1 ANALYSING POSSIBILITIES OF SELF-INITIATED EXPATRIATES AND HOME COUNTRY NATIONALS IN JAPANESE AFFILIATES IN INDONESIA FINAL PROJECT In partial fulfilment of the requirements for the master’s degree from Institut Teknologi Bandung By Makoto Uda Student ID: 29123701 (Master of Business Administration Program) 2 ANALYSING POSSIBILITIES OF SELF-INITIATED EXPATRIATES AND HOME COUNTRY NATIONALS IN JAPANESE AFFILIATES IN INDONESIA 3 4 INSTITUT TEKNOLOGI BANDUNG December 2024 ABSTRACT ANALYSING POSSIBILITIES OF SELF-INITIATED EXPATRIATES AND HOME COUNTRY NATIONALS IN JAPANESE AFFILIATES IN INDONESIA By MAKOTO UDA Student ID: 29123701 (Master of Business Administration Program) Since COVID 19, many Japanese affiliate companies operating in Indonesia have reduced the number of expatriates, against a backdrop of heightened awareness of risk and cost reduction. Through interviews with 14 people of 11 companies, it was revealed that i) each role of expatriates, self-initiated expatriates and home country nationals, ii) issues of each segmented employees, iii) new trend to solve the problems, and iv) possibility of boundary spanners. The management of local subsidiaries is becoming increasingly complex, due to the change of business model. Different from the past, many Japanese companies exploit domestic market. Nevertheless, the managerial system and skills of head office remain the same. Communication between the Japanese headquarters and local subsidiaries relies on expatriates due to language problems, which has been criticized for long time as “ethnocentric” and come a bottleneck for localization. This paper proposes solutions to deal with the shortage of expatriates and localization problems in Japanese affiliates in Indonesia. To be more specific, it focuses on the possibility that self-initiated expatriates and host country nationals and examines whether they can be a substitute for organized expatriates. Keywords: organized expatriate, self-initiated expatriate, host country national, boundary spanner, cultural gap, Japanese affiliated company in Indonesia 5 ABSTRAK MENGANALISIS KEMUNGKINAN EKSPATRIAT YANG BERINISIATIF SENDIRI DAN WARGA NEGARA ASAL DALAM AFILIASI JEPANG DI INDONESIA Oleh Makoto Uda 29123701 (Program Studi Magister Administrasi Bisnis) Sejak COVID 19, banyak perusahaan afiliasi Jepang yang beroperasi di Indonesia telah mengurangi jumlah ekspatriat, dengan latar belakang meningkatnya kesadaran akan risiko dan pengurangan biaya. Melalui wawancara dengan 14 orang dari 11 perusahaan, terungkap bahwa i) peran masing-masing ekspatriat, ekspatriat yang bekerja di Indonesia, dan warga negara asal, ii) masalah yang dihadapi oleh masing-masing karyawan yang tersegmentasi, iii) tren baru untuk menyelesaikan masalah, dan iv) kemungkinan terjadinya pelampauan batas. Pengelolaan anak perusahaan lokal menjadi semakin kompleks, karena perubahan model bisnis. Berbeda dengan masa lalu, banyak perusahaan Jepang yang mengeksploitasi pasar domestik. Namun demikian, sistem manajerial dan keterampilan kantor pusat tetap sama. Komunikasi antara kantor pusat Jepang dan anak perusahaan lokal bergantung pada ekspatriat karena masalah bahasa, yang telah lama dikritik sebagai “etnosentris” dan menjadi hambatan untuk pelokalan. Makalah ini mengusulkan solusi untuk mengatasi kekurangan ekspatriat dan masalah pelokalan di afiliasi Jepang di Indonesia. Secara lebih spesifik, makalah ini berfokus pada kemungkinan adanya ekspatriat yang berinisiatif sendiri dan warga negara tuan rumah serta memeriksa apakah mereka dapat menjadi pengganti ekspatriat terorganisir. Kata kunci: ekspatriat terorganisir, ekspatriat yang bekerja atas inisiatif sendiri, warga negara tuan rumah, kunci pas, kesenjangan budaya, perusahaan afiliasi Jepang di Indonesia 6 TABLE OF CONTENTS VALIDATION PAGE…………………………………………………………………... 2 ABSTRACT…………………………………………………………………………… ..4 TABLE OF CONTENTS………………………………………………………………... 6 LIST OF APPENDICS………………………………………………………… ...……...8 LIST OF TABLES……………………………………………………………………… .9 LIST OF FIGURES…………………………………………………………………… .10 Chapter 1 Introduction……………………………………………………………… 11 1.1 Background………………………………………………………………… .11 1.2 Japanese Subsidiaries in Indonesia………………………………………… .14 1.3 Business Issue of Japanese companies……………………………………… 19 1.4 Questions………...………………………………………………………… .23 1.5 Objectives………...………………………………………………………… 23 Chapter 2 Literature Review………………… ..……………………………………… ..24 2.1 Theoretical foundation……………………………………………………… 24 2.2 Conceptual framework……………………………………………………… 28 Chapter 3 Research Methodology…………… ...……………………………………… .20 3.1 Research design…………………………………………………………… ...30 3.2 Data Collection method…………………………………………………… ...32 3.3 Data analysis method……………………………………………………… ...32 Chapter 4 Analysis…………………………………………………………………… ...34 4.1.1 Each role of OEs, SIEs, and HCN………………………………………… 34 4.1.2 Demand to hire SIEs……………………………………………………… 35 4.1.3 Category of job and salaries of SIEs……………………………………… 37 4.2 Issue of OEs and SIEs……………………………………………………… .40 4.2.1 Issues of OEs……………………………………………………………… 40 4.2.2 Issue of SIEs……………………………………………………………… .43 4.2.3 Summary of the founded issues…………………………………………… 47 4.3 Solution to fulfill the scarce of manpower in Japanese OEs in Indonesia…..48 4.4 Analysis of implementation of each solution………………………………... 62 4.5 Implementation plan………………………………………………………… 66 Chapter 5 Conclusion and recommendation….……………………………………… ...68 5.1.1 Why do the companies send OEs?……………………… ………………… 68 5.1.2 What is the difference of role and responsibilities among OEs, ISEs, and HCNs, and how we can replace OEs to SIEs and HCNs?……………………… 68 7 5.1.3 What are the obstacles to replacing OEs to SIEs and HCN and what is the solution to the obstacles?......................................................................................69 5.2 Recommendation…...……………………………………………………… .70 REFERENCES………………………………………………………………………… 72 APPENDIX…………………………………………………………………………… .76 8 LIST OF APPENDIX Appendix A: Summary of interviews .................................................................