We all know that the only constant in life is change. It can be quite frustrating – one day things are smooth; the next day, policy has changed and that can adversely affect your business. It is more common than you think, and it is not limited to certain sectors only.

I experienced this first hand in New Zealand in the early 2000’s. Was I running a bar, a brothel, or a car dealership? No. I was involved in the tertiary education sector. Constant governmental changes and directives towards the immigration department saw the private sector tertiary education market come to a standstill – no new investors as strict limits were suddenly being placed on visa’s being issued. For me, that meant no new clients.

Last week I posted about the 7-Eleven experience in Jakarta, Indonesia. This article from techinasia.com delves a little deeper on that, but it also highlights a broader perspective for entrepreneurs to consider – that of keeping abreast of policy change and how it can potentially impact upon your business.

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Photo credit: Bagus Ghufron

When 7-Eleven’s iconic storefronts first emerged in Indonesia in 2009, it was anticipated that the stores would appeal to the country’s growing young urban population with its unique restaurant-cum-convenience store hybrid model. Offering fuss-free, ready-to-eat meals, free wireless internet, seating, and air-conditioning, “Sevel”, as 7-Eleven is known to the locals, soon became a popular haunt for young Indonesians.

The convenience store’s parent company, PT Modern Internasional Tbk, is controlled by the Indonesian Honoris family, who first made a name for themselves as the sole distributor of Fujifilm Japan products in the country. The family acquired the license to operate the franchise at a time when the photo processing business was declining with the advent of digital technology. In 2013, 7-Eleven had accounted for over 60 percent of PT Modern Internasional’s US$127 million sales.

However, business is rarely straightforward in Indonesia and although the franchise is not foreign-owned, there is little local entrepreneurs like PT Modern Internasional Tbk can do in the face of the country’s frequent regulatory changes.

Local opposition, local competition

The introduction of an alcohol ban in April 2015 dealt a significant blow to 7-Eleven’s earnings. Caving in to the pressures of media and religious groups in Indonesia, the government banned the sale of alcohol by any mini-market and convenience store in the country under Trade Regulation No. 06/M-DAG/PER/1/2015 on the Control and Supervision of Procurement, Distribution, and Sale of Alcoholic Beverages. For a company that relies on sales of alcohol for 10 percent of its earnings, the ban was a great setback for the chain, especially as it had a multiplier impact on the sale of snacks frequently purchased together with alcohol.

Indonesia’s retail market has long featured key players like Indomaret and Alfamart, backed by the Salim and Djoko Susanto families, respectively. The alcohol ban only served to further edge 7-Eleven out of the sector while its competitors remained largely unscathed, as consumers more frequently associated them with household goods and necessities—market segments that were untouched by regulatory hurdles.

In June 2016, after two years of declining revenue and intense competition, PT Modern Internasional announced the closure of 7-Eleven outlets, which numbered 161 nationwide, at the end of 2016. The company’s initial plan to sell the franchise to a unit of PT Charoen Pokphand Indonesia Tbk (of the Thai Charoen Pokphand conglomerate) for US$74 million was also scrapped just six weeks after it was announced, as both parties had failed to reach an agreement.

The case of Uber

In a similar fashion, the growth of app-based ride-hailing services like Uber and Grab is hampered by regulatory restrictions. Pressure from incumbent players such as taxi giant PT Blue Bird Tbk has pushed the government to enact new regulations on the operations of app-based taxi services. The new regulations include setting minimum and maximum prices (a direct attack on Uber’s core business model of dynamic pricing), limiting the number of vehicles operating in a district, and requiring that all drivers possess a vocational license for public transportation, with all cars licensed to a commercial entity or cooperative.

Despite long protracted appeals by ride-hailing services against them, the new regulations were slated to come into force in July 2017. However, the government has since extended the “tolerance phase” for its implementation, giving companies another six months to comply with the new rules. This is not the first time the deadline for regulatory enforcement has been extended since the rules were released over a year ago.

Public sentiment and its effect on regulation

Both cases of 7-Eleven and Uber in Indonesia have demonstrated something that investors have long known about the country—regulatory uncertainty can cause dramatic swings in company performance and, when faced with such hurdles, there is little that the company can do to avoid its pitfalls.

However, what is perhaps more pertinent is the impact of public sentiment in swaying these governmental regulations. In the case of 7-Eleven, the alcohol ban was preceded by protests by hardliner Islamic parties and groups like Indonesia’s Islamic Defenders Front, who pressed the government to ban alcoholic beverages in a bid to push for Islamization of the secular state. These measures culminated in the ban that was deemed necessary to protect young people in the Muslim-majority country, as alcohol consumption had been rising.

The presence of ride-hailing services in Indonesia was met with large-scale protests by taxi drivers and unions like the Land Transportation Drivers Association (PPAD), who decried—in some cases violently so—on the streets the apps for unfair business competition practices.

Moving forward with foreign investment

Investments into a foreign country have to always be accompanied with an acute understanding of the local market and landscape. Foreign investors frequently have to contend with changing regulatory regimes in Indonesia, which can even impact long-standing contracts, as in the ongoing case with PT Freeport Indonesia. As a young democracy, these regulatory changes can be mired by vehement public opposition, which tie the hands of the ruling government.

Under the regime of President Joko Widodo, Indonesia is increasingly becoming open to foreign investment. A “Big Bang” in the country’s economic liberalization took place in early 2016, which included the easing of foreign ownership restrictions on sectors such as tourism, transportation, and retail. With the size of the domestic market—many sectors within remain underserved—the potential for foreign companies looking to invest is immense.

One way foreign companies can enter the Indonesian market is by working with local partners. For instance, when internet giant Alibaba entered the Indonesian market, they acquired a controlling stake in Lazada Group SA, the Indonesian unit that is pivotal for the group’s performance. Lazada Indonesia is the most visited ecommerce site in the country, with homegrown site Tokopedia coming in a close second.

Alibaba also teamed up with Indonesia-based logistics company J&T Express to launch a new company called J&T Alibaba to facilitate the push of Indonesian SMEs onto the global market. More recently, in order to meet the growing demand for reliable data storage services, Alibaba’s cloud computing arm Alibaba Cloud also announced plans to open a data center in Jakarta. This meets the recently tightened government regulations on the fintech sector.

A deeper study into the Indonesian market can help to anticipate the possible risks or setbacks that a company might face if its investments affect different social groups or working classes in Indonesia. Teaming up with local partners is a way to lay the necessary groundwork to ease the entrance of foreign companies into the market.

Another strategy could be using social media as a tool to reach domestic audiences, with the country being the fastest growing one in internet use. As Indonesia opens up its shores to foreign investments, companies could do well by playing on the country’s unique strengths to maximize its growth potential.

Converted from Indonesian rupiah. US$1 = IDR 13,316.

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Craig J Selby | Craig is a long-time proponent of structured and measured change. His early career saw him teaching marketing and management at a variety of Universities and PTE’s in his native New Zealand, where he quickly climbed the management ladder to head several private sector institutes. Needing to do that little bit extra, Craig formed his own consultancy firm and was engaged by many in the sector as a trouble-shooter - responsible for internal auditing, restructuring and redevelopment of many departments and institutes in order to remain competitive in a highly contested market. This involvement motivated him to branch out and work with other industries - focussing on change and development as a core theme in business survival. When Craig moved to Malaysia, he went back into the Education sector to share his ideas with local private sector educational facilities. In 2009 Craig co-founded Orchan Consulting Asia, an award-winning Public Relations agency. His areas of specialisation are Crisis Management Communications and Change Management.

Any conversation about leadership is both important and evolving. The following (abridged) article from The Edge | Markets (7 July 2017) offers a brief, but excellent, modern, local take on leadership today and beyond. 

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Image Source - The Edge Markets

Former Bank Negara Malaysia (BNM) governor and chairman of Iclif Tan Sri Dr Zeti Akhtar Aziz said the concept of leadership in the 21st century demands new thinking.

This new thinking, she said, takes into account the increasing rate of change, the complexities of a more globalised world, and the need for sustainability in the face of heightened uncertainty.

“Unlike conventional thinking, leadership has nothing to do with one’s position, title or authority. Rather, leadership [now] is about the drive to create a better future, and having the inner energy to keep going despite resistance and obstacles,” she said during her keynote address at the launch of the 2017 Leadership Energy Summit Asia (Lesa) yesterday.

Zeti also touched on the importance of “Open Source Leadership” — ... which seeks to explore what it takes to be a transformative leader in the 21st century, who must reinvent themselves to thrive in a connected, transparent and disruptive environment, and how technological empowerment has transformed companies into open-source organisations.

“We must consider the uber-connected environment of today as well as the increasing number of sophisticated young talent that do not think, act, perceive, strategise or make decisions like their parents did; where business-as-usual is a thing of the past”.

Source: http://www.theedgemarkets.com/article/zeti-concept-leadership-21st-century-demands-new-thinking

Training members of your team is an essential responsibility of every organization, and at every level. It does not mean spending thousands of dollars on sending team members to courses; it can be as simple as mentoring – often underrated as a training tool, but one of the most powerful training methods available to help employees at all levels to develop in their craft and enhance their professional skills.

I have previously written about the power of mentoring, and the amazing mentors I have been fortunate enough to have throughout my career. Today, I focus on a Forbes ‘problem / response’ article which struck a chord – about an organization which did not deliver on the promised training to their employee.

Not only does non-delivery affect the person’s long term career (they could end up well behind their peers), but it impacts upon motivation levels, and general capabilities within the workplace. Moreover, it reflects poorly upon the organisation’s leaders – for not developing internally. As I said, it doesn’t have to be expensive courses – training can involve time invested, shadowing, internal training, peer partnerships, and a plethora of other options.

In our creation of our legacy, or responsibility is to create the next generation – to honour our responsibility, we must find ways to train and develop talent at all levels.

I shall leave you to reflect on the Forbes post, as the response offered is certainly sound advice.

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Image Source - Shutterstock

They Promised To Tain Me -- But That Training Never Happened

Dear Liz,

I took a new job in March. I interviewed with four managers, and they were all very nice.

I liked them a lot. That's one reason I took the job.

I still like some of them. Some of them turned out to be con men. The CEO in this company is the biggest con man of all. He's a salesman. He's not a bad person, but he speaks without thinking.

He was the last person I met during my interview process.

I was flattered that the company CEO wanted to meet me. He said "Everybody here likes you and I like you, so the only remaining question is 'Do you like us?'"

I took the job.

I'm a Regional Operations Coordinator. There are six of us in my department. We were all hired within the past year.

The company is growing fast -- way too fast in my opinion considering there are no processes, we work way too much overtime (unpaid) and our leaders are constantly making changes.

It's really stressful.

Before I was hired, they promised to train me. On my interviews, I asked a lot of questions about the training for this job. The CEO told me I would get two weeks of training followed by three weeks of shadowing a current employee.

I think he made that up on the spot. I haven't had two minutes of training. They threw me into the job on my first day. My coworkers and I constantly exchange ideas but we are all in the dark. We are all floundering. We feel like idiots and our customers are starting to complain more and more.

I have tried in my very limited personal time to create a training outline for new hires in my department.

I've listed about 80 critical topics already and I'm nowhere near done with the outline. I've talked to my boss a dozen times or more about the need for training. She says "Yeah, we need to get to that" and then the idea evaporates again.

What else can I do?

Thanks,

Marisa

Dear Marisa,

It sounds like a crazy environment -- but what amazing learning you are getting!

I don't know if your CEO is a con man or not, but he certainly sounds like a person who lives on the edge. It was not cool of him to promise you training that turned out to be vapor ware -- but there is a huge opportunity in front of you!

It's time for you, with or without your coworkers by your side, to speak up in a way you haven't done before. Make a business case to your manager and/or the whole management team.

This is not the story of an aggrieved and misled employee. It is a much bigger story than that -- but only when you get altitude on the problem and address it as a business issue.

You have the opportunity, if you want to grab it, to step back and create a business proposal that your boss will have a hard time turning down. To accomplish that, you must see the problem through  "business eyes."

How does it cost your company money to go without a training program for people in your position? Begin to quantify and note the complaints you're getting and the volume of business the unhappy customers generate for your firm.

Before outlining the training program itself, start building the case to get a training program established - either with the help of an outside consultant or by giving you and your peers enough time and space to build the training program in-house.

Your first step is to understand the pain your employer is experiencing now or will experience as a result of your missing training program and lack of procedures. Looking for the pain will teach you critical consulting skills we all need to develop.

If you don't feel like diving into this project, your alternative is to start looking for another job.

No one would blame you if you did -- but I hope you stick around and overcome this obstacle. Your mojo and muscles will be enormous if you do!

All the best,

Liz

Source - Cédric Dhaenens | Unsplash

The not-so-recent proliferation of shopping malls in Klang Valley has led many operators to look into ways they can stay competitive. With extensive experience in supporting clients in the retail industry, Orchan Directors – Craig J Selby and Farrell Tan share with us what mall operators and owner can do to survive the competitive climate.

1.    What are some of the challenges malls face in this competitive climate? 

There are simply a lot of malls out there. There are a lot of the ‘same outlets’ and the ‘same A & P initiatives’. The challenge is keeping relevant to your core demographics, keeping relevant to the new customers that you are attracting, and staying fresh with ideas to bring in new customers. No one wants to see the same roadshow at four consecutive malls – customers want variety.

Additionally, customers want convenience. Parking. Retail. Food and beverage. Convenience. They want to be considered as part of the process – not just “oh, customers will come as long as we have Brand X here”.

2.    How do consumer habits and spending power affect the survivability of malls? What can mall operators do to influence this?

Malls need customers to spend. Simple. Malls, and individual outlets need to explore how best to engage with customers. The recent e-commerce trend – virtual stores and online shopping – is having an impact. But at the end of the day, customers still want to feel and touch products too – they just do their research online first, and are therefore more targeted in their purchases. Because of this, stores, and malls need to step up their game to encourage and facilitate impulse purchases.

Survivability however is beyond just purely customers. It is having the right tenant mix, creating a community hub (be it a hub for a geographic community, or a community of like-minded individuals [eg; electronics mall, discount stores mall] – somewhere where the stratums of society feel at home, want to come to shop, to be seen, and to function – all of this is relevant too. Mall operators need to know their demographics, and their psychographics; then work with retail brands – both established and new – to create unique experiences that people want to enjoy.

3.    What are some of the elements that can make a mall standout for consumers and tenants?

For consumers – tenant mix – a variety of great brands, but also the unknown and emerging brands. A mall without a strong food & beverage selection can be a massive failure – you have to give reason to people to hang around. Interesting and diverse activities, roadshows, customer engagement opportunities.

For tenants – a mall must be active in marketing (A & P) – they must be committed to helping all tenants equally in putting forth their brand. They must also be committed to creating a positive mall environment (cleanliness, security, accessibility, maintenance).

4.    What are some of the strategic approaches existing malls can take in order to keep up with the game?

By taking a strategic approach to tenant mix, to marketing (A & P) support, and to expansion plans – by keeping relevant to their catchments – these are what will help. As a society we are heading more and more towards micro-integrated-townships – does your mall reflect this trend? If not – consider whether you should be.

5.    If freeze on new malls is not implemented, what can new operators or owners expect if they wish to start the business?

They can expect a challenge. They can expect a lot of competition. They can expect to find the early months extremely tough. They can expect to find tenants who want bargain rental deals. They can expect to do a lot of hard work in marketing for potentially disproportionate results.

But they can expect things to get better. Malls, just like brands, attract loyalty. When you consistently maintain the standards that your customers expect, and you deliver on a quality retail experience, your customers will come back. They might like a certain outlet, or they may like the vibe; but it will become their “go-to” place for select activities.

6.    Looking into mall concepts might be one of the ways malls can stand out. What are some mall concepts operators and owners can consider?

There are many concepts out there. My personal favourite is Grand Indonesia in Jakarta, and how they have created functional and fun zones for shoppers. It’s a huge property – vertically massive, which creates its own challenges.

Concepts may go from the simplistic of targeting select tenants only – fashion and textiles; homewares and furniture; electronics; through to more micro-level concepts – cultural alleys, continents, technology zones.

For this to work, operators really need to consider both their catchment and their attractiveness. Will this work for the current catchment? Or, is it stretching the experience too much? Likewise, am I similar to my competitors? What makes me different? Nothing worse than being a boring neighborhood strip mall – unless, of course, that’s what your neighborhood wants, supports, and makes viable.

7.    In this climate, should mall operators focus on getting the right tenants, or getting the right number of tenants?

Both.

The right tenants are extremely important. The wrong tenants will close shop anyway. But, the mix that works, that meets the needs of the customers is important.

Concurrently, the right amount of tenants is important. If you only have a 20% occupancy rate; it will not inspire confidence in either customers (there’s simply not enough to attract and wow them) or prospective tenants (what went wrong).

8.    Are online stores necessarily a threat for brick-and-mortar stores, or can they be a blessing in disguise? How can mall operators work with retailers to ride the wave of online shopping?

The industry gossip is that they are a threat. Large retailers are closing down across North America.

But, I contend people want to shop. We are social beings. We still need our malls. At least, in Asia that is.

What is changing is how we choose our products. We either research online to target then purchase. Or, we head to a retail store to check products out, then purchase online via aggregator sites to get the deals.

Retailers and mall management need to understand these trends, and see how they can work within the phenomena. That’s the key to a successful future.

9.    Will freezing new mall licenses solve Malaysia’s impending retail problems? What benefits can a freeze bring to existing operators?

I do not believe it will.

Developers are not stupid. They don’t invest hundreds of millions to fail. There’s a longer-term plan / goal in sight – call it land-banking, hedging, whatever. So, it works for them.

Freezing mall licenses is a temporary measure only. It allows the population to catch up with the malls. But it lulls retailers and operators into a false sense of security too – they won’t feel the true essence of competition.

10. Based on current trend, we can foresee that the rising number might not change anytime soon. What are some of the things existing mall operators need to take into consideration if the number grows larger in the coming years?

Keep themselves relevant to their catchments.