Digital Strategic

DIGITAL ECONOMY AND DIGITAL TRANSFORMATION REVIEW
ISSN : 2987-2863
E-ISSN : 2987-2839
VOLUME 2 NO 1 2023
PP: 105-114
PERFORMANCE IMPROVEMENT STRATEGY THROUGH THE BUSINESS

ENVIRONMENT, PRODUCT INNOVATION AND COMPETITIVE
ADVANTAGE
Aswad Fahruddin1, Abd. Rahman Kadir2, M. Sobarsyah3

123
Universitas Hasanuddin, Indonesia
Correspondent: cawawawa@gmail.com
Article History Abstrak
Recived: 01 Juni 2023In an an increasing number of competitive surroundings and
Revised: 03 Juni 2023clients who are increasingly critical in choosing merchandise,
Accepted: 06 Juni 2023
corporations are required to be more progressive in generating a
product. there are many competitive strategies to turn out to be
Keywords:
Business market winners, consisting of product innovation techniques.
Environment, Product Product development or product innovation is very crucial in
Innovation, cutting-edge market competition. All efforts, the energy
Competitive possessed via the organization, is directed to produce value as
Advantage and SME anticipated, because higher effects imply having introduced fee
Performance as compared to competition. what is the relationship between
commercial enterprise surroundings on SME overall
performance thru variables product innovation and competitive
benefit? There are nonetheless few researchers who find out this
query. research to study the have an effect on of the commercial
enterprise surroundings, product innovation and aggressive gain
at the performance of SMEs. This kind of studies is a survey. The
populace on this look at is all SMEs in Makassar town. The
sampling method is easy random sampling with a complete of
300 respondents. The statistical technique used is path analysis.
The effects of the studies show that: (1) there's a effective have
an impact on of the enterprise surroundings on product
innovation., (2) there may be a effective have an effect on of the
business environment on competitive advantage., (three) there
may be a wonderful impact of product innovation on SME
overall performance., (five) there is a high quality effect of
competitive gain on SME performance. The practical
implications are; (1) SMEs should continue to improve their
business orientation by making clearer visions and business goals
by preparing longer-term business plans and clearer., (2)
Increasing business learning and sustainable competitive
advantage by continuously seeking new information, especially
from sources of formal activities.
Digital Economy and Digital Transformation Review Vol 1 no. 2 2022 105
Pengaruh Strategi Pemasaran Dan Kualitas Layanan Terhadap Keputusan Orang Tua Siswa
A. INTRODUCTION
In an more and more competitive surroundings and consumers who're an increasing
number of essential in choosing products, businesses are required to be extra progressive in
generating a product (Ahmadi-Gh & Bello-Pintado, 2022; Hutahayan & Yufra, 2019a;
Sulaiman, 2018). there are many competitive techniques to become market winners, which
include product innovation techniques (Buccieri et al., 2020; Maupa et al., 2019; Silva et
al., 2020; Sulaiman et al., 2021). Product development or product innovation is very
essential in modern-day marketplace opposition. All efforts, the power possessed with the
aid of the organization, is directed to produce price as expected, because higher outcomes
imply having brought price compared to competitors. however to produce extra cost or
superior value obtained thru various progressive trends (Maupa et al., 2023; Sher & Yang,
2005; Sulaiman, Maupa, et al., 2017). accordingly, the goal that need to be achieved in
growing its strategy is to provide superior fee or service this is a ways higher than that of
competitors (Sulaiman, 2022; Sulaiman, Pahlevi, et al., 2017; Sulaiman & Maupa, 2020;
Sulaiman & Soenanto, 2019).
With the right product innovation for the marketplace, a company's performance will boom
(Coskun-Setirek & Tanrikulu, 2021), this could be visible from the growth in present
income, a far broader market share and increased business enterprise income (Hameed et
al., 2021; Moradi et al., 2021; Yi et al., 2020). for that reason, a organisation can be stated
to be successful in a aggressive approach that ends in aggressive victory in going through
the marketplace and competitors in product innovation. In a changing commercial enterprise
surroundings, product innovation is wanted to manual organization competitiveness and
typical overall performance (Hutahayan & Yufra, 2019b, 2019a; Le & Ikram, 2022; Rusydi
et al., 2019; Sulaiman et al., 2021).
The innovation strategy will become the primary driving force for the overall
performance of small and medium institutions (SMEs) with the useful resource of enforcing
a life-style of innovation in a strategic and set up manner (Bouwman et al., 2019; Chiappini
et al., 2022; Gaganis et al., 2019; Lavoie & Abdulnour, 2015; Surya et al., 2021). The carried
out innovation strategies can permit SMEs to compete and live to tell the tale in a aggressive
worldwide surroundings. Small and Medium businesses (SMEs) as a issue of the country
wide organisation, have an critical feature in the national monetary machine, employment,
equitable distribution of improvement consequences and poverty consolation. therefore, in
case you want to assist its improvement and empowerment, the government has strategic
coverage pillars that have been carried out thru annual applications and sports activities.
based totally on facts from the essential Bureau of statistics and the Ministry of Cooperatives
and SMEs, the range of SMEs changed into recorded at 42.39 million gadgets or 99.9% of
all business business enterprise devices. 2d, its awesome ability in absorbing hard work.
every investment unit can create more project possibilities whilst in comparison to the equal
investment in large groups.
As a task to the development of an more and more dynamic and global economic
environment, in 2008, the authorities issued regulation no. 20 of 2008 concerning Micro,
Small and Medium companies. regulation No. 9 of 1995 concerning Small businesses which
best regulates Small companies is replaced so that it's far hoped that Small and Medium
establishments in Indonesia will obtain guarantees of enterprise actuality and equity.
(Lavoie & Abdulnour, 2015) said that there are three conditions for the development of
106 Digital Economy and Digital Transformation Review Vol 1 no. 2 2022
SME/IKM businesses, specifically: (1) situations related to marketers, especially abilities
and attitudes, (2) conditions associated with agencies, specially capital form and company
lifestyle, and (three) situations related to the surroundings, particularly the selection of
method.
(Horvat et al., 2019) stated that the characteristics of the proprietors of the enterprise's
managers are the simple determinants of company performance, organization characteristics
affect the commercial enterprise or marketplace surroundings, employer goals, control
talents which in flip will have an effect on the business enterprise's boom performance. The
human factor consists of strong motivation, exertions deliver, work productivity and
exertions high-quality. financial (commercial enterprise) factors which consist of raw
substances, access to monetary resources, monetary cost and marketplace segments served.
those factors need to be able to be dealt with by SME marketers to boost their enterprise
performance. corporations and Medium corporations (SMEs) in Makassar town also have
an vital function within the economic system and employment. The traditional hassle for
SMEs in Makassar town is their declining performance. that is because of limited capital,
advertising and marketing difficulties, production aspects, restrained sources and the use of
conventional technology. therefore, for business improvement and development, the ideal
method is wanted, particularly a method to supply progressive merchandise that are capable
of compete in an surroundings of intense opposition to enhance the overall performance of
SMEs in Makassar metropolis.
The achievement of an industry relies upon on how the industry pertains to its
environment. The competitive environment affects the number and kind of competition
marketing management ought to face and the way they'll behave. The aggressive
environment has always been appeared as a limiting issue within the enterprise's growth
charge. elements of the aggressive surroundings ought to be studied more deeply due to the
fact the enterprise's failure to gain sales boom stems from control's incapability to research
adjustments that occur within the enterprise's aggressive surroundings.
The aggressive scenario inside the enterprise relies upon on five forces. There are 5 forces
that shape competition in an industry, particularly inter-enterprise opposition, risk of new
entrants, hazard of substitutes, bargaining electricity of consumers and bargaining energy
of suppliers. This competitive environmental state of affairs can be used to formulate the
right strategy. The aggressive surroundings can encourage creativity, as information of the
aggressive surroundings highlights possibilities that may be highlighted and weaknesses
that have to be taken under consideration. The addition of the surroundings to the resources
that help the organization's method emphasizes the importance of the enterprise's inner
capacity to perform and the way a long way the have an impact on of the socio-monetary
surroundings is.
Product innovation is one of the maximum critical competitive factors to achieve

success where lately the commercial enterprise surroundings is constantly changing rapidly
(Petereit et al., 2022). The innovation strategy of a production employer can function a
manual and guide for executives in four ways, specifically by using determining whether or
not product or technique innovation is a method used as a priority for competition, thereby
linking production sports with the business enterprise's aggressive method; Innovation
strategies in manufacturing businesses assist executives in allocating restricted sources by
means of deciding on tasks that can growth the skills and competitiveness of manufacturing
organizations; This strategy forces executives to provide an explanation for the focal point
and sources of future manufacturing innovation by means of considering agency strategy,

industry situations, internal capabilities, sources, strengths and weaknesses; production
innovation method also can help organizations to clarify their competitive benefit thru
specific merchandise and create fee for clients (Chaudhuri et al., 2022; Supriyanto et al.,
2021).
progressive merchandise determine the employer's response to notably competitive

environmental pressures (Coroş et al., 2017; Mancha & Shankaranarayanan, 2021;
Upadhyay et al., 2022). The characteristics of the industry that offers the innovation have
an effect on the velocity of diffusion and the achievement of the general market potential.
by innovating, a enterprise can differentiate itself and its products from its competitors
(Bresciani et al., 2021; Jiang et al., 2019; Melander, 2019), as a result innovation can offer
a manner for agencies to create competitive gain. in addition, a way of life of innovation
also encourages exploration and experimentation to broaden new groups inside existing
businesses and ongoing business renewals (Loock, 2020).
competitive advantage has exceptional but related meanings. the primary definition
emphasizes superiority or superiority in phrases of property and know-how possessed via
manner of the company (Farida & Setiawan, 2022; Hassani & Mosconi, 2022; Rahman et
al., 2020). businesses which have competence inside the fields of marketing, manufacturing,
and innovation can use them as resources to collect competitive advantage (Aziz & Samad,
2016; Hermawati, 2020; Jatmiko, 2022; Kato et al., 2016). thru those three competency
areas, organizations can increase techniques so one can produce marketable merchandise.
whilst the second know-how emphasizes excellence in achieving performance to this point.
This experience is related to the region of the organization compared to what its opposition
are. organizations that hold to be aware of the improvement in their overall performance
and attempt to beautify this performance have the possibility to obtain a top notch
competitive function, so the enterprise without a doubt has strong capital to maintain to
compete with unique groups.
(Hong & Nguyen, 2020; Kukkamalla et al., 2021; Varadarajan, 2020) explains that
aggressive benefit is the cease result of enforcing a method that makes use of numerous
resources owned through using the business enterprise. unique abilties and assets are seen
as a supply of aggressive gain. precise expertise is a business organization's capacity to
make its employees an important part of conducting aggressive advantage. The company's
capability to increase the capabilities of its personnel properly will make the enterprise
superior and the implementation of human beneficial resource-based completely strategies
can be hard for competition to imitate. whilst particular belongings or resources are actual
property wanted by the enterprise employer to perform its aggressive method. every of these
sources need to be directed to help the appearance of low-price business company usual
overall performance and function a distinction with distinctive companies.
B. METHOD
This studies turned into carried out in Makassar city. This location changed into
chosen due to the fact it's far an industrial middle in South Sulawesi, and is a representative
of industrial and alternate towns in South Sulawesi. The population on this have a look at
have been all Small and Medium firms (UKM) inside the city of Makassar (statistics from
the branch of industry and trade and UKM). This place changed into selected with the
consideration that the city of Makassar is an business/SME middle in South Sulawesi.
determination of pattern length and withdrawal technique changed into executed the use of
easy random sampling. primarily based on this, the number of samples turned into set at
three hundred respondents. Sampling is performed by way of the owner of the organisation
or can be represented in another segment (manufacturing department, advertising
department) in Small and Medium enterprises (UKM).
opposition environment, are elements which can threaten the organization. The signs
of the aggressive surroundings encompass marketplace adjustments, opposition depth and
technological modifications. Product Innovation is the organization's capacity to create new
ideas, products or techniques. Product innovation signs are technical innovation, layout
modifications, creativity, and distribution gadget changes. competitive advantage is the
organisation's ability to add value to its products to outperform different companies.
indicators of competitive benefit are product superiority, product uniqueness and fee
efficiency. The overall performance of SMEs is a degree of the achievement of small and
medium organizations (SMEs) in coping with their commercial enterprise. this may be seen
in the indicators of increase in capital, hard work, and operating profit. The analytical
method used to discover and look at the connection between variables in this observe is the
direction evaluation approach
C. RESULT AND DISCUSSION

1. Research Instrument Test
Validity shows the diploma to which the device gadgets represent the idea being
measured. If the tool being measured has described the size and signs applicable to the idea,
then the device has good validity. In determining whether or not or now not an item is
appropriate, a correlation coefficient significance test is accomplished at a importance level
of 0.05, this means that that an object is considered legitimate if it has a great correlation
with the full score. the following is a recapitulation of the effects of the research device
validity test.
Table 1. Validity Test
Variable Item Correlation P- Decisions
coefficient Value
Business Environment X1.1 0,810 0,000
X1.2 0,810 0,000 Valid
X1.3 0,780 0,000
Product Innovation Y1.1 0,629 0,000
Y1.2 0,629 0,000 Valid
Y1.3 0,713 0,000
Competitive Y2.1 0,805 0,000
Advantage
Y2.2 0,805 0,000 Valid
Y2.3 0,781 0,000
SME Performance Y3.1 0,807 0,000

Y3.2 0,763 0,000 Valid
Y3.3 0,807 0,000
The instrument is said to be reliable if it is used several times to measure the same object so
that it will produce the same data. The technique used to carry out the reliability test is to
use Cronbach's alpha, namely grouping items into two or several parts. The reliability test
was carried out using the standard r-count > 0.60, so the research data was considered
reliable enough to be used as input in the next data analysis process to test the research
hypothesis. Based on the results of data analysis, the reliability values of all research
constructs are obtained as follows.
Table 2. Reliability Test
Construct Alpha Cronbach Decisions
Business Environment 0,916 Realiabel
- X1.1
- X1.2
- X1.3
Product Innovation 0,842 Realiabel
- Y1.1
- Y1.2
- Y1.3
Competitive Advantage 0,920 Realiabel
- Y2.1
- Y2.2
- Y2.3
SME Performance 0,907 Realiabel
- Y3.1
- Y3.2
- Y3.3
Table 2 shows that all variables in this study have met the standard of instrument reliability,
therefore this data can be analyzed in the next process.
2. Examination of hypothesis test
2.1. Sub Structure 1
Based on data processing with the AMOS and SPSS programs on sub-structure 1,
the results are shown in the appendix. Path testing uses the t test because there is one
independent variable, namely X which affects variable Y1. The results of processing
AMOS in testing significance are indicated by Regression Weights (path
coefficients) indicated by the calculated P-value (probability level). The P value =
*** indicates the P-count value is less than 0.001 (significant). Test individually
shown in the following table.
Table 3. Regression Weights
Estimate S.E. C.R. P
Product Business
<--- 0,57 0,040 14,006 0,000
Innovation Environment
To find out the significance of path analysis is to compare the probability value
(0.05) with the probability value in the Regression Weights table and compare the
C.R value with the t-table value which is used as the basis for decision making. The
P column value (Table of Regression Weights) is 0.000 <0.05 and the CR value is
14.006 > 1.660 (t-table value), so H1 is regularly occurring and H0 is rejected, this
means that that the path analysis coefficient is giant. So there may be an immediate
tremendous impact among environmental elements on product innovation.
2.2. Sub structure 2
independent variable, namely X1 which affects the variable Y2. The results of
processing AMOS in testing significance are indicated by Regression Weights (path
0.000 indicates the P-count value is less than 0.001 (significant). Test individually
Competitive Business
<--- 0,223 0,046 4,807 0,007
Advantage Environment
CR value with the t-table value which is used as the basis for decision making. The
4.807 > 1.660 (t-table value), so H1 is widely wide-spread and H0 is rejected, which
means that that the direction evaluation coefficient is great. So there's a right away
substantial influence among environmental factors on aggressive benefit.

independent variable, namely Y1, which influences the Y2 variable. The results of
Competitive Product
<--- 0,584 0,052 11,151 0,000
Advantage Innovation
11.151 > 1.660 (t-table value), so H1 is conventional and H0 is rejected, which
means that that the direction analysis coefficient is significant. So there's an
immediate massive impact among product innovation and competitive benefit.
independent variable, namely Y1, which affects variable Y3. The results of
SME Product
<--- 0,542 0,057 9,456 0,000
Performance Innovation
C.R value with the t-table value which is used as the basis for decision making. The
9.456 > 1.660 (t-table value), so H1 is regular and H0 is rejected, this means that that
the route analysis coefficient is giant. So there's a right away huge have an effect on
between product innovation on SME performance.
independent variable, namely Y2 which affects the variable Y3. The results of
SME Competitive
<--- 0,537 0,055 9,752 0,000
Performance Advantage
9.752 > 1.660 (t-table value), so H1 is everyday and H0 is rejected, which means
that that the direction analysis coefficient is huge. So, there may be a direct vast
affect among competitive benefit on the performance of SMEs.
D. CONCLUSION
The business environment has a fantastic and remarkable affect on product innovation
in SMEs in Makassar city, this indicates that the number one hypothesis is often happening.
the economic company surroundings has a nice and big have an impact on on aggressive
advantage in SMEs in Makassar metropolis, this suggests that the second speculation is
ordinary. Product innovation has a outstanding and enormous influence on competitive gain
in SMEs in Makassar metropolis, this indicates that the second hypothesis is normal.
Product innovation has a splendid and first rate impact on the overall performance of SMEs
in Makassar city, this indicates that the second speculation is popular. aggressive gain has a
incredible and massive have an effect on at the overall performance of SMEs in Makassar
city, this suggests that the second hypothesis is widespread.

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DIGITAL ECONOMY AND DIGITAL TRANSFORMATION REVIEW

PERFORMANCE IMPROVEMENT STRATEGY THROUGH THE BUSINESS

Aswad Fahruddin1, Abd. Rahman Kadir2, M. Sobarsyah3

Product innovation is one of the maximum critical competitive factors to achieve

and sources of future manufacturing innovation by means of considering agency strategy,

progressive merchandise determine the employer's response to notably competitive

C. RESULT AND DISCUSSION

SME Performance Y3.1 0,807 0,000

2.3. Sub structure 3

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