Abstract
One of the indicators that might upgrade micro and small enterprise is the ability to expand their market target outside their location or district. The objective of this article was to analyze the determinants of market expansion for small and medium enterprise especially in the food industry in Indonesia. Market expansion is defined as selling products or services outside the district where the enterprise is located. Secondary data were utilized in the research by using the Micro and Small Enterprise Survey conducted by Statistics Indonesia in 2014 with the data of 21,380 firms. Two analysis were conducted, firstly using the logit analysis in order to differentiate between enterprises selling their products inside and outside the district. The second analysis used Tobit analysis of which the dependent variable is the share of product sold outside the district. Independent variables used in both equations are similar. The results indicated that higher education level, number of labor, value of production, number of enterprise with external finance, number of enterprise located in Java and male-owned firms resulted in higher probability of selling their product outside the district. Moreover, the same variables will also increase the share of product sold outside the district. From the two equations, it can be concluded that the government policy must be addressed in two aspects in order to upgrade the small and medium enterprises, the first is increasing the scale of the enterprises and secondly, fostering financial inclusion for these enterprises.Keywords: micro and small enterprise, logit analysis, tobit analysis, food industry, market expansion
Highlights
In Indonesia, the types of enterprise are differed by the number of workers
According to survey conducted by Statistics Indonesia, problem in marketing is the second biggest problem faced by the small and micro enterprise which amounted to 25%
Statistics Indonesia (2015) indicated that 0.1% of the small and micro enterprises have exported their products while the majority sell their products inside the district (89.45%)
Summary
In Indonesia, the types of enterprise are differed by the number of workers. Enterprise with workers less than four person is considered as micro enterprise. The contribution of small and micro enterprise in Indonesian economy was relatively small, only 43.08% of total constant GDP in 2013. Tambunan (2008a) mentioned several problems faced by the micro and small enterprise causing relatively small contribution of the micro and small enterprise to the Indonesian economy. These problems are lack of capital, difficulties in procuring raw materials, lack of access to relevant business information, difficulties in marketing and distribution, low technological capabilities, high transportation costs, communication problems, problems caused by cumbersome and costly bureaucratic procedures and policies and regulations that generate market distortions. Statistics Indonesia (2015) indicated that 0.1% of the small and micro enterprises have exported their products while the majority sell their products inside the district (89.45%)
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