indonesia: country analysis (international marketing)

Country Analysis

INDONESIA

Index Content

INTRODUCTION

MARKET POTENTIAL INDEX

HOFSTEDE MODEL

PESTEL & SWOT ANALYSIS

GLOBAL COMPETITIVE INDEX

RISK ASSESSMENT

Introduction

Indonesia Map

Introduction

GENERAL ASPECTS ABOUT INDONESIA

1. Indonesia is a sovereign state in Southeast Asia & Oceania.

2. It is called an Archipelago (Group of Islands) since it comprises of 17,508 islands.

3. Population is 251 million – 4th most populous country in the world. (As of 2013)

4. Founding Member of ASEAN.

5. 1 INR = 196.46 IDR

Republic of Indonesia

CAPITAL CITY Jakarta: which is the business and governmental center

GOVERNMENTType: Independent Republic Independence: 17 August 1945 Highest Authority: People’s Consultative Assembly

PEOPLE

Nationality: IndonesianPopulation: 240.8 million: >50% under age of 29 (2010-15E annual average growth: 1.0%)Religions: Islam 86%, Protestant 6%, Catholic 3%, Hindu 2%, Others 3%

CURRENCY Indonesian Rupiah (IDR)

INFLATIONAverage of 5.1% in 2010; 5.4% in 2011 and 4.3% in 2012Forecasted between 3.5% - 6.1% over 2013-14

NATURAL RESOURCES Oil, tin, natural gas, coal, gold, copper, silver, nickel, bauxite, timber, fertile soils

GDP & GDP growth rate $ 878 Billion, Growth rate = 6%

About Indonesia

Sector-Wise Contribution

10.2%

15.2%

12.7%

6.6%13.5%

23.6%

10.1%

0.8%

7.3%

Services

Agriculture

Mining

Transport

Hotels

Manufacturing

Construction

Electricity

Financial Services

Economic Growth

Quarter I Quarter II Quarter III Quarter IV

2013 6.05 5.83 5.62 -

2012 6.29 6.36 6.16 6.11

2011 6.45 6.52 6.49 6.50

2010 5.99 6.29 5.81 6.81

2009 4.60 4.37 4.31 4.58

Source: Statistics Indonesia (BPS)

Indonesia’s Economic Growth 2009 - 2013 (annual percentage change)

Market Potential Index


Country Overall Rank Overall Score

Indonesia 16 34

India 9 41

Singapore 1 62

Thailand 20 30

Countries under Comparison


10

37

1 3

0

5

10

15

20

25

30

35

40

Indonesia India Singapore Thailand

Market Size

6874

86

19

0

10

20

30

40

50

60

70

80

90

100


Market Growth Rate


28 28

74

31

0

10

20

30

40

50

60

70

80


Market Intensity

77 78

66 66

60

62

64

66

68

70

72

74

76

78

80


Market Consumption Capacity


3222

80

47

0

10

20

30

40

50

60

70

80

90


Commercial Infrastructure

54 52

83

49

0

10

20

30

40

50

60

70

80

90


Economic Freedom


3 3

97

17

0

20

40

60

80

100

120


Market Receptivity

39 42

100

48

0

20

40

60

80

100

120


Country Risk

Hofstede Model

Hofstede Model - Indonesia v/s India

78

14

46 48

77

48

56

40

61

0

10

20

30

40

50

60

70

80

90

PDI IDV MAS UAI LTO

Indonesia India

Power Distance Indicator (PDI)

High score - 78

Dependent on hierarchy

Unequal rights between power holders and non power holders

Superiors in-accessible

Leaders are directive, management controls and delegates

Power centralized

Communication is indirect and negative feedback hidden

Co-workers expect to be clearly directed by boss or manager: Classic Guru-Student kind of dynamic

Individualism (IDV)

Low score of 14 - Collectivist society

High preference for a strongly defined social framework in which individuals are expected to conform to the ideals of the society and the in-groups to which they belong

Child-parent commitment

Family loyalty

Masculinity/Femininity (MAS)

Score of 46 - Low Masculine

Status and visible symbols of success important; but not always material gain that brings motivation

Position that a person holds is more important

Indonesian concept called “gengsi” – outward appearances

Strongly maintain “gengsi”- aimed at impressing and creating the aura of status

Uncertainty Avoidance Index (UAI)

Score of 48 - Medium low preference for avoiding uncertainty

Strong preference towards the Javanese culture of separation of internal self from external self

Maintaining work place and relationship harmony very important

Conflict resolution- Direct communication often seen as threatening and uncomfortable situation

Using a third party intermediary- exchange of views without loss of face, intermediary removes the uncertainty associated with a confrontation

“Asal Bapak Senang” (Keep the Boss Happy) – rewarded; no economic or status uncertainty

Global Competitive Index

Overall Ranking

Basic Requirements

Innovation &Sophistication

Factors

Efficiency Enhancers

Country Ranking

Indonesia 38

Malaysia 24

Singapore 2

Thailand 37

Basic Requirements

Country Ranking

Indonesia 45

Malaysia 27

Singapore 1

Thailand 49

Institutions

Infrastructure

Macroeconomic environment

Health and primary education

Efficiency Enhancers

Country Ranking

Indonesia 52

Malaysia 23

Singapore 2

Thailand 40

Higher education and training

Goods market efficiency

Labour market efficiency

Financial market development

Technological readiness

Market size

Innovation & Sophistication Factors

Country Ranking

Indonesia 33

Malaysia 25

Singapore 13

Thailand 52

Business sophistication

Innovation

Comparison

Overall Ranking Basic Requirements Efficiency EnhancersInnovation and

Sophistication Factor

Indonesia 38 45 52 33

India 60 96 42 41

3845

52

33

60

96

42 41

0

20

40

60

80

100

120

PESTEL Analysis

Democracy still young, however relatively stable

Political System: A work in progress owing to the Suharto era

Presidential and parliamentary elections scheduled in 2014

Corruption & bureaucracy

01

02

03

04

Political

Economic

Shielded from global economic crisis (GDP growth 6%)

Major destination for FDI in Asia

Leading exporter of high-value commodities like palm oil & thermal coal

Free-trade zones

01

02

03

04

Social

World’s 3rd largest young democracy & Muslim majority country

Transiting from lower to middle income society

Literacy rate 90.4% however quality of higher education questionable

Unemployment rate 6.25%

01

02

03

04




Unemployment rate 6.25%

High crime rate05 High crime rate

Technological




01

02

03

IT industry technological implementation

Supply chain mechanism

Allocated approximately $205 Million for R&D

Environmental




01

02

03

At high risk to natural disasters due to its geographical location & topography

Deforestation

Water pollution from industrial wastes & sewage

Legal




01

02

03

Judicial system opaque, incoherent, and time-consuming

Discriminatory attitude towards foreign investors

Barriers to imports & smuggling involved in exports

SWOT Analysis

Sustainable economic growth – 6%

Southeast Asia’s largest potential market

Wealth of natural resources

Strengthening Banking Sector

Diversity of human resources

Low cost labor

Tourism

Consistent development leading to considerable foreign government and multilateral support

Strengths

Weaknesses

Logistical shortcomings

Low investment rate

Raw materials exports dependent on China’s demand

Lack of infrastructure

Persistent corruption & lack of transparency

Poverty accentuation inter-ethnic tension

Opportunities

Foreign involvement is allowed

Huge growth opportunities in health, education

Emerging markets – Automobiles, consumer goods, banks, natural resources, infrastructure

Large geothermal resources – big market for alternative energy technology and equipments

Major opportunities for financial firms, construction companies and equipment providers

Threats

Corruption, bureaucratic inertia, and inconsistent and unclear regulations.

No legal protection for employers

Deficient healthcare system

Terrorism and crimes against persons and property

Indigenous groups considers foreign direct investment exploitive

Risk Assessment

Risk Assessment

Growth is strong and will be very robust in 2013

Country rating: B

Business climate rating: C

Economy is relatively closed: exports represent only 25% of GDP.

Growth is still driven by domestic demand, spurred by continuous credit growth.

Exports are expected return to growth in 2013, with raw materials benefiting from strong Chinese demand.

Inflation is expected to remain in the Central Bank’s Target Range

(3.5 – 5.5%)

Risk Assessment

The financial position remains solid but the current account balance is now in deficit

Public debt will continue to fall in 2013 under the combined effect of sustained growth and a low deficit.

Public infrastructure investment remains weak.

The trade balance suffered in 2012 from a strong import growth.

The current account balance is expected to worsen further in 2013 despite an expected export rebound.

Foreign investments, are rising sharply particularly in the sectors related to household consumption.

Banking sector continues to perform satisfactorily: high capitalization and profitability ratios, falling rate of non-performing loans.

Risk Assessment

More and more visible disagreements within the coalition

Disagreements within the ruling coalition formed after the 2009 elections are becoming more and more visible.

They impede the decision-making process and limit the government’s ability to implement structural reforms in 2013.

The anti-corruption commission brought several of the country’s high officials to justice in 2012.

Fighting corruption is a priority for President Yudhoyono.

New rules restricting foreign investment in the mining and banking sectors were announced in 2012.

References

http://globaledge.msu.edu/mpi

http://geert-hofstede.com

http://www3.weforum.org

http://www.asiarisk.com

http://globaledge.msu.edu/mpi

http://geert-hofstede.com/

http://www3.weforum.org/

Thank you for your attention!