To What Extend is Inclusive Business Model Adopted by
Tourism-related Industries in Toba Samosir Regency?
Samuel Tampubolon and Yosef Manik
Engineering Management Study Program, Faculty of Industrial Technology, Institut Teknologi Del,
Laguboti 22381, North Sumatera, Indonesia
Keywords: Inclusive Business Model, Bottom of the Pyramid, Industry.
Abstract: This study identifies to what extend do tourism-supporting industries in Toba Samosir Regency adopt the
principles of inclusive business model (IBM) as a foundation to analyze the opportunities and challenges for
full implementation of IBM in such sector in the light of Indonesian government's policy to establish Lake
Toba area as one of national strategic tourism area. Eight business entities representing three tourism-
supporting industrial sectors were surveyed. The sectors are Batak traditional textile, food, and traditional
crafting. The practices of business activities in each of these industries are compared with the criteria of the
IBM obtained from the broad body of literature. The conformity is rated in the range of 0 to 1, where 0
indicates no conformity and 1 indicates perfect conformity. The results show that the adoption rating of IBM
by tourism-supporting industries in Toba Samosir Regency among the three sectors vary between 0.43 and
0.71. This fact implies that even though IBM's principles have been applied in the business processes of
tourism-supporting industries in Toba Samosir Regency, there are still huge opportunities to improve the
implementation of IBM. One of the typical challenges found in this study is that most of the companies
surveyed adopt the family-business system, and thus limiting the inclusion of low income people into their
business process.
1 INTRODUCTION
Lake Toba area is a natural ecosystem that provides
strategic functions of the basic human needs and
economic development. One of some regencies
located in the Lake Toba area is Toba Samosir
Regency. Recently, the Government of Indonesia is
making every effort to accelerate the development of
the Lake Toba region into a main tourist destination
in the country. Even though tourism has traditionally
been considered the main driver for social and
economic development for the region, the
development of the Lake Toba region is also marked
by the rise of manufacturing sectors. The industrial
application of IBM in strategic decisions and
operational practices in Lake Toba area is essential
considering the demographical condition, in which
the poor who lives at the base of the global income
pyramid (the so-called ‘base of the pyramid’ or BoP)
in the region are still dominant.
New companies that want to anticipate their long-
term presence in a place take a long-term orientation
in strategic decisions and make social investments to
connect themselves with the community (Wang &
Bansal, 2012). In the future, it is expected that
companies' mindset will be more to find out why
some companies prioritize their economic
environment while others embrace a company's view
that is further (Crily & Sloan, 2012). Previous
research (Tampubolon & Manik, 2018) has found an
IBM's application in Toba Samosir Regency, Lake
Toba Area, at a tapioca flour industry made from
cassava which is located far from the market and has
been built from the beginning to be closer to the
cassava farming community.
Departing from these facts, the authors consider it
important to conduct research which identifies the
opportunities and challenges in implementing
Inclusive Business Model in manufacturing
industries in Toba Samosir Regency. This study is a
part of a larger agenda in the research roadmap of the
Faculty of Industrial Technology at Institut Teknologi
Del, which contributes in policy design and
development of Toba Samosir Regency and Lake
Toba Area.
Tampubolon, S. and Manik, Y.
To What Extend is Inclusive Business Model Adopted by Tourism-related Industries in Toba Samosir Regency?.
DOI: 10.5220/0008431703950399
In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World (ICIB 2019), pages 395-399
ISBN: 978-989-758-408-4
Copyright
c
2020 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
395
2 METHODOLOGY
In this section, the framework of this study is
presented. The framework is presented in Figure 1.
This research aims to identify opportunities and
challenges for implementing IBM in Toba Samosir
Regency in the shape of recommended strategies for
policy makers such as the government as regulators
and industrial stakeholders. For that, this study begins
with a literature review about IBM through several
studies undertaken by previous researchers and
organizations. This literature review is performed to
find the parameter or criteria of IBM ((Kelly, et al.,
2015) and (Rösler, et al., 2013)) by revisiting
theories, backgrounds, and reports about the practices
of IBM in the companies worldwide.
After the literature review, a series of data
collection and interview is then conducted, limited to
the manufacturing industry in Toba Samosir
Regency. The business model, business plan,
employee’s background, and companies’ vision are
Figure 1: Methodology framework.
ICIB 2019 - The 2nd International Conference on Inclusive Business in the Changing World
396
gathered from the key personnel or the executives of
the company in question. After that, authors then
continue to do conformity test through comparing the
practical field finding and theoretical characteristic of
IBM. The comparison is discussed to find to what
extend the IBM is adopted in the strategic
management of the company. Finally, the authors
analyze the opportunities and threats in implementing
IBM in manufacturing industries in Toba Samosir
Regency.
3 INCLUSIVE BUSINESS MODEL
REVISITED
The definition of IBM is a type of business model that
includes or includes 'the poor' on the demand side,
namely as a client, and on the supply side, namely as
employees, material producers, etc., at various points
in the value chain (UNDP, 2008).
According to Rösler, et al. (2013), 'The poor' are
those who are at the bottom of the income pyramid
(called the 'Base of the Pyramid' or BoP) who do not
have access to markets which provide essential
services and essential goods.
Criteria for IBM, have been formulated in several
existing literature. Some of the relevant and authors
use in this study are IBM criteria (according to (Kelly,
et al., 2015) and (Rösler, et al., 2013)) presented in
Table 1.
4 RESEARCH DATA
COLLECTION AND
PROCESSING
In this paper, authors use 8 unit of industries as
sample. Briefly, eight of these samples can be seen in
Table 2.
Table 1: Source: (Kelly, et al., 2015) and (Rösler, et al., 2013), processed.
No.
Characteristics of IBM
1.
Creating capacity and room for innovation and research
2.
Deepening and expanding the involvement of low-income communities
3.
Build awareness among clients and other stakeholders
4.
Building capacity, e.g supplier training
5.
Engage in policy dialogue
6.
Set upstream-downstream solutions
7.
Improve self-management skills, as SMEs (Small and Medium Enterprises)
8.
Commit to financing, time and patience to carry IBM up to return on investment (break-even)
9.
Providing decent wages for vulnerable groups (low-income, weak economy)
10.
Use flexible trading settings
11.
Support farmers and small businesses to build stronger negotiating positions
12.
Build skills and expertise of business people in existing markets
13.
Measurably, business scale can be enlarged in the medium term
14
Allows for diverse sources of income
Table 2: Research samples.
No.
Type of Industry
Industrial production
Location
Label
1
Clothing
Weavering of ulos*
Balige
Clothing #1
2
Manirat** ulos
Silaen
Clothing #2
3
Weavering of ulos
Laguboti
Clothing #3
4
Food
Tapioca flour
Laguboti
Food #1
5
Making of Sasagun
Balige
Food #2
6
Coffee
Habinsaran
Food #3
7
Craft
Wood-crafting
Balige
Craft #1
8
Wood-cutting and wood crafting
Laguboti
Craft #2
*Ulos is a traditional cloth from Batak tribe.
**Manirat is a process to put some motives or name writings on a plain ulos.
To What Extend is Inclusive Business Model Adopted by Tourism-related Industries in Toba Samosir Regency?
397
Table 3: Comparison between IBM Parameters and Field Practices in the Clothing #2.
No.
Parameter
Practices in industrial unit
Conformity
1
Creating capacity and
room for innovation and
research
This industrial unit has indeed experienced an increase in terms of
production volume and choice of types of products and services.
However, the types of products and services do not increase through
innovation or research.
Non-conforming
2
Deepening and
expanding the
involvement of low-
income communities
This industrial unit has involved low-income communities as labor.
This is supported by the increase in the number of workers from 2
people in 2007 to 15 in 2018.
Conforming
In Table 3 is an example of conformity test which
is done qualitatively by authors.
In accordance with the research objectives and so
that the level of inclusiveness can be displayed
quantitatively, the inclusivity of each sample is
performed. Presentation with numbers allows each
sample unit to be compared with each other. The
calculation is carried out following the following
formula 4.1:
… (4.1)
Table 4 is the result of calculating inclusivity from all
sample of industrial units. Inclusivity values are
obtained from the number of conformities divided by
the number of IBM criteria.
Table 5 is the result of calculating inclusivity
from industrial clusters. Inclusivity values are
obtained from the average number of conformities in
each cluster divided by the number of IBM criteria.
5 DISCUSSION
In this section, the authors discuss the analysis of the
opportunities and challenges of each sample of
industrial units.
As an example, Clothing #1 (inclusivity: 0.71)
has tried to focus to operate independently, or being
free from any parenting companies. This unit does
not sell its product directly to the consumer, so this
unit is not directly related to consumers. The yarn
which is used in this unit is bought from other part of
the country which limits the ability of this unit to help
other local IBM units and local BoP. Meanwhile,
there is an opportunity because this unit has applied
industrial work patterns in the local society which is
related to this unit as workers. Instead of hiring as
much local BoP as possible to increase productivity
and competitiveness, this unit chooses the use of
more automated or mechanical machines which can
threaten the process of adding more local BoP into
this unit.
Table 4: Inclusivity of Each Industrial Unit Sample.
ICIB 2019 - The 2nd International Conference on Inclusive Business in the Changing World
398
Table 5: Inclusivity of each Industrial Cluster.
The author takes another example form Clothing
cluster. This cluster gets stacks of stakeholder’s
support, from big companies and the central
government of the country. Moreover, the number of
BoP, who want to join, is abundant. Those
opportunities are also challenged by some threats.
Clothing units are not yet fully operating
independently and are still under parenting
organization or parenting companies which means
that Clothing units are not so independent in
management and financial affairs.
6 CONCLUSIONS AND
RECOMMENDATIONS
Authors conclude that IBM's application to industrial
units in Toba Samosir varies. A bold point which
reduces the inclusivity of those industrial units is the
fact that some of them are family companies which
make an exclusive barrier from BoP coming from
outside the family. Meanwhile, some units are under
other organizations as their parenting management or
as their subsidiary donor. Some companies do not see
that involving the BoP is an important thing to do.
Because of their need for a donor, BoP can still rely
on IBM concepts, but IBM needs support from
government and large organizations.
Authors recommend, for further study, some
features to be added to the formula which is used in
this paper. There is a weakness in the formula for
calculating inclusivity. The formula does not pay
attention to the number of BoP involved. Suitability
of the conformity is limited to 'yes or no',
‘conforming or non-conforming’, or ‘1 or 0’. It will
be more specific if it is between 0 and 1.
REFERENCES
Crily, D. & Sloan, P., 2012. Enterprise Logic: Explaining
Corporate Attention to Stakeholders from The ‘Inside-
Out’. Strategic Management Journal.
Kelly, S., Vergara, N. & Bammann, H., 2015. Inclusive
business models – Guidelines for improving linkages
between producer groups and buyers of agricultural
produce, s.l.: FAO.
Rösler, U. et al., 2013. Inclusive Business Models Options
For Support Through PSD Programmes. s.l.:Deutsche
Gesellschaft für internationale Zusammenarbeit (GiZ)
GmbH.
Tampubolon, S. & Manik, Y., 2018. Inclusive Business
Model in Tapioca Starch Industry in Lake Toba Area:
A Case Study. s.l., IOP Conference Series: Materials
Science and Engineering.
UNDP, 2008. Creating Value For All: Strategies For
Doing Business With The Poor, s.l.: United Nations
Development Programme.
Wang, T. & Bansal, P., 2012. Social Responsibility in New
Ventures: Profiting from A Long-Term Orientation.
Strategic Management Journal.
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