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Lecturer : Sendy Widjaja B. Comm, MM, MBA

Prepared By :

Hesty Oktariza014200900073

Banking and Finance

PRESIDENT UNIVERSITY

Indonesian Business Culture

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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 world’s 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 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.

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IslamWith 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 CultureHierarchy

Hierarchy in Indonesia can make your way much longer or shorter, it’s 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

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 term”Jam

Karet” is very familiar in Indonesia since this country

doesn’t force punctuality. People in Indonesia tend to be

flexible and relaxed with time.

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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 IndonesiaTo study about influence of a country nature to the corporate culure, a Dutch

scholar,Geert Hofstede did a research at IBM’s 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 13 Rank & Class are less important Germany 35Netherlands 38USA 40Japan 54France 68Hong Kong 68India 77West Africa 77Indonesia 78China 80Rusia 95 Rank & class are very important

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 it’s 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

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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 91 Highly Individualistic Netherlands 80France 71Germany 67Israel 54Rusia 50India 48Japan 46Hong Kong 25China 20West Africa 20Indonesia 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.

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Uncertainty Avoidance Index

Uncertainty avoidance refers to attitude towards risky situations, ambiguous behaviors,

predictability and control. Below are the result of the research :

Japan 92 Avoid Risk Rusia 90France 86Israel 81Germany 65China 60West Africa 54Netherlands 53Indonesia 48USA 46India 40Hongkong 29

Indonesia is at the fourth position as high risk avoidance culture. This indicates the

society’s 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 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 IndonesiaBusiness 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 (Do’s and Don’ts)

Indonesians very appreciate the forms of courtesy that demostrate self-control 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 interpersonal relationship. Start by

introducing yourself properly, then treating

your clients like your own families could gain

their sympathy and trust on you. For this

reason, business will be more effective by face-

to-face in making dealing rather than the use of

electronic devices.

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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 would like to

offer them. Don’t 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. Don’t accept/ give cards using left hand because it

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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 do not make hasty decisions because they might be 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 this, doing so would give a good

impression. Be prepared to exercise patience.

Recap what you have discussed in your

meeting. It may be necessary to explain

yourself in a different way. Indonesians will

never indicate if they do not understand

something so it is wise to summarise in order

avoid any misunderstandings.

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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 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

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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 IndonesiaPut 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 Jakarta’s 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.

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.

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ConclusionThis 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 do’s and don’ts 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