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Why Singaporean Companies Should Look Into Venturing Overseas To Increase Their Revenue

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“Singapore companies hold a large potential to succeed and grow overseas. By analysing the report by Enterprise Singapore, many things still needs to be improved to maximise profits and the potential of local companies as their overseas revenue increased to 4.2%, compared to the total revenue growth of 1.3%.

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This shows that local companies are thriving and are continuously profiting. Internationalisation has become a major reason for growth of Singaporean companies. Asian countries are increasingly popular among local companies to venture to, as 50% of Singaporean companies are already successful in Asia’s top markets. Internationalisation also plays a crucial part in creating jobs which increases the revenue gained for the nation. Local companies look to international market for opportunities to transform their businesses. An example would be Razer that has expanded overseas, which has shown great improvement in their revenue. As such, more Singaporean companies should look into venturing overseas to increase their revenue.

SWOT of Internationalisation

One of the strengths of internationalisation is the growth of local companies through overseas revenue. Overseas revenue forms 53% of the total revenue of all SMEs in Singapore collectively, a 3% from the year before. Large enterprises are also on a 1% rise from last year with 40% of total revenue coming from overseas revenue. Internationalisation also helps create more higher skilled jobs as compared to local-based companies. Even though overseas expansion created jobs locally and internationally, Singaporeans and Permanent Residents are carrying most of the jobs based locally, and SMEs have higher inclinations towards sending Singaporeans and PRs to take up overseas jobs.

However, internationalisation also has its fair share of weaknesses. Internationalisation allows the company to expand overseas, but will also require manpower in those countries to maintain its standards, causing workers to work overseas for long periods of time. The frequent travelling of these workers will make it difficult for them to fulfill their roles and obligations at home, leading to antagonism from their families. Family members who are left behind are also faced with the stress of playing multiple roles to the family. This can cause strains among family members while they attempt to subsist with the deprivation of their family members in absentia.

OPPORTUNITIES ?? What your business gains through your strength

When companies go abroad to look for opportunities, they are able to get growth in revenue at a faster and higher rate. Through globalisation and internationalisation, businesses are able to transform, hence help in creating high-quality jobs for the country which can in turn help to sustain the growth of Singapore.

THREATS ?? What your business losses through your weakness

Unhappiness and stress arising from families due to workers working overseas for long periods of time can in turn result in a decrease in number of people willing to work. This is because they might not want to strain the relationship within the family and hence they might choose not to take the chance of going overseas to expand.

PEST of Internationalisation

Political- Political unrests and threats have a major effect on internationalisation. If two countries are at war with each other, it is impossible for business owners to venture into those countries to try and open their businesses there. An example would be the President of the United States of America, Donald Trump, and the President of North Korea, Kim Jong-Un… Causes a strain on countries like Singapore that wish to remain neutral as companies that plan on expanding will be representing Singapore. If they show a preference or support for a certain country’s goods. please help me continue.(I think u mean trump and China. I’ll continue in the morning. I’m brain dead) Political unrests in one country due to political instability can affect other nations and as a result, will affect companies from venturing overseas, affecting internationalisation.

If between China and Trump:

Due to the trade war happening between China and America, Singaporean companies may find it harder to expand to these countries. The tariffs imposed, increases the price of goods coming into America, which forces companies there to pay more for imports or buy more expensive domestic products.The firms will therefore need to pass down the price to consumers or absorb the extra cost. Both of these will most likely negatively affect the firms as if absorbed, the profit earned will decrease immediately and if passed down, consumers may choose not to buy or

Tariffs drive up the cost of goods coming into the US, forcing businesses to pay more for imported goods or buy more expensive domestically produced goods. This causes costs to increase for businesses that use those goods as parts for their final product. In turn, these firms must either absorb those new costs or pass down price increases to consumers.

The Deutsche Bank economists Brett Ryan, Peter Hooper, and Matthew Luzzetti found that the tariffs introduced by Trump could push up inflation and result in a drag on economic growth.

“Our analysis indicates that such a further escalation of the trade dispute to include $200 billion of imports could reduce real GDP growth by roughly -0.2 to -0.3 percentage points,” the trio said in a note to clients.

“In addition, the effective $32.5 billion ‘tax’ on imported goods could have the effect of boosting core PCE inflation by roughly 0.15 percentage points.”

In essence, they said, consumers are likely to pay more for goods that are subject to tariffs and buy less as a result, which would slow the growth of the US economy.

Gregory Daco, the chief US economist at Oxford Economics, estimated that Trump’s newest tariff threat, on $200 billion of Chinese goods, would shave 0.3 to 0.4 percentage points off gross domestic product. He cited two reasons it posed an even larger indirect problem for US firms.

“First, the tariffs on $200 billion of imports would affect a wide array of business sectors including some with significant supply chain multipliers (i.e. sectors where each dollar of activity generates more than a dollar of activity in other sectors),” Daco said.

Economic- exchange rate becomes an increasingly important influence on the companies where small costs such as freight charges or manufacturing cost can waiver due to fluctuating cost of the country’s currency.

How will economic issues affect internationalisation (tariffs can be part of it too, so can take some from political)

Social

How will social issues affect internationalisation

Technological- deregulation and technological advance in financial markets

Purpose of this study

Internationalisation is beneficial to companies as it brings in revenue for the company and allows for the growth of business. Many companies wanted to expand overseas, however they needed more information about the overseas market, or even finding people that have the right skills. This leads to them being unable to successfully expand to other countries. We will be talking about the good practices of Razer Inc that led to its success and these will be advices to companies who want to go overseas. Recommendations will also be given to better help companies when expanding abroad.

Scope

In this report, we will be looking at:

Local workforce in Singapore especially people of Razer and their attitude towards expansion

How it will be economically beneficial

How Razer solved the problem of technological divide and what we can learn from it

The first factor we look at is the workforce in Singapore. Research shows that Singaporean millennials are willing to go overseas for work, a total of 7 in 10 responded positively to a survey done by the World Economic Forum’s Global Shapers community. This shows that most Singaporean companies would not have a problem with sourcing Singaporean workers to help start up their companies overseas.

Expanding overseas will be economically beneficial as cheaper labour and resources can be found overseas. Building a factory in another country with more land would be cheaper in comparison to building on the land-scarce Singapore.

Razor solved its problem of technological divide when expanding overseas by

Limitations

Small and Medium Enterprises (SME) make up 99% of companies locally, churning close to 50% of Singapore’s Gross Domestic Product (GDP). Almost half of these SMEs envision that international development will drive an increase in income. They however face issues with regards to mainly budget and the lack of knowledge as well as experience in foreign markets. These would then cause them to be ill-prepared for the challenges that venturing overseas will pose. Overseas expansion can unexpectedly create a hastened progress in documents related to the merchandise. This will further cause issues such as a sudden influx in demand of the product which SMEs will in turn discover their inability to keep up with production and put a strain on the enterprise’s resources. A lack of experience in foreign markets will see company leaders’ fear of damaging their brand’s reputation through the acceptance of projects on a higher complexity that require greater skillsets or technology to deliver effectively. SMEs will be further intimidated by external competitors and the augmented rivalry that comes with these competitors.

Findings and analysis

Internationalisation is a major factor contributing to growth of the local workforce and companies. A survey was conducted on 700 companies by International Enterprise (IE) to find out about the effects of internationalisation. Through this, it was proven that overseas revenue allows for the growth of companies as companies’ overseas revenue (OR) increases from 1.3% year-on-year to 4.2%. Furthermore, a rise in contribution of OR to total revenue was seen in both large enterprises and SMEs.

Through National Business Survey, we are able to find out that 71% of the local businesses have went overseas and started operating. However, the study also discovered that about 93% of companies needed to understand the standards and regulations of the markets overseas more. 89% faced trouble sourcing related local contacts in markets in other countries, nine-in-ten of the local companies hope to get more information on taxation rules. Through this, we are able to find out that many companies had challenges expanding overseas and they needed more help. Therefore by teaching them about Razer’s good practices that led to their success will help the companies greatly.

Technological divide is an social and economical inequality. It refers to the gap between regions that have access to technology and modern communications such as mobile phones, computers and internet, and those that do not or only have limited access. Due to globalisation, the company has expanded to various countries in North America, Europe and Asia Pacific. People in different countries are able to purchase directly from the physical store and enjoy using Razer’s gadgets. However, there are countries that hope to get access to the gadgets but they may not have the technology to do so. Razer Inc is aware of this problem, hence they try their best to improve on this situation by introducing online stores even to less developed countries so that they can have better access to Razer’s products. This is something that its competitors did not perform well enough, hence leading to greater success of Razer’s company. Even in the recent years, Razer continue to earn more revenue due to the online stores that cater to needs of people from different countries and regions. Companies who wants to expand overseas can try setting up online stores first and extend to more regions.”

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