SMEs Strategies to Improve the Competitiveness of Dairy Products in West Sumatra Province, Indonesia

Considered a side business, most dairy farms in Indonesia are small-scale farms with low productivity. Farmers tend to sell the milk produced in the form of fresh milk rather than processed products. This condition causes low competitiveness of dairy products and the difficulty of dairy products penetrating the modern market. This study aims to identify factors that determine competitiveness and formulate strategies that can be done to improve the competitiveness of dairy products. This research was conducted on dairy farms in west Sumatra Province, Indonesia. The method used was the survey method. The variables used to identify factors affecting competitiveness were based on Porters diamond model and Porters five forces model and alternative strategies were formulated based on Porters generic strategies analyzed by Analytical Hierarchy Process (AHP). Based on the results of the analysis, the factors that affect the competitiveness of dairy products are human resources, capital resources, technology, competitor advantages, and power of suppliers, thus there are five factors that determine the competitiveness of milk. Based on the research results, the highest factor affecting competitiveness is technology while the lowest value is the power of suppliers. At the actor level, cooperatives play an important role in improving the competitiveness of dairy products. Then the priority strategy that can be chosen to improve competitiveness is to do product differentiation through new product innovation.