The Financial and Economic Feasibility Analysis: A Value-Added Approach

Authors

  • Sahri Economics and Development Studies, Faculty of Economics and Business, University of Mataram, Indonesia
  • Tajidan Master's Program in Agribusiness, Faculty of Agriculture, University of Mataram, Indonesia
  • Lalu Sukardi Master's Programs in Dry Land Agriculture, University of Mataram, Indonesia
  • Fahruddin Soil Science Study Program, University of Mataram, Indonesia
  • Candra Ayu Agribusiness Studies Program, Faculty of Agriculture, University of Mataram, Indonesia
  • Syarif Husni Agribusiness Studies Program, Faculty of Agriculture, University of Mataram, Indonesia
  • Zulkifli Informatics Study Program, Faculty of Engineering, University of Mataram, Indonesia

DOI:

https://doi.org/10.1229/tecempresarialjournal.v17i2.65

Keywords:

Key account management performance, stochastic frontier analysis, ready-made garments industry, Bangladesh

Abstract

The author introduces value-added analysis as a novel analytical method for assessing the financial and economic feasibility of business activity to broaden knowledge. Using the value-added analysis method in the feasibility analysis is based on the presence of elements of revenue and consumable costs in the calculation of added value without considering the amount or wages and profits. So, if the added value exceeds the labor wages, the entrepreneur makes a profit. Through a case study in tobacco farming, the author demonstrates that the value-added approach can be used to analyze financial and economic feasibility and is equipped with ready-to-use applications. The research was carried out on 30 Kasturi tobacco farming units spread across three sub-districts in the West Lombok Regency, namely Sekotong, Sheet, and Gerung District, from May to July 2022. The financial feasibility analysis results show that the added value of musk tobacco farming is Rp. 33,820,555/llg, which is greater than the labor wage of Rp. 20,800,800/llg, while the economic feasibility analysis result shows that the added value of musk tobacco farming is Rp. 25,656,000/ha, so musk tobacco farming is feasible. The feasibility analysis results using the added value approach are consistent with the B/C ratios analysis, greater than 1.06, e.g., 1.5175, and 1.7619.

References

. Food and Agriculture Organization (FAO). (2022). Crops and livestock products. FAOSTAT. https://www.fao.org/faostat/en/#data/QCL/visualize

. Directorate General of Secondary Crops. (2022). Tobacco Production by Province in Indonesia. Directorate General of Secondary Crops, Jakarta. https://www.google.com/search?q=production+tobacco+according+province+di+indonesia

. Diela, T. (2016). Indonesia to Raise Excise on Cigarettes by 10.5% Next Year, September 30 2016. https://jakartaglobe.id/context/indonesia-raise-excise-cigarettes-10-5-next-year

. OEC. (2022). Raw Tobacco. The Observatory of Economic Complexityp. https://oec.world/en/profile/hs/raw-tobacco

. World Health Organization (WHO). (2020). Raising Tobacco Taxes and Prices for a Healthy and Prosperous Indonesia. Retrieved from https://apps.who.int/iris/bitstream/handle/10665/336149/9789290227748-eng.pdf

. Singha, R., & Kanna, S. Y. (2022). Tobacco Farming, Addiction, Promotion of Gender Equality, Well-being and Monopoly of the Indian Market. Journal of International Women's Studies, 23(5), 155–172.

. Hussain, A. K. M. G., Rouf, A. S. S., Shimul, S. N., Nargis, N., Kessaram, T. M., Huq, S. M., Kaur, J., Shiekh, M. K. A., & Drope, J. (2020). The economic cost of tobacco farming in Bangladesh. International Journal of Environmental Research and Public Health, 17(24), 1–21. https://doi.org/10.3390/ijerph17249447

. World Bank. (2017). The Economics of Tobacco Farming in Indonesia. Health, Population, and Nutrition Global Practice, In World Bank Group. https://doi.org/10.1596/28568

. Appau, A., Drope, J., Goma, F., Magati, P., Labonte, R, Makoka, D., Zulu, R., Qing Li, & Lencucha, R. (2020). Explaining Why Farmers Grow Tobacco: Evidence from Malawi, Kenya, and Zambia. Nicotine & Tobacco Research, 22(12), 2238–2245. https://doi.org/10.1093/ntr/ntz173

. Ahsan, A., Wiyono, N. H., & Veruswati, M. (2019). Comparison of tobacco import and tobacco control in five countries: lessons learned for Indonesia. UI Publishing, Jakarta. https://openaccess.city.ac.uk/id/eprint/28799/

. Sudaryanto, T., Prajogo, U. H., & Friyatno, S. (2010). Analysis of tobacco economical project in the world market and its reflection in Indonesia in 2010. Center for Socio-Economic Analysis and Agricultural Policy. Agriculture Department, Bogor, p. 22-59.

. Hasan, F., & Darwanto, DH. (2013). Prospects and challenges of Madura tobacco farming. SEPA, 10(1), 63–70.

. Sihombing, D. T., & Sumarauw, J. (2015). Analysis of Value-Added Rice Supply in Tetengesan Village, Pusomaeb District, Southeast Minahasa Regency. Journal of Research in Economics, Management, Business and Accounting, 3(2). 798-805.

. Barringer, B. B., & Gresock, A. R. (2008). Formalizing the front end of the entrepreneurial process using the stage gate model as a guide. Journal of Small Business and Enterprise Development, 15(2), 289-303.

. Berry, G., & Shabana, K. M. (2020). Adding a strategic lens to feasibility analysis. New England Journal of Entrepreneurship, 23(2), 67-78.

. Young, R. A., & Gray, S. L. (1985). Input-Output Models, Economic Surplus, and the Evaluation of State or Regional Water Plans. Water Resources Research, 21(12), 1819–1823.

. Cooke, S. C. (1991). The Role of Value Added in Benefit/Cost Analysis.The Annals of Regional Science, 25(2), 145–149.

. Scarborough, N. (2012). Effective Small Business Management: An Entrepreneurial Approach. Prentice Hall, Upper Saddle River, NJ.

. Pujaastawa, I. B. G. (2016). Interview and observation techniques for gathering information materials, Anthropology Study Program. Faculty of Letters and Culture. Udayana University, p.1—10. https://simdos.unud.ac.id/uploads/file_penelitian_1_dir/8fe233c13f4addf4cee15c68d038aeb7.pdf

. Mudjia, R. (2011). Methods of collecting qualitative research data. Postgraduate School of the State Islamic University of Maulana Malik Ibrahim Malang. http://repository.uin-malang.ac.id/1123/1/metode-pengumpulan.pdf

. Uli, I., & Lizawati, L. (2019). Environmental Observation Techniques Based on Local Wisdom in Improving Critical Thinking Ability. Journal of Indonesian Language and Literature Education, 109-117.

. Tajidan, T., Halil, H., Fernandez, E., Efendy, E., Nabilah, S., & Effendy. (2022). A cost-driven method for determining the optimum selling price in tofu production on the household-scale tofu agroindustry: A case study in Mataram, Indonesia. International Journal of Sustainable Development and Planning, 17(3), 1033-1039.

. Harsono, P. (2012). Organic Mulch: Its Effect on the Micro Environment, Soil Chemical Properties and Performance of Red Chili in Vertisol Soil Sukoharjo in the Dry Season. Journal of Horticulture, 3(1), 35-41.

. Rahardjo, T. P. (2017). The effect of plant spacing and its height on the quantity and quality of musk tobacco production. Journal of Agrotechnology: Journal of Agrotechnology and Agribusiness, 1(1), 63-73.

. Larsito, S. (2005). Analysis of the benefits of smallholder tobacco farming and relative economic efficiency according to the scale of arable land area (Case Study in Gemuh District, Kendal Regency), Masters Thesis, Postgraduate program at Diponegoro University.http://eprints.undip.ac.id/15819/1/Sigit_Larsito.pdf

. Nur, H., & Apriana, D. (2013). Competitiveness of Local Virginia Tobacco in Domestic Market Yudha. Trade Research and Development Scientific Bulletin, 7(1), 73-90.

. Tambajong, G. J., Tilaar, S., & Rogi, O. H. (2019). Correlation between land prices and building density in Malayang District, Manado City. Spatial: Urban and Regional Planning, 6(1). 24-32.

. Färe, R. and Zieschang, KD. (1991). Determining Output Shadow Prices for a Cost-Constrained Technology. Journal of Economics, 54(2), 143–155.

. Tirtosastro, S. (2004). Application of Tobacco Quality Standards in Indonesia. Perspective, 3(1), 24-34.

. Prasad, V. M. (2007). Case study of tobacco cultivation and alternate crops in India. Study conducted as a technical document for the first meeting of the Ad Hoc Study Group on Alternative Crops established by the Conference of the Parties to the WHO Framework Convention on Tobacco Control. https://www.who.int/docs/default-source/searo/india/tobacoo/india-case-study.pdf?sfvrsn=143f1fae

. Ki-HyunKim, EhsanulKabir, & AraJahan, S. (2017). Exposure to pesticides and the associated human health effects. Science of The Total Environment, 575, 525-535.

. Almeida, V., Castro, G., & Félix, R. M. (2010). Improving competition in the non-tradable goods and labor markets: the Portuguese case. Portuguese Economic Journal, 9, 163–193.

. Manpower and Transmigration Office. (2021). The minimum wage of West Nusa Tenggara Province in 2022 has been set, the calculation of the UMK is in process, 29 November 2021. https://disnakertrans.ntbprov.go.id/ump-ntb-tahun-2022-telah-deterapan-penhitungan-umk-medang-berproses/

. Ferguson, C. A., Halloran, J. H., & Nakamoto, S. T. (1991). What is Value Added? Economic Fact Sheet #14 June 1991 Department of Agricultural and Resource Economics College of Tropical Agriculture and Human Resources University of Hawaii. https://scholarspace.manoa.hawaii.edu/server/api/core/bitstreams/8f3b76cb-68ca-483e-8cae-a2a1f3ea078d/content

. Andawayanti, U., Muldianto, H., Suhartanto, E., & Soetopo, W. (2021). Analysis of Water Service CostsWith System Dynamic Methods in Jatigede Reservoir. Journal of Irrigation Engineering,12(2), 197–204.

. Valaskova, K., Nagy, M., Zabojnik, S., Zabojnik, S., & Lăzăroiu, G. (2022). LazaIndustry 4.0 Wireless Networks and Cyber-Physical Smart Manufacturing Systems as Accelerators of Value-Added Growth in Slovak Exports, Mathematics, 0(14), 1-21. https://doi.org/10.3390/math10142452

. Novizantara, A., Mulyadi, A., Tang, U. M., & Putra, R. M. (2022). Calculating economic valuation of mangrove forest in Bengkalis Regency, Indonesia. International Journal of Sustainable Development and Planning, 17(5), 1629-1634. https://doi.org/10.18280/ijsdp.170528

Downloads

Published

2022-11-09

How to Cite

Sahri, Tajidan, Sukardi, L., Fahruddin, Ayu, C., Husni, S., & Zulkifli. (2022). The Financial and Economic Feasibility Analysis: A Value-Added Approach. TEC EMPRESARIAL, 17(2), 17–33. https://doi.org/10.1229/tecempresarialjournal.v17i2.65

Issue

Vol. 17 No. 2 (2022): Tec Empresarial Journal

Section

Articles

License

Copyright (c) 2022 Tec Empresarial

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.