Indonesian Footwear Industry Analysis

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ANALYSIS OF INDONESIAN FOOTWEAR INDUSTRY COMPETITIVE ADVANTAGE WITH PORTER’S DIAMOND THEORY

Emir Hanniverano Sediadi
Nicky Giftano Mugonarendro
Trisakti University Faculty of Economics International Class

Introduction
Footwear was invented thousand years ago. It was originally comes from the necessity to provide protection when moving over rough terrain in varying weather conditions. Later, more inventions come to the industry. Rubber and leather made shoes was introduced in the 19th century. Nowadays, Footwear industry manufacture shoes more than just leather and rubber. It manufactures plastic shoes, canvas, or even combinations of both as well as occupation-based footwear, such as Outdoors work footwear, Sports footwear, and Military footwear. Footwear manufacturing industry involves all kinds of footwear manufacturing, including: Athletic Footwear, Infants & Children Footwear, Men’s and Women’s Footwear (Except athletic footwear), Cleats Athletic Footwear (For Football, Baseball, etc), and House Slipper Manufacturing. Footwear plays an important role in a person’s wardrobe, so does in the country’s economy. It is a labor-intensive industry. Most developing countries benefits in the industry as it serve relatively low cheap labor, and large availability of cheap raw material. Indonesia is with no exception one of these countries. Indonesian Footwear is one of the fast growing industry, and one of the most contributors of the Indonesian economy. It’s been rapidly developed since the first time it was introduced in the country. It was also the first group among non-oil products that successfully reached export value exceeding USS 1 billion (Export Indonesia, 2007). Footwear industry history in Indonesia starts when Bata, a Czechoslovakian footwear manufacturer established its factory in the area of Jakarta known as Kalibata in 1940s. The industry continuously growing, and by the year in 1970, Indonesia starts to implement the mass production of footwear. In the 1990s, Indonesian was the third largest footwear exporter. Today, the industry produces about 131 million pairs of footwear a year worth approximately 2.5 billion US dollars, while employing more than 440 thousand workers (Ministry of Trade, 2009). The country is not only producing local brands. Global companies such as Nike and Adidas has now established their factory in Indonesia as well. The purpose of this paper is to show the competitive advantages of Indonesian footwear industry. This analysis is based on Michael Porter’s Diamond Theory. This paper will show outlines of the footwear industry conditions in Indonesia, with factors shaping its competitiveness, and its growth as well.

Michael Porter’s Diamond Theory: Description
There are some reasons why some nations, or industries within nations are more competitive than others. Aimed to analyze those reasons, Michael Porter develop a model known as “The Diamond Theory,” as shown in figure 1. Porter suggest in analyzing the competitive advantages of a nations, or an industries within a nations, four determinants should be considered: 1. Factors Conditions

This is the situation regarding the production factors that are relevant in international competition within one industry. These factors can be classified into human resources (Labor skills), materials resources, knowledge resources, capital resources, infrastructures, and technology. 2. Demand Conditions

This situation refers to the nature of demand in one particular industry within a country. There are many factors shaping the demand of an industry, either within one particular nation, or globally. 3. Related and Supporting Industries

The situation of those industries related, or the supporting industries within one particular industry, in this case footwear industry. 4. Firms Strategy, Structure, and Rivalry
Cultural aspect such as management style and working morale in different country will shape a different ways of...
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