Question #3 Discuss the marketing and financial implications of selling Volkswagen and other automobile brands to Muslim buyers

in predominantly Islamic nations, such as Indonesia, as discussed on textbook page 66. You may want to discuss the financial practices used in Indonesia for selling and financing automobiles according to Sharia law and local consumer regulations. To define marketing and financial implications of selling an Islamic car, we shall define target market for such a car, and describe what will appeal to Muslim buyers to buy such a product including production specifics, marketing and selling techniques. Specifics of Islamic economy and, in particular, of Indonesia shall be taken into account. Target market Each fifth person in the world is Muslim. The number of Muslims for the last 5 years increased by 235% and now equals to 1.6 billion people. Interestingly, the top five countries with the highest number of Muslims are not traditional Islamic countries, but western countries. These are top ten countries with largest number of Muslim population: 1. France 5,8 millions 2. USA 7 millions 3. Germany 3 millions 4. Italy 1 millions 5. UK 1,6 millions 6. Indonesia 182,2 millions 7. Pakistan - 46,9 millions 8. Bangladesh 116,0 millions 9. India 109,6 millions 10. Iran 63,9 millions Therefore, the target market for Islamic car is traditional Islamic and non-Islamic countries with large number of Muslim citizens/residents including Europe and America. Market Determinants

With increased number of Muslim population, the demand for halal (allowable, permitted) goods is growing. The halal concept mostly associate with food production, where food is prepared in strict compliance with Sharia rules. There are specific rules for food preparation (specific butchering and bleeding requirements, prayers, religious affiliation of workers involved into production). However, the halal idea is not related to food only, it is also about lifestyle, relationships, clothing manners, etiquette, etc. Therefore, it is actively used not only in food industry, but also in pharmaceutics, cosmetology, education, healthcare and service sector. This is a very popular trend, particularly in Muslim countries, and annual growth of this market globally approaches 25%. One can conclude based on this specific trend and populous Muslim market, that Islamic cars can become another popular halal product. However, manufacturers shall define what Islamic car is and what specific features or adds-on it shall have to appeal to the Muslim. As suggested by Malaysia-based car manufacturer Proton, it shall include compass pointing to Mecca and a dedicated space to keep a copy of the Koran and a headscarf.3 Apart from that, production and servicing shall be done in accordance with Sharia law to appeal to Muslim population. The following considerations shall be thought of: Cars shall be produced by faithful Muslims, so the idea is that the Islamic car is made for Muslims by Muslims. Cars shall be sold at showrooms with separate entrances for men and woman. Staff shall follow Islamic etiquette and facilities can include Namaz room and toilets shall be designed accordingly. Car distributors can partner with Islamic banks to offer their customers loans and insurance as Islamic banking system as is consistent with the principles of Shariat. (According to Islamic banking principles, the payment or acceptance of specific interest or fees for loans of money is forbidden).

 Car manufacturer shall promote itself as a social oriented company through charity campaigns, as concern for poor people takes a central part in Islam. Thus, the whole value chain (inbound logistics, production, outbound logistics, marketing, sales and aftersale services) shall be Muslim-oriented. Those are specific attributes that would distinguish an Islamic car from an ordinary car. However, all these features are not difficult to imitate, so other car manufacturers can easily introduce such features to their product offerings. Therefore, some strong difficultto-imitate features shall be thought by Islamic car manufacturer to remain competitive. Indonesian Economy and Potential Demand for an Islamic Car Indonesian car market is considered one of the fastest growing markets in the world. It is the third largest market in Asia after Thailand and Malaysia and considered to catch up with Chinas in terms of its growth rate. According to the World Fact Book, with over 245,5 million citizens, Indonesia has the fourth largest population in the world. Median age of Indonesians is 28 years; 86% of population are Muslims. During the global recession, Indonesia outperformed most of its regional neighbors thanks to major reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. As to the banking system, in order to provide a wider banking services alternative to Indonesian economy, the development of Islamic banking in Indonesia is implemented under dual banking system which includes Islamic banking and conventional banking systems that jointly support a wider public fund mobilization. The characteristic of Islamic banking operation is based on partnership and mutual benefits principle provides an alternative banking system with mutual benefits both for the public and the bank. This system will give priorities to aspects related to fairness in transaction and ethical investment by underlining the values of togetherness and partnership in production, and by avoiding any speculative activity in financial transaction. By providing various products and banking services supported by variative

financial scheme, Islamic banking will be a credible alternative that can be benefited by all of Indonesian people without exception. An extensive use of various Islamic financial products and instrument will help attaching financial sector and real sector and create harmonization between the two sectors. In addition to support financial and business the widely use of Islamic product and instrument will also reduce speculative transactions in thus the economy supports the stability of overall financial system. At the end, the Islamic banking will significantly contribute to the achievement of mid-long term price stability. Therefore, with its boosting economy, fast-growing car market and favorable consumer lending conditions under Islamic banking system, Indonesia definitely has a huge potential demand for inexpensive Islamic cars. Although, there are some risks associated with poor infrastructure, corruption, high unemployment rate, poverty and imperfect legislation of the country.

References 1. http://www.imam.ru/articles/stati.html 1 Retrieved May 26, 2011 2. http://articles.gazeta.kz/art.asp?aid=319010 Retrieved May 26, 2011 3. http://news.bbc.co.uk/2/hi/asia-pacific/7089707.stm 4. http://www.shahfoundationbd.org/hannan/article20.html 5. http://www.globalintelligence.com/insights-analysis/asia-news-update/asia-newsupdate-january-1-2010/ 6. http://www.businessweek.com/magazine/content/04_42/b3904068.htm 7. https://www.cia.gov/library/publications/the-world-factbook/geos/id.html