APPLICATION OF AGGLOMERATIVE HIERARCHICAL CLUSTERING IN GROUPING TOURISM INDUSTRY SMES IN EAST JAVA

Abstract

This study addresses a significant research gap in the classification and evaluation of Small and Medium Enterprises (SMEs) within the tourism industry in East Java, specifically focusing on their marketing performance. The primary objective is to categorize these SMEs based on their marketing effectiveness, a critical factor for their competitiveness in the tourism sector. To achieve this, the research employs cluster analysis, utilizing Agglomerative Hierarchical Clustering techniques. The optimal clustering method was determined using the cophenetic correlation coefficient and cluster validation indices. Data for the analysis were collected through questionnaires, with a sample comprising 30 tourism SMEs across 11 regions in East Java, with responses from three employees per SME. The findings revealed two distinct clusters: SMEs with fairly good marketing performance and those with good marketing performance. The results suggest that while many SMEs in the tourism industry in East Java exhibit competitive marketing capabilities, there remains a subset that requires strategic improvements, particularly in spiritual marketing practices. This study's novelty lies in its approach to classifying tourism SMEs by marketing performance, providing a framework for targeted performance enhancement and industry strengthening in the region.