Case Study Description of Indonesia: Attracting Foreign Investment
Describes the economic development of Indonesia from independence after World War II to 2006 and the post-Suharto period. The coverage of the post-Suharto period provides evidence of how political and economic conditions are intertwined after a change in the political regime. Profiles the business environment in 2006, including a documentation of past and present policies that shaped the current situation. A particular focus is Indonesia's stance towards attracting foreign direct investment (FDI). The country has a checkered history of oscillating between seeking and fighting foreign investors. Provides a perspective on the relative importance of FDI policies, general economic policies and business environment conditions, and the nature of competition from other locations on FDI flows.
Authors :: Michael E. Porter, Christian H.M. Ketels
Swot Analysis of "Indonesia: Attracting Foreign Investment" written by Michael E. Porter, Christian H.M. Ketels includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fdi Suharto facing as an external strategic factors. Some of the topics covered in Indonesia: Attracting Foreign Investment case study are - Strategic Management Strategies, Competition, Competitive strategy, Emerging markets, Global strategy, Policy and Global Business.
Some of the macro environment factors that can be used to understand the Indonesia: Attracting Foreign Investment casestudy better are - – increasing government debt because of Covid-19 spendings, geopolitical disruptions, technology disruption, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Indonesia: Attracting Foreign Investment
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Indonesia: Attracting Foreign Investment case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fdi Suharto, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fdi Suharto operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Indonesia: Attracting Foreign Investment can be done for the following purposes –
1. Strategic planning using facts provided in Indonesia: Attracting Foreign Investment case study
2. Improving business portfolio management of Fdi Suharto
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fdi Suharto
Strengths Indonesia: Attracting Foreign Investment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fdi Suharto in Indonesia: Attracting Foreign Investment Harvard Business Review case study are -
Analytics focus
– Fdi Suharto is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Michael E. Porter, Christian H.M. Ketels can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Global Business industry
– Indonesia: Attracting Foreign Investment firm has clearly differentiated products in the market place. This has enabled Fdi Suharto to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Fdi Suharto to invest into research and development (R&D) and innovation.
Learning organization
- Fdi Suharto is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Fdi Suharto is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Indonesia: Attracting Foreign Investment Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Fdi Suharto has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Indonesia: Attracting Foreign Investment HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Fdi Suharto is one of the most innovative firm in sector. Manager in Indonesia: Attracting Foreign Investment Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Fdi Suharto has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Indonesia: Attracting Foreign Investment Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Organizational Resilience of Fdi Suharto
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fdi Suharto does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Fdi Suharto is present in almost all the verticals within the industry. This has provided firm in Indonesia: Attracting Foreign Investment case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Fdi Suharto is one of the leading recruiters in the industry. Managers in the Indonesia: Attracting Foreign Investment are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Fdi Suharto has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Indonesia: Attracting Foreign Investment - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Fdi Suharto has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fdi Suharto has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management
– Fdi Suharto is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Indonesia: Attracting Foreign Investment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Indonesia: Attracting Foreign Investment are -
Skills based hiring
– The stress on hiring functional specialists at Fdi Suharto has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Indonesia: Attracting Foreign Investment HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Fdi Suharto has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Fdi Suharto has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Fdi Suharto products
– To increase the profitability and margins on the products, Fdi Suharto needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Fdi Suharto has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Fdi Suharto even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High operating costs
– Compare to the competitors, firm in the HBR case study Indonesia: Attracting Foreign Investment has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fdi Suharto 's lucrative customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Fdi Suharto supply chain. Even after few cautionary changes mentioned in the HBR case study - Indonesia: Attracting Foreign Investment, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fdi Suharto vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Fdi Suharto is dominated by functional specialists. It is not different from other players in the Global Business segment. Fdi Suharto needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fdi Suharto to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Fdi Suharto has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Indonesia: Attracting Foreign Investment HBR case study mentions - Fdi Suharto takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Products dominated business model
– Even though Fdi Suharto has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Indonesia: Attracting Foreign Investment should strive to include more intangible value offerings along with its core products and services.
Opportunities Indonesia: Attracting Foreign Investment | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Indonesia: Attracting Foreign Investment are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Fdi Suharto can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Fdi Suharto has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at Fdi Suharto can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Using analytics as competitive advantage
– Fdi Suharto has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Indonesia: Attracting Foreign Investment - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fdi Suharto to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Fdi Suharto to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fdi Suharto can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Fdi Suharto can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Fdi Suharto can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Fdi Suharto to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fdi Suharto to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Fdi Suharto to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Fdi Suharto has opened avenues for new revenue streams for the organization in the industry. This can help Fdi Suharto to build a more holistic ecosystem as suggested in the Indonesia: Attracting Foreign Investment case study. Fdi Suharto can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fdi Suharto in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Fdi Suharto can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Fdi Suharto can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Indonesia: Attracting Foreign Investment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Indonesia: Attracting Foreign Investment are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Fdi Suharto will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Fdi Suharto is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Fdi Suharto needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fdi Suharto can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Indonesia: Attracting Foreign Investment .
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Fdi Suharto can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Fdi Suharto business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Fdi Suharto high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Fdi Suharto
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Fdi Suharto.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Fdi Suharto in the Global Business sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fdi Suharto in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Fdi Suharto needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Environmental challenges
– Fdi Suharto needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Fdi Suharto can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Fdi Suharto.
Weighted SWOT Analysis of Indonesia: Attracting Foreign Investment Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Indonesia: Attracting Foreign Investment needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Indonesia: Attracting Foreign Investment is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Indonesia: Attracting Foreign Investment is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Indonesia: Attracting Foreign Investment is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Fdi Suharto needs to make to build a sustainable competitive advantage.