The purpose of this analysis is to determine the feasibility of manufacturing and marketing shoes in Indonesia. By analyzing both internal and external business environment, this analysis provides a possible market prospect of shoe manufacturing in Indonesia. The company focused on children shoe manufacturing in United States. Based on the CEO’s mandate, the target market that could both support good working condition and maintain profitability.
Since the industry is labor-intensive, the market would have advantages of labor cost, industrial resources and investment environment to reach the business goal. Today, Asian countries, including China, Vietnam, India, Indonesia and Thailand provide more than 85% of footwear products for the global market. Asia becomes the center of the global footwear industry for its outstanding investment environment. That’s the reason we choose Indonesia as our foreign market. Indonesia is a democratic constitutional state with a presidential system.
After 2006, Indonesia maintained a stable political situation for Susilo inaugurated as the president of Indonesia. The government provided preferential policies of tax relief to attract foreign investment. Besides, there is also a lacking of sound law and the phenomenon of corruption is still common in Indonesia. The tax revenue of GDP is decreasing during 2007 to 2010 and could be continue to go down in the future years. In addition, the export or international trade tax rate of total tax revenue is less than 4% and stay in a low level in the last four years.
Economy in Indonesia is developing in a high speed. Indonesia has a stable bank system and the GDP keep a growth rate around 6% from 2007 to 2011. In 2010 the total GDP exceeded $700 billion and the growth momentum will continue after 2011. The rate of experts of total GDP stayed in stable level of about 30% in recent years as well. Manufacturing is the third highest value industries of Indonesia but the industry infrastructure is backward. Indonesia has a rich resource of labor force and the rate of unemployment continued to decline in recent years.
The total population of Indonesia is 2. 42 billion in 2011 and that would keep increasing. Also the growth rate is 1. 1% in 2010, higher than the average rate of Asia area. Even though the education level is low, 59% of Indonesia’s labor is only primary education level and only 5% are above the high school level, the average level of working wage in Indonesia is the cheapest compared to other Asian countries. Indonesia would have sustained economic growth based on the growing GDP as well as an increase income level per capital.
The financial risk for foreign investment is low for its stable federalized banking system and sustained economic data. The cheap labor force is the main advantage of Indonesia. The growing population provided rich labor resources. Also the increasing GDP and population together could enhance the ability of domestic purchasing. In addition, there could be a waste or loss of capital because of the backward infrastructure and political disturbances.