International Journal of Management (IJM)

Volume 11, Issue 5, May 2020, pp. 351-357, Article ID: IJM_11_05_034
Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=5
Journal Impact Factor (2020): 10.1471 (Calculated by GISI) www.jifactor.com
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.11.5.2020.034

© IAEME Publication Scopus Indexed

COMMUNITY READINESS AS A BUSINESS

PLAN TO ITS DIGITAL ERA
COMPETITIVENESS
Fivi Rahmatus Sopiyah*, Yulinda, Yetti Meliani
Department of Economic, Universitas Sumatera Utara,
JL. Prof. T. M. Hanafiah, Medan, Indonesia
*Corresponding Author Email: fivirahmatus2017@yahoo.com

ABSTRACT
The biggest challenge in facing MSMEs in the era of the industrial revolution 4.0
is their ability to adapt to existing technology. This study aims to find out how the
readiness of the community as entrepreneurs towards the industrial revolution 4.0.
This research also offers several models that can be applied by business actors to
improve business competitiveness. This type of research is explanatory research.
Primary data collection in this study used questionnaires and interviews while
secondary data collection was carried out using literature. This research uses
Structural Equation Modeling (SEM) with the help of Smart PLS software. The results
of this study indicate that innovation owned by MSMEs will be able to change market
conditions and these conditions will indirectly be able to increase the competitiveness
of MSMEs in the industrial revolution era 4.0. Other results in this study indicate that
the most dominant factor in influencing the role of government in the development of
MSMEs is facilities and infrastructure. The most dominant factor influencing market
conditions is innovation, and the most dominant factor influencing business
competitiveness is the fulfillment of needs related to facilities and infrastructure to
support the development of MSMEs in North Sumatra, Indonesia.
Key words: industrial; MSMEs, business; competitiveness
Cite this Article: Fivi Rahmatus Sopiyah, Yulinda, Yetti Meliani, Community
Readiness as a Business Plan to its Digital Era Competitiveness. International Journal
of Management, 11 (5), 2020, pp. 351-357.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=5

1. INTRODUCTION
The industrial revolution is the birth of digital technology which has a massive impact on
human life throughout the world. The latest 4.0 generation industrial revolution is driving
automation systems in all business activity processes. The development of the Indonesian
economy is inseparable from the role of MSMEs (Micro, Small and Medium Enterprises)

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 Fivi Rahmatus Sopiyah, Yulinda, Yetti Meliani

which are the backbone of the country's economy that is able to save the country in critical
condition. MSME (Micro, Small and Medium Enterprises) is a productive business unit that
stands alone, which is carried out by individuals or business entities in all sectors of the
economy. In principle, the distinction between microbusinesses, small businesses, medium
enterprises, large businesses is generally based on the value of the initial assets (excluding
land and buildings), average turnover per year, or the number of permanent workers [1], [2].
At the present, businesses that are increasingly in demand are MSMEs. They were able to
provide 97.2% of the total employment available in Indonesia in 2013 and contributed around
56.5% of the formation of Gross Domestic Product in 2015. However, amidst the existing
economic development, MSME as a pillar of the national economy in terms of quantity it has
not been balanced with adequate quality improvement. And the problem faced is the low level
of productivity and competitiveness of MSME businesses. Competitiveness is important in
running a business / business [3].
The existence of competitiveness of companies and even MSMEs will be able to increase
the level of productivity. In the concept of business competitiveness, businesses that have no
competitiveness will be abandoned by the market. Because, if you do not have
competitiveness means that you do not have an advantage, and not superior means there is no
reason for an effort to remain in the competitive market for the long term. Competitiveness
relates to the effectiveness of an organization in a competitive market, compared to other
organizations that offer the same or similar products or services. Companies that are able to
produce good quality products or services are effective companies in the sense that they will
be able to compete [4], [5].
With the increasingly competitive environment at the moment and the existence of a
dynamic market situation, it is no longer possible for any business actor to avoid competition,
businesses must face the level of competition in the best possible way. It should be interpreted
here as an effort carried out optimally and continuously to produce something better and
better in the future [6], [5].
Empowerment of MSMEs in the midst of globalization and high competition must make
MSMEs able to cope with global challenges, such as increasing product and service
innovation, developing human and technological resources, and expanding marketing areas.
This needs to be done to increase the selling value of MSMEs, especially in order to compete
with foreign products that are increasingly flooding industrial and manufacturing centers in
Indonesia, given that MSME is an economic sector that is able to absorb the largest workforce
in Indonesia [7], [8].
The purpose of this research is to find out how the community's readiness model as SMEs
in entering the era of the industrial revolution 4.0. This study will also examine several
variables that are thought to affect business competitiveness, namely the level of knowledge
of human resources (HR), technology, innovation, creativity and infrastructure. And this
study also uses the role of government and market conditions as an intervening variable. So
this research will illustrate how the community readiness model can be useful to improve the
competitiveness of MSMEs in the face of the industrial revolution 4.0.

2. LITERITURE REVIEW
2.1. Business Competitiveness
Competitiveness as the business ability of a company in the industry to deal with various
environments encountered. This competitiveness can be determined by the competitive
advantage of a company and very much depends on the level of its resources or commonly

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 Community Readiness as a Business Plan to its Digital Era Competitiveness

referred to as competitive advantage [9],[3],[10] with the importance of competitiveness

because of the following three things :
 It encourages the productivity and increase the ability of independent,
 It can increase economic capacity, both in the regional economic context and the
quantity of economic actors so that economic growth increases,
 Belief that market mechanisms create more efficiency. Competitiveness is very closely
related to the effectiveness of an organization in the competitive market, compared to
other organizations that offer the same or similar products or services.
Companies that are able to produce good quality products or services are effective
companies in the sense that they will be able to compete in the market.

2.2. Industrial Revolution 4.0

The term Industry 4.0 was born from the idea of a fourth industrial revolution. Its existence
offers many potential benefits. Industry 4.0 is a comprehensive transformation of all aspects
of production in the industry through the merger of digital and internet technology with
conventional industries [11], [12].
The definition of the speed element of information availability, which is an industrial
environment in which all entities are always connected and able to share information with
each other. A more technical understanding with [13], [14] that Industry 4.0 is the integration
of the Cyber Physical System (CPS) and the Internet of Things and Services (IoT and IoS)
into industrial processes including manufacturing and logistics and other processes. CPS is a
technology to combine the real world with the virtual world. This integration can be realized
through integration between physical and computational processes (embedded computers and
network technology) in a close loop through IoT [15], CPS is able to communicate with each
other and work together in real time, including with humans. IoS are all service applications
that can be utilized by each stakeholder both internally and between organizations [16], [17].

3. METHOD
This type of research is explanatory research. Namely research that aims to test a hypothesis
in order to strengthen or even reject the hypothesis of existing research results. The model
produced in this study is a conceptual model that can be used as an instrument to increase the
level of MSME competitiveness.
The sample used in this study is the SMEs in North Sumatra Province. Total respondents
who were sampled in this study were 100 SMEs. Primary data collection in this study used
questionnaires and interviews while secondary data collection was carried out using literature.
This research uses Structural Equation Modeling (SEM) analysis technique with the help of
SmartPLS software.

4. RESULT AND DISCUSSION

4.1. Result
4.1.1. Outer Model Analysis
The following picture is the result of SEM model calculation using Smart PLS which shows
the loading factor value of the indicator on each variable. The convergent validity of the
measurement model with reflexive indicators is assessed based on the correlation between the
item or component score with the latent variable score or the construct score estimated with
the Smart PLS program. The convergent validity test results in the research model show that

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 Fivi Rahmatus Sopiyah, Yulinda, Yetti Meliani

all indicators used in this study already meet the convergent validity criteria because it has a
factor loading value greater than 0.7.
This study uses five independent variables namely knowledge of HR (X1), technology
(X2), Innovation (X3), creativity (X4) and facilities & infrastructure (X5). The intervening
variables used in this study are the role of government (Y1) and market conditions (X2), and
business competitiveness (Y3) as the dependent variable of research.
Based on the data presentation in Table 2 above, it can be seen that the independent
variables that are able to significantly influence the role of government are technology (X2),
creativity (X4), and facilities & infrastructure (X5). Variables that can significantly affect
market conditions are HR knowledge (X1), technology (X2), innovation (X3). While the
variables that are able to significantly affect business competitiveness are knowledge of HR
(X1), technology (X2), innovation (X3), facilities & infrastructure (X5) and market conditions
(Y2).
Based on the expalantion, it can be seen the indirect effect of each independent variable
on the dependent variable through intervening variables, namely the role of government and
market conditions. The table above shows that the indirect effect of the innovation variable
has a significant influence on business competitiveness through market conditions (0.016
<0.05). While in other results, all the indirect effects of other independent variables on the
dependent variable through the intervening variable are not significant at the 5% level. So that
in this test only found one model that explains that market conditions can be used as an
intervening variable in the effect of innovation on business competitiveness. This means that
by increasing innovations owned by the community as SMEs, it will change market
conditions for the better, and indirectly these conditions will affect the competitiveness of
MSMEs in the market during the era of the industrial revolution 4.0 as it is today.

4.2. Discussion
4.2.1. Factors Affecting the Government's Role
The role of government in the process of development and success of MSMEs continues to be
in the spotlight. Until now, MSME has proven to be one of the sectors that has a very large
role in the Indonesian economy. Based on the results of this study, it can be seen that the
factors that have a significant influence on the role of government are technology (X2),
creativity (X4), and facilities & infrastructure (X5).When viewed based on the magnitude of
the coefficient values of each of these variables, it can be seen that the most dominant factor
influencing the role of government is facilities & infrastructure, then followed by technology
and creativity. These results explain that for now, the thing that is of concern to the
government is the fulfillment of facilities & infrastructure. This positive direction of influence
shows that the more fulfilled the need for facilities & infrastructure in MSMEs will increase
the role of government in it. And of course, creativity and innovation are also factors driving
the government's role in developing MSMEs like the idea [1], [2], [3], [4].
4.2.2. Factors Affecting Market Conditions
Market conditions will be related to the level of supply and demand held by business actors
contained in the market. So this will be related to the success of SMEs in reading the current
market situation and using it for business success. In fact, market conditions will always
change with the times, so market participants must be able to follow these developments. The
results of this study found several factors that were proven to significantly influence market
conditions, namely: knowledge of HR (X1), technology (X2), and innovation (X3) as the
opinion [5], [6], [7], [8].

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 Community Readiness as a Business Plan to its Digital Era Competitiveness

Some of these factors have their respective roles in shaping market conditions in
Indonesia. Fulfillment of the level of knowledge of human resources in MSMEs will drive
market conditions to become more competitive. Likewise with the use of technology, and
innovation of SMEs, this will also affect market conditions in the industrial revolution era 4.0
that is similar to [9], [10], [11], [12].
From the results of this study, it can be seen that the most dominant factor in influencing
market conditions is the biggest influence is innovation, knowledge of human resources and
technology.
4.2.3. Factors Affecting Business Competitiveness
The main thing that is the focus of this research is the competitiveness of MSMEs as one of
the leading types of businesses in Indonesia. The ability of MSMEs to compete in the 4.0
industrial revolution era can be influenced by several factors, including: the level of
knowledge of human resources (X1), technology (X2), innovation (X3), facilities &
infrastructure (X5) and market conditions (Y2) as the concept of [13], [14], [15].
Competitiveness is an advantage or excellence that consists of comparative advantage and
competitive advantage. Competitiveness is also commonly referred to as the level of
productivity that has been generated by a business (Porter, 1980). Having a high level of
competitiveness becomes absolutely must be fulfilled by MSMEs, being able to compete and
survive in the MSME market must know what factors can influence the level of
competitiveness of a business. The results of this study indicate that the most dominant
factors in influencing business competitiveness are facilities & infrastructure, technology,
market conditions, innovation, and HR knowledge for the opinion of [16], [17].

5. CONCLUSION AND SUGGESTION

5.1. Conclusion
Some conclusions that can be drawn from the results of this study include:
 Partially, the factors that have a significant influence on the role of government are
technology (X2), creativity (X4), and facilities & infrastructure (X5).
 Partially, factors that have a significant influence on market conditions are knowledge
of HR (X1), technology (X2), and innovation (X3).
 Partially, the factors that have a significant influence on competitiveness are
knowledge of human resources (X1), technology (X2), innovation (X3), facilities &
infrastructure (X5) and market conditions (Y2).
 Market conditions can be used as an intervening variable in the effect of innovation on
business competitiveness.

5.2. Suggestion
The results of this study provide some input that can be used by business actors to prepare a
sufficient level of competitiveness in dealing with industry 4.0. to be able to improve its
performance. The following are some suggestions for further research and alternative models
that can be used by MSMEs to improve business competitiveness.
 In the results of this study, it can be seen that the factors that most influence business
competitiveness are facilities & infrastructure, technology, market conditions,
innovation, and HR knowledge. So it is expected that the stakeholders who are one of
the parties responsible for the survival of MSMEs in Indonesia. This can be done by
increasing the fulfillment of the needs for UMKM facilities and infrastructure,
increasing the use of technology in all UMKM activities, the ability to read good

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 Fivi Rahmatus Sopiyah, Yulinda, Yetti Meliani

market conditions, increasing product or service innovation, and deepening the level
of knowledge of human resources as MSME actors.
 The results of this study also show that market conditions can mediate the effect of
innovation on MSME competitiveness, this means that market conditions can be used
as intervening variables in the model. Therefore, it is expected that in the future all
SMEs and stakeholders involved in it will be able to create healthy market conditions.
 To support the results of this study, it is hoped that further research will conduct
further studies to find out how to model well for developing MSMEs in the era of the
industrial revolution 4.0.

ACKNOWLEDGEMENTS
This research was fully funded by the research institute of Universitas Sumatera Utara in
accordance with the contract of Talent Research in the year of 2019 with the number of
contract 4167 / UN5.1.R / PPM / 2017, 1st April 2019

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