Strategy for Business Development Patchouli Farmers

in Meranti Tengah Village, Pintupohan Meranti District,

Toba Samosir Regency

Nicholas Marpaung

, Nana Dyki Dirbawanto

and Siswati Saragi

Department of Business Administration, Faculty of Social and Political Science, Universitas Sumatera Utara, Medan,

Indonesia

Department of Public Administration, Universitas Darmawangsa, Medan, Indonesia

Keywords: Strategy, Business, Development, Patchouli Farmers.

Abstract: This research aims to determine the strategy of business development of patchouli oil farmers in improving

economic welfare and to analyze obstacles or barriers in running the cultivation and production of patchouli

oil in central Meranti The district of Pintu Pohan Meranti Toba Samosir Regency. This type of research is

descriptive research with a qualitative approach because the research intends to understand what phenomena

experienced by the subject of research. The method of determining the area of the research use Purposive

technique or deliberate with consideration of Central Meranti is one of the villages that the majority of its

citizens still hang the livelihood as a patchouli oil farmer. Data collection methods are obtained from

primary data and secondary data where primary data is obtained through interviews with informants as well

as direct observations of the field, and secondary data is obtained from the relevant agencies. The Data

obtained is then analyzed using SWOT analysis. The results show that there are only 2 families that still

maintain patchouli oil farming efforts with patterns and strategies to develop this business in a simple way.

Patchouli marketing is also done by selling directly due to price fluctuations that happen very often. In

addition, the limited information such as the writing and socialization of a patchouli is still very limited

from the government to the farmers so that more and more farmers are switching commodities.

1 INTRODUCTION

Indonesia is known as the largest producer of

essential oils in the world, especially Patchouli Oil.

Indonesia is also a supplier of 90% of the world's

patchouli oil needs. Essential oils are produced from

various types of plants and one of it is Patchouli

(Pogostemon Cablin Benth) through the process of

patchouli leaf and stem distillation. Essential oils

(patchouli oil) function as a binder element

(fictitious) the best aroma for fragrances (perfume)

so that the resulting fragrance can last a long time

and is not easily lost due to the washing or

evaporation process. This makes patchouli essential

oil the most perfect mixture for producing perfumes

and has not been replaced by synthetic substances

that exist today so that the demand and needs of

patchouli oil domestically and abroad remain high

and large.

Indonesia's volatile oil exports from year to year

also experienced fluctuations in which in 2014 were

at 4,036 tons, in 2015 at 3,990 tons, in 2016 around

5,190 tons and in 2017 increased sharply to 30,770

tons. In Indonesia, there are several regions that

contribute to the supply of patchouli oil for both

export and domestic needs. The Province of

Nanggroe Aceh Darussalam contribute to 60% of the

national patchouli oil supply and then by Provinces

of North Sumatra, West Sumatra and Central Java.

The area which is the center of patchouli oil

production in North Sumatra Province is in the

regency of Dairi and Toba Samosir. In Toba Samosir

Regency there is a Meranti Tengah village in the

Pintupohan Meranti District. This village is a village

in Toba Samosir where the people still depend on

their livelihoods as patchouli oil farmers. The

limitations of standardized distillation facilities and

the lack of government assistance both in the form

of education and finance for the cultivation and

distillation of patchouli oil are a challenge for the

Marpaung, N., Dirbawanto, N. and Saragi, S.

Strategy for Business Development Patchouli Farmers in Meranti Tengah Village, Pintupohan Meranti District, Toba Samosir Regency.

DOI: 10.5220/0010013801910198

In Proceedings of the 3rd International Conference on Social and Political Development (ICOSOP 3 2019) - Social Engineering Governance for the People, Technology and Infrastructure in

Revolution Industry 4.0, pages 191-198

ISBN: 978-989-758-472-5

191

residents of Meranti in cultivating patchouli plants.

In addition, the increasingly massive change of land

use and price uncertainty caused by the patchouli oil

price caused by middlemen (middlemen) makes this

business increasingly abandoned by the people of

Meranti Tengah.

It is very ironic if patchouli is considered a very

valuable commodity on the world market but

farmers do not get government assistance which is

actually complacent with the status of the world's

largest patchouli oil exporter. This research will

discuss in depth the problems faced by Patchouli

farmers in the Meranti Tengah village and how

farmers' strategies in developing and maintaining

their businesses.

2 LITERATURE REVIEW

2.1 Concepts of Business Development

Strategies

Basically, strategy is a tool to achieve goals.

Goldworthy and Ashley (1998) propose seven basic

rules in formulating a strategy, they are;

a) It must explain and interpret the future, not only

the present,

b) The strategic direction must be able to determine

the plan and not vice versa,

c) The strategy must focus on competitive

advantage, not solely on financial considerations,

d) It must be applied from the top down, not from

the bottom up,

e) Strategy must have an external orientation,

f) Flexibility is essential,

g) Strategy must be centered on long-term results.

2.2 Review of Business Development

Library

Business development is the responsibility of every

entrepreneur or entrepreneur who needs foresight,

motivation and creativity (Anoraga, 2007). Business

development is the task and process of analytical

preparation of potential growth opportunities,

support and monitoring of the implementation of

business growth opportunities, but does not include

strategic decisions and implementation of business

growth opportunities. As for large businesses,

especially in the field of industrial technology, the

term business development refers tomanaging

strategic relationships and alliances with others. To

carry out business development, support is needed

from various aspects such as production and

processing, marketing, human resources, technology

and others.

There are 2 elements of business development,

namely:

1. Internal elements are categorized as someone

who has the intention of an entrepreneur /

entrepreneur to develop their business to become

bigger and know how to develop products or

develop a running business and make a

consistent budget to find out the expenditure and

income of products for the continuity of their

business .

2. External elements are categorized as someone

who is always updated with information from

outside the business that is currently being run,

recognizing environmental conditions that are

conducive to business, obtainingfunds not only

by borrowing from outside parties, the range of

products that always supports creativity and

innovation

2.3 Stages of Business Development

According to Anoraga (2007), the stages of business

development include: Phase I: identification of

opportunities supported by data and information.

Information can usually be obtained from various

sources such as: 1) company plans, 2) small

management suggestions, 3) programs and

government, 4) results of various business

opportunity research 5) kadin or similar business

associations. Phase II: formulating business

alternatives. After gathering and analyzing

information then the company leader or business

manager can formulate any business that might be

opened. Phase III: alternative selection. Many

alternatives must be chosen one or several of the

best and prospective alternatives. For prospective

businesses, the basis for their selection can include

the following criterias: 1) market availability, 2)

failure risk, 3) price. Phase IV: implementing

selected alternatives. Phase V: evaluation which is

intended to provide corrections and improvements to

the business being run.

2.4 Business Development Techniques

2.4.1 Increased Economic Scale

This method can be done by increasing the scale of

production, labor, technology, distribution systems,

and place of business (Suryana, 2006). This is done

if business expansion or increased output will reduce

long-term costs, which means achieving economies

ICOSOP 3 2019 - International Conference on Social Political Development (ICOSOP) 3

192

of scale. Conversely, if an increase in output results

in an increase in long-term costs, then it is not good

to do. In other words, if the products and services

have reached the most efficient point, then

expanding the scale of the economy cannot be done,

because it will drive up costs.

2.4.2 Expansion of Business Coverage

This method can be done by adding new types of

businesses, new products and services that are

different from those currently produced

(diversification), as well as with different

technologies. Thus, the scope of economic business

can be defined as a diversification of economic

business characterized by the total combined

production costs (joint total production cost) in

producing two or more types of products together is

smaller than the sum of the production costs of each

product if separately produced. Expansion of the

scope of this business can be done if the

entrepreneur has sufficient capital.

2.5 SWOT Analysis

SWOT analysis (Strength Weakness Opportunities

Threats) is a tool commonly used to analyze the

internal and external environment in order to achieve

a systematic approach and support for a decision

making situation. SWOT analysis can be done using

one of two matrix models, namely the SWOT matrix

or the TOWS matrix. The matrix model takes

precedence over external factors (threats and

opportunities), then looks at internal capabilities

(strengths & weaknesses). The TOWS matrix

produces 4 strategies (Rangkuti, 2006), namely:

1. SO Strategy (Strategy of strength - opportunity),

creating a strategy that uses strength to take

advantage of opportunities.

2. Strategy WO (Strategy of weakness -

opportunity), creating a strategy that minimizes

weaknesses to take advantage of existing

opport

unities.

3. ST Strategy (Strength - threat strategy), creating

a strategy by utilizing strengths to avoid or

minimize the impact of external threats.

4. WT Strategy (Strategy of weakness - threat),

based on activities that are defensive and try to

minimize, and avoid threats.

Previous research on the topic of agricultural

commodity business development strategies has

been widely presented in a number of national and

international journals, including research entitled

Corn Biscuit Business Development Strategy in

Sustainable Farmers Women's Groups Subun

Tua'lele Village, West Insana District, North Central

Timor Regency by Kolo and Hutapea (2016). The

research used a SWOT strategy analysis tool and

successfully identified the strengths, weaknesses,

opportunities and threats for the development of the

farmer's business so that farmers could find out the

potential and obstacles faced. Another study titled

Analysis of business development strategies for

soursop juice drinks by Kurniawan and Haryati

(2017) also uses SWOT Analysis to identify

business development strategies. The study found an

obstacle often faced by farmers was the lack of

innovation to diversify their products.

This study has a deeper concern and will try to

escape from the stigma of agribusiness that arises

because the object of this research is among farmers.

This research offers a State of the art research that is

focused on business development strategies in the

realm of business administration and emphasizes the

sustainability of products and processes.

3 RESEARCH METHOD

The study was conducted for 1 year, by selecting

research locations in Meranti Tengah Village Pintu

Pohan Meranti District, Toba Samosir Regency.

Desa Meranti Tengah as a village which majority of

the residents work as patchouli farmers is the reason

for choosing this location. The approach that will be

used in this research is a qualitative approach.

Qualitative research aims at obtaining a complete

picture of a matter according to the human point of

view studied. Poerwandari (2007) revealed that

qualitative research produces and processes data that

is descriptive in nature, such as interview transcripts,

field notes, pictures, photographs, video recordings,

etc.

4 RESULT AND DISCUSSION

Desa Meranti Tengah is a village in the District of

Pintupohan Meranti, Toba Samosir Regency, North

Sumatra Province. The village is inhabited by 413

people, an area of 98.85 km2 with an average

population density of 4.15 people/km2. The

livelihoods of the majority of the population are

farmers and planters.

Strategy for Business Development Patchouli Farmers in Meranti Tengah Village, Pintupohan Meranti District, Toba Samosir Regency

193

Table 1: The area of villages in the district of Pintupohan

Meranti

4.1 Research Results

4.1.1 Overview of Patchouli Farming

Business management patchouli farmland in Meranti

Tengah Village so far have been carried out by

several families traditionally. The majority of

Central Meranti patchouli growers plant patchouli

species of Aceh Patchouli or Pogostemon Cablin

Benth. Based on interviews with interviewees, the

reason why farmers in Central Meranti planting

Patchouli Aceh is because the type of patchouli

originating from the mainland of the Philippines and

the Malay Peninsula has characteristics of not

flowering, downy leaves with oil content of 2.5-

5.0%. This type of patchouli is widely cultivated in

Indonesia, including in Meranti Tengah Village. As

a type of patchouli that has a higher oil content than

other types, patchouli aceh is the most widely

planted patchouli type in Meranti Tengah village.

Because the more the oil content is, the higher the

sales quantity will be.

Patchouli farmers in Meranti Tengah Village

have a fairly simple principle in running patchouli

oil farming. The principles of traditional oil

management and marketing should be changed by

good marketing management too, especially to keep

getting stable prices. Lack of information in the

marketing of patchouli oil is a major obstacle that

should not depend on collectors' demands where

farmers can utilize more effective marketing

methods to get high selling points.

4.1.2 Increasing the Economical Scale of

Patchouli Farmers

Economic scale is a theory that describes the

phenomenon of decreasing production costs per unit

in a company coupled with an increase in production

volume (output). If the business unit gets bigger, the

production costs will be smaller. How could output

increase but the cost of production per unit actually

decreases? In layman's logic, any increase in output

is generally followed by an increase in unit

production costs. The assumption is that factors of

production such as raw materials (inputs) and labor

also increase, so it should also affect production

costs per unit which increases or is higher. This

assumption may be correct, but not always right.

This actually happened to Patchouli Farmers in

Meranti Tengah Village, where production or yields

could be increased because of the cost of production

(planting) that could be reduced. the increase in

economies of scale in Central Meranti Village

patchouli farmers should be achieved easily. Costs

for purchasing seeds included in production costs

(planting) can be reduced because raw materials can

be obtained without cost.

Although for other farmers, there are still those

who still pay for getting seeds of better quality

compared to those already available in nature. Mass

production or planting of patchouli seeds in bulk and

without cost in Meranti Village can actually reduce

the cost of production per unit because there are no

raw material costs. Simply put, the purchase of raw

materials (seeds) in large quantities should get

discounts so that the price of raw materials (inputs)

becomes cheaper. However, with the condition of

the seeds (raw materials) that are available free of

charge with the same frequency / working hours for

processing land and the same number of workers,

processing these raw materials or planting the seeds

will lead to lower production costs.

Thus, the economies of scale at Meranti

patchouli farmers are being seen through their

success in efficiency. The efficiency of these

farmers is generally influenced by the size or scale

or size of the land they own. Farmers who have large

land area tend to be more efficient compared to

farmers who have small scale land. Patchouli

Farmers in Central Meranti Village have actually

done cost efficiency by ignoring the quality of raw

materials (seedlings) that are no less important as a

determinant of income increases. There are still

many farmers who prioritize raw materials from

nature or the results of their own cultivation so that

the quality is inadequate which results in the

ICOSOP 3 2019 - International Conference on Social Political Development (ICOSOP) 3

194

production of patchouli leaves that are less than

optimal and not too have a good quality

4.1.3 Expansion of Patchouli Farmers'

Business Coverage

The expansion of patchouli farmer's business scope

is certainly different from the expansion of business

coverage in companies or organizations. As an

independently and traditionally managed business,

the expansion of the scope of patchouli farming in

Meranti Tengah Village has actually been

implemented simply and self-taught. If the company

or organization is expanding its business scope to

include several indicators such as expanding the

scale of production, labor, technology, business

location and distribution system as well as the

business network, then the expansion of patchouli

farmer business coverage in Central Meranti starts

from expanding the land to be planted in patchouli,

diversifying patchouli commodity to be planted, and

efforts to adopt the use of a new machine for the

distillation process even though it has not been

realized until now.

1. Expansion of patchouli plant land

Based on field observations, the number of

patchouli farmers in the village of Meranti Tengah,

found the fact that only 15 people left or families

who work as patchouli farmers, with details 3 out of

15 farmers are not active farmers but only seasonal

farmers who plant patchouli when the price is

predicted to rise . The vast land owned by certain

farmers is one of the main reasons why patchouli

farmers in Meranti village are not developing in

terms of quantity. Patchouli Farmers in the village of

Meranti Tengah actually have implemented an

expansion of business scope with most of them

choosing to rent land to be planted patchouli for

farmers who do not have land. Likewise for farmers

who have large enough land, they will also look for

new land to plant patchouli as well as a strategy to

increase their income.

2. Patchouli Production/Crop Diversivication

The majority of patchouli farmers in Desa

Meranti Tengah do not have specific actions or

strategies in diversifying or making derivative

products from their main production product,

patchouli, despite attempts to fill patchouli spaces

with other patchouli with other economically

valuable crops such as beans, chilies, tomatoes and

even planting with other types of patchouli is a

diversification and maximization of resources in a

fairly simple way. The size of the farmer's efforts

and whether or not to provide a significant increase

in income can be categorized as a diversification

effort in the smallest scope of agriculture.

3. Technology and Machinery

Technology and machinery are important

elements in expanding the scope of business. In

businesses engaged in agriculture, the use of

technology and machinery is absolutely necessary.

Technology in agriculture can be used to predict

climate and weather, while machinery can be used to

streamline labor and time management before and

after harvest. However, in patchouli farming in

Meranti Tengah Village, the use of technology and

machinery is still failing to be carried out due to the

lack of technological understanding and inability to

use machines or the price of machines that are too

expensive.

Figure 1: Patchouli distillation tool of central Meranti

patchouli farmers.

Utilization of technology and machinery by

patchouli farmers in Meranti Tengah Village based

on the observations of researchers is still not well

utilized. The use of technology for weather and

climate forecasting in the context of the planting

process, identifying rainfall and others is also not

well considered. Likewise with the use of a

processing machine for dried patchouli leaves,

namely distillation that is still done very simply

without using the right machine. The distillation

process uses only simple tools that are independently

modified by farmers and are used together.

Supposedly, the use of more sophisticated machines

will make it easier for farmers to get maximum

yields.

Strategy for Business Development Patchouli Farmers in Meranti Tengah Village, Pintupohan Meranti District, Toba Samosir Regency

195

Figure 2: Patchouli oil receptacle drum containers.

By using machines such as Figure 1 and Figure

2, we can be sure that the yield from distillation of

dried leaves will not get maximum results. The latest

and sophisticated machine should be able to improve

the distillation results because by using traditional

machines like that is possible for the oil still

contained in patchouli leaves will not come out

perfectly. Therefore, the government's attention to

patchouli farmers in the village of Meranti Tengah

in terms of information assistance and the provision

of distillery equipment is absolutely needed by

farmers because based on the results of interviews,

none of the patchouli farmers have ever gotten that.

4.2 Identification of SWOT Analysis of

Internal and External Factors

4.2.1 Internal Factors

Based on the observations and results of the analysis

of the patchouli farmer respondents at the research

location in Meranti Tengah Village, the factors that

can be identified as strengths and weaknesses of the

respondents are as follows:

Table 2: Internal factors.

Strength Weaknesses

1.Aceh Patchouli Quality

2.Increased Patchouli

production

3.Patchouli farming

experience

4.Potential of natural

resources owned

5.Availability of

Abundant Seeds

1.Simple farming

equipment

2.Lack of guidance to

farmers

3.Lack of market

information

4. Limited cultivation land

5. Limited capital

4.2.2 External Factors

External factors that become opportunities and

threats in patchouli farming at the study site are as

follows:

Table 3: External factors.

Opportunity Threat

1.Increased demand for

patchouli oil

2.Transportation access

3.Close marketing

channels

4. Market opportunities

5.Availability of vacant

land

1. Pests and diseases

2.The existence of

competition

3.The high cost of farming

4.Lack of institutions

supporting the

development of Patchouli

Oil Farming

5.Determination prices by

collectors

4.2.3 SWOT Analysis as a Strategy for

Developing Patchouli Agriculture

Business

A. IFAS Matrix Analysis (Internal Factor Analysis

System)

Based on the internal factors above illustrating

the strengths and weaknesses to determine the

condition of Patchouli Oil which is summarized in

the IFAS (Internal Factor Analysis System) matrix,

more details can be seen in the Table 4.

Table 4: Internal matrix system factor analysis strategy

(IFAS).

Based on the results of calculations made in table

above, the total value of IFAS obtained for patchouli

farming is 2.94 consisting of a strength score of 1.85

or (64.92%) with the highest strength score of 0.48,

namely the quality of Aceh Patchouli and the score

weakness of 1.09 or (35.08%) with the lowest

weakness factor score of 0.17, namely limited

cultivation land. Therefore, by paying attention to

existing strengths and weaknesses, Nilam farming

ICOSOP 3 2019 - International Conference on Social Political Development (ICOSOP) 3

196

still occupies a strategic position that is strong

enough to continue to be developed because the

strength factor is more dominant than the weakness

factor.

B. EFAS Matrix Analysis (External Factor Analysis

System)

Based on the results of calculations made in the

above table, the total value of EFAS for patchouli oil

farming is 3.04 consisting of an opportunity score of

1.75 or (59.23%) with the highest chance score of

0.45, namely market opportunity and threat score

1.29 or (40.77%) with the lowest threat factor score

of 0.12, namely the price game by collectors. Noting

the opportunities and threats, patchouli oil farming is

still in a strategic position to continue to be

developed because opportunity scores are more

dominant than threat scores.

Table 5.

External factor analysis system (EFAS).

4.2.4 Alternative Decision Making Strategies

in SWOT Analysis

Based on the assessment of IFAS (Internal Factor

Analysis System) and EFAS (External Factor

Analysis System) conducted on the patchouli farmer

business development strategy in Meranti Tengah

Village, an average IFAS score of 2.94 with a

strength score of 1.85 or (62.84%) and the weakness

value is 1.09 or (37.15%) while the total EFAS

average is 3.04 from the opportunity value of 1.75 or

(57.57%) and the threat value is 1.25 (42.43%) . To

find out the business development based on the

assessment of internal and external factors, a

reduction is made between the number of strengths

and weaknesses in the X-axis, and the reduction

between the number of opportunities and threats for

the (Y) axis, then the value, X = (SW) = 1.85 - 1.09

= 0.76 and the value of Y = (OT) = 1.75-1.29 = 0.47.

Thus obtained figures on both axes (X and Y =

0.76 and 0.47 which are positive for the

development of patchouli oil farmers in Meranti

Tengah village, for more details can be seen in

Figure 3.

Figure 3: Alternative decision making strategies in SWOT

analysis.

The results of data analysis in the SWOT

diagram obtained coordinates 0.47; 0.76 which

coordinates are in quadrant 1, which is an aggressive

strategy. This strategy is a very favorable situation.

Patchouli business development has strengths and

opportunities that are united and mutually

supportive, that is by using the all power factor to

take advantage of existing opportunities. It can be

concluded that the results of the SWOT analysis of

the development strategy of Patchouli Oil Farming

in Meranti Tengah Village obtained IFAS value of

2.94 and EFAS value of 3.04 and the right strategy

in the patchouli farmer business development

strategy is an aggressive strategy.

5 CONCLUSION

There are five external strategic factors that become

opportunities and threats for patchouli farmers. The

factors that become the dominant opportunity for

patchouli farmers are increasing demand for

patchouli oil, transportation access, close marketing

channels, market opportunities, availability of vacant

land. Whereas the dominant threats are pests and

diseases, competition, high farm costs, lack of

patchouli support institutions, and game prices by

collectors.

The strategy that can be used by Patchouli Oil

Farming in Meranti Tengah Village obtained from

the SWOT analysis is an aggressive strategy, a

strategy that allows this business to continue to

Strategy for Business Development Patchouli Farmers in Meranti Tengah Village, Pintupohan Meranti District, Toba Samosir Regency

197

develop its business, increase growth, expand and

achieve maximum progress. The facts found are

related to patchouli planting patterns which are

carried out without clear measurements, inadequate

use of technology and machinery so that farmers'

yields have not been able to be consistently

improved. Besides that, the role of the government

was apparently not so significant and real in

distributing assistance in the form of socialization,

education or capital assistance for patchouli farmers

in Meranti Village. This is an irony considering that

Patchouli is a very valuable export commodity and

Indonesia's status as a State supplying 90 percent of

the world's essential oils, but the government has not

really focused on the supervision and guidance of

patchouli farmers in remote areas such as in Meranti

Tengah Village.

ACKNOWLEDGEMENT

This research is a Young Lecturer scheme research

funded by the Universitas Sumatera Utara through

the program of TALENTA USU 2019.

REFERENCES

Anoraga, P., 2007.Pengantar bisnis: pengelolaan bisnis

dalam era globalisasi. Jakarta: Rineka Cipta. 2002.

Koperasi, Kewirausahaan, dan Usaha Kecil. Jakarta:

Rineka Cipta.

Goldworthy and Ashley, 1998. Australian public affairs

information service, APAIS. Australia.

Kolo, H., 2016. Strategi pengembangan usaha biskuit

jagung di kelompok wanita tani lestari Desa Subun

Tua'lele, Kecamatan Insana Barat, Kabupaten Timor

Tengah Utara,Jurnal Agribisnis Lahan Kering, ISSN:

2502-1710

Kurniawan, H., 2017. Analisis strategi pengembangan

usaha minuman sari buah sirsak, Jurnal Teknologi dan

Manajemen Agroindustri, 6(2), 97-102.

Poerwandari, K., 2007. Pendekatan kualitatif. Jakarta.

Universitas Indonesia

Rangkuti, F., 2010. Strategi promosi yang kreatif dan

analisis kasus integrated marketing communication,

Gramedia Pustaka Utama. Jakarta.

Suryana, 2006.Kewirausahaan pedoman praktis: Kiat dan

proses menuju sukses,Penerbit Salemba. Jakarta, 3

edition.

Silalahi, U., 2009. Metode penelitian sosial, PT. Refika

Aditama. Bandung.

ICOSOP 3 2019 - International Conference on Social Political Development (ICOSOP) 3

198