Anticipated Expansion of Blundstone Footwear Company - Book Report/Review Example

REPORT ON THE ANTICIPATED EXPANSION OF BLUNDSTONE FOOTWEAR COMPANY Management Blundstone is an Australian based company that deals in the manufacturing of footwear1. The organization was established in 1870 in Tasmania and has been in the business of manufacturing rugged, rural, outdoor and industrial footwear over the period2. The company is 100 percent private and best producing products in the line of lace less, elastic-sided, ankle-length boots. Its head office is located in Hobart, Tasmania. Blundstone comprises of a highly integrated faction of companies owned and run by a family which bought it in 19323. Although, the company has an outstanding reputation as the world most recognisable boot brands, it still remains Tasmanian and preserves its initial family values. The organization has not focused much to operate in other countries other than Thailand and India. For the long period it had been doing business, Blundstone has mainly ventured in Australia. However, it is presently considering establishing a manufacturing plant in Indonesia. In connection to this, before the company makes a decision on whether to venture in Indonesia, it has to examine the business environment in Indonesia. Thus, this report provides a critical analysis of the country’s internal and external environment. The content of this report will help Blundstone Company make a wise decision about venturing and operating in Indonesia. Essentially, this report entails the PESTEL analysis of Indonesia, SWOT analysis and the recommendations based on the findings of the report. A brief overview of Indonesia Indonesia is among the largest countries in South-eastern part of Asia. The country is situated between the Indian Ocean and the Pacific Ocean and majorly comprise of mountains. Further, it is mainly covered with rain forests, swamps and more than 13,000 islands. The country’s capital is Jakart4a. Indonesia, a country that previously experienced excruciating domination, gained its freedom from a resolute Japan in 1945. The country’s official language is Bahasa which is a modified type of Malay; however the language that is most used is Javanese. Muslim forms the largest population of Indonesia with more than eighty percent of them. In addition, the country has a considerably large trading environment, with a number of countries ranging in products from gas to textiles. The Indonesian population that live below the poverty line stands at twenty percent. Its PESTEL analysis Political and legal factors Indonesia is regarded as an independent nation. Its legal rules and regulations are grounded on the Roman-Dutch law. The country holds election after every five years in which fresh leaders are elected by way of direct citizenry voting. She has no any reported political violence implying that it enjoys political stability. The country has very enormous labour forces in the globe. In fact, it ranked fifth in labour force size. Indonesia has laws that guard the rights of this huge labour force. The government mainly makes these laws known as Labour laws Article 28D (2). The labour laws of Indonesia recognize the 7 hour workdays and 40 hour workweeks, with half an hour rest period for every four working hours5. In 1992, the country signed a memorandum of understanding with ILO under the umbrella of international program for the elimination of child labour under the 14 years of age. Indonesian company law is mainly obtained in its company law of 1995, which gives the most vital structure for the present legislation on corporate governance in the country. As per the company law, a company is a legal entity represented by directors and commissioners. All the companies must register their memorandum of act according the company act of Indonesia. Concerning the prime rates of lending, Indonesian commercial bank prime lending is quite friendly to borrowers. The commercial banks lending rates stands at 6.41 percent and that of their central bank is at 10.83 percent. Moreover, the country has laws that protect the environment. The main body mandated to ensure environment laws are followed is the Indonesian Environmental Agency. For example, Municipal Noise Reduction Plan puts noise limits like in areas of housing occupancy, schools, religious centres and hospitals6. Another vital law that is worthy to take note is business taxation laws. The taxation system has a number of rules and regulations. For instance, the taxation rates of income of 25 million income stands at 10 percent. Economic factors The country falls under the category of developing nations. Indonesian GDP growth has been on the sharp rise within the past few years due to its government policies and treasure of national resources. Indonesia spends more than 23 percent of her GDP in nation building and development7. The country has a hub of natural resources like the oil resource, natural gas among others. Indonesia has made some huge economic progress over the past few years. Her debt to GDP ratio in last few years has gone down due to the increasing strong growth of its GDP which stood at 6.1 percent in 2008. This trend shows an improvement when compared to that of 2006 which was 5.5 percent. The country got ranked at position 54 in terms of GDP growth in the world. Moreover, the country has a quite impressive per capita income8. Her per capita income in 2008 was $ 3900 and ranked number 157 in per capita as per the World Bank. In a similar way due to an improvement on economic growth in terms of productivity and good policies of the government, Indonesian export has also been on a sharp rise. The country mainly exports goods such as oil and natural gas, electrical appliances, textiles and rubber. Social factors The country has a huge population, which is steadily increasing. Indonesia has a total population of 240, 271, 522, which is placed at the 5th position all over the world and its rates of growth stands at 1.13 percent. The country birth rate is 18.840 per 1000 persons and the rates of mortality stands at 29.300 deaths per 1000 persons9. Her rates of life expectancy is 70.76 years and more than half the population dwell in the urban areas which are rising at a rate of 3.2 annually. Additionally, the country population is majorly comprised of the youth10. The aggregate median age is 27.60 years in which male have a median of 27.1 years and women 28.1 years. The country has a good rate of literacy. The percentage of the population that is educated in Indonesia stands at 90.4 percent. Indonesia is a multi culture and religion nation. People from diverse religion background work in the country but the most dominant religion is Islam, comprising 86% of its population. Technological factors Indonesia has effective and well developed system of transportation with 139 airports, railway networks of 8529 km and water ways which coverers a distance of 21579 km. In addition, the country has a communication system that is considered as highly developed. More than 17 million of its population have access to landlines while those using cellular mobiles are estimated to be 83.3 million11. The internet users figure stands at 13 million people. This statistics is a good indication of a country with a prospect to do business in. Environmental factors The geographical environment of Indonesia is the most complex and the most diverse in the globe. The country is located between the Indian Ocean and Pacific Ocean. Its total area is 1,904, 569 square km, 1, 811, 569 square km is land and that covered by water is 93,000 square km. The country is also covered by several island and covered by rain forests as well as mangrove trees and arid plains and snow capped mountains. Indonesia SWOT analysis Strengths The rich culture of the people of Indonesia attracts abroad connections and the low costs of production in the country are an advantage to her. The other aspect that promotes business in the country is the sustained economic growth. The country has a huge potential market with its population of 220 million people. Indonesia has plenty wealth of natural resources and the potential to scale up development resources is quite fast12. The country is strategically vital such that it can count a significant foreign government and multilateral support. Weaknesses Corruption and too much bureaucracy make the country a very challenging place to operate a business13. These two issues heights the cost of doing business. Another difficulty in establishing business in Indonesia is the weak system of education, which translates to poor skills among the labour force. Opportunities Looking at the country’s external factors, the domestic population size and the prospect market and expansion of subcontracting market are attractive aspects for business. Moreover, the other good factor for operating the business in the country is the relatively high diffusion of the social network. The capital city of the country stock market has set an objective of taking more than 75 companies’ public and to increase the capitalization of the market by $ 300 billion. This initiative will, therefore, spur even more the inflow of capital. Threats Deficiency in established career paths, insufficient promotion of talent training and education and lack of good will from the government for content distribution and raising funds are major constraints for new businesses. Corruption and the inertia in the bureaucracy also pose huge threats to foreign companies in Indonesia14. The labour union in the country can agitate for unreasonable demands and the county legal system does not provide much protection. Recommendations Blundstone Company can opt to operate in Indonesia to take advantage of the huge market provided by the country population. The industry in which Blundstone Footwear operates does not face many challenges in Indonesia. Although, corruption and bureaucracy is a major issue the revenue that the company will collect from operating in the country will be significant enough to take covered the costs due to such. Bibliography Batra, Geeta, Daniel Kaufmann, and Andrew HW Stone. Investment climate around the world: Voices of the firms from the World Business Environment Survey. World Bank Publications, 2003. Blundstone. "Foreign Owned Company Registration In Indonesia." Indosight Blog. N.p., 2015. Web. 20 Apr. 2015. Craik, Jennifer. "Is Australian fashion and dress distinctively Australian?."Fashion Theory: The Journal of Dress, Body & Culture 13.4 (2009): 409-442. Lahi, L. "Foreign Owned Company Registration In Indonesia." Indosight Blog. N.p., 5 Jan. 2013. Web. 20 Apr. 2015. Morrison, Terri, and Wayne A. Conaway. Kiss, Bow, or Shake Hands: The Bestselling Guide to Doing Business in More Than 60 Countries. Avon, Mass: Adams Media, 2006. Rose-Ackerman, Susan, and Jennifer Tobin. "Foreign direct investment and the business environment in developing countries: The impact of bilateral investment treaties." Yale Law & Economics Research Paper 293 (2005). Van der Eng, Pierre. "Business in Indonesia: old problems and new challenges." Business in Indonesia: New Challenges, Old Problems (2004): 1-20. Read More