International Journal of Business Management & Research (IJBMR) ISSN(P): 2249-6920; ISSN(E): 2249-8036 Vol. 4, Issue 5, Oct 2014, 51-60 © TJPRC Pvt. Ltd.
THE EFFECTS OF START-UP CAPITAL, SUPPORTING FACILITIES AND YEAR OF ESTABLISHMENT ON THE NUMBER OF CUSTOMER VISITS TO COFFEE SHOPS IN BANDA ACEH MUHAMMAD ISA1 & HERLINA2 1
Lecturer, Department of Maths, FKIP, Serambi Mekkah University, Indonesia 2
Assistant Lecturer, Serambi Mekkah University, Indonesia
ABSTRACT The objective of this study is to observe the effects of start-up capital, supporting facilities, and year of establishment on the number of customer visits to the coffee shops. This study employed both primary and secondary data that was analyzed using multiple linear regression. The primary data was obtained using the random sampling method by interviewing 30 coffee shop owners or managers in various locations in Banda Aceh. Meanwhile, the secondary data was gathered through review of literature and documentation. Data collection was also carried out at the Integrated Licensing Service Office in Banda Aceh.This research which combined quantitative and qualitative methods shows that the start-up capital, supporting facilities, and year of establishment variables have positive effects on the number of customer visits to the coffee shops. Good management of coffee shops is crucial in order to increase the income.
KEYWORDS: Start-Up Capital, Supporting Facilities, Customer Visits, Coffee Shop Business INTRODUCTION Background of Research There were 59 coffee shops registered at the Integrated Licensing Service Office in Banda Aceh. There wereKk. Inti, Mak' nyuss, Cofee idola, Paknek coffee, Kk. Ana, Warkop desember, Grand aceh kupi, Jasa ayah, Kedai kopi dewantara, Kk. Dua saudara, Kk. Sabena, Bakso pakde atjeh post, Kupi abit, Kedai kopi jaya, Gunung salju, Kk. Berdikari, Warkop cek wan, De helsinki coffee, Mutiara cafe, Rawa sakti coffee, Ring road coffee, Jeep kupi, Zakir warkop, Canai mamak kl, O' jiel kupi, Selera baru, Warung kopi wisma kompas, Warung mutia, Haba nanggroe, Cafe sport, Kedai kopi siang malam, Warkop anugerah, Kantin gkpn, Cabeung kupi, Mutiara, Royal kupi, Kk. Mei baru, Kk. Ana, Emte kupi, Soccer club, Warkop facy, Kim kupi, Canai mamak kl, Coffee bay, Waroenk nenek, Waroenk nenek, Hendra-hendri, Sate ciribon bpba, Ayam bakar koeta radja, Ali kebab, Ie-cafe, Surabi bantai, Warung kopi geutanyoe, The real cafe, Taufik kopi, Kk. Antoni lioe, Es campur afuk, Rahmat baru, Yellow cafe. In 2012, the number of coffee shops and cafes registered at the Integrated Licensing Service Office in Banda Aceh was 56. Meanwhile, the survey showed that out of 30 samples, 3 coffee shops were opened before the tsunami and 27 opened post-tsunami. Although the number of coffee shops formally registered at the Integrated Licensing Service Office in Banda Aceh before the 2004 tsunami was small, the reality showed that a large number of coffee shops had already existed before the tsunami. The current rise in the number of registered coffee shops shows how much the scale of this type of business has escalated.
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Number of Population and Unemployment in Banda Aceh The rate of population growth in Banda Aceh has been rising from year to year. This consequently leads to the development of labors, labor force, not-in-the-labor force as well as unemployment. Data on population developmentcan be seen on the following table: Table 1: Number of Population in Banda Aceh2008-2012 No of No of Population Population Unemployment Growth (%) 2008 217 919 12090 2009 212 241 10071 -2,61 2010 223 446 10505 5,28 2011 228 562 8916 2.29 2012 238 784 7029 4,47 Source: Badan Pusat Statistik Provinsi Aceh 2013 Year
Unemployment(%) 11,43 9,78 11,56 8,52 7,17
The increasing number of population concurring with the slightly decreasing number of relative unemployment requires well-developed private sectors to support the economy. Senior high school graduates make up the biggest part of unemployment rates in Aceh. One of the ways to tackle unemployment is through entrepreneurship development. Coffee shop business contributes to labor absorption as well as to regionally-generated income by means of income tax and parking retribution, as mentioned in the research by Zahara (2014). Problem, Objective and Benefit of the Research The problem of the research is how start-up capital, supporting facilities and year of establishment affect the number of customer visits to coffee shops in Banda Aceh.The objective of the research is to find out the effects of start-up capital, supporting facilities and year of establishmenton the number of customer visits to coffee shops in Banda Aceh. It is also one of the measures to understand the coffee shop phenomenon in Aceh, Banda Aceh in particular.
REVIEW OF LITERATURE Coffee Shops: Formal and Informal Sectors There has not been any consensus by experts either in economics or other social sciences on the definition of informal sector. The differences innotionregarding the concept of informal sector were caused by different points of view in terms of legal protection by government, types of business activities, and so forth. Keith Hart, a British anthropologist, initiated the term ‘informal sector’ in 1971 by highlighting the issue of work opportunity for underprivileged groups from three cities in Africa i.e., Accra, Nina, and Ghana. They were divided into the formal, legal informal, and illegal informal groups. The concept was then developed and stipulated by ILO (International Labour Organization) in the research conducted in 8 Third World cities coordinated by Sethuraman. The cities were Free Town, Lagos, Kana, Kumasi, Colombo, Jakarta, Manila, Kardoba and Campinas (Manning and Effendi, 1985:75-76). Meanwhile, Todaro (1998:332) states that the typical characteristics of informal sector include the diversity in production activities of goods and services, being of small scale, individual or group ownership of production units, massive use of labors (labor-intensive), and relatively simple technology.
Impact Factor (JCC): 4.9926
Index Copernicus Value (ICV): 3.0
The Effects of Start-Up Capital, Supporting Facilities and Year of Establishment on the Number of Customer Visits to Coffee Shops in Banda Aceh
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The emergence of informal sector was the result of dualism in economic activities in developing countries such as Indonesia, India, Brazil, Kenya, and others (Swasono, et al, 1986:33). Economic dualism is a condition in which on the one hand the economy is controlled by traditional elements and, on the other hand, by modern ones. Simanjuntak (1985:98) provides a description of informal and formal sectors. In formal sector, a company generally has a legal status, recognition and official permit, large scale operation, well-organized management and large capital. The characteristics of informal sector are: a) its business activities are usually very modest, not dependent on mass cooperation or on a tightwork division system. Therefore, the work systemin informal sector can be carried out by individuals, families, or joint ventures between some people on the basis of trust and without written agreement, b) the scale of business is relatively small. In this case, the business capital is also working capital and the sales turnover is generally small and can be done in stages, c) informal sector businesses generally have no business permits, d) working in informal sector is easier than working in other sectors, e) the rates of earnings in informal sector are generally low despite of the occasional high profits. However, due to small sales turnover the absolute advantage is also small, f) the linkage of informal sector with other businesses is very limited. Most informal sector businesses function as producers or small suppliers that caters directly to the customers, g) informal sector businesses are very wide-ranging from street vendors, food shop traders, barbers, pedicab drivers, tailors, weavers, to coffee shops traders. Informal sector businesses operate in various fields such as transportation, services, trading, and processing industries. Theories of Wages Mankiw (2001:10) states that wages constantly adjust themselves in order to create a balance between the supply and demand of labors. Wages are equivalent to the value of marginal product of labor. In general, individual wages are respectively determined by households and companies in a more specific manner. Wages or compensations are companies’ recompense for employees’ contribution to the companies and constitute the employees’ entitlement. It is the obligation of the companies to render this to the employees in return for their services. In this case, compensation can be disbursed through time-based scheme or within a fixed period of time, for example within the period of one day, one week, or one month. Employees can be recompensed by means of revenue sharingthat is a percentage of the output of their work. Compensation can also be given by means of wholesale that is determining the amount paid to the workers from the volume of the work. Munandar (2001:148) states that there are a number of wage payment systems that are included in the incentive-based wage system namely a) Time-based two-tiered wage system, b) Output-based two-tiered wage system, c) Time-based wage system with output-based incentive, d) Output-based wage system with output-based incentive e) Incentive-based wage system calculated using certain formulas. The amount of wage to be given to labors depends on the length of time that they work or the output units that they complete. Furthermore, Handoko (2000:155) states, “Compensation is everything received by the employees in recompense for their work”. Therefore, compensation is what companies recompense their employees for the work they have performed, either in the form of money or goods. This recompense is carried out within a timeframe agreed between the service providers and recipients
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Definition of Income and Business Capital Petrof (2008) explains that income constitutes the entire amount of money received by a person or household in a particular period of time. Income may come from labor wages or earnings, wealth (such as rents, interests, and dividends), as well as earnings from government such as pensions and insurance. According to the Major Labor Law, those aged 15 to 55 are considered the productive-age population. Age affects the ability to perform a job and a high level of productivity can be achieved at a certain age. Differences in skills and working experience will affect the speed in completing tasks which will eventually affect earnings/wages. In other words, the level of income earned is determined by the investment of human capital within a person. The wage levels can be improved by investing in human resource. Working experience or the length of time someone has run a business will affect his/her expertise and competence in performing the work. The longer he/she does an activity, the more accomplished he/she gets in that particular field. The length of time in which someone runs a business correlates to the material and non-material profits as well as to the required skills. Dependents are one of the factors that will motivate someone to work in the hope that he/she will reap rewards from his/her contribution. In general, the more family dependents one has, the harder one works. Classical economists contend that being unproductive leads to low income. Therefore, resolving this issue requires productivity improvement through education, training of skills (working competency) and capital. Capital is one of the very important factors for individuals to start a business. Capital can be obtained from savings, loans, joint ventures, and bank credits. Previous Studies In 1981, Moir (Chandrakirana and Sadoko, 1995:89), in a research on informal economy in Jakarta concludes that the informal sector contributed 30 percent or about 400 millions from the total of Jakarta’s regional income. Meanwhile, the study by Rayeuk, et al (1992) on the impacts of informal sector in economic development showed that the informal sector has a number of effects: a) increasing the regionally-generated income, although in small amount, b) improving the standards of living of the communities working in the informal sector, c) expanding the market and product distribution of the communities in Banda Aceh. According to Idris (1998), duration of business is a dominant variable affecting the level of income of migrant women in informal sector in Palembang. Experience and duration of business are positively related to the levels of income. The result of this research proved that migrant female workers of informal sector who have worked longer have higher income. On average, a difference in every one year working experience will result in a difference in income by Rp. 15,000 per month. This means that the higher the level of expertise and skills of a worker, the more experience and the higher level of income he/she gets. Also, a research conducted by Leonard A.H.S (2002) proved that the capital variable has a positive impact on the income of coffee shops. This research is similar to the previous studies in terms of the methodology used whereas the time and locations are different.
Impact Factor (JCC): 4.9926
Index Copernicus Value (ICV): 3.0
The Effects of Start-Up Capital, Supporting Facilities and Year of Establishment on the Number of Customer Visits to Coffee Shops in Banda Aceh
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METHODS OF RESEARCH Research Locations and Respondents The population of the study was all popular coffee shops in Banda Aceh. Banda Aceh was the focus area because it is both the capital of the Province of Aceh and the center of economic growth. This city houses the largest number of coffee shops compared to other places. There were 59 coffee shops registered at the Licensing Service Department in Banda Aceh. The research data consists of primary and secondary data. The primary data was obtained through interview, questionnaire and observation. 30 coffee shop owners or managers were interviewed and given questionnaire. Observation was also conducted in the coffee shopsThe secondary data was gathered through review of literature and documentation. The Licensing Service Department of Banda Aceh was one of the sources of the secondary data. Method of Data Analysis Multiple linear regression coefficients are used to see the relationship amongst variables using the following formula: +
Y=
+
+
+
+
+
+e
Where Y = Number of customer visits to the coffee shops = Constant = Business Capital = Facilities of Business : TV = WI FI = Praying room = Toilet = Year of Establishment ,
,
,
,
= Coefficients
e = Error
RESULTS AND DISCUSSIONS Characteristics of Coffee Shop Owners in Banda Aceh From the point of view of education, income does not have a huge impact on the number of customers. Therefore, the income of the coffee shops may still be increasing. What gives impacts is the time length of the business. The longer these traders run their business the more practical knowledge they gain, and the more capable they are to overcome each rising problem. These coffee shops are also equipped with supporting facilities such as toilets, praying rooms, televisions, and wi-fi.
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Table 2: Characteristics of Coffee Shops Based on Facilities
Table 3: Characteristics of Owners/Managers Based on Education
On average, owners or managers of coffee shops in Aceh are men. The sample only has one coffee shop managed by a woman. The income of this particular coffee shop has not reached the daily target of sales. On average, this relatively new coffee shop makes Rp. 900.000 daily. The educational background of most owners or managers is senior high school, and only 7 of them went on to a higher level. The Effects of Business Capital, Supporting Facilities and Year of Establishment on the Number of Customer Visits to Coffee Shops Start-up capital, supporting facilities and year of establishment are partially significant variables to the customer visits to the coffee shops. Table 6 shows that the number of customers is simultaneously influenced by start-up capital, facilities available at the coffee shops (TV, WiFi, toilet, praying room), and year of establishment (duration of business) of the coffee shops. This is indicated by the F Change of 5,623 which is bigger than the F Table or showed by the Sig. F Change of 0,003 < 5%. Table 4: Summary Model
Impact Factor (JCC): 4.9926
Index Copernicus Value (ICV): 3.0
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The Effects of Start-Up Capital, Supporting Facilities and Year of Establishment on the Number of Customer Visits to Coffee Shops in Banda Aceh
The value of regression coefficient of 0,678 indicates that approximately 67, 8% of the visitors is influenced by the start-up capital, duration of business (experience of coffee shop business), as well as available facilities. Whereas about 32,2% of visitors is influence by other factors not included in the model. Table 5: ANOVA Model Sum of Squares df Mean Square F Sig Regression 974592,016 6 162432,003 5,623 0,003 1 Residual 462201,463 16 28887,591 Total 1436793,478 22 a. Dependent Variable: number of customers b. Predictors: (Constant), start-up capital, tv, toilet, praying room, duration of business, wi-fi Table 6: Coefficients
If partially viewed, each variable is different and only start-up capital affects the number of visitors significantly. The explanation for this is that with large start-up capital, coffee shops can buy/rent a large space to fit more visitors. The other supporting facilities in each coffee shop do not significantly affect the number of customer visits Efforts to Improve Coffee Shop Income A number of strategies selected by coffee shop traders to improve their income include maintaining the cleanliness, comfort, and the facilities, adding more varieties of food, as well as increasing the business capital. Improving entertainment facilities is also a strategy to increase coffee shop income.The fact that Aceh lacks of recreational places is duly noted by the coffee shop owners or managers. Thus, some coffee shops provide frequent band performances which multiply their profits. One kilogram of ground coffee can be made into 70 cups of coffee. Paying only Rp 4,000 for a cup of coffee, the customers can spend as much time as they want. Some coffee shops even open 24 hours. There are some advantages and disadvantages of 24 hours coffee shops. There is a coffee shop on Iskandar Muda Street, the only one that opens 24 hours. As it is located near the Maternity and Children Hospital, a great number of patients and their families come to the coffee shop to get food and drinks. There was a maternity patient who needed coffee and egg shake believed to enhance the stamina. Tourists en route to Sabang sometimes spend their time enjoying relatively good coffee in this coffee shop. The disadvantage of coffee shops is related to the lack of recreational facilities. The coffee shops are turned into a place to hang out for a lengthy time. The internet availability becomes an entertainment facility.It is up to each individual to focus on the advantages or disadvantages, for example how to control his/her online gaming hobby. www.tjprc.org
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Based on the study, one strategy to increase the income of the coffee shops is to improve or maintain good management of their business. Business capital is also crucial in order to improve the coffee shop facilities. The overly long period of waiting for service shows that recruitment of additional waiters or cashiers is required, especially in several large-scale coffee shops. A crowd of customers served by a single cashier will turn to other places with faster services. Televisions and screens to watch football matches have become one of the strategies used by the coffee shops to increase their income. They are aware that their customers like watching football matches and that they need a place to do that. This phenomenon brings profit to the coffee shops.The same thing applies with music entertainment. Maintaining the quality of service (i.e. Hospitality towards the customers) is required because each coffee shop has its own loyal customers who are familiar with the employees.
CONCLUSIONS AND SUGGESTIONS Start-up capital, supporting facilities, and year of establishmenthave positive impacts on the income of coffee shops in Banda Aceh. Therefore, the strategy to increase the income is by increasing business capital to be used for maintaining and enhancing the quality and service.In addition, social media such as Facebook, Twitter, and so forth constitute a promotional tool for these coffee shops apart from word of mouth. By offering their products on the internet they will increase their income from the sales of ground coffee or coffee-themed paraphernalia. All of these are executed within good management.
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Impact Factor (JCC): 4.9926
Index Copernicus Value (ICV): 3.0
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