Indonesia: Country Analysis (International Marketing)
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Indonesia is the world's 4th most populous country with over 250 million people. It has a predominantly young population and a growing economy averaging 6% GDP growth annually. While Indonesia maintains political and economic stability, it faces challenges such as corruption, lack of infrastructure development, and disagreements within its governing coalition that can hamper reforms. The country also has strong potential for continued economic growth through developing industries, tourism, and its large domestic market.
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Indonesia: Country Analysis (International Marketing)
- 2. Index Content MARKET POTENTIAL INDEX INTRODUCTION GLOBAL COMPETITIVE INDEX HOFSTEDE MODEL PESTEL & SWOT ANALYSIS RISK ASSESSMENT
- 3. Introduction
- 5. 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
- 6. About Indonesia Republic of Indonesia CAPITAL CITY GOVERNMENT PEOPLE Jakarta: which is the business and governmental center Type: Independent Republic Independence: 17 August 1945 Highest Authority: People’s Consultative Assembly Nationality: Indonesian Population: 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) INFLATION Average of 5.1% in 2010; 5.4% in 2011 and 4.3% in 2012 Forecasted between 3.5% - 6.1% over 2013-14 NATURAL RESOURCES GDP & GDP growth rate Oil, tin, natural gas, coal, gold, copper, silver, nickel, bauxite, timber, fertile soils $ 878 Billion, Growth rate = 6%
- 8. Economic Growth Indonesia’s Economic Growth 2009 - 2013 (annual percentage change) 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)
- 10. Market Potential Index Countries under Comparison Country Overall Rank Overall Score Indonesia 16 34 India 9 41 Singapore 1 62 Thailand 20 30
- 11. Market Potential Index Market Size Market Growth Rate 37 40 100 86 90 35 80 30 70 25 50 15 74 60 20 68 40 10 10 30 5 1 3 0 19 20 10 0 Indonesia India Singapore Thailand Indonesia India Singapore Thailand
- 12. Market Potential Index Market Intensity Market Consumption Capacity 74 80 70 60 50 40 30 28 Indonesia India 31 28 20 10 0 Singapore Thailand 80 78 76 74 72 70 68 66 64 62 60 77 78 66 Indonesia India 66 Singapore Thailand
- 13. Market Potential Index Commercial Infrastructure 90 Economic Freedom 80 80 70 70 60 47 50 40 83 90 80 32 54 52 Indonesia India 49 50 40 22 30 60 30 20 20 10 10 0 0 Indonesia India Singapore Thailand Singapore Thailand
- 14. Market Potential Index Market Receptivity Country Risk 120 120 97 100 100 100 80 80 60 60 40 40 20 17 3 3 0 39 Indonesia India 48 42 20 0 Indonesia India Singapore Thailand Singapore Thailand
- 15. Hofstede Model
- 16. Hofstede Model - Indonesia v/s India Indonesia India 90 80 78 77 70 61 56 60 48 50 46 48 40 40 30 20 14 10 0 PDI IDV MAS UAI LTO
- 17. 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
- 18. 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
- 19. 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
- 20. 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
- 23. Basic Requirements Country Ranking Indonesia 45 Malaysia 27 Singapore 1 Thailand 49 Institutions Infrastructure Macroeconomic environment Health and primary education
- 24. Efficiency Enhancers Higher education and training Country Ranking Indonesia 52 Malaysia 23 Singapore 2 Thailand 40 Goods market efficiency Labour market efficiency Financial market development Technological readiness Market size
- 25. Innovation & Sophistication Factors Country Business sophistication Innovation Ranking Indonesia 33 Malaysia 25 Singapore 13 Thailand 52
- 26. Comparison 120 96 100 80 60 60 40 52 45 38 42 41 33 20 0 Overall Ranking Indonesia India Basic Requirements Efficiency Enhancers 38 60 45 96 52 42 Innovation and Sophistication Factor 33 41
- 27. PESTEL Analysis
- 28. Political 01 Democracy still young, however relatively stable 02 Political System: A work in progress owing to the Suharto era 03 Presidential and parliamentary elections scheduled in 2014 04 Corruption & bureaucracy
- 29. Economic 01 Shielded from global economic crisis (GDP growth 6%) 02 Major destination for FDI in Asia 03 Leading exporter of high-value commodities like palm oil & thermal coal 04 Free-trade zones
- 30. Social 01 World’s 3rd largest young democracy & Muslim majority country 02 Transiting from lower to middle income society 03 Literacy rate 90.4% however quality of higher education questionable 04 Unemployment rate 6.25% 05 High crime rate
- 31. Technological 01 World’s 3rdtechnological implementation IT industry largest young democracy & Muslim majority country 02 Supply chain mechanismmiddle income society Transiting from lower to 03 Literacy rate 90.4% however quality of higher education Allocated approximately $205 Million for R&D questionable
- 32. Environmental 01 At high 3rd largest young democracy its geographical World’s risk to natural disasters due to& Muslim majority location country & topography 02 Deforestation lower to middle income society Transiting from 03 Literacy rate 90.4% however quality of& sewage Water pollution from industrial wastes higher education questionable
- 33. Legal 01 World’s system opaque, incoherent, andMuslim majority Judicial 3rd largest young democracy & time-consuming country 02 Discriminatory attitude towards income investors Transiting from lower to middle foreign society 03 Literacy rate 90.4% & smuggling involved in exports Barriers to imports however quality of higher education questionable
- 34. SWOT Analysis
- 35. Strengths 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
- 36. 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
- 37. 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
- 38. 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
- 39. Risk Assessment
- 40. Risk Assessment Country rating: B Growth is strong and will be very robust in 2013 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%)
- 41. Risk Assessment Public debt will continue to fall in 2013 under the combined effect of sustained growth and a low deficit. The financial position remains solid but the current account balance is now in 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.
- 42. Risk Assessment Disagreements within the ruling coalition formed after the 2009 elections are becoming more and more visible. More and more visible disagreements within the coalition 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.
- 44. Thank you for your attention!