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A thorough country analysis of Indonesia with International Marketing point of view. Consists of latest statistics, facts and figures as of 2013-14. Covers points such as Market Potential Index, Hofstede Model, GCI Index, PESTEL and SWOT analysis.
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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
Market Potential Index
Country Overall Rank Overall Score
Indonesia 16 34
India 9 41
Singapore 1 62
Thailand 20 30
Countries under Comparison
Market Potential Index
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
Indonesia India Singapore Thailand
Market Growth Rate
Market Potential Index
28 28
74
31
0
10
20
30
40
50
60
70
80
Indonesia India Singapore Thailand
Market Intensity
77 78
66 66
60
62
64
66
68
70
72
74
76
78
80
Indonesia India Singapore Thailand
Market Consumption Capacity
Market Potential Index
3222
80
47
0
10
20
30
40
50
60
70
80
90
Indonesia India Singapore Thailand
Commercial Infrastructure
54 52
83
49
0
10
20
30
40
50
60
70
80
90
Indonesia India Singapore Thailand
Economic Freedom
Market Potential Index
3 3
97
17
0
20
40
60
80
100
120
Indonesia India Singapore Thailand
Market Receptivity
39 42
100
48
0
20
40
60
80
100
120
Indonesia India Singapore Thailand
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
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%
High crime rate05 High crime rate
Technological
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
01
02
03
IT industry technological implementation
Supply chain mechanism
Allocated approximately $205 Million for R&D
Environmental
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
01
02
03
At high risk to natural disasters due to its geographical location & topography
Deforestation
Water pollution from industrial wastes & sewage
Legal
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
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
Thank you for your attention!
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