Australia and New Zealand: Doing Business in Indonesia - Essay Example

?Australia and New Zealand: doing business in Indonesia Table of content ………………………………………………………………………02 Introduction……………………………………………………………………02 Cultural differences……………………………………………………………03 International business and globalization………………………………03 Cultural models- Hofstede or Trompenaars…………………………..04 Cross cultural approaches……………………………………………..06 Culture in Indonesia……………………………………………………07 Business opportunities in Indonesia……………………………………………08 Entry level strategies for Australia and New Zealand………………………….09 Some of the global business giants …………………………………………….10 Conclusion………………………………………………………………………12 Appendix…………………………………………………………………………13 Bibliography……………………………………………………………………..14 Abstract: In this new era of globalization the business culture has got a new paradigm of excellence. There are many companies are there who are going abroad to set up their businesses and exploring the opportunities in the new countries. Cross cultural behaviors and cultural imperialism play a vital role in these cases. The most important fact is the accepting the cultural changes in the countries for these global expansions. In this case Australians and New Zealanders are trying to explore the opportunity of settling up businesses in Indonesia. There are many factors which are very much important to start up a business in different countries. And they are the demographic description of the country, legal procedures, SWOT and TOWS analysis of the business culture of the country, the entry strategy and many other things. One of the most important factors is the trade agreements among the counties. These trade agreements allow the different counties to do business within their areas without any political or any governmental problems. This paper will focus on all the aspects of Australians and New Zealanders to do business in Indonesia. Introduction: Indonesia is a small country but with great potential of creating wealth with money. However, with the help of foreign direct investment (FDI) it can create a market for the global powerhouse like Australia and New Zealand. Australia has been taken as one of the continents of the world for its giant size. But, with great education and advancements the Australians have gained some opportunities in the competitive global business environment. New Zealand has also got some great people who can do wonders in the global business environment for their great exposures. Indonesia can be taken as one of the neighboring countries of the Australia and New Zealand. And the Australians and the New Zealanders have started their exploration towards the south Asian countries for the business expansions. However, Australia and New Zealand are two separate countries and they have their own ways of leading business cultures. Australia is basically a casual country but Indonesia has got some norms related to their religions and this paper with focus on those cross cultural entities to eradicate the boundaries as far as the globalization is concern. Cultural Differences: International business and globalization: The wide arena of international business has not only expanded opportunity for business people to reach more number of customers across the globe, increase total amount of revenue and contribute to a larger extent in contributing to the entire national economic condition, but at the same time level of competition, providing proper service according to demands of customers and surviving in the an extremely competitive market have also become great challenges for participants. Due to diverse range of participation, implementation of policies and variety of individual perception over execution of decision making, the field of international business has become so diverse that it does not have any definitive explanation. The growth and expansion of international business in last two decades have provided a general perception that it is entirely a product of recent business development and dynamics of the entire process is quite new. In reality the journey of international business started since 19h century. Historical evaluation of international business shows that the entire process is discontinuous, “In different periods, different choices were made between alternative methods of operating abroad, and alternative forms of organization. The relative importance of particular industries has varied markedly over time” (Jones, 1996). In this context the three associated countries are Australia, New Zealand and Indonesia. And to do a fruitful business these three countries must come together to meet all the mutual statements Cultural models- Hofstede or Trompenaars: Cultural models- Hofstede: In the international context the national culture has a great value for each country. However, Hofstede has given a great explanation about the cross cultural synergy. The five rules of Hofstede are given bellow (Hofstede, 2005). 1. Expectations regarding equality among people, called ‘power distance’ 2. Expectations regarding reactions to situations considered different and dangerous, called‘uncertainty avoidance’ 3. Relationship between the individual and the group in society, called ‘individualism’ 4. Expectations regarding gender roles, called ‘masculinity’ 5. Orientation toward time, called ‘long term orientation’ The implications of these models are that you as a multinational manager can more effectively understand the differences between national cultures when your company establishes overseas subsidiaries or you trade internationally. Cultural models –Trompenaars: Hofstede and Trompenaars both have tried to explore the significance of the international culture. They both have designed many questions regarding the cross country cultures for the global business environment. However, Trompenaars’ model (1994) has got a great significance in the global business culture (Holbeche, 2006). According to Trompennars’ model there are several dimensions which can control the global business culture. However, there are seven core dimentions and they are given below. 1. Universalism vs. particularism: According to universalism the rule must be same to everybody. And in a particularistic society the right of the friend or partner is taken to be more important than the rights of the large community. 2. Individualism vs. collectivism: it is basically about the focus of the individuals on his or her rights, motivations, capacity etc. 3. Neutral vs. affective: This factor concerns the acceptability of expressing natural emotions. 4. Specific vs. diffuse: This important factor depicts the extent to which an individual’s life is involved in their professional relationship. In specific oriented cultures, business is segregated from other parts of life. 5. Achievement vs. ascription: This dimension addressed the cultural behavior by which a particular society gives status. In an achievement-oriented societies, the community people earn status based on their performance. In ascription-oriented societies, one’s inherent characteristics or association define status. 6. Time orientation: The time horizon concerns the way cultures deal with the past, present, future, and boundaries among these time zones 7. Internal vs. external control: This particular factor concerns beliefs regarding how people interact with their natural environment. In cultures where it is believed that nature dominates people, managers are likely to be fatalistic. In contrast, where cultural values support the notion that people dominate nature, managers tend to be proactive. Cross cultural approaches: Maintaining unity in diversity is a very important fact in the business organizations. Diversity gives a unique feature to the organization. It can present a pool of talent due to the gatherings of different people from different culture and different nations. In this strictly globalized business circumstances the unity in the diversity is the only option to have a successful business environment. The management of diversity is a management process which creates supportive work environment for the employees in the organization to increase the productivity (Pynes. 2008). The diversity can be classified into many sections the diverse work culture could have Mixture of culture, language, gender and nationalities. The International Labor Organization (ILO) has shown and evaluated the importance of antidiscrimination and diversity- training programs (Michelle and Barak, 2010). The universal employment law should be applied to all of the employees irrespective of the culture and nationalities (Budd.2006). For the last few decades the Asian countries have shown a great endeavor towards the growth and advancement towards the business. The cultural differences have given a diversified looks to the Asian countries. There are many numbers of religions, languages and people are residing in the Asian countries. Business culture is a blend of cultural heritages and the business of the country. Business culture is a phenomenon which has been developed with the passing of the time and it is been introduced repeatedly with the spread of the commercialism (Ikeo 1997). It is a mixture of spiritual content and materialistic form created by the merchants or the businessmen through their business acclivities. It has been practiced since the inception of the commerce and the human civilization. Indonesia has got a different culture than that of the cultures in Australia or New Zealand. Australians are normally very much casual like Americans but in New Zealand the cultural platform is slightly different. The great formality and the formal culture make the New Zealand more like Great Britain (Fox, 2008). However, both the countries can accept the new challenges to bridge the cultural gaps within the Indonesian culture. Culture in Indonesia: Indonesia is basically an Islamic country. It is been treated as the world’s most populous Islamic country and also the world’s largest Islamic democracy (Indonesia country brief). However, the culture in very much diversified in Indonesia, there are more than 300 languages used by different communities. According to Cullen and Parboteeah (2011) Islamic standards and norms are very much important to understand for the foreign business people in the Indonesia. The basic five pillars of the Islamic religion must be obeyed and respected. The business culture is much more different than any other counties. Previously the business culture in Indonesia was dominated by the small family businesses. And business relations were mostly based on relationships rather than any stipulated rules. Among the Asian countries Indonesia was got an impression of having worst standard of corporate governance in the Asia pacific region. Most of the Indonesian businesses were highly concentrated within the East Asia (Basri, Eng & Institute of Southeast Asian Studies, 2004). The ownership business was the main reason of the poor corporate governance in Indonesia. However, after the study conducted by the World Bank to find out the reason behind the poor corporate governance they found out that there are many organization in Indonesia who were performing will and some them were Business groups as Salim, Astra, Sinar Mas etc (Basri, Eng & Institute of Southeast Asian Studies, 2004). However, the business culture started changing in the Indonesia during the 2000. The core idea of relationship based business turned into the businesses based on strict rules which could attract many foreign investors to invest in Indonesia. Country like Australia and New Zealand took the opportunity and started their international relationship with export business with Indonesia. New Zealand started to export dairy products, frozen beef etc to Indonesia and Australia started investing directly to the country in the tourism, education, manufacturing and financial sectors. Business opportunities in Indonesia: Indonesia has many natural resources which can make them world class destination for the investment. However, due to poor corporate governance the scenario was taking an inconvenient shape. Nut, after some good initiatives from the government and with some great monitoring bodies the business opportunities in Indonesia started to show off to the whole world. The Australians and the New Zealanders took the initiative to grab the opportunity to expand their businesses in Indonesia. The Australia-Indonesia Business Council (AIBC) is one of the great initiates to help the people of the both countries to know more about the business opportunities within the two countries (Harris, 1997). Australians and New Zealanders are very much experience in the tourism business due to their unlimited resources of tourism business. However, Indonesia is also a great place to invest in tourism business for these Australians and New Zealanders. Indonesia has great potential for the tourism business. In 1996 with around 4 million tourists the tourism business contributed more than $ 6 billion to the country’s GDP (USA International Business Publications, Ibp Usa). Later in 2000 the number of tourists grew up to 9 million . it can be seen from the figures that Indonesia has got a great potential for the Australians and new Zealanders to invest in Tourism. Same ways there are other industries like food industries, Consumer Durables etc are the good option for the investments for the Australians. Entry level strategies for Australia and New Zealand: There are many factor are involved in setting up an international wing. However, the rules and regulations vary from country to country. Australia and New Zealand are having the least regulation for starting a new business, but, Indonesia is having many regulations for the start ups and it could take more than 150 days to complete the all formalities (World Bank, 2005). The government policies, the political risk, legal aspects of starting up new business and also the taxation play a vital role for any new venture. The main reason behind implementation of changing taxation rules and increasing attention of different system of governance on this issue is to ensure the “capital-market integration and global commercial competition” (Feldstein, Hines, and Hubbard, 1995). Technological advancement and introduction of liberalized national economy have provided a fertile ground for globalization and the business houses also received opportunity to enhance the scope of their respective business on an elaborate plain. However, it did not provide business organizations with the opportunity for profit making in the same magnitude. Thus, the changing taxation policies in the context of international business helped in maintaining a situation of equilibrium. However, entry strategy for the countries like Australia and New Zealand must be to set up a joint venture with some Indonesian organization. This strategy would help them to take steps accordingly towards the great achievement and takeovers. Some of the global business giants: Ford: Ford Motors is the global powerhouse of Automobile manufacturing business. It has got more than 100,000 employees in all over the world. However, the company has got many unites in many countries. Australia is one of the main countries where the company has set up their plans. Precisely Ford Motors have set up there three plants in Australia and they are the assembly plant in Victoria, stamping plants in Victoria and the engine plants in Victoria. With these three plants the Form Motor has the great existence in the Australia (Global operations: Ford Motors). However, they would look for the opportunity in the Indonesia too in the near future. They have existence in some other Asian Countries like India, China, and Japan etc. however, with the great global exposure and the globalized culture they would definitely look for a great opportunity in the Indonesia. Phillips: Philips is one of the global giants of electrical appliances and healthcare machines. However, they have a strong position in the Australia. The Royal Philips electronics of Netherlands has got its division in Australia. Philips opened its venture in Australia in 1926 and from that time it has got a great existence in Australia. The head office of Philips Australia is located in Sydney (Philips in Australia). It has got great products and simply it can change the lives of the human being. However, the great existence in the Australia has given them a great strength. And the subsidiary would look for an opportunity in Indonesia for the business expansion. They have their international subsidiary in Jakarta Indonesia. But they would definitely look for further expansion. Proctor & Gamble: P & G is one of the leading companies who manufacture fast moving consumer goods. However, the existence in the Australia is not very strong. But the growing subsidiary in Indonesia has got a great exposure in the global business. P&G Indonesia is basically a new market and it is a growing subsidiary. P&G is marketing many brands in Indonesia and they are Pantene, Head & Shoulders, Rejoice, Olay, SK-II, Pampers, Vicks, and Pringles etc. as it is the world’s fifth largest populated country, the P&G is looking for more business opportunities over there (Welcome to P&G Indonesia) Shell : Shell known as one of the biggest players in the energy industry. It has got more than 90,000 employees in more than 90 countries globally. Shell has got its existence in both Australia and New Zealand. With the great global expansion it has got a subsidiary in Indonesia too and that is located in Jakarta (Shell Indonesia) From the above discussion it very clear that companies from all the sectors are setting up their units in both the Australia and Indonesia. This depicts that Indonesia is changing accordingly towards the globalization to invite more companies for great business exposure. Conclusion: With the help of the through study it is very much prominent that, culture has a great effect on the business. It is very true that the highly diversified cultures have shaped the countries in Asia and it has attracted many foreign countries for the international business. The harmony in the diversified cultures in Asia has modernized the Asia countries. Business has essence of money and a great flavor of culture with the proper blend it can show many miracles and ultimate success which have been already proved. Appendix:   AUS Indonesia NZ Government style  Democracy and constitutional monarchy Republic   Democracy and constitutional monarchy Population  22,580,551 237,556,363  4,393,500 Current GDP per capita (US$)  $39,699 $4,379  $27,420 GDP (US$ billion)  $882.362 billion $1.027 trillion  $119.791 billion Growth rate &/or inflation  .7%/2.7% 6%/7%  .2%/4% Unemployment rate %  4 % 9%  6% Labour force  11,620,000 116,500,000  2,320,000 Literacy level  99% 92%  99% Languages spoken  English  English   English Religion  Christianity Islam  Christianity Bibliography Budd John W. 2006. Employment with a Human Face: Balancing Efficiency, Equity, and Voice. New York: Cornell University Press. Cullen, JB & Parboteeah, P. 2011, Multinational management : a strategic approach, 5th edn, Thomson, Australia. Feldstein, M.S. Hines, J.R. and Hubbard, G. 1995. The effects of taxation on multinational corporations. Chicago: University of Chicago Press Fox S, 2008. Business Etiquette for Dummies. New Jersey: Wiley Publication Inc. Harris D, 1997. High tide: Australians doing business in Asia. Kent Town: Wakefield Press. Hofstede, G 2005, Cultures and organisations: software of the mind, 2nd edn, McGraw Hill, New York, NY. Holbeche L, 2006. Understanding change: theory, implementation and success. Massachusetts: Butterworth-Heinemann. Ikeo, A. 1997. Economic development in twentieth century East Asia: the international context London: Routledge. Jones, G. 1996. The evolution of international business: an introduction. London: Routledge. Michelle and Barak, 2010. Managing Diversity: Toward a Globally Inclusive Workplace. New York: Sage. Pynes. John E. 2008. Human Resources Management for Public and Nonprofit Organizations: A Strategic Approach. New Jersey: John Wiley and Sons. USA International Business Publications, Ibp Usa, 2007, Indonesia Business and Investment Opportunities Yearbook. Washington DC: Int'l Business Publications. World Bank, 2005. Doing business in 2005: removing obstacles to growth. Washington DC : Wolrd Bank. Nd. Indonesia country brief. Available at: http://www.nzte.govt.nz/explore-export-markets/South-and-Southeast-Asia/Doing-business-in-Indonesia/Pages/Indonesia-country-brief.aspx (Accessed on 10th April 2011). Nd. Global operations: Ford Motors. Available at: http://corporate.ford.com/about-ford/global-operations (Accessed on 10th April 2011). Nd. Philips in Australia. Available at: http://www.philips.com.au/philips1philipsau/about/company/local/index.page (Accessed on 10th April 2011). Nd. Welcome to P&G Indonesia. Available at: http://www.pg.com/en_US/careers/careers_outside_us/countries/indonesia.shtml (Accessed on 10th April 2011). Nd. Shell Indonesia. Available at: http://www.shell.co.id/home/content/idn/footer/contact_us/ (Accessed on 10th April 2011). Read More