Indonesiais composed of large chains of islands that are located between Asiaand Australia and has the most extensive land and population in theregion. Indonesia occupies a total area of 1.9 million square km. Thecountry is considered as the fourth largest in population size afterChina, India, and the US with at least 260 million people, with thebiggest population being the Muslims (Expat, July 11, 2016). With anannual growth rate of 1.20%, the country’s population is expectedto grow. Indonesia political organization is said to be very stable.After the upheaval experienced in 1998, the country has undergone amajor transformation in the political environment. The World Bank(2016) reported that Indonesia as one of the most vivacious State inthe Asia region, reporting it as a confident middle-income economy.Literacy levels play a significant role in economic development. Thecountry`s literacy level stands at 90% with approximately 75% havingenrolled in secondary education (ADB, 2017 & YU et al., 2016).
Withrobust economic growth, viable fiscal organization, and robustmacroeconomic program structure creates an advantageous position forthe young population. Yu et al., (2016) found the median age for theyoung population to be 29.6 years. Statistics even show a massiveincrease of more than 200% of households with incomes above $10,000for the last decade. At the same time, the unemployment rate wasfound to be 5.5% in 2016 (YU et al., 2016). Additionally, thecountry`s economic growth has contributed to a relatively steadyinflation. As at 2016, the nation`s GDP was estimated at 860 billion(YU et al., 2016). Indonesia experiences abundant rainfallattributing to about 6% of the world`s freshwater resources. However,water pollution is prevalent in the country and the government`sinput in piped water supply systems are insufficient (WSP, 2015).Water purifier’s products and services may be the best and cheapestsolution for the population’s fresh water demand (YU et al., 2016).
Rationalefor Launching Water Purifier in Indonesia
InIndonesia, one of the growing markets that are unexploited is thewater purifier market. It is presumed that Indonesia holds about 6%of the global freshwater resources and the quality of clean water isinadequate and of poor quality. In this section, an analysis ofIndonesia’s cultural and economic backgrounds will aid to justifywhy it is suitable to introduce UK’s Aquasana water purifiers intothe Indonesian market.
Indonesiawater service sector has undergone major transition since theindustry involvement during the 1990s as well as economic andpolitical transformation in 1998 (Expat, November 9, 2016). The watersupply and sanitation systems in the country are embodied bydeplorable levels of access and quality. WSP (2015) reported thatthere exist vast disparities in water aggregation in urban and ruralareas. Limited access to clean water and sanitation is a seriouschallenge for the nation particularly, in the countryside. Failure tosupport behaviour change is the primary reason why the health impactof water and sanitation has worsened. This creates the need tointroduce water purification programs for the community.
Theeconomic impact associated with inadequate water supply systemspresents significant hindrances to improved living conditions of thepopulation. The substantial economic costs have shown to be thesource of declining school performance, poor nutrition, workproductivity, etc. which is an obstacle to the country’s economicdevelopment. Research conducted by WSP showed that Indonesia loses anequivalent of almost 2.5% of its total GDP annually due to poorwater. Efforts to provide clean water and sanitation systems are ofimportance to the country to minimize the country`s growing costs inthe future.
MarketAudit and Competitor Analysis of Indonesia
Theprimary aim of this section is to identify those issues that AquasanaInc. may encounter in Indonesia. The competitive analysis for thewater purification system will be identified while evaluating thecompetition environment in Indonesia and examining the perceptions ofthe product offered by the organization in the country.
Drinkingwater from water bodies contains dissolved metals, chlorine, mineralsalts, etc. (Putri,Prasetyo & Arifin, 2012). Fortunately,one can obtain clean water from using the water purifiers. AquasanaInc. may be a suitable water purifier company to set base inIndonesia. The company’s water purifier products have taken thewater decontamination to a whole new level. Aquasana has waterfilters that have been proven to be one of the safest, simple, andeconomical methods for treating water at the point of entry and pointof use applications (WSP, 2015). Aquasana’s water filters aim atproviding a safe solution against microorganisms, which are known toresult in hundreds of reported health cases every year. With modestand constant technology, these products are environmentally friendlyand so millions of households have resorted to water purifiers totreat their water for consumption (Expat, November 9, 2016).
AnEvaluation of Water Purifier Products
Giventhe poor water quality in Indonesia, it is highly recommended forhouseholds to have water purification systems in place (WSP, 2015).In Jakarta, there exist few reputable companies that can installwater purification systems to filter the common pollutants mentionedabove. It is not uncommon for residents to outsource the services ofexpatriates to rent or buy water purification systems. The systemsthat are presently available in the Indonesian market are economicaland cost efficient as they are durable and convenient (Expat,November 9, 2016).
Thereare many types of water purifiers available at Aquasana which areequipped with carbon activated, sub-micron filtrations, etc.(WordPress,2017). Itis highly advisable that one should not just look out for thecheapest water purifier but should purchase the water treatmentsystem that is of high quality and is capable of removing impuritiesfound in water (Expat, November 9, 2016). The quality performance ofAquasana’s water filters and the abilities of maintenance providedby the organization guarantees water quality and safety for everyhousehold.
Problemsand Resistance to Water Purification Products in Indonesia
Inan attempt to minimize any possible failures, businesses in allsectors are required to be proactive so as to manage potential risksby adjusting to the culture of the host country. Strong riskmanagement policies may help the business to simplify operations andfortify the impact of the firm. Lack of entrepreneurial outlook, highlevels of business failure, and the power of relationships are justsome of the business cultural issues that Aquasana have to addressbefore commencing business in the country.Thebusiness climate in Indonesia is very different from other countrieslike the US and Singapore. The government regulations for companyregistrations are quite stringent. This creates a low entrepreneurialspirit which limits the growth of entrepreneurs in the country.Financial controls are some of the must have primary skills thatentrepreneurs must possess. However, in Indonesia about 70% of theentrepreneurs are financially incompetentwhich contributes to business failure (Pruetipibultham, 2012).Likewise, in Indonesia, the value of the power of relationship isvital for business success. Foreign business people seek to establisha reliable and knowledgeable resident partner who acts as anintermediary to develop a successful business(Pruetipibultham, 2012).
TheIndonesianMarket for Water Purifiers
Thewater purifiers in Indonesia are presumed to be on a high growthpath. For this reason, Aquasana has a great success chance amongwater purifier players in the market. The country`s drinking watersupply is largely sourced from rivers where only a mere 0.50% ofthese water bodies satisfy the water quality requirements (WSP,2015). The poor water quality of the rivers and the growing gapbetween demand and supply of clean drinking water is increasing thesales of water purifiers. According to a report in the Indonesiawater Purifier Market Forecast & Opportunities, 2020, it isstated that the low penetration level of water purifiers in thecountry is the core factor that drives the water purification marketon a strong trajectory. It is even predicted that the water purifieris expected to escalate at a CAGR of 5.7% between 2015 and 2020 (Yuet al., 2016). The Java region, which is highly populated, is thelargest demand facilitator of water purifiers. It has also been notedthat UV water purifiers are the market leaders in terms of volumesales whereas the membrane water purifiers dominate the markets interms of revenue sales in the aggregate market for water purifiers inIndonesia.
Togrow the sales of water purifier products, it is crucial to carry outcompetitive analysis in Indonesia. Hollensen(2015) defines competitiveanalysis as the process used to collect and interpret informationabout competitors, their activities, products, strengths, andweaknesses, as well as business trends so as to evaluate the positionin the market and enhance a company`s product and services andmarketing strategies. Globally, the water purifier market is expectedto generate more than $45 billion by 2022 (WSP, 2015). Thepenetration of water purifiers is comparatively high in developednations while in developing countries such as Indonesia’s ruralareas are untapped.
Aquasana’spenetration into the Indonesian market may serve as a tremendousbenefit to the community. However, the company is likely to facecompetition from Eureka Forbes Limited, Kent RO system, Panasonic,WaterLife, LG, Coolplex, LG, and strauss water. This seeks tohighlight the growth strategies and developments. The water purifierin the region is segmented based on technology, end-user,distribution channel, and location. Market segmentation based ontechnology includes the UV, RO, and gravity purifiers(Lou et al., 2013).RO purifier system is deemed to be the most growing segment due toincreased water pollution, rapid industrialization, and urbanization(Expat, November 9, 2016). Segmentation based on distribution channelcomprises online sales platforms, direct sales and retailers(Lou et al., 2013).
InIndonesia, indirect sale is regarded as the ideal sales network forwater purifiers through the use of retail stores and distributors.However, direct sales through online platforms are gaining momentumin the region. Water purifier market is highly competitive owing tothe high numbers of players. These players are consistently engagedin implementing innovative strategies. As such, Aquasana shouldconsider introducing free installation, free demos, etc. in theirpackage to achieve competitive advantage. Similarly, market playersare increasingly focused on developing new technologies with advancedwater purification systems. Companies have invested their resourcesin developing water purifiers equipped with ozone, activated carbon,and reverse osmosis among others in order to attract a broad base ofcustomers and fortify their foothold in the market(Bosma et al., 2012).In 2015, Kent RO introduced two models which were based onhigh-efficiency particulate air which helped the company to achieve astronger position in the water purifier market(Tiwari & Herstatt, 2012). Likewise, Aquasana water purifiers are known to use the besttechnology to ensure a reduction in water impurities while leavingbeneficial minerals in water which may work to their advantage(Aquasana Inc, 2017).
An and Strategy for the Water Purifier
Themarketing objective for Aquasana’s water purifier in Indonesia isto promote its products and services to the people in a timely andefficient manner. This will be facilitated by the creation ofawareness, establishment of the company in the industry, and thusincrease sales of the said water purifiers. The key componentAquasana will use is the provision of quality services for the entirepopulation while employing local employees to act in support servicefunctions.
Kotler& Keller (2012) describe promotion mix as the combination ofdifferent types of communication to achieve the marketing objective.Print and broadcast advertising, personal selling, merchandising, anddirect marketing will be used by Aquasana to promote water purifiersin Indonesia in order to attract potential customers.
Salespromotion is considered as the most common type of advertising usedby many companies (Kotler & Keller, 2012). Aquasana willintroduce sales promotion methods in Indonesia such as productsamples, discounted offers, and coupons to stimulate purchases andincrease sales. Other sales promotion that Aquasana may launchincludes offering vacation holidays, trips to parks, etc. This methodmay also be beneficial for the company as it seeks to informpotential buyers about the new product in the market or to bring backold customers.
Thedistribution channel is an interrelated structure of storagefacilities, people, and transportation system that moves products andservices from manufacturers to final consumers (Kotler & Keller,2012). Aquasana suppliers in Indonesia will employ high-qualitydistribution systems, which will be critical in helping the companycontrol its costs and thus maintain a competitive edge. Itsdistribution networks must comprise having a private fleet ofdrivers, several distribution terminals, numerous transportationoffices in the main towns, and hundreds of associates.
Insuranceclaims aim to protect a company from risks and suits emanating fromthe production or sale of a product(Embrechts, Klüppelberg, & Mikosch, 2013).Aquasana must request for insurance claims to protect from economic,environmental, and financial losses.
Pricingdetermination is an essential strategic aspect in marketing mix as itrelates to product positioning (Hollensen,2015).Selecting an appropriate price for a product may prove to be a trickyaffair however, the pricing regimen must mirror the demand andsupply relationship (Kotler & Keller, 2012). Aquasana must bewilling to offer the lowest prices for its products because theseproducts are regarded as a valuable commodity for the country`spopulation. Indonesia is a developing nation with a population ofabout 240 million people, with 21 million households translating toan eighth of the population having incomes above $10,000 (Yu et al.,2016). According to Tiwari& Herstatt (2012), customersmay not be willing to pay more for water purifiers thus, offering lowprices will guarantee the community access to water purifiers whichmean clean and fresh water and less water-borne diseases for thepeople. At the same time, the companies may consider employing thevalue based pricing for its products. This pricing strategy seeks toconsider the value of the product to customers instead of how much itcosts to produce the product. As such, the value is based on theadvantages it offers consumers which in this case is to promote thecommunities well-being.
Thisis the mode in which a buyer chooses to pay for goods and servicesand is also acceptable to the seller. Aquasana Inc. may considerallowing modern business payment methods such as cash, credit anddebit cards, and checks.
Pro-formaFinancial Statement and Budget
ThePro-forma financial statement and financial plan, which are foundedon the assumptions for Aquasana’s water purifiers in Indonesia, canbe presented as follows:
Revenues 800,000,000,000 950,000,000,000
Costof sales 400,000,000 520,000,000
Operatingincome 750,000,000 1,800,000,000
Expenses 100,000,000,000 150,000,000,000
Earningsbefore interest and taxes 700,350,000,000 801,280,000,000
Taxes 210,105,000,000 240,384,000,000
Netincome 490,245,000,000 560,896,000,000
Thisincludes those resources that water purifier industries in Indonesiamay require to set up and conduct their daily operations. This mayconsist of finances, personnel, office assets and properties.
Indonesiahas abundant water sources, but with limited poor quality of waterthat can be consumed. The country forms the largest market for waterpurifiers by dint of industrial development which has is contributedto the contamination of water sources. Given the high demand forwater purifiers, its market is somewhat unexploited in Indonesia. Theuntapped market serves as an excellent business opportunity forentrepreneurs and the industry is projected to grow over the periodbetween 2015 and 2020. The market growth will be greatly influencedby increased concerns of the population’s safety of waterconsumption and its impact on health, awareness regarding advantagesderived from using water purifiers and rapid urbanization in theregion.
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