Question

Select ONE country in Southeast Asia (excluding Malaysia). Discuss the factors that need to be considered by the firms in the country if they are planning to operate globally.
[Total: 30 marks]

Answer 1

Indonesia is one of the country from Souteast Asia. It is known for its crude oil, natural gas, cocoa, coffee, medicinal and many other products worldwide.

A large number of factors have to be considered by an Indonesian firm, if it chooses to expand its business globally which are explained as follows:

A. Cultural Factors: these are the factors related to the culture followed in one's country. While, expanding business to the other country Indonsian firm should keep in mind the cultural factors of the other country too. It includes:

i) Taste - when an Indonesian firm chooses to expand its business to some other country, it should take care whether the product to be sold in the other country is as per the taste of that country's residents or not and make necessary changes to suit their tastes. It should choose that country where its products are accepted as favourable taste.

ii) Regional Values- while planning to expand business the companies should keep in mind the difference in regions of the various countries and prefer to sell their product to such country where it is regionally suitable. For example, selling cocoa and coffee to cold regional countries where it is widely used and accepted.

iii) Customer habits- selling a product by an Indonesian firm, it should make ensure that the country to which it is selling its products the consumer lying in that country are habitual of using that product. It is a very important determinant to expand business globally.

iv) Age of customers- while expanding business globally, an Indonesian firm must make ensure that the product which it is selling which belongs to a particular age group , that country must have enough proportion of that age group for product to be successful.

B. Economic factors- these are the factors that provide economy i.e. profitability to the firms. Before expanding business to other countries, an Indonesian firm should ensure those economic factors for expanding business globally which include the following factors:

i Economic stability- to ensure that the business operations take place with efficiency and regularly with smoother pace, with good financial flow.

ii Good Per Capita income -to make sure that the product earns a good profit with lower cost production benefits.

iii Greater Demand and Supply possibilities- to make sure that the country to which the business is to be expanded has greater potential for the Demand and Supply possibilities of the product in that country.

iv Banking and financial services- to make sure that the country to which Indonesian firm wants to expand its business have such facilities to enable smooth flow of finance and avail other benefits like loans etc.

C. Political Factors- it is one of the important factors to considered before expanding the business to any country. It refers to the political conditions and rules, regulations prevelant in a country. It includes the following:

i Laws- these are the regulation and rules prevelant in a country. An Indonesian firm should select the country that have allows foreign companies to do business with ease.

ii Licensing and Permits- an Indonesian firm should also keep in mind the various licensing and permit regulations to be followed while expanding its business to other countries. It should choose the country which have ease in obtaining license.

iii Fees- it is the amount which is paid for entering into a foreign market. It is treated as one time payment. An Indonesian firm must assess the fee structure of various countries and should select the countries having lower fee structures and greater return potential.

iv Taxation- it is the amount paid at regular intervals to the goverment in regards to sale of the product. An Indonesian firm should closely study the tax structure of the potential countries before expanding the business and should select the country that imposes lower taxations to be able to earn greater returns.

D. Other factors- some other elements to be considered before expanding business globally are important to take into account. It includes:

i Ease of doing business- the firms should make ensure that the country to which it is planning to expand its business have the ease and access in doing business. It is very important determinant.

ii Stability in country- country should have stable conditions. Instability like natural calamities, wars, attacks if happens in any country, then it is better to avoid that.

iii Investmental Restrictions- some countries impose restriction on the investment limit. Some have lower limits while some have greater. Before expanding the business globally, Indonesian firms should closely study these limits and invest in country that have greater limits to invest. It is very important factor to consider for expanding business globally.

Therefore, these are the various factors that Indonesian firms should consider to expand business globally.