Indonesia: 2000 years new and a land of business opportunity…if you are prepared for the challenges

Build your Business in Indonsia

Indonesia is the string of islands to the north of Australia, and has long had issues with dealing with foreigners. These foreigners have been the Chinese traders who have been in the area for millennia, the Indian and Arab traders who have brought with them the various religious belief systems that are common to the islands, or the Dutch and other European colonists who have had a trading hold over Indonesia in recent centuries.  These tensions developed further during the battles for independence from the Dutch, and the subsequent political upheaval over various periods of the past 60 years.   These issues have been around for more than 1500 years, but have over this time not inhibited trade through the region for very long. Indonesia is at the epicentre of trade between East and West, it is a stone’s throw from Singapore, and forms a nexus between India and China.  

The past decade in Indonesia has seen a transformation in the governance in Indonesia, and has just started to settle down, with President Yudhoyono, recently elected to a new term.  Indonesia skipped through the GFC with little negative impact and maintained positive economic growth during 2008, 2009 and has seen increased forecasts of growth for 2010. The time is ripe to re-engage with Indonesia in a business sense, and take advantage of the opportunities.  In recent months the Australian and Indonesian governments have commenced working on a free trade (FTA) agreement which has the potential to create increased business opportunities in Indonesia for Australian Businesses. As with any FTA, the negotiations will take months to years, but in the mean time Australian businesses have recently gained improved trade conditions with Indonesia as part of the expanded ASEAN free trade area that has commenced in 2010. Notwithstanding these improved investment and trade conditions in Indonesia, there are still many challenges that need to be effectively navigated if investment into the Indonesian market is to be a success.

It is important to remember that Indonesia is an ethnically diverse society, with each island (there are approximately 18,000 of them) having their own cultural traditions. Add to that the influence of the Ethnic Chinese, who have been trading in Indonesia for the past 1000 years, you can see the impact culture has on how you conduct business in Indonesia. You need to know who you are doing business with, Javanese, Balinese, Sumatran or Chinese Indonesian (or any of the other ethnic groups that exist throughout the islands).

Generally speaking Indonesia has a peaceful and gentle culture, and this translates into the conduct of business. Explicitly aggressive behaviour is not displayed, and they will expect a similar calm and gentle approach from anyone with whom they are negotiating.   It is important to remember that Indonesia is a society that is based upon religion and the majority of the population are Muslim, which means that as a rule, they don’t drink alcohol, don’t eat pork, and will be accommodating of any guests they host. So don’t confuse hospitality and friendly behaviour as a sign of a successful business deal. It is said that there are three types of ‘yes’ in Indonesia which actually mean: No, maybe but probably No, and Yes. It is critical that when doing business in Indonesia that you observe all non-verbal behaviour to help ensure you can identify what the true response has been. Rarely will you be told No.

Be aware of the cultural nuances when conducting business in Indonesia

The Ethnic Chinese in Indonesia however can be a different story, and although influenced by the Indonesian culture in which they live, they exhibit behaviours much more in common with the Chinese in Singapore, Malaysia, Hong Kong and China. Relationship building is critical to business success, and it is much more likely that the business relationship may develop over a dinner banquet or a game of golf. Although aggressive behaviour is rarely displayed, you can expect dealings with Ethnic Chinese Indonesians’ to be much more assertive and forthright than with the ethnic Indonesians.

Now, don’t get me wrong there are other challenges other than the cultural issues when entering the Indonesian market and you will need to consider the legal issues and non-tariff barriers that can be a hindrance to trade.  But you need to consider the cultural nuances of trade first if you are to even contemplate success in Indonesia. Just remember the facts – Indonesia is the 4th largest country by population, with over 235 million, and it is Australia’s closest neighbour. Entering the Indonesian market is full of bureaucratic complexities and cultural challenges, but the business rewards can be very large if you are culturally aware and have patience.

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Prestige and History: How branding and bottling is critical to introducing your wine brand to China

As wine companies worldwide open their eyes to the true potential of China as a fantastic wine market, and in many cases a saviour of the wine industry (see my previous article “Ignore the Chinese wine market at your peril: How china can rescue the Australian Wine Industry” http://wp.me/pS6DN-1z ) it is important to consider the way wine is currently being marketed in China.  A vastly different drinking culture exists in China compared to the western world and as such, any penetration of wine into that drinking culture will require a considered market entry strategy that goes beyond the traditional wine marketing. Such a strategy would invariably require both an education of the Chinese consumer on how and why to drink wine and in addition to this an adaption of the marketing mix to appeal directly to the Chinese consumer. So what are Wine companies and distributors doing now in China to sell wine, and make it appealing to the Chinese Consumer?

Well it’s important to brand the wine appropriately. Most brands especially from Europe emphasise the word “Chateau” in their label, and many Chinese brands do likewise. This is understandable in a culture that is over 4000 years old, tradition and history adds prestige to a wine brand, and the word “Chateau” has an association with history and tradition. Some Chinese wine companies have gone so far as to build replica “Wine Chateaus” in China to capture the prestige and history of European wines and wineries. These Chinese brands also emphasise strong Chinese icons such as the Great Wall or the Silk Road, and this is wholly aimed at appealing to the nationalistic and patriotic feeling in China. However most of these Chinese brands are not really very great to drink…in fact I wouldn’t recommend them at all of I am honest. Of course that doesn’t mean they don’t sell in the Chinese Market, because they do!

Another brand image consideration in China is the bottle and closure device used. Even cheap, low cost wine is generally sold in bottles with a large dimple, and when you meet with wine distributors in China this is one of the first things for which they will look: How deep is the dimple? The bottle doesn’t need to necessarily contain prestigious wine, but it needs to appear that it does.  Using Cork closures is the other strong preference for the Chinese wine consumer, although a synthetic cork will probably suffice. The emotive sound and sensation of the cork being released is still important to the Chinese, and it is not as New Age as a screw cap. Once again this goes back to the desire for age, tradition, history and prestige.

 So what can we read into these branding and presentation preferences? Well wine is about prestige in China, and is more about the image than substance. If you think about my other article on understanding the Chinese wine market (http://wp.me/pS6DN-1G ), where I discuss the “shooting” and Toasting of wine in China, then taste is probably not going to be your primary motivation when buying wine in China. Ultimately creating the “right” image and branding for your wine will open up many more doors in China than the taste of your wine.

Present your wine brand as prestigious and you will find entry to the Chinese wine market much easier….but challenges will always exist, especially if you are from the New World Wine markets.

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