International Marketing Analysis of Indonesia

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International Marketing Analysis of Indonesia 

Introduction

Indonesia is in the South East of Asia and is composed of thousands of volcanic islands. It is well known for its Komodo dragons, volcanoes, beaches and jungles, sheltering tigers, orangutans and elephants. It is composed of more than 300 ethnic groups who use different languages while conversing. On the Java islands, lies Jakarta which is the Indonesia’s sprawling and vibrant capital, popular for its traditional puppetry and gamelan music. 

Political and Financial Background

Kind of Government

The government of Indonesia works within the framework of democratic republic presidential representative, where the president heads both the government and the state.  The president is in charge of choosing the Indonesia Cabinet which composes the Executive branch who manages the everyday governance like, education, religious affairs, foreign affairs, agriculture, defense, and economic issues. It also has a justice system which consists of different courts systems like the National Ombudsman Commission that manages cases that are against the state, and the Supreme Court which in the country is the highest in the judicial system. The 1945 constitution of Indonesia gives the President and the executive government branch most of the powers. The legislative government branch is made up of Majelis Permusyawaratan Rakyat, (MPR), which is the People’s Consultative Assembly. The country is composed of thirty provinces which forms the local government headed by local councils who are elected during general elections. (World Atlas, 2016)

Political Stability

In the world, Indonesia is the third largest democracy, a G20 member and in the south-east Asia, it is the largest economy. Its democracy is a presidential system and it politically stable. It acts as a role model for an effective political transition (Department for International Trade, 2016). However, according to the Global Economy (2016), the political stability index (2.5 strong; -2.5 weak) provides that the average value of Indonesia between 1996 and 2014 was -1.23 points. The political stability index and absence of terrorism and violence measures the likelihood of the Indonesia’s government to be overthrown of destabilized.

Foreign Direct Investment (FDI)

In Indonesia, the foreign direct investment (FDI) has risen by 7.4% year-on-year until 99.7 trillion IDR in 2016 third quarter. This is the highest value ever recorded due to the increased investments in mining, property sector and electronic with Singapore. From 2010 to 2016, the Indonesian Foreign Direct Investment in average was 64738.46 IDR Billion, which in 2016 reached its peak of 99700 IDR Billion

General Demographics

There are more than 300 ethnic groups in Indonesia. The composition of these ethnic groups in 2010 are as follows; Javanese 40.1%, Sundanese 15.5%, Malay 3.7%, Batak 3.6%, Madurese 3%, Betawi 2.9%, Minangkabau 2.7%, Buginese 2.7%, Bantenese 2%, Banjarese 1.7%, Balinese 1.7%, Acehnese 1.4%, Dayak 1.4%, Sasak 1.3%, Chinese 1.2%, other 15%. The country has more than 700 spoken languages. The official language is Bahasa Indonesia which was modified from Malay, Dutch, English and local dialects. The prominent Religion in the country is Muslim with 87.2% followers. This is followed by Christianity 7%, Roman Catholic 2.9%, Hindu 1.7%, other 0.9% (CIA, 2016).

According to CIA (2016), the total population is 258,316,051 which is distributed by age structure. According to the population structure, there are more young children of 0-14 years than any other group. The total per cent of children between 0-14 years is 25.42% (32,224,706 female and 33,435,020 male). The youths, 15-24 years comprised of 17.03% (female 21,604,985 and male 2,397,086) while 25 to 64 years had 42.35% (female 53,543,682 and male 55,857,415). The elderly between 55 and 64 added up to 8.4% (female 11,790,016 and male 9,918,897), and lastly, above 65 years were 6.79% (female 9,913,993 and male 7,630,251). The country has a total median age of 29.9 years; females 30.5 years while male 29.3 years. Indonesia has a population growth rate of 0.89% with a birthrate of 16.4 births/1,000 population.

Population in Indonesia

The total population in Indonesia by July 2016 is 258,316,051. Geonames (2016) illustrates that, in Jakarta, the population 8,540,121, Surabaya – 2,374,658, Medan – 1,750,971, Bandung – 1,699,719, Bekasi – 1,520,119, Palembang – 1,441,500, Tangerang – 1,372,124, Makassar – 1,321,717, South Tangerang – 1,303,569 and Semaranq – 1,288,084. 

Employment Figures

There is increasing accessibility of basic education which is steadily improving every single day. However, there are several remaining disparities in education. There a big gap of Urban-rural education from attainment levels, enrollment rates and literacy. For example, in 2010, the rate of illiteracy among 15 years old in Papua was 31.7% which is very high while compared to Jakarta with 0.9% which is the capital region (OECD, 2013). The disparities in enrollment rates are caused by the level of education especially of guardians and parents. Free and basic education has increased enrollment and education attainment and regional disparities like Jakarta and Papua may be due to the paucity of economic and social infrastructures in less developed places like Papua.

The unemployment rate of Indonesia has dropped to 5.5% of the nation’s labor force. In absolute terms, this was 7.2 million people in 2016, in comparison to February 2015 which was 5.8%. This data indicate that the nation’s labor force reduced from 128.3 million in February 2015, to 127.8 million in February 2016. This remarkable change was particularly influenced by the decline of workers in agriculture sector. In 2015, the total labor force was 122,380,000, and the employed were 114,820,000 while the unemployed were 7,560,000.

Current State of the Economy

GDP is the final value of all services and goods that are produced by a country in a given year. The GDP per capita PPP is calculated by dividing the Indonesia’s gross domestic product, which is adjusted by purchasing power parity, by the total population. Its Gross Domestic Product per capita was last recorded in 2015 as 10385.30 US dollars after adjusting with purchasing power parity (PPP). This GDP Per Capita is comparable to 58% of the world’s average. Between 1990 and 2015, the GDP Per Capita has been ranging at an average of 6935.69, which in 2015 was at its peak of 10385.30 USD and lowest in 1990 at 4477.30 USD (Trading Economics, 2016). According to CIA (2016), it is estimated that the GDP in 2015 was $2.842 trillion, with an official exchange rate of $859 billion and GDP Per capita (PPP) of $11,100. 

The Indonesian rupiah (IDR) on 15^th September 2016 traded at 14,407 per USD which is weaker with 20.8% of what was registered on the same day last year. Since 1998, Rupiah has never traded with such a low rate during the Asian financial crisis. So far in this year, rupiah has lost more than 16.0% of its value. This downward trend is caused by both external and domestic factors. The disappointing fact is that the reducing exports, weak economic growth and Chinese Yuan depreciation are increasing the demand of dollars and reducing the value of rupiah as well as increasing capital outflows. This has made the Central Bank to go beyond their typical foreign exchange market interventions by prohibiting the use of foreign currencies while transacting domestically (Forecast Economy, 2016).

Indonesia Investments (2016) explains that the volatility and level of inflation in Indonesia in history is higher than their peer nations that are emerging. Between 2005 and 2014, Indonesia was having inflation rate of 8.5% while other emerging markets shared among 3% to 5%. The Indonesia’s inflation volatility peaks correlate with the adjustments in prices. Indonesia works in a policy of providing cheap electricity and energy which do not float according to the conditions of the markets. This leads to a deficit that is absorbed by the government and state-owned companies Perusahaan Listrik Negara (PLN) and Pertamina. The policy has been criticized by International institutions such as the World Bank and International Monetary Fund (IMF).

Major Imports, Exports, and Trade Restrictions

Indonesia enjoys generous natural resources that include copper, gold, tin, natural gas and crude oil. In regard to Trading Economics (2016), Indonesia’s key imports include foodstuffs, fuel chemicals and equipment and machineries. The country’s major exports include gas and oil, textiles, plywood, rubber and electrical appliances. As a member of Association of South East Asian Nations (ASEAN), Indonesia rates of preferential are applied are applied to other member’s imports. Its custom uses tariffs schedules that are based on coding system and Harmonized Commodity Description for classifying goods. Registered importers are granted to imports items and the prohibited and restricted good include certain species of flora and fauna, arms and ammunitions, narcotics and explosives. Other goods are exempted from import duties like goods of scientific and research purposes and machineries that are used in establishing industries. 

Direct Shoes Competitors

I am planning at starting a shoe company in the heart of Indonesia which is its capital city Jakarta. My choice of shoe wear is sports shoes and mostly for the age group between 25 and 54 years. In Indonesia, there are several shoe companies that are my potential                        competitors. They include Pt Indosports Jaya located at DKI Jakarta has been using league brand since 204. The shoe company also produces its own shoes of 250.000pairs shoes/month. The second competitor will be Mixing Shoes Indonesia, which is located at Sumatera Utara that sell s as its name suggests mixed shoes. They also give customers a chance to have their shoes customized according to their tastes. The last competitor is Semesta Makmur Mandiri located in Jakarta that produces their own shoes and has been in market for 20 years.

My one competing strategy will be provision of quality and valuable shoes. Sport shoes are used almost every other day and they tend to wear faster. Having quality shoes means providing the customer with the best and long-lasting challenge. Nowadays, shopping online has become popular; I will take the advantage by offering the best customer service to my customers to ensure that they will come back and bring with them other new ones. I will also invest in an eye catching logo that will sell my products not just today but in decades to come.

References

CIA,. (2016). The World Factbook — Central Intelligence Agency. Cia.gov. Retrieved 27 October 2016, from https://www.cia.gov/library/publications/the-world-factbook/geos/id.html

Department for International Trade,. (2016). Overseas Business Risk – Indonesia – GOV.UK. Gov.uk. Retrieved 27 October 2016, from https://www.gov.uk/government/publications/overseas-business-risk-indonesia/overseas-business-risk-indonesia

Forecast Economy,. (2016). Exchange Rate in Indonesia. Forecast Economy. Retrieved from https://www.focus-economics.com/country-indicator/indonesia/exchange-rate

Geonames,. (2016). Biggest Cities Indonesia. Geonames.org. Retrieved 27 October 2016, from http://www.geonames.org/ID/largest-cities-in-indonesia.html

Global Economy,. (2016). Indonesia Political stability – data, chart | TheGlobalEconomy.com. TheGlobalEconomy.com. Retrieved 27 October 2016, from http://www.theglobaleconomy.com/Indonesia/wb_political_stability/

Indonesia Investments,. (2016). Inflation in Indonesia – Analysis Indonesia’s Consumer Price Index | Indonesia Investments. Indonesia-investments.com. Retrieved 27 October 2016, from http://www.indonesia-investments.com/finance/macroeconomic-indicators/inflation-in-indonesia/item254

OECD,. (2013). ‘Structuraly Policy Country Notes Indonesia’. STRUCTURAL POLICY CHALLENGES FOR SOUTHEAST ASIAN Countries. Retrieved from https://www.oecd.org/dev/asia-pacific/Indonesia.pdf

Trading Economics,. (2016). Indonesia GDP per capita PPP | 1990-2016 | Data | Chart | Calendar. Tradingeconomics.com. Retrieved 27 October 2016, from http://www.tradingeconomics.com/indonesia/gdp-per-capita-ppp

World Atlas,. (2016). What Type Of Government Does Indonesia Have?. WorldAtlas. Retrieved 27 October 2016, from http://www.worldatlas.com/articles/what-type-of-government-does-indonesia-have.html