Why Global Businesses Fail in Indonesia
Indonesia has long been a magnet for international brands who plan to expand a global presence. Although expansion can be successful, there are various factors a business must consider before they expanding to Indonesia.
There are some prominent examples that have failed to create a presence in Indonesia. Evidence would suggest that this failure boils down to ill-considered market strategies along with a tendency to generalise the diverse Indonesian market.
Seven-Eleven (7-11)
7-11 is seen almost everywhere in Asia as the number one convenience store at least in Singapore and Thailand. However, even though there are no 7-11s in Indonesia this is not for want of trying. In Indonesia, 7-11 decided to target the youth and adopted the idea of being a place for the younger generation to hang out with free Wi-Fi.
It did attract a lot of youngsters, but most of them just bought inexpensive items and would just sit there and use the free Wi-Fi, without purchasing other goods. The sales suffered tremendously, and 7-11 was forced to withdraw from Indonesia
Nando’s
Nando’s once opened a store in a mall and soon after had the same fate as other major brands. Nando’s failed mostly because Indonesians preferred a chicken dining place that was more affordable. Let’s not forget that Indonesia is still a developing country. In addition Indonesia uses a vast range of spices in its recipes. Nando sauces options were not unique enough.
Walmart
Walmart used to have a store at Pluit Village – a shopping center located on Jl. Pluit Indah Raya, Pluit, Penjaringan, North Jakarta, Indonesia. The main reason for Walmart’s failure in Indonesia was that consumers took advantage of the 30-day return policy. As a result, sales were always low, and residents in Indonesia did not have high purchasing power like people in the USA.
Petronas
Originally from Malaysia, this petrol company was actually quite successful in Indonesia at the start. However Indonesians stopped buying Malaysian products as a result of the Indonesia-Malaysia confrontation. The confrontation was a violent conflict from 1963–66 that stemmed from Indonesia‘s opposition to the creation of Malaysia, and led to the closedown of Petronas.
Ford, GM and Chrysler
Unlike Japanese car brands, these American automobile brands have not succeeded in Indonesia despite high expectations and an aggressive market strategy. These brands howver failed to appreciate that Indonesia has a relatively weak automobile market as compared with other Asian regions. Although they have tried to enter the market in Indonesia a few times their sales figures were always low and they have had to withdraw.
Indonesia is one of the most diverse countries in the world. There are massive differences between poor and rich people and their purchasing power, and targeting all the citizens at the same time is hampered by different religions, traditions and lifestyle.
Although Indonesian has made good growth in the past years, it still remains a developing country and should not be approached in the same way as developed nations. The minimum wage in Indonesia differs across regions, and the location of your business is thus a very strategic decision.
Indonesians will have a strong brand loyalty, and companies that somehow insult or do not comply with traditional values and culture will soon suffer from antagonism towards their products and services. Not to forget the powerful role of social media in Indonesia that can destroy your business or cause a drop in your sales within a few days.
So, what should you not do when expanding to Indonesia?
- Remember that what worked elsewhere might not work in Indonesia
- Do not pick the biggest market but focus on its segments
- Never underestimate the impact of culture traditional values in Indonesia
For more information on how Business Due Diligence Indonesia can support you please contact us. BDDI can also recommend Investigation companies in Indonesia such as Indonesia Private Investigation Agency and Bali Eye Private Investigation Agency.
From my experience, I have noticed how much culture affects businesses in Indonesia and major other Asian countries. This has become a factor major companies no longer neglect in the process of establishment
Super interesting! It is totally exciting to see how the Indonesian market reacts to Western companies. It seems to me that they all neglect the culture of the Indonesians. The Indonesians (especially the Asian region) attach great importance to humanity. The people in Indonesia are very religious – and they are diverse! Islam, Christianity, Hinduism, Buddhism …
I find it incredibly difficult to run a business there without very good, preferably local, Indonesian experts being able to evaluate the market and judge that “my” company can be successful. Especially the various cultural customs make it incredibly difficult, in my opinion.
You may have covered it in all the 5 case studies above, but another cause for brand failure is trying to make the brand mean everything to everyone instead of everything or at least something to someone. I’ve seen this happen where product managers were responsible not only for their products but also for the marketing and communication budgets.
I once heard a joke from Dan Lok I think. Said if you want to get loved by everyone you don’t have to start a business just give free ice cream. So far it is a product or service you provide then someone somewhere will not be satisfied with what they pay for while others pay and give tips too.
One of the major mistakes that big brands do is that they stick to their products and fail to do a case analysis of the requirements of the consumers. I remember back in 2010’s Starbucks was struggling to make an impact in China. But they turned their business around when they started serving local flavored beverages which attracted the right crowd. It’s essential to do proper market research, identify the areas of improvement and then dive into the market.