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The cultural issues of doing business in Indonesia

Posted 29.04. 2014 by Michal Wasserbauer / Last update on 6.04. 2017

The cultural issues of doing business in Indonesia Review by Michal Wasserbauer on 29. 4. 2014 Company Registration in Indonesia, Market Research in Indonesia, Work Permit in Indonesia, Product Registration in Indonesia, Local Partner Selection in Indonesia, Trade Mission in Indonesia, Company Formation in Indonesia, Company Establishment in Indonesia, Company Set Up in Indonesia, Payroll Outsourcing in Indonesia, Tax Reporting in Indonesia, Medical Product Registration in Indonesia, Medical Device Registration in Indonesia, Cosmetic Registration in Indonesia, Food Supplement Registration in Indonesia.
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Compared to other Asian countries, Indonesia is a promising country for developing a business in various sectors.

But in order to reduce any potential failure, companies should be proactive in managing the risks by adjusting to Indonesian culture. Effective risk management will ease business operations and strengthen the impact of the business. Some risks come from the culture of the people involved in the business. There are at least, three fundamental issues related to the business culture in Indonesia that must be addressed before starting to do any kind of business in Indonesia.

 

Lack of entrepreneurial mindset

It’s not only the employer who should have an entrepreneurial mindset. Everyone, including the government, should have that. An entrepreneurial mindset is critical for building and increasing the wealth of the country. Low entrepreneurial spirit can decrease the  growth of entrepreneurs in Indonesia. The desire to become an entrepreneur and the climate in Indonesia is different from other countries such as Singapore or United States. In China, the government encourages each household to produce a product and the government has invented plenty of market products. In Indonesia, it is more difficult because the regulations for company registration in Indonesia are quite strict. Yet, the number of potential human and natural resources Indonesia is abundantly large. Based on that fact, it should be possible to develop a rich nation. The large population is a tremendous capital asset.

High rate of business failure

Based on existing data in the United States, only 4% of start-ups will survive 10 years.  Half fail in the second year, and 80% go bankrupt by the fifth year. It happens in a country where the government strongly encourages the business community, which is as much as 11% entrepreneurs as. In Indonesia, the fail rate of businesses is higher due to many factors. It is not only personal factors that affect entrepreneurs, but also external factors that have a negative effect on their business. You must pay attention to root cause factors if you intend to pursue business set up in Indonesia. In Indonesia, 70% of business people are financially incompetent. In fact, financial controls are basic skills that a business person must have. Business culture in Indonesia is not yet accustomed to discussing business problems, and that contributes to business failure. Speaking about issues in business is considered a disgrace. In the developed countries, it is common to discuss business problems. As a result, more and more businesses learn from the failure of others, and businesses that are failing can gain the support of other businesses.

Mostly rely on the power of relationship

The business culture in Asian countries, such as Indonesia, is very different from the West. Frankly speaking, the value of relationship is really essential to success. Foreign workers will simply find it in their reliable local partner who acts as a mediary to grow a successful business. For instance, working with a knowledgeable partner that has close relationships with government officials can be the key to growing your future business. Actually, the political connections of your partners can help you in growing  your business because the government is involved in many business affairs. They want to see your real commitment to Indonesia through your presence, thus it is considered important to frequently visit the country. The point is, when you deal with the government, begin with the relevant department and find a way directly to the top because it is more effective than speak with the person in charge. However, be careful with the power of the relationship. In Indonesia, you will find that business can be done everywhere: on a tennis court, during dinner, or even during breakfast. The fact is Indonesian businesses are dominated by the Chinese, so it tends to be more formal and shrewd, and relies on facts with a specific focus. In Indonesia, your patience, smile, and persistence are immensely appreciated.



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