doing business in indonesia and cultural issues

The Cultural Issues of Doing Business in Indonesia

  • InCorp Editorial Team
  • 29 April 2014
  • 4 minute reading time

Compared to other Asian countries, doing business in Indonesia is more promising in that it offers limitless opportunities in various sectors, not to mention the huge population and low labor cost. With this, there could be cultural issues in Indonesia when starting a business there.

But in order to reduce any potential failure, companies should be proactive in managing the risks by adjusting to the 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. Address the issues before you start doing any kind of business in Indonesia.

Most Common Cultural Issues in Indonesia When Doing Business

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 the United States.

In China, the government encourages each household to produce a product. Its 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 are 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.

In Indonesia, the fail rate of businesses is higher due to many factors. It is not only personal factors that affect entrepreneurs. External factors also have negative impacts 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. Indonesian people are not yet accustomed to discussing business problems. This contributes to business failure.

Many consider speaking about issues in business 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. Businesses that are failing can gain the support of other businesses.

Most rely on the power of relationship

The business culture in Asian countries, such as Indonesia, is very different from the West. 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. The political connections of your partners can help you grow business because many business affairs involve the government.

They want to see your real commitment to Indonesia through your presence. Thus, it is considered important to frequently visit the country. When you deal with the government, begin with the relevant department. Then, find a way directly to the top. 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.

Doing Business Without Cultural Issues in Indonesia with Cekindo

As a leading consulting company with 10 years of experience in Indonesia, Cekindo can provide you with consultation on cultural issues, market entry, business setup, and more.

Our team of legal specialists and professional consultants will leverage their expertise, knowledge, and skills to assist you in penetrating the market.

Consult with us for free by first filling in the form below.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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