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@Hofstede Insights
Welcome to
Doing Business In Indonesia and Malaysia
Sjaak Pappewith
WEBINARWEBINAR
@Hofstede Insights
ABOUT
About the Cubein platform It was designed to help European SMEs with business and innovation in emerging markets.
CUBE IN was set up by a consortium of experts in the fields of cultural differences with the involvement of SME support and innovation agencies. CUBE IN is fully financed by the European Commission.
About the Learning Circles.Organised by the high profile consultancies ICUnet AG and Hofstede Insights. They are targeted at decision makers of SMEs from specific industries, and they take place either in Europe, in one of the emerging economies, or virtually. Participation is free of charge for SMEs. A selection process ensures that places are reserved for SMEs with the highest potential to succeed. Upcoming learning circles are announced on cubein.eu.
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Some practical information
Microphones muted
Your microphone will be muted to ensure the best sound quality during the webinar.
General questions
If you have a question that everybody could benefit from – use chat box to address everybody
Q&A Phase
At the end of the webinar there will be time dedicated to your issues and questions (if not answered before)
Questions to me
If you have a direct question, please use the chat window
Click here to start
@Hofstede Insights
Education and work experience•PhD, Cross-cultural Transfer of Management Practices, Univ.Groningen •MA, Organisational & Management Sociology, University of A’dam•BA, Personnel Management & Labor Market Policy, R’dam Univ. AS
•International Director, P&O, CRM and TQM, at Texaco & Boots•Executive Searcher, Hyphen International•Ex-Client of Hofstede Insights for nearly 10 years•Advisory Board Member & Guest Lecturer, Rotterdam Business School
Areas of great interest and expertise:-Cross-cultural innovation strategy-International marketing, sales and service management-Trans-cultural production management-Intercultural human source management and organisational development
ABOUT SJAAK PAPPE
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ASSOCIATE PARTNER HOFSTEDE INSIGHTS
Burgerveen
Cultural Awareness
My cultural roots
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HOW they do it is embedded in their tradition and culture”
“WHAT Managers do is the same the world over..
Peter Drucker
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HOW you achieve that has a lot to do with the TIME and INVESTMENT you make inUnderstanding target culture”
“WHAT you want to do is WIN BUSINESS and find the right Partners..
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INDONESIA :A Market of 260 MILLION PEOPLE
• Population of 260.580.739 (2017)• Largest economy South East Asia• 300 Ethnic Groups• Fast growing young population and
urbanisation • 50% of the population lives on Java• Muslim-majority country • Multiple cultural influences: Chinese,
Malaysian, European (Dutch) and Indian• 46% population works in agriculture• Export: 25% agricultural, 50% industrial• Textile, food, electronics, furniture and
car industry concentrated on Java• Family, religion and religious harmony
are cornerstones
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MALAYSIA: A Market of nearly 32 MILLION PEOPLE
• Population of 31,924,000 (est. 2018)• A fusion of Malay, Chinese and Indian• A multi-sector economy: blending old
traditions and new technological innovations
• A declining state-oriented market economy
• One of the most competitive Asian economies
• A center of Islamic-banking• Knowledge-based services are
expanding• One of the world's largest exporters of
semiconductor devices, electrical devices, and IT and communication products
• Strong defense industry and own space program
• Just like Indonesia family, religion and religious harmony are cornerstones
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Who are you doing business with in Indonesia ?
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Who are you doing business with in Malaysia ?
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How to …(biggest issue …) create Trust and Credibility in such a family-, religion-
and harmony-focused environment ?
• The Basis for effective cross border business• The Essence of virtual teams and services• The Core of all collaborative efforts • The NEED to Make strong Stakeholders of all
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TRUST - the basis of all successful business
• WINNING BUSINESS means WINNING TRUST
• Its impact is on communication, work place etiquette, meeting etiquette, organisational hierarchies, repeat business and future relationship
IN ORDER TO DO THAT …….
Business and Trust
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Get OUT of your comfort zone !
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➢BE PREPARED • Indonesia and Malaysia are countries of
strong hierarchy and in-group focus (family etc.)
• Patience is needed to find out who is in charge….
• Because also Relationship Building is key• Bureaucracy are widely spread• Be open to provide lots of (pre)Information• Corruption is everywhere (Indonesia)
➢BE FLEXIBLE
IN ORDER TO DO THAT …
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“We don’t know who discovered the sea,but we are sure it was not a fish!”
Arab proverb
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Heroes
Rituals
Values
IcebergSymbols
Values
attitudes
behavior
NOT EASY TO SEE
VISIBLE
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To be on top of the World …•Accept
•Understand
•Appreciate
•Sense of Self
•Recognize
•Adapt
•Build Relationships
•Create Opportunities
•Embrace Cultural Diversity
From “THE CULTURE PROCESS” ©Nadir Karanjia & Associates
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• Understands the differences between Individual vs. Group
• Be open minded and aware of differences, but do not let bias take hold
• Must Be adaptable and able to accept Changing Reality .
• THATS how you will WIN BUSINESS IN INDONESIA AND MALAYSIA!
The ”Culturally savvy” person
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6 Basic Dilemmas
The Hofstede 6-D Model
Hierarchy vs equalityHandling inequality
Individualism vs. CollectivismDependence on Others
Performance vs. caringSources of Motivation
Uncertainty avoidance vs. let it beDealing with the Unknown
Flexibility vs disciplineTime Perspective
Indulgence vs restraintDealing with natural drives
PDI
IDV
MAS
UAI
LTO
IVR
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78
14
46 48
62
38
100
26
50
36 41
57
0
25
50
75
100
125
Indonesia Malaysia
@Hofstede Insights
78
14
46 48
62
38
100
26
50
36 41
57
18
74
1623
35
70
38
80
14
53
67 68
0
25
50
75
100
125
Indonesia Malaysia Denmark NetherlandsThe “Nordic Europeans”
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78
14
46 48
62
38
100
26
50
36 41
57
35
89
66
35
51
69
28
70 68
3524
65
0
25
50
75
100
125
Indonesia Malaysia United Kingdom IrelandThe “Anglo-Saxon Europeans”
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78
14
46 48
62
38
100
26
50
36 41
5768 71
43
86
63
48
6575
54
9482
57
0
25
50
75
100
125
Indonesia Malaysia France BelgiumThe “Latin Europeans”
@Hofstede Insights
78
14
46 48
62
38
100
26
50
36 41
57
35
67 66 65
83
40
11
55
7970
60 63
0
25
50
75
100
125
Indonesia Malaysia Germany AustriaThe “Central Europeans”
@Hofstede Insights
78
14
46 48
62
38
100
26
50
36 41
57
70
3040
85
69
16
90
3042
90
52
20
0
25
50
75
100
125
Indonesia Malaysia Bulgaria RomaniaThe “Eastern Europeans”
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Power Distance
Indonesia and Malaysia have a high score on the Power Distance dimension.
This means that hierarchy is accepted and expected; viewed as normal …even good
This also means that rank and status affect all business interactions. Seniority is valued but Designation is revered.
Subordinates will defer to their boss; in turn, the boss is supposed to look after their needs.
Rule # 1 : The Boss is always Right ! (Even when he is Wrong …)
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Individualism versus Collectivism
Indonesia and Malaysia have a lower score for Individualism, they are therefore a Collectivist Cultures.
This means that life is structured around the multiple in-groups; typically, this is the extended family, close friends, colleagues, business relationships etc.
The responsibility an individual has is to their group and they are obliged to show loyalty and sacrifice for the well being of the group, knowing that in return, the group will show this same loyalty to them.
To act in contravention to the Groups’ interests brings shame, loss of face and can result in exclusion (to say the least) of the guilty party .
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Takeaway !
Given the high score for Power Distance and the low score for Individualism, one key learning takeaway is that personal and business relationships tend to intertwine with no clear defining boundaries.
You must establish a personal relationship and show that you are dependable, before you can do business. Investing time getting to know potential business partners is essential to getting a contract. Socialising outside the work place is essential in building this trust.
RESPECT THE HIERARCHY and work with the little power centers
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Masculinity versus Femininity
Indonesia and Malaysia have a medium score on the Masculinity/Femininity dimension, indicating that the society values the symbols of success and achievement in one situation, but may value caring for others and quality of life in other situations.
Competition is seen as an aspect of life more often by Malaysians than Indonesians, but conflict should be avoided within in-groups.
Individual recognition is not highly appreciated by the work force because standing out “harms” the face of the group. But it can given in one-on-one situations.
It is likely that people will work feverishly behind the scenes to deliver the best quality, yet on the surface will project a sense of unity across groups and segments to maintain harmony.
Price and good quality are also a critical factors –getting the best possible deal for the best price is a huge image and status boost.
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Uncertainty Avoidance
Indonesia and Malaysia has a medium-low to low score in Uncertainty Avoidance, indicating that the countries are comfortable with a certain degree of ambiguity in everyday life.
Process perfectionists will have reluctant at best, buy-infrom Indonesians and Malaysians; and most times people will be keeping one eye on finding a process loophole or “short cut” that is not likely to raise alarm or bring the roof down. Often resulting in inventiveness and ingenious innovation.
People may feel OK if things are not perfect; but it will serve the current purpose.
Some implications are queue jumping, not following rules and regulations properly and can be seen quite visibly in the chaotic driving and traffic conditions in Indonesian cities.
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Long term orientation and Indulgence
Indonesia has a medium-high and Malaysia a medium-low score for Long term orientation and Indonesia a low score for Indulgence and Malaysia a medium-high score for indulgence. These two dimensions make sense when considered together.
Malaysians traditionally shunned credit cards till relatively recently because the central philosophy was own it when you can afford it. Things are changing now and credit is becoming the norm.
Most decisions in Indonesia are made with a Long term perspective and life strategy involves gradual acquisition of assets culminating in a comfortable retirement lifestyle that is aspired toward. This is less in Malaysia despite the country is seen by foreigners as one of the best countries to enjoy retirement.
Restraint in the short term will pay back in the long term is the traditional philosophy in Indonesia. In Malaysia it is somewhat the other way around.
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Fruitful cooperation with Indonesians and Malaysians
• Relationships are VERY important. Prepare to spend time cultivating them. Trust moves mountains.
• Be prepared for heavy bureaucracy – but also for suggestions on how to avoid it/cut corners. Your partners get that warm and fuzzy feeling if you “get it” and know when not to sweat the little details – they understand where the light bends – so to speak, and appreciate it if you trust them in making that call. Exercise caution.
• Expect negotiations to be hard. They are addicted to a good deal and long lasting relationships.
• Invest heavily in personal relationships, in gift-giving, learning about the other person. It takes time for them to emerge from their shells but once you are seen as one of their own magic can happen .
• Respect their hierarchy - don’t expect people to work outside of it – as the repercussions for them are well known and severe.
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TAKE AWAYS
Winning a business assignment goes hand In hand with winning trust and building a relationship – it takes time .
Be prepared to have nothing closed in the first few meetings ; it is more a process thana moment, that will define success .
Try to find the network; if you come in as a recommended and trusted party, things will move faster and smoother.
Being collectivist and relationship oriented, the more exposure to and contact with each other will lay the foundation for a successful association
Be prepared to be price competitive and offer a strong value proposition
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An EU based SME wants to sell innovative mini video camera’s to Indonesian or Malaysian video producers that it found on the internet. All parties are unknown to each other yet want to take the
business forward . Cultural differences, communication issues and some worries on
dependability exist; on both sides.
How do they overcome these concerns ?
✓What would you advise?
A case study
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A Dutch boss casually mentioned to an Indonesian and a Malaysian staff member at the branch
offices in Kuala Lumpur and Jakarta, that they should take more of a lead role in the existing
project. The staff members smiled and nodded. However, the next time they met, there had been no
visible change in modus operandi.
What is the explanation?
A case study
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Consumer Needs and Behaviour
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4 Key Findings on Indonesian Consumers
(Source: McKinsey)
1. The consuming class—55 million urban and 15 million rural Indonesians—are the most commercially attractive segment.➡70 million become sophisticated in spending habits and
product choices, one of fastest growing consumer markets
2. Indonesian cities are at different levels of consumerism driven by the ability and propensity to consumer.➡Urbanisation GDP contribution from 55% to 75-85% coming
decade
3. While traditional retail channels (like mom and pop shops, “warungs”) dominate, modern retail continues to gain ground.➡Growth in convenience stores, hyper & super markets, etc. ➡Highest usage social networking, twitter, etc. in the world➡Low penetration online shopping and -banking, still..
4. Indonesians strongly prefer and trust local brands, and the Consuming class is driving growth in new emerging categories.➡Localisation, Acquisitions, Mergers
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Key Findings on Malaysian Consumers
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More Findings on Malaysian Consumers
(source Accenture)
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Marketing Trends
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Top Online Marketing Trends Indonesia
Browse on Mobile, Buy on Desktop
Indonesian Consumers Spend EURO 29 Thousand on Average on line, second lowest in South East Asia
Indonesian Consumers Shop on Weekdays
Bank Transfer is the Preferred Payment Method
More Consumers Prefer Using Smartphones
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Top Online Marketing Trends Malaysia
How do they rate the following channels in terms of return on investment?
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• Firstly is the rise of the buy button; • instead of businesses constantly using social media to spike the interest in products. A built-in buy button and
mobile option payment options enable the consumer to go from discovery to checkout with a single click.
• The next trend to watch out for is the cashless economy going mainstream. • In order to take full advantage of the rise of mobile payment systems, marketers need to have such potential
readily integrated into their platforms.
• Reaching out to micro-influencers instead of your traditional influencers will be a trend to keep an eye on.
• Micro-influencers in comparison have a more modest set of followers and share content that revolves around a specific passion.
• Lastly, content marketing has always been viewed as a subset of usual advertising.
• As the customer-focused takes centre stage in 2018, content marketing is set to grow and establish itself as a separate pillar of marketing altogether.
Dheeraj Raina speaks on trends transforming Malaysian digital
marketing
Managing Director Malaysia for AdParlor Asia Pacific.
Cultural Dimensions:PDI +IDV - (collectivistic in-group)IndulgentShort term oriented, by now
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Meetings and Negotiations
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Setting a meetingPDI+IDV-MAS-
• Who to approach – relative position, third party introductions are most comfortable
• Clarity on what value you bring
• Do you have contacts at power holder levels?
• A confirmed meeting is NOT confirmed till you reconfirm it and check it in private if they agree and will do
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Who should meet and who should go
Aim high to top management level – lower level managers do not make decisions about new partners, sales, purchases
Important people only meet important people. Send the same level negotiator (PDI+).
Meeting may not start on time – prepare to wait
Expect several rounds of meetings before a decision is made
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How to dress for business meetings
• Formality is safe in first meetings: • Wear a suit or smart lightweight casual
jacket and trousers for men (smart watch, polished shoes) in Malaysia and Indonesia or
• “Batik” shirt is also appreciated in Indonesia • Dress or suit for women (traditional
Indonesian and Malaysian dress appreciated)
• Later meetings: • Check how the counterpart is dressed
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Greetings in first meetings
• Very soft, almost limp, several seconds lasting handshake along with a slight bow and drop your eyes (if a woman, wait till she offers her hand, for western woman, extend your hand), clasp the grasped hand, when released touch your heart with right hand
• Exchange business cards with both hands (reverse side in Indonesian, Malaysian or Chinese) with a smile. Silently read the card and say the other person’s name. Lay the cards in front of you as a seating plan and never write on/play with them. Afterwards place them in a card holder in left inside pocket of your jacket (near to your heart)
• Hierarchy will be clear: grey hair, age, # assistants
• If they applaud your presentation, applaud back
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Small talk to create a positive atmosphereIDV vs COLL!
• Personal interests and hobbies• Food, • local culture, art, traditions• Sports • Family
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Meetings &Management Styles
PDI ++COLL
• Titles are very important, they are not used as casual as in Europe, so a “vice president” is rigid, and a high rank
• Complementing, rewarding, criticising publicly is ABSOLUTELY INEFFECTIVE. Criticising is done in private and displaying concern for the feelings of the other person
• Deference is shown by subordinates and paternalistic concern by executives
• Primary goal is to protect one-self and one’s position rather than getting a commercial deal. This means negotiations can move VERY SLOWLY or RAPIDLY
• Decision making usually works top down, so ACCESS TO POWER determines action
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Meeting & NegotiationStyles
PDI+COLLMAS-UAI -
• Have an AGENDA prior to the meeting• Expect FEW DECISIONS at the table• Be willing to provide COPIOUS AMOUNTS OF
INFORMATION, in response and in anticipation• Have WELL PREPARED AND SIMPLE PRESENTATION for
study, not for feedback or decision making. Details left out, but left behind in local language
• Come with a well-organised team (CLEAR ROLES)• NEVER DISAGREE with each other in front of your
counterpart or appear uncertain, unsure, not authorised, or out of control
• Partners DON’T LIKE TO BARGAIN, if done it is presented as a win/win possibility
• CONTRACTS are detailed but merely are a sign of mutual trust and commitment
• Finalise deal with celebratory MEAL or/and round of drinks. SIGNING might be delayed until an auspicious or lucky day.
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After meeting
• Follow up with email – thanking them for their time and enlisting action items from both parties
• Keep communication always open, even at a distance, because connection with government and fluid political situation
• Have a contact on the ground to keep you informed at all times
• FOLLOW UP!
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5 KEY TAKEAWAYS
PDI +IDV -MAS -UAI -LTO +/-IVR -/+
• Indonesia and Malaysia are countries of possible contrasts - rule of thumb: NEVER ASSUME AND ALWAYS RECONFIRM
• The two things I always ask my clients to pack in their suitcases while doing business in Indonesia and Malaysia: PATIENCE and FLEXIBILITY
• Even after attending this webinar and several others, it is recommended that you take the time to observe, ask and learn while in different localities in Indonesia and Malaysia
• In Indonesia and Malaysia, generally, relationships trump merit and social status trumps relationships
• FOLLOW UP on important tasks
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KEY POTENTIAL PITFALLS FOR YOU SUMMARIZED
European Culture Clusters: Indonesia Malaysia
France, Poland, Spain, BelgiumPDI, IDV, UAI
• Building personal relationships
• Relationship as long as there is mutual benefit
• Need for pre-information is different from yours (PDI)
• The highest power holder decides on everything even in personal life
• See Indonesia
Hungary, Germany, SwitzerlandPDI, IDV, UAI
• Need for pre-information is different from yours (PDI)
• Technical reliability is less important than personal
• The highest power holder decides on everything even in personal life
• See IndonesiaUK, USA • Building personal
relationships• They don’t need to score• Status > success
• The highest power holder decides on everything even in personal life
• See IndonesiaLithuania, Estonia, Estonia, Finland, The Netherlands
• Building personal relationships
• Establishing common ground
• The highest power holder decides on everything even in personal life
• See IndonesiaPortugal • Relationship as long as
there is mutual benefit• Need for pre-informations
different that yours • Natural drives less curbed
• The highest power holder decides on everything even in personal life
• See Indonesia
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Questions?
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Additional resources
Read more about Indonesia and Malaysia on CUBE IN
www.Cubein.eu
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How to manage across cultures: Cultural Intelligence as the key to success.
Next Webinar
Tuesday May 15, 2018 -15:00to 16:00 CEST
