Market entry strategy for exports to Indonesia

If Indonesia is a relatively unknown market for you, you need a clear market entry strategy. This may be different from the strategies you have used so far, as the market structure and the competition is different.

Key in your market entry strategy is some market research. Of course there are reports on market size and market growth, but often these are general. Specific knowledge on how your product is perceived and what your competitions is, is harder to get but more valuable.

Oppportunities for international business in Indonesia

Indonesia is called the Emerald of the Equator for its sheer tropical beauty. Being a collection of about 18,000 islands and located in Asia, Indonesia is the world’s largest archipelago. The Indonesian government is a presidential representative democratic republic, whereby the president is both head of state and head of government.

Ranking 114th in the world in the ease of doing business, Indonesia imports goods and services worth approximately a quarter of its GDP.

While Indonesia is open to trade and foreign investment, business deals must follow proper due diligence process to ensure smooth sailing later. Enforcing of cursory contracts is not easy, and diligent pre-contract research is required to realize the vast International Business Potential that Indonesia offers.

What are business opportunities in Indonesia?

With a multi-billion dollar international trade, the Indonesia international business sector offers several business opportunities. With regular trade fairs and business information updates, the Indonesian government and industry tries to provide a friendly environment for foreign business to explore business opportunities.

Where the action really is – international business and Indonesia

The top 5 imports into Indonesia are:

Oil
Machinery
Electronic Equipment
Iron and Steel
Plastics

What are Indonesia’s important events?

While Indonesia can be a great place with an international business culture for commercial opportunities, it is also a developing country. Income is distributed very unevenly and the people in Jakarta have the most spending power. Other big cities like Medan or Surabaja, or the touristic island of Bali follow. It is wise to start your commercial activities here. East-Java, South Sumatra and the other island have in general a poor population where only specific products would sell.

Diligent research, planning, and local partners are recommended to prevent complications later. Especially when dealing with the ‘grey’ economy in Indonesia with all its personal relationships and favours this is essential. Business agreements have to be well researched and thought out before being formalized.

Five ways into a market

Your entry model decides your cost, your speed and how much control you keep: sell directly from home, work with an agent, appoint a distributor or importer, sell online, or open a local office.

Control and investment move together. Direct and online selling are cheap to start and easy to stop. A local office gives full control, but needs staff, registration and often a local company.

Most companies start light, prove that there is demand, and only then invest.

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Entering the market in Indonesia in three steps

Step 1

Validate the demand

Check market size, competitors and price levels, then speak with five to ten potential buyers. Their reaction tells you more than a general market report.

Step 2

Choose channel and price

Pick the entry model that fits your margin and your capacity, and calculate your landed cost: transport, duties, VAT and the margin the channel will take.

Step 3

Pilot, then scale

Start in one region or with one partner, agree what success looks like after six to twelve months, and expand the country plan only on those results.