Go-Jek in Indonesia is known as the first unicorn tech startup in the world's fourth most populous country. It has been recognized as one of the top 50 companies that "change the world" by Fortune Magazine. Its motorbike delivery and ride-sharing app have given the people and the businesses an alternative to their means of achieving greater productivity, leading to the growth of the country's economy.
Andreas Pazi Raharso; Siew-Kien Sia
Harvard Business Review (NTU131-PDF-ENG)
July 10, 2017
Case questions answered:
- Understand how Indonesia’s business environment (focus on cultural, economic, and political dimensions) has contributed to its founding and success.
- Understand how Go-Jek’s strategy and management practices have contributed to its success.
- Identify the opportunities for Go-Jek to expand to other countries in Asia, and to the Western countries. Further, identify the challenges it may face in internationalization and make appropriate recommendations for Go-Jek’s internationalization.
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Case answers for Go-Jek in Indonesia: Seizing Digital Opportunities at the Bottom of the Pyramid
Introduction – Go-Jek in Indonesia
In this report, we will explore the rise of the local Indonesia deacon company Go-Jek in Indonesia by analyzing the external environmental factors, namely cultural, political, economic and competitive environment; as well as delve into the company’s internal factors, such as strategy and management, resources and capabilities, that have lead to its success. Finally, we examine the possibility of global expansion for Go-Jek into India.
1. Traffic Congestion and the rise of Go-Jek
The success of Go-Jek is not possible without the poor infrastructure and bad traffic conditions in large cities of Indonesia and the use of motorbikes as a means of transport has allowed the company to flourish.
In Indonesia, inadequate means of public transportation, coupled with the lack of roads and the amounts of cars due to a large population in large cities like Jakarta causes serious traffic congestion. On top of this, there is a year-on-year increase in vehicles, with the bus to car ratio and the motorbike to car ratio at 45:1 and 8:1 respectively (Indonesian Statistics Agency, 2017), and in 2015 it was awarded the title of “Most Jammed City in the World” (Castrol, 2015 cited in Pantanzi, 2015).
The capital city of Indonesia, Jakarta, and its surrounding cities of “Greater Jakarta” (Bogor, Depok, Tanggerang, and Bekasi) is home to over 24 million people, yet only 13% of people commute to work via public transport (Ford and Honan, 2017 cited in Yuana, et al., 2019) and prefer to use motorbikes or motorbike taxis (known locally as Ojeks) instead, due to the lower cost and smaller size making it easier to park and weave through traffic. In 2017, the number of motorbikes in Jakarta reached 15.5 million (National Police of Indonesia, 2018 cited in Lokadata, 2018).
This problem of congestion was an opportunity for Go-Jek, and by utilizing smartphone technology access, Go-Jek provides the convenience of an online Ojek. The phenomenon of Go- Jek online ride-hailing and its on-demand services are now widespread in all circles in major cities in Indonesia.
2. Company Overview
“Indonesian on-demand everything” which is if consumers want something, in 60 minutes, as long as it’s legal, they can get it in the application.” -Go-Jek CEO (Tech in Asia, 2016)
Go-Jek was founded in 2010 by CEO Nadiem Makarim and was Indonesia’s first ride-hailing app (ASEAN UP, 2018). The idea was born out of Makarim’s frustration with the conventional Ojek services in Jakarta while he was working as a consultant for McKinsey Indonesia (Gani, 2018), as he always used Ojeks over cars as a faster way to get to business meetings, however, was often late as he faced typical problems such as not being able to find a driver, as Ojek drivers clustered around their own particular street corners, and that drivers increased prices dramatically during rush-hour due to higher demand. When interviewing some drivers, they stated that there were unmatched supply and demand.
From this, Makarim conducted his own experiments to test the honesty of Ojek drivers and overcome his own personal bias towards a group of people whom he originally perceived as a dishonest community from the slums, and ask them to run small errands at a fee, such as buying food and delivering goods (Gani, 2018). After many successful trials, Makarim recruited 20 Ojek drivers and established a call/SMS-centre for motorbike taxis from his 5x7m garage.
Apart from Greater Jakarta’s high demand for motorbikes, the success of Go-Jek is also intrinsic to the global popularity of Uber. Uber’s popularity attracted investor attention, and by 2014, GoJek launched Android and iOS applications in early 2015 offering three services: transportation (Go-Ride and Go-Car), courier (Go-Send) and food delivery (Go-Food) to the Greater Jakarta residents, which were supported by 800 drivers (Pratama, 2016).
Go-Jek was unique in understanding local Indonesians, and these services could be paid for via cash or through Go-Jek’s e-wallet on the app (Go-Pay), as credit cards and PayPal were not popular. Furthermore, in contrast to Uber that takes a commission from drivers, Go-Jek applies a 20% commission on customers.
In just one year after launching its mobile app, Go-Jek became a Unicorn company with a valuation of USD 1 Billion in April 2016 (Katadata, 2019), and in April 2019, became the first Decacorn in Indonesia and the second in South East Asia with valuations more than USD 10 Billion, and is ranked 15th in the world, trailing Grab (Malaysian ride-hailing app) in 10th position (Cbinsights, 2019).
Go-Jek has become a “Super App”, by expanding its services which are available on one digital platform and provide dozens of services ranging from transportation, courier, food, personal care, shopping, entertainment to payment services (Life at GOJEK, 2019).
3. External Analysis
The external environment is analyzed via the cultural and social environment, political and economic factors, in terms of enhancing or challenging Go-Jek’s success, and competitors.
3.1. Cultural and Social Environment
In recent years, Indonesians more readily use smartphone applications and technology and are willing to accept changes as long as these changes provide benefits, such as comfort, do not damage people’s reputation, and do not contradict with community values (Yunus, 2018). Hence, apps have now become integrated into the lives of many city dwellers and are used to fulfill many daily needs. This has also created an informal gig-economy for workers but is a double-edged sword as more people enter the informal workforce, skills are lost in other jobs.
Further to this, Indonesians are becoming less price-sensitive due to an aspiration to follow global trends, such as the digital economy, and has a rising high-class economic group, which has enhanced the success of Go-Food. Despite discounts offered to customers when ordering food via Go-Jek, consumers will tip Go-Jek workers for good service. Due to trends of On-Demand services, wealthier Indonesians prefer to order food via Go-Jek rather than cook or order from the many restaurants on the streets near their home or office due to convenience (Yunus, 2018).
Indonesian society has a high level of collectivism (Hofstede Insights, 2019), creating informal institutional norms of helping each other out and the community (Khanna, Palepu, & Sinha, 2006). Hence Go-Jek drivers are a strong community who usually share tips, discuss road conditions or warn about police and traffic accidents and keep in communication via many self-made drivers WhatsApp groups, they wave and greet each other on the street when passing, also if a Go-Jek driver gets into an accident, other drivers will gather to help.
Go-Jek has also been able to understand and utilize this culture when it comes to drivers. For example, Go-Jek drivers all wear the same uniform, and they do not need to advertise to recruit drivers as it is initiated by driver-to-friend word-of-mouth and to enhance the connection between Go-Jek and drivers, bonuses are available to drivers with high performance. However, this strong culture of persaudaraan (brotherhood) has also led to conflict and fights between Go-Jek drivers and traditional Ojek drivers and taxis (BlueBird), which the company has remained silent about.
3.2. Political Environment
The government gave Go-Jek a lot of freedom and support by allowing the company (and similar competitors) to choose the status of their company as tech or transportation, of which all chose tech. However, after experiencing government support, there is increasing pressure on the Indonesian government from the conventional transportation community to introduce new regulations on online transportation.
New laws introduced to deal with the recent phenomena of ride-hailing and delivery apps have been passed since Go-Jek was founded, for example, regulation No. 141 in 2015 prohibits motorcycles from passing through the protocol road released by Governor of Jakarta, and the PM 108 regulation in 2017 released by the Ministry of Transportation requiring companies that run online transportation businesses to become transportation companies to provide legal standing for their drivers.
PM 108 regulation put in place on the company regarding vehicles used for online transportation is to be registered under legal entities and not as individuals, vehicles must physically be tested every year and attach an identification sticker (Menteri Perhubungan Republik Indonesia, 2017). The two regulations were eventually revoked in 2018 by the Supreme Court after civil society filled out the lawsuit for judicial reviews for PM 108 (Silaen, 2018), and for Regulation No. 141/2015 (Hidayat, 2018), yet symbolizes a big step the transportation community has taken to support Go-Jek to continuing ride-hailing business.
After the regulations were revoked, the Ministry issues regulation No. 12/2019 regulates fair rates should be received by driver and consumer, and safety aspects (Menteri Perhubungan Republik Indonesia, 2019). Further, the central budget has also been allocated to developing infrastructure in cities and developed policies including developing public transport, law enforcement on tax regulations for e-commerce including on-demand services such as ride-hailing, and Jakarta’s government plan to implement Electronic Road Pricing on the protocol road. All of these future challenges are significant threats to the continuity of the ride-hailing business.
3.3. Economic Environment
Indonesia’s macro-economic environment has risen in recent years and is expected to grow, which can be seen by the country’s consumer trends (see figure 1). This is viewed as an opportunity by venture capitalists and investors around the world and a majority of foreign investment into startups has been invested into Go-Jek (see figure 3).
Indonesia’s consumer trends 2016 vs. 2021
Figure 1: Indonesia’s consumer trends 2016 and 2021 (ATKearney, Google, Amvesindo, 2017)
The Gross Domestic Product (GDP) in Indonesia was worth 1015.54 billion US dollars in 2017 (see figure 2), and is rising at a growth rate of five percent (Trading Economics, 2019). The share of industry and services in the national GDP is also increasing as more and more people are opting out of their…