1.

Product Overview

1.1.The product description, the product origin area and HS Code

Figure 1 Wardah cosmetic logo

Wardah begins with an inspiration. Inspiration to become an important part of life

for women in Indonesia. Invented in 1995, Wardah bring a simple vision: Fulfilling the
need for halal cosmetics. Over time, Wardah understand Indonesian female beauty is in
her personality. It shines as natural, and elegant as grounded. Supported by a very solid
team and the concept of modern products, beauty ideology Wardah highly accepted by
Indonesian women.

Wardah live from one story to the story of Indonesian women other women.
Recommendation of mouth is the most significant evidence that the quality does not have
to walk alone without emotional attachment. Each creation of cosmetics and skin care
Wardah is the result of modern technology process under the supervision of expert and
dermatologist. Because Wardah hold on 3 principles:

● Pure and Safe.

● Beauty Expert.
● Inspiring Beauty

Wardah cosmetics is categorized as product chemicals and allied industry and Essential
OilS and resinoids; Perfumery, Cosmetic or Toilet Preparations with HS code 3304 and
the regulation for this type of product is categorize as regulation for Obat dan Makanan
in Indonesia accordance with applicable regulations
1.2.Total Production in Indonesia
Among Indonesians, Wardah is known as an affordable brand with 300 cosmetic
products for makeup, skin care and perfume with total production amounting 135 million
products every year (Puspitasari,I. 2018) in the price range of IDR 16,000 - IDR 667,000
($ 1.20 - $ 50). The company currently offers its products in 22,000 store locations in
Indonesia and Malaysia and partners with SymonAnMi to sell a variety of products in
Bangladesh.

1.3.The commodity regulation in export – import activity in Indonesia

Regulations regarding imports in Indonesia are regulated in Peraturan Kepala
Badan Pengawas Obat dan Makanan Republik Indonesia Nomor 27 tahun 2013 tentang
Pengawasan Pemasukan Obat dan Makanan ke Dalam Wilayah Indonesia stated that
every product that categorize as medicine and food based on the regulation must attach
the distribution permit and have at least ⅓ from the shelf life. The exporter should fulfill
all the requirement and document that explained in the regulations. The Government of
Indonesia makes a new policy that the imported company should have a local agent to
represent the company‘s existence in Indonesia. This local agent will then help the
company to obtain an import license. This import license is a must in order to bring the
company‘s products into Indonesian market. Without the presence of the local agent, it is
impossible to register your company under the list of certified import company. The
import duties for cosmetic and skin-care products are 10 percent.

1.4.Market demand from foreign market

Figure 2 Foreign market demand for health and beauty products

 Globally, Indonesian health and beauty products has penetrated a number of
foreign markets, mainly the United States (USD 210.15 million), Singapore (USD 116.61
million), Malaysia (USD 67.63 million), Thailand (USD 31.64 million), Philippines
(USD 23.46 million), India (USD 17.75 million), United Kingdom (USD 17.05 million),
United Arab Emirates (USD 16.35 million), France (USD 14.96 million) and Germany
(USD 13.28 million). Products with the highest demand were wigs from synthetic textile
materials, perfumes and toilet waters, essential oils, skin care items, and also false
eyebrows or eyelashes made from synthetic textile materials. On the other side, according
to Euromonitor International report in May 2017, the beauty and personal care products
in Indonesia are classified into 16 categories, comprising of (1) Baby and child-specific
products; (2) Bath and shower; (3) Color cosmetics; (4) Deodorants; (5) Depilatories; (6)
Fragrances ; (7) Hair care; (8) Men‘s grooming; (9) Oral care; (10) Oral care excluding
power toothbrushes; (11) Skin care; (12) Sun care; (13) Sets/kits; (14) Premium beauty
and personal care; (15) Mass beauty and personal care; and (16) other beauty and
personal care items. From those 16 categories, the biggest sales growth in 2011-2016
gained by Deodorants with 577.6%. Other significant growths also recorded by the
categories of Skin care (126.8%), Men‘s grooming (121.6%), and Premium beauty and
personal care (103%). Totally, in 2016, Indonesia was ranked at the position of 20 among
all the world‘s exporters for these products. However, the total export transaction for the
commodity reached a positive trend during last five years, consecutively USD 814.60
million (2012), USD 859.45 million, (2013), USD 929.98 million (2014), USD 942.61
million (2015), and USD 1.01 billion (2016). Overall, the increasing trend in 2012-2016
was 5.46%. Meanwhile, the growth achieved in 2016 was 7.66% in comparison to 2015.
The development of health and beauty products in Indonesia is influenced by some
factors, mainly innovation and social media.

1.5.Porter Diamond Analysis

1.5.1. Factor Condition

o Labor Quantity. Indonesia in 2018 having 131,01 millions of working age
population, when in general Indonesia has 265 millions of total population, based
on BPS (BadanPusatStatistik) 2018 data. A lot of experts predict that Indonesia will
 experience demographic bonus in 2020-2030, which is more than half of Indonesia
population are on their productive/working age. This prediction indicates that
Indonesia will continue to have an even higher number of labor force.
o Labor Quality. To determine the labor quality of Indonesia we use education level
of Indonesia population. Based on BPS (BadanPusatStatistik) 2018, Indonesia have
82.84% of high school participation rate and 25% of bachelor participation rate. It
means that Indonesia have high number of average skilled worker (graduates of
high-school) and few number of high skilled worker (bachelor graduates). The
impact of this condition are a lot of Indonesia people are working as factory
workers and Indonesia still using expatriates for position that need high skilled
workers.
o Land. Indonesia is a huge archipelago country where Kalimantan and Papua island
hold the biggest land area, and Kalimantan is relatively stable from volcanic activity
that often happen in other region of the country which is part of ‗the ring of fire‘.
But, the positive side is Indonesia has fertile land due to high volcanic activity.
Indonesia also have various kind of land, such as highland, mountains, etc.
o Capital. Indonesia currently hold a limited capital that come from local entities,
compared to other more developed country. Indonesia capital holder also often
invest their money in other country with no or lower tax, because in Indonesia there
is high tax imposed to both corporation and individual. In order to grow the capital,
Indonesia need a lot of foreign investment to maximize the huge natural resources
that Indonesia have.
o Natural Resources. Indonesia is one of the country that have the biggest natural
resources in the world, especially tropical forest and spices. Indonesia the second
country with the largest tropical forest after Brazil. Indonesia also supported by the
location that located in the equator which make the climate is stable along the year.
Even though in recent times Indonesia had lost a lot of natural resources due to
exploitation, Indonesia still have a lot of remaining natural resources to be utilized.
o Technology. In this industry 4.0 era, Indonesia still relatively have a medium
technology advances. By this, we mean that Indonesia has mostly already apply
manufacture technology which mostly due to the number of factory or plant in
 Indonesia. But, compared to other developed country, Indonesia still has a low
technology innovation going on the country. Foreign company often put the
machine with a more advanced technology that they develop in their country to be
used in Indonesia, where most of the operation process being done.
o Know-How. Currently Indonesia have a relatively weak know-how, reflected from
the situation where mostly all of the new industrial method and new technology is
brought from overseas, then Indonesia act as the resources provider, such as natural
resources and labor. This is also reflected by how Indonesia is a huge rice producer
rice and consumer, yet still present time, Indonesia have not apply a more efficient,
profitable, and higher standard rice farming.
o Entrepreneurship. Even though the country have relatively low legal support to
legalize new business from Indonesia law institution, but the government currently
do highly encourage startup businesses to grow and developed through a lot of
program and funding support. The formation of local unicorn startup also become a
high motivation for the community to enter entrepreneurial world.

1.5.2. Related and Supporting Industries

o Suppliers
PT Paragon Technology & Innovation produced its owns makeup such as
Wardah, Emina, and Make over. They don‘t used outsources supplier to produce
the product because they already have a team to produce each product. So,
basically Wardah cosmetic didn‘t have any suppliers to provide their materials.

o Competitors

No Competitors Strength Weakness

1. Sari Ayu Martha Sari Ayu has a low price than Lack of promotion
Tilaar Wardah and there are lot of Sari strategy and innovation of
Ayu outlet in Indonesia. product.
 2. L‘oreal Developed activities in the field of Has a low profit margin,
cosmetics as well as in the too many subdivision and
dermatological and pharmaceutical the lack of coordination
fields in order to put more and the control of the
concentration in their particular activities and image in
activities the worldwide market

3. Viva Cosmetic Viva has a low price and the The innovation in product
distribution product have a huge is slow and the design is
area. not fit with modern area.

4. Garnier The fact that Garnier is a part of The product categories of

L‘oreal helps it win the instant Garnier are very similar
trust of the customer and increases to each other and there is
their credibility. not much scope for
differentiation and too
much of decentralization

5. Oriflame Have natural ingredients and high Have a problem with

advertising strategy. quality issue. Lack of
promotional activities
through mass media.
Depends on the network
of individual sponsors on
most of its distribution
and available in very few
stores

Table 1 List of Competitors

o Complementary firm
 As one of PT Paragon Technology & Innovation, Wardah have a large of
distributor in Indonesia such as Supermarket, Cosmetic stores, and outlet over
Indonesia.

1.5.3. Demand condition at home

According to economy.okezone.com, last year global halal cosmetic market is
projected to reach USD 54 billion or about Rp783 trillion. Meanwhile, in 2022 it is
predicted to reach USD 90 billion or about Rp1,305 trillion (currency of Rp
14.500).In addition, based on Cosmetic Design Asia (26/10), the main market region
for halal product is still located in Indonesia because it is the biggest muslim country
in the world with a population of 250 million people, with the percentage of 90% of
the population embrace Islam as their religion. MutiArintawati, the representative of
LPPOM MUI (Lembaga Pengkajian Pangan, Obat-obatan, dan Kosmetika Majelis
Ulama Indonesia), said that currently the awareness of muslim consumer is not only
focus on the halal food product but also focus on the halal cosmetic. This awareness
is increasing both in Indonesia and Global. Because of the increasing awareness and
demand of halal cosmetics, Indonesian halal cosmetics are expected to increase and
take advantage of these market opportunities.

1.5.4. Firm‘s Strategy, structure, and rivalry

PT Paragon and Innovation sticks on to Differentiation Strategy, which aims
to develop and market unique products for different customer segments. For instance,
their product called ‗Emina‘ is one of their cosmetics related stuff which is intended
for young ladies, meanwhile their other product, Wardah, labeled as ‗halal‘ cosmetics
product, is aimed for women who are more comfortable and prefer to use halal
products.Here is the organizational structure of PT. Paragon and Innovation :
 Figure 3 Organizational Structure of PT Paragon

According to the data from Indonesia‘s Ministry of Industry, in 2018, the

cosmetics industry recorded a growth of 20% or four times growth in a year before. The
most notable are Sari Ayu Martha Tilaar, Viva Cosmetics, L‘Oreal, Oriflame, etc. There
is a fierce domestic competition among them.

2. Market Analysis

2.1.Country Attractiveness

2.1.1. India

a. Benefit :

● The growing demand for halal qualification by Muslim consumers around the
world has led to several countries establishing government and non-government
agencies to provide formal certification services. India has the world‘s second
 largest Muslim population at more than 170 million, and presents huge market
opportunities for halal-based entrepreneurs.

● The personal care sector alone has registered promising sales numbers in recent
years. Of the $43-billion total cosmetics sales in 2015, $4.2 billion came from
Muslims in India, according to the country‘s national statistics and research
findings.

● H.E. Mohammed SalehBadri, Secretary General, of International Halal

Accreditation Forum (IHAF), said: ―India, being home to millions and millions of
Muslims, is definitely a country that we look forward to working with as we strive
to strengthen IHAF. Driven by our mission to unify the global halal industry and
break trade barriers , IHAF is ready to support India in bolstering its halal
infrastructure.‖

● India has signed its membership with IHAF last year. Keeping the country‘s halal
industry in sync with the global movement, this development augurs well not only
for its flourishing cosmetics sector but also for the national economy.

● India was a protectionist state for a long time, but the country has become
progressively more open to international trade. It has recently signed free trade
agreements with South Korea and ASEAN, and has entered into negotiations with
several partners (EU, MERCOSUR, Australia, New Zealand and South Africa).
India is the world's eighth largest exporter and tenth largest importer of
commercial services. Trade represents 40% of the country's GDP (World Bank,
2016).

● Based on world bankDoing Business, Worldwide, 128 economies introduced

substantial regulatory improvements making it easier to do business in all areas
measured by Doing Business. The economies with the most notable improvement
in Doing Business 2019 are Afghanistan, Djibouti, China, Azerbaijan, India,
Togo, Kenya, Côte d‘Ivoire, Turkey and Rwanda.
 Figure 4 Ease of doing business scoring

b. Cost :

● The average customs duty is around 15%. Though this is relatively high,
according to the WTO commitments India is going to slowly reduce it.

● Based on world bank, The latest value for Cost to import (US$ per container) in
India was 1,462.00 as of 2014. Over the past 9 years, the value for this indicator
has fluctuated between 1,462.00 in 2014 and 465.30 in 2007. The Cost measures
the fees levied on a 20-foot container in U.S. dollars. All the fees associated with
completing the procedures to export or import the goods are included. These
include costs for documents, administrative fees for customs clearance and
technical control, customs broker fees, terminal handling charges and inland
transport. The cost measure does not include tariffs or trade taxes. Only official
costs are recorded.
● If the cost of import is compared, then India had positioned rank of 84 in the
highest cost import in the world. Meanwhile, Singapore as the developed country
had positioned rank of 181.

● Below is the cost of border compliance in India. Border compliance captures the
time and cost associated with compliance with the economy‘s customs regulations
and with regulations relating to other inspections that are mandatory in order for
the shipment to cross the economy‘s border, as well as the time and cost for
handling that takes place at its port or border. The time and cost for this segment
include time and cost for customs clearance and inspection procedures conducted
by other government agencies. The latest value for cost of border compliance was
574 in 2014.

Figure 5 Cost of border compliance in India

● Meanwhile, the latest cost of documentary compliance in India was 145 in 2014.
Documentary compliance captures the time and cost associated with compliance
with the documentary requirements of all government agencies of the origin
economy, the destination economy and any transit economies.
 Figure 6 Compliance in India

c. Risk

● Indian federal government impose countless regulations, standards, and

administrative hurdles on businesses, each of India‘s 28 states imposes its own
local bureaucracy and red tape.

● Import taxes and controls on foreign investment are substantial, with import
tariffs averaging 12 percent on nonagricultural products, as compared to less than
roughly 4 percent in Europe, Japan, and the United States.

● Hundreds of commodities can be imported only after receiving government

approval. Licensing fees, testing procedures, and other hurdles can cost an
importer thousands of dollars.

● Even though India's economy has been the world's fastest growing major
economy, lately economic growth in India faces a significantly slowed by
bureaucracy, poor infrastructure, and inflexible labor laws (especially the inability
to lay off workers in a business slowdown).

● India has a significant problem of poverty. India had third highest number of
people living in extreme poverty in after Nigeria and Congo in January 2019
based World Poverty research.
2.1.2. Turkey

a. Benefit :

● Demand to halal cosmetics rises all over the world. These products are shown
interest both by the rich Muslim customers and middle class customers expecting
high quality and reliability, however, cosmetic products, used by Muslim women,
keeps its feature to become a controversial issue. Especially cosmetic products,
during manufacturing of which pork oil and alcohol are used, create discussion
between those using these products and those not using them. In this case, one of
the most important issues is at what degree consumers are informed about
products.

● There are 19 Free Zones in Turkey that are located close to the EU and Middle
Eastern markets. The Free Zones are area where legal and administrative
regulations in the commercial, financial and economic domains that are applicable
within the customs area are either not implemented or partially implemented.

● Turkey also have Organized Industrial Zones that are designed to allow companies
to operate within an investor-friendly environment with ready-to-use infrastructure
and social facilities. The existing infrastructure provided in OIZs includes roads,
water, natural gas, electricity, communications, waste treatment and other services.
There are 322 OIZs in 80 provinces, 255 of which are currently operational, while
the remaining 67 OIZs are being constructed throughout Turkey, as cited from
Invest in Turkey website.

● Population growth 1.35% in 2018 with total population 79.800.000. The

population growth is not significantly different with Indonesia (1.1%), indicating
Turkey market size will continue to getting bigger.

● Convenience in accommodation to transport goods to Turkey due to the bilateral

agreement created with Indonesia.
 ● Turkey also has a maintained highway transport system and growing
infrastructure. The highway system make up to 95% of passenger transport and
over 90% of the surface transport of goods. Turkey have extensive road network,
with over 382,000 kilometers (nearly 237,000 miles) of roads. Other infrastructure
also in construction process and expected to fully operated in 2019-2023, although
the process mainly need to be postponed due to the economy crisis in 2018.

● Turkey‘s investment legislation is simple and complies with international

standards, while it offers equal treatment for all investors. There are no general
(statutory, de facto, or otherwise) limits on foreign ownership or control; Turkey's
regulatory environment is extremely business-friendly.

b. Cost

● Corruption

Based on the corruption rank by tradingeconomics.com with lower rank means more
corruption, Turkey is six position better compared to Indonesia. If we take this to
Wardah point of view that already run a quite successful business in Indonesia,
then it will be better for Wardah when they operate in a country that have less
(even if it is not significant) corruption.
 Figure 7 Corruption Rank

● Lack of railway infrastructure

Even though Turkey has 10,933 kilometers (6,778 miles) of railways running between its
western and eastern borders, only 2,133 kilometers (1,322 miles) are electrified,
and a lot of them are aged and in badly need for renovation. Railway expansion
also not favorable and popular project to be funded for several years back.

c. Risk

● High standard of halal product that require relatively a long time to acquire the
halal certification from Turkey.

● Economy mismanagement in 2018 caused several ambitious infrastructure

projects need to be suspended. Turkey government also need to do heavy
reconsideration about the spending budget. This condition leads to Turkey‘s lower
creditworthiness.

● Unstable political situation caused by the upcoming presidential election.

 ● Turkey has for years failed to pass modernizing amendments to its patent,
trademark and copyright laws, and also has failed to re-institute criminal penalties
for patent and trademark violations.

● There have been violent attacks in Turkey, and the possibility of terrorist attacks
against U.S. citizens and interests, from both transnational and indigenous groups,
remains high.

● Labor unions report their relations with management of Turkish companies are
often adversarial.

2.1.3. Uni Arab Emirates

a. Benefit :

● According to Emirates Women, the Halal cosmetic market is expected to increase

value to US$45 billion by 2020.

● According to the latest Dubai Socio-Economic Survey, the Emirate is home to

510,163 Muslims out of the total 862,387 residents, including 250,588 females.

● The United Arab Emirates (UAE) has well-established infrastructure, a stable

political system, and one of the most liberal trade regimes in the Gulf region.

● Consumers in the UAE spent $247 per capita on cosmetics and personal care,
more than any other country in the Middle East, and ninth worldwide; this is
forecast to grow to $294 in 2020.

● According to Thomson Reuters, global Muslim spending on halal cosmetics is

expected to grow to $73 billion in 2 years.

● The economy is constantly growing, the cost of labor is significantly lower, there
are almost zero taxes and the free zones in Dubai make it the perfect business
haven for foreign investors.

b. Cost
● End of the gas subsidy, if company wants to do business activity with gas, the
cost will be high.

● The United Arab Emirates scored 70 points out of 100 on the 2018 Corruption
Perceptions Index reported by Transparency International. Corruption Index in the
United Arab Emirates averaged 64.56 Points from 2003 until 2018, reaching an
all time high of 71 Points in 2017 and a record low of 52 Points in 2003.

Figure 8 Corruption perception Index

● An existing of Free Zone Confinement is the first and foremost problem of

starting a business in Dubai as a foreigner. There are over 20 different free zones
in Dubai. All these places don‘t have any income tax, and registration of a
business is easy here. The rules and regulations are greatly relaxed making it
almost the perfect place to conduct business. However, the downside of such free
zones is there will be limited to this particular zone for good. For example If the
objective of the foreign investor is to slowly expand the business and move to the
other parts of Dubai then they cannot take advantage of the free zone. Any
business established inside the free zone shall remain within the zone. They are
not allowed to expand their business in other markets of the UAE nor can they
cater to the needs of other customers of Dubai living in other areas. This becomes
a huge stumbling block for companies that have great growth potential.
 c. Risk

● Degree of political freedom in Dubai is very small which is 6/7 point. It means
there are several limitations in carrying out their activities. It can give an impact
on business development both in terms of innovation and other sides.

2.2.The 7th Instrument Policy analysis

2.2.1. India

Tariff rate, applied, simple mean, manufactured products (%) in India was
7.41 as of 2016. Its highest value over the past 26 years was 82.96 in 1990, while its
lowest value was 7.11 in 2010. Simple mean applied tariff is the unweighted average
of effectively applied rates for all products subject to tariffs calculated for all traded
goods.

The Indian government is pursuing local content requirements in specific

areas including information and communications technologies (ICT), electronics, and
solar energy to spur an increase in the manufacturing sector‘s contribution to India‘s
Gross Domestic Product (GDP). These policies negatively affect U.S. exporters.
India drafted a policy expressing preference for domestically- manufactured
telecommunications and ICT products in government procurement, citing security
concerns. In addition, all telecom and ICT product purchases by the government that
have security implications must be notified to the Department of
Telecommunications. All imported ICT equipment requires mandatory licensing and
certification from accredited labs in India. This regulation has not been fully
enforced due to the limited capacity of Indian testing labs.

In India, the import and export of goods is governed by the Foreign Trade
(Development & Regulation) Act, 1992 and India‘s Export Import (EXIM) Policy.
India‘s Directorate General of Foreign Trade (DGFT) is the principal governing body
responsible for all matters related to EXIM Policy. Importers are required to register
with the DGFT to obtain an Importer Exporter Code Number (IEC) issued against
their Permanent Account Number (PAN), before engaging in EXIM activities. After
an IEC has been obtained, the source of items for import must be identified and
declared. Hundreds of commodities can be imported only after receiving government
approval. Indian federal government impose countless regulations, standards, and
administrative hurdles on businesses, each of India‘s 28 states imposes its own local
bureaucracy and red tape. Licensing fees, testing procedures, and other hurdles can
cost an importer thousands of dollars.

In the last decade, India has steadily replaced licensing and discretionary
controls over imports with deregulation and simpler import procedures. Most of
import items fall within the scope of India‘s EXIM Policy regulation of Open General
License (OGL). This means that they are deemed to be freely importable without
restrictions and without a license, except to the extent that they are regulated by the
provisions of the Policy or any other law. Imports of items not covered by OGL are
regulated and fall into three categories: banned or prohibited items, restricted items
requiring an import license, and "canalized" items importable only by government
trading monopolies and subject to Cabinet approval regarding timing and quantity.
The following are designated import certificate issuing authorities (ICIA):

● The Department of Electronics for the import of computer and computer related
systems

● The Department of Industrial Policy and Promotion for organized sector firms
except for import of computers and computer-based systems

● The Ministry of Defense for defense related items

● The Director General of Foreign Trade for small-scale industries not covered in
the foregoing.

Capital goods can be imported with a license under the Export Promotion
Capital Goods plan (EPCG) at reduced rates of duty, subject to the fulfillment of a
time-bound export obligation. The EPGC plan now applies to all industry sectors. It
is also applicable to all capital goods without any threshold limits, on payment of a
five percent customs duty. A duty exemption plan is also offered under which
imports of raw materials, intermediates, components, consumables, parts,
accessories and packing materials required for direct use in products to be exported
may be permitted free of duty under various categories of licenses. For the actual
user, a non-transferable advance license is one such license. For those who do not
wish to go through the advance-licensing route, a post-export duty-free
replenishment certificate is available.

Foreign direct investment (FDI) in India is a major monetary source for

economic development in India. Foreign companies invest directly in fast growing
private Indian businesses to take benefits of cheaper wages and changing business
environment of India. Foreign direct investment is allowed in most sectors, and the
sectoral lists for FDI falling under the automatic route, prior approval route and
prohibited list are revised on a regular basis by the Government. FDI is also subject
to other sectoral laws or regulations of the relevant industry regulator.

● Automatic route: By this route FDI is allowed without prior approval by

Government or Reserve Bank of India.

● Government route: Prior approval by government is needed via this route. The
application needs to be made through Foreign Investment Facilitation Portal,
which will facilitate single window clearance of FDI application under
Approval Route. The application will be forwarded to the respective ministries
which will act on the application as per the standard operating procedure. On 24
May 2017, Foreign Investment Promotion Board was scrapped by the Union
Government.Henceforth, the work relating to processing of applications for FDI
and approval of the Government thereon under the extant FDI Policy and
FEMA, shall now be handled by the concerned Ministries/Departments in
consultation with the Department for Promotion of Industry and Internal
Trade(DPIIT) , Ministry of Commerce, which will also issue the Standard
Operating Procedure (SOP) for processing of applications and decision of the
Government under the extant FDI policy
 The Government of India has amended FDI policy to increase FDI inflow.
Indian pharmaceutical market is 3rd largest in terms of volume and 13th largest in
terms of value. Indian pharma industry is expected to grow at 20% compound
annual growth rate from 2015 to 2020. 74% FDI is permitted in this sector.

Several export subsidies and other domestic support is provided to several

industries to make them competitive internationally. Export earnings are exempt
from taxes and exporters are not subject to local manufacturing tax. While export
subsidies tend to displace exports from other countries into third country markets,
the domestic support acts as a direct barrier against access to the domestic market.
The Indian government‘s Foreign Trade Policy (FTP) 2015-2020 announced on
April 1, 2015 is primarily focused on increasing India‘s exports of goods and
services to raise India‘s share in world exports from 2 to 3.5 percent. India
maintains several export subsidy programs, including exemptions from taxes for
certain export-oriented enterprises and for exporters in Special Economic Zones.
Numerous sectors (e.g., textiles and apparel, paper, rubber, toys, leather goods, and
wood products) receive various forms of subsidies, including exemptions from
customs duties and internal taxes, which are tied to export performance.In 2017,
India graduated from Annex VII of the WTO‘s Subsidies and Countervailing
Measures Agreement. Consequently, it should now eliminate all its export subsidies
in all sectors of its economy without exception. Despite its graduation from Annex
VII, India has not publicly articulated a timeline for elimination of any export
subsidy programs.

The central government may impose an anti-dumping duty if it determines

a good is being imported at below fair market price, and an importer will be notified
if this is the case. The duty cannot exceed the difference between the export and
normal price (margin of dumping). This does not apply to goods imported by 100
percent Export Oriented Units (EOU) and units in Free Trade Zones (FTZs) and
Special Economic Zones (SEZs). If an importer is notified by the federal
government then an Anti-Dumping duty is to be imposed, the notification will
remain valid for five years with the possibility of being extended to 10 years.
2.2.2. Turkey

Turkey impose government intervention as below. In form of regulation and

technical standard, Turkey established a Halal Accreditation Authority (HAK) under
law no. 7060 that is published in the Official Gazette on November 18, 2017. Because
the product is a halal cosmetics and skin care, the product must fulfill standard from
Standards and Metrology Institute for the Islamic Countries (SMIIC).

Turkey regulate their foreign direct investment through Foreign Direct

Investment (FDI) Law No. 4875, which briefly state the freedom to invest without
any significant obstacles for foreign investor to invest. Related to the Turkey
relationship with Indonesia, Wardah, as a brand that comes from an Indonesian
company will be imposed with several policy resulted from bilateral agreement
between Indonesia and Turkey. It is the Double Taxation Prevention Treaties where it
enables the foreign investor company to offset tax paid in one of two countries
against the tax payable in the other.Indonesia also imposed with the Customs Union
and Free Trade Agreements (FTA) where it is creating a free trade area in which the
countries agree to eliminate tariffs, quotas and preferences on most goods and
services traded between them, as cited from Invest in Turkey website.Both of the
investment policy is beneficial for Indonesia, since it is giving more freedom for
investment that comes from Indonesia to Turkey.

For the tariffs regulation, Turkey and Indonesia has negotiated through a
Comprehensive Economic Partnership Agreement (Indonesia Turkey Comprehensive
Economic Partnership Agreement/IT-CEPA) in purpose to increasing export by
providing low tariffs in several commodity/product and one of the product is product
that related to muslim halal product such as food & beverage, clothes, cosmetics, and
etc.

2.2.3. Uni Arab Emirates

Dubai has tariff policy as they implemented customs duties quite low which
is 4 %. Generally, a 5% customs duty is levied on all goods imported into the UAE.
Higher duties of 50% to 70% apply to imports of luxury goods (such as tobacco).
Certain goods are exempt from customs duties for public benefit reasons, including
pharmaceuticals and agricultural products. In conclusion, Wardah don‘t have to pay
custom duties since it is a pharmaceutical product.The country currently apply free
trade policy so there is no quota. Thus, wardah could do free trade with dubai no
quota included.

The country have cosmopolitan lifestyle, and clean environment. Dubai is one
of UAE‘s member, they must follow the regulation about the green development.
Thus, Wardah should adjust to the local content requirement. For example, how
should they make the environmentally friendly packaging and content of the product
itself. Moreover, the branding of the cosmetic should in line with the cosmopolitan
lifestyle of Dubai citizen.

Government intervention and regulation of private sector is exist but kept

to the minimum. There are no direct taxes on corporate profits and personal income
except for oil companies and foreign banks.

Retail sales. Regulatory framework, To conduct retail sales, a company must

comply with Federal Law No 18 of 1993 regarding commercial transactions and
Federal Law No 4 of 2012 regulating competition. Main requirements, To distribute
goods in the UAE market, foreign companies must open a branch in the UAE and
appoint a local service agent. In certain sectors, foreign companies may also need to
obtain approval from the relevant authorities. For example:

- A halal certificate is required for the import of poultry and meat.

- The import of pharmaceutical products requires approval from the Ministry of

Health.In short, Wardah must get approval from Dubai‘s Ministry of Health to be
able to sell their products.

The procedure of setting up a branch of a foreign company in Dubai and anywhere

in the UAE will range from 2 to 4 weeks.
 Foreign companies could have a full foreign ownership in special areas for
investment, or usually called by Free Zones. They also apply double tax treaties.
They restrict several areas that is considered as strategic location. Companies that
want to be incorporate outside the free zone are only allowed to have less than 51%
of the share capital owned by UAE national. The UAE has set up numerous free
zones where customs duties are not payable. Therefore, an entity registered in one
of the free zones can import goods into that free zone without having to pay
customs duties. Goods produced in countries that are party to the Greater Arab Free
Trade Agreement 1998 are exempt from customs duty. This means that Wardah
could have 2 options, either to have full ownership of their company in the free
zone area but must pay double tax or incorporate the company outside the free zone
with less than 51% of share capital owned by UAE national.

As a member of United Arab Emirates, Dubai also conducted the anti-

dumping duties. This law is passed by Foreign National Council to protect the
locals price against the dumping goods price. So, Wardah must not dump their
products to Dubai as the UAE has launched law of anti- dumping duties.

2.3.Political, Economic and Legal analysis

2.3.1. India

a. Political

The politics of India takes place within the framework of the country's
constitution. India is a federal parliamentary democratic republic in which the
President of India is the head of state and the Prime Minister of India is the head of
government. India follows the dual polity system, i.e. a double government that
consists of the central authority at the center and states at the periphery. The
constitution defines the organizational powers and limitations of both central and
state governments, and it is well-recognized, rigid and considered supreme; i.e. the
laws of the nation must conform to it.
 Governments are formed through elections held every five years (unless
otherwise specified), by parties that secure a majority of members in their perspective
lower houses. The previous general election was held for 16th LokSabha in April–
May month of 2014 which was won by National Democratic Alliance (NDA) led by
BharatiyaJanata Party (BJP) under the leadership of the current Prime Minister
NarendraModi by defeating the United Progressive Alliance (UPA) led by Indian
National Congress (Congress). Earlier there were speculations that the Modi
Government might pre-pone the 2019 general elections to counter the anti-
incumbency factor, however learning from its past blunder of pre-poning election
made by Vajpayee Government it decided to go into election as per the normal
schedule which is likely to be announced by Election Commission of India (ECI) in
the first week of March 2019.

b. Economical

The Indian economy has held up better than other emerging countries to the
global economic slowdown and has benefited from low oil prices in recent years.
According to data released by the Ministry of Statistics and Program Implementation,
the Indian economy grew by 7.1% in 2017, driven by a rebound in industrial activity,
especially manufacturing and construction, and an expansion in agriculture. The
forecast for the fiscal year 2018 is at 6.6%. India‘s fiscal deficit for the period April-
October 2017 – at INR 5.25 trillion - overtook by 96.1% the budget estimate for
2017/18, mainly due to lower revenue realization and rise in expenditure, with the
debt to GDP ratio remaining high (67.5%). The average retail inflation has declined
to a six-year low of 3.3% in 2017-18, with the economy moving towards a more
stable price regime. In 2017, Prime Minister NarendraModi continued his program of
reforms aimed at consolidating public accounts, promoting investment and industrial
development and improving the business climate. Since the election, the government
has passed a key goods and services tax bill (which aims at turning the 29 states into a
common market) and raised foreign direct investment caps in some sectors, with
various economic reforms focusing on administrative and governance changes. The
major decision taken by the government in 2017 was to suddenly declare that India‘s
 highest-denomination banknotes – accounting for 86% of cash – would no longer be
legal tender and so they had to be deposited in banks. This policy aimed at tackling
the black economy and, after a first period of uncertainty, it is expected to have
positive effects on the country‘s economy (as an example, since April 2017 over
twice as many Indians have filed tax returns than in the same period of the previous
year). However, long-term challenges remain significant, including: India's
discrimination against women and girls, an inefficient power generation and
distribution system, ineffective enforcement of intellectual property rights, inadequate
transport and agricultural infrastructure, limited non-agricultural employment
opportunities, high spending and poorly targeted subsidies, insufficient availability of
quality basic and higher education, constant rural-to-urban-migration.

India is expected to overtake China as the world‘s most populous country by

2024. It has the world‘s largest youth populations, nevertheless according to the
OECD over 30% of India's youth are NEETs (not in employment, education or
training). India continues to suffer from a low GDP per capita, almost 25% of the
population still lives below the poverty line (about one-third of the world‘s population
living on under USD 1.90/day live in India) and the country's inequalities are very
strong: the richest 1% of the population own 53% of the country‘s wealth. According
to ILO reports, the unemployment rate will stand at 3.5% in 2018 and 2019.

c. Legal

Law in India has evolved from religious prescription to the current

constitutional and legal system nowadays, traversing through secular legal systems
and the common law.At the dawn of independence, the parliament of independent
India was the forge where a document that will guide the young nation was being
crafted. It will fall on the keen legal mind of B. R. Ambedkar to formulate a
constitution for the newly independent nation. The Indian Bar had a role in the
Independence movement that can hardly be overstated – that the tallest leaders of the
movement across the political spectrum were lawyers is ample proof. The new nation
saw its first leader in Jawaharlal Nehru, and a paternal figure in M. K. Gandhi, both
 exemplary lawyers. Perhaps it is the consequent understanding of law and its relation
to society that prompted the founding fathers to devote the energy required to form a
Constitution of unprecedented magnitude in both scope and length.The Constitution
of India is the guiding light in all matters executive, legislative and judicial in the
country. It is extensive and aims to be sensitive. The Constitution turned the direction
of system originally introduced for perpetuation of colonial and imperial interests in
India, firmly in the direction of social welfare. The Constitution explicitly and
through judicial interpretation seeks to empower the weakest members of the
society.India has an organic law as consequence of common law system. Through
judicial pronouncements and legislative action, this has been fine-tuned for Indian
conditions. The Indian legal system‘s move towards a social justice paradigm, though
undertook independently, can be seen to mirror the changes in other territories with
common law system.From an artifice of the colonial masters, the Indian legal system
has evolved as an essential ingredient of the world‘s largest democracy and a crucial
front in the battle to secure constitutional rights for every citizen.

d. Market

India has emerged as the fastest growing major economy in the world and is
expected to be one of the top three economic powers of the world over the next 10-15
years, backed by its strong democracy and partnerships.Indian consumer durables
market is broadly segregated into urban and rural markets, and is attracting marketers
from across the world. The sector comprises of a huge middle class, relatively large
affluent class and a small economically disadvantaged class. Global corporations
view India as one of the key markets from where future growth is likely to emerge.
The growth in India‘s consumer market would be primarily driven by a favorable
population composition and increasing disposable incomes.Per capita GDP of India is
expected to reach US$ 3,273.85 in 2023 from US$ 1,983 in 2012. The maximum
 consumer spending is likely to occur in food, housing, consumer durables, and
transport and communication sectors.

India is expected to be the third largest consumer economy as its consumption

may triple to US$ 4 trillion by 2025, owing to shift in consumer behavior and
expenditure pattern, according to a Boston Consulting Group (BCG) report; and is
estimated to surpass USA to become the second largest economy in terms of
purchasing power parity (PPP) by the year 2040, according to a report by
PricewaterhouseCoopers.

e. Human Resource

The personnel function in India originated in 1920s with the concern for
labor welfare in factories. The Trade Union Act of 1926 gave formal recognition to
workers‘ unions. The Royal Commission of Labor 1931 recommended the
appointment of labor welfare officers and the Factories Act of 1948 laid down the
duties and qualifications of labor welfare officers. Further, the Indian judiciary played
an important role in expounding the correct scope of the protection envisaged to the
working class by the legislation that was enacted in several spheres of IR as per the
spirit of the Constitution.

In India, human resource development has got strengthened with the

companies investing their time to analyze the employees‘ fitment for the different job
profiles and evaluate the required skills & abilities. Apart from that, the organization
also determine the levels of orientation & training, setting out the appropriate
packages for different job profiles and making the workers learn how to make
optimum use of company‘s resources.Where a large part of the workforce in India
comes from the rural background, it is very easy for them to get attracted to all the
bright opportunities in Urban India. It comprises of better employment & livelihood
opportunities, better standard of living, higher education and developing interpersonal
skills. The rural workforce lacks in the right skills, their abilities to communicate and
do justice to their work.
f. Infrastructure

Infrastructures sector is a key driver for the Indian economy. The sector is
highly responsible for propelling India‘s overall development and enjoys intense
focus from Government for initiating policies that would ensure time-bound creation
of world class infrastructure in the country. Infrastructure sector includes power,
bridges, dams, roads and urban infrastructure development. In 2018, India ranked
44th out of 167 countries in World Bank's Logistics Performance Index (LPI) 2018.

India has a requirement of investment worth Rs 50 trillion (US$ 777.73

billion) in infrastructure by 2022 to have sustainable development in the country.
India is witnessing significant interest from international investors in the
infrastructure space. The Government of India is expected to invest highly in the
infrastructure sector, mainly highways, renewable energy and urban transport. The
Government of India is taking every possible initiative to boost the infrastructure
sector. Following are the achievements of the government in the past four years:

● The total national highways length increased to 122,434 kms in FY18 from
92,851 kms in FY14.

● India‘s rank jumped to 24 in 2018 from 137 in 2014 on World Bank‘s Ease of
doing business - "Getting Electricity" ranking.

● Energy deficit reduced to 0.7 per cent in FY18 from 4.2 per cent in FY14.

● Number of airports has increased to 102 in 2018.

India‘s national highway network is expected to cover 50,000 kilometers by

2019. National highway construction in India has increased by 20 per cent year-on-
year in 2017-18. India and Japan have joined hands for infrastructure development in
India's north-eastern states and are also setting up an India-Japan Coordination Forum
for Development of North East to undertake strategic infrastructure projects in the
northeast

g. Profit
 Here are three kinds of business which are most profitable in India:Restaurant
business is one of the most successful business ideas. Due to busy lifestyle, people
don‘t find time to cook food at home & we even see many people prefer eating in
restaurant frequently. This is the reason why restaurant business is most successful
business idea today.

Starting recruitment firm is really good business idea. Recruitment firm does
not require huge investment. Unemployment ratio is increasing and recruitment firm
is in huge demand. Every student & professional requires good job and every
company require good productive candidate. To get good job and good candidate they
are ready to take paid/commission base services from recruitment firm.

Consultancy and contracting is very good and successful business idea. This
business requires expertise & domain knowledge. This business requires very less
business capital. There‘s a growing need for consultants & contractor in all fields
including engineering, marketing, and scientific industries. Big companies are even
ready to offer very lucrative payment for good consultants and contractors.

2.3.2. Turkey

a. Political

One of the current political strengths in Turkey is that their government have
policies on liberalization. Turkey is supporters of liberal trade and investment policies
which allow open trade between different countries in the EU. Turkey forged a
custom union agreement in 1996 to allow many Turkish firms to get bigger and more
successful in the global economy. Exports have been rising on average at a rate of
10% every year and this will allow the fashion industry to flourish with the exports
produced in the Turkish plant.

One of the current political challenges in Turkey is the series of violent

terrorist attacks that have happened in the country due to Islamic extremist, Kurdish
radicals, Turkish militants that may have link with Al-Qaeda. This is a disadvantage
for bringing the plant to Turkey as it may be targeted by these terrorist.
b. Economical

The economy has begun the new year in uninspiring fashion. In January, the
manufacturing PMI remained mired in contractionary territory, with new orders,
output and employment continuing to shrink. Moreover, both consumer and business
sentiment stayed markedly pessimistic in the same month. This comes after a likely
weak outturn in Q4, with consumer spending suffering on the back of high inflation
and elevated interest rates, as evidenced by sharp contractions in retail sales in
October and November. More positively, the pace of the decline in private-sector
credit eased in December, while the external sector has recently seen a marked
turnaround—underpinned by the weaker lira and soft domestic demand—as reflected
by a fourth consecutive current account surplus in November. In January, the Central
Bank announced it was bringing forward the payment of its dividend, which will
boost government coffers ahead of the March local election.

The economy is set to remain fragile in the months ahead, with restrictive
financial conditions constraining private consumption and fixed investment.
However, the external sector will provide support, and a recovery should gradually
take hold in H2 as lower inflation gives the Central Bank room to cut interest rates.
Currency volatility and the possibility of renewed geopolitical tensions pose
significant downside risks. FocusEconomics panelists expect the economy to shrink
0.2% in 2019, which is down 0.2 percentage points from last month‘s forecast, and to
expand 3.1% in 2020

c. Legal

One of the legal strength‘s in Turkeys is the comprehensive legal structure

they have. The judicial system is made up of general courts which deal with domestic
cases, heavy penal courts which deal with more serious case, military courts which
will deal with the military cases and the Constitutional Court which is the highest
level of courts that will deal with many different cases which is essential in the
Turkish government such as war crimes. This is an advantage for the plant being
brought into Turkey as this shows that the Turkish government are strict on the law
 and will enforce the law if need be, it will allow the company to have a fair trial if any
form of disruption were to come up such as trade union issues that would cause the
company any serious problems.

Another legal advantage in Turkey would be the robust framework for the
business entities, as the company who are looking to invest into Turkey will not need
to go through a very long and lengthy business registration process as there is a
freedom to start, operate and close a business by the Turkish regulatory environment.
so for example in Turkey, it will take on average 6 day to starting up a business
compared to 43 days in the other world countries which is a much longer time and
could be beneficial for the type of market the company is involved with. As the
fashion industry clothe range change very often and will need to be able to adapt
quickly if the plant is being brought over to Turkey.

One of the current legal challenges in Turkey is the judicial inefficiencies as

there are some delays in the Turkish judicial system which can cause some serious
issues. There are also judges who are politically biased and this has affected legal
outcome. This is a disadvantage for bringing in the plant into Turkey as there may be
a decision made against the company if ever in a legal battle as the judges may not
have an unbiased view of the case but in fact have a biased view according to the
political situation at the time.

d. Market

At the crossroads of Europe and the Middle East, Turkey presents promising
immediate and long-term opportunities for American firms. Turkey‘s growing
economy, advantageous geographical position, expanding middle class, youthful
population (median age of 30), and dynamic entrepreneurial class have made this
country a growing market for U.S. exporters. Currently, the 17th largest economy,
Turkey has grand ambitions to become a top ten economy by 2023, the 100th
anniversary of the republic. Additionally, over 1,400 American firms, across
virtually all industry sectors, are active in Turkey, including 60 U.S. companies that
have established regional headquarters. However, like many middle income
 developing markets, Turkey presents a range of challenges to doing business,
including complex and at times turbulent politics, bouts of instability domestically
and regionally, a complex and opaque bureaucracy, onerous terms and conditions in
government procurements, including increasing localization requirements, an
unpredictable judicial system, weakening rule of law, a recent spate of terrorist
attacks, purges in the public and private sector following the July 2016 attempted
coup, and market access barriers across a range of sectors. As of July 2018, the
country remains under an official State of Emergency, which suspends the country‘s
normal legal framework and adds greater uncertainty for investors.

e. Human Resource

● Cost, availability, and productivity of skilled labor in Turkey, they have

employment rate of 47% (totaling 28,314,000 persons), labor force participation
rate 53.4%, labor costs 166.66 Index Point, wages in manufacturing 155.5 Index
Point, minimum wages 2.558,4 TRY per month, wages low skilled 1.380,00 TRY
per month, and wages high skilled 2.830,00.
● Involvement of labor unions - Labor unions are legal in Turkey, and have been
present since 1947. The Constitution of Turkey affirms the right of workers to
form unions "without obtaining permission" and "to possess the right to become a
member of a union and to freely withdraw from membership". Turkey affirm the
right of workers to engage in collective bargaining and to strike, respectively.
However, Turkish unions do face certain restrictions. A union must represent at
least 10% of Turkish employees to be recognized as a bargaining agent, and
workers in the education, national defense, sanitation, and utilities industries are
banned from striking.
● Employment regulation - Pursuant to the Labor Law in Turkey, there are various
types of employment contracts:
a) Employment contracts for ―temporary‖ and ―permanent‖ work
b) Employment contracts for a ―definite period‖ or an ―indefinite period
c) Employment contracts for ―part-time‖ and ―full-time‖ work
d) Employment contracts for ―work-upon-call‖
 e) Employment contracts with a trial period
f) Employment contacts constituted with a team contract

Any kind of discrimination among employees with respect to language,

race, gender, political opinion, philosophical approach, religion or similar criteria
is prohibited by law. Discrimination based on the gender of an employee is
prohibited when determining the amount of remuneration for employees working
in the same or equivalent jobs.

Under the Labor Law, the maximum regular working hours are 45 hours
per week. As a rule, hours exceeding the limit of 45 hours per week are to be paid
as ―overtime hours‖. The wage/salary for each hour of overtime work is paid by
raising the hourly rate of the regular working salary by fifty percent. Instead of
the overtime payment, employees may be granted 1.5 hours of free time for every
overtime hour worked. In Turkey, there is total 9 days of paid public holidays per
year.

Figure 9 Paid vacation period in Turkey

f. Infrastructure

o Availability and quality of local manufacturing

 Figure 10 Turkey manufacturing production

This is Turkey manufacturing production for the past five years. As we can
see, the percentage is decreasing along with the economic instability.

o Efficiency of physical distribution - Turkey infrastructure is currently being

massively built start in the beginning of 2017 until now, even though some of
those projects are being postponed due to the economic decline of Turkey.
o Cost, availability, and quality of utilities and finance - Especially for the rail
infrastructure building process, Turkey is having China as their main investor for
infrastructure right now. The quality of the infrastructure is becoming better, add
by Turkey that is imposed with the standard of quality set by the EU. The cost of
the infrastructure is shown as the Construction cost index in Turkey below.
 Figure 11 Construction cost index

g. Profit

o Types and level of taxes - Turkey has 3 classification for its taxes. Those are
income taxes, taxes on expenditure, and taxes on wealth. Income taxes is divided
into individual income taxes and corporate income taxes. In Turkey, the corporate
taxpayers is defined as capital companies, cooperatives, public economic
enterprises, economic enterprises owned by associations and foundations, and joint
ventures. Corporations with legal or business centers located in Turkey are
qualified as residents and are subject to tax on their income derived in Turkey and
other countries. If both the legal and business centers are not located in Turkey,
then these corporations are qualified as non-residents and subject to tax only on
their income derived in Turkey. In Turkey, the corporate income tax rate levied on
business profits is 20%. The rate for corporate income tax has been increased to
22% for the tax periods 2018, 2019, and 2020; however, the Council of Ministers
is authorized to reduce the 22% rate to a rate as low as 20%.For the taxes on
 expenditure, it is consist of VAT and stamp duty. The generally applied VAT rates
are set at 1%, 8%, and 18%. Commercial, industrial, agricultural, and independent
professional goods and services, goods and services imported into the country, and
deliveries of goods and services as a result of other activities are all subject to
VAT. Stamp duty is levied as a percentage of the value of the document at rates
ranging from 0.189% to 0.948% or is collected as a fixed price (a predetermined
price) for some documents.For the taxes on wealth in Turkey, especially for
property taxes for buildings, apartments, and land owned in Turkey are subject to
real estate tax ranging at a rate between 0.1% and 0.6%.
o Tax rates for profit repatriation - Resident corporations are subject to a 15%
withholding tax when dividends are paid out to shareholders. However, dividends
paid by resident corporations to resident corporations are not subject to
withholding tax. As a share capital increase by the corporation using the retained
earnings is not considered to be a dividend distribution, no withholding tax applies
in such cases. Similarly, non-resident corporations are subject to a 15%
withholding tax during remittance of such profits to their headquarters.
Withholding tax is applied on the amount after the deduction of corporate income
tax from taxable branch profits.
o Complexity of tax system - Based on TMF Group‘s inaugural Financial
Complexity Index 2017, Turkey is a country with highest tax complexity.
o Rate of inflation
 Figure 12 Turkey rate of inflation

This is the graphic of Turkey‘s rate of inflation for the last 5 years, which
is start to goes up in the beginning of 2017.

2.3.3. Uni Emirat Arab

a. Political
UAE is considered to be one of most open and modern states in the Middle East.
This is due to the condition of government was stable. The government type in the
UAE is referred to as a federal presidential elected monarchy, as monarchs who rule
each of the seven emirates elect the president. Each emirate has its own local
government, and municipal governments. And the political system is based on the
Constitution which explains the main rules of the political and constitutional
organisation of the country. The Constitution demonstrates the main purpose of the
establishment of the federation and its objectives at the local and regional levels. It
guarantees all UAE citizens equal rights and opportunities, safety and security, and
social justice.
Currently, it is seen that the government is cracking down heavily on the
conservatively Islamic organisation, Al Islah. Al Islah has a desire to reform the UAE
into a more conservatively Islamic country, which eventually would make the UAE to
 a less attractive investment market and tourist destination. Therefore, the government
have treated the members of the organisation hard and banished it in the UAE.
In the last decades, and especially the last few years, the UAE have increased
their income since many companies have moved their location to the UAE instead of
other countries in the Middle East and North Africa (MENA) region. This is due to
the revolutionary wave of demonstrations, protest and wars, which began in late
2010, referred to as the Arab Spring. The UAE government have managed to remain
free of the riots related to the Arab Spring.
b. Economical

According to IMF, the GDP of UAE is expected to grow considerably in 2018

whis is 3.4% and 3.9% according to UAE Ministry of Finance as both oil and non-oil
outputs are projected to grow more than by 3% in 2018 in Abu Dhabi, the largest and
wealthiest emirate in the country. The healthy banking sector and tourism revenues
have helped soften the impact of falling oil prices, which reflects the economic
diversification of the UAE (the oil sector represents only 30% of GDP). However,
since 2015, the UAE has faced a significant deficit due to the decline in oil revenues.
After further deepening in 2016, trade deficit has moderated somewhat in the first
half of 2017. Many public infrastructure projects, which were postponed, are poised
to continue in 2018 and a new masterplan for the upcoming two decades is being
prepared by the Ministry of Infrastructure. Current account surplus, which used to be
equivalent to over 10% of GDP before the oil shock, fell to 2.4% in 2016, but is
thought to have reached 2.6% of GDP in 2017 (IMF). The surplus is expected to rise
to 2.8% in 2018 with the recovery in oil prices and production.

Inflation, which had reached 6.5% in 2015 and 5.8% in 2016, fell to 1.97% in
2017, and is expected to remain contained in 2018. All emirates, Dubai and Abu
Dhabi in particular, continue their efforts to diversify the economy and lower the
importance of oil-related activities. While the Emirate of Dubai has focused on
infrastructure-related projects in light of World Expo 2020, Abu Dhabi has invested
in alternative forms of energy production and the country's first nuclear power station,
Barakah Power Plant, is expected to open in 2019.
 The UAE has one of the highest per capita income levels in the world and a
highly developed welfare system. It also has one of the lowest rates of unemployment
in the Middle East (1.6%) and depends heavily on foreign labour (more than 85% of
the workforce). A policy of 'Emiratisation' has been launched to encourage
employment of the local workforce. The UAE government aims to ensure that
Emiratis comprise at least 5% of the private workforce by 2020 and the
unemployment rate among nationals down to less than 1% by 2021. The latter
continues to be considerably high compared to the rate among non-nationals (6.9% as
opposed to 1.4% according to latest results). Unemployment among nationals varies
also emirate by emirate and has the highest rate in Abu Dhabi (12.5%).

Figure 13 Economic indicator in UAE

c. Legal

The legal system in UAE is based on dual system which are civil law principles
and Islamic Sharia law (this is a constituting the guiding principle and source of law).
In dubai and other civil law jurisdictions, legislation tend to be formulated into a
number of codes. There are federal codes of law which apply in Dubai and the other
emirates dealing with the most important and fundamental principles of law,
including civil, commercial, civil procedure, companies, intellectual property,
immigration, maritime, industrial, banking and employment law. In contrast, many of
the laws enacted by the Ruler of Dubai relate to matters which are more
 administrative in nature, such as the establishment and operation of government
affiliated entities.

d. Market

According to Hong Kong Means Business, UAE spending are mostly relied on
housing as their first priority. Followed by Food & Non-Alcoholic Beverages,
Transport and Clothing & Footwear. UAE‘s market also taken a huge attention to
healthcare and medical services. The country is also the key driver of luxury market.
This can be seen as Dubai build numbers of luxurious hotels and shopping malls.
They have created a vigorous ―lavish‖ branding for they own country. Many of
Dubai‘s neighbour country visit to buy luxury goods there. Dubai has become
shopping paradise for worldwide citizen.

Based on Santander, UAE has several growing market sectors such as cars,
consumer electronics, cosmetic, perfume, and healthcare service. Most of UAE‘s
consumer spend their money on offline stores with the percentage of 84%, meanwhile
9% of the consumers spend their money on online stores. Most of the consumers do
not get influenced that much from advertising, instead they are drawn in the
experience they get at the shop and also word of mouth.

The media information of UAE‘s consumers mainly come from Television,

Newspapers, in transportation venues, radio, and also website. Although television is
an important tool for information, however due to presence of internet, consumers
prefer to use internet than television. Newspaper is effective tool for information
sharing too as people like to read both arabic and english newspaper. Last most
effective information media sharing is radio, the population spend around 4 hours to
22 minutes on the radio.

e. Human Resources

On 2019, Dubai population has crossed to 3.1 millions. There are 2,195, 480
males and 940,920 females in Dubai. Dubai citizen are mostly on the productive age
proven from DSC that 20-44 years old people are taking 66% of the population. It is
 known that the largest age group are people from 30-34 years old, followed by people
from 25-29 years old. (khalejtimes.com, 2018)

Based on Bayt.com, most common jobs in UAE are maintenance-repair-

technician, sales, teaching-academics, information technology, and management.
Furthermore, according to justlanded.com, employers need to pay cash packages
which includes several expenses for basic salary, car provision, housing provision,
education for children, and air ticket for home visits.

They also get something that is called ‗Indemnity‘ at the end of their working
contract period. The indemnity is based on basic salary excludes bonuses. Usually the
employees work 40 to 48 hours a week following the company policy. There is no
difference in summer or winter hours, however they reduce the working hours to 6
hours per day during ramadan.

f. Infrastructure

Dubai definitely has a strong will to develop their infrastructure. It is stated on

visitdubai.com that the country has a plan to be smart and sustainable city by
establishing fully connected and integrated infrastructures which fortifies maximum
mobility and easy access. In 2016, Dubai airport has become one of the busiest airport
for international passenger traffic. They‘re enforcing the quality of their airport to
support tourism activity.

Beside that, according to dubaicityguide.com, the country has established several

superb infrastructure like seaports, airports, sport facilities, shopping centers, hotel,
restaurants, bars & pub. They might not have rail system, main transportation is taken
through road networks that connect all cities.

g. Profit

Based on livingindubai.com, Dubai don‘t impose taxes on its people. Dubai is

widely known as a free-tax country. However, If someone come from another country,
there is a possibility that the person has to pay tax to his/her origin country. In this case,
 the person do not pay tax to Dubai, but to his home country. In corporate tax, Dubai also
do not levied the corporation to pay tax. Unless, the business are foreign banks and also
oil producing companies. For foreign oil producing companies, they have to pay 55% of
its operating profits. Meanwhile, for foreign banks, they have to pay 20% of their taxable
income. Now, if someone running a hotel or entertainment business, they also pay
indirect taxes. they have to pay 10% municipal taxes.

In Dubai, you get to own 100% profits with one condition. The foreign company
could not own more than 49% ownership. The 51% shares should be own by the locals
(uaecompanyregistration.com).

2.4.Foreign Direct Investment Analysis

2.4.1. India

Figure 14 FDI in India

 Figure 15 FDI in India per sector

Apart from being a critical driver of economic growth, foreign direct investment
(FDI) is a major source of non-debt financial resource for the economic development
of India. Foreign companies invest in India to take advantage of relatively lower
wages, special investment privileges such as tax exemptions, etc. For a country where
foreign investments are being made, it also means achieving technical know-how and
generating employment.

Based on FDI growth on India, we know that the country FDI grow is decreasing.
Data for April-September 2018 indicates that the services sector attracted the highest
FDI equity inflow, followed by computer software and hardware, telecommunications
and trading.

2.4.2. Turkey
 Figure 16 FDI in Turkey

Figure 17 Top Sector FDI in Turkey

Based on FDI growth in Turkey from 2016 the FDI is decreasing due to political
issue that happened in Turkey. Most of the investment are in financing and
manufacturing area followed by energy with proportion of 12%. Although Turkey
give simple process for investor do the investment, the foreign company tend to not
 used FDI as their strategy. It is may caused by the building of infrastructure that is
still being processed (which is currently being postponed due to economic instability).
And it is also may be caused by the taxation complexity that Turkey is country with
the most complex taxation. These are may be the reasons why FDI is not being used
by foreign company to enter the market.

2.4.3. Uni Arab Emirat

Figure 18 FDI in Uni Arab Emirates

 Figure 19 FDI per sector in UAE

Based on FDI growth on Dubai, we know that the country FDI grow is increasing
from 33000 to 38000 which means good because we could do foreign direct
investment in Dubai. Most of the investment are Hotel & tourism followed by real
estate. Beside that, based on the factors on FDI, Dubai definitely support FDI to
enforce their economic growth. Dubai has several policies which indicate that they
support FDI, for example like free trade, low tariff, and no quota.

2.5.Culture Analysis

2.5.1. India

a. Culture Difference

India has 28 states and seven territories, according to the World Health
Organization. There is no official language in India, according to a Gujarat High
Court ruling in 2010, though Hindi is the official language of the government.
The Constitution of India officially recognizes 23 official languages. Many people
living in India write in Devanagari script. In fact, it is a misconception that the
 majority of people in India speak Hindi. Though many people speak Hindi in
India, 59 percent of India residents speak something other than Hindi, according
to The Times of India. Almost all business people speak English well. However, it
is advisable to speaking short, simple sentences and avoid using jargon and slang.

Bengali, Telugu, Marathi, Tamil and Urdu are some other languages spoken in the
country.

b. Negotiation Patterns

In India, the primary approach to negotiating is to employ distributive and

contingency bargaining. While the buyer is in a superior position, both sides in a
business deal own the responsibility to reach agreement. They expect long-term
commitments from their business partners and will focus mostly on long-term
benefits. Expect negotiations to be slow and protracted. Delays are often
inevitable, particularly when dealing with government bureaucracy. Be prepared
to make several trips if necessary to achieve your objectives. Throughout the
negotiation, be patient, control your emotions, and accept that delays occur.
Indians view impatience or pushiness as rude. Indians generally employ a
polychronic work style. They are used to pursuing multiple actions and goals in
parallel. When negotiating, they often take a holistic approach and may jump back
and forth between topics rather than addressing them in sequential order.

c. Decision - Making Styles

Most companies here tend to be very hierarchical, and people expect to work
within clearly established lines of authority. Disagreeing with or criticizing
superiors is often viewed as unacceptable. Decision making is a slow and
deliberate process in India. Decision makers are usually top executives who
consider the best interest of the group or organization. They might consult with
others before making the call. Subordinates may be reluctant to accept
responsibility. Decision makers delegate their authority, so it is important to deal
with senior executives. They expect to deal with equals. People may not always
 be open to new ideas. When making decisions, Indian business people usually
consider not only universal principles, but also the specific situation. Personal
feelings and experiences weigh more strongly than empirical evidence and other
objective facts do, but they will consider all aspects.

d. Ethical Practices

Ethical practices in India covers some issue such as marketing ethics and business
sustainability. Use of Spirituality at and ethical HR practices at workplace is one
of the ethical practices because India has always been a land of great spiritual
gurus and leaders. Entire world can learn from spiritual lessons from India. The
next one is adopting ethical practice in marketing: marketing is sensing, serving
and satisfying customers. It is all about delivering what is promised. When an
organization behaves ethically; customers develop a positive attitude about the
firm, its products and services. Advertising informs consumers a lot about the
product or services offered. While advertising in foreign nations, ethics include
promotion by not hurting the feelings of any specific community in the country of
operation.

2.5.2. Turkey

a. Cultural Differences

The cultural differences that may be faced when do international business with
turkey is the language barrier because 75% of population in Turkey using their
official language which is Turkish and 18% of the population using Kurdish, and
the rest using others minorities languages. Beside the language barriers we should
more pay attention to the business culture in Turkey because Turkey people are
hospitable, polite, extremely professional, and stick related to job . Turkey like to
get acquainted with people they will work and do business with. They will most
likely do business with those they able to trust and those that can provide a long
term relationship. To get the trust from Turkey people we have to behave polite
and must be careful in every act.
b. Negotiation Patterns

When do the negotiation, Turkey business people do not like to be put under
pressure and do not like deadlines. Being patient is an asset when negotiating with
Turkey business people. Turkey business people not only considered the financial
benefit but also considered the non-financial aspect such as power, influence,
honour, respect, and stress aspect that can occurred when the negotiation process
running. Turkey also use tough negotiating tactics, so it is important to leave
room for compromising at different stages and every reasonable compromise
should shows that the decision made because we like and respect the counterpart.

c. Decision-making Styles

Turks do not like to be hurried up, same goes with their decision making styles.
Turks like the decision making process to be slow yet sure. Turks also only want
to go to decision making meeting getting know each other and trust the partner,
this means decision making can not be made in the first meeting. Other than that,
in Turkey, the decision is only made by the highest level of the organization. So,
to cut the time needed for the proposal to reach the upper level, the one who want
to do business with Turks need to go straight to make an appointment with the
highest level person of the organization, even though in the end the organization
will firstly engage us with a meeting with lower level person for several times
until we can meet the highest level person. In the decision making, it is important
to present a structured proposal, but Turks do not solely take it as consideration.

d. Ethical Practices

Ethical practices in Turkey covers some issue such as marketing ethics and
business sustainability. Based on a paper titled Business ethics, marketing ethics,
consumer ethics, sustainable consumption and corporate social responsibility in
 Turkey, written by Hande Begüm Bumin Doyduk, we can generate some
conclusion regarding business ethics in Turkey.

● Majority of Turkey firms are family-based, so it is hard to improve the

corporate governance and CSR concept. CSR in Turkey mostly done only
by big conglomerates in Turkey.

● Human rights, working condition, child labor, gender, racial, and religious
rights, and also living condition is perceived as important in Turkey.

● Biodegradability, recyclable materials, product disposability, and animal

rights is perceived as relatively low importance in Turkey.

● Based on survey, 14% of Turks will pay more for an ethical product or
product that come from ethical company.

2.5.3. Uni Arab emirat

a. Culture Differences

The United Arab Emirates (UAE) consists of the seven small emirates of
Abu Dhabi, Dubai, Sharjah, Ras Al-Khaimah, Ajman, Umm Al-Qaiwain, and
Fujairah, which were united as a federal state on 2 December 1971. Before the
establishment of the oil economy in the early 1960s, two main orientations shaped
traditional Emeriati culture: the nomadic desert-oriented Bedouins with small
oasis farming within the broader context of the desert economy and culture, and
the sea-oriented culture that revolved around pearling and sea trading. These
subcultures were economically, politically, and socially interdependent, creating a
common culture and social identity. The UAE shares significant aspects of its
culture with neighboring Arab countries and the larger Arab culture.

b. Negotiation Patterns
 According to the Dubai-Freezone.ae, there are 5 golden rules for negotiation
in the UAE

● Rule 1

Beginning negotiation in the UAE requires trust. It is also important to

show interest on your partner personally. This includes their family,
favorite sport, and hobbies. It is advised to start business with small talk
before starting business topic.

● Rule 2

Respect your partner beliefs and cultural norm. As we know that islam
strongly embedded in their culture. It has become major part in their daily
lives. That‘s why, when you go to business meeting, wear modest clothes,
don‘t wear something too showing. This rules apply both for men and
women. So, the proper dress would lean to formal and professional style.
Beside that, the business meeting is usually relaxed. So, they usually come
late.

● Rule 3

When interacting, the arabs prefer to stay in a distance. You should also
consider specifics when doing conversation. Arabs are usually more
conservative and follow certain linguistic ‗ritual‘.

● Rule 4

There are essential points when holding business meetings :

● Be flexible. The ability to adapt with your partner is the key. Both
should have clear strategy in order to gain the goals.

● Be consistent and available. There should be continuous

monitoring in business operation..
 ● Become friends, not just business partners. Arabs highly value
family and friendships in personal relationships.

● Rule 5

You should be patient if you may have to wait a bit. Because, everything
goes much more slowly unlike western time.

c. Decision Making Styles

In the Asian culture, ―yes‖ does not have the same meaning as in the
Western culture, since it rather means ―perhaps.‖ To really know what Emirati are
thinking in certain moments, it is better to ask open questions and to suggest
different alternative of doing business. In order to have no obligations, they use
expressions like Insha Allah (―Good willing‖) or Bukra Insha Allah (―Tomorrow,
God willing‖). It is difficult to consider these expressions as good or bad news-it
will depend on the conversation context.

Negotiation process is mix of the snail and snake strategies. Emirati take
time on making a decision but once they have made up their mind, they want
everything to be carried out quickly. It can be surprising that no operations could
be carried out even if the first one has been beneficial for both parties. The reason
must be that they could have found a supplier offering better prices. To keep
negotiations moving forward, it will be necessary to maintain the presence in the
market and to offer competitive prices in every occasion.

If the parties do not reach an agreement, emirati will always be friendly.

They will tell you that the rejected proposal has been analyzed and taken into
account, although it is not really true. To maintain commercial relations, personal
contact is essential especially for Emirati in making a decision. It is better a visit
than a phone call and more effective a phone call than emails.

d. Ethical Practices
 The form of greeting is a short and soft handshake when we introduce
ourself and when we leave. Among them, they bring noses together in a kiss on
both cheeks. With women we must avoid any physical contact, just a gesture of
courtesy (for male partners and vice versa between female partners and emirate‘s
male). If the meeting is held in an office we should greet first the older person,
even if he is not the host. If, on the contrary, it is held in a majlis or diwan, we
should shake everybody‘s hand counter clockwise. We do not have to offer a
business card at the beginning of the meeting. It is better to wait for them to give
theirs. We should keep the cards given to us as it is difficult to find their location
data in phone directories. Greeting expressions are very elaborate. When saying
Assalamu’alaikum (―Let peace be with you‖) it is answered Wa’alaikumsalam
(―Also with you‖). Then, it is said, kayfa halak? (How are you?). Other common
phrase are, Sabaah al-khayr (Good morning), Massa al-khays (Good night) and
shukran (Thank you).

People are addressed as Mister Manssur, Sheikh Hamad or Prince Said

followed by the name. The title of sheikh (which means ―expert of the Koran‖) is
used by high-ranking people, who do not belong to the Royal Family. The title
Your Highness must be used for members of the Royal Family and Excellency for
Government ministers. Other titles are Mohandas (Engineer) and Ustadz
(Professor). Although punctuality is not a deeply-rooted custom, it is expected
that the foreigner be punctual. In occasions, urgent commitments lead to
cancellation an appointments without warning in advance. Therefore it is
advisable to prepare a letter regretting the cancellation and wishing an alternative
date. The letter and the contact details are given to the company so that is easy for
the counterpart to arrange other appointment. This strategy commonly works.
First meetings frequently start with an informal talk on the trip, family, etc. we
should be calm and avoid gesture of impatience to start business, since this could
communicate anxiety.

Conversation topics to avoid are: politics, expatriates‘ situation or their

relationship with the US. we should ask for the family in general, not for wife or
 the number of sons or daughters. Positive topics are: the country‘s modernity, the
tea of coffee quality, or the luxurious shopping centers, called gold souks (golden
market). When speaking about the countries of the area, we must say Arab Gulf
states and not Persian Gulf states. Physical contact and giving objects with the left
hand must be avoided. This hand is considered impure -it is one used in the toilet-
. We should neither sit cross-legged pointed out toward the speaker not showing
the soles of the shoes, as this is thought to be a derogatory gesture.

And last but no least, Friday is holiday. Official institutions close on

Thursday and Friday and those companies with foreign relations, on Friday and
Saturday. It is advisable to check a timetable and calendar of public holidays
before arranging a business trip to the country. Also during Ramadhan (that last
four weeks) one is not allowed to smoke, drink or eat in their presence. It is also
common to interrupt meetings to pray.

2.6.Country Risk

2.6.1. India

1. Growth is expected to rebound from a low base

Real GDP growth will likely improve during the 2018/19 financial year,
albeit from a low base. Activity was supported by strong domestic consumption
(60% of GDP), after a slowdown in previous years due to demonetisation
(withdrawal of the 500 and 1,000 rupee notes), and the introduction of a
harmonised goods and services tax (GST). Household consumption continues to
struggle from the residual impact of these measures, as their influence over the
informal sector – although difficult to quantify – remains significant. However,
improved financial integration of the poorest households should support demand
in the long term. Inflation is set to reach 5.3% by the end of FY 2018/19 and is
expected to stay stable in 2019, thanks to subdued core inflation. Food prices
benefited from normal monsoon rains. This will allow the Reserve Bank of India
 (RBI) to pause monetary policy tightening through the first half of 2019, after
hiking rates by 75 bps in 2018. Both factors should be supportive of growth,
leading to a slight pickup in FY 2019/20.

The Modi government‘s reforms – aimed at boosting India‘s

manufacturing sector, attracting FDI, and reducing constraints burdening the
economy – should benefit the private sector in the long-run. However, some
major headwinds emerged in 2018. Non-performing assets (NPAs) in the banking
system are at an all-time high of 12%, which has hindered domestic companies‘
willingness to borrow money and invest, leading to sluggish private investment.
Banks also remain cautious following a series of banking scandals in 2017 and
2018. Reforms aimed at cleaning up the banking system have been put into place,
but dealing with NPAs will take time. Moreover, RBI could resume tightening in
the second half of 2019, which will lead to higher borrowing costs, exerting
further downside pressure on private investment.

1. Public finances to struggle amid headwinds

The fiscal deficit and public debt levels remain high. The most notable
attempt at reducing these was the introduction of the GST, which aims to boost
fiscal revenues and make the economy more competitive in the long term. In
addition, demonetisation should improve budget revenues by reducing the weight
of the informal economy. Nevertheless, fiscal consolidation efforts will be
hindered by higher energy prices, as India remains a net importer of oil and
subsidies this commodity. Public investment might help to offset the decline of
private investment ahead of the elections in 2019, but this will also contribute to a
widening of the fiscal deficit.

The current account deficit is also expected to increase. Export growth is

set to slow, in line with a slowdown in global demand. Faster import growth will
also play a role, with domestic consumption remaining strong, while oil prices
will stabilise but remain higher than levels of the past years. Rising demand for
gold after demonetisation will also play a role. For these reasons, it is expected
 that the rupee will continue to experience depreciatory pressure in 2019, while
remaining vulnerable to a rise in global risk aversion and a faster-than-expected
rate of monetary policy tightening in the United States. At the same time, foreign
exchange reserves are set to remain at comfortable levels (nine months of imports
in September 2018), and FDI and foreign portfolio investments are on an upward
trend.

1. National Democratic Alliance faces some challenges

India‘s ruling coalition, the National Democratic Alliance (NDA), is an

alliance of several parties, of which the Bharatiya Janata Party (BJP) – the party
of Prime Minister Narendra Modi – is the most important. The BJP has suffered
setbacks recently, such as losing its simple majority in the lower house of Indian
parliament in by-elections on May 2018. Although BJP still rules 18 out of 29
Indian states, it lost support in the 2018 state elections (Vidhan Sabhas), which
does not bode well for the party ahead of the 17th Lok Sabha, or general election,
scheduled to take place in April or May 2019.

Kashmir remains a source of tensions between India and Pakistan.

Diplomatic talks were suspended after an attack on an Indian base in Punjab on
January 2016, and relations between the two countries have deteriorated since.
New tensions emerged after the Indian army shot the leader of the main insurgent
movement, Sabzar Ahled Bhat, in Kashmir in May 2017. Further escalation of
violence is unlikely as Pakistan and India both have an interest in preserving the
status quo.

2.6.2. Turkey

1. Sharp correction leading to stagflation

During 2018, the Turkish lira depreciated significantly due to the negative
impacts of a tightening US monetary policy, high levels of foreign exchange debt
in the private sector, rising current account deficit, and political tensions with the
United States. The spillover of the lira‘s depreciation will continue to weigh
 negatively on the economic performance in 2019. Because of the Turkish
economy structural dependence on imported inputs for its activity, the weakness
of the lira has significantly raised production costs and deteriorated pricing
behaviours. After closing to 50% on an annual basis in the third quarter of 2018,
the rise in producer prices will continue to be passed onto the consumers.
However, the slowdown of the domestic demand will not allow a complete pass-
through, meaning that already-tight profit margins will be narrowed even further.
Coupled with higher funding costs (interest rates on loans hit nearly 40% after the
central bank‘s 625 basis points rate hike in September 2018 as a reaction to the
lira‘s depreciation), these factors are expected to result in a higher number of
companies seeking for debt restructuring, thus dragging down private
investments. Moreover, manufacturing output has started to lose pace, a trend
which is expected to continue in the coming quarters. On the household
consumption front, real wages are expected to remain under pressure, as salary
increases are expected to remain mostly below annual inflation. This will affect
consumption-depending sectors, such as retail, construction, and electronics.
Higher interest rates will undoubtedly reduce the pace of growth of domestic
demand. In order to support the economy, the government has implemented some
measures, such as the extension of credit card instalments, and several incentives
targeting the private sector, such as the government‘s decision to postpone to
2019 the payments which were supposed to be collected from the SMEs in 2018
as a part of the financial aid they received from the government, as well as export
aid of up to TRY 300,000 for SMEs, and encouragement for the local production
of the intermediate goods that exporters currently import from abroad, among
others.

1. Slower growth will widen public deficit, but narrow current account deficit

The slowdown in domestic demand is expected to weigh on tax receipts,

as nearly 65% of total fiscal revenues are in the form of indirect taxes. Although
the government has announced a total saving of TRY 60 billion (nearly USD 11
billion), the sharp slowdown of the economy will put pressure on the fiscal stance
 by pushing the government to introduce some incentives to prevent a systemic
risk resulting from payment delays and debt non-payments in the private sector.
Public savings would be made on capital investments, social security, and
purchases of goods and services, according to the New Economic Plan
2019/21.The fiscal consolidation may be also hampered by upward pressures
resulting from rising costs of public-private partnerships in relationship with the
public guarantees provided to private investors over their operating income.
Nevertheless, the low level of public debt gives the government some scope for
action. Conversely, the lira‘s weakness is expected to support Turkish exports
(automotive, food, clothing, textile, machinery, metals, etc.), which are already
benefiting from the growth in Europe, Turkey‘s main trading partner. Tourism
revenues are set to increase, as Turkey has become a more affordable destination
for international tourists thanks to the lira‘s depreciation, and the security
environment is more stable. On the other hand, subdued household consumption
and private investment and slower manufacturing production will moderate
import demand. Therefore, the trade deficit and, consequently, the current account
deficit are expected to narrow in 2019. Private sector external debt will continue
to represent a challenge. Total external debt hit 52% of GDP as of the second
quarter of 2018. With lower available external financing, the Turkish private
sector could turn into a net debt payer.

1. Political stability will remain

Although President Recep Tayyip Erdogan‘s Justice and Development

Party (AKP) was only able to secure 295 of 600 seats in Parliament, it managed to
form a majority with the conservative nationalist MH party. With the concomitant
re-election of Mr Erdogan in June 2018, political noise has diminished. The
country will hold local elections in March 2019. Any increase of the political
and/or geopolitical tensions ahead of the election would weigh on the economic
dynamics, which are already fragile – although this seems to be an unlikely
scenario.
2.6.3. Uni Arab Emirat

1. Better growth perspectives due to higher oil prices and public spending

Despite having been negatively affected by lower energy prices, the

UAE‘s economy has benefited from its relatively diversified economy (total non-
oil activity accounted for 71% of GDP in 2017). After recovering strongly in
2018, the growth is expected to accelerate during 2019. This improvement will be
largely due to a higher level of oil production, higher oil prices, and increased
government spending ahead of Expo 2020 (a universal exposition that will be held
in Dubai). However, overall growth performance is expected to remain below its
2013-2017 average of nearly 4%.

The mining sector, which includes oil and natural gas production; will be
positively affected by higher oil production following the expiry of the OPEC
production cap, and increased energy prices. As of September 2018, UAE oil
production already stood at 3 million bpd. This increase will contribute to growth
performance.

Investments recovered in 2018 and are expected to strengthen during 2019

on the back of higher fiscal revenues. The government will be able to support the
economy through a more supportive fiscal policy. Indeed, in June 2018 Abu
Dhabi announced a 3-year AED 50 billion programme (USD 13.6 billion;
equivalent to 1.2% of Abu Dhabi‘s annual GDP) in order to promote growth,
tourism and job creation. Also, the UAE has approved a USD 16.4 billion budget
for 2019, a 17% increase from 2018. Private consumption remained under
pressure in 2018 due to higher fuel prices, a new VAT, and the removal of some
subsidies. However, higher government spending and improving growth should
support household spending throughout 2019.

Because government spending depends on oil prices, their volatility

presents a significant risk. Although the UAE‘s economy is relatively diversified,
oil revenues are still the main source of finance for economic activity (53% of
 total fiscal revenues in 2017). Separately, a tightening monetary policy stance also
will represent a challenge for the private sector‘s financing costs. The UAE
dirham is pegged to the US dollar and the UAE central bank follows the footsteps
of the US Federal Reserve. This means that interest rates in the UAE will likely
continue to rise, weighing on the funding costs of companies. Tourism flows will
be an important factor during 2019: the travel and tourism sector accounts for
nearly 5% of the UAE‘s national output. However, tourism flows in Dubai inched
up by only 0.4% in January-August 2018 from a year earlier because of weaker
economic growth in visitors‘ countries (Iran, Oman, Saudi Arabia, etc.) and
higher accommodation and restaurant prices after the introduction of the VAT.

1. Fiscal improvement on the horizon

After tightening in 2017, the fiscal stance has been slightly easing since
2018 on the back of higher oil revenues. In the first quarter of 2018, total
spending rose nearly 16% from a year earlier, compared with an increase of 3.5%
in total revenues. The return to a budget surplus is expected to also be supported
by higher non-oil revenues in line with the increased economic momentum.
Reduction in fuel subsidies and reduced capital transfers to government-related
entities (GREs) should help to sustain the budget balance in positive territory.
Meanwhile, despite the need to finance the budget deficits between 2015 and
2017, the general government gross debt level relative to GDP has remained low.
Additionally, the UAE will continue to enjoy strong financial buffers with the
sovereign wealth fund‘s assets estimated at more than 300% of GDP.

1. Political stability

The UAE is considered as a ―safe haven‖ for investments in the region and
the economy was not significantly affected by the boycott imposed on Qatar in
June 2017. The country, which is a constitutional federation, is governed by the
Federal Supreme Council. It consists of the leaders of the seven emirates. The
Federal National Council, which is the consultative council, has 40 members, of
which half is elected and the rest is appointed by the rulers of the seven emirates.
 The latest election was held in 2015 and the next one is due in 2019, where no
substantial changes are expected. The country is expected to remain politically
stable, and should therefore continue to attract foreign investments.

3. Country Decision (Scoring Weight based on Political – Economic - Legal analysis,

Country attractiveness, Foreign Direct Investment, culture, country risk analysis and The
7Th Instrument Policy)

No Factors Consideration Weight Scoring

India Turkey UAE (Dubai)

1 Political 0.20 3 1 4

2 Economical 0.25 1 3 5

3 Legal 0.02 2 4 3

4 Country Attractiveness

Benefit 0.04 2 3 4

Cost 0.03 4 3 3

Risk 0.03 2 2 4

5 Foreign Direct Investment 0.08 3 4 4

 6 Culture 0.05 3 3 3

7 Country risk 0.17 3 2 4

8 7 instrumental policy

Tariff 0.01 3 4 4

Subsidies 0.015 4 4 3

Regulation and 0.027 4 3 3

Technical standard

Quotas 0.015 3 4 4

Local Content 0.020 4 4 4

Requirement

Anti Dumping duties 0.018 4 4 4

Administrative policies 0.025 3 4 3

Total 1.00 48 52 59

Table 2 Scoring weight base

From all factors we rank the factors based on the important aspect from each
factors. For the very important factor, we choose Economical factor because when we
want to do business internationally its is important to do the business in country that have
growth or stable economic. For the second one we choose Political, beside the economic
 condition we also have to do business in country that has stable economic so the policy
and regulation related to the business won‘t be change and the politic issue won‘t be
affect the business. The third on is country risk, the country risk is one of factors that
important because when we want to entry foreign market we should know what kind of
risk that may be occur and how the risk should be manage that‘s why country risk include
in 3 the most importance in choosing the target country. So, from the scoring table above
we choose Uni Arab Emirates (UAE) as our target country because of UAE have high
score and seems to be more attractive for running business in there.

4. Targeting Market Overview

4.1.Country Overview
The United Arab Emirates (U.A.E.) is a federation consisting of 7 regions, each is
led by an emir. The seven regions are Abu Dhabi, Dubai. Sharjah, Ajman, Umm al-
Quwain, Fujairah, Ras al-Khaimah, where Abu Dhabi as the country‘s capital. The
U.A.E. has a population of approximately 9.5 million, out of which about 85 percent are
expatriates. In 2015, the U.A.E. registered a real GDP growth rate of 3.9 percent, down
from 4.6 percent in 2014. Due to its vast oil wealth and relatively small citizen
population to which it must provide services, the U.A.E. is well positioned to handle the
current low-oil-price economy. To diversify away from oil, the government is
transitioning from an investment economy to a knowledge economy. To this end, it is
focused on developing new industrial and commercial sectors, including aerospace,
healthcare, education, and defense and tourism. The U.A.E. is a leading commercial
center serving the Middle East, Africa, and South Asia, with a significant portion of its
import volume ultimately being re-exported. Dubai in particular plays a central role as a
regional trade, logistics and tourism hub. Its economy has also been buoyed by ongoing
construction and infrastructure projects in the lead-up to the Dubai World Expo 2020.
While the construction sector has come under substantial pressure due to the prolonged
slump in oil prices, the sector remains resilient, and Dubai's planned real estate and
infrastructure projects are progressing. Most notably, the expansion of the Al Maktoum
 International Airport by Dubai Airport Authority, valued at $33 billion, is Dubai‘s single
biggest project.
Abu Dhabi has been relatively more exposed to the commodities downturn given
its reliance on the oil sector. As a result, the government has enacted austerity campaigns
to rein in its spending. This includes fiscal restraints and revenue-generating measures
across the board, e.g., energy price reforms, subsidy reforms, wage freezes, prioritization
of capital spending, and expansion of non-oil tax revenues. Some projects that have been
delayed and could be awarded in the future include the second phase of the national
railway network by Etihad Rail and the Sheikh Khalifa Medical Hospital.

4.2.Regulation between Indonesia and the UAE market

4.2.1. The Regulation of UAE Market

The United Arab Emirates (U.A.E.) is a significant U.S. export market and an
important regional hub for American companies doing business throughout the
Middle East, Africa and South Asia. The U.A.E. has a population of approximately
9.5 million, out of which about 85 percent are expatriates. In 2015, the U.A.E.
registered a real GDP growth rate of 3.9 percent, down from 4.6 percent in 2014.
Due to its vast oil wealth and relatively small citizen population to which it must
provide services, the U.A.E. is well positioned to handle the current low-oil-price
economy. To diversify away from oil, the government is transitioning from an
investment economy to a knowledge economy. To this end, it is focused on
developing new industrial and commercial sectors, including aerospace, healthcare,
education, and defense and tourism.

The U.A.E. is a leading commercial center serving the Middle East, Africa,
and South Asia, with a significant portion of its import volume ultimately being re-
exported. Dubai in particular plays a central role as a regional trade, logistics and
tourism hub. Its economy has also been buoyed by ongoing construction and
infrastructure projects in the lead-up to the Dubai World Expo 2020. While the
construction sector has come under substantial pressure due to the prolonged slump in
oil prices, the sector remains resilient, and Dubai's planned real estate and
infrastructure projects are progressing. Most notably, the expansion of the Al
Maktoum International Airport by Dubai Airport Authority, valued at $33 billion, is
Dubai‘s single biggest project. As a member of the GCC, the UAE is a party to the
GCC common market, and GCC national investors enjoy a special status in the UAE.
However, to protect and encourage further foreign investment, the UAE has signed at
least, approximately, 50 bilateral investment treaties, although not all of them are
currently in force. Bilateral investment treaties that have come into force include
treaties with:

● European states: Austria, the Belgium and Luxembourg Economic Union,

Finland, France, Italy, Poland, Portugal, Romania, Serbia, Montenegro, Sweden,
Switzerland, and Turkey;
● Asian states: Bangladesh, China, India, Republic of Korea, Malaysia and Tunisia;
● Middle East and African states: Algeria, Egypt, Jordan, Lebanon, Morocco, Syria,
and Yemen; and
● Commonwealth Independent States: Azerbaijan, Belarus, Russian Federation,
Turkmenistan,and Ukraine.
The UAE has also partnered with the United States to establish an economic
policy dialogue to strengthen the economic, trade and commercial relationship
between the two countries. The UAE is a member of the International Centre for the
Settlement of Investment Disputes, and the Multilateral Investment Guarantee
Agency. With regards to trade, the UAE is a member of the World Trade
Organization and a contracting party to the General Agreement on Tariffs and Trade.
Through the UAE‘s membership of the GCC, it is a party to a free trade agreement
with the European Free Trade Association states of Iceland, Norway, Liechtenstein
and Switzerland, and has a free trade agreement with Singapore. At the same time,
the GCC is working to agree on free trade agreements with the European Union,
Japan, China, India, New Zealand and Australia among others. Finally, the UAE is
also a party to various multilateral agreements regarding investment, and these
include the Agreement on Promotion, Protection, and Guarantee of Investments
among Member States of the Organization of the Islamic Cooperation, and the
Unified Agreement for the Investment of Arab Capital on the Arab States.
4.2.2. The Regulation of Indonesia Market
Indonesia has been viewed by many expatriates as a top destination for
business, work and tourism. To make the country a more attractive investment
prospect, the Indonesian government have set up regulations for foreigners to live and
work permanently in the country. The Ministry of Manpower‘s Regulation No. 16 of
2015 regulates the provisions for Indonesian companies hiring foreign employees as a
means of controlling the use of foreign workers in Indonesia.

Furthermore, taxation in Indonesia is based on Law No. 6 of 1983 regarding

General Procedures and Provisions for Taxation as was recently amended by Law No.
16 of 2009. There are a wide variety of taxes in Indonesia that are based on corporate
income tax, personal income tax, value added tax, and luxury tax. With the
Indonesian government aiming to improve the country‘s rapidly changing business
climate, these laws have been amended to accommodate Indonesia‘s current
economic outlook. Furthermore, the government introduced the Tax Amnesty
Program in 2016 as a means to boost tax compliance in Indonesia as well as increase
much-needed tax revenue that could significantly contribute to the country‘s
economic development. Taxation in Indonesia is determined on the basis of residency
which is applied to individual residents or corporations that are domiciled in
Indonesia; international companies that are permanently based in Indonesia are also
subjected to the country‘s tax regime. Moreover, individual resident taxpayers must
also stay in Indonesia for more than 183 days in any 12-month period or are present
in Indonesia during a tax year and reside in the country. Tax returns in Indonesia are
filed by taxpayers based on a self-assessment system whereas groups of companies
are taxed as individual companies. Indonesia has signed and implemented a number
of free trade agreements with countries and regions around the world as an
independent market as well as a member state of the Association of South East Asian
Nations (ASEAN). Among the agreements are:

● Indonesia-Japan Economic Partnership Agreement

● ASEAN-People's Republic of China Comprehensive Economic Cooperation
Agreement
 ● ASEAN Free Trade Area
● ASEAN-Australia and New Zealand Free Trade Agreement
● ASEAN-India Comprehensive Economic Cooperation Agreement
● ASEAN-Japan Comprehensive Economic Partnership
● ASEAN-Korea Comprehensive Economic Cooperation Agreement
● Pakistan-Indonesia Preferential Trade Agreement
● Preferential Tariff Arrangement ‒ Group of Eight Developing Countries
In addition to trade agreements that are already in effect, Indonesia has also
signed a cooperation that is yet to be implemented, namely the Trade Preferential
System of the Organization of the Islamic Conference which has the participation of
35 countries.

From both of country‘s market regulation, it seems between Indonesia and

UAE still not have the specific trade agreement. Especially for the free trade
agreement that might be give some advantages for both of countries. Therefore, start
from Wardah that will make a cooperation with one of UAE‘s cosmetic and skin care
company, Indonesia and UAE will make the trade agreement and free trade
agreement soon.

4.2.3. Foreign Investment Restriction in UAE

The United Arab Emirates (the UAE) has introduced long-anticipated
legislation which liberalizes restrictions on foreign ownership of companies
incorporated ―onshore‖ in the UAE (ie outside the free zones). Federal Law No.19 of
2018 regarding foreign direct investment (the FDI Law) establishes a new framework
for foreign ownership. Moving away from the long-standing general restriction
(known as the ―51/49 rule‖) which requires a UAE company to have not less than 51
percent.of its share capital owned by UAE nationals, the new regime allows
foreigners to own up to 100 percent. of the share capital in UAE companies operating
in certain sectors, subject to licensing requirements. The sectors covered by the new
regime will be set out in secondary legislation which is yet to be issued. Existing
foreign ownership restrictions, including the 51/49 rule, will continue to apply
generally for sectors not covered by the new regime, but the Cabinet of Ministers
retains the ability to grant specific exemptions in relation to such sectors on a case-
by-case basis.

The FDI Law does not apply to free zones or to any special arrangements
relating to foreign ownership entered into with UAE government authorities.
However, any existing private arrangements which do not comply with the 51/49 rule
or other restrictions on foreign ownership may need to be adjusted to comply with the
new regime and a licence under the FDI Law (an FDI Licence) may need to be
obtained. It is uncertain when such compliance would be required, but this may be
clarified in secondary legislation.

KAN facilitates halal products export to UAE

The National Accreditation Committee (KAN) and the National

Standardization Agency (BSN) have signed a cooperation with the Emirates
Authority for Standardization and Metrology (ESMA) to facilitate Indonesia`s halal
export to the United Arab Emirates (UAE). Under the cooperation, halal certificate,
issued by KAN`s accredited certification institution, would be recognized by ESMA
based on UAE`s standard. The MoU was signed by Prasetya and ESMA`s Director
General Abdulla Abdelqader Al Maeeni.Head of the BSN who is also KAN‘s chief,
BambandPrasetya, said that with the signing of the agreement, KAN would provide
accreditation to halal certification institutions for exporting products to UAE and
monitor the institution to assure the integrity of the issued halal certificate. He also
stated that one hindrance for Indonesian products to enter UAE`s market is the
requirement to get halal certificate issued by accredited certification agency
recognized by ESMA. Meanwhile, Abdulla expressed optimism that the cooperation
would increase bilateral trade while harmonizing the standard for halal in the two
countries. He said optimistically that this cooperation would smooth the bilateral
trade.

Based on a survey of the Global Islamic Economic Gateway, the increased

number of Muslims, which is expected to reach 20 percent of the total world
 population by 2020, is predicted to encourage halal trade. Halal trade has been seen as
an opportunity for investment.

4.3.Best Trade Area

Uni Emirates Arab provides a free zone area for international business trade in
several areas in Uni Emirates Arab and each free zone is strategically located near a
transportation hub, reducing the timescales and logistics needed for cargo and shipping.
Jebel Ali Port, for example, is very close to Dubai World Central, poised to be the
world‘s largest logistics hub. Jebel Ali Port, within Jebel Ali Free Zone, is also the largest
container port between Singapore and Rotterdam and etc. The free zone area that can be
used for trading from Indonesia is Masdar City, Abu Dhabi Ports Company, Abu Dhabi
Airport Free Zone, Khalifa Industrial Zone, ZonesCorp, and etc. The free zone area
regulation is obligate others country to pay double tax if they want to entry the free zone
are but Indonesia and Uni Emirates Arab already signed the agreement related to double
tax exemption based on Indonesia UU article 23 about Penghindaran Pajak Berganda dan
Pencegahan Pengelakan Pajak Atas Penghasilan. So, Wardah can enter the free zone area
without paying double tax to Uni Emirates Arab. Free zones foster an attractive
environment for businesses as they offer foreign investors, among others, the following:

● 100% foreign ownership

● Zero tax rates on corporate income for up to 50 years (the tax exemption may vary
slightly between the different free zones)
● No foreign exchange controls
● No restriction on capital repatriation
● No currency restrictions
● No import or re-export duties (except for products entering the UAE or GCC)

4.4.Consumer or/and Business Characteristics

4.4.1. Consumer Characteristics

o Market Size. To analyze the consumer characteristics in UAE especially in
Dubai, we straightly analyze the characteristics of beauty and personal care
product consumer in Dubai. Based on Khaleejtimes, consumer in UAE spent $247
 per capita for cosmetics and personal care and expected to grow to $294 in 2020.
UAE is the highest spender on cosmetics and personal care in the Middle East,
and is ninth top spender in cosmetics and personal care worldwide. Euromonitor
International estimate retail value of the Middle East and Africa (MEA) region‘s
beauty and personal care market will be worth $35.9 billion in 2018, and will
continue to grow at a compound annual growth rate at nearly 10% over four years
ahead. In Dubai, distribution is pervasive through exclusive stores of luxury
products in malls, stores or through direct selling channels. Ecommerce is
emerging as a competitor to direct sales for all mass and premium brands.
o Top Feature and Preferences. In Dubai, proper skin care is not only applies for
woman. Because of the harsh climate in UAE, everyone in Dubai should invest in
a good skin care routine regardless of gender. The biggest trend in UAE is halal
cosmetics, or also can be identified as vegan or organic, due to religious
restriction. Products that are made with those category is gaining market traction.
The organic and halal beauty also grow in men‘s skincare.

o Top Product Types and Skin Needs

Dubai customers willing to pay more to get products that offer other benefits like
anti aging, fresh-looking, anti-pimples, sebum controlling, moisturizing, and
containing popular natural ingredients. BB, CC, DD, and EE products also
popular in Dubai.
One expert in Dubai says that men skincare and grooming experience a double-
digit growth over past three years, because UAE residents increase their emphasis
on looked polished. Because of that, men in UAE become more conscious about
their appearances. Treatment they do include making sure their skin moisturized,
trimming and nourishing their beard and hair, and moisturizing hands. They do
care of it especially at work.
Basma Faramawy says that face framing brows and intensive skincare leading the
market. ―Eyebrows are a statement feature here,‖ says Faramawy. Microblading
trend also keep gaining popularity. Laser treatments for face and body also
become more routine in UAE.
4.4.2. Business Characteristics
Uni ArabEmirates business is locally family-owned and controlled. A local
management style will be directive and paternalistic. Managers are expected to give
clear and direct instructions to their subordinates and the subordinate will be expected
to carry out the instructions to the letter. Each of these states has its own identity and
individual characteristics (some are more liberal in their attitudes to clothing etc. than
others) but they also share a great many commonalities and this country profile will
concentrate on the commonalities and, as such, can be used as a guide to all the states
which comprise the UAE.

5. Market Entry

5.1.Choosing a method of market entry

Method of
Strength Weakness
market entry

Foreign Direct - No direct taxation of corporations - The country imports a

Investment (apart from oil, banking and lot of manufactured
insurance sectors) or of individuals goods
1. Acquisiti
- No foreign exchange control or - Dependence on the
on
constraints related to repatriation international financial
2. Merger
of funds situation
- Good-quality business climate - Risks of speculative
- Long-term political stability bubbles
- Dynamic and diversified economy - A lack of flexibility in
- Very rich hydrocarbons resources monetary policy
- Solid and profitable banking sector - Inadequacy of the
with a powerful sovereign fund national statistical
and favorable regulations for system
 foreign investments - Degradation of the
- Geographical location of the regional geopolitical
country, making it a potential environment
platform of influence on the Gulf,
Iran, Asia and the Middle-East
- Low-cost foreign labor force
- Good transport and production
infrastructure (financed by
hydrocarbon income)

Franchising Freedom of self-employment, it is a Only U.A.E. nationals or

recognizable brand and can be corporations wholly
established in a proper location owned by U.A.E.
without having to worry about the nationals or those with a
competition. A franchise comes with a U.A.E. partner or sponsor
solid reputation on the market and has are permitted to carry out
a reduced risk of failure. Sharia law operations. All franchise
applies to commercial transactions. agreements must be
The investors can set up this type of registered before a U.A.E.
venture in Dubai‘s free zones without court.
the sponsorship requirement.

Licensing - Tax free. Holder of license does - Cost for license is high
not have to pay tax on profit, around AED 30,000-
income, or any other amount. 40,000
- Trade locally and internally. - Issuance of license
- Hassle-free process. requires the approval
- Could apply for multiple Visa from Government
- Doesn‘t have to submit auditing institution
reports. - Must be established in
the free-zone
- Trading companies are
restricted to only have
51% share to the
partner. However, it is
possible to get 100%
ownership with local
service agent.
- General Trading
License only valid for
one year, and there
will be renewal next
year. The renewal will
be valid for 5 years.
- The industrial license
for manufacturing has
other qualifications to
be fulfilled.
- The Industrial license
needs approval from
Department of
Economic
Development, Dubai
Municipality, Ministry
of Commerce and
Economics.
- Must have physical
office, a min of 10
workers, and 5
 machines.

Joint Venture - Simple - The foreign company

- Convenience
- Flexible
- Cheap
- The service for the legal
requirement is widely provided by
local legal service company
- There is no time
limitation/minimal time
requirement
- There is no rule for the profit
sharing percentage
- Foreign company and local
company have distributed risk and
can focus on preferred expertise
that is obliged to each company.
could not own more
than 49% of the total
ownership of the joint
venture
- Foreign company need
to find a local partner
that is the most
suitable to be the local
partner.

Export and - There are several choices of - There are a lot of

Import transportation mode to export the
products
- There are various of convenience
for the importing from the free
zone trade to UAE
documents should be
prepared for exporting
importing process
- Needs much costs to
prepare the documents
of export or import

Table 3 Strength and Weakness for each method entry

From analysis based on each strength and weakness for each method, we choose
Joint Venture as Wardah international business strategy in Uni Arab Emirates because
this method is simple, convenience, flexible, & cheap than others method process also
there is no rule for the profit sharing percentage and the foreign company and local
 company have distributed risk and can focus on preferred expertise that is obliged to each
company. Based on those reason and consider the business characteristics in Uni Arab
Emirates that based on trust and also family relations, Joint venture is the right strategy to
do business in Uni Arab Emirates.

5.2.Selection of clients, distribution and partners

We choose joint venture as our market entry strategy as it is the most popular
strategy that used by company that want to expand their business to UAE, also joint
venture give more benefit than other strategy in UAE. To implement the joint venture
strategy Wardah can utilize business consultant business to easier the process, one of the
trusted and experienced consultant is https://www.flyingcolour.net/. We proposed
Wardah to used this consultant because they focused on joint venture and already have a
lot of client around the world.

1) We choose joint venture as our market entry strategy as it is the most popular
strategy that used by company that want to expand their business to UAE, also joint
venture give more benefit than other strategy in UAE. To implement the joint
venture strategy Wardah can utilize business consultant business to easier the
process, one of the trusted and experienced consultant
is https://www.flyingcolour.net/. We proposed Wardah to used this consultant
because they focused on joint venture and already have a lot of client around the
world.

Figure 20 Logo and Shiffa Products

We proposed Wardah to joint venture with Shiffa Beauty, local Dubai beauty
brand that focus in nature based skincare and spa. Shiffa was founded by Dubai-born
physician Dr Lamees Hamdan. She developed the brand after struggling to find
natural but effective stretch mark solutions during her first pregnancy by combining
her devotion to holistic healing with her extensive knowledge of dermatology.
Shiffa, meaning ‗healing‘ or ‗to heal‘ in Arabic, combines precious, natural
ingredients with modern dermatology for an indulgent range of products inspired by
ancient Middle Eastern beauty customs. Bringing together nature and science, these
formulas promote wellbeing and calm in both mind and body, while also being
highly effective. Shiffa products are created for people who care about what they use
on their bodies by providing a long term natural solution, and reassurance about
wellness, as well as beauty. Shiffa is a powerful range of products made from
natural, holistic remedies, unique ingredients that are carefully sourced and
combined into effective treatments (Shiffa, 2019).
By joint venture between Wardah and Shiffa, it can give mutual benefit for them.
Wardah can expand their market to Uni Emirat Arab by collaborating with Shiffa in
form of create new cosmetic brand Wardah X Shiffa, which have halal and nature
based material. Shiffa can develop their products by creating makeup collaborate
with Wardah since they only focus on skincare and spa. Mostly makeup brand that
are available in UAE market are from foreign country, the big local makeup is only
Huda Beauty, usually local beauty brand only focus in skincare products. So, based
on that, we see opportunities from Wardah X Shiffa collaboration. For selling
channel, because a lot of people in UAE are like to go shopping to the mall, so the
collaboration products will be sold in offline store in mall. We also proposed to sell
it through wholesaler such as Sephora as it is one of the biggest beauty store in the
world and Shiffa already do collaboration with Sephora, so it is easier for Wardah X
Shiffa to collab with Sephora. We also propose to sell it in online platform such as
official website and others online wholesaler as people who do online shopping are
increasing year by year. According to ChinaBrands, some of the Best Beauty
Wholesale Distributors in Dubai are:
1) Dokan E Husn:
Dokan e Husn is a leading wholesale beauty & cosmetic product supplier in
Dubai. They are an authorized cosmetics product distributor for several beauty
 brands. Most of the famous Spas and Salons choose Dokan E Husn for their
cosmetic products.
2) E Beauty Trade:
E Beauty Trade is another makeup and beauty products suppliers company in
Dubai. E Beauty Trade actually works as a B2B marketplace for Spas, Salons,
beauty clinics and retailers. They let the customers contact them directly for any
kind of negotiations. They have some of the biggest branded beauty products
available and customers can checkout their wholesale prices by just registering
on their site.
3) Mohsin&Saleh:
This Wholesale cosmetics company in Dubai is Offering great range of beauty
products categorizing for Men, Women and even babies. Their service includes
Free returns of any product you want to return. They say their goal is customers
satisfaction. They‘ve been shipping to about 50 countries worldwide. They even
dedicate their customers a consultant for any kind of advice about product
purchasing.
4) International Beauty Supplies LLC:
This beauty Supplier company in Dubai was founded in 2007. This company is a
privately owned beauty retail shop as well as a wholesaler of cosmetic products.
They import most of their products from USA and UK and try to give the best
quality branded stuff to their buyers. They are known to offer a very reasonable
price to their clients.
5) AJA International General Trading LLC:
Aja International is a trading company specially focused on beauty products.
They claim that they‘ll be providing quality beauty products like no one can on a
much reasonable price. They have 2 distribution centers in Dubai and Seoul
which make their products distribution more efficient.
6) Enigma:
Enigma is one of the best distributors in the Cosmetics market. They include
their online shop, their own spas, and beauty salons. Enigma is famous for
having one of the biggest brands on their list of brands they work with.
7) Beauty Solutions:
Based in Dubai Beauty Solutions is believed to be one of the leading distributors
and suppliers of the cosmetic industry in Dubai, UAE and some other Middle
Eastern countries. Their teams keep finding for the best products from the new
emerging brands in the beauty market for their retailers to give them the best.
8) Medi Beauty:
This beauty supplier company started in 2005 with the aim of getting into the
Salon business providing salons equipment. But with the growing response they
got from their customers they turned themselves into the beauty supplier
company, providing retailers the products they need from the best brands around
the world.
9) Joz Group:
Joz Group has been around in this Cosmetics industry in different countries like
Qatar for a long time, and in the last 4 decades their business has grown better.
They grounded their feet in the Salon equipment selling business and especially
for their Skin and Hair care products. Their affordable prices always attract the
retailers more.
We will create a long term contract with several partners:
a) For product design and development
LamarQ International, professional and top design company provide services
for product branding, packaging, and design, located in Dubai.
b) For raw material transportation and logistics
KARYA MULYA Logistics, which is a freight forwarder in Indonesia that
serve both air freight and sea freight straight to Dubai
Al-Futtaim Logistics, which is a broad logistics service in Dubai that covers
parcel courier, warehousing, third party logistics service, and also a freight
forwarder from Dubai to several countries.
c) For Production
Mabuchi Singapore, international packaging company providing professional
packaging services and materials in Singapore.
 Shiffa, WardahXShiffa will formulate the suitable ingredients and
manufactures product for their customer in Dubai
d) For Marketing
Sandpaper, a digital design and communications agency with a reputation for
effective, results oriented design solutions. This marketing agencies located in
Dubai and has experienced doing business both internationally and regionally

6. Marketing Strategy

6.1.Standardization and Adaptation

United Arab Emirates has Emirates Standardization and Meteorological Authority
(ESMA), the body established and mandated by the Federal Law No 28 of 2001 to
regulate and supervise the personal care sector in the country. ESMA has implemented a
product certification scheme, the Emirates Conformity Assessment Scheme (ECAS), for
all imported and locally-manufactured cosmetic and perfumery products. The purpose of
the ECAS is to guarantee that such products comply with the applicable technical
standards before they are imported into the UAE, at the port of entry, or put on the UAE
market (for locally manufactured products).The technical standards relate to health,
safety, packaging, labeling, and metrology. If the products are considered to comply with
the ECAS requirements, ESMA issues an ECAS Certificate of Conformity. Ports and
custom departments would only permit imported products with an ECAS Certificate of
Conformity to enter the country and be distributed onwards.

Once a Certificate of Conformity has been issued by ESMA, imported and locally
manufactured cosmetic and perfumery products must be registered with the relevant
Municipality in the UAE before they can be offered for sale in the retail market. It means
that international companies seeking to market their products in the UAE must either
establish a local presence or appoint a local distributor to import, register and distribute
the products on their behalf.

Key Legislation
 In order to be presented for sale and used in the UAE, imported and locally-
manufactured cosmetics and perfumery products must comply with health and safety
requirements that are principally set out by the following legislation:

● Cabinet Decision No. 18 of 2014 on the UAE Regulation for the Control of
Cosmetics and Personal Care Products (the "Cosmetics Law")
● Cabinet Decision No. 5 of 2014 on the UAE Regulation for the Supervision of
Fragrances (the "Fragrances Law")

The Cosmetics Law applies to all types of cosmetics and personal care products
offered, manufactured, imported, supplied, packed, or used within the UAE.The
Cosmetics Law defines cosmetics and personal care products as:"any substance or
mixture made for the use and contact of the external organs and parts of the body (such as
the skin, hair, nails, lips, teeth, genitals or the mucosa of oral cavity) for the purpose of
cleaning or perfuming them, changing their appearance, or enhancing their smell, or
protecting or keeping them in the best shape.‖ This excludes:

● Medical products used in the treatment of diseases; and

● Devices and tools accompanying cosmetics.

The Fragrances Law applies to all types of perfume products offered,

manufactured, imported, exported, packed, or used within the UAE. The Fragrances Law
defines perfume products as: "any cosmetics and personal care products with a nice scent,
composed of essential oils, fixatives, alcohol solution, water, permissible colorants, anti-
oxidants and solvents."

Applicable Technical Standards

The Cosmetics Law and the Fragrances Law (the "Regulations") set out the
technical adopted standards to be fulfilled in relation to safety, packaging, wrapping,
labeling and metrology for all cosmetics and perfumery products to be offered for sale
and used in the UAE.

Safety Requirements
 At any phase of the supply chain, the products shall comply with the general
safety requirements of Standard GSO 1943/2016 set by the Gulf Standardization
Organization (GSO).

The main safety and quality requirements under this Standard are as follows:

● Products shall be free of any prohibited substances, including any substances or

derivatives prohibited by Islam (such as pork);
● They shall be safe for human health when used under normal or reasonably
foreseeable conditions of use;
● They shall be homogeneous, stable and their properties shall not change during their
shelf life when stored and used as per their instructions.

Packaging and Wrapping Requirements

Products shall be packed in appropriate and clean containers that do not interact
with the cosmetic product and vice versa, and it shall be ensured that the containers are
free of sharp edges, and are properly closed.Containers used for products shall comply
with the requirements set forth in Standard UAE S. GSO ISO 22175 relating to
packaging and labeling and Standard UAE.S GSO 2093 relating to glass containers (in
case of glass containers) used for cosmetics.

Metrology Requirements

Products shall meet the requirements of Standard UAE.S GSO OIML R87
relating to the quantity of product in containers.

Labeling Requirements

The labels of products that are intended for sale to consumers in the UAE must
satisfy the general requirements stipulated by Emirati Standard No. UAE.S GSO
1943.Labelling shall be in clear font and applied in a way that is not easy to remove. In
particular, all cosmetic and personal care products shall bear the following information in
visible lettering:

● Name of the product and brand name

 ● Name and address of manufacturer or supplier or distributor
● Country of origin
● Nominal content of the product
● Expiry date expressed by date of minimum durability or period after opening
● Conditions of use, warning statements and precautionary information
● Batch number or lot code
● Product function
● Ingredients

All information contained on the labels must be accurate, scientifically or

laboratory verified, and shall not be misleading. It should be in English and/or Arabic,
apart from the following information that must be in English AND Arabic:

● Product function and/or use

● Warning instructions and precautionary information
● Storage instructions for safe use

The foregoing information must be included on the label of both the container and
outer packaging (if any). In addition, if products contain allergens, these substances must
be mentioned on the list of substances composing the product which appears on the labels
of container packages. As for perfumes, if the composition contains any aromatic
allergenic substances of a concentration exceeding (0,001%), these substances must be
indicated within the list of substances composing the product appearing on the container's
packaging.

6.2.Competitive Advantage and Value Proposition

Wardah has been known well as one of cosmetics brand that provide cosmetics
halal in Indonesia. Wardah continuously create and develop new cosmetics product based
on women especially muslim perceptions. Wardah offer their customers with low price
product with halal ingredient, so women especially muslimah won‘t be afraid to use
makeup because of the non halal product. This offering becomes Wardah competitive
advantages that can differed they product with others. Wardah has been used focus cost
leadership by selling their product to customers majoritymuslim that concern with
product halal especially in Indonesia and Malaysia. But nowadays Wardah try to adjust
their target customers because of the interest of woman that not muslim in using product
of Wardah. They start to sell the product to all women as general by promoting the
product with use artist that using hijab and not using hijab for their endorsement and
advertising strategy. So, through their competitive advantage it can be useful when they
expand their business to UAE because majority of UAE is muslim and they also concern
about product halal.

Meanwhile Shiffa beauty is one of known well skincare product in Uni Arab
Emirates because of the natural and halal image that they offer to the customers. As one
of known well company especially in UA Shiffa beauty using differentiation strategy by
selling product that have good quality with middle - high price. Shiffa really concerned
related to natural ingredients and halal ingredients in order to produce their product.
Shiffa also have interest in producing makeup that used natural ingredients. With this
condition, wardah can collaborate with Shiffa by producing makeup halal that using
natural ingredients with used Differentiation strategy as their competitive advantage.

Value Proposition

Figure 21 Value Proposition canvas

Customers side :

o Pain : Difficult to find makeup ingredient that fit with skin.

 o Need : High quality of makeup, makeup with good ingredient.

o Want : product beauty and skin care that have label halal and using natural
ingredient, Lot of variance of makeup and skincare, good packaging and elegant.

Company side :

o Gain creators : Create new product that can match with all variance skin
type, used only natural ingredient with high quality, provide packaging that can
increase customers pride with elegant looked.

o Product and service : Create Wardah X Shiffa product.

o Pain Relievers : Provide product that using natural ingredient that fit with
all type of skin and has label halal.

6.3.Product, Price, Promotion, and Place

6.3.1. Product
Wardah specializes in Halal product make up. Meanwhile, Shiffa as a well
known brand in UAE focusing themselves in skincare products. Therefore, we would
like to collaborate with Shiffa because we want to create natural make up. This is
also because most people in Dubai like to use natural ingredients for their beauty
purpose.

6.3.2. Price
Since Dubai people consider more about quality, we will use best materials
for the product. Thus, we will give price that fit its product worth. This means that
high price equal to the product‘s high quality. We determine the price by comparing
competitor‘s price. Therefore, our price will be able to compete in the market.

6.3.3. Place
As we collaborate we Shiffa, we will sell our products in Shiffa retail store.
And also sell it on online beauty store. We certainly will sell our product in the mall
because Dubai has a lot of luxurious shopping paradise and the behavior of the people
who likes to spend their money for trivial things.
6.3.4. Promotion
We would like to promote our products mostly through internet and television
because Santader research stated that most people there use Internet and television,
followed by newspaper, and last is radio. Beside, since they concern about nature
based beauty products. We would promote that Wardah is nature friendly by using
organic materials that won‘t harm the nature.

We would use spokesperson for our product. The spoke persons are
environmentalists, empowerment figure, miss UAE, beauty influencers, etc. We will
promote wardah ―inspiring women‖ that we use in Indonesia in order to make Dubai
people acknowledge the brand value of Wardah itself. We would like to encourage
the people to bring their after-use packaging to preserve nature. If they bring it to the
retail store, they will get discount or free items.

6.4.Packaging and Branding

6.4.1. Packaging
Based on Hongkong Means Business, Dubai people like to spend their money
on lavish products. That way, we decide to make a classy and luxurious packaging
using high quality woods. The packaging use materials that won‘t harm the nature as
people in Dubai concern about the environment. Beside, we also consider about the
hot weather in Dubai. So, the packaging must be heat-resistant. After use, the
packaging can be recycled.
 Figure 22 Packaging Design

6.4.2. Branding
Since we do collaboration with Shiffa, we would like to do differentiation in
the logo because Shiffa is a nature based skincare. The logo will have wood color but
with the same font and logo. We will maintain wardah original value which is
empowering women by giving them promotional content like busy business woman
in Dubai could wear wardah while preserving the nature. In order to expand to Dubai,
we make new brand cosmetic named Wardah X Shiffa. We use that name to utilize
our partner brand, Shiffa, which already well-known and trusted among Dubai
market, so people won‘t asking again for the quality of its products.

6.4.2.1.Branding Element
Brand Identity

Figure 23 Brand Logo

o Original Name : Wardah X Shiffa

o Color : Wood Color with the same font and logo and Without extra patterns or
symbol for simple, luxurious, eco-friendly appeal
o Logo :Wardah has a meaning of rose and it came from arabic word, while Shiffa
means healing also from arabic word. Both brand named has a strong islamic
image which make it easier to be known globally. Only use simple, luxurious, and
eco-friendly appeal for the font.
o Font : Using simple font to reinforce the simple and luxurious appeal.
Brand Image

Physique High reactiveness and flexibility,

 Basis of The Brand market oriented

Relationship Trusted quality, fair exchange of

value
Handshakes between customer and
company

Reflection Beauty, follow the Islamic rules by

using halal cosmetic, healthy by using
Customer Perception of what the brand
nature based cosmetic, preserve
means
nature by using eco-friendly cosmetic

Self-image Empowerment, natural, inspiring

beauty, Halal, eco-friendly
What customer thinks about herself

Culture Islamic countries, Middle east,

international, good relationship with
Country of Origin, values it stands for
customer and environment

Personality Beautiful inside and out, mature,

inspiring, calm, confident,
What is the brand when it becomes a
independent, care about nature.
person

Table 4 Brand Image

Based on paragon-innovation.com, If we look at Wardah Spoke person such
as TatjanaSaphira, InnekeKoesherawati, and Dewi Sandra, we know that Wardah is
targeting women around 20 - 45 years old. The consumers are young, aware of the
importance of halal product, and also could inspire women with their contribution in
Indonesia. While Shiffa positioning as leading natural based skincare and spa in
UniEmirat Arab. However, as we expand this product in Dubai and make Wardah X
Shiffa, we would like to have spokesperson like Jessica Kahawaty and Ascia AKF.
Both of the women are known for their remarkable accomplishments. We would also
position wardah as a brand that preserve nature, and promote beauty from inside and
out.

Brand Personality
According to marketing.co.id, Wardah positioned itself as pure and safe, beauty
expert, and also inspiring beauty in Indonesia. However, we will add some
adjustment for its positioning in Dubai. Since we propose Wardah X Shiffa, Wardah
will keep its inspiring beauty with additional personality from Shiffa which are nature
preserve, and luxurious value in Dubai. This personality will be strongly shown in
many kinds of marketing communication such as advertising, packaging,
spokesperson, events, etc.
Brand Experience
Shiffa‘s reputation grew from its initial launch at the Six Senses Spa, and then
located at the MadinatJumeirah resort hotel in Dubai. Beside natural skincare, Shiffa
also have its own spa to celebrate Shiffa‘s commitment to purity at a luxury level and
promote the brand throughout their growing global chain of destination world-class
spas. Today Shiffa is considered as the ‗haute couture‘ of spa products and treatments
and is found in some of the world‘s most exclusive spas. Shiffa‘sluxuriate
experiences already available in UniEmirat Arab (UAE), Kingdom of Saudi Arabia
(KSA), Bahrain, and United States of America (USA). As we propose Wardah X
Shiffa collaboration, we will add the Wardah X Shiffa cosmetics product in the spa.
So, beside spa, they will have beauty salon which using Wardah X Shiffa products for
the customers who want to beautify themselves with halal and nature based cosmetic.
So, beside of luxurious, now they can feel halal and nature experience in the spa and
salon.

Brand Equity
According to marketing.co.id, Wardah has won Top Brand Award in 2014 in
Indonesia. It manages to gain score of 14,4 % for face powder and 12,6% for lipstick.
While based on Shiffa official website, the brand got awarded by The Natural Health
Magazine as Best Organic Skincare Brand in 2014 and also awarded by Beauty
Shortlist Awards as Best Spa Brand in 2015. Both of the brand already have well-
known named in each country based.
In order to create intangible value of Wardah X Shiffa Brand equity, we will
use the Aaker models. There are some integrated elements in the Aaker model, as
followed (Aaker, 1996) :

● Brand Awareness
Launched in 1995, Wardah cosmetics is a pioneer of beauty products that carry
the label "Halal" in Indonesia and provide a variety of choices in its cosmetic
variants. Nowadays, Wardah already become Indonesia‘s Top Brand Cosmetics.
While Shiffa launched in 2004, this brand also a pioneer of nature based skincare
in Dubai. At the first time, Shiffa only used word-to-mouth marketing strategy,
and now it‘s already become one of the top beauty brand in Dubai. Based on that,
both Wardah and Shiffa already have big awareness from the market in each
country based. By launching Wardah X Shiffa, its expected that it will easier to
reach the market as Shiffa already have well-known name in Dubai market.

● Brand Associations
The strategies that are being propose have a purpose to positively affect the brand
associations for consumers of the Wardah X Shiffa brand, for example, as people
in Dubai like to go to the mall for shopping, Wardah X Shiffa will also open their
retail in famous mall in Dubai. The retail will designed as simple, luxurious, and
nature as the brand value. The purpose for associations of the sustainability
initiatives include; environmentally awareness and sustainability. Wardah X
Shiffa will also sell their products in e-commerce too as the growth of people who
are shopping from internet are increasing. Meanwhile, Wardah X Shiffa will also
utilize beauty spa that Shiffa already have, the purpose of the associations are; a
luxurious and memorable experience.

● Brand Loyalty
Wardah got Indonesia Top Brand as a lot of people there are loyal to Wardah
because the brand emphasize its halal value. Shiffa also go Top Brand as their
value is suitable for Dubai market, which are prefer halal and nature based beauty
 products. From that we know that Wardah X Shiffa expected will got high brand
loyalty as it has value that Dubai market prefer.

● Perceived Quality
Wardah perceived as leading halal cosmetics in Indonesia while Shiffa perceived
as top nature based skincare and spa products. Wardah X Shiffa perceived quality
expected are the combination of both brand perceived quality, which is high
quality, halal, and nature based cosmetic. Wardah X Shiffa will offer products
with fair exchange of value and gain customers trust due its quality.

Brand Differentiation

o Inspiring Beauty
Wardah X Shiffa will promote itself as a strong women empowerment brand. It
gives an image of a young working women who is passionate about her work and
stay beautiful. It shows women that work in different field and make contribution
for the country with their work.

o Eco Friendly
Wardah X Shiffa is using simple, luxurious, and eco-friendly packaging for the
product. Women could bring their used packaging to Shiffa store to get discount
for other products.

o Natural Ingredients
Wardah X Shiffa is also concern about preserving the nature. Therefore, we will
use high quality natural ingredients for our products. Although the price would be
quite pricey, but we ensure that it is worth the quality.

Brand Communication

As people in Dubai like to go to the mall, so Wardah X Shiffa will invest in

the retail shop to attract the people that come to the mall to go shopping and purchase
Wardah X Shiffa product there. Dubai people concern in environment issue also
increasing nowadays, so we will use environmentalist as our spokesperson to
communicate to the public that by using Wardah X Shiffa products, they can be
beauty inside and outside because the brand is eco-friendly and responsible to the
environment. Wardah X Shiffa will also utilize social media to promote the brand,
such as Instagram, Facebook, Twitter, and Youtube. Wardah X Shiffa will using
social media to promote about their products as well as engage with their customers,
because mostly Wardah X Shiffa‘s target market are using social media.

Brand Gap

By launching Wardah X Shiffa cosmetic, it answer most of gap in cosmetic

brand, which is the halal and environment issue. Nowadays there are a lot of issues
regarding the material that used in the cosmetic products, such as it contain harmful
material for human and environment. As country with Muslim majority, most of
people in UAE are looking for halal products beside they also looking for nature
product. Based on that, Wardah X Shiffa provide halal and nature based make up for
UAE market, which answer their market needs.

Brand Extension

For future product development, we proposed Wardah X Shiffa to launch

halal and nature base cosmetic product for men, because nowadays not only woman
who need to use makeup, the gentleman also need it to make their look more fresh
and stunning. Man cosmetics will become great opportunity as there are increase in
man who wearing makeup.
7. Global Value Chain

7.1.Global Value Chain

In development studies the global value chain (GVC) describes the people and
activities involved in the production of a good or service and its supply, distribution, and
post-sales activities (also known as the supply chain) when activities must be coordinated
across geographies.

Figure 24 Value Chain canvas

1. Product Design
& Development

6. Customer 2. Raw Material

Support

5. Distribution 3. Production

4. Marketing

Figure 25 Global Value Chain

1) Product Design & Development
Product Design :LamarQ International (Dubai)

A regional branding agency based in Dubai with a positive view to the Arab
World. They create big ideas that revolutionize Brands in the GCC. LamarQ
International provides services for product branding, packaging, and design. They
also become top 10 design companies in UAE. Our company will rely on this
company in terms of design of product and product packaging. We expect that the
product design and product branding of Wardah could be accepted with majority
people in Dubai who likes fancy things.

2) Raw Material
Raw Material Supplier : PT Paragon Technology and Innovation

Indonesia had been recognized as the biggest supplier of herbal raw

material in the world in 2008. As a tropical country, herbal plant could grow
massively in this country. Based on BPS data on 2008, ten indonesian export
destination countries have contributed 69.28% of the total export of herbal
products to the world in 2008. Up to 2016, Indonesia has been recorded to be the
second largest exporter of herbal raw materials in the world. Indonesian herbal
ingredients not only have low prices but also excellent quality. Therefore, we
decided to choose Indonesia as the raw material supplier of Wardah in Dubai.

Then, we chose PT Paragon Technology and Innovation since it is

Wardah‘s parent company. Paragon is located in Indonesia. With more than 32
years of experience, Paragon has been recognized as one of the largest national
cosmetic manufacturing companies in Indonesia and has been taken into account
at the international level in creating superior brands such as Wardah, Make Over,
Emina, IX, and Putri.

As an Indonesian cosmetic company with a growth rate higher than the

average industrial growth per year, Paragon now has more than 7500 of the best
employees in its field throughout Indonesia who are entrusted to produce more
than 95 million personal care and makeup products each year. Besides of that,
 Paragon has maintained good relationship with its supplier. Therefore, without
doubt we chose Paragon as our raw material supplier for Wardah x shiffa for the
raw material.

3) Production
Product Packaging Production : Mabuchi Singapore

Packaging is very essential in a product. It can attract your customer better

than the salesman can do. Therefore, we will give our best effort in producing the
packaging. Most of packaging services and production companies in Indonesia
don‘t have advances technology to produce the packaging. Thus, we decided to
choose Singapore as it was well-known for the technology of the packaging
production.

Mabuchi Singapore is a packaging solutions company in Singapore

providing professional packaging services and packaging materials in Singapore.
The core emphasis of Mabuchi company‘s business is delivering reliable quality
services and materials. This core of the company is suitable for Wardah
packaging production in Dubai. Besides, Mabuchi company adopts state of the art
technology and well trained professionals in the delivery of packing services and
packaging materials such as industrial packing and CKD packing. This company
also has ‗go international‘ and open branch in Johor Baru, Kuala Lumpur,
Malaysia.

Formulation, Production, and Product Assembly :shiffa

By collaborating, Wardah and Shiffa will formulate the suitable

ingredients for their customer in Dubai. They will also create the products in
Shiffa manufactures. Product Assembly also will be done in this process, the raw
material will be processed to the cosmetic and skin care product, meanwhile the
packaging exported by Indonesia will be used at the end of the production
process. By this, we expect the quality of the product will be maintain to the time
of the product received by the customer.
4) Marketing or Advertisement : Sandpaper
Marketing is an important activity in company because it helps the
company to sell your products or services. The bottom line of any business is to
make money and marketing is an essential channel to reach that end goal.
Therefore, we need a good marketing partner company that can create a
remarkable marketing product and communicate our product well to target market
in Dubai.

After searching so many companies that know Dubai very well, we chose
Sandpaper as our marketing partner agencies. Sandpaper is a digital design and
communications agency with a reputation for effective, results oriented design
solutions. Most of the ex-client of Sandpaper gave five stars to this company
because of their professionality and their never ended innovation. They
concentrate on specific areas of design and communication where they excel, their
key strengths being are digital strategy, digital design, branding, and online
advertising.

Sandpaper is included as the top ten marketing agencies in Dubai based on

sortlist version. Sandpaper also has experienced in doing business both
internationally and regionally for several years. Besides from their experiences,
Digital Marketing is infinitely more affordable when compared to traditional
marketing channels. Therefore, we chose Sandpaper as our marketing agencies.

5) Distribution
Distribution is the process of making a product or service available for the
consumer or business user who needs it. This can be done directly by the producer
or service provider, or using indirect channels with distributors or intermediaries.
In this case, we use shiffa company as the producer to be the distributor of the
product too and partnered with Al Futtaim to be our third partner or
intermediaries in logistic and distribution to local region. The logistic and
distribution will be explained more in part named logistic

o Wardah x Shiffa Company

 Shiffa is well known brand internationally. To support its business, this
company has so many logistic transportation to distribute their products.
Therefore, we will also partnered with Shiffa Company so we could use their
logistic transportation as well. This activities will not only strengthen the
good relationship between Wardah x Shiffa but also decrease the distribution
cost.
o Al-Futtaim
Al-Futtaim is a company engaged in logistic providers. Al-Futtaim Logistics
has an immense portfolio of transport, supply chain and logistics solutions.
As such, they‘re experts in identifying the challenges specific to every
industry. They provide booking a truck, retail logistic, fashion logistic,
industry logistic, etc.
6) Customer Support : Shiffa Company
Customer support is a range of customer services to assist customers in
making cost effective and correct use of a product. It includes assistance in
planning, installation, training, troubleshooting, maintenance, upgrading, and
disposal of a product. For doing the customer support activities, we will involve
Shiffa company to be the customer support since they can communicate well with
the customers. Besides, they also know better about explaining their product to
the customers in Dubai.

7.2.Transportation
To analyze what transportation that is needed, we first analyze what kind of
material/product that need to be transported. There are mainly two kind of material that
would be sent from Indonesia to UAE. Those are wood/paper/card boxes packaging and
herbal/natural ingredients from Indonesia. Meanwhile for other material such as plastic
packaging, glass packaging, other chemical that is needed to produce the product, and the
formulation of the product is sourced from Dubai itself. Then, all of the material would
be converted into ready to sell product in manufacture facility in Dubai.
 Based on the needs and process, we can generate that the business need transportation
to move material from raw material warehouse in Indonesia to raw material warehouse in
Dubai. That transportation process will cover the movement from:

o Indonesia raw material warehouse to Indonesia port

o Indonesia port to Dubai port
o Dubai port to Dubai raw material warehouse
Other than that, we need also transportation modes to move material that is sourced
from inside Dubai.

Figure 26 Train station in Dubai

Even though there is train operating in Dubai, but the station that is available is quite
linear and do not have a good spread. This also influenced by the highway that become
the main transportation route that is used in Dubai. This lack of spread can cause
additional cost to move the goods from station to the warehouse. One of the suppliers for
plastic/semi glass packaging that is sourced So, due to convenience, flexibility, safety,
and cost efficiency, truck is the transportation mode that will be used for logistics activity
within Dubai region.

After this being decided, we left with decision of what transportation mode that we
should use to move raw material from Indonesia to Dubai. The materials that will be sent
are paper/wood/card boxes packaging and herbal/natural ingredients. Paper/wood/card
boxes are material that would not go bad easily with proper protection from water and
humidity. The herbal/natural ingredients will lasts long with proper protection from
water, humidity, and it is better to pack it with an airtight container. Both of the materials
are not really high in value, so there is no special treatment needed except a proper
packing to maintain its shape and condition.

To decide the transportation modes that will be used, we create two scenarios of
transportation to move material from Indonesia to Dubai. Those scenarios are:

1) With port-to-port freight forwarder service, by using truck from Indonesia

warehouse to Indonesia port, then using cargo ship from Indonesia port to Dubai
port, then using truck from Dubai port to Dubai warehouse.
Sea freight : Jakarta-Dubai 20 days
Sea freight cost : Low
Freight forwarder : KARYA MULYA Logistics (port-to-port)
Freight forwarder cost : Low to Medium
Trucking cost : Low
Route safety : Good
Effect to expiration : No to very low effect
2) With door-to-door freight forwarder service, using truck from Indonesia warehouse
to Indonesia port, then using cargo airplane from Indonesia port to Dubai port, then
using truck from Dubai port to Dubai warehouse. The freight forwarder is from
Indonesia due to the regulation of Indonesia government.
Air freight : Jakarta-Dubai 8 hours
Air freight cost : Very high
Freight forwarder : KARYA MULYA Logistics (door-to-door)
Freight forwarder cost : High, and it is higher than port-to port freight forwarder
Trucking cost : No cost occurred
Route safety : Good
Effect to expiration : No effect
As seen from the data above, scenario 1 seems to be more compatible with the needs
and it is more favorable because of the low cost. We choose scenario 1 because:
- With an airtight, waterproof packing, and a good operational resources
planning, travel time would not give significant benefit to the company. The
 time needed to travel with sea freight also not really long, compared to the route
from Jakarta to Europe or America that may take 40 days on average. Thus, it is
more beneficial for the company to choose sea freight that has low cost and
tolerable travel time rather than air freight with very high cost.
- A port-to-port freight forwarder service would be more preferable rather than a
door-to-door freight forwarder service. Since the company warehouse (PT
Paragon) is located in Cikarang, Bekasi which is not very far from Jakarta, and
the company already have truck for distribution. So it will be more cheap for the
company move the material from the warehouse to the port by themselves, to be
handled by the freight forwarder after that in the port.

-
Figure 27 Harbour location and Airport location in Dubai
As we can from the picture, there are a lot of sea port/harbour along
Dubai, due its nature that has more vertical area, compared with the number of
airport available. So, it will be easier to move the material from the nearest
harbour to Dubai warehouse using truck. The truck that is used also owned by
the company so the cost would be not very high.

- KARYA MULYA Logistics is considered because its credibility and broad

service availability, so the company can make a long term contract with
KARYA MULYA for a cheaper price. In Indonesia, there are not much freight
forwarder that provide route straight to Dubai. They are mainly provide service
to China, Australia, USA, and Europe. Meanwhile, KARYA MULYA seems to
have a dedicated operation to Dubai. KARYA MULYA is also chosen because
of Indonesia government regulation that obligate Indonesia exporter to use local
 freight forwarder service. Due to port-to-port mechanism that is chosen, the cost
occurred from the use of freight forwarder service would not be very high, yet
the process will be more convenience because the administration process and
activity in the port already handled by the freight forwarder.
- Last, is the safety of the route. Both sea freight and air freight have relatively
the same risk of accident caused by error or natural disaster. But, for sea freight
there is an additional risk, which is risk of piracy. Along Jakarta-Dubai route,
there are several area with high risk of piracy which can be seen on the picture
below:

Figure 28 Piracy Map

As we can see, the route have a relatively low probability of piracy
attack because the area that have high risk of piracy (labelled with yellow
highlight) is relatively quite far from the Jakarta-Dubai route. So, the sea freight
will be more preferable because of low risk of piracy and low cost, rather than
an air freight.

7.3.Logistics
Logistics, consist of warehousing, packing, and delivering, depends on the
selection of channel of the product. In this plan, the channels are online website, makeup
 store (such as Sephora), and branches of single brand store. Based on those channels, we
can see that the logistics that is needed are personal parcel delivery for customers that
order from online website, and logistics for distributing and controlling supplies in
makeup store and brand store.
Things that can be done by the company itself is the logistics to local stores. With
a warehouse owned by the company it self, and truck that also owned by the company,
the logistics will be done straight from the company warehouse to the makeup store/mall
warehouse, and to each brand store. Because Dubai itself does not have a very wide area,
so it is efficient enough for the company to deliver it straight to each channel, without
having to separates the area (where the main warehouse deliver goods to sub-warehouse,
and 1 sub-warehouse is serving 1 area coverage of Dubai).
To anticipate a low capacity, and to mitigate the risk of in house logistics, it is
better to have a third party logistics partner that cover service of warehouse and local
logistics. For the third party logistics, we choose Al-Futtaim Logistics, due to its well-
known brand, good reputation, wide service (covers warehouse, local logistics, cross-
border transportation, to freight forwarding), and their service is also used by several
well-known brand. Having a logistics partner will make operation process easier and will
prevent the company to have a big financial loss, when the company is not able to handle
it by themselves at the time. In addition, Al-Futtaim Logistics also have a last mile
delivery service for e-commerce, which can be used for customers that order the product
via online website.

8. Human Resources Management

In process of human resources there are three step to choose the employee, first
staffing system that applied in the company based on country regulation, second
recruiting system that explained how the employee will be recruited , and the third one is
Selecting which is the process to choose which one that fit with position that we search.

1) Staffing
In Uni Arab Emirates there is no specific regulation related to how company must
do in staffing system even the company will do joint venture with company from
 other country. But to make the process controlling more easy and the product is still
have its own characteristics using Geocentric staffing with include some employee
from home country and employee from targeted country with composition 70%
employee from home country with 3 of them as BOD and 30% from targeted country
and one BOD.
2) Recruiting
The recruiting system will be from Wardah employee and Shiffa employee. If
there is still an empty position, recruitment for expatriates in the UAE will be opened
with specification of ability related to those empty position
3) Selecting
In order to select the employee that fit well with the position that available, each
position have their own requirement and specification. So, if the applicants is fulfill
the requirement they will be accepted and will get benefits in accordance with
regulations regulated by the UAE.
Company Organizational Structure

Figure 29 Organizational of Wardah X Shiffa

 Job Description
1) PresidenDirektur. This position fill with both from Wardah and Shiffa as
representative for this business and have responsibility to all business activities.
2) Operational Manager, transportation staff, and logistic staff. This position will be fill
by Wardah employee as Operational Manager with responsibility to make decision
for all transportation and or logistics needed. For the staff can be from home country
and target country depend on the needed and competencies of the employee from
Wardah and Shiffa.
3) Sales & Marketing Manager, sales & marketing staff. This position will be fill by
Shiffaemployeeas Sales & Marketing Manager because Shiffa employee know the
UAE market well than Wardah employee, this position responsible for all activities
related to sales and marketing strategy that will be applied. For the staff can be from
both countries or expatriate depend on needed and competencies requirement.
4) Finance Manager, Purchasing staff, and Finance staff. This position will be fill by
Wardah employee as Finance Manager that responsible to make all decision for all
financing activities. For the staff can be from both countries or expatriate depend on
needed and competencies requirement.
5) Product Development Manager, Rndofficer , Product design officer and staff. This
position will be fill by Wardah employee as Product Development Manager with
responsibility to control and make decision for all the activities both for Rnd and
product design. For the officer it can be employee from Wardah or Shiffa but not for
expatriate. For the staff can be from both countries or expatriate depend on needed
and competencies requirement.

9. International Business Risk

Since Wardah chooses the joint venture as the market entry strategy to UAE, there
are various risks will be faced by Wardah. The first thing is about the amount equity
ownership. The local party as Wardah‘spartener should has 51% of the total equity
ownership. This condition might impact the control of the company that most of the
control comes from the local party. Sometimes it will give the advantages to the company
sucy have been known all of the aspects for extending the business in UAE, especially
the eases of the company to extend the network of business because of the local
Wardah‘s partner is one of the well-known skin care's founders in UAE. But sometimes
the condition may also give some disadvantages to the company such as the company
will not have discretion in running the business.
The UAE‘s government spending depends on oil prices, their volatility presents a
significant risk. Although the UAE‘s economy is relatively diversified, oil revenues are
still the main source of finance for economic activity (53% of total fiscal revenues in
2017). This circumstance may affect the price of Wardah product especially when the
volatility condition is occurred. Therefore the company should prepare the best marketing
plan to face the condition.
The last risk that Wardah should prepare to face it is about the double taxes in the
Free Zone trade. If the market entry strategy will eventually open the shop in the zone,
Wardah must be able to manage their flow of finance properly. Also for the target market
share should be better in every period based on the condition of market.
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