A Conceptual Framework for Essential Oils Marketing: A Systems Approach

Essential oils have a high economic value because of their utilities as perfumes, food flavors, and medicinal raw materials. Indonesia is one of the countries producing and exporting essential oils in the world, although the development of Indonesian essential oils industry has not been able to meet global demand. The main problem of Indonesian essential oils marketing is the fluctuating in price. Some research conducted only focus on certain factors that influence the dynamics of Indonesian essential oils prices, but no researches have integrated factors that influence the dynamics. An integrated model, in which all variables that influence the dynamics of Indonesian essential oils prices are illustrated in a relationship between variables, will help policy makers to understand the system better. This research uses a systems dynamic approach, a conceptual framework that has been developed to show various factors that have an impact on fluctuating prices of Indonesian essential oils. A causal loop diagram is developed based on literature review and statistical analysis, while regression analysis is used to validate the framework. The Causal loop diagram illustrates the reciprocal relationship between several variables that affect the dynamics of fluctuating prices of essential oils. This framework can be used as a basis for further research related to the development of the essential oils agro-industry.