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Name ID

Najia Akter 1512725030


(Motivator)
Md. Junayed Amin Shuvo 1610464030
(Compiler and Designer)
Atika Hossein 1620524030
(Group Leader)
Elma Hoque 1620040030
(Writer)
Ayesha Feroz Roza 1711541030
(Researcher & Editor)
Expansion of Business in
Indonesia
21st December 2019

To,

Tanya Ahmed (TYA)

Department of management

North South University

Subject: Submission of group report on expanding business in Indonesia.

Dear Madam,

We are presenting you a report on expanding business in Indonesia which has been finalized after
your permission. We have tried to apply our learnings, which have been taught to us by you in
class. We hope that, you will like our effort and believe that, you will be always there to help us.

We have tried to create a good report and if any more information you need, regarding the report,
we will be more than happy to provide you the information.

However, if you have any questions about this submission or if any additional information is
necessary, you may reach us at amin.shuvo@northsouth.edu

Regards,

On behalf of Group Roaster (Indonesia)


Acknowledgements

Working on this report was very exciting and we learned a lot from our experience. However,
Many people have helped us with any suggestions and references. We would like to thank them
from the heartily from everything they have done for us.

The report would not have been completed without the help and instruction of our dearest and
honorable Ma’am Tanya Ahmed. Her instruction was very essential to our work and she was really
helpful during the office hours.
Table of Contents
Introduction ................................................................................................................................1
Research Methodology ................................................................................................................1
History ........................................................................................................................................2
Country Analysis ........................................................................................................................3
Economy .................................................................................................................................3
People .....................................................................................................................................3
Currency .................................................................................................................................4
Climate ...................................................................................................................................4
Food Culture ...........................................................................................................................5
Religions .................................................................................................................................6
Natural Resources of Indonesia ...................................................................................................7
7Ps analysis.................................................................................................................................8
Logistics ................................................................................................................................... 12
SWOT Analysis of MDO .......................................................................................................... 12
Competitors .............................................................................................................................. 13
Government rules and regulations ............................................................................................. 14
Business Culture ....................................................................................................................... 14
Staffing ..................................................................................................................................... 16
Recommendation ...................................................................................................................... 18
References ................................................................................................................................ 19
Introduction
This undertaking, authorized by the CEO of MDO Inc., Mr. Mark Orr. Of MDO Inc, situated in
Grand Rapids, Michigan, is to dissect developing markets and an appropriate area to grow the
matter of the organization. As an unmistakable Food and Beverage organization concentrating on
bakery items, MDO Inc. is notable all through the USA in the Bakery Business for its proficient
and imaginative items like Trimasu, Chocolate Mousse, Donuts, Molten Lava Cake, Churros
Cookies Pies, Macaroons, Frappe, Kitkat Brownie Shake and so on. During this snapshot of
budgetary strength and development, MDO Inc. needs a key choice to extend to worldwide market
and which market to enter.

We will be naming our brand as “Kue-Kerajaan” which means Cookie/Pastry/Bakery-Kingdom.

Research Methodology
To find out the feasibility of expanding business in Indonesia, we have done our research on online.
Our aim was to identify and understand the overall probability of expanding business in Indonesia.
So, the information that we have used to prepare this report is from secondary source.

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History
40,000 years ago, Indonesia was connected to Asia by a land bridge when the sea level was lower.
After last Ice Age hit, the new Indonesia rebirthed. Now, Indonesia is consisting of 17,000 islands
and the homeland of diverse culture and indigenous beliefs. Indonesia has
the history of being inhibited by early ancestors, the discovery of fossil
‘JAVA MAN’ is the symbol of it. Indonesians, along with Malaysians and
Filipinos, are thought to be the descendants of migrants that arrived around
4000BC. In 2003, the discovery of a small skeleton named ‘the hobbit’ added
a new piece to Indonesia’s evolutionary jigsaw.

The Dongson culture which took birth in Vietnam and China spread to Indonesia which brought
the tradition of rice irrigation, husbandry skills, bronze casting and weaving methods. The original
antecedents of Indonesia were animalist- who believes has a soul or
life source. Therefore, they used to show honor to the dead, also placed
weapons and utensils in their tombs so they could use in their afterlife.

Indonesia emerged as a united and thriving country after gaining independence from foreign
colonization and both World Wars. During World War II, the Japanese invaded and occupied
Indonesia. In 1945 the Japanese set up a committee of Indonesian Nationalists, which outlined the
geographic boundaries of a future independent Indonesia. In same year, Japanese which paved the
way for Indonesian independence. It is uncertain how the Hinduism and Buddhism arrived here.
Islam in Indonesia was first found in northern Sumatra brought by the Arab traders. The Hindu
and Buddhist belief combined to a new Islam which is different from orthodox Islam found in
Middle East.

Indonesia is a constitutional democracy. The fall of Suharto’s New Order marked the beginning
of the Reformation period and every election after that is regarded to be
free and fair. Although not completely corruption free and money-
politics can be utilized to buy power or political positions. New Order
regime, in 1998, and various constitutional amendments were made in
order to reduce effective power of the country's executive branch, thus
making a new dictatorship almost impossible.

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Country Analysis
Economy
The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300
ethnic groups. The country’s GDP per capita has steadily risen, from $823 in the year 2000 to
$3,932 in 2018. An emerging lower middle-income country, Indonesia has made enormous gains
in poverty reduction, cutting the poverty rate by more than half since 1999, to 9.8% in 2018.
Despite heightened global uncertainty, Indonesia’s economic outlook continues to be positive,
with domestic demand being the main driver of growth. Supported by robust investment, stable
inflation, and a strong job market, Indonesia’s economic growth is forecast to reach 4.9% in 2020.

In such a flourishing economy, the bakery industry is expected to kick off even more. PT Kaneka
Foods Indonesia (KFI), the JV Mitsubishi Corporation and Kaneka Corporation is expected to set
up a new factory to meet the rising demand in the nation’s bakery markets. The consumption of
baked goods has been showing a compound annual growth rate of 5%. It is observed that Japanese
style attractive confectionary is highly demanded in Indonesia.

People
Indonesians (Indonesian: orang Indonesia) are residents of Indonesia, paying little respect to their
race, ethnicity or religious foundation. There are around 300ethnicity in Indonesia, a multicultural
archipelago nation with an assorted variety of
dialects, culture and religious convictions. The
number of inhabitants in Indonesia as per the
2010 national statistics was 237.64 million, and
it was evaluated to achieve 255.4 million out of
2015. 51% live on the island of Java, the world's
most crowded island. Around 95% of
Indonesians are Native Indonesians (once in the
past assembled as "Pribumi"), with Javanese
framing the greater part, while the other 5% are Indonesians with lineage from outside starting
point, for example, Chinese Indonesians.

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Starting at 2018, Indonesians make up 3.5% of world total population, and Indonesia is the fourth
most crowded nation after China, India and the United States.

Currency
The Indonesian Rupiah is the currency of Indonesia, a country whose first currency dates back
from the IXth century. The currency code for Rupiahs is IDR, and the currency symbol is Rp. The
first Indonesian rupiah was issued on the 3rd
October 1946, when the Japanese currency was left
unused, after being the currency used to trade with
Dutch settlements. This currency is named after the
currency of India. Many Indonesians call the rupiah
“perak”, which in Indonesian means “silver”.
Despite the hyperinflation, Indonesia has never renamed its national currency. The exchange rate
of 1USD=14016.05 Rp.

Climate
The main variable of Indonesia's climate is not temperature or air pressure, but rainfall. Indonesia
has an almost entirely tropical climate, with the coastal plains averaging 28°C, the inland and
mountain areas averaging 26°C, and the higher mountain regions, 23°C. The area's relative
humidity is quite high, and
ranges between 70 and 90
percent. Typhoons can hit the
Islands of the Indonesia
between September and
December, and can cause
rainstorms and heavy winds.
Lightweight cotton clothing is
advised throughout the year,
with an umbrella or raincoat for sudden cloudbursts. A sweater is needed in the mountainous inland
areas. No matter where you go, be prepared for high temperatures and humidity.

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Food Culture
Indonesian food comprises of the different provincial cooking styles in parts of Indonesia; there
are a wide assortment of formulas and cooking styles partially in light of the fact that Indonesia is
made out of roughly 6,000 populated islands of the complete 17,508 on the planet's biggest
archipelago, with in excess of 300 ethnic gatherings
calling Indonesia home. Numerous provincial
cooking styles exist, regularly dependent on
indigenous culture with some remote impacts.
Indonesia has around 5,350 customary formulas, with
30 of them considered the most essential. Indonesia's
food may incorporate rice, noodle and soup dishes in humble nearby diners to road side bites and
as much as possible plates.

Indonesian cooking changes incredibly by locale and has a wide range of influences. Sumatran
food, for instance, frequently has Middle Eastern and Indian impacts, including curried meat and
vegetables, for example, gulai and curry, while Javanese cooking is for the most part indigenous,
with some trace of Chinese impact. The foods of Eastern Indonesia are like Polynesian and
Melanesian cooking. Components of Chinese cooking can be found in Indonesian food:
sustenance’s, for example, noodles, meat balls, and spring rolls have been totally absorbed.

Indonesian food regularly exhibits complex flavor,


gained from specific fixings and bumbu flavors blend.
Indonesian dishes have rich flavors; frequently
portrayed as exquisite, hot and hot, and furthermore
blend of fundamental tastes, for example, sweet, salty,
acrid and severe. The greater part of Indonesians season
hot and zesty nourishment, along these lines sambal,
Indonesian hot and hot bean stew sauce with shrimp
glue, is a staple fixing at all Indonesian tables. Seven principle Indonesian cooking strategies are
fricasseeing, flame broiling, simmering, dry simmering, and sautéing, bubbling and steaming.

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Religions
Nearly nine-tenths of the Indonesian population professes Islam. There are, however, pockets
of Christians scattered throughout the country, particularly in Flores, Timor, northern Celebes, the
interior of Kalimantan, and the Moluccas. Most are Protestant or independent Christian and the
remainder are mainly Roman Catholic. Many Chinese in the cities are also Christian, but some
follow Buddhism or Confucianism, sometimes blended with Christianity. Hindus account for less
than 2 percent of all Indonesians, although Hinduism is the dominant religion on Bali and has
many adherents in Lombok. Local religions are practiced in some remote area.

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Natural Resources of Indonesia

Indonesia is a nation with the incredible of potential for its natural assets. It mainly has tin, gold,
natural gas, coal, nickel and copper. Silver, bauxite and petroleum are also available in smaller
quantities.

The Mining Industry


The mining industry sector is one of the largest industries in the country Un-expected mineral
deposits support it. The nation’s mineral resource subordinated by natural gas and crude petroleum.
Other major mineral exports include coal, nickel, and bauxite, gold, tin and copper. Oil and natural
gas accounted for over 90% of the USA $10 billion in exports in 1989. The country is developed
by the domestic processing of mineral wealth.

Oil
The Royal Dutch Shell Company dominated to its oil by
investigation in the early years. It was the first oil explore
company in 1890, but the competitors Caltex the duri and
minas oil had field. The government stiffened terms of the
contract and increasing the benefits of the gas company. The nation had 5.14 billion barrels of
proven oil reserved in the 1990s.

Natural Gas
Indonesia is the leading producers of in liquefied natural gas in the world. P.T Arun plants which
condense natural gas through refrigeration to enable shipment through tankers and the export of
the liquefied natural gas is facilitated by P.T. Badak. The country export revenue around $3.7
billion.

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Coal
Indonesia has an estimated 4.2 billion tons of proven coal reserves. Most of the reserves are found
in Easter and southern Kalimantan and southern Sumatra.

Copper
Indonesia is currently the 5th largest producer of copper globally. Grasberg and ersberg areas
probable reserves of copper and it is the national copper reserves areas which are home to 15
billion tons of proven.

Blessing of abundant amounts of natural resources about 11.2% of Indonesia’s population lives
the below the poverty line.

7Ps analysis
Product
This restaurant will provide 25 types of baked items include cookies, cakes, pastries, brownies etc.
This is different from others because this restaurant provides different shapes of cookies according
to the trend or some movie characters. The best-selling product is the black forest cake. Some
fancy cakes are made occasionally. The rolls are mostly filled with various fruits, chocolate or
cheese according to the customer’s choice.

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Price
The price is very reasonable. People from all class can
afford the products in a low cost with great quality.
Before finalize the price, the shop analyzes the market
demand. The price of each product is less than our
competitors. We analyzed the competitors’ market and
then decided to keep the price range between Rp.10.000
to Rp. 400.000 depending on the type of baked products

Place
The shop will be located in the most hyped place of Indonesia which is Jakarta. Some popular
tourist place such as Bali is also suitable for conducting business. So, the shops will be located in
those two places because there the number of customers is huge and the restaurant can target them
all.

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Promotion
For promoting the product both the online and offline promotion strategies will be used. The
customers will be influenced to buy the product if the promotional activity is effective. Some
promotional techniques which are used by this shop are:

• Advertisement in the newspaper, billboards.


• Personal selling.
• Sponsorship of a sports or an event.
• Promotional campaign such as happy hour, discounts, student offer etc.
• Use the word of mouth method.

Advertising of the business


Foreign parties who want to invest in Indonesia directly then they must follow the rules for foreign
direct investment. To engage in business in Indonesia firstly establish a limited liability company
with follow all of the rules of foreign investment. The advertising business media ensure various
advertising service such as:

• Placement of advertisements in newspaper, magazines and tabloids, radio, television, the


internet and other media.
• Create the advertising fields. Such as bulletin boards, panels, posters and pictures, circulars,
brochures and showroom designs for our business advertising.
• Creation of a booth and similar structures, other exhibition and other advertising services
in order to get and maintain the customers.
• Social media is powerful platform for advertising. In this time people always use different
types of social media like Facebook, Twitter, Instagram and so on. And now all most all
brands are spending their time browsing their social media pages for increasing their brand
awareness to all. And we can't forget about the YouTube because for the modern time
YouTube is one of the most popular platform to show companies advertisements to all.
• Create billboard because it can gain attention when people pass from the way. Then they
can know about our subsidiary.

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• Make poster & leaflets which give the knowledge about our subsidiary. They also distribute
leaflets to our target customers.

Process
As the aim is to provide healthy and hygienic food all the process is maintained very carefully.
The process is visible to the customers so that they can see what ingredients are used and how
hygienic the foods are.

Physical evidence
Physical evidence is very important to attract the customers. Most of the people in Indonesia are
relaxed attitude to their time management. So, they are not in hurry when they are in a food shop.
The shop is well decorated with some Balinese art and there is a touch of nature. There is a comfort
sitting zone where people can spend good time with family and friends. Sometimes soft music is
played from a rich music

People
In the previous period, people are not willing to pay much in eating. But at present people like to
spend more for tasty and healthy food items. All kinds of people including the tourists come to
visit our shop. People come with family or friends for hangout or for having some healthy food.
All the staffs are very friendly and try to satisfy all the customers by giving good service.

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Logistics
Our bakery will have our own transportation system and we have 10 vehicles for our 3 outlets. It
helps us to reduce our logistics and transportation cost. By this, we can also ensure the safety and
timely delivery from our factory to outlet. All our customers will buy our products from our outlets
and for the rural areas we will deliver our products to them basis on their order.

For making the cookies some of the ingredients will import from other countries by using shipping
or air service. If the distance is far away then it is better to use the air service because it is cost
effective and there are no issues in discharging or license. We will serve our customers from our
outlets and will make the bakery items in our restaurant. So in Indonesia we may face two kinds
of logistic problems, one is the license issue which can be solved if we take the license and use air.
Another one is the time, because sometimes it takes too much time to deliver or receive products
from another country.

It is not easy to a foreign company to invest in Indonesia if they don’t have experience and good
network. As ours is an experienced company with good network, it is easy for us to conduct our
business there. We are maintain our business there as a representative office. We don’t have any
minimum capital requirement or ownership restriction.

SWOT Analysis of MDO


Strengths Opportunities
• Good brand image • Increasing product line.
• Unique shape and different taste. • Networking.
• Good quality cookies in low price. • Large target market.

Weakness Threats
• Lack of communication. • Huge competitors
• Fail to deliver products in local • Cultural barriers.
areas on time.

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Competitors
Indonesia is a tourist palace. Many country people are going there. Pastry is the famous cake in
Indonesia. we have a hug competitor because there has a big mall in Jakarta city there is only
pastry shop and its shop market called the pastry market. Here is the name of 5 competitors

1. Francis Artisan Bakery (Jakarta)


2. The Harvest Cake Sunter (Jakarta)
3. Paul Bakery plaza (Jakarta)
4. Tara Belle Donuts (bail)
5. La Maison Grand (Jakarta)

So, the demand for this shop and the overall threat of substitute product or services is quite high
in Indonesia. Indonesia is a natural resources-based country. This beneficial thing would lead
Indonesia to have the great positions for economy. Besides, the tremendous economy growth in
Indonesia could be one support to create a business in Indonesia. This country is also considered
as one of the leading ASEAN markets. And you know that Indonesia is a populated country and

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here we will run our bossiness properly because to run a new start up business there is no political
handicap in there. So, after analyzing those issues we will run there a new Bakery business.

Government rules and regulations


We know that Indonesia is a Muslim country and they have a huge number of
Muslim populations. So, starting a new Bakery business in here we must have
concerned about their food habits. The Indonesia government maintain a
special cater for halal diet here halal diet means permitted or lawful foods by
Islamic sunnah. They have strict restriction on food preparation. The halal products for
consumers protection Act No.8 of 1999. Law no.66 of 1999 on labelling and advertising. We need
to get a certificate from the Indonesian Council of ulama to promise of producing halal foods.
When we establish our bakery, we need products guarantee certificates.

Business Culture
Indonesians typically talk in high context that is they do not
convey their messages directly. This implies they do not
generally say what they mean. It is relying upon the
audience to figure out the real story to get the genuine
message. It might seem inappropriate to individuals who
talk in loud tone. On the other hand, Americans might speak
at higher volumes in public spaces.Since business is
considered personal in Indonesia, it requires time to build a
strong relationship. Whereas, USA do not approach
business relationships with the hopes of developing
friendships out of them, but rather aim to generate money
out of them. Indonesians prefer doing face-to-face business.
They do not like unnecessary show-off and would not tell
anything directly if something offends them.

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Meeting & Greeting
In initial business meetings, Indonesian will try to get-to-know-you rather than discussing anything
regarding business. However, American began business conversation almost immediately when
every member in meeting arrives. Make sure to greet individuals starting from eldest or most senior
person. They begin greeting with soft handshake saying ‘Selamat’ sometimes followed by a soft
bow. The exchange of business is performed after greeting. Translating business cards in Bahasa
Indonesia can help acquire positive impression which is not required in America.

Hierarchy
Hierarchy plays a great role in Indonesian culture. The country’s business culture is extremely
hierarchical and superiors enjoy enormous deference. Decision making is a very slow and
deliberate process in Indonesia. Superiors tend to behave in paternalistic ways. Seniors are often
called "bapak" or "ibu", which means the equivalent of father or mother, sir or madam. Although
top personnel make business decisions, group discussions and consensus are equally important to
Indonesians to maintain strong relationships.

Communication Style
Not everyone in Indonesia can speak fluently in English, therefore translator is needed. For
business purpose, English needs to be used in a very friendly way. Indonesians do not like voices
being raised. Also, they do not like to show emotional feelings in public. Indonesians do not prefer
to directly say ‘No’ to express disagreement. Bahasa Indonesian actually has 12 ways of saying
"No" and several other ways of saying "Yes" when the actual meaning is "No"!!

Business Clothing
While attending normal business meetings, it’s appropriate for men to wear western business attire
of suits with ties and women are preferred to wear skirts and blouse. Due to Muslim culture,
women should not wear revealing clothes. Women should ensure that they cover from ankle to
neck. Whereas, the U.S. offers the widest range of different business dress code.

Religion
Religion plays an important role in Indonesian business. Hinduism, Christianity, and Buddhism
all have substantial followings in Indonesia, but for the vast majority of Indonesians. Islam is so
widespread; its major holidays are state holidays and its calendar is observed nationwide.

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Moreover, Islamic bans on activities (alcohol consumption, for example) affect some areas of
business. Finally, the Friday service at the mosque is one of the main areas for solidifying business
relationships—a resource often outside of the reach of the non-Moslem foreigner.

US-Indonesia Relations
Indonesia plays a crucial role in Indo-Pacific Region which made US-Indonesia relation
increasingly important. In 2010, these two parties initiated a Comprehensive Partnership to foster
consistent high-level engagement on democracy and civil
society, education, security, climate, maritime, energy, and
trade issues, among others. Based on its success, in 2015 the
two countries upgraded the relationship to the U.S.-Indonesia
Strategic Partnership, extending cooperation to issues of
regional and global significance. Both countries are implementing strategies to strengthen
university partnerships and increase the number of American and Indonesian students who study
in each other’s country.

Staffing
“When the customer comes first, the customer will last.” – Jack Ma. For satisfying customers and
providing world class service, MDO needs to hire the right staff.

“A great employee is like a four-leaf clover, hard to find and lucky to have.” – Tammy Cohen.

Local employees are crucial for MDO as they will bring many benefits for trying to penetrate in
Indonesia. The most obvious one, of course, is mastery of Bahasa Indonesia. We will look for
bilingual staff which will help serving in a tourism country like Indonesia. We are going to hire
different type of staffs’ like- manager, chefs, serving staffs, cleaners and so on.

As manager is a very important position, we have to find most suitable person for this post for
each outlet. Because he is going to maintain and manage all the activities of his outlet. Another
benefit is the high cost of bringing foreign workers into Indonesia from USA. If the MDO want to
bring employees from their origin country then additional relocation costs like housing,

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transportation allowances, visa fees etc. would incur. The minimum wage rate is very cheap in
comparison to the wage rate of US.

How WE will hire


• Create job analysis and compose job Ads
• Select appropriate sources- newspapers, employee agencies, social media platforms etc.
• Assess Resume/CVs
• Shortlist applicants
• Advance to selection stage with chosen interviewee
• Carry out background, medical and criminal check
• Send official offer letter

Skill Required for Baker


• 2-year degree from an accredited university in Culinary Arts, Hotel and Restaurant
Management
• Strong communication, time and planning skills
• Ability to work in hot, tactic environment, stand, use hands and appliances for extended
periods
• Understanding of food safety practices

Due to Indonesia’s complex cultural, ethnic, religious and political system HRM does not have an
important role in business management. Therefore, MDO can adopt international or their own
companies HR policies. However, there are some laws which Indonesian government have set up
for employment laws. The equal treatment between men and women in job is given high
importance. Female workers at night shifts should be provided with food and drinks and morality
should be maintained. It the obligation of MDO to provide transportation to female workers at
night shift. As per Indonesian Employment Law there are 3 types of employment: fixed period
employment, permanent employment and traditional employment. The written employment
contract should be in Bahasa Indonesia.

We are looking forward to hire both full and part-time workers depending on their role and tasks
being performed. Part-time workers will be on the basis of hourly wage rate. The minimum wage
of locals varies by province, district and sector where the Central Java being the lowest paid

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province and Jakarta being the highest paid. As MDO is planning to open up 3 outlets in Jakarta
at the beginning, we need to pay a minimum wage rate of 3.94 million IDR per month. Other than
these, we need to provide paid annual leave of not less than 2 weeks. Those working part-time
should not work more than 7 hours per day and if they work the overtime rates should be higher.
The Indonesian sick leave payments are more generous than western countries e.g. 100% for first-
3 months.

Recommendation
To expand the business of MDO. Inc. Internationally, Indonesia would be a good choice for them.
The economic stability of Indonesia makes it a suitable country for operating international
businesses. The political situation of Indonesia is also under controlled which makes it a political
stable country. So, foreign companies can operate their businesses easily. Moreover, the labor
productivity of Indonesia is comparatively higher than those of its neighbor country due high
density of knowledge-based industries and adoption of cutting-edge technology for manufacturing.
So, MDO Inc. expansion to Indonesia would be a profitable move.

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References
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fyYfj6hGb9V4clM0vFXPi7Ns.
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6. Bread & Bakery Products - Indonesia: Statista Market Forecast. (n.d.). Retrieved from
https://www.statista.com/outlook/40050000/120/bread-bakery-products/indonesia.
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https://tradingeconomics.com/indonesia/wages-in-manufacturing.
8. Indonesia. (n.d.). Retrieved from http://www.foodbycountry.com/Germany-to-
Japan/Indonesia.html.
9. Putri, E. (2018, February 21). 11 Things You Should Know About Indonesian Culture.
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know-about-indonesian-culture/.
10. The Indonesian rupiah . (n.d.). Retrieved from https://www.globalexchange.es/en/currencies-
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investments.com/culture/religion/item69.

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