Question

Emerging markets are often characterized by a lack of relevant market infrastructure
(institutional voids). What are relevant institutional voids for Jababeka and how the
company coped with these?

Answer 1

The emerging markets are often characterized by institutional voids — particularly in infrastructure, where governments have limited budgets and ability to provide basic public goods such as water, electricity, roads, and ports. The private sector can participate in infrastructure projects, which poses opportunities but also substantial risks. The case can be used to discuss this topic from the following angles: ·Strategy: As Jababeka pursues its industrial estate business, it sees opportunities in infrastructure development in Indonesia. Its decision implies a major strategic change, but it also faces considerable risks. The case offers an opportunity to review this strategic decision and understand the realities of emerging markets. ·Managing institutional voids in emerging markets: The case outlines a situation common to emerging markets — the economic development of a country leaves the government unable to catch up to provide public facilities to support economic growth. The resulting institutional voids provide opportunities and risks for players in emerging markets.

SWOT analysis of Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure can be based to make important strategic decisions and accomplish the business objectives. The four components of Filling Institutional Voids in Indonesia Jababeka’s Foray into Infrastructure SWOT analysis are given below.

I. Strengths of Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure

Ø The geographic presence in different regions can act as one of the major strength of the organization. It determines the business’s reached to the target market and ensures the easy accessibility.

Ø The wide product portfolio can allow the organization to expand the customer base and offset the losses from one product category with benefits obtained from the other.

Ø Strong online presence on different social networking sites and efficient social media management can enhance the effect of positive e-WOM and develop strong relationships with customers.

Ø Strong financial position and health can allow the firm to make further investments.

Ø Access to the suppliers that offer raw material at a lower cost can improve the overall business efficiency.

Ø The locational advantage can improve the competitive positioning of the firm in various ways, such as- lower cost, improved accessibility or enhanced brand image.

Ø The well-developed and efficiently integrated IT infrastructure can improve the operational efficiency and increase knowledge of the latest market trends.

Ø Competent and committed human capital can act as a powerful source of competitive advantage, particularly when business is service oriented in nature.

Ø High product quality increases brand loyalty and improves Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure's performance in a competitive market.

Ø Workplace diversity can also act as major business strength, particularly when the organization intends to operate in the international market.

Ø The horizontal and/or vertical integration can increase the control over whole value chain; result in improved access to raw material and quick product delivery to the final customer.

Ø An organization may own different intellectual property rights that can make the product offerings unique and exclusive, making it difficult for competitors to imitate.

II. Weaknesses of Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure

Ø The organization can draw the criticism from the environmentalists for its poor waste management practices and inability to integrate sustainability in business operations.

Ø The company may lose efficiency due to poor inventory management practices. The shortage or excessive inventory can either result into

Ø The cash shortage or insufficient current assets negatively affect the liquidity position and harms the overall business performance.

Ø Insufficient budget for the marketing and promotion activities weakens the firms’ ability to expand the customer base and encourage repeat purchase.

Ø Less expenditure on the research and development activities can weaken the company performance due to poor local/international market knowledge.

Ø The inability to understand customers’ needs and expectations lead to an ineffective strategic decision-making process. With this weakness, the organization may not be able to identify the potential improvement seeking areas in product/service mix.

Ø The prices charged by the business may not be perceived as justified when compared to the product/service characteristics. It indicates the need to revise the pricing strategy.

Ø The poor customer service (such as inefficient customer complaint handling) can trigger the negative word of mouth about the business and affect business growth.

Ø The decision making in the Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure takes too much time, causing expensive delays in introducing new products in the market.

Ø Poor project management practices can internally weaken the ability of the organization to successfully open new branches or expand the product line.

Ø Lack of organizational commitment and high employee turnover can increase recruitment costs and reduce organizational productivity.

Ø High job stress and consequent low workers’ morale makes the workforce less productive.

Ø The misalignment between the organization’s leadership style and its core strategic objectives can make the business organization directionless.

Ø Organizational culture also becomes a big internal weakness when it does not align with the strategic/business objectives. For example, the main strategic objective of the chosen business organization is to launch innovative and new products in the market. But there exists a risk adverse attitude prevailing in organizational culture, which discourages employees from thinking creatively.

III. Opportunities of Filling Institutional Voids in Indonesia Jababeka’s Foray into Infrastructure

Ø The exponential growth in the population and particularly in the existing or potential customer segments is a great growth opportunity for the business organization.

Ø The changing customer needs, tastes and preferences can act as an opportunity if the business organization has good market knowledge.

Ø The development of new technologies to assist the product/service production and delivery process can be exploited to embed the innovation in business operations. The advanced technological integration can decrease costs, improve efficiency and result in the quick introduction of innovative products.

Ø Rise in the customers’ disposable income and increase in the affluent customer base can be taken as an opportunity to introduce more high-end products.

Ø Reduction in the interest rates makes the fund raising and financing at lower cost easier for the business organization.

Ø Customers may start preferring new and creative products/services as a result of changing tastes.

Ø The emergence of e-commerce and social media marketing as a trend can be a great opportunity for Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure if it can ensure strong online presence on different social networking sites.

Ø The emergence of new market segments and new niches provide business and product line expansion opportunities.

Ø The diminishing boundaries and rising global interconnectedness allow the organization to get into the international market; target geographically dispersed customer base and increased profitability.

Ø The subsidies provided by the government and other policies to make the business environment more friendly is a positive external environmental factor for Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure.

Ø Improvement in the customers- lifestyle and standards mean more consumption on consumer goods and services, and more opportunities to encourage the purchase.

IV. Threats of Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure

Ø The changing regulatory framework and introduction of new stricter regulations impose a major threat to the Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure. It makes compliance with legal standards more complex and challenging for the business organization. Inability to comply with changed regulations raises the risk of expensive law suits.

Ø Shortage of skilled labor in the market can make it difficult for the organization to attract talent with the right skills set.

Ø The increasing number of direct and/or indirect competitors affects the organization’s ability to sustain and expand the customer base.

Ø The deteriorating economic conditions affect business performance when they directly influence the customers' spending patterns and purchasing power.

Ø The rise in inflation increases the cost of production and affects the business profitability.

Ø The growing environmental sustainability trends act as a major threat when offered products/services are not environment friendly. It draws the negative publicity and criticism from the environmentalists and affects the brand image in a competitive market.

Ø The globalization pushes the organization to cross national boundaries and deal with cultural diversity, which may have a detrimental impact if the organization lacks the cultural intelligence.

How the company coped with these?

The geographic presence of Filling Institutional Voids in Indonesia Jababeka’s Foray into Infrastructure in different regions would help the organization to get into the international market and target the geographically dispersed customer base. Filling Institutional Voids in Indonesia Jababeka’s Foray into Infrastructure can reduce the job stress and increase workers’ morale to launch new and creative products by exploiting creative thinking capabilities of its workforce. The Project management practices are improved to exploit the opportunities offered by emerging market segments. That allows the organization to successfully handle new product development projects. The well-developed and efficiently integrated IT infrastructure of Filling Institutional Voids in Indonesia Jababeka s Foray into Infrastructure allow it to take advantage of emerging innovative technologies. The organization has increased the expenditure on the research and development activities to cope the competitive pressure due to the rising number of indirect and direct competitors. The organizations also improve waste management practices and integrate sustainability in business operations. It will help the organization to effectively handle environmental pressure.