Ethical and CSR Issues
The first issue that becomes after the review of the Mobil Indonesia case is that the local government and the international company did not have a mutual understanding of how they should fulfill their responsibilities and benefit the community. The process of attaining organizational goals became flawed due to the difference in awareness levels that Mobil and the government displayed when interacting with each other. Mobil’s strong inclination toward the achievement of personal and political objectives became a thoroughly devastating factor that severely limited its chances to take fair advantage of the existing opportunities. Knowing that Mobil did not have a certain agenda either, it may be concluded that the key problem with CSR in terms of the lack of awareness related to the question of how the corporation would be able to restore local trust after disregarding the needs of resident Indonesian people. Therefore, the unwillingness to follow core CSR principles affected Mobil to an extent where the company had to reposition itself and lose time and resources trying to refurbish its competitive advantages.
The second issue that is perfectly outlined throughout the case is the evident mismatch between the interests of the beneficiaries and the expectations displayed by Mobil. The uncertainty characteristic of the Indonesian community played a negative role and deteriorated the relationship between Mobil and the local stakeholders, paving the way for an increased number of conflicts that would further weaken the corporation’s position in the overseas market. In the case of Mobil, there were no NGOs that could protect the company from addressing the mismatch in a swift manner and develop a different penetration strategy that would not put any strain on the enterprise’s monetary and resource-based condition. Before any of the activities were completed by Mobil, the company’s executives should have run the needs assessment to gain more insight into what could be essential for the local stakeholders.
Another challenge that shall not be overlooked when discussing the case of Mobil extending its operations to Indonesia is the corporation’s negligence in relation to the sustainability of its activities. After trying to penetrate the Indonesian market, Mobil became somewhat exhausted in financial terms and could not protect itself from the impact of scarce resources. There was no chance for Mobil to sustain its beneficiaries, while the latter was struggling with sustaining themselves, too. Instead of rushing into its social activities, Mobil should have first evaluated the potential level of its sustainability. Instead, the oil industry mogul decided to make a long-lasting impact on the Indonesian industry without assessing any of the potential outcomes. By ignoring the areas where the positive impact could have been achieved, Mobil developed a situation where the beneficiaries realized that sustainability could not be achieved and turned away from the international oil company to pursue their own objectives.
The last issue with Mobil’s activities in Indonesia that cannot be overlooked is the mistrust that appeared between the company and numerous NGOs that were interested in protecting the environment and making sure that Mobil is not going to affect the Indonesian market in a devastating manner. Based on the case, there was no proper dialog between the stakeholders and the corporation, which created multiple gaps in Mobil’s strategy. The majority of interested parties decided to quit as soon as they realized that Mobil’s interests only revolved around profits and a positive relationship with the government. As the oil corporation tried to streamline its operations to achieve organizational objectives with no attention being paid to the local NGOs whatsoever, there was no doubt that Mobil’s operations in Indonesia would be ceased quickly, especially under the influence of the fact that the local population of Aceh has always been known as prone to revolts and conflicts.
Hofstede’s Five Dimensions
Power distance is an essential dimension for Mobil in this case because the company majorly failed to secure its benefit of hierarchy and chose to promote different rights among its Indonesian stakeholders. For the local parties, this was an unacceptable move, as they were much more accustomed to the centralization of power and did not expect Mobil, as foreigners, to exceed their authority. By not showing at least a slight share of obedience, the international oil mogul made it harder for the Indonesian stakeholders to engage in partner-like relationships and provide Mobil with all possible development opportunities (Bachriadi & Suryana, 2016). While negative feedback was not shared along the way (in line with the typical ideas of Indonesian power distance), it has led to numerous cases of miscommunication and proved that Mobil did not respect their overseas partners as much as the latter expected.
The dimension of individualism was not covered by Mobil either, as the company chose to prioritize its own objectives instead of taking care of community ideals and interests that were typical of the local population. As far as many Indonesian stakeholders perceive business partners as their second family, Mobil failed to address the essential concept of individualism and tried to develop relationships that would be based on a reversed hierarchy. Similar to how Indonesian people have to learn more about each other’s families prior to their marriage, Mobil should have investigated the local business climate and made reasonable conclusions about what kind of policies it would have to follow in order to achieve the best possible outcomes. It is typical of Indonesians to work in groups, which means that Mobil failed to support the dimension of individualism through improved collaboration. As a successful international organization, Mobil should have maintained a community-based approach to its operations and developed an agenda that would consider the cultural peculiarities of Indonesian people and NGOs.
The dimension of masculinity might have been addressed by Mobil in a much more all-inclusive way as well. For the local organizations, it was much more important than the oil mogul could help them develop a sense of prestige and stay away from unnecessary motivation and pieces of training. The fact that the locals’ status was damaged by Mobil’s swift decisions that were not environment-friendly also paved the way for additional conflicts and made it harder for the international oil company to achieve its objectives (Bee, 2013). The only area that Mobil managed to cover was the process of attaining a better quality of life and improved work-life balance for all employees and stakeholders, irrespective of their personal characteristics or vitals. Nevertheless, none of the conflicts that occurred along the way had been resolved through proper negotiation and compromise. This means that Mobil did not exert enough effort to focus on local welfare and choose to engage in decision-making that only affected the company’s well-being.
The dimension of uncertainty became the key reason for Mobil’s initial failure for two reasons. The first is that Indonesians are extremely inner-centered, as they never show negative emotions and remain angry for a prolonged period (Pekerti & Sendjaya, 2010). Mobil’s management did not take the time to study the peculiarities of Indonesian culture and continued its operations without assessing the potential influence of the corporation’s actions on the local population. Even though there was a sign of harmonious relationships between the Indonesian government and Mobil, the outcomes of their partnership prove that the lack of proper conflict resolution strategies became the biggest problem for the international oil tycoon. The second reason why Mobil failed was that it never engaged in direct communication with the stakeholders and forced the Indonesian parties to resort to the idea that their conflicts with Mobil would threaten the local prosperity. Overall, Mobil disregarded the two warning signs from above and chose to pursue the status of an exquisite innovator that could help it remain one of the most valuable members on the list of Indonesia’s business partners.
Mobil also disregarded the dimension of long-term orientation because the company’s executives failed to realize that Indonesian culture was based on restraint. That averted the company from setting up positive relationships with stakeholders and developing a working environment where employees would be rewarded for practically anything that would lead the organization forward. The existing social norms made it harder for Mobil to ensure that the company could follow Indonesian values successfully and attain several competitive advantages linked to the ability to indulge and provide the locals and key stakeholders with additional benefits, too.
Alternative International Expansion Strategies
The first alternative strategy for Mobil to expand its activities would be to develop a compelling value proposition instead of pursuing its own goals when communicating with the local stakeholders. Strong knowledge in terms of local cultures and values would allow for proper internationalization of Mobil and an extensive market capture associated with positive relationships between the oil industry mogul, NGOs, local government, and Aceh residents. A unique value proposition would increase Mobil’s chances to develop the required strategic partnerships and solidify existing capabilities. In order to highlight the value propositions at hand, the corporation could also link them to different technological improvements that would appeal to the locals. When Mobil tried to penetrate the Indonesian market for the first time, it did not have any definite strategy, and the ultimate objectives were not aligned against the key stakeholders. In a sense, Mobil’s task would be to attain the individual purposes of every party that is interested in a partnership with the international oil company. Nevertheless, Mobil would have to conduct a risk assessment prior to establishing the deadline and the possible budget for its operations.
Another strategy that Mobil could use to equalize the state of affairs and approach Aceh differently is to achieve an unambiguous shareholder commitment. This objective could be attained with the help of primary international investments that would pave the way for easier internationalization while also helping the executives to make sure that Indonesian shareholders are aware of the ultimate Mobil’s objectives and are committed to achieving them together with the corporation. Compared to the strategy from the case, the option proposed within the framework of the current paper seems to be exposed to fewer risks, as it does not require extreme monetary investments and may lead to positive outcomes on both short- and long-term scales. Nevertheless, Mobil should be vigilant about its risk management, as there could be additional corporate policies that are typical of the Indonesian market. An accurate review of potential issues might have a strong impact on the company, allowing top managers to discover exclusive revenue streams that were not available at the time when they picked the most straightforward market penetration strategy. Ultimately, Mobil would have to align its operations against the local government’s initiatives to ensure that they successfully collaborate with all shareholders as well.
The last alternative strategy that Mobil could use to expand its business operations would be to increase the company’s organizational effectiveness through stronger internationalization. The new social and supervisory contexts should be explored in advance so that Mobil executives could foresee the potential ways of addressing the potential challenges and become proactive. With a stronger focus on development and production, the corporation would have a chance to propose additional opportunities to the local stakeholders instead of exposing them to a situation where they would not have any other options but to follow Mobil’s agenda. Improved organizational effectiveness would be achieved with the help of signing additional international contracts and ensuring that the corporation is not going to violate any of the local regulations. These activities should also be synchronized with the NGOs from the area to make it possible to provide employees and stakeholders with the required training on why certain changes are necessary. Mobil could successfully overcome the limitations of the Indonesian regulatory framework if the company’s management were more focused on privacy laws and the proper execution of organizational operations.
Bachriadi, D., & Suryana, E. (2016). Land grabbing and speculation for energy business: A case study of ExxonMobil in East Java, Indonesia. Canadian Journal of Development Studies, 37(4), 578-594.
Bee, O. J. (2013). The petroleum resources of Indonesia. Springer.
Pekerti, A. A., & Sendjaya, S. (2010). Exploring servant leadership across cultures: Comparative study in Australia and Indonesia. The International Journal of Human Resource Management, 21(5), 754-780.