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05 Dec 2018 Updated 05 Dec 2018

Global Outlook 2019 – Market Insights and Opportunities Forum

How Singapore Companies Can Succeed in Overseas Markets

2019 could be a good year for Singapore small and medium-sized Enterprises (SMEs) planning to expand overseas, with the International Monetary Fund predicting a global economic growth rate of 3.7%, and consumer spending slated to increase globally.1

How Singapore Companies Can Succeed in Overseas Markets 1


By doing your homework, firms could also capitalise on several events and trends. For example, while the ongoing trade war between the United States and China could hurt some markets, it could benefit others if the two superpowers turn to other sources for their goods.

In fact, Singapore firms may be in a better position than most to take advantage of the trade tensions, due to Singapore’s extensive network of more than 20 Free Trade Agreements, including with China and the US, said Mr Irvin Seah, DBS Bank’s Executive Director of Group Research.

Closer to home, Asia continues to outperform the world in trade, and the region’s consumer expenditure is expected to more than double from US$6.6 trillion (S$9.1 trillion) in 2017 to US$15.2 trillion (S$20.9 trillion) in 20302. Singapore SMEs should act quickly to capture a larger slice of this pie.

Expanding into foreign markets

Once companies have decided on their target market(s), you can choose from several ways to internationalise, depending on the business’s long-term goals, said Mr Adam Jarczyk, Frontier Strategy Group’s Director for Asia Pacific Research.

By simply exporting your goods for sale, you can expand into new markets quickly, get relatively high returns due to the minimal intermediate costs, and gain better control over pricing. However, you may face challenges in cross-border shipping, having to address customers’ concerns from afar and your market coverage is also likely to be extremely limited.

By setting up operations in target market(s) instead, you can create a direct relationship with customers, provide after-sales support, control pricing and distribution and gain market insights, which will benefit your business in the long run. However, this will directly expose you to the market’s rules, profit repatriation restrictions and unsavoury realities such as corruption.

Partnering local businesses for success

Alternatively, you can partner local businesses in the target market(s) to reap the benefits of the latter’s expertise. You can sell the products through the local partners, which would have distribution channels in place, existing relationships with customers and market expertise.

Singapore SMEs that choose this route should bear in mind, however, that you would have to pay commission to these partners and assume risks such as the latter going bankrupt.

Another way that Singapore SMEs could partner local businessmen is through franchising. Franchisees can provide local knowledge and connections. They would also bear the bulk of the business risks and thus be more motivated to succeed, said Mr John Ong, Chief Executive and Principal Consultant of professional services firm FT Consulting.

He noted that several Singapore firms, including the food-and-beverage retailer BreadTalk Group, have had success with this method.

Many firms have also expressed interest in it. In 2018, the top five markets3 of interest to Singapore firms when it came to franchising were, in order, Indonesia, China, Malaysia, the Philippines, and, tied for fifth place, Myanmar and Thailand, according to the Franchising and Licensing Association of Singapore.

Indonesia’s middle class is now at 45 million and will triple to 135 million by 20304 and become the third biggest after China and India. Mobile internet usage is undergoing a double-digit growth rate and currently stands at close to 30% among the population5. With plenty of mobile internet users and weak infrastructure, companies who park themselves in the e-commerce sphere will see great opportunities.

In Malaysia, consumer spending increased in the second quarter of 2018 to reach an all-time high of S$55.5 million6. Coupled with rapid growth of Information technology and communication in the market; greater level of internet penetration at 70% in 2015 to 86%7 in 2017. Singapore companies should not miss out on the e-commerce opportunities in this market too.

Good news for companies in the infrastructure and urban solutions sector. The Philippines is made up of more than 7,000 islands (with 2,000 uninhibited)8; transportation of goods and moving of people is a top priority and a challenge. Not only so, high density in key cities has encouraged growth outside the Metro. The government has made announcements to build more environmentally sustainable and climate resilient cities outside of these key metros and companies in urban solutions should not miss out on this chance.

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The above are some common concerns or challenges faced by companies expanding overseas. To help you better prepare for entry into new markets such as China, India, Southeast Asia or Middle East do check out the services provided by our in-market partners Plug and Play network.

The importance of due diligence

No matter which internationalisation method you choose, Singapore SMEs should do your due diligence, including familiarising oneself with the target market’s regulations and vetting potential business partners.

In Indonesia, for example, franchisors and their franchisees must use domestically-produced goods and services for at least 80% of their raw materials9.

In China, a potential franchisor must have at least two direct sales stores and have undertaken the business for more than one year. When expanding into this large market, it’s important to note that Chinese consumers place a strong emphasis on brands they have heard of or well-established in the market. For new brands entering China, you will need to spend more time and work with reputable partners to develop a good brand strategy.

In Japan, a potential franchisor must provide disclosure documents before entering into a franchise agreement if the business is considered to be a chain business under the Medium and Small Retail Commerce Promotion Act.

All business partnerships should also be formalised, with agreed-upon commercial expectations, review processes, and key performance indicators. These should include quarterly relationship reviews and plans for capability development.

Giving an example, Mr David Kwee, Founder and Chief Executive of training and education provider Training Vision Institute, said that he sets out clear timelines and sales targets with potential overseas partners before going into business together.

Enterprise Singapore’s in-market overseas centres are well-placed to offer advice on in-market trends, business matching and marketing strategy to Singapore firms who are new to the markets, said Mr Ivan Tan, the agency’s Global Markets Director for Southeast Asia.

By doing the groundwork and tapping the right support networks, Singapore SMEs will have much better odds of success.

For advice on how to better prepare yourself and your business, do check out the "Best Practices for Breaking into a New Overseas Market."


1 Frontier Strategy Group Singapore (2018)
2 KPMG Singapore (2018)
3 4th Members’ Forum Polling Results (FLA Singapore, 2018)
4 FT Consulting Pte Ltd (2018)
5 Number of internet users in Indonesia from 2015 – 2022. Retrieved from www.statista.com/statistics/254456/number-of-interent-users-in-indonesia
6 Malaysia Consumer Spending. Retrieved from https://tradingeconomics.com/Malaysia/consumer-spending
7 The New Straits Times, Malaysia (19 Mar 2018). Malaysia’s Internet penetration is now 85.7%. Retrieved from https://www.nst.com/my/business/2018/03/346978/malaysia-internet-penetration-now-857-cent
8 Wikipedia, Philippines (2018)
9 FT Consulting Pte Ltd (2018)

 
 
 

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