Palm Oil Manufactures Add Value and Its Effect in Indonesia : Report

Literature Review

TABLE OF CONTENTS
introduction......................................................................................................................................3
Identifying the problems and barriers that palm oil companies face...........................................3
Determining opportunity and threats among companies and government..................................5
Identify factors that lead to success of exporting value added products......................................7
CONCLUSION .............................................................................................................................10
References......................................................................................................................................11
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INTRODUCTION
Literature review is the most important part of any study because it consists of large
amount of information related to the study. For current study, on “how Palm oil manufactures
add value and its effect in Indonesia” different sources like journals, books and online articles
have been used. It assists the researcher to generate in-depth knowledge about the topic through
which it can effectively reach at outcome of the study. Furthermore, themes will be prepared in
accordance with research objectives which aid to produce fruitful outcome for scholars.
Similarly, current study explores all issues associated with palm oil companies. Therefore,
researcher uses several sources for reaching at the aim of the study in an effectual manner.
Identifying the problems and barriers that palm oil companies face
Palm oil is a type of edible vegetable oil which is extracted from palm fruit. It is
generally grown on African oil palm tree but in modern era it can be grown in North America,
Africa and Asia. However, Indonesia and Malaysia are two countries which export approximate
85% of oil. The palm oil sector came into demand from British Industrial Revolution. During
that time, near about 250,000 tons of palm oil was being exported annually from South -East
Asia. It has been increased to 60,000,000 tones today (Palm oil, 2016).
It can be critically evaluated that by using unsustainable measures, companies are facing
issues in their appropriate growth. Such kind of scenario affects the performance of the company
to a great extent. However, there are major issues such as habitat degradation, deforestations and
climate change which affect the palm oil companies adversely. It is well known fact that palm oil
plantation require clean or clear land or forests. Otherwise production process can be carried out
effectively. Carlson and et. al., (2012) asserted that, palm oil cost is paid in term of biodiversity
and ecosystem of country. This is because third of all mammals species in Indonesia are about to
destroyed because of unsustainable development of palm oil. Here, animals are encroached on
their habitat which has direct impact on the environment.
Furthermore, 90% of orangutan habitat destroyed in last 20 years just because of rapid
expansion of palm oil. For example, average 1000-5000 orangutans are killed every year for the
production or planting palm oil in forest. Here, the orangutan is a keystone species in ecosystem
which plays an important role in maintaining health of the same. Here, placental mammal is
essential for clean forest where after spreading rainforest seeds in Indonesia, they (seeds) grow
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when they pass through gut of an orangutan. It reflects that many species in nature are affected
by developing palm oil in South-East Asia.
Harsono and et. al., (2012) stated deforestation is another aspect which is associated with
climate change. Here, during removal of native forests several factors like burning of invaluable
timber, emission of smoke are main reasons through which Indonesia is becoming third highest
greenhouse gas emitter in the world. Furthermore, this particular sector is affecting human being
also who are living in the remote areas. Children are asked to carry huge load of heavy fruits and
they spend their time in completing all these activities. It affects them to a great extent.
Mukherjee and Sovacool (2014) argued that, Palm oil industry in Indonesia violates human
rights such as child labor. Children belong to poor family generally perform task related to
collecting fruit from plantation floor. It can be critically evaluated that even after putting too
much efforts, children get no reward for their performance.
Damayanti, Ujang and Salim (2011) sustainable operation of palm oil industry can be
effective aspect to resolve all issues faced by the companies. At this juncture, activities which
harm personnel and cause deforestation must be avoided by the organization. It facilitates in
ensuring smooth operation with increased rate of return. However, because of presence of
several issues, palm oil industry might suffer from scarcity. However, rules and regulations
imposed by government are followed by the same through which boundary is set for the
organizations. However, RSPO (Roundtable on Sustainable Palm oil) is another corporation
which generates huge income as it operates in accordance with sustainability measures.
Palm oil companies in Indonesia are facing barrier in term of information flow
concerning innovative practices. This happened because of knowledge gap among personnel
associated with the sector. It generates requirement in bringing innovation in the sector for
meeting needs of the clients in an effectual manner. Due to knowledge gap, companies are not
able to beat competition in less time span. This situation tends to affect future performance and
lowers down profitability of the same in the marketplace. Fattah and et. al., (2014) reported that
employee turnover and conflict between government legislation are also crucial barriers for
growth and development of the companies. In this regard, Sustainability training centers and
social engagement and environmental management skills can be focused to implement
innovative practices and determine long run growth of sector in an effectual manner.
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