Indonesia & the Security System Market   Term Paper ID:27524 Click to get this paper

Essay Subject: Examines the economic culture & climate of Indonesia. Analyzes the prospects for marketing home security products in the country.... More...

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Paper Abstract: Examines the economic culture & climate of Indonesia. Analyzes the prospects for marketing home security products in the country. Paper Introduction: Indonesia has seen a rapid growth in its economy in the last two decades which has inevitably given rise to a skyrocketing crime rate. These two factors alone suggest this nation is a potentially lucrative market for any American producer and exporter of high quality security systems. Currently, no high end or sophisticated security equipment including fire and burglar alarms, video surveillance, signal equipment, and a bevy of other types of monitoring or warning systems, are produced domestically. This lack of domestic security systems production means Indonesia's booming commercial and residential construction industry must rely on imports for incorporation into their building projects. It is true that government statistics for the period 1990 through 1995 have shown a slight decline in the importation of security equipment but this report will detail why this is a misleading figur Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Reese also found thatother types of bank security equipment totaled $5 million. Reese has done extensive research into how the security systemimportation market breaks down annually in terms of the total $42 millionestimate. Another obstacle to selling security systems in Indonesia is thereliance on domestic middlemen to market and distribute products. Thus, Indonesia's tourism industry is a majorsource of purchasing orders for security equipment, especially high techequipment that tourists are supposedly familiar with, such as sophisticatedcamera and entry systems. Currently, no high end or sophisticated security equipmentincluding fire and burglar alarms, video surveillance, signal equipment,and a bevy of other types of monitoring or warning systems, are produceddomestically. However, it is hoped that theelimination of trade barriers as Indonesia integrates more fully into worldmarkets will open opportunities for companies to establish their ownmarketing and distribution structures, staffed by Indonesians, in the nearfuture. (1994). Construction on thenation's first super-mall began in 1994 with plans calling for it to cover18 , m2 and include 25 shops, an amusement center, and an 8 seat foodcourt (Indonesia - Security equipment, 1994, 11). These projects will require huge, integrated, andsophisticated security systems to monitor platforms, control access tocertain areas, and maintain baggage safety. While the Indonesian market is potentially very lucrative for UnitedStates firms exporting security equipment, such an investment is notwithout a certain number of obstacles. It is truethat government statistics for the period 199 through 1995 have shown aslight decline in the importation of security equipment but this reportwill detail why this is a misleading figure. Some of these obstacles includeIndonesia's absurdly high import tariffs, the critical need of foreignsecurity firms to conduct their business through middlemen and the highercosts associated with this practice, and a need for improvement ofIndonesia's infrastructure to facilitate the transportation of securityequipment to potential customers. For example, theimport tariff on fire extinguishes for fire security systems is astaggering 4 % which is compounded by an additional 1 % import sales tax(Reese, 1996, 1 ). In 1994, 81 new homes werebuilt in Indonesia and 3 % of these homes were purchased by middle andupper level income families (Reese, 1996, 3). Plansearch Associates released a market research report in 1994 inwhich they reported that Indonesia's construction of office space hasincreased annually by more than 4.3% (Indonesia - Security equipment, 1994,1 ). In the meantime, salesfigures for foreign corporations will not suffer due to the increasingdemand for their security products. In 1994 Indonesia had 2.4 million m2 of office space with aprojection that an additional 46 , m2 would be needed in 1995 and48 , m2 more needed by 1996 (which translates to about 6, officesuites) (Indonesia - Security equipment, 1994, 1 ). In fact, the factors listed in thispaper which point to continued strong demand for these products as well asthe necessity for Indonesia to eliminate many of its protectionism policiesmake Plansearch Associates estimates of 11% future annual growth of theIndonesian market unduly conservative. Recent statistics reporting theannual increase of crime by as much as 7% (a figure which in the past wasunheard of in Indonesia) seems to bear out these fears (Reese, 1996, 2).Reese attributes much of this increase in crime to a widening gap betweenthe rich and the poor. (1996). In 197 , Indonesia imported $1.5 billion worth of products andby 1996 this figure has increased to $42 billion (Reese, 1996, 1). This lack of domestic security systems production meansIndonesia's booming commercial and residential construction industry mustrely on imports for incorporation into their building projects. This practice is so widespread that it must be assumedthe government has an unofficial policy of looking the other way concerningthese types of infractions. However, to avoid these tariffs, domestic importerscommonly list security equipment as different products, which are subjectto lower tariff levels, on their manifest bills. References Indonesia - Security equipment. The Indonesiangovernment is well aware that reports of high rates of crime can retard thegrowth of a region's tourism industry, as in the case of Florida afterreports of targeted attacks by criminals on foreign tourists, and in somecases devastate a nation's tourism industry, as in the case of Brazil andJamaica (Reese, 1996, 3). Indonesia has seen a rapid growth in its economy in the last twodecades which has inevitably given rise to a skyrocketing crime rate.These two factors alone suggest this nation is a potentially lucrativemarket for any American producer and exporter of high quality securitysystems. Indonesia is experiencing a thriving tourist industry. In terms of residential housing, it is estimatedthat there are currently approximately 32.5 million families in Indonesia(Reese, 1996, 1). Still other means of importing securityequipment into Indonesia seems to be through a thriving smuggling market(Reese, 1996, 4). In the very shortterm, the increasing revenues in the this market still make this anattractive venture since the high demand for these types of productsobviously proves that Indonesians are willing to pay the inflated prices.Second, as Indonesia's economy continues to develop it will become evenmore critical to her success to integrate into the world markets throughtrade pacts and free trade zones by reducing or eliminating many of thesetariffs. Additionally, theseimprovements to the nation's infrastructure will facilitate the importationand distribution of security equipment, reducing the company's overhead atthe same time guaranteeing the ability to meet all projected increase indemand for these products. As mentioned one of the biggestobstacles are the unreasonably high import tariffs Indonesia slaps onincoming products. Statistics show the building industry is increasing by 5 % annuallyfor a variety of reasons. Jakarta: PlansearchAssociates. It is projected that for the balance of the 199 s, Indonesia'seconomy will continue to increase in size by about 8% annually (Reese,1996, 1). Perhaps not surprisingly,a great deal of security equipment such as sensors, alarms, and cameras areimported under misleading titles such as general electronic equipment(Reese, 1996, 4). Metal detection equipment is purchased for $1.5 million annually. The need for middlemen to gain government contracts takes on greaterimportance because the Indonesian government has undertaken a series ofmassive infrastructure upgrade projects including the extension of 3airports and the building of a brand new one, worth $1.36 billion inconstruction contracts, and the building of a new mass transit rail system,worth $1.4 billion in construction contracts (Indonesia - Securityequipment, 1994, 2). Admittedly, while the Indonesian security market is potentially verylucrative for foreign firms, there are certain obstacles which must bedealt with in order to be successful. By all accounts, independentexperts have listed the security equipment market in Indonesia atapproximately $42 million in 1995 (Reese, 1996, 4). Reese also concluded that the fastest growing segments of theresidential security market included anti-burglary and fire alarms, fireextinguishes (which are monopolized by the domestic market), automated gatesystems, and garage locks. It is projected that in 1997 Indonesia willrequire an additional 3 , m2 in retail space. However, in thatsame year, the government's Capital Investment Board released additionalcontracts for 55 new hotels, representing an increase of 15, rooms, inrecognition of the tourism industry's annual growth of 15%. He also foundthat automatic car park systems accounted for $1.5 million. Traditionally, Indonesian families often lived with otherfamily relations or in poor and subsistence housing thus requiringrelatively small annual demand for new residential housing. This increase in per capitaincome has meant an increase in the demand for homes by Indonesian familiesand the nation now faces a housing shortage. The Indonesian security system market provides a rich opportunity forforeign manufacturers provided they have the patience to wait for thetariff and trade obstacles to disappear and do not compete withdomestically produced, but relatively unsophisticated (and less lucrative)equipment, such as fire extinguishes. Despite these pitfalls, Indonesia is worthy of investmentconsideration by American security firms because of its booming economy aswell as crime rate, the fact that there is no domestic competition andlittle world competition other than European firms, and the excellentreputation of Indonesian companies in terms of paying their bills. Currently, Indonesia has approximately 18 shopping centers, 46 majordepartment stores, 28 new shopping malls, and 38 supermarkets (Indonesia -Security equipment, 1994, 11). In the commercial market the highest increasein demand has centered around sophisticated access and entrance controlequipment as well as anti-fire safety systems (Reese, 1996, 5). Thispractice drives up the cost of developing business in Indonesia: Normally, end users do not directly import the safety and security systems or equipment they need, but order or purchase it through local agents or distributors. Closedcircuit TV equipment accounted for $3.5 million and centralized alarmmonitoring accounted for an additional $2.5 million. However, the intelligent producer of security productswill not be deterred by this problem for two reasons. However, withthe boom in the economy, Indonesian families have seen their average yearlyincome jump from $4 in the early 198 s to an annual income ofapproximately $95 by 1995 (Reese, 1996, 1). Indonesia - The market for security systems.Jakarta: Plansearch Associates. The elimination of middlemen who know the country and have long-established relations with domestic corporations and government agencieswill prove problematic to overcome. However, if Indonesia wants tocontinue to spur its economic expansion domestically and internationally,the elimination of these obstacles is inevitable. In 1995,Indonesia listed 5 hotels with roughly 5 , rooms. Finally, computerized time attendance equipment totaled $5 , whilemiscellaneous industrial and power house safety equipment, such as firedetectors, accounted for $5 million dollars (Reese, 1996, 4). He states: This high level of crime frightens home owners, especially those of middle and upper level incomes, so they prefer to use more sophisticated security equipment, including alarms for fences, garages, doors and windows, access control systems equipment, [and] cameras (Reese, 1996, 2). According to Reese, (1996), who studied the market for securityequipment in Indonesia and reported his findings in a market researchreport, the Indonesian economy has grown by 7% annually since 198 (Reese,1996, 1). Commercial building has also increased by huge amounts in the last 15years. Reese, C. High qualitysecurity locks for residential, commercial, and automotive use totaled $3million. Fence and guard house security systems account for$4.5 million while building automation accounts for $4 million. The discrepancy betweengovernment figures and independent conclusions lies in the unreasonablyhigh tariffs the Indonesian government places on imports. Although Indonesian government figures concerning the domesticsecurity system purchases portray this market as relatively small anddeclining annually (from $18.2 million in 1993 to $1 .1 million in 1995),these figures are extremely misleading. In fact, for a large procurement plan, for instance the purchase by a government agency, it must be procured through a local agent or distributor (Reese, 1996, 6). One ofthe fastest growing sectors of the Indonesian economy is the building andtransportation industries. He found that miscellaneous access control equipment, such aselectronic keys or electronic recognition cards, accounts for the largestchunk at $11 million. The growing economy and the fact that Indonesiahas a population of 195 million people (which is also increasing by 1.9%annually) has required a massive increase in the building of residential,commercial, and manufacturing structures. These newly affluent families understandably fear the threat of crimesagainst themselves and their property. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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