INTERNATIONAL MARKETING STRATEGY

Executive summary

This report aims at developing a market strategy for extending a market offering in the business market of Indonesia. The UK based small-medium enterprise taken for this purpose is an e-payment application named Checkout.com. For the analysis, firstly the macro environment of Indonesia is evaluated for strategic incorporation of the suggested offering. It is observed that the market is suitable for the service that Checkout.com has to provide. Finally, some recommendation regarding pricing, promotion, placing or distribution, and product management has been given. These will increase the chances of this company penetrating the market and evolve as a strong competitor.

Introduction

The following study aims to evaluate the potential of marketing strategies adopted by Checkout.com to expand its service offering in Indonesia. Indonesia has a promising industry in terms of e-commerce from both foreign and local investors. It is a developing country with growing disposable incomes of numerous middle-class households and over 130 million “internet users.” Therefore, with the growing demand for people, each marketing sector is flourishing in this country. Checkout.com is an SME in the UK that is attracting the attention of many through its compatible online payment methods. Indonesia is known as “Asia’s foremost mobile-first nation” which justifies their need for online payment requirements regularly. The purpose of this discussion is to extend a marketing strategy for the expansion of the service of Checkout.com in the Indonesian market.

Company Overview

The company was established in 2006 by Guillaume Pousaz and officially launched in 2012 (Checkout.com, 2020). It is an authorised payment institution and is a principal member of MasterCard, Union Pay, Visa and other renowned institutions. This SME was authorised as an “Electronic Money Institution” (EMI) in the UK recently in 2017. Ever since its online journey, it has grown from 200+ employees in 8 offices to 500+ employees around 10 offices in 2019. Its start-ups in the UK, France, and Australia had been successful and the result is revenue worth $5.5 billion. The company is distributed in 13 countries currently with 18 offices across the world. It is rapidly developing in London, San Francisco, Singapore, and Paris. The company had started only a few years back and represented reputed countries legally.

Figure 1: Checkout.com vision

(Source: Bozic et al. 2019)

Checkout.com claims to replace the old transaction methods with online modes for the development of a smart world that can make fast decisions with efficacy. Concerning its interest in unveiling its presence in international markets, it can be set to Indonesia as well. Indonesia has a high demand for mobile applications that can make random purchases of growing families easier (Zhang et al. 2018). Checkout.com replaces complex procedures with easy methods thereby giving unlimited opportunities. Thus the Indonesian market will be a suitable choice for the extension of its service. It would raise the level of “social commerce” in Indonesia and also allow Checkout.com to showcase its speedy and reliable platform to that part of the world.

Situation Analysis

Macro environmental analysis (PESTLE)

In order to make a coherent analysis of the strategies that can be implemented by Checkout.com to develop as a global market and expand its business in Indonesia, a PESTEL analysis is made. It would reveal the opportunities in the marketing environment of the country that can support the growth of a business.

1. Political factors

Indonesia provides a good political environment as it keeps positive relations with foreign countries. According to reports, 68% of industry owners rely upon the legislation. However, there are many corruptions and the struggle for independence in many provinces is challenging for the country.

2. Economic factors

Indonesia’s corporate tax is 25% and the nominal GDP in 2019 was $1.09 trillion (Butarbutar et al. 2020). This data shows that private companies have chances to create high economies of scale in this market. Indonesia’s general GDP growth rate is above 5% therefore any business in this nation has low chances of facing financial risks. It has a very stable capital system that uplifts domestic demand and enhances a firm’s profitability. An economic risk that persists here is that whenever inflation occurs here, it continues for a long period making incurable losses in businesses.

Figure 2: Indonesia economy

(Source: Fuciu, 2020)

3. Socio-cultural factors

Although Indonesia is the “largest Muslim country in the world”, it is very diverse ethnically. 95% of the population is literate and show a positive attitude towards new products. Therefore the demand for tech products is rising here continuously. However, it faces social issues like labour militancy and that is a major risk for SMEs in Indonesia. There are constant demands from the workers for high wages due to which costs of production increase. Thus Checkout.com would require analysing worker’s demands before settling business in this nation.

4. Technological factors

Indonesia has good progress in adopting technology and its government wants to unveil the use of technology in all sectors like food and beverage, textile, automotive, chemicals, and electronics. As it wants to become a worldwide leader in terms of technology, introducing tech products in this country can be profitable. Businesses are influenced by the demand for innovation in technology here. As per Havice and Campling (2017), the environment supports intellectual and innovative software and the government also invests in development and research thereby helping businesses to explore a great deal of automation.

5. Environmental factors

As Indonesia is a chain of numerous islands, it is credible to frequent tsunamis and earthquakes. Thus operating physical markets is a threat in Indonesia. Other environmental challenges include traffic congestion and rapid urbanisation. Nevertheless, online business has opportunities to grow here. It is because online systems do not hamper the physical environment directly. They have nearly zero contribution to the degradation of climate and hence no claim against nature havoc can come over to such SMEs.

6. Legal factors

Indonesian law protects employment rights and makes it mandatory for companies to give pre-notice for extended working hours, holiday allowances, and other (Hobbs, 2020). However, it must be noted that opening a foreign business in Indonesia is a time-consuming and complex process.

Micro environmental analysis 

The internal features of Checkout.com that need to be scrutinised for market development are given using a SWOT analysis.

Table 1: SWOT analysis of Checkout.com

(Source: Created by the learner)

From the analysis, it can be seen that this UK based SME has a flair for emerging as a highly competitive company in the world of e-payments. The primary cause behind this statement is that the company is supported by Google. The threats are very common to every E-payment institution; hence Checkout.com can also cope with them and focus on the opportunities using its brand identity.

The operational environment of this growing SME can be analysed using Porter’s five forces:

Figure 3: Porter’s Five Forces

(Source: Lai, 2016)

“Threat of new entrants”

The threat of entry of new players in the E-commerce industry is moderate for Checkout because it has“high brand equity” (Montoya-Cruz et al. 2020.). As people rely more on existing and renowned services for monetary exchange and security concern is a priority, new players are often not entertained.

“Bargaining power of suppliers”

Suppliers including “credit card companies”, banks and other monetary institutions have high bargaining power. It is because the sources are few but the demand for cash exchange online is very high. Banks can hold back savings accounts and cheques to ensure money is exchanged only through cash.

“Bargaining power of buyers”

This feature has a low threat as buyers have to accept the policies prepared by Checkout.com providers. Therefore buyers have small say in deciding the value of the deduction for the service of money transfer.

“Threat of substitutes”

According to Munson et al. (2017), moderate threats from substitutes are faced by Checkout.com for their high equity in branding. However, substituting another secure app is easy and fast whenever charges of one application rise.

“Threat of competitors”

Checkout.com has high competition with PayPal and both the growing institutions are trying to “carve a niche” for the expansion of their product or services in the market. Indonesia has many other small institutions of payments however in the presence of PayPal, not many of them could receive recognition or popularity. Thus, Checkout.com would have to make exaggerated promotions to gain customer attention.

Marketing objectives: 

In the UK, so many online payment companies are active and establish their business in this country successfully. “World Pay,” “stripe”, “Saga pay” are some renowned example of such companies, which has already established their business in the UK. Checkout.com is one of the online payment companies that have a respective number of customers in the UK and that are why they want to set their business in other countries like Indonesia (Gómez et al. 2019). Some marketing objectives are identified and created by the management of Checkout.com. It is very necessary to analyze the present marketing plan and future strategy in the time of creating the four following marketing objectives.

• Market Share: In the UK, the market share of this company varies low and that is why the management has chosen those countries, which have a better financial position but are considered as developing countries. As the company is under the SME, so they have limited financial strength and that is why the market share of this company is not considerable. As per the opinion of Goldberg et al.(2019), before investing, the company has to fix how much market it wants to gain, how to collect and preserve consumer data, and how much the company will spend on advertisement purposes. The market share data of this company is to be analyzed and then fix the share of the new market of Indonesia.
• Profit: Checkout Company is an SME and the amount of its profit is much decrease than other established companies in the UK. The Online market of Indonesia is quite different from the UK and that is why the company has shown an interest to grab the market of Indonesia. As per the opinion of Juntunen et al. (2020), there is a chance of gaining profit for the company because the other competitive companies like “Go Pay”, “OVO” cannot set up their business effectively. The company can expect the profit which must be higher than the profit that comes from the UK
• Promotion: com has to prompt their new business through social media and electronic media in Indonesia. The management of Checkout.com for better promotion (Al-Surmi et al. 2020) applies “Couponing,” “A digital campaign, in-store promotion”. The promotion campaign is divided into three parts as “beginning”, “middle”, “end”.  Checkout can adopt the promotion system of the renowned UK online payment company and can implement those in the market of Indonesia.
• Growth: the company has to realize its current size of business in the UK. The previous strategic mistakes should not be repeated in its new business plans. Management has to fix the goals, which reflects how much the company wants to grow. This growth can be measured through various social media and the company’s shares.

Marketing strategy

So many ways are available, in which an online payment company like Chechout.com can enter into the market of Indonesia. There is no specific strategy that can be applied to entering every industry. In the market Indonesia, so many factors can affect the company’s targeted strategy (Mokhtariani et al. 2017). Following marketing strategies may be applied by the management of Chechout.com for expanding the business in Indonesia.

1. Direct Exporting: As this is an online payment company, there is no chance to sell any product hand by hand to the customers. The product of this company memes the services that it can provide to its targeted customers. The company can make a partnership with Indonesian online retail companies to make some offers of cashback if the customers pay their bills through checkout.com. The cashback will be directly credited into its bank account.
2. Licensing: com is an online payment company in the UK and that is why it needs to take permission from the Indonesian government. The license will be prodded to the company by the Indonesian government for approving the permission of using the products and services from other firms for better production (Colton and Poploski, 2019). Licensing is also required for marketing and promoting the services of the company.
3. Franchising: It is a process of North America for expanding the business rapidly and attracting the attention of the other companies of the world. Checkout.com has a specific business model and that is so flexible that “franchising” works very well. The two “caveats” are required during the utilization of the Model of the franchise. First, the business model of checkout.com is unique, and second, the company can create future competition with their competitors.
4. Partnering: com is an SME company that is not so successful in the online payment market in the UK. Therefore, the company has decided to set a partnership with the online retail companies of Indonesia as  “Lazada”, and “Blibli” (Martínez-Sala et al. 2017). The partnership with these two Indonesian companies can create the chance to know the cultural and social information about Indonesia. The local partners of Checkout.com can provide knowledge about the local market and Contacts, which can be used by the company for creating a better business strategy.
5. Joint venture: It is one type of partnership that can create the third “independent company” for taking the decisions on behalf of the two companies. The “1+1=3” process is applied during establishing the joint venture. Three members of checkout.com and three members of Lazada will make a new governing body to select the marketing strategy for new entering of checkou.com in Indonesia. The risks and the profits will be equally divided by the partners.
6. Buying a company: com can buy small online payment companies for collecting the users at a time. The business strategies of those Indonesian companies should be adopted by checkout.com because they have better knowledge about the market of Indonesia. It can help the company for taking the facilities of government and can decrease the competition in the same market (Gómez et al.2019). Though this strategy is very costly for an SME company like checkout.com, it has a long-term positive effect on the business of this company.

Marketing tactics (4Ps)

The marketing strategies or tactics to be applied by Checkout.com are given using a 4Ps strategy:

Figure 4: 4Ps Marketing Model

(Source: Nasution et al. 2020)

• Product

Checkout.com allows money transfers in 135+ currencies using Stripe. Individuals and enterprises can ease their transfer procedures using Checkout.com features. The strategy it can apply in the Indonesian market is assisting customers with their credit card payments as well. They use details of a credit card but do not share it with the stores. They can use a cross-border transaction like PayPal to attract customers (Omotubora and Basu, 2018). It can extend its use as a payment method to a “payment bank” where users can store bulk amounts for the future. It can install an invoice feature that would allow businesses and marketplaces to see cash exchange details on their own websites. It will help Checkout.com to compete with PayPal and penetrate this market.

• Price

The pricing strategy of any online payment institution must be such that the users do not feel their money is getting reduced while using an online system. Otherwise, it would force them to automatically divert towards physical cash exchange. According to Osang (2017), they can mention a fixed percentage of cost-cutting applicable due to the use of this service beforehand. It can charge only a minute fraction of money for the conversion of currency and aid users to earn reward money for using this app frequently. The small quantities of charges will not only attract more users but also influence the loyal users of other competitors to incline towards this app.

• Place

Currently operating in 13 countries, Checkout.com wants to entail its business in other progressing countries as well. Indonesia, being a techno freak country, is a good choice for the expansion of the technological sector. Thus by following the regulatory norms and taxations, Checkout.com can select which areas in Indonesia demand the swiftest money transactions. It is a growing SME hence it must take risks and examine all possible opportunities by operating in distinct locations (Putri et al. 2019). Checkout makes online payments easier thus it must reach out to the places where online transfers have still not become native to the customers. Indonesian people have a variety of choices in terms of online service, hence if Checkout.com wants to rise as a competitive company; it needs to diversify its operations in developing economies.

• Promotion

The craze for any new product or service can easily be elevated using social media platforms like Twitter, Facebook, and other such application. They are cost-effective and enables millions of users to learn about the features of the service instantly (Syahchari and Maulana, 2020). Thus Checkout.com must deliver efforts in advertising its service. It must showcase its vitality in today’s world and try to gain the trust and reliability of large businesses in Indonesia. Once it gets approved officially by at least one large company, it would be easily accepted by numerous other users in the country.

 Marketing action plan

 Figure 5: Action Plan

(Source: Created by the Learner)

Conclusion

It can be concluded that the Indonesian market is a suitable choice for the augmentation of the intercontinental market. Checkout.com must introduce its market offering in Indonesia because it has a very opportunistic environment for tech-related businesses. Through strategic planning, this SME can foster robust economic growth and can further expand in other foreign markets. Furthermore, it has a huge population that indicates it has a diverse range of customers and Checkout.com can approach any section of the consumer. There is no such trade barrier, however, the company needs to scrutinise the overall condition of the economy and labour demands before a start-up as inflation or deflation can destroy even its current revenues.

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Website

Checkout.com (2020), Unleash innovation with connected payments. Available at: https://www.checkout.com [Accessed on: 15/12/2020]