Indonesia – An Exciting opportunity for European Companies expanding in Asia
Category: Column By : Marco Noto La Diega Read : 256 Date : Friday, June 02, 2017 - 16:28:36

For any European company willing to expand in Asia, Indonesia is an essential market to consider, perhaps even the main market. However, properly assessing and seizing the opportunities Indonesia has to offer requires careful preparation and patience in order to overcome the considerable complexity the country presents.

Let’s start with extensively available data, a key to illustrating Indonesia’s strategic role in itself and within the enlarged ASEAN commercial area: Indonesia is the largest economy in Southeast Asia, a G-20 member, the world’s fourth most populous nation with more than 250 million inhabitants and a nation showing a steadily growing GDP per capita trend. In two-wheeled automotive terms—my industry of operation—Indonesia represents a strategic market of 5.9 million units as of 2016. Even though it has seen a contraction over the past few years, the digits remain bigger still than those of the European market, where the automotive industry is constrained by certain local economies undergoing periods of recession.

The country is making progress in poverty reduction, infrastructure development and in developing social assistance programs. It is a young population, very digital-oriented, enjoying an emerging middle-income class promising an affluent consumer base for premium and alternative products.

It is very important for any incumbent company to interpret and listen to the traits of the Indonesian market and its needs, as it will enable such companies to model the most suited market entry strategy. Inability to take advantage to such traits risks seeing companies rapidly lost in an immense market basin due to failure to define their means of differentiation.

To share my professional experience, Piaggio Indonesia has taken advantage of this opportunity by developing a new market of premium scooters and motorbikes, rather than going head-to-head in the established mainstream arena. Our brands are positioned in a niche segment of sophistication and lifestyle differentiation, giving many Indonesians an aspirational and iconic status symbol to stand out.

To effectively listen to the market, one must acknowledge that most Indonesians belong to at least one community. Therefore, all brands should reach out and nurture strong ties with their community to stimulate a strong brand catalyst. At Piaggio, we have implemented such ties in Indonesia, enabling us to develop the second largest Vespa community in the world, after Italy.

There are also considerable challenges, which, despite being largely known, are sometimes not properly weighted by European companies when designing market penetration strategies:

Indonesia’s size means European companies must be prepared to operate in a market of dimensions even beyond the EU’s and must be ready to handle the associated logistics and cultural challenges. Indonesia is certainly not just the Bali all Europeans know. Indonesia is not simply Jakarta, a capital of headquarters, and nor is it simply Java, a region where the majority of business is concentrated. Indonesia is a dynamic country composed of many more tier-two and tier-three cities with many affluent consumers who need to be served through proper capillary operations and distribution networks. These same consumers require partners of different cultures with whom Europeans companies must fast learn to relate to. Selecting the right partner in each location is indeed a key to move forward—my advice is to constantly remember that your brand equity can be fast dissolved if you are partnering with the wrong hands. 



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