BUSINESS
OPPORTUNITY IN INDONESIA
By: Kristo Radion
Purba
1.
INTRODUCTION
Indonesia is densely populated, with a lot of business
opportunity. Opening new businesses can be a challenge with constraints such as
choosing the best location and choosing the business category. In this report,
the population data in each city in Indonesia was compared with the venues data
from Foursquare to find the best location and business category.
In this research, the most popular business category is
analyzed through exploratory map data analysis. One of the significantly rising
venues in Indonesia is convenience store, such as Indomaret and Alfamart, with
a growth rate of 16.4% in 2009
In this research, the best location to open a business was
determined by the density of venues relative to the population size. By
comparing the number of venues in each city with the number of populations, we
can estimate this density. This density value, which will be called VP (number
of venues per population), represents business opportunity. A low VP value
means there are still a few number of business venues in the city relative to
the number of population, while a high VP value means there are a lot of
venues. A low VP value can be used as one of the constraints to open a business
in an area, which represents a big business opportunity.
2.
DATA
There were two data sources, i.e.:
·
Indonesia cities and location (latitude and
longitude) data, collected and processed from https://worldpopulationreview.com/countries/cities/indonesia.
The data was pre-processed into CSV file with the columns: City, Population,
Lat, Lng
·
Foursquare venues data for each city, from
venues search endpoint. The collected data are the venue categories for each
city, and the total number of venues.
3.
METHODOLOGY
Here is the methodology for this research:
1.
Collect Indonesia Cities and Location
Data
In total, there are 384 major cities collected from
the source, with the total number of populations of 64,324,423. Each city will
have the number of populations, latitude and longitude.
2.
Venues Data Collection from Foursquare
API
From the Foursquare API, get the number of venues in
each city, along with the number of venue categories for each city.
3.
Cluster the Cities
Cluster the cities into 10 clusters. This clustering
is necessary since if we calculate the venues per city, the resulted numbers
will be too small.
4.
Exploratory Map Data Analysis
Conduct an exploratory map data analysis to
get the spread of venues for each cluster. Assign colors for each cluster from
green to red, where green represents less venues and red for more venues. The
green markers on the map represents potential areas to open new business.
4.
RESULTS
This section will be divided into two parts, i.e. (1) venue
categories, which is the analysis of the popular categories in each cluster, (2)
venue density, which is the analysis of the total number of venues if compared
to the number of population in each cluster. To give some context, below is the
Indonesia map along with the name of the islands, as shown in Figure 1.
Figure 1. Map of Indonesia
(Source: https://www.lonelyplanet.com/maps/asia/indonesia/map_of_indonesia.jpg)
After collecting the number of venues by category for each
city, we can calculate the total number of venues by category for all cities. The
top 15 venue categories in Indonesia, based on the data from Foursquare from
the 384 major cities, are shown in Table 1.
Note that not all venues are profitable businesses, such as Office, Government
Building, etc. Thus, we decided to only take the following categories: Indonesian
Restaurant, Asian Restaurant, Café, Coffee Shop, Convenience Store.
Table
1. Top Venue Categories in Indonesia
|
# |
Venue Category |
Total Number of Venues |
|
1 |
Office |
388 |
|
2 |
Indonesian Restaurant |
377 |
|
3 |
Government Building |
234 |
|
4 |
Building |
219 |
|
5 |
Asian Restaurant |
191 |
|
6 |
Bank |
173 |
|
7 |
Mosque |
161 |
|
8 |
Hospital |
107 |
|
9 |
Café |
102 |
|
10 |
Church |
101 |
|
11 |
Coffee Shop |
97 |
|
12 |
Medical Center |
84 |
|
13 |
Diner |
80 |
|
14 |
Convenience Store |
79 |
|
15 |
Capitol Building |
74 |
The cities were clustered using K-means into 10 clusters,
based on their latitude and longitude. Each cluster will also have the total
number of the five venue categories and the number of cities in the cluster.
The clusters are shown in Table 2.
The VP value is Venues divided by Population.
Table
2. City Clusters
|
Clus-ter |
Venues |
Population |
Cities |
VP |
Indonesian
Restaurant |
Asian
Restaurant |
Café |
Coffee
Shop |
Convenience
Store |
|
0 |
2,847 |
8,559,782 |
95 |
0.033 |
94 |
53 |
18 |
19 |
19 |
|
1 |
1,106 |
4,724,106 |
37 |
0.023 |
37 |
22 |
16 |
19 |
5 |
|
2 |
360 |
1,389,519 |
12 |
0.026 |
14 |
5 |
2 |
3 |
2 |
|
3 |
780 |
5,318,560 |
26 |
0.015 |
34 |
7 |
7 |
9 |
3 |
|
4 |
2,190 |
25,607,290 |
73 |
0.009 |
70 |
30 |
10 |
10 |
18 |
|
5 |
370 |
983,694 |
13 |
0.038 |
19 |
10 |
7 |
1 |
2 |
|
6 |
300 |
1,006,806 |
10 |
0.030 |
4 |
8 |
3 |
4 |
3 |
|
7 |
150 |
333,733 |
5 |
0.045 |
0 |
0 |
3 |
0 |
1 |
|
8 |
2,501 |
9,761,830 |
84 |
0.026 |
93 |
41 |
29 |
26 |
23 |
|
9 |
820 |
6,639,103 |
29 |
0.012 |
12 |
14 |
7 |
5 |
3 |
The next step is to plot the map that shows the total number
of venue categories for each cluster. The number for Indonesian Restaurant is
shown in Figure 2.
In general, Java island (the small main island at the south of Indonesia) is
the most populated island in Indonesia that contributes to 56.1% of the total
Indonesia population. Furthermore, Java island has the highest number of venues
if compared to other islands, in which the city clusters in Java have mostly
yellow to red color (a high number of venues).
In terms of Indonesian restaurant, as seen in Figure 2,
the West Java area is the best choice to open a restaurant in Java. As for the
other islands, it is shown that most areas have still a small number of
restaurants if compared to Java. However, the cluster around Medan city has a
medium number of restaurants, and this is not surprising since Medan is the
third most-populated city in Indonesia.
Figure 2. Total Number of Indonesian
Restaurant per Cluster
In terms of Asian Restaurant, as seen in Figure 3,
clusters outside Java island is also mostly green colored, which indicates a
good business opportunity. In Java island, interestingly, the Central Java has
the greatest number of Asian Restaurant if compared to West and East Java.
Also, West Java has a yellow color which indicates a good business opportunity
of Asian Restaurant in Java. Overall, the spread of Indonesian and Asian
Restaurant is mostly similar.
Figure 3. Total Number of Asian Restaurant
per Cluster
The spread of Café, as seen in Figure 4,
is a bit different with the restaurants. The East Java cluster has a lot of
Cafés, while West Java is still green-colored. Interestingly, the cluster
around Medan city is yellow colored which means that the number of Cafés is
also growing outside Java.
Figure 4. Total Number of Café per
Cluster
The spread of Coffee Shop, as seen in Figure 5,
is mostly similar with Café. This is not surprising since both categories
target a younger audience. Interestingly, the cluster around Medan city is now
orange colored which shows a high number of Coffee Shops. As for the Java
island, West Java is still a preferable choice to open a new coffee shop as
other regions in Java already have a high number of Coffee Shops.
Figure 5. Total Number of Coffee Shop
per Cluster
The number of Convenience Stores, as seen in Figure 6,
are mostly very high in Java island. Based on my experience, we can easily find
convenience store every 15 minutes of driving around Java. This is very
different with the clusters outside Java, where the number of convenience
stores are still low.
Figure 6. Total Number of Convenience Store
per Cluster
4.2.
VENUE DENSITY
This section is intended to see the overall business venues
spread throughout Indonesia, based on Foursquare data. The main metric is VP,
which is the total number of venues divided by population. The raw VP values
are already shown in Table 2.
The plot of the VP value on the map can be seen in Figure 7.
Using the VP values instead of the total number of venues
give an interesting insight. Even though Java island has already a lot of
venues, as previously shown in Section 4.1,
the venues are still not enough to serve the population number. In Figure 7,
Java island still has yellow to green color markers in terms of VP value. This
shows that Java island still has a low VP value, which indicates a good
business opportunity, with West Java as the best place in Java. Other parts of
Indonesia that also have a good business opportunity is the southern part of
Sumatra, eastern part of Kalimantan, and southern part of Sulawesi.
Figure 7. The VP (Venues per Population) for
Each Cluster
5.
DISCUSSION
There are five profitable business categories that were analyzed
in this report, i.e. Indonesian Restaurant, Asian Restaurant, Café, Coffee
Shop, Convenience Store. For all categories, West Java is the best choice to
open a new business since it still has a small number of venues. Overall, Java
has the greatest number of venues if compared to the other parts of Indonesia,
with the exception of the cluster around Medan city.
The Foursquare API endpoint that we are using is the search
endpoint which returns all nearby locations, which is a bit different with the explore
endpoint which returns the popular locations. Plotting the venue numbers
give an interesting insight to the overall spread of locations throughout
Indonesia. Although we were not using all cities in Indonesia, since we can't
find a reliable complete dataset, the number of major cities used in this
research should be a good start.
Interestingly, when we cluster the cities into 10 clusters
using K-Means, the Java island is clustered into three clusters which
represents three provinces, i.e. West Java, Central Java, East Java. Other
parts of Indonesia were also clustered neatly. Note that we have tried a lower
number and a higher number of clusters but it didn't give us any additional
insights, and thus we kept it to 10 clusters.
6.
CONCLUSION
In this report, we have analyzed the potential business
opportunities in Indonesia, which includes the types of business and which are
the preferable locations to open a new business. Indonesia is highly active in
terms of the creative economy, given its dense population and hardworking
citizens. We can conclude that West Java is the best choice to open a new
business for any business category, such as restaurant, café, coffee shop and
convenience store. Based on the VP value, it is also shown that West Java has a
small number of venues relative to the population size, which means there is
less competition.
There are still a lot of challenges for opening a new
business, where tiny details have to be considered. For example, a coffee shop
should probably be opened nearby universities where there are a lot of young
people, a convenience store should be in densely populated cities or villages.
However, hopefully this research can be expanded in the future to include those
tiny details.
7.
REFERENCES
Pandin, M., 2009. The Potrait of Retail Business
in Indonesia: Modern Market, s.l.: Indonesia Economic Review no. 25.
Przybylski, N., 2018.
Outlook on the Food Service Industry in Indonesia, s.l.: Indonesia
Investments.
