Market Conduct and Derivative Product Development of CPO and PKO in Solok City, Indonesia

This study is to analyze the relationship between market conduct and product development. The research is focused on the case of CPO and PKO derivative product development. The research question is that whether market conduct support or not the development of CPO and PKO derivative products in Solok City? For this purpose, there are six aspects are necessary to be analyzed: (i) by using time series data (2010-2018), the hypothesis testing of price relationship equation between the dependent variable, i.e: Pp which is considered as the realization of buying price of FFB at the farmer’s level, with several related independent variables. The results show that each parameter coefficient of independent variables marked by positive sign and smaller than one, except for ETC parameter coefficient which is marked by negative sign and smaller than one. Those facts indicate that there is a big possibility of opportunity opened for creation and development of derivative products of CPO and PKO; (ii) by calculating RCA indices of CPO (2004-2018), the finding is RCAs>1 in average which implies that the development of CPO derivative products has a comparative advantage. (iii) the LQ values for most of business fields and industry in forming GRDP of Solok City is in average greater than 1 (one) which implies that market opportunities are opened for those sectors to be developed as the engine of mover economic growth of the regions. (iv) HDIs of Solok City (2014-2018) are in average equal to 77.00. (v) the palm oil industry tree shows that there are many possibilities of creating and developing CPO and PKO derivative products. (vi) the location of Solok City is quite strategic as the center for industrial derivative product development of CPO and PKO in Sumatra. All findings confirm that the existing condition of market conduct supports the development of CPO and PKO derivative products industries in Solok City.