International Business: Porter’s Diamond Model Analysis and Market Entry Strategy for Indonesian Retail Market

This report analyzes the factors required to be considered while implementing and starting a new business in a new country. It includes Porter’s Diamond model analysis, market entry strategy, and contemporary management issues. The report focuses on the Indonesian retail market.

Running head: INTERNATIONAL BUSINESS
International Business
Name of the Student
Name of the University
Author note

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Executive Summary
The report has helped in the entire analysis of the different factors which are required to be
considered by while implementing and starting a new business in a new country. With the
help of Porter’s Diamond model, the proper analysis has been done which has helped in
analyzing and identifying the different factors which are advantageous and non-advantageous
in nature for the success of the retail firm in Indonesian market. Furthermore, the market
entry strategy has been analyzed which has helped in understanding the disadvantages and
advantages for the same effectively and appropriately. Lastly, the different management
issues have been identified from the two sections which have been analyzed as to gain more
knowledge on the internationalization.

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Table of Contents
Introduction................................................................................................................................3
Part 1: Porter’s National Diamond Analysis..............................................................................3
Factors Conditions.................................................................................................................4
Related and supporting Industries..........................................................................................6
Home Demand Conditions.....................................................................................................7
Rivalry....................................................................................................................................8
Government..........................................................................................................................10
Chance events.......................................................................................................................11
Part 2: Market Entry Strategy..................................................................................................12
Foreign Direct Investment....................................................................................................12
Advantages of Using Foreign Direct Investment in Indonesian Market..............................12
Disadvantages of Using Foreign Direct Investment in Indonesian Market.........................13
Recommendations................................................................................................................14
Advantages of Joint Venture in Indonesian Market.............................................................14
Disadvantages of Joint Venture in Indonesian Market........................................................15
Advantages of Acquisition in Indonesian Market................................................................15
Disadvantages of Acquisition in Indonesian Market...........................................................15
Proposition of Choice of Entry............................................................................................15
Recommendation of Appropriate Partners for Joint Acquisition.........................................16
Part 3: Contemporary Management Issues..............................................................................16
References................................................................................................................................18

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Introduction
The report helps in analysis of the different new business opportunities for the retail
industry for the expansion of the same in Indonesian retail industry. Proper and effective kind
of research is required to be taken into consideration which will help in analysis of the overall
competitiveness along with the investment attractiveness as well. The entire analysis is
required to be conducted with the help of the Porter’s National Diamond Analysis of the
entire Indonesian Retail Store.
On the other hand, the market entry strategy of the retail market in the Indonesian
Retail Store is required to be analysed effectively which will help in analysis and
identification of institutional environment of Indonesia market. Lastly, the contemporary
management issues is required to be analysed as well which has to be taken into account
before starting the operations in the Indonesian Retail market.
Part 1: Porter’s National Diamond Analysis
Michael Porter has developed economic diamond model for the different businesses
as this will help them in understanding their competitive position in the market in the entire
global market (West, Ford & Ibrahim, 2015). The Porters Diamond model is also known as
Porter Diamond Theory of National Advantage which plays an essential role in global
business competition and the competitiveness of the business is related to the performance of
the business.

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Figure 1: Porter’s Diamond Model
(Source: Pavicevic, Haleblian & Keil, 2018)
From the diagram, this can be analysed that the retail sector can take advantage of the
Porter’s Diamond Model to establish the processes through which they can translate the
national kind of advantages into international advantages. In order to create advantage in the
global scale, this is essential in nature to analyse the different factors of the Indonesian Retail
Market which will help in managing the competitiveness in an efficient and appropriate
manner.
The different kinds of determinants of the Porter’s Diamond Model includes the following:
Factors Conditions
This is the entire situation in the Indonesian market in which there are different
factors related to production of the retail sector which includes the knowledge and
infrastructure. The infrastructure of the Indonesian Retail market is effective in nature which
will help the retail market to achieve success and gain competitive advantage in such

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infrastructure (Haleblian, Pfarrer & Kiley, 2017). The population is large and the operational
infrastructure is effective in the respective market which will assist them in selling products
effectively. Furthermore, the labour costs, knowledge resources and infrastructure are the
other essential factors which is required to be analysed and identified as this plays a major
role in the market.
Figure 1: Number of Household and population in Indonesia
(Source: Haleblian, Pfarrer & Kiley, 2017)
The climate of the Indonesian market is effective and appropriate for starting and
expanding the retail store business and this is the international competitive position
which can be gained by the company in an effective manner.
Furthermore, in case of Indonesian Retail market, Indonesia is the best option which
can be chosen by the marketers as the climate and the natural resources are easily
available.

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The infrastructure is effective in Indonesian market as the country has different kinds
of geographical information technologies advantages and the government tries to put
huge effort on IT policies which will make the entire project successful in nature
Related and supporting Industries
Furthermore, the entire success of the market depends on the different kinds of
presence of the suppliers and related industries within the similar region. The competitive
kind of suppliers help in reinforce internationalization along with innovation. Besides the
suppliers, the related kinds of companies are essential and plays a major role in the
organization as well.
Additionally, this has been analysed that when one such organization of the same
domain is successful in nature, then this will be beneficial for the other company as well.
Both the companies can benefit from one another in an appropriate manner.
In the case of retail market which will be expanded in the Indonesian market, the
suppliers are in large number who are having huge knowledge on the market
conditions and this will improve the quality of the product which will be delivered to
the customers in the entire market (Haleblian, Pfarrer & Kiley, 2017).
Furthermore, the country Indonesia is leading in the retail segment and the
government in Indonesia is trying to expand their operations in the retail sector.
Indonesia is leading in the retail and IT related production which will help the country
in being more successful
Lastly, the government of Indonesia is trying to analyse the other areas in which the
country can be successful and retail sector or industry is one of them which will help
retail industry to be successful as the suppliers are huge in nature who will lessen the
work and cost to the market and improves the overall quality of the product

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Home Demand Conditions
The important determinant question in this area is the reasons which help in making
the market successful in nature. The market size along with the nature of the market has to be
analysed effectively which will help the companies to understand the position before the
internationalisation or shifting from home country to the global market. There is an
interaction between economies of scale, cost of transportation and size of the home market. It
is the duty of the retail or other sector to understand the economies of scale and size of the
home market effectively.
Figure 2: Retail Ecommerce Sales in Indonesia
(Source: Haleblian, Pfarrer & Kiley, 2017)
In case of the retail sector which is required to be transferred to the Indonesian
market, there are different kinds of analysis which is done as this will help them in
understanding and gaining knowledge on the weaknesses and opportunities of the host
country in which the expansion is required to be done.

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From the above table, this can be analysed that the sales of retail industry in the 2017 and
2018 have been huge and this will be a big opportunity for the retail sector to be more
competitive in nature in comparison to the other competitors in the Indonesian market.
With the implementation or the growth of the retail industry or sector, this can be seen
and identified that the retail company expansion in Indonesia market will be effective in
nature to be more successful as the sales and profit will be increased in nature.
In case of the retail sector which will be starting their new operations in the
Indonesian market, this is essential for them to understand the costs which is required
to be incurred by them for installation of the business. In Indonesian market, the
transportation costs are less and the business of retail industry can gain huge success
(Greve & Man Zhang, 2017)
Secondly, retail industry which will be starting their operations in the Indonesian
market, they can start their business from a single location and the innovation and the
development of the product has huge scope in the market of Indonesia as well
(Requejo et al., 2018)
Rivalry
This is the other factor which is required to be analysed in the international expansion
of the business in other parts of the world. The respective factor is in relation to whether the
organization is managed or organized in nature with the different kinds of corporate
objectives along with the analysis of the rivalry within the organizational culture.
Furthermore, the strategy, structure and rivalry mainly focus on conditions of the
respective country in which the sector or the industry is trying to set up their business
effectively. Furthermore, the cultural aspects play a major role in rivalry and strategy as the
regions along with provinces may differ from one another and the different kinds of factors

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such as working morale, interactions along with management of the different provinces and
places vary from one another as well.
These all factors can be both advantageous and disadvantageous for the new firm
which will be or planning to establish their market in that respective market of the respective
country. As per Michael Porter, the domestic kind of rivalry and the continuous kind of
research for the competitive advantage in the nation can help the organizations in achieving
the advantages on international scale.
There are various other factors which are required to be taken into consideration while
setting up the business in the other country such as the different kinds of interventions from
the government in the respective market of the respective country as well. In case of retail
market or sector which is planning to establish their position in the Indonesian market, there
are different factors which are required to be undertaken and considered while implementing
their position that are as follows:
The retail market which will be establishing their position in the Indonesian market
can face different issues in the respective market such as the cultural differences as
the preferences of the individuals in the respective market in Indonesia (Gronroos,
2016).
Furthermore, it has been seen that in Indonesian market, there are different
supermarkets which have already gained large position in the market and this can be a
huge challenge for the other company which is ineffective in nature. The domestic
companies in Indonesia has already taken a huge position which will be difficult for
gaining a share in the market (Erel, Jang & Weisbach, 2018)
Furthermore, the government interventions are strong along with different tariff
barriers are of strict nature in Indonesia market which can create huge issues for

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setting their business in the respective market as well. The cultural differences play a
major role in affecting the business opportunities for the retail industry in Indonesia
market which can be a big challenge for making the entire business successful in
nature.
Government
The governments play a major role in encouraging the entire development of the
companies and industries both at abroad and home as well. the finance which is gained from
government and construct infrastructure and invest in different kinds of activities effectively
as well (Eriksson et al., 2015). Furthermore, the government helps in encouraging the
different organizations in order to use the alternative energy or the environmental systems
which affects the entire production.
In case of the retail sector or the retail industry, this has been seen and analysed that
government agencies play a major and important role in the encouraging the
development of the retail sector in the Indonesia market. This has been seen and
analysed that in Indonesia there are different kinds of tariffs and barriers which are
required to be analysed while setting up the business in the respective market (Adams,
Gabler & Landers, 2017).
Furthermore, the financial matters can be undertaken by the government of Indonesia
such as investments and other decisions can be taken care by the government of the
respective country which will be effective in nature for gaining a competitive position
in the entire market (Miller & Weinberg, 2017).
From the diagram below, this can be analysed and seen that the government spending
in the Indonesia market is such that this will be helpful for the companies which are thinking
for global expansion in the Indonesia market. Furthermore, this can be seen that Indonesia is

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ethnically diverse country and this will be helpful for the retail sector in gaining huge benefits
in an effective manner as well (Sheth & Sisodia, 2015).
Figure 3: Population of Indonesia
(Source: Armstrong et al., 2015)
Chance events
Michael Porter has indicated that the chance of the market plays a major role as this
helps in providing different kinds of opportunities for the different companies which are
innovative in nature and they are ready to set up different kinds of operations in the Indonesia
market. The chance events play a major role in understanding and gaining competitive
advantage in setting up their business in a different country and this will help in being
competitive.
In case of the retail industry, this can be seen that the retail industry which will be
setting their business in the Indonesia market, this will be beneficial for the company

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as this will provide them with different opportunities in the respective market and
they will be grow effectively as well (Armstrong et al., 2014)
Secondly, the internationalisation efforts will play a vital role in the setting up the
business in the Indonesia market. The retail sector in Indonesia market will be
beneficial for the marketers as this will provide them with different new opportunities
such as operating in a completely new environment effectively (Serra & Kunc, 2015)
Therefore, with the usage of the Porter’s Diamond Model, the organization can help
in identifying the different kinds of factors which will help them in building advantage in
international level. Furthermore, this can be analysed that Michael Porter is that of the
respective opinion in which all the different factors are decisive in nature for gaining
competitiveness in the entire industry with respect to the different foreign competitors in the
market of Indonesia as well.
Part 2: Market Entry Strategy
Foreign Direct Investment
The foreign direct investment is defined as the investment which is in the form of the
controlling the entire ownership in the business which is done in one country by the entity
which is based in other country. The foreign direct investment includes different kinds of
mergers along with acquisitions, along with building new facilities in the market earned from
the overseas kind of operations (Proctor, 2014).
Advantages of Using Foreign Direct Investment in Indonesian Market
Firstly, the FDI helps in stimulating the economic development of the target country
and creation of conducive environment as this helps in analysis of the different benefits for
the local industry which will be beneficial in nature for retail company to set up their business
in an effective manner (Baker, 2016).

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Secondly, the FDI helps in employment and economic boost as the FDI helps in
creating new jobs as the investors build new opportunities and this can lead to increase in the
overall income as this will create boost in the entire economy.
The equipment which are being provided by the foreign investors helps in increasing
the productivity of the entire workforce in the target country (Eriksson et al., 2015). The FDI
helps in reducing the overall dispute between the different costs and revenues. With such
foreign direct investment, this can be analysed that the production costs will remain the same
and this can be sold in an easy manner as well (Strauss & Frost, 2016).
The FDI helps in allowing the different resources transfer along with there will be
proper access to the different kinds of technologies effectively. Lastly, the FDI helps in
increasing the income of the target country which helps in managing the different activities
effectively (Blonigen & Piger, 2014).
Disadvantages of Using Foreign Direct Investment in Indonesian Market
There is hindrance to the domestic investment as this mainly focuses on resources
than the home country of the investors. The FDI may sometimes hinder the domestic
investment. The FDI is risky in nature as there are different kinds of political issues in
different countries which instantly changes and this causes huge issues in the country
(Welford, 2016).
When the investment is done in the different foreign countries, there can be times it is
expensive in nature when the goods are exported. It is imperative which prepares sufficient
money to set up the operations (Baker, 2014).
The FDI can create negative impact on the investment of the country which creates
direct effect on the investing country. Furthermore, the investments can be banned in

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different kinds of foreign markets, that means this is impossible in nature in order to pursue
the inviting kind of opportunity (Bromiley et al., 2015).
From the above advantages and disadvantages of the FDI, this can be analysed that
the investment from other economy of country can be financially rewarding in nature and this
helps in providing the boost needed which will be required to analyse the level of the success.
Recommendations
Therefore, the respective retail company which will be settling their business in
Indonesian market, the Joint Venture and acquisition are the best strategies which can be
adopted by them (Pride & Ferrell, 2016). The joint venture is the business entity which is
being created by two or more parties which is characterized by the shared kind of ownership
along with shared kinds of returns as well. This is the strategic alliance which can be adopted
by the respective retail company in the Indonesian market which will be helpful for the new
company and the local company in engage into the specific project or undertaking as well
(Chang, 2016).
Advantages of Joint Venture in Indonesian Market
There are different kinds of advantages for the Joint Venture in Indonesian market
which helps in the following manner to the retail store:
This will provide the retail company with the opportunity in order to gain new
capacity along with expertise (Gomes, Barnes & Mahmood, 2016)
This helps in allowing the company to enter the related businesses in the host country
which must be having huge knowledge on the different kinds of government policies
and norms which are required to be followed by them in a joint manner (Hovhanesian
et al., 2016)

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In the era of consolidation and divestiture, the joint venture can help in offering retail
company to exit from the non-core businesses effectively and this can be seen that
joint venture is flexible in nature (Knight, 2015)
Disadvantages of Joint Venture in Indonesian Market
The objective of JV is not clear and this is not being communicated effectively as well
There is huge imbalance in expertise level and the different cultures and style of
management results in poor kind of integration (Knight, 2015)
Advantages of Acquisition in Indonesian Market
Speed is the pro of the acquisition in which this is tome efficient and the growth
strategies is efficient (Piaskowska, Nadolska & Barkema, 2014)
The acquisition helps analyzing the and building market presence for the company
and this reduces the stronghold of the competitor
Disadvantages of Acquisition in Indonesian Market
There can be financial fallout as the returns may not be beneficial in nature as there
are different kinds of factors (Carroll, Primo & Richter, 2016)
The costs are hefty in nature along with integration issues beyond the earlier
projections and poorly matched partner (Brandenburg & De Wit, 2015)
Proposition of Choice of Entry
The Joint Venture is the proposed solution which can be adopted by the retail sector
as the joint venture is better than the acquisition. In JV, this has been seen that will help the
business of retail company to grow in a faster pace and this will increase the overall
productivity of the organization in an effective manner.
Furthermore, the other benefits of the JV include access to the new markets and the
distribution networks which will help in becoming successful in making the different

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activities more effective in nature. The joint venture will be beneficial in nature for the retail
company which will help in managing the activities effectively.
Recommendation of Appropriate Partners for Joint Acquisition
The appropriate partner of retail sector which will be settling in Indonesia is the 99
Ranch Market which will help the respective retail store in becoming successful in the host
country. Furthermore, this has been seen that the 99 Ranch Market in Indonesia will help in
managing the different kinds of activities in a joint manner and the profits can be shared by
them jointly as well. Additionally, both the companies will be helpful in managing the
activities in such a manner which will be effective in adopting the technological
advancements which will make the tasks easier in nature.
Part 3: Contemporary Management Issues
There are different kinds of management issues in both the parts such as in Porter’s
Diamond Model and the Marketing strategy for entering into the Indonesian market. It has
been seen that from the Diamond analysis, there are different rivalries in the respective
market which is required to be analysed in an effective manner by the respective retail store
which will be starting their business in an effective manner.
The rivalry in the Indonesian market is a huge threat for the respective retail store
which will be starting their operations in the Indonesian market. Furthermore, the government
rules and regulations are the other area which is required to be analysed by the business of the
retail store while setting up their business in Indonesia. This is one major factor which is
required to be analysed effectively by the retail store which is trying to set up their business
in Indonesia.
On the other hand, the second management issue which can be identified from the
marketing entry strategy is related to the disadvantages of the joint venture approach. This

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has been seen and analysed that there is lack of flexibility and the flexibility can be restricted
as well. It can be seen that there are different major issues which can be caused and this has
to be suffered by the respective retail store in the entire market which includes the clash of
the culture in Indonesia and the home country wherein the retail store or company is being
situated.
Furthermore, this has been seen that the cultural issues can be a huge problem for the
retail market which will be establishing their business in Indonesia. In case of Nokia and
Microsoft, this was analysed and seen that there was clash of culture and lack of poor
integration and communication between the companies as well in the entire market. There
can be different examples for the disadvantages of using the joint venture approach.
For instance- Microsoft and Nokia applied the joint venture approach while
performing the business effectively and to gain huge success in the market. However, this
was a huge disaster for them as both the companies could not use the approach positively and
there was restriction in the flexibility approach as well. It was seen that the objectives were
not clear in nature and it was not being communicated effectively to the other company as
well. The big flop for Nokia was the Windows phone as the sales were poor and there was
huge loss which was incurred by them and this was a huge flop in the entire market as well.

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