Indonesia - Cultural and Economic Analysis

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Introduction

        Indonesia is found as the best bet for Patanjali Ayurved, the Indian FMCG major, to enter because of the favorable factors the country provides in terms of high market attractiveness, high competitive advantage and low risk assessment. This section deals with the cultural and economic analysis of the country, to get insights that will benefit in developing marketing mix.

Cultural Analysis of Indonesia (For detailed analysis, refer to Exhibit 1)

        Indonesia’s second president, General Suharto set the country straight with a series of economic reforms, and outdid his predecessor, Sukarno’s policies. The results were evident from Indonesia’s GDP growth between 7-9% in the 1990s.The 15th largest nation in the world, the Indonesian archipelago includes 17000 islands. Its climate is majorly decided by rainfall. Parental roles play a major role in kids’ upbringing. Marriage and courtship is a family affair and the in laws are expected to be from the same social status and religion. Post liberalization, women of Indonesia have broken out of the shell and is more empowered.

        Indonesia’s education predominantly had been Hindu-Buddhist and Islamic, until the country’s independence. Now, it boasts of the fourth largest nation in the world. Post the fall of the 30 long year rule under the autocracy of General Suharto, the deepening politicization of the electorate has created greater expectations on its politicians. President is both the head of the state and government, and the state governments perform the administrative duties.

        Indonesia can be considered a Socialist country, with the rules typically having a flair of Islamic laws. The country’s mixture of races and subcultures is one of the reasons for rarity of social mobility. Also, the country is pretty collectivistic and has high power distance. And, religious considerations mark every decision to be made. Indonesian government recognizes six official religions: Islam, Protestantism, Catholicism, Hinduism, Buddhism and Confucianism, with Islam leading the pack. In fact, Indonesia is the largest Muslim nation in the world. The country favors arts and cultural activism, as the belief is that they foster freedom of expression and social and cultural exchange. The country is also home to hundreds of forms of music, and music is an important part of its culture.

While modern healthcare is limited to urban locality, traditional medicine is predominantly followed in majority of the country. And, despite the present of 719 individual languages, Indonesian is the only recognized official language.        Rice with meat, fish, eggs and vegetables is the main cuisine. Most houses being bamboo built, affluent houses are adopting the western model.

Cultural Analysis of Indonesia: Insights

        The cultural analysis holds significant implications for Patanjali Ayurved. The first of which is the language constraint which makes it mandatory for the firm to adapt its communication and packaging. Also, the predominance of traditional medicine should make the selling of the Patanjali Ayurved concept much easier. The favorable attitude towards art and art forms will be significant inputs to develop promotional campaigns. The Islamic vigor dominating spheres of life should be considered, in every step of marketing, in particular, because of the strong association of Patanjali Ayurved to Hinduism. 

Economic Analysis of Indonesia (For detailed analysis, refer to Exhibit 2)

Indonesia is the fourth largest populated country in the world with population around 255 million and is growing at 1.2 percent. The population is equally distributed according the gender and the region (rural – 47 %, urban – 53 %). The working population is continuously increasing which is around 67 percent and likewise, the dependence of non-working population is decreasing. The unemployment and inflation rate are 5.9 & 4.23 % respectively. The female labor force participation has been increasing. The current GDP growth rate is 4.7 percent. The total income held by the middle 60 percent is around 44 percent.. The BOP condition is improving where it has come down by USD 9 billion from 2014 to 2015. Its major exports include petroleum products whereas imports are Oil & gas, nuclear reactors, iron & steel, organic chemicals, automobiles etc.

There are no trade restrictions on cosmetics. The import duty rate for cosmetics is 10 percent with an additional VAT of 10 percent. The penetration of international brands is still less. The cosmetic industry is poised to grow at 10 -15 percent with skincare and hair care being the largest categories.

Indonesia lags in the transportation infrastructure and it is a main challenge. The quality of all the four modes of transportation isn’t very good and railways are the best form of transport. The Java port is very important for trade. FDI in transport and the communication sector where it is the third largest sector for FDI currently may improvise the situation. Infrastructure with related to communication systems is also improving and so is the smartphone penetration. The spent on research on science and technology is very less at 0.08 percent. The establishment of Indonesian Science Fund (ISF) in collaboration with the U.S by government in 2016 means there would be larger thrust in skilling the population in technology. English is the main lacked skill in Indonesia.