How to Embrace SMEs in Global Market: The Role of E-Commerce in Industrial Upgrading in the Indonesian Apparel Value Chain

Mr Muhammad Ilham Nugroho1

1Universitas Gadjah Mada, Sleman, Indonesia

Indonesian Small and Medium Enterprises (SMEs) are not prominent actors in Indonesia’s apparel export industry. It is widely known that Indonesia’s large apparel industries dominate exports to global market and global supply chains. With the presence of e-commerce, SMEs have opportunities to be competitive. This paper explores strategies for SMEs in Indonesia’s apparel industry to sell into global markets and participate in global value chains driven by the internet. The key constraints to get into global market include ability to go beyond the domestic market despite significant demand provided by large population, limited access to foreign buyers and small role played by Indonesian government. It is found that exports via e-commerce are likely to face many difficulties, still it is possible to sell their products abroad on a small scale. Global value chain framework helps to assess this emerging market. E-commerce has altered upgrading mechanisms, particularly in process, functional and end-market upgrading, which enables SMEs to get into the global market. Furthermore, the framework determines reasons why Indonesian institutional context prevent digitally-led exports from growing rapidly.


Muhammad Ilham Nugroho is a master’s student of Graduate School of International Relations, Universitas Gadjah Mada. He is currently researching the dynamics of Indonesian textile and garment industry, focusing on improvement of export perfomance and market diversification through internet for midstream and downstream industries.


The Asian Studies Association of Australia (ASAA) is the peak body of university experts and educators on Asia in Australia. Established in 1976, we promote and support the study of Asia in Australian universities and knowledge of Asia among the broader community. Our membership is drawn mainly from academics and students, but also includes industry and government Asia experts. We take a strong interest in promoting knowledge about Asia in schools and in contributing to state and Commonwealth government policies related to Asia. We provide informed comment on Asia to a broad public through our bulletin, Asian Currents, and specialist research articles in our journal, Asian Studies Review. Four book series published under our auspices cover Southeast Asia, South Asia, East Asia and Women in Asia.

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