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Here is Why You Should do Business Expansion to Indonesia

When your business continues to thrive, you will reach a certain point where you start considering expanding your business. This is due to the numerous advantages that business expansion provides for the business owner. It can increase a company’s market share and customer base. It also can result in significant cost savings and operational improvements. Eventually, managing multiple channels with an integrated ERP system is essential when you expand your business.

Expanding a business is not an easy decision to make as you need to keep several factors in mind. If not managed properly, expansion can bring struggling businesses to their downfall. However, ERP software comes as a solution to assist you in growing your business. With powerful features that increase efficiency and productivity in every company’s operational activities, the ERP solution drives your company’s growth. Learn more about the ERP software pricing scheme calculations to understand its significance for your expanding businesses. 

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Strategies for Business Expansion

Strategies for business expansion | image

Expanding a business means long-term planning, financial analysis, and economic resources. Therefore, business expansion involves using certain strategies to help you to succeed. Before deciding on which plan to implement, you should understand how business expansion strategies can change and evolve alongside your company’s goals, objectives, and circumstances. Here are the six most effective business expansion strategies.

Market penetration strategy

Market penetration is the percentage of people who can access your company’s products or services. You can effectively increase the number of customers by promoting your business to a specific market segment. Marketing to potential customers who are not yet committed to a certain product or brand is one of the best ways to increase market penetration. 

You can accomplish this by launching local advertising campaigns. For example, if you own a pest control company, you could hold a campaign where you offer free chemical treatments to people who own pets. This will increase your market share because you provide a service with high demand.

Marketing and promotion

To maximize your market share, you must focus on solid marketing and promotional strategy. You can cultivate strong customer loyalty to your brand or company. Creating customer loyalty is achievable by attracting new customers in various ways. One of the most effective ways to tackle this is to build a strong customer base. 

After gaining many new customers, you can expand your business more quickly as you will have more new customers to spread your company’s name to a broader community. Creating a website is one of the most effective ways to attract new customers. A website is an excellent way to showcase your company’s services and project a professional image. If you intend to expand internationally, you should also create a localized version of your website to engage the local customers better. 

Expansion into a new market

When a market becomes saturated with one type of product or service, it tends to dry up. In traditional business expansion, many businesses expanded into areas where they were previously unable to do business. This could be due to various reasons, such as a lack of local market penetration, lower capital costs, higher profit, or a shift in consumer preferences. Despite what causes the market saturation, you can use new market expansion strategies to thrive your business. 

Expand your business abroad

For some businesses, the local market eventually becomes saturated. Thus, the only way to expand is to go abroad. As you will be able to sell your products or services to a broader audience, this can come like a double side of a coin. Therefore, this is a step that many businesses are afraid of because it brings both challenges and opportunities. 

You should find local partners to manage a portion of your business operations, particularly the operational and administrative aspects, such as HR and payroll, that can cause you to lose money and violate local law. You need to consider all factors that can undermine your market presence. However, to overcome this situation and secure your business processes, implementing the integrated HRIS system comes in handy

Start a franchise

Starting a franchise could be one of the best strategies for business expansion. A franchise is opening a business in a location where there is market demand, and people are willing to invest money and energy to manage the business. Franchises allow you to grow your business without having to worry about competitors. Additionally, this type of strategy provides you with the environment to expand broadly, with each branch able to manage its business on its own. 

Reasons Why You Should Expand Your Business to Indonesia

Expanding your business to Indonesia

The world sees Indonesia as the largest archipelago with beautiful tourist destinations. However, Indonesia is more than just one of the most popular tourist destinations. Indonesia is an excellent place to locate your investments and register your business with its strategic location. Most importantly, Indonesia has enjoyed steady economic growth over the last decade.  In 2019, the country’s GDP was 1119.19 billion USD, making it the largest economy in Southeast Asia and one of the world’s top 20. Furthermore, there are several more reasons why you should expand your business to Indonesia. 

1. Trade agreements

The Indonesian government is constantly working to boost the country’s economic growth and make it easier for foreign businesses to invest. Signing trade agreements is one way to achieve this growth. Indonesia has had several trade agreements up to the present day, including the economic partnership agreement with Japan (which went into effect in 2008) and the preferential trade agreement with Pakistan (signed in 2012).

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) and the historic signing of the Regional Comprehensive Economic Partnership came into effect in 2020. (RCEP). The agreement involved fifteen countries (10 ASEAN countries, New Zealand, Australia, China, Japan, and South Korea), making it one of the largest trading agreements, covering nearly a third of the global economy.

2. Ease of doing business

According to World Bank’s report, Indonesia ranked 73 out of 190 economies in total, with an overall score of 69.2 in terms of ease of doing business in 2020. This is possible thanks to the government’s initiatives. 

Firstly, the process of registering a company in Indonesia has significantly improved. Previously, the company registration process took at least two months to complete. However, this is not the case in 2020, as foreign investors can now expect to complete the entire process in one and 1.5 months. Furthermore, new businesses established in Jakarta are no longer required to submit a Company Domicile (SKDP)

Since the implementation of the Online Single Submission (OSS) system, more businesses can now begin operations immediately as long as the system has registered a Business Identification Number (NIB) without the need for additional licenses. There are 45 new business fields, including call center, event organizer, ticketing in travel agencies, and education and training.

Finally, foreign investors who fill the positions of shareholders, directors, or commissioners and meet the requirements of invested shares can begin working immediately with a permit of the Investor KITAS. Other advantages include the ease of application and the waiver of the government’s work permit fee (DPKK).

download skema harga software erp
download skema harga software erp

3. Investment incentives for foreign investors

The Indonesian government has reduced the corporate income tax (CIT) rate from 25% to 22% for 2020-2021. This is good news for all investors, especially because they will reduce the CIT rate to 20% in 2022. Aside from the CIT reduction, the government has granted various tax breaks to encourage more foreign investment. Repair and maintenance services, information and technology services, HR consulting, legal consultation, research and development (R&D) services, and toll manufacturing are eligible for zero-rated value-added tax (VAT). 

Furthermore, companies engaging in R&D activities can benefit from a 300% reduction in gross income, while businesses in trendsetting industries can benefit from a 60% reduction in net income. Moreover, there are monetary and non-monetary incentives for companies operating in one of Indonesia’s 13 special economic zones.

4. Huge population, growing middle class, and competitive labor costs

According to World Bank, Indonesia’s population will exceed 273 million by mid-2020. This amount is equivalent to 3.51 percent of the world’s total population. Moreover, this number is expected to rise further in the coming years. In addition to a large population, Indonesia’s middle class is rapidly expanding. A large population implies strong purchasing power, and strong purchasing means that any type of business can thrive and generate significant profits if they target the right market. 

Additionally, according to the World Bank, more than 40% of the population is of working age. Accordingly, Indonesia comes as a large pool of workers. Furthermore, the country has competitive labor costs if you compare them to other countries, such as China, where the monthly minimum wage is rising, and Singapore, where everything is expensive. 

5. Permitted land ownership by foreign investors

Foreign investors can now purchase land in Indonesia. Furthermore, to buy land in the country, foreign investors can choose whether to establish a foreign-owned company (PT PMA) or a locally owned company (PT). Additionally, you can secure the right to build (Hak Guna Bangunan – HGB) with a PT PMA. This way, the name of the foreign-owned company will appear on the land certificate. A legal agreement grants fully protected ownership. 

Moreover, the HGB allows you to build property and generate income by selling or renting it out. Because the government can only grant the freehold title or right of ownership (Hak Milik –HM) to Indonesian citizens, foreign investors can obtain the HM by establishing a PT through a local nominee arrangement. 

Conclusion

Expanding your business requires many things to consider. When your company reaches a certain point and is ready for expansion, you must decide which strategy is best for your objectives and goals. Expanding your business to Indonesia is a great choice, especially because of the promising economic growth and the supportive policies and regulations. Once you establish your expanding company, the process does not stop there. Managing multiple companies may be hard if you do it manually. This is where the comprehensive ERP system is convenient.

PSG Egibility

Hash Core ERP is the perfect solution for growing businesses. With the best security system, this integrated software can keep all your company data, from the employee to financial and other important information. Hash Core ERP is also customizable and allows you to access data from anywhere and anytime. As a result, you can make accurate and timely decisions and manage multiple companies and employees from all across your business with the best cloud-based ERP system from HashMicro. Get the pricing scheme calculations here if you want to learn more about Hash Core ERP. 

Interest in getting savvy tips for improving your business efficiency?

Jonea Christie
Jonea Christie
Junior Content Writer at HashMicro.

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