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International Business Environments

Contents

Introduction.

Advantages of introducing M&S Textile in Indonesia.

Disadvantage of introducing M&S Textile in Indonesia.

Risks of establishing the M&S manufacturing plant in Indonesia.

Opportunities while establishing the M&S manufacturing plant in Indonesia.

Culture of Indonesia.

Ethics of Indonesia.

Trade-in Indonesia.

Recommendations.

Conclusion.

References.

Introduction to M&S Textiles Analysis

M&S Textiles is a successful textile company in Australia and now willing to expand itself in other countries too. It produced cotton fabrics with an amazing quality which has increased its reputation in the textile market. Due to the increased competition in the textile industry the company is now willing to establish its manufacturing plant in other countries and want to start with Indonesia as it considered it very beneficial for the success of the manufacturing plant. To decrease the competition and to achieve profits, it is very important to start overseas manufacturing (Morgan 2015). M&S textiles are known for its unique and traditional fabrics and textiles which connect with culture. Marks and Spencer has a long history of 106 years. International marketing is always beneficial for the industry which also helps the industries to expand themselves globally. M&S textiles have its emergence in the Australian Textile market (Marks & Spencer 2019). It has a high quality of materials. Today, international globalization becomes an important strategy for the industries. Companies always desire to increase the extra profit which can increase the value and reputation of the company for this they expand internationally to seek new market opportunities (Wilson 2015). However, international globalization is always considered as a critical decision for the companies so it is always important to recognize all the important factors before expanding it to other countries. It is important to know every factor in detail such as culture, ethics, and the trade before expanding. This report aims to recognize all the factors which are important such as advantages, disadvantages, risks and opportunities. These factors are very important to make the expansion successful or unsuccessful.

Advantages of Introducing M&s Textile in Indonesia

Due to the increased competition within the textile industry, it is important to establish the manufacturing plant in another country to increase the profit. M&S Textiles have chosen Indonesia as a manufacturing division. This textile manufacturing plant will open new opportunities for foreign market within the country. According to a report of 2014, the Indonesian textile industry had covered almost 36% of woven fabric which is competitive in nature. International textile trading is considered as trending trading over recent years. The raw materials are manufactured in developing countries and not in developed countries as which cost them less costing (Mooney 2018). There is high labour cost in developed countries as compared to developing countries so it is always beneficial for the industries to establish the manufacturing in developing countries which offers fewer labour costs. Indonesia is considered as a global resource for the textile industry and a major contributor in the country’s industrial revenue. In 2004, Indonesia was ranked as the 10th position in the world of textiles from then it is considered as an important country which promotes textile manufacturing. The labour charge in Indonesia textile industry is approximately 30 US dollars which is very less as compared to developed countries so it is an advantage to promote the manufacturing of textile in Indonesia. Indonesian textile garments not only provide textile raw manufacturing at less cost but also provide materials at a very reasonable price. There are a lot of manufacturers, retailers, suppliers, and exporters of the textile industry within the country which also increase the bargaining power of the developed nations. The availability of the fabrics which are available at a very less price makes it unique due to its low labour cost.

Disadvantage of Introducing M&s Textile in Indonesia

With beneficial advantage, there are disadvantages as well which gives us the reason which does not support the manufacturing in Indonesia as it does not have a large for cotton and cotton related inputs. This is not just a disadvantage but also considered as a very serious disadvantage as due to this factor Indonesia needs to export the cotton from the other countries. Indonesia is dependent on other countries for imported cotton and this is the major drawback of Indonesia garment industry. They have to order tonnes of cotton from other countries and this factor can create a delay in its delivering. It is stated that Indonesia can only produce 4 % of cotton and they have to order other 94 % of cotton from other countries which is a great value. Indonesia is considered as the most competitive economic state for textile manufacturing but still is not considered as compared to China and Thailand in textile and clothing manufacturing as these companies provide the manufacturing in very less rate with good quality. China has a large textile flow with a lot of experts of textile marketing which make it more unique in the Textile industry (Guan et al. 2018). A lot of garment factories are present in China and Thailand which promote manufacturing and doesn’t have any barrier as Indonesia, however, Indonesia is considered as a hard-working state and create raw material similar to cotton which comes from the “rami” plant. This disadvantage can be considered as a big downfall in Indonesian garment manufacturing but is covered by “rami” plant. It is still enriched with a competitive advantage and also an important global centre state for the textile industry.

Risks of Establishing the M&s Manufacturing Plant in Indonesia

The quality of infrastructure of Indonesia is very weak therefore the development of economic and social factor is very weak and still considered as incomplete. Indonesia needs companies to invest to grow its economy (Hamid 2017). Indonesia with a population of 255 million people has a lot of mixed cultures and values and do not follow any common thing. Indonesia is always a home for natural disasters and a place for volcano eruption, tsunamis, and earthquakes which is a danger for the people of Indonesia as well as the infrastructure. Indonesia with its origin on the Pacific Ring of Fire attracts the natural disasters within itself. This is also a reason for the weak infrastructure. Indonesia also witnessed a lot of violence in history but still considered as a peaceful state. It is a risk to establish the manufacturing plant in Indonesia as it can anytime be affected by the natural disaster and then it would be problematic for other developed states and they will be again waiting for the things to be normal and have to stop their manufacturing because of the less raw materials (Ku 2020). The economic imbalance in the country can also affect the investment within the country.

Opportunities While Establishing the M&s Manufacturing Plant in Indonesia

The country has a peaceful political system which enables the textile industry to work without any challenge. The country has a large number of employees that can work in the manufacturing plant to create raw materials which can be beneficial for the parent company. In Indonesia, people are encouraged to work in the textile industry as there are a lot of legal incentives given to people for their participation in the textile industry (Padilha 2016). The Indonesian textile industry is struggling and working hard to improve the image of the country and to increase its economic growth which attracts foreign textile companies to work with them.

Culture of Indonesia

The Culture of the country represents the behaviour, values, ideas, and attitudes of the people living in the country. The culture of Thailand is considered to be very different. The culture of Indonesia is very different as compared to Australia as it is a developed country. It is a state of several cultures as it has 300 different ethnic groups which have their own cultures and values and nothing in common as compared to other cultures. However, Indonesia is always known for its popular trading routes between South Asia, Middle East, and the Far East (Wahyuni 2015). It has a combination of many religions like Buddhism, Confucianism, Hinduism, Islam, and Christianity. However, the western world of Indonesia is different and is educated knowing science and technology. There are many ethnic groups which can be found in Indonesia with their traditional dresses and culture like Mentawai, Dayak, Dani, Asmat, Toraja, and so on. Indonesia is also enriched with the music, dance, painting, martial arts and theatre.

Ethics of Indonesia

Ethics is considered as a very important part of the business trade and investment. Ethics are the combination of values and principles which explains the difference between the right and wrong. The ethical policies of the country always work to transform Indonesian society and to connect society with western civilization. Indonesia has a high interest in foreign business and investors and wants to change its place in the global market and want themselves to transform themselves according to western culture and values (Zhao 2020). The business in Indonesia is always challenging because of the mix cultures, values, and societal norms. It is very important to know about the culture, ethics, and business before investing or establishing the manufacturing plant in the country. Culture is considered as a mix-up emotion of values which are enriched in the people of the state.

Trade-In Indonesia

Every country has its own legal and trade systems. Indonesia is considered as the major exporters of textile. It has a mixed economy in which there are both private and government enterprises working together. In entire South Asia, Indonesia has the largest economy. Indonesia is located at the pacific ring of fire therefore has a large variety of natural resources present in the country. The main exports in the country are chemicals, industrial machines, power plants, metal, scrap, waste paper, oils, perfumes, and so on. The major trade partners of Indonesia are China, United States, Japan, Singapore, India, Malaysia, and Thailand. The main exports consider oil, gas, minerals, electrical appliances, and rubber products. However, China is considered as the largest trading nation. Trade includes a large number of natural resources which is considered as a useful trade for Indonesia (Morgan 2015). The textile trade in Indonesia is growing at a high speed which is also increasing the GDP of the country. It is a fact that the cotton production in Indonesia is very less and cannot be a part of Textile Industry and have to purchase the cotton from the cotton-producing countries and also used some of the similar materials from their own country.

Major trade partners of Indonesia-

COUNTRY

PERCENTAGE

United States

32.87 %

Japan

10.08 %

China

5.7 %

South Korea

4.7 %

Due to the lack of cotton Indonesia exports a lot of cotton from other countries and considered as a major cotton importing country.

Recommendations on M&S Textiles Analysis

It is a very critical decision to select Indonesia as its manufacturing state because of the risks and challenges involved within the plan. As it is known that Indonesia does not have the proper materials to prepare the raw materials for M&S textiles which can be a drawback for the country sometimes people want pure cotton products which should be available in M&S stores otherwise it can affect the brand reputation of the company (Mark &Spencer group 2019). However, Indonesia is considered as one of the leading economies for textile and garment manufacturing but still has a tough time when tried to compete with China and Thailand. China and Thailand are enriched with the materials used in making garments that can be beneficial for the company. By taking raw materials from China and Thailand it could be more beneficial as compared to Indonesia. China and Thailand are considered as the strong competitive countries in regards to the textile and clothing sector for Indonesia. Many companies were affected by the crisis hit Indonesia in 1997. There were the three industries which were hit by the crisis that were an automotive sector, electronic sector, and the textile sector. The major challenge to establish a manufacturing plant in Indonesia is the lack of cotton and it will automatically increase the cost when they will purchase the cotton from other countries. It will be beneficial for the company to choose either China or Thailand.

Conclusion on M&S Textiles Analysis

It is concluded that M&S Textiles is a successful textile company in Australia and known for its cotton fabric amazing quality. The increased competition in the textile industry establish its manufacturing plant in other countries and now in process of choosing Indonesia as its new manufacturing country. Before choosing the country the board of directors needs to know the important details of the country before selecting it. International globalization becomes an important strategy for the industries which helps the companies to reduce their manufacturing cost and increase the profit margin. Textile manufacturing plant will open new opportunities for foreign market within the country because of the high labour cost in developed countries as compared to developing countries. The labour charge in Indonesia textile industry is approximately 30 US dollars which is very less as compared to developed countries so it is an advantage to promote the manufacturing of textile in Indonesia. Indonesia is dependent on other countries for imported cotton and this is the major drawback of Indonesia garment industry which is considered as the biggest challenge in manufacturing. Indonesia can only produce 4 % of cotton and they have to order other 94 % of cotton. A lot of garment factories are present in China and Thailand which promote manufacturing. The quality of infrastructure and social policies are very weak in Thailand. The Pacific Ring of Fire attracts the natural disasters within itself. Indonesia has a large number of employees that can work in the manufacturing plant to create raw materials which can be beneficial for the parent company. The culture of Thailand is considered to be very unique. Indonesia is always known for its popular trading routes between South Asia, Middle East, and the Far East. Ethics are the combination of values and principles which explains the difference between the right and wrong. The main exports in the country are chemicals, industrial machines, power plants, metal, scrap, waste paper, oils, and perfumes. Either China or Thailand can be selected for the manufacturing as Indonesia is not recommended.

References for M&S Textiles Analysis

Morgan, E. 2015. ‘Plan A’: Analysing business model innovation for sustainable consumption in mass-market clothes retailing. Journal of Corporate Citizenship, (57), pp. 73-98

Wilson, J. P. 2015.The triple bottom line: Undertaking an economic, social, and environmental retail sustainability strategy. International Journal of Retail & Distribution Management, 43(4/5), pp.432–447

Marks and Spencer Group plc. 2019. M&S Annual Report 2019. [Online]. Available at http://annualreport.marksandspencer.com/operating-and-financial-review/where-wesell.aspx [Accessed on 10 October 2020]

Mooney, L. 2018. How Does a Poor Company Culture Affect Employees? [Online]. Available at https://yourbusiness.azcentral.com/poor-companyculture-affect-employees-4410.html [Accessed on 10 October 2020].

Muir, S. 2015. Top 5 benefits of Corporate Social Responsibility. [Online]. Available at http://cubegroup.com.au/top-5-benefits-of-corporate-social-responsibility/ [Accessed on 10 October 2020]

Guan, Z., Xu, Y., Jiang, H., & Jiang, G. 2018.International Competitiveness of Chinese Textile and Clothing Industry: a Diamond Model Approach. Journal of Chinese Economic and Foreign Trade Studies, 12(1), pp. 2-19.

Hamid, M. F., & Aslam, M. 2017. Intra-regional Trade Effects of ASEAN Free Trade Area in the Textile and Clothing Industry. Journal of Economic Integration, 32(3), pp. 660-688.

Ku, C-C., Chien, C-F., & Ma, K-T. 2020. Digital Transformation to Empower Smart Production for Industry 3.5 and an Empirical Study for Textile Dyeing. Computers and Industrial Engineering, 142, pp. 106-120.

Padilha, C. K., & Gomes, G. 2016.Innovation Culture and Performance in Innovation of Products and Processes: a Study in Companies of Textile Industry. RAI Revista de Administração e Inovação, 13(4), pp. 285-294

Wahyuni, S., & Boeditomo, P. T. 2015. Does the Quality of Work Life Influence Competitiveness? A Comparison between Indonesia and Vietnam. Global Business and Management Research: An International Journal, 7(1), pp. 32-59.

Zhao, H., & Lin, B. 2020.Impact of Foreign Trade on energy efficiency in China’s textile industry. Journal of Cleaner Production, 245, pp. 10-16.

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