ED 47: January-February 2013

18
Co m m E n ta r y
expanSion
overSeaS
Why it is needed for enterprises to grow
Even if Singapore is the 4th best country in the world to do business,
according to a Forbes report, local firms will agree it is becoming more
challenging as business and labor costs continue to rise. Entrepreneurs
and small and medium enterprises (SMEs) are increasingly seeking
overseas expansion options to fuel growth. Giants like Keppel
Corporation “continue to believe their main interests is expansion within ASEAN
especially with successful operations in the Philippines,” according to CEO
Mr Choo Chiau Beng. However, the smaller entities on the other hand, have
restricted resources, scarce networks, and limited budgets to initiate growth.
When going global, they need to be convinced that they are doing the right thing
and have an effective plan in place.
Ja n | FE b 2013
En t r E p r E n E u r s’ Di g E s t
Why do companies expand overseas?
• Strong Singapore Brand overseas
In a 2011 Channel News Asia report, “39
per cent of Singapore companies earn more
than half of their sales income from overseas
markets.” The role of International Enterprise
(IE) Singapore is to drive Singapore's external
economy through international trade. This
is promoted by partnering Singapore-based
companies in their international expansion
plans. This encourages successful companies
to invest overseas, have a good understanding
of the market, put the right people to manage
overseas operations and build on the strength
of foreign partners. Utilising Singapore with
its effective brand, design, and intellectual
property and manpower strategies act as a key
differentiator when competing in congested
overseas markets.
• Cost benefits
To sustain any expansion strategy, improving
the bottom line may not always keep pace with
the growth in revenue and sales as a result of
new market entry. Finding the manpower with
essential capabilities remains a key challenge
in planning for expansion. Because of this,
Singaporean businesses can choose to take
advantage of lowering costs in other ways.
For example, they might move manufacturing
plants closer to natural resources, invest in new
and more efficient technology, or profit from
tax structures. Expanding overseas also gives
local firms the opportunity to extend product
lifecycles that may be entering decline.
• Diversify risk by increasing market
penetration and size
Managing overseas operations and gaining
the right business partners are some of the
top challenges that Singapore companies
face when internationalising. Diversification of
the customer base helps spread risks, and
gives greater security in times of economic
uncertainty. A recession in one country may
not have a huge effect if the business is doing
well in another country. Viewing diversification
as a solution to market problems can be an
unforeseen method of achieving growth. When
businesses look into diversification to increase
market penetration and size, they often see it as
a way to mitigate the risks of the core business,
by expanding into others. The Singapore
market is limited by size and often sways the
demand and supply equation. Opening up new
markets overseas could rebalance and stabilize
this equation.
Jeffrey koh
group Managing Director
loyal reliance