Partnership Strategy in SMEs Industry to develop Competitiveness and the Implication to the Corporate Performance : A Study on SMEs development in West Java Indonesia

Abstract

It has been commonly acknowledged that the micro, small and medium enterprises (SMEs) play a very important and strategic role in the national economic especially in the GDP, the regional GDP, employment, income distribution and the poverty reduction. The population of SMEs in Indonesia has reached up to 53,823,732 units or 99.9% which are distributed throughout the Indonesian regions (The Ministry of Cooperatives and SMEs, 2012), and in the West Java Province itself there are 8,731,790 business units. This shows that through optimum capitalizing, it would bring significant contribution to the people’s welfare (BPS, 2011).Under the national development program aiming at pro poor, pro growth and pro rural, the counseling program to develop the SMEs should be prioritized. According to Zuhal (2010) the employment rate of 99.5% is the basic foundation and that the counseling and guiding in technological support to increase the productivity has been needed. However, the problem arising is that the competitiveness is pretty low which is due to the financing and marketing (BPS, 2011). Thus the mortality and frequency of shifting in types of business operation has become the common phenomena. The mission as prescribed in the Law number 20 regarding SMEs is to uplift the competitiveness and develop the business climate through a policy regarding partnership. One of the partnership aspects is the mutually beneficial relation between SMEs and the large scale business facilitated by both the Central and Regional Government to stimulate the partnership (Law number 20 of 2008 Chapter V articles 11 and 25).
 Partnership is not a new strategy but it has come up as an important issue due to the complexity and risks both in the national and international economic environment as well as the limited capability and resources in a business unit. Therefore the strategic partnership is sought to enhance the relation between the demand and supply in the form of cooperation between independent business organizations. Striving for the sales in the hight competition requires collaborative venture to face technology, extend the resources, increase productivity and quality, and penetrate new markets (Cravens, 2013). Thus, this research attempts to find out to what extent the effect of the strategic partnership can increase the competitiveness and the implication to the performance of SMEs in West Java.