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Abdul Halim, Imam Mukhlis. (2022). Government's Strategy and

Role in the Internationalization of MSMEs. Journal Eduvest. Vol 2(5):

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Eduvest – Journal of Universal Studies

Volume 2 Number 5, May, 2022

p- ISSN 2775-3735- e-ISSN 2775-3727

GOVERNMENT'S STRATEGY AND ROLE IN THE

INTERNATIONALIZATION OF MSMEs

Abdul Halim, Imam Mukhlis

Malang State University

Email: abdul.halim.2004139@students.um.ac.id, imam.mukhlis.[email protected]

ARTICLE INFO ABSTRACT

Received:

April, 26

2022

Revised:

May, 14

2022

Approved:

May, 16

2022

This study aims to discuss the strategy and role of the

government in the internationalization of MSMEs. The

research method used in this study is a qualitative descriptive

method. The type of data used in this research is qualitative

data, which is divided into primary data and secondary data.

Sources of data obtained through library research techniques

that refer to resources available online and offline, such as:

scientific journals, books, and news from trusted sources. The

results showed that the internationalization strategy

conceptually and theoretically can be divided into two

categories, namely internationalization theory and selectivity

theory. The emergence of internalization theory can threaten

the existence of MSMEs due to the development of large

companies in the 1970s. Furthermore, in its development, the

theory seeks to internalize the benefits that can be obtained

from internationalization, localization, and ownership. At the

same time, the eclectic theory in the internationalization

strategy places more emphasis on the resources owned by

MSMEs and knowledge of the markets and networks that

MSMEs choose to market their products. The steps taken by

the current government by creating a special portal at INSW

are appropriate, but if this is achieved not only through

existing portals, but also through direct engagement with

business people, including through seminars and workshops by

interacting with them more often and socialize.

KEYWORDS

Role, Strategy, MSME, Internationalization

Abdul Halim, Imam Mukhlis

Government's Strategy and Role in the Internationalization of MSMEs 894

This work is licensed under a Creative Commons

Attribution-ShareAlike 4.0 International

INTRODUCTION

Like other countries in the world, Indonesia must be able to adapt to the effects of

globalization, one of which is the challenge of the ASEAN Economic Community (AEC)

(Rahayu & Sari, 2018). Through multilateral environmental agreements, it will create a

large market in the ASEAN region with a significant impact on the economies of its

member countries. In addition, one of the blueprint projects signed by all ASEAN member

countries is the SME sector which is considered a driver of the regional economy (Abd

Aziz & Basir, 2017) (Zhang & Ghorbani, 2020).

In the process of globalization or going international and intense competition,

empowering SMEs, so that SMEs must be able to face global challenges, such as increasing

product and service innovation, developing human and technical resources, expanding

marketing areas, etc. This is necessary to increase the selling value of SMEs themselves,

especially considering that SMEs are the economic sector that absorbs the largest

workforce in Indonesia, so that they are able to compete with foreign products that are

increasingly flooding Indonesia's industrial and manufacturing hubs. On this basis, the

internationalization of small, medium and micro enterprises is considered imminent.

In general, internationalization can be defined as a process by which a company

gradually increases its awareness of foreign markets and conducts business activities with

other countries to achieve organizational goals, taking into account the company's strategy,

structure and resources (Sherly et al., 2020). According to (Muchtar & Qamariah, 2016).,

in general, companies do internationalization/go international for two reasons. The first

reason is being proactive and getting benefits from other countries, such as cheap labor,

availability of cheap raw materials, and low tariffs. In addition, it responds to the threat of

losing its domestic market, which results in products of higher quality and value.

Internationally oriented companies are not just international companies (Yulianti,

Damayanti, & Prastowo, 2021).

The internationalization process is a dynamic concept, namely the process of adding

internationalization operations both externally and internally (Hallett, 2012). The

internationalization process is the process by which companies raise awareness of the direct

and indirect impacts of future international transactions, and establish and conduct

transactions with other countries (Kaukab, 2017). However, the internationalization

process cannot be carried out in this way, and there must be a specific strategy and the role

of the government to exert force in the internationalization process of small, medium and

micro enterprises.

The government's role in supporting the internationalization process of MSMEs is

very important (Hartanti & Setiawati, 2017). This policy helps MSME players to be able

to export, encourages increased exports of goods, and protects MSME players from being

able to compete with other products. The government through the Ministry of Cooperatives

and SMEs developed 5 policy steps in 2014 to increase the best cooperatives and SMEs

associated with long-term development plans (Laysandra et al., 2019). The policy aims to

improve the business climate for MSMEs, carry out product marketing for MSMEs,

develop products and marketing for MSMEs, increase MSME competitiveness in human

resources, and strengthen cooperative institutions (Herliana, 2015).

Based on the considerations above, this article is a literature study on the strategy

and role of the government in efforts to internationalize MSMEs. This study aims to discuss

how the strategy and role of the government in the internationalization of MSMEs.

Eduvest – Journal of Universal Studies

Volume 2 Number 5, May 2022

895 http://eduvest.greenvest.co.id

RESEARCH METHOD

The research method used in this study is a qualitative descriptive method. The type

of data used in this study is qualitative data, which is divided into two categories, namely

primary data and secondary data (Dufour & Richard, 2019). Sources of data obtained

through library research techniques (Library Research), which refers to sources available

online and offline, such as: scientific journals, books, and news from trusted sources (Chen,

Jeon, & Kim, 2014). These sources are collected based on discussions and links from one

information to another. Data collection techniques used in this study were observation,

interviews and research. Analyze data and draw conclusions.

RESULT AND DISCUSSION

1. MSME Internationalization Strategy

Studies conducted (Boddewyn, 2015) show that conceptually and theoretically,

internationalization strategy can be divided into internalization theory and electronic

theory. The theory of internalization, due to the development of large corporations in the

1970s, can threaten the existence of MSMEs themselves. Furthermore, in its development,

the theory seeks to internalize the benefits that can be obtained from internationalization,

localization, and ownership. At the same time, eclectic theory in internationalization

strategy places more emphasis on the resources owned by MSMEs and knowledge of the

markets and networks that MSMEs choose to market their products (Coldwell, Venter,

Joosub, & Duh, 2022).

The internationalization process can be seen as a learning process for SMEs. Several

aspects related to internationalization, such as the age of MSMEs, the size of MSMEs, and

the industrial sector chosen by MSMEs, became the topic of research conducted by several

researchers in other countries. The SME internationalization strategy also needs to focus

on individuality, which will greatly affect the performance of SMEs in implementing the

SME internationalization strategy. This discussion is actually one of the new elements that

need to be considered in the implementation of the internationalization strategy, which is

related to the form of ownership of small, medium and micro enterprises.

a. The process and stages of internationalization that a local company goes through

The process of internationalization of Indonesian companies (both medium scale –

SME and large scale) is as described below.

Figure 1 Internationalization Process

Abdul Halim, Imam Mukhlis

Government's Strategy and Role in the Internationalization of MSMEs 896

As can be seen from the figure, the internationalization process seems to be usually

carried out by exporting the company's goods or products to the destination country.

Different models have emerged for different types of service companies, such as PT Bumbu

Desa, which carries out the internationalization process by choosing a master franchise.

This shows that the internationalization process is highly dependent on the characteristics

of the company. Manufacturing companies that produce certain products or commodities

enter international markets by exporting. As Carpenter explains, exports are the entry point

for companies. Export is the easiest way of entry used by a company, because in this case

the company does not need to take additional action but only adds to its distribution

channel, namely abroad (if currently only distributing within the country).

As (Boddewyn, 2015) states, with the initial process of entering foreign markets, the

intensity of the company's internationalization phase will increase if the company not only

exports but also opens sales or marketing representative offices in many countries. This

step can be done by granting a license or franchise to PT. Country Spices. Furthermore, if

this step is successful, the company will conduct business activities abroad through foreign

direct investment (FDI). The researchers fully describe these phases in the table below. The

diagram is a matrix between the type of entry model and the stages of the

internationalization process that companies typically go through. Figure 2 below shows a

model matrix for firms entering international markets and the various stages of the

internationalization process.

Figure 2 Matrix of Company Entry into International Markets with the Stages of

the Internationalization Process

b. The right strategy for the company when entering the international market

By focusing on the data and discussion above, it can be said that as the

internationalization process goes through three stages (export, transnational and global), so

does the strategy used. Especially in the early stages, the right strategy is a home replication

strategy. Domestic replication strategy is a strategy used by a company to replicate in its

home country.

This policy means that the company will not make any changes or modifications to

the products it sells. As a result, costs can be reduced, but companies cannot adjust to the

tastes of the people of the destination country. This strategy uses the input derivation

scheme as described above. In addition to the home replication strategy, the company can

also adapt other strategies, as shown in Figure 3. In the matrix, the company chooses

between the entry strategy and mode, as shown in Figure 3 below.

Eduvest – Journal of Universal Studies

Volume 2 Number 5, May 2022

897 http://eduvest.greenvest.co.id

Figure 3 Matrix of Internationalization Stages, Strategies and Entry Modes

2. The Role of the Government in Efforts to Internationalize MSMEs

The government's role in supporting the internationalization of SMEs is very

important. This policy allows MSME actors to export, encourages increased exports of

goods, and protects MSME players from competing with other products. Government

through the Ministry of cooperatives and SMEs in 2014 formulated five policy steps related

to long-term development plans to optimize the strength of cooperatives and SMEs. The

policy is the existence of the Indonesia National Single Window (INSW).

INSW is an Indonesian national system that allows single and simultaneous data and

information processing, as well as single and simultaneous data and information

processing. and spending) (Perpres No. 10 of 2008). The INSW system must be applicable

to all business actors who carry out import and export processes, including MSMEs. Facing

the era of free and open trade, SMEs must be ready to compete with other business actors.

INSW as a government design is expected to encourage a more efficient import and export

process.

Presidential Regulation Number 10 of 2008 stipulates that the Indonesian national

system allows the transfer of data and information in processing data and information

separately and simultaneously and processing data and information separately and

simultaneously. release of goods.

The purpose of implementing INSW is to accelerate the completion of the import

and export process as well as improve the efficiency and performance of handling the flow

of imported and exported goods. INSW implementation is carried out through the INSW

Portal, a national integrated electronic system that can be accessed via the Internet, which

will consolidate relevant information for processing customs documents and other import

and export related documents, ensure data and information security, Integrate flow

information and automatic information processing between systems internal systems,

including customs systems, permits, ports/airports, and other systems related to service

processes and regulation of import and export activities.

The success of the INSW implementation will depend on the government's efforts to

support the success of the program. The steps taken by the current government by creating

a special portal at INSW are appropriate, but if the socialization is supported not only

through the existing portal, but also through direct involvement with business people,

including through seminars and workshops, with them interacting more often. The

government also needs to prepare human resources to provide training for those appointed

as part of INSW's business activities.

 
 
Abdul Halim, Imam Mukhlis 
Government's Strategy and Role in the Internationalization of MSMEs  898 
CONCLUSION 
 
In summary,  conceptually and theoretically  internationalization strategies  can be 
divided  into  two  types:  internationalization  theory  and  selective  theory.  Internalization 
theory is the result of the development of large corporations in the 1970s, which could 
threaten the existence of MSMEs. Furthermore, in its development, the theory seeks to 
internalize the benefits that can be obtained from internationalization, localization, and 
ownership. At the same time, eclectic theory in internationalization strategy places more 
emphasis on the resources owned by MSMEs and knowledge of the markets and networks 
that MSMEs choose to market their products. The steps taken by the current government 
by creating a special portal at INSW are appropriate, but if the socialization is supported 
not only through the  existing portal, but also through direct involvement with business 
people, including through workshops and interacting with them more frequently. 
 
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