72 LPPM - Universitas Narotama ISSN : 2594 - 4777 (Online) 2597 - 4742 (Print) https://jurnal.narotama.ac.id/index.php/scj/index The Spirit of Society Journal International Journal of Society Development and Engagement The Spirit of Society Journal Volume 6, Number 1 September 2022 Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia Che Zalina bt Zulkifli1, I Putu Artaya2*, Wasana Boonsong3,Sengguruh Nilowardono4 1Universiti Pendidikan Sultan Idris Malaysia, 2,4,Universitas Narotama Surabaya Indonesia, 3Rajamangala University of Technology Srivijaya Songkhla Thailand. Correspondent author: putu.artaya@narotama.ac.id2 chezalina@fskik.upsi.edu.my1; Awasana.b@rmustsv.ac.th3; sengguruh@narotama.ac.id4 Abstract: The main purpose of this research is to see or position the region in East Java, especially micro-enterprises by segmenting their products. There are five effective areas in East Java which are well-known centers of micro-enterprises, i.e Mojokerto, Pasuruan, Malang, Gresik and Lumajang with their local wisdom products. There are 160 micro business actors in the five regions of East Java. Where their products have the opportunity to be developed into mainstay products in the province of East Java. Based on the results of the Categorical test, an overview of the test results is obtained, i.e: for micro- enterprises in Malang and Gresik they have the same character (dimension 1, i.e: innovation, product attractiveness, product originality, raw materials and environmentally friendly) both management and products so that because they have similarities , the two regions deserve to develop a joint business in a sales network. As for dimension 2 (selling value, market value, quality and market opportunity) micro- enterprises in Pasuruan, Malang and Gresik can form a group together in the sales network in facing market opportunities and increasing sales. Whereas micro-enterprises in Lumajang city (are in a neutral segment (not dimension 1 and not dimension 2), micro-enterprises in Lumajang district may compete with four other cities in fighting for market opportunities, both locally and globally because in the Categorical test the position of micro-enterprises Lumajang is categorized as having a special character and is different from the other four cities, i.e Malang, Gresik, Mojokerto and Pasuruan, so that only micro-enterprises in Lumajang district may not participate in the sales network. Keywords: micro business, sales network, categorical test INTRODUCTION The local government in an effort to improve the competitiveness of micro-enterprises in the global market, has made various real efforts, such as the Pasuruan district government. By launching the application for the Center for Strategy and Economic Services for Maslahat or known as Satrya Emas. In the Decree of the President of the Republic of Indonesia Number 61 / TK / 2017 concerning the Awarding of the Satya Lencana Development Honors, it is stated that the Pasuruan district has a high commitment in alleviating poverty, unemployment, and consistency in facilitating capital, exhibitions, and BDS (business development service) assistance by micro business innovation clinics, partnerships, and equipment grants, internships and technical guidance provided as stimulants or drivers of increasing micro business turnover. Until now there are about 4800 micro-enterprises in Pasuruan city, to realize healthy micro-enterprises and have competitiveness in the free market (MEA), one of the paths taken is that existing micro-enterprises must become members of cooperatives, and until now it's around 950 cooperatives that are still active as a forum for the development of micro business activities. The Satrya Emas program has an important role in introducing and promoting micro business products so that they can enter the free market. This program is considered effective because Pasuruan benefits from its position in the golden triangle area which has considerable economic and investment potential, this is a distinct advantage for the district in developing micro-enterprises in the future. https://jurnal.narotama.ac.id/index.php/scj/index mailto:putu.artaya@narotama.ac.id2 Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 73 The Spirit of Society Journal Volume 6, Number 1 September 2022 Unlike the case with Pasuruan district, in Mojokerto district until April 2018 there were around 155,354 micro-enterprises, the classic problem faced by micro-enterprises in Mojokerto is access to marketing and capital which is still relatively weak. Meanwhile, these two factors are still hampering the strength and ability of micro-enterprises in Mojokerto in facing free market competition. To revive the activities and competitive advantage of micro-enterprises in the city, the government's focus is more focused on fostering micro-enterprises through CSR programs from state-owned enterprises and the private sector. As for Gresik district, up to now there are 186,000 micro-enterprises, of which almost 70% of micro-enterprises in Gresik have been able to enter the international market. However, the weaknesses that are still an obstacle for Gresik Regency in developing the strength and competitiveness of micro-enterprises are product standardization, intellectual property rights and the use of technology. Discussing the competitive strength of micro-enterprises in an area is something that cannot be ignored because every year, micro-enterprises are enough to make no small contribution to the growth of gross domestic product. With the start of the era of free competition and the implementation of more open market mechanisms between countries such as AFTA and MEA, creating a competitive advantage for micro-enterprises cannot be ignored anymore. Micro-enterprises in Indonesia must have a competitive edge that is balanced with foreign micro-enterprises that have started to market their products to Indonesia. At least with a comparative advantage, Indonesian micro- enterprises are able to exist in the international market. Literature Review Strategy is an action plan that aligns organizational resources and commitment to achieve superior performance. Competitive/comparative advantage is a benefit that when a company owns and produces a product and or service that is seen from its target market is better than the closest comparative. According to Zaman (2014) the basis for achieving competitive advantage, a micro- enterprise must be able to recognize various basic elements to achieve this advantage, these elements include: 1. Price or value: An entrepreneur who is able to produce low-cost products or services so that the strategy in setting prices (not too high compared to competitors' products/services). If able, it can be added that the product or service has more value (value) compared to the value of competitors' products or services. Thus, our products/services have advantages in terms of price and value. Customers who are sensitive to price, usually the difference in the price of only Rp. 1000 with a competitor's product or service will be a consideration in buying a lower price product. 2. Pleasing consumers: The second advantage that must be pursued so that products/services can compete with competitors is to strive for products or services to please consumers. Pleasant from various aspects, such as the quality of products / services that are quality and provide satisfaction. For example: satisfactory service, satisfactory communication, and without complaint or at least if there is a complaint, it is immediately responded to or not delayed. 3. Consumer experience: good or bad experiences that we convey and those experienced by a consumer, generally will be an important record (often sticks for life). For that, provide the most pleasant or satisfying experience for the stakeholders. The more so for consumers. An experience that is more memorable for all time, and is often issued to consumers' friends. Vice versa, bad experiences will quickly spread by word of mouth to friends and closest neighbors. In order for our products or services to be superior, apart from the point of view of price, value, pleasing consumers, provide the best possible experience to consumers. 4. Recordable product attributes: The following advantages that must be achieved by an entrepreneur are that all product/service attributes attached to it must be recorded. The benefit of product/service attribute records is that products/services can be improved from pre-existing attributes, at least all product/service attributes can be introduced not only to consumers but also to our employees or Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 74 The Spirit of Society Journal Volume 6, Number 1 September 2022 waiters. Thus, both consumers and our employees or waiters are able to recognize all the attributes of our products/services so that nothing is kept a secret (no ambassadors or lies between us so that consumers do not feel cheated either intentionally or not. 5. Unique service features: if the four elements have reached a superior position, what is no less important is how the unique service features can be displayed. A good example, you can see how privileged the services provided by Singapore airlines are. Then the services that we can note include, even though the plane is not or has not been full of passengers or publics, but if the flight schedule shows the same number as the number listed on the ticket for all take-off schedules, then Singapore airlines never delays flight schedules. Micro Business Network Strengthening Factors As stated by Sunyoto (2015) in developing micro-enterprises, the approach in creating competitive advantage is absolute and important, because there are several important factors that must be owned by micro-enterprises in order to easily enter the ASEAN free market, i.e: 1. Product quality: several local and free market segments abroad, since 2015 have required product quality assurance according to manufacturing standards to ensure that the product has a guaranteed health value, is environmentally friendly and is not contaminated. Some of these requirements must be met by micro-enterprises in Indonesia so that their products can be well received in the destination market. The specifications of the products produced are also in accordance with the demands of foreign customers, this factor must be gradually fulfilled by all micro-enterprises who need an open market when their exports are carried out to the destination country. 2. The urgency of product packaging: everyone already understands that entering the free market with the aim of countries in the Asean region is not easy, but there is one determining factor for the acceptance of local products in their markets, i.e the guarantee of the hygienic value of the packaging used to guarantee product quality at a certain level . Many local products are less successful in the Asean market due to quality and packaging guarantees that do not meet the demands of foreign markets so they cannot compete with products from neighboring countries. This means that in the future, micro-enterprises must understand and be willing to change and adjust their product packaging according to the specifications desired by foreign markets. 3. Strength of collaboration, another factor that triggers the strength of competitiveness of micro- enterprises is cooperation in a certain form as a forum and means of product development and joint business between local micro-enterprises and foreign micro-enterprises, i.e exchanging commodity products to fulfill potential and power of consumers in each country. For example, the patterns and motifs of West Java and East Java textiles are highly favored by consumers in Asean countries, but on the other hand, traditional textile businesses in Java require good raw materials from several ASEAN countries. With this model, a common market is established in the form of a sales network between local and foreign micro-enterprises (Soekiman, 2018). Strengthening the Advantages of Micro Business Networks One of the urgent consequences that micro-enterprises must be ready to face in the MEA era is the increasingly tight financing and capital factors sourced from the banking world, this is important because the business sector is very closely related to injections of funds to increase capital, production capacity and product development. Based on the agreement, the MEA frees up the flow of goods, services, labor, money, and investment between countries in the ASEAN region. Indonesia and nine other ASEAN countries have the same opportunity to take advantage of an integrated market in one region. Because it has been implemented, there is no other choice for people in ASEAN countries, including the business world, both large and micro, small and medium business segments, other than having to be ready to face the ASEAN open market. Access to finance is the most discussed issue in Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 75 The Spirit of Society Journal Volume 6, Number 1 September 2022 the development of micro-enterprises. Micro-enterprises are often in a competitive position in seizing financing from financial institutions. From the banking institutions, they prefer entrepreneurs who meet the criteria for granting credit and have a track record. Meanwhile, from the side of micro-enterprises, the problems start from the lack of literacy, management ability, limitations in preparing financial reports, minimal business capacity, to the absence of credit guarantees. The survival of micro business actors will be determined by the market, and with its various limitations, it will certainly be difficult to compete with business actors who are part of the global conglomerate network. This includes funding, which will depend on credit disbursement by commercial financial institutions, which understand the data of large companies better than micro-enterprises. The temporary measure that has been taken is that the government creates a People's Business Credit (KUR) program whose interest rate this year is reduced to 9% to help the micro sector. The government and the Financial Services Authority (OJK) also want to encourage banks to lower their commercial loan interest rates to stimulate the business world. The decline in loan interest rates is certainly positive because it will reduce risk and increase credit demand. Reducing risk and increasing credit volume will have a chain effect, such as increasing the capacity of guarantee companies to support financing, especially micro-enterprises, to increasing the competitiveness of the business world to face open competition (Apriyani, 2016). Creating a Common Market for Micro Enterprises The meaning of the common market in the era of global competition (Keegan, 2006) is a single market that seeks to guarantee the free movement of goods, capital, services, and people without having to be restrained or restricted by restrictive regulations. The main purpose of the common market is to make the movement of commodity exchange between countries conducive to increasing competition, increasing specialization, expanding economies of scale, enabling goods and factors of production to move to areas where consumers have the most value and need, thereby increasing the efficiency of resource allocation. It is also intended to promote economic integration where the economies of previously separate member states become integrated into a broad economy such as the common market of the European Union. Half of the trade in goods in the free market is covered by legislation harmonized by the countries involved. The creation of the internal market as a single market is a continuous process, with service industry integration still containing gaps. The free market also has an international element, where the free market will later become the single market in international trade negotiations and transactions. Stimulants in Creating Opportunities for Micro Enterprises According to Stiekia (2016), the factors that drive the creation of marketing and micro-enterprises in the common (global) market are as follows: 1. Technology: Technology is a means to provide goods needed for human comfort and survival. The use of technology by humans begins with converting natural resources into simple tools. Technology is a universal factor, not limited to countries and cultures. When a technology is developed, the product released by the company will soon be available worldwide. Examples of technologies that give rise to true global marketing are: Information and Communication Technologies such as the Internet, Satellite Impressions, and World Television Networks. 2. Regional Economic Agreements: The number of multilateral trade agreements (Big Power Trade Agreements) has accelerated the steps of Global integration. Examples are NAFTA, GATT, and MEA. 3. Market needs: Market needs and economy can be driven by knowing the needs of the market being served. The same market needs can be met with a global approach. For example: food and soft drink needs, investment needs, tourism needs and others. Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 76 The Spirit of Society Journal Volume 6, Number 1 September 2022 4. Improved transportation and communication: Improved transportation and communication can eliminate time and cost barriers associated with distance and also make it easier to travel and deliver goods between countries. 5. Product Development: Cost Product development is an impetus to enter the global market that requires a very large investment or injection of funds and a long period of product development, for example the pharmaceutical industry. 6. Quality of resources: Quality is one of the global competition that forces companies to improve their quality. When global companies perform benchmarks in terms of quality, competitors must quickly improve their products (Budiarto, 2016). 7. World Economic Growth: which is characterized by three main things, i.e: Creating market opportunities that encourage companies to develop globally, Reducing resistance against the entry of foreign companies into the local economy, and Shifting the world towards deregulation and privatization. 8. Global Strategy: Leverage is some type of advantage that an entire company enjoys based on the fact that the company is leading the business of more than one country. There are three important things in a global strategy, i.e the transfer of experience, saving economies of scale, and resource utilization. 9. Global corporations: there are global companies that are ready and proven successful in the global market and make appropriate use of developing technology, communication and transportation. METHODOLOGY Research Location and Object Observation and data collection through interviews in five big cities in East Java, shows a significant number of developments regarding the number of micro-enterprises that are able to expand their market, initially local, now shifting to international markets. For more details, the data is presented in the form of a table below: Table 1. Micro-enterprises in five cities in East Java with their various superior products. No. City Number of Business Actors Type of Products Local Market Export Market 1. Mojokerto 31 Foodstuffs, Food Products, Semi-finished Products. Kalimantan, Sulawesi, NTT Malaysia, Thailand, Taiwan, Saudi Arabia. 2. Pasuruan 28 Plantation Commodities. Jawa Barat, Bali, Sumatera Singapore, Japan. 3. Malang 32 Plantation Commodities. Bali, NTT Saudi Arabia, Madagascar. 4. Gresik 48 Seafood Commodities. Bali, NTT Malaysia, Singapura 5. Lumajang 21 Plantation and Fishery Products. Bali, NTT, Lombok Australia Source: Results of literature review, 2022. The total number of micro-enterprises sampled in this study amounted to 160 people spread across the five cities. These 160 micro-enterprises have successfully entered the global market through their products which have a comparative advantage over other countries. Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 77 The Spirit of Society Journal Volume 6, Number 1 September 2022 Data Collection Technique The process of collecting data for study, analysis and discussion in this study uses three methods or methods, i.e. (Santoso, 2015): 1. Preliminary survey: at this stage, observations are made on commodities that are the mainstay of micro-enterprises to be traded or exported abroad in an effort to build a common market and exchange commodities with countries invited to cooperate. 2. Interviews with micro business actors: community leaders and village heads to collect important data related to the research object. Which includes the age of micro business actors, business background, target market area, concentration of products or commodities that are used as business objects. 3. Descriptive analysis: carry out mathematical calculations and analysis, regarding whether or not business actors/micro businesses are sampled in this research study, which includes the number of workers absorbed, business licensing/legality, obstacles that arise, local government contributions, regulations and regulations , regional potential, export market absorption capacity and business development opportunities with foreign parties. Research Data Analysis Model To assist the decision-making process, it takes a collection of data that has relevance to the object used as study material in research (Arikunto, 2012), so that the results of the analysis can be used as estimates in the temporary decision-making process whose interpretation is considered the closest to the truth value. The test equipment in this study uses the Categorical Test, which is a non-parametric statistical test tool that aims to find several important factors that can be used as stimulants and estimation tools in increasing the comparative advantage of micro-enterprises so that they can create a common market to penetrate the free market (Santoso, 2015). RESULTS AND DISCUSSION After conducting a categorical test on the data, it can be clearly seen that there are several dominant factors that appear in two dimensions, i.e dimension one and dimension two. In the first dimension, the more to the right the larger the number, indicating the more dominant the interaction. Whereas in the second dimension, the higher you go, the stronger the dominance of the interaction. The dominant variable can be seen or determined from the intersection of the first dimension (flat axis) with the second dimension (vertical axis). If we look at the quadrant of the data test results, it appears that there are two dominant variables, i.e global corporations and product development. This means that these two variables are the determining factors for the creation of a comparative advantage for micro-enterprises. So that with the comparative advantage in these two variables, it is possible for micro-enterprises to create a common market that is supported by several supporting forces, i.e the power of technology and global strategy (in the second dimension) and the quality of resources and variables of transportation and communication. (on dimension one). The four supporting variables, i.e technological strength, global strategy, quality of resources, and transportation and communication will strengthen the two variables above, i.e global corporations and product development as the basis for strengthening the comparative advantage of micro-enterprises in an effort to create a common market between them. Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 78 The Spirit of Society Journal Volume 6, Number 1 September 2022 Figure 1. Map showing the level of excellence of cities and micro-enterprises commodities. Figure 2. Map showing the degree of prominence of the factors associated with the commodity In Figure 1 above, if we look carefully based on the results of the Categorical test, we will see a map or quadrant that describes a position and condition that micro-enterprises located in Malang and Gresik from the perspective of dimension 1 have advantages in the field of large market opportunities for products. -their products, unlike micro-enterprises in other cities. From the perspective of dimension 1 more broadly, micro-enterprises in Malang, Gresik and Mojokerto, they all have advantages in the field of product originality or the products they produce are not the same in character as the products produced by micro-enterprises in Pasuruan and Lumajang. However, it has the same character as micro-enterprises in Malang and Gresik. Another advantage for micro-enterprises in Malang, Gresik and Mojokerto is that apart from their original products, in the sense that they do not imitate the products of other micro-enterprises, generally the products are made to have more quality according to the needs of the consumers they are aiming for and finally the products of micro-enterprises in the three districts are more affordable. have a wider market opportunity because the demand from buyers always increases every year. Based on dimension 2, the three districts have advantages of micro-enterprises, especially in the fields of: their products are full of innovation for buyers, have attractive advantages for the domestic and global markets and have superior characteristics because the products they produce are more Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 79 The Spirit of Society Journal Volume 6, Number 1 September 2022 environmentally friendly both in terms of raw materials and uses or utility. These three advantages certainly open a better market gap in the long term in the future in an effort to expand the market through sales networks. This factor should be managed better by the local government to be able to provide support for micro business products, especially sales activities and market power. Meanwhile, what is unique is (see Figure 1 above), micro-enterprises in Lumajang district, they are able to produce products with advantages in the fields of raw materials, selling value and market value. Different character with micro business products in other districts. With this special feature, it will open up opportunities for micro-enterprises and industrial micro-enterprises in Lumajang to encourage product attractiveness and expand their market in the eyes of buyers. Micro-enterprises in Lumajang are more inclined to differ in developing their products to serve their market. Different product characters but still complementary, i.e complementing each other with micro business products located in the other four districts. With the results of the Categorical test above, the opportunity to advance in developing businesses for micro-enterprises in five districts in East Java has great opportunities in the future, especially to meet the demand for products that have special characteristics in the field of micro-enterprises in general. Of course, this condition is very important for micro business actors to establish cooperation and open or build their sales network in a wider area or market area and markets that have export potential, i.e the ASEAN free market and AFTA. At the end of the discussion using the Categorical test, researchers can present data on the level of product excellence in five cities located in East Java province in the form of images and have the opportunity to form a sales network so that their market is stronger in competing in maintaining the position of the level of demand for its commodities abroad: Figure 3. The coefficient of nine factors indicating the need to build a sales network in increasing the export market Based on Figure 3 above, it shows three main factors that are urgently needed by micro- enterprises when they want to maintain and increase market share through their commodity export activities. The three main factors are (Stiekia, 2016): 1. Market demand: this figure has the highest value, which is 92.6%. This means that commodities and/or products of micro business actors should only be directed to foreign markets that have the highest level of demand among other trading destination countries. The goal is to create optimal efficiency and profitability for products and/or commodities offered in the global market. The sales network formed here is to foster and establish good communication between fellow micro business actors so that they are able to provide and share superior information when there is a market opportunity that has a high level of demand. This is the main benefit of micro-entrepreneurs forming a sales network. By sharing reliable information, none of the micro-enterprises will have the wrong goal when marketing their products or commodities. This step is able to create an efficiency and avoid losses. Zalina, C., et al, Micro Business Segmentation Using Categorical Test Approach in Supporting Sales Network in East Java Indonesia, (p. 72 – 81) 80 The Spirit of Society Journal Volume 6, Number 1 September 2022 2. The second factor is global operation, which means that in marketing commodities and products, micro business actors must be observant and precise in calculations in the form of avoiding all forms of operational costs that are unnecessary by creating transit routes for their products in several countries that are considered capable of providing benefits. optimally, this step can be realized only if the micro business actors already have a good sales and cooperation network. Without a good sales network, communication between them will not be able to run optimally in creating profits. 3. The third factor that is considered important in Figure 3 above is the transportation route for most of the commodities and products of micro-enterprises that have been tied to the sales network. Transportation is an important activity when micro business actors carry out the process of delivering products or commodities to overseas buyers safely and efficiently. Do not let the commodities and or products they send, become defective or damaged when the delivery process is carried out. If this happens, it will reduce or even eliminate buyer confidence in the target market. Maintaining the level of buyer trust is the most difficult and complicated condition if it is not supported by good infrastructure and or facilities. CONCLUSION From the results of the Categorical test, it can finally be determined that the five district cities in East Java province, i.e Mojokerto, Pasuruan, Malang, Gresik and Lumajang have the opportunity to form a global sales network and they are micro-enterprises able to maintain cooperation by emphasizing the strength of global corporations and continuous product development to increase the added value of products in each country's market. The trick is that each country must be able to measure its market potential to be used as a mainstay commodity when they enter each other's markets. Each country is consistent with each other for the flow of commodity exchanges based on multilateral regulations between them. The long-term advantage is that each country will be able to meet the needs of the market economy without having to depend on other countries. If the common market power has been formed and runs well then every country involved in the common market will have the same power in international trade with other countries that are their market destinations. This will be the advantage of a joint sales network between them. One thing that may need to be a bit careful in actual application is the factor of economic agreements between countries (micro-enterprises) involved in trading through sales networks. Because economic activity is dynamic and always changing and is strongly influenced by the supply and demand mechanisms of buyers and consumers. If the countries that are the market share are not able to keep their commitments then the sales network that has been formed will be difficult to implement transparently between them. Because after all, each country will try to maximize the so-called commodities that have their selling value in order to provide optimal economic benefits in their markets in other countries. In order for the comparative advantage of micro business actors who have joined the global market to have a positive impact in the long term, one important factor that cannot be ignored is increasing the quantity and quality of economic agreements through the sales network formed by them. Acknowledgments: The author would like to thank all stakeholders, and those who have helped, during the data collection process, the analysis process, so that this research activity can be completed properly. Conflicts of Interest: There is no conflict of interest in the writing of this article, either between fellow authors or with outside parties as research partners or other parties who contribute. 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