Industry Analysis
The company selected for this assignment is Endless Wave Pty Ltd. The company was founded on the year 1980 and it is a surfboard as well as surfing apparel based organization. The company occupies around 10% market share in the Australian market. The target market of the company includes the teenagers and people in the age group of 20 to 30. The brand targets funky people who can be both males as well as females. The main products of the brand include the surfboards, wetsuits, bikinis, jackets, t-shirts, wallets, board shorts and others. The missionof thecompany is toprovide developed as well as refined products. The company has engaged in the development of the different patented technologies for the wetsuits as well as surfboards. The aim is to deliver fast and customized surfing experience to the individuals. The manufacturing unit of the brand is located in Europe and Asia and its products are designed in Melbourne. There are around 950 employees working in the worldwide locations of the company. The turnover of the company is considered to be $250 million and the company has faced global financial crisis quite well. The business entity operates in a segment and use equity finance to venture into the international markets. This organization is a fictitious organization, which is prepared by taking into consideration the different publicly available data of the surfboard as well as apparel wear companies in Indonesia.
The scope of the report is to understand the market dynamics, competitor types, industry trends, SWOT and the impact of these factors on the entry mode in a foreign location. The methodology used for this report is secondary research through online publications, journals and books. The limitations of the report that it would not use primary data collection method to collect data from the correspondent, which may give more realistic entry strategy recommendation.
Endless Wave operates in the tourism sports industry in Bali, Indonesia. The tourism industry in Indonesia is considered as one of the most important parameters of the economy of Indonesia, which is one of the significant sources of foreign exchange (Pulido-Fernández Andrades-Caldito and Sánchez-Rivero2015). In the year 2015, the tourism sector contributes around US$9 billion of the foreign exchanges to the country and it is ranked as the 4th largest sector that contributes to the export sector of goods/services (Purwomarwanto and Ramachandran 2015). The industry is expected to grow at fast rate and the tourism sector is expected to surpass US$ 10 billion in the coming years.
Market Analysis
Fig: Tourism Industry in Indonesia
Source: (Purwomarwanto and Ramachandran 2015)
Surfing plays an important role in the tourism of Indonesia. Surfing brings social, cultural, economic and environmental benefits for the country (Saufi O’Brien and Wilkins 2014). The Mentawai Islands, which are located at the west coast of Indonesia, is considered as an emerging destination for surf tourism (Satake et al. 2013). Indonesia is famous for its waves and well-developed surfing harbors. There are around 33 surf destinations in Bali, starting from East Bali to West Bali. They also include key offshore islands of Nusa Lembingan and some of the popular surfing spots in Bali are- Hu’u, Sumbawa and Lakey Beach located in Cembi Bay (Lueras and Lueras 2014). The surfing industry is interrelated with the sports as well as tourism industry. The development of the sports industry requires travelling of the participants as well as development of the sporting activity that involves travelling spectators (Pulido-Fernández Andrades-Caldito and Sánchez-Rivero 2015). Sports tourism is an increasing trend in Indonesia, where an increasing influx of is nautical as well as sports tourism. Surf industry is witnessing significant growth and it ranges from surf wear, surf camp to renting of the surf equipment (Towner and Orams 2016).
Fig: Surfing facts about Bali, Indonesia
Source: (Lueras and Lueras 2014)
Surf tourism is an increasing market segment which is embedded in the wider tourism market. The revenue of the world-wide surfing industry is $US 6.28 billion in the year 2016 and there are around 90,000 people working in the worldwide surf industry (Welfens and Perret 2014). The primary growth of the industry can be attributed to the surf equipment makers, associations and marketers that make surfing more accessible. Bali is one of the unique surf sports destinations in the world (E. Dobbs 2014). These destinations have most popular surfing destinations such as Padang Padang, Bali, Keramas and Uluwatu(Pulido-Fernández Andrades-Caldito and Sánchez-Rivero 2015).
Fig: Global Surfing market
Source: (Welfens and Perret 2014)
Tourism, which includes surfing, is the second largest employment generator sector in Australia and it contributes around 30% to Indonesian GDP (Naidoo and Sharpley 2016). This underlines the enormous opportunity which is presented by the surfing industry in the country. More than half billion dollars is generated from Bali surfing business and it is a representation of around 10% of the amount generated in Bali(Pulido-Fernández Andrades-Caldito and Sánchez-Rivero 2015). There is a huge proportion of the surfers who are tourists and hence surfing can be considered as major tourism contributor in Bali, Indonesia (Scorse and Hodges 2017).
Competitor Analysis
Surfing business is most prominent in April to October in Bali and it provides prominent business opportunities. The Mentawis is a prominent business location. The business should pay attention to the protection of reefs on the beaches and implement environment friendly practices (Pulido-Fernández Andrades-Caldito and Sánchez-Rivero 2015). The surf spots in Bali works in Dry season and Wet season. The dry season is considered with the peal surfing season and it ranges from May to September.
The size of the sports tourism sector in Indonesia is relatively small as compared to the industry of the neighboringcountries. The tourism sector of Indonesia amounts for four percent within the total economy of the country (Alegre and Sard 2015). The Indonesian Government is planning to double this figure to 8 percent of GDP within 2019 (Pinto Masaki and Harimurti 2016). This implies that within next three years, there is a need of doubling the visitors to around 20 million in the country. This would be possible only with the help of additional business opportunities in the niche sports tourism category (Alegre and Sard 2015). This implies that there are sufficient opportunities for Endless Waves in this country,regarding the development of the surfing options. An estimated number of 9% of the total national workforce works in the tourism sector of the country (Alegre and Sard 2015). This implies that Endless Waves would be able to recruit talent manpower for performing their daily work operations. The market is not saturated and it is a stable industry within which there is enormous potential of growth.
There are several players in the sports tourism industry in Indonesia. There are some popular surfing shops in Bali such as The Surf Travel Company, Bali Surf Express, Surfing Bali, Surf factory outlet and others. The Surf travel company aims to provide accommodation as well as surf breaks in Bali to the tourists (The Surf Travel Company 2017). They provide different types of surf breaks such as airport lefts, balian, balangan, canggu, bingin and others. There are several types of surf such as funboarders, semi gun and other(The Surf Travel Company 2017). They are located in Australia, but provide surfing services in Bali. They are operating in the market since 1987 and are fairly big company.
Fig: Semi Gun Shortboarders at The Surf Travel Company
Source: (The Surf Travel Company 2017)
Bali Surf Express operates in Indonesia since 1997 and offer tours with the uses of speedboat, land and yacht overnighters (Balisurfexpress.com 2017). There are also land tours, outer reefs, surf and stay, lembongan and others. The company is an average size company with high rates of customer satisfaction.
Fig: Surfing with Bali Surf Express
Source: (Balisurfexpress.com 2017)
The increasing number of tourists in the country provides good opportunities for the companies as it improves the social as well as economic growth of the firm (Law et al.2016). The threats of these companies includethat surfing is an optional sport and it is one of the niche sports tourism sector. This often poses a threat to the company as there may be subsequently longer lean periods.
Fig: Surfing locations in Bali
Source: (World Economic Forum 2017)
The level of completion in the sports tourism industry of Indonesia is moderate. The country ranks 50th in the travel and tourism competitiveness index 2015 with value of 4.04 (World Economic Forum 2017). There is growing tourism industry in the country with more than 9 million visitors in the year 2014 due to the continued infrastructure investment (World Economic Forum 2017). The main competitive advantage of the country is the price competitiveness and the vast natural resources (including sea coasts, beaches, harbors, bays and others) (World Economic Forum 2017). There is average number of competition in the industry and there is attractive market for making profits.
The SWOT analysis for the sports tourism sector is done as under-
The Ministry of Youth as well as Sports launched a different kind of resurgence sports industry in the country. Indonesia has diverse culture and natural resources (Sarkar et al. 2017). The following are the strengths of the industry-
- Growing tourism industry
- Diverse culture with high influx of tourists
- Rich sources of natural sources including beaches
There are several weaknesses such as-
- Decentralized system of government
- Language barrier
- Less popularity of the surfing sport in developing countries (Barbieri and Sotomayor 2013)
There are several sources of opportunities for the sports tourism industry in Indonesia such as-
- Growing number of jobs and opportunities for surfing centers
- Growing marketing of the surf centers in Indonesia
- Different kinds of services offered such as accommodation and surfing activities
There are several threats for this kind of industry-
- Security and growing trends of tourism
- Climate change- extreme hot or extreme cold weather (Frank et al. 2015)
- Poor government support for sports tourism
The SWOT analysis shows that there is lucrative market for growth of tourism opportunities in Indonesia along with high influx of tourists. There isalso less popularity of surfing sports, especially in developing countries. This implies that the new company needs to take care of the promotional campaigns that would be used to penetrate into the market. However, Endless Wave needs to be aware of the growing trends of the terrorism in the global market. The company also needs to arrange for sufficient financial sources since there is ales contribution of the government for sports tourism products.
Endless Wave should adopt a cost-effective strategy while performing business in Bali since there is low awareness of the sports in the developing industry and also there is low government aid for sports tourism(Adnyana 2016). The company should ideally be opened in Nusa Lembingan, which is considered as oneof the lucrative for surfing (Adnyana2016). The company should engage in extensive promotional strategy so that the target audience is aware of the services of the company.
The company should devise unique products or services in order to survive in the average competitive market of surfing in Bali, Indonesia. The company should also give adequate attention to the climatic variations in the country(Adnyana 2016). It should implement attractive deals in the peak seasons ranging from April to October. There should be extensive promotion strategies. The main highlights of the strategy would be-
- Offer unique competitive products to surfers
- Give attractive offers in peak seasons
- Extensive promotion strategies
- Increase brand awareness
- Increase awareness about surfing
- Company should be located in Nusa Lembingan
The entry mode selected for the company would be joint venture. This venture would allow the company to share the risks as well as resources that are required to venture into the international market domains(Sun and Lee 2013). The reason for choosing this kind of market entry strategy is facilitation of the market entry, risk sharing, technology sharing and the joint product development (Sun and Lee 2013). It is also beneficial as the existing companies in the market would be having various political connections as well as distribution channels so that they can prosper well. There should be joint venture with Bali Surf Express, which is operating in the country for long years. The resources required would depend on the partnerships between the companies. An average time of 8 months would be required for this purpose.
The primary reasons for the selection of this kind of market entry strategy is the following factors-
- There would be higher level of risk or reward sharing in which the joint ventures would have greater responsibilities which would be equal for both the partners and there would be equal risk, loss, profit and reward.
- There would be higher sharing of technology aspects which would improve the quality of the surfing services
- It would be easy for the new company to conform to the government legislations of Bali when it would enter into joint venture with Bali Surf Express.
- It would be easier for Endless Wave to understand the market dynamics of Indonesia, when it would tie up with the local firm, who has years of experience.
Endless Waves should engage in efficient marketing strategies for the new product development and new business ventures in Indonesia. It should engage in proper planning of the business venture and should devote sufficient time for planning activities. The company should also engage in proper financial management since there is the requirement of budget for overseas promotion. The company should use extensive promotional strategies such as advertising, social media tools, distribution of brochures, pamphlets and others. It should also engage in the creation of more brand awareness in the market. The organization should leverage the average competition in the Bali market.
Conclusion
The market entry is one of the most important strategies in the event of international market penetration. This report discussed the market entry of Endless Wave in Bali, Indonesia for their surfing store. The company occupies around 10% market share in the Australian market. A detailed industry analysis of Bali has been done along with in-depth focus on the market analysis of Bali. The competitor analysis of Bali has been done and it has been identified that there are two main competitors namely The Surf Travel Company and Bali Surf Express. The SWOT analysis of the sports tourism industry has been done along with the formulation of strategy suitable for market entry. The joint venture entry mode would be used for penetrating into the market.
References
Adnyana, I.B.P., 2016. The Development of Marine Transportation System in Supporting Sustainable Tourism Case Study: Nusa Penida Island, Bali Indonesia. Journal of Sustainable Development, 9(4), p.89.
Alegre, J. and Sard, M., 2015. When demand drops and prices rise. Tourist packages in the Balearic Islands during the economic crisis. Tourism Management, 46, pp.375-385.
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Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates.Competitiveness Review,24(1), pp.32-45.
Frank, D., Reichstein, M., Bahn, M., Thonicke, K., Frank, D., Mahecha, M.D., Smith, P., Velde, M., Vicca, S., Babst, F. and Beer, C., 2015. Effects of climate extremes on the terrestrial carbon cycle: concepts, processes and potential future impacts. Global change biology, 21(8), pp.2861-2880.
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Sarkar, S., Dyer, J.S., Margules, C., Ciarleglio, M., Kemp, N., Wong, G., Juhn, D. and Supriatna, J., 2017. Developing an objectives hierarchy for multicriteria decisions on land use options, with a case study of biodiversity conservation and forestry production from Papua, Indonesia. Environment and Planning B: Urban Analytics and City Science, 44(3), pp.464-485.
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Scorse, J. and Hodges, T., 2017. 8 The non-market value of surfing and its body policy implications. Sustainable Surfing, p.137.
Sun, S.L. and Lee, R.P., 2013. Enhancing innovation through international joint venture portfolios: From the emerging firm perspective. Journal of International Marketing, 21(3), pp.1-21.
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