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International Journal of Trend in Scientific Research and Development (IJTSRD)
Volume 4 Issue 2, February 2020 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470
@ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 360
Problem Identification and Alternative
Solution of Retail Furniture in Indonesia
Lusy Evylia Puspita1, Lena Ellitan2
1Ph.D Student, 2Lecturer,
1,2Faculty of Business, Widya Mandala Catholic University Surabaya, Indonesia
ABSTRACT
The retail business or retail trade for furniture products is very dependent on
the supply of products offered to consumers in accordance with the
consumer's choice and purchasing power. Changes in furniture buying
behavior is one of the important factors that is a concern for retailers to build
their competitive advantage with continuous innovation starting from
products, service processes, marketing and management. Competitionamong
furniture retailers, especiallytraditional retailersisincreasinglypushedbythe
presence of modern retail with the ability to create high buying value to
consumers in terms of price, product variants, design and quality. The
presence of e-commerce that sells furniture products through online, has
begun to grow significantly. This paper will discuss more specifically about
Furniture Retail Businesses in Indonesia and identify problems faced and
various alternative solutions from both theoretical andpractical perspectives.
KEYWORDS: Retail Furniture, Problems and Solution
How to cite this paper: Lusy Evylia
Puspita | Lena Ellitan "Problem
Identification and Alternative Solution of
Retail Furniture in
Indonesia"Published
in International
Journal of Trend in
Scientific Research
and Development
(ijtsrd), ISSN: 2456-
6470, Volume-4 |
Issue-2, February 2020, pp.360-364,URL:
www.ijtsrd.com/papers/ijtsrd29998.pdf
Copyright © 2019 by author(s) and
International Journal ofTrendinScientific
Research and Development Journal. This
is an Open Access article distributed
under the terms of
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CommonsAttribution
License (CC BY 4.0)
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/4.0)
INTRODUCTION
The trade sector, particularly retail or retail sales, is one of
the crucial drivers of the Indonesian economy. The
contribution of this sector to GDP (Gross Domestic Product)
is 13.23%, the second largest after the manufacturing or
processing sector (Coordinating Ministry for Economic
Affairs, 2019). The retail business which is the final part of a
supplier's product and service chain of suppliers, before
reaching the consumer or end user, is ina highlycompetitive
and volatile business environment. When the Indonesian
economy was macro-positivewithpositiveeconomicgrowth
and an inflation rate of 3.5%, the retail sector slowed down
every year in the retail sector.
The retail sector in 2016 had total sales of 522 million USD,
with a total of 36,000 modern retail outlets in 2015 and
growth of 4% -5% per year. From 2017 to 2018 the
slowdown in this sector is still happening, seen from the
increase in modern retail outlets that were closed, starting
with 7-Eleven which closed all of its outlets in Indonesia,
followed by fashion retail GAP from America, and finally the
closing of several Giant (economic) .bisnis.com, 2019).
Traditional retailers also experienced a decrease in the
number of outlets to 12,000 in 2015 with a decreaseofmore
than 7% per year (Global Business Guide Indonesia, 2016).
The shift in buying behavior and competition with modern
retailers that provide better purchase value for buyers,
makes traditional retailers have to create a competitive
advantage with competitors. This paper will discuss more
specifically about Furniture Retail Businesses in Indonesia
and identify problems faced and various alternative
solutions from both theoretical and practical perspectives.
Furniture Retailers in Indonesia and Its Problems
Furniture retailers in Indonesia and their problems.
Although it is well known for selling groceriesproductssuch
as food products and daily necessities or fashion products,
retail businesses also exist as providers of other necessities.
One retail business that has a large market in Indonesia is in
the furniture retail sector. The furniture retail sector in
Indonesia is in a competitive industry with a large
population, a growing number of middle class households,
low-cost housing programs by the government, property
projects for both residential and commercial. Furniture
consumption for the domestic market in 2013 reached Rp 9
trillion (Trade Assessment and DevelopmentAgency,2017).
According to HIMKI (Indonesian Furniture and Crafts
Industry Association), the turnover for furniture and crafts
in the country currently reaches Rp 10 trillion per year. The
domestic consumption is filled with furniture products
produced in the country by 55%, whiletheremaining45%is
imported furniture products from China (Trade Assessment
and Development Agency, 2017).
Indonesia, whichisfamousfortheproductionof wood-based
furniture crafts, has furniture retailers ranging from shops
with self-owned workshops, traditional furniture shops to
IJTSRD29998
International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
@ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 361
modern retailers who have a network of outlets in several
cities in Indonesia such as Informa, Vinoti, Vivere, JYSK, or
part of an international retail chain such as the presence of
IKEA, Index Living, Zara Home, and also the entry of e-
commerce for furnitureproductssuchasDekoruma,Fabelio,
RupaRupa, Livasa. The furniture retail market in Indonesia
in 2017 reached Rp 29,571 billion with a growth of 3.9% in
2017. The challenges facing the retail industry, in 2018 it is
projected that furniture retailing will also experience a
growth decline at 3.6% (Euromonitor International, 2017).
Competition among furniture retailers, especiallytraditional
retailers is increasingly pushed by the presence of modern
retail with the ability to create high buying value to
consumers in terms of price, product variants, design and
quality. The presence of e-commerce that sells furniture
products through online, has begun to grow significantly,
with sales of 795 million USD in 2015, projected to be 2,076
million USD in 2020 (Trade Research and Development
Agency, 2017).
The retail business or retail trade for furniture products is
very dependent on the supply of products offered to
consumers in accordance with the consumer's choice and
purchasing power. Changes in furniture buying behavior is
one of the important factors that is a concern for retailers to
build their competitive advantage with continuous
innovation starting from products, service processes,
marketing and management. Domestic furniture consumers
are predominantly in the lower middle segment, which is
dominated by affordable or assembled furniture products
(Trade Assessment and Development Agency, 2017).
Consumers in the upper middle segment prefer products
with design and quality materials The shift in buying
behavior is happening for furniture products with more
alternative choices of products that are more diverse in
design.Today furniture such as fashion products that follow
the design trends, which prioritizes aesthetics, comfort, and
less attention to the durability of furniture in a long time.
The domestic furniture retail market is currentlydominated
by traditional retailers in the form of shops that sell
furniture owned and managed by families or mom and pop
stores, with limited outlets and outreach (Trade Research
and Development Agency, 2017). The presence of modern
retailers with a wider network of outlets and a wider and
more extensive store area, is an alternative for the middle
class to make furniture purchases. The large domestic
market with a large population and middleclassfamilyisthe
main attraction for entering thisretail business,asisdone by
modern retailers with the largest number of outlets, namely
Informa. The entry of foreign retailers to Indonesia, IKEA,
which is the largest furniture retailer and producer from
Sweden in 2014, proves that the big potential of the
Indonesian market for furniture retailing is still remain.
APRINDO (Indonesian Retail Employers Association) as an
Indonesian retail association, does not have specific data on
furniture retailing and its performance. The phenomenon
that occurs in the furniture retail business that has been
described above, raises a gap about how the furniture retail
business, especially traditional retail which has been
dominating the market,buildingitscompetitiveadvantagein
the midst of the slowing growth of the retail industry,
changes in furniture buying behavior, technological
developments and competition.
Alternative Solutions for Retail Business Problems:
Theoretical and Practical Views
Building sustainablecompetitiveadvantageisa challenge for
companies in the midst of change and intense competition.
Competitive advantage is the creation of value (creating
value) provided by the company above itscompetitors,hasa
relationship with company performance. The creation of
competitive advantage has been a concern of strategic
management researchers from the beginning in scientific
contributions that help business practitioners to adopt and
integrate economic principles and logic into their fields
(Breznik and Hisrich, 2014). As business develops and
changes more quickly, and competitiongetstougher,studies
in strategic management science, explore and redefine
various theoretical perspectives and relationships between
constructs in the creation of sustainable competitive
advantage.
Two major theories developed in strategicmanagementthat
looked at the company's competitive advantage, has a
relationship with the performance produced by the
company. Hoskisson (in Sukoco, 2014) shares the
development and evolution of strategic managementtheory
in a pendulum that moves in four swing eras. Starting with
an inward movement thatfocusesonthecompany'sinternal,
the second era of the pendulum moves outward with a focus
on the external organization which says that organizational
performance is a function of the industrial environment or
known as I / O Economics, the third swing when the
pendulum is in the middle position between internal and
external with a focusonorganizational economics,thefourth
swing of the pendulum moves back into the organization
with a focus on a resource-based approach or Resource-
Based View (RBV).
Perspectives on the company's internal and external
environment as described above, strive to explore and
explain how companies compete, building competitive
advantage that affects their performance. The industrial
organization perspective or I / O focuses on the external
environment with the main premise that organizational
performance is a function of the industrial environment in
which the company is located and competes. In this
perspective industrial structure will determine actions, and
actions influence on performance (Sukoco, 2014). The five
forces theory put forward by Porter states that companies
are influenced by five forces namely supplier power, buyer
power, competition in the industries entered, barriers to
new entrants and threats from substitute products. These
five strengths affect the performance of the company. But
this approach cannot answer how companies that are in the
same industrial environment, have different performance.
The dynamic business environment and increasingly fierce
competition landscape, encourages companies to
continuously renew their competitive advantage.
Competitive advantage comes from ownership of resources
and capabilities that have the characteristics of VRIN
(Valuable, Rare, Inimitable, Non-substitution), with a
dynamic environment that is no longer a permanent
advantage. So the implication is that competitive advantage
must be dynamic, not static, which must be continuously
updated (Breznik and Hisrich, 2014). Dynamic capabilities
that support goals or goalsthroughthecreationof excellence
that are continuously renewed to be one step ahead of their
International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
@ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 362
competitors area challengeforthecompany(Eisenhardt and
Martin, 2000).
The RBV (Resource Based View) approach sees a gap that
the I / O (Industrial Organization) approach cannot explain
the different performance of companies in the same
industrial and competitive environment. This research is
directed at strategic resources and capabilities owned,
managed and controlled by companies through the creation
of competitive advantagesthathaveaninfluenceon business
performance. Resource-based research (RBV) and its
relationship to competitive advantage and performance,
received strongsupportfromempirical studiesconductedby
researchers. An analytical study conducted by Barney and
Arikan (2001) states that of 166 empirical studies of RBV,
only 2% are inconsistent with the logic of the RBV approach.
This study was further developed by Newbert (2007), who
conducted a study of 55 articles on RBV using a more
comprehensive and unbiased approach to sampling.
Newbert's research found that the RBV had empirical
support of 53% of the total sample studied. The most widely
used approach is through heterogeneity of resources.
Newbert's study also provides recommendations for future
research to focus more on dynamic capabilities comparedto
static resources.
The study of strategic resources that meet the VRIN criteria
(Valuable, Rare, Inimitable, Non-substitution) and their
effects on performance, through a meta-analysis study
conducted by Crook et al. (2008), found that resources and
performance have a stronger relationship if these resources
meet the RBV attributes. At present the RBV research stage
is more geared towards meeting the missing link thatoccurs
between resource ownership and resource use that can be a
lever of competitive advantage and high business
performance (Ellitan, 2017).
Building a sustainable competitive advantage is largely
determined by how the company establishes a strategic
orientation. Strategic orientation is an intangible resource
that a company has. Strategic orientation is a means used by
companies to manage and carry out activities in business
and efforts to maintain and improve business performance
(Hakala, 2010). According to Gatingnon and Xuareb,
strategic orientation is the principles that direct and
influence activities within the company and build behaviors
that are directed to ensure success and business
performance (Gatingnon and Xuareb, 1997).
Strategies are made at the business or company level,
directing every activity andbehaviorinthecompanytobuild
excellence and improve business performance, which
influences how the company determines its structure, how
to manage its resources and capabilities. Strategy is a tool to
create solutions to problems faced by the company and also
capture various opportunities that exist in the company's
external environment (Obeidat, 2016). According to Huff,
strategy is one of the tools trusted by managers in the
company that influences the achievement of company
performance (Huff et al., 2009).
Strategic orientation was first used by Venkatraman(1989),
to express the measurement scale of strategy constructs.
Strategic orientation is measured through managerial
perceptions and trust in the main dimensions of the
company, namely strategic aggressiveness, analysis,
defensiveness, futility, proactiveness, riskiness. A study
conducted by Hakala (2010) states that strategicorientation
consists of four different perspectives to measure the
elements of strategy that affect business performance,
namely market orientation, entrepreneurial,technologyand
learning orientation. Developed from previous research, Ho
(2014) conducted a study of strategic orientation by
holistically looking at the multiple strategies implemented
by companies. Multiple strategic orientation is a unique
resources that is an element to form competitive advantage
and has an influence on company performance.
The company should compete in seeing the strategic
orientation from the perspective used byHo,(2014), namely
by looking at multiple strategic orientations, by measuring
how the managerial perceptions of furniture retailersonthe
four elements of strategy are market orientation,
entrepreneurial orientation ), technology orientation
(technology orientation) and relationship orientation /
collaboration (relationship orientation) as a source of
competitive advantage and influence on business
performance.
Companies that have high performance on an ongoing basis
are those who are able to identify and manage the unique
internal resources (unique internal resources) they have,
build capabilities from the uniqueness of resourcessothatit
becomes the core competency of companies that can
maximize the opportunities they have in the external
environment to obtain competitive advantage. Ireland
(2011) mentions four important criteria for building
sustainable competitive advantage: building rare
capabilities, having value that can maximize opportunities
and neutralizing threats (valuable capabilities), difficultand
expensive to be imitated by competitors (costly to imitate)
and there is no substitute or nonsubstitutable.
The increasingly fierce competition in the current era of
knowledge economy, as well as the intensity of global
competition and the high level of technological progress,
make companies increasingly see the importance of
innovation as the centerofcreatingcompetitiveadvantageof
the organization. One of the highest priorities of an
organization or company is how to develop new ideas and
innovations (Lawson and Samson, 2001). The resource-
based-view (RBV) approach as described in the previous
paragraph, that organizations are a collection of unique
resources and capabilities that are the source of core
competencies to create competitive advantage. With this
assumption, differences in organizational performance will
greatly depend on how organizations use organizational
resources that are owned so it is not easy to emulate. The
organization does not compete on new products but more
than that as the core competencyishowtheorganization has
the capability of innovation.
According to Teece and Pisano (1997) based on dynamic
capability theory, that the competence or capability of a
company will enable a company to create new products,
processes and responses to market changes. Dynamic
capability emphasizes management capabilities and
combinations of resources that are not easy to replicate.
Innovation is one of the dynamic capabilitiesthata company
must have in order to continue to be able to provide value
International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
@ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 363
above the average of the market and its competitors.
Managing innovation is an important thing that receives the
attention of both researchers and business practitioners
(Tidd, Bessant, Pavid, 1997; Breznik and Hisrich, 2014).
Minztberg et. al. (2003), said if a company wants to survive,
then the company must maintain its flexibility byinnovating
on established patterns, and that is possible if the company
has innovation capabilities. The capability of innovation is
the ability to continuously transform knowledge and ideas
into new products, processes and systems that benefit the
company and its stakeholders (Lawson and Samson, 2001).
Companies that have innovation capability are companies
that have the ability to integrate the resources and key
capabilities they have as stimulation to create innovation.
The retail industry, which is the last channel between
producers and consumers or end users, manages
relationships with suppliers and consumers is a very crucial
part. Therefore supplier network capability is an element
that forms a company's competitive advantage and
influences business performance (Chandra and Kumar,
2000). Managing supplier networks is a way to improve
competitiveness by reducing uncertainty and improving
customer service. Managing supplier networks is an
important issue in companies in various industries, because
it involves how companies build a competitive advantage in
a sustainable manner against their competitors and affect
the company's performance (Suharto and Devie, 2013). A
superior supplier network, optimization and integrationare
the focus and goals of many companies, because at this time
to achieve growth in company revenue is very important, in
addition to only making cost reductions. The supplier
network is formulated into a strategy aimed at dealing with
increasing levels of competition, on the other hand it is a
media in building competitive advantage (Holmberg, 2000).
Previous studies suggest that there is a significant influence
between supplier networks on competitive advantage and
company performance (Suharto and Devie, 2013). Supplier
network capabilities must be re-evaluated regularly
including network accessibility, network efficiency,network
mobility and network learning capabilities (Jin and
Edmunds, 2015).
Business performance is the final stage of the strategic
management process. Company performance reflects how
the company takes advantage of tangible and intangible
resources to achieve company goals (Wheelen and Hunger,
2015), which is the culmination of business processes and
activities. Organizational or business performance is a
multidimensional construct. Different organizational
strategies and organizational activities havedifferent effects
on organizational performance (Richard et al.,2009),sothat
measurement benchmarks differ according to their
characteristics such as business fields and businessformats,
company background, company status, capital structure,
growth rate , the level of technology and other specificities.
Competitive advantage is the company's position to provide
more value to the market above its competitors. From
Barney's conceptual model (1991), it was stated that
competitive advantage affects business performance. The
company's competitive advantage is obtained when the
company is able to explore and use the company's internal
strength to respond to opportunities that exist in the
external. Researchers generally classify sources of
competitive advantage into two, namely assets that are
defined as unique resources, and capabilities that are
defined as specific expertise (Bharadwaj et al., 1993). In a
study conducted by Bharadwaj et al. (1993) in the service
industry and Grant (1996), it is stated that assets and
capabilities are the source of companies to build
differentiation advantages and cost advantages that affect
market performance and financial performance.
Garcia and Moreno (2018) state that competitive advantage
plays an essential role as a mediating variable between
strategic resources, dynamic capabilities and business
performance. The ownership of strategic resources and
dynamic capabilities positively contribute to achieving
competitive advantage throughcost,differentiationandstaff
efficiency.
The explanation in the previous paragraph states that not
every resource ownership will be a source of competitive
advantage, only strategic resources that meet the attributes
of VRIN (Valuable, Rare, Inimitable, Non-subtitutions) that
have an influence on business performance (Crook et al.,
2008). This research puts competitive advantage as an
intervening variable from exogenous variables, namely
strategicorientation,suppliernetwork capability,innovation
capability, towards endogenous variables, business
performance. The company's competitive advantage is built
on the strategic orientation which is a unique resourceof the
company, as well as the supplier network capabilities and
innovation capabilities that enable the company to have a
competitive advantage measured from resources and
capabilities that meet the VRIN attributes (Valuable, Rare,
Inimitable, Non-subtitutions).
The Gyang stated that there is an urgency to conduct a study
that looks at traditional furniture retail businesses in
Indonesia, building their competitive advantage through
unique resources, namely multiple strategic orientations
from a market, entrepreneurial, technologyandrelationship
orientation perspective, and supplier network capabilities
and innovation capabilities. This study also looks at how
they affect business performance as measured by the
perception of shop owners or managersoffinancialandnon-
financial performance compared to their competitors.
Conclusion
This paper is expected to provide theoretical benefits in
adding insight, especially in the Resource Based View (RBV)
and Dynamic Capability approach, as well as practical
benefits for building competitive advantage and business
performance in furniture retailing. The review in this paper
contributes to the thought and enrichment of strategic
management theories within thescopeoftheresourcebased
view and dynamic capability approach. This paper has
discussed how to build competitive advantage sourcedfrom
the company's unique resources, namely strategic
orientation, and supplier network capabilities and
innovation capabilities, making the company have a
competitive advantage. With the competitiveadvantagethat
is owned will affect the resulting business performance
variations.
From the discussion of phenomena in the furniture retail
industry, it is expected to add to the literature for
International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470
@ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 364
practitioners and to see how to build business excellence in
furniture retailing, which is still very limited in empirical
studies. Through this research findings, traditional retailers
who are the biggest dominance in the furniture retail
business will find out how the influenceofa holisticstrategic
orientation, namely market,entrepreneurial,technology and
relationship organization orientation, as well as supplier
network capabilities and innovation capabilities, will affect
business excellence and business performance , amid
increasingly fierce competition and enter the digital
economy. This paper is expected to provide benefits for
companies that are in the furniture industry as furniture
suppliers, to be able to find out how customers, namely
retailers, namely traditional shops, build their business
performance through their resourcesandcapabilities.Sothe
company is able to provide more value to customers than
other suppliers.
References
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Problem Identification and Alternative Solution of Retail Furniture in Indonesia

  • 1. International Journal of Trend in Scientific Research and Development (IJTSRD) Volume 4 Issue 2, February 2020 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470 @ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 360 Problem Identification and Alternative Solution of Retail Furniture in Indonesia Lusy Evylia Puspita1, Lena Ellitan2 1Ph.D Student, 2Lecturer, 1,2Faculty of Business, Widya Mandala Catholic University Surabaya, Indonesia ABSTRACT The retail business or retail trade for furniture products is very dependent on the supply of products offered to consumers in accordance with the consumer's choice and purchasing power. Changes in furniture buying behavior is one of the important factors that is a concern for retailers to build their competitive advantage with continuous innovation starting from products, service processes, marketing and management. Competitionamong furniture retailers, especiallytraditional retailersisincreasinglypushedbythe presence of modern retail with the ability to create high buying value to consumers in terms of price, product variants, design and quality. The presence of e-commerce that sells furniture products through online, has begun to grow significantly. This paper will discuss more specifically about Furniture Retail Businesses in Indonesia and identify problems faced and various alternative solutions from both theoretical andpractical perspectives. KEYWORDS: Retail Furniture, Problems and Solution How to cite this paper: Lusy Evylia Puspita | Lena Ellitan "Problem Identification and Alternative Solution of Retail Furniture in Indonesia"Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456- 6470, Volume-4 | Issue-2, February 2020, pp.360-364,URL: www.ijtsrd.com/papers/ijtsrd29998.pdf Copyright © 2019 by author(s) and International Journal ofTrendinScientific Research and Development Journal. This is an Open Access article distributed under the terms of the Creative CommonsAttribution License (CC BY 4.0) (http://creativecommons.org/licenses/by /4.0) INTRODUCTION The trade sector, particularly retail or retail sales, is one of the crucial drivers of the Indonesian economy. The contribution of this sector to GDP (Gross Domestic Product) is 13.23%, the second largest after the manufacturing or processing sector (Coordinating Ministry for Economic Affairs, 2019). The retail business which is the final part of a supplier's product and service chain of suppliers, before reaching the consumer or end user, is ina highlycompetitive and volatile business environment. When the Indonesian economy was macro-positivewithpositiveeconomicgrowth and an inflation rate of 3.5%, the retail sector slowed down every year in the retail sector. The retail sector in 2016 had total sales of 522 million USD, with a total of 36,000 modern retail outlets in 2015 and growth of 4% -5% per year. From 2017 to 2018 the slowdown in this sector is still happening, seen from the increase in modern retail outlets that were closed, starting with 7-Eleven which closed all of its outlets in Indonesia, followed by fashion retail GAP from America, and finally the closing of several Giant (economic) .bisnis.com, 2019). Traditional retailers also experienced a decrease in the number of outlets to 12,000 in 2015 with a decreaseofmore than 7% per year (Global Business Guide Indonesia, 2016). The shift in buying behavior and competition with modern retailers that provide better purchase value for buyers, makes traditional retailers have to create a competitive advantage with competitors. This paper will discuss more specifically about Furniture Retail Businesses in Indonesia and identify problems faced and various alternative solutions from both theoretical and practical perspectives. Furniture Retailers in Indonesia and Its Problems Furniture retailers in Indonesia and their problems. Although it is well known for selling groceriesproductssuch as food products and daily necessities or fashion products, retail businesses also exist as providers of other necessities. One retail business that has a large market in Indonesia is in the furniture retail sector. The furniture retail sector in Indonesia is in a competitive industry with a large population, a growing number of middle class households, low-cost housing programs by the government, property projects for both residential and commercial. Furniture consumption for the domestic market in 2013 reached Rp 9 trillion (Trade Assessment and DevelopmentAgency,2017). According to HIMKI (Indonesian Furniture and Crafts Industry Association), the turnover for furniture and crafts in the country currently reaches Rp 10 trillion per year. The domestic consumption is filled with furniture products produced in the country by 55%, whiletheremaining45%is imported furniture products from China (Trade Assessment and Development Agency, 2017). Indonesia, whichisfamousfortheproductionof wood-based furniture crafts, has furniture retailers ranging from shops with self-owned workshops, traditional furniture shops to IJTSRD29998
  • 2. International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470 @ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 361 modern retailers who have a network of outlets in several cities in Indonesia such as Informa, Vinoti, Vivere, JYSK, or part of an international retail chain such as the presence of IKEA, Index Living, Zara Home, and also the entry of e- commerce for furnitureproductssuchasDekoruma,Fabelio, RupaRupa, Livasa. The furniture retail market in Indonesia in 2017 reached Rp 29,571 billion with a growth of 3.9% in 2017. The challenges facing the retail industry, in 2018 it is projected that furniture retailing will also experience a growth decline at 3.6% (Euromonitor International, 2017). Competition among furniture retailers, especiallytraditional retailers is increasingly pushed by the presence of modern retail with the ability to create high buying value to consumers in terms of price, product variants, design and quality. The presence of e-commerce that sells furniture products through online, has begun to grow significantly, with sales of 795 million USD in 2015, projected to be 2,076 million USD in 2020 (Trade Research and Development Agency, 2017). The retail business or retail trade for furniture products is very dependent on the supply of products offered to consumers in accordance with the consumer's choice and purchasing power. Changes in furniture buying behavior is one of the important factors that is a concern for retailers to build their competitive advantage with continuous innovation starting from products, service processes, marketing and management. Domestic furniture consumers are predominantly in the lower middle segment, which is dominated by affordable or assembled furniture products (Trade Assessment and Development Agency, 2017). Consumers in the upper middle segment prefer products with design and quality materials The shift in buying behavior is happening for furniture products with more alternative choices of products that are more diverse in design.Today furniture such as fashion products that follow the design trends, which prioritizes aesthetics, comfort, and less attention to the durability of furniture in a long time. The domestic furniture retail market is currentlydominated by traditional retailers in the form of shops that sell furniture owned and managed by families or mom and pop stores, with limited outlets and outreach (Trade Research and Development Agency, 2017). The presence of modern retailers with a wider network of outlets and a wider and more extensive store area, is an alternative for the middle class to make furniture purchases. The large domestic market with a large population and middleclassfamilyisthe main attraction for entering thisretail business,asisdone by modern retailers with the largest number of outlets, namely Informa. The entry of foreign retailers to Indonesia, IKEA, which is the largest furniture retailer and producer from Sweden in 2014, proves that the big potential of the Indonesian market for furniture retailing is still remain. APRINDO (Indonesian Retail Employers Association) as an Indonesian retail association, does not have specific data on furniture retailing and its performance. The phenomenon that occurs in the furniture retail business that has been described above, raises a gap about how the furniture retail business, especially traditional retail which has been dominating the market,buildingitscompetitiveadvantagein the midst of the slowing growth of the retail industry, changes in furniture buying behavior, technological developments and competition. Alternative Solutions for Retail Business Problems: Theoretical and Practical Views Building sustainablecompetitiveadvantageisa challenge for companies in the midst of change and intense competition. Competitive advantage is the creation of value (creating value) provided by the company above itscompetitors,hasa relationship with company performance. The creation of competitive advantage has been a concern of strategic management researchers from the beginning in scientific contributions that help business practitioners to adopt and integrate economic principles and logic into their fields (Breznik and Hisrich, 2014). As business develops and changes more quickly, and competitiongetstougher,studies in strategic management science, explore and redefine various theoretical perspectives and relationships between constructs in the creation of sustainable competitive advantage. Two major theories developed in strategicmanagementthat looked at the company's competitive advantage, has a relationship with the performance produced by the company. Hoskisson (in Sukoco, 2014) shares the development and evolution of strategic managementtheory in a pendulum that moves in four swing eras. Starting with an inward movement thatfocusesonthecompany'sinternal, the second era of the pendulum moves outward with a focus on the external organization which says that organizational performance is a function of the industrial environment or known as I / O Economics, the third swing when the pendulum is in the middle position between internal and external with a focusonorganizational economics,thefourth swing of the pendulum moves back into the organization with a focus on a resource-based approach or Resource- Based View (RBV). Perspectives on the company's internal and external environment as described above, strive to explore and explain how companies compete, building competitive advantage that affects their performance. The industrial organization perspective or I / O focuses on the external environment with the main premise that organizational performance is a function of the industrial environment in which the company is located and competes. In this perspective industrial structure will determine actions, and actions influence on performance (Sukoco, 2014). The five forces theory put forward by Porter states that companies are influenced by five forces namely supplier power, buyer power, competition in the industries entered, barriers to new entrants and threats from substitute products. These five strengths affect the performance of the company. But this approach cannot answer how companies that are in the same industrial environment, have different performance. The dynamic business environment and increasingly fierce competition landscape, encourages companies to continuously renew their competitive advantage. Competitive advantage comes from ownership of resources and capabilities that have the characteristics of VRIN (Valuable, Rare, Inimitable, Non-substitution), with a dynamic environment that is no longer a permanent advantage. So the implication is that competitive advantage must be dynamic, not static, which must be continuously updated (Breznik and Hisrich, 2014). Dynamic capabilities that support goals or goalsthroughthecreationof excellence that are continuously renewed to be one step ahead of their
  • 3. International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470 @ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 362 competitors area challengeforthecompany(Eisenhardt and Martin, 2000). The RBV (Resource Based View) approach sees a gap that the I / O (Industrial Organization) approach cannot explain the different performance of companies in the same industrial and competitive environment. This research is directed at strategic resources and capabilities owned, managed and controlled by companies through the creation of competitive advantagesthathaveaninfluenceon business performance. Resource-based research (RBV) and its relationship to competitive advantage and performance, received strongsupportfromempirical studiesconductedby researchers. An analytical study conducted by Barney and Arikan (2001) states that of 166 empirical studies of RBV, only 2% are inconsistent with the logic of the RBV approach. This study was further developed by Newbert (2007), who conducted a study of 55 articles on RBV using a more comprehensive and unbiased approach to sampling. Newbert's research found that the RBV had empirical support of 53% of the total sample studied. The most widely used approach is through heterogeneity of resources. Newbert's study also provides recommendations for future research to focus more on dynamic capabilities comparedto static resources. The study of strategic resources that meet the VRIN criteria (Valuable, Rare, Inimitable, Non-substitution) and their effects on performance, through a meta-analysis study conducted by Crook et al. (2008), found that resources and performance have a stronger relationship if these resources meet the RBV attributes. At present the RBV research stage is more geared towards meeting the missing link thatoccurs between resource ownership and resource use that can be a lever of competitive advantage and high business performance (Ellitan, 2017). Building a sustainable competitive advantage is largely determined by how the company establishes a strategic orientation. Strategic orientation is an intangible resource that a company has. Strategic orientation is a means used by companies to manage and carry out activities in business and efforts to maintain and improve business performance (Hakala, 2010). According to Gatingnon and Xuareb, strategic orientation is the principles that direct and influence activities within the company and build behaviors that are directed to ensure success and business performance (Gatingnon and Xuareb, 1997). Strategies are made at the business or company level, directing every activity andbehaviorinthecompanytobuild excellence and improve business performance, which influences how the company determines its structure, how to manage its resources and capabilities. Strategy is a tool to create solutions to problems faced by the company and also capture various opportunities that exist in the company's external environment (Obeidat, 2016). According to Huff, strategy is one of the tools trusted by managers in the company that influences the achievement of company performance (Huff et al., 2009). Strategic orientation was first used by Venkatraman(1989), to express the measurement scale of strategy constructs. Strategic orientation is measured through managerial perceptions and trust in the main dimensions of the company, namely strategic aggressiveness, analysis, defensiveness, futility, proactiveness, riskiness. A study conducted by Hakala (2010) states that strategicorientation consists of four different perspectives to measure the elements of strategy that affect business performance, namely market orientation, entrepreneurial,technologyand learning orientation. Developed from previous research, Ho (2014) conducted a study of strategic orientation by holistically looking at the multiple strategies implemented by companies. Multiple strategic orientation is a unique resources that is an element to form competitive advantage and has an influence on company performance. The company should compete in seeing the strategic orientation from the perspective used byHo,(2014), namely by looking at multiple strategic orientations, by measuring how the managerial perceptions of furniture retailersonthe four elements of strategy are market orientation, entrepreneurial orientation ), technology orientation (technology orientation) and relationship orientation / collaboration (relationship orientation) as a source of competitive advantage and influence on business performance. Companies that have high performance on an ongoing basis are those who are able to identify and manage the unique internal resources (unique internal resources) they have, build capabilities from the uniqueness of resourcessothatit becomes the core competency of companies that can maximize the opportunities they have in the external environment to obtain competitive advantage. Ireland (2011) mentions four important criteria for building sustainable competitive advantage: building rare capabilities, having value that can maximize opportunities and neutralizing threats (valuable capabilities), difficultand expensive to be imitated by competitors (costly to imitate) and there is no substitute or nonsubstitutable. The increasingly fierce competition in the current era of knowledge economy, as well as the intensity of global competition and the high level of technological progress, make companies increasingly see the importance of innovation as the centerofcreatingcompetitiveadvantageof the organization. One of the highest priorities of an organization or company is how to develop new ideas and innovations (Lawson and Samson, 2001). The resource- based-view (RBV) approach as described in the previous paragraph, that organizations are a collection of unique resources and capabilities that are the source of core competencies to create competitive advantage. With this assumption, differences in organizational performance will greatly depend on how organizations use organizational resources that are owned so it is not easy to emulate. The organization does not compete on new products but more than that as the core competencyishowtheorganization has the capability of innovation. According to Teece and Pisano (1997) based on dynamic capability theory, that the competence or capability of a company will enable a company to create new products, processes and responses to market changes. Dynamic capability emphasizes management capabilities and combinations of resources that are not easy to replicate. Innovation is one of the dynamic capabilitiesthata company must have in order to continue to be able to provide value
  • 4. International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470 @ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 363 above the average of the market and its competitors. Managing innovation is an important thing that receives the attention of both researchers and business practitioners (Tidd, Bessant, Pavid, 1997; Breznik and Hisrich, 2014). Minztberg et. al. (2003), said if a company wants to survive, then the company must maintain its flexibility byinnovating on established patterns, and that is possible if the company has innovation capabilities. The capability of innovation is the ability to continuously transform knowledge and ideas into new products, processes and systems that benefit the company and its stakeholders (Lawson and Samson, 2001). Companies that have innovation capability are companies that have the ability to integrate the resources and key capabilities they have as stimulation to create innovation. The retail industry, which is the last channel between producers and consumers or end users, manages relationships with suppliers and consumers is a very crucial part. Therefore supplier network capability is an element that forms a company's competitive advantage and influences business performance (Chandra and Kumar, 2000). Managing supplier networks is a way to improve competitiveness by reducing uncertainty and improving customer service. Managing supplier networks is an important issue in companies in various industries, because it involves how companies build a competitive advantage in a sustainable manner against their competitors and affect the company's performance (Suharto and Devie, 2013). A superior supplier network, optimization and integrationare the focus and goals of many companies, because at this time to achieve growth in company revenue is very important, in addition to only making cost reductions. The supplier network is formulated into a strategy aimed at dealing with increasing levels of competition, on the other hand it is a media in building competitive advantage (Holmberg, 2000). Previous studies suggest that there is a significant influence between supplier networks on competitive advantage and company performance (Suharto and Devie, 2013). Supplier network capabilities must be re-evaluated regularly including network accessibility, network efficiency,network mobility and network learning capabilities (Jin and Edmunds, 2015). Business performance is the final stage of the strategic management process. Company performance reflects how the company takes advantage of tangible and intangible resources to achieve company goals (Wheelen and Hunger, 2015), which is the culmination of business processes and activities. Organizational or business performance is a multidimensional construct. Different organizational strategies and organizational activities havedifferent effects on organizational performance (Richard et al.,2009),sothat measurement benchmarks differ according to their characteristics such as business fields and businessformats, company background, company status, capital structure, growth rate , the level of technology and other specificities. Competitive advantage is the company's position to provide more value to the market above its competitors. From Barney's conceptual model (1991), it was stated that competitive advantage affects business performance. The company's competitive advantage is obtained when the company is able to explore and use the company's internal strength to respond to opportunities that exist in the external. Researchers generally classify sources of competitive advantage into two, namely assets that are defined as unique resources, and capabilities that are defined as specific expertise (Bharadwaj et al., 1993). In a study conducted by Bharadwaj et al. (1993) in the service industry and Grant (1996), it is stated that assets and capabilities are the source of companies to build differentiation advantages and cost advantages that affect market performance and financial performance. Garcia and Moreno (2018) state that competitive advantage plays an essential role as a mediating variable between strategic resources, dynamic capabilities and business performance. The ownership of strategic resources and dynamic capabilities positively contribute to achieving competitive advantage throughcost,differentiationandstaff efficiency. The explanation in the previous paragraph states that not every resource ownership will be a source of competitive advantage, only strategic resources that meet the attributes of VRIN (Valuable, Rare, Inimitable, Non-subtitutions) that have an influence on business performance (Crook et al., 2008). This research puts competitive advantage as an intervening variable from exogenous variables, namely strategicorientation,suppliernetwork capability,innovation capability, towards endogenous variables, business performance. The company's competitive advantage is built on the strategic orientation which is a unique resourceof the company, as well as the supplier network capabilities and innovation capabilities that enable the company to have a competitive advantage measured from resources and capabilities that meet the VRIN attributes (Valuable, Rare, Inimitable, Non-subtitutions). The Gyang stated that there is an urgency to conduct a study that looks at traditional furniture retail businesses in Indonesia, building their competitive advantage through unique resources, namely multiple strategic orientations from a market, entrepreneurial, technologyandrelationship orientation perspective, and supplier network capabilities and innovation capabilities. This study also looks at how they affect business performance as measured by the perception of shop owners or managersoffinancialandnon- financial performance compared to their competitors. Conclusion This paper is expected to provide theoretical benefits in adding insight, especially in the Resource Based View (RBV) and Dynamic Capability approach, as well as practical benefits for building competitive advantage and business performance in furniture retailing. The review in this paper contributes to the thought and enrichment of strategic management theories within thescopeoftheresourcebased view and dynamic capability approach. This paper has discussed how to build competitive advantage sourcedfrom the company's unique resources, namely strategic orientation, and supplier network capabilities and innovation capabilities, making the company have a competitive advantage. With the competitiveadvantagethat is owned will affect the resulting business performance variations. From the discussion of phenomena in the furniture retail industry, it is expected to add to the literature for
  • 5. International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470 @ IJTSRD | Unique Paper ID – IJTSRD29998 | Volume – 4 | Issue – 2 | January-February 2020 Page 364 practitioners and to see how to build business excellence in furniture retailing, which is still very limited in empirical studies. Through this research findings, traditional retailers who are the biggest dominance in the furniture retail business will find out how the influenceofa holisticstrategic orientation, namely market,entrepreneurial,technology and relationship organization orientation, as well as supplier network capabilities and innovation capabilities, will affect business excellence and business performance , amid increasingly fierce competition and enter the digital economy. 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