The Impact of External Environment on Competitive Advantage through SME Differentiation Strategy in Central Java

Yadi Fakhruzein Terang Jaya,Muhammad Nasir,Pramesti Dewi

doi:10.13189/ujm.2021.090202

Abstract

The competitiveness of Small and Medium Enterprises (SMEs) in Indonesia is still very low and vulnerable compared to increasingly uncertain business environment dynamics. Changing conditions require SMEs carry out continuous and systematic analysis of the external environment, so that owners who carry out strategic planning get information through various sources in the external environment. This is done to maintain a competitive advantage and as an effort to realize unexpected opportunities and progress. This study aims to: (1) measure the impact of external environment on differentiation strategy in SMEs in Central Java; (2) measure the impact of external environment on competitive advantage in SMEs in Central Java; (3) measure the impact of differentiation strategy on competitive advantage in SMEs in Central Java. The type of research used in this study is causal research. The method used in this research is quantitative. The population that will be used and examined in this study is all SMEs in Central Java, while the samples in this study were 180 SMEs in Central Java with a multivariate type sample size. Data collection technique was conducted using a questionnaire. This study uses Partial Least Square (PLS) for its analysis technique. The results in this study indicate that: (1) External Environmental has a significant effect on Differentiation Strategy; (2) External Environmental has a significant impact on Competitive Advantage. And (3) Differentiation Strategy has a significant effect on Competitive Advantage.

Highlights

The development of globalization has an enormous impact on various sectors of the country, including Indonesia
Based on the results of testing the hypothesis above, the results obtained are: 1. External Environment has a significant effect on the Differentiation Strategy, and this is evidenced by the T-statistic value of 4,184 or > 1.96
External Environment has a significant effect on Competitive Advantage and this evidence from the T-statistic value of 4,616 or >1.96

Summary

Introduction

The development of globalization has an enormous impact on various sectors of the country, including Indonesia. The development of a business environment that is full of uncertainty, increasingly complex, and very dynamic requires entrepreneurs to change and be adaptive. Efforts to develop and empower SMEs have become increasingly critical due to the dramatic changes in the business environment faced. SMEs in Indonesia are still low in competitiveness and prone to a dynamic business environment This condition has an impact on the low productivity produced, and the existence of the business is threatened. This condition is due to the low adaptation and responsiveness of SMEs in facing the challenges of the external business environment, due to the limited internal capabilities they have (Zimmerer, 2005)

Objectives

Discussion

Conclusion