Implementation of Business Strategies and Its Impact on the Performance of Village Credit Institutions (LPD) in Badung Regency

Abstract— The Village Credit Institutions (LPD) are very important to the customary villages in Bali. This is because the LPDs are established to improve the economy of the village people. Among its main functions, one of LPD's function is to help provide capital for MSMEs (Micro, Small and Medium Enterprises). To maintain its continuity, the LPDs also compete with their competitors such as the BPR (Rural Bank) and Saving and Loan Cooperatives. Various strategies can be implemented to win the competition such as innovation strategy, differentiation strategy, and partnership strategy. The objective of this study is to explain the implementation of business strategies and their impact on the performance of LPDs in the Badung Regency.

The research is conducted on the Village Credit Institution in Badung Regency with a total population of 122. The whole population was taken as respondents. However, after distributing the questionnaires, only 73 questionnaires were retrieved (60% response rate). The analysis technique used is SEM based on PLS.

The research results showed that innovation strategy, differentiation strategy, and partnership strategy have a positive and significant influence on the business performance of LPDs in the Badung Regency.

The implications of the research results are LPD managers are expected to be able to provide innovative services, improve the competence of the employees and always develop partnerships with stakeholders. Furthermore, the theoretical implication of the research results is expected to enrich the theories in strategic management.

Keywords— innovation, differentiation, partnership, and business performance