Professional Documents
Culture Documents
Indonesia (ASEI)
For the past 20 years, Asia Electronics Company (AE) has strived to become
not only a top company in the Korean consumer electronics industry, but also a world-
class international corporation. AE‟s brand „Star‟ already has a strong base in Southeast
Asia and AE is endeavoring to establish its image as a high-tech electronics company.
AE‟s local subsidiary in Indonesia, Asia Star Electronics Indonesia (ASEI), was
established in 1995 through a joint venture with the Salim Group. ASEI is currently
pushing hard to develop a localized management system in the Indonesian market.
Already having a large market share through the production and sales of color
televisions and refrigerators, it is looking to further expand its range of products to
include washing machines and air conditioners. In its 22 foreign production and sales
subsidiaries, AE is pushing its Priority 3 strategy which aims at advancing, in every
country, 3 products into the top 3 market share list. With this strategy, AE is pursuing its
vision of becoming a global consumer electronics company.
Since being assigned in 2003 as General Manager of ASEI, Mr. Suh-kyun Kim
has worked hard to increase local sales in consumer electronics. Due to his efforts, Star
products have settled into the market. Although ASEI had some initial difficulties in the
early years of investment, especially at the time of Asian financial crisis during 1997-
2000, it achieved the annual sales of US$ 100 million for the first time in 2001. In 2002
the revenue skyrocketed to 120 million dollars. Mr. Kim achieved a record sales volume
of US$140 in 2003, and set a goal of 200 million by the year 2006, and seeks to further
enhance the company‟s status to become a consumer electronics company that can rank
with its Japanese counterparts in the local market.
In addition, as part of the firm‟s efforts to diversify its products Mr. Kim is
seriously considering entering the Multimedia PC and notebook market. However, he is
not still sure what kind of strategy he needs to pursue and what report he has to make to
the executives in the head office. ASEI‟s entry to the PC and notebook market and the
performance thereafter will significantly influence the long term business strategy the
head office has for the ASEAN region. Still, whether or not jumping into the PC market
would be a plus or a minus to ASEI was unclear. Especially because Multimedia PC and
notebook was considered as a fast growing market in Indonesia, he thought that the new
business could become a strong future cash cow to ASEI. However, at the same time he
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realized that the PC industry may be somewhat different with the traditional consumer
electronics industry in many aspects. Feeling both excitement and pressure about the
new project, Mr. Kim started analyzing the following recent economic data.
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disposable income was over US$7,500 had increased from 2.1% to 7.0% of the
Indonesia‟s total household during the 2004-2007 period, as in Table 1.
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1.2 Infrastructure- Electric Power, and Communications
Indonesia‟s infrastructure is still weak. About 80% of city households and just 40%
of those in rural areas are provided with electricity from the electric power corporation.
Moreover, the electric power corporation supplies only two-thirds of the electricity
demanded, and the rest is supplied by independent power plants running on diesel
engines.
In communications, although service has expanded, demand is still increasing at a
faster rate than supply. The number of would-be users awaiting phone services has
always exceeded the total phone-line capacity of the Indonesian communications
corporation. There were only 3.3 million phone lines in use in 1995, and the number
increased to 16 million in 2007. In spite of the rapid increase of telephone line supply,
three out of four Indonesia households still did not have telephone lines in 2006. So thus
far, due to the inadequacy of the communications infrastructure there are many
difficulties in freely using the internet or PC communications, except a few major cities.
The Indonesian government is planning to supply 22 million phone lines by 2012.
When the project is over, the communications infrastructure is expected to be greatly
improved.
However, the number of mobile telephone subscribers has increased much faster. In
1995, there were only 211,000 mobile telephone subscribers in Indonesia, but the
number in 2007 was about 70 million.
Increasing internet accessibility and usage has increased since 2000. In 2000, there
were less than 2 million internet users. But the number increased to around 27 million in
2007.
Indonesia’s PC Market
2.1 Indonesia’s PC Consumer Status
Indonesia‟s PC market is in its growth stage. Per capita income is still too low
for PCs to be used by an average consumer. In 2000, only 3% of the total households
had PCs. In 2007, the household ownership of PCs was around 12.4%, with the
percentage of those owning internet-enabled computers an only 4.5% due to the lack of
telecommunication infrastructure. However, due to the continued economic growth and
its dual economic structure based on a wide income discrepancy, the proportion of
households that possibly could afford a PC is expected to be near 30% in 2015.
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[Table 2] Indonesian PC Market by Use
(thousand, %)
2000 2004 2007 2010 2013
Number ratio Number ratio Number ratio Number ratio Number ratio
Office use 280 28 390 26 600 24 880 22 1,200 20
Individual 720 72 1,110 74 1,900 76 3,120 78 4,800 80
use
Total 1,000 100 1,500 100 2,500 100 4,000 100 6,000 100
Source: Compiled by the author
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PC market was desktop PCs. However, the market for notebook and netbook is
increasing, as in many advanced countries. By 2013, desktop PCs will account for only
40%, and notebook PCs will reach 50% of the total PC market in Indonesia.
Analysis of Competitors
The world‟s leading PC companies entered the Indonesia market. As in Table 4,
brand name products accounted for 75% of the total market in 2007.
Among many brands, Acer, HP, Dell and Toshiba were considered as top brands.
Acer which is a Taiwan-based electronics giant manufactures its products in Indonesia,
and currently ranks the second among world PC companies. It is also a multinational
corporation that has offices, assembly plants, and subsidiaries in several dozen countries.
Acer‟s products are equipped with many new functions and sleek designs have a
competitive edge over other brands. Promoting the theme “We make inexpensive but
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convenient products” in advertisements, Acer is focusing on PC development that
emphasizes convenience.
HP is the world largest PC company, and its strongest points lies in its
inexpensive products, given the brand image. Non brand products are 15~30% cheaper
than brand name products, but low consumer confidence is a major weak point.
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Local PC prices are about 6.5 million~8.5 million rupees for desktop PCs, and
9.3 million~12.5 million rupees for notebook PCs, a level at which only high-income
households can afford. Table 5 shows the price range of leading brands.
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<Discussion Questions>
1. Do you think entering the PC market is a wise decision for ASEI? Discuss the
reasons for your decision.
2. If Mr. Kim decides to enter the market, which product type would be more
suitable? Which market segment should he target?
3. What should be the appropriate price range for the product?
4. Assuming ASEI enters the market, what strategies should be used for
advertisement and distribution?
5. If the company forgoes the PC market, what alternatives are there for ASEI?