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EXPANDING OVERSEAS

Managing Global Aspirations

Considerations And Potential Pitfalls
BY ISCA

TAKEAWAYS

  • A first-mover advantage and a risk mindset are good to have when exploring or entering emerging markets.
  • Doing your due diligence is crucial. Ask the right questions – from whether you have the resources to expand to how well you understand the business environment, and the rules and regulations of the country/market you are going into.
  • Set clear goals about why you are going into that particular country/market.
  • Look for available support, including tapping on government schemes that support companies’ internationalisation efforts.

More Singapore firms are planning to expand overseas this year, according to the annual SME Pulse Check survey by DBS. This tracks closely with the objectives of the Singapore Economy 2030 plan, as outlined in Budget 2022. The survey, as reported in The Straits Times recently, noted that while most companies took defensive stances last year, they are planning more aggressive moves in 2023 and beyond. More than 60% of the small and medium-sized enterprises (SMEs) surveyed – which includes 116 SMEs across a broad spectrum of industries – will be exploring new markets and expanding overseas. These moves are being supported by the Enhanced Financing Scheme included in Budget 2023, according to the survey.

Expanding one’s business overseas is both daunting and tempting. Finding more customers can only be a good thing (one would think) but there is a lot to do before the first dollar even comes in, and that includes making investments to ensure that the expansion goes to plan.

So, how does one plan for a business move overseas, especially if it is the first such move for the company? Ultimately, there is no one-size-fits-all approach, but there are plenty of examples to look at, including that of ShopBack, the homegrown shopping and rewards platform that expanded overseas to Malaysia and the Philippines back in 2014 – the same year it was founded. It now has a presence in 10 markets and serves approximately 38 million users.

EMBRACE A RISK MINDSET

On the other hand, things can go sideways, as the pandemic demonstrated, and local software firm Inspire-Tech can attest to this. Inspire-Tech was founded in 2000 and is a provider of cloud security services, among other software solutions. As reported in Today last year, Inspire-Tech’s international business virtually ground to a halt during the pandemic, with revenue falling between 30 to 50% in 2020. The company weathered this storm however, and is now continuing on its expansion path. “It takes courage and a certain risk mindset to dare to go to emerging markets,” Inspire-Tech CEO Sharon Teo told Today. “The first-mover advantage and being willing to try new markets are important.”

CONSIDER COSTS VERSUS BENEFITS

Helpfully, the first steps towards going regional or even global are relatively easy to identify and can be generalised to be inclusive. You, as the business owner or party assigned to consider the expansion move, have to consider if it is worth doing.

While many businesses can bring their products and services to market in other places besides their home countries, not every business can. This can be obvious, as in the case of a local grocery store or private health clinic, but it also includes companies that do not have the resources to scale up their businesses.

ASK THE RIGHT QUESTIONS

Making considerations on whether or not to expand, particularly overseas, raises the importance of asking the right questions, which is noted in a PwC report on preparing for international business expansion. The same reports asks a pointed question about whether the business has the resources to expand, which builds on an established trope about why SMEs frequently do not expand abroad.

Also, do consider the rules, regulations and restrictions that have been put in place in the country/market that you are hoping to expand to. These may have implications on matters such as ownership status, tax issues, employment guidelines and more. There are also the differences in business etiquette to consider. Thus, you may not be able to run your business abroad exactly the same way you do in Singapore, and you will need to consider the potential hassle and difficulties that may ensue due to this.

SET CLEAR GOALS

The points raised so far are important because growing a business is not always or even primarily about finding new customers. That same PwC report makes the following observation, “Knowing the specific aim of your new venture will be key to developing the correct structure and strategy for your plans but also gives you a clear set of factors to judge your performance against.” Companies should have a clear idea of what their goals are in expanding their footprint. For example, it might be useful to have a research and development facility overseas or establish a manufacturing centre in a good location in a country with favourable and competitive costs. And, as an Auxadi news post puts it, “perhaps you want to launch a back-office facility to reduce head office costs. You might be looking to offer 24-hour services to your customers and need a base in a different time zone, or maybe you’re looking to diversify through various routes to market. Maybe you want your own production centre to ease quality control monitoring. Or you might simply want to reduce supply chain issues by being nearer the source”. Auxadi is an international business expansion consultancy, with a local office in Singapore.

LOOK FOR AVAILABLE SUPPORT

If the homegrown business can indeed grow outside its home, it would do well to consider all the official support that is available. This includes a custom starter kit for any business considering overseas expansion, available via Enterprise Singapore (ESG). To get customised support, the company must provide extensive information about the business in question, including all relevant financials. A company that is ready to pursue a big move internationally should be prepared for such disclosures.

In a story published by CNA late last year, ESG noted that there is everything to gain from at least exploring international opportunities, because there are many global companies emerging from Singapore. “Indeed, while we have had global champions in the past like Creative Technologies in the 1990s, we have many more globally recognised companies like Ninja Van, Secretlab and NanoFilm in recent years,” said Jeffrey Siow, Managing Director and Chief Operating Officer of ESG to CNA. It all comes back to the initial questions that businesses have to ask themselves as they weigh the pros and cons of international expansion. With the kind of support offered by the likes of ESG, perhaps one additional question to bear in mind is a simple one, “Why not try?”


GOING GLOBAL FAQ

  • Do you have the capacity in your business to invest the time and capital required for international expansion?
  • How do you plan to fund the expansion and how long can you fund it until it sustains itself?
  • How will going international impact your local business?
  • Is this a short- or long-term proposition?
  • Will you be increasing your competitiveness?
  • How will you staff this expansion, and how will you recruit them?
  • Who are the local competitors?
  • Who are your potential customers and how will you get to know about them?
  • How different is local business etiquette from your own?
  • What are the implications for intellectual property?
  • What is your global tax strategy?
  • What is your risk management strategy?
  • What due diligence will you need to do?
  • Do you have a good understanding of your liabilities in terms of international reporting?
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