The growth of leather-based creative industry SMEs in Garut District, West Java Province, Indonesia

Abstract

Amongst the 15 creative industry subsectors developed in Indonesia, then in 2013 the creative craft industry is the third-largest contributor to GDP. Eastern Priangan Region is one of area of concern for the government. It is comprised of Ciamis, Tasikmalaya, and Garut. In Kabupaten Garut, leather-based creative industries is the creative industries which have an important role. On the performance, business development goes hand-in-hand with business growth. Growth, which quantified through increase in company value, requires the company to be able to gain profit. This is possible if the company is able to manage its business. This study aims to assess the growth on leather-based creative industries in Garut, by measuring the rate of growth and identifying the growth process. This research is a descriptive study, with quantitative and qualitative approaches. Survey method using simple random technique sampling is used, with sample size of 43 of the total population of 471 leather-based creative industry SMEs. Venture growth rate were calculated using the Compound Annual Growth Rate (CAGR) formula. Venture size were measured from the net assets. To eliminate time value of money’s influence, then net assets were converted into present value first, using compounding factor based on average interest rate during each enterprises venture time period. Entrepreneurial process stage of companies are conducted by qualitative descriptive identification and comparison of the survey data with the identifier of entrepreneurship in the startup phase or growth phase, with the help of cross-tabulation. Research shows that the average age of entrepreneurs was 39 years old, and the average venture age was 12 years, with 85% male. Employee ranged 2 – 300 persons. The main product is jackets, with addition of shoes, sandal, bag, wallet, belt, raw hide, gloves. 35 of 43 ventures are self-financed. Yearly sales ranged between IDR 100,000,000 – IDR 3,600,000,000, with average profit of 20%. The average initial assets were IDR 96,962,790 with range of IDR 100.000 - 750.000.000. Existing net assets ranged between IDR 42,000,000 - IDR 4,000,000,000. The average growth rate was 11.55 % with range -0.04 % to 29.64%. Business process done, were business ideation (9.7 months avg.), start-up (2.4 years avg.), growth (9.24 years avg.) since the start. To be able to grow more rapidly, it is necessary to overcome the problems faced by entrepreneurs. The dominant problems faced are the limitations of skilled employees, raw materials both in quantity and quality, capital, and low leather processing technology.