Market Opportunity Evaluation Report for BMS Organics

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Introduction
In todays overall business scenario there are two significant forces or phenomena that are
playing a significant role, namely, globalization and health consciousness among people in
general. It has been noted that the average awareness of people regarding fitness and
maintaining a healthy lifestyle has greatly improved (Nielsen , 2015) and therefore, people
world over are now making healthier choices, not just in the field of food products but also
while making decisions about the clothes, beauty product, activities, etc. One of the business
related manifestations of this trend is the opportunity that it has created in the field of organic
production. According to a global research report it has been forecasted that the global
organic sector will grow at an average rate of 16 percent per year between the years 2015 and
2020 (TechSci Research, 2015). This presents a highly lucrative business opportunity, which
the organization chosen for the purpose of this report, BMS Organics has leveraged and built
upon in Malaysia. It was established in Malaysia more than a decade ago and today it has
expanded its presence all over the country, operating through a network of more than 40 retail
shops and almost 20 organic restaurants (BMS Organics, 2015). It is currently being operated
by three brothers, Dr. K.B. Lee, K.F. Lee and T.C. Lee (BMS Organics, 2015).
The second phenomenon of globalization is yet another significant factor that is resulting is
increasing opportunities for businesses. The overall integration of the different economies is
also encouraging the various successful business organizations to increase their footprint
beyond their home country. This is the case with BMS Organics as well. After having
successfully operated for many years in Malaysia, BMS Organics seeks to expand their
presence to other emerging countries as well. Therefore, in this report, a market opportunity
evaluation is performed for it. Since BMS Organics operates in multiple sectors like food,
organic clothing, Home essentials, etc. the focus of this report is on Beauty and Skin Care
Products. The country chosen for expansion is Indonesia.

Why Indonesia?
Indonesia is regarded as a highly promising emerging market economy by many independent,
international agencies. For example, according to a study made by the International Monetary
Fund (IMF), Indonesia has been rated highly positive for its overall economic scenario and
for the opportunities that it presents (Dieng, 2016). A separate study made by Euromonitor
International also corroborates this finding and ranks Indonesia among the best performing
economies besides the BRIC nations, in the emerging market segment (Euromonitor
International , 2015). The overall health and wellness industry, which includes the organic

product segment as well, is also forecasted to perform well in the coming years, due to the
largely unsaturated market segment (Euromonitor International (a), 2016). While it is stated
that the overall level of awareness of the customers regarding the benefits of organic products
is relatively low, the consumer interest in this sector is on a promising rise, making the
market quite lucrative and a potential source of the first mover advantage (Euromonitor
International (a), 2016). Even when analysing strictly from a Beauty and Cosmetic products
perspective as well, the Indonesian market holds promise. According to the research reports,
the organic beauty product market in the ASEAN countries was valued at a strong USD 2.5
billion figure in the year 2014 itself (Future Market Insights, 2014). By the year 2020, this
figure is forecasted to reach USD 4 billion. In addition to that, the regional analysis shows
that Indonesia and Thailand together accounted for approximately 53.8 percent of the total
market size in the year 2014 (Future Market Insights, 2014). This figure clearly shows that
Indonesia is indeed a key player in the organic beauty and personal care segment and
therefore, choosing it as the destination for international expansion of its beauty related range
of products will be a correct strategic move for BMS Organic.

Country Information
Market Potential Index
According to the Market Potential Index (MPI) available for the year 2016, Indonesia holds
the 33rd rank among the 87 countries surveyed (Michigan State University, 2016). However,
when compared with the last three years ranks, the trend is positive, as Indonesia has
improved its ranking from 39th in year 2014 to 33 in 2016 (Michigan State University, 2016).
It is also noteworthy that the top 32 ranking countries in this survey also contain many
developed countries, like Japan, Germany, France, etc. and therefore, if only the emerging
economies are considered, the MPI rank of Indonesia is promising.
Many of the parameters or metrics that are used by the index to compute the overall rank,
provide the similar information as briefly provided in the preceding section. For example, its
score for Market Size metric is 11 (out of 100). However, its score for Market Growth Rate is
69 (Michigan State University, 2016). From this is can be inferred that although the current
market size as measured by the Electricity Consumption and Urban Population might be low,
but the rate at which the growth is happening is quite high and therefore, the future potential
that it holds is quite strong.

Although, there are some challenges as well that this indicator presents. For example, the
score of Indonesia in terms of the Overall Economic Freedom is a moderate 46 (out of 100).
In addition to that, it scores quite low on the Commercial Infrastructure metric (only 30).
However, even for Malaysia (which is ranked 27 on this index), the metrics have similar
scores. For example, Market Size score is 3, Economic Freedom is 52 and Commercial
Infrastructure is 47 (Michigan State University, 2016). As BMS Organic has already
established themselves in spite of the challenges that Malaysia presents, similar challenges in
Indonesia should not prevent it from leveraging the opportunity that Indonesian markets
present.

Micro and Macro Analysis

Micro Analysis Porters 5 Forces
Threat of New Entrants- High
The skin care market of Indonesia has been growing at a rapid pace over the last few years.
According to the Euromonitor research, this sector is expected to grow at a rate of 11 percent
till the year 2020 (Euromonitor International (b), 2016). The developing middle class
population in the country is driving the demand for skin care and beauty products, which is
attracting many international skin care companies to target Indonesia. For example, global
giants like Unilever, and LOral are already making significant investments in the country
and even setting up manufacturing centres in Indonesia (Chaterjee & Paramaditha, 2012). In
other words, the high growth potential that the Indonesian market offers is a lucrative
opportunity for the business organizations and therefore, the threat of new entrants is high.
Degree of Rivalry- Low
As already stated in the previous sections, the Indonesian beauty and skin care market is in
the initial phase and as of now is highly unsaturated. Particularly its organic product segment
as of now does not have many players and therefore the degree of rivalry is not very high.
Threat of Substitutes- High
One of the major substitutes for the Organic beauty products are the non-organic beauty
products developed by the global cosmetic giants like Unilever, LOral, Clinique, etc.
According to the available information, the Indonesian customer base is quite brand
conscious and is highly attracted to the products from the international companies (Chaterjee

& Paramaditha, 2012). The demand for their products could substitute the demand for organic
beauty products that BMS Organics offers.
Bargaining Power of Customers- Medium
The beauty and skin care products can be broadly considered to be a part of the Fast Moving
Consumer Goods category, which is often characterized by low switching costs and high
bargaining power of customers. However, since the market currently is in its growing stage,
with high demand for organic products (Future Market Insights, 2015) and less number of
products available, it moderates the bargaining power of the customer. Therefore, it is
regarded as medium.
Bargaining Power of Suppliers- Low
The international giants which are operating in Indonesias beauty product sector already
have highly diversified supply chains which limits the bargaining power of the suppliers.
However, even for the relatively smaller scale firms like BMS Organics, as organic
agriculture is quite popular in the country (Suharjo, et al., 2013). The large supply of
organically grown raw materials reduces the overall supplier power.

Macro Analysis: PESTEL

Political Factors in Indonesia
Indonesia is the third most populous democracy in the entire globe and it presents a stable
political regime (Export.gov, 2012). It is also among the G 20 group of nations as well. There
is also a strong emphasis being laid upon the decentralization of power among the various
government entities, that is a further promising sign for increased political stability and
reduced political risk. The policy related decisions that are being taken by the government of
Indonesia are also progressive. For example, one of the major priorities of the current
political regime is to develop the infrastructure in the country by investing USD 450 billion
by the year 2019 (Strategic Risk Global, 2015). A second example is the initiative taken by
the government to increase the ease of doing business by implementing a policy that reduces
the time required by the business owners to register themselves with the Ministry of
Manpower (The World Bank (a), 2016). A lot of efforts are also being made by the
government to improve the access of electricity to the business organizations as well (The
World Bank (a), 2016). According to the Ease of Doing Business ranking provided by the
World Bank group, the 2016 rank of Indonesia is only 106 (The World Bank (b), 2016).
However, it does represent a positive trend as in the year 2015 it had a rank of 120.

Economic Factors in Indonesia

IMF has regarded Indonesia among the best performing emerging countries in the world, in
terms of economic performance in the past and the projections made for it (Dieng, 2016). The
country registered a healthy growth of almost 5 percent in the year 2015 and through the
various policy initiatives that have been taken by the central bank, the inflation levels are also
within control and as per the target that they had initially set (Dieng, 2016). It has also been
found that the in the South East Asian region, Indonesia is the second largest market for
organic beauty products, and in the year 2015, it has registered a total revenue of USD 671
million (Future Market Insights, 2014). Its financial systems, however, are less vibrant than
that of Malaysia, as almost 80 percent of the financial system is dominated by the banks, as
compared to the figure being only 50 percent in Malaysia (OECD, 2015). This might limit the
credit availability to the new business organizations setting up their bases in Indonesia.
Another factor posing economic risk to the business enterprises is the dependence of the
economic performance of Indonesia on China (Sipahutar, 2016). Indonesias trade is greatly
associated with China, and since it is experiencing a slowdown in its GDP growth and
economic performance, Indonesian economy is also suffering from its side effect (Sipahutar,
2016). This could have worrying consequences for Indonesia, as the slowdown in China is
expected to continue.
Social Factors in Indonesia
As already highlighted in the previous section of this report, Indonesia is currently witnessing
a huge surge in the demand for beauty and skin care products due to the changing social
preferences. However, a lot of this demand is triggered by the rising middle class population
and their increasing disposable incomes, and they are highly attracted by differentiated
products (U.S. Commercial Service, 2015). For example, they prefer products that are either
imported or have a high brand value associated with it.
Technological Factors in Indonesia
Developing technology is being leveraged by the companies to develop innovative products
and also to engage in innovative ways with the target customer base (opaciuk & oboda,
2013). For example, social media is a massive trend in Indonesia which is being effectively
utilised by the companies to engage with their customers. Also, the advancing technology is a
huge enabler in product research and development of the skin care formula.
Environmental Factors

The organic range of beauty products are created by using organic produces, which are all
produced in an environment friendly manner. Hence, there is no significant environmental
impact of the business operations.
Legal Factors
While Indonesia does have civil code, which tries to provide a highly objective legal system,
its legal processes are highly influenced by the civil and customary law provisions
(allens.com.au, 2014). This could be a source of legal risk for the foreign companies.

Market Evaluation Table

Country Information

Score
1 to 10; 10 being the highest score

Market Potential Index

Competitors Information

New Entrants Information

Substitutes Information

Power of the Clients Information

Power of the Suppliers Information

Political Information

Economic & Trade Information

Socio-Cultural Information

Technological Information

Total score

61 (out of 100)

GE-Mc Kinsey Matrix

This matrix compares the industry attractiveness with the ability of the firm to compete.

Image Source: (Jurevicius, 2014)

As evident from the analysis presented in the previous sections, that in terms of industry
analysis, Indonesia is quite lucrative and presents a strong business opportunity for the
players in the beauty product segment. Hence, the Y axis value is quite high. There are
multiple sources of strength for BMS Organics. First, it is already a highly successful
company in Malaysia. Hence it already has an established brand image, which is significant
for the Indonesian consumers. Secondly, due to its organic nature, its ability to differentiate
itself is also quite high. However, when compared to other international cosmetics firms, it
does lack the strong financial backup and global brand value. Therefore, the X axis value is
determined to be moderate.

BMS
Organics

Since the position of the fir lies above the diagonal, according to the matrix, BMS Organics
should increase its investment in Indonesia.

Conclusion and Recommendations

On the basis of the above analysis it can be concluded that Indonesia clearly presents a strong
business opportunity for any firm belonging in the organic beauty products segment. Even
though it is an emerging economy having its fair share of challenges, its large population
base, rising awareness regarding the organic products and the social trend that has led to an
increased demand of beauty and skin care products, present a massive opportunity for
globalization to BMS organics. It is highly recommended that BMS Organics leverages this
opportunity. On the basis of this analysis, it is also recommended that when launching the
new products, adequate care is done on the branding of the product and other aspects like
packaging, advertising etc. since the Indonesian population is quite brand conscious. It is also
highly recommended that a consumer preference analysis is performed as a part of the duediligence process in order to determine the exact parameters that the customers employ as the
decision making criteria, and how different they are from those in Malaysia. The positioning
statement and the entire marketing communications strategy should be accordingly decided.
Studies have shown that the lack of trust factor is a strong reason for many Indonesians not to
use organic products (opaciuk & oboda, 2013). Therefore, it is also important for the firm

to establish its trust factor among its target market segment and establish that their product is
high quality and uses actual organic products.

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