Indonesian Business Structures

As often happens, the prevailing cultural norms of society are reflected in the business structure of the country.

Therefore, businesses tend to be extremely hierarchically organised with decision-making controlled at the top by either a small group of senior managers or by the senior family member.

A sense of hierarchy permeates the whole organisation with employees preferring the manager to make decisions and allocate tasks. Initiative, proactive thinking etc. are not really viewed as positives or even desirable as they could be seen as an implied criticism of the manager and the structures of the organisation.

Promotion and selection are often based more along 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. The high-profile cases surrounding the Suharto family amply illustrate how deep-rooted family ties are in the region. 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.

The hierarchical nature of most organisations in Indonesia has given rise to the development of a vast and unwieldy bureaucracy – and this is especially true when dealing with the civil service. (Civil servants who are notoriously badly paid very often have two jobs and are, therefore, not always at their desks to perform the service you require – patience is often sorely tested.)

A brief overview of some key concepts to consider when doing business in Indonesia

Written and Produced by Keith Warburton

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Overview

Indonesia is complex. That is hardly surprising given the fact that the country spans thousands of islands, has over 300 languages and population of about 243 million (which is rising rapidly.) Navigating your way around Indonesia is both literally and figuratively difficult.

However, Indonesia is a country which has tremendous economic potential. The Indonesian government is working hard to try to reduce the country’s dependence on exports of (raw) commodities and to diversify into both the manufacturing and service sectors. In addition to this, vast sums are being pumped into the basic infrastructure of a nation which has suffered from some core infrastructure weaknesses for decades.

About 50% of Indonesia’s population are under the age of 28 which means that the country has a huge demographic dividend with large numbers of people about to enter the workforce. This younger generation is aspirational and consumerist in nature. It could be argued that internal demand for goods and services in Indonesia is about to explode in the next decade.

Many observers believe that, provided some form of political stability can be maintained, Indonesia represents a country with massive growth potential. If Indonesia is to achieve its potential it needs a great deal of external stimulus and support. It needs Foreign Direct Investment and it needs skills and expertise. Indonesia probably needs your goods or services and you are advised to seriously consider Indonesia as a future market if you are not already operating there.

However, Indonesia is a thoroughly Asian country with a rich and unique business culture. The Indonesian approach to business is heavily relationship focused. You need to take time to develop deep and lasting alliances and you need to really understand Indonesian business culture if you are to avoid alienating potential partners.

This country profile provides an overview of some of the key aspects of Indonesian business culture in a concise, easy to follow-format. The document includes information on:

  • Background to business
  • Business Structures
  • Management style
  • Meetings
  • Teamwork
  • Communication
  • Women in business
  • Entertaining
  • Top tips