(California Fitness) Environmental analysis

4. Environmental analysis

To expand to Indonesia, California should know general background of the Indonesia which will be more discussed in PASTEL analysis. Indonesia is one of the largest countries in the South-Asia basis, which consists of more than 17,500 islands; 6000 islands are inhabited; 1000 of which are permanently settled, and the large islands consists of coastal plains with mountainous interiors (Bureau of East Asian and Pacific Affairs 2010). Jakarta is the capital of Indonesia; however, Bali Island is more famous in tourism. It has 2 seasons; rainy season and dry season. Susilo Bambang Yudhono and Boediono, who won the election with such a significantly plurality – 60.6%, has been selected as president and vice-president of Indonesia. Indonesia gained its independence on 17^th August 1945 from Japan, and bahasa Indonesia is the official language in Indonesia. Its population is approximately 240.3 million and 88% of Indonesians population is Muslim (The World Fact book 2011)

4.1. Political factors

Indonesia is considered as Republic country and 17^th August is its national holiday. Indonesia’s legal rules and regulations are based on Roman-Dutch law. In the government system of Indonesia, the President is both head of state and chief executive. The president, elected for a 5-year term, is the top government and political figure. The president and the vice president were elected by popular vote for the first time on September 20, 2004. The president, assisted by an appointed cabinet, has the authority to conduct the administration of the government (Bureau of East Asian and Pacific Affairs 2010). He holds office for a term of five years and is eligible for re-election. Since the President is also the Mandatory of the People's Consultative Assembly, he must execute his duties in compliance with the Guidelines of State Policy as decreed by the Assembly (Asianinfo n.d.).

For Indonesian labour law, Indonesia ranks number 5 of the largest labour forces and according to the labour law, 7-hour workdays and 40-hour workweeks is legal in Indonesia, where the minimum working age is 14 years (OECD 2008)

4.2. Economical factors

Indonesia is a developing country. Indonesia has a market-based economy in which the government plays a significant role. There are 139 state-owned enterprises, and the government administers prices on several basic goods, including fuel, rice, and electricity (Bureau of East Asian and Pacific Affairs 2010). In 2009, Indonesia managed to grow stronger than expected. Previous prediction put the country's economic growth at 3%-3.5% but in the first 11 months of 2009, the country's economy grew 4.2%. The growth rate was estimated to reach 4.3% in the whole of 2009 (Indonesian Commercial Newsletter 2009). Indonesia’s real GDP was expected to be 2.6% in 2009 and 3.4% in 2010 as private consumption growth helped offset decline in external demand (Vaughn 2009). As global demand has fallen, prices for Indonesian commodities have dropped. Some 13.5% of GDP comes from agriculture while it employs 42.1% of the workforce. Industry and services account for 46.8% and 38.3% percent of GDP and 18.6% and 39.3% of employment respectively (The World Factbook 2011).

General Description of Indonesia’s economy in 2009: Strong stability was recorded in the rupiah exchange rate. Toward the end of 2009, the rupiah gained to reach the level of 9,400 per dollar or the same as in 2007. The inflation rate tended to decline in 2009 after the prices of primary commodities shrank from peaks in 2008. In 2009, the country's inflation was 2.78% or the lowest in the past decade. The country's economy grew by around 4.3% in 2009 or   higher   than 3.5% predicted by international agencies. It was driven mainly by increase in household consumption   and government consumption, which grew by 4.7% and 10.2%. Respectively, Contraction, however, was recorded in exports and imports by 8.2% and 18.3% respectively. It was driven mainly by increase in household consumption   and government consumption, which grew by 4.7% and 10.2%. Respectively, Contraction, however, was recorded in exports and imports by 8.2% and 18.3% respectively. Indonesia managed to post positive GDP growth despite export and import contractions thanks to consumption sector (Indonesian Commercial Newsletter 2009).

4.3. Social factor

Population: Indonesia population is estimated 240.3 million, with annual growth rate in 2009 is 1.136%. The majority of Indonesians are of Malay extraction. The remainders of the “pribumi” (natives) are Melanesian (in Papua-Irian Jaya and the eastern islands). There are ethnic Chinese, Indians and Arabs concentrated mostly in urban areas throughout the archipelago (Expat Web Site Association Jakarta n.d.). Indonesia is dominated by Javanese (40.6%), followed by Sundanese (15%), and others (44.4%) (Bureau of East Asian and Pacific Affairs 2010).

Education: 90.4% of its populations are literate in which male are 94% and female are 86.8%.

3.6% of their GDP is spent on education (Expat Web Site Association Jakarta n.d.).

Religion: Indonesia is a multi-culture and religion country. The majority is Muslim with 86.1%, Protestant 5.7%, Roman Catholic 3%, Hindu 1.8%, and others (3.4%). (Bureau of East Asian and Pacific Affairs 2010)

4.4. Technological factors

The communication system in Indonesia is highly developed which maintained 17.33 millions of people use landlines where as 83.3 million of people use Cellular mobiles in the same way there are 13 million of internet users which is good sign for a country. It has interisland microwave system, HF radio police net and domestic satellite communications system coverage which makes its communication system better (Goyal etc 2009).

4.5. Environmental factors

Indonesia is a rich country in its natural resource and biodiversity. However, factors including natural disaster, low income economy, illegal exploitation of resources and weak environmental governance have wasted its resources (DFID Indonesia Country Assistance Plan preparation n.d.).

Indonesia is particularly vulnerable to the effects of climate change, which include rising sea levels and erosion of coastal areas, increased frequency and intensity of extreme weather events, species extinction, and the spread of vector-borne diseases. At the same time, Indonesia faces challenges in addressing the causes of climate change. Indonesia has the world's second-largest tropical forest and the fastest deforestation rate, making it the third-largest contributor of greenhouse gas emissions, behind China and the U.S (Bureau of East Asian and Pacific Affairs 2010). One reason Indonesia’s phenomenal rate of forest loss is global demand for wood pulp and palm oil and the resulting clearance of forests for plantations (The World Bank n.d.). Moreover, pollution in Indonesia is caused by rapid economic development, particularly around major population centre results in large amounts of sewage and industrial pollution, causing the decline of many reef areas (WWF n.d.).

4.6. Legal Factors

The Indonesian legal system is complex because it is a confluence of three distinct systems. Prior to the first appearance of Dutch traders and colonists in the late 16th century and early 17th century, indigenous kingdoms prevailed and applied a system of adat (customary) law. Subsequently, after Indonesian declared independence on 17 August 1945, the Indonesian authorities began creating a national legal system based on Indonesian precepts of law and justice (Tabalujan 2002).

There are several things that need to be known before conducting business in Indonesia. First thing is to process the procedure; it takes 151 days to establish a new business there (comparing with only 30 days on average around the world) (McLeod 2006). For doing the international trade business we have to know about the tariff and non tariff defence. Licensing for import and export, then tariff, have been considerably decreased exploring domestic business to high international competitive business:

·         The tariff for import has reduced faintly up to maximum of 5% in the year 2001 from 20%

·         Whereas for the year 2003 again it has reduced 10% from 20%, with an transitional target of 20% in 2000

·         This tariff will differ from products (Goyal etc 2009).

4.7. Competitive Audit

	Core Products	Facilitating Products	Strengths	Weaknesses
Existing Competitors
First Fitness	Health care in Gym service	-       Gym equipment -       Swimming pool -       Dance class	Globally well-known	High price
True Yoga	Health care in Yoga service	-       Yoga Class -       Swimming pool	Focus on Yoga service	-       High Price -       Only offers Yoga service
Pure fitness	Health care in Gym service	-       Gym equipment -       Swimming pool -       Dance class	Affordable price	Not too much gym equipment

	Core Products	Facilitating Products	Strengths	Weaknesses
Emerging Competitors
Apartment Gym	Health care in Gym service	-       Gym equipment -       Swimming pool -       Dance class	-       Cheap price -       Convenience location (apartment)	-       Gym equipment is not complete -       No standard quality
General Gym	Health care in Gym service	-       Gym equipment -       Dance class	-       Cheap price -       Convenience location (housing area)	-       Gym equipment is not complete -       No standard quality