family business survey 2014 · family business survey 2014 69% 70% 83% 12% 15% 13% 2014 2012 2014...

Family businesssurvey 2014

Findings for Indonesia

www.pwc.co.uk

September 2014

PwC

Agenda

Key findings at a glance

Overview

Main Findings:

A. Performance and Challenges

B. Internationalisation

C. How family businesses differ

D. Family involvement and succession planning

E. Moving to digital and emerging global trends

Conclusions

September 2014Family business survey 2014

Slide 2

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Key findings at a glance


Slide 3

Family Businesses in Indonesia have seen much stronger growth than the global average over the last year and are very bullish about future growth. 83% have grown in the last 12 months (vs. 65% globally) and 96% are aiming to grow over the next five years (vs. 85% globally)

The key challenge to growth will be the number of businesses competing (rather than the economy which is a relatively minor issue in Indonesia). In addition, businesses see the need to innovate, attract skills and talent and the need to professionalise as key challenges for the future

Ensuring the company’s long term future is the most important goal for the next 5 years followed by factors that may help drive this: running the business more professionally, being more innovative, and attracting high quality skills

Factors relating to the family (creating employment for family members) and diversification (new products/sectors, exporting) are of less importance

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Key findings at a glance (continued)

September 2014

Slide 4

Family business survey 2014

But many recognise the disadvantages too: less open to new thinking and ideas and, to a lesser extent, reduced access to capital (and it being harder to benefit from the recovery as a result)

Family Businesses in Indonesia believe they play a role in their country’s economy and society; including supporting community initiatives and employment. However they are significantly less likely than the global average to feel this extends to job creation and adding stability to a balanced economy

80% of family businesses in Indonesia have proceduresin place to deal with family member issues/conflict (on a par with the world as a whole: 83%)

Over half are planning to pass on ownership to the next generation but bring professional management in. A quarter will pass on ownership and management to the next generation

Family businesses believe they hold some key advantages over non-family businesses including: being more entrepreneurial and making decisions faster / being more streamlined with regards to decision making

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Methodology

September 2014

Slide 5


2,378 interviews conducted in over

40 countries 30 interviewsAveraging 41 minutes

Conducted between 21st May and 29th

August 2014

In Indonesia…

All interviews conducted by phone

Throughout report:

= 2014 country % higher or lower than the global average

= 2014 % higher or lower than 2012 %

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Sample profile


Slide 6

PwC

Indonesia sample profile: Business

27%

7%

3%

20%23%

17%14% 13%

20%

16%

22%

11%

$5-10m $11-20m $21-50m $51-100m $101-500m >$500m

Turnover (US$s)

Mix of sectors:

• Manufacturing: 50% (30%)

• Transport: 13% (6%)

• Business activities: 13% (7%)

• Construction: 7% (9%)

• Others: 5% or less

30%

53%

17%18%

44%38%

Under 20 years 20-49 years 50+ years

Company age

23%

37%33%

0%

30%

40%

19%

11%

1 generation 2 generations 3 generations 4+ generations

Number of generationsSector

September 2014

Slide 7


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Indonesia sample profile: Respondents

47%

7%

23% 23%

49%

8%

23%19%

CEO/MD Owner/Partner

FinanceDirector

Other Boardmember

52%48%

64%

36%

Family Non-family

27%

43%

23%

3% 3%

10%

25%

34%

22%

8%

Under 35 35-44 45-54 55-64 65 or older

87%

13%

90%

10%

Own and manage Just own – don’t manage

Role Family member?

AgeFamily role in business

September 2014

Slide 8


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Organisation performance and challenges


Slide 9

A

Main findings

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65%65%83%

18%19%10%

83% of family businesses in Indonesia grew in the last financial year (compared with 65% globally) and 96% are aiming to grow in the next 5 years (compared with 85% globally)

September 2014

Slide 10


70%69%83%

15%12%13%

2014 2012 2014

Sales Growth

Sales Reduction

2014 2012 2014

Grow quickly & aggressively

Grow steadily

3% 16% 13% Consolidate

0% 2% 1% Shrink

100% of Indonesian family businesses predicting growth are confident of achieving it

Next five yearsLast year

Growth Aims (Next five years)Growth in last financial year

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The key issues facing family businesses in Indonesia are government policy / regulation, staff recruitment and competition. Compared with the rest of the world, businesses in Indonesia are less concerned about market conditions

47%

20%

13%

13%

13%

10%

49%

28%

25%

15%

13%

19%

Staff recruitment

Company re-organisation

Business/productdevelopment

Availability of finance

Technology

Cash flow/cost control

Key internal issues in next 12 months Key external issues in next 12 months

September 2014

Slide 11


50%

43%

27%

23%

20%

7%

33%

32%

63%

13%

10%

5%

Govt policy/regulation

Competition

Market conditions/Euro uncertainty

Exchange rates

Price of raw materials

Infrastructure

“Search for professional talent especially in technology development.”

(Third Generation family business)

“Human resource (quality & quantity). Attract quality people talent and get more of them.”

(Second Generation family business)

“Government policy, performance evaluation and execution e.g.2006 Bio-fuel policy still not executed by Government till now.”

(Third Generation family business)

“Competition (size of the competitors),even though we are currently top 3 in Indonesia.”

(Second Generation family business)

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73%

67%

63%

60%

53%

50%

50%

47%

43%

40%

37%

33%

23%

20%

42%

64%

61%

58%

40%

48%

41%

36%

42%

33%

56%

44%

26%

11%

Number of businesses competing

Need to continually innovate

Attracting the right skills/talent

Price competition

Need to professionalise

Retaining key staff

Need for new technology

Company succession planning

Complying with regulations

Increasingly international environment

General economic situation

Containing costs

Suppliers/supply chain

Conflict between family members

Family businesses in Indonesia are more likely to see the number of businesses competing as a challenge but less likely to identify the general economic situation as a challenge

Key challenges in five years’ time

Slide 12


Next five years

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16.0%

13.2%

11.9%

10.7%

9.4%

8.7%

5.0%

5.0%

4.8%

4.6%

4.0%

3.7%

1.7%

1.4%

16.2%

8.8%

13.7%

9.3%

10.1%

9.4%

4.3%

4.0%

5.6%

3.8%

5.4%

4.3%

4.4%

0.7%

Ensure company's long term future

Run business more professionally

Improve profitability

More innovative

Attract high quality skills

Ensure staff are rewarded fairly

Contribute to the community / positive legacy

Grow as quickly as possible

Diversify into new products/sectors

Move into new regional markets in home country

Enjoy work and stay interested

Different export markets

Ensure business stays in the family

Create employment for other family members

It may be that the recession and the tough environment emerging afterwards has sharpened Family Business thinking. Their priorities are clearly set out here – the long term future and success of the business come first. The key enablers of commercial success are the second priority and family and community related aspects are less important

Relative importance of personal and business goals over the next 5 years (out of 100)

Slide 13


(New question in 2014)

Next five years

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Internationalisation


Slide 14

B

Main findings

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Increased internationalisation is predicted. 18% of sales today are accounted for by international sales (expected to rise to 24% of sales)

Avg. % of sales = International(based on all i.e. all exporting and non-exporting businesses)

Countries/regions seeing biggest increase in five years (Indonesia)?

88%

18%

12%

6%

0%

6%

Asia Pacific

Europe

Africa

Americas

Middle East/Gulf

No new countries

The new countries for exports will primarily be in Asia Pacific

September 2014

Slide 15


18% 24%

Currently In 5 years’ time

25% 32%

Next five years

Russia: 12%

Malaysia: 29%

China: 24%

Thailand: 24%

India: 18%

Singapore: 12%

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How family businesses differ


Slide 16

Main findings

C

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57%

57%

57%

57%

53%

53%

50%

43%

43%

30%

30%

78%

71%

59%

55%

69%

47%

56%

73%

36%

38%

34%

% agreeing with statements about how family businesses behave

September 2014

Slide 17


Play an important role in job creation

Measure success differently – not just profit / growth

More entrepreneurial

Take a longer term approach to decision making

Decision making is more streamlined / faster

Were able to withstand the recession better

Re-invent themselves with each generation

Add stability to a balanced economy

Less open to new thinking and ideas

Take more risks

Harder to benefit from recovery (due to capital access issues)

Family businesses generally feel positively about how their sector compares with other businesses. However, Indonesian businesses tend to be less positive than businesses in other countries

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97%

73%

73%

57%

76%

72%

59%

73%

Almost all feel family businesses have a strong sense of responsibility to support employment, while three quarters agree that family businesses do all they can to retain staff and that they have a strong sense of responsibility to support community initiatives

% agreeing with statements about how family businesses differ to other businesses

September 2014

Slide 18


Strong sense of responsibility to support employment

Do all they can to retain staff, even in the bad times

Strong sense of responsibility to support community initiatives

The culture/values tends to be stronger

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Slide 19

Main findings

Family involvement and succession planning

D

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80% of Indonesian family businesses have non-family members on the board

% have non-familymembers on the board

% have non-familystaff who have shares

Further % likely to offer shares to non-family in the next five years

September 2014

Slide 20


80% 65%

50% 34%

33% 18%

PwC

September 2014

Slide 21


Over a half of family businesses in Indonesia have non-working family member shareholders

Family involvement in businesses

% have family members working as Senior Executives within the company

% have family members working within the company, but not as senior executives

% have family members who don’t work for the company or have shares, but are

recompensed in other ways

% have family members who don’t work for the company but have company shares

100% 93%

53% 49%

53% 48%

17% 18%

PwC

September 2014

Slide 22


60% of family businesses in Indonesia have next generation family members working for the business

Family “Next Generation” involvement in businesses

% have Next Gen family members working as Senior Executives within the company

% have Next Gen family members working within the company, but not as senior

executives

% have Next Gen family members who don’t work for the company or have shares,

but are recompensed in other ways

% have Next Gen family members who don’t work for the company but have

company shares

Any next gen working for business

60%

55%

60% 43%

27% 28%

33% 23%

10% 7%

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80% of Indonesian family businesses have at least one procedure/mechanism in place to deal with conflict (on a par with the global average: 83%)

Procedures in place

September 2014

Slide 23


53%

40%

37%

27%

23%

23%

20%

13%

20%

54%

39%

22%

32%

43%

27%

33%

27%

17%

Shareholders agreement

Measuring and appraising performance

Family constitution

Family council

Incapacity and death arrangements

Conflict resolution mechanisms

Entry and exit provision

Third party mediator

Nothing

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70% of family businesses have some sort of succession plan, while 27% of family businesses have a succession plan in place that is robust and documented

September 2014

Slide 24


Succession plan for key senior roles?% with a succession plan in place

for at least some senior roles

27% of Indonesian family businesses have a succession

plan in place that is robust and documented (16% worldwide)

13%

17%

40%

20%

16%

18%

20%

44%

All senior roles

Most seniorroles

Small numberof senior roles

None

70% 53%

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57%

23%

10%

10%

0%

32%

40%

20%

8%

1%

Pass on ownership but bringprofessional management in

Pass on management to nextgeneration

Sell/float

Don't know

Other

September 2014

Slide 25


Future plans

Over a half of Indonesian family businesses are planning to pass on ownership to the next generation but bring professional management in. A quarter plan to pass ownership and management down to the next generation

Breakdown in Indonesia

• Flotation / IPO: 10%

• Sell to private equity investors: 3%

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Moving to Digital and Emerging Global Trends


Slide 26

Main findings

E

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The majority of Indonesian family businesses recognise the importance of digital (more so than the global average)

September 2014

Slide 27


% agreeing with statements about the digital world

90%

87%

87%

63%

72%

64%

57%

43%

Need to adapt organisation to an increasingly digital world

Moving to digital will help raise organisational awareness

Understand the tangible business benefits of moving to digital and have

a realistic plan for measuring them

Attracting talent to undertake the conversion to digital is at the top of

our agenda

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Family Businesses in Indonesia have a similar outlook to the world as a whole in terms of the global trends that will transform business over the next 5 years although place more emphasis on a shift in global economic power and less on urbanisation

Slide 28

Top three global trends that will transform business over the next 5 years (Indonesia)

Ranked top 3 (globally): 56% 60% 52% 79% 40%

Next five years

20%30%

10%

47%

3%

20%

33%

20%

10%

13%

13%

17%

17%

23%

10%

Demographic shifts Shift in global economic power

Resource scarcity andclimate change

Technologicaladvances

Urbanisation

Ranked 3rd

Ranked 2nd

Ranked 1st

Ranked top 3: 53% 80% 47% 80% 27%


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Conclusions

September 2014

Slide 29


Businesses in Indonesia have similar priorities to businesses around the world although place more emphasis on the number of businesses competing. They recognise the importance of professionalising the business in order to help meet these ambitious growth targets

Family businesses in Indonesia seem to be better placed than average in terms of succession. Although only 27% have a robust and documented succession plan in place this compares with favourably with the world as a whole (16%)

Optimism and ambition for the future is high with 96% aiming for growth over the next 5 years. The general economic situation is not such an issue in Indonesia as it is in many other markets (although competition is seen as fierce).

Family businesses in Indonesia recognise the important role family businesses play in the economy and society, although are less likely to feel they play an important role in job creation or adding stability to a balanced economy

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the

United Kingdom) which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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family business survey 2014 · family business survey 2014 69% 70% 83% 12% 15% 13% 2014 2012 2014...

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