The Business Governance Integration Model of Fruit Farmers and

Fruit Sellers

Firmansyah, Tona Aurora Lubis

Universitas Jambi

Keywords : Business governance, integration, business performance.

Abstract : Business governance of local fruit farmers and fruit sellers have not been well-integrated in Jambi

Province. It can be led the asymmetry of information between them, and it can be led to inefficient

marketing and price distortion. The purpose of this study to analyze the influence of business governance

and Integration to the business performance. The research used a mix method which is the first step

researcher using the qualitative method and the second step researcher using the quantitative method.

Respondents of this study are 240 respondents including fruit farmers and fruit sellers in Jambi Province,

who were taken by using quota sampling. The result of this study indicated that business governance

variables have significant effect on integration variables. Furthermore, integration variables have significant

effect on business performance variables. On the other side, business governance has no significant effect

on business performance, both on fruit farmers and fruit sellers in Jambi Province.

1 INTRODUCTION

Indonesia has been known as a country which has a

wealth of fruits, particularly tropical fruit. Indonesia

fruits production has been increased every year

(BPS, 2013). However, the level of consumption of

Indonesia fruit community is far from the standard

recommended by the Food Agricultural

Organization (FAO) of 65.75 kilograms per capita

per year (Ditjen horticulture, 2012). Increasing

production of local fruits are not able to meet the

fruit consumption of community in Indonesia, so it

is causing an increase in fruit import in this country.

As a result, the fruit import more dominated in the

Indonesian market (Agro Media, 2009).

Furthermore, an effort to increase competition for

local fruits against the imported fruit by marketing

the local fruit itself. The presence of less adequate

price information between farmers and retailers

would lead to the existence of asymmetry

information. According to Anindita (2004) this

asymmetry information is a cause of the market

failure, because the information between the two

sides is not complete.

Integrated market indicates an efficient

marketing system (Fadhla,2008), where a positive

correlation will occur from time to time between

prices in different market locations (Heytens, 1986).

So transmission and information among the various

markets lead prices to move simultaneously in

different markets. On the other hand, an integrated

Market is part of the implementation of efficient

business governance. Instead, the markets are not

integrated both spatial as well as intertemporal can

indicate that efficiency occurs resulting in the

existence of a marketing game prices and the onset

of price distortions in the market (Barrett, 2005).

This is in line with the opinion of Anindita (2004)

that the weak market structure is a consequence of

the weak integration of markets, the flow of

information, and the difficulty of trading in the

interbank markets.

Around regency or city of Jambi province also

has a local fruit, including commodities duku,

durian, mangosteen, rambutan, jackfruit, pineapple,

jackfruit, banana, and others that are processed into

the craft, but it is used as the pre-eminent creative

craft products is still limited. For example, the

pineapple became one of the leading commodity in

Muaro Jambi Regency. Pineapple-producing area in

Muaro Jambi Regency this is Tangkit. On the other

hand, a very rich pineapple in Muaro Jambi Regency

made the fruit market could not afford them. It

resulted in a lot of pineapple fruit rotten and wasted.

Therefore, the craftsmen local fruit pineapple

154

Firmansyah, . and Lubis, T.

The Business Governance Integration Model of Fruit Farmers and Fruit Sellers.

DOI: 10.5220/0008784601540159

In Proceedings of the 2nd International Research Conference on Economics and Business (IRCEB 2018), pages 154-159

ISBN: 978-989-758-428-2

processing into food products such as dodol and

chips.

Previous research on the business governance on

the object of research of fruit growers and traders of

fruit among them, on the research of Nurhuda (2017)

concluded that the main problem facing farmers in

the village of Malang Ngadas was not the relative

amount of supply, the limited access to information,

unclearly financial flow, lack of product

transformation activities into other processed

products, as well as the weak coordination between

the existing institutions, involved in the supply chain

fruit in Ngadas ranging from farmers, local penebas,

wholesalers to the retailers level. Next on research of

Andreastika (2017) it can be concluded that the

fruits of the businessman in the city of Malang to

improve business competitiveness of fruit needed

basic actions such as improving the ability of

business management and encouragement from the

Government in order to can give you an advantage

in the business of local fruits. Research of

Sudiatmaka (2016) concluded that the loss of the

fruit traders in Klungkung Regency due to lack of

skills to market the business relationships in the lack

of plus to develop its business, as well as managing

the business in terms of administration of business

transactions. Furthermore, Enjolras research (2018)

of traditional fruit growers in France, it can be

concluded that the farmers are having problems

managing their business. French Fruit growers have

difficulty in integrating the management of

production and marketing

Jambi province also has a local fruit, including

commodities duku, durian, mangosteen, rambutan,

jackfruit, pineapple, jackfruit, bananas and so on.

The local fruit market in Jambi province also has an

asymmetry of information between the local fruit

growers and traders, local fruit, so that led to

inefficient marketing and price distortions. This is

shown with a selling price of local fruit purchased

from local fruit traders consumers much more

expensive compared to the selling price of the fruit

offered local fruit farmers to local fruit traders.

Remembering the potential fruit resources in

Indonesia is wealth. Based on the phenomenon and

research gap research then this study becomes

interesting and important research.

2 LITERATURE REVIEW

2.1 Business Governance

Business governance generally according to the

Organisation for Economic Co-operation and

Development (OECD) is a set of integrated

relationship management of business entities. Tshipa

(2017) expressed business corporate governance as a

process of adaptation of a business to be able to

articulate requests in action, the courage to take

risks, learn from mistakes, and are able to make

changes. Llewellyn (2014) stated that the

governance of business as in showing the

adaptability in the face of the challenges of business

is considered important particularly in the face of

changes in the external environment. Klein (2012)

also suggests that good business entities are those

who can afford to responsive and responsible.

2.2 Integration

Ozdan, Mondragon, and Harindranath (2016) stated

that integration is the degree to which a business

strategically collaborates with its business supply

partners, and collaboratively manages inside and

outside organisational processes, in order to achieve

effective and efficient flows of products and

services, information, money and decisions, to

provide maximum value to the business customer.

From the study of Ozdan et al. (2016) can be

concluded that integration is synchronized

processes. Another point of view from Ibeh dan

Makhmadshoev (2016) concluded that integration is

resources exchange, synergy, dan value/knowledge.

2.3 Business Performance

Business performance is the business entity against

the understanding of the processes that are needed to

achieve strategic goals and then measure the

effectiveness of those processes to achieve desired

results. The core of the process of business

performance includes financial and operational

planning, consolidation and reporting, business

modeling, analysis, and monitoring of key

performance indicators related to the strategy.

Business performance is a series of processes that

help business entities in the business to optimize

performance guarantee the achievement of business

objectives (Enjolras, 2018). Cruz, Jover, Gras (2018)

study have been identified business performance

indicators are sales growth and profit growth.

Further, Another study by Li, Shao, Zhang (2017)

The Business Governance Integration Model of Fruit Farmers and Fruit Sellers

155

has been founded that business performance

indicator is business income and growth asset.

3 METHODS

The method of this study is the mixing method

which the first step researcher using the qualitative

method and the second step researcher using the

quantitative method. The qualitative method of this

study consists of four steps, such as, finding the

cases and the potential objects of this study, using

phenomenology approach on theoretical studies,

collecting and analyzing data with an in-depth

interview, observation, and documentation,

hypothesis finding. The data analysis used data

reduction and conclusion, domain verification, and

reflection. The quantitative methods determined

quantitative samples of the population from the

research object. This study examines 240 samples of

local fruit farmer and seller which are located in

Jambi Province. This sample of this study using

quota sampling. The data have been collected by

using a questionnaire. The questionnaire was done

by using a Likert scale with the range of assessment

1-5. The second step managed primary and

secondary data. Furthermore, the third step does

descriptive analysis and inferential.

4 RESULTS

The result of this study consisted of 240

respondents. All of the respondents are fruit farmer

and fruit seller in Jambi Province that selected by

quota sampling. Furthermore, characteristics of these

samples are the age of fruit farmers and fruit sellers,

ownership type of business, the age of business,

number of employees, involved business on the

business association, accepted business assistance of

capital, workshop, and marketing. The details of

these characteristics and the percentage of this study

will be shown in table 1 below.

Table 1: Characteristics and Percentage of Fruit Farmer

Samples.

Characteristics

Fruit Farmer

Percentage

(%)

Fruit Seller

Percentage

(%)

Age:

a.<31 years old

b.31-40 years old

c.41-50 years old

d.>50 years old

30%

50%

20%

50%

30%

Ownership type:

a. Self-ownership

b. Cooperating

c. Family

ownership

100%

65%

20%

15%

Age of business:

a. >10 years

b. 5-10 years

c. 2-5 years

d. < 2 years

70%

20%

10%

50%

30%

10%

Number of

Employee:

a. >4 persons

b. 3 persons

c. 2 persons

d. a person

10%

20%

40%

30%

10%

20%

30%

40%

(Reference: Data by author)

The result of qualitative phase findings variable and

indicators on the table below, such as:

Table 2: Variables and Indicators of Study.

Variables

Indicators

Business

Governance

)

(1) Transparency

(2) Accountability

(3) Responsibility

(4) Independence

(5) Fairness

Integration (X

)

(1) Resources exchange

(2) Synchronized processes

(3) Synergy

(4) Value or knowledge

Business

Performance

(Y)

(1) Growth sales

(2) Growth profit

(3) Growth asset

(Reference: Data by author)

On the next phase of the quantitative using

component-based structural modeling, as the result

of this research calculate model can be seen as

follows:

IRCEB 2018 - 2nd INTERNATIONAL RESEARCH CONFERENCE ON ECONOMICS AND BUSINESS 2018

156

Figure 1 below, showed that researcher propose

model which business governance has the effect to

integration and business performance, and also

integration has the effect to business performance.

Model of Figure 1 is a result of dropping out an

indicator from a variable, which has value under

point 0,6. The dropping out indicator is growth sales

(Y) from a business performance variable.

Table 3: AVE dan Communality

Variable

AVE

COMMUNAL

ITY

Integration

0,600276

Business

Performance

0,628309

Business

Governance

0,615873

(Reference: PLS Output)

Table 3 shows the value of AVE and

communality above point 0.5 for all variables. It

means that all variables have the value of the

discriminant validity. Reliability in research as well

as the consistency of the research instrument is as

follows:

Table 4: Reliability Coefficient Cronbach Alpha and

Composite Reliability

Variable

Cronbach's

Alpha

Composite

Reliability

Integration

0,777984

0,857015

Business

Performance

0,437501

0,767439

Business

Governance

0,841589

0,888373

(Reference: PLS Output)

Table 4 indicated that the average value of

Cronbach's alpha and composite reliability for all

variables of this study above point 0.70, or it could

be said that all reliability instruments (questionnaire)

on this research revealed the "reliability" and tested

the establishment, so that it can be used in further

research.

Figure 2: Bootstrapping Result to Research Model

(Reference: PLS Output)

Figure 2 shows that the highest indicator values

on the variable of integration are X2.3 (synergy),

and the smallest is X2.4 (value/knowledge). As for

the variable, the value of the highest governance

indicator is X1.4 (independence), and the value of

the indicator is the lowest X1.5 (fairness). On the

business performance of the variable, the value of

the highest indicators is Y2 (Growth profit), while

the lowest indicator value is Y3 (Growth asset). The

following table shows the influence between the

variables in this study:

The influence of significance variable can be seen

from the statistic t value on the upper point of 1.96.

Table 5 shows the influence of integration variable

to business performance shows the number on point

0.18 and significant, and business governance to

integration shows the number on point 0.60 and

significant, While the influence of the business

governance to business performance are not

significant.

Figure 1: The result of Calculating Research Model

(Reference: PLS output)

The Business Governance Integration Model of Fruit Farmers and Fruit Sellers

157

Table 5: Path Coefficients (Mean, STDEV, t-Values)

Original

Sample (O)

Sample

Mean (M)

Standard

Deviation

(STDEV)

Standard

Error

(STERR)

T Statistics

(|O/STERR|)

Integration -> Business

Performance

0,178346

0,184556

0,062198

2,867395

Business Governance ->

Integration

0,598845

0,602613

0,036288

16,502674

Business Governance ->

Business Performance

0,065808

0,066831

0,068228

0,964531

(Reference: PLS Output)

5 DISCUSSION

The result of this study indicated that business

governance variables have significant effect on

integration variables. Furthermore, integration

variables have significant effect on business

performance variables. On the other side, business

governance has no significant effect on business

performance, both on fruit farmers and fruit sellers

in Jambi Province. It means that integration between

fruit farmer and fruit seller will rise up the business

performance of them. Integration variable which is

reflected by synergy indicator, means those actors of

the business should have clear business relation to

each other. This study is in line with Barret (2005)

study about integration of business will increase the

business performance. This study also clarifies Ibeh

and Makhmadshoev (2016) study about integrating

will rise the business performance in growth profit

and growth asset. Then, this study also clarified that

growth asset has been used to be indicator from

business performance, and this study is in line with

Li, Shao, Zhang (2017) research.

Well-integrated business governance between

fruit farmers and fruit sellers occur when fruit

farmers get information about fruit price on the

market and fruit craftsman to get information about

the frequency of fruit farmers production, seasonal

production of fruit farmers, and accurate time

information about the production. The good process

that integrates and collaborate across two functions

of fruit farmers and seller in a business entity

referred to as an enterprise to improve productivity,

improve data accessibility, robust growth, and

maximize the financial value of each other. Well-

integrated business governance between fruit

farmers and seller will give impact to business

competition because a well-integrated system has

become vital for every business to succeed in today

competitive.

Based on the result of this study, fruit farmer and

fruit seller are expected to improve their technical

ability in order for gaining rapidly information about

market and price. Fruit farmer and fruit seller should

be able for sharing about market and business

information to each other. The government should

also make good business relationship with local

business or farmer association, cooperation, and fruit

farmer and seller. The government is expected to

make regulation in order for supporting business

integration between fruit farmer and seller. Finally,

recommendation is made to any further researcher

who wants to make study in the field of business

integration, particularly in local fruit farmer and

seller, the further researcher should be able to make

a study in different market and place in Indonesia.

6 CONCLUSION

At the end of this research concluded that business

governance variables have significant effect on

integration variables. Furthermore, integration

variables have significant effect on business

performance variables. Business governance has no

significant effect on business performance, both on

fruit farmers and fruit sellers in Jambi Province.

ACKNOWLEDGMENT

The authors are grateful to the fruit farmers and fruit

sellers as respondents in Jambi Province, who kindly

provided information about their business. We are

also immensely grateful to the Economic and

IRCEB 2018 - 2nd INTERNATIONAL RESEARCH CONFERENCE ON ECONOMICS AND BUSINESS 2018

158

Business Faculty is gratefully acknowledged, for the

material and financial support.

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