Growing internet adoption has shifted shopping behavior. Internet adoption has reached 73.7% of the total population of 274.9 million per January 2021 and 44% of Indonesian customers switched to online purchases in 2020, which is a 1.6x increased adoption for the online channel as the preferred shopping method across markets compared to the previous year [1]. This condition pushed the internet economy growth to fulfill most online needs worldwide.

In Indonesia, the rapid growth of the startup and e-commerce industry is in the spotlight, some even reaching unicorn status with valuations above 1 billion USD. To expand its business scope, there is an emerging strategy, which is to become a 'master developer'. This refers to a lead company using its expertise to add value to a target business through specific skills such as financial management or research. While this approach has advantages such as greater focus on the subsidiary's operations, it also carries the risk of high dependency on a single shareholder, which can reduce independence in decision-making. However, even with rapid growth, startups remain vulnerable to external factors. The economic disruption in 2022 led to a decrease in Venture Capital funding, resulting in some startups experiencing significant financial difficulties. Many of them were forced to lay off or even close their businesses due to a lack of funds to cover operational costs and employee salaries. The slowdown in economic growth predicted by the IMF in 2023 further adds to the uncertainty.

The importance of the CEO leadership role is also very apparent in these difficult conditions. Effective leadership can help companies through crises, adapt to market changes, and make strategic decisions that reduce risk. Conversely, poor leadership with a lack of vision or inability to adapt can exacerbate the negative impact of a downturn, even leading to business failure. JD.id is an e-commerce company established as a subsidiary of JD.com, one of the largest online retailers in China and part of the Fortune Global 500. Formed in November 2015, JD.id provides retail and marketplace e-commerce services with a B2C model. JD.com influence in JD.id development has been strong, from the focus on counterfeit irregularities with the tagline "Dijamin Ori", to leveraging direct connections to the Chinese market and East Asian brands, to JD.id development of delivery and fulfillment services. 

The company also strengthened its offline presence by setting up its first physical store at PIK Avenue in 2018, highlighting its advanced technologies such as AI facial recognition, RFID, and cashless payment. By 2022, JD.id has become one of the ten leading e-commerce in Indonesia with an estimated 2.5 million monthly visitors.

JD.id has more than 1000 employees divided into e-commerce and logistics divisions, reflected in its organizational structure that separates the business and warehouse aspects. The company's vision is to become "Indonesia's Most Trusted E-commerce Company", which is reflected in its mission to provide customers with an exceptional shopping experience as well as provide business solutions to corporate clients and strategic partners through their business ecosystem. The company's core values emphasize the importance of customer prioritization, integrity, collaboration, appreciation, dedication, and ownership in every aspect of operations and interactions with all relevant parties.

JD.id, a subsidiary of JD.com, met the end of its journey as a prime example where the impact of the economic recession resulted in the closure of a business. Despite initially achieving unicorn status in 2020, JD.com decided to close JD.id in 2023, shifting focus to other business sectors. This decision raised concerns, especially regarding the leadership which was highlighted as insufficiently competent and only skilled at making compelling presentations. The main problem plaguing JD.id is the strong influence of the parent company, where most decisions are determined by JD.com. JD.id leaders lost autonomy in making decisions, often facing resistance to their local understanding of the Indonesian market. Declining investor confidence and delays in responding to local economic conditions were also contributing factors to the closure of the business.

JD.id CEO plays a key role in dealing with the challenges brought about by difficult economic conditions. The leadership style adopted by the CEO can greatly influence how the company responds to these issues. While there is no specification on the leadership style of JD.id CEO, the need for an adaptive and effective leadership approach in dealing with internal and external dynamics is crucial in addressing the business issues affecting JD.id.

Objectives of the Study

This final project's purpose is to: 

• To explore the effect of leadership style in JD.id as a child company during economic disruption

• To observe changes in the leadership style of JD.id during reduced investor confidence level

• To gain insight into what can be learned from the JD.id case for another e-commerce company that is acting as a child company

Theoretical Review

Parenting Theory: According to [2], to evaluate the suitability and positioning of a subsidiary in the context of the parent company, a matrix, the Parenting Suitability Matrix is used. This matrix divides the assessment into a horizontal axis that assesses the consistency between the characteristics of the parent company and the potential of the business, and a vertical axis that measures the extent of mismatch between the characteristics of the parent company and the key success factors of the subsidiary business. Various positions in the matrix indicate strategic implications for the overall company.

Heartland Business

This indicates a business in the same industry as the prospective derivative company. There is an opportunity for the parent company to improve its business as it has the resources and capabilities necessary for the success of the acquisition target.

Ballast Business

This signifies a business in the same industry as the future subsidiary company. However, there is no opportunity for the parent company to contribute value to its business as the target company already has the necessary skills for its success.

Value Trap

This refers to businesses outside the future subsidiary's industry. Opportunities do exist for the parent company to enhance its business as it has the required resources and capabilities in areas critical to the success of the acquisition target.

Foreign Business

This also relates to businesses outside its target industry. The parent company has limited knowledge of the internal and external factors affecting the target business. In addition, there is no opportunity for the parent company to add value to its business as the target company already has the skills essential for its success.

Economic Disruption & Unexpected External Disruptions

Economic disruptions are major changes in the existing economic framework, characterized by upheavals in business models, shifts in ways of working, changing market dynamics, and adaptations in consumer behavior. The source of these disruptions may come from technological developments, geopolitical changes, financial crises, natural disasters, or other unforeseen events. The impacts include changes in employment, industrial transformation, shifts in consumer behavior, and rising socio-economic inequality. However, economic disruptions also provide opportunities for innovation, entrepreneurship, sustainable development, and global economic restructuring. 

These circumstances are often characterized by the uncertainty of responding to the situation, the lack of organizational readiness for the challenge, and the unpredictable and complex nature of events such as the Covid-19 pandemic and recession, which is reflected in the VUCA concept: Volatile, Uncertain, Complex and Ambiguous. The term became a way for business leaders to describe the rapidly changing global business and market environment.

According to Bennett and Lemoine [3] VUCA has four core characteristics: Volatility, Uncertainty, Complexity, and Ambiguity. Volatility refers to situations with scarce knowledge and rapid, unstable change, which often has an unclear duration. Uncertainty describes the inability to predict events even when preliminary information is available. Complexity arises from the large number of interconnected variables, which makes decision-making difficult despite aspects that can be predicted in isolation. Ambiguity occurs when cause-and-effect relationships are not completely clear, which can lead to incorrect interpretations. Originally associated with chaotic situations, VUCA encompasses these phases simultaneously, creating a state of chaos.

Leadership Style

The focus on different leadership styles and the role of leaders in times of turmoil led to the exploration of leadership theories, such as Transactional Leadership, Transformational Leadership, and Adaptive Leadership. However, uncertain, ambiguous, and ongoing economic disruptions require a customized approach to applying these leadership theories;

• Transactional Leadership, this leadership style involves the leader directing and incentivizing team members with a focus on basic management tasks. It consists of rewards for performance, passive management, active management by exception, and a laissez-faire approach to delegation of responsibilities [4].

• Transformational Leadership, transformational leaders act as role models who inspire their teams to achieve big goals. This includes establishing idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration to motivate and direct team members [4].

• Adaptive Leadership, adaptive leadership involves the leader's ability to navigate constantly changing conditions and adapt in a dynamic environment. It involves an open attitude to change, flexibility in changing direction, and the ability to adjust to unexpected challenges in a changing environment.

Cross-Cultural Leadership

Cross-cultural leadership involves the ability to motivate and influence individuals from different cultural backgrounds by understanding and integrating various value systems and knowledge. It differs from conventional leadership in that it emphasizes cultural gaps that must be overcome in the leadership process [5]. Global leadership shares similar principles, demanding the ability to influence people from different cultural backgrounds, viewed from the perspective of corporate achievements that include profitability, sustainability, commitment, adaptation, and innovation [6]. Effective global leaders maintain a balance between different perspectives and understand universal human motivations to build teamwork, trust, and performance in multicultural environments.

Cynefin Skeleton

The Cynefin framework, developed through expert collaboration, helps executives gain new insights, understand complexity, and address real-world challenges [7]. Through this approach, leaders can define the framework using examples from their organization's history and potential future scenarios. This encourages better communication and helps executives quickly understand the context of their operations. Cynefin consists of five decision-making contexts or "domains", including complicated, complex, chaotic, and confusing, helping managers understand how they perceive situations and understand behavior, both their own and that of others.

Complex domains present situations with multiple dependencies and uncertainty, requiring investigation and experimentation to find solutions [7]. On the other hand, chaotic domains, as seen in unexpected events such as Covid-19 and recessions, feature dynamic uncertainty, requiring rapid responses and innovative action plans [7]. These situations differ from conventional crises in that the goal is to navigate the new emerging reality, not return to a previous state. Crisis management strategies may not always be effective in addressing economic disruption that creates a 'new normal'. Leaders must have the openness to change their approach, assess the situation, and design new solutions amidst prolonged uncertainty, demonstrating their ability to address different adversities with flexible responses.

The research design in this study will use a qualitative approach, which aims to uncover the essence of participants' experiences during the economic recession until the closure of the company. In this research, we collect information using two types of data: primary and secondary. To obtain primary data, we will conduct interviews using open-ended questions and observe participants. For secondary data, we will use information from company documents and outside sources contained in the literature. To obtain information about the leadership style of Chinese Multinational Companies involving staff at JD.id, researchers conducted interviews with a total of 11 informants who met the criteria. 

The research involved 2 Board of Directors (BOD) from different countries (Indonesia and Switzerland) and 9 managers to represent how work is organized during economic disruptions. The reason for choosing specific roles and criteria was to gain insight into the unique perspectives of each participant at those leadership levels, which are closely related to the situation under investigation. The Semi-structured Interview Questions can be found below in table 1.

In this study, researchers used observation as a data collection method, specifically by using the Observatory Technique. Observatory involves collecting data by observing and experiencing the life activities of the object under study while being nearby [8]. The data analysis method used in this research is based on [9], which involves four stages:

Table 1: Semi-structured Interview Questions

• Data Collection: The researcher collected data through techniques such as interviews, participant observation, and literature review

• Data Display: The collected data is used to test the relationship between the data and the theory or conceptual framework of the research

• Data Reduction: Once the data was aligned with the research background, the researcher simplified and focused more on relevant aspects

• Verification: To ensure the accuracy of the data, the researcher verified it with the data sources from the initial collection

In this study, the triangulation technique used data triangulation or investigator triangulation, where researchers interviewed sources outside the initial informants. The other person chosen to triangulate the data is someone who has expertise in the field of Human Resources, and who is able to evaluate how leadership styles interact with staff.

Leadership Style Shifts at JD.id for Local Leaders as a Subsidiary during Economic Disruption

In the era of COVID-19 and economic recession, the impact on leadership styles at JD.id has been significant. This situation affected various divisions, ranging from operations, commercial, and finance, to HR, with each leader showing different adaptations in dealing with economic disruptions. In the operations division, it was seen that the previously dominant transactional leadership shifted towards adaptive leadership, allowing the operations team to adapt quickly to the changing expectations of the company. However, in the commercial division, there was instability due to leadership turnover and lack of direction, leading to chaos and decreased team morale. 

While in finance, the leader was able to transform to a solid adaptive leadership style, maintaining team morale and finding the best solutions in difficult conditions. In HR, leaders also successfully implemented adaptive leadership by providing the best solutions for employees in the midst of company closures. Overall, economic changes force every leader to adjust their leadership style for the survival of the company.

To summarize, we can observe the shifting leadership styles of the leaders in each division in times of economic disruption in the matrix below in Table 2.

With every division experiencing a leadership style shift, we can conclude that economic disruption plays a big factor in leadership style in this multinational company. Since economic disruption causes business impact, the performance of each division is impacted and requires adaptation from each member to ensure that working quality remains optimum. Therefore, leadership style needs to be adjusted by the impact.

Leadership Style in Directing the Company when the Level of Investor Confidence Decreases

The parent-fit matrix illustrates the relationship between JD.com and JD.id as a Ballast Business, where the parent company is unable to add value to the subsidiary in the same industry. Cross-cultural leadership occurs due to interactions between leaders from different cultural backgrounds. During the economic recession, VUCA (Volatility, Uncertainty, Complexity, Ambiguity) conditions were formed which made JD.com doubt JD.id ability to survive in the market. Previously, subsidiaries had freedom in managing their business, but when investor confidence declined, the parent company switched to being more authoritarian in making decisions to ensure the continuity of the subsidiary's business.

The impact varies by division. On the operational side, the parent company's intervention did not have much effect as the division was already trying to be efficient from the start. However, the commercial division was hit hard due to marketing budget cuts, forcing it to generate revenue without adequate support. In addition, changes to the expense approval matrix saw the parent company take full control of decisions, causing regional leaders to lose influence. Overall, the situation pushed the division leaders to adapt to the parent company's new leadership style and do their best under more constrained conditions.

Solution and Proposed Implementation Plan

To minimize the impact of economic disruptions, the authors recommend several solutions to ensure that employees within the company can work as efficiently as possible even when facing challenges such as economic disruptions:

Table 2: Leadership Style Matrix before and after Economic Disruption

Table 3: Hypothetical timeline

• Prioritizing the creation of competitive advantages to differentiate the business offered compared to competitors. The importance of this solution is that companies do not just follow the trend of existing features, but can provide unique services according to customer needs. To execute this solution effectively, companies must have a deep understanding of the needs and values of target customers, so that they can explore untapped businesses or enhance existing businesses with added value.

• Organize regular leadership training for Directors and managers. This solution involves the top management of the subsidiaries and should be conducted annually using an external vendor with experience in dealing with VUCA conditions. It can be applied to all companies, especially those operating in dynamic businesses and constantly facing change. The importance of this solution is to prevent leadership from breaking down when faced with unexpected situations that require quick decision-making. The solution is effective by getting all Directors to understand their leadership style first, then involving them in solving cases under different circumstances to train their ability to deal with unusual situations.

• Conduct regular top-level management meetings to provide visibility of the company's direction and gather input from relevant parties. This solution involves top-level management from the subsidiaries and representatives from the parent company and is recommended to be conducted on an annual, quarterly or monthly basis, depending on the company's situation or any major changes in direction. The importance of this solution lies in reducing the information gap between the parent company and the subsidiary, and ensuring that it is easy for the parent company to receive input and better understand the subsidiary's situation. Implementation is effective when both parties are willing to share information and receive feedback and direction to align company direction and business decisions.

• Conduct periodic audits to gain credible visibility into the true condition of the subsidiaries. This audit process involves external auditors and the subsidiaries, recommended to be conducted annually for companies with parent-child systems that have information gaps between top management and the parent company. The importance of this solution lies in ensuring the parent company has a credible source of information on the condition of the subsidiary, preventing deviant behavior from employees, as well as ensuring proper implementation of controls over SOP and business processes in the subsidiary. To effectively implement this solution, the parent company needs to select external auditors who have credibility to ensure trust in the audit results and conduct the audit process as a standard practice periodically, especially in divisions that require more control and have a significant impact on business continuity.

• Regular Townhalls for all employees in subsidiaries that share low-level information on the direction and condition of the Company. By holding these meetings, the aim is to update all employees on the direction and condition of the Company. Involving all employees, these meetings should be conducted quarterly, monthly, or when issues arise before they become more complex. The main focus of this solution is to minimize employee resistance during critical situations and build trust in the company. With increased transparency, it is expected that employees' sense of ownership and loyalty will grow, increasing dedication to the company and its future.

Implementation Plan Justification

Implementation plan for other companies with similar structures and conditions using a hypothetical timeline in Table 3.

This research explores leadership styles in the context of a parent-child system amidst a multi-cultural landscape. Through interviews with 2 BOD and 9 managers at JD.id, a subsidiary of JD.com, the research found that leadership style plays a crucial role in managing the company, especially during critical economic situations. In times of economic disruption, there is a shift in leadership style from transactional to adaptive, and some divisions experience a significant shift in the way they are led. The Commercial team, which was hit the hardest, lost leadership direction when their promotional budget was slashed. This led to a loss of effectiveness and morale within the team as economic conditions suffered. Companies with a parent-child structure need to set standards for inter-company interactions and decision-making with a balanced exchange of information, as extremes of too much or too little control hurt both parties.

Recommendations

Several steps can be taken to ensure both companies can synergize and achieve optimal results:

• Creating a competitive advantage to differentiate the business can help the company win the competition in the market compared to just chasing the trends and services set by other competitors.

• Regular leadership training for Directors and managers can ensure that local leaders have sufficient ability to withstand pressure at key moments.

• Regular top-level management meetings can provide a platform for the parent and subsidiaries to receive information. The parent company can receive feedback from the subsidiaries and know the actual business situation in the subsidiaries. The subsidiary company in return will receive information about the direction of the company and learn more about the parent company's point of view.

• Regular audits will ensure that the information received by the parent company is reliable and not just rely on word of mouth from trusted people within the subsidiary company. This process will also ensure that employees in the subsidiaries are working properly and that there are no errors in the operational process.

• Townhalls conducted regularly will provide transparency to all levels of employees working and improve employees' understanding of the current state of the company. By balancing fun and information during town halls, companies can increase engagement while ensuring that employees have a certain level of knowledge about the direction of the company.

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