Quoc conduct their business in the Singaporean market.

Quoc Khanh Lien
Doan

Dr. Robert
Gramillano

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MGT 357

1/28/18

 

Market Entry Strategy
Project- Singapore

Introduction

Singapore has long been known as one of
the major economic powerhouse of Asia and undoubtedly the world as well.

Singapore alongside with South Korea, Taiwan and Hong Kong are the “Four Asian
Tigers”, in which these countries plays an important role in the economy of
Asia. After Singapore declared its independence in 1965, it has gained strong
economic momentum and since rise rapidly into a highly-developed country as it
is today. One of the reason that I choose Singapore as my focus for this
project is that I have always been amazed by this country every time I visit
and it has hugely impressed me by its incredible economy and innovative civilization.

Also, I have always wondered why such a small nation with a small population of
around 5.6 million people can achieve such economic productivity and efficiency.

Throughout this paper, I will discuss the ways to do and run a business in
Singapore by analyzing all relevant business perspectives and identify its
advantages and disadvantages. At the end of this paper, I will give out my
personal recommendation whether or not international corporations should enter
and conduct their business in the Singaporean market.

Singapore is an economic melting pot for
multinational companies from to set up their headquarters in South East Asia. Singapore
is home to many notable and estabalished MNCs1
from different countries such as Belgium (Nuscience Group), France (CIC),
Germany (Bosch, Carl Zeiss, Bayer AG, BMW, DHL), Ireland (Actavis), Japan (
Rakuten, Brother Industries, Sony, Panasonic, Omron, Bridgestone), Netherlands
( Philips, Unilever) , New Zealand (Xero), Switzerland (AdNovum, Novartis,
Panalpina, Ferring), U.K ( GlaxoSmithKline, AON) , United States ( Facebook, Twitter,
Linkedln, Microsoft, Apple, Google, Micron Tech. Inc, Disney, General Electric,
Chevron, Levi’s, General Motors, Cisco, UPS). It is easy to recognize that
these MNCs come from all around the world and include various of industries. According
to the World Bank2,
Singapore ranks 2nd in the world in “Ease of doing business” and 6th
in “Starting a business”,  There are multiple
reasons on why Singapore is such a favorable nation for these MNCs. Firstly,
Singapore is located in a convenience location of South East Asia, which is
easy for international trading including importing and exporting goods to neighboring
countries such as Malaysia, Vietnam, Indonesia, Philippines and Thailand.

Singapore also acts as a launching pad for MNCs to enter these markets as it is
located in the heart of South East Asia. Also, Singapore has one of the busiest
shipping ports in the world as it is the link between Europe, Asia and the
Americas. Secondly, Singapore has a high supply of skilled workers and one of
its main language is English, therefore, MNCs can easily find talents in the
area. Thirdly, Singapore has developed infrastructures due to its city planning
program, therefore, can meet the demand of office supply of foreign companies.

Also, Singapore offers a stable political environment and high quality of life,
which attracts the foreigner to come and work in the country.

 Furthermore, Singapore has a business-friendly
tax scheme for MNCs. The Singapore Economic Board of Development offers
incentive for Regional Headquarters (RHQ) and International Headquarters (IHQ).

Companies that set up as Region Headquarters will be taxed 15% for up to 5
years for business income in Singapore3.

Companies that set up as International Headquarters will only be taxed 0-10%.

This is a huge benefit for MNCs looking to expand into a new region as this is
an extremely attractive incentive. With this tax scheme, MNCs will be able to
maximize more profits and have more capital for future investments.

Additionally, Singapore has 21 executed
Free Trade Agreements (FTA) with 32 trading partners around the world4
,which is some of the biggest name the world’s economy including China, India, Japan,
South Korea, and United States…etc. Since there are minimal to none tariffs
between Singapore and these trading partners, MNCs from these countries should take
advantage of the FTA to increase their business productivity and revenue of expanding
into Singapore. Singapore also one of the biggest importer and exporter in the
world even though it is a small country and lack of natural resources. Because
of the increase in the Free Trade Agreements, the International trade also
rises.  In 2016, Singapore imported $259
billion and exported $315 billion5.

It’s top five trading partners are China, Hong Kong, United States, Malaysia, and
Indonesia. This shows that Singapore is a great logistic hub for MNCs that want
to set up manufacturing and servicing center as they exporting and importing
productivity is high and efficient.

According to the KOF Index of
Globalization, Singapore scored 83.646,
which is 20th in the world and 1st in Asia. The rise of
globalization has both advantages and disadvantages to Singapore’s economy.

Local workers working on low wages and get exploited by MNCs are common stories
in today’s business world, however, globalization have a positive impact
towards Singapore’s economy. Also, since Singaporeans are highly-educated and
rank as the best country in terms of education system according to BBC7,
therefore, the supply of educated and skilled workers in Singapore is high,
which can easily meet the demands of the rising number of MNCs. With this
advantage, MNCs does not need to bring many people over for skilled and high
position jobs, but instead can hire from the local people. This suggests that
globalization essentially create more jobs and boost salaries. However, one
major threat that globalization bring towards Singapore is that it seems to
divide and further the gap between the rich and poor. In 2016, Singapore’s
income inequality is one of the worst in the world with the score of 0.4588.

Growth and income inequality often positively correlate with each other and
Singapore is an example of this statement. Because of the mass globalization in
the country for the last 50 years, Singapore transforms its economic identity
to knowledge based economy, in which they focus more in advanced industry such
as finance and technology. Because of this reason, economic opportunities and
wealth fall into the hands of skilled workers, meanwhile, unskilled/semi-skilled
workers experience a stagnation in their career.

Singapore has always been described as a
multicultural nation. Before it gained its own independence, Singapore was a
British colony, therefore has a massive western influence with the mix of Asian
heritage. Because of that there are various ethnicities that reside in
Singapore, including 74.3% Chinese, 13.3% Malay, 9.1 % Indian, and 3.2% others9,
English, also known as Singlish, is one of the most spoken language in
Singapore alongside with Chinese, Malay and Tamil. There are 5 national values that
was issued by the government in 1991 and implemented and taught in Singapore’s
education. These values are 1) Nation before community and society above self,
2) Family as the basic unit of society, 3) Community support and respect of
individual, 4) Consensus not conflict, 5) Racial and religious harmony

 

 

 

 

1 Shona. “Global Companies with Regional Headquarters in
Singapore.” Demystify Asia, 8 Aug. 2016,
www.demystifyasia.com/global-companies-regional-headquarters-singapore/.

 

2 Doing Business in Singapore – World Bank Group,
www.doingbusiness.org/data/exploreeconomies/singapore.

 

3 “6 Reasons Why MNCs Should Setup HQ in
Singapore.” Rikvin, 26 Apr. 2016,
www.rikvin.com/press-releases/6-reasons-why-mncs-should-setup-hq-in-singapore/.

 

4 “Singapore FTAs – Trade from Singapore – International
Enterprise Singa.” IE Singapore – Driving Singapore’s External Economy,
www.iesingapore.gov.sg/Trade-From-Singapore/International-Agreements/free-trade-agreements/Singapore-FTA.

 

5 “Singapore.” OEC – Singapore (SGP) Exports,
Imports, and Trade Partners, OEC, atlas.media.mit.edu/en/profile/country/sgp/.

 

6 “KOF Globalization Index 2017.” Statista, Apr.

2017, www.statista.com/statistics/268168/globalization-index-by-country/.

 

7 Coughlan, Sean. “Pisa Tests: Singapore Top in Global
Education Rankings.” BBC News, BBC, 6 Dec. 2016,
www.bbc.com/news/education-38212070.

 

8 “Statistics: Singapore’s Income Inequality among the
Worst in the World.” States Times Review, 16 Feb. 2017,
statestimesreview.com/2017/02/16/statistics-singapores-income-inequality-among-the-worst-in-the-world/.

 

9
Lee, Pearl. “English Most Common Home Language in
Singapore, Bilingualism Also up: Government Survey.” The Straits Times, 10
Mar. 2016,
www.straitstimes.com/singapore/english-most-common-home-language-in-singapore-bilingualism-also-up-government-survey.