Adaptation and Innovation: Rejomulyo Fashion MSMES's Strategy in Facing Competition in the Free Trade Era

Abstract

This study aims to analyze the adaptation and innovation strategies implemented by fashion MSMEs in Rejomulyo, Kediri City, in facing competition in the free trade era. With a qualitative approach and a single case study, data were collected through in-depth interviews, participant observation, and document analysis. The results of the study indicate that MSMEs adapt in the form of product diversification and customization, although they are still reactive due to limited capital and information. Product innovation is carried out by combining traditional motifs and modern designs, as well as the use of alternative raw materials. However, process and marketing innovation is still limited, and the organizational structure of MSMEs tends to be informal. The main supporting factors are entrepreneurial spirit and local communities, while the obstacles include access to information, capital, and HR skills. This study strengthens the theory of dynamic capabilities and provides practical implications for the development of MSME strategies and government policies.