Measuring the Competitiveness of Local Specialty Food Agro-Industrial MSMEs in Indonesia: Critical Factor Index and Data Envelopment Analysis Approach

Competitiveness of MSMEs in the agro-industrial sector is crucial for business sustainability, particularly under global competition. This study evaluates the technical efficiency of agro-industrial MSMEs producing yellow tofu in East Java Province, Indonesia, using Data Envelopment Analysis (DEA) and the Critical Factor Index (CFI). DEA assesses both technical and scale efficiency, while CFI identifies the critical factors that influence business performance. The findings reveal that average technical efficiency remains below optimal levels, with most firms exhibiting increasing returns to scale (IRS). CFI analysis reveals the gap between customer expectations and actual MSME operations, indicating the need for improved production efficiency and innovation. Integrating DEA and CFI offers a comprehensive view of the factors affecting MSME efficiency, and yields strategic recommendations. Specifically, MSMEs with high CFI scores but low DEA efficiency should optimize resource management, whereas those with high DEA efficiency but low CFI scores should enhance marketing and branding. This combined approach enables data-driven identification of inefficiencies and competitive gaps. The results provide valuable insights for MSME stakeholders, policymakers, and industry practitioners in designing strategies to enhance competitiveness and sustainability. Strengthening operational efficiency and aligning business strategies with market expectations are key to improving long-term resilience in the sector.