Executive Summary

In Indonesia, Only 3% of family businesses which still exist up until now were built in
1932 to 1943, 2% were built in 1944-1955, 10% were built in 1956-1967, 24% were built in
1968 – 1979, 24% were built in 1980 – 1991 and 37% were built in 1992 – 2003, the
composition is dominated by relatively new companies. On the positive side the data shows us
that within the last decade there has been good progress in Indonesian family businesses
development. It also demonstrates there has been improvement in business management. The
research analyzes the steps needed in small scale Indonesian family businesses life cycle to
enable them enhancing their transformation and growing ability into professional ones.
Moreover, businesses could also learn from the failure and success of others.
The research applies five stage models which consist of: existence, survival, success,
renewal and decline. First, the existence stage is known as entrepreneurial or birth stage, founder
communicated and realized business idea thus business is still fragile. Simple organization
structure is applied thus information is processed informally and documented in the form of
hand-writings. Second, the survival stage, company has accomplish to overcome start-up
problems, growth is excellent and founder spots on new opportunities however the founder trap
also starts to exist. Third, the success stage, day to day operational activity started to be handled
by professional director except when competent relatives do exist. However, it is still difficult to
give up the authority for running the business to outsiders. Fourth, the renewal stage, company
wishes to re-experience early stages; execute collaboration and teamwork to accelerate
innovation and creativity by infiltrating matrix structure, thus decision making will be much
decentralized. Corporate is still big and bureaucratic but its members are driven to work-hard.
The research analyses PT. Nyonya Meneer, a traditional herbs and medicines company.
The sample was chosen attributed to its 88 years business period and has been lead by three
generations. The methodology uses non-participative observer method. Qualitative design
(Naumes, 1979) is applied to observe participant as reference (Weber, 1968). The research uses
secondary data which has been well publicized yet by mass media and also by the company
itself. Secondary data is utilized to compare the result obtained through interview with the one
that is understood and broadcasted by mass media. Obtained information then grouped to analyze
its life cycle stages of the business sample.
Mrs. Meneer company was formed in 1919 by Lauw Ping Nio who was well-known as
Mrs. Meneer. At the beginning Mrs. Meneer mixed herbs to help people with illness. All and all
it was done simply to lend a hand for charity purpose without requesting for any payments.
Business foundation was triggered by her spouse’s death and since the traditional herbal
medicine business started, she was able to supply her customers regularly thus customers were
able to buy directly and people no longer felt hesitate asking for favors.
The herb’s effectiveness popularity has becoming well-spread through word of mouth.
Orders started coming from outside Semarang city, product demands increased drastically which
made Mrs. Meneer no longer able to deliver the herbs on her own. The problem is solved by
changing product packages by putting her picture as an authenticity guarantee. Mrs. Meneer
started to expand her business by opening a shop in Padamaran and she kept developing her
recipes. Any reference books related to many kinds of medical plants were read to find new
discoveries. Her two daughters (Lucy and Marie) were actively included within the daily
activities, with her full passion and persistency Mrs. Meneer started analyze production needs,
projected raw material availability and also planned to increase her market share. Moreover, Mrs.
Meneer began to search for distribution agents who are willing to sell her products. Her first
agents were in Cirebon, Jogjakarta and Solo. Mrs. Meneer’s company had becoming more
successful with the increasing number of employees, her leadership style was discipline and
direct manner, affectionate but wise. Her philosophy regarding profit was to share it with others
which made the harmony within the work place and enhanced her employees’ hard-working
characters. Nonnie, her first daughter got married and moved to Jakarta to open a shop in Juanda
Pasar Street with the intention of improving their distributions channels. In late 40’ish, Mrs.
Meneer’s products had been brought by many Chinese-Indonesian doctors to abroad countries.
Many Dutch people were interested to bring her products to their homeland. She decided on
changing her company form became partnership in 1952 and observed carefully every word
within the certificate which claimed Lucy and Marie as corporate commissaries, herself as the
Chief Director and Hans Ramana as Vice of Chief Director.
Product’s distribution had started to be well-organized in 1952, a truck was provided to
load and freight the traditional herb medicine to Surabaya and Jakarta. She also bought a
Germany grinding machine with 100 times bigger capacity compared to human’s; it needed only
an hour compared to three days when it was done manually. Mrs. Meneer realized that traditional
herbs medicines are health products; therefore she had always reminded to keep excellent
hygienic level. Mrs. Meneer’s took an active role in the company, decided rules and regulation
and displayed superb commitment for its development. Founder managed the company directly,
started from mixing to selling, her skills and ability to process these spices was derived from her
many years experience.
In 1967 the company was formally trusted over to her son-in-law, Hans Ramana, the Vice
Director. Her daughter, Lucy Saerang, Marie Kalalo and Has Pangemanan sat down within the
commission board. Management model was still following founder’s model and simple
management system was employed. Beauty products lines were developed. Mrs. Meneer’s began
to send her products to smaller Indonesian regions using limited equipments and vehicles. In the
70’ish, the industry started to undergo intense competition level, the number of traditional herbs
medicine (jamu) companies recorded was about 70 companies. Hans Ramana short leadership
tenure ended in 1976, he passed away in Honolulu, U.S.A. and the business was changed into
corporation in 1977. Table 8 shows the transition era when leadership transferred from first
generation to first successor. It also shows the increasing demands for traditional herbs medicine
increased the industry competition, PT. Sido Muncul and PT. Air Mancur were the main
competitors within the periods.
On Sunday, 23rd April 1978, 83 years old Mrs. Meneer passed away. The first director
position was trusted to Nonnie Saerang, the second was handed over to Hans Pangemanan.
Meanwhile commissary position was held by Marie Kalalo, Lucy Saerang and Charles Saerang.
Business was exclusively kept within family members, reserved their traditional authenticity
characters and still large profit-oriented. The same traditional management technique was still
employed. The main obstacle was to rebuild traditional herbs medicine image which had been
slowly overwhelmed by pharmacy’s medicine reputation. Conflicts between majorities group
and minority group started after three years Mrs. Meneer passed away. Fortunately Mrs. Meneer
had developed distribution system to gather information, ideas and data from customers such as:
critics, customers’ needs or any other suggestions to increase production quality. Products within
the market were controlled and maintained. The company maintained partnership between
manufacturer and agents/distributors. Advertising and promotion were done to increase sales and
popularity. Mrs. Meneer’s traditional herbs medicine image were famous among women and had
reached Sumatera, Sulawesi, Maluku and even Irian Jaya islands.
Anxiousness and stressful atmosphere began on the 15th January 1985 with the hitting
incident where it was taken to the green court with assaulting claim. The internal conflict had
made Mrs. Meneer’s company stopped the operational activities for half a month (started from
Saturday, 30 November 1985 until Wednesday, 4 December 1985) but they were still giving the
core salaries and wages to the employees as the result, the company did not earn anything but
had to pay expenses. The conflict was solved when the majority groups bought-back the minority
share in 20th March 1986. As the conflict ended, the company began to improve and correct the
company’s boards of director arrangements. For over a year the company did not develop new
jamu products. Some of distribution and agents did not receive the supply they ordered thus
some partnership relationships were neglected and it happened right when demands reached the
peak. Therefore, competitors used this moment to supply the market with their products. In
consequence, their market share and demands increased significantly. In 1987 – 1989 periods,
the company tried to fix their distribution channels, packaging, maintaining good relationships
with employees and conducting continuous innovations. Plasma Agriculture program was
developed to sustain product’s efficiency in order to increase the certainty on receiving raw
materials quantity, quality and price stability levels. Mrs. Meneer’s product packaging was
modernized to increase customers’ eagerness and branding toward the products. The company
has started to use recycled material as their packaging material. As the result, the company’s
product image has been continuously becoming better and was able to penetrate abroad countries
Malaysia, Brunnei Darusalam and Singapore. It had also awarded employees with excellent
performance and loyalty. Product diversification was driven by the changing trend, therefore the
company tried to fulfill the market’s demand towards instant products. In 1989, Mrs. Meneer’s
company owned 150 traditional herbs medicine (jamu) product lines.
During 1990’ish periods, the company was handed over to the third generation.
Competitors had increased dramatically to 300-500 companies in Indonesia. However, Mrs.
Meneer’s company had 34% national market share and the rest were spread within abroad
countries. In 1995, product lines increased to 206 variety and in 2001 it reached 254 products.
Clinically-tested products were done to increase traditional medicines quality to make their
products able to compete world-wide, it was done within five main products, which were:
traditional herbs medicine (jamu) for back pain, diabetes, diarrhea, hypertension and cholesterol
The new innovation boosted product demands which reached 270 tons per month and also to the
growing customers’ fanatics. Mrs. Meneer’s owned 40 distribution agents wide spread within 19
Indonesian provinces throughout these number of distribution agents, company were able to
strengthen and adding more outlets to become 28.665 outlets with 57.330 employees. The
number of abroad outlets was 4.900 within twelve countries, which are: Malaysia, Philippines,
Korea, Netherlands, Taiwan, Japan, U.S.A, Brunei, Arabia, Vietnam, Singapore, New Zealand
and Denmark.
Several problems identical to family business are: (1) unfocused strategic planning,
decision making and resources allocation processes (2) informal and unsystematic procedures on
solving the problems related to succession (3) tendency to react reluctantly towards changes
although maintaining a sustainable business and continuously conducting innovative and creative
improvements to increase the company’s service quality for its customers and business partners
are critical. To become successful family businesses, the combination of three main aspects
(business management, family management, ownership management) is essential.
 LIFE CYCLE OF INDONESIAN FAMILY BUSINESS

Prepared by: David Sukardi Kodrat and Lenny Gunawan

David Sukardi Kodrat:

Affiliation : AMA (Association of Indonesian Managers),
ISEI (Association of Indonesian Economic Bachelors),
ADIWIRA (Association of Entrepreneurship Education).
Address: Waterpark Boulevard, Citraraya, Surabaya 60216, East Java-Indonesia
Contact Number: +62811334092, +62317451699
Email address : david.sukardi@ciputra.ac.id
: kodrat_05@yahoo.com

Lenny Gunawan:
Affiliation : Monash University Alumni and
ISEI (Association of Indonesian Economic Bachelors).
Address : Waterpark Boulevard, Citraraya, Surabaya 60216, East Java-Indonesia
Contact Number: +62817309705, +62317451699
Email address : lenny.gunawan@ciputra.ac.id
: michjoey@excite.com

Economy Faculty of International Business Management Department

Ciputra University, Indonesia
2007
 LIFE CYCLE OF INDONESIAN FAMILY BUSINESS

David Sukardi Kodrat

Lenny Gunawan

Economy Faculty of International Business Management Department

Ciputra University

ABSTRACT

The research main purpose is to explain the life cycle of Indonesian family businesses
and how to develop their ability transforming them into professional ones. Generally, Indonesian
family businesses are started by close family circle or immediate family. Almost one-third of
family businesses were started individually, while the rest were started by two or more people.
Only 3% of family businesses which still exist up until now were built in 1932 to 1943,
2% were built in 1944-1955, 10% were built in 1956-1967, 24% were built in 1968 – 1979, 24%
were built in 1980 – 1991 and 37% were built in 1992 – 2003. The phenomena shows how
difficult it is to maintain and transform start-up family businesses into corporate family
businesses.
Business ideas may come as easy as within dinner interactions, discussion with family
members or business communication among relatives. Many entrepreneurs come to realize the
difficulties of realizing the ideas alone, thus they start to find confidence modalities from the
other family members. This supportive partnership attitude is mainly bonded with trust and
attached by the same business vision that usually happened within spouses.
The founder of family business focuses on the hard work of building and growing the
company, dealing with variety of start-up business obstacles. When family businesses have
become bigger and own much stronger power as a company, the second generation/extended
family will heritage and therefore joint the business, their arrival influences the business’s
nature. Moreover, when more generations join the business, these changes makes the business
becomes a dynasty family business.
Family and business values contradictions are likely to occur when new generations
arrive and within each business stages. Moreover, some dilemmas also appear such as: whether
to give job opportunity to unemployed family members regardless their abilities and skills or
employing competent individuals. Several problems identical to family business are: (1)
unfocused strategic planning, decision making and resources allocation processes (2) informal
and unsystematic procedures on solving the problems related to succession (3) tends to react
reluctantly towards changes without obvious short-term needs, although they realize maintaining
a sustainable business and continuously conducting innovative and creative improvements to
increase the company’s service quality for its customers and business partners are critical. To
become successful family businesses, the combination of three main aspects (business
management, family management, ownership management) is essential.

Key word: Life cycle of Indonesian family business, transform, professional, dynasty family,
business partners.
Foreword
An interesting myth within family business that is known not only in Indonesia: “the first
generation builds the business; the second enjoys, while the third destroys it.” The saying
explains that the action of maintaining the business and handing it over to the second generation,
is not an easy thing to be done, thus it gets even harder transferring it to further generations.
Family business is mainly characterized by the significant ownership and contributions
from family members within the business management. Therefore, automatically they anticipate
that leadership and supervisory roles will be given to and conducted by successors. The life cycle
model shows that companies’ growing and development stages are similar to human although
every company might go through varies experiences which differ one to another.
A survey in Australia proves that 71% family businesses owned by first generation, 20%
of them owned by the first successor and no more than 9% owned by the next successor
(Astrachan, 2003). As survey in America demonstrates that 90 % family businesses owned by
first generation, 13% by the first successor and only 10% owned by the next successor (Paisner,
1999).
In Indonesia, Only 3% of family businesses which still exist up until now were built in
1932 to 1943, 2% were built in 1944-1955, 10% were built in 1956-1967, 24% were built in
1968 – 1979, 24% were built in 1980 – 1991 and 37% were built in 1992 – 2003, within these
establishment periods, we may observe that its composition is dominated by companies which
ages are relatively new (no more than 3 decades). On the positive side the data shows us that
there has been good progress in Indonesian family businesses development, especially within the
last decade. These new companies’ existences are within the middle up level. Thus, the data also
demonstrates there has been improvement within the business management that allows them to
grow faster.
The research analyzes the steps within Indonesian family businesses life cycle for small
scale companies so they will be able to enhance their transformation ability and growing into
professional ones. Moreover, businesses could also learn from the failure and success of others.

Family business’ life cycle

Prior business’ life cycle literatures were used to predict company’s development
progress (Greiner, 1972; and Churchill and Lewis, 1983). The latest findings within this area
were used to comprehend the practical essence on managing businesses’ development (Miller
and Shamsie, 2001).
Business’ life cycle adopts concept in biology (Penrose, 1952; Downs, 1967; and Greiner,
1972). Like humans, business also experiences life cycle from baby (existence) (Tichy, 1980)
grows to teenager (survival) (Mintzberg, 1989) and then becoming old (maturity and declining
stages) or die (saturated) (Kimberly and Miles, 1980). Nonetheless, human’s life cycle is
determined by their ages. Company’s business period also influence its growth even though it is
not the critical factor. The practical evidence shows that there has been insignificant correlation
between company’s business period and its life cycle (Susanto, 2005). There are some
companies which exist within centuries and still running excellent businesses, but some still
within 20 years and has already started to be grasping for energy.
Company’s life cycle theoretical idea is to determine where the company’s current stand
point and where it heads towards the next point. Every point in company’s life cycle is a loosely
comprised set of organizational activities and structures (Hanks, 1990). Several important notes
on understanding organization life cycle are: (1) organization might return to the previous life
cycle point (Drazin and Kazanjian, 1990), (2) organization might be in a certain life cycle point
for a long period (Miller and Friesen, 1984) and (3) organization which failed to pass early
stages will rapidly gone through declining, saturation and finally dying stages (Churchill and
Lewis, 1983).
There are several understandings about company’s life cycle concept to be observed: (1)
the number of stages exist within companies’ life cycles varies between three to ten stages
(Adizes, 1979; Churchill and Lewis, 1983; Miller and Freisen, 1984; and Mintzberg, 1984) and
(2) differentiating small companies and large corporations (Churchill and Lewis, 1983) and
between commercial and non-profit organizations (Kimberly and Miles, 1980).
The research applies five stage models which consist of: existence, survival, success,
renewal and decline (Lester and Parnell, 1999 and Miller and Friesen, 1984) as shown in figure
one.
Existence stage is known as entrepreneurial or birth stage. In this stage, company’s
founder owns a business idea which is communicated and realized, the start-up business is still in
fragile condition with main problems such as: lack of cash flow, facing the unstable market, lack
of customers to support its existence, decision making problem, single-handed ownership and
authority managed by one or a few people. Generally, a simple organization structure is applied
thus information is processed informally and documented in the form of hand-writings.
In Survival stage, company has accomplished to overcome negative cash flow, revenue
has increased, company’s growth is excellent and founder spots on new opportunities however
the founder trap also starts to exist. In order to solve the problem good administration system
need to be employed. Founder also realizes that he could not work alone thus the formation of
board directions occurs.
Professional executives and relatives start to be invited to join the company. However,
when founder constantly thinks that only him/herself and his/her family and relatives are the
ones who are able to work well then the founder trap has started to take place. Consequently,
founder felt reluctance to hire professional executives or (if hired) they are not well-trusted in
running the company although recruited from big corporations, being well-paid but still reserved
as back-quarter players to the company, however founder feels the pride for his/her success on
recruiting the top executives although they are not fully authorized and given the flexibility.
Within the second stage, company able to advance their growth and starts to enter the
third stage which is success stage. In this stage, day to day operational activity has started to be
handled by professional director except when competent relatives do exist. However, founder
still feels reluctance to give up the authority for running the business to a stranger which is
simply understandable from the standpoint that founder did the all the hard work to establish the
company and wish to take pleasure in his/her success.
As soon as founder able to overcome those wishes and decides to hand over the authority,
he/she has to be mentally prepared as hiring other people means differences among individual
characteristics are highlighted. It is a fatal mistake when founder expects to find “tailor-made”
people like him/herself. Moreover, managing a start-up business surely is different with running
an established prospect-full business. In addition, within this stage company has entered
administrative and management improvement therefore recruited professional executives do not
substitute but compliment the founder’s management, administrative and systems.
When segregation of duty is clearly managed, top manager will be able to focus on future
strategic planning while middle managers focus on day-to-day activity. Organization’s structure
will be formally done and controlling is conducted through bureaucracy. However, bureaucracy
becomes the main critic in success stage for the inflexibility it creates in the company’s ability
responding to business environment changes.
Renewal stage, company wishes to re-experience the early stages; execute collaboration
and teamwork to accelerate innovation and creativity. Creativity can be infiltrated by doing
matrix structure thus decision making is much decentralized. Corporate is still big and
bureaucratic but its members are driven to work-hard.

Methodology
The research analyses PT. Nyonya Meneer, a traditional herbs (jamu) and medicines
company. The sample was chosen attributed to its 88 years business periods and has been lead by
three generations. The methodology uses non-participative observer method. Qualitative design
(Naumes, 1979) is applied to observe participant as reference (Weber, 1968).
The research uses secondary data which has been well publicized yet by mass media also
by the company itself. Secondary data is utilized to compare the result obtained through
interviews, with the one that is understood and broadcasted by mass media. Obtained
information was then grouped to analyze its life cycle stages within the 88 years business
operational periods.

Discussion

Founder runs the company

PT. Nyonya Meneer was formed in 1919 by Lauw Ping Nio who was well-known as Mrs.
Meneer. At the beginning Mrs. Meneer mixed herbs to help people with illness. All and all it was
done simply to lend a hand for charity purpose without requesting for any payments. Business
foundation was triggered by her spouse’s death and since the traditional herbal medicine
business started, she was able to supply her customers regularly. As the result, customers were
able to buy directly and people no longer felt hesitate asking for favors.
The herb’s effectiveness popularity had became well-spread through the word of mouth.
Relatives and friends outside Semarang city, (Central-Java province) started to place orders too,
product demands increased drastically and made Mrs. Meneer no longer able to deliver the herbs
on her own. The problem was solved by changing product packages by putting her picture as an
authenticity guarantee. The result was overwhelming, sales boosted dramatically as customers
felt as if products were delivered personally by Mrs. Meneer. Local sales had gone even further
when Mr. Soleh sold her traditional herb medicine using a carriage everyday. Further
information can be seen in table 1 (appendix).
Mrs. Meneer started to expand her business by opening a shop in Padamaran. The shop
was small but located strategically. At that time there were not many traditional herb medicine
products produced. Her products had dry texture, instantly-ready to be drunk at the shop. Product
lines were limited, such as: traditional herbs (jamu) for digestion system, jamu for men and jamu
for women.
Bringing into play her excellent creativity, Mrs. Meneer kept developing her recipes. Any
reference books related any medical plants were read to improve her new discoveries within
health and well-being area. Her two daughters (Lucy and Marie) were actively included within
her business daily activities and the number of demands kept increasing, productions were
smoothly rolling. As the result of her business passion and persistency, Mrs. Meneer started to
analyze production needs, she also projected raw material availability and planned to increase
her market share. Her entrepreneurial spirit had enhanced her force of will to keep her business
going and growing. Further information can be seen in table 2 (appendix).
In order to maintain the fantastic sales figures, Mrs. Meneer began to explore distribution
agents who are willing to sell her products. Her first agents were in Cirebon (West-Java
Province), Jogjakarta and Solo (Central-Java province).
Distribution channels in Jogjakarta were managed by Mrs. Meneer together with her
second spouse. They were routing the main commercial streets using a carriage, to sell the
products. Similar cases were gone through on finding willing partners to distribute her products
in Semarang city. Further information can be seen in table 3 (appendix).
Together with the increasing number of employees, Mrs. Meneer’s company had
becoming more successful. She led the company with disciplines and direct manner. Every
employee followed her working rhythm which was dedicated fully to the company. Besides her
direct manner, Mrs. Meneer also led her employees with affections and wisdom. Her fondness
and charity personalities drove her to hire a maid who was dedicated to prepare the employees
meals. No other company had done the same thing during that periods.
Her philosophy about profit was to share it out together with others. It created the work
place harmony and enhance her employees’ will to work harder, thus the business productivity
level had increased. Further information can be seen in table 4 (appendix).
Nonnie, her first daughter got married and moved to Jakarta to open a shop in Juanda
Pasar Street with the intention of improving their business distributions channels (finding new
distribution partners) and market share in Jakarta, further down to Surabaya. In the 50’ish, Mrs.
Meneer’s products had been brought by many Chinese-Indonesian doctors and had been taken to
abroad countries. Many Dutch people were interested to bring her products to their homeland.
Further information can be seen in table 5 (appendix).
The immense development which followed the company’s growth had driven Mrs.
Meneer to plan even further for her future business sustainability. Her bright intellectual led her
to change her company form to become partnerships in 1952 using the service of a law firm.
Through her tedious and critical mind, Mrs. Meneer observed carefully every word within
the certificate which claimed that Lucy and Marie are the corporate commissaries, herself as the
Chief Director and Hans Ramana as Vice Director.
Product’s distribution has started to be well-organized started from 1952, a truck was
personally provided to load and freight products to Surabaya and Jakarta. Demand had started to
grow even bigger, consequently supply was increased to balance it. Mrs. Meneer bought a
grinding machine from Germany which capacity was 100 times compared to human capacity
when the work was done manually; it needed three days compared to an hour by machine.
Mrs. Meneer and her daughters had became more driven to create new recipes since
production was still rising. More research and development activities were done to enhance their
production lines. Pages of recipes were written daily and then experimented. Further information
can be seen in table 6 (appendix).
Mrs. Meneer realized that her products are health products; therefore she had always
reminded her employees to maintain excellent hygienic level in production. She also realized that
supplier bears significant responsibility to choose superb raw material quality, they also have the
responsibility on showing how products were dried, inventoried. Even the grinding process had
to be done perfectly as well as maintaining the correct packaging so the products’ freshness and
quality are well-preserved.
Within drying stage, spices should be treated according to their needs. Some had to be
completely dried, but some needed only to be half-way dried. It is important because when those
standards were failed to be adhered, raw material would not be able to be grinded well. In
addition, most raw materials had to be processed using a pipisan (a flat, smooth-surfaced stone
taken from mountains). Each pipisan is specifically provided for specific type of herbs or spices.
The degree of texture smoothness could be measured using the palm skin’s sensitivity.
Herbs powder which was used on skin such as parem and pilis, have to be exceptionally well-
grinded, while mangir, has coarser texture. Mrs. Meneer’s skills and ability to process these
spices was derived from her many years experience. Further information can be seen in table 7
(appendix).
Tables 1 to 7 show how the company formed by founder went through each stage from
existence to survival stages. Within these stages, founder took an active role in the company,
deciding rules and regulation, displaying superb commitment for its development. Founder also
managed the company directly, started from mixing to selling.

Company in transition periods from first generation to the first successor.

In 1967 Mrs. Meneer was still the Chief Director although formally the company was
trusted to her son-in-law, Hans Ramana (the Vice Director). Her daughter, Lucy Saerang, Marie
Kalalo and Has Pangemanan sat down within the commission board. Meanwhile, management
model was still following their mother’s model (large profit-oriented). The company still
employed a simple management system.
Product diversifications began to be enriched by many kinds of other illness medicines.
Product lines were also developed by varies beauty products such as: face powder, bathing scrub,
body deodorant products to hair and massage oil.
Mrs. Meneer’s sent her variety products to smaller Indonesian regions had increased her
market share although the activity was done using limited equipments and vehicles only.
Within the 70’ish, the industry started to undergo intense competition level. New
traditional herbs medicine competitors appeared and crowded the market with their products,
striving to capture customers’ interests. Within these periods, the number of traditional herbs
medicine companies recorded was about 70 companies (both the registered and unregistered
ones). Competitive atmosphere were obvious from the war price, the action of launching similar
product lines or fighting over market share in certain regions.
Hans Ramana short leadership tenure within the company was supported significantly by
Mrs. Meneer and his siblings. He was a down-to-earth characteristics and wise leader which
made him popular and becoming well-known. His reputation made him able to create
harmonized business relationships with his agents and distribution partners. Every once in a
while he went to many places to evaluate the selling process. As the result, his leadership had led
the company to grow incredibly.
However, In 1976, Hans passed away in Honolulu, U.S.A because of TBC illness in
Honolulu, U.S.A. before he was legally crowned as the next leader. Therefore the company had
to be handed over to the other siblings. In 1977, Mrs. Meneer’s business was changed from
partnership to corporation through the certificate made in front of an attorney named Tan A Sioe.
Table 8 shows the transition era where Mrs. Meneer’s business leadership transforms
from the first generation to the first successor. Operationally during these periods, the company’s
management was done by second generation. On the other hand, Mrs. Meneer herself tried to
scrutinize whether her successor deserve to handle the business’ next role leader. Unfortunately
in her case, her first to be successor passed away. As a consequence, Mrs. Meneer’s first
succession process did not go well. The effect of the incident will be described clearly within
company’s second generation’s operational activity.
Table 8 also shows the increasing demands for traditional herbs medicine increased the
industry competition which also implies that the other main competitors such as PT. Sido Muncul
and PT. Air Mancur used this opportunity to increase their market shares and sales. On the
positive side, we can conclude bigger market player has positive effects on growing the products
demand.

Company managed by second generation

Mrs. Meneer passed away when she was 83 years old on Sunday, 23rd April 1978, leaving
behind her 4 children and tens of grandchildren. The first director position was trusted to Nonnie
Saerang, second was handed over to Hans Pangemanan, meanwhile commissary position was
held by Marie Kalalo, Lucy Saerang and Charles Saerang. The main thoughts which linger in
everybody’s mind were how to keep the business exclusively only within family members.
Second was how to reserve their traditional authenticity characters and at the same time
producing even bigger profits, as abundantly as they could. Third, they wished the company
would still be operating using the same traditional management technique heritage from their
ancestor. In contrast, they also dealt one main significant problem which to rebuild traditional
herbs medicine image that had been slowly overwhelmed by pharmacy’s medicine reputation.
In the third year after Mrs. Meneer passed away, the company started to experience long-
term family conflicts between the majorities group (Nonnie Saerang, Hans Pangemanan (second
generation) and Charles Saerang (third generation) and the minority group (Lucy Saerang and
Marie Kalalo (second generation).
The majorities felt that they were the children who were prepared by Mrs. Meneer’s
herslf to continue her leadership in the company. On the other side, the minority felt that they
were the ones who did most of the hard-works, giving most of their time to service and develop
the company. They argued that the company’s secret weapon was still within their hands, which
was the expertise on herbs mixing.
Fortunately Mrs. Meneer had developed distribution system which main purpose was to
make products able to reach customers easily. The distribution channel main purpose was also to
gather information, ideas and data from customers whether it is about: critics, specific
customers’ needs regarding certain illness or any other suggestions which are useful to increase
the production quality. Products within the market were closely controlled and maintained,
where as defected products, packages and expired products were taken out from the retailers,
agents, small shops, carts and individual sales person and changed with the new ones. The
collaboration between manufacturer and agents/distributors was known as partnership.
Advertising and promotion were done to increase sales and the products’ popularity. Mrs.
Meneer’s traditional herbs medicine image were famous among women. During those periods,
the company’s priority product was endless-beauty traditional herbs. The active role in
distribution activities had brought the company’s products to reach Sumatera, Sulawesi, Maluku
and even Irian Jaya islands. Further information can be seen in table 9 (appendix).
For a very short period, the first director was held by Hans Pangemanan and second was
held by Charles Saerang from the majorities group however the condition did not last for a long
time as the family conflict was occurring. In order to calm down the situation, boards of direction
arrangements were changed to the team of Hans Pangemanan (from majority group) as the 1st
Director and Fritzcimons Kalalo (from minority group) as 2nd Director to lead the company.
However the new arrangement yet did not result harmony. Anxiousness and stressful atmosphere
had become worsen on the 15th January 1985 when the hitting incident of Pandu Oktavianus
(who was pro to Hans Pangemanan) by Alex Haryanto (pro Fritzcimons) took place. The
incident was taken to the green court with an assaulting claim.
The internal conflict had made Mrs. Meneer’s company stopped the operational activities
for half a month (started from Saturday, 30 November 1985 until Wednesday, 4 December 1985)
but they were still giving the basic salaries and wages to their employees. The arrangement was
done based on the agreement between the company, employees and government (labors and
workers department). As the consequence, the company did not earn anything within these
periods but had to pay expenses and therefore, the company’s condition got even worse by then.
The conflict was solved when the majority groups bought-back the minority share in 20th
March 1986. As the conflict ended, the company began to improve and did corrective actions in
the company’s boards of director arrangements. Hans Pangemanan was appointed as the Director
and Charles Saerang as the Marketing Director. Products promotions were done nationally and
internationally by conducting advertising in mass media, radio, putting brochures in the cities’
main streets, also the company gave sponsorships to many events. Product variety reached 120
kinds of traditional herbs medicine (jamu).
Within almost one year, Mrs. Meneer’s company did not develop new jamu product,
moreover some of distribution and agents did not receive the supply they ordered thus the some
partnership relationships were neglected. It was an unfortunate incident for the company since
the lack of product supply happened exactly when demand reached the peak point. Therefore,
competitors used this opportunity to supply their products to fulfill the neglected demand. In
consequence, their market share and sales had increased significantly. Further information can be
seen in table 10 (appendix).
In 1987 – 1989 periods, the company tried to fix their distribution channels, their
packaging, they also tried to maintain good relationships with employees and still conducting
continuous innovations. Plasma Agriculture program was developed to sustain their product’s
efficiency and to increase the certainty on receiving raw materials quantity, quality and price
stability levels. The program was accomplished by conducting training and mentorship on
agriculture, especially within modern herbs medicine planting area. The company also
guaranteed to procure the harvested products.
Mrs. Meneer’s product packaging was modernized in order to increase customers’
eagerness and branding toward the products. The company used recycled material (such as
degradable paper) as their packaging material so Mother Nature would not be polluted.
Moreover, quality control was enhanced continuously. They also maintained the quality of
packaging paper and its endurance as packaging material. In 1986, Mrs. Meneer’s company had
begun to use aluminium foil as the packaging material. The company had been trying to do
continuous improvement in their packaging beginning from the material used to developing
illustrations for every product.
As the result, the company’s product image had been continuously becoming better
which enabled the company to penetrate abroad countries. Although the strategy was not easy
and often giving them many obstacles such as: regulations and quota limitation from export
destination countries, they did not give up. The persistency had earned them the access to enter
markets in Malaysia, Brunnei Darusalam and Singapore at their early networking stage.
The company was able to maintain the excellent relationship with their employees, for
instance in 1986 the company conducted “an employee outing activity” to Tawang Mangu,
utilizing 12 buses. The company had also awarded employees with excellent performance and
loyalty.
Mrs. Meneer’s innovation did not merely limited to shapes and packages diversification
but also launched new innovative product line, compact powder. Started in 1989, they had
launched cosmetic, traditional shampoo and soap products as well. Product diversification was
driven by the changing life-style trend, the company tried to fulfill the market’s demand towards
instant products. The company realized that people did not wish to do time-consuming activities
anymore including in the way they drink medicine. New product lines were grouped into
traditional, cosmetics and other instant products.
Up until 1989, Mrs. Meneer’s company owned 150 traditional herbs medicine (jamu)
product lines, with variety textures such as: powder, boiled products or capsules started from
products with illness-prevention purpose, to medicines, to beauty products.
Tables 9 to 11 prove the failed regeneration process leads to continuous family conflicts
(from 1978 to 1989). Conflicts were solved when the majorities group bought-back the
minorities shares. Although it seems that the conflicts has been alleviated, new conflicts arose as
second generation handed it over to the third. An interesting message taken from it: human
greediness and insatiability towards money and power result constant conflicts.

Company managed by third generation

Within the 90’ish itself, there were 300-500 traditional herbs medicine (jamu) companies
in Indonesia. However, Mrs. Meneer’s company owned the 34% of national market share and the
rest were spread abroad. In order to overcome the increasingly competitive market, the company
had conducted innovative and creative attitude to increase their competitive advantage.
In 1995, product lines increased dramatically to 206 variety and continuously growing
every year. In 2001, it reached 254 products. Product diversifications varies from taste, texture,
usefulness and cosmetic products. Seventy percent of Mrs. Meneer’s products were dedicated to
women.
Clinically-tested products were done for five main products, which were: traditional herbs
medicine (jamu) for back pain, diabetes, diarrhea, hypertension and cholesterol. These research
innovations were continuously done to find other health discoveries, also to increase traditional
medicines quality and to make their products able compete world-wide. The outcomes of
conducting these clinically-tested medicines had given the company boosted product demands
which reached 270 tons per month and also the growing customers’ fanatics towards Mrs.
Meneer’s products.
Under the third generation’s leadership tenure, distribution channels were continuously
being mended. Within these periods, Mrs. Meneer’s owned 40 distribution agents wide spread
within 19 Indonesian provinces employing 225 employees, comprises Jabotabek (Jakarta, Bogor,
Tangerang, Bekasi), West-Java Province, Central-Java Province, East-Java Province, Jogjakarta,
Bali, South Borneo, East Borneo, West Borneo, Jambi, Nusa Tenggara Timur Province, North
Sumatera, South Sumatera, West Sumatera, North Sulawesi, Central Sulawesi, Riau Province,
Lampung and Irian Jaya.
Throughout these number of distribution agents, the company were able to strengthen and
added more outlets, becoming 28.665 outlets which employed 57.330 employees.
Mrs. Meneer’s International commerce management model was adjusted to the target
market’s rules and regulation conditions. Most marketing networks were built in accordance to
the trading model of each destination export country. The number of abroad outlets was 4.900
within twelve countries, which are: Malaysia, Philippines, Korea, Netherlands, Taiwan, Japan,
U.S.A, Brunei, Arabia, Vietnam, Singapore, New Zealand and Denmark.

Conclusion
Unlike most companies, family business has several structural difficulties which made its
management style becomes a little more complicated: (1) the higher possibilities of conflict
happened between family members cause high degree of company’s corporate politic.
Consequently the company becomes unfocused in doing their strategic planning, decision
making and resources allocation processes. (2) succession process affects significantly to the
company’s future sustainability therefore it becomes the most important agenda. However, most
family businesses do not employ formal and systematic procedures on solving succession related
problems. (3) Family business usually reacts reluctantly towards changes and transformation
practices because of the founder’s dominant role. The implications of changes are considered
taboo, whether they are within: strategy, system, culture also leadership style. The inflexibility
towards changes is the main reason for the family business’s low sustainability capacity.
In order to run a successful family business there are three aspects to be carefully
considered: business management, family management, and ownership management. To manage
a successful family business, all the three aspects need to be implied equally because they are
closely-correlated to each other. Wrong implication of these aspects would guarantee the failure
of company’s sustainability in the long run.
Business management relates to the strategy implication, vision and mission
implementation and also building organization design. This is a generic area where the condition
can be seen within any organization, whether it is a family business or not. Business
management aspect is important, however it becomes useless without the other two aspects.
Family management aspect comprises of: segregation of power within family members,
decision making regarding which members would be sitting in the boards of directors, building
and maintaining family bond and trust, balancing variety of intentions between family members’,
settling on family regulations, united the family’s vision, solving family conflicts and planning
succession within generations.
Meanwhile, ownership management consists of: determining the structural and
distribution ownership patterns within family members who are included in the business, equity
capitalization, maintaining the family mechanism control in the business, developing regulations
of equity’s withdrawal for non-family members and maintaining the family’s ownership
domination.
Successful regeneration process in family business means the ability to combine business
management, family management and ownership management as can be seen from the shadowed
area in figure 2.

The shadowed area in figure 2 shows the combination of business management, family
management and ownership management, it is called a good family business. The combination
between business management and family management is called potentially-conflicted family
business. The phenomenon becomes possible since the family members possess power and
accesses on company’s development area, thus he/she eager to own bigger ownership in the
business.
Meanwhile the combination of business management and ownership management is
called potential conflict family business since the person becomes a passive owner.
List of figures

Figure 1: Stages in Family Business Development

“Mr. Outside” Influx

Biz
Growth Extended
Family

Founder
Focus

Existence Survival Success Renewal Rejuvenate

Time

Figure 2: Family Business success model

Business
Management

Family Ownership
Management Management
List of tables

Table 1: Company within 1919 - 1922 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1919- Existence * Production oriented. Non formal Centralized * Descended spouse
1922 * Brand strategy triggered business
formation.
* Employs six
employees.
Source: modified secondary data

Table 2: Company within 1923 - 1925 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1923- Existence * Operate business * Non formal Centralized * Sole competitor
1925 using a shop was Jamu Jago
. * Product (1918).
Development * Re-married and
* Raw material had another child.
planning
Source: modified secondary data

Table 3: Company within 1926 - 1939 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1926- Existence * Distribution * Non formal Centralized * Limited
1939 division competitors
development * Employs 12
employees
Source: modified secondary data

Table 4: Company within 1940 - 1945 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1940- Existence * Role model * Non formal Centralized * Limited
1945 competitors
* Employ 16
employees
* Sent their son Hans
Ramana to study
abroad.
Source: modified secondary data
Table 5: Company within 1946 - 1950 periods
Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1946- Existence * Opened a branch * Non formal Centralized * Marriage of first
1950 daughter.
* Employs fifty
employees.
Source: modified secondary data

Table 6: Company within 1951 - 1952 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1951- Survival * Management * Formal - Centralized * Company was in
1952 system Functional the form of
* Production partnership.
efficiency * Arrival of new
(Bought Germany competitor PT.
machine) Sido Muncul
* Recipe testing * Increasing demand

Source: modified secondary data

Table 7: Company within 1953 - 1966 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1953- Survival * Quality Control * Formal - Centralized * New competitor,
1966 Functional PT. Air Mancur.
* Demand was still
increasing.

Source: modified secondary data

Table 8: Company within 1967 - 1977 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1967- Survival * Revising * Formal - Centralized * Company has
1977 management Functional evolved to become
system a corporate
* Profit oriented * Increasing demand
* Product * Competitive
diversification competition level
* Handing over to
successor
Source: modified secondary data
Table 9: Company within 1978 - 1984 periods
Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1978- Survival * Defending family * Formal - Dual decisions * Even more
1984 leadership within Functional generated from competitive
the company majority and industrial
* Building minority parties competition
distribution * The growth of
networking traditional herbs
* Create adaptive medicine industry
management * European
regulation limited
herbs medicine
exports
* 1300 employees
* Mrs. Meneer
descended
* Family conflict
Source: modified secondary data

Table 10: Company within 1985 - 1986 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1985- Existence * Bought-back * Formal - Dual decisions * Even more
1986 minority shares Functional generated from competitive
* Management majority and industrial
conflicts minority parties competition
* The growth of
traditional herbs
medicine industry
* 1300 employees
* Family conflict
Source: modified secondary data
Table 11: Company within 1987 - 1989 periods
Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1987- Survival * Supply chain * Formal - Centralized * Even more
1989 management Functional competitive
* Boosting industrial
products’ image competition
* Performance * The growth of
system traditional herbs
* Product medicine industry
diversification * European
* Innovation regulation limited
herbs medicine
exports
* 2000 employees
* Family conflict
Source: modified secondary data

Table 12: Company within 1990 - 2005 periods

Year Life Cycle Strategy Structure Decision Situation
Stage Making Style
1990- Survival * Enhance * Formal - Centralized * Adverse
2005 innovation to Functional competition
create difficult to market
be duplicated * The growth of
products traditional herbs
* Increase market medicine industry
sensitivity * 3000 employees
* Blue ocean
* Developing export
market
Source: modified secondary data
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