Business Plan for Introducing Erythritol in Indonesia Assignment

Business Plan for Introducing Erythritol in Indonesia - Assignment Example Unlike other sugar substitutes, it is made from naturally occurring substances and hence is largely free from side-effects. Indonesia is an archipelago of 13,367 islands with a total land area of 1,907,950 square kilometers. The reforms undertaken by Indonesian government since the 1997 economic crisis have resulted in very conducive environment for establishing a new business. The low cost of labor in Indonesia makes setting an Erythritol production factory a very profitable enterprise. Besides, with increasing consumer awareness in Indonesia, it will also be profitable to market and sell this zero-calorie, no side-effect sugar substitute in Indonesia. Although Indonesia is not an easy place to start a new business Indonesian government encourages foreign investment in Indonesia. Considering the low cost of labor, it would be cheaper to setup a factory in Indonesia rather than importing Erythritol from outside. According to www.doingbusiness.org, it takes an average of 97 days and a minimum capital of IDR 20,000,000 (USD 2500) to obtain the required licenses to launch a new business in Jakarta. Another 40,000,000 (USD 5000) is needed to obtain the required permits and registrations for a warehouse. Hence the main costs would be of building the factory and buying/leasing equipments. Unfortunately, in Indonesia this cost could be prohibitive. Another hurdle in setting up a factory in Indonesia is the long time it takes to get all the requir... Glucose can be obtained from a number of high starch crops. Since corn is readily available crop in Indonesia and has high glucose content, it is the first choice for raw material for production of Erythritol. The crop is mainly grown on the island of Java. So it is best to locate the factory on the island, near the raw material. While deciding the location of the factory, we have to consider the cost of land. In the urban areas and in major cities, including Jakarta, there is limited land area and hence the price is extremely high. In fact, many cities have forbidden setting up of new factories within their municipal limits. Hence it would be better and cheaper to locate the factory in the rural area where there is plentiful of land and adequate manpower. Raising Capital Due to the huge benefits of Erythritol as a sugar substitute and the cheap cost of labor in Indonesia, setting up a factory in Indonesia represents a low-risk business. Capital is needed for buying real estate, building factory, buying corn from farmers, buying equipment, labor and marketing. There are several options for raising capital. However, the best and the cheapest option is a bank loan. With a low-risk strategy and a solid business plan, getting a bank to finance the new business should be easy. The land and factory can be used as collateral in the bank loan. Company Operations The company will be hiring local population for all major positions, including the Chief Executive Officer. The local people understand the local customs better and thus will be in a better position to handle the day-to-day operations. The low labor cost in Indonesia also makes this proposition an attractive one. The raw material, corn in this case can be easily obtained from