Cultural Understanding in Indonesian Business

This assignment examines the crucial role of cultural understanding in market entry and development, focusing specifically on Indonesia. It utilizes Hofstede's cultural dimensions framework to analyze Indonesian culture and explores Corporate Social Responsibility (CSR) issues impacting global business activities. Furthermore, it delves into the Association of Southeast Asian Nations (ASEAN), outlining both the advantages and disadvantages of regional integration.

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Business Case Study
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Executive Summary
In this assignment relating to cultural aspect regarding global business, expansion of business
into global territories can take place either via internal growth or mergers and acquisitions. There
can take place the aspect of cultural mismatching when an organization will be making decisions
in setting up new operations within a new country, as because it will be taking time for learning
the cultural aspects as well as adopting the country’s traits. While making entry into the new
market, the knowledge relating to organizational culture is considered important in respect of
managers and should be considered in the feedback process, and regarding the intrinsic as well as
extrinsic rewards and so on.

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Table of Contents
Introduction......................................................................................................................................3
Importance of cultural understanding regarding market entry and development............................3
Analysis of the Indonesian culture by using the Hofstede Framework...........................................5
Impact of CSR issues on the international business activities of an organization...........................8
Incorporation of risk into market entry strategies using an Adaptation Strategy..........................10
Description regarding the Association of Southeast Asian Nations (ASEAN).............................11
Benefits and drawbacks of regional integration............................................................................11
Conclusion.....................................................................................................................................12
Reference.......................................................................................................................................13

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Introduction
This case study is delving with the issues relating to the cultural aspect of global
business. Sustainable business practices take into consideration the issues relating to CSR,
foreign investment, as well as the advantages of regional integration in respect of the countries
within as well as organizations conducting business in that area. The organizations that are trying
to start their operations in a foreign nation need to consider the cultural changeability of various
areas of the world as well as developing a cultural understanding.
Importance of cultural understanding regarding market entry and development
When an organization is entering a new market, certain issues in regard to cultural
differences might be encountered by the company. Cultural differences that need to be
considered by the company entering the new market comprises of factors such as languages,
religions, social standards as well as demographics. The significance of cultural understanding
regarding the aspect of market entry and development are mentioned as under,
1. The cultural aspect, which might be considered being national or organizational culture, will
be providing the company a better understanding for conducting business. It should be noted
here that the majority of the daily as well as regular business operations are considered being
culturally driven.
2. While entering a new market, an organization should not simply be relying upon its present
process of conducting business. The reason for doing so is that the every country is having a set
of varied variables that can be regarded as new for an offshore company such as rules and

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regulations, taxation, different currency, different periods of holiday and so on. The most
significant consideration regarding this is the cultural difference (Crowney, 2016).
3. Expansion of business into international territories can take place either via internal growth or
mergers and acquisitions. There can occur the aspect of cultural mismatching when an
organization will be making decisions in setting up base in a new country since it will be taking
time for learning the cultural aspects as well as adopting the country’s traits.
4. When organizations are trying to make an entry into a new market that is having varied
cultural aspects, it is required for the organizations entering the new market to have an
understanding as well as mapping of the cultural differences for bridging the gap amongst the
business units that are performing in multiple cultural aspects.
5. While entering the new market, the knowledge relating to organizational culture is considered
essential in respect of managers and should be taken into consideration in the feedback process,
intrinsic as well as extrinsic rewards and so on.
6. Organizations that are not having any complete understanding of the cultural aspect of the
region that is being targeted for setting up base will often be devising strategies related to
marketing that will not be attracting the customer’s interest and will be facing failure from the
very beginning itself.
For working effectively in Indonesia there is the need to try reaching an agreement. The
country is having an agreement based discussion cultural aspect. One of the constitutional
standards is associated with the aspect of making decisions depending upon consultation as well
as consensus. This attitude is very much common regarding the business culture in Indonesia.
Decisions are made depending upon discussions that are considered being long lasting as well as

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consultation amongst the business partners. A business solution that might be a considered being
a contractual association or any business deal is required meeting the consent of everybody that
is having an involvement, since the Indonesian cultural aspect is depending upon a collective
principle in which every individual is required providing their consent for having a working
solution (Kraidy, 2017).
Analysis of the Indonesian culture by using the Hofstede Framework
Through the use of the Hofstede Framework, the Indonesian culture needs to be analyzed
that will take into consideration the dimensions of Power Distance Index, Individualism,
Masculinity, Uncertainty Avoidance Index as well as Long-Term Orientation.
Powder Distance Index
This dimension is explaining the degree to which the less powerful organizational
members as well as institutional members within a country are accepting the fact that there
occurs unequal distribution of power.
Indonesia will be having a high score regarding this dimension stating that the country is
following certain traits such as having dependence on hierarchy, unequal rights amongst the
power holders as well as non-power holders, directive leaders, and controls relating to the
management. There occurs centralization of the power and managers are counting upon the team
member’s obedience. Staffs are having the expectation of being told what needs to be done and
when it should be done. There is the expectation of control and managers are given due respect
regarding their position. There occurs indirect communication and negative feedback is not

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disclosed (Forsgren, 2014). High Power Distance is also stating that the co-workers in Indonesia
will be having the expectation of having a clear direction from the manager or senior.
Individualism
The primary issue that this dimension will be addressing is considered being the level of
interdependence that is maintained by the society within its members. In the Individualist
societies, it is supposed that people should only be looking after themselves as well as their
direct family. In Collectivist societies, individuals are belonging to the ‘in groups’ that are taking
care of them in return of loyalty (Moran, 2014).
Indonesia is considered being a Collectivist society, explaining the fact that there is
increased affinity for a strong social structure where individuals are having the expectation of
conforming to society’s ideals as well as the in-groups to which they are a part of.
Masculinity
A high score i.e. Masculine on this dimension will be indicating that the society gets
driven by competition, achievement as well as success, where success gets defined by the one
wins or outshines others in their respective field. This is a value system that begins in school and
will be continuing all through the organizational phase.
A low score i.e. Feminine on this dimension will be stating that the prevailing societal
values are to care for others as well as quality of life. From a Feminine society’s perspective,
quality of life is considered being the sign of being successful and it is not commendable to stand
out from the crowd. The primary concern in this respect is what crates motivation from

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individuals, whether it is the desire for being the best i.e. Masculine or to like what an individual
does i.e. Feminine (Storey, 2016).
Indonesia is considered having low Masculine regarding this dimension. Within the
country, statuses as well as visible symbols relating to success are considered having significance
but it is not material profit that will be bringing motivation every time. Most of the time it is the
position that is being held by an individual that is considered having more significance to them
due to an Indonesian notion known as “gengsi” that means ‘outward appearances’. It is
considered being necessary that there is strong maintenance of “gengsi” so that a different
outward appearance gets projected that is having the aim to impress as well as create the
impression of status (Brouthers, 2013).
Within the Feminine countries, the managers are striving for an agreement, individuals
are valuing equality, solidarity as well as quality within their professional lives. There occurs
resolving of conflicting situations through the aspect of compromising as well as negotiating.
Incentives like free time as well as flexibility are supported. An efficient manager is considered
being a supportive one, and there occurs the achievement of decision making via involvement.
On the other hand, the lower Masculine countries are displaying the characteristics of Masculine
societies but in a lesser quantity.
Uncertainty Avoidance
This dimension is associated with the manner in which a society is dealing with the fact
that the future is always unknown and the degree to which the members of a cultural aspect will
be feeling threatened by the circumstances that are considered being ambiguous or not known.
Indonesia is having a low preference towards the avoidance of uncertainty, meaning that there is

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a strong preference within the country regarding the Javanese separation culture relating to the
internal self from the external self. One more aspect of this dimension can be associated with
Conflict resolution. Direct Communication can be considered as a conflict resolution method that
is mostly considered as an intimidating circumstance and one that the Indonesian is not
comfortable in (Ambos, 2014). A successful conflict resolution process is associated with the
aspect of taking the more familiar path of using a third party mediator that is having numerous
beneficial aspects.
Long Term Orientation
This dimension is describing the ways by which every society is required maintaining
certain connections with its individual past while dealing with the challenging aspects associated
with the present as well as future. Also, societies are prioritizing these two existential objectives
in a different manner. In this regard, it can be stated that countries having a pragmatic cultural
approach are encouraging prudence as well as efforts in modern education as a means for
preparing for the future. Indonesia is considered having a pragmatic culture and individuals that
are in societies having a pragmatic orientation, they are believing that the truth is depending
strongly or circumstances, context as well as time (Reiche, 2016). They are showing the
capability for the aspect of adapting the traditional aspects in an easy manner for changed
circumstances, a strong inclination in respect of saving as well as investing and determination to
achieve the outcomes.
Impact of CSR issues on the international business activities of an organization
In regard to the Corporate Social Responsibility, there are certain issues that are
impacting the international business activities of an organization that take into consideration the

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economic responsibilities, legal responsibilities, ethical responsibilities as well as the
philanthropic responsibilities.
Economic Responsibilities
In respect of the international business activities, it can be stated that the primary
responsibility of an organization is associated with its economic responsibilities. This is stating
that an organization is required having the primary concern of making profit when setting up
business abroad. This is associated with the fact that without making adequate money, staffs will
be losing their jobs and the organization will not be able to think about taking care of its social
accountabilities in the foreign country. Therefore, prior to an organization having the thought of
becoming a better corporate citizen, it primarily requires ensuring that it can become profitable
in regard to its international business activities (Armstrong, 2015).
Legal Responsibilities
The legal responsibilities of an organization are the needs that are placed on it in accord
with the law when setting up business in a foreign country. To ensure that the organization is
having profitability, it is required ensuring that it will be obeying every law that is prevailing
within the foreign country, which is having the most significant accountability, in accord to the
corporate social responsibility theory. The legal responsibilities will be ranging from the
securities regulations to the labour laws, environmental laws as well as criminal laws in relation
to the international business activities (Ferraro, 2017).
Ethical Responsibilities

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After meeting the primary requirements regarding economic as well as legal
accountabilities in respect of an organization, there is the need for the organization to concern
itself with the ethical responsibilities regarding the international business activities. The ethical
responsibilities will be including the process of being environmentally friendly, making the
payment of fair wages or refusing to do business with countries that are considered being
oppressive (Pudelko, 2014).
Philanthropic Responsibilities
When an organization will be meeting each of its other responsibilities relating to the
international business activities, it will also start to meet the philanthropic responsibilities. These
responsibilities are considered moving beyond what is simply necessary or what the organization
believes to be correct. They are having the involvement of making an endeavour of benefitting
the society within the foreign country (Wild, 2014).
Incorporation of risk into market entry strategies using an Adaptation Strategy
When an organization will be entering a new market, it is required coping up with the
cultural as well as demographic differences in the way it will be handling marketing. The
adaptation strategy will be implying the process of changing the different aspects relating to
products as well as services to a substantial extent for meeting the requirement of the customers
in the global markets by considering their differences. Moreover, while the product adaptation
strategy will get involved, there will occur the addressing of the differences relating to particular
markets at the stage of product development, accommodating the differences regarding the wants
of the customers as well as needs in an efficient way (Stahl, 2015).

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There are certain disadvantages associated with the adaptation strategy in respect of an
organization that are mentioned as under,
1. Increased levels of financial costs can be particularly mentioned as a major drawback relating
to the adaptation strategy.
2. Low implementation speed regarding adaptation strategy is considered being another
drawback.
3. Adaptation strategy in general, does the elimination of the scopes to benefit from the
economies of scale.
4. To learn the conditions regarding the local culture for the integration of this information
relating to the components of marketing mix will be considered to be an expensive scheme
(Cavusgil, 2014).
Description regarding the Association of Southeast Asian Nations (ASEAN)
In 1967, there occurred the formation of the Association of Southeast Asian Nations
(ASEAN) by Malaysia, Indonesia, Singapore, Thailand and the Philippines towards the
promotion of political as well as economic association as well as regional constancy. The
ASEAN Community comprises of the three pillars such as the Political-Security Community,
Economic Community as well as Socio-Cultural Community.
Benefits and drawbacks of regional integration

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Gains in Trade (Benefits)
Trade gains are considered being one of the key advantages in respect of regional
integration. This will assist in leading towards the monetary advantages in respect of countries
that are having the involvement via more advantages in respect of the countries of origin as well
as via cheaper products in respect of the importing nations (Deresky, 2017).
Cultural Centralization (Drawbacks)
Regional Integration is having a non-economic disadvantage stating that in particular,
strong integration will be leading to the loss of distinctive minority cultural aspects within a
region.
Conclusion
To conclude, it can be stated that a discussion has been made regarding the significance
of cultural understanding in respect of market entry and development. Then, with the use of the
Hofstede Framework, the Indonesian cultural aspect is being analyzed. The CSR issues have
been described and explaining in what ways these issues will be impacting the global business
activities regarding an organization. Also, a brief description has been provided regarding the
Association of Southeast Asian Nations as well as discussing the advantages as well as
disadvantages relating to regional integration.

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