ASEAN ECONOMIC COMMUNITY 2015: HOW TO IMPROVE THE COMPETITIVENESS AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES (SMEs) IN MAKASSAR, INDONESIA

The purpose of this research is to examine and analyze the effect of external factors on internal factors; external factors on competitiveness, external factors on SMEs performance, internal factors on competitiveness, internal factors on performance of SMEs, and competitiveness to small and medium enterprises (SMEs) performance in Makassar, Indonesia. Respondents are the owners or managers of small and medium enterprises (SMEs). The number of sample are 100 respondents that consists both 85 small enterprises and 15 medium enterprises. Method of Analysis used in testing hypothesis is structural equation modeling (SEM). The results shows that external factors variables which consists of government policy aspect, the role of related institutions aspect, social and cultural aspects, and information technology aspects directly and positively affect on internal factors, competitiveness and SMEs performance. Internal factors variables which consists of human resources aspects, technical and production aspects, financial aspects, and marketing aspects directly and positively affect on competitiveness and performance of SMEs. Competitiveness has positive and significant effect on SMEs performance. Thus, managers in SMEs have to use their capability and autonomy to make decisions in order to improve the performance of their firms by improving elements of competitiveness such as cost, quality, delivery, and flexibility