Essays on International Engineering Management - KHS GmnH Opening Production Facility in Indonesia Case Study

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The paper "International Engineering Management - KHS GmnH Opening Production Facility in Indonesia" is an engrossing example of a case study on management. The aim of the report is to analyze the viability of establishing a production plant in Indonesia by a Germany company called KHS GmnH. The Indonesian economy, culture, and political situation are analyzed and discussed. The advantages and disadvantages including risks of establishing the production line in Indonesia are discussed. Company Overview KHS GmbH is a German company that deals with supplying packaging and filing systems. KHS GmnH offers filling lines for PET and glass bottles, cans, and kegs for the non-food industries, food and beverage sectors.

The demand for KHS GmbH is high but the problem is the high production costs, and the company thinks of transferring the production line to a local market that has minimal production costs. Indonesia is a proposed country, but the problem is the targeted market of the final products and complications that may be associated with the internationalization of the business. For example, logistic problems and negative perceptions from the home market may affect the continuous production of the company since most customers expect on-time delivery. Indonesia Country Overview Economy (Status of Economy) The following charts present a summary of Indonesia economic activity for the periods 2011 and 2015: Figure 1: Indonesia Economy Data Source (Focus Economics, 2016) Figure 2: GDP Growth: Indonesia Source (Asian Development Bank, 2016) According to Focus Economics (2016) and Asian Development Bank (2016), the Indonesian (Gross Domestic Product) GDP is slowing each year: from 6.2% in 2011 to 4.8 in 2015.

GDP is the monetary value attached to all finished services and goods, which are produced within a specific period.

All the periods illustrate the economy is facing challenges, while also the investment is also slow. Nevertheless, the population is growing from 241 million in 2011 to 255 million in 2015. The growth in population expands the market for KHS GmnH, and KHS GmnH can access cheap labor. Economy Forecast The following charts present a summary of GDP forecast for Indonesia: Figure 3: Indonesia GDP Forecast Source (Knoema, 2016) The data illustrates the GDP of Indonesia will start improving from 2016. Comparison of forecasts from the World Bank and the International Monetary Fund shares similar estimates (Knoema, 2016).

The common variable on both estimates is 4.7% which rises considerably throughout to 2019 when the GDP stabilizes at 6.0% (Knoema, 2016). The following chart presents a summary of inflation: Figure 4: Indonesia Inflation Forecast (% Change) Source (Knoema, 2016) Inflation is the sustained increase in the prices of the services and goods within a specified period. When inflation rises, the number of services and goods bought are fewer (Knoema, 2016). The data indicated in the chart (above) indicates the inflation will rise to around 4.5% in 2017 from the current 4.3% in 2016.

However, from 2017, inflation starts dropping to around 4.0% in 2021 (Knoema, 2016). Infrastructure The social and economic developments in Indonesia suffer because of challenges associated with the quantity and quality of its infrastructure. Infrastructure such as electricity supply, airports, and roads and ‘ soft’ infrastructure such as health care and social welfare has not developed in Indonesia (World Economic Forum, 2013). Based on the 2013-2014 edition of the World Economic Forum, the Indonesian competitiveness is ranked as 61st out of 148 economies studied regarding infrastructural developments.

The challenge of social and economic development is linked to the Asian Financial Crisis that occurred in the later 1990s even though the macroeconomic sector is developing well. The development of the infrastructure would lift the economy of Indonesia in terms of GDP, but the poor nature of the infrastructure continues to negate the development of Indonesia as an important sector. Nevertheless, KHS GmnH may utilize the seaports and the developing road networks to accomplish the requirements of logistics. Furthermore, the developing energy sector including the telecommunication platforms ensures the company accomplishes the logistic and production requirements.

References

Asian Development Bank. (2016). Indonesia Economy. Retrieved from http://www.adb.org/countries/indonesia/economy

Aswicahyono, H., Hill, H., & Narjoko, D. (2010). Industrialization after a deep economic crisis: Indonesia. The Journal of Development Studies, 46(6), 1084-1108.

Focus Economics. (2016). Indonesia Economic Outlook. Retrieved from http://www.focus-economics.com/countries/indonesia

International Trade Centre. (2016). BB WTO Trade Policy Review: Indonesia. Retrieved from http://www.intracen.org/BB-WTO-Trade-Policy-Review-Indonesia/

Knoema. (2016). Indonesia Economics. Retrieved from https://knoema.com/xojswsd/indonesia-inflation-forecast-2013-2015-and-up-to-2060-data-and-charts

Lipsey, R. E., & Sjöholm, F. (2011). Foreign direct investment and growth in East Asia: Lessons for Indonesia. Bulletin of Indonesian Economic Studies, 47(1), 35-63.

Ministry of Trade. (2016). Homepage. Retrieved from http://www.kemendag.go.id/en

Rosengard, J. K., & Prasetyantoko, A. (2011). If the banks are doing so well, why can't I get a loan? Regulatory constraints to financial inclusion in Indonesia. Asian Economic Policy Review, 6(2), 273-296.

Tan, K. G., & Amri, M. (2013). Subnational Competitiveness and National Performance: Analysis and Simulation for Indonesia. Journal of Centrum Cathedra: The Business and Economics Research Journal, 6(2), 173-192.

World Economic Forum. (2013). The Global Competitiveness Report 2013–2014. Retrieved from http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf

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