Analysis Efficiency Production and Strategies of Small-Medium Scale Enterprises

Abstract

This research was aimed to analyze the factors that affect the level of production and efficient use of production factors on small and medium scale enterprises (SMEs), and to identify the internal and external factor to find strategic model alternative that can be applied by small and medium scale enterprises (SMEs) to develop their business. To achieve the objectives, we estimate the frontier production model to obtain technical efficiency with technical inefficiency determinants model. In this study, we adopt the translog production model in obtaining the technical efficiency scores and the linear technical inefficiency model to determine factors affecting the firms' inefficiency level and to find some strategic model used SWOT analysis. This study use survey and interview questionnaire technique which contain a series of questions for SMEs. Results showed that most variables, have signs as expected and most significant. The average level of technical efficiency (TE) for SMEs are 0.7832. Several economic factors that significantly affect technical inefficiency includes are quantity of labor, value of fixed asset, and for TE are the ratio of research and development expenditures to total expenditures of enterprises; ratio of information and communication technology and telecommunication expenditure; ratio of training expenses, but ratio of employees with education levels not significant. For strategis with SWOT analysis approach, the result indicated that SME's which have big potential to develop is ST strategy. According to this strategy, SME's should carry out product diversification by using technology, improve quality of product, and cooperate with suppliers to get supply raw material