Could Small and Medium Enterprises (SMEs) Entering to Global

Market? Evidence of SMEs in Central Java

Ana Shohibul Manshur Al Ahmad

and Mulyadi

Faculty of Economic and Business, Universitas Sebelas Maret

Keywords: Small and Medium Enterprises (SMEs), Global Market, Export, Synergy and Collaboration

Abstract: Entering the international market is a challenge especially for Small and Medium Enterprises (SMEs).

Limited market access, capital, competitiveness, product standardization, managerial capability and

competitive conditions that have caused the non-conducive business climate to become the main obstacle

for SMEs to penetrate the global market. To achieve it, a strategy and support from various parties is needed

to produce SMEs that have competitiveness and independence to be able to exist in the global market. The

purpose of this study is to analyze the capabilities and conditions of SMEs in Central Java in entering the

export market. This research method is purposive sampling, which a sample chosen based on certain criteria

and applied according to the research objectives. The population in this study were all SMEs in Central Java

with a total sample of 162 (n = 162). The results of this study indicate that SMEs have been able to

penetrate export by 9.7% while others are still focused on the domestic market. Some problems that include

labor unpreparedness (lack of skill labor), non-standardized products, market access, promotion and

marketing systems, capital and supply chains cause low competitiveness of SME products making it

difficult to penetrate international markets. The implications of this research are the need for synergy and

collaboration between government, academics (colleges and secondary education), financial institutions,

private sector, media and industry associations to enhance the role of SMEs through empowerment,

integrated coaching, mentoring and technical support.

1 INTRODUCTION

The expansion of market heading to global market

becomes a challenge for small and medium

enterprises (SMEs), especially for those who are

from developing country. Indonesia as one of the

developing countries has pretty hard challenges in

developing and improving the roles of small and

medium enterprises as one of the economic supports

which is sticky when shock happens. The

contribution of SMEs towards Indonesia’s total of

export is relatively small, which is around 15.8% in

2016 and it is still below Thailand and Philippines

which are 29,5% and 20%. This can happen because

the changes of international trade policy which are

relatively fast especially the involvement in free

trade treaty which is either bilateral or multilateral.

The free trade will create a competitive climate

business because there are a lot of foreign company

operations in the country and the product’s price is

cheap. This condition affects to the huge chance of

SMEs to export and expand to international market.

However, this cannot be optimized by Indonesian

SMEs in which the limited source and infant

industries condition as one of the reasons.

The studies about internationalization of SMEs

have been done (Anonim, 2002); (Jones, 2006); (Lis,

Nienstedt, Proner, & Yalazi, 2012); (Olejnik &

Swoboda, 2012); (Veilleux, Haskell, & Pons, 2012);

(Ng & Kee, 2017); ((Ngoma, Ernest, Nangoli, &

Christopher, 2017); and (Torkkeli, Nummela, &

Saarenketo, 2018). There are 2 factors detain the

internationalization SMEs which are iternal and

external factor. Internal, human resources berries,

either the owner or the manager towards the access

mode to export and domestic oriented market is

more dominat (El-Gohary et al., 2013); the limit of

experieces and knowledge of the manager about the

export activities (Athanassiou & Nigh, 2000) and

(Ruzzier et al., 2007) the limit access and knowledge

about export target (Liesch & Knight, 1999).

Ahmad, A. and Mulyadi, .

Could Small and Medium Enterprises (SMEs) Entering to Global Market? Evidence of SMEs in Central Java.

DOI: 10.5220/0009498104130421

In Proceedings of the 1st Unimed International Conference on Economics Education and Social Science (UNICEES 2018), pages 413-421

ISBN: 978-989-758-432-9

413

External, lack of government support and assistance

especially in providing policy framework in

accordance with the export practices or guidances

(Leonidou, 2004); the demands of global consumers

in improving the added value faced the lead time

which is relatively short in verifying product as the

form of building competitiveness (Kotabe &

Murray, 2004); information of international market

is inefficient, the lack of capital access (company

source and expert source), difficult to fulfill the

import needs, the decadency of economy in the

home country, currency fluctuation, the obstacles of

sociocultural and marketing (Al-Hyari et al., 2012);

different of language, background of social

condition, politic condition in the country which are

unstable, complexity procedure of export, inaction

of export service and corruption in the home country

(Rahman et al, 2017).

Besides, the success of SMEs entering export

marketis decided by some important factors which

are the ability in utlizing network access and market

(through group/cluster) and inovation fit with the

changes of company/market (Villar & Pla-Barber,

2018); strong commitment from companies to do an

export, innovation and joint business/partnership

(Maurel, 2009); product and service quality, market

diversification and company orientation to

international markets (Larimo, 2006). In overcoming

obstacles related to internationalization of SMEs, a

modern approach is needed, which is external

barriers that include procedural barriers (style of

communication with consumers, access to finance,

experience and knowledge, and many more),

governmental barriers (support, empowerment and

technical assistance), task barries (conditions of

economy, taste, habits, and climate conditions), and

external environmental barriers (exogenous

variables) (Narayanan, 2015). In addition,

entrepreneurial spirit, experience and knowledge,

business innovation, differentiation and orientation

to export and competitors become one of the success

entering the global market (Hsieh, et al., 2018),

strong institutional support and infrastructure are

also the factor for SMEs to penetrate the

international market (Deng & Zhang, 2018) and

(Synovics, Kurt, & Syncovics, 2018) e-commerce

platform as one of the driving forces in accessing

new markets (exports), global value-chains, creating

value added, services and new business models, and

market expansion towards global competition

(Savrul, Incekara, & Sener, 2014).

Central Java as one of the Provinces in Indonesia

has a unique characteristic of SMEs, in which

industries created follow the topography in this

region. The SMEs in this area reached 4.1 million in

2016 and was able to create jobs up to 90% of the

available labor force. However, if seen from the

export performance, the export contribution of

Central Java SMEs to total regional exports is still

below the contribution of national SMEs. The

support of the regional government in terms of

policy is large, this can be seen from the Central

Java Regional Medium-Term Development Plan

where the SMEs are one of the strategic issues and

policy agendas at national and global levels.

Besides, the regional government through the Office

of Cooperatives of Small and Medium Enterprises

develops the concept of One Village One Product

(OVOP) for SMEs as a form of product innovation

and the creation of superior products (regional

superior products). However, this support is only at

the policy level, while it is still very small at the

implementation and technical level. The total of

SMEs under the guidance of the regional

government is 115,751 units or 2.8% of the total

SMEs in Central Java. This has an impact on the less

competitive SMEs, especially on classic issues,

access to marketing and investment, development of

human resources, access to capital and other

technical supports.

The objective of this study is to analyze how the

readiness of Central Java SMEs to enter the global

market, especially exports. Referring to these

researches (Synovics, Kurt, & Sinkovics, 2018);

(Savrul, Incekara, & Sener, 2014); (Deng & Zhang,

2018); (Narayanan, 2015) and (Rahman, Uddin, &

Lodorfos, 2017) these studies tried to develop

several independent variables to develop the model.

This research used quantitative and qualitative

analysis. This paper consists of several parts, the

next section discusses the literature review, which is

about patterns of entering international markets

conducted by SMEs and various policies related to

the development model of SMEs. The third part

contains research methods that were used as

analytical tools both quantitatively and qualitatively,

data and how to obtain them. The next section

discusses empirical results and discussion, and the

last section contains conclusions, implications of the

results of this study and the limitation of study based

on the researchers’ side.

2 LITERATURE REVIEW

Internationalization is a process at the company level

that crosses borders between countries with various

approaches, which can be done through exports,

licenses, franchising, joint ventures, and direct

investment (Zekiri & Angelova, 2011) and (El-

Gohary et al. , 2013). Meanwhile, in line with the

SMEs approach as a business actor who runs a

business that is natural, internationalization (export)

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414

is a process of developing networks related to

business with other countries through penetration

and integration (Johanson & Vahlne, 1990) and

(Ngoma et al., 2017) In the process of

internationalizing SMEs, there are 3 patterns of

internationalization, which are gradual

internationalization, the international organization

called born globals and international ventures or

born again global firms (Olejnik & Swoboda, 2012).

2.1 Internationalization of Uppsala Model

The Uppsala model emerges as a form of criticism

of behavioral theories d by (Cyert & March, 1963)

and (Vernon, 1966). This theory was put forward by

Johanson & Vahlne (1977) that the process of

internationalization of the company was conducted

step by step to increase its role internationally

through additional approaches and made it possible

to benefit from the effects of learning. This is due to

human resources and lack of knowledge and

understanding of the market when they decide to go

international (Dominguez & Mayrhofer, 2017). Lack

of knowledge about international markets is

influenced by many factors, including physical

distance between countries, differences in language,

education systems, managerial practice, socio-

cultural and industrial development. The distance

factor is one of the dominant things, where this

factor is able to disrupt the transmission of

information between the company and the market.

Although market information can be accessed online

(Savrul, Incekara, & Sener, 2014), more

comprehensive information is less able to be

captured. The distance factor will affect

managers/companies subjectively to the psychic so

that the lack of knowledge about the market will

have an impact on the barriers to the expansion of

the export market. Companies will tend to carry out

international expansion through exports with

markets aimed at nearby countries/neighbors by

limiting resource commitments, because physical

distance has a negative impact on exports

(Ekanayake et al., 2010). Distance is not an obstacle

for companies when they have broader experience in

the internationalization process and have high

resource commitments to invest in international

markets.

The stages of internationalization in the Uppsala

model consist of four stages (Hollensen, 2017), (i)

no export activities on a regular basis (sporadic

export); (ii) export activities through agency/export

(export mode); (iii) establishment of a foreign sales

subsidiary; and (iv) foreign

production/manufacturing units. Internationalization

activities require market commitment, which are

committed resources and the degree of commitment.

Besides, the internationalization process requires

general knowledge and market-specific knowledge,

in which specific knowledge is gained from

experience in the market while operating knowledge

is obtained through transferred knowledge from

other countries. So that market knowledge and

market commitment are dimensions of human

resources. This condition implies that the broader

knowledge about the market, the more valuable

resources and market commitments (Hollensen,

2017).

2.2 Modern Concept of Internationalization

The development of technology and communication

brings success in business practices and creates new

opportunities in international business. This disputes

the previous theory, in which Uppsala models focus

more on internal conditions and ignore external

factors such as market potential, demand conditions

and competitive forces. In addition, some

economists criticize the internationalization of the

Uppsala model, where the model is unable to explain

how the initial process of internationalization

activities took place, how the internationalization

process took place, when the process took place and

began, the inequality and consistent speed of

internationalization (Oviatt & McDougall, 1994) and

(Buckley & Casson, 1998), how to enter the

international market with a relatively small level of

risk and able to control the market (Doole & Lowe,

2008), the existence of geographical diversification

and changes in the global environment (Dominguez

& Mayrhofer, 2017).

The emergence of global companies does not

always go through the stages as explained by

previous theory (domestic, sporadic export, export

mode, subsidiary etc) where they were born as

global companies (born global). Born global is a

firm that has a vision of becoming a global company

since they were established without going through a

domestic period, exports and long-term

internationalization (Gabrielsson & Kirpalani,

2004). Born global is characterized as SMEs with a

workforce of less than 500 people and large depend

on the latest technology in supporting the innovation

process (Hollensen, 2017).

This company tends to be initiated and managed

by young entrepreneurs who have the dedication and

visionary souls who see the world as a single market

without restrictions. Another variation of this kind is

Born-again global, this company was originally a

domestic company and then transformed into a

relatively fast international company, where the

transformation process was caused by changes in

ownership, management changes, takeovers by other

companies and other critical events (Bell,

McNaughton, & Young, 2001). With this way, it is

possible for the company to gain access to financial

Could Small and Medium Enterprises (SMEs) Entering to Global Market? Evidence of SMEs in Central Java

415

resources, managerial capabilities and a wider

international market. Born-regional global is a

company with international activities since the

company stood and owned international shares, but

international activities are only carried out in the

home region (Lopez, Kundu, & Ciravegna, 2009).

The development of the internet and darling media

are factors that influence the emergence of this

theory. Today, many SMEs and small companies are

born with e-commerce platforms with an internet

start-up base and sell to global communities. They

put forward e-commerce platforms as a media

campaign in the global market and still maintain the

conventional model in its operationalization

(production processes, physical distribution

channels, control of stock handling, sales and other

physical activities) (Hollensen, 2017). Another study

stated that born global companies initially chose

psychological proxies to reduce business risk, but in

its development, the company is able to use business

networks, expertise and entrepreneurial skills to

expand quickly to markets that are psychologically

distant (Trudgen & Freeman, 2014).

2.3 SMEs Views

The ability of SMEs to penetrate to the international

markets depends on internal and external conditions

of the company. The capability of the resources

owned is the main factor for the success of SMEs in

going international. The limitations of market

knowledge possessed by the owner, manager and

sales will influence company in penetrating export

markets. Internal factors such as owner and manager

expertise, support from the government and

company commitment, high resource ownership,

business size, type of product produced, the

company's orientation to the international market,

export handling costs, the level of competition in the

domestic market, and product life cycle in the local

market have a significant influence on the company

in determining the mode of entry of export markets

(El-Gohary et al., 2013). The age of the company,

business scope, scale of production, experience in

internationalization, number of subsidiaries,

orientation to international markets, capabilities in

communicating with markets, and marketing mix

become variables that influence the pattern of entry

into international markets (Olejnik & Swoboda,

2012).

In order for SMEs to be able to internationalize,

the support from various parties is needed, which

come from government and agencies including

financial service companies (export credit agencies),

agents or liaisons between local and international

businesses, local governments that handle the

development of SMEs, chambers of commerce at the

regional level, business associations, private

companies affiliated with export activities,

consultants, and academics (Sear & Hamilton, 2004)

networking patterns between SMEs, focus on

government support and interactive communication

patterns with markets through online media or

through other digital new media (Wright, ul-Haq, &

Oktemgil, 2005). In addition, knowledge,

understanding and experience in export activities are

needed, a strong commitment to export, a business

network and a reliable entrepreneurial spirit

(Synovics, Kurt, & Sinkovics, 2018).

2.4 SMEs Policy in Indonesia

Indonesia as a developing country has crucial

problems in developing SMEs. As in other

developing countries, the problems of SMEs are

more on external factors, from capital, market access

and marketing, to product standardization. SMEs in

Indonesia, including Central Java, are as production

bases, which are able to absorb more than 90% of

the total workforce. However, in terms of

contribution to GDP and exports, SMEs can only

contribute to the formation of GDP of less than 60%

and the rest are large scale companies. Meanwhile in

terms of export performance, SMEs can only

contribute around 15% of total national exports. It

also happens in Central Java. When viewed from the

form of government support, the government

continues to encourage SMEs to grow and develop

in order to have competitiveness in the local and

global markets. Implementation of this support is the

inclusion of SMEs in the national framework

through the 2015-2019 National Long Term

Development Plan as strategic direction and policy.

The efforts and strategies undertaken include (i)

coordinating the location of land redistribution and

the legalization of assets with community

empowerment programs; (ii) development of

agricultural technology and processing of

agricultural products; (iii) the establishment and

strengthening of microfinance institutions and (iv)

building connections between farmer businesses,

and SMEs with the industrial world (RPJMN 2015-

2019, 2018).

At the regional level, Central Java, the

government support for the SMEs is also

implemented in the form of a strategic 2018-2023

Long Term Development Plan. The problem of

SMEs in Central Java is the lack of optimal

existence of SMEs as a base and stimulator of the

regional economy, related to institutions, human

resources, markets access and capital as well as

product quality. Meanwhile the policy direction

occupied by the regional government is to support

the growth of SMEs through (i) improving quality of

work (education level and managerial quality), (ii)

providing business facilities for SMEs, (iii)

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facilitating access to capital from banks, (iv)

increasing market access through digital economy

development, (v) improvement of production,

distribution, promotion and marketing network

infrastructure, (vi) development of technological

innovations, (vii) development of techno-park, and

(viii) facilitation of product standardization and

certification of SMEs (RPJMD 201-2023, 2018).

However, the lack of adequate government support

in terms of developing the SMEs has become a

problem for the government in order to encourage

SMEs to increase their role and contribute to the

support of the regional and national economy.

3 RESEARCH METHOD

The objective of this study is to analyze how the

readiness of MSMEs in Central Java in penetrating

the export market. The studies related to

patterns/modes carried out by SMEs in the

international world are (Wright, ul-Haq, &

Oktemgil, 2005), (Maurel, 2009), (Olejnik &

Swoboda, 2012), (Dominguez & Mayrhofer, 2017)

and (Hsieh, et al., 2018). The author developed

several variables based on the context that had been

studied in several previous studies. The population

in this study are SMEs in Central Java Province

under the guidance of local governments or who are

members of Forum for Economic Development and

Employment Promotion (FEDEP) and Local

Economic Development (PEL). The data collection

was conducted through focus group discussions

(FGDs) deep interview, in which UKM members

were invited to be accompanied by the Central Java

provincial government. The sample was selected

according to the SME criteria of 160 units and the

interview process was conducted in depth to obtain

accurate data and information. The process of

collecting data through FGDs and in-depth

interviews was conducted within the period

September-November 2018.

This study is mix cross-sectional qualitative and

quantitative because it makes the study to be

conducted in limited time and costs but still provides

optimal results (Neuman, 2011) and (Ngoma et al.,

2017). The selected SMEs are cross-sectional

industries, in which the SMEs are heterogeneous in

terms of the products produced but still maintain

certain criteria related to the objectives of the study.

The product characteristics SMEs are grouped in the

agricultural and plantation sectors, manufacturing

and services, the manufacturing sector including

creative and craft industries. The deep interview

process refers to the prepared questionnaire in which

questions were concentrated on how the company

(SMEs) is ready to export (understanding and

experience of the owner/manager of export markets,

financial and capital conditions, promotion and

sales, standardization of products and processes,

institutions, access to financial resources and

conditions of resources owned).

4 RESULT AND FINDING

The focus of this study is to capture the readiness of

SMEs in Central Java from the company's internal

side. Based on the data obtained through the FGD

and in-depth interviews, it obtained explanatory

variables that explained the readiness of SMEs to go

international. The researchers conducted in-depth

interviews and distributing questionnaires to 160

companies, but only 64 respondents or 40% of them

who fulfilled the requirements according to the

criteriathat had been decided.

We also cross-checked with the government, the

institutions related to various programs in order to

increase the role of SMEs in economic activities.

Experience and knowledge of business and

international is one of the drivers of companies to

enter the international market. Based on the results

of analysis and interviews, the average businessmen

in Central Java (UKM) has less than five years of

experience. From 64 respondents, 70.3% of them

said that their business experience was less than five

years. This is in line with (Athanassiou & Nigh,

2000) and (Ruzzier et al., 2007) studies that stated

that experience in business/internationalization has

an impact on international mode. This condition is

one of the causes of the small number of Central

Java SMEs that do an export activities. SMEs in

Central Java that have been able to export

themselves and export directly are only 9.7% or 6

entrepreneurs. If it is viewed from potential

resources, Central Java are one of the icons of

national superior products, which are Batik,

Furniture, and Textiles and Textile Products. If it is

viewed from the quality of the product, 17.8% of

them said that their products sold abroad and 17% of

them stated that their products were supplied to

collectors trading companies who redesigned and

packed products, and exported by the trading

companies. Thus, this can be underlined that the

problem of the SMEs is still lack of capacity in

Could Small and Medium Enterprises (SMEs) Entering to Global Market? Evidence of SMEs in Central Java

417

export, influenced by access to international

markets.

The commitment and orientation to customers

and the international market is an important factor in

penetrating international markets. The dynamic taste

of global consumers and enormous market

competition requires producers (SMEs) to be able to

produce products that have unit characteristics and

value added for consumers. Even though some

Central Java SMES products have penetrated the

export market, but most or 81.25% of the products

produced by Central Java SMEs have not been

standardized nationally, even internationally. This is

also caused by the production process which has not

all clearly used standard standard operating

procedures, in which more than 50% of SMEs stated

that their production processes do not have the right

procedures. Apart from quality, global consumers

also demand intime delivery, they do not tolerate

delays in the delivery of goods caused by human

factors.

The delay in delivery as a result of late

production and or availability of raw materials is one

factor in customer dissatisfaction. For the SMEs in

Central Java, the delay in the supply of raw

materials caused by natural factors, transportation

and many more are still common. 48.4% of

respondents stated that they often faced problems in

delay in the supply of raw materials due to weather

factors, the import process (custom) was not finished

because some raw materials were imported and so

on. Product and production problems for Central

Java SMEs require special treatment and support

from all parties, not only B to B but also the role of

the government in order to facilitate the flow of

goods. This finding supports the opinion of Larimo

(2006) who stated that how important the product

and service quality for consumers as one of the

international market entry modes. The researchers

argued that in the process of product distribution

(both raw material, intermediate and final goods) an

integrated supply chain logistic is needed starting

from raw material sources to end customers

involving all transportation associations in Central

Java, traders, SMEs, large industries and the

government. The government has a very big role

related to the policy of goods distribution,

transportation, warehousing and business

infrastructure and licensing.

Market and marketing are one of the obstacles

for SMEs, especially in developing countries,

including in Indonesia. In business, marketing is the

spearhead for the survival of the company.

Knowledge and understanding of the market is an

important factor for the success of the marketing

process. Promotional media, owners/workers who

understand the market and promotion are the most

important factors in the marketing process. But for

SMEs, these three factors are basic and traditional

obstacles in accessing markets. Understanding of

market demand can be known through a research

process and market survey by someone who is

competent.

Based on the survey results, 72% of respondents

stated that they did not have workers who were

experts in marketing both locally and internationally.

This implies that, SMEs in Central Java do not have

managerial skills in terms of marketing, so

understanding and knowledge of the market is

crucial to solve. These results are in line with the

studies of Dominguez & Mayrhofer (2017) and

Synovics, Kurt, & Synovics (2018) in relation to

understanding and knowledge for SMEs in the

process of internationalization. Media promotion is

the main thing related to the creation of brands and

imagery in the community. Media promotion

through e-commerce platforms is a current trend in

introducing products. Media promotion through

social media has become a trend in the last five

years, this is reflected in the many uses of social

media by SMEs in Central Java during the

promotion process. Based on the results of the

interview, 51.7% of them use social media as a tool

of promotion. However, this does not converge with

the use of computer/website, in which 10.9% of

them use websites as a tool of promotion. If seen

from its scope, especially for accessing international

markets, the website is far wider compared to social

media. On the other hand social media is more user

friendly and mobile when compared to using

personal computer/laptop connected to the internet

to do promotions. In addition, e-commerce platforms

also offer promotional costs that are much smaller

when compared to other media. Apart from the use

of internet/social media as an e-commerce platform,

conventional promotion is still very much needed.

This is very closely related to convincing

prospective buyers, cultural and social differences

are the differentiating factors, some customers from

certain countries have to meet and negotiate with

sellers. This requires the company to spend more in

the framework of promotion, even many large

companies allocate costs for promotion to reach 20%

of sales. SMEs in Central Java are less concerned

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418

about promotion, as many as 50% of companies

allocate special costs for promotions, and even then

it is only 2.5% of total sales and there is only one

entrepreneur allocating promotional costs up to 20%

of total turnover (IDR 1,000,000,000) Based on this,

it is necessary to transfer the knowledge of the

importance of marketing as a means to know and

understand the market and as a means to maintain

the survival of the company.

The legality/corporate legal entity are one of the

tools to access funding sources and various forms of

technical assistance from both the government and

the private sector/association. Legality is also a form

of recognition and image formation in the eyes of

consumers. Based on the results of the FGD with

SMEs and the Regional Planning and Development

Agency of Central Java Province, companies that do

not yet have legality (PT, VD and UD) are 62.7%.

Meanwhile, others that have legality are mostly in

the form of CV. This influences on the lack of

access from financial resources and various business

facilities/ease of business from the government.

Meanwhile, in terms of companies that have access

to financial resources, 57.8% do not have access to

financial institutions. This means that in terms of

meeting working capital needs, they do not use the

facilities provided by financial institutions through

credit schemes. In discussions with entrepreneurs

(SMEs), capital becomes one of the main problems

for them. Less information about the facilities of

financial institutions and psychological factors are

obstacles for SMEs in accessing financial resources.

The supports from the government through

empowerment, coaching, mentoring and technical

assistance are important factors in developing SMEs

as infant industries. When viewed from various

government policies and programs through national

and regional development strategy plans,

government policies are very supportive to create a

business climate and increase competitiveness for

SMEs. Based on the results of discussions with

entrepreneurs (SMEs), it showed that 48 SMEs or

72% of the have never received any form of

assistance either from the local government or from

the central government. This condition was clearly

very unfavorable for the growth and development of

SMEs, especially for areas that have

geographical/physical difficulties in access. The help

from government tends to be more stable and large

in size and in business groups/clusters. This has led

to an unfavorable assessment of the government

regarding this matter. 43.75% of them gave a very

poor assessment of the government's role in

supporting SMEs to continue to grow and develop as

one of the pillars of the national economy role

model. These results support the findings of Sear &

Hamilton (2004); Leonidou (2004) and Wright et al.

(2005) who emphasized the importance of the role

of government in encouraging and supporting SMEs

to be able to go-international through empowerment,

assistance, guidance and development.

5 CONCLUSIONS

The development of SMEs in developing countries,

especially Central Java is faced with various internal

factors and traditional traits. The step towards

internationalization is very difficult with these

obstacles. Human resources, weak expertise,

knowledge and skills of the owner / manager of the

most dominant market. The readiness of the

company towards internationalization is constrained

by various obstacles, managerial and English skills

which are still low, do not have workers in the field

of export-import, low international knowledge and

experience are obstacles to the process of

internationalization. Market and trade barriers are a

significant part of SMEs, on average they do not

allocate sufficient costs for promotion. They use

social media as a promotional media without links

between socio-cultural and social variables between

countries.

SMEs in Central Java tend to be production-

based, so they focus more on producing goods and

paying less attention to the value of goods to

consumers and how they are acceptable to

consumers. The lack of innovation in production and

service causes the brand of goods to be less

acceptable to the market, as a result there is idle

capacity and uncompetitive prices. Product

standards are still low, so they seem to pay little

attention to the safety and comfort aspects of their

products. This causes goods to be less attractive to

the market, especially global markets that are very

dynamic and competitive. Logistics problems as one

of the causes of delays in the production and

delivery of goods have an impact on service images

that are not in-time delivery.

Government support is relatively low, especially

technical, marketing and licensing support. SMEs

have limitations, especially access to international

markets. This is the duty of the government to

promote SMEs to foreign markets through ITPCs

Could Small and Medium Enterprises (SMEs) Entering to Global Market? Evidence of SMEs in Central Java

419

abroad. The government must encourage SMEs

continuously through empowering, fostering and

mentoring all existing SMEs in an area through

providing technical training and increasing expertise

/ capabilities to members of SMEs, expanding local

and international markets, facilitating trade shows

both nationally and internationally, expanding

business centers, development of e-commerce

platforms through start-up as one of the promotion

media, providing assistance and support in an

integrated, measurable and synchronized

government work program with SMEs.

Collaboration and synergy between SMEs,

government, large-scale companies, business

associations, traders, logistics companies, provider

companies, media and academics (both university

and secondary level) are needed as transmission and

integrated business supply chain. Integration is not

only at the policy level but must be implemented.

Academics as a center of excellent and agents of

change must be able to produce output that has the

spirit of entrepreneurship, a center of innovation and

prepare output that controls the market and has a

vision of the market. Large-scale companies, traders,

providers, business associations and the government

must be able to create a business climate and logistic

system by increasing the role of SMEs in order to

have stronger competitiveness and be able to create

larger and more stable economic activities.

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