful in adaptive decision

making (Levin et al., 2000).

Research on the need for cognition suggests that this characteristic is a predictive

manner in which individuals deal with tasks and social information (Cacioppo and

Petty, 1982). A need for cognition scale has been revised to increase its efficiency as an

assessment instrument. Cacioppo et al. (1984) was to develop a scale to measure the

NFC version of the 18-item version, but the recent study reported that the need for

cognition (NFC) consists of four major components, namely, enjoying cognitive

stimulation, preference for complexity, cognitive effort commitment, and a desire to

understand (Lord and Putrevu 2006 in Zhang and Bruning, 2011).

The Entrepreneurial Orientation

Entrepreneurship is touted as a pioneer company to achieve sustainable economic

growth and high competitiveness. According Suryanita (2006), "entrepreneurship is a

creative and innovative capabilities that form the basis of, tips, and resources to find

opportunities for success". Entrepreneurship is known as a new approach in the renewal

of the company's performance. This certainly responded positively by companies began

trying to rise from the economic downturn caused by the prolonged crisis. The shape of

the application on entrepreneurial attitudes can be indicated with an entrepreneurial

orientation with an indication of the ability of innovation, pro-activeness, and ability to

take risks (Looy et al., 2003 in Suryanita, 2006).

Most empirical studies of entrepreneurial orientation has leveraged instruments

developed by Miller (1983) and extended by Covin and Slevin (1986, 1988, 1989).

Entrepreneurial Orientation (EO) related to the processes, practices, and decision-

making activities that lead to new ventures (Lumpkin and Dess, 1996). EO involves not

only intentions but also acts a key player in a dynamic generative process aimed at the

creation of new businesses. Covin and Slevin (1991) argues that "in addition to

affecting the creation of new businesses, the EO also affect the performance of an

existing company". Empirical evidence shows that firms with high EO are much more

likely to innovate (Manimala, 1992) and achieve better performance of the organization

as a whole (Smart and Conant, 1994).

The positive influence of EO on performance is very broad, and the strength of this

effect increases over time. There are three approaches to measuring the entrepreneurial

orientation (Lyon, Lumpkin, and Dess, 2000) that managerial perceptions, firm

behavior, and resource allocation. In this study, the approach used is the managerial

perception. Employers do not consider themselves to be risk takers, but often view

business situation more positively than non-entrepreneurs. Different orientation with

entrepreneurial entrepreneurship itself. Entrepreneurship refers to the entrants or new

players in the business. While the entrepreneurial orientation is more directed at the

process of how entrepreneurship is run that includes the methods, practices, and

decision-making style to act entrepreneurially.

According Quince and Whittaker (2003), the fundamental dimensions that characterize

the entrepreneurial orientation (entrepreneurial orientation), among others, the


Book One 152

innovation in question (inovativeness), pro-activeness (pro-activeness), and exposure to

risk (openness towards risk) (Miller, 1983; Covin and Slevin, 1986, 1989).

The Inovativeness

Innovativeness related to support and encourage new ideas, experimentation, and

creativity that are likely to generate new products, processes or similar service (Miller

and Friesen, 1983). Creative innovation plays a major role in an entrepreneurial.

Although enterprises operate in an environment that supports or does not support the

growth of ideas or new ideas, experimentation, new solutions, or the creative process,

but the entrepreneur still require innovative attitude as a very important dimension to

run its business. Creative innovative high culture will provide greater opportunities in

the development of new technologies, new products, new services, or new processes in

the society concerned. The indicators used to assess the innovation consists of the level

of involvement in R & D, the level of innovation, and workforce qualifications.

The Pro-activeness

Pro-activeness concentrate on the first-mover and other actions aimed at finding,

securing, and protecting market share, as well as the future perspectives are reflected in

the actions taken in anticipation of future

demand (Miller, 1983; Covin and Slevin, 1989 ; Lumpkin and Dess, 2001). Culture that

supports a proactive stance is characterized by the presence of a support for

entrepreneurial activity for anticipatory action against all odds market opportunities and

participation in the old or new.

The proactive individual who will do everything to realize the concept and the benefits

of excellence as the first to seize every opportunity. Pro-activeness indicator used here

consists of collaboration; incidence and magnitude of innovation, activities designed to

protect intellectual property and market structure.

The Risk Taking

Measuring the extent to which individuals differ in their willingness to take risks. And

the distinguishing factor is the way it is calculated risk (Norton and Moore, 2002).

Matters relating to entrepreneurship is the desire and courage in taking risks. The

individual who is ready to accept uncertainty and risk is often regarded as a person who

is able to work alone, in this study is a businessman. The attitude of risk-taking is an

important component of entrepreneurial orientation. Cultural environment that can spur

the bold attitude in the face of the risk of giving birth to more and more new

entrepreneurs are ongoing. This study focused on behaviors that may indicate a

willingness to take risks, which is looking for venture capital, and two indicators of

willingness to invest is certain, namely, the level of expenditure on R & D and

investments in off-job training.

The Business Performance

Whether or not the views of the performance of SMEs. Each SMEs want the best

performance that can be generated from its activities. This study also raised the

performance of SMEs as the ultimate goal to be achieved by the personal characteristics

of entrepreneurs consisting of need for achievement, internal locus of control, and need

for cognition, the strategic choice entrepreneurial oriented organization (entrepreneurial

orientation).

Business performance can be interpreted as the result or the performance obtained by an

organization. Performance of the company is the result of hard work of managers,


Book One 153

companies usually have a target explicitly given to the manager to then be evaluated

results of achievements as a form of performance (Merchant et al., 2000 in Moer, 2001).

Target referenced will impact on managerial company. The more difficult targets set for

the organization, the greater the effort required to achieve it. Conceptually there is no

exact definition of the performance, but there are some models that can be used for a

discussion of organizational performance. More emphasis on performance measurement

standards set by the organization. Measurement of performance has been generally

accepted is to use the movement parameters of the financial statements or the company's

stock price. Business performance is the result of the operation of the organization as a

whole, however, the right to assess the performance of the company is highly dependent

on the condition of the company concerned and the purpose of analysis.

Business performance is essentially the achievements of a business organization that

can be seen from the results of its performance, the results of this performance is not

quite right when viewed from one dimension only. According to Day and Wensley

(1988) and Jaworski and Kohli (1993), "the researchers agreed that business

performance measurement is not just simply use a single measure". According to

Walker and Ruekert (1987) cited Sutianti (2006) the performance of the company has

three dimensions

The Effectivity

Effectiveness associated with the comparison condition and the level of success of the

company. The effectiveness of the company can be judged from the rate of sales

growth, market share, customer retention, satisfaction and the level of customer

complaints.

The Efficiency

Efficiency associated with the company's ability to manage input and output ratio, labor

costs, the level of product failure, and the level of use of the engine company. This

assessment can be measured by using the rate of return on investment and profit before

tax.

The Adaptability

The Adaptability related to the company's ability to respond to changes that occur in the

environment. The Adaptability assessment can be done by looking at the ratio of the

volume of sales and sales of new products. Size of business performance that is often

used is profitability. Profitability shows the ability of the company makes a profit in

relation to sales, total assets, and the capital itself. Thus, profitability is the net result of

a series of policies and decisions. The higher the profitability, the better the

performance of the company.

In a study by Jaworski and Kohli (1993) in Chang (1998), measurement of business

performance is measured by the overall performance of the organization in the past year

and overall organizational performance

compared to its main competitors. While the research Narver and Slater (2000),

business performance is measured by profitability compared to the set target.

H1 : The Personal Characteristics Effect on Business Performance

The success of small businesses rely heavily on human capital, which is owned by the

entrepreneur (Jones et al., 2007). Penrose (1959) argues that "personal characteristics


Book One 154

are a key resource companies". Own personal characteristics have a large direct impact

on the performance of the company (Switzerland and Huang, 2007; Adam et al., 2005).

Zhang and Bruning (2011) also stated that "the personal characteristics of an

entrepreneur plays a very important role in the performance of the company, which

considers human resources, including business skills, experience, and personal

characteristics, organizational resources as an important strategy, and have a positive

impact on performance of the company ".

Many studies investigating the characteristics of entrepreneurship by using the theory of

Hambrick and Mason (1984) who considers that the company is the result of reflection

of the entrepreneur. In addition, Smith et al. (1996) have also revealed that "the

company's performance is largely influenced by the personal characteristics of

entrepreneurs".

H2 : The Entrepreneurial Orientation Effects on Business Performance

Entrepreneurial orientation with regard to the processes, practices, and decision-making

activities that lead to new ventures (Lumpkin and Dess, 1996). Meanwhile, according to

Covin and Slevin (1991), "entrepreneurial orientation also affect the performance of an

existing company". Empirical evidence shows that firms with high entrepreneurial

orientation is far more likely to achieve overall organizational performance (Smart and

Conant, 1994).

Zhang and Bruning (2011) states that "a businessman who adopt a strategic orientation

in the form of entrepreneurial orientation (entrepreneurial orientation) tend to be

positively correlated to the performance of the company". Several other empirical

studies found support for the impact or a positive impact of entrepreneurial orientation

on business performance (Wiklund, 1999; Zahra and Covin, 1995 in Wiklund and

Stepherd, 2005). Similarly, the study conducted by Covin and Slevin (1991). In

addition, the effect of entrepreneurial orientation on business performance is also

supported by the results of research conducted by Tan (1996) which states that

"proactive strategies, innovative, and risk taking in Zahra (1995), Zahra and Colvin

(1998), and Dess, Lumpkin, and Covin (1997) is part of the entrepreneurial orientation

dimensions, is positively related to the performance of the company ".

H3 : The Personal Characteristics Effect on Business Performance through

Entrepreneurial Orientation

Results of research conducted by Zhang and Bruning showed that "personal

charateristics positive effect on business performance through entrepreneurial

orientation". When an employer has a need for achievement, internal locus of control,

and need for cognition are likely to adopt an entrepreneurial orientation to give their

customers the best products and services through creativity and innovation, where it will

impact positively on the performance of the company. Lumpkin and Dess (1996) also

has declared that "there is a positive relationship between need for achievement and

entrepreneurial orientation". As explained in the theory of entrepreneurial orientation

that need for achievement is part of the personal characteristics indicator.


Book One 155

THE METHOD

From the formulation of the problem that has been set in the previous chapter, this study

used a quantitative approach to test the hypotheses and produce results that can be

generalized. This research approach begins by creating a model of analysis and the next

step is to make a hypothesis, identifying variables, making operational definitions, as

well as analysis. The process of calculation and processing of quantitative data obtained

from the questionnaire by using the statistical method will help analyze and ultimately

answer the hypothesis.

According Sugiyono (2011), "the study variables is basically everything that shaped

what is defined by the researchers to be studied in order to obtain information about it,

and then drawn conclusions". Based on the description of these problems and

hypotheses that have been proposed, then the variables that were analyzed can be

grouped as follows:

In general, the sampling technique using probability sampling methods, these methods

give the same chance or opportunity for any element or selected members of the

population to be sampled (Sugiyono, 2011). There are several types of probability

sampling, but in this study uses the sampling technique to determine if the object under

study samples or very large data sources. The sample in this study is in the municipality

of Kediri SME entrepreneurs spread across three districts, namely, disctrict Mojoroto,

disctrict Kota , and dictrict Pesantren.


Book One 156

Arikunto (1998) argued that "... if the subject is too large number can be taken between

10% -15% or 20% -25% or more ...". While in this study, sampling of 60% of total

SME population in each district. Taken 60% because they are better able to represent

the amount of the existing population.

Tabel 2 : The research samples

Hypothesis testing is done by using Partial Least Square to tabulate the data from the

questionnaire that was filled out by the respondents (the owners of SMEs)

THE RESULTS & THE IMPLICATIONS

Questionnaires were distributed addressed to the owners of micro, small, and medium

are found directly at where the company is located. The questionnaire contains 28

questions to assess personal characteristics variables, entrepreneurial orientation, and

business performance of the company where he works, appropriate response tendencies

captured by each respondent.

Of the data collection process for a month gained as much as 54 Micro, Small and

Medium Enterprises (SMEs) are scattered in the municipality of Kediri. The entire

questionnaire is filled full with regard to the conditions that existed at its corresponding

predetermined inclination. To obtain additional information about the characteristics of

respondents in each questionnaire distributed has included a questionnaire.

Questionnaire to be filled are age, gender, education last, the business name, address,

number of employees, the old business, and the average income per year.

The Result of H1 : The Personal Characteristics Effect on Business Performance

From the test results obtained that there is a direct influence of personal characteristics

on the performance of the business in the Micro, Small and Medium Enterprises

(SMEs) who becomes the object of study of the test results. And the results showed that

there is significant influence of personal characteristics on business performance as

indicated by the t-test was 2.986> 1.96.

This is consistent with the previously proposed hypothesis that the personal

characteristics significantly influence the business performance of SMEs. Moreover, by

looking at the estimated coefficients of the personal characteristics of the performance

of the business shows a positive sign. This means increasing the personal

characteristics, the greater the business performance. Vice versa, the lower the personal

characteristics, the businessman who owned the lower the business performance of the

business being operated.

The influence of personal characteristics on the performance of the business in

accordance with the study conducted by Zhang and Bruning (2011) which states that

"the personal characteristics of an entrepreneur plays a very important role in the

performance of the company". Human resources, including business skills, experience,

and personal characteristics, organizational resources as an important strategy, and have

a positive impact on company performance.


Book One 157

Empirical evidence supports the recent view that the personal characteristics of

entrepreneurs have a high direct effect on firm performance (Switzerland and Huang,

2007; Adams et al, 2005), and the indirect effect on firm performance is mediated by

the speed of decision making, types of decisions , and strategy formulation (Karami et

al., 2006).

From the research it can be seen that the overall average of the personal characteristics

of the respondents claimed to have run its business. Respondents apparently by the good

condition of the company's achievements, with an average high of 4.19 for the category

of personal characteristics and high category average of 4.16 for the performance of the

business. It is clear that employers who have personal characteristics that can carry

executable business achieve optimal performance. Of individual characteristics such as

need for achievement the achievement motivation of the respondents showed an average

high score. By having the achievement motivation, as the respondent SME

entrepreneurs are driven to perform or carry out an activity or task as well as possible in

order to achieve a commendable achievement by the predicate. This is in accordance

with the opinion Jhonson (1984).

In addition, most respondents tend to have an internal locus of control as shown in the

description of the response variable personal characteristics in Table 4.6, where

entrepreneurs who have an internallocus of control will tend to show as much as

possible existing capabilities in him. This can affect their own performance

improvement that will also affect the overall business performance improvement.

And personal characteristics of the latter is the need for cognition, entrepreneurs with

higher levels of NFC are likely to be involved and enjoy a thought. It is capable of

supporting entrepreneurs in making adaptive decisions about their business, which will

also affect the performance improvement company.

The Result of H2 : The Entrepreneurial Orientation Effects on Business Performance

After testing, the entrepreneurial orientation variables proved to have a significantly

positive effect on business performance as indicated by t count of 4.375> 1.96. These

results are consistent with the hypothesis proposed earlier, namely entrepreneurial

orientation positively impact the business performance of SMEs. The influence of

entrepreneurial orientation on business performance in accordance with the study

conducted by Zhang and Bruning (2011). Zhang and Bruning stated that "an employer

who adopts a strategic orientation in the form of entrepreneurial orientation


Book One 158

(entrepreneurial orientation) tend to be positively correlated to the performance of the

company".

Several other empirical studies found support for the impact or a positive impact of

entrepreneurial orientation on business performance (Wiklund, 1999; Zahra and Covin,

1995 in Wiklund and Stepherd, 2005). Similarly, the study conducted by Covin and

Slevin (1991) which states that "entrepreneurial orientation affects the performance of

an existing company". Empirical evidence shows that firms with high entrepreneurial

orientation is far more likely to achieve better performance of the organization as a

whole (Smart and Conant, 1994). The positive influence of entrepreneurial orientation

on performance is very broad, and the strength of this effect increases over time. These

results are also consistent with the study by Tan (1996) which states that a proactive

strategy, innovative, and risk taking in Zahra (1995), Zahra and Colvin (1998), and

Dess, Lumpkin, and Covin (1997) is the dimension of entrepreneurial orientation is

positively related to firm performance.

Value entrepreneurial orientation or high entrepreneurial orientation will lead to an

increase in the entrepreneurial spirit and the ability to compete globally (Nasution et al.,

2007). One of the fundamental dimensions that characterize the entrepreneurial

orientation (entrepreneurial orientation) is an innovative attitude. Where the innovative

attitude leads to the entrepreneurial spirit in the form of creativity and innovation.

Creativity and innovation is a critical success factor in the business world. Furthermore,

proactive attitude that leads to the entrepreneurial spirit of planning. Lack of planning

and a proactive attitude will ensure success and excellence in many aspects. And the

latter is a fundamental dimension of risk taking. Courageous in the face of calculated

risks is careful and intelligent attitude to compete and allow the company to achieve

better performance.

The Result of H3 : The Personal Characteristics Effect on Business Performance

Through

Entrepreneurial Orientation After testing, the personal characteristics variables shown to have a significantly

positive effect on entrepreneurial orientation as indicated by the t-test was 4.686. And

further the entrepreneurial orientation has significant influence on the performance of

the business with t-test was 4.375. The results in this study are consistent with studies

previously conducted by Zhang and Bruning (2011) which shows that personal

characteristics positive effect on business performance through entrepreneurial

orientation. When an employer has a need for achievement, internal locus of control,

and need for cognition are likely to adopt an entrepreneurial orientation to give

customers the best products and services through creativity and innovation, where it will

impact positively on the performance of the company. Lumpkin and Dess (1996) also

has declared that there is a positive relationship between need for achievement and

entrepreneurial orientation. As described in the previous chapter that the need for

achievement is part of the personal characteristics indicator. Entrepreneurs with the

level of achievement motivation (need for achievement) high are more likely to adopt or

implement entrepreneurial orientation, which in turn contribute to the performance of

the company. Lumpkin and Dess (1996) argue that entrepreneurs who have a direct


Book One 159

impact on the achievement motivation of corporate strategy and not directly on the

performance of the company.

Meanwhile, a businessman with an internal locus of control is high may not be willing

to cede control of the company. The businessmen prefer to control their own and

formulate competitive organizational culture that is internally driven by the ideas

themselves are innovative and creative. Entrepreneurs with internal locus of control tend

to be more innovative (Miller and Toulouse, 1986) and effective (Govindarajan, 1989).

Previous studies also showed positive effects of internal locus of control on firm

performance is mediated by risk taking (Boone et al., 1996).

An entrepreneur with a high need for cognition will tend to have an affinity towards

complex problems, where the interest is to prove that the employer bold in the face of

risk (risk-taking) of the problems faced. According to Zhang and Bruning (2011), a

businessman with a high need for cognition will place greater emphasis on logical

arguments and make strategic decisions based on extensive market research. With the

market research, entrepreneurs demonstrate a proactive attitude, which identify and take

advantage of market opportunities before competitors preceded.

To find out how much a personal relationship characteristics on business performance

through entrepreneurial orientation can be seen from the multiplication of the "original

sample estimate characteristics of the personal relationship of entrepreneurial

orientation" with "original sample estimate the relationship of entrepreneurial

orientation on business performance", where each figure shows 0.751 and

0.583. And the result is equal to 0.438 where the figure is greater than the "original

sample estimate personal relationship characteristics on business performance" which

shows the number 0,287. This means that the indirect effect of personal characteristics

on business performance through entrepreneurial orientation greater than the direct

influence of personal characteristics on business performance. An entrepreneur will

achieve a better performance of the company if other than the personal characteristics

apply in running the business also adopt a strategic orientation in the form of

entrepreneurial orientation consisting of innovativeness, pro-activeness, and risk taking.

REFERENCES Cacioppo, J.T. et al. 1984. The Efficient Assessment of Need for Cognition. Journal of

Personality

Assesment. Vol. 48, pp. 306-7. ------------. 1996. Disopositional Differences in Cognitive

Motivation: The Life an Times of Individuals

Varying in Need for Cognition. Psychological Bulletin. Vol. 119 No. 5, pp. 1032-43.

Covin, J.G. and D.P. Slevin. 1989. Strategic Management of Small Firms in Hostile and Benign

Environments. Strategic Management Journal. Vol. 10, No. 1, pp. 75-87. ------------. 1991. A

Conceptual Model of Entreprenurship as Firm Behavior. Entrepreneurship Theory and

Practice. Vol. 16 No.1, pp. 7-28.


Book One 160

Crider, A.B. 1983. Psychology. Glenview: Scott Forresmen And Co. Danim, Sudarwan. 1997.

Metode Penelitian untuk Ilmu-ilmu Perilaku: Acuan Dasar bagi Mahasiswa Program

Sarjana dan Peneliti Pemula. Edisi Pertama. Jakarta: Bumi Aksara.

Dess, G. and R. Robinson. 1984. Measuring Organizational Performance in the Absence of

Objective Measures: The Caseof Privately-Held Firm and Conglomerate Business Unit.

Strategic Management Journal. Vol. 36 No. 6, pp. 1196-1250.

Gallen, T. 2006. Managers and Strategic Decisions: Does the Cognitive Style Matter”, The

Journal of

Management Development. Vol. 25 No. 2, pp. 118-33.

Ghozali, Imam. 2008. Structural Equation Modelling Metode Alternatif dengan Partial Least

Square (PLS).

Edisi Kedua. Semarang: Badan Penerbit – Undip.

Govindarajan, V. 1989. Implementing Competitive Strategies at the Business Unit Level.

Strategic Management Journal. Vol. 10 No. 3, pp. 251-69.

Hami, Suryaman. 2009. Entrepreneurial Leadership, Orientasi Pasar, dan Kinerja Bisnis pada

Usaha Menengah di Jawa Timur.

Karami, A. et al. 2006. The CEOs’ Characteristics and Their Strategy Development in the UK

SME Sector:

An Empirical Study. The Journal of Management Development. Vol. 25 No. 3, pp. 316-24.

Katalog BPS : 1102001.3571 tahun 2010

Kauer, D. et al. 2007. Effects of Top Management Team Characteristics on Strategic Decision

Making. Management Decision. Vol. 45 No. 6, pp. 942.

Kohli and Jaworski. 1993. Markor: A Measure of Marketing Orientation. Journal of Marketing

Research. Vol. 30, p: 467-477.

Kuncoro, Mudrajad. 2003. Metode Riset untuk Bisnis dan Ekonomi. Yogyakarta: Erlangga.

Lumpkin, G.T. and G.G. Dess. 1996. Clarifying The Entrepreneurial Orientation Construct and

Linking it to Performance. Academy of Management Review. Vol. 21 No. 1, 135-172.

Nasution, A.H. dkk. 2007. Entrepreneurship Membangun Spirit Teknopreneurship. Yogyakarta:

CV Andi Offset.

Prameshinta, H.T. 2009. Entrepreneurial Leadership, Relationship Marketing Orientation, dan

Kinerja

Bisnis pada Usaha Menengah di Jawa Timur. Sekaran, Uma. 2006. Reseach Method For

Business:

Sugiyono. 2011. Metode Penelitian Kuantitatif, Kualitatif, dan R & D. Bandung: CV. Alfabeta.


Book One 161

Sutianti, Mindralina. 2006. Pengaruh Orientasi Pasar, Orientasi Pembelajaran, dan Inovasi

Terhadap Kinerja Bisnis Perusahaan Mebel Kayu di Indonesia.

Walker and Ruekert. 1987. Marketing’s Role in the Implementation of Business Strategies: a

Critical Review and Conceptual Frame Work. Journal of Marketing. Vol. 51, p: 15-33.

Whittaker, H. and T. Quince. 2003. Entrepreneurial Orientation and Entrepreneur’s Intentions

and Objectives. ESRC Centre for Business Research, University of Cambridge.Working

Paper No. 271.

Wiklund, J. 1999. The Sustainability of the Entrepreneurial Orientation- Performance

Relationship. Entrepreneurship Theory and Practice. Vol. 24 No. 1, pp. 37-48.

Wu, Sibin et al. 2007. Need for Achievement, Business Goal, and Entrepreneurial Persistence.

Management Research News. Vol. 30 No. 12, pp. 928-941.

Zhang, D.D. and E. Bruning. 2011. Personal Characteristics and Strategic Orientation:

Entrepreneurs in Canadian Manufacturing Companies. International Journal of

Entrepreneurial Behaviour & Research. Vol. 17 No. 1, pp. 82-103.


Book One 162

IbK PROGRAM FOR CREATING STUDENT ENTREPRENEURS

AT THE WIDYAGAMA UNIVERSITY

Wiwin Purnomowati1, Ismini2

Widya Gama University

INDONESIA


ABSTRACT

Changing students’ mindset from job seekers to be job creators when they are

already at university is not easy. Many entrepreneurial programs at University

have not been able to create new entrepreneurs significantly. One of program

creating new entrepreneurs at Widyagama University is Ipteks bagi

Kewirausahaan (IbK program).

Science and technology program for entrepreneurship (IbK) is a Dikti (Higher

Education Directorate) program that aims to create student entrepreneurs.

Higher Education formulate a program with a mission to produce new

entrepreneurs from campus, through an integrated program with the creation of

a method that left entirely to the organizers of IBK. Each university has the right

to manage the IBK program involving a number of professors who are

experienced entrepreneurs from various disciplines. IBK implement business

management training for tenants and a number of other creative activities to

generate new independent entrepreneur based science and technology.

IbK program at the Widyagama University implemented in the form of

entrepreneurship training, internships in SMEs, business plan competition and

facilitate student entrepreneurship. Training conducted to provide knowledge

entrepreneurship, encouraging the growth of entrepreneurial motivation,

improve understanding of management (organization, production, finance and

marketing) and create a business plan. The facilitation of entrepreneurship

students in the form of capital, mentoring and exhibition.

Keywords: Entrepreneurship, Internship, Business Plan

INTRODUCTION

The Need of Entrepreneurial Programs

Based on data from the Central Bureau of Statistics, up to February 2012 an

Unemployment Rate (TPT) reached 6.32 percent to the total number of unemployed

reached 7.6 million men. To TPT Diploma and Degree levels, respectively 7.5 percent

and 6.95 percent of the unemployment rate. In this situation, unemployment problem

will impact negatively to social stability. This condition is supported by fact that the

most of university graduated are job seekers. It is happened because learning system in

universities is focused on how to prepare the students graduate fast and get job, not to

prepare them as job creator. So, it’s very important for universities to motivate their

students be young entrepreneurs. One effort to overcome and prevent unemployment


Book One 163

among the educated, is a need to prepare for entrepreneurial generation seriously since

early age. It will create the young generation as job creators.

According to Ciputra (2008), there are three ideas to create entrepreneur. First, in the

primary and secondary level there should be curriculums that teach about

entrepreneurship. Second, entrepreneurs should be created and developed in the

graduate level by implementing entrepreneurship education and entrepreneurship

project such as IbK (Ipteks bagi Kewirausahaan) and PMW (Program Mahasiswa

Wirausaha), where students acquire training (provisioning), apprenticeship, business

planning, starting up business and business assistance.

From the formation side of the character of entrepreneurs, universities should create an

atmosphere that can encourage independent attitude to the academic community. This

can be achieved by: 1) developing and getting used to working in creative ideas and

independent attitude to the students in the learning process (models emphasize exercise,

independent tasks, problem solving, decision-making, taking opportunity, etc.), 2)

inculcate honest attitudes and behaviors in communication and act in all development

activities, education and learning as a foundation in building entrepreneurial mental on

student s, 3) Education Practitioners also need to share and give support on

entrepreneurship mental education to the institutions related to the emerging field of

business services in the community that really works and prepare policies to facilitate

and serve the community. Educational practitioners are also important to liaise closely

with the business in order to create a process of learning by doing.

Third, there should be national entrepreneurship training movements done by the

government and people in order to teach a wider group of people. Nowadays, many

government institutions have entrepreneurship program to create new entrepreneurs or

empower SMEs. Program of DIKTI (Minister of National Education) is aimed to

creating new entrepreneurs among the students. Program of other government

institutions such as Minister of Cooperative and SMEs is aimed to empower

Cooperative and SMEs. Program of Minister of Youth and Sport is creating young

entrepreneurs. Besides the government institutions, private companies also have

program for empowering SMEs through their CSR (Corporate Social Responsibility).

Changing students’ mindset from job seekers to be job creators when they are already at

university is not easy. Many entrepreneurial programs at University have not been able

to create new entrepreneurs significantly. One of program creating new entrepreneurs

at Widyagama University is Ipteks bagi Kewirausahaan (IbK program).

Science and technology program for entrepreneurship (IbK) is a Dikti (Higher

Education Directorate) program that aims to create student entrepreneurs. Higher

Education formulate a program with a mission to produce new entrepreneurs from

campus, through an integrated program with the creation of a method that left entirely to

the organizers of IBK. Each university has the right to manage the IBK program

involving a number of professors who are experienced entrepreneurs from various

disciplines. IBK implement business management training for tenants and a number of

other creative activities to generate new independent entrepreneur based science and

technology.

IbK program at the Widyagama University implemented in the form of entrepreneurship

training, internships in SMEs, business plan competition and facilitate student

entrepreneurship. Training conducted to provide knowledge entrepreneurship,


Book One 164

encouraging the growth of entrepreneurial motivation, improve understanding of

management (organization, production, finance and marketing) and create a business

plan. The facilitation of entrepreneurship students in the form of capital, business

mentoring and product exhibition.

Entrepreneurship Condition at the Widyagama University

Widyagama University has established the identity of toward scientific research and

entrepreneurship university. There are three key words that need to be outlined. First

word is toward. Towards shows the meaning of determination, dynamic and honest at

the same time. University at this time is still not aware of the competence and quality as

expected. Therefore, the Widyagama University determined to achieve that goal through

relevant policies and programs that can be operated. Second word is Research. Research

shows (determination): (i) the learning process at faculties of Widyagama University

that never ceases to identify problems and seek the truth for the benefit of mankind, (ii)

the achievement of the performance measure of research quality or competency

universities in the international academic community, and (iii) the basis for an objective

framework for the systematic formation and maturation (and competence) and the

academic community of the University. Third word is entrepreneurship.

Entrepreneurship University demonstrated ability in terms of: (i) high commitment

academic of faculty to interact with the real world, face variety of problems and

challenges, (ii) a broad-spectrum competence that puts the university can take part in

various activities and field, and (iii) anticipated environmental strategic lead to

globalization and advances in information technology. Three words indicate that

Widyagama University is dedicated to improving and developing the quality of

academic resources for the benefit of science and society.

Implementation research and entrepreneurship can not be mutually exclusive. Both

work in synergy with each other (vertically and horizontally) enriching academic

competence, as well as produce the variety and quality of the research or scientific work

quality. Therefore, the implementation of scientific identity towards research and

entrepreneurial university should be formulated and projected in programs oriented to

the front.

As the implementation of research and entrepreneurial university, Centre for

Entrepreneurship Development (P2K) was established on June 24, 2005 based on the

Decree of the Rector of University Widyagama No. 11/ PTS.030.H1/Kep/VI/2005.

Entrepreneurship Development Centre (P2K) is an agency under the rector that

functions in the management of entrepreneurship programs at the Widyagama

University. P2K draft planning and development, as well as coordinate activities that

build on the basic concepts of science, technology and art from resources in the

University. Sources of competence, ie laboratories, faculty, and supporting resources are

managed to provide value-added knowledge and skills.

Cultivation and Development of Entrepreneurship in addition accommodated in the

curriculum as Course (2 credits) are also given in the form of Competence

Entrepreneurship Program which is mandatory for students who are managed by the

Centre for Entrepreneurship Development (Pusat Pengembangan Kewirausahaan/P2K).

However P2K management system is not optimal due to the potential development of

entrepreneurship has not synergize and available resources; pattern is not sustainable


Book One 165

entrepreneurial development (short term) and the lack of a new entrepreneurial

incubation units. P2K performance since 2005 to 2010 to produce entrepreneurs still not

up yet indicated the significance of the number of participants and the lack of a business

plan competition entrepreneur generated number. Availability of information access

facilities (internet) not fully utilized like to explore business opportunities / business,

promotions and marketing. Several laboratories have untapped potential for the

development of entrepreneurship such as agro-processing laboratories, engineering

laboratories and computer labs. In addition, the faculty as educators as well as the most

experienced entrepreneurs and practitioners have not been involved in the development

of entrepreneurship optimally.

Pioneering fostering entrepreneurship began to appear in 2009 with the assistance

obtained from the PMW Kopertis VII which produces 4 people who pioneered micro-

scale entrepreneurs / small. Since that year the business plan competition from

entrepreneurial start the program competencies tested to explore the potential student

entrepreneurs and creative ideas though not maximized because of the general proposal

is still not able to produce a business plan implementation. The development of PKM

(Student Creativity Program) shows progress is being made with the achievements of 13

titles funded 19 titles in 2010 and funded in 2011 that demonstrated the ability to

develop creative ideas and began to rise. Beginning in 2011 there were 5 groups of

students got the opportunity to get funding sourced from P2KPN Assistance Program.

In 2011, Entrepreneurship Development Centre (P2K) also got a grant for strengthening

entrepreneurship center. In 2012 P2K got IBK program for the first year and also got

PMW program in producing and marketing La Soya Plus. In 2013, P2K got IbK

program for the second year and an integrated learning program work (Cooperative

Academic Education Program/COOP) and a PKMK program. In 2014, P2K got IbK

program for the third year and COOP program for the second year.

IbK is a Dikti (Higher Education Directorate) program for creating new entrepreneurs.

Dikti formulate a program with a mission to produce new entrepreneurs from campus,

through an integrated program with the creation of a method that left entirely to the

organizers of IbK. Each university has the right to manage the IbK program involving a

number of professors who are experienced entrepreneurs from various disciplines. IbK

implement business management training for tenants and a number of other creative

activities to generate new independent entrepreneur based science and technology.

PURPOSE OF THE PROGRAM

* The purpose of the program IBK are :

a. Creating new independent entrepreneurs based on science and technology;

b. Improving business management skills for an industrial society; and

c. Creating a suitable entrepreneurial training method for students PKMK / other PKM / student who is starting a business / entrepreneurial alumnus.


Book One 166

IMPLEMENTATION METHOD

* Recruitment Patterns

a. Recording the students who get the PKMK or other PKM program.

b. Students/alumnus who starting a business can enroll for the IbK program.

c. Selection of participants is done with the interview and test the entrepreneurial

(fill in the questionnaire) to determine the extent of the interest and motivation

of student.

d. Selection of participants to obtain as many as 20 participants per year.

* Method of approach

a. Education and entrepreneurial Training, including:

- Knowledge of entrepreneurship to strengthen entrepreneurial motivation.

- Creating a business plan.

- Management (organization, production, finance, marketing)

The materials will be provided by the speakers either by experienced lecturers in

Science and technology and entrepreneurship as well as practitioners who have

had business experience. Model of education and training in addition to

theoretical also provide practice cases so that the participants are expected to

understand the theory and practice.

b. Internship at SME partners

This internship will provide practical experience for students. The materials

studied are work culture, production technology, financial management and

marketing, as well as product development and market strategy. After internship,

students are required to make a report.

c. Mentoring and coaching

At this stage of development is done in a variety of aspects related to business

issues, ranging from strengthening the mental attitudes of entrepreneurs,

mastery of production technology, financial management and marketing as well

as access to additional capital in the search.

d. Evaluation:

the material that is used to evaluate the success of coaching includes a

commitment to follow the students in activities that can be represented on

attendance, ability to match the quality of the expected production and

marketing capabilities of products, development of business turnover.

e. Financing:

For training, apprenticeship and production as well as the introduction of a

product into the market covered executive team. When the good market response

and capable of independent tenants will be given a loan (working capital).

f. The problem solving

The problem solving through consultation and mentoring by field instructors and

speakers. In the event of problems will be evaluated and resolved problems.

During the training period, participants allowed to utilize the facilities provided

by the IbK team according to the agreement that has been done.


Book One 167

Business plan presentation

Mentoring

Entrepreneurship training

RESULT

In 2014, the tenant IbK of Widyagama University include various types of business,

such as in the fields of design and advertising, food, handicraft, organic vegetable

farming, catfish farming, fattening sheep and goats, canaries cultivating, switching

power supply and custom shoes. In implementing the program, the IbK team faces the

challenge to change the mindset of students from job seekers into job creators. It need

much time to instill and strengthen the entrepreneurial spirit. From 20 tenants of IbK,

only 8 tenants whose business running smoothly. The students who do not have a strong

entrepreneurial spirit, it would be easy to give up when the business does not run

smoothly. Therefore coaching and mentoring are needed to support new entrepreneurs

in solving their problem and keep motivating them.


Book One 168

SUMMARY

1. One effort to overcome and prevent unemployment among the educated,

especially the students, is a need to prepare for entrepreneurial generation

seriously since elementary school. It will create the young generation as job

creators, not job seekers.

2. There are three ideas to create entrepreneur (Ciputra, 2008). First, in the primary

and secondary level there should be curriculums that teach about entrepreneurship.

Second, entrepreneurs should be created and developed in the graduate level by

implementing entrepreneurship education and entrepreneurship project such as

IbK (Ipteks bagi Kewirausahaan). Third, there should be national

entrepreneurship training movements done by the government and people in order

to teach a wider group.

3. IbK program at the Widyagama University implemented in the form of

entrepreneurship training, internships in SMEs, business plan competition and

revolving working capital . Training conducted to provide knowledge

entrepreneurship, encouraging the growth of entrepreneurial motivation, improve

understanding of management (organization, production, finance and marketing)

and create a business plan.

4. In 2014, the tenant IbK of Widyagama University include various types of

business, such as in the fields of design and advertising, food, handicraft, organic

vegetable farming, catfish farming, fattening sheep and goats, canaries cultivating,

switching power supply.

REFERENCES

Charney, A., Libecap,G.D., 2000, The Impact of Entrepreneurship Education: An Evaluation of

the Berger Entrepreneurship Program at the University of Arizona, 1985-1999, FINAL

REPORT, May 23, 2000

Ciputra. 2008. Ciputra Quantum Leap. PT. Elex Media computindo.

www.forum.org/en/initiatives/gei/Entrepreneurship Education

http://www.forum.org/en/initiatives/gei/Entrepreneurship


Book One 169

DESIGN STRATEGY FOR PROPERTY DEVELOPER

ADDRESSING THE POLICY OF BANK INDONESIA

NO.15/40/DKMP ON 24 SEPTEMBER 2013

(CASE STUDY: CITRALAND SURABAYA)

Kevyn Hadianto Setijo1, Denny Bernardus2, Christina Widya Utami3

Universitas Ciputra

INDONESIA

E-mail: [email protected], [email protected], [email protected]

ABSTRACT

The background of this research is the issuance of “Surat Edaran Bank

Indonesia (SEBI) No.15/40/DKMP” dated to September 24, 2013, which

explains the regulation of Loan To Value (LTV) in the property industry. This

leads to a decrease in property sales nationwide in Indonesia, and in particular

for property developer company CitraLand Surabaya, which will be used as a

study case for this research.The aim of this study is to: 1) find and analyze

internal factors that affect the property developer after the issuance of ”SEBI

No.15/40/DKMP 24 September 2013”; 2) find and analyze the external factors

that affect the property developer after the issuance of ”SEBI No.15/40/DKMP

24 September 2013”; 3) recommend strategical design suited for property

developer based on internal and external factors identification after the

issuance of ”SEBI No.15/40/DKMP 24 September 2013”.This research utilizes

quantitative descriptive approach by using IFE (Internal Factor Evaluation)

matrix, EFE (External Factor Evaluation) matrix, IE (Internal Eksternal)

matrix, SWOT (Strengths Weakness Opportunities Threats) matrix, QSPM

(Quantitative Strategic Planning Matrix) and in depth interview result that aim

to figure out the internal condition of the company when research is conducted,

the response of the company towards the external condition that is happening,

recommend alternative strategical design that is based on the strengths,

weakness, opportunities, and threats that happen, and recommend strategical

design that should be prioritized by the company to be done. The population in

this research includes company management, bank management, and

consumers. The sample in this research are 2 respondents from company

management, 2 respondents from bank management, and 2 respondents from

consumers. Technique used in picking up samples is Non Probability Sampling

with Purposive Sampling. Based on the analytical result done, it is known that

the strategic internal position of the company is located in the present condition

and respond quite well with external condition (opportunities and threats) that

is happening in the property industry. Recommended strategies are comprised

from financial and non-financial sectors, equipped with execution details.

Based on the company and bank management’s view, it is wise to prioritize

strategy from financial sector, whereas based on consumers’ view, strategy

from both financial and non- financial sectors have to be carried out in balance

to increase sales in property industry.




Book One 170

Keywords: Internal, External, Strategy, Property

INTRODUCTION

Indonesia is a developing country with rapid economic growth. This can be seen by the

movement of the real sector and property business in Indonesia increased considerably.

Based on the data from BPS 14/02/ Th.XVI, February 5th, 2013, Construction Sector

growth rate of 7.5% from 2010 to 2012; while the Financial sector, Real Estate, and

Business Services at 7.15%. Each sector was ranked 5 and 8 as a contributor to the

increase in the rate of the Indonesian economy. Indonesia's economy in 2012 grew by

6.23% compared to the year 2011. One factor supporting the development of these

sectors is the number of developers which continue to provide decent housing needs and

continue to make improvement and innovation. One of the many developers that

contributes to Indonesia is Ciputra Group, through its subsidiary PT. Ciputra Surya Tbk.

which develops housing CitraLand Surabaya with the tagline "The Singapore of

Surabaya - Living a Clean, Green, and Modern City" and a complete range of facilities

like an independent city.

Sales of property in CitraLand Surabaya continued to increase and reached its peak in

2012 and 2013, but started the 2nd half of 2013, the slowdown in home sales occurred in

CitraLand Surabaya that only sold home-type > 70 m2. Sales data can be seen in the

following figure.

Figure 1. Percentage of Actual Sales against Targets in 2013

Source: Internal Ciputra

Figure 1. Percentage of Actual Sales against Targets in 2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan Feb Mar Apr May Jun Jul August Sept Oct Nov Dec

Percentage of Actual Sales against Targets in 2014

0%

20%

40%

60%

80%

100%

120%

Jan Feb Mar Apr May Jun Jul August Sept Oct Nov Dec

Percentage of Actual Sales against Targets in 2013


Book One 171

Source: Internal Ciputra

It is influenced by various factors, such as the BI rate continued to increase and in

September 2013, Bank Indonesia issued a policy Loan To Value (LTV) with the

issuance of Circular Letter of Bank Indonesia (SEBI) 15/40/DKMP as can be seen in

the following table.

Table 1. Regulation of Credit / Financing Property

Source: www.bi.go.id

Terms LTV in Table 1 is very influential for the developer and the prospective

consumer. Down Payment (DP) to be paid by the prospective consumers to purchase the

property becomes progressively bigger and in accordance with the conditions of the

prospective customers. While the impact of the LTV rules for the disbursement of funds

for the developer is the mortgage (mortgage) which previously could immediately

accepted despite housing units have not been built, it cannot be done. For the first home,

the bank will disburse the mortgage to the developer in accordance with certain termyn

of the appropriate development progress, while for the second, third, and so on, the

bank will disburse the mortgage at the time of housing units which have been completed.

This will make it difficult for most of the cash flow property developer to be able to

continue to produce housing units, because developers have to provide more funds for

working capital.

Looking at the background of the existing problems, PT. Ciputra Surya Tbk. developer

has to find the right strategy to be able to continue to increase sales. Thus, this study

will attempt to find and analyze internal and external factors affecting the property

developer after the issuance of “Surat Edaran Bank Indonesia (SEBI) 15/40/DKMP”,

and recommend appropriate design strategies for property developers based on the

identification of internal and the external factors.


Internal and External Environmental Factors According Buchory and Saladin (2010), put forward several reasons for the importance

of environmental factors analysis in an effort is made, the environment is changing very

fast or dynamic so that corporate leaders need to analyze and diagnose changes in the

environment, leaders need to investigate to determine whether the particular

environment factors in the current environment and are now threatening the

achievement of the strategic objectives of the company, and the company that

systematically conduct environmental analysis and diagnosis is generally more effective

than those that do not do it.

http://www.bi.go.id/web/id/Peraturan/Perbankan/se_154013.htm


Book One 172

The internal environment is the factors that are directly related to the environment,

which affect the company. So the internal environment is a reflection of the strength or

weakness of a company's organization and may reflect the ability of management to

manage the company.

According to Glueck in Buchory and Saladin (2010), external environments are factors

that are beyond the reach of the company that may lead to opportunities and threats to

the company. The external environment can be analyzed by using a PEST (political and

legal, economic, social and cultural, technological) analysis.

These things can help to analyze the conditions that occur due to the influence of factors

internal and external environments of a company. Because of the strength of a company

rely heavily on the strength of an analysis. The more accurate analysis, the more precise

decision-making should be done by a company.

SWOT Analysis According Kotler (2009), SWOT analysis is an overall evaluation of the company’s

strengths (S), weaknesses (W), opportunities (O), and threats (S).

Strengths include internal capabilities, my source and positive situational factors that

can help the company to serve its customers and achieve goals. Weaknesses include

internal limitations and negative situational factors that can affect the performance of

the company. Opportunities are good factors or trends in the external environment that

can be utilized by the company. The threats are not good external factors that may be

present and affect the performance of the company.

Consumer Behavior

Definition of consumer behavior according to Kotler (2009) is the study of how

individuals, groups, and organizations select, use, and take advantage of how goods,

services, ideas, or experiences to satisfy their needs and desires. Consumer behavior not

only learn what the consumer purchased or consumed, but also how consumer habits,

and the conditions of how the goods and services purchased.

Model of consumer behavior according to Kotler in Figure 3, explains that consumers in

the purchase decision is influenced by characteristics other than the consumer, can be

influenced by marketing stimuli which includes product, price, distribution, and

communicators, and other stimuli that include political, economic, cultural, and

technology.

Figure 3. Model of Consumer Behavior

Source: Kotler (2009)


Book One 173

Purchase Decision

In addition to studying how internal and external environmental factors that affect the

performance of a company and learn how consumer behavior and the factors that

influence consumer purchase, it is necessary to note also how the strategy should be the

managerial company to reach a decision by the consumer to purchase the product are

marketed. Purchasing decisions have meaning/understanding and process the different

stages.

According to Schiffman and Kanuk (2010), making the decision is the selection of the

action of two or more alternative options. In other words, a decision can be made only if

there are a few selected alternatives. According to Kotler (2009), the purchase decision

process can be described in several stages as shown in Figure 4.

Figure 4. Purchase Decision Process

Source: Kotler (2009)

Definition and Strategy Formulation

According Porter (2008):

- Strategy is the creation of a unique and valuable position, involving a different set of

activities. The essence of strategic positioning is to choose activities that are different

from rivals.

- Strategy is making trade-offs in competing. The essence of strategy is choosing what

not to do.

- Strategy is creating fit among a company’s activities. The success of a strategy

depends on doing many things well – not just a few – and integrating among them.

Based on the explanation of Porter, it can be concluded that the strategy is how to

position the company into something unique and valuable to make a decision on what to

run and what is not executed, and the next is to make the conformity of all activities of

the company.

The process of preparation of the strategy is a critical issue of how to achieve the stated

goals, objectives both financial and strategic objectives. In general, we define a strategy

as a way of achieving the goal. Strategies can be hidden or concealed, are not easily

known outsiders, even insiders though, can also be open, one can easily determine a

company's strategy undertaken. The strategy is proactive (intended and deliberate) but

also the reactive (adaptive).

RESEARCH METHODS This study used a descriptive quantitative approach. In this study, the included

populations are the corporate managerial of developer, managerial banks, and

consumers. The samples in this study were 2 respondents from managerial companies, 2

respondents from managerial banks, and 2 respondents from the consumer. The

sampling technique is Non-Probability Sampling, with purposive sampling.

Data collection methods used were interviews, observation, technical literature, and

filling the matrix IFE (Internal Factor Evaluation), matrix EFE (Eksternal Factor


Book One 174

Evaluation), matrix IE (Internal-Eksternal), matrix SWOT (Strengths Weakness

Opportunities Threats), and QSPM (Quantitative Strategic Planning Matrix).

Processing and data analysis methods used in this study are the approaches to the

concept of strategic management. Analysis of environmental data is through descriptive

analysis presented in the form of tables, charts and descriptions. In the early stages

descriptive analysis through observation in the location of research, interviews with

internal and external parties and company literature. Once the internal and external

factors are identified then performed reconfirmation to the management of the company

to determine the accuracy of the data obtained. The resulting quantitative analysis in this

study is a result of the weight, rating and scores. The data collected will be processed

and analyzed in three stages: the input stage, matching stage, and the decision stage.

Data Analysis

1. The Input Stage

External Environment Analysis, to identify some of the opportunities and

threats in the political and legal factors, economic, social and cultural, and

technological changes that may affect the property business.

Internal Environmental Analysis identifies the strengths and weaknesses of the

company to be able to cope with the changes that occur.

IFE and EFE Matrix, based on the identification of external and internal factors

obtained will be determined the weight of each factor with a paired

comparison method. Then, it was conducted to determine the rating of the

results of the analysis of the company's situation with a predetermined scale.

The result of multiplying the weight by the rating will get the value of IFE

and EFE. EFE matrix values show how companies respond to the

opportunities and threats that exist in the industry. Value IFE matrix describes

the condition of the company internally.

2. Matching Stage

IE Matrix, puts the position on the x-axis value of the IFE and EFE values on

the y-axis, to determine the position of the company is located in quadrant

know how and what strategy should be done.

SWOT Matrix, develops a strategy based on internal and external

environmental situation. Strategy obtained is divided into four types of

strategies: SO (strengths-opportunities; strengths-opportunities), WO

(weaknesses-opportunities; weakness-opportunities), ST (strengths-threats;

strength-threats) and WT (weaknesses-threats; weakness-threats).


Book One 175

Table 2: SWOT MATRIX

Source: David (2009)

3. Decision Stage.

QSPM (quantitative strategic planning matrix) is a tool that allows authors to

evaluate alternative strategies objectively strategy based on key success factors

internal and external that has been identified previously. In concept QSPM

determine the relative attractiveness of various strategies based on how far the

key success factors of internal and external utilized or repaired. Value based

on the attractiveness of alternative strategies with the largest value is the

preferred strategy.

RESULT

Input Stage 1. Analysis of External Environment

2. Analysis of Internal Environment

3. IFE and EFE Matrix

The results of the assessment rating of the internal factors obtained a total IFE score of

2,584. Score of 2.584 indicates that the position of the company's strategy in a state of

being.

The results of the assessment rating of the external factors obtained a total EFE

score of 2,551. Score of 2.551 indicates that the position of the company's strategy to

respond quite well to the opportunities and threats that exist in the property industry,

although still not optimal, indicated by the average value.

Matching Stage 1. IE Matrix

From the data processing IFE and EFE matrix, obtained was 2.584 for the value of

IFE and 2.487 for the value of EFE, will be plotted into the IE matrix in Figure 5.


Book One 176

Figure 5. IE Matrix PT. Ciputra Surya, Tbk.

Source: Data processed

Based on the analysis of the IE matrix in Figure 5 shows that PT. Ciputra Surya Tbk. for

the year 2014 is in quadrant V. At quadrant V, according to the company strategy is a

strategy to maintain and sustain (hold and maintain). Alternative strategies that can be

used for companies that are in quadrant V usually is market penetration strategy and

product development. Market penetration strategy is a strategy of looking for a bigger

market share through product at this time, in the current market through better

marketing. While the strategy of product development is a strategy to strive to increase

sales through improved product at this time or new product development.

2. SWOT Matrix

1. SO (Strengths Opportunities) Strategy

This strategy is based on the company's way of thinking, that is by using

all the strengths and exploit the opportunities that exist.

General strategy:

Expand the marketing area by way of promotion, advertising, and

publicity.(SNP) Improve the quality of existing human resources in order to achieve the

target. (SNP) Perform design and development of high quality products with

complete facilities.(SNP)

2. ST (Strengths Threats) Strategy

This strategy made by using the whole power of the company to address

existing threats.

Strategies addressing SEBI:

Based on the bank financing system implemented that purchase products that

use a home mortgage second, third, etc. must provide the physical condition

Strong Average Weak

3.0 - 4.0 2.0 - 2.99 1.0 - 1.99

3.0 2.0 1.0

4.0

High

3.0

Medium

2.0

Low

1.0

VII VIII IX

The Total Value of the IFE rated

Th

e T

ota

l V

alu

e o

f th

e E

FE

rat

ed

I II III

IV V VI


Book One 177

that is so, then the company must provide the product home property stock in

sufficient quantities to not spend too much working capital.(SNP)

General Strategy: Maintain and improve product quality with minimal production costs and

selling prices remain competitive.(SNP)

Improve the product warranty and after sales service.(SNP) Utilize cooperation and good relations with the consumer to dampen the

competitors.(SNP)

3. WO (Weakness Opportunities) Strategy

This strategy is based on exploiting the opportunities that exist in a way

that overcomes these weaknesses.

General Strategy:

Implement sales system sales booking numbers to products sold in the

moments before launching.(SNP)

Open new business line sales of the secondary products, in addition to primary

products.(SNP) Provide assurance handover on time products to consumers in accordance with

the following agreed time with the consequences.(SNP)

4. WT (Weakness Threats) Strategy This strategy is based on activities that are defensive and trying to minimize weaknesses and avoid.

Strategies addressing SEBI: Implement a more flexible system of financing for the purchase of products by

consumers.(SP) Provide convenience for the consumer finance through cooperation with the

banks.(SP)

Strategi secara umum: Provide innovative bonuses and more helpful for consumers in the purchase of

the product by the consumer only at certain events.(SNP)

Based on the SWOT matrix is done, get some good alternative strategy of SO, WO,

ST, and WT. From the analysis of several alternative strategies, can be seen there are

two sectors which are the core of each of these strategies, namely finance and non-

finance sectors. Therefore, an alternative strategy would be divided into 2 groups of

strategies, as follows:

1. Financing Strategy (Strategy coded SP).

2. Non-Financing Strategy (Strategy coded SNP).

Furthermore, there are two alternative strategies will be analyzed using QSPM

(Quantitative Strategic Planning Matrix).

The Decision Stage Based on the results of the QSPM analysis with the managerial department of CitraLand

Surabaya represented by the General Manager/Associate Director and Marketing Manager by

filling in the value of the (AS) Attractives Score, it can be seen that the strategy that had

highest value of TAS (Total Attractives Score) was the alternative strategy from the financial

sector (strategy I), with a total score of 5.140 and 5.519, compared with the alternative strategy

of non-financial sector (strategy II), with a total score of 4.112 and 4.920.


Book One 178

Based on the QPSM analysis with the banks represented by the Head of the Office of Consumer

Credit at Bank Central Asia and the Secured Loan Manager of Bank OCBC NISP, by filling in

the value of the AS (Attractives Score), it can be seen that the strategy that had the highest

value of TAS (Total Attractives Score) was the alternative strategy from financial sector

(strategy I) with a total score of 6.177 and 5.492, compared with the alternative strategy of

non-financial sector (strategy II), with a total score of 4.978 and 4.816. Based on the QSPM analysis with the Citraland Surabaya consumers represented by Mr. Stephanus Pribudi and Mr. Teguh Lauwis, by filling in the value of the AS (Attractives Score),

it can be seen that the strategy that had the highest value of TAS (Total Attractives Score) was

the alternative strategy of non-financial sector (strategy II) with a total score of 5.897 and

5.798, compared with alternative strategies of financial sector (strategy I), with a total score

of 5.806 and 5.780. However, there was almost no difference between the strategies so it can be

said that from the customer's perspective, both strategies should be made and applied to answer

the needs and desires of consumers.

The value of the total score of the managerial department and the banks showed similar

result: the financial sector strategies (Strategy I) took precedence over non-financial sector strategies (Strategy II), thus according to the managerial and banking, financial sector strategies must be analyzed in detail to be applied by property developers after the issuance of SEBI 15/40/DKMP. This is because the SEBI policies highly affect the cash flow for

developers and the financial sources of the developers are sourced from the cooperation

with the banks.

On the other hand, the value of the total score from the consumers showed different results

than the managerial and banking: the financial sector strategy (Strategy I) and non-financial

sector strategy (Strategy II) were strategies that should be prioritized in balance, thus for the

consumers, both financial sector strategies and non financial sector strategies must be analyzed in detail to be applied by property developers after the issuance of SEBI 15/40/DKMP. This is because consumers do not just put the funds needed to purchase the

property and the prevailing lending rates into priority, but also to maintain the quality of

products being purchased, the availability of the demanded products, and the warranties and

after sales service service on products being purchased.


Book One 179

Implications of Research Results Implications of coping with SEBI

No Recent Condition Strategy to Recommended Managerial Implication

1 Housing units are built

based on the order and

sales from the marketing.

Housing stock are built

based on the existing

condition and in limited

quantity.

Housing stocks are build in

large quantity based on the

budget (the most preferred

housing type by the

consumers). The progress

does not have to reach

100%, but already look

clean and neat.

By the availability of housing

stocks, the purchasing process is

easier for the consumers who need

the house immediately, in order to

cope with SEBI policy for the

consumers of mortgage 2, 3, and

so on.

2 The work order of

housing constructions for

the contractors are

divided into two parts of

contracts: foundation

contract (if using pile

foundation) and

construction to finishing

contract.

The work order of housing

constructions are divided

into three parts of contracts:

foundation contract (if

using pile foundation), poer

to sloof contract, and

construction to finishing

contract. If required, the

first work order will be

issued for the foundation

and poer to sloof, but not

for the construction to

finishing.

By issuing the work order for the

foundation and poer to sloof, most

banks can release the payment up

to 50%, in order to help the cash

flow of the company. Thus, it can

help the developer to cope with

SEBI policy for the consumers of

mortgage 1.

3 Payment:

- mortgage consumers

type 1: DP 30% with the

installment up to 3x

- mortgage consumers

2,3, and so on :DP 30%

with the installment up to

3x, the rests are up to 12x

- Inhouse = 2 years,

DP 30% with the

installment up to 3x, the

rests are up to 21x

Payment:

-mortgage consumers type

1: DP 30% with the

installment up to 12x

- mortgage consumers 2,3,

and so on :DP 30% with the

installment up to 6x, the

rests are up to 18x

- Inhouse = 3 years, DP

30% with the installment up

to 6x, the rests are up to

=30x (giro cover)

By more flexible payment, the

payment term becomes longer, and

the numbers of consumers with

purchase power will be increase.

4 Mortgage Program:

- mortgate interest

without subsidies

- fixed interest in year

1,2,3, and 5

- fixed interest in 3 years

and 2 years after.

Mortgage program :

- Subsidies for

mortgage in year 1 is

available.

- Easy approved

program if the consumers

pay the DP up to 50%

(the submission is

approved, only require a

checking account and BI

checking)

The mortgage interest tends to

increase, so with the subsidies and

cooperation program with the

banks, the credit installements can

be decreased, so the number of

consumers with purchasing power

will increase.


Book One 180

General Implications

No Recent Condition Strategy to Recommended Managerial Implication

1 Promotion by

advertisements,

newspapers, banners

in Surabaya, and

promotion with

developer website.

Promotion by

advertisements,

newspapers, banners at

nearest cities from

Surabaya such as Gresik,

Lamongan, Sidoarjo,

Malang, Mojokerto, etc.;

Promotion with developer

website and other websites

such as rumah123.com,

berniaga.com, etc.

Promotion done in a broader

location will reach a wider market.

The number of consumers who are

interested in obtaining information

will increase, in order to increase

sales.

2 Training on

personality and job

specification are held

for the human

resources

Conducting additional

training for on how to

provide good service to

customers and how to

effectively sell the targeted

properties products.

By giving human resources the

ability to serve customers well and

sell a product developer, the

consumers will be more satisfied

and will be more easier to make a

purchase.

3 The quality of the

product is equivalent

to the quality of a

competitor's product.

Improving the quality of the

product to be better than a

competitor's product, by

improving the quality of

contractors, suppliers, and

specifications of the

materials used.

By improving the quality of

products owned, it will make the

value added to the product, so that

consumers will be more easily to

purchase the products offered by

developer.

4 Insurance for home

care benefits for 6

months after the

handover of

consumers, except if

there is damage to the

structure. The time

required for after sales

service is standard.

Increasing home care

insurance for 1 year after

the handover of the

consumer; improving after

sales service, especially on

the issue of complaints

(Example: give a special

slogan "a complaint will be

handled within 1x24 hour")

With good quality products,

increasing the guarantee

maintenance of the products is not

difficult.

It should also be supported by a

committed team of after sales

service and service

implementation team to make the

consumers feel satisfied with the

products and services provided by

the developer.

5 Several housing units

are overly late-handed

to the consumer.

Guarantees the handover at

the agreed time, by

sanctioning the consumer

and developers if breaking

the agreement.

With a commitment of time given

by the developers to the

consumers, so consumers will feel

safe to purchase the products and

the developers will also feel

secure with the stability of the

consumer repayments.

6 Bonuses for product

purchase are standard,

such as electronic

vouchers, cash back,

air conditioning units,

The bonuses for products

purchased are innovated to

certain events only, such as

free golf membership, free

club house facilities, free

With the bonus innovation given

to consumers only in certain

events, then consumers will not

easily miss the offerings provided

by the developer.


Book One 181

etc. internet and cable TV, car

raffle, etc.

7 Purchasing a product

without booking fee

but paid directly to

seal the buying

contract offered by the

developers.

Running the numbers

booking system at a cost of

sales with the selling price

after launching will

certainly higher than the

initial price. Preference will

be given to the existing

customers first. If

consumers fail to purchase,

the cost can be refunded.

With the booking number system,

the developer can determine the

interest of potential customers

first. In addition, the developer

gives more opportunities and

rewards for existing customers

and provides a return on

investment already promised.

8 Developer only sells

primary products.

Developer opens a new line

of business, by selling

primary products and

secondary products.

By selling secondary products, the

developer can reach a wider

market, and can immediately

follow the development of the

product and the price of property

in the environment.

9 The sales of store

housing product sales

regardless of what

business will be run.

To sell the store housing

products, potential

consumers should be given

an opportunity to explain

the areas of business which

will be run. There is

guarantee money to

guarantee the security of

the business that will be

opened within a certain

period (if the consumer

interest are large enough)

With a selling system of store

housing, it can become an

advantage for developers, because

there is no guarantee that

consumers will immediately open

their business and the area will be

developed.

CONCLUSION

Conclusion 1. The identification of internal factors of the property developer after the issuance of

SEBI No.15/40/DKMP, September 24th, 2013, were based on the strength as the

main factor, which were: developers have pretty good reputation, complete facilities

of the environment and housing, good product quality standards, the value of the property

as a promising investment, and strong financial condition of major developers. Based on

the weakness as the main factor were: the increase of BI rate and credit interest that

tend to increase, the purchase power of the consumers which is not in line with the

increase property price, ±70% of the property consumers choose mortgage type of

payment, the dealing with construction permit and legally take a long time, and

nonflexible of SEBI policy.

2. The identification of internal factors of the property developer after the issuance of

SEBI No.15/40/DKMP, September 24th, 2013, were based on the opportunity as

the main factor, which were: demand for homes is still high, there is the promotional

offering to attract buying interest, the appearance of the building material product


Book One 182

innovation, the more efficient work system/method in the development, and a lot of

small developers who are out of property business. Based on the threat as the main

factor were: the characteristics of government policies that tend to change, the

delayed development as resulted by the shortgage of working capital for the developers,

the increase in the price of building production, the secondary property becomes

more competitive to purchased, the investors postpone to purchase the property and

divert the funds to other investments, and the business property experiences a

slowdown up to 15-20%.

3. The QSPM results of the managerial and the banking showed similar result; the financial

sector strategies took precedence over non-financial sector, thus according to the

managerial and the banking, the financial sector strategies must be analyzed in detail to be

applied by the property developers after the issuance of SEBI No.15/40/DKMP. This is

because the SEBI policies highly affect the cash flow for developers and the developer

financing sources are sourced from the banks. On the other hand, the QSPM results of

the consumer showed different results compared with the QSPM results of the

managerial and the banking; the financial sector strategy and non financial sector

strategies should both be prioritized in a balanced way. Thus, according to the

consumers, the strategy of sector financing and non-financing must be analyzed in more

detail to be applied by the property developers after the issuance of SEBI 15/40/DKMP.

This is because the consumers do not just put the funds needed to purchase the property

and the prevailing lending rates as the priority, but also maintain the quality of products

being purchased, the availability of the demanded products, the guarantees and after sales

service on products being purchased.

4. The strategies to recommend in order to cope with SEBI No.15/40/DKMP, issued on

September 24th, 2013, based on the non financial sector, were to build the stock of

the most preferred house type by the consumers in large quantity with the allocated

budget. The progress does not have to reach 100%, but should reach the clean and

neat condition. With the availability of the optimal house stock, the sale can be easily

done (for consumers who need a home immediately) and can cope with SEBI policy for

the mortgage consumers type 1,2,3, and so on which requires that the housing units being

purchased should have been completed. However, the problem that is faced by the

developers was how to set the optimal cash flow for the all types of mortgage consumers. This can be done by issuing the work order for the housing construction and dividing the

work order into three contracts: foundation contract (for the pile foundation), poer to sloof

contract, and construction to finishing contract. If required, the work order for the

foundation (for the pile foundation) and poer to sloof can be issued first, but not with

the work order for the construction to finishing. Therefore, most banks will disburse the

payments to developers up to 50% at the time of purchasing by the consumer, because

the foundation up to the sloof have been completed. This can help the developers to

arrange the cash flow and to overcome with the SEBI policy no. 15/40/DKMP.

Additionally, there are many strategies to be done on the non-financial sector to support

the performance of the properties developers, such as the innovations in marketing

strategy, improving the quality of products and services, opening new lines of business,

and so on. Detailed explanation can be found in general implications that have been

outlined in Chapter V.


Book One 183

5. The strategies to recommend in order to cope with SEBI No.15/40/DKMP, issued on

September 24th, 2013, based on the financial sector, were to adjust with the

payment system which are applicable. For the mortgage consumers type 1, the Down

Payment of 30% can be paid in installments up to 12x, while the type 2 and 3 and so on,

the down payment of 30% can be paid in installments up to 6x, and the remaining

installments are up to 18x. The inhouse consumers / installments to developer are allowed

to do installments up to 3 years, with the down payment of 30%, with the detail that the

installments are up to 6x and the rests are up to 30x with giro cover. In addition, the

developer should work with the banks to provide mortgage programs, such as mortgage

interest subsidies for the first and second year, the easy approved program if the consumer

pays the down payment up to 50% (only require a checking account and BI checking),

and other programs. With a more flexible payment system, the payment period

becomes longer; the interest subsidy programs in cooperation with banks are available so

the number of consumers who have purchase power will be increased. The condition can

be reached because the selling price of property continues to rise and the consumers will

be more easily to purchase the products offered by developer.

Recommendations

Based on the background of the case and the policy of Loan To Value (LTV) with the issuance

of SEBI No.15/40/DKMP on September 24th ,2013, it can be ascertained that the society

has slight decrease of their interest in purchasing houses. If this situation continuously happens,

the climatic condition the housing business will decline. To overcome these problems, the

government and the banks have to cooperate. Banks are expected to review the LTV policy that

has become a burden for the developer and the consumer. The government is expected to

review the system of housing contract in Indonesia. This is because if the people who face

difficulty to purchase houses as resulted by unaffordable down payment will make them

shift to the housing contract system that is cheaper.

In addition to those problems, it is expected that there will be a further research to measure

the successful of strategies design for the property developers that have been suggested in this

study, due to the circumstances and conditions that are constantly changing.

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Cahyana dan Sudaryatmo. 2002 Rumahku Istanaku: Panduan Membeli Rumah

Hunian.Jakarta.:PT. Gramedia.

Creswell, J.W. 2007 Research Design: Qualitative, Quantitative and Mixed Methods

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David, Fred R.2009 Manejemen Strategis.Jakarta: Salemba Empat.


Book One 184

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http://www.properti.kompas.com (Accessed: 7 Desember 2013).

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Keputusan Pembelian’,Jurnal Administrasi Indonesia1(1).

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http://www.republika.co.id/


Book One 185

THE INFLUENCE OF PRICE, PRODUCT QUALITY, SERVICE

QUALITY ON CUSTOMER SATISFACTION AND CUSTOMER

LOYALTY OF DCK SURABAYA

Daniel Kurniawan1, J. E. Sutanto2

Universitas Ciputra

INDONESIA

E-mails: [email protected], je [email protected]

ABSTRACT

The higher the number of exported furniture from China, the more difficult it is

for the furniture SMEs (Small and Medium Enterprises) in Indonesia to compete

in global market. The marketing performance is one of the obstacles SME

entrepreneurs should deal with in the competition. This study is aimed to

examine and analyze some variables that influence marketing performance,

such as price, product quality, service quality, customer satisfaction, and

customer loyalty.

Each variable is formed by several indicators, on of which is price consisting of

flexibility, customization, differentiation, and promotion. Product quality is

formed by defect, durability, matchness, and consistency. Service quality is

formed by tangible, reliability, assurance, responsiveness, and empathy.

Customer satisfaction is formed by complaint, referral, and repurchase

likelihood. Customer loyalty, on the other hand, is formed by brand loyalty,

customer retention, and demand growth.

This study uses random sampling method. The samples were taken from

population consisting of all customers that have been served by DCK. The

samples number were taken by Slovin formula. Primary data was collected

through direct interview to obtain the respondents’ perceptions on every

question given in questionnaire.

Instrument validation test of this research uses construct validity; the research

is considered valid if the correlation coefficient is positive and higher than 0,50.

Reliability test is done using construct reliability; the research is called reliable

if it has construct reliability which is higher than 0,70. The analysis technique

used to analyze the research data is structural equation modeling with partial

least square approach. Statistical program applied in the data analysis is

smartPLS.

The main conclusion obtained from this study is that non-significance of

relationship from price and product quality to customer loyalty. Other main

conclusion is the negative but significance relationship from service quality and

customer satisfaction to customer loyalty.

Keywords: Price, Product Quality, Service Quality, Customer

Satisfaction, Customer Loyalty



Book One 186

INTRODUCTION

CV. Dharma Citra Kencana, here in after referred to as DCK, standing in Surabaya

since 1993. Its service provided at first is a general contractor for the renovation of

homes, offices, shops, storefronts, and many other kinds of furnishing work. But in its

development, not only the renovation is being done, but also the company has been able

to build homes, factories, warehouses and other property types, from zero to finished.

Even to this moment, DCK services has also penetrated into the interior design,

complete with furniture making.

With the growing demand for increasingly large market, because people have started to

realize that home or place of business is an expensive asset to be enhanced existence,

DCK was also experiencing growth in the amount of turnover and production from year

to year. Central Bureau of Statistics (BPS) published the official report on the growth of

the sector production value of furniture belonging to small industry, which in 2012 the

total value of 2.59 trillion rupiah, increased to 20.2 trillion rupiah in 2013 (BPS, 2014).

Therefore, anticipation DCK to continue to develop the business should be done, to

keep the trend of increasingly complex needs of the community with regard to the

business field.

Although DCK has high turnover growth, but this does not necessarily lead to the

increase in gross margin for the DCK. In the last five years, the average increase in

turnover of 25% per year. The ease of access to the internet since last 5 years, has

brought a new landscape competition, because consumers can easily and quickly assess,

compare prices is a design services company with another company. Intense

competition prices and interior design services company increasing prices of raw

materials, making the gross margin down.

Every year the price of raw materials has increased significantly, resulting in COGS

(cost of goods sold) higher, and consequently the gross profit (gross margin) obtained

by DCK also declined. DCK marketing performance over the last 5 years is not too

encouraging. On the one hand, the sales turnover increasing from year to year (except

for the period 2011-2012), but on the other hand, a decline in gross margin which forms

the negative trend from year to year.

With more and more competitors in Surabaya, the price of services offered to the

market even today's increasingly competitive, sometimes even DCK got little profit

margin in order to compete in the market. With this phenomenon, research is needed to

determine whether the price of the services offered to the consumer for this is in

accordance with the intended target market segments. With the creation of the right

price, will increase the competitiveness of the business compared DCK future

competitors. The competitiveness of a firm increases when the price of the product

indicated is no longer a major consumer objections before making a purchase decision

(Hawkins & Mothersbaugh, 2011).


Book One 187

More than 50% of the number of DCK customers ordering home furnishings, which

earned gross margins are much higher than ordering furniture for office furniture. That

is, the chances of future market development is still very promising. This research aims

to assess the perceptions of consumers who never buy DCK services, whether the price

of services purchased are in accordance with the wishes and expectations of consumers.

In addition to price, the success of business services and furniture design is largely

determined by the quality of the resulting product. Expected product is a product that is

the result of consumers in accordance with the design drawings given at the beginning

of the order. In addition, these products do not have disabilities during installation and

at the time of delivery. The strength and durability of the product is also a major

consideration when consumers want to buy DCK services. Product quality that were

produced by DCK is sometimes not so good, so it is still often leads to complaints from

consumers, particularly consumers who more than once to make a purchase. DCK is

less consistency in providing products for this service can be seen from some of the

negative responses of consumers who ever take the services.

This research also aims to determine whether the products are good enough in quality

and can consistently increase sales turnover of DCK, or even consumers are actually

looking for quality products that mediocre origin in accordance with the budget alone.

Important factors in addition to price and quality of products are sought after by DCK

consumers maybe is the quality of service. Currently DCK still do not have a standard

of service, particularly related to issues of delivery and installation of furniture in the

location. This research also aims to determine whether the service quality affects

customer satisfaction of DCK or not.

At this time, the factor that also being a problem in the DCK is customer satisfaction,

because this factor can be a way to differentiate itself, compared to other companies.

Typically consumers in Surabaya have different perceptions of the quality of the

product in its interior and furniture compared to other big cities. In general, consumers

are looking for a high quality product, but on the one hand, the desired price is very

cheap. Therefore, it can no longer DCK only emphasizes the price or quality of the

product alone, but rather in terms of service quality and customer satisfaction, in order

to reassure consumers and create loyal customers and continue to do repeat buying from

time to time.

RESEARCH QUESTION

Based on the background described, the formulation of the problem of this research are:

1. Does the Price have the effect on Customer Satisfaction?

2. Does the Product Quality have the effect on Customer Satisfaction?

3. Does the Quality of Service have the effect on Customer Satisfaction?

4. Does the Customer Satisfaction have the effect on Consumer Loyalty?

5. Does the Price have the effect on Consumer Loyalty?

6. Does the Product Quality have the effect on Consumer Loyalty?

7. Does the Quality of Service have the effect on Consumer Loyalty?


Book One 188

REVIEW OF LITERATURE

Singh (2013) conducted a study which aims to determine the impact of service quality

on customer loyalty. The population of this study are all large supermarket consumers

in India. The research sample was taken as 600 customer, was obtained from 7 major

supermarkets from different districts in India. The variables used in this research is the

quality of service, customer satisfaction and loyalty. The analysis uses descriptive

statistics and one-way ANOVA. The results showed that if the quality of service with a

good note, it shows positive results and significant customer loyalty.

Shi & Smith (2012) conducted a study of furniture manufacturers in China. The purpose

of this study is to get a way for the producers to reduce the cost of production but not to

sacrifice the quality of furniture products, both domestically and are absorbed

requirement for export purposes. The population of this research is the furniture

industry and a large middle class who are members of associations Chinese National

Furniture Association (CNFA) and are often involved in international exhibitions. 4297

acquired a company that is willing to be responsden research. Data obtained by

conducting a survey to each exhibitor who participated in the international exhibition 9

different places in China. The variable used is cost effectiveness and product quality.

Statistical analysis is used to determine the average and trend of furniture producers in

making production and marketing strategies. The results of the study found that the

furniture manufacturers in China can still get high profit margins without sacrificing

quality by using raw materials and cheap replacement available in large quantities in the

market.

CONSUMER LOYALTY

Consumer loyalty is the degree of the extent to which a consumer show repeated

purchasing behavior, and continuously from a service provider or product. The degree

to which consumers continue to have a positive attitude towards the tendency of the

company. Consumers will always consider the existence of the company first, when the

need arises to use the services or specific product before looking for alternatives to other

similar companies.

Grewal & Levy (2012: 364) argues that a consumer is said to be loyal when the show

regularly purchasing behavior which itself obligated to purchase at least two times

within a certain time interval. Measures to repurchase a preferred product or service in

the future (repeat buying), is evidence of the creation of customer loyalty.

Consumer loyalty dimensions used in this study are the dimensions developed by Tetu,

et al. (2013), namely Brand Loyalty, Consumer Retention and Sales Growth. Here is an

explanation for each of these dimensions:

1. Brand Loyalty Is the degree to which the relation of a consumer to a product brand or company name.

This reflects that a consumer who is loyal to a brand will not easily move their

purchases to other brands, no matter what happens with the brand. Loyal consumers in

general will continue to purchase the brand, although faced with various alternative

brands of competitors' products that offer superior product characteristics is viewed

from different angles attributes.


Book One 189

2. Consumer Retention Is a state where the consumer wants to remain on good terms with the company on an

ongoing basis. Some sizes are used in consumer retention is a positive feedback to

companies such as always giving suggestions for improvement of the quality of

products and services. In addition, customer retention can be measured from the contact

continuity of the company so far to consumers.

3. Sales Growth

Is the degree to which consumers will make repeat purchases are more numerous in the

future. If consumers only buy products with a nominal amount or the same volume in

the future, then surely the company has not experienced an increase in performance

marketing. A consumer can not necessarily be said to have contributed positively to the

performance of the new marketing if only buy once, because do not necessarily repeat

buying in the future, or if the conduct of repeat buying once, not necessarily or nominal

volume purchases more than ever before. Therefore, the dimensions of consumer

loyalty indicators need to be measured from the increase in demand or also called sales

growth.

CONSUMER SATISFACTION

Satisfaction is a person's level of feeling both pleased and disappointed after comparing

the perceived performance or results when compared with the expectations. Grewal &

Levy (2012: 361) defines customer satisfaction as an emotional response to the

evaluation of the consumption experience of a product or service. In addition, customer

satisfaction is formulated as purnabeli evaluation, the degree of consumer perceptions of

the performance of the products or services that are chosen to meet the expectations

prior to purchase.

Customer satisfaction is very important to note because the consumer can provide long-

term benefits to the company, among which are the following: 1) Consumers want to

buy products with greater amounts; 2) Consumers want to buy a new product or

enhanced products from companies in the future; 3) Consumers are willing to share

praise for the company and its products to others; 4) Consumers are becoming less

attention to the brand and advertising competitor, and less sensitive to the price of a

competitor; 6) Consumers are willing to give new ideas for the development of the

goods or services of the company, because consumers have a greater sense of belonging.

Dimensions of customer satisfaction were used in this study are the dimensions

developed by Jayasankar & Kumar (2012), the Complaint, Referral, and Repurchase

Likelihood. Here is an explanation for each of these dimensions:

1. Complaint Is the degree to which consumers are not satisfied with the quality of the products or

services provided by the company. Indicator contradiction with consumer satisfaction is

deliberately used to direct the company to understand what factors actually sought

consumer satisfaction. The higher the degree of the complaint, the lower the perceived

level of customer satisfaction. Complaints of consumers can be caused by several


Book One 190

factors, among them the promise of a discrepancy with the results of a given company.

For a company that made the production process along with the consumer, the

possibility of the biggest complaints is caused by the time production and delivery of

products turns past the deadline that has been agreed.

2. Referral

Is the degree to which consumers are willing to refer friends or other people to buy a

product from the same company, without the promised incentives or benefits over the

company. The higher degree of consumer referrals made to indicate the higher the

perceived level of satisfaction. Referral or also called Word of mouth (WOM) is

positive can be done by means of a proactive and passive. Consumers who do

proactively referral can be seen from the behavior that deliberately show off the excess

product without first asked by his friend. While passive referral usually occurs if the

consumer is asked by his first, then answer questions such as where to buy, at what

price, and so on.

3. Repurchase Likelihood

Is the degree to which the consumer has the greatest potential to buy again the same

product or different products from the same company at a later date. Consumers who

are satisfied may be indicated by his willingness to do repeat buying. Because the

products purchased and services company have been enjoyed by consumers, and

consumer expectations have been met, then it is likely to buy back (repurchase

likelihood) will be created by itself. Dimensions of consumer satisfaction can be

measured with other types of products, volume of purchases, and when it re-purchase

took place at a later date.

PRICE

Price is the value that appears in the mind of the consumer of the product or service

transaction deal value specified by the buyer or the seller (through bargaining) or set by

the seller for the same price to all buyers (Ellickson, et al., 2012). Price is the amount of

money charged for a product or service, the amount of the exchangeable value of the

consumer to the benefits of having or using a product or service. Under normal

circumstances, demand and price have an inverse relationship or negative. This means

that the higher the price is set, the smaller the demand. But for a product - a prestigious

product (prestige) can be unidirectional or prices have a positive relationship.

According to Grewal & Levy (2012: 390), Price has two main roles in the decision

making process of the buyer is: 1) The role of the allocation of the price, ie the price

function in helping the buyer to decide how to obtain the expected benefits based on the

highest purchasing power. Thus, the existence of price can help buyers to decide how to

allocate its purchasing power in different types of goods or services. Buyers to compare

prices of various alternatives available, then decide the allocation of funds desired.

2) The role of the information of price, ie the price function in "educating" consumers

about the product factors, such as quality. This is especially helpful in situations where

buyers have difficulties to assess the factors of production or benefits objectively. The

common perception is that it applies a high price reflects its high quality.


Book One 191

Dimensions prices used in this study refers to research conducted Alptekinoglu &

Corbett (2012), which is the flexibility, customization, differentiation, and price

promotions. Here is an explanation for each of these dimensions:

1. Flexibility

Price created from the method of payment that will be made by the consumer.

Consumers can choose whether the method of payment in installments or in cash.

Companies can apply different prices for different payment methods. Repayment period

is longer (longer payment terms), is a price that can be paid off in a shorter period of

time, but as a consequence, the price of which is set to be higher than if paid in cash up

front. In this case the company stretching out the loan for a longer period.

2. Customization

In addition to the price that can be paid is flexible in terms of repayment, price can also

be created through product customization. That is, the pricing on the consumer to other

consumers can be different, depending on the type and quality of raw materials required

to make the product, thus consumers would think that the product price is relative,

depending on the type of need and demand. The application of these rates can be

applied to companies directly involving the role of the consumer in the production

process. Companies can make the exact same product at different prices when the

desired materials and different qualities of each consumer.

3. Differentiation

Price can also be created for all types of consumers being served, the amount of the

purchase volume, and when the time of booking. Higher prices can be aimed at the

home user who purchases less volume when compared to corporations (corporate user).

Likewise, if a company is to have a lot of stock of raw materials, pricing is cheaper than

the price of a product can usually be done in order to sell quickly, and the company

does not hoard goods in the warehouse. Pricing is suitable for companies that serve

multiple segments at once. In this way, consumers will have the perception that the

price is relative, depending on market conditions and company policies.

4. Promotion Price

Promotion price is one way of creating price that aims to increase the number of sales

turnover in the short term. Promotion price (promotion price) is an effective strategy to

influence consumer purchase decisions immediately. This method uses a cross-subsidy

approach, in which the loss arises because the price of a type of product promotion has

actually been closed by the high profits of other types of products. Concrete shape in the

form of discounts, bonuses for pembelajaan with certain nominal, and many others.

PRODUCT QUALITY

The quality of products according to Lovelock & Wirtz (2011: 96) is to consider

companies in building consumer trust. Performance (performance) is a basic

characteristic of a product, is the most important element of a product that is sought

after by consumers. According to Grewal & Levy (2012: 348), the performance is the

degree to which a product is able to perform its functions properly according to


Book One 192

standards of the company. Performance (performance) is a principal operating

characteristics of the product core (core product) purchased.

Another element is the product quality characteristics of the product or additional

features (features), which is a special characteristic that adds differentiation complement

the use of the product compared to other products. Reliability (reliability) is the degree

to which the product will be damaged or fails, the company should be considered to

maintain the quality standards of its products.

Another factor is the quality of the product durability (durability), which is a factor of

the length of an acceptable product before the product is to be replaced, due to wear or

below the initial standard. Durability (durability) related to how long the product can

continue to be used. These dimensions include technical life or the economic life of the

product.

In addition to factors inherent in the product itself, there is also a factor which is a

complement of the product, but its existence can not be separated, that is aesthetic, is

how the product appearance, taste, sound, smell. Aesthetics can also be interpreted with

the product appeal to the five senses. External factors are product quality perceived

service quality (perceived quality), is taken from the quality reputation of the

manufacturer of the product, how the standard of services provided by the company,

(Golder, et al. 2012).

Dimensions of quality products used in this study are the dimensions developed by

Golder, et al. (2012), ie Defect, Durability, Matchness, and Consistency. Here is an

explanation for each of these dimensions:

1. Defect Is the degree to which the presence or absence of defects when the product is received

by the consumer, if there is a product defect, the extent to which the level of consumer

acceptance or tolerance of the possibility of such defects. Dimensional quality of this

product is suitable for companies that process of production carried out jointly by the

consumer, and still involves a labor-intensive process. Production is usually done made

by order, meaning that production is done if there are orders from customers. Thus,

consistency of manufacture of the product and the quality is very vulnerable to the

availability of raw materials, particularly related to the quality of the raw materials that

existed at that time. In addition, the labor factor also affects this dimension, which is

when there are orders from consumers, labor experts may not be able to handle it alone,

so it must be assisted by the new labor and inexperienced.

2. Durability

Is the degree to which a product is resistant to factors that may cause damage in the

future. The products are not including consumer goods where there explicitly expire

date on the packaging, should have the durability (durabilty) the better, because the use

of these types of products are usually for long term and permanent, eg household


Book One 193

appliances, furniture, vehicles , and so on. For products produced from wood in

particular, resistance (durabilty) can be seen from the changes in texture, color, strength

in the weight-bearing, and the rate of loss.

3. Matchness

Is the degree to which the products produced by the company is in compliance or not

with the customer order. Because it is made by order, it is possible that the resulting

product does not correspond to the initial consumer tastes and expectations. In contrast

to a company that is already finished and ready products purchased by consumers, in

this case the consumer still can and have the opportunity to choose. The company that

made the production process along with consumers, should pay attention to product

quality matchness dimensions, whether the design, choice of colors, choice of finishing

processes, are in accordance with the expectations of the consumer or not.

4. Consistency

Is the degree to which companies are able to deliver quality products to maximum and

consistent, appropriate consumer expectations. Companies that consistently maintain

the product quality to consumers, will have an impact on customer satisfaction itself.

Consistency of product quality can be maintained by each staff and employees in the

company should be able to keep and do SOP (standard operating procedure) that have

been made. This consistency can be reflected in the standard of quality that has always

felt the same product by the consumer from time to time.

SERVICE QUALITY

Companies that are able to produce quality products alone will not be able to compete

with competitors who in addition to having quality products, are also able to provide

better quality of service to consumers. Quality of service is a factor mandatory for

companies to do the differentiation. The quality of service can be seen from how far the

difference between expectation and reality consumers for services received. Quality of

service can be measured by comparing consumer perceptions of service received by the

expected actual service (Lovelock & Wirtz, 2011: 52).

In addition, the quality of the actual service consumer assessment will refer to the

company as a whole and overall, the assessment of the quality of work the whole team

or staff within the organization. If there are consumers disappointed with the services of

a waiter in a restaurant, then it implies that negative perceptions will appear also in the

minds of consumers, that the quality of the restaurant management will be undermined.

Service quality dimensions used in this study are the dimensions developed by

Parasuraman in Chabbra (2013), namely Tangibles, Reliability, Responsiveness,

Assurance, and Empathy. Here is an explanation for each of these dimensions:


Book One 194

1. Tangibles

Is the degree of the company's ability to show their existence to external parties. This

ability is manifested in the appearance and capabilities of physical infrastructure

companies and the state of the surrounding environment.

2. Reliability

Is the degree of the company's ability to deliver as promised services accurately and

reliably.

3. Responsiveness

Is the degree of the company's ability to assist and provide services to customers

quickly and accurately, with clear information delivery.

4. Assurance Is the degree of the company's ability to foster a sense of trust of the consumers towards

the company.

5. Empathy

Is the degree of the company's ability to deliver genuine concern and personal, given to

consumers by trying to understand consumer desires one by one.

RESEARCH MODEL

Proposition that is based on theoretical studies and empirical studies will be explained

how many hypotheses are to be compiled, the variables contained in each of these

hypotheses and how to influence the relationship between variables. Here is a picture of

the conceptual framework of the study.


Book One 195

HYPOTHESES

Based on literature review, review of the theoretical and conceptual framework, then

compiled the following research hypothesis:

1. Price has significant and positive effect on Consumer Satisfaction (H1)

2. Product Quality has significant and positive effect on Consumer Satisfaction

(H2)

3. Service Quality has significant and positive effect on Consumer Satisfaction

(H3)

4. Consumer Satisfaction has significant and positive effect on Consumer Loyalty

(H4)

5. Price has significant and positive effect on Consumer Loyalty (H5)

6. Product Quality has significant and positive effect on Consumer Loyalty (H6)

7. Service Quality has significant and positive effect on Consumer Loyalty (H7)

RESEARCH DESIGN

This study includes quantitative research, so the primary data collected by distributing

questionnaires to the respondents who had been set then the data is processed with

statistical tools in research laboratories. The unit of analysis refers to the level of

aggregation of data to be collected for the study. This study uses individual unit of

analysis. Time Horizon of this research is the data collected in a single time, perhaps

over a period of days, weeks, or months aims to answer the research questions (Sekaran,

2010: 164).

Research site is in Surabaya and surrounding areas, while the research time is during the

months of May-June 2014, respondents were consumers who have purchased services


Book One 196

DCK. This study used a purposive sampling method to draw a sample. The sampling

criteria were: (1) Buy DCK services with a nominal minimum of 15 million dollars to

the top, and (2) Live in Surabaya; (3) Has a minimum purchase DCK services a year

ago (in 2013). The total population currently there are 96 consumers.

The data used in this study are as follows: 1) Nominal data, such as name, sex, purpose

of purchase of furniture products; 2) ordinal data, such as the educational background of

respondents; 3) Data interval, i.e. all respondents perceptional questions will be variable

pricing, product quality, service quality, customer satisfaction and loyalty; 4) ratio data,

such as the age of respondents, long been a customer, the nominal purchase of products

that have been done.

Sources of data used in this study there are two kinds, namely primary data source,

taken from a questionnaire answered by the respondents to be collected in this study.

Total respondents 30 consumers who have purchased DCK services with a nominal 15

million dollars to the top. While other data sources are secondary data source that the

data from the relevant government agencies such as the BPS furniture sales in the

region. This data serves as the reference market development trends that occur.

Techniques of data collection using questionnaires. Once the questionnaire is made,

then the respondents who had previously contacted to make an appointment to meet,

given the time to answer all the questions in the questionnaire. Researchers waited and

provide explanations when filling out the questionnaire conducted by the respondent.

The following table is the data which will be the study respondents.

All the indicators that make up the latent variables in this study use traditional scale

interval indicator stating something that is abstract. Variable price, product quality,

customer satisfaction, and customer loyalty in this study were measured using a Likert

scale or Summated ratings method and measurement results are in the form of interval

scale data. The size of each of these variables is based on the average of the values of

each item were obtained from respondents to these items, by selecting a value in a five-

point scale. A value of 1 indicates the respondent strongly disagreed with the statement

that there is in the questionnaire, the value of 2 indicates respondents disagreed, a value

of 3 indicates respondents are neutral toward the statement, a value of 4 indicates the

respondents agreed, and the value of 5 indicates the respondents strongly agreed with

the statement that there is.

Data analysis in this study using Partial Least Square (PLS). PLS can be used on any

kind of scale of data (nominal, ordinal, interval, ratio) and assuming a more flexible

terms. PLS was also used to measure the relationship of each indicator with the

construct. In addition, the test can be done PLS bootstrapping to structural models that

are outer and inner model. Because in this study using indicators to measure each

construct, and also a structural measurement model, it was decided to use PLS.

FINDINGS

An indicator is valid if it has a factor loading above 0.5 on the intended constructs.

SmartPLS output loading factor to give results like in the attachment. Testing validity

for reflective indicator using the correlation between the scores of items with a score

konstruknya. Measurements with a reflective indicator indicates a change in an indicator

in a construct if other indicators on the same constructs changed (or removed from the

model). Reflective indicators suitable for measuring the perception that this study uses a


Book One 197

reflective indicator. Table loading factors provide the recommended value of 0.5

(Gaston in Yamin, 2011). The smallest value is equal to 0.508496 for Y2.2 indicator

(Customer Retention). Meaningful indicators used in this study is valid or has met the

convergent validity.

In the initial research model, there are several indicators that are not valid, so it can not

be included in the research model. In the X1 variable-price, indicators that should be

eliminated is X1.3.2 and X1.3.3. In X2-quality products, all apparently valid indicator,

so there is no indicator that should be eliminated. In X3-quality services, the indicators

that should be eliminated is X3.1.1 and X3.1.2. In the Y1-variable consumer satisfaction,

an indicator that should be eliminated is Y1.2.2. In Y2-variable consumer loyalty, the

indicators that should be eliminated is Y2.2.2. After all indicators invalid removed, then

the model be perfect. Here is a diagram of the factor loading of each indicator in the

research model after an invalid indicator deleted:

Figure 2. Loading Factor Value after Invalid Indicator Once Removed

The value of AVE recommended minimum is 0.5. If the value obtained AVE greater

than 0.5, then the indicators in the developed model proved to actually measure a latent

construct that is targeted and does not measure other latent construct. However, if the

value of AVE below 0.5, then Fornell and Larker's (1981) explains that a latent

construct has discriminant validity were satisfactory when the AVE values greater than

the latent construct squared correlation with other latent construct.

Table 1. Average Variance Extracted (AVE)

Variable AVE The Sum of Squared

Loading Factor Note

Price 0,439053 0,3462+0,032=0,1206 0,43>0,12 (accepted)

Consumer Satisfaction 0,671367 N/A AVE>0,5 (accepted)

Service Quality 0,483859 0,4772+0,252=0,29 0,48>0,29 (accepted)

Consumer Loyalty 0,574951 N/A AVE>0,5 (accepted)

Product Quality 0,588270 N/A AVE>0,5 (accepted)

The table above gives the value AVE above 0.5 for the variable Customer Satisfaction,

Customer Loyalty, and Product Quality. As for the variable price and Quality of Service


Book One 198

has the lowest AVE value below 0.5. However, the value of the latent construct squared

correlation is still below the value of the existing AVE. For the price variable, (0.3462 +

0.032) <0.439. For the variable quality of service, (0.4772 + 0.252) <0.483. Explanation

for this may happen due to the purchases that consumers have lasted long enough, so

the price and quality of service that consumers perceived that time and time becomes

less valid survey.

Table 2. Composite Reliability

Variable Composite Reliability

Price 0.860570

Consumer Satisfaction 0.934430

Service Quality 0.881582

Consumer Loyalty 0.865515

Product Quality 0.944302

Value of composite reliability for all constructs are above 0.7 which indicates that all

constructs in the model were estimated to meet criteria for discriminant validity. Lowest

composite reliability value is equal to 0.860570 to construct price.

Table 3. Cronbach’s Alpha

Variable Cronbachs Alpha

Price 0.816173


Service Quality 0.846921


Product Quality 0.934846

Reliability test can also be strengthened by Cronbach's Alpha. The recommended value

is above 0.5 and Cronbach's Alpha value for all constructs be above 0.5. The lowest

value is equal to 0.805184 (Customer Loyalty). Once the model is estimated to meet

criteria Outer Model, subsequent testing structural models (Inner models). Here is the

R-square value in the construct:

Table 4. R-Square Value

Variable R Square

Price N/A


Service Quality N/A


Product Quality N/A


Book One 199

The above table gives the value of 0.783620 for Consumer Satisfaction constructs

which means that the price (X1), Product Quality (X2) and Quality of Service (X3) is

able to explain the variance of Customer Satisfaction (Y1) of 78.3620%. R-square

values are also contained in the Consumer Loyalty is influenced by price, Quality

Products, Quality Service and Customer Satisfaction is equal to 0.605550. R-square

value on customer satisfaction and loyalty is already above the required threshold is the

lowest value of 0.19 (Gaston in Yamin, 2011).

To validate the model as a whole, then used a goodness of fit can be measured using a

Q-Square predictive relevance formula.

Q2 = 1 – ( 1 – R12) ( 1 – R2

2 ) ... ( 1- Rp2 )

Where R12 , R2

2 ... Rp2 is R square endogen variable in a model.

Hence, the value of Q2 is

Q2 = 1 – (1 –( R square Kepuasan)2) . (1 – (R square Loyalitas)2)

Q2 = 1 – (1 - 0,7836202).(1 – 0,6055502)

Q2 = 0.752; means still higher than the required threshold value is Q2> 0. Q-square

value greater than 0 (zero) value indicates that the model has predictive relevance,

whereas Qsquare value is less than 0 (zero) indicates that the model lacks predictive

relevance (Gaston in Yamin, 2011).

Testing the hypothesis is as follows:

Table 5. Path Coefficients (Mean, STDEV, T-Values)

Original

Sample Sample Mean

Standard

Deviation

Standard

Error T Statistics

Price

Satisfaction 0,346 0,350 0,003 0,083 4,167

Price

Loyalty 0,033 0,025 0,129 0,229 0,257

Satisfaction

Loyalty 0,986 0,982 0,139 0,139 7,077

Service

Satisfaction 0,290 0,291 0,093 0,003 3,092

Service

Loyalty -0,476 -0,480 0,128 0,128 3,718

Product

Satisfaction 0,353 0,348 0,083 0,083 4,229

Product

Loyalty 0,160 0,180 0,175 0,175 0,915

DISCUSSION

The new findings in this study supported the hypothesis is not the fifth, sixth, and

seventh, ie the relationship between price, product quality, and service quality on

consumer loyalty. The fifth and sixth hypotheses are not proven significantly, in other

words there is actually no direct relationship between price and customer loyalty, and

product quality and customer loyalty. This is probably caused by the price and quality

of the products is expected in early expectations by the consumer before the purchase of

the product, not the re-purchase or nature reps, because customer loyalty leads to long-

term repetition.


Book One 200

This concurs with Chhabra (2013) which examines the consumer loyalty.

While the seventh hypothesis proved to be significant but the result is negative, it means

improving the quality of service even lower consumer loyalty. This is most likely due to

products purchased once its installed, or need long-term nature. So the quality of service

is not required, but the other aspects that are more important to consumers, such as the

price and quality of products. Agree with Chen (2012) which examines the relationship

of price and service quality on loyalty, it is evident that the role of price has more

influence on loyalty than quality of service.

The Effect of Price on Consumer Satisfaction

Relationship between the price with satisfaction is statistically significant at the T-

4.167955 (> 1.96). Estimate the value of the original sample is positive is equal to

0.346161 which indicates that the direction of the relationship between the price the

consumer satisfaction is positive. Thus hypothesis H1 in this study which states that

'price significantly influence consumer satisfaction' is acceptable. The empirical fact is

an example of proof of this hypothesis is another study with the title influence the

quality of service, product, and price fairness on satisfaction and customer loyalty in

Lnc Skin Care Singaraja conducted by Amryyanti & Sukaatmadja (2013).

The Effect of Product Quality on Consumer Satisfaction

Relationship between Product Quality on Consumer Satisfaction is significant with a T-

statistic of 4.229643 (> 1.96). Estimate the value of the original sample is positive is

equal to 0.353393 which indicates that the relation between Quality Products with

Customer Satisfaction is positive. Thus the hypothesis H2 in this study which states that

'The quality of products significantly influence consumer satisfaction' is acceptable.

Empirical fact another study conducted Amryyanti & Sukaatmadja (2013) also showed

the same thing, ie the quality of the products have a significant effect on customer

satisfaction.

The Effect of Service Quality on Consumer Satisfaction

Relationship between Service Quality on Consumer Satisfaction is statistically

significant at the T-3.092975 (> 1.96). Estimate the value of the original sample is

positive is equal to 0.29041 which indicates that the relation between Quality of Service

with Customer Satisfaction is positive. Thus hypothesis H3 in this study which states

that 'The quality of services significantly influence customer satisfaction' is acceptable.

Empirical fact another study conducted Amryyanti & Sukaatmadja (2013) also showed

the same thing, ie the quality of services significantly influence customer satisfaction.

The Effect of Consumer Satisfaction on Consumer Loyalty

Relationship between Consumer Satisfaction with Consumer Loyalty is statistically

significant at the T-7.077814 (> 1.96). Estimate the value of the original sample is

positive is equal to 0.986457 which indicates that the direction of the relationship

between Customer Satisfaction with Customer Loyalty is positive. Thus the hypothesis

H4 in this study which states that "consumer satisfaction have a significant effect on

consumer loyalty 'is acceptable. Empirical fact another study conducted Amryyanti &


Book One 201

Sukaatmadja (2013) also showed the same thing, namely customer satisfaction

significantly influence customer loyalty.

The Effect of Price on Consumer Loyalty

Relationship between the price and the Consumer Loyalty is not significant, because the

T-statistic of only 0.257899 (<1.96). Thus hypothesis H5 in this study which states that

'price have a significant effect on consumer loyalty' is unacceptable. Empirical fact

another study conducted Amryyanti & Sukaatmadja (2013) also showed the same thing,

namely the reasonableness of the price no significant effect on customer loyalty.

The Effect of Product Quality on Consumer Loyalty

Relationship between Product Quality on Consumer Loyalty is not significant, because

the T-statistic of only 0.915336 (<1.96). Thus the hypothesis H6 in this study which

states that 'The quality of the products have a significant effect on consumer loyalty' is

unacceptable. Empirical fact another study conducted Amryyanti & Sukaatmadja (2013)

also showed the same thing, ie the quality of the product does not have a significant

effect on consumer loyalty.

The Effect of Service on Consumer Loyalty

Relationship between Service Quality on Consumer Loyalty is significant with a T-

statistic of 3.718646 (> 1.96). Estimate the value of the original sample was negative in

the amount of -0.476597 which indicates that the relation between Quality of Service

with Customer Loyalty is negative. Thus the hypothesis H7 in this study which states

that 'The quality of services significantly influence customer loyalty' is acceptable, but

the relationship is inversely or negatively. Empirical facts Amryyanti & Sukaatmadja

(2013) shows the difference, namely that customer satisfaction turns positive and

significant effect on customer loyalty.

CONCLUSION

This study includes the effect of price, product quality, and service quality on customer

satisfaction and loyalty. From the research conducted, it can be concluded some points

as follows:

1. Price has significant and positive effect on consumer satisfaction.

2. Product quality has significant and positive effect on consumer satisfaction.

3. Service quality has significant and positive effect on consumer satisfaction.

4. Consumer satisfaction has significant and positive effect on consumer loyalty.

5. Price has no significant effect on consumer loyalty.

6. Product quality has no significant effect on consumer loyalty.

7. Service quality has significant, but negative effect on consumer loyalty.

The resulting research conclusions about similarities and differences between previous

research that studied researchers compared the results obtained. The implications of this

research as conclusions can be drawn on the chart comparison with the results of

previous research the following research hypothesis.


Book One 202

Based on the research results, advice that can justify the following, among others: 1)

Variable Price and product quality can not be directly checked conjunction with

consumer loyalty, meaning that these two variables can indeed affect loyalty but not

directly, because it must pass through the first stage of customer satisfaction; 2)

Variable quality of service may be a more appropriate moderator variable that is located

between variables consumer satisfaction and loyalty, not to the independent variables

that are causal, but moderation.

Here are some suggestions for the next study authors: 1) The study population was

limited to furniture consumers in Surabaya, it is necessary to conduct further research

with a broader scope of the industry such as industry or cross the same but regionally

and across industries within the same region. Thus would explain the causal relationship

between price, product quality, service quality, satisfaction, and customer loyalty in a

wider scale; 2) The unit of analysis of this study is a mixture of consumers for

household furniture or office, then we need to do further research on each type of

consumer. Because consumer households and offices have a preference needs quite

different from each other.

REFERENCES

Alptekinoglu, A., Corbett, C. 2008. Mass Customization Vs. Mass Production: Variety and

Price Competition. Manufacturing & Service Operation Management, Vol. 10 (2), p.

204-217.

Chen, J., Rizzo, J. 2012. Pricing dynamics and product quality: the case of antidepressant drugs.

Empirical Economics, vol. 42, p. 279-300.

Chhabra, N. 2013. Measurement of Consumers’ Perception of Service Quality in Organized

Retail Using Servqual Instrument. Management Dynamics, vol. 13 (1), p. 70-82.

Ellickson, Paul B., Misra, S., Nair H. 2012. Repositioning Dynamics and Pricing Strategy.

Journal of Marketing Research, XLIX (Dec 2012), p. 750-772.

Ferdinand, A. 2010. Structural Equation Modeling Dalam Penelitian Manajemen (4th Edition

ed.). Semarang: Badan Penerbit Universitas Diponegoro.

Gherasim 2012. Prices Marketing Strategies. Economy Transdiscplinarity Cognition, vol. 15 (2),

p. 180-185.

Golder, P., Mitra, D., Moorman, C. 2012. What is Quality? An Integrative Framework of

Processes and States. Journal of Marketing, Vol. 76, July 2012, p. 1-23.

Grewal, D. & Levy, M. 2012. Marketing, 3ed. New York: McGraw Hill.

Hawkins, D., Mothersbaugh, D. 2011. Consumer Behavior: Building Marketing Strategy, 11th

ed. New York: McGraw Hill.

Jayasankar, C., Kumar, V. 2012. Antecedents and Consequences of Customer Satisfaction in

Food & Grocery Retailing: An Empirical Analysis. Decision, Vol. 39 (3), p. 101 – 140.


Book One 203

Lovelock, C., Wirtz, J. 2011. Services Marketing, 7th ed. New York: Prentice Hall.

Neuman, W. L. 2003. Social Research Methods: Qualitative and Quantitative Approaches (5th

Edition ed.). Boston: Allyn and Bacon.

Rawson, A., Duncan, E., Jones, C. The Truth about Customer Experience. Harvard Business

Review, Sept 2013, p. 90-98.

Rust, R. & Huang, M. 2012. Optimizing Service Productivity. Journal of Marketing, Vol. 76

(March 2012), p. 47-66.

Sekaran, U. 2010. Research Method for Business. Chicago: Thompson.

Singh, A. 2013. Comparison of Service Quality, Customer Satisfaction and Behavioral

intentions across the Various Formats (Supermarket, Hypermarket & Departmental

Store) in India. Business & Economic Research, Vol. 3 (1), p. 344 – 355.

Tetu, Y., Yuhlin, S., Kuihsu, T. 2013. The Impact of Brand Image and Customer Commitment

on Loyalty: An Empirical Study of Automobile Sector. Information Management &

Business Review, Vol. 5 (4), p. 181 – 193.

Yamin. 2011. Regresi dan Korelasi dalam Genggaman Anda. Jakarta: Salemba Empat


Book One 204

THE IMPLEMENTATION OF STUDENTS’ ENTREPRENEUR

THROUGH THE COOPERATIVE-BASED ENTREPRENEUR

INSTRUCTIONAL MODEL

Sri Sutrismi1

Universitas Tulungagung

Ngunut-Tulungagung. Jawa Timur

INDONESIA


ABSTRACT

This research is entitled the implementation of students’ entrepreneur through

the cooperative-based entrepreneur instructional model, initialized by the

meeting of all rectors of 23 universities and Indonesia Boards of Cooperatives,

and involving Indonesian cooperative development studies, followed by the

memorandum of understanding for the development of cooperative-based

entrepreneur. The long term goal of this research is to actualize students’

entrepreneur independence, while the short term goal of this research is to

develop the cooperative-based entrepreneur instructional model. To achieve

these goals, the development activities were divided into two phases. In each

phase, the research steps to do were: 1) Exploring the potential of the students’

entrepreneurial behavior and environment. 2) Developing the instructional

model for lecturing by developing cooperative-based entrepreneur instructional

model. This study used a four-d models (Thiaragajan et.al, 1994). The first

phase of the study (conducted on first semester), based on the data analysis

from the behaviors and environment instrument through the making of idea,

showed that from the 40 students as the research samples, 75% students had

high potential while 25% students had medium potential. The result also

showed that the instructional method used before this failed to balanced the

hard skills and soft skills thus the students’ entrepreneurship independence was

less optimal. The results of the second phase of the study (the second half)

showed that: 1) Before testing the cooperative-based entrepreneur instructional

model, the researchers already developed a learning model assessment sheets

which were declared as valid under the proper category though still needed

improvement. 2) The results showed that the instructional model was capable to

meet the efforts of actualizing student’ entrepreneur independence.

Keywords: Cooperative-Based Entrepreneur Instructional Model,

Exploring The Entrepreneur Potential, Students’ Entrepreneur

Independence

INTRODUCTION

As inspired by the actualization of entrepreneurial students’ independence, this research

is aimed to design the most effective instructional model. This research is then



Book One 205

developed from the meetings of the rectors of 23 universities and Indonesia Boards of

Cooperatives (DEKOPIN) of East Java Province in 2010 facilitated by the Department

of Cooperatives, Indonesian cooperative development studies and SMEs (small micro

and medium business) in East Java, then followed up with the memorium of

understanding for the idea of developing cooperative-based entrepreneur. The result

from those meetings and MoU was the module of cooperative-based entrepreneur

modules as a text reference. The modules are one of learning references. The definition

of student learning in term of process and products is to prepare the student to apply for

the job applicants available, as well as to create their own work or to be an entrepreneur.

The needed human resources for that is human resources that have potential and highly

competitive skills. Therefore, balancing the hard-skill and soft-skill learning in higher

educational institutions is very essential.

Universities are obliged to to carry out their job to create human resources efficiently

and effectively as quality human capital investment. Productive human resources will

be ready to compete in the global market to face the Asean Economic Community in

2014. To achieve this objective, the quality of education requires continuous

improvement. The quality of the education can not be separated with the process and

product quality. The expected quality education can be achieved by creating effective

and efficient learning process in implementing real and meaningful science and

knowledge. The product quality can be achieved if the students demonstrate their level

of mastery in the work-sphere and the level of autonomy as relevant with the real life,

such as entrepreneurship. Related to the above description, in order to foster

entrepreneurial independence attitudes and behaviors, it is necessary to create a

instructional model that is appropriate, such as a instructional model that integrates the

characteristics of entrepreneurial spirit with the philosophy of the cooperative: the spirit

of mutual cooperation and unity. Thus, based on the above explanation, this study is

aimed to develop a cooperative-based entrepreneur instructional model.


Book One 206

THEORETICAL FOUNDATION AND RESEARCH METHOD

The development of expected instructional model in this research used four-d model

(Thiaragajan et.al, 1994) with the flow as illustrated in the following chart.

Figure 1. The Flow of Model Development

This study was developed in two phases: (1) The first phase was to conduct research on

the implementation of entrepreneurialship learning in the Faculty of Economics,

Management Department, University of Tulungagung. Based on the observations and

analysis results, the instructional model and its instruments were designed as a

cooperative-based entrepreneur learning media. (2) The second phase was to

disseminate the training of instructional model developed by the lecturers, and to

implement the instructional model. The learning instrument was available, such as

facilities in the Student Cooperative. of socialization training faculty developed

instructional model, then implementing the instructional model and learning the

instrument provided such facilities exist in cooperative student (KOPMA). The

operational activities are as follows:

DEFINE DEVELOP DISSEMI

NATE

Curriculum analysis, courses

of entrepreneurship,

students, learning

instrument, learning method

Revision

n

Analysis

test

revision

Test of

acceptance

Model revision

Designing

entrepreneuralship

instructional model

Developing

cooperative-based

entrepreneuralship

instructional model

Implementation

of instructional

model,

cooperative-

based

entrepreneursh

ip

Master Model

DESIGN


Book One 207

a. First phase

1) Analyzing the entrepreneurial potentials of the students through environmental

behaviors on the business idea proposal activities as a reference to (a). identify the

problem, (b). develop the alternative instructional model.

2) Designing a draft of cooperative-based entrepreneur instructional model and

perfecting the existing instrument.

b. Second phase

1) Developing instructional model and integrating entrepreneurship dan cooperative

with required modules for learning, which were published as a cooperation result of

23 universities, Indonesia Boards of Cooperatives, the department of cooperatives,

small micro and medium businesses, and cooperatives (Hard-skill).

2) Developing a set of evaluation instruments as part of the implementation of Student

Cooperative learning as soft-skill media.

3) Developing an instruction of the implementation of cooperative-based entrepreneur

learning integrated with the activities of university, faculty, and students.

4) Reviewing by the competent experts

5) Testing its validation

6) Gaining the data of students’ entrepreneur potentials

7) Gaining the data of supporting and inhibiting factors influencing the implementation

of the instructional model

8) Implementing the instructional model

Techniques of data collection techniques used in this research were: the documents

already available in the university, direct observation of the researcher as a lecturer of

Introduction to Business and to company the students in their entrepreneurship efforts,

technique of data collection from the making of business idea by the students in

relevance to their real life or the already understood business environment. The

technique of data analysis used in this study were: the results of instructional model trial

test, qualitative descriptive analysis to determine the entrepreneurial potential and

behaviors of the students after the intervention of instructional model, and descriptive

statistical analysis techniques as displayed in the Table of Development.

RESEARCH RESULT

The development of instructional model in this research covered: 1) the development of

cooperative-based entrepreneur instructional model, 2) the development of instructional

instruments, 3) the development of the instruction on the implementation of

cooperative-based entrepreneur instructional model, 4) trial test, 5) implementation. The

description is as follows:

The result of the development of cooperative-based entrepreneur instructional

model after trial and revision as displayed in the following chart.


Book One 208

Figure The development of cooperative-based entrepreneur instructional

model in the University of Tulungagung

The result of the development of cooperative-based entrepreneur instructional

model

a. The entrepreneur behaviors and potentials of students before and after the

intervention of cooperative-based entrepreneur instructional model. The data

gained showed that the entrepreneur behaviors are the human behaviors in

entrepreneurial efforts as their efforts to cope with problems of their

entrepreneur activities. The entrepreneur behaviors and potentials are the

objectives that should be achieved in the entrepreneur instructional. The data

were gained by grouping the students which were already involved in the

entrepreneur activities, direct and indirect, which were also resulted from the

environmental reality, and then followed up by the idea of business making

during the enrollment of Introduction to Business course, as displayed in the

following table:

STANDARD

COMPETENCE

BASIC COMPETENCE SYLLABUS

DECENTRALIZED BASIC EDUCATION

PROJECT (RPS)

ENTREPRENEUR

INSTRUCTIONAL ACTIVITIES

CHARACTERISTICS OF

ENTREPRENEUR AND

COOPERATIVE SPIRIT

COOPERATIVE-BASED

ENTREPRENEUR

INSTRUCTIONAL ACTIVITIES

INTEGRATED WITH THE

ENTREPRENEUR-THEMED

COURSE

DECENTRALIZED BASIC

EDUCATION PROJECT IS

INTEGRATED WITH

ENTREPRENEUR AND

COOPERATIVE

CHARACTERISTICS

STANDARD

CONTENT

MINISTER

POLICY NO.

22 Year 2006

ENTREPRENEUR

COURSE

STUDENT

COOPERATIVE

Cooperative should be based on the Law

No. 25 Year 1992, after cancelled by the

constitutional court in March 2014 by

material testing of Law No. 17 Year 2012

Togetherness

Kinship /

Solidarity

CONFIDEN

T

HONEST

INNOVATIVE

CREATIVE

REALISTIC

PERSPECTIVE

DARE TO TAKE RISK

INDEPENDENT

HIGH COMMITTMENT

Integrated


Book One 209

Table 1. : The entrepreneur behaviors and potentials of students

Involving in the

entrepreneur activities Total % Entrepreneur Category

Directly involved 30 75 High potential

Indirectly involved 10 25 Medium potential

Total 40 100

b. Factors supporting and inhibiting the implementation of cooperative-based

entrepreneur instructional model are:

Supporting factors: the commitment and consistency of leaders in

actualizing the vision of student independence through self-employment,

follow-up the memorium of understanding (cooperation), the assistance of

cooperative-based entrepreneur with Indonesia Boards of Cooperatives, the

Department of Cooperatives, and SMEs (small micro and medium

businesses) in East Java, the strong motivation of the lecturers of the

entrepreneur-themed courses, not only smart in memorizing the theories but

also able to turn the courses as research sources and actualize the students’

entrepreneur spirit to make it no longer the students’ psychological burden,

high motivation of the students since they received more attention to the

existence of their entrepreneur activities.

Inhibiting factors: to sustain the entrepreneur activities, limited by the study

period, ineffective socialization to the students of Faculty of Economics after

courses more on the background of the studied knowledge, and the lack of

ratio of the mentors and the number of students.

CONCLUSION AND SUGGESTION

Conclusion

Based on the analysis result, the conclusions made are as follows:

Before the development activities of cooperative-based entrepreneur

instructional model were tried, the researcher had developed the instrument

sheets from the process and result. The test result showed that the model was

improved and was feasible to use.

Based on the result of the development of cooperative-based entrepreneur

instructional model, it can be used to read the entrepreneur potential of the

students which need further assistance.

Based on the intervention of cooperative-based entrepreneur instructional model,

the result showed that from 40 students of one class as the research sample, 75

% (30 students) of them were having high potential of entrepreneur and 25 %

(10 students) of them were having medium potential of entrepreneur. During the

development, the improvement of entrepreneur implementation in the facility of

Student Cooperative occurred.

The implementation of the instructional media could go smooth based on the

strong motivation and commitment of the leaders in actualizing the vision of

university, which is the students’ entrepreneur independence.


Book One 210

SUGGESTIONS

1. Sustain the instructional model to be more perfect in actualizing and

exploring the students’ entrepreneur potential and entrepreneur

independence.

2. More effective socialization is needed to the internal and external

stakeholders to condusively support the atmosphere of the university to do

entrepreneur activities.


Book One 211

THE INFLUENCE PERCEIVED STIMULATION AND

PERCEIVED CROWDING AGAINST IMPULSE BUYING AND

CUSTOMER SATISFACTION RAMAYANA DEPARTMENT

STORE IN SURABAYA

Bambang Purwoko1

University of WR.Supratman

INDONESIA


ABSTRACT

The retail business growth that is increasing concurrent with the increase

purchasing power which increased. Ramayana Department store Surabaya is

counters that able to give the added value for its customers by selling some

cosmetic products, clothing, shoes and the need to work divide in full branded.

Purchasing decisions can back onto factors individual customers who tend to

behave affective and perceived stimulation and perceived crowding. In addition,

the research aims to learn more marketing impact relational databases and

commitment relational databases on customer loyalty Ramayana Department

store in Surabaya.

Samples of this research 105 person and data analysis with the model analysts

track mingled with the program SPSS. Results of the discussion can be

concluded that (1) significantly influenced satisfaction to our commitment

relational customers in perceived stimulation partially affect impulse buying

Ramayana Department store in Surabaya, (2) Perceived stimulation partially

affects impulse buying Ramayana Department store in Surabaya, (3) Impulse

buying influence on customer satisfaction Ramayana Department store in

Surabaya, (4) Perceive stimulation partially influential to customer satisfaction

Ramayana Department store in Surabaya with impulse buying variables as

mediation and (5) Perceived stimulation partially affected impulse buying

Ramayana Department store in Surabaya.

Keywords: Perceived Stimulation And Perceived Crowding, Impulse

Buying And Customer Satisfaction

INTRODUCTION

The growth Department store in Indonesia, increase that is quite significant. This was

marked with the increasing glow Department store found in some big cities. Some

Department store as the Sun, SOGO, Ramayana and others, tried to attract customers to

come to travel. The competition was forcing some peritel buyback strategy aimed to be

able to compete with other peritel. One of the strategy to be able to compete with

applying visual merchandise sales strategies with the way display products of the aim to

attract buying interest consumers. This strategy is very effective, because products


Book One 212

offered have been prepared for displaying a pattern, a light, and the organization colors

that support and the diverse products and service quality that is offered.

One of the Department store, popular among people of Surabaya is Ramayana

Department store, a well-known Entrepreneurs and medium enterprises class person in

Indonesia. During the time period in 2013 to 2014, the turnover sales continue to

increase, as seen below:

Table 1 The cycle sales of PT Ramayana Lestari Sentosa (RALS) in 2013-2014

Year In The Sales In Trillion (Rp)

First Semester of

2013

2,48

First Semester of

2014

2,66

Source: http://www.tribunnews.com/bisnis/2014/08/18/ramayana-kejar-target-2014

Based on The table 1 shows that Ramayana Department store, the increase sales of first

one year from 2013 until 2014. first one Sales increases utilized in line with economic

growth. Therefore, Ramayana incessantly expanding throughout Indonesia. Another

advantage in Ramayana Department store that are convenient, is the place and friendly

service cool and diversity products with items that vary, also have a space that makes it

easier for consumers and free shopping. Purchasing decisions can back onto factors

individual customers who tend to behave affective at a level where individuals feel good

fun, happy or satisfied in a situation (Semuel, 2005). While other factors perceived

stimulation is customer perception of impulses that can affect impulse buying

consumers and perceived crowding is a perception environmental shops that received or

perceived as excessive stimulation that cause the low self-control. Its population density

felt that shows that the density negatively correlated with customer satisfaction and the

number of will (Grossbart dkk., 1990).

This condition can cause impulse buying consumer Ramayana Department store in

Surabaya. Perceive stimulation that positive consumers will be able to impulse buying

Ramayana Department store in Surabaya and vice versa perceived stimulation that

negative impacts will encourage consumers to not interested in the Ramayana

Department store Surabaya. In addition, perceived crowding has also been part

consumers interested in buying Ramayana Department store in Surabaya, because

consumers feel fulfilled their needs and obtained satisfaction. The Election Ramayana

Department store because counter that has a good image of the eyes consumer services

such as a satisfactory, variety a comprehensive product as well as product quality with

an affordable price. Thus, the authors are attracted to examine the influence perceived

stimulation and perceived crowding against impulse buying and customer satisfaction


Formulation of problems which is proposed to this study included: (1) What is

perceived stimulation and perceived crowding partially affect impulse buying

Ramayana Department store in Surabaya?. (2) What is impulse buying influence on

customer satisfaction Ramayana Department store in Surabaya? (3) What is perceived

as well as stimulation perceived crowding affect consumer satisfaction Ramayana

Department store in Surabaya with mediation impulse buying?. While the purpose of

this discussion is: (1) To find out the influence perceived stimulation and perceived

crowding partially to impulse buying Ramayana Department store in Surabaya (2) To

find out the influence impulse buying to customer satisfaction Ramayana Department


Book One 213

store in Surabaya and (3) To find out the influence perceived stimulation and perceived

crowding to customer satisfaction Ramayana Department store in Surabaya with

mediation impulse buying.

LITERATURE REVIEW

Theoretical Approach

The attitude is most important concepts in their studies consumer behavior, with

influence the consumers, the marketer hope to be able to influence on will consumers.

According to Schifman and Kanuk (Simamora, 2002:152) the attitude is an expression

feelings (Inner feeling), which reflects what is a happy/not happy, like/dislike and agree

or not to a subject. Mowen and Minor (2002:319) define this attitude as efeksi or feeling

for or against a stimulus. Mowen and Minor (2002) presents the attitude:319 is at the

core of liked and did not want to, the group, the situation, objects, and ideas did not

come into existence.

1. Perceived Stimulation were categorized into three categories based on individual

comment about the scale stimulation (Mattila and Wirtz, 2008):

a. Stimulation becomes a less (the 0 to 3.5);

b. Neutrals (the scale 3.6 to 4.5); and

c. Stimulation becomes a higher rate (4.6 to 7).

Or previously in psychology shows that a self-decreases when their ability to self-

decreases (Muraven et al,1998). Self-Control that cannot be controlled also applied for

the consumer (Mattila and Wirtz, 2008).

2. Perceived Crowding is a perception reaction affective consumer behavior and

the reaction to the crowded the physical environment (Mattila and Wirtz, 2008).

Research on the density and the number of will that he felt it shows that the density man

is correlated with satisfaction from a negative buyer (Mattila and Wirtz, 2008). Direct

effect of crowding on the room will affect the satisfaction of buyer's shopping and

indirectly led to the emotional changes of the buyer.

3. Impulse Buying

Kotler & Armstrong (2001:195) refers to on will ends the households and individuals

buy goods and services for personal consumption is one of the forms are impulse

buying. According to Bitner, Booms and Tetreault (in 1990), the implications of the

environment shopping toward the behavior will support the assumption that physical

services provide an environment affect consumer behavior. Rook (1998:191), impulse

buying as it happened when consumers suddenly, a strong desire and firm to buy

something as soon as possible.

4. Consumer satisfaction

Wyckop that was quoted from Fandy Tjiptono (2008:59) quality of service as a measure

how good high service that is given to be able to in accordance with ekspetasi customers.

Parasuraman in Precatorius Lupioadi and A. Hamdani (2008:180) quality of service is a

comprehensive assessment on high a good service, the service quality (service quality)

as a result perception of a comparison between hope customers with the actual

performance service. Kotler (2005:36) satisfaction is a joy or disappointed eseorang


Book One 214

that comes from a comparison between the effect on the performance of a product and

his expectations. Engel, et al (1995:273) customer satisfaction as evaluation after

consumption where an alternative that was chosen at least to meet or exceed

expectations. Kotler and Armstrong into (2000:546) defines a customer satisfaction as a

certain level in product which was felt in accordance with the hope that buyers.

Consumer satisfaction to buy depending on performance actual products, so that in

accordance with the hope that buyers.

5. Relations with Perceived Stimulation Impulse Buying

The excessive (that is, higher than the illusory happiness of the) will cause them to the

loss just self-control, and then increase the possibility will berimpuls. Baumeister

(1998) and Muraven, et al, (1998), "Prior research in psychology shows that self-

regulation is reduced presiding over the self-'s crucial resources have been depleted".

Baumeister (2002) shows that people's capacity to withstand temptations are in high at

least low.

6. Relations with Perceived Crowding Impulse Buying

Machleit et al. (2005), Conversely, researched on perceived crowding postulates that

human density is negatively correlated with satisfaction". In other words, the hostility

towards staff shops that he felt it can reduce negative impact on density that is felt to be

not particularly planned.

7. Model analysis of


Book One 215

8. The hypothesis

H1 : Perceived stimulation partially affect impulse buying Ramayana Department store

in Surabaya.

H2 : Perceived crowding partially affect impulse buying Ramayana Department store in

Surabaya.

H3 : Impulse buying influence on customer satisfaction Ramayana Department store in

Surabaya.

H4 : Perceived stimulation and perceived crowding affect impulse buying Ramayana

Department store in Surabaya with impulse buying variable as moderation.

H5 : Perceived stimulation and perceived crowding affect impulse buying Ramayana

Department store in Surabaya with impulse buying variable as moderation.

RESEARCH METHOD

The loading technique samples are non-probability samplings. The withdrawal samples

of using sampling techniques aksidental that is determining samples based on chance.

According to Sugiyono (2005:55) population is a region that are composed

generalization; objects or subjects that have certain characteristics quantity and

determined by researchers to be learned and then drawn to conclude".

The population of this research is that people who have to use and buy Ramayana

Department store in Surabaya. Sugiyono (2005:56) samples are part of the number and

characteristics which is owned by populations that were as many as 105 respondents.

Samples taking do during the week on 15-24 july, 2014 in Ramayana Department Store

THR Mall, Jl. Kusuma Bangsa 116-118, and Ramayana Department Store JMP Plaza, Jl.

Jayengrono 2 Surabaya.

1. The identification variables

Formulated four variables which is to be determined to do and be categorized as

follows:

a. The free variables, namely:

a. Perceived stimulation (X1)

b. Perceived crowding (X2)

b. Variables bound as:

a. Impulse buying (Y1)

b. Consumer satisfaction (Y2)

2. Operational Definition.

a. The Perceived stimulation (X1), Perceived stimulation

is stimulation of consumer perception of positive or

negative ransangan (Mattila's and Wirtz, 2008).

b. Perceived crowding (X2), Perceived crowding is a perception reaction

affective consumer behavior and the reaction to the crowded the physical

environment (Mattila and Wirtz, 2008).

c. Impulse buying (Y1), Impulse buying is done by the consumer Ramayana

Department Store Surabaya in this research impulse buying, presented by

Stern (1962)

d. consumer satisfaction Variable (Y2), The consumer satisfaction is a

feeling happy or upset someone who comes from the comparison of the


Book One 216

effect on performance or outcomes of a product and his expectations in the

store (Kotker, 2005: 36).

3. Data Sources.

To obtain the relevant data, collecting data throughsurvey questionnaires by

spreading in ways that give you a questionnaire that is closed to the consumer in

accordance with the specified characteristics.

4. Data Analysis techniques.

a. Test Validity.

According to Sugiyono (2005: 267), "Valid means the instrument can be used to

measure what is measured". If the value of the probability of less

than 0.05 so that statement is said to be valid.

b. Test Reliability.

According to Ghozali (2009: 45) is a device used to

measure reliability a questionnaire that is an indicator of variable or invalid

constructs. An invalid constructs or variables are said to be reliability if

cronbach alpha value above 0.6 (Nunnally, 1960) in Ghozali (2009: 46).

c. Test Path Analysis.

According to Al-Rashid (2005), before noticing some assumptions need to

be analysed as follows: (1) the relationships between variables to be linear and

additive, (2) all residue variable had no correlation to each other, (3) patterns

of relationships between variables is recursive or relationship that does not

involve a reciprocal influence direction, (4) the level of measurement interval is

at least all the variables. Based on a conceptual framework, then this

research uses techniques of path analysis is a technique for analyzing

causal relations occurring on multiple regression - free if the variable

affects variables depends not only directly, but also indirectly

(Rutherford 1993 in Sarwono 2007:1). As for the analyst pathway is:

a. Determine the path diagram model based on the paradigm of relationships

between variables.

b. Make a diagram of the route parallels its structure.

c. Analyze by using SPSS to equation substructure analysis of 1 to 4.

1) substructure Equations 1

Y1 = α0 + α1X1 + α2X2 + ε1

Description: Y1 = Impulse buying

X 1 = Perceived stimulation

X 2 = Perceived crowding

α0 = constants

α1, 2, = regression Coefficient associated with the variable free

ε1 = Variable outside of the model (error)


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Y2 = α0 + α1 X1Y1 + ε3

Description: Y2 = customer satisfaction

X 1 = Perceived stimulation

Y1 = Impulse buying

α0 = constants

α1, 2 = regression Coefficient associated with the variable free

ε3. = Variable outside of the model (error)


Y2 = α0 + α1 + ε3 X2Y1


X 2 = Perceived crowding

Y1 = Impulse buying

α0 = constants




Y2 = α0 + α1 Y1 + ε3


Y1 = Impulse buying

α0 = constants



5. Hypothesis Testing Procedure

The procedures hypothesis used the influence significant test track perceived

stimulation and perceived crowding against impulse buying and customer satisfaction

Ramayana Department Store in Surabaya, include:

a. The hypothesis test 1 and 2 with equations test line 1

1. H1 : Perceived stimulation partially affect impulse buying Ramayana

Department store in Surabaya.

2. H2 : Perceived crowding partially affect impulse buying Ramayana

Department store in Surabaya.

b. The hypothesis test 3 of the equation test line 2.

1. H3 : Impulse buying significantly affect to customer satisfaction


c. The hypothesis test 4 and 5 with equation test line 3.

1. H4 : Perceived stimulation and perceived crowding affect impulse buying

Ramayana Department store in Surabaya with impulse buying variable as

moderation.

2. H5 : Perceived stimulation and perceived crowding affect impulse buying

Ramayana Department store in Surabaya with impulse buying variable as

moderation.


Book One 218

DISCUSSION

1. Description Respondents

Description of the Sexes Respondents

Table 1. The percentage of the Sexes

No Gender Amount Percentage

1 Men 38 people 36,2%

2 Women 67 people 63,8%

Total 105 Total 100%

Source: data questionnaire processed

In the table can be seen that respondents most of the opposite sex women are 67

respondents or of and the lowest 63.8 percent of the sexes men as much as 38

respondents or by 36.2 percent.

Description Domicile Respondents

Table 2.percentage Domicile

No Gender Amount Percentage

1. Surabaya 105 people 100%

2. Outside Surabaya - -

Total 105 people 100%

Source: data questionnaire processed

In table 2 can be seen that all respondents is domiciled in Surabaya or of 100% and

there is no respondents who came from outside Surabaya.

2. Results of Research Analysis

Testing the validity

Testing the validity here will be done in 105 respondents are chosen. The validity

obtained at the significance that is when the value significantly less than 0.05 then said

to be valid. While tests reliability Malhotra (2004:310) a powerful instruments can be

said that when the alpha cronbach, that is more than 0.6 which means reliabel. Table 3

below shows results of the analysis validity and reliability data.


Book One 219

Table 3. Validity Test Instrument Perceived variable stimulation (X1), Perceived

crowding (X2), Impulse buying (Y1), and Customer Satisfaction (Y2)

Instrument Pearson Correlation Significan

t

Note

X1.1 0.559 0.000 Valid

X1.2 0.708 0.000 Valid

X1.3 0.738 0.000 Valid

X1.3 0.815 0.000 Valid

X2.1 0.842 0.000 Valid

X2.2 0.888 0.000 Valid

Y1.1 0.855 0.000 Valid

Y1.2 0.846 0.000 Valid

Y1.3 0.767 0.000 Valid

Y1.4 0.716 0.000 Valid

Y2.1 0.753 0.000 Valid

Y2.2 0.656 0.000 Valid

Y2.3 0.794 0.000 Valid

Y2..4 0.734 0.000 Valid

Variable Coefficient Variations

Alpha

Alpha

Cronbach

Note

X1 0.664 0,600 Reliabel

X2 0.662 0,600 Reliabel

Y1 0.799 0,600 Reliabel

Y2 0.713 0,600 Reliabel

4. Analysis of the line (the path Analysis)

Structural Model

test result coefficient line (the path greatly enhanced by) the influence directly served in

table 4.

Table 4. Coefficient Direct Path

Exogenous

Variables

Eksogen

Endogenous

Variables

Endogen

Standardize

Coefficient

standardize

Sig. Decesion

Perceived

stimulation

Impulse buying 0,413 0,000 Significant

Perceived

crowding

Impulse buying 0,470 0,000 Significant

Impulse buying Customer

satisfaction

0,811 0,000 Significant

table 4 above, it shows that Impulse buying a sphere of influence dominant to customer

satisfaction with the coefficient standardize direct effect of 0.811 (p = 0.000).

Following the path analysis as seen at the bottom of this page.

Y1 = Impulse buying

X1 = Perceived stimulation

X2 = Perceived crowding

α0 = constant


Book One 220

H4 = 0, 419 sig.0,000

H1 = 0,413 H3 = 0,811 sig 0,000

Sig 0,000

H1 = 0,470 H5 = 0,443 sig 0,000

Sig 0,000

Figure. Analysis of the Track

Testing influence does not immediately be carried out by looking at test result tracks

which is passed by, if all the path that is travelled significantly so the influence does not

directly also siginifikan, and if there are at least one line that non-significantly so the

influence does not directly said non-significantly. Coefficient track influence can be

served in the table 5.

Table 5. Coefficient not Directly influence the Path Exogenous

Variable eksogen

Intervening

Variable

Endogenous

Variable

Standarize

Coefficient Decision

Perceived

stimulation Impulse buying Customer

stisfacion 0,335*) Significantly

Perceived

crowding Impulse buying Customer

stisfacion 0,381**) Significantly

Note :

* = 0.413 x 0.811

**= 0.470 x 0.811

Based test result coefficient routes such as in the table 4 and table 5, then models in the

form path diagram test result coefficient line will be served in the picture 1 above.

Model was also can be declared in the form simultaneous equation system (equal). Path

analysis in the form common served as follows:

Zimpulse buying = 0.413 ZPerceived stimulation + 0.470 ZPerceived crowding

ZCustomer stisfacion = 0.419 ZP.stimulation and Impulse buying + 0.443 ZP. crowding and Impulse buying.

ZCustomer stisfacion = 0.811 Zimpulse buying

5. Discussion Results of Research

The results of the analysis research has shown that the relationship Perceived

stimulation, Perceived crowding and Impulse buying and customer satisfaction

Ramayana Department Store Surabaya in that vary as a result vindication for the

hypothesis proposed in this study. Empirical Research done by researchers before all

will be used as a comparison in a discussion results of research, whether theory or

empirical research result that will support or contrary to test result that will be done in

this research, so that by impact and significant on a new theory or development theory

that has been there.

1).influence perceived stimulation to impulse buying

Perceived

stimulation

Perceived

crowding

customer

satisfaction

Impulse

buying


Book One 221

Based on test track coefficient direct effect that is served in the table 4 produced a hits

that perceived stimulation to significantly affect impulse buying Surabaya, because the

value significantly 0,000 (<0.05). These research results in the direction of the research

done by Simamora (2004), which shows that the behavior buy consumer is influenced

by store environment or environmental shops. Or Mattila and Wirtz (2008) shows that

such an environment shops are very stimulating and fun so that it will cause an increase

in the drive.

2).influence perceived crowding against impulse buying


that perceived crowding significantly affect to impulse buying Surabaya, because the

value significantly 0,000 (<0.05). This research is contrary to the statement Stokols in

Vaske and Shelby (2008) that defines a jostled as negative evaluation of its population

density and involves consideration that the density or the number of meetings with other

visitors too much.

3).influence impulse buying to customer satisfaction

Based test track coefficient direct effect that is served in the table 4 produced a hits that

impulse buying significantly affect to customer satisfaction Ramayana Department

Store Surabaya, because the value significantly 0,000 (<0.05). More consumers get

what he hoped at the time it, then it is very likely that consumers will buy back (Wong

and Sohal, 2003).

4).influence perceived stimulation to customer satisfaction with impulse buying variable

as mediation.

Based on test track coefficient influence not directly served in the table 5 produced a

hits that perceived stimulation significantly affect to customer satisfaction with impulse

buying variable as mediation, because the value significantly 0,002 (<0.05). From test

result can be concluded that the hypothesis 4 stating that perceived stimulation

significantly affect to customer satisfaction with impulse buying as mediation is proven.

This research is supported with the research done by Mattila and Wirtz (2008) shows

that such an environment shops are very stimulating and fun so that it will cause an

increase in the drive. Consumer decision to buy impulsif can resulted by the high level

of comfort that was created by the stimulus environmental shops (Chen, 2008).

5).influence perceived crowding to customer satisfaction with impulse buying variable

as mediation.


that perceived crowding significantly affect to impulse buying Surabaya, because the

value significantly 0,000 (<0.05). From test result can be concluded that the hypothesis

5 (five) stating that perceived crowding significantly affect to customer satisfaction with

impulse buying as mediation is proven. This research is contrary to the statement

Stokols in Vaske and Shelby (2008) that defines a jostled as negative evaluation of its

population density and involves consideration that the density or the number of

meetings with other visitors too much.

Baumeister (1998) and Muraven, et al, (1998), "Prior research in psychology shows that

self-regulation is reduced presiding over the self-'s crucial resources have been

depleted". Baumeister (2002) shows that people's capacity to hold the most humble is

at the level at the end of the day when the spirit to shop more decreases.


Book One 222

THE CONCLUSIONS, , IMPLICATIONS AND LIMITATIONS

1. The conclusions

Based on the results of the analysis and discussion on, so it can be conclused as follow:

a. Perceived stimulation affect impulse buying Ramayana Department store in

Surabaya with the value of 0.413 coefficient standardise and significantly of

0.000.

b. Perceived stimulation affect impulse buying Ramayana Department store in

Surabaya with the value of 0.470 coefficient standardise and significantly of

0.000.

c. Impulse buying influence on customer satisfaction Ramayana Department store

in Surabaya with the value of 0.811 coefficient standardise and significantly of

0.000.

d. Perceived stimulation influential to customer satisfaction Ramayana Department

store in Surabaya with impulse buying variable as mediation have the coefficient

standardise of 0.419 and significantly of 0.000.

e. Perceived stimulation affect impulse buying Ramayana Department store in

Surabaya with the coefficient standardise each of 0.443 and significantly of

0.000.

2. The implications

After these variables in analysis that is observed in this research and her conclusion,

there are several implications:

a. The policies that when it comes to perceived stimulation and perceived

stimulation that had been implemented by Ramayana Department store in

Surabaya in marketing, especially in in policies to influence on buy impulsif put

must be maintained and improved so that intention consumer spending will

increase.

b. Customers to be satisfied with the environment that is comfortable and cool and

not jostled shopping time that given by Ramayana Department store in

Surabaya.

c. Advanced researchers should be added variables which are used to measure, so

or become more perfect

3. Limitations

limitation in this research is:

a. In this research did not discuss customer loyalty Ramayana Department store

in Surabaya in terms of the life style that results of research is only focused

relashionship marketing. This means that the loyal customers this research to

Ramayana Department store in Surabaya, due to the fact that the relationship

between customer and Ramayana Department store, it is not because customers

require Ramayana Department store because to follow the trend or lifestyle.

b. In this research respondents only who lived in Surabaya.


Book One 223

REFERENCES

Algifari, 2000, Analisis Regresi Teori, Kasus dan Solusi, Edisi 2, Yogyakarta: BPFE.

Anoraga, P., 2004, Manajemen Bisnis, Jakarta: Rhineka Cipta.

Berry, L., 1995, Relationship Marketing of Services Growing Interest: Emerging Perspectives,

Journal of the Academy Marketing Science, Vol. 23. No.4, page 236-245.

Chen, Tsai. 2008. Impulse Purchase Varied by Products and Marketing Channels.Journal

ofInternational Management Studies.

Cooper, D.R., and Schindler, P.S., 2003, Business Research Methods, Eight Edition, Mc

GrawHill: Boston

Ghozali, Imam., 2007, Aplikasi: Analisis Multivariate dengan Program SPSS, Semarang:

Universitas Diponegoro.

Kim, K.H., Kim, K.S., Kim, D.Y., Kim, J.H., dan Kang, S.H., 2008, Brand Equity in Hospital

Marketing, Journal of Business Research 61, 75-82.

Kuncoro, M., 2003, Metode Riset untuk Bisnis dan Ekonomi. Jakarta: Erlangga.

Malhotra, N.K, 2005, Riset Pemasaran: Pendekatan Terapan, Jakarta: Indeks Kelompok

Gramedia.

Mattila, A. S. and Wirtz, J. 2008. The role of store environmental stimulation and social factors

on impulse purchasing. Journal of Services Marketing, Vol.22, No. 7, pp. 562-567.

Mattila, Anna S. dan Wirtz, Jochen. 2007. TheRole of Store Environmental Stimulation And

Social Factors on Impulse Purchasing, Journal ofServices Marketing,

Morgan, R., M., and Shelby D. Hunt, 1994, The Comminment Trust Theory of Relationship

Marketing, Journal of Marketing, July.

Mowen, J. C. and Michael Minor. 2001. Consumer Behavior. Fifth Edition, Harcourt, Inc.

Mowen, John C., 1995, Customer Behavior, Fourth Edition, International Edition, Englewood

Cliffs, New Jersey: Prentice Hall Inc..

Prasasti, R.D., Chaniago, H., dan Sutarso, Y., .2003, Pengaruh Relationship Marketing terhadap

Kepuasan Pelanggan dalam Industri Jasa Asuransi Jiwa, Jurnal Ventura, Vol.6, No.2,

Agustus 127-145.

Sarwono, J., 2007, Analisis Jalur untuk Riset Bisnis dengan SPSS, Andi: Yogyakarta

Soehartono, I., 2008, Metode Penelitian Sosial, Bandung: Remaja Rosdakarya.

Sugiyono, 2005, Statistika untuk Penelitian, Bandung: Alfabeta.

Tjiptono, F., 2006, Manajemen Jasa, Yogyakarta: Andi.


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Umar, H, 2003, Riset Akuntansi, Jakarta: Gramedia.

Widiana, M., E., 2004, Dampak Faktor-faktor Pemasaran Relasional dalam Membentuk

Loyalitas Nasabah Pada Bisnis Asuransi, Majalah Ekonomi, Universitas Airlangga

Tahun XIV, No.3 Desember, Surabaya.

Yamit, Zulian, 2004, Manajemen Kualitas Produk dan Jasa, Yogyakarta: Ekonisia.

http://www.tribunnews.com/bisnis/2014/08/18/ramayana-kejar-target-2014, diakses tanggal 20

Agustus 2014

http://www.tribunnews.com/bisnis/2014/08/18/ramayana-kejar-target-2014


Book One 225

EFFECT OF INTERNAL AND EXTERNAL FACTORS OF

AGAINST SUGARCANE FARMERS INCOME IN NGIMBANG

LAMONGAN

Wayan Sukesedana1 , J.E. Sutanto2

Universitas Ciputra

INDONESIA

E-mail: [email protected], [email protected]

ABSTRACT

This study aims to determine the effect of internal factors (culture techniques,

cane varieties, fertilizer / fertilization, costs) and external factors (yield, price) to

the sugarcane farmers’ income and at the same time to determine the factors that

most influence the sugarcane farmers' income in the subdistrict Ngimbang

Lamongan.Moreover, The independent variables examined in this study consisted

of technical culture (X1), varieties of sugarcane (X2), fertilizer / fertilization

(X3), costs (X4), yield (X5), price (X6), and the affected variable is the income of

sugarcane’s farmer (Y). Technical culture has five indicators, that include land

selection (A-1), cropping patterns (A-2), tillage (A-3), plant maintenance (A-4)

and the optimization of cutting and hauling (A-5). Sugarcane varieties has five

indicators, that include seed quality optimization standards (B-6), production

potential optimization (B-7), varieties composition arrangement(B-8), growing

season (B-9), seed certification program (B-10 ). fertilizer / fertilization has four

indicators, that include, fertilization timeliness (C-11), Exact fertilizer dose (C-

12), Exact fertilizers application (C-13), and exact fertilizer type (C-14). Cost has

three indicators, that include the cost of production inputs (D-15), labor costs (D-

16), the cost of capital (D-17). The yield of having three indicators, that include

the potential of sugarcane varieties (E-18), maturity or sugarcane’s age (E-19),

and the quality of cane raw materials (E-20). Price has two indicators, that

include the price of sugar (F-21) and the price of sugarcane (F-22). Sugarcane

farmers' income has three indicators, which are internal factor (G-23), external

factors (G-24), net profit (G-25). The analytical tool used in this study is the

analysis of quantitative data and qualitative data analysis. In quantitative data

analysis multiple linear regression is use for analytical function. The population

in this study are all cane farmers in the Ngimbang subdistrict at Lamongan, who

manages his own cane on land as well as land leased and has been farming

sugarcane more than one growing season (1 year). While the sample used

amounted to 116 respondents with a random sampling technique. Based on the

analysis that has been made in which all factors (technical culture, varieties,

fertilizer / fertilization, cost, yield and price) has a significant effect on the

sugarcane farmers income in Ngimbang Lamongan. While, the price factor is the

biggest influence on the sugarcane farmers income in Ngimbang Lamongan,

followed by technical culture factors, cost factors, fertilizer / fertilization, yield

factors and varieties.



Book One 226

Keywords: Technical Culture, Varieties, Fertilizer / Fertilization, Cost,

Yield, And Price

INTRODUCTION

Indonesia has experienced the glory of sugar industry in the 1930s. This can happen due

to the ease of obtaining fertile land, cheap labor, irrigation priorities, and discipline in

the technology application (Susila, 2005: 1)

As a country with growing purchasing power, Indonesia has the potential to become one

of the world's largest sugar consumer. In accordance with research Sugiyanto (2007)

Indonesian sugar consumption in 2014 reached 11.47 kg per capita/year and will

increase to 13.06 kg per capita/year by 2020, this figure is still below the average of

world sugar consumption that have been reach 20 kg per capita per year (Sugiyanto,

2007: 114).

Government and sugar industry stakeholder in Indonesia should aware of business

opportunities above and take proper action. Indonesia was known as the leading world

sugar producer in the past. The main production center of sugarcane plantations in

Indonesia are located in: East Java, Central Java, Lampung, West Java and DI

Yogyakarta, reaching 99.28% contribution to the total production of sugarcane

plantations in Indonesia.

Sugarcane (Saccharum officinarum Linn.) Is a strategic commodity as the main raw

material for the sugar manufacturer (Asmara and Nurholifah, 2010: 109). Demand

increment for sugar should be able to provide the opportunities for sugarcane farmers to

do farming. Sutrisno (2009: 155) says that agriculture and farming today not merely as

a "way of life" but also has become the real business. Therefore, the farmers have to

consider the business cost and income, including the income of farmers in managing the

business.

Empirical data shows drop in sugar prices impact on farmers for their losses (read: a

decrease of the farmers income), followed by shrinkage of sugarcane area, especially in

the region that are highly dependent on sugarcane farmers, such as in East Java. As a

matter of fact, in 2002 when the price of sugar fell from Rp 3,400 to Rp 2,600 per kg,

sugar cane area in East Java in 2003 shrank as many as 11 thousand hectares. The sugar

price reduction not only reducing sugarcane plantation area but also decreasing crop

productivity, as farmers are reluctant to maintain good cane. Proven in 2002 averages

the crystal (sugar) dropped from 5.27 tons per hectare to 5.17 tons per hectare

(Toharisman, 2013). The low price of sugar is not the only one that affects the level of

income of farmers. But is also influenced by factors in the sugar mills and cane growers

quality (off farm and on farm).

The low yield and production of crystal sugar by Sutrisno (2009) due to the lack of

proper technical culture, especially in terms of the selection of land, cropping pattern,

soil tillage, crop maintenance, harvesting and transport optimization. Cultivation and

management of sugarcane varieties that have not been in accordance with the planting

season, is also a cause of low yield and production of crystal sugar.

In addition to the above problems, the determination of HPP (basic price) sugar policy

in 2014 by the government through the Minister of Trade Regulation No. 25/2014


Book One 227

Benchmark Pricing White Crystal Sugar Growers in 2014 amounted to Rp 8,250 per kg

was considered too low, where as the results based on yield calculations APTRI

(farmers organizations) including Cost of Goods Manufactured (BPP) and the land lease

should be Rp 9,500 per kg (Sunanto and Musyawir in Azizah, 2014).

From the description above, Internal Factors (teknnis culture, cane varieties, fertilizer /

fertilizer, and costs) and External Factors (yield and price) simultaneously or partially

can affect sugarcane farmers' income in Indonesia (Sutrisno, 2009 and Yanutya, 2013)

including east of Java, Lamongan and Ngimbang. On the basis of the above problems,

then a study entitled: “Effect of Internal and External Factors for Sugarcane Farmers

Income in Ngimbang Lamongan”, was performed.

Identification and Formulation of Problem

1. Are there affect of technical factors, cane varieties, fertilizer / fertilization,

cost, yield, and price of against income cane farmers in Ngimbang

Lamongan?

2. what is the most factor influential of incomes against sugarcane farmers in

Ngimbang Lamongan?

Research Objectives

1. To determine the influence of technical culture, cane varieties, fertilizer /

fertilization, cost, yield, and price of against income cane farmers in

Ngimbang Lamongan.

2. To determine the most factor influential of incomes against sugarcane farmers

in Ngimbang Lamongan.

Technical culture

According Kuntorohartono in Sutrisno (2009) technical culture is defined technically as

a set of activities required to prepare the environmental conditions for the growth and

development of sugarcane. Selection technique of field such as irrigated land done on

the pattern A (May-July), while the rain-fed land, must follow the pattern B

(September-November). Tillage aims to create the best conditions for the growth and

development of sugarcane roots. Plant maintenance including fertilization, cultivation,

weeding, pest control and disease, irrigation or drainage, and leaf stripping, should be

intensively done and on time. Optimization of cutting transport associated with the age

and maturity of the cane. Because transport is very complex cutting jobs, the amount of

supply of cane every day, the availability of logging, transportation, the readiness of the

road, cutting transport infrastructure, etc. Technical culture of sugar cane is often

regarded as a pre-condition to support the response of fertilizer, improved varieties,

irrigation, weed and pest control of the cooking process or filling the sugar in cane

stalks (Sutrisno, 2009).

Sugarcane varieties

Variety is defined as a collection of plants which have genetic and phenotypic

properties of the same. Yielding varieties is a collection of the same plant and have

certain superior properties (Sugiyarta in Sutrisno, 2009). Some important things to note


Book One 228

associated with sugarcane varieties, are as follows: Optimization of seed quality

standards through seed certification test. Optimization of the production potential by

ensuring as much as possible so that the full potential of a superior varieties can be

realized. Efforts to optimize the production potential of each variety can be a way to

meet all the requirements to grow the best. Structuring varieties namely arranging

varieties to match the maturity level of each variety of sugar cane and adapted to the

harvest period. Planting season is the perfect time to perform activities of sugarcane

cultivation.

In a study Sutrisno (2009) found that varieties very significant effect on sugarcane

farmers income, it is reinforced by research Pratiwi and Priest (2003) which says that

the contribution to the production of sugar varieties can reach 60%.

Fertilizers and Fertilization

Fertilizers are solids, liquids or gases containing nutrients that plants require, non toxic

and can be administered through soil (Ismail in Sutrisno 2009). Applications and

fertilization know-how is very important to produce optimal sugarcane yield (Nazir.

Et.al, 2013). Research results Hussain and Khattak in Dlamini and Masuku (2012)

found that increased use of chemical fertilizers can increase sugarcane productivity if

applied on time, right dose, right methode of application, and the exact type of fertilizer

used. Timely means fertilization when plants need extra nutrients. Fertilization should

be done several stages according to the phases of sugarcane growth. This is consistent

with that proposed by Sandara in Chidoko and Chimwai (2011) that timely aplicated

fertilizer will produce the most good plant growth. Mean dose to the exact fertilizer

application should be in accordance with the results of soil analysis. Exactly how the

application means the application of fertilizer should be done the right way. The goal is

that the fertilizer applied is not lost (especially nitrogen fertilizer) and also fertilizers are

not easily swept away in the flow of surface water. The right kind of fertilizer meant for

the use of fertilizers that have the exact nutrient content.

Cost

Cost is around the sacrifices or the input value used for farming process. Costs are

grouped into: production cost, labor costs, and capital costs. Cost of production, are

consisted of all supporting facilities costs that is related to sugarcane cultivation, these

include: the cost of fertilizers, agricultural chemical costs, and others. Labor costs,

which are expenses incurred to pay the wages of all workers or laborers for sugarcane

cultivation activities. The capital costs associated with the additional amount of interest

from each source of funds borrowed and used by farmers in the farm. Research Sutrisno

(2009) found that the cost factor affects the income of farmers in sugar cane plant of

Mojo Sragen.

Yield

Yield is sugar content in sugarcane expressed in percentage. Mochtar in Sutrisno (2009)

yield is sugar produced from each quintal of sugarcane. Yield of sugarcane is strongly

influenced by: the variety, maturity (sugarcane age) and quality of raw materials from

the field until the sugar cane milled (Marjayanti 2006 in Sutrisno, 2009). Several factors

that affect the yield are as follows: The potential varieties or any variety characters in


Book One 229

addition to the technical culture, climate factors influence on the yield of sugarcane,

Maturity and age related to the future sugarcane planting. If the cane is planted in the

right age and maturity of the obtained optimal cane. The quality of raw materials

associated with slash transport process. Harvested cane must be sweet, clean and fresh.

The results of the study Sutrisno (2009) that the yield factor biggest impact on farmers

income in the plant cane sugar Mojo Sragen.

Price

Price is the amount of money exchanged for a product or service. Price is the amount of

value exchanged for a number of consumer benefits by having or using a product or

service. The common perception is that it applies a high price reflects its high quality

(Tjiptono 2008 in Yanutya, 2013). Sugar price despite market affecting its mechanism,

but HPP (basic price) of sugar from the government remain as the benchmark. Yanutya

Research (2013) find that the price has a positive and significant relationship to the

sugarcane farmers income in Japon Blora.

Sugarcane Farmers Income

Rahim in Yanutya (2013) says that farm income is the difference between revenue and

all costs incurred in farming. Revenues and costs of farming can be influenced by

internal and external factors. Internal factors that affect farmers' income include:

technical culture, varieties, fertilizers, and farming costs. External factors that affect

farmers' income, including: the yield and price of sugarcane. Gross receipts is the result

obtained by multiplying production by selling price in the sugar cane milling season (in

Yanutya Rahim, 2013). Net profit (income) is the difference between total revenue and

total cost incurred in the production process, in which all inputs family-owned

calculated as production costs (Sukirno in Yanutya, 2013).

Hipotesis

H1 : The technical culture would affect sugarcane farmer’s income

H2 : The sugarcane varieties would affect sugarcane farmer’s income

H3 : The fertilizer / fertilization would affect sugarcane farmer’s income

H4 : The cost factor would affect sugarcane farmer’s income

H5 : The yield of sugarcane would affect sugarcane farmer’s income

H6 : The price of sugarcane would affect sugarcane farmer’s income

Research approach

This study was a quantitative descriptive survey method. To confirm and clarify the

results of quantitative research, qualitative research was also conducted using in-depth

interviews with some farmers selected respondents. Interviewed farmers should be able

to represent the overall sugarcane farmers, as well as having extensive knowledge and

insight about the sugar cane farming. Both studies quantitative and qualitative

conducted in the same population, ie sugar cane farmers who are sub district of

Ngimbang Lamongan. This method is said to be suitable Sugiyono (2014: 83) that the

survey method used to obtain the data from a particular place is conventionally using

the data collection instrument or in the form of questionnaires and interviews.


Book One 230

Sampling Method

The sampling method with probability sampling, the sampling techniques that provide

equal opportunities for every member of the population to be elected as members of the

sample. The population in this study were all cane farmers in the district who are

Ngimbang Lamongan, has made farming more than one growing season. The sample is

part of a population whose characteristics are considered representative of the

population.

Data Collection Method

1. Quantitative Data Collection

Questionnaire used in the data collection according Likert scale, which is commonly

used to measure attitudes, opinions, and perceptions of a person or group of people

about the phenomenon. The Likert scale gradation, as follows: (4) Strongly Agree, (3)

Agree, (2) Disagree, (1) Strongly Disagree. Before being used to retrieve data, such

instruments will be tested for validity and reliability.

2. Qualitative Data Collection

Qualitative data was collected by conducting in-depth interviews (indept interview)

against three farmers (informants) were purposefully selected and has advantages

compared with other farmers. And the data were extracted from the interview revolves

around the statements contained in the instrument (questionnaire) from quantitative

research.

Quantitative Data Analysis

1. Multiple Linear Regression Analysis

Multiple linear regression analysis formula, as follows:

Y = a + b1x1+b2X2+ b3X3+ b4X4+b5X5+b6X6+ Є

Y = income of farmers

X1 = technical culture

X2 = sugarcane varieties

X3 = Fertilizer / fertilization

X4 = Cost

X5 = Yield of

X6 = Price

A = constant Numbers

b1 = regression coefficient of the variable X1

b2 = regression coefficient of variable X2



b5 = Regression coefficient variable X5


Є = Error (error term).


Book One 231

2. Testing Parameters

2.1. Individual Significance Test (Test Statistically t)

Aiming to compare whether two samples are from the same population or not.

According Kuncoro (2013: 244) t statistical test basically shows how far the influence

of the individual independent variables in explaining the affected variable variation.

2.2. Accuracy Test Model

2.2.1. Simultaneous Significance Test (Test Statistic F)

F statistic test shows whether all the independent variables included in the model have

jointly effecting the dependent variable.

2.2.2. The coefficient of determination (R2)

Determination coefficient (R2) measures how far the model's ability to explain

variation in the dependent variable. Determination coefficient is between zero and one.

Value close to one means that the independent variables provide almost all the

information needed to predict the dependent variable (Kuncoro, 2013: 246).

2.2.3. Coefficient of Partial Determination (Partial R2)

Partial determination coefficient (R2 partial) aims to determine the most influential

independent variable on the dependent variable. The independent variables that have the

largest partial R2 values are independent variables that the most influence to the

dependent variable.

Qualitative Data Analysis

According Creswell in Sugiyono (2014: 347) says that qualitative research means the

process of exploration and understanding the meaning of the behavior of individuals

and groups, describing social problems or problems of humanity.


Book One 232

Results of Multiple Linear Regression Analysis

Table 1: Results of Multiple Linear Regression Analysis

Variable Coefficient

Regression

Coefficient

Beta t Sig

Constante -1,687 -2,535 0,013

Technical culture (X1) 0,141 0,209 2,259 0,026

Cane Varieties (X2) 0,109 0,145 2,115 0,037

Fertilizer/pertilization

(X3) 0,159 0,162 2,464 0,015

Cost (X4) 0,171 0,178 2,557 0,012

Yield (X5) 0,154 0,145 2,431 0,017

Price (X6) 0,332 0,241 3,636 0,000

Fhitung = 69,793

R2 = 0,793

Sig. F = 0,000

Sources: Statistical analysis of research data

1. Test Accuracy Parameter Estimates (t-test)

In testing the accuracy of parameter estimators (t test) showed variable technical

cultures obtained t value of 2.259 > 1.984 means technical culture has a positive and

significant effect on the income of farmers. Varieties obtained t value 2.115> 1.984

means that the varieties have a positive and significant effect on income of farmers.

Fertilizer/fertilization obtained t value 2.464 > 1.984 means that the fertilizer has a

positive and significant effect on income of farmers. Costs obtained t value of 2.557 >

1.984 means that the cost has a positive and significant effect on the income of

sugarcane farmers. The yield of obtained t value of 2.431 > 1.984 means that the cost

has a positive and significant effect on the income of sugarcane farmers. Price obtained

t value of 3.636 > 1.984 means that the price has a positive and significant effect on

income of farmers.

2. Test Model Accuracy

2.1. Test F

Results of F statistical analysis of the obtained results calculated F 69.793 with a

significance of 0.000. Calculated F value is greater than 2.18 (69.793 > 2.18) means that

there is an influence jointly between the independent variables (technical culture,

varieties, fertilizer / fertilization, the cost of yield and price) of the variable income of

farmers. The results of the regression analysis show that the model is correct.


Book One 233

2.2. The coefficient of determination (R2)

The coefficient of determination is used to determine how much the independent

variables can explain the dependent variable. R2 value of 0.793 indicates the selection

of the independent variables in explaining the variation in revenue of 79.3%, the

remaining 20.7% is determined by other variables outside the model. Thus the selected

explanatory variables are able to explain the variation in income.

2.3. Coefficient of Partial Determination (Partial R2)

Based on the analysis of the data found that the independent variable has a value price

largest partial R2, is equal to 0.241 This means the greatest effect on the dependent

variable Y (sugarcane farmers income). Followed by variable technical culture = 0.209;

variable costs = 0,178; variable fertilizer / fertilization = 0.162 and variable yield and

sugarcane varieties respectively = 0.145

Discussion

1. Effect of Technical Culture Against Farmers Income

Technical culture positive and significant effect on income of sugarcane farmers in

Ngimbang Lamongan. This means determine the technical culture of sugarcane farmer’s

income. The more intensive cultivation of the technical implementation of sugarcane

production and farmers income will be higher. It is appropriate that the Kuntorohartono

in Sutrisno (2009) said that the technical culture is a set of activities required to prepare

the environmental conditions for growth and development that is good for the plant cane,

then Dlamini and Masuku (2012) says that a good technical culture is very important to

increase production sugarcane farmers, so as to increase the income of farmers. This fits

well with one of said cane farmers in Ngimbang named: Ismuntoyo, in an interview

with the researcher, as follows:

"...... we have to increase farmer awareness in proper cane cultivation" (02 / IS / II / 20-22).

With regression coefficient of the variable X1 (b1) is equal to 0.141 means that if

another state does not change then any changes and increase agronomic treatments led

to an increase in farmers' income of up to 14.1%.

2. Effect of Varieties Against Farmers Income

Sugarcane varieties grown by farmers has positive and significant effect on their income.

If the other variables does not change, then the proper selection of varieties of sugar

cane, can increase revenue by as much as 10.9% compared to the previous. The

importance of selecting appropriate varieties of sugar cane Sutrisno (2009) said that the

varieties of very significant effect on sugarcane farmers income, it is reinforced by

research Pratiwi and Priest (2003) which says that contribute to the production of sugar

varieties can reach 60%. However, the actual implementation is not fully utilize. This is

similar to sugar cane growers say (informant) Ngimbang named Soli, as follows:

"While this plant was no pack is how it fits great varieties in dry land was still difficult, which many here

is the only BL, the BL is susceptible to dry, well yes indeed the yield is low" (01 / SL / III / 4 -6).


Book One 234

In addition, local sugar factory should become farmers advisor in each sugar cane

development region.But in the otherhand, they failed to perform this role actively, this

is in accordance with the farmers Ismuntoyo statements:

"Composition ... varieties, we should get important guidance with intensive counseling, insight to our

farmers more detail maybe we can arrange it, however sugar factories previously was not prioritizing

varieties depiction, in this point, early, middle end "(02 / iS / III / 29-33)

3. Effect of Fertilizer / fertilization Against Farmers Income

Fertilizer/fertilization positive and significant impact on the sugarcane farmers income.

If the other variables does not change, then the fertilization is done on time, exact dose,

exact methode and the right type of fertilizer, it will be able to increase the sugarcane

farmers income up by 15.9% from the previous state. This is in accordance with

Hussain and Khattak in Dlamini and Masuku (2012) that the increased use of chemical

fertilizers can increase sugarcane productivity if applied on time, right dose, right way

of application, and the exact type of fertilizer used. Similarly, Sandara said in Chidoko

and Chimwai (2011) that timely fertilizers application will produce the most good plant

growth. But the influence of Fertilizer/fertilization especially in Ngimbang should still

be improved. Because of interviews with informants, sugar factory has not given

intensive counseling and sustainable sugarcane farmers surrogate; as well as the

procurement of fertilizer for farmers is also not maximized. It is appropriate that said

farmer (informant) Ismuntoyo:

"During this time, you may ask all farmers and you might be wondering maybe sugar factory does not

exist here, only vast sugar cane plantation, the sugar factory management does not educate us on how to

cultivate good cane quality with high yield" (02 / IS / IV / 17-20).

"as the time goes, it is more difficult to find fertilizer in lamongan and the price become more expensive

every year. If there are no more choices, farmers sometime buy non-subsidized fertilizer. I feel pity to our

farmers,"(02 / IS / IV / 26-31).

Farmers sometimes do not get the full subsidized fertilizer quota , therefore aiming for

the right dose also became an obstacle. This situation is reinforced by Soli farmers

statement, as follows:

"It is correct that sugar factory itself never facilitate the needs of farmers. For example one ha, one ha can

use up to to one and a half-ton, but it is sometimes only seven hundred were sent"(01 / SL / IV / 26-29)

4. Effect of Costs Against Income Farmers

The cost factor farming positive and significant impact on farmers income. From the

results of this study demonstrated that with the proper allocation of costs could increase

farmers income of up to 17.1% (other conditions being equal). This is supported by the

results of the same research Sutrisno (2009) in Mojo sugar mill in Sragen, that is very

influential factor in the cost-to-income farmers. consistently Soli (informant) also

stated: "Highly influential pack (read: fertilizer), and a lot of capital, probably added big maybe" (01 / SL / V /

31-32)

Similarly Ismuntoyo say about this cost issue, as follows:


Book One 235

"certainly influencing the income, if we're managing the cost properly then we would be able to lower

the cost. (02 / IS / V / 4-10).

5. Effect The yield Against of Farmers Income

The sugarcane yield would positively and impacting singnificantly on the sugarcane

farmers income. Any increase in yield can affect farmers income by 15.4% (if the other

state does not change). This is in contrast to research Sutrisno (2009) in Mojo Sragen,

where it says the greatest influence; however not the case in Ngimbang. This is

probably caused by differences in the region and the condition of farmers in each of

these regions. Effect of the yield to the income of farmers is also justified by the farmer

Ahmad Basoni, as follows:

"The Sugar cane variety can affect yield and quality" (03 / BS / VI / 3-5)

6. Effect the Price of Against Farmers Income

Posisitif factors influence the price and very significant compared to other factors. If

other conditions remain, so if there is an increase in sugar prices by the government and

or increase in sugarcane prices for farmers as a result of market mechanisms; then the

situation can increase farmers income by 33.2%. This situation is in line with the results

of the research Yanutya (2013) in the sub district Japon Blora, that price has a positive

and significant relationship to the sugarcane farmers' income. Toharisman in "20th Asia

International Sugar Conference 25-28 August 2014" in Jogjakarta, also reinforces this

situation, as follows: "Price reflecting sugar policy. Sugarcane (sugar) production,

productivity and area were strongly affected by the relative price of sugar (farmer

benefits)" One of the farmers in Ngimbang (Soli) related to the issue price also says:

" Yes, It would affected (read: price)" (01 / SL / VI / 5)

"expensive labor, transportation also getting more expensive" (01 / SL / VI / 7)

"The price is really low, currently already reached Rp8,200,-/kg" (01 / SL / VI / 9-10)

Then the same thing is said by farmers Ismuntoyo and Ahmad Basoni related to the

issue price, as follows:

"Definetely , sugar price decrease so the sugarcane price during the action will also fall. While the cost

for maintenance, cuting and transportation cost are getting more expensive each day. This made farmers

lose hope "(02 / IS / VI / 7-10 )

"Yes obviously, with the current pricing issue, we could not survie" (03 / AB / VI / 5-6)

7. Effects of All Variables Against Farmers Income

Based on multiple linear regression analysis it is known that the regression coefficients

of each independent variable is positive, so that said variable technical culture, varieties,

fertilizer / fertilization, cost, yield, and price jointly positive effect on sugarcane farmers

income.

From the analysis of the above data, the value of the coefficient of determination (R2)

of 0.793. This means that the relative contribution provided by a combination of

variable technical culture, varieties, fertilizer / fertilization, yield, and price to earnings


Book One 236

sugarcane farmers in Ngimbang Lamongan amounted to 79.3% while the rest is

influenced by other variables.

Among all independent variables were tested, it is known that the variable X6 has the

greatest value of the beta coefficient: 0.241. Thus it can be said, that the price factor is

the biggest impact among the six other factors, especially in Ngimbang Lamongan.

Conclusion

Based on the analysis of data and the above discussion it can be concluded as follows:

1. The internal factors (technical culture, sugarcane varieties, fertilizer /

fertilization, and costs), respective positive and significant effect on farmers

income. Furthermore, external factors (yield and price) of each positive and

significant impact on the sugarcane farmers income.

2. Contributions sixth variable (technical culture, varieties, fertilizer / fertilization,

cost, yield, and price) to the sugarcane farmers income reached 79.3%; while

the remaining 20.7% determined by variables outside the model.

3. Price factors is the biggest factor influence on sugarcane farmers income in

Ngimbang Lamongan.

Suggestion

1. For academics, further research needs to be conducted to determine other factors

that may affect sugarcane farmers income.

2. For the government it is advisable to focus more on policy determines the price

of sugar, as this is the most decisive factor in the sustainability of farmers trying

to farm sugar cane.

3. For the sugar factory recommended providing intensive and ongoing counseling

to reduce the cost of farming. Thus, the sugarcane farmers' income could be

increased.

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Book One 239

FLEASIBILITY STUDY FOR DEVELOPMENT BUSINESS PT. J

Jaya, Adi Gama Tengtarto1, David Sukardi Kodrat2

Universitas Ciputra

INDONESIA


ABSTRACT

Analysis of the feasibility for development business of PT. J is intended to

determine the feasibility of the business plan development and investment

capabilities within providing benefit to the amount of capital invested.

This study examined the feasibility of developing business through five aspects,

namely, the environmental aspects of the industry, market aspects and

marketing, technical aspects and technology, management and human

resources, and financial aspects. From the five aspects of the business

development plan indicates that PT. J are acceptable and feasible.

This study use four methods for calculating investment feasibility analysis tool

with the results of the following calculation: Method NPV (Net Present Value)

obtained a positive value of Rp 2,192,392,228. Method IRR (Internal Rate of

Return) obtained an interest rate of 13.18%. Payback Period method showed

that the time required to cover the investment of Rp 1.8 billion is 5 years and 5

months. Methods PI (Profitability Index) show the results obtained greater than

1 that is equal to 2.22. From the calculations using these four methods can be

interpreted that the business development plans of PT. J are acceptable and

feasible.

Keywords: Feasibility Study, Business Development, Family Business,

Analysis

INTRODUCTION

Trade in this globalization era is growing rapidly along with the increasing needs of the

global community. In fact, it takes the role of manufacturers to produce goods that have

better quality with competitive prices. Opportunities to develop business in the field of

manufacturing knitted gloves manufacturer in Indonesia still widely open, because

Indonesia is a developing country.

PT. J is a family company that is engaged in manufacturing knitted gloves and has been

established since 2000 with the number of machines early as 20 machines, and at this

time amounted to 216 machines. The purpose of developing this family business is to

master the local market in Indonesia.



Book One 240

Table 1. Comparison Between Production and Sales PT. J Years Total (dozens)

2008 Last Stock 22.510

2009 Production 648.214

Selling 644.060


Selling 715.521


Selling 758.475

2012 Production 1.183.628

Selling 1.096.344

2013 Production 1.059.499

Selling 1.163.663


Table 1 describes the comparison of data between the production and sales of the PT. J

where the data can be seen that the sales of PT. J almost always achieve the maximum

capacity of production held by PT. J. This suggests that the developing the business of

PT. J can be said to be worthy seen from the data presented in Table 1.

In 2013, economy of east java is supported by three main sectors, namely: agriculture

(14.91%), manufacturing industry (26.60%), and trade, hotels and restaurants (31.34%)

and industrial gloves in industry processing. The third major sector accounted for

72.85% of the GDP in East Java, namely Rp 1.136.330.000.000.000,00. Economic

growth in East Java in 2013 grew by 6.55% and the growth of industrial sector reached

5.59%. Industrial gloves are included in the textile sub-sector showed a growth of

5.14% compared to the previous year of 1.70%.


Understanding the Feasibility Study of the Business Development

Understanding of business feasibility study is a study that aims to determine whether a

business idea is feasible or not. A business idea is declared feasible to be implemented

if the idea can bring greater benefits for all parties (stakeholders) than negative impacts

(Suliyanto, 2010: 3). Categories of business feasibility study is divided into three

categories (Subagyo 2011: 29), namely: the establishment of new businesses (create a

new business), business development (developing of business), and the purchase of an

existing business (business acquisition). Category studies the feasibility study to be

conducted within this opportunity is a business feasibility study on business

development (developing of business) because researchers have an existing business

and has plans for further expansion. At this stage of the establishment of new businesses

(create a new business), aspects that need to be addressed is (1) Legal Aspects, (2)

Environmental Aspects of Industry, (3) Aspects of Market and Marketing, (4) Technical

Aspects and Technology, (5) Aspects management and Human Resources, and (6)

Financial Analysis. At this stage of business development (developing of business), the

analysis of the aspects that will be addressed in the feasibility study on business

development (developing of business) is (1) Environmental Aspects of Industry, (2)

Aspects of Market and Marketing, (3) Aspects technical and Technology, (4) Aspects of

Management and Human Resources, (5) Financial Analysis. (Suliyanto, 2010: 251).


Book One 241

Legal aspects not be used in the study of developing business / legal aspects of business

because only deals before setting up a license of a company.

Aspects in Feasibility Study of the Business Development

1. Environmental Aspects of the industry

According to Ireland (2013: 36-44) environment generally consists of segments that

are outside of the company. Although the effect of different levels, it affects the

entire segment of the industry environment and the companies that compete in them.

Analysis is performed within aspects of the industrial environment is PEST analysis

(political, economic, social and cultural, and technological) and five analysis.

2. Aspects of market and marketing

The market is a group of buyers and sellers of goods or services. As a group, the

buyers determine how much demand for such goods, and as another group, the seller

determines how much the supply of goods (Mankiw, 2009: 78). Analysis is

performed within market and marketing aspects is STP Analysis (Segmenting,

Targeting, and Positioning) strategy and the marketing mix (Product, Place, Price,

and Promotion).

3. Aspects of technical and technology

Businesses fail because it does not able to deal with technical problems. Therefore,

the analysis of the technical aspects be used to answer the question of whether the

business is technically able to run or not (Suliyanto, 2010: 133). Things that need to

be analyzed on the technical aspects of within industrial environment, such as: (1) the

selection of the location of the plant development, (2) determination of the optimal

scale of production, (3) the selection of machinery and equipment, (4) the

determination of plant layout and building, (5) technology selection.

4. Aspects of management and human resource

Aspects of human resource are an important aspect in the analysis and the need for

material as well as development of a business. The role of human resources no longer

as a technical implementation, but as a partner within company to be actively involve

in efforts to achieve competitive advantage (Nature, 2009: 101). The discussion

within aspect of human resources include: (1) organizational structure, (2) job

analysis, (3) as well as compensation and benefits.

5. Aspects of financial

Aspects of financial include information and data from whole other aspects to be one

in the financial statements. These financial statements will be analyzed by means of

investment criteria, namely: Net Present Value, Internal Rate of Return, Payback

Period and Profitability Index (Muslich, 2009: 153).

RESEARCH METHODS

The research approach applied to this feasibility study is applied research, which this

kind of research concerns the application of theory to solve a particular problem

(Kuncoro, 2009: 7). Type of applied research is divided into three, namely: research

evaluation, research development, and action research. This research uses the evaluation

and development of research in which the research is expected to contribute ideas,

feedback, and evaluation materials for business development within this study to

determine whether or not the business / enterprise to be developed.


Book One 242

Table 2. Sampling Method No. Description Population Sampling Method Number of Sampling

1. Supplier 4 Saturation Sampling 4

2. Customer 31 Purposive Sampling 3

3. Competitor 4 Saturation Sampling 4


Table 3. Data Gathering Method in Every Aspect No. Aspect Types

of Data

Data

Sources

Data Gathering Method

1. Environmental Aspect of the

Industry

Secondary

a. Politic Nominal Documentation

b. Economy Ratio Documentation

c. Social Nominal Documentation

d. Technology Nominal Documentation

e. Customer Ratio Primer,

Secondary

Documentation, Interview

f. Supplier Ratio Documentation, Interview

g. Competitor Ratio Documentation, Interview

2. Aspects of Market and Marketing Primer,

Secondary

a. Total market (Rp) Ratio Observation, Documentation,

Interview

b. STP Interval Observation, Documentation,

Interview

c. 4P Nominal Observation, Documentation,

Interview

d. SWOT Nominal Observation, Documentation

3. Aspects of Technical and

Technology

Primer,

Secondary

a. The development of the factory

site selection

Nominal Observation, Documentation

b. The determination of the

optimal production scale


c. The selection of machinery and

equipment


d. The determination of plant

layout and building

Nominal Observation, Documentation,

Interview

e. The selection of technology Nominal Observation, Documentation

4. Aspects of Management and

Human Resource

Primer,

Secondary

a. Organizational structure Nominal Observation, Documentation

b. Job analysis Nominal Documentation, Interview

c. Compensation and benefits Ratio Observation, Documentation

5. Financial Primer,

Secondary

a. Investment costs (Rp) Ratio Observation, Documentation

b. Lending rates (%) Ratio Documentation



Book One 243

RESULT

a. Environmental Aspects of the industry

From the analysis of the five forces that exist in the market, can be made to summarize

the five forces analysis is shown in Table 4 below.

Table 4. Summary Analysis of Five Forces in the Market Indicator Conditions

Bargaining power of buyers Strong

Bargaining power of suppliers Strong

Competition among companies Medium


Table 5. SWOT Calculation Element Point Rating Value

INTERNAL FACTORS

STRENGHT

Management is open to any changes, especially changes made to develop

the business 0,183 3 0,55

Efficiency in the production process 0,250 4 1,00

Cheaper price with quality maintained 0,117 3 0,50

Total 2,05

WEAKNESS

Product sold almost the same as the product sold by competitors 0,217 3 0,65

Limited capital to develop the business 0,117 3 0,35

Less experience of running gloves businesses than competitors 0,117 3 0,35

Total 1 1,35

Total Internal Factor + 0,70

EXTERNAL FACTORS

OPPORTUNITY

Gloves can be sell freely for export to the ASEAN region 0,233 4 0,93

Strict safety regulations from the government 0,233 4 0,93

Pro-market policies to support domestic businesses 0,083 3 0,25

Total 2,12

THREAT

The entry of foreign products into Indonesia 0,183 3 0,55

The slow development of engine technology of gloves 0,133 3 0,40

Consumer loyalty to a product that has been purchased 0,133 3 0,40

Total 1,35

Total of External Factor + 0,77



Book One 244

Figure 1. SWOT Calculation


b. Aspects of market and marketing

Figure 2. Brand-Positioning-Differentiation Concept


Guaranteed Quality,

Affordable Prices

Gloves “J”

Content: Gloves have a good and

stable quality with an affordable

price by the consumer.

Context: Packaging is attractive to

consumers and high efficiency in

packaging materials.

Infrastructure: The company is

able to do a production with a high

level of efficiency so that the result

of products have a good quality

with low price.

Brand

Positioning Diffentiation

Opportunity (+)

Threat (-)

PT. J (0,70:0,77)

X

Y

Strength (+) Weakness (-)


Book One 245

Figure 3. Implementation of Growth Oriented Strategy in Marketing Mix


c. Aspects of technical and technology

Table 6. Analysis of Technical and Technological Aspects No. Terms Condition at PT. J Analisys

1. Location of business development

sufficient and feasible for use.

Location to be used still

in the process of

development.

Feasible

2. The equipment for production and

production support easy to obtain.

Production equipment

can be obtained.

Feasible

3. Suppliers are ready to send the raw

materials.

Suppliers of raw

materials ready to send.

Feasible

4. Skilled labor has been in the process of

production and packing.

Skilled labor able to

obtain.

Feasible


d. Aspects of management and human resource

Table 7. Analysis of Management and Human Resource Aspects

No. Terms Condition at PT. J Analisys

1. The organizational structure has been

formed.

There has been a

functional organizational

structure int the company

Feasible

2. Analysis of the work has been established. PT. J has made the job

analysis

Feasible

3. Standard operation procedure has

effectively formed.

PT. J has the SOP Feasible

4. Employee management system has been

well established.

PT. J has management

system for employess

Feasible


Product

Increase the

number of

products

produced

Promotion

Previously no

promotion, use

the promotion

currently

Place /

Distribution

Improved

processing

speed

distribution

Price

Remain


Book One 246

e. Aspects of financial

a) Initial Investment

Table 8. Initial Investment

Type of Expenses Total Value per unit

(Rp)

Total Vaue

(Rp)

Purchase of machinery 31 Piece 50.000.000 1.550.000.000

Initial Cost

Remodeling the place 1 Time 50.000.000 50.000.000

Recruitment new employees 1 Time 500.000 500.000

Training employees 5 Day 200.000 1.000.000

New work equipment 24 Person 250.000 6.000.000

Inventory

Initial inventory 1 Package inventory 185.000.000 185.000.000

Total Initial Expenses 1.792.500.000

Source: Data were processed in 2014 b) NPV (Net Present Value)

Table 9. Net Present Value (Rp)

Description Number Discount Factor Final Value Accumulation

Cash Out (1.792.500.000) 1,000 (1.792.500.000) (1.792.500.000)

1st year cash in 223.743.979 0,917 205.269.706 (1.587.230.294)

2nd year cash in 229.450.120 0,842 193.123.576 (1.394.106.718)

3rd year cash in 280.295.066 0,772 216.439.220 (1.177.667.498)

4th year cash in 334.699.159 0,708 237.109.322 (940.558.176)

5th year cash in 392.911.537 0,650 255.365.540 (685.192.636)

6th year cash in 736.666.635 0,596 439.250.245 (245.942.391)

7th year cash in 829.916.737 0,547 453.992.876 208.050.485

8th year cash in 897.594.346 0,502 450.472.335 658.522.820

9th year cash in 970.009.388 0,460 446.619.269 1.105.142.089

10th year cash in 2.573.916.484 0,422 1.087.250.139 2.192.392.228


In the 10th year, NPV has reached a positive value with a value of Rp 2.192.392.228,00

c) IRR (Internal Rate of Return)

Table 9. Net Present Value (Rp)

Description Total

Cash out (1.792.500.000)

1st year cash in 205.269.706

2nd year cash in 193.123.576

3rd year cash in 216.439.220

4th year cash in 237.109.322






10th year cash in 1.087.250.139

IRR 13,18%


Book One 247


IRR in the 10th year reaches 13,18%.

d) PP (Playback Period)

Table 10. Playback Period

Description Total Accumulation

Cash out (1.792.500.000) (1.792.500.000)

1st year cash in 223.743.979 (1.568.756.021)

2nd year cash in 229.450.120 (1.339.305.900)

3rd year cash in 280.295.066 (1.059.010.834)

4th year cash in 334.699.159 (724.311.675)

5th year cash in 392.911.537 (331.400.138)

5th year on 5th month cash in 331.400.138 0

6th year cash in 736.666.635 405.266.497

7th year cash in 829.916.737 1.235.183.235

8th year cash in 897.594.346 2.132.777.581

9th year cash in 970.009.388 3.102.786.969

10th year cash in 2.573.916.484 5.676.703.453


In the 5th year 5th month there has been a payback period of the final value in year 6th

has reached Rp 405.266.497,00.

e) PI (Profitability Index)

Table 11. Playback Period

Description Value

a. Cash Out 1.792.500.000

b. Cash In 3.984.892.228

PI ( b : a ) 2,22


The PI value is 2,22.

CONCLUSION

Based on the research on the 5 aspects that have been done above, it can be concluded

as follows:

1. From all aspects studied, the environmental aspects of the industry, aspects of

market and marketing, aspects of technical and technology, aspects of management

and human resources, and financial aspects, indicating that PT. J’s condition is

feasible at this time to be developed.

2. The plan of business development which will be carried out by PT.J, studied trough

the financial aspects with the following results:

a. The Net Present Value (NPV)

In this study, the expected NPV of the 7th year have reached a positive value.

At the end of the 7th year NPV value has reached Rp 208 050 485,00, so in

terms of business development, NPV is feasible to be applied.


Book One 248

b. Internal Rate of Return Method (IRR)

In this study, the limit value for IRR is 9%. The calculations show that the IRR

is equal to 13.18%, so in terms of business development, IRR is feasible to be

applied.

c. Payback Period Method (PP)

In this study, the payback period is to be achieved within seven years. The

calculations show that the PP occurred in the 5th year 5th month, so in terms of

business development, PP is feasible to be applied.

d. Profitability Index Method (PI)

In this study, the PI is expected after running the business for ten years is 1.5.

The calculations show that the PI value of 2.22, so in terms of the PI, business

development is feasible to be applied.

REFERENCES

Delaney, Patrick R, and Whittington, O.Ray.(2010) Business Environment and Concepts.New

Jersey:John Wiley & Sons, Inc.

Husnan, S. dan Muhammad.2009 Studi Kelayakan.Yogyakarta:Graha Ilmu.

Ireland, R.Duane, Hoskisson, Robert E., Hitt, Michael A.2013 The Management of Strategy

Concepts and Cases, 10th edition. Canada: Nelson Education, Ltd.

Jakfar, dan Kasmir.2010 Studi Kelayakan Bisnis.Jakarta:Kencana Prenada Media Grup.

Kartajaya, Hermawan.2010 Grow with Character.Jakarta:PT Gramedia Pustaka Utama.

Kodrat, David Sukardi.2009 Manajemen Distribusi: Old Distribution Channel dan Postmo

Distribution Channel Approach.Yogyakarta:Graha Ilmu.

Kodrat, David Sukardi. 2009 Manajemen Strategi: Membangun Keunggulan Bersaing Era

Global di Indonesia Berbasis Kewirausahaan.Yogyakarta:Graha Ilmu.

Kodrat, David Sukardi. 2010 Manajemen Eksekusi Bisnis. Yogyakarta:Graha Ilmu.

Kotler, Philip dan Gary Amstrong. 2007 Marketing an Introduction. Eight Edition. New Jersey:

Pearson Education Inc.

Kotler, Philip dan Kevin Lane Keller.2007 Manajemen Pemasaran. Edisi Kedua. Klaten Utara:

PT. Macanan Jaya Cemerlang.

Kuncoro, Mudrajad. 2009 Metode Riset untuk Bisnis & Ekonomi: Bagaimana Meneliti &

Menulis Tesis. Edisi 3.Jakarta:Penerbit Erlangga.

Lazuardi, Reza Fiqhi. 2014 Analisis Kelayakan Usaha Mobile Carwash di Kota Bandung,

Jurnal Teknik Industri Itenas, I(3), pp. 48-56.


Book One 249

Mankiw, Gregory N. 2009 Principles of Economics: Pengantar Ekonomi Mikro. Edisi

3.Jakarta:Penerbit Salemba Empat.

Mulyadi. 2012 Akuntansi Biaya. Edisi 5.Yogyakarta:Unit Penerbit dan Percetakan Akademi

Manajemen Perusahaan YKPN.

Muslich, Mohammad. 2009 Manajemen Risiko Operasional : Teori dan Praktik.Jakarta:Bumi

Aksara.

Nanang. 2011 Pertumbuhan Pasar Ekspor di Indonesia.Harian Umum Kompas, 22 Agustus

2011,pp.12.

Nurfuadah. 2011 Pertumbuhan Industri Fashion di Indonesisa.Harian Umum Kompas,

15Agustus 2011,pp.14.

Rangkuti, F. 2011 Analisis SWOT: Teknik Membedah Kasus Bisnis. Jakarta: PT Gramedia

Pustaka Utama ; Jakarta

Rivai, Veithzal. 2009 Manajemen Sumber Daya Manusia untuk Perusahaan. Edisi

Kedua.Jakarta:Raja Grafindo Persada.

Siyanbola, Trimisiu Tunji, and Raji, Gbolagade Mojeed.(2013) The Impact of Cost Control on

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Subagyo, Ahmad 2011 Modul Studi Kelayakan Bisnis.Jakarta:PT Elex Media Komputindo.

Suliyanto. 2010 Studi Kelayakan Bisnis: Pendekatan Praktis.Yogyakarta:Penerbit Andi.

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Book One 250

THE SUCCESSION PROGRAM PLANNING

OF DAMAI SEJAHTERA FAMILY BUSINESS

Ongkowidjojo, Kevin Alexander1, Damelina Tambunan2

Universitas Ciputra, Surabaya

INDONESIA

ABSTRACT

This research was conducted to describe the succession program planning at

Damai Sejahtera family business. This research was a qualitative design in which

the data were gained through conducting survey supported with non-participative

observation and in-depth interview for unconfirmed answer given. Four internal

informants of Damai Sejahtera were interviewed to gain the data needed. The

informants were the CEO, the wife of CEO as the family member, the employee as

a CEO’s confidant, and the future successor.

The succession program planning of Damai Sejahtera covered five basic factors

of succession planning, namely the CEO preparation, the business preparation,

the successor development, the family preparation, and the owner preparation in

order to find out the readiness of the business and the family to the succession

program that would be implemented. The result of the research concluded that

Damai Sejahtera is not ready for succession program planning program and has

to follow managerial implications that covers 5 basic factors proposed by Aronoff.

Keywords: CEO, Family Business, Succession Program, Successor,

Indonesia.

INTRODUCTION

Family business is an important pillar for the economy of Asia, family businesses in the

region recorded a total cumulative profit is equal to 261% during 2000-2010, with a

compound annual growth rate of 13.7% during this period (Kompas Ekonomi, 2011). In

Indonesia, the majority of family businesses engaged in wholesale and retail trading for

36%, 24% on manufacturing and distribution, professional services 14%, two types of

business on 13%, agriculture and fishing for 4%, 3% on construction, finance, real

estate for 2%, transportation, hotel and entertainment only 1% (Grant Thorton Indonesia,

2013). Succession is a must do in a family business considering of CEO or founder’s

performance will continue to decrease as they are getting older so that should be a

transfer of corporate responsibility to the next generation. The purpose is to maintain

the continuity of the family business is because there is no certainty on when the CEO

of the family business will be off from duty so that later the company has a system of

self-organization that can be passed to the next generation (Aronoff CE, 2011: 9-10).

Preparation for succession planning program will be implemented in Damai Sejahtera, a

family business managed by the first generation or founder named Soewarno

Ongkowidjojo who handles almost all of the activity from finance, marketing, human

resources and operational with some assigned workers.


Book One 251

Damai Sejahtera has been doing business of plastic mica for over 15 years and handles

almost all of the packing materials using plastic mica like souvenirs’ packs for special

events such as wedding, valentine and other celebrations, packs for dried foods, baby

shoes, underwear and also distributes unprocessed plastic mica from suppliers to

customers in rolls with various sizes and thickness levels of plastic mica or made to

consumer’s demand to be processed either in the form of sheet mica or printed

following the shape desired by the customer.

The main issue for Damai Sejahtera is that this company has not prepare succession

program planning for the second generation and as written that the entire existing

activities in the company is controlled by founder and using his own efforts rather than

rely on or involve other family members to work on part of the company.

The second generation has not fully briefed and no detailed deepening in Damai

Sejahtera so it can be said that the second generation is not ready to be a successor, it is

exacerbated by the presence of internal conflict within the family over the last 4 years

because of differences in opinions and principle issues in financial so that the

relationship is not going on well and effected on the company because of this ineffective

communication. Succession program became essential to be done in order to provide

preparation for Damai Sejahtera to the first and second generation for the survival of the

family business. The research is expected to provide an overview of how the program is

being prepared for succession.

Based on this issue, this paper formulates the research question as follows:

(1) How about the readiness of succession program planning in Damai Sejahtera

family business?

LITERATURE REVIEW

Sentot (2014) conducted a case study on succession in family businesses in Indonesia

found that succession is a crucial issue, with a continuation percentage of first-

generation family business is only 30% to second and third generation continues to only

12%, that number continues to shrink with the shift to the next generation. It is mostly

caused by first generation for feeling hampered of unpreparedness of the second

generation. Nyanyu and Wawan (2012) found that succession can be started from the

successor’s intention to continue the family business as well as gaining the trust of the

family to continue as the basic in family business that has been running and connected

to the needs, goals and successor’ abilities as main indicator, it was found also that the

successor does not have to be the first child and family problems may also make the

next generation able to decide to enter the family business or not.

Succession is achieved with leadership transition from CEO to be by a successor. Every

CEO in family businesses has a way to do that is succession; according to Poza (2010:

112-116) there are six systems that are used in the majority of CEOs with different

scales in preparing the family business succession, starting with The Monarch where

there is no thought from the CEO to retire and there is no discussion of succession, The

General where CEO seemed looking forward to succession but the CEO have prepared

a plan to return, The Ambassador which is giving the responsibility to the next

generation or professional management for business operations the CEO is still holding

role to represent the company, The Governor is where CEO has set a time for

succession to the next generation and then announce it to the public with a commitment


Book One 252

aims to prepare the succession as a whole before the specified time, The Inventor is

where CEO has built a business with the operational structure that will help the

successor to lead the company, the CEO in this system also provides training, advice

and negotiating meeting to discuss measures to be implemented in the company,

Transition Czar is where CEO will act to provide training and support to each successor

in different ways and forms divisions structured so that the successor will still has a

good relationship in the family business level and also with the CEO.

Gimeno & Coma-Cros (2010: 72-77) has a different view of the model system for the

family business and preparation for succession, first is Captain and Emperor Models

where it has two systems have in common in succession to prepare working CEOs and

elderly led to a succession of not performing as well as having a business structure that

is at risk, Professional Family Model is developed in the mid-level succession, the

successor able to overcome the problems with maintaining relationships between family

members and still be professional in accordance with their respective capabilities,

Corporation Model is developed by a succession of different models from the family

professional model which is more focused on professionalism in management roles with

or without family members.

Business preparation for leadership transition is also preparing for family business that

will be continued by the successor with following indicators (Aronoff CE, 2011: 28), (a)

Sales and profit growth, (b) Location (c) Attractive product with high demand on the

present and future, (d) Marketing program focuses on a well-defined marketing segment,

(e) Employees are trained to take responsibility, (f) Financial statements, management

reports that are reliable and good control, (g) Facilities and the latest equipment, (h)

Standard procedures and policies on site, (i) No threat to the regulations and potential

litigation. Transition of leadership by the CEO to successor, carried following indicators

to be ensured successful (Poza, 2010: 89), (a) Possessed in knowledge and passion in

family business, (b) Understand the capabilities and shortcomings as well as having the

experience and education, (c) Determination to lead and serve, (d) Support from the

generation predecessor, mentor and professional, (e) Good relationship and able to

adjust to other people, (f) Trust on non-family professionals, (g) Control of the

leadership and ownership, (h) Appreciation from employees, customers, suppliers and

family, (i) Able to suit the business needs of the family, (j) Appreciate the past and

focus on future business and family.

The successor profile had to have the basic things to be fulfilled in order to reach

success in both business and family. Those are trust, good communication and values

that are mutually shared life in the family business (Michael Henry, 2013). Family

Preparation for future leadership transition is in following indicators, (Aronoff CE,

2011: 53), (a) Family values relating to the business, (b) Family involvement policy in

business, (c) The principle of compensation for family members, (d) Ethic code relating

to business, (e) Policies in the financial information, (f) Guidelines to form a family

organization. Preparation for ownership is in following indicators (Aronoff CE, 2011:

60), (a) Successor seeing themselves as business people, (b) Consider the welfare of

others (business, family and shareholders) as themselves, (c) Education about business

ownership, (d) Understand the privilege of ownership, (e) Business value addition as an

institution.


Book One 253

In preparation for the succession program there are 5 basic factors that are universally

recognized in the family business succession,

(1) CEO Preparation, as a business owner, CEO prepared to provide control for the

successor to the business planning and preparation for retirement. (2) Business

Preparation, the CEO shall be independent in order to make the system ready with new

leadership. (3) Successor Development, the value of life, ability and ethic code. Future

development will focus on successor for the future of the business, including for the top

leadership position. (4) Family Preparation, support of the family in the form of a

discussion on the influence of the family business as well as approval for same vision

and mission of the business as well as in family. (5) Ownership Preparation, the

transition from the CEO or founder to successor in the family business with

acknowledgement on business ownership, business arrangements and cooperation.

These five basic factors have purpose to let the family business able to be continued by

a successor with a independent system that leads to perfect leadership in family business

and five basic steps used as reference in succession for problems and solutions for a

variety of family business (Aronoff CE, 2011: 4.17-18).

Research Method and Result

Putra (2013: 87) says the qualitative research is to provide a major concern on the

meaning rather than measure and is often described as the cause of cultural studies

focusing on the relationship between human beings and / or human relations with the

products, services and brands in a specific cultural context. In this research the author

will examine Damai Sejahtera family business that specializes in plastic mica for 15

years involving the four people as internal part of Damai Sejahtera, the first is Soewarno

Ongkowidjojo as CEO, Cicilia Ira Ratnawati as administrator, Adi as employee who

have worked more than five years and become confidant of the CEO who knows the

family and the business internally, Christopher Gerry as the author's brother who is still

attending senior high school as a potential successor. The main issue in the family

business is there is no preparation for the second-generation succession program

planning as the first generation is still in charge on the overall activities at Damai

Sejahtera so that the second generation has not had the preparation as a successor for the

future.

Method of Data Collection

In researching of Damai Sejahtera family business succession readiness, the author use

the survey questionnaire because the scope of the answer only refers to the indicator

points at each step to determine the succession preparation program planning proposed

by Aronoff (2011).

Validity and Reliability

Surveys were conducted by distributing questioner to the four informants and

accompany each informant to answer each point of the five-step, non-participatory

observation on the business and family. It conducted unstructured interviews that refer

to confirm the answers that are not clear in the survey for example that in the family

preparation to the question 'Does the family have a family values relating to the

business? 'Questions on the four informants, for example, if the CEO answered' yes'


Book One 254

then the answer will be tested its validity by asking 3 other informants such as the

CEO's wife who answered 'yes', because at a time when a family gathering, the CEO

expressed to successor to not to be greedy in taking advantage when doing business in

the future. Employee answered ' Do not know’ due to not following the family meeting

and the successor has the same answer with CEO's wife so it has a validity of data so

that it does not use in-depth interviews but only to give general reasons for any answers

given of each point.

Method of Data Analysis

The research will follow the 5 basic factors of preparation program of Damai Sejahtera

business succession. Analysis of these data will be processed in a descriptive and

detailed thoroughly explained with existing data with primary data obtained by the

survey (Aldoranuary, 2012) which will be established in general because of the

limitations of the study are based on a survey in accordance with the help of non-

participatory observation and unstructured interviews which are elaborated on validity

and reliability. Four informants are using code as A is CEO, Wife of the CEO is B, C is

Employee and D is Successor. Indicators of 5 basic factors are in the following (Aronoff

CE, 2011),

CEO Preparation which includes (a) CEO readiness for succession, (b) Financially

secured, (c) Strategic plan for the family business, (d) An election to the successor and

retirement, (e) Complete property planning, (f) Life after retirement, (g) Permit to

successor to take risks in the family business, (h) Sense of comfort with the successor

model of leadership in business and the new system by the successor.

Business Preparation which includes (a) Sales and profit growth, (b) Location (c)

Attractive product with high demand on the present and future, (d) Marketing program

focuses on a well-defined marketing segment, (e) Employees are trained to take

responsibility, (f) Financial statements, management reports that are reliable and good

control, (g) Facilities and the latest equipment, (h) Standard procedures and policies on

site, (i) No threat to the regulations and potential litigation.

Successor Development that includes (a) A work experience outside of the family

business, (b) A personal development plan, (c) A family member or tutor to help

successor, (d) Opportunity to contribute independently and in a real business. (e)

Sustainable way to learn skills and values in business and beyond, (f) A mentor or

family member to teach the history, philosophy and business strategy, (g) Opportunity

to practice outside of business leads and gains appreciation, (h) Develop a rational

individual to work in the business, (i) Time with other family members to share the

interest.

Family Preparation that includes (a) Family values relating to the business, (b) Family

involvement policy in business, (c) The principle of compensation for family members,

(d) Ethic code relating to business, (e) Policies in the financial information, (f)

Guidelines to form a family organization.

Ownership Preparation that includes (a) Successor seeing themselves as business people,

(b) Consider the welfare of others (business, family and shareholders) as themselves, (c)

Education about business ownership, (d) Understand the privilege of ownership, (e)

Business value addition as an institution. Research at Damai Sejahtera is conducted to

explain the succession readiness program planning in the family business. Researcher


Book One 255

has chosen four informants to be involved in the family business for an interview

including CEO, the CEO's wife, employee (CEO confidant) and successor.

Preliminary research on family business succession program planning in Damai

Sejahtera, referring to the 5 basic factors proposed by Aronoff because it is used as

reference in succession for problems and solutions for a variety of family business

(Aronoff CE, 2011: 4.17-18). Based on the results of the research that has been done

can be concluded that the Damai Sejahtera is not ready to do succession program

planning with several factors succession as successor still too young, employees are not

familiar with the successor and the following result:

1. CEO Preparation with six of the eight indicators show the CEO has been

prepared to implement the program and still need preparation through

managerial implications succession when the program starts.

2. Business Preparation with eight of the nine indicators show the business is ready

to implement the succession program and only needs to overcome doubts on

successor and employee about mica plastic’ products.

3. Successor Development with eight of 10 indicators showed the successor is not

ready to implement the program and will be guided so that when the program is

executed successor will be ready.

4. Family Preparation six out of six indicators showed the family was ready to

implement a succession program

5. Ownership Preparation of four of the five indicators indicates ownership by the

successor of preparation and is not ready to take a concerted education and

ownership of the business.

CONCLUSION

The research has shown that Damai Sejahtera is not ready for succession program

planning based on 5 basic factors by Aronoff and suggestions for further research is to

involve consumers and suppliers as external parties to determine insightful market, then

using a family mediator in order to obtain more accurate data and neutral side whether

in a good family situation and conflict as well and using in-depth interviews in each

informant to obtain information so that the quality of the information obtained, the

research can answer perfectly.

The study was conducted in order to obtain maximum results, but this study cannot be

separated from the limitations, the results of this study using only simple survey for a

variety of internal conflicted conditions and advised to the family to use the interview

directly to obtain more accurate data for further research.


Book One 256

REFERENCES

Aldoranuary 2012 .Deskriptif Kualitatif.

http://aldoranuary26.blog.fisip.uns.ac.id/2012/02/29/deskriptif-kualitatif/. Accessed on

May 28, 2014

Arnoff, Craig E., Ward, John L., 2011. Family Business Value 1st Edition. India:

Palgrave Macmillan

Cooper, Donald R. and Pamela S. Schindler, 2011. Business Research Methods.

New York: Mcgraw Hill Irwin

Gero, Pieter P., 2011. Bisnis Keluarga Pilar Penting bagi Perekonomian

Asia.Jakarta: PT Kompas Cyber Media

Gimeno, Albert, Coma-Cros, Gemma Baulenas & Joan.2010. Family Business

Models.United Kingdom: Palgrave Macmillan

Henry, Michael, Ronel Erwee & Eric Kong.2013.Family Business Succession:

Trust and gender issues in family and non-family succession, the European Academy of

Management, Turkey Galatasaray University, 2013

Poza, Ernesto J.2010.Family business 3E.United States of America: South-

Western Cengage Learning

Putra, Nusa.2013.Metode Penelitian Kualitatif Manajemen.Indonesia:

PT RajagrafindoPersada

Thorton, Grant.Potret Bisnis dan Perusahaan Keluarga Indonesia

http://ybisnis.com/potret-bisnis-dan-perusahaan-keluarga-indonesia/. Accessed on March 12,

2014

Tirdasari, Nyanyu and Henry Dhewanto.2012.Family Business Succession in

Indonesia: A Study of the Hospitality Industry, International Conference on

Asia Pacific Business Innovation and Technology Management,

Procedia - Social and Behavioral Sciences 69-74, 2012

Wahyono, Imam Sentot.2014.Suksesi Dalam Perusahaan Keluarga, Jurnal Ilmiah

Dosen UMSurabaya, 2014

http://aldoranuary26.blog.fisip.uns.ac.id/2012/02/29/deskriptif-kualitatif/


Book One 257

CREATING COMFORT ZONE WITH ENTREPRENEURSHIP

Wulandari Harjanti1

STIE Mahardhika

Surabaya INDONESIA


ABSTRACT

Studying the comfort zone was intriguing because according to

Bernadette Kusdiantari, Consultant Experd, the comfort zone is a

situation when a person is already comfortable with the situation. The

crisis that hit Indonesia since 1996 not only affected business, but also

affected the public welfare. The world of work is getting narrower, while

the people who need jobs is increasing. Unemployment caused by the

absence of jobs eventually becomes a burden on society as well.

Unemployment is a result of the difficulty of getting a job, especially in

big cities. It required courage to open comfort zone to make a new

breakthrough in the world of entrepreneurship. The government is

expected to support the advancement of entrepreneurship in Indonesia by

providing marketing assistance and capital goods that have been

produced so that the entrepreneur can establish a business without a

hitch on the cost of capital and marketing. Job seekers were initially only

interested in the formal sector is also expected to change his views and

switch on the informal sector entrepreneurs

Keywords: Comfort Zone, Entrepreneurship, Opportunity

INTRODUCTION

Human life is very challenging to a more in the works. Studying the comfort zone was

intriguing because according to Bernadette Kusdiantari, Experd Consultant, the comfort

zone is a situation when a person is already comfortable with the situation. Targets that

you received are not challenging yourself to do something more than current. Someone

who has been in a comfortable position usually tend to enjoy what you already have and

do not push themselves to achieve better terms and are satisfied with the current state.

The crisis that hit the Indonesian nation since 1996 not only affect business, but also

affect the public welfare. The world of work is getting narrower, while the people who

need jobs is increasing. Unemployment caused by the absence of jobs eventually

become a burden on society as well. Unemployment is a result of the difficulty of

getting a job, especially in big cities. People living in urban areas often expect to get a

formal job in offices, while employment in the formal sector offers very limited and it is

still in the added presence of the word outsourcing became a familiar sound in our ears.

Unfortunately however, there are still many who do not understand about what is

actually referred to outsourcing labor itself.What is it outsourced?


Book One 258

Referring to Law No. 13 of 2003 on employment, Outsourcing known as the provision

of labor services as stipulated in article 64, 65 and 66 In the world of Industrial

Psychology, recorded outsourcing employees are contract employees who are supplied

from a provider of outsourcing. Initially, outsourcing company providing the kind of

work that is not directly related to the core business of the company and do not care

about career path. Such as telephone operators, call centers, security guards and

cleaning personnel or cleaning service. But currently, outsourcing is used more

widespread to various lines of activity of the company.

The higher quality of human resources required and the higher the specificity demands

more difficult to fulfill. Limited employment make people find a way to survive in order

to live properly. By looking at the situation of the informal sector is an alternative that

can help absorb unemployment. Entrepreneurship is the best alternative solution.

Entrepreneur is a person who has the willpower to perform helpful actions.

Entrepreneurship is also defined as a person who has ideas and manages and run his or

her project. Entrepreneurship is the ability to mobilize people and resources to create,

develop and implement solutions to various problems in order to create meaning and to

meet human needs.

Based on the above situation, the presence and role of entrepreneurship course will give

effect to the economic progress and improvement in the economic situation in Indonesia

today. Being entrepreneurial means to be able to find and evaluate opportunities to

collect source, the necessary resources and act to take advantage of opportunities. With

the rise of entrepreneurship, Indonesia's economy is also expected to increase. Based on

the background of the problems described above, the problem of this research is how

entrepreneurship will open comfort zone to explore the capabilities in entrepreneurship,

and whether the risk of entrepreneurs in business development in order to increase the

revenue.

LITERATURE REVIEW

Comfort Zone

The majority of people interpret that as long in one company or have worked in an

institution will feel comfortable to undergo what is already in the works and can be

taken every month or do the work on a regular basis, then you've arrived at a

comfortable zone. In this case, a person enters the comfort zone, if in performing career

or work does not set a higher target or make improvements to a more challenging ability,

knowledge, or skills themselves.

The solution is not merely looking for another company, but how to get out of the

secure zone. An example, when in a job you can give a new method, a new target, or

improvements that can further improve the effectiveness and efficiency in your work

unit. It could also contribute in providing solutions to develop the existing business, or

other proposals followed by concrete actions to make it happen, instead of just running

the existing work processes.

Entrepreneurship

Several decades have shown social change and economically very rapidly as a result of

the globalization process in various sectors and the opening of a wide range of trade

cooperation. Although on the other hand, concern arises by inflation, unemployment,


Book One 259

and economic dilemmas and carrying a balance on this planet. The existence of this

desire led to increasingly demanding creative leadership in solving complex issues and

venture out of the grip or the culture in the region. The next generation of now and

required to be able and trained to deal with this and a variety of social change and

human needs.

In a country that is mired in various aspects such as Indonesia today, food shortages and

famine and humanitarian tragedies often occur. Such conditions lead to a loss of

confidence in the ability of self and the ability to manage the future as there is no more

to be done and just waiting for help without any pass except march on humanitarian

grounds, and it is very vulnerable, especially considering in East Java there are 5

regions lagged behind ie Bondowoso, Situbondo, Bangkalan, Sampang, Pamekasan

(http://www.kemenegpdt.go.id/hal/300027/183-kab-area-behind).

Looking at the above facts about economic life that does not go well, the extent to

which entrepreneurship can provide solutions relevance of economic, environmental,

social and humanitarian problems. Entrepreneurship has a very important role in all

dimensions of life. Rebuilt communities have vitality and energy that started from

entrepreneurial activity.

Entrepreneurship is the ability to mobilize people and resources to create, develop and

implement solutions to various problems in order to meet human needs. A society in

which there are people who have an entrepreneurial spirit will be able to respond to

changing needs and realities. This entrepreneurial spirit is shown by the desire to take

the initiative and be creative and innovative in managing people and resources in order

to achieve satisfactory results. The entrepreneur is an agent of social change, political

and economic.

In general, people associate the entrepreneurship as a pioneering company in the

economic sector. Surely the entrepreneurial spirit can grow and thrive in the economic

sector or NGO such as: a new community organization, a new rehabilitation center, or a

new institution in the field of art. The unique character of entrepreneurship is the

pioneer and builds something new and more effective than continuing something that

already exists.

The linkage between the development of Entrepreneurship with the Economy

Over the past two years, the condition of Indonesia in various fields showed no

significant change. The government policy is still confusing, the law is not clear,

disaster is everywhere, and social conditions increasingly uncertain. In the economic

sector, there is no change towards a better condition. Layoffs persist because many

entrepreneurs are no longer interested in starting or developing a business, and foreign

investors have been many who decided to move their operations to other countries more

promising.

On the other hand, the population of productive age can not be idle. Life still have to

run and steady income to be sought to cover the cost of living that getting more

expensive. Various business ideas sprung and discussed in various forums both formal

and informal meetings. Most of these ideas is simply a "beautiful dream" but some

responded with great enthusiasm. From this it appears that our society should feel

encouraged when faced with a prolonged crisis. This is in line with the opinions

expressed David Fagin (in the book Crouch, 2002), which says that most challenges can

http://www.kemenegpdt.go.id/hal/300027/183-kab-area-behind


Book One 260

be faced with creativity. Without creativity, problem is rarely transformed into

opportunities.

The contribution of entrepreneurship to economic development of a country can not be

doubted anymore. A country that can grow and can construct ideally, should have

entrepreneurs at 2% of the total population (UN). The entrepreneur is meant here is that

according to the criteria of professional expertise, has a strong entrepreneurial character,

have high achievement motivation (McClelland) and the ability to innovate (Drucker)

and the ability of the affiliated or build alliances.

Positive Effect of Entrepreneurship

The positive impact of socio-economical that the entrepreneur who create jobs, improve

quality of life, improve income distribution, harness and mobilize national resources to

increase productivity, and improve the welfare of government through government

programs, such as taxes and others. Hendra Esmara forwarded ideas measurement

Indonesian development consisting of three components and 20 indicators. The third

component is the population and employment, economic growth, and equity and social

welfare. Based on these ideas, the entrepreneurship can improve the development of

Indonesia because entrepreneurship can provide jobs that improve the welfare of society.

According to Michael P. Todaro, a source of economic progress could include a wide

range of factors, but in general it can be said that the main sources of economic growth

is the existence of investments that can improve the quality of capital or human and

physical resources, which in turn managed to increase quantity of productive resources

and that can raise the productivity of all resources through new discoveries, innovation,

and technological progress. Based on these opinions, entrepreneurship may affect the

rate of economic growth of a country.

Given the positive impact entrepreneurs, the job seekers are initially only interested in

the formal sector is expected to change their views and switch on the informal sector.

According to Stephen R. Covey, the change is often a painful process. It is a change that

must be motivated by a higher purpose, by the willingness to play down what you think

you want now for what you want in the future.

RESEARCH METHODOLOGY This study is a quantitative descriptive which means that qualitative is valued by an

average score of results with a population of workers who use 8 hours of work and rest

of time to run entrepreneurial activity where researcher have obtained 100 respondents

randomly in East Surabaya, with 8 questions to determine that a person must be able

and willing to get out of the comfort zone. The statement structure includes:

1. How much is the revenue gained from the activity apart of the permanent job?

2. What entrepreneurial field/activity is done off the office hour?

3. How much capital has been issued?

4. How much risk does ever appear?

5. Is it difficult to start the job?

6. Where is the location chosen?

7. What reason exists to work outside the office?

8. How long has a business been run?


Book One 261

RESULT AND DISCUSSION Along with the development effort is usually followed by a change in management style,

then at the same time entrepreneurs are faced with various risks. Basically there are two

risks faced by entrepreneurs when given the opportunity to develop their business. Both

of these risks are real risks, the risks are visible, can be counted, can be anticipated and

avoided and psychological risk, ie the risk that is not visible, can not be calculated, it

can be anticipated, but not necessarily inevitable.

According to Walter Wriston (in the book chouch, 2002), life is a process of risk

regulation, not abolition. Complaints such as those mentioned above should not be the

case if the entrepreneur has prepared the infrastructure of human resource development

effort since the decision was made. In fact, HR planning is rarely done by the

entrepreneurs and often forgotten. Placement of professionals in the business into a

process that is often called the entry and exit of employees ataupu contestable markets

as a result of piracy against professionals, but not necessarily the exact pirated

professional results with the business needs in lakoni, entrepreneurs often end up being

disappointed.

In the opinion of Douglas Mc Gregor (the book Sadarachmat, 2001), there are two types

of theories that show human nature at work, namely the theory X and theory Y. Theory

X assumes that humans basically are lazy, always trying little as possible, not have

ambition, do not want to take the initiative that they want is a sense of security, has no

responsibility. While the theory Y assumes that people are basically not opposed to the

need to organize and view work as an activity that is reasonable or needs, such as eating,

sleeping, resting, and so on. Human salalu ready and wants to take responsibility. Based

on this theory, we can imagine if the assumptions of the theory of X is all around us,

how hard and difficult it to take care of an organization. This is what inhibits the

development of entrepreneurship.

The statement structure includes:

1. How much is the revenue gained from the activity apart of the permanent job?

a. Obtain under 1 million answered by 25 respondents

b. Obtain above 1 million to 5 million answered by 45 respondents

c. Obtain above 5 million answered by 30 respondents

2. This shows that the respondents have understood the advantages that can be

gained by doing some efforts out of their comfort zone.

3. What entrepreneurial field/activity is done off the office hour?

a. laundry services, health; answered by 20 respondents

b. Products like culinary answered by 45 respondents

c. Business franchises and multi-level marketing answered by 35

respondents

4. This shows that the majority of respondents understand the business run and its

risk.

5. How much capital has been issued?

a. Over 40 million, answered by 25 respondents

b. Between 10-40 million, answered by 55 respondents

c. Below 10 million answered by 20 respondents


Book One 262

6. This shows the big amount of capital absorbed outside the comfort zone and the

need to take into account the risks that might be occured.

7. How much risk does ever appear?

8. Over 10 million , answered by 5 respondents

9. Under 10 million , answered by respondents

10. There is absolutely no risk , answered by respondents

11. Respondent who choose that “There is absolutely no risk” because they have

obtained the break-even point so they do not feel the loss of doing hobby, such

as joining Multi-level Marketing or culinary.

12. Is it difficult to start the job?

a. It is difficult, answered by 30 respondents to the initial word initially

“embarrassed” and do not know how to do business so it needs such

meetings and consultations in the MLM business

b. Easy, answered by 70 respondents because all comes from their hobby

and implemented well

c. Where is the location chosen?

13. In front of the house, answered by 70 respondents 10 respondents

14. Hire stand, answered by 70 respondents 70 respondents

15. Cyber , answered by 70 respondents 20 respondents

16. Nearly 90 respondents to open a business outside the house-zone due to the

profit gained.

17. What reason exists to work outside the office?

18. Getting financial excess, answered “yes” by 80 respondents

19. Implementing hobby that can not be done in the office, answered by 20

respondents

20. How long has a business been run?

a. Less than 1, answered by 30 respondents

b. Between 1-10 years, answered by 50 respondents

c. More than 10 years, , answered by 20 respondents

21. Running a business that is less than one year are due to try and enjoy new

business increase, and jumping from one business to another business and not

feel fit yet with the business run, but of all the business outside the office are

very promising and prove the truth of the book Robert T. Rich Dad Son

Kiyoshaki about Rich.

CONCLUSIONS AND RECOMMENDATIONS

Conclusion

The presence and the role of entrepreneurs have an impact on economic progress and

improvement in the economic situation in Indonesia today because entrepreneurs can

create jobs, improve the quality of life, improve income distribution, harness and

mobilize national resources to increase productivity, and improve the welfare of

government. Thus, the increasing development of entrepreneurship can improve the

economy in Indonesia.


Book One 263

Recommendation

After doing research on opening a comfort zone with entrepreneurial ability to dig

themselves, it is advisable entrepreneurship can be a viable alternative in the effort to

alleviate poverty and unemployment in Indonesia. The government is expected to

support the advancement of entrepreneurship in Indonesia by providing marketing

assistance and capital goods that have been produced so that the entrepreneur can

establish a business without a hitch on the cost of capital and marketing. Job seekers

were initially only interested in the formal sector is also expected to change his views

and switch on the informal sector entrepreneurs. And workers who feel the need for a

better life can enjoy free time after working with entrepreneurial businesses.

REFERENCES

Covey, Stephen R. The 7 Habits 1997 of Highly Effective People. Jakarta: Binarupa script.

Crouch, Van. Pocket Book 2002 The CEO (Chief Executive Officer). New York: Harvest

Publication House.

Esmara, Hendra. 1986 Planning and Development in Indonesia. Jakarta: PT. Scholastic.

Sadarachmat, Duduh. 2001 Flower Potpourri Management. Surabaya: Magazine Partners.

Todaro, Michael P. 2000 Economic Development in the Third World Seventh Edition. New

York: McGraw.

Todaro, Michael. "The Urban Employment Problem in Less Developed Countries - An Analysis

of Demand and Supply". ProQuest. Retrieved January 14, 2014

Internet sources

http://www.amikom.info/resiko-entrepreneur-in-development-bisnis/

Indonesia. Law no. 13 of 2003 on Employment

http://www.amikom.info/resiko-entrepreneur-in-development-bisnis/


Book One 264

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