DIGITAL TRANSFORMATION AND ITS IMPACT ON FINANCIAL PERFORMANCE: IN THE FOOD AND BEVERAGE SMALL BUSINESS SECTOR

Abstract

This study examines and identifies the driving factors of digital transformation towards improving financial performance during the covid 19 pandemic in the context of small food and beverage businesses located in Surakarta and its surroundings, intending to know the availability of technology, competitive pressures, and digital capability as a driver of digital transformation and shows the mediating role of digital transformation on financial performance. Quantitative research with a sample of 104 small business actors in the food and beverage sector who have adopted e-commerce and fintech in Surakarta and its surroundings with data analysis using Smart PLS 3.0 modeling. The results of the study indicate that there is a considerable impact from the availability of technology, and the adaptive ability of business actors in managing their business through a digital transformation during a pandemic. Digital transformation for small food and beverage businesses is very important in business management during a pandemic, this is influenced by the availability of internet technology, ease of internet access that reaches a wide area, and is supported by the innovation capabilities of business actors where most of them are young people whose daily life they never free from dependence on internet social media so that using it for businesses can improve their financial performance. The results show that during online business transactions using internet technology, sales turnover and profits have increased during the pandemic. Small food and beverage businesses will be encouraged to take advantage of the benefits of digital transformation as an opportunity to improve their financial performance. This study looks at the perspective of micro and small businesses in the food and beverage sector about their drive to carry out the digital transformation that impacts their financial performance during the Covid19 pandemic. The significant positive effect of digital transformation on improving financial performance shows that it is important for small culinary businesses to improve their digital skills and knowledge in business development to meet customer needs and improve performance for business sustainability.

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