Introduction
Fashion Unlimited is currently facing a series of challenges related to the local market, with each of them leading April Song, the VP of Supply Chain Management, to review Indonesia as one of the potential expansion targets. Despite the problems linked to the competitiveness of the business environment and the lack of firmly sustainable economic growth, Indonesia is still one of the most appropriate picks for the organization. The level of bureaucracy is steadily reducing across the country, with corruption rates tending to zero as well. A possible re-connection to the Indonesian market could reanimate both the local economy and Fashion Unlimited’s supply chain management. Investment ventures are looking rather strong for Indonesia, turning this country into a relatively powerful competitor in the Asia Pacific region. The relatively young demographic serves as another indicator for Fashion Unlimited, as the company’s expansion, would create jobs and affect the country’s economy.
The growth potential can also be viewed through the prism of innovation and a high level of political stability achieved by Indonesia throughout the past decade. Socioeconomic conditions reduce the predisposition of the local population to any kind of extremist activities, proving that any given individual below the age of 30 could become a contributor to the growth of Fashion Unlimited. Compared to other countries from the available list of alternatives, Indonesia is the best choice for the company because of the absence of fierce competition that might introduce complex parameters into the equation of Fashion Unlimited’s overseas expansion. The only viable alternative identified by the author of the report is Malaysia, but it would be most likely for the company to meet additional problems with the proposed business extension due to the Malaysian focus on all-around digitalization and inappropriate monetary requirements.
Operating Environment
The first element of the operating environment that has to be reviewed is the increasing involvement of Indonesian organizations in venture deals. It shows that investment transactions are becoming a much more recurrent factor for the local businesses or overseas opportunities. The current funding options also show that Indonesia is successfully appealing to quite a several investors from all over the world despite a relatively high level of business complexity in the area. This particular element of the operating environment is going to have a positive impact on Fashion Unlimited because the latter would have an opportunity to focus on its investment capability instead of thinking about the financial burden of expanding the business.
Another element of the operating environment that cannot be ignored is the increasingly high value of Indonesian infrastructure that makes Fashion Unlimited a perfect company for government-run initiatives. The willingness to enhance the physical infrastructure and create more connections among various transportation options is what April Song is looking for in a possible overseas business expansion. The cost of logistics is what makes Indonesia so attractive because the company would also have an opportunity to raise the overseas GDP and deploy efforts to support the existing growth.
The third factor in the proposed operating environment is the growing amount of attention paid to startups. Across the Asia Pacific region, Indonesia remains one of the most tolerant countries in terms of how it protects foreign business initiatives and establishes room for additional investments. There is also a growing number of startup incubators who are ready to invest their resources in a valuable initiative without any hesitation. The importance of this factor can also be highlighted with the help of a relatively trivial exposure to terrorist attacks and political instability.
The ultimate section of the operating environment that has to be considered by Fashion Unlimited is the increasing talent pool that is recurrently imbued by local youth. The Indonesian government focuses on the development of dynamic growth initiatives and ensures that the key business focus of the country is to create support for the digital economy. The startup and business expansion scenes are relevantly maintained with the help of talent scholarship programs that set Indonesia apart from many of its competitors. Fashion Unlimited could benefit from this particular factor by appealing to Indonesian employees and attracting them to the given business expansion.
Root Cause Analysis
Why is Indonesia the top pick for Fashion Unlimited? One of the main reasons for Indonesia staying on top of the list of the best countries for business expansions is the existence of its highly performant demography. This means that the local population provides enough support for business initiatives of all shapes and sizes, meaning that both national and foreign providers could engage in joint projects to increase their returns on investment. Even though there may be other countries providing their services to Fashion Unlimited, Indonesia remains the top pick because it is politically stable and does not get affected by terrorist attacks or cultural conflicts.
Why is Indonesian demography so promising for Fashion Unlimited? The nature of Indonesian demography shows that foreign investments could significantly affect the presence of business innovations in the region. By educating a population of startup supporters, Indonesia is trying to attract more foreign businesses and help them expand in a meaningful way. In the case of Fashion Unlimited, business innovations are going to become visible due to the changing governmental policies allowing for larger investments and increased overseas participation in business operations. April Song might consider the role of innovation to create a link between the Indonesians and the company’s business expansion.
Why is the local population playing an important role in the future successes of Fashion Unlimited? The most evident answer to this question is a quickly growing middle-class cohort of Indonesians that is ready to invest in lucrative business prospects. The problem is that most middle-class individuals remain underserved despite their large contributions to the financial and digital sectors. Therefore, this is an opportunity for Fashion Unlimited to build a positive relationship with the local community and appeal to unbanked Indonesian civilians who are willing to earn money and receive adequate financial and social services in response.
Why are social and financial services creating room for improvement and causing the Indonesian government to adjust to foreign businesses? It may be claimed that the most recent improvements in the area may be linked to the decreasing levels of corruption and bureaucracy that the government is willing to pursue because of stagnating foreign investments. These initiatives stem from the development of relationships with multiple overseas partners. Business owners and investors perceive Indonesia as a valuable player because of its robust efforts to reduce corruption and establish a business environment that would nurture innovation in the first place.
Why should Fashion Unlimited invest in its relationship with Indonesia and expand its operations overseas instead of picking a closer destination? The ultimate answer to this question is the existence of multiple positive conditions that make Indonesia a perfect destination for business expansion. The lack of bureaucracy and a decent level of political stability is backed by the lack of terrorism and the local community’s huge interest in business initiatives. Accordingly, the most significant variable for Fashion Unlimited is the peaking level of concern displayed by both the local population and the government. Fashion Unlimited’s interference would create new jobs in the region and boost an already booming middle-class development process.
Possible Alternatives
A possible alternative to expanding the company’s operations to Indonesia could be a business expansion to Malaysia. The key reason for this choice would be a large number of consumer-related opportunities that affect numerous business spheres such as finance, education, and retail. During the last few years, both Malaysia and Indonesia were able to increase their GDP significantly and create favorable conditions for overseas investments (Ellitan, 2017). As an alternative, Malaysia offers a significant market to businesses similar to Fashion Unlimited that could demand improved logistics services and all kinds of equipment for construction and development.
Business environments in both countries seem to be expanding rather quickly, improving local competitiveness and disclosing multiple opportunities related to the digital side of the business. Nevertheless, Malaysian businesses are much more competitive than their Indonesian counterparts (Ong et al., 2020). This is a covert advantage that Fashion Unlimited could utilize to benefit from a developing infrastructure. The cost of expansion is much higher for businesses settling in Malaysia, so April Song should be rather careful when allocating the budget and setting the pace for future organizational projects. Indonesian municipal infrastructure seems to be more flexible than its Malaysian alternative.
Despite the high prevalence of energy and agriculture business opportunities, Malaysia remains a possible outlet for retail businesses as well. The only intention that has to be controlled, in this case, is the uncompromising focus on technological innovations that might be seen as damaging to Fashion Unlimited executives. Therefore, the company’s products and services could be perfectly fit for an expansion to Malaysia, but the country might be too inclined to retain the market edge instead of letting foreign investors move freely (Ong et al., 2020). In terms of startup management and overseas business expansion, Indonesia is a better pick both socioeconomically and financially.
Recommendation(s)
Three essential recommendations might make it easier for Fashion Unlimited to expand to Indonesia and protect its production costs and output. First of all, the executive board would have to be responsible for picking the best local distributor to ensure that the organization is not going to fail miserably after switching to an international format. The homeland market is way less complex for Fashion Unlimited because the company has all the required experience and resources to maintain a fast-paced logistics and production line. To be able to do the same in Indonesia, Fashion Unlimited has to conduct valuable research first and then build partnerships with required representatives to validate its qualifications (Simangunsong, 2018). The company should display its commitment to international partnerships to unlock the market potential and succeed in Indonesia.
Another crucial recommendation is to limit the organization’s purchasing decisions overseas to gain access to proper after-sales, pricing strategies, financing opportunities, and human resources. The Indonesian retail market is currently on the rise, which is a rather important point for Fashion Unlimited if it expects to achieve larger investments and provide staff with adequate training (Mustofa & Mulyono, 2020). Irrespective of whether it relates to experienced managers or entry-level employees, the company should carefully approach the workforce and appeal to their motivations to have Indonesia invest in Fashion Unlimited, too. One more vital condition that the organization would have to think through is the process of trade financing and loan opportunities in the case where Indonesian Fashion Unlimited is going to struggle. Export initiatives cannot be overlooked in the case of the Indonesian market because it is still in the development stage and cannot respond to any upcoming changes immediately.
Lastly, the presence of local distributors and agents should not avert Fashion Unlimited from partnering directly with other state-owned organizations or the government itself. It might be a helpful opportunity to allow the company to expand into the Asia Pacific region without breaking any laws or interfering with the existing operations. Strategic partnerships are crucial, and Fashion Unlimited should begin with building some before the expansion itself (Wulandjani & Hatta, 2019). Further project development should revolve around establishing the best ways for April Song to deliver products and services overseas while not damaging the original brand image. Indonesian government agencies will be more inclined to partner with Fashion Unlimited if they see the executives establishing agent- and distributor-based relationships and setting up the logistics within the country, creating jobs and positively affecting the local economy.
Implementation
The implementation process shall be completed within three basic stages. The first step for Fashion Unlimited would be to determine the right approaches to communicating with local vendors and building positive relationships throughout. To achieve the desired outcomes with the help of Indonesian partners, Fashion Unlimited executives have to implement principles of socially-aware management to add business value to their proposal while not limiting overseas partners in terms of their activities and intended benefits. Before launching the Indonesian facility, Fashion Unlimited should also set proper expectations and prioritize future operations to integrate the comprehensive plan into the company’s agenda while remaining in line with the original scope (Witjara et al., 2019). The best pick for Fashion Unlimited would be to go beyond the notion of a mere transaction and see this business expansion to Indonesia as a vivid example of partnership.
The next step would be the knowledge transfer, with the original team being responsible for setting up the logistics. Even though informal discussions are outlined as the most popular instrument of knowledge dissemination, Fashion Unlimited should look into more dynamic ways of conveying data. This is especially crucial due to the current COVID19 pandemic that has affected every country across the globe to a certain extent. A collaborative approach to a business established during the first step would ultimately become the best way for Fashion Unlimited to build consistency and help employees share all kinds of knowledge with each other (Ong et al., 2020). During this stage, Fashion Unlimited staff would be responsible for engaging outside stakeholders in learning activities and helping all teams align around the same organizational goal and objectives.
The last stage related to the implementation of the proposed expansion plan would be to follow project requirements and implement a systemic vision that would ease the process of gaining access to stakeholder and investor feedback. Market trend analysis and target audience research would close the gap between Fashion Unlimited’s homeland strategy and its Indonesian variation. It might be reasonable to apply agile practices during this stage to allow for a smarter prioritization and establishment of team-building initiatives (Ellitan, 2017). Robust knowledge in the field could become the key competitive advantage for Fashion Unlimited, turning its Indonesian expansion attempts into a large-scale reiteration of innovation and development incentives that would also be regulated and nurtured by the local government if necessary.
Monitor & Control
Based on the existing evidence from the case study, it may be suggested to Fashion Unlimited monitor its overseas operations with the help of a series of dependent variables intended to create an extended body of knowledge. The presence of multiple expansion opportunities makes it safe to say that inter-organizational relationships should become the first factor to be controlled by the executives. It would be an essential topic to cover when looking into measuring the organizational performance of Fashion Unlimited and comparing its expansion results to domestic activities. Even though the list of appropriate measures would have to be defined later, the key idea for Fashion Unlimited would be to investigate the essential reasons for the extension and highlight the most important of them. There should be no restrictions in terms of areas of research to be covered by stakeholders or end-users, as there may be certain difficulties linked to gathering information within an external business environment. All data collection initiatives should remain as task-specific as possible to validate and assess the effectiveness of Fashion Unlimited’s supply chain as well.
Another way to monitor the company’s success inside the Indonesian business setting would be to review existing strategic alliances and marketing channels. It would be a helpful experience for the organization, as executives would gain a better understanding of how they could continue extending to Indonesia without risking the reputation of Fashion Unlimited or spending too many resources on innovation and development. The two variables that should be reviewed in this particular case are perceived benefits achieved by the organization and consumer/provider satisfaction. As a vendor, Fashion Unlimited should pay enough attention to its relationship with local partners. Therefore, satisfaction measurement cannot be ignored because it would uncover previously under-researched aspects of inter-organizational relations. The perceived effectiveness of extension initiatives should be aligned against the previously agreed-upon points intended to outline the benefits achieved by Fashion Unlimited as well. The complexity of expansion relationships makes it safe to say that the team might be interested in regulating the expectations displayed by local partners in addition to measuring satisfaction and perceived success.
The ultimate reasons for monitoring and controlling Fashion Unlimited’s extension initiatives are technological, economic, and strategic by nature. Accordingly, if the project is failing, it means that at least one of the three areas was disregarded by the company. To gain more confidence in the market and restore Fashion Unlimited’s position in the Indonesian market, April Song would have to redirect the team to pursue strategic benefits and help staff gain core competencies and enhance the overall level of flexibility possessed by employees. In economic terms, Fashion Unlimited would have to lower the production costs and see how it might affect the team’s joint capability and access to benefits. Despite being less competitive, the Indonesian market is not as easy to approach as it seems, so the management should keep the business scaled down as a backup plan. Human resource management is linked to the idea of controlling costs as well. Speaking of the technological factors, the team should avert any technological obsolescence to appeal to Indonesian investors and accelerate positive infrastructure-related change.
References
Ellitan, L. (2017). The role of business environmental and strategy alignment in the optimization of business performance of small-scale manufacturing companies in Indonesia. World Journal of Research and Review, 5(2), 57-63.
Mustofa, M. S., & Mulyono, K. B. (2020). Superior business innovation capability: Antecedent and its impacts on small business in Indonesia. Humanities & Social Sciences Reviews, 8(4), 147-157.
Ong, S. Y. Y., Habidin, N. F., Salleh, M. I., & Fuzi, N. M. (2020). The relationship between women’s entrepreneurship practice, ICT adoption, and business performance in Malaysia and Indonesia. International Journal of Entrepreneurship and Small Business, 39(4), 530-547.
Simangunsong, E. (2018). Generation-Z buying behavior in Indonesia: Opportunities for retail businesses. MIX: Jurnal Ilmiah Manajemen, 8(2), 243-253.
Witjara, E., Nidar, S. R., Herwany, A., & Santosa, S. P. (2019). The implication of business partnership, company asset and strategic innovation to business valuation of digital industry in Indonesia. Academy of Strategic Management Journal, 18(1), 1-13.
Wulandjani, H., & Hatta, I. H. (2019). The analysis of SMEs business development strategy design in Indonesia. South East Asia Journal of Contemporary Business, Economics and Law, 19(5), 27-30.