Purpose: The purpose of this research is to develop a model that will explain the impact of
government policies to the competitiveness of palm oil industry. The model involves two
commodities in this industry, namely crude palm oil (CPO) and refined palm oil (RPO), each
has different added value.
Design/methodology/approach: The model built will define the behavior of government in
controlling palm oil industry, and their interactions with macro-environment, in order to
improve the competitiveness of the industry. Therefore the first step was to map the main
activities in this industry using value chain analysis. After that a conceptual model was built,
where the output of the model is competitiveness of the industry based on market share. The
third step was model formulation. The model is then utilized to simulate the policy mix given
by government in improving the competitiveness of Palm Oil Industry.
Findings: The model can accommodate government’s policy mix which is then optimized. The
model has been built structurally based on hierarchical multi-level system approach, while in the
process element, the subprocesses are built using VCA approach. The model can simulate
industry performance, and show that such government policy mix can improve the
competitiveness of Indonesian palm Oil Industry.
Research limitations/implications: The model was developed using only some policies
which give direct impact to the competitiveness of the industry. For macro environment input,
only price is considered in this model. Practical implications: The model can simulate the output of the industry for various
government policies mix given to the industry. The techno-economic aspect is also discussed.
Originality/value: This research develops a model that can represent the structure and
relationship between industry, government and macro environment, using value chain analysis
and hierarchical multilevel system approach.
