Topic: Country Analysis and Firm &

Industry Analysis – Aarong

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 Executive Summary

The term paper will provide extensive analysis on Aarong, its industry and its target countries. It
will aim to provide insight regarding the brand identity of the company and the way it aims to
globalize and the strategies it will employ while doing so. Additionally, context will be provided
to characterize the countries the company will enter into. Their regulatory environment and
institutional perspective will all be provided to provide feasible analysis regarding the launch.
Aarong will be targeting Indonesia and the United Kingdom as its target markets and the paper
will observe whether the company is the right fit for the target market. The country's cultural
uniqueness will be observed employing Hofstede’s insights and also other cultural factors will be
noted to analyze what might influence the brands activity. Here, factors that influence consumer
behavior will also be observed to contextualize the diverse cultures within these countries. Along
with that, Aarong’s unique selling point and comparative advantage will be discussed to see
whether their product offering would be attractive in the market. Lastly, it will conclude by
reasoning why globalization should be done now and why it would be effective in going so.
Overall, the paper aims to provide valuable insight regarding a company that’s seeking to enter
a particular market.

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 Table of Content

Letter of Transmittal……………………………………………………………………. 4

Introduction…………………………………………………………………………....... 5

Industry Overview of the Home Country and the Host countries…………………… 6-9

Uniqueness of Culture and Future Aspects……………………………………………. 10-13

Hofstede’s Cultural Dimension…………………………………………………………. 13-17

Hofstede’s Dimension…………………………………………………………………… 17-19

Future Prospects………………………………………………………………………… 19-20

Regulatory Environment………………………………………………………………... 20-21

Institutional Perspective………………………………………………………………… 21-22

Comparative Advantage………………………………………………………………… 22-24

Globalization Effort……………………………………………………………………... 25-26

Conclusion………………………………………………………………………………... 27

Reference…………………………………………………………………………………. 28-29

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 LETTER OF TRANSMITTAL

21st September, 2020.

Ms. Fabiha Enam, Senior Lecturer and Asst. Proctor

BRAC Business School

BRAC University

Subject: To find out what the scopes and strategies to suggest for global expansion of Aarong in
United Kingdom and Indonesia.

Dear Ma’am,

We are very delighted to submit the term paper on company valuation as the course material of
the course BUS301 – Section 03. Our main incentive is to prepare the term paper in accordance
with the terms and guidelines provided by you. We tried our best to produce our work as per the
instructions you have provided. We believe we have done an adequate job considering our level
of expertise and experience.

We are extremely grateful to you for giving us the opportunity to work on this project and letting
us express our innovative ideas. We earnestly hope that you will like our work and we stand by
to answer all the questions and queries regarding our work.

Sincerely yours,

1. Md. Nahian Kabir (19304095)

2. Rabbi-ar-Rahman (17204099)
3. Aliya Fairuz (18104217)
4. Muhtasim Al Morsalin (18104191)
5. Rafid Kader Rivu (14304171)

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 Introduction:
For the fantasy for edified, solid, and majority rule the social request liberated from starvation,
neediness ecological corruption and types of misuse of power and exploitation, BRAC began its
journey in 1972 after the freedom war. Aarong set up 1978; from the earliest starting point of its
journey, this way of life retail chain is going about as a way to engage rural craftsmen especially
ladies. In 42 years, a minor retail chain ends up being a colossal way of life brand of Bangladesh
with 21 retail stores and over 100 fashion and lifestyle product lines, on over the nation covering
all the significant urban areas like Dhaka, Bogra, Chittagong, Sylhet, Comilla, Narayangonj, and
so on.

Aarong implies a village fair – it speaks to fairness in the global village. Aarong works as the
promoting support of BRAC. Its goal is to convey a consistent and rewarding source of
employment for the denied rural individuals. Aarong built up a dream to help the craftsmen to
help themselves by restoring their pride and self-assurance.

In 1976, when BRAC–the world's biggest development organization – drew in a modest number
of rural ladies to deliver crafts, their solitary purchasers were a couple of dissipated retailers in
Dhaka. In the course of recent decades, Aarong has cut out an extraordinary market portion for
crafted works, reviving Bangladesh's rich legacy and affecting the lives of in excess of 325,000
individuals through 850 little entrepreneurs and the Ayesha Abed Foundation. The establishment
goes about as Aarong's production hub, where craftsmen discover business and admittance to
BRAC's comprehensive help including, maternal medical services, cleanliness mindfulness and
subsidized latrines, miniature credit, legitimate guide, day care and instruction for their kids.

From clay pots to precious diamond jewelry, and silk and cotton textures to metal and leather
stock, Aarong's tremendous scope of inventive items, upheld by a powerful flexibly chain and
dissemination organization, makes Aarong really a family unit brand in Bangladesh. Its
developing presence outside of Bangladesh – through reasonable exchange organizations and the
online shop–keeps on widening the market for Bangladeshi specialties around the world, making
more open doors for craftsmen to secure their deep rooted workmanship and employments.

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 The Industry Overview of the Home Country and Host Countries

One of the industries that Aarong falls in is the clothing retail industry which is our focus here
and we have provided a brief overview of the industry of the home country i.e. Bangladesh and
Host countries which we have decided are United Kingdom and Indonesia. The brief explanation
in provided as follow;

In Bangladesh:

Expected to turn into a Middle-income nation by 2021, the developing monetary ability of the
nation and expanding spending power of its citizens, appear to have transformed Bangladesh into
an energizing retail recommendation for some large names.

Early days for what it's worth, garments manufacturers who are well-furnished with the retail
skill – on account of worldwide purchasers/retailers that they have been obliging for a very long
time. They are venturing out in retail to be in a place of solidarity to profit by the open doors as
the market develops and develops. Nonetheless, they are in good company in this. Worldwide
retail biggies have just smelled the blood and are gradually yet consistently streaming in to warm
up the opposition. In the event that players like Decathlon and Puma are here to take advantage
of the expanding wellbeing cognizant people by offering their most recent in active Clothing,
names like Uniqlo that entered Bangladesh long back holding the hands of the Grameen Group,
some are of those brisk riser in the style retail part, who are currently all around set to procure
the profits having built up themselves emphatically throughout the long term. Numerous others
are standing ready to make their essence felt.

As per some estimates, the total market size in retail is around Taka 1,500 crore and the growth
rate is around 15 per cent for the last 3-4 years, which is expected to continue well into the
coming years that would witness the market grow around 15 times (Resources & Resources,
2020). However, compared to the total retail market, organized retail consists only over 1 per
cent (Resources & Resources, 2020). According to Bangladesh Superstores Owners’ Association
(BSOA), some 30 companies with over 160 outlets are currently operating across the country,
albeit the stores are mostly located in cities and urban areas. (Resources & Resources, 2020)

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It may be mentioned here that as of FY ’18, the per capita income in Bangladesh increased by
149.07 per cent in last 10 years, showing remarkable success in all socioeconomic indicators
from 2008 to 2017 (Resources & Resources, 2020). Further, as per New York-based research
firm Wealth-X, Bangladesh will record the third-quickest growth in the number of high-net-
worth individuals in the world in next five years. (Resources & Resources, 2020)

As it would have been with any part that is yet to develop its underlying foundations profound
and solid, retail in Bangladesh is additionally tormented by different bottlenecks. Restricted
market insight, weak supply chain management system, lack of expertise, innovation
transformation and strategy suggestion are simply to give some examples.

In United Kingdom:

The Clothing retail industry has been and is going through noteworthy changes coming about
because of cycles of globalization, changes in customer request just as changing corporate
activities regarding key promoting choices. The UK Clothing retail industry has encountered
huge development which has zeroed in consideration on concentrates in the field with this area
being considered as one of the most serious business sectors in Europe. This is principally
because of the concentrated intensity of bigger retailers, for example, Marks and Spencer. One
prime issue because of globalization is that there are an ever increasing number of retailers
sourcing worldwide intending to give serious costs and quality items in the market.

According to, “Fashion Industry Statistics UK 2019 - 2020: Fast Fashion Statistics UK”;

• The UK fashion industry has experienced a big growth over the last two decades, and it
accounts for 5.4% of the national GDP (Felix, 2020).
• It employs 55000 people across the country and women’s suits account for 11% of all the
sales (Felix, 2020).
• The UK fashion industry has experienced a big growth over the last two decades, and it
accounts for 5.4% of the national GDP (Felix, 2020).

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• It employs 55000 people across the country and women’s suits account for 11% of all the
sales (Felix, 2020).

Anyway, it is guaranteed that the growth in revenue inside this industrial part will back off
basically because of the effect of discount and value including retailers offering clothing
merchandise at fewer prices, driving costs down in general inside the business. As the price war
among supermarkets and discount stores have driven down the market cost for Clothing items,
the pressure of improvement of quality in the retailing areas has gotten fundamental in the
general value-adding measure. There has been a development in the UK Clothing retail industry
which has seen increments in both offshore sourcing and global expansion.

Because of the changing nature of the UK Clothing retail industry, there are progressive changes
happening in the supply chain segment. The most significant component here can be viewed as
the expanding measure of sourcing tasks from less expensive foreign suppliers, for example,
Eastern European nations. south asian nations etc. just as far Eastern areas. Furthermore
remembering the key highlights of Clothing items, the principle of quick response is a necessary
component of the part. This is to state lead times regarding plan, creation, transportation just as
promoting have gotten shorter. Thus, profiting by huge decreases in stock holding numbers just
as dangers connected with markdown deals Clothing retailers can give new scopes of items
inside half a month with kept up net revenues.

The clothing retail industry has been and is going through noteworthy changes coming about
because of cycles of globalization, changes in purchaser request just as changing corporate
activities regarding key showcasing choices. The UK garments retail industry has encountered
huge development which has zeroed in consideration on concentrates in the field with this part
being considered as the one of the most serious business sectors in Europe. One prime issue
because of globalization is that there are an ever increasing number of retailers sourcing
internationally planning to give serious costs and quality items in the market.

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In Indonesia:

According to the market research report ‘’ Apparel Retail in Indonesia” , Clothing & footwear is
the second largest sector in the Indonesian retail industry and accounted for 12% of sales in
2016. The sector registered Rp465.3 trillion in sales in 2016; clothing was the largest category,
generating 85.2% of total sector sales. The growth is largely attributed to the growing middle
class and increasing household consumption. Furthermore, festive seasons such as Ramadan and
Eid-ul-Fitr push sales in the sector periodically. Sales are forecast to grow at a CAGR
(Compound Annual Growth Rate) of 13.6% during 2016-2021, reaching Rp880.2 trillion by
2021. A stable economy, improved purchasing power, and muted inflation are expected to push
growth during 2016-2021.

According to the research report, there is a scope of growth in the clothing retail market till 2021
by a CAGR (Compound Annual Growth Rate) of 13.6%. Indonesia is a nation growing per
capita. This will also drive the sales and increase the buying power of its people.

In Indonesia, the mass market brands are driving deals with low price tactics. Mass market in
Indonesia is as yet battling. The small clothing retail businesses are hesitant to enter this portion
since the capacity to satisfy the market need is as yet restricted. Quick retailing, quick creation
and exact interest determining are required and accordingly challenge the business. One of
approaches to be one of the greatest clothing retailers is by entering mass-market.

Clothing Retail Industry is a promising sector in Indonesia. Consumption level that keeps
growing becomes a positive incentive for the entrepreneurs to start the clothing retail business.

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 Uniqueness of Culture and Future Aspects

Indonesia and the United Kingdom (UK) have vastly different cultures and are yet markets that
have growing cultural norms. In order to assess whether Aarong would be a suitable brand for
these markets, the unique culture of these countries was observed. These countries have their
own independent rich cultures with some similarities to Bangladeshi cultural clothing items.
They also have growing norms that are causing more visible changes in consumer spending
patterns. In order to provide an informative viewpoint on culture, different aspects of culture was
noted and Hofstede’s cultural dimensions were employed to analyze the adaptability of the brand
and the unique cultural factors that would influence the way the brand operates.

Indonesia

Aesthetics:
The aesthetic value perception in Indonesia is heavily influenced by their culture and the
interaction between their indigenous customs and foreign influences. Their culture isn’t
homogenous and has traits from at least 300 ethnic groups which means aesthetic value differs
from one group to another. It can be noted that this only means that people in Indonesia are more
open to different cultures especially because many of these cultural designs correlate with
Aarong products. In the past, many foreign actors have also influenced the aesthetic value in the
country where India has notably influenced Indonesian art,songs and movies. Additionally, many
different traditional outfits worn by various ethnic groups have multiple common features with
many of Aarong’s product offerings such as them being bright, multicolored, richly embellished
and having flamboyant patterns. Such is the case, for the sarong(wrap around skirt similar to the
lungi worn in Bangladesh) that is a colorful checkered cloth worn by Indonesian men and is very
popular in Java, Sumatra, Bali etc. This means that the conception of artistic value is very
diverse and because Balinese culture is shaped by the appreciation for colorful and decorative
art, consumers are more receptive to products that follow these trends.

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Religion:
Businesses will have to consider religious norms which influence the culture of countries.
Indonesia vastly has 6 religions which are Islam, Protestantism, Catholicism, Hinduism,
Buddhism and Confucianism. This causes a cultural mix originating from different indigenous
cultures. It’s evident because of how Balinese dances have stories regarding ancient Buddhist
and Hindu kingdoms and Islamic art forms and architecture are also present in the Sumatra. This
creates a perception of art that shows how religious values can sometimes be intertwined. This
influences the way in which people admire and choose certain products over the other if it
resonates with the cultural and religious diversity that they’ve been exposed to. Additionally
because Indonesia has the largest Muslim population with 88% of their population practicing
Muslim faith, it also implies that halal clothing brands are favorable. As Aarong provides such
clothing that resonates with religious values of consumers within Indonesia, they would be
highly appealing to them. For instance, Indonesian men also wear a traditional Muslim shirt
called ‘baju koko’ which is a garment used for religious ceremonies and similar occasions. This
shirt is roughly similar to many men’s clothing items that Aarong provides, so they can expand
and also similarly cater to these individuals' religious interests.

Education:
Indonesia has a literacy rate of 95%, with 92% of children being enrolled in primary education.
This means that people are mostly educated and can make more analytical decisions regarding
brands. Aarong’s products would be feasible to provide within the country because their products
usage don’t usually require analytical thinking. Additionally, education is likely to make people
more informed of ethical business practices and encourage them to support more handcrafted
product brands that empower rural communities. This is why Indonesia has a rich culture for
aesthetic handcrafted art because people are very appreciative of it and are more exposed to these
cultural exchanges within classrooms.

Economy:
The economy of the country has been fluctuating for years but it increased again in 2017.
Household consumption has been increasing with individuals having more disposable income.
Consumers tend to be more loyal to brands if they offer good quality products and so are even
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willing to pay more for a product if it offers value. Thus, Aarongs products are likely to respond
to their interests by ensuring reasonable prices and also by ensuring quality. Ensuring
Affordability and quality would be effective ways in which people appealed to different target
consumer groups.

However, Indonesia also has a concerning inequality rate with the gender pay gap being around
23% and the top 20% having a higher growth in income and consumption than the rest of the
population. While this may mean that certain luxury products of Aarong would be appealing to
these wealthier classes who spend massively, in order to reach out to more consumers the
company will need to also focus on affordable pricing. Thus differentiation and costs will be
valuable in appealing to the consumers with different economic circumstances.

Language:
Bahasa Indonesia is the language that is commonly used in government, schools, courts, print,
literary arts etc. While native language of the family is still spoken,Indonesian is mostly used
outside of homes in multiethnic areas. English is also the second official language that is taught
in schools. This means that brands must be able to communicate their offerings in Bahasa
Indonesia if they want to establish more rapport. While Aarong can also use english, more
Indonesians are receptive to brands that represent more local values and so brand messaging
should be done in a way that is representative of the common language.

Societal structure:
In Indonesia, the societal structure in the formation of a family prefers the nuclear family with
the husband, wife and children as the common norm. Only exceptions exist for the traditional,
rural matrilineal Minangkabau for whom the domestic unit has co resident females around the
grandmother with married and unmarried daughters. Additionally, kinship is very valuable
within the country will individuals having to undergo primordial loyalty throughout Indonesia as
government support doesn’t extend to social security, unemployment insurance, old age care etc.
And so many of the ethnic groups have strong kinship groupings upon patrilineal, matrilineal or
bilateral descent. This means that individuals are highly influenced by kinships and families and
their perceptions towards brands will be heavily determined by how their families perceive the

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brand. Thus, as Aarong purports the intrinsic value of family connectivity in their products such
as wedding wear, Eid clothing etc. they can appeal to values within individuals in Indonesia.

Atleast 300 ethnic groups, own set of similarities or tendencies.

Largest Muslim population with 88% of their population practicing muslim faith. Clothing is
done in way that projects those norms.
The most recognizable pieces of Indonesian national costume are kebaya and batik. Though,
originally these items belong to Javanese, Sundanese, and Balinese culture. But they've become
widespread and typical for the whole country. Sarong is also worn by Indonesian men. It is a
kind of wrap-around skirt. The cloth is usually colorful, with checkered or another pattern. This
garment is very popular in Java, Sumatra, Bali, and Kalimantan.

Hofstede’s Cultural Dimensions:

Indonesia:

Power distance:
This expresses the attitude of culture towards inequalities.Indonesia scores high (78) meaning
they have hierarchy, unequal rights between powerholders and on power holders, superiors are
non-accessible, leaders are directive, management controls and delegates. Thus as the society is
based upon hierarchical norms, it means there is a smaller middle class but that there is a
wealthier class who is interested in luxury brands. Hence, many higher price jewellery and
accessory items may be appealing to certain classes who indulge in luxury spending. While other
products such as Taaga clothing, shoes and decor items would be affordable and more favourable
for the middle class who have limited consumer spending.It also means that innovation is only
accepted when the hierarchy supports it and so Aarong shouldn’t try to be very drastically
differentiable and alienate its target consumers.

Aarong must alsos note how operations will be influenced through power distance. As power is
centralized in this society, managers have to count on the obedience of their team members.

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Thus, employees expect to be told what to do and when. Communication is conducted in a very
indirect way and negative feedback is hidden and so when operating its outlet in Indonesia,
Aarong must be wary of these cultural traits in management.

Individualism:
Interdependence maintained amongst societal members is measured through the dimension of
individualism. Indonesia receives a score of 14 implying they’re a collectivist society where
there’s a strong pressure for people to conform to societal ideals and the in-groups to which they
belong. This implies that the influences from in-groups are important in people making business
decisions and so products that align with ethnic traits can be attractive for these individuals.
Since many ethnic communities are very closely tied due to the acceptance of the domestic unit
and the duty to kinship, often individuals are likely to be attracted to and buy products their in-
groups purchase. Thus, many of Aarongs products that resemble ethnic wear and designs of these
groups will appeal to these people.

Masculinity:
Indonesia is considered to be low masculine and are less masculine than Japan, China and India.
This is the case where the position that a person holds is more important to acquire respect from
people because of an Indonesian concept called “Gengsi”. Here for Aarong to get legitimacy,
they must appeal to such role models and their cultural values. In such societies, people also
value leisure and employ social media for rapport building and communication. Thus, brands
need to be communicative online and focus on promoting the enjoyable aspect of their products
to appeal to consumers.

As they’re also tilted more towards femininity, there is the narrative in these societies where
managers strive for consensus and people value equality and quality in their working lives.Thus
teamwork is highly valued and people also have more sympathy for each other. While running
operations and communicating with consumers, the brand must be wary of the approach people
prefer.

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Uncertainty avoidance:
This measures the extent to which the members of a culture feel threatened by ambiguous or
unknown situations and have created beliefs and institutions that try to avoid these. With a score
of 48 on Hofstede's insights, they have a moderated version of uncertainty avoidance. Generally,
people want to avoid uncertain outcomes and choose to act in a way that avoids displaying
certain emotions that cause uncertainty. Within Javanese culture, people are expected to not
show negative emotions and employ direct communication to resolve conflicts. People are highly
concerned over the loss of face and choose to prioritize maintaining harmony. This is worth
noting as it implies that brand messaging should not be too confrontational for consumers. It also
means innovation will be slower and that brands need to establish trust and rapport with
consumers to appeal to them.

Long term orientation:

Indonesia's score reveals that they have a society based upon pragmatic orientation and people
believe that the truth depends on the situation, context and the time. It means that people are
willing to adapt to changed conditions more easily and have a strong propensity to save. Thus
people are more likely to respond to Aarong’s diverse range of products that encompass various
ethnic designs. They are also likely to be attracted due to its affordability because these people
value thriftiness in their culture.

Indulgence:
Indonesia has a culture of restraint which means that people are more susceptible to cynicism. In
these societies, people do not value leisure time as much and rather control the gratification of
their desires. Thus people are unlikely to indulge in a lot of acts which may prove to deter them
from spending a lot of Aarong’s products that’re more higher priced such as jewellery, bags etc.
However, as there are a wide range of products that Aarong offers which is affordable and used
widely, it may still appeal to many consumers as these products don’t fall under indulgent
spending.

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United Kingdom (UK)

Aesthetics:
People in the UK often value their sense of beauty and appreciate the artistic talent in the
products they consume. This is relevant because fashion is constantly revolving in the country
and encompasses more foreign designs as new trends which consumers follow through.
Similarly, local individuals are more receptive towards foreign products that offer more colorful
and creative designs than what is normally available to them.

Economy:
The economic conditions of UK consumers play an important role in terms of doing business.
England has the highest unadjusted disposable income, worth about 19878 pounds which means
that the purchasing power for most consumers is high. Income inequality across gender is also
narrowing and consumption has been increasing by approximately 1% per quarter since 2018.
Additionally as 86.7% of the active population is employed with 12.7% being self-employed and
entrepreneurs, it implies that people have more ability to afford different products and indulge in
their interests. As a result, their living standards being better would make them a beneficial
market for Aarong as most target consumer bases are able to afford the products.

Education:
The UK literacy rate is approximately at 99% which implies that most people are able to make
more analytical decisions. Their good quality education also allows people to have more
consumer awareness about ethical issues. It’s evident because the sales of organic products have
increased to 2.2 billion pounds for 6 years. This is because many people living in the UK support
brands that promote an important cause. As a result, they’ve supported many foreign handicraft
businesses because they support growth of local artisans in the developing world. This is why
people are likely to be more receptive towards Aarong as a brand as they are more aware of these
practices due to their education systems.

Societal structure:

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The UK largely strives for less inequality and wants to enforce less hierarchy. Societal structures
and norms have largely changed within the country due to globalization which has allowed the
UK to be exposed to new cultural norms. This has allowed various stratas of the population to
become more accepting towards migrants. Additionally due to the influx of migrant populations
in various parts of the country, more people have become more culturally inclusive and are
welcoming more diversity. This is evident as fashion shows now display more culturally diverse
clothing or that films are becoming more culturally diverse in their plots. Along with that, since
the country has over 56 million individuals from different ethnic groups and about 4.2 million
people who come from solely asian ethnic groups, societal structures are changing more and
becoming more diverse. As a result, Aarongs products would be very appealing towards
consumers living within the UK.

Hofstede’s Dimensions

Individualism:
In the UK, there is a high value placed on people’s time & freedom. They highlight being
individualistic and private and encourage everyone to be unique. This means that people are
more accepting of newer designs and would be more open towards buying Aarong products that
would have very diverse ethnically themed designs. Since people also try to differentiate
themselves in the UK, they would be attracted to diverse styles of clothing & shoes that Aarong
offers. Similarly, as many ethnic groups live in the UK these people would find Aarong products
appealing as some of them will resemble part of their own culture, for instance Aarong’s unique
style of salwar kameez’s reflect south asian cultural values particularly within India and
Pakistan. More people are also likely to appreciate and be open towards using these products in
these societies.

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Uncertainty avoidance:
Within the UK, people are fine with unpredictability and ambiguous situations and so they have
low uncertainty avoidance. They want to experience a high level of creativity and innovation.
This indicates that highly creative industries thrive in this market through their advertising,
marketing, financial engineering etc. Thus, Aarong can differ in terms of pricing because their
products would be relatively affordable and also through their creative designs in their handicraft
items. The unique style patterns offered in Aarong’s clothing, accessory and children’s toys
items would easily differentiate themselves from other providers. Normally these ethnic
handicrafts aren’t available in many UK markets and as Aarong can easily provide better quality
and diversity in designs, they can have an edge in the market.

Indulgence:
They want to realize desires and are open to having fun and so favor leisure time. Thus people
are more optimistic to spend money to fulfill their desires. This means that if Aarong products
can provide people value in terms of happiness, people are very likely to indulge spending on its
products. This is why Aarong’s children’s handcrafted toys would appeal to consumers in the
UK as it would be a new way in which people can experience leisure. Similarly, for adults their
decor items such as candles, flower vases, lamps and shades etc would be appealing as these
items are what improves individuals leisure time. Products in such designs are normally not
available in the UK, so providing them would also be a way in which people can realize their
desires.

Power distance:
In the UK, people believe that inequality should be minimized and people believe everyone
should be treated equally. This cultural norm often is why most residents in the UK support more
ethical and fair practices, especially ones that benefit the underprivileged. This is why they have
a tendency to support ethically made artisan products that help provide development to
communities. Aarong would have the unique selling point of them being one of the largest
Bangladeshi companies to offer handcrafted products by utilizing the skills of artisans living
within rural communities. Many people in the UK believe they have an obligation to reduce
inequality and are more open to support companies that reduce power distance. Thus, they would

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be very receptive to Aarong because of the way in which the company gives recognition and
returns to marginalized groups.

Long-term Orientation:
The UK has an intermediate score of 51 in the long term orientation dimension. This means that
you can’t determine whether this society wants to maintain some links with its own past while
dealing with the challenges of the present and future. This means that providing products that
appeal to a middle ground can be more effective in terms of appeal. As people are more willing
to change, they’re likely to be more open towards changing their dressing style or decor
preferences. Similarly as some people also want to cling to the past, as long as these products are
not too drastic and still offer the same benefits for consumers, they should be acceptable for most
individuals. As a result, as Aarong products offer unique value but also represent traditional
cultural norms of ethnic groups, they fall within the middle ground.

Future prospects

Aarong notably has many future prospects within these markets as cultural norms keep changing.
They can adapt more of their Taaga clothing to resemble more unique features of Indonesian
clothing. The multicultural features of different ethnic groups in Indonesia would leave Aarong
with a large and different consumer base to appeal to. They can also look more into fashionable
trends in the UK and incorporate those trends within their accessory items as people in the UK
follow fashion trends more closely. Their target consumers are also people who’re more exposed
to diversity and would be more open towards accepting other brands as long as it doesn’t deviate
too much from their own cultural preferences. As the flamboyant designs of Aarong products
have very similar appeal to that of handcrafted items in Indonesia, there is a lot of leeway for the
brand to employ more differentiation strategies to raise their product value. While in the UK,
people do support more innovation and so the brand can utilize their comparative advantage to
further differentiate themselves and ensure their brand identity is more recognizable by their
target consumers.

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Overall, future prospects for the brand are promising as even many foreign residents within
Bangladesh often compliment Aarong products. However, the brand must try to prioritize quality
and affordability which are huge factors that will continuously influence consumer spending.
Additionally, they must be wary of changing cultural norms and incorporate changes and
preferences accordingly.

Regulatory Environment

Indonesia:

World Bank Group report indicates that Indonesia wants to start and continue improvement in its
regulatory environment for international entrepreneurs and business.

Understanding Regulations for Small and Medium-Size business indicates as per the report that
Indonesia is improving its credit information system, banking feasibility to make more
appropriate environment for global business through a new regulation that shows legal points for
starting credit bureaus which will make easier for Indonesian companies and international
business as well simultaneously.

Indonesia was one of 15 economies in East Asia and the Pacific that has implemented regulatory
reforms for international business in the past year making it easier for local and international
entrepreneurs and companies to do business.

“Successful improvement in the business regulatory environment requires strong and sustained
actions,” said Rita Ramalho, Lead Author, Doing Business, World Bank. This helped Indonesia
and according to to the mentioned words, Indonesia is working and moving forward in terms to
make a more sustainable business environment.

This helped us to consider Indonesia as one of the suitable countries to open and penetrate the
market for the Arong. .

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The United Kingdom:

Doing business in the UK is a bit tough comparing to Indonesia and as per the regulations given
the authority says that a company needs to maintain the monetary policy, The UK & EU
relationship agreements, anti- competitive agreements, Data protection and so on.

Being the first world and one of leading countries these are some basics environmental
regulations which needs to be followed.

Institutional Perspective

Indonesia:

One of the findings says that the first part of this study discusses the theoretical idea and features
of New Public Management (NPM) as well as the relevant factors behind the development in
terms of business of NPMin the world. The second part tries to indicate and shows accounting
reform in the context of NPM. Special attention is also provided to all sort complexities emerge
in the implementation of accounting reform, that is a movement from single entry and cash basis
accounting into accrual based and double entry accounting systems. At the end, this findings
shows the institutional perspective in sociology relevant to public sector accounting, specifically
correlated to the process of accounting reform. As Indonesia now is in the process of
implementing autonomy and decentralization policies which one of its initiative is putting
accrual double entry accounting systems in place, this study also specifically highlight the
process of accounting reform in Indonesia.

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The United Kingdom:

This research is mainly focused on the process of performance measurement undertaken by

different business relatives in the UK higher education sector, focusing on the institutional
perspective. Different classes of business people have different motivations to measure
performance. Institutions will be affected on the one hand by the state evaluation of them, and on
the other by the applicant's. The contribution of Data Envelopment Analysis (DEA) to inform
management is explored and illustrated in an application to the University of Warwick, using
concepts from a technique to support strategic option formulation, the Boston Consulting Group
(BCG) matrix.

Comparative Advantage

The relevance of comparative advantage has flourished more by the grace of globalization.
Comparative advantage is one country's ability to produce a good or service more efficiently and
inexpensively than another. The theory of comparative advantage was established by economist
David Ricardo in the early 1800s. The cost of labor, cost of capital, natural resources,
geographical location, and efficiency of the workers are some of the variables influencing
comparative advantage. Less developed countries have benefited from globalization by taking
advantage of their comparative labor cost advantage. Corporations have shifted manufacturing
and other labor-intensive operations to these countries to take advantage of lower labor costs.

Bangladesh is ready to exploit the demographic dividend with a higher share of working-age
population. Labor is Bangladesh’s strongest and underutilized source of comparative advantage.
Absorbing the increasing labor force and making greater use of the current underemployed stock
requires expanding labor-intensive operations, which means expanding exports. Moreover, the
Bangladesh wage is half of India’s, and less than one-third of China’s or Indonesia’s.

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Comparative advantage over Indonesia:

Internal restrictions also haunt the textile industry of Indonesia and have massively hampered
it.Compared with other textile producing countries, electricity and gas prices are high, which has
limited Indonesia’s competitiveness on the foreign market.

Labor costs have also increased annually; the minimum wage in Indonesia has been increased by
8.5 percent for 2020. The country’s minimum wage is also fixed based on the sector. ‘Leading
sectors or industries’ in a province, like textiles and garment manufacturing, can determine their
own minimum wage rate, which has led their minimum wage to be around 290 USD per month
whereas it is only 95 USD per month in Bangladesh giving Bangladesh an upper hand in the
race.

Ageing machinery, which results in overall lower productivity and efficiency for the
government, has become another problem in Indonesia. This contradicts one of the core strengths
of the industry – the involvement of both the upstream and downstream sectors, but only the
larger players can afford to invest in new plants and equipment to support these operations.
Furthermore, increasing regional integration has resulted in an influx of cheaper textile products
into Indonesia (legal and illegally).

From the aforementioned analysis it can easily be stated that Aarong will have a great scope of
expanding their business to Indonesia by exporting their apparel from Bangladesh and will have
a positive chance to flourish as a good number of their population is interested in ethnic apparel.

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Comparative advantage over United Kingdom:

Data from the International Trade Center indicates that more than 10 percent of Bangladesh’s
overall exports went to the UK in 2015. UK being one of Bangladesh's oldest trading partners, it
is no surprise.

Bangladesh exported more than $3.5 billion to UK which was having on an average 6% growth
for last five years. This data shows how big Bangladesh is in the textile market of UK. UK has
been considered to be a thirst market for Bangladesh and the country has set higher export target
in UK market in the current fiscal year. Besides Textile and apparel footwear sector is seeing
huge growth in the UK. For last five years the sector was having 25% average growth.

Bangladesh certainly has the cheap and growing labor advantage over a first world country like
the UK where the other production factors are not as competitive as well. The minimum wage of
the United Kingdom is 1648 USD per month which is more than ten times more than the
minimum wage in Bangladesh.

Moreover, ethnic apparels from this part of Asia are also attracting buyers of all classes and ages
in the western part of the world which will give Aarong a big advantage to expand their market
in the UK as the smaller ethnic apparel manufacturers will not be able to compete in pricing their
products as well.

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 Globalization effort

Traditionally many companies have stayed focused in their domestic markets and have kept
away from entering globally. They know their domestic markets better and understand that they
have to make fundamental changes in the way they work to be able to compete globally. But on
the case of Arong, we can see that Arong is the established brand in domestic market, they have
a very strong supply chain, distributions, product variations and marketing team in the domestic
market. They know and understand the domestic market behavior very well. Arong also do not
need to attempt any fundamental changes in terms of going global.

Why should Arong go global?

One of the major reasons to go global for a company is to reduce cost by not changing the
production. This means the product for each and every country will be similar. As Aarong has
the handmade product which is fancy and bears the traditions. That is why Aarong has no need to
change its strategy to bring new products in the market or they do not need to customize the
product lines. If Aarong goes with the same product they sell on the host country, they can easily
reduce the production cost. Now there are only shipping cost left. This is the way Aarong can
still keep the main product concept with no changes in manufacturing. That is going global can
be helpful for Aarong.

Going Global Aarong can easily have the benefits of entering International markets include
generating more revenue and profit, competing for new sales, investment opportunities,
diversifying, reducing costs and recruiting new talent.

There are a few more reasons on behalf of Aarong for going into globalization. These are
mainly:

▪ Slow Growth of Domestic Market

▪ Suppliers follow their Customers Internationally
▪ Attractive Cost Structures Globally
▪ Growth Rate and Potential
▪ Compete Successfully in Domestic Market

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Aarong will aim to differentiate themselves while also ensuring a low cost strategy that makes
their product affordable. The differentiation strategy will be used in order to appeal to different
local interests in Indonesia where people prefer products that resonate with their cultural norms,
and so the company will employ a multi-domestic strategy where they’ll cater their product
offering according to the interests of different markets. They’ll use the multi-domestic strategy in
Indonesia where there is higher pressure for local responsiveness and a lower pressure for cost
reductions. As Indonesia has almost 300 ethnic groups, people place their cultural norms very
strongly within their preferences. Although many of Aarong’s existing designs may already
resonate with the cultural preferences of locals, and so they can focus more on localizing on
those specific designs and incorporating newer cultural norms to continue their appeal. This way
they can customize their product offering and provide value in a way that matches the tastes and
preferences of customers on the ground.

On the other hand, in the UK they would employ the global standardization strategy as there
would be a strong pressure for cost reductions and the demands for local responsiveness are
minimal. Consumers in the UK would be more willing to respond to newer products and do not
necessarily prefer products which only resonate with their interests. Rather, most middle class
consumers would value affordability through lower prices. Aarong will aim to raise profitability
through cost reductions from experience curve effects and location economies. As they do not
necessarily have to customize very strongly, their existing products would be attractive to some
consumers as they can exploit economies of scale to make their products more accessible. Since
costs for marketing, R&D would reduce, they can easily focus more on distribution and
accessibility of their products. As a result, the company would employ both differentiation and
low cost strategy according to the nature of the market.

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 Conclusions

As per our findings, we have chosen the UK and Indonesia to penetrate the market for Aarong.
We have found the people lives in Indonesia and The UK loves fancy products and handmade
crafts, that is why we have very good market for jute made products on these two countries.

Also as per the comparative advantages, cultural unfitness we have found and shown clearly
indicates Aarong should take immediate steps in order to penetrate the market in the UK and
Indonesia. Both of the country has the suitable situation to form business. As both of the country
is one of the leading countries in the world, it creates a scope for Aarong to penetrate its market
for further profit maximizations.

For, Aarong considering both of the above situation we have found the through the good will to
BRAC and maintaining all the regulations we can penetrate the market. Also we have the major
and core target group outside of the country lives there.

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Reference:

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