Bank Mandiri is the largest bank in Indonesia with over $60 billion in assets. It aims to expand into Mexico by leveraging its strengths of a large branch network, long history, and focus on multiple customer segments including corporate, retail, and microfinance. However, entering the Mexican market poses threats such as lack of trust from local customers, stronger competitors with better technology, and an inability to offer sharia-compliant products due to the small Muslim population. A Porter Five Forces analysis found medium barriers to entry due to difficulties becoming a full-service bank but easier regional entry, as well as threats from scale and product differentiation of incumbents.

1. GLOBAL MARKETING RESEARCH PAPER
“BANK MANDIRI ENTRY STRATEGIES TO MEXICO”
Agung Rizky Wirawan 3104001
Alex Chandra 3104009
Anastasia Ariani Santoso 3114701
Eka Darmadi 3094802
Julian Giovanni 3104812
Masaki Iwabuchi 3122736
Faculty of Business and Economics
International Business Networking

2. 1
1. Company Profile
Bank Mandiri was established on 2 October 1998, as part of the bank
restructuring program of the Government of Indonesia. In July 1999, four state-owned
banks - Bank Bumi Daya, Bank Dagang Negara, Bank Exim and Bapindo - were
amalgamated into Bank Mandiri. The history of these four banks can be traced back to
over 140 years, and together they had contributed to the beginning of the Indonesian
banking sector.
1.1 Consolidation and Integration
Following the merger, Bank Mandiri immediately embarked on a comprehensive
consolidation process - beginning with the closure of 194 overlapping branches and a
reduction of redundant staff, bringing the combined workforce of 26,600 down to
17,620. A single brand - Bank Mandiri was rolled out throughout the national network
and across all of advertising and promotional activities. One of Bank Mandiri's most
significant early achievements was the complete overhaul of its technology platform.
The Bank inherited a total of nine different core banking systems from its four legacy
banks. After an initial investment to consolidate the systems around the strongest
inherited platform, the Bank undertook a 3-year USD 200 million program to replace the
core banking platform with one that was specifically geared towards retail banking.
Today, Bank Mandiri's IT infrastructure provides straight through processing and a
unified interface for our customers. In line with the bank's vision, Bank Mandiri tapped
into profitable business segments with growth potential so as to enable us to offer a
comprehensive range of banking services. Bank Mandiri chose to focus on key segments
including corporate, commercial, micro, retail and consumer finance - with distinctive
strategies for each business while leveraging on synergies across these different market
segments. Bank Mandiri emerged as a Domestic Multispecialist Bank in Indonesia, and

3. 2
embarked on specific initiatives that enable us to grow and achieve dominant market
share of revenue in our focus segments. In addition, Bank Mandiri aims to be a Regional
Champion Bank - a public-listed bank that would be measured by market capitalization
and ranked high amongst other blue chip public-listed banks in South East Asia.
1.2 Transformation Program - Stage 2 (2010 - 2014)
Bank Mandiri are now embarking on the second stage of Bank Mandiri
transformation process for the 2010-2014 period by revitalizing Bank Mandiri vision "To
be Indonesia's Most Admired and Progressive Financial Institution". By 2014, Bank
Mandiri intends to achieve a market capitalization of Rp 225 trillion, a market revenue
share of 16%, an ROA of around 2.5%, and an ROE of around 25%, while at the same
time maintaining an asset quality in a gross NPL ratio of under 4%. And by end 2014,
Bank Mandiri are determined to reach the ranks of the Top 5 Banks in ASEAN.
The Bank has set its sights to be among the Top 3 in ASEAN by 2020, in terms of
market capitalization, and to be a major regional player. In order to realize this vision,
Bank Mandiri's business transformation during the 2010-2014 period will focus on the
following three business areas:
1.2.1 Wholesale Transactions
Bank Mandiri are consolidating Bank Mandiri leadership position by offering
comprehensive financial transaction solutions and developing a holistic relationship
approach in serving Bank Mandiri corporate and commercial customers in Indonesia.

4. 3
1.2.2 Retail Deposits & Payments
Bank Mandiri are determined to become the bank of choice for consumers in the
retail deposit market by providing a unique and superior banking experience.
1.2.3 Retail Financing
Bank Mandiri goal is to become the No. 1 or 2 bank in the retail financing
segment by leading in the mortgage, personal loan, and credit card markets, and by
becoming a major player in the micro banking segment. Besides focusing on these three
strategic areas, Bank Mandiri are also strengthening Bank Mandiri organizational
structure and infrastructure (branch, IT, operations, risk management) to provide more
integrated service solutions. To successfully achieve Bank Mandiri goals, Bank Mandiri
will leverage on the critical support of Bank Mandiri human resources, technology,
prudential risk management, and good corporate governance.
1.3 Achievements to Date
As of December 2011, Bank Mandiri's total assets have reached Rp 551.9 trillion
(equivalent to USD 60.86 billion), more than double of that in 2006 (Rp 267 trillion) -
which is a growth of 15.6% (CAGR); making us the largest bank in Indonesia. Bank
Mandiri loans also grew by 22% (CAGR) to Rp 314.4 trillion (equivalent to USD 34.67
billion) from Rp 118 trillion in 2006 while Bank Mandiri net profit grew by 38.3% (CAGR)
to Rp 12.2 trillion (equivalent to USD 1.35 billion) from Rp 2.4 trillion in 2006. Besides
being the nation's largest lender (on a consolidated basis), Bank Mandiri is also the
largest depository in the country with Rp 422.3 trillion (equivalent to USD 46.57 billion)
in third party funds. In terms of asset quality, Bank Mandiri gross and net NPL ratios
stand at 2.21% and 0.52% respectively.

5. 4
One of the key milestones towards realizing Bank Mandiri's vision during the
second stage of the transformation process was the successful completion of a rights
issue in February 2011 that strengthened Bank Mandiri capital base. With this, Bank
Mandiri's capital has reached Rp 62.7 trillion (equivalent to USD 6.9 billion),
representing an increase of 48.9% year-on-year. Hence, Bank Mandiri became the first
bank in Indonesia to achieve the status of an international bank according to the
Indonesian Banking Architecture (Arsitektur Perbankan Indonesia/API).
Bank Mandiri are also supported by Bank Mandiri subsidiaries which contribute
significant income of approximately 12% to the total consolidated net profit of the Bank.
Today, Bank Mandiri has the largest ATM network with 10,000 units throughout
Indonesia. Bank Mandiri have earned the distinction of being a most trusted company in
Indonesia for corporate governance for 5 consecutive years. Bank Mandiri are ready to
become an anchor bank in Indonesia as Bank Mandiri have fulfilled the criteria set by
Bank Indonesia, and propelled ahead by Bank Mandiri vision to be Indonesia's Most
Admired and Progressive Financial Institution.
2. Overall strengths and weaknesses of Bank Mandiri
Strengths:
 140 years tradition in banking industry from 4 different banks which 14 years ago
collaborated into Bank Mandiri as Bank Mandiri know now in Indonesia
 Introducing new core banking system to be more efficient
 Using straight-through service to all customer
 Bank Mandiri customers hold major economic and industry in Indonesia such as food
and beverage manufacturers, construction, chemistry, textile, etc.
 Strong management team and good corporate governance
 Growing asset for more than Rp 319 trillion, with more than 21 thousand employee
in 1000 domestic offices and 6 overseas offices.

6. 5
Weaknesses:
 Hard to find competent workers who have knowledge, good service, and the ability
to use their soft skill in the office
 The ATM is not widely spread throughout Indonesia
 Does not have big branches in small city
 It is not easy to fully implement the management information system in banking
industry
 Does not have variety of product and services
3. Marketing Strategy
3.1 Main Focus
Wholesale Transaction: Bank Mandiri is consolidating its leadership position by
offering comprehensive financial transaction solutions and developing a holistic
relationship approach in serving its corporate and commercial customers in
Indonesia.
Retail Deposit & Payment: Bank Mandiri is determined to become the
consumer's bank of choice in the retail deposit market by providing a unique and
superior banking experience.
Retail Financing: Bank Mandiri's goal is to become the No. 1 or 2 banks in the
retail financing segment by leading in the mortgage, personal loan, and credit
card markets, and by becoming a major player in the micro banking segment.

7. 6
3.2 Targeting
Multi-segment targeting: Corporate, Retail and Micro
Bank Mandiri has different business division that covers the entire segment in
Banking Industry almost equally. Unlike any other competitor that focuses only on single
segment only, Bank Mandiri had almost equal attention to its entire potential consumer
as a niche market that can be exploited as profit center.
For example: BCA that focuses on its retail consumer and BRI on its micro finance sector.

8. 7
3.2.1 Positioning:
Bank Mandiri has a positioning of a national local bank.
3.2.2 Product:
From Corporate and Retail, and as the government vision to support micro industry, it
had been reaching micro industry using “KTA” Kredit Tanpa Agunan
3.2.3 Price:
Lower Interest for Micro Industry
3.2.4 Place
As one of largest Banking Chain in Indonesia, Bank Mandiri had a nationwide coverage
of its banking service. Through 8,996 ATMs and brand offices across Indonesia, Bank
Mandiri provide a high customer contact to gain higher share on both retail and
corporate banking.

9. 8
3.2.5 Promotion
3.2.5.1 Micro Finance Campaign
Inline with governmental vision to increase the economic capability of Small and
Medium Enterprise (SMEs), Bank Mandiri has a comprehensive campaign to increase
the number of Micro Funding using their “Kredit Tanpa Agunan” which doesn’t require
any collateral.
3.2.5.2 Seasonal Event
Seasonal Promotion to boost the deposit or loan allocation activity that’s undergone in
special occassion such as Christmas, Idul Fitri, New Year, etc.
3.2.5.3 Customer Satisfaction Improvement
The usage of IT to increase the customer service level and customer contact such as e-
banking, m-banking, Mandiri PraBayar, etc.
4. Mexico Environment and Opportunities
4.1 Country information of Mexico
Location
Mexico is located in southern North AmericaIt is bounded on the north by the
United States; on the east by the U.S., the Gulf of Mexico, and the Caribbean Sea; on the
south by Belize and Guatemala; and on the west by the Pacific Ocean. Mexican federal
jurisdiction extends, in addition to Mexico proper, over a number of offshore islands.
The area of the country is 1,972,547 sq km, (761,604 sq mi).

10. 9
The Land of Mexico
Mexico has two major peninsulas, the Yucatan in the southeast and Baja
California in the northwest. The high Mexican Plateau forms the core of the country and
is enclosed by mountain ranges. Central Mexico is an elevated plateau dominated by
volcanic high mountains. In the Central Highlands region, there are many volcanoes, two
of which, Popocatépetl and Ixtacíhuatl, can be seen from Mexico City. Both of these are
essentially dormant, although Popocatépetl sends up steam and smoke occasionally. In
the north the central plateau drops steeply to the wide valley of the Río Grande (called
the Río Bravo in Mexico). The east coast is low and flat, though the lofty coastal
mountains in the state of Veracruz dominate its landscape.The northwestern part of the
country is predominantly low, sandy shoreline, with the plateau rising sharply behind it.
The northern Pacific slope and its interior region receive little rainfall, prompting
irrigation, though rainfall is heavy along the Gulf coast.
Natural Resources in Mexico
The mineral resources of Mexico are extremely rich and varied. Almost every
known mineral is found, including coal, iron ore, phosphates, uranium, silver, gold,
copper, lead, and zinc. Proven petroleum and natural-gas reserves are enormous, with
some of the world's largest deposits located offshore, in the Bay of Campeche. Forests
and woodland, which cover about 23% of the land, contain such valuable woods as
mahogany, ebony, walnut, and rosewood. About 13% of the land is suitable for
agriculture, but less than 10% receives enough rainfall for raising crops without
irrigation.
Population (and people, culture, language)
The Mexican population is composed of three main groups: the people of
Spanish descent, the Indians, and the people of mixed Spanish and Indian ancestry, or
mestizos. Of these groups, the mestizos are by far the largest, constituting about 60% of
the population. The Indians total about 30%. The society is semi-industrialized.

11. 10
The population of Mexico at the 2011 census (preliminary) was 108,396,000. The
estimated population density in 1990 was 41 persons per sq km (107 per sq mi). About
73 percent of Mexicans lived in urban areas (around Mexico City).
People in Mexico uses Spanish as a official language, but more than 50 Indian
languages are spoken. Religion mostly Christian (predominantly Roman Catholic; also
protestant)
Economy
Mexico has a mixed economy based on agriculture, manufacturing, and the
extraction of ptroleum and natural gas. About one-eighth of the land is arable; major
crops include corn, wheat, rice, beans, coffe, cotton, furuits, and vegetables.
Mexico is the world's leargest producer of silver, bismuth, and celestite. It has
significant reserves of oil and natural gas.
Manufactures include processed foods, chemicals, transport vehicles, and
electrical machinery.
GNP at market prices (2005): 8 374 348.5 million pesos
(2011): $1,661 trillion
GNP per capita (2005): 78,668.1 pesos per inhabitant
(2011): $14,609
Real annual GNP growth rate (2005): 3.0%
Government
It is a federal republic with two legislative houses; its head of state and
government is the president. Mexico consists of 32 administrative divisions -- 31 states
and the Distrito Federal (federal district), which is the seat of the federal administration.

12. 11
4.2 Opportunities and Threats
Following the data and resources that Bank Mandiri collect or know, Bank
Mandiri found some opportunities that Bank Mandiri can take some advantage of them.
In the other hand Bank Mandiri also found some threats that can endangered Bank
Mandiri future also.
Opportunities
 Low barrier to open new branches in Mexico
 Only few retail banking in Mexico
 Only need relative low funding
 Good human resources in Mexico compared to Indonesia
Threats
 Trust from the local people
 Competitors have better technology
 Variety of product from the other banks
 Can’t sell Syariah products due to few number of Muslim in Mexico
5. Porter Five Forces Analysis - Banking Mexico
In the mid-1980s Mexico started to liberalize its trade; and, since the signing of the
North American Free Trade Agreement (NAFTA) in early 1994, Mexico has followed an
aggressive globalization strategy, placing about 90 percent of its trade flows under free
trade agreements with over 40 countries. These polices have made Mexico the country with
the most free trade agreements in the world.1 Mexico’s liberalization strategy has also
included its financial sector and, in particular, the banking industry.
Mexico’s experience with financial liberalization provides an interesting case study
for at least two reasons. First, economic theory suggests that financial liberalization bolsters
economic growth. Mexico’s path toward financial liberalization has been an arduous one

13. 12
and includes several failed attempts, which, until recently, prevented the development of
its banking sector and limited the growth of financial credit to the private sector, which is
necessary for economic development.
5.1 Threat of new competition
Important issue that presents a barrier to entry for new competitor is trust; because
the nature of the business requires institutions to deal with other people’s money and
financial information, customer prefer well-known trustworthy institutions in order to open
a bank account.
That the barrier to entry in the banking industry are medium to low, because it is
difficult to enter the industry as a bank with the full range of products and service but it is
relatively easy as open a local or regional bank with limited product and offering.
Economic of scale
Although the concept of scale economies is frequently associated with manufacturing, it
is also applicable to R&D, general administration, marketing, and other business
functions. Honda’s efficiency at engine R&D, for example, results from the wide range of
products it produces that feature gasoline-powered engines. When existing firms in an
industry achieve significant economies of scale, it becomes difficult for potential new
entrants to be competitive.
Economies of product differences
Differentiation can be achieved as a result of unique product attributes or effective
marketing communications, or both. Product differentiation and brand loyalty “raise the
bar” for would-be industry entrants who would be required to make substantial
investments in R&D or advertising.

14. 13
Capital requirements
Capital is required not only for manufacturing facilities (fixed capital) but also for
financing R&D, advertising, field sales and service, customer credit, and inventories
(working capital). The enormous capital requirements in such industries as
pharmaceuticals, mainframe computers, chemicals, and mineral extraction present
formidable entry barriers.
Access to distribution
If channels are full, or unavailable, the cost of entry is substantially increased
because a new entrant must invest time and money to gain access to existing
channels or to establish new channels.
Government Policy
Frequently a major entry barrier. In some cases, the government will restrict
competitive entry. This is true in a number of industries, especially those outside the
United States that have been designated as “national” industries by their respective
governments. Japan’s postwar industrialization strategy was based on a policy of
preserving and protecting national industries in their development and growth phases.
The result was a market that proved difficult for non-Japanese competitors.
Competitor response
New entrants expect existing competitors to respond strongly to entry, their
expectations about the rewards of entry will certainly be affected. A potential
competitor’s belief that entry into an industry or market will be an unpleasant
experience may serve as a strong deterrent. Bruce Henderson, former president of the
Boston Consulting Group, used the term “brinkmanship” to describe a recommended

15. 14
approach for deterring competitive entry. Brinkmanship occurs when industry leaders
convince potential competitors that any market entry effort will be countered with
vigorous and unpleasant responses. This is an approach that Microsoft has used many
times to maintain its dominance in software operating systems and applications.
5.2 Threat of substitute products or services
In Mexico Banking Sector, banking sector had been adapted the technology that can
allow new entrants in an in industry and banking is no exception, one of many example
are worth looking in payment systems.
For example trails include more than 440 McDonalds as a payment card, and the new
feature was added enabling the customers to link their shop card (credit card or Flazz)
and automatically get discount.
For example, Mandiri can produce such as a card that allow the customer to fill their
fuel by tap the card to the machine, this feature can increase the payment speed.
Based on the information, presented above, the threat of substitutes is high for
particular service such as payment system but low for banking services as a whole.
 Buyer propensity to substitute
 Relative price performance of substitute
 Buyer switching cost
 Perceived level of product differentiation
 Number of substitute products available in the market
 Ease of substitution. Information-based products are more prone to substitution, as
online product can easily replace material product.
 Substandard product
 Quality depreciation

16. 15
5.3 Bargaining power of customers (buyers)
There are three factors that should be considered when assessing the bargaining power
of bank customers, first: the same base of products is offered by most players in the
industry, second customer are now recognize that their deposits or loans are not the
only important things, but also the trustworthy bank, third internet technologies have
reduced the cost of comparing the price of holding an account in several banks before.
When analyzing, the advantage the internet gives to customers by enabling them to
“Shop” for the cheapest provider of financial services with “a click of the mouse”, one
would deduce that buyer bargaining is high; there are important security and privacy
consideration that increase the bargaining power of banks.
Because banking is about managing people’s wealth and information, customers look
for a trustworthy institution that will provide them with a secure platform to manage
their accounts and will not sell lease or otherwise share their personal information with
undesired third party. This reason why aspects such as brand and track record become
relevant for customers reducing their willingness to open an account with the cheapest
and rather choose the cheapest among the safest.
The bargaining power of customers is also described as the market of outputs: the
ability of customers to put the firm under pressure, which also affects the customer's
sensitivity to price changes.
5.4 Bargaining power of suppliers
Consider about the raw material for a bank is money there are four main sources of
money for banks, first customer deposits, second the scale of mortgages and other
loans, third issuance of mortgage backed securities (MBS) and four loans from other
financial institution.

17. 16
By using these four sources of money, the banks insure the necessary resources to serve
customers borrowing needs while providing the availability of funds for depositor
withdrawals.
The first source of money of a bank is the customer deposits and the analysis and
relationship with clients at this end of the value chain is the same of that at the opposite
end, that is clients that ask for a loan usually also have a saving account or a checking
account and choose a bank to have this deposits on mainly the same basis of discounted
above, therefore have the same bargaining power.
The next two sources of money are closely related the sale of mortgages and mortgage
backed securities, Mortgages that comply with the guidelines for credit worthless and
repayment likelihoods and are smaller than the set threshold (Approx. $300,000), are
sold on the secondary market mainly to two organizations.
Banks sometime also need to look for financing from other banks or support funds such
as the import-export bank and other that provide cheap resources to finance operation
from particular industries or with particular condition. This source of financing have a
high bargaining power.
Because these sources of funds are strongly dependent on the market, the bargaining
power of suppliers is medium high, signaling that banks depend on take the market to
price their mortgage and securities but this pricing is influenced by the type and size of
the bank as well as the credit worthiness of the mortgage portfolio.
5.5 Intensity of competitive rivalry
With about approx. 3000 and more bank, it is not hard to say that Mexico has a very
fragmented industry compared to the banking system. In other developed country,
reveals that the banking system has gone through significant consolidation, this
consolidation had three main purpose, first increase the bank geographic coverage,
second increase the number of products and service offered to their clients, three
leverage on the economies of scale that the size providers.

18. 17
In several information, large banks not only spread their fixed cost across a wider
number of markets but can also test a service in a distant but relevant market. The
knowledge acquired and therefore increasing the probabilities of success such as:
Mandiri can deploy a new mobile banking system in Mexico, and test their product in
Mexico.
For most industries, the intensity of competitive rivalry is the major determinant of the
competitiveness of the industry.
 Sustainable competitive advantage through innovation
 Competition between online and offline companies
 Level of advertising expense
 Powerful competitive strategy
 Flexibility through customization, volume and variety
6. Proposed Entrant Strategy
Core Value: Maximizing Retail Banking
As Bank Mandiri would have started their operation in Mexico using low amount of
resources and market knowledge, it wouldn’t be a wise strategy to conduct a head-to-head
competition to existing giant banking company that currently own a massive market share.
Besides lack in capital ownership, their weak brand awareness would be their main
weakness in competing in whole Mexican market. Therefore, Bank Mandiri should focus on
niche market that hasn’t been entered by banking giant in Mexico.
The key advantages that Bank Mandiri acquire is the strong presence in Micro Finance
that represents its vision and long experience to have a better impact to local economic
society while maintaining its profitability. Since Mexico had a relatively similar characteristic
as Indonesia, applying micro financing scheme in Mexico would likely experience a same
success as it had in Indonesia.

19. 18
As the income structure of Mexico represents a higher piece in their middle to low
income, the brand awareness would be less sensitive matter in determining market
penetration success. Moreover, the core value and pricing emphasize would be a better
approach to penetrate even more applicant regardless demographic area.
In Brief, Mexican market demands a banking service that focuses on the strong
existence in retail banking especially in micro funding scheme. For this reason, Bank Mandiri
should maximize its competitive advantage in form of knowledge and experience in
empowering Indonesian small and medium enterprises (SMEs) and apply it to Mexican
market that had a similar economic environment with Indonesia.
Joint Venture Strategy
Considering Bank Mandiri low experience in Mexican industry, building brand from
scratch would be an unwise decision through several reasons:
 High Initial Investment
o As Banking Industry require high amount of initial asset or capital expenditure
 Regulation and Political Risk
o Moving abroad in unfamiliar environment would present a risky circumstances
to foreign company, especially in emerging country such as mexico, due to its
unstable political environment.
o As political environment highly correlated with the regulation beneath
operational of an industry. The higher the uncertainties would reflect higher risk
of regulation changes that would lead to operation disruption.
 Low brand awareness
o Brand awareness had become a significant measure in retail market. Building a
good awareness would take high amount of cost and time.

20. 19
 Cultural Differences Risk
o Different country reflects different economy and also different culture.
Therefore, it would be risky to conduct a banking business that had higher
consumer contact without any cooperation with other company.
Therefore, the proposed strategy gathered in this reports is to apply joint venture with
local banking company to build a micro finance oriented company to provide a lower
experience and capital requirements. Through this strategy, Bank Mandiri could exploit its
expertise in applying microfinance in Indonesia while adopting its strategy using assistance
from the local partner in term of local wisdom and knowledge. Using Joint Venture, Bank
Mandiri could minimize the risk explained above and therefore put a better utilization of its
competitive advantage and expand with less possible risk of being failure especially due to the
weak brand awareness. It’s caused by using Joint Venture, it could have an extension from Bank
Mandiri’s partner previous brand and therefore absorb current market’s potential that had
already taken by its partner.
Several local banks that focus on micro finance and could be a partner for Mandiri
are:
 Compartamos Banco, founded in 1990 as the biggest micro finance bank that
seeks to serve South American Small and Medium Enterprise through several
products including, Woman Credit, Grow Your Business Credit and Merchant
Credit
 Inter American Development Bank (IADB), largest development bank in South
America, including Mexico, that differentiate itself as a Bank with great
empowerment to local community.