marketing analysis of indonesia concerning microwave ovens

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Marketing Analysis of Indonesia Concerning Microwave Ovens

Prepared for:

MKTG 4340

Dr. Waheeduzzaman

Prepared by:

Lezette Balboa

Luynh Nguyen

Wiriya Sarika

Brittany Tennison

May 1st, 2013


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EXECUTIVE SUMMARY

In an international market, the scope of data is much larger than those of domestic markets.

Multiple factors must be taken into account besides economic and marketing statistics, including

the form of government, the countrys background, religious domination, as well as cultural

influences. For a U.S. based company, data collection is relatively convenient since there are a

large variety of reputable secondary sources to collect from. This research is conducted with a

primary goal: to facilitate the company determining if it should enter the Indonesian market for

microwave ovens and if considered promising, the research will also be used to construct an

effective entry strategy. This research covers all aspects aforementioned in order to effectively

assist in the decision making process of entering the Indonesian market.

The data collected determine the low possession rate of microwave ovens in Indonesia, as well as

very small amount of disposable income. Microwave ovens seem to have very little demand and

are not commonly found in Indonesian households. In addition, the government has strict

regulations and controls over international trades, with extensive non-tariff barriers companies

have to face. The market is essentially isolated, and we would also be selling our product at a

relatively low price in order to fit the Indonesian price index. Most importantly, our product also

needed a great number of alterations to fit the Indonesian standards.

Ultimately, the research provided sufficient data for us to determine that we do not recommend

entering the Indonesian market selling microwaves ovens from the U.S. The risks seem to be

greater than the benefit we could gain. It would include costly expenses in order to enter the

market, when the product will only be selling at lower price without the guarantee that they

would even sell as much as we needed them to.

ii


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TABLE OF CONTENTS

EXECUTIVE SUMMARY.ii

I. INTRODUCTION.... 4

II. POPULATION AND DEMOGRAPHICS.. 5

III. DEMAND ESTIMATION 7

IV. ECONOMY AND MARKET 9

V. INTERNATIONAL BUSINESS ENVIRONMENT..11

VI. GOVERNEMENT AND POLITICS13

VII. MARKETING MIX 15

VIII. CONCLUSION.. 17

APPENDIX... 19

Table 1: Population and Demographic Analysis.. 20

Table 2: Demand Estimation for the Durable ... 21

Table 3: Economy and Market Analysis... 22

Table 4: International Business Environment Analysis 23

Table 5 Government and Political Environment Analysis.... 24

Table 6International Ratings 25

Table 7 Standardization/Globalization and Marketing Mix 26

REFERENCES. 27

INDEX .. 28

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I. INTRODUCTION

Urbanization is undeniably expanding to every part of the world. It changes how people live their

lives, as well as performing simple tasks such as cooking. As time become more valuable than

ever before, microwave oven is considered one of the staple appliances in the U.S. household as

it reduces cooking time to just a few minutes. The research was conducted on a situational basis

of an international marketing preliminary market survey for a company that manufactures U.S.

household appliance. Regarding this project, the company is considering exporting microwave

ovens to Indonesia. In order to successfully and efficiently enter as international market, a

detailed analysis of the prospective market is needed. As businesses are competing vigorously to

enter new markets on a daily basis, this research will provide the basis of marketing in an

Indonesian market. It will further be used to determine whether the company should enter the

Indonesian market, as well as suggesting market entry strategies, if considered favorable.

The data for this project were collected from multiple secondary databases including the Global

Market Information Database (GMID), Global EdgeMichigan State University, The World

Bank, United Nations, and the Central Intelligence Agency (CIA). The data scope is from 2007

up until the most recent data available as of 2012. The data covers of various aspects of

Indonesia, including marketing, international trade policies, infrastructure, and economics. They

are organized into corresponding tables (see table 1-7) to be critically analyzed.

This analytical report discusses the following aspects of Indonesia: Population and

demographics, demand estimation, economy and market, international business environment,

government and politics, marketing mix, and finally, a conclusion with suggested market entry

strategies. While this data can be used by other industry considering market entry to Indonesia;


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the data are collected from secondary sources concerning general aspects of Indonesian market.

Therefore, further specific and primary data collection is advised for a more in-depth analysis for

any other particular products.

II. POPULATION AND DEMOGRAPHICS

The population in Indonesia is growing at about one percent a year, a slow but healthy growth

rate. When populations increase, this usually means that either the number of people in each

household has grown or there are more households. In Indonesia, there is no change in the

number of people per household; rather there is an increase in the number of households,

measuring about seven hundred more households a year. These new households need

somewhere to go, and we have found that they are increasing numbers of urban households. The

number of urban households has been growing for the past two years by about 900 households

(2012 and 2011), and decreasing in the two before that (2010 and 2009) decreasing by 155 and

58 respectively.

The life expectancy in Indonesia has also been increasing for the past five years, with an increase

of .4 every year. Additionally, the adult literacy rate has also been increasing. The Human

Development Index for Indonesia is .6, which is fairly low compared to other countries. This

score, however, has been slowly increasing, showing improvements in their system.

When Indonesia is compared to other countries around the world, several rankings and scores are

considered. First, the globalization index for Indonesia is 55.2 out of 207, which is fairly low.

This shows that Indonesia has very low levels of globalization and the economy is not very open.

The country also has a score of 128 out of 185 for the ease of doing business, meaning that it is


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fairly hard to do business in Indonesia. They have a score of 50 out of 144 for global

competitiveness, showing that they are not very competitive on a global scale. With an economic

freedom score of 108 out of 161, Indonesian are not necessarily has the freedom to do their own

business. Politically, the country has a score of B, meaning that they are neither particularly

safe nor particularly risky. Also, they have a relatively high amount of political freedom, but

they are highly corrupted with a score of 32 out of 100.

When the development of the country is combined with the growing population in Indonesia, it is

safe to assume that the quality of life in Indonesia has been growing steadily for the past few

years. The increasing number of people combined with the increasing life expectancy shows that

Indonesians have been given access to something that made their lives better, perhaps medical

technology, education, or an influx in money from the outside so that people can support

themselves.

The number of people that have disposable income over $2,500 has been increasing, although the

rate that it is growing has been slowing down. In the past five years, only 2009 had a negative

number, showing that they the number of people with $2,500 decreased. Also, for the past five

years the number of households with disposable income over $5,000 has been increasing, but at a

fluctuating rate of growth (seeAppendix A). These two factors show that an increasing number of

people are getting more disposable income; however, it may not last.

Furthermore, in the past five years the GINI index has been increasing, showing growing levels

of stratification, usually in income. This means that the difference between the wealthy and the

poor has been growing. In the past five years it decreased by 1 point in 2008, then bounced back

by 2 points, and has been growing slowly at an average of .25 points a year. Combining this


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with the increasing number of people with more than $2,500 in disposable income, it shows that

the some people are being left behind with poor wages while others are able to increase their

income significantly.

III. DEMAND ESTIMATION

The percentage of families having household durables has been increasing continuously from

20.40% in 2007 to 21.70% in 2008, 22.80% in 2009, 23.80% in 2010, 24.70% in 2011, and

25.50% in 2012. The compounded annual growth rate (CAGR) of this percentage is 3.79%. This

information showed that Indonesians have improved in their concept of using household durable

goods, and they are starting to rely more on household appliances. However, the percentage is

still quite low, only one-fourth of the total households. The percentage of families owning a

microwave oven is also very low in Indonesia. This figure is rising up with a CAGR of 6.99%,

from 2% in 2007 to 2.2% in 2008, 2.4% in 2009, 2.6% in 2010, 2.8% in 2011, and 3% in 2012.

As a result, the increase in households owning microwave ovens leads to the increase in total

demand of the durable. The demand of microwave oven based on possession data has also been

increasing continuously over the 6-year period of 2007-2012. The demand of the durable in

thousands was 1,179.06 in 2007, and kept rising up to 1,313.93 in 2008, 1,451.01 in 2009,

1,590.28 in 2010, 1,732.53 in 20011, and finally reaching 1,877.10 in 2012. The demand of the

durable rose up as well, with a growth rate of 8.06%. The average yearly demand of the durable

based on possession data is 1,523,980.

Meanwhile, the percentage of households having a kitchen or electric lighting has also gone up

each year during 2007-2012. The number of households having a kitchen is growing with a

CAGR of 0.61% from 77.90% of total households in 2007 to 80.80% of total households in


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2012. The portion of households with electric lighting has reached 95.70% in 2012, indicating a

CAGR of 0.75% over 6 years. These figures showed that most of the Indonesian households

have kitchen for cooking and full electricity coverage. In other words, many families have

sufficient conditions to use microwave for daily cooking.

Based on the conditions to use microwave, we can derive the estimate demand of the durable

using chain ratio method. The average annual estimate demand using chain ratio is 45,245,540.

This demand estimate rose from 42,020,670 in 2007 to 48,382,630 in 2012. The demand using

chain ratio increases every year with a growth rate of 2.38%. This demand figure is the highest

among the three estimates of demand for the durable. However, this estimation is not accurate

because the percent of households using microwave ovens is very low compared to the percent

of households having sufficient conditions to own the durable.

As a result, we calculate the third estimation using method of analogy, choosing Brazil as a

comparing target. We use the ratio of the possession of microwave oven to the total households

in Brazil as an analogy to estimate the possession and the demand of microwave oven in

Indonesia. The average annual estimate demand using method of analogy is 3,919,200. This

demand estimate rose from 3,605,460 in 2007 to 4,189,260 in 2012. The demand using method

of analogy increases every year with a growth rate of 2.53%. In addition, Indonesia possession of

microwave oven is very low, so Indonesians do not use microwave ovens as much as they do in

Brazil. Brazil has the close population with Indonesia but their country seem developed by the

percentage higher than Indonesia 32.10 in 2007 and increase to 38.50 in 2012.

All three estimations of the demand for the durable increase every year from 2007 to 2012.

Therefore, the average demand of the durable is going up continuously each year. The average


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demands of microwave oven each year in thousands are 15,601.73 in 2007, 16,153.35 in 2008,

1,664.00 in 2009, 17,151.41 in 2010, 17,657.30 in 2011, and 18,149.66 in 2012. The CAGR of

the average demand is 2.55%, which is almost the same as the CAGR of the estimations using

the chain ratio and the method of analogy. The average yearly demand of the durable is

16,896,240.

IV. ECONOMY AND MARKET

Indonesia GDP increases every year during the period of2007 to 2012. The countrys GDP was

$840,418.20 million in 2007, $910,718.80 million in 2008, $961,180.50 million in 2009,

$1,036,068.80 million in 2010, $1,123,979.40 million in 2011, and approached $1,191,004.00

million in 2012. The GDP growth rate is 5.98%, higher than Brazils GDP growth rate of 3.92%

and USAs GDP growth rate of only 1.88%. The fast GDP growth rate of Indonesia indicated

that this countrys economy is developing dramatically compared to other developing countries

such as Brazil, or developed countries such as the United States.

The GDP measured at Purchasing Power Parity per capita of Indonesia is also escalating much

faster than those of other more developed countries. The GDP per capita climbed up gradually

from $3,615.30 in 2007 to $3,876.20 in 2008, $4,048.50 in 2009, $4,319.30 in 2010, $4,638.30

in 2011, and $4,865.80 in 2012. The growth rate of Indonesias GDP per capita is 5.08%, which

is much higher than Americas GDP per capita growth rate of 1.17%. In addition, Americas

GDP per capita went up and down while Indonesias GDP per capita constantly increased during

the period 2007-2012. Consequently, Indonesias economy is growing dramatically and

becoming more competitive among other countries. The strengthening economy of Indonesia


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was ranked 50th among 144 countries in the Global Competitiveness Index and described as an

efficiency-driven economy.

However, Indonesias real GDP growth fluctuated around 5.97% with standard deviation of

0.69% during 2007-2012. Real GDP growth fell from 6.30% in 2007 to 6% in 2008 and

plummeted to 4.60% in 2009. However, the growth rate climbed back to 6.20% in 2010 and

6.50% in 2011 before going down again to 6.20% in 2012 (seeAppendix B).

Inflation in Indonesia differs dramatically with the mean of 5.97% but standard deviation of

2.21%. The inflation was higher than 6% in 2007 (6.40%) and 2008 (10.20%). These high

inflation rates were one of the reasons that negatively affected the countrys real GDP growth

and economic performance. However, the government managed to control the inflation to be

around 4% and 5% during 2009-2012 (seeAppendix B). As a result, lower inflation rates

enhanced the nations economic competitiveness and credit rating.

Indonesias risk rating is still low due to the uneasy and unsupported business environment. The

country was ranked 128th out of 185 in Ease of Doing Business Ranking in the year 2012. The

government mostly restricts the countrys economy. Indonesia only stands at 108th out of 161 in

the economic freedom ranking. The strict rules and policies of the government refrain foreign

companies from investing and conducting businesses in the country. Besides, official corruption

is still a common problem when doing business in this nation. As a result, these factors created

an uncertain and risky business environment in Indonesia, making the economy more difficult to

develop into innovation-driven stage.

Household goods and services prices are increasing with a growth rate of 4.07%. The index of

household goods and services prices went up from 563.20 in 2007 to 613.30 in 2008, to 642.90


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in 2009, to 661.80 in 2010, to 691.20 in 2011, and up to 715.40 in 2012. Increasing prices

showed a growth in the countrys economy but also indicated uncontrollable inflation through

each year. On the another hand, consumer expenditure on household appliances also went up

14.31% each year due to the increasing prices of household goods and services as well as the

greater demand of household appliances in Indonesia. Consumer expenditure escalates every

year from Rp 20,338,721.60 million in 2007 to Rp 45,385,799.90 million in 2012.

V. INTERNATIONAL BUSINESS ENVIRONMENT

The internationals business environment in Indonesia can be closely summarized with a few

factors. Exports have not been very steady in the last five years. Exports decreased in 2012 and

2009, while increasing the other three years in between at a steady rate. Imports were much

steadier compared to the exports, increasing all five years except for in 2009. In 2012, however,

the imports only increased by a very small percentage. Exports as a percentage of GDP

decreased in 2012 and in 2009, and imports as a percentage of GDP were negative in 2009 and

very small in 2012. Considering these factors, it seems that the economic situation in Indonesia

has not been very steady or safe. Indonesia is not a very globalized country, with a ranking of

55.20 out of 207. This can be part of the instability in both imports and exports in the past five

years, because there are few countries that would do business with such an isolated country.

Also, when Indonesia is compared to other countries around the world, they are given the

ranking of 50 out of 144, which is not very good. They are not able to compete in a global

market, and part of the reason is that they the people of Indonesia are not free to use their money

however they want, which is shown in their economic freedom rating of 108 out of 161. If the


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people are not able to use their money however they want then they tend to save it, which cannot

support the market.

Foreign direct investment has been steadily increasing except for in 2011, when there was a

negative inflow. Foreign direct investment as a percentage of GDP barely increased at all in

2012, and was negative in 2009. These both mean that the number or the amount of money that

foreigners are investing in Indonesia were increasing, but are now slowing down. The foreign

exchange reserves have been increasing every year except for in 2009 when they decreased.

Also, for the last three years, the amount that it has increased (the rate of growth) has been

decreasing. The foreign trade balance increased all five years except 2009, but in 2012 it barely

increased at all. This shows that the economy has been doing pretty well overall, but it is

slowing on. The foreign exchange reserves as a percentage of GDP were negative in 2012 and

2008. This means that the amount of foreign investment compared to all of the production in

Indonesia was doing well except in 2012 and 2008. The foreign exchange reserves as a

percentage of exports were negative in 2011 and 2008, and the foreign exchange reserves as a

percentage of imports were negative in 2012, 2011, and 2008. This compares the foreign

investments to both exports and imports, and it illustrates the decrease in both directions.

In Indonesia, it is difficult to do business as they have been ranked at the 128th out of 185. If it is

hard to do businesses in a country, foreigners will avoid doing so and the country will eventually

suffer. This has been shown with their declining levels of foreign investment and low growth

rate compared to other countries. Also, Indonesia has a political rating of B, which shows that

they are neither a particularly safe nor a particularly dangerous country to do business in. Lastly,

Indonesia has very high levels of corruption with a score of 32 out of 100. When all of the

factors are combined, the international business environment in Indonesia is not particularly


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supportive to new businesses. They are not growing very fast and they are not very politically or

economically supportive.

VI. GOVERNMENT AND POLITICS

Indonesia is a republic with a bicameral legislative system, with the Democratic Party (PD)

having the majority seats in the government. The Government of Indonesia (GOI) encourages

foreign direct investment (FDI) as they aimed to create jobs, improve Indonesias infrastructure,

and facilitate the economic growth. However, the GOI has vague and conflicting regulations and

high level of corruption exists. Indonesias struggle with insufficient infrastructure, poverty, and

unemployment is still an issue the government has yet to improve.

In 2011, President Susilo Bambang Yughoyon and several high ranks party members of the PD

were arrested of corruption charges. There are also violence conflicts between the Muslims and

Christians in Indonesia including religious bombings and open-fire shootings. With such distress,

the public became more aware of the corruption allegations and had continuously grown anti-

corruptions efforts. Indonesia Corruption Perception Index (CPI) is 32 out of 100, with the

number being closer to zero means higher rate of corruption in the public sectors. Indonesias

Corruption Eradication Commission (KPK) itself was accused of multiple ethics violations,

though they were cleared of the allegations later on. However, the incidents caused the public to

suspect the KPK of conspiring. Indonesia press freedom is highly limited by the legal

restrictions. Journalists are restricted to enter certain areas, and are prone to practice self-

censorship to avoid getting in trouble with the government. According to Freedom House,

Indonesias political freedom rating is 2 out of 7, with 1 representing most free and 7 being the


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least free. The country was also ranked at 100th out of 183 countries in the Transparency

Internationals 2011 Corruption Perception Index.

Indonesia signed an Investment Framework Agreement (TIFA) with the United States in 1996,

which facilitates trades and create opportunities for investment among the partnered countries.

Additionally, Indonesia is a part of multiple major economic groups, including the WTO, G-20,

APEC, ASEAN, and IMF. As of 2011, Indonesias average Most Favored Nations (MFN)

applied tariff is 7.6% to all products, with various non-tariff barriers applied towards import

goods and foreign trades. First of all, Indonesia has a strict standard of products. The products

being imported into the market must meet the Indonesian National Standards (SNIs), which are

controlled by the Badan Stabdardisasi Nasional (BSN) committee. For instance, the product

labels must be printed in Indonesian, with Arabic numbers and Latin letters. Furthermore,

according to Regulation No.36/1977, foreign companies are required to appoint an Indonesian

agent and/or distributors to the Ministry of Trade (MOT). Additionally, Indonesian customs

department requires extensive documentation prior to the import of goods via the Electronic Data

Interchange system (EDI) in a certain standardized format. The U.S. firms that had dealt with the

Indonesian customs in the past had reported costly delays in custom processing and instances of

unofficial payments to custom officers to complete the process.

In the Decree 56, Indonesia requires pre-shipment verification by designated surveyors at the

importers expenses. Additionally, limiting the entry of final consumer goods imports to only

five designated ports and airports. These limitations apply to goods including electronics,

household appliances, toys, textiles, and food or beverages. Furthermore, the Ministry of Trade

Regulation no. 45/2009 and regulation no. 17/2010 states that companies can either import goods

for further distribution or for their own manufacturing, but not both. As for monetary restrictions


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microwave due to the household size. In Indonesia, the population and demographic analysis

stated that there are 3.90 people in an average household as of 2012 (see Table 1). The size of the

microwave should be midsize, 20 inches wide and 13 inches high, which would be suitable for

the household size in Indonesia.

In regard of promotions, there are many factors needed to be consider for the Indonesian market.

First of all, the advertisements must be in Indonesian to make sure the message gets delivered

correctly to the consumers. According to Table 7, local media and newspaper advertising are

effective in reaching to consumers in Indonesia. Additionally, we have the option of doing direct

mail, banners on the bus exteriors or bridges, as well as television ads. Since Indonesian people

highly valued brand loyalty, it could be a challenge for us to introduce our brand which is just up

and coming for them. With reference to these factors, we gave a rating of 3 out of 5, since there

are a decent amount of adaptation needs to be done, but not entirely an overhaul to do so.

In order to price our microwave in Indonesia at an affordable rate, we would use the following

formula, . By using this formula, we determined that our price of the microwave

would be $55.61. In addition, we would leave the promotional strategies to the retailers or

distributors in Indonesia. This is due to the many regulations given by the Indonesian

government several of which are based in distribution and importation, requiring us to appoint a

retailer or distributor when importing goods for further distribution.

At a recent World Trade Organization meeting, members strongly encouraged Indonesia to make

more and better use of trade and investment policies that comply with its international

commitments. They also were supportive of the multilateral trading system that better reflects

Indonesias work towards being a leading role on the global stage (Yulisman, 2013). Currently,


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Indonesia has several policies that make distribution and selling in Indonesia a difficult task.

Firstly, all foreign companies have to appoint a local agent or distributor to do the distribution

for them. Also, there is extensive documentation that must be completed before any importing

occurs, and the paper work must be in a standardized format. Indonesia requires pre-shipment

verification by designated surveyors at importers expense. This verification also limits the

shipments entry points to five designated ports and airports on items classified as final

consumer goods. This includes electronics, household appliances, textiles, footwear, toys, and

food/beverages products. Lastly, another regulation says that companies can only import goods

to sell or goods to manufacture, but not both. Keeping these regulations in mind we are given

little choice about how we can distribute. We are required to hire a local distributer, and we can

only ship to five ports. We would be selling our product to retail stores in Indonesia, so other

decisions about distribution, pricing, and promotions would not be under our control.

To best penetrate the Indonesian market, the easiest entry strategy would be to license our

product. We would not face several common barriers, such as reputation barriers. The most

well known electronic and appliance brand in Indonesia is Sharp Electronics. We would

approach them and ask for them to take our product to Indonesia. If licensing were not an option

for our company, the next best entry strategy would be direct exporting, or selling our product

directly to a local retailer.

VIII. CONCLUSIONAccording to the data collected and analyzed, we do not recommend the company to enter the

Indonesian market for microwave ovens. First of all, there are numerous restrictions, including

the strict import regulations and other non-tariff barriers. The fact that we would have to have a


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contract with retailers or distributors limits how much freedom we have over the marketing of

our product. Additionally, the Indonesian economy has been struggling in the past few years as

well. Other factors include the government policies and stability, which limits how much

freedom we would have in conducting businesses with Indonesia. The highly corrupted public

sectors, the distrusts of the government, and the insufficient infrastructure that Indonesia has

been trying hard to improve.

Ultimately, the possession of microwave ovens in Indonesia is very low. It would not be

favorable for us to market such a low-demand product that requires extensive marketing plan,

since it would not be selling well. The product would also need to be adapted to fix the

Indonesian standards, as well as the marketing differences. Going in with such a product would

be an overhaul, with a very slim chance of selling as much as we need to cover the production

and exporting costs in the first place.

While Indonesia has a decent number of population and urban households, Indonesian people

have generally low disposable income. It would affect greatly how much they would want to

spend on small appliances such as microwave ovens that they might not need. It is important for

us as we consider how much impact our product is going to have on the target consumers. It

seems promising, though the high risks we have to face might not be worth it for such a big

commitment.


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APPENDIX

Appendix A: Indonesian Household Disposable Income (2007-2012)

Appendix B: Indonesia Real GDP Growth and Inflation (2007-2012)

-

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

2007 2008 2009 2010 2011 2012

Households withdisposable income over$2,500

Households withdisposable income over$5,000

-

2.00

4.00

6.00

8.00

10.00

12.00

2007 2008 2009 2010 2011 2012

Real GDP Growth

Inflation- % Growth


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Table 1

Population and Demographic analysis

Year 2007 2008 2009 2010 2011 2012

Population: nationalestimates at January 1st 232,461.70 234,951.20 237,414.50 239,870.90 242,325.60 244,769.10

Occupants perhousehold at January1st

3.9 3.9 3.9 3.9 3.9 3.9

Total households

58,952.80 59,724.10 60,458.60 61,164.60 61,876.20 62,570.00

Urban households

27,052.50 27,103.50 27,045.10 26,890.10 27,810.00 28,708.70

Households (% of

total) with Annual

Disposable Income

over $2500

44,935.3 48,577.1 48,192.5 52,635.9 53,733.9 55,367.8

Households (% of

total) with Annual

Disposable Income

over $5000

21,750 26,194.5 26,220.2 34,526.4 37,550.1 39,818

Gini Index

36.00 35.00 37.00 37.50 37.70 37.90

Life expectancy atbirth 67.70 68.10 68.50 68.90 69.30 69.70

Adult literacy rate

91.40 92.20 92.60 92.70 93.10 93.40


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Table 2

Demand Estimation for the Durable

Year 2007 2008 2009 2010 2011 2012

Possession of thedurable

20.40 21.70 22.80 23.80 24.70 25.50

Demand for the durablebased on possessiondata 12,026.37 12,960.13 13,784.56 14,557.17 15,283.42 15,955.35

Households with aKitchen (% of Total) 77.90 78.40 79.00 79.60 80.20 80.80

Households withElectric Lighting (% ofTotal)

91.50 92.70 93.50 94.20 95.00 95.70

Demand for the durableusing chain ratiomethod 42,020.67 43,405.56 44,657.74 45,863.17 47,143.48 48,382.63

Demand for the durableusing method ofanalogy 3,605.46 3,740.56 3,883.24 4,000.78 4,095.88 4,189.26

Average demand forthe durable

19,217.50 20,035.42 20,775.18 21,473.71 22,174.26 22,842.41


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Table 3

Economy and Market Analysis

Year 2007 2008 2009 2010 2011 2012

GDP measuredat purchasingpower parity

840,418.2 910,718.8 961,180.5 1,036,068.8 1,123,979.4 1,141,004.0

Real GDPgrowth

6.3 6.0 4.6 6.2 6.5 6.2

Annual rates of

inflation

6.4 10.2 4.4 5.1 5.4 4.3

Per capita GDPat purchasingpower parity

3,615.3 3,876.2 4,048.5 4,319.3 4,638.3 4,865.8

Index ofhousehold

goods andservices prices

563.3 613.3 642.9 661.8 691.2 715.4

Consumerexpenditure onhouseholdappliances

20,338,721.6 25,116,771.3 29,125,922.1 34,650,405.2 40,515,784.4 45,385,799.9


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Table 4

International Business Environment Analysis

Year 2007 2008 2009 2010 2011 2012

Foreign directinvestment (FDI)inflows

63,324,223.6 90,268,567.6 50,762,804.5 125,135,546.7 165,936,012.1 n/a

Foreignexchangereserves

54,555.7 49,164.0 60,369.0 89,751.1 103,380.1 10,5342.9

Exports 114,100.9 137,020.4 116,510.0 157,779.1 203,496.6 190,044.6

Imports 74,473.44 129,197.3 96,829.2 135,663.3 177,435.6 191,670.9

Trade Balance 39627.5 7823.1 19680.8 22115.8 26061.1 -1626.3

FDI as apercentage ofGDP

1.6 1.82 .91 1.94 2.24 n/a

Foreignexchangereserves as apercentage ofGDP

6.49 5.40 6.28 8.66 9.20 9.23

Exports as apercentage ofGDP

13.58 15.05 12.12 15.23 18.11 16.66

Imports as apercentage ofGDP

8.86 14.19 10.07 13.09 15.79 16.80

ForeignExchange

Reserve as apercentage ofExports

47.81 35.88 51.81 6.88 50.8 55.25

ForeignExchangeReserve as apercentage ofImports

73.26 38.05 62.35 66.16 56.26 54.96


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Table 5Government and Political Environment Analysis

Criteria Description

Form of government -Republic with bicameral legislativesystem

Stability of government policy -Conservative policies result in insufficientinfrastructure impeding economic growth

-Vague and conflicting regulations, poorinfrastructure, and corruption

Government policy towards foreign business -Government encourages FDI, spureconomic growth, courted foreigninvestors, develop Indonesiasinfrastructure

-Investment Framework Agreement (TIFA)1996

Membership in major economic groups -ADB, APEC, ARF, ASEAN, G-11, G-15,G-20, G-77, IMF, UNCTAD, UNESCO,WHO, WIPO, WMO, WTO

Tariff barriers: average tariff rate -Average MFN applied tariff (2011) 7.6%Non-tariff barriers: documentation, productstandards, imports restrictions etc.

-Product certification by IndonesianNational Standards (SNIs)-Product labels must be printed inIndonesian, Arabic numbers, and Latinletters.

-Regulation No.36/1977: required toappoint an Indonesian agent when import.-Extensive documentation through theElectronic Data Interchange

-Decree 56; pre-shipment verification by atimporters expense and limits entry ofimports.

-Ministry of Trade Regulation 45/2009 andRegulation 17/2010: can either importgoods for further distribution or goods fortheir own manufacturing, but not both.

Monetary and exchange restrictions: transfer ofmoney, profit repatriation etc.

-Banks must report all foreign exchangetransactions to the Bank of Indonesia

-Cash in or out of Indonesia limit at ofRupiah 100 million ($11,000)


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Table 6

International Ratings

Criteria Ratings

Globalization Index 55.20 out of 207 (2013)

Country Risk Rating Rating B- Political and economic uncertaintiesand an occasionally difficult businessenvironment can affect corporate defaultprobability is appreciable.

Ease of Doing Business Ranking 128t out of 185 (2012)

Human Development Index 0.6 out of 186 (2012)Medium Human Development

Global competitiveness rating/ranking 50 out of 144 (2012)

Economic freedom rating 108 out of 161 (2013)

Political freedom and civil liberties index Political freedom: 2 out of 7Civil liberties: 3 out of 7

Freedom status: 1 out of 7 (FREE)(2012)

Corruption Perception Index 32 out of 100 (2012)


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Table 7

Standardization/Globalization and Marketing Mix

Criteria Ratings*

Product: Conversion to 220-240 Volts 50Hertz, Plug/Outlet type C, F, and G.

5

Price: PPP -35 (%relative to USA), CPI 2012 =726.3 (USA 98.1), GDP $1.212 trillion,exchange rate $1 = 9717 Indonesian Rupiah,low to middle income.

4

Promotion: Translation to Indonesian, localmedia and newspaper advertising, direct mail,bus exteriors/shelters, bridges, TV ads. Brandloyalty and low interest rate highly valued.

3

Distribution: Required registration withagent/distributors, presence of corruption andassociating fees, import restrictions to certainports, geographical transportation difficulties.

4

*Based on a scale of 1-5, with 5 being the highest for adaptation.


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References


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Index

Total Demand of the Durable Based on possession data =

Demand for the durable using chain ratio method =

Total Households (000) in Indonesia

Demand for the durable using method of analogy =

Total households ('000) in Indonesia( ) 100

Average demand for the durable = Average (Total demand of the durable based on possession

data, Demand for the durable using chain ratio method, Demand for the durable using method of

analogy)

Trade Balance = Exports + Imports

FDI as a percentage of GDP =

Foreign exchange reserves as a percentage of GDP:

Exports as a percentage of GDP =

Imports as a percentage of GDP =

Foreign exchange reserves as a percentage of Exports =


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Foreign exchange reserves as a percentage of Imports =

AVG = Average of data from 2007 to 2012

Compounded Annual Growth Rate (CAGR) = ( ) - 1

Std Dev = Standard Deviation of Data from 2007 to 2012

Determining price (using CPI formula) =

marketing analysis of indonesia concerning microwave ovens

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