CHALLENGES, STRATEGIES, AND ROLES OF DIGITAL TRANSFORMATION IN THE DEVELOPMENT OF MICRO, SMALL, AND MEDIUM ENTERPRISES (MSMES)

Abstract

Batam City is one of the Free Trade Zones and strategic industrial centers in Indonesia which is directly adjacent to Singapore and Malaysia, so it has great potential for the growth of entrepreneurship and Micro, Small, and Medium Enterprises (MSMEs). This research aims to analyze the dynamics of entrepreneurship in Batam City, identify the main challenges faced by business actors, and examine the strategy and role of digital transformation in encouraging the competitiveness of MSMEs. This research uses a descriptive qualitative approach with the library research method, whose data is collected from previous scientific publications, government agency reports, and policy documentation related to MSMEs in Batam City. The results of the study show that the number of MSME actors in Batam City reaches around 75 thousand business units that absorb more than 156 thousand workers, with the culinary sector as the most dominant sector. The main challenges faced include limited financial literacy and digital literacy, low access to capital, lack of business legality, and competition for similar products due to homogeneous business types. On the other hand, institutional support such as the Integrated Business Service Center (PLUT) and digital financial literacy programs have been proven to contribute to strengthening the capacity of business actors. Digital transformation, through the adoption of e-commerce, digital financial record-keeping, and online platform-based marketing, has proven to be a significant leverage factor for improving the performance and competitiveness of MSMEs in the era of the Industrial Revolution 4.0. This research recommends strengthening synergy between local governments, educational institutions, and business actors in designing sustainable entrepreneurship mentoring programs oriented towards mastering digital technology.