Analysis on competitiveness structure, value chain and development strategy of Indonesian apparel industry

This paper aims to identify the competitiveness structure and the value chain governance pattern of Indonesian apparel industries in global value chain and also develop future strategy of Indonesian apparel industry. The research is a case study to determine the factors that enable Indonesian apparel industry to survive in global competition even hit by several problems using Cho's Nine Factor model. Although Indonesia apparel industry can survive in global competition, the growth gets slower. In order to analyze why Indonesia apparel industry is stagnant, an analysis on Gereffi's value chain model is conducted, and restricting factors are analyzed by using a system dynamics model. Unique competitiveness structure has been developing in Indonesian apparel industry, where the research shows that Indonesian apparel industry's competitiveness is caused by the movement to medium-up products. The drivers were only two out of nine Cho's factors, namely: (1) entrepreneurs; and (2) opportunities. There is one new factor that makes the movement become successful, which is (3) historical relationship based on trust. As the result of the product upgrading to medium-up goods successfully, there are two other factors that support the enhancement of the Indonesia apparel industry competitiveness, namely: (4) workers and (5) professional. While, three factors hindering competitiveness, which are (6) business environment, (7) supporting and related industry, and (8) politicians and bureaucrats, could be solved even by increasing cost. Furthermore, one factor, which is (9) domestic demand, even though it does not hinder, it does not support the competitiveness. The reason for the export stagnation is that Indonesian apparel industry only involves in lower value added activity, where the stage of involvement in value chain is original equipment manufacturing (OEM). In general, Indonesian apparel industry is not ready to perform functional upgrading to original design manufacturing (ODM) and/or original brand-name manufacturing (OBM), due to the limitation of resources. The workers and professionals are enough for OEM, but have to increase to perform funcrional upgrading to ODM and/ or OBM. The value chain governance pattern is relational. The strategies that can be done in order to promote Indonesian apparel industry are to encourage entrepreneurs to invest in order (1) to increase the capacity of workers and professionals, both quality and quantity; (2) to increase the production capacity.