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INDONESIAN BUSINESS CULTURE

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Take Home Mid term Examination of Cultural Diversity


Lecturer : Sendy Widjaja B. Comm, MM, MBA

Prepared By :

Hesty Oktariza 014200900073 Banking and Finance

PRESIDENT UNIVERSITY
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Introduction
The Indonesian national motto Unity in Diversity points to one of the greatest attractions of Indonesia. There are some 300 ethnic groups, a result of both the country's unique geography and history. With a population of more than 200 million people on 13,667 islands, Indonesia is the worlds largest archipelago located between Asia and australia, and between the Pasific and the Indian Oceans. Indonesia is also well-known for its abundant natural resources: oil & gas, minerals, forestry, agriculture and marine products including its stunning natural scenery. Indonesia is just like an awakening giant that is moving toward accelerated growth and right now is a very promising market in business.

Indonesia can be described as mixing of many cultures: Dutch, Malay, Chinese, Indian, Arabian, Muslim, Christian, Budhist and Hindu which created an unique and rich culture. Dutch heritage For about 3.5 centuries, Indonesia was colonialized by Dutch and this left a long lasting influence. As one of the most egalitarian in the world, Dutch community always consider everyone worthy of esteem. Clients are respected but superiority are not admitted. Indonesian translates this into a culture of consensus that valuing diversity of opinion. Chinese influence Traders from China settled in Indonesia hundreds years ago and have been maintained a strong Chinese influence on business patterns (a mix

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of patience and speed of execution, wide margin of uncertainty, family oriented decisions). This hence grew alot of medium size businesses or family companies with Chinese owners.

Islam With 88% of the population is Muslim make Indonesia as the largest Muslim population in the world. Islam in Indonesian is a moderate Sunni but in fact largely influenced by Hinduism and Buddhism. But islam in Indonesia is not as strict as its source in Arabic world. It even blends nicely with Confusianism in the public and business life, which is shown with a social behavior called Ramah Tamah,that relies on courtesy to others, harmonious relationship within the community. As a result, Indonesians put group harmony above individual greed although diligence and hard work are appreciated. Traditional social & culture features Bahasa Indonesia as the official language is a strong unifying factor in a country where more than 300 distinct regional languages are still spoken. Each island or archipelago, such as Sumatra, Java, Bali, Kalimantan, Sulawesi, Papua, has its own languages and unique cultures which significantly influence the way people interact, work and make decisions.

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Key Concept on Indonesian Business Culture


Hierarchy Hierarchy in Indonesia can make your way much longer or shorter, its needed in all aspect especially in making business. Doing business in Indonesia need to take a deep understanding on its hierarchy and how does it works because hierarchy plays an important role in Indonesian culture. Respect is usually shown to people with status, power, position and age. Those who are respected will get a privilege to make group decision but still ties back to the idea of maintaining strong group cohensiveness and harmonious relationship. To call superiors or older people, people are often called "bapak" or "ibu", which means the equivalent of father or mother, sir or madam. Face The concept of face is about avoiding the cause of shame. As a result, people are very careful with the way they interact and speak in order to maintain group harmony. Someone should not ever offend, ridicule or shout at anyone. Any imperfections and blame should always be hidden and talked privately. The concept of face/shame is that Indonesian communicate quite indirectly, for example they would never wish to cause anyone shame by giving them a negative answer. So you are expected to say what people want heard rather than the truth. Bahasa Indonesian actually has 12 ways of saying "No" and several other ways of saying "Yes" when the actual meaning is "No". Time
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Like no other western countries, in Indonesia, time is not money. People prefer harmonic relationship rather than high profit but full of tenses relationship. The termJam Karet is very familiar in Indonesia since this country doesnt force punctuality. People in Indonesia tend to be flexible and relaxed with time. There is a famous proverb in Indonesia said Biar lambat asal selamat or Slow but sure, this reflects that Indonesian do not like to feel hurried including in business negotiation because they need time to make consideration and decision. Group Thinking Due to the diverse nature of Indonesian society there exist a strong pull towards the group, whether family, village or island. People will define themselves according to their ethnic group, family and place of birth. Because of the colectivist characteristic of the Indonesian society, group harmony get higher importance than individual greed.

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Cultural Dimensions of Indonesia


To study about influence of a country nature to the corporate culure, a Dutch scholar,Geert Hofstede did a research at IBMs corporation in 1991. This study survey IBM personnel in 40 countries, including Indonesia. Among the cultural dimension where Indonesia significantly stand out are; Revering Hierarchy (or Power Distance) It refers to how people think about equality and relationship with supervisors and subordinates. The study found that : Israel Germany Netherland s USA Japan France Hong Kong India West Africa Indonesia China Rusia 13 35 38 40 54 68 68 77 77 78 80 95 Rank & class are very important Rank & Class are less important

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From the table above, we can see that Indonesia has Power Distance (PDI) as its higest ranking Hofstede Dimension at 78. This is the indicator of a high level of inequality of power and gap on wealth within the society. Therefore, in businesses also tend to be extereme in hierarchial where decision making are fully organized by the senior leader in an organization or older people in family. Making deal or negotiating in Indonesia may also take longer time since its should pass through so many bureauracies before the final decision being taken. Your status is really important if you are in Indonesian society since they are status conscious. People are respect more one in higher status, position, power or even title. Promotion and selection are often based on relationship lines than on pure performance criteria (as viewed from the western perspective.) Thus, nepotism is rife in Indonesia and viewed with little or no concern. Indeed, as connections with the government or other organisations are the key to success, it could be argued that promotion through family connection is probably the most effective approach under the circumstances.

Individualism vs. Collectivism It is the extent to which a person sees herself as an individual rather than part of a group. The result show : USA Netherlan ds France Germany Israel Rusia India Japan Hong 91 80 71 67 54 50 48 46 25 Highly Individualistic

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Kong China West Africa


Indonesia

20 20
14 Rank & class are very important

Indonesia is the lowest score for Individualistic culture. The score on this Dimension indicates that Indonesian society is Collectivist. This is manifested in a close long-term commitment to the member 'group', whether is that a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules and regulations. In this collectivist society, opinions are determined by group members. People see themselves first as part of the group and are concern with the welfare of the group.

Uncertainty Avoidance Index Uncertainty avoidance refers to attitude towards risky situations, ambiguous behaviors, predictability and control. Below are the result of the research : Japan Rusia France 92 90 86 Avoid Risk

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Israel Germany China West Africa

81 65 60 54

Netherland 53 s Indonesia USA India


Hongkong

48 46 40
29

Indonesia is at the fourth position as high risk avoidance culture. This indicates the societys low leveloftolerance for uncertainty. Country in this level tend to create and implemented strict rules, laws, policies, and regulations in order to minimize or reduce the uncertainty. As a consequences, Indonesians society does not readily accept change and s very risk adverse. Combination of High Power Index and High Collectivism The combination of the high score of Power Distance, Collectivism and Uncertainty Avoidance create societies that are highly rule-oriented with laws, rules, regulations, and controls in order to reduce the amount of risk, while power and wealth gap occurs in society. When these three dimensions are combined, it creates a situation where leaders have virtually ultimate power and authority, and the rules, laws and regulations developed by those in power, reinforce their own leadership and control. It is not unusual for new leadership to arise from armed insurrection the ultimate power, rather than from

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diplomatic or democratic change. These culture create kind of caste system that separate people with power and wealth with people who are lack of everything but difficult to move significantly.

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Business Ethics in Indonesia


Business ethics in Indonesia is influenced along with its historical and geographical background. Cultural and religious perspective plays an important role in determining the business etiquette in Indonesia. Thus, understanding this aspect will help you a lot in conducting business in Indonesian society. Business Etiquette & Protocol (Dos and Donts) Indonesians very appreciate the forms of courtesy that demostrate selfcontrol which are politeness, respect, a smiling face, genial demeanour, pleasant voice, non-threteaning words and the most important, gestures. Indonesians are indirect communicators. What they say may be not exactly the same as their meaning. To get the real message, the listener should pay attention on both the lines and the body language. Due to their indirectness and the potential of losing face, Indonesians avoid confrontation. To be polite, they may tell you what they think you want to hear. If you offend them, they will mask their feelings and maintain a veil of civility. If an Indonesian begins to avoid you or acts coldly towards you, it indicates a serious problem. Voice Indonesians does not really accept aggresiveness that even rewarded in Western culture. Generally, Indonesians speak quietly with controlled tone. Load people would consider as sligthly aggressive. Introduction Doing business in Indonesia need to initialize by building Start by interpersonal introducing relationship.

yourself properly, then treating your clients like your own families could gain their sympathy and trust on you. For

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this reason, business will be more effective by face-to-face in making dealing rather than the use of electronic devices. Introduce yourself with not-too-firm handshaking and warm smile. Indonesians are a polite people and very tolerant towards foreigners and their manners. Indonesians like to establish relationships. The greeting process is very important. Be humble in your negotiations and give your business partner the highest respect. Indonesians prefer personal closing. If you ask simple question and call their name, you have done the ice breaking. They will feel secure and think that you are friendly. If you are being introduced to several people, always start with the eldest or most senior person first. Greetings Since Indonesian are very kind, greet and smile at everybody not with standing their level position will indicate your friendliness. Indonesian thinks that people who do not reply their smile are arrogant and not easy to talk with. Smiling at them can make them comfortable. spect. A handshake is the most common greeting accompanied with the word "Selamat". Respect on values and beliefs Regarding to the diversity, various religions, race, ethnic groups with various cultures exist in Indonesia and we should aware on this. Respect and make harmonious relationship with people from various background. In Indonesia, religion is essential and sensitive matter. The majority of Indonesian are Moslems and not all of foods and drinks are allowed for them for example pork and alcohols which are forbidden (Haram). Ensure that the foods and drinks are certified Halal if you

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would like to offer them. Dont give beefs to Balinese because most of them are Hindus.

Business cards Business cards are normally exchanged after the initial handshake and greeting. As Indonesians are status conscious, business cards should display your title. This helps enchance your image and credibility. Dont accept/ give cards using left hand because it will be considered impolite.It is important to treat business cards with respect. Examine a business card you receive before putting it on the table next to you or in a business cardcase. It is important to treat business cards with respect. Appearance When attending normal business meetings, standard western business attire of suits and ties for men and suits or skirts and blouse for women are appropriate. Be aware of the heat and humidity in Indonesia and ensure that clothes are lightweight and made of natural fabrics. Respects are given more to those with uniforms or suit in Indonesia. Women should be aware of Muslim sensitivities and clothes should not be too revealing. Negotiations Indonesians decisions do not make hasty be because they might

viewed as not having given the matter sufficient consideration. Negotiations can be quite lengthy as Indonesians like to give enough time to carefully consider the business proposal. Business meetings Indonesian do not like making business in rush. The first meeting might be just an introduction rather than a serious business-talk. Indonesians to enter the meeting room according to rank. Although you do not have to do
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this, doing so would give a good impression. Be prepared to exercise patience. Recap what you have discussed in your meeting. Indonesians will never indicate if It may be do not necessary to explain yourself in a different way. they understand something so it is wise to summarise in order avoid any misunderstandings. Dining Etiquette Once, you might be invited to come to a breakfast, lunch or dinner after meeting. Dining etiquette in Indonesia is generally relaxed but depends on the setting and context. The more formal the occasion the more formal the behaviour. Below are some basic dining etiquette tips. As a guest, you will be shown to your place to sit that have been prepared. Food is often taken from a shared dish in the middle. You will be served the food and it would not be considered rude if you helped yourself after that.If the foods are served in buffet style, you may serve yourself first. It is considered polite if you insist people to go first before you. In formal situations, men are served before women. Wait to be invited to eat before you start. A fork and spoon are often the only utensils at the place setting. Depending on the situation some people may use their hands. Never, especially in dining, use your left hand to eat (if you use hands) or to pass the food. Gift-Giving Etiquette If it happened that you would like to give something for business counterpart, you better to consider their favourite or absention based on the ethnicity in general. Here are some general gift giving guidelines: Gift giving etiquette for the Chinese : The receiver might verbally refuse the gift before accept it, it shows that the receiver are not greeedy and consiidered

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polite. Items to avoid include scissors, knives or other cutting utensils as they indicate that you want to end the relationship. Gifts are not opened when received. Wrap the gift nicely in red or gold color, it symbolize auspicious. Gift giving etiquette for ethnic Malays / Muslims : Avoid giving any foods or drinks that is considered as Haram in Islam, they are include pork and alcohol.Any food substance should be "halal" - things that are not halal include anything with alcoholic ingredients or anything with pork derivatives such as gelatine. Halal meat means the animal has been slaughtered according to Islamic principles.Offer gifts with the right hand only. When the gift is received, do not expect them to open it directly. Gift giving etiquette for ethnic Indians : Wrap gifts in red, yellow or green paper or other bright colors as these bring good fortune. Do not give leather products to a Hindu. Do not give alcohol unless you are certain the recipient imbibes. Gifts are not opened when received. Women in Business in Indonesia Nowdays, equality happened as more and more Indonesian women that are well educated and entering the workforce. Although Indonesia is a predominantly Muslim country, yet many women hold positions of authority within organisations and it unlikely that female visitors will encounter any hostility from male colleagues. Female managers should behave in a very professional manner with male colleagues, as overt signs of friendship could be misconstrued. Be aware that, although same sex tactility is commonplace, touching between the sexes is frowned upon.

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Recommendations for Outsources and Expatriates Working in Indonesia


Put on your cultural glasses (Widjaja, Sendy. 2010) is things to do first for those who should live abroad. For expatriates or outsources that are going to live and work in Indonesia for a long time period, you better to start thinking and perceiving things from the Indonesians point of view.You must try to remain conscious of the possibility of difference when interacting with Indonesians. Here are some recommendations for you. For Western businessperson, physically it might seem that globalization has bring Indonesia into a more Western culture. In the bustle of Jakartas traffic, tall buildings and gleaming shopping centers it is all too easy to think of Indonesia as a modern nation. However, there are still so many patterns, values, attitudes and outlooks that planted out firmly in this indigenous culture. While Indonesia is the most collectivist country, USA and most of countries from Western culture are remain in high individualistic. This must be take into account when you try to understand the way people work in Indonesia. Always try to show respect for the hierarchy of the organisation you are dealing with in Indonesia, as well as the senior managers of an organisation. Try not to have middle-ranking employees from your company interfacing with the top-level managers from the Indonesian organisation. Nepotism and cronyism are a fact of business life and it is essential to have the right contacts in the right places. It may be necessary to have locals make the initial introductions - and these introductions can prove expensive. A combination of extreme dependency on hierarchy and nepotism has resulted in the development of extremely cumbersome bureaucracies. When dealing with these bureaucracies, patience is needed. For businessperson from Eastern, the cultures is more-or-less the same in several aspect : indirectness, collectivism, and the power distance. But of all the nations in East Asia, Indonesia remain in the strongest and the richest traditional cultural characteristic. So, watch it out.

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Beside the aspect of culture and people, you should also be prepare with the other aspect such as geographical, climate and weather differences. Indonesia is supposed to be tropical-climate country with only two seasons which are rainy and dry. When the transition seasons came, the weather could be windy and unstable, so you need to keep your health during the period.

Conclusion
This paper seeks to give an overview of those elements that are important when undertaking business in Indonesia, including the social and cultural landscape, recent developments regards 'governance', business structures, and business etiquettes. Much emphasis is given to the issue of culture, more specifically, the perceptions, outlooks and/or beliefs that affect human interaction. Among the key points that describe the business culture in Indonesia are; rich-cultural archipelago, collectivist, strong-hierarchy, importance of face/shame, and time flexibility. The analysis of Indonesian business culture can be explain by The Geert Hofstede cultural dimension. The research found that Indonesia is significantly higher than others countries at two dimension which are the Power Distance Index and Collectivism. The business etiquette and protocol shows the dos and donts of Indonesian culture manifestation. The etiquette evolves within culture in the way people communicate with others, introduce theirself, greet, wear attire, give something and also respect others believes.

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Bibliography
Published references
Widjaja, Sendy.(2010).Business Culture in Indonesia, first edition. Jakarta: Endoseni Murni Widjaya, Sendy. (2010). Class Lecture. President University

Internet references :
Indonesian Business Style http://www.worldbusinessculture.com/Indonesian-Business-Style.html Intercultural Tips Working in Indonesia http://www.kwintessential.co.uk/resources/global-etiquette/indonesia.html Onerview of Indonesia http://www.expat.or.id/info/info.html Doing Business in Indonesia http://okusi.net/garydean/works/bizindo.html Doing Business in Indonesia http://www.communicaid.com Indonesian Business Culture http://www.cifor.cgiar.org/Careers/Global/LivingWorking

Indonesian Business Etiquette, Vital Manners, Cross Cultural Communication and Geert Hoftede Analysis http://www.internations.org/guide/indonesia

Metal Finishing News (January, 2009), Indonesian Business Culture. See: http://www.mfn.com/mfn-worldwide/asia/Indonesiahtml Indonesia http://en.wikipedia.org/wiki/Indonesia

Video references :
http://il.youtube.com/watch?v=3z8Y3LknZFo

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