Understanding Indonesian Business Culture

The diverse and rich cultural dynamics dominate Indonesian business culture. By having a better understanding of it you increase your chances of doing business with Indonesian companies. Therefore, the best advice is to start with learning about Indonesian people and about the unwritten habits of the country and its organizations.

In the following article we lift the veil on Indonesian business culture.

Foreigners in Indonesian Business Culture

Citing a well-known Indonesian proverb: “Dimana bumi dipijak, disitu langit dijunjung.” Hold up the sky of the land where you walk. This is similar to When in Rome, do as the Romans. The same goes for doing business.

People who come to Indonesia with a clear vision yet a flexible mind have excellent chances of blending in. Prejudice often leads foreigners into false expectations, therefore follow these steps to shape your idea of how business works with Indonesians.

#1 Relationship First, Then Business

The diverse cultural dynamics dominate Indonesian business culture. There are a number of customs and traditions that need to be followed. This is to the extent that the Indonesians sometimes feel burdened by their culture code/ etiquette (tata krama). The same feeling of obligation and burden applies for the kindness (ga enakan hati).

Nevertheless, Indonesians are very proud of both their cultural heritage as well as they happily show kindness towards a foreigner. However, once you are in Indonesia, you will understand how many customs actually need to be followed. Also, how it affects doing business.

Tip for a foreigner is to observe and get to know local customs. This will help you blend in better and it becomes simpler to emphasize on local’s dedication.

Knowing when to move on from “building a relationship” stage to doing business is what differentiates seasoned veterans from foreigners new to doing business in Indonesia. That is why we advise companies new to the market to take an experienced person with them to business meetings.

#2 Power and Hierarchy Influencing Indonesian Business Culture

Hierarchy principles here are similar to several other Asian countries. Supported by Hofstede’s study, Indonesia still has a high power distance value.

People are not equal in society and this also reflects in the organisation. In other words, employees with less power in life expect and accept to have less at a workplace as well.

Hierarchy concept is still commonly found, especially in older generations and well-established companies. Being introduced to new people, try greeting the eldest or most senior first. Title is a thing to boast around and show your status in society. It is polite to refer to them with titles Mr/ Mrs (Bapak / Ibu) rather than direct name recognition.

#3 “Yes, Boss” Phrase in Indonesian Business Culture

This phrase does mean “Yes”, but mostly to make a person happy, show respect and satisfy the request of another. However, do not be fooled into thinking it automatically confirms what is being discussed in between partners.

It is often when foreign companies get the wrong idea, thinking that a deal has already been agreed. When actually the Indonesian partner just wants to please the other party. Once the foreign company goes back home, they find that nothing happens.

Thus, a one time “yes” does not mean an Indonesian will do what is discussed or necessarily agrees with it. Make sure to double check your proposal a couple of times.

#4 Importance of Connections in Indonesia

Who you know is more important than what you know. This means, connections are often more valuable than knowledge. It comes especially heightened when dealing with governmental sector in Indonesia. Therefore, it is wise to gather partners with wide circle of connections, rather than have a few bright ones close to you who lack connections on necessary levels.

Indonesians grow a strong bond with people they know. They follow up on those close to them as well as on those of higher rank. New acquaintances however are further behind in the list. Therefore, give it time to bond and build relations while putting in a genuine interest.

Bragging about who you know is a common practice as well – everyone you know claims they know someone important. Sometimes they do but sometimes it’s just a marketing tactic they use for an improved reputation.

It is also easier to arrange a first meeting if you said you knew someone on the loop. Only knowing the high rank name could be the key to your first meeting.

#5 Avoid Agreements During First Contact With Indonesian Partner

While follow-ups to new connections are not prioritized, Indonesians feel committed to relationships and keeping them on good terms. Saying “no” is not a phrase that slips over the lips of a local easily. Thus, it is often that they skip a meeting or contact if they feel it is about business and they are not ready. Rather than saying no.

So, the tip is –  do not put sales as an objective in the first contact. Emphasize on starting a relationship or introducing your company with no agreements or further binding proposals.

Nowadays, it is best to divide business culture based on who we are dealing with. Let’s discuss one by one.

Governmental Organization in Indonesia

Governmental organizations can be divided as:

• Ministry
• State Owned Company (BUMN-BUMD)
• Local Government Office (Kelurahan, Kecamatan)

Have Local Partners

Business runs smoother once there is a local trustworthy partner by your side. They can support you on business but even more vital is them sharing insider’s knowledge with you. The primary reason is – different organizations in Indonesia have their own business style and way of handling things.

Getting to know the regulations prior to entering any facilities is a must – a local partner will make sure you will not be the odd man out. You will have an overview of who makes decisions in the organization and who has the biggest influence. In life, the influencer may have even more power than the one ranking higher.

While online research is also very useful, it does not demonstrate or replace what an insider will reveal. Therefore, start with building your circle of trust.

Family Business and Privately Owned Company

A large number of companies in Indonesia are run by families. As a part of the culture, it is natural that children take over from their parents. The company is inherited from generation to generation. They grow moderately, year over year, with the oldest brother or son as the leader.

The way of business is by following the former leader. Even when the son or daughter is appointed as the new leader of the company, the decision will still come from his parents or the oldest brother.

For a better understanding about what a private owned family business is all about, here are some tips:

#1 Approaching the Family on Business

The structure itself is similar, however power is sometimes dissolved internally, no matter who is assigned on which position. Try approaching the entire family and see who is behind making decisions.

Doing business with families is overall similar to working with any other type of company in Indonesia. The key is – you need to win them owner by demonstrating how partnering or working with you will bring profit to their business.

#2 Dinner on Business in Indonesia

It is a very good sign if they invited you for dinner. This essentially means that they are already curious about the product or service, but they need to know more about you or your company personally.

They will have their own way to judge you during dinner. At this point, profit and quality are not under discussion. What they want to know is how can they trust you. They will measure your ways of handling business relations and the assurance you offer.

#3 Rescheduling on Family Matters

Indonesia is a collective nation, thus maintaining a relationship or proceeding with family matters can become a top priority. Even the process of decision making is sometimes longer as they consider the effects of their actions to other people.

You will find plenty of meetings rescheduled due to frequent leaves for family matters. The obligation to support each other does not only lay on the core family, but also on more distant cousins or relatives.

#4 The Power of a Gift

An effective ice breaker upon a business meeting is bringing a souvenir from your country (oleh-oleh). It will surprise your partners and make them happy.

After a gift is presented, the meeting will usually begin with fruitful small talk and laugh for both parties.

Bring either a signature snack or an item suitable for displaying on their desk. They will make sure to show it to their colleagues or family.

#5 Expressing Yourself

There are a couple of must do’s that will put you in a good light when meeting an Indonesian partner. By expressing yourself correctly, you will show a sign of respect towards the locals and Indonesian business culture overall. Here is a simple five-minute practice in advance of a meeting:

Overall, the less you confront Indonesians the better. The same goes for being being critical as it may come off personal. They put in a great effort not to get into conflicts.

Also be cautious with your statements as locals believe messages have implicit meanings. With this in mind, always give your best to make a message sound as clear as possible. For future reference, have important topics in writing.

Making Mistakes is Acceptable While Doing Business in Indonesia

The occurrence of cultural mistakes amongst foreigners is not that uncommon, especially in a rich culture such as Indonesia. However, locals are understanding as long as you bring the right attitude and it is an honest mistake. The key is showing respect towards their country and not dismissing or belittling the cultural standards purposely.

Don’t be afraid if you made a mistake that was not as cultural etiquette would require. People in Indonesia appreciate welcoming foreign entrepreneurs who bring knowledge from a developed country while being genuinely interested in the skills of locals. Recognizing that foreigners and locals work well together by completing each other is a perfect starting point and admitting your mistakes with the right attitude is where it all begins.

Locals appreciate the effort you make and mistakes are not always taken too seriously. In fact – Indonesians even consider mistakes to be common. Despite that, make sure to say “maaf yah”, which translates to: “I am sorry”.

Local Representation Service in Indonesia Helps You Navigate the Culture Better

Soon you will be ready to meet your Indonesian partner for a meeting and talk business. If going for that meeting by yourself still seems too foreign, have yourself a support team. Local representation provides you with a professional support link, a consultant who will explain the parts of business under discussion. Plus it is an excellent way to avoid bureaucracy and race to the deal faster.

Local representation overall means conducting business in Indonesia without a legal entity. This service allows you to concentrate on operating business without losing any valuable time.

If your business needs in the market are more excessive and you think of opening a representative office, a nominee company or a limited liability company, find us comparing them here.

Leave your contacts below and require a free initial consultation with Emerhub. Our team will advise further on Indonesian business culture and assists with setting up a company.