country Indonesia study
Mason Tompkins
MGT 4478
Dr. Wright
November 17, 2011
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In any growing economy, the construction sector is one of the busiest at any given time.
This is because it is involved in the construction of roads and infrastructure, building bridges,
homes, sky scrapers and many more these are the basic building blocks of the country. Infact, a
regular person rates the development of a region by how accomplished the structures and
infrastructure are, which are, among others, products from the construction company. For this
reason, it was wise to indulge in this lucrative business because its demand is always on the rise.
The business specializes in a wide range of products, from building low cost residential houses
for the rural folk to corporate offices in the major cities. Thus, the target clients vary from the
wealthy businessmen to the low income earners. Since there is a strong customer base in
America, going international could be the next venture. The exposure to the opportunities in
another country and learning new ideas from the companies already in existence there is a
positive move. This paper discusses about setting up and running a business in Indonesia, a
country in Asia.
When planning to invest in a given country in the world, there are quite a number of
research issues that need to be addressed before moving on to invest there. The political,
economic, technological and legal issues are the key issues that have an effect on business. By so
doing, it makes it easy to plan for business in terms of grabbing opportunities and being on alert
about the possible threats or challenges the business is likely to face. The business is only put up
in that part of the world after the findings of the research affirm that it can succeed and the
eminent challenges are manageable. Resources need to be allocated to enable agents to travel and
carry out research in the target country. Indonesia is a place worth considering in the quest for
going international in the construction business. The construction industry in Indonesia, thus, has
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to be studied in order for the management to be aware of the current situation they are likely to
face.
Currently, the World Bank ranks Indonesia as the 20th largest economy. It has come a
long way, after major challenges like the Asian currency crisis, the tsunami in 2004, and the
challenges of embracing the countrys democracy. Its vast population of over 237 million people
provide a rich human resource base to tap into. This is because there are many local Indonesians
who are well educated with skills and expertise to run a business. In addition, it has strong
natural resources and investment laws that are favourable to any willing investor. Its once
tarnished international image is being repaired, as there is a spirited fight against corruption.
Indonesias progress is so promising that Goldman Sachs report indicated that it could be the 11 th
largest economy in 2050. These positive attributes are encouraging, and attractive to business
people planning to invest (Business Advantage International, 2008, p.6). Indonesias
construction industry has also grown in the past decade, but its competitiveness is low. This is
attributed to unsuccessfulness in laying down strategies and policies for its development (Agung
et al, 2009, p.51). This issue can be capitalized upon to get into the market before it becomes too
competitive. However, it should be noted that the industry faces challenges that need to be
keenly scrutinized and a plan to overcome them drafted. One of the challenges is inflation in the
sector, caused by the rise in prices of materials used in construction. Cement prices have gone up
because of the high cost of distribution, coupled with the collusion of cement producers to reduce
the production and increase the prices. Despite the fact that efforts are being made to fight
corruption, there still lies a corruption threat, especially in the tendering infrastructure.
It is necessary to come up with the best strategy that will ensure that the company
succeeds in the foreign country. Gaining faith and acceptance from the local people and authority
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bodies is the major entry strategy to be applied. Knowing the needs of the potential customers
will enable the company managers to device a way of offering the best services that will fulfil
the customers needs. Since it is a new company among many already existing ones, the tenders
won by the company should be done in an exceptional way to attract good remarks, thus, a good
reputation of the company will be built. Another way could be through charging a relatively low
fund for clients as compared to the other existing companies. Since clients always tend to go for
cheaper products services, and this will attract a significant number of them. Being a new
company in the country, the managers need to make the best decision on where to locate it. A
strategic location that will make it accessible to as many customers as possible will be of
indispensable advantage. However, accessibility to other components like raw materials, labour,
social facilities and transportation needs to be considered. The materials needed in such an
industry are like cement, steel, sand, among others. For this reason, a location near a cement
factory and a steel factory is ideal.
The managers need to invest on advertisement, to make the company brand known
across the country. This is the known fastest and successful way of informing the public about a
product or service a company is offering. In order to have positive results, professionals in this
field, who know how best to present the idea to the public can be contracted. Social media
websites, the internet, newspapers, posters, radio and TV can all be used to advertise the
company. Utilizing the maximum channels possible increases the chances of the information
reaching even the most remote of the population. More of the targeted clientele is reached.
The high population in Indonesia, as mentioned before, provides a large resource for the
labour needs. However, it is important to be aware of laws of labour in the country. Interviews
need to be carried out, in order to scrutinize and obtain the best people to fill positions in the
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firm. A study on the range of payment that the workers of the same level are offered in the host
country should be done. It will enable the human resource managers to give a reasonable
package, which will favour both the company and workers. A fraction of the management can
comprise of native Indonesians. Another fraction could be made up of people from the parent
company in America, whose duty will be informing the other managers on the values, strategies
and the companys principles. They need to be visionary so as to steer the new company to
positive heights. The other departments of the company, say, sales maintenance, engineering,
also have to be staffed with employees from both countries for the start (Export.gov, 2011). After
a predetermined period, when the managers are sure that the native staff has familiarised
themselves with the companys operations, the foreign employees, in this case, the American
employees can slowly be phased out, to create employment chances for the local people. This
strategy of creating employment for the native people can contribute in fulfilling the corporate
social responsibility of the company (Tzu 2011, p.19).
A cooperative relationship that will last for a long time is necessary, in order for the
company to get the support it needs for its success. Providing jobs for the Indonesian people will
help in fighting unemployment in the already densely populated country. Another way could be
by participating in projects that will improve the lives of the citizens. This can be done by
helping the needy, educating bright students from poor backgrounds and much more. The
environmental conservation efforts have to be put in place to prevent its degradation. No host
country can have a good business relationship with a company that degrades and pollutes its
environment. Each country has its own laws that govern running businesses or organisations and
they have to be followed to the latter. The managers need to make sure that the projects done by
the company are standard in all aspects possible, including their strength and aesthetic value.
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These are some of the basic things on which a good relationship with the host country is built
upon.
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References
Business Advantage International., (2008). Business Advantage Indonesia. Retrieved online
on 16th November 2011 from:
http://www.businessadvantageinternational.com/1_6_Indo08_climate.pdf
Agung et al., (2009). Competitiveness of the Indonesian Construction Industry. Retrieved online
on 16th November 2011 from:
http://web.usm.my/jcdc/input/JCDC%20Vol
%2014(1)/4_Agung%20(p.51-68).pdf
Export.gov., (2011). Political and Economic Environment. . Retrieved online on 16th
November 2011 from:
http://export.gov/indonesia/doingbusinessinindonesia/politicalandeconomicenvironment/i
ndex.asp
Streetdirectory.com. (2011). Avoid the Legal Pitfalls when Setting Up a New Business.
Retrieved online on 16th November 2011 from:
http://www.streetdirectory.com/travel_guide/159/business_and_finance/avoid_the_legal_
pitfalls_when_setting_up_a_new_business.html
Tzu, S., (2008)., Building Your CSR Business Strategy. Retrieved online on 16th November 2011
from: http://admin.csrwire.com/system/book_excerpt_pdfs/311/original/book_info.pdf
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