Adaptive Governance and Sustainable Supply Chain Strategies to Address Market Distortion in the Seaweed Industry

Indonesia is a tropical archipelagic nation with biological conditions that support seaweed growth. Seaweed itself is a multicellular plant with a complexly differentiated thallus, is macrobenthic, and lacks true roots and leaves [1]. As a cultivated fishery commodity, seaweed plays a strategic role in national economic development. With its long coastline and favorable geographic conditions, Indonesia has great potential to become a major global seaweed producer [2, 3].

According to 2023 One Data from the Ministry of Maritime Affairs and Fisheries (KKP), total national production in 2022 reached 9,282,391 tons with a value of IDR 40.85 trillion [4]. In West Sulawesi Province, production in 2022 was 16,353 tons, a sharp decrease compared to 2021's 77,271 tons [5]. However, research with the Conservation Strategy Fund (CSF) in 2023 found potential new cultivation locations in Majene Regency, so increasing production is still very possible [6].

Based on Figure 1, the distribution of seaweed production highlights Indonesia’s significant contribution to the global market, accounting for approximately 16.2%. In 2023, Indonesia recorded export volumes of 251,071.5 tons, representing the highest level in the past decade [7]. These figures indicate the strong production capacity of Indonesia’s seaweed sector and underscore West Sulawesi’s potential as a key regional supplier, provided that effective management and appropriate policy support are implemented.

Figure 1. Seaweed production in 2022

However, the seaweed industry is not without challenges, particularly the issue of market distortion. This industry forms a complex network of business-to-business (B2B) and business-to-consumer (B2C) relationships [8, 9]. Previous research has emphasized the importance of sustainable communication and distribution strategies for a competitive, integrated MSME-based seaweed industry [10]. However, practices of market distortion appear at various stages of the process.

In this study, market distortion is conceptualized not merely as price suppression, but as a broader structural condition involving asymmetric power relations, quality manipulation, and market dependency across the supply chain. This includes practices such as underpricing by collectors, quality distortion at the production level, and unequal bargaining positions between actors. Thus, market distortion is understood as a systemic market distortion rather than an isolated pricing issue.

This distortion is evident in the practice of farmers drying their products without racks, resulting in contamination with stones and sand to increase weight. This is detrimental to the processing industry due to increased sorting costs. Meanwhile, collectors often purchase at inflated prices or make incomplete payments, exploiting capital ties with farmers. This mutual pressure creates serious problems that impact market perceptions and preferences. Perceptions are formed through the process of selecting and interpreting product stimuli [11], while preferences are influenced by social factors and benefits [12].

Previous research confirms that market distortion can influence market behavior. For example, in China, distortion on the distribution of goods resulted in inefficiencies, but market recovery through redistribution revitalized the rural sector [13]. Meanwhile, in Slovakia, suppressed agricultural land prices significantly influenced market dynamics [14]. Therefore, understanding the perceptions and preferences of both B2B and B2C markets is crucial for formulating sustainable commercial strategies for seaweed cultivation centers in West Sulawesi.

Based on the above background, this study aims to: (1) identify the dominant factors shaping market preferences in the seaweed supply chain, and (2) determine governance priorities to address market distortion through an integrated market perspective. This study does not aim to compare B2B and B2C actors independently, but rather to analyze their interconnected roles within a unified market system.

This study was conducted in West Sulawesi and South Sulawesi Provinces, focusing on seaweed farmers and firms engaged in seaweed cultivation and processing activities. A non-probability purposive sampling technique was employed to select participants with relevant experience in the seaweed value chain [27]. The sample consisted of distribution channel actors operating under both B2B and B2C schemes across two regencies in West Sulawesi and three regencies in South Sulawesi, including firms involved in export–import activities.

The total sample consisted of 120 respondents, comprising 70 seaweed farmers, 30 collectors/intermediaries, and 20 representatives from processing companies and export-oriented business units. The respondents were categorized into B2B (business actors such as processors and exporters) and B2C (farmers and local traders) segments to reflect the structure of the seaweed supply chain. Data collection was conducted over a three-month period from May to July 2024 across two regencies in West Sulawesi and three regencies in South Sulawesi.

The sample consisted of distribution channel actors operating under both B2B and B2C schemes across two regencies in West Sulawesi and three regencies in South Sulawesi, including firms involved in export–import activities. Although respondents were categorized into B2B and B2C segments, the analysis was conducted at the aggregate level to capture the integrated structure of the seaweed market. This approach reflects the interdependent nature of actors within the supply chain, rather than treating them as isolated analytical groups.

The analytical approach integrates the Analytic Hierarchy Process (AHP) and Bayesian methods to enhance robustness in decision modeling. AHP was first applied to structure the decision hierarchy and derive the relative importance (weights) of criteria through pairwise comparisons. Respondents evaluated each criterion using a standardized Saaty scale (1–9), and consistency ratios (CR) were calculated to ensure the reliability of judgments [38, 39].

Although the total number of respondents was 120, only responses meeting the AHP consistency threshold (CR < 0.1) were included in the final analysis to ensure reliability. Out of the total sample, 98 responses satisfied this criterion and were retained for further analysis. This approach is consistent with AHP methodological standards, which emphasize the importance of judgment consistency rather than large sample size. Furthermore, the use of purposive sampling ensures that respondents possess relevant knowledge and experience in the seaweed supply chain, thereby improving the validity of the pairwise comparison assessments.

In addition to the CR, several complementary consistency indicators were used, including the Geometric Consistency Index (GCI), Psi index (Ψ), Mean Relative Error (MRE), and Estimated Mean Relative Error (MRE est). GCI evaluates the geometric consistency of pairwise comparison matrices, while Psi reflects the degree of deviation from ideal judgment consistency. MRE and MRE est measure the relative inconsistency between observed and estimated pairwise comparison values. Lower values of these indicators indicate better internal consistency and reliability of respondent judgments.

To complement the AHP results, Bayesian updating was applied to refine the priority weights obtained from pairwise comparisons. This integration allows for improved estimation accuracy, particularly in conditions of limited or uncertain data [40]. The normalized AHP weights were treated as prior probabilities, while observed respondent preference frequencies were incorporated as likelihood evidence. Posterior probabilities were then calculated using Bayes’ theorem:

$P\left(C_i \mid D\right)=\frac{P\left(D \mid C_i\right) P\left(C_i\right)}{P(D)}$

where, $P\left(C_i\right)$ represents the prior weight derived from AHP, $P\left(D \mid C_i\right)$ denotes the likelihood of observed market preference data, and $P\left(C_i \mid D\right)$ represents the posterior probability of each criterion after updating.

Thus, this study adopts a mixed-methods analytical approach, combining multi-criteria decision-making (AHP) with probabilistic modeling (Bayesian inference) to capture both subjective expert judgment and statistical uncertainty in analyzing real-world phenomena [41].

The findings should be interpreted as reflecting integrated market behavior rather than segmented B2B–B2C preferences. This confirms that market distortion operates systemically across the supply chain, rather than within isolated actor groups. The research results indicate that price is the most dominant criterion influencing perceptions and preferences in the seaweed market in South and West Sulawesi. This finding aligns with previous studies that emphasized that seaweed commodities in Indonesia are highly vulnerable to global price fluctuations, as the majority is still exported as raw materials [3, 24]. The dominance of local prices in the sub-criteria (55.5%) also emphasizes that price stability at the farmer and collector levels is the most pressing issue for ensuring business sustainability.

The phenomenon of market distortion found in this study reflects pressure practices within the distribution chain, both in terms of quality and price. Unstandardized drying practices by farmers result in product contamination [16, 17], while collectors often exploit capital dependence to purchase at low prices. This situation creates structural inequities in the supply chain, similar to similar phenomena in China [13] and Slovakia [14].

Furthermore, differences in preferences between market players in South Sulawesi and West Sulawesi indicate differing market orientations. In South Sulawesi, dependence on raw material exports makes global prices a greater influence on decision-making, while in West Sulawesi, local prices are more decisive due to the direct trade linkages between farmers and collectors. This indicates the need for differentiated policy approaches that consider regional market structures, rather than uniform national price interventions.

Importantly, the empirical findings of this study primarily demonstrate the centrality of price as the dominant factor and highlight structural inefficiencies within the distribution chain. The data do not directly test the effectiveness of specific technological or institutional interventions. Therefore, the following discussion distinguishes between evidence-based findings and broader policy implications derived from the literature.

From an evidence-based perspective, the results suggest that improving price stability and addressing asymmetric bargaining power are critical priorities for reducing market distortion. Strengthening local price mechanisms and improving transparency in transactions emerge as key areas directly supported by the findings. The empirical findings of this study indicate that price dominance and asymmetric relationships between actors are the core mechanisms underlying market distortion. In this context, previous studies provide supporting evidence that institutional and technological interventions can address similar structural inefficiencies. For example, cooperative-based institutional arrangements have been empirically shown to strengthen farmers’ bargaining positions and reduce dependency on intermediaries [31], which is consistent with the observed dominance of local price dynamics in this study. Likewise, supply chain transparency mechanisms, such as traceability systems, have been found to reduce information asymmetry and improve trust among actors [30], aligning with the identified distribution inefficiencies. In terms of quality-related distortion, prior evidence demonstrates that improved processing technologies, including controlled drying systems, can significantly reduce contamination and quality manipulation practices [24].

Furthermore, international literature shows that the successful development of the seaweed industry depends on the synergy of downstream policies, technological innovation, and inclusive supply chain governance [28, 29].

Overall, this study confirms that market distortion in the seaweed industry is not solely a technical cultivation issue but also a structural problem related to market governance and distribution systems. While the empirical findings emphasize price as the dominant factor, broader strategies involving institutional strengthening and technological adoption should be explored in future research to validate their effectiveness in addressing market distortion.