Global Players from Emerging Markets: Strengthening ... - Unctad

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126 Outward Foreign Direct Investment by Enterprises from Singapore played a role in motivating Singaporean investments there. 100 This set of motivations (cost, personal relationships and ethnicity and social connections) is particularly important for SMEs. They may be less relevant for the larger Singapore companies. As a result, SMEs from Singapore tend to invest regionally in nearby host countries that are both cheaper in terms of production costs and culturally closer in terms of ethnic relations (e.g. China and Malaysia). Expanding regional and/or global networks. TNCs venture abroad to establish a regional or even global coverage of their operations. This motive is more significant for large TNCs that aim at the global market and it is the most important motive for TNCs investing in North America. Singapore Airlines’ acquisition of a strategic stake in Virgin Atlantic Ltd in December 1999 to broaden its share in the transatlantic air travel market is an example. A similar earlier effort by City Developments Ltd. to acquire UK-based Millennium & Copthorne Hotels Plc in 1995 also enabled the former to have a global presence in the hotel industry. Access technology . High-tech manufacturing TNCs invest in Europe and North America in search of a conducive environment for R&D and specialized labour skills. 100 See a full analysis in Henry Wai-chung Yeung (2004). Figure 3. Mechanisms of overseas operations by TNCs from Singapore Source: Survey conducted by Henry Wai-chung Yeung. Efficiency-seeking. Whilst a significant reason, cost saving is not the most important factor in fostering OFDI from Singapore. Most TNCs in the sample are not labour-intensive. Rather, they are high-value-added manufacturers or service providers. Production or labour costs constitute only a relatively low proportion of their total operational costs. D. OFDI and implications for enterprise competitiveness OFDI has helped increase the competitiveness of Singaporean companies in several ways (table 5). Some two-thirds of TNCs confirmed that OFDI had increased their companies’ competitive advantages. The foremost important competitive advantage was the increasing familiarity and experience in international business (exposure to foreign culture and business practices) that became a firm-specific asset. 101 This increase in familiarity and experience is particularly important for SMEs since they tend to have limited experience of different business cultures and practices. Another gain from OFDI is reputation and brand image. Some 41 per cent of respondents cited “better reputation” as an outcome of increased competitiveness in relation to OFDI. Potential clients 101 Athanassiou, Nicholas and Nigh, Douglas (2000), and Blomstermo, Anders and Sharma, D. Deo (eds.) (2002).
Table 5. Impact of OFDI on the competitive advantages of TNCs from Singapore of Singaporean firms value the firm experience abroad and view foreign presence as an indication of the competitiveness of TNCs. One fifth of the respondents identified better managerial and marketing expertise as an outcome of their OFDI activities. While organizational capabilities are an important initial precondition for OFDI to occur, these capabilities can be further enhanced by managing foreign operations. 102 OFDI also leads to better product/service quality and greater technological edge. This increased competitiveness in product and process is particularly linked to Singapore OFDI taking place in industrialized economies such as the United States and Western Europe. In the manufacturing industry, some leading technology-driven TNCs such as Creative Technology (PC sound cards), Aztech Systems (ADSL products), WBL (flexible printed circuit boards) and Singapore Technologies Engineering have benefited from having their operations in the United States. They have gained access to cutting-edge technology and have been able to improve their 102 See further ideas in Nohria, Nitin and Ghoshal, Sumantra (1997). CHAPTER X 127 Competitive advantages after OFDI Total Percentage Yes 123 65.8 No 64 34.2 Total 187 100.0 Greater familiarity and experience 67 54.5 Better reputation 50 40.7 Better managerial expertise 34 27.6 Better product quality and services 30 24.4 Better marketing expertise 24 19.5 Special contacts and connections 24 19.5 Possession of specialized materials and resources 19 15.5 Greater financial assets 17 13.8 Greater technological edge 14 11.4 Others 31 25.2 Total 123 100.0 Source: Survey conducted by Henry Wai-chung Yeung. product and process technologies by being nearer to their customers. While the survey did not fully capture the profitability indicator, an increase in revenues as a result of OFDI activities for enterprises highlighted in table 3 deserves mentioning. Many of the leading Singaporean TNCs have a major stake in a single affiliate, due to some large-scale acquisitions conducted since the mid-1990s. For example, Neptune Orient Lines’ (NOL) United States affiliate, American President Lines, contributed 61 per cent and 22 per cent of NOL’s revenues in 2004, which were respectively generated from the Americas and Europe, making it the largest Singapore TNC in terms of revenue. SingTel, the largest local telecommunications group, reported a consolidated sale of S$ 12 billion in 2004, of which its Australian affiliates SingTel Optus (acquired in 2001) contributed some two thirds. City Developments Ltd (CDL) is another example. Its UK-based Millennium & Copthorne Hotels Plc., an acquisition completed in 1995, contributed much to its revenues from the Americas (S$ 510.8 million) and Europe (S$ 454 million) in 2004. These two markets alone accounted for 68 per cent of CDL’s total foreign sales.
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United Nations Conference on Trade
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Preface The landscape of internatio
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Acknowledgements This publication i
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