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Case studies on Internationalisation of companies listed on the Stock
Exchange of Singapore for the period from 1998 to 2007
Leong Horn Kee Bachelor of Technology (Production Engineering), University of Loughborough, UK
Bachelor of Science (Economics), University of London, UK Bachelor of Arts (Chinese Language and Literature), Beijing Normal University, China
Master of Business Administration, INSEAD, France Master of Business Research, University of Western Australia, Australia
UWA BUSINESS SCHOOL University of Western Australia
Supervised by: Winthrop Professor Ann Tarca
This Thesis is presented for the degree of Doctor of Business Administration of the
University of Western Australia
2013
i
ABSTRACT
This study examines the internationalisation of 14 companies listed on the main board
of the Stock Exchange of Singapore (SGX). Past research has been mixed regarding
whether internationalisation has improved the performance of multinational companies
(MNCs). Two established theories on internationalisation are the Eclectic Paradigm
and Uppsala Internationalisation Framework. To determine the best approach to
undertake this study, certain quantitative and qualitative research models for
internationalisation, including Yip’s model, were reviewed. This study adopts a
qualitative approach based on multiple case studies. For the theoretical research
framework, an Internationalisation Reference Model (Reference Model) is developed
using the McGrath Review Model, modified to be applicable for this study. The study
explores the Antecedents, Processes and Outcomes concerning the structures, business
strategies and performance of these SGX companies with regard to their
internationalisation programmes for the period from 1998 to 2007.
The study was conducted in three phases. The first phase was a pilot study that initially
tested the research design and data collection methods. This pilot study aided in the
design of the main study and enabled the formulation of relevant research questions.
The pilot study determined that 12 was the saturation level for the number of
companies to be included in the research. The second phase of the study was the
selection of SGX companies for case study. Companies in the manufacturing industry
were selected and 14 companies agreed to participate. The third phase was to conduct
one-to-one in-depth interviews with these companies’ senior executives such as
ii
Chairmen and Chief Executive Officers (CEOs). Data were collected from the
interviews and archival records such as the annual reports of the companies.
Analysis was undertaken using Nvivo9 software for the interview data, from which
numerous themes and sub-themes of internationalisation relevant to Singaporean
companies were derived. Then the co-axial technique was used to examine the
relationships between internationalisation and actual performance. The cross-company
and intra-industry comparisons were presented, and enlightening perspectives and
results were derived. Using the Reference Model, insights were gained into the
iterative framework of the Antecedents, Processes and Outcomes of these companies’
internationalisation programmes and strategies.
A main research finding is that Singaporean companies’ internationalisation
approaches conform to the established theories of the Eclectic Paradigm and Uppsala
Internationalisation Framework. The second main finding is that the companies in this
study have attained better performance in relation to their level of, and perceived
importance of, internationalisation. Like foreign MNCs, Singaporean companies have
used internationalisation as a main business strategy. Conventional internationalisation
concepts such as economy of scale, localisation of management, centralisation and
decentralisation of resources, and regional expansion; are employed by Singaporean
companies. An interesting finding is that Singaporean companies are driven by certain
themes unique to Singapore such as survival and the small size of the Singapore
market. Of special interest is the finding that most of the sample companies are self-
motivated to venture overseas for opportunities and they have made limited use of the
Singapore government’s promotional incentives and assistance to internationalise.
iii
The study provides a new Reference Model that can be used as a research tool when
studying the internationalisation strategies of companies. The Reference Model offers
another avenue for the conduct of future research on internationalisation. This study
adds to the research on internationalisation. The study gives a deeper understanding
and new perspectives on issues regarding the internationalisation of companies in small
but economically developed countries like Singapore. Although Singapore has a small
domestic market and limited resources, Singaporean companies have managed to
compete effectively in the international arena.
v
CERTIFICATE OF AUTHORSHIP
I hereby declare that this study is my own work. To the best of my knowledge and belief,
it contains no material previously published or written by another person nor material
which to a substantial extent has been accepted for the award of any other degree or
diploma at The University of Western Australia (UWA) or any other educational
institution, except where due acknowledgement is made in the thesis.
I agree that this thesis be accessible for the purpose of study and research in accordance
with the normal conditions established by UWA for the care, loan and reproduction of
theses.
Leong Horn Kee
vii
ACKNOWLEDGEMENTS
This research would not have been completed without the help, assistance and
encouragement of a large number of people. I wish to offer my most heartfelt thanks to
the following:
1. My thesis supervisor Professor Ann Tarca, who is an invaluable source of
guidance and encouragement. Her insight, advice and patience have been
critical for the development and completion of this thesis.
2. The interviewees, who gave their invaluable time and shared their thoughts
openly. Without exception, they were co-operative, helpful and responsive to
my request for interviews, and provided every form of assistance that I needed
for the interviews and research of their companies.
3. My two research assistants, Desmond Khoo and Andrew Ling, who provided
much help in collecting research materials, reports, statistics and documents.
4. My executive secretary, Amy Cheah, who arranged the interviews, typed the
corrections to the report and prepared the transcripts of the interviews. She
collected the companies’ annual reports, and performed the role of general
liaison and co-ordinator among the various parties involved in my research.
5. Elite Editing, for undertaking the professional editing of the thesis, and editorial
intervention was restricted to Standards D and E of the Australian Standards
for Editing Practice.
6. Finally, my personal thanks to my wife and four children for their constant
encouragement, which enabled me to persevere and complete this research.
ix
CONTENTS
ABSTRACT ...................................................................................................................... i CERTIFICATE OF AUTHORSHIP ............................................................................ v
ACKNOWLEDGEMENTS .......................................................................................... vii CONTENTS .................................................................................................................... ix
LIST OF FIGURES ..................................................................................................... xiii LIST OF TABLES ........................................................................................................ xv
LIST OF ABBREVIATIONS .................................................................................... xvii LIST OF APPENDICES ............................................................................................. xix
DEDICATION .............................................................................................................. xxi CHAPTER 1. RESEARCH RATIONALE ................................................................... 1
1.1. Introduction ............................................................................................................ 1 1.2. Overview ................................................................................................................ 1 1.3. Topic ...................................................................................................................... 2 1.4. Potential significance ............................................................................................. 4 1.5. Structure ................................................................................................................. 5 1.6. Conclusion.............................................................................................................. 8
CHAPTER 2. LITERATURE REVIEW ...................................................................... 9 2.1. Introduction ............................................................................................................ 9 2.2. Defining multinationality, globalisation and internationalisation .......................... 9
2.2.1. Multinationality ............................................................................................. 10 2.2.2. Globalisation ................................................................................................. 11 2.2.3. Internationalisation ........................................................................................ 13
2.3. Theoretical foundation of early research .............................................................. 15 2.3.1. Transaction cost analysis theory ................................................................... 16 2.3.2. Foreign direct investments theory ................................................................. 18
2.4. Multinationality and performance ........................................................................ 23 2.4.1. World/USA studies ....................................................................................... 24 2.4.2. European and other country studies .............................................................. 25 2.4.3. Singaporean studies ....................................................................................... 26
2.4.4. Quantitative and qualitative studies .............................................................. 33 2.5. Various levels of internationalisation studies ...................................................... 34
2.5.1. Multiple-industries level studies ................................................................... 34 2.5.2. Industry-level studies .................................................................................... 34 2.5.3. Company-level studies .................................................................................. 35 2.5.4. Subsidiary-level studies ................................................................................ 35
2.6. Imperatives of internationalisation ....................................................................... 36
2.6.1. Eclectic Paradigm ......................................................................................... 36 2.6.2. Uppsala Internationalisation Framework ...................................................... 38
2.7. Factors of internationalisation .............................................................................. 39
2.7.1. Economy of scale .......................................................................................... 40 2.7.2. Geographical diversification ......................................................................... 41 2.7.3. Locational advantage .................................................................................... 41 2.7.4. Learning experience ...................................................................................... 42
2.7.5. Strategic advantage ....................................................................................... 43
x
2.7.6. Options advantage ......................................................................................... 43 2.7.7. Improved product quality .............................................................................. 44
2.7.8. Enhanced customer preference ..................................................................... 45 2.8. Singapore government assistance programmes ................................................... 45 2.9. Research focus ..................................................................................................... 49 2.10. Conclusion ......................................................................................................... 51
CHAPTER 3. RESEARCH DESIGN AND METHODOLOGY .............................. 53 3.1. Introduction .......................................................................................................... 53 3.2. The choice of a qualitative multiple case studies methodology ........................... 54
3.2.1. Choice of qualitative approach ..................................................................... 54 3.2.2. Rationale for a multiple case study approach ............................................... 56 3.2.3. Level of studies – company-level and industry-level ................................... 58 3.2.4. Research period 1998 to 2007 ....................................................................... 58 3.2.5. Saturation on number of cases ...................................................................... 60
3.3. Developing a three-stage research approach ........................................................ 61 3.3.1. Phase 1: Pilot study of SGX companies ....................................................... 61
3.3.2. Phase 2: Selection of sector and companies for case study .......................... 63 3.3.3. Phase 3: Multiple case study of selected SGX companies ........................... 69 3.3.4. Interactive data analysis ................................................................................ 75
3.4. Ethical considerations .......................................................................................... 78 3.5. Models of internationalisation ............................................................................. 79
3.5.1. Models in prior literature .............................................................................. 79 3.5.2. Developing an alternative model .................................................................. 84 3.5.3. Model of Internationalisation adopted for this study .................................... 86
3.6. Factors included in the Reference Model ............................................................ 88 3.6.1. Block 1: Antecedents of internationalisation ................................................ 88 3.6.2. Block 2: Processes of internationalisation .................................................... 90 3.6.3. Block 3: Outcomes of internationalisation.................................................... 91
3.7. Internationalisation measures ............................................................................... 92
3.7.1. Measures on the level of internationalisation ............................................... 93 3.8. Key research questions ......................................................................................... 94
3.8.1. Questions relating to antecedents .................................................................. 94 3.8.2. Questions relating to processes ..................................................................... 95 3.8.3. Questions relating to outcomes ..................................................................... 96
3.9. Data analysis procedures ...................................................................................... 98 3.9.1. Analysis of interview data using NVIVO ..................................................... 99
3.9.2. Data analysis using axial coding and Cruciform charts .............................. 103 3.10. Conclusion ....................................................................................................... 105
CHAPTER 4. ANALYSIS OF THE 14 SELECTED SGX COMPANIES ............ 107 4.1. Introduction ........................................................................................................ 107 4.2. Businesses and internationalisation strategies of participating SGX
companies ............................................................................................................. 108 4.2.1. Company A: A food and primary production manufacturer ....................... 111
4.2.2. Company B: A global food, beverage and frozen products manufacturer .. 113 4.2.3. Company C: A major alcoholic beverages producer .................................. 117
4.2.4. Company D: A major offshore marine company ........................................ 120 4.2.5. Company E: A manufacturer of motorcycles and motor electronics .......... 124 4.2.6. Company F: An Asian-based construction machinery producer and
distributor ..................................................................................................... 126 4.2.7. Company G: A motor parts and motor related producer ............................ 129 4.2.8. Company H: An IT and property related company..................................... 132
xi
4.2.9. Company I: A producer of construction materials ...................................... 135 4.2.10. Company J: A regional IT products producer and distributer .................. 137
4.2.11. Company K: A global logistics provider .................................................. 140 4.2.12. Company L: A global warehousing and logistic company ....................... 143 4.2.13. Company M: A global manufacturing services company ......................... 146 4.2.14. Company N: An IT products, property and car distribution
conglomerate ................................................................................................ 149 4.3. Analysis of research materials and interview data ............................................. 151 4.4. Theories based on the Eclectic Paradigm and the Uppsala Internationalisation
Framework ............................................................................................................ 152 4.4.1. Companies that adopted Eclectic Paradigm theory ..................................... 154 4.4.2. Companies that adopted Uppsala Internationalisation Framework theory . 155
4.5. Analysis of interview data using Nvivo method ................................................ 156 4.5.1. Antecedents for the internationalisation of SGX companies ...................... 161 4.5.2. Processes for the internationalisation of SGX companies .......................... 192 4.5.3. Outcomes of the internationalisation of SGX companies ........................... 226
4.5.4. Comparison of themes by ‘Strength in industry’ ........................................ 242 4.5.5. Comparison of the themes by size of SGX companies ............................... 247
4.6. Data analysis using Cruciform charts ................................................................ 248 4.7. Answers to key research questions .................................................................... 254
4.7.1. Questions relating to antecedents ................................................................ 255 4.7.2. Questions relating to processes ................................................................... 256 4.7.3. Questions relating to outcomes ................................................................... 257
4.8. Conclusion.......................................................................................................... 260
CHAPTER 5. CONCLUSION ................................................................................... 263 5.1. Introduction ........................................................................................................ 263 5.2. Theoretical findings and contribution ................................................................ 265
5.2.1. Theoretical findings .................................................................................... 265 5.2.2. Value of theoretical findings ....................................................................... 269
5.2.3. Theoretical contribution .............................................................................. 269 5.3. Empirical findings and contribution................................................................... 271
5.3.1. Empirical findings ....................................................................................... 271 5.3.2. Empirical contribution ................................................................................ 276
5.4. Implications for practitioners ............................................................................. 277
5.5. Limitations and areas for future research ........................................................... 279 5.5.1. Limitations .................................................................................................. 279
5.5.2. Areas for future research ............................................................................. 283 5.6. Conclusion.......................................................................................................... 285
BIBLIOGRAPHY ....................................................................................................... 287
LIST OF APPENDICES ............................................................................................ 303
xiii
LIST OF FIGURES
Figure 3.1 : Interactive Data Analysis (Miles and Huberman 1994) ..................... 76
Figure 3.2 : Osegowitsch’s (2003) Model of Internationalisation and
Performance ........................................................................................ 80
Figure 3.3 : Yip’s Globalisation Drivers Model .................................................... 82
Figure 3.4 : McGrath General Model ..................................................................... 85
Figure 3.5 : Internationalisation Reference Model ................................................ 87
Figure 3.6 : Sample Cruciform Chart of Revenue Growth Versus Level of
Internationalisation ............................................................................ 104
Figure 4.1 : Hierarchy of Themes and Sub-Themes of Internationalisation:
Antecedents ....................................................................................... 162
Figure 4.2 : Hierarchy of Themes and Sub-themes of Internationalisation:
Processes ........................................................................................... 193
Figure 4.3 : Hierarchy of Themes and Sub-themes of Internationalisation:
Outcomes ........................................................................................... 227
Figure 4.4 : Revenue Growth v. Level of Internationalisation Achieved ............ 249
Figure 4.5 : Profit Growth v. Level of Internationalisation Achieved ................. 250
Figure 4.6 : Revenue Growth v. Importance of Internationalisation ................... 252
Figure 4.7 : Profit Growth v. Importance of Internationalisation ........................ 253
xv
LIST OF TABLES
Table 2.1 : Studies of Internationalisation and Performance ................................. 30
Table 3.1 : Table of Number of SGX Companies Listed Prior to 1998 by
Industry Sectors ................................................................................... 66
Table 3.2 : Nvivo Analysis—Sample Table ........................................................ 102
Table 4.1 : Summary Table of the 14 Participating SGX Companies ................. 110
Table 4.2 : Adoption of Internationalisation Theories ......................................... 154
Table 4.3 : Themes and Sub-themes on Antecedents .......................................... 158
Table 4.4 : Themes and Sub-themes on Processes ............................................... 159
Table 4.5 : Themes and Sub-themes on Outcomes .............................................. 160
Table 4.6 : List of Themes and Sub-themes by Order of Strength in Industry .... 243
Table 4.7 : Comparison of Consistent and Unique Themes................................. 247
xvii
LIST OF ABBREVIATIONS
ASEAN Association of Southeast Asian Nations
CEO Chief Executive Officer
CFO Chief Financial Officer
CIS Commonwealth of Independent States
COE Certificate of Entitlement
DOI degree of internationalisation
DTD Double Tax Deduction
EVA Economic Value-Added
GEM Growth Enterprise Market
GLC government-linked companies
HR human resource
ICSB International Council for Small Business
IES International Enterprise Singapore
KPI key performance indicator
M&A merger and acquisition
MD Managing Director
MNC multinational company
NVOCC Non-Vessel Operating Common Carrier
PATMI profit after tax and minority interest
PFI Participating Financial Institution
PRC People’s Republic of China
R&D research and development
ROA return on assets
ROE return on equity
xviii
ROI return on investments
ROS return on sales
SBU strategic business unit
SGX Stock Exchange of Singapore
SEM structural equation modelling
SME small- and medium-sized enterprise
TCA transaction cost analysis
UK United Kingdom
xix
LIST OF APPENDICES
Appendix Page
Appendix 2.1 : Definitions of Globalisation ........................................................ 305
Appendix 2.2 : Details of International Enterprise Singapore incentives ............ 307
Appendix 3.1 : Pilot Study ................................................................................... 309
Appendix 3.2 : Letter of Invitation ...................................................................... 333
Appendix 3.3 : List of Participating Companies* and Executives*..................... 334
Appendix 3.4 : Consent Form .............................................................................. 335
Appendix 3.5 : Interview Guide ........................................................................... 336
Appendix 3.6 : Summary table of interview responses........................................ 338
Appendix 4.1 : Summary of developments and financials of Company A .......... 359
Appendix 4.2 : Summary of developments and financials of Company B .......... 363
Appendix 4.3 : Summary of developments and financials of Company C .......... 367
Appendix 4.4 : Summary of developments and financials of Company D .......... 371
Appendix 4.5 : Summary of developments and financials of Company E .......... 375
Appendix 4.6 : Summary of developments and financials of Company F .......... 379
Appendix 4.7 : Summary of developments and financials of Company G .......... 383
Appendix 4.8 : Summary of developments and financials of Company H .......... 387
Appendix 4.9 : Summary of developments and financials of Company I ........... 391
Appendix 4.10 : Summary of developments and financials of Company J ......... 395
Appendix 4.11 : Summary of developments and financials of Company K ........ 398
Appendix 4.12 : Summary of developments and financials of Company L ........ 402
Appendix 4.13 : Summary of developments and financials of Company M ....... 406
Appendix 4.14 : Summary of developments and financials of Company N ........ 409
Appendix 4.15 : Nodes / Sub-Nodes and Sources from Nvivo9 analysis ............ 413
Appendix 4.16 : Table of 10-year Revenue and profit average annual growth
rate of return and survey results ........................................................ 419
Appendix 5.1 : Internationalisation Reference model (Strength of Themes –
Very Strong) ...................................................................................... 420
Appendix 5.2 : Internationalisation Reference model (Strength of Themes –
Strong) ............................................................................................... 421
Appendix 5.3 : Internationalisation reference model (Strength of Themes –
Medium) ............................................................................................ 422
xx
Appendix 5.4 : Internationalisation reference model (Strength of Themes –
Weak) ................................................................................................ 423
xxi
DEDICATION
Dedicated to my wife Lee Eng, and my four children, Celine, Alvin, Bessie and
Delphine.
1
CHAPTER 1. RESEARCH RATIONALE
1.1. Introduction
This chapter explains the motivation for my study. It gives an overview of the scope of
the thesis and explains the research topic and its significance. This is followed by a
description of the structure of the research.
1.2. Overview
Over the past several decades, there has been a large increase in the number of
companies that have expanded beyond their national boundaries to locate parts of their
operations in other countries. Many reasons are given for internationalisation, such as
to be closer to customers or to take advantage of lower production costs or other
strategic and operational factors. Some companies have also sought to establish closer
and longer-term business relationships with their overseas partners (Wheatley, 1991,
Williams et al., 1998).
To leverage on their competitive advantages and ensure business survival in the fast
changing global economic environment, corporations have been shifting away from
depending on their domestic markets to develop a more globalised reach. This allows
them to diversify factor input sources and markets and to derive production capabilities
in different locations, technological knowhow and competitive strengths. As a result,
whether through organic growth or acquisitions, we have observed a major
international consolidation of companies, which has created truly multinational
companies (MNCs).
2
Multinationality started in developed countries such as the United States (US), United
Kingdom (UK), Japan and Germany. In recent years, even companies in small
countries such as Singapore have ventured overseas, seeking the benefits to be derived
from internationalisation. International business relationships are increasingly looked
upon as a strategic option equivalent to other business strategies like knowhow,
products and technologies (Friedman, 2005, Webster, 1992, Zain and Ng, 2006).
The primary focus of my thesis is to explore the global integration and
internationalisation strategies, processes and outcomes of Singaporean companies
during the period from 1998 to 2007. This is particularly pertinent because Singapore
has a very small and limited domestic market, and the Singapore government has been
promoting the internationalisation of local companies for the past three decades.
1.3. Topic
My study examines the influence of internationalisation on the performance of
companies listed on the Stock Exchange of Singapore (SGX) for the 10-year period
from 1998 to 2007. Singapore is evaluated by Foreign Policy, a US-based magazine,
and AT Kearny as one of the countries with the highest level of internationalisation
based on the International Cities Index (Foreign Policy, 2006). Internationalisation is a
strategic variable that affects the competitiveness of a country. Numerous aspects of
internationalisation have been explored in the past in the industrialised countries. As
Singapore is a newly developed economy, it is interesting to explore how
internationalisation has influenced Singapore-incorporated companies. There are
currently over 800 companies listed on the SGX. They constitute a sizeable base of
companies with publicly available market, business and company data to support the
research.
3
Numerous studies have investigated the motivations for corporations to become
international and the resulting influence of internationalisation on these companies.
Companies need or choose to become international for a variety of reasons such as
growth, survival, competitiveness, economies of scale, proximity to markets and
performance enhancement (Hutzschenreuter and Guenther, 2008, Kogut, 1989, Kogut,
1999).
Internationalisation has been generally defined as ‘a strategy undertaken by a
corporation to expand overseas to take advantage of various factors such as costs and
proximity to markets in the overseas markets’ (Fallah and Lechler, 2008).
Internationalisation refers to the overall extent of a company’s international
engagement. It can be represented by the amount of foreign-based assets as compared
to its total assets; the percentage of foreign-based sales as compared to total sales; or
the percentage of its operations located in foreign countries compared to total
operations. Most corporations started from large domestic home markets like the US,
UK, Europe and Japan. One of the main objectives of internationalisation is to improve
profitability (Norbarck and Persson, 2008). Only a limited number of studies have been
done on Southeast Asian and Singaporean companies (Siew Meng and Chin Tiong,
1993, Birkinshaw, 1995).
Publicly listed companies were selected for study because some details on the
companies’ history, business scope, plans, financial data, factories and operations
locally and overseas are available publicly in their annual reports.
4
This research is interesting and worthwhile, as it will enable managers to have a better
understanding of the imperatives and motivations that drive Singaporean companies to
become international. It also extends the literature by providing a comparison with
previous studies on this subject done by other researchers in Singapore and overseas.
The differences in experiences, strategies and performance results will enable the
formulation of a set of internationalisation strategies that could be more relevant for
Singapore-based companies.
1.4. Potential significance
From the onset, internationalisation has caused geographical boundaries to fade as new
business paradigms emerge. The traditional method of doing business within national
borders, dependent solely on huge domestic markets (for example, the US is a large
market in itself), has changed with the emergence of the global village (Friedman,
2005). To prepare companies to exit their national borders, it is important for them to
understand the effects, relationships and implications of the internationalisation
phenomenon, and to equip themselves with the knowledge and competencies to
overcome likely changes and challenges.
In Singapore’s context, internationalisation is a policy issue that has great significance.
As early as in 1992, Mr Lee Kuan Yew (Singapore’s former Prime Minister) urged
Singaporean companies to venture overseas. He termed it quaintly as ‘to spread a
second wing, that is an external wing’. Since then, the Singapore government has been
actively promoting the internationalisation of Singaporean companies through
government initiatives and policies aimed at encouraging and incentivising companies
to expand overseas. In particular, Singapore’s government-linked companies (GLCs)
have been encouraged to expand more actively overseas. This study examines the
5
measures undertaken by the Singapore government to promote internationalisation,
whether these initiatives had been effective, and the policy implications that can be
concluded from the analysis of the evidence and results.
This thesis therefore examines both the efforts directed by the Singapore government
as well as the private sector’s initiatives towards internationalisation as a business
strategy. The shared experience of becoming international will enable Singaporean
companies to better structure their organisations to tackle the world market and to
adopt the right strategies and action plans to compete well in the international arena.
The research will add to current knowledge on internationalisation and enable further
research in an area that is becoming increasingly relevant in today’s highly connected,
technology-driven and internationally competitive world market.
1.5. Structure
The study is structured into five main chapters. Following Chapter 1, which gives an
overview of the research rationale, Chapter 2 presents the literature review of relevant
research, from the seminal work by Vernon (1971) to the numerous studies looking at
the relationship between performance of large MNCs and their level of
internationalisation. The chapter describes the theoretical foundations of the research
on internationalisation. Noteworthy is the revelation that quantitative methods of
research have led to different results about the impact on the performance of
corporations. This subsequently led to more studies being conducted using qualitative
methods to derive deeper insights on internationalisation theories and strategies. The
two recognised theories on internationalisation are the Eclectic Paradigm and the
Uppsala Internationalisation Framework (Johanson and Vahlne, 2009). The chapter
ends by stating the perceived research gaps and intended research emphasis.
6
Chapter 3 describes the rationale for the selection of the qualitative case study
approach. The research is conducted in three phases:
1. A pilot study is undertaken to test the primary research parameters such as the
saturation level on the potential number of companies to be interviewed, the
relevant questions and issues to be posed, and the appropriateness of the
companies and interviewees to be selected.
2. An analysis of all SGX companies is conducted by examining the
internationalisation factors and performance measures based on data from
publicly available databases of SGX companies. This exercise enabled the
selection and invitation of an appropriate group of target companies for
participation in the case study research.
3. An in-depth qualitative study is conducted by using the case study approach to
examine in detail the purposes, processes and outcomes of the
internationalisation of selected SGX companies, by conducting one-to-one in-
depth interviews with the key senior executives of the participating companies.
Phase 1 (Pilot study) is meant to be a brief study, and Phase 2 is to examine the
publicly available data on the internationalisation of SGX companies and provide the
basis for the selection of an appropriate cluster of companies for the main part of the
research. Phase 3 is to conduct an in-depth study into selected companies. The main
results and findings are derived from the research materials gathered in Phase 2 and
from the in-depth case study interviews in Phase 3.
In the latter part of Chapter 3, certain previous quantitative and qualitative research
methodologies are examined, and a Reference Model is developed that is deemed
7
suitable for use in this study. The Reference Model displays the internationalisation
process in three blocks: Antecedents, Processes and Outcomes.
Following the Reference Model, key research questions are formulated. The first key
research question is ‘Does internationalisation result in better performance for
Singaporean companies?’ The two key research questions that follow are ‘What are the
main motivations for a Singaporean company to go international?’ and ‘What are the
outcomes of the internationalisation process?’ Another relevant and interesting
question is ‘As the Singapore government actively promotes internationalisation, do
government initiatives have any impact on the push of Singaporean companies to
internationalise?’
Chapter 3 concludes with a description of the data gathering techniques and procedures
using Nvivo9 software and co-axial analysis.
Chapter 4 provides the summary information on the selected SGX companies and
gives an analysis of the survey results using Nvivo9 software. The analysis provides
the answers to the various key research questions, and describes the themes and sub-
themes emerging from the interviews. Further analysis is conducted using co-axial
analysis, comparing the rated level and importance of internationalisation against the
actual performance of the companies.
Chapter 5 provides a summary of the main findings and their implications, and the
contributions of the thesis to the current body of research on internationalisation.
8
1.6. Conclusion
This chapter explains the research rationale and structure of the study. The research is a
worthwhile project because it adds to the knowledge and understanding of
internationalisation for companies in a small economy like Singapore. The next chapter
explores the literature in depth, considering both pioneering and current research on the
topic of internationalisation.
9
CHAPTER 2. LITERATURE REVIEW
2.1. Introduction
This chapter provides an overview of prior research undertaken in the area of
internationalisation. The chapter begins by explaining the meaning of
internationalisation, multinational corporations and globalisation. It then outlines the
key theoretical concepts and provides a review of the early quantitative studies that
compared the relationship between multinationality and internationalisation. The
review covers the research on internationalisation at the company, subsidiary, industry
and multiple-industries levels, and discusses the benefits of internationalisation in
many country settings. This chapter also discusses the research on the
internationalisation of Singaporean companies and the Singapore government’s
assistance for companies’ internationalisation objectives. The chapter concludes by
identifying the research gaps in the literature that led to the choice of research
emphasis for this thesis.
2.2. Defining multinationality, globalisation and internationalisation
One of the early pioneers of the globalisation literature was Fayerweather (1969), who
described globalisation as a ‘unification idea’ in which an MNC presents a completely
unified stance in all countries in which it does business, with standardised products
based on concentrated production. Another well-recognised early article on global
strategy was by Levitt (1983), who discussed the concept of the global village and
suggested that the use of a global strategy was inevitable, and that all companies would
one day be producing globally standardised products for unified markets. Cvar (1986)
further expressed the view that a global company is one organised in such a way as to
take maximum advantage of efficiencies through the reduction of costs wherever
10
possible. Thereafter, there was a strong groundswell by MNCs to standardise their
products and procedures across the globe.
In the past, globalisation and global strategy were viewed together as a generic
international strategy adopted by multinational companies as an alternative to ‘multi-
domestic’ or ‘multi-local’ strategies, by locating their operations or plants in different
countries. This status of a company is generally termed as ‘multinationality’. It was
further expounded that multinationals, which put local responsiveness first, would
choose a multi-local strategy, while companies that decided to pursue lower costs
would choose an internationalisation strategy. This uni-dimensional view looked upon
the choice to adopt a global strategy as a conscious decision to base the company’s
international competitive strategy on the main objective of lowering costs through
concentration of production and a drive towards standardisation of production and
marketing policies.
2.2.1. Multinationality
‘Multinationality’ was defined in a 1973 United Nations article on ‘Multinational
Corporations in World Development’ as the status of a corporation or enterprise that is
involved in activities in more than one nation. It stated that there are certain qualifying
criteria to be used in respect of the type of activities or the importance of the foreign
component in the total activity. These activities may be related to sales, assets,
production, employment or profits generated by the foreign branches and affiliates. A
foreign branch is defined as that part of the corporation that operates abroad. An
affiliate is the part of the corporation under effective control of the parent company and
may be either a subsidiary (with the parent holding a majority of shares or a lesser
portion), or an associate (in which the investor holds 20 per cent or less of shares).
11
Deriving from this definition, any corporation with one or more foreign branches or
affiliates engaged in any of the activities mentioned will qualify as ‘multinational’.
2.2.2. Globalisation
There have been many discussions of the definitions of globalisation in numerous
research papers and reports (Beyer, 1994, Cairncross, 1997, Dicken, 1998, Dunning,
1993a, Giddens, 1990, Jameson and Miyoshi, 1998, Robertson, 1992, Walters, 2002).
These have covered a wide range of perspectives and definitions of globalisation from
a variety of academic, linguistic, economic and religious fields and have demonstrated
a considerable variance in concepts and approaches (see Appendix 2.1: Definitions of
Globalisation). However, three common factors are evident: (1): the integration of a
previously insular national or regional phenomenon (for example, culture, interest rates,
technology, ideas, consumption patterns, diseases or standards) into some sort of
worldwide, or near worldwide structure; (2) the process by which this integration
occurs; and (3) identification of a set of integrating mechanisms (for example, disease
paths, exchange rates, trade, foreign direct investment, books, movies, travel or internet)
that facilitate the integration by transmitting influence (for example, disease pathogens,
inflationary pressure, fashions or behaviours) from one location to another.
Building on these points, the following general description of globalisation is offered
by a practitioner article (Clark and Knowles, 2003). Globalisation is the process by
which economic, political, cultural, social and other relevant systems of nations are
integrating into world systems. It has the following two elements:
(a) A world system, which is a planet-wide complex of channels capable of
transmitting stimuli simultaneously to many locations at wide geographic distances;
and
12
(b) A degree of globalisation, which is the extent to which the economic, political,
cultural, social and other relevant systems of nations are actually integrated into world
systems. This degree varies considerably.
This description has the virtue of being general, in that it does not limit globalisation to
any particular metric, observable phenomenon, model, theory or disciplinary
perspective; yet, it captures the basic idea that all fields are grappling with and
attempting to model into their own academic context. The description also recognises
globalisation as a dynamic process that affects different phenomena to varying degrees,
occurring in economic, cultural or social domains. The description also provides a
framework for capturing the rate at which the process is advancing in particular
contexts. Emerging and existing world systems include inflation, interest rates,
business cycles, fashion, pop music, technical and professional standards, consumption
behaviours, diseases and media.
In recent years, with the rise of the green movement and concerns about environment
protection, the process of globalisation has been blamed as the cause of the spread of
diseases, the breakdown of cultures and changes in geo-political power across nations.
Numerous sociologists, scientists, anthropologists and environmentalists have
examined the topic and sought to identify the impact of globalisation in their respective
fields (Friedman, 1999). Giddens (1999) opined that the widespread usage and
coverage of the term globalisation has led to referring to it as a ‘runaway force’, which
leads to the convergent view that globalisation has been overly faulted for all cross-
border ills in cultural, social, political and economic arenas.
13
Globalisation has been generally employed as a broad-based term for the process
whereby global forces or developments interact and give rise to the social advent called
‘globalisation’, a phenomenon involving different organisations, nations or entities.
2.2.3. Internationalisation
Internationalisation has been generally interpreted in a variety of ways, with the most
common concept being the optimisation of various resources by MNCs to be located in
different countries (Ghoshal, 1987, Ghoshal and Bartlett, 1988a). According to Kobrin
(1991), an internationalised company contains subunits that can be incomplete
economic entities, and their value is, as part of the entire organisation, derived from
their relationships with others, to produce maximum returns for the group. Therefore,
increasing and strengthening integration should result in increased intra-unit exchanges
of people, raw materials, resources, technologies, components and finished products.
However, these views alone do not define what internationalisation actually is. Among
other things, internationalisation can be a negative connotation. It has been described
as the advent of a force that has led, on the premise of worldwide economic
advancement and integration, to global environmental degradation and economic
exploitation.
Bartlett and Ghoshal (1989) proposed an organisational form they termed the
transnational, and re-iterated the conventional view that in the internationalised
organisation, the cost and quality advantages of global efficiency are expected to
provide optimal value that customers will eschew differences in preferences and accept
standard products. The current conventional wisdom tends to continue to equate
internationalisation with lowering of costs and standardisation, with Hill and Jones’s
(2000) widely used text on strategic management being one such example. Birkinshaw
14
(1995) provided additional support where he stated that economy of scale was the most
significant driver of international integration in his study of US manufacturing
companies.
It is therefore understandably difficult to define a term that in recent years has come to
mean many different things. For the purposes of this study, it is necessary to
concentrate on the application of the term ‘internationalisation’ with regard to how it
has affected Singapore-based international business corporations, and in particular, to
focus on what is understood by the term ‘internationalisation strategy’. This approach
does not seek to ignore the wider social and technological impacts of
internationalisation. However, it aims to focus primarily on business and management
literature in which business strategies have been placed at the core of this
internationalisation research. This is in accordance with Bartlett and Ghoshal (1989),
who have ventured to term multinational corporations as the ‘dominant vehicle’ of
internationalisation.
In summary, this study defines internationalisation as:
A strategy undertaken by a corporation to expand overseas to take
advantage of various factors such as costs of production, drawing upon
domestic resources, manpower and regulatory advantages, sharing of
technologies and knowhow across borders, and proximity to markets in
the overseas markets.
For the purpose of this thesis, the term ‘internationalisation’ is used as a business-
related concept that refers to the process of MNCs expanding and shifting their
operations overseas. Therefore, throughout this thesis, the term internationalisation is
15
use for the study of MNCs. In summary, globalisation is used to describe a social
phenomenon, whereas internationalisation describes a business process.
In terms of the relationship between multinationality and internationalisation, in this
thesis, internationalisation describes the process through which MNCs expanded out of
their domestic markets and established branches or affiliates overseas.
2.3. Theoretical foundation of early research
The study of the internationalisation of companies has traditionally focused on
manufacturing MNCs, although later studies have extended the scope to services and
other sectors. Early studies tended to compare the level of internationalisation against
performance, and explored issues relating to the motivations for, and benefits of,
internationalisation. Typically, the main proposition underpinning the research was that
more internationalisation should lead to better performance. Later studies became more
interdisciplinary in nature and encompassed areas such as strategic management,
international business concepts, international finance and economics. Other research
has also ventured into the various cultural and cross-cultural aspects of
internationalisation (Gaines and Liu, 2000, Hewapathirana, 2009, Pei-Wen, 2004).
Vernon’s pioneering seminal work investigated the association between
internationalisation and performance (Vernon, 1971, Vernon, 1981). He made a
comparison of the Return on Assets (ROA) of domestic companies and MNCs, and
found the latter to have superior performance.
The subsequent studies by Vernon and others investigating the influence of
internationalisation on corporations tended to adopt comparative approaches. For
16
example (Grant et al., 1988) examined the relative performance of corporations that
had remained domestic against those that had become international. The early research
was mainly conducted on European and US companies. Later research expanded the
coverage to Japan and other countries, as these countries started to produce several
large international companies. Recent research has tended to focus on MNCs and to
adopt control approaches. Researchers have used operational multinationality as a
continuous variable for comparison against performance. The theoretical foundation
underpinning the examination of the internationalisation of companies and their
performance rests on two key concepts. The first is the transaction cost analysis theory
(TCA), which states that a company’s decision either to undertake a transaction
themselves in their internal structure between related entities or to let the market
perform the transaction is based on transaction cost differentials (Coase, 1937,
Williamson, 1976). According to this theory, the cost benefit advantages of
internationalisation have to be greater than the additional direct costs brought by the
complexities and uncertainties caused by internationalisation.
2.3.1. Transaction cost analysis theory
Williamson (1975, 1985) explained that TCA is based on the premise that a company
will internalise those activities that it is able to conduct at a lower cost, and rely on
external providers for activities in which such providers have an advantage. TCA is
developed on a micro-analytic framework with strong links to observed behaviour.
Companies are assumed to be subject to bounded rationality. In addition, at least some
companies are assumed to be opportunistic if given the chance. Similarly, imperfect or
asymmetric market information will give some companies the opportunity to exploit
advantages (especially financial) in their dealings with other companies.
17
Transaction costs (such as the costs governing a production system) tend to be low in
highly competitive markets, and therefore provide minimal or no cost advantage or
incentive to substitute internal organisation for market exchange. In comparison, when
confronted with an imperfect market or market intelligence, companies are expected to
internalise transactions to reduce costs of exchange. The objective of forward
integration of operations is to minimise the sum of transaction costs (John and Weitz,
1988, Williamson, 1985). The higher the cost of contracting externally, the greater will
be the incentive to internalise transactions.
Forward integration means that a company may decide to invest into businesses that
relate to its main products, such as into other similar and related products or services,
or those that are downstream businesses to the main production output of the company.
Backward integration is the business direction where the company invests into sub-
components, supplies and support services that lead to the production of its main
products.
However, unlike production costs, transaction costs are very difficult to measure and
estimate precisely, because they represent the potential outcomes of alternative
decisions. John and Weitz (1988) said that studying transaction cost issues often cannot
measure such costs directly, instead only testing whether organisational relations align
with the attributes of transactions as predicted by the transaction cost rationale.
Studies of TCA in terms of asset specificity and internal uncertainty have been
conducted by numerous researchers (Anderson, 1985, John and Weitz, 1988, Anderson
and Coughlan, 1987). Asset specificity refers to the extent to which specialised internal
18
investments are required to support a transaction, whereas uncertainty refers to the
ability to predict the relevant contingencies, both internal and external to the company.
2.3.2. Foreign direct investments theory
The second research approach employed in the early period is the theory of foreign
direct investments, which is focused on how MNCs conduct business internationally.
Hymer (1976) initiated the concept of market imperfections and considered that the
TCA of internationalisation concept propounded by Coase (1937) can be extended to a
theory of foreign direct investments (Hymer, 1976, Hymer, 1960). This theory posits
that companies can exploit differential advantages in labour, land, resources, tax, local
knowledge and other factors through foreign direct investments into foreign markets.
Companies undertake cross-border geographical diversification because they can
exploit unique advantages of proprietary knowledge, technological advantages,
managerial skills, availability of resources, supply of raw materials and other
intangible assets, which enable them to make extraordinary performance gains.
Aharoni (1966) presented a discourse on the definition and process of foreign direct
investments. He suggested that the foreign investment decision process was not a
single identifiable act, and viewed it as a complex succession of acts involving a
dynamic social and interactive process of mutual influences among various executives
of a company, constrained by the company’s business strategy, resources and the
management or manpower capacity, goals and needs of its members, throughout which
choices emerge (Aharoni, 1966).
The foreign investment decision process is undertaken by a group of executives in a
company, who typically have different backgrounds, knowledge, experience and
19
orientations. It is a long process and involves different organisational levels. Decisions
are made under uncertainty because of the lack of information and the limited capacity
of the management team.
According to Aharoni (1966), the decision process starts because of an outside factor
that causes a decision-maker to look overseas. The strength of this force determines the
investigation process, throughout which management accumulates psychological
commitments toward other organisations and entities. The more committed they
become, the higher the probability of a decision to invest. Thus, if the force that caused
the manager to look abroad is strong enough, the decision to invest abroad is gradually
formed, and the investigation process may concentrate on minimising the size of the
investment and the risks involved. The process changes with the accumulation of
experience and the result of organisational modifications such as the creation of an
international division.
Aharoni (1966) considers that a foreign investment decision process includes several
elements. First, any choice made by a company depends on its internal systems. These
systems comprise management’s relations with other individuals and entities both
within and outside the company, including customers, suppliers, banks, competitors
and government agencies in host and home countries. Second, the process evolves over
a certain (and potentially extended) period of time. Third, decisions are made under
uncertainty, which means that the management’s perception of uncertainty is a major
element in the process. This perception changes as a result of experience and
knowledge, and management’s level of interest can vary over time, reflecting how
comfortable they are with the uncertainty surrounding the decision. Fourth, companies
20
have goals and objectives. Finally, there are many constraints on the freedom of action
of the management.
The decision-making process is spread over a long period (Aharoni, 1966). Implicit
and explicit negotiations, both inside the company and with outsiders, may cause the
process to become extended. During that period, there can be many changes; it is often
found that certain factors were not taken into account, were taken over by events or
proved to be unpredictable. These changes invariably require more modifications,
more approvals and sometimes a new round of negotiations has to be started.
When a series of investment decisions are examined, another important factor emerges
which is the accumulation of experience by executives in various echelons regarding
foreign investments creates profound changes in the company itself. Gradually,
companies evolve into multinational corporations, after successfully establishing or
acquiring operations and business opportunities abroad (Aharoni, 1966).
Organisations learn, and with learning the perception of uncertainty in foreign
operations changes; that is, investments previously perceived as risky become
acceptable. When the process is put in a historical perspective, it may be observed that
the company commenced to look overseas after it received significant export orders
over a period of time. Alternatively, a foreign agent might have developed an overseas
market, with the management paying little or no attention to this foreign development.
With the growth of export business, sometimes even without any deliberate action
from headquarters (HQ), an export department may have been created. This, in turn,
forms a group of people in the company who feel obligated, driven by their vested
21
interest, to expand the company’s international operations. The very existence of an
international division gives a momentum to international operations, which are
subsequently expanded. The assignment of a group of executives to an international
division creates several institutional and individual commitments. The cost of
investigation in an international division is generally lower, as knowledge has been
accumulated from previous investigations. Further, because of their role and
experience, the international executives perceive the risk of foreign operations to be
lower; they have more knowledge about remote control operations. With time, foreign
investments become a substantial part of total operations. The level of the international
division in the company’s hierarchy becomes much higher and the involvement of top
management increases. When evaluating the expansion of existing foreign operations
is considered, the investigation becomes much more favourable.
The location pattern also evolves and, very often, the first subsidiary selected for
foreign operations may change. The foreign subsidiary may have accumulated
considerable experience in foreign operations in its domestic location and in other
countries. This phenomenon can be attributed to the idea of experience first, where
companies may prefer to ‘get their feet wet in safer water’ (Aharoni, 1966). Thus,
because of path dependence, the history of the company is an important variable.
Aharoni studied US companies. A similar incremental process of learning and
experience, and the choice of familiar countries first, were found by Johanson and
Vahlne (1977) in their observations of Swedish companies. They concluded that
companies were inhibited by lack of knowledge about markets. Therefore, companies
proceeded in small steps, adjusting their actions as they gained knowledge through
experience. Thus, internationalisation is an evolutionary, continuous process from
22
export to joint venture representation, to sales subsidiary, to resource development
subsidiary. Further, based on experience and knowledge acquisition, companies
entered new markets with successively greater psychic distance. These explanations
were considered at the company level, rather than at the individual level. As stated by
the authors that in their model, they considered knowledge to be vested in the decision-
making system. They did not deal explicitly with the individual decision maker
(Johanson and Vahlne, 1977).
In subsequent works, Johanson and Vahlne (1990, 2009) expanded the notion of
knowledge development to include knowledge gained through relationships with other
bodies in the foreign market. They viewed markets as networks of relationships among
companies. They argued that the localisation process in relevant networks was
necessary for successful internationalisation. Relationships offered potential for
building trust and commitments, which, in turn, shaped a company’s market
knowledge.
Following the theoretical concepts described above (which take the approach that
companies customarily focus on domestic beginnings and then grow incrementally
towards internationalisation, thus becoming a MNC), researchers started to
conceptualise a new breed of companies called ‘born-global companies’ (Zhou et al.,
2007). Zhou (2007) defined born-global companies as young, small entrepreneurial
companies that, from the onset, are organised and structured such that a substantial
amount of their total revenues were drawn from multiple countries. Zhou argued that
this new global phenomenon was due to experienced entrepreneurs having established
international connections and networks, which enabled them to form companies or
joint ventures with international visions, worldwide acceptable innovative products and
23
a focus on international sales from their inception. Therefore, these born-global
companies could leapfrog the domestic growth route and launch into the international
arena from the outset (Oviatt and McDougall, 2005a, Oviatt and McDougall, 2005b).
The early research was mainly quantitative, examining the relationship between
internationalisation and performance based on comparative studies of MNCs. The
control approach was adopted to enable researchers to study the impact of different
levels of internationalisation on a company’s performance. However, as evidence was
mixed about the influence of internationalisation on performance, the later research
tended to become qualitative, and the earlier comparative and control approaches were
sidelined. As an alternative, case study approaches were used in an attempt to gain a
better and more in-depth understanding of internationalisation as a business strategy.
The next section of this literature review examines the research on the control approach;
that is, those studies that investigate the extent to which different degrees or levels of
internationalisation have affected companies’ performance. These studies are listed in
Table 2.1 and discussed below.
2.4. Multinationality and performance
There has been considerable research on the relationship between multinationality and
performance. As explained above, the term ‘multinationality’ is generally used to
describe the extent of a company’s foreign-based investments in overseas markets, and
the degree of internationalisation (DOI) usually refers to the geographical
diversification of the company. In the area of international finance, a significant
amount of research has examined the relationship between multinationality and
market-based measures of performance such as market capitalisation or stock market
24
returns (Errunza and Senbet, 1981, Errunza and Senbet, 1984, Doukas et al., 1999,
Morck and Yeung, 1991, Morck and Yeung, 1992). The studies are discussed below,
grouped by country or region.
2.4.1. World/USA studies
Studies based on an international sample or on US companies provide mixed evidence
about the relationship of internationality and performance. In a large cross-country
study, Buckley, Dunning and Pearce (1977) examined 387 of the world’s largest
industrial companies and compared their foreign subsidiary sales ratios to their
performance measures, ROA and sales growth for the period 1962 to 1972. The survey
contains both US and non-US companies. They concluded that there was a positive
relationship between degree of internationalisation and return on assets for the full
sample. However, when the sub-samples of US and non-US companies were tested
separately, there was no correlation found between internationalisation and return on
assets. They also found a positive relationship between internationalisation and sales
growth for the 1967 to 1972 period, but inconsistent outcomes on the direct
relationship between internationalisation and performance for the full 1962 to 1972
period.
Studies of US companies have reported no relationship of internationality and growth
or even a negative relationship. Severn and Laurence (1974) examined 62 US
manufacturing MNCs and compared their foreign asset ratios to the performance
measure of ROA. They concluded that there was no significant relationship between
profitability and internationalisation. Siddhartan and Lall (Siddharthan and Lall, 1982)
examined the 74 largest US manufacturing MNCs, compared their foreign sales ratio to
sales growth and concluded that there was a negative relationship between
25
internationalisation and growth. Chang and Thomas (1989) investigated 64 US
manufacturing companies, compared their growth in foreign sales ratio with their
growth in ROA and found a negative relationship between growth in internationality
and profitability.
2.4.2. European and other country studies
Studies in other countries have also reported mixed results. Kumar (1984) studied 672
UK manufacturing MNCs, comparing their foreign sales ratio to ROA, return on sales
(ROS) and sales growth. The study concluded that there was no significant relationship
between internationalisation and profitability or sales growth.
Grant (1987) studied 304 UK manufacturing companies by comparing the level of
sales to ROA and return on equity (ROE). He found a positive relationship between
multinationality and profitability. Geringer, Beamish and da Costa (1989), who
compared foreign sales ratio and ROA, also found a positive relationship.
Lu and Beamish (2001) studied 95 listed Japanese companies and compared the
number of foreign direct investments and number of host countries with the
performance measures, ROA and ROS. The authors concluded that there was a u-
shaped relationship between internationalisation and profitability, which meant that the
correlation was valid for the smallest and largest companies, but not for the mid-range
companies. The results were interpreted as follows: smaller companies can be more
focused and start from smaller bases, and thus can enjoy relatively significant benefits
from internationalisation. The largest companies can also derive benefit from
internationalisation owing to their resources and scale.
26
2.4.3. Singaporean studies
The preceding section demonstrates that there is already a very large body of research
examining the relationships between internationalisation and measures of corporations’
performance. However, a literature search indicated that not many studies have been
conducted on this subject for Singapore-based companies.
The first general pool of studies in Singapore focused on the competitiveness of
Singapore as a country (Blomqvist, 2002, Robert and Dick, 2005). They described how
Singapore’s economic policies have assisted companies to sustain international
competitiveness in the new internationalised world economy.
Zutshi and Gibbons (2004) commented that western management theories of
internationalisation do not fully explain the evolution of Asian MNCs, and they held
Singapore as a model of internationalised economic expansion. The authors studied the
internationalisation process and strategies of two GLCs.
Singaporean corporations have been strongly encouraged by the Singapore government
to regionalise their operations. Using Singapore’s public enterprise sector as a case
study, Roberts and Dick (2005) described the internationalisation strategies of
Singaporean GLCs. The authors concluded that effective systems of corporate controls
are necessary for the development of the international capabilities of Singapore GLCs.
Another study examined the success of Singaporean companies making investment
inroads into China as a form of international strategy. Kumar, Siddique and Wong
(2005) examined the internationalisation of ethnic Chinese business companies from
Singapore and delved into their strategies, processes and international competitive
advantages. Lim and Ng (2001) made a specific industry-level study on the factors
27
influencing the internationalisation decisions of small- and medium-sized enterprises
(SMEs) in Singapore, with particular reference to the plastic engineering industry.
Pangarkar (2008) examined the relationship between the internationalisation and
performance of SMEs in Singapore. He studied the relationship between the DOI and
performance of 94 SMEs in Singapore, using a DOI measure based on the dispersion
of sales across geographic regions. He found that DOI had a positive impact on the
performance (ROA and profit growth) of these companies. The analysis was conducted
by comparing the companies’ level of internationalisation in 2003 (the survey was
conducted in mid-2005) with their corresponding performance metrics for 2004 (a
study period of one year). Pangarkar’s first focus was on smaller SMEs with limited
resources and little to no internationalisation history. The second focus, which is also a
limitation, is that the study was conducted over a short period (that is, 2003–2004).
The above review shows that studies on SGX companies have focused on certain
industry types (for example, plastic engineering industry) and specific aspects of
internationalisation (for example, the responses of Singapore GLCs to the
government’s call to become international). Thus, the existing studies can be classified
as limited cross-sectional studies. A relevant and recent study by Pangarkar (2008)
limited itself to investigating smaller SMEs over a short period of one year (2003–
2004).
An overview of the past research indicated that studies using profitability and sales
growth as dependent variables generally supported Vernon’s results (Wolf, 1977,
Capar and Kotabe, 2003). However, some studies found domestic companies to be
superior performers (Hughes et al., 1975, Siddharthan and Lall, 1982, Al-Obaidan and
28
Scully, 1995). Interestingly, a third group of researchers found no significant
differences between the performance of domestic and internationalised companies
(Horst, 1972, Rugman, 1983, Shaked, 1986). Many reasons were postulated for the
causes of the inconsistent results. Some researchers attributed the poor results to the
fact that the relationship between performance and multinationality is more
complicated than was allowed for in the empirical testing (Al-Obaidan and Scully,
1995). There could also be several other factors that might account for, or contribute to,
performance differentials besides internationalisation. Therefore, the empirical
evidence suggests that proxies for the multinational effect are inadequate as the sole
explanation for performance.
Early studies on measuring the impact of multinationality on performance assumed a
beneficial linear relationship. Subsequently, a school of thought emerged that rejected
the linear association between multinationality and performance. Some researchers
favoured a deterministic association, and argued that the relationship was the shape of
an inverted ‘u’. Their proposition was that performance rises initially with growth in
multinationality before it reaches a threshold at which point it starts to decline. In the
beginning, companies would expand into new markets or production locations
characterised by similar production methods, consumer taste, markets and institutions
or regulations. These new ventures enabled the use of existing methods, techniques and
operations without substantial adaptation, and required no substantial modification of
existing structures and systems. Therefore, the political and environmental risks were
potentially reduced, allowing companies the opportunity to make extraordinary gains
from the initial expansion projects (Gomes and Ramaswamy, 1999). In contrast, the
later stages of international expansion would be increasingly difficult due to the
involvement of dissimilar countries. Instead of having to make only small or
29
incremental changes and capital injections, companies must make more adjustments,
take higher risks and inject more capital. As a result, the performance gain could be
marginal or negative.
Another group of researchers argued that the relationship between multinationality and
performance is influenced by learning processes and cost-benefit trends, which can be
changed by capable managers who adopt superior processes and methods (Ruigrok and
Wagner, 2003). These researchers rejected the deterministic theory, and disagreed with
the concept of threshold of internationalisation benefits. They contended that astute
and proactive management could overcome the limitations and difficulties of threshold
of gains to be derived (Hitt et al., 1997, Sullivan, 1994a, Sullivan, 1994b).
30
Table 2.1 : Studies of Internationalisation and Performance
Authors,
Year Companies
Internationalisation
Measures
Performance
Measures Results
1. World/US
Cantwell
and
Randaccio,
1993
143 world large
industrial
companies
Foreign production
ratio Sales growth
No significant
relationship
between
internationalisation
and sales growth,
except for a sample
sub-set with a
strong global
presence
Buckley,
Dunning
and Pearce,
1978
387 world large
industrial
companies
Foreign subsidiary
sales ratio
ROA sales
growth
Positive
relationship
between
internationalisation
and ROA
Chang and
Thomas,
1989
64 US
manufacturing
companies
Foreign sales growth
ratio ROA growth
Negative
relationship
between
internationalisation
and ROA
Daniels
and
Bracker,
1989
116 US
manufacturing
companies
Foreign sales ratio,
foreign assets ratio ROS, ROA
Positive
relationship
between
internationalisation
and ROS/ROA
31
Authors,
Year Companies
Internationalisation
Measures
Performance
Measures Results
Siddhartan
and Lall,
1982
74 large US
manufacturing
MNCs
Foreign sales ratio Sales growth
Negative
relationship
between
internationalisation
and sales growth
Han, Lee
and Suk,
1998
2,643 large
manufacturing
companies
Canada, Japan,
UK, USA,
Germany, Italy
Foreign sales ratio ROA No significant
relationship
2. Europe
Kumar,
1984
672 UK
manufacturing
companies
Foreign sales growth ROA, ROS,
sales growth
No significant
relationship
between
internationalisation
and ROA only
Grant,
Jammine
and
Thomas,
1988
304 UK
manufacturing
companies
Subsidiary sales ratio Return on net
assets
Positive
relationship
between
internationalisation
and ROA
Buhner,
1987
40 German listed
manufacturing
companies
Regional sales index
Return on
assets, return
on equity
Positive
relationship
between
internationalisation
and ROA/ROE
32
Authors,
Year Companies
Internationalisation
Measures
Performance
Measures Results
Riahi-
Belkaoui,
1996
31 French
companies Foreign sales ratio ROA
Positive
relationship
between
internationalisation
and ROA
3. Other Countries
Delios and
Beamish,
1999
399 Japanese-
listed
manufacturing
companies
Number of foreign
direct divestments,
number of host
countries
ROA, ROS,
ROE
Positive
relationship
between
internationalisation
and all profitability
measures
Li
Mingfang,
2004
250 Chinese
multi-industry
companies
Foreign sales ratio ROA
Positive
relationship
between
internationalisation
and ROA
Lu and
Beamish,
2001
95 listed Japanese
companies
Number of foreign
direct investments,
number of host
countries
ROA, ROS
U-shaped
relationship
between
internationalisation
and ROA/ROS
33
4. Singapore
Roberts
and Dick,
2005
Internationalisation
of Singaporean
GLCs
Sales growth
overseas ROA
Qualitative
assessment of
positive impact
Lim and
Ng, 2001
15 Singapore plastic
engineering
companies
Sales overseas ROA
Positive
relationship of
internationalisation
and ROA
Pangarkar,
2008 94 Singapore SMEs
Sales across
geographic regions
ROA, profit
growth
Positive
relationship
between
internationalisation
and ROA/profit
growth
2.4.4. Quantitative and qualitative studies
The above review shows that the early quantitative studies produced varying results
about the question of the impact of internationalisation on performance. The trend by
subsequent researchers has been to adopt a combination of qualitative and quantitative,
or solely qualitative, methods in their studies on the link between internationalisation
and performance (Ghoshal, 1987). For example, Osegowitsch (2003) used a
combination of qualitative case study and quantitative analysis to examine the
relationships between global integration and performance in multinational professional
engineering companies. Whitla (2003) used a qualitative case study approach to study
globalisation in service industries, while Hewapathirana (2009) also used the case
study method in her study on the internationalisation of small businesses in Sri Lanka.
34
2.5. Various levels of internationalisation studies
Studies on internationalisation have been conducted at a number of different levels,
including at the multiple-industries level, industry level, company level and subsidiary
level. As the scope of each research focus can be large, there is a need for each
research effort to narrow and define its scope so that the research is manageable and
the research results are capable of meaningful comparison and analysis.
2.5.1. Multiple-industries level studies
Some researchers have ventured to compare the relationship between
internationalisation and performance among a few industries. For example, Whitla
(2003) studied globalisation in service industries, covering three different industry
types: the hotel industry, the advertising industry and the construction industry. He
found different degrees of relationship and impact of internationalisation and
performance within each of these industries, and demonstrated the differences in the
influence of internationalisation on performance.
2.5.2. Industry-level studies
Most early studies covered manufacturing companies, as the advent of MNCs was
propelled by the initial desire of companies in this sector to expand overseas to take
advantage of cheaper labour and costs of production in less developed countries as
compared to the country of origin. Thus, many studies are comparative studies at the
industry level (Grant, 1987, Sambharya, 1995, Sullivan, 1994a, Sullivan, 1994b).
Subsequent research broadened into other industries such as services (Contractor et al.,
2003), pharmaceuticals (Ramaswamy, 1995) and the non-financial sector (Ramirez-
Aleson and Espitia-Escuer, 2001). These studies provided a wealth of evidence about
the relationships between multinationality and performance within a selected industry.
35
2.5.3. Company-level studies
A limited number of later studies investigated internationalisation strategy formulation,
dissemination and implementation using a single-company approach. These studies
provided in-depth knowledge of internationalisation at the company level. However,
such studies tended to be narrow and limited in scope for providing cross-company
comparisons or drawing conclusions that would be beneficial to an industry, though
they do give valuable insights into how an individual entity or company addressed and
implemented its internationalisation strategy. For example, Li (2011) conducted a
study on the influence of internationalisation across different divisions of a Hong Kong
based company. He noted that the rationale, appreciation and influence of the
company’s internationalisation strategy were felt differently among the various levels
of the company’s management and personnel.
2.5.4. Subsidiary-level studies
Another approach has been to examine how foreign subsidiaries of major MNCs
perform relative to the intra-company sourcing of services and production from
internal units of production (Kotabe, 1989, Kotabe and Murray, 1990, Kotabe and
Murray, 1996). These studies found positive relationships between internal sourcing
and the performance of the subsidiaries. However, when considering these studies, it is
necessary to note that their focus was on a particular product or component. The
studies did not test the effects of international sourcing as compared to the internal
intra-company sourcing of services and the resultant benefits of such practices.
A subsidiary-level study by Grosse (1996) investigated the relationship between
international intra-company knowledge and technology flows and market share in the
36
banking, hotel, advertising, consulting and software industries. He concluded that
better performance was associated with greater knowledge and technology transfer.
2.6. Imperatives of internationalisation
This section reviews the past research examining the benefits and imperatives that
drive companies to internationalise. The concepts discussed in this section will act as
reference points for the examination of the internationalisation of SGX companies later
in this thesis.
Two well-documented and established theories are reviewed for studying the sample
companies’ main approaches towards internationalisation. These are the Eclectic
Paradigm by Dunning (1977) and the Uppsala Internationalisation Model by Johanson
and Vahlne (1977). These two concepts are discussed below.
2.6.1. Eclectic Paradigm
The Eclectic Paradigm approach to the theory of international production proposes that
a company can tap three methods for growth: horizontal and vertical diversification, or
expansion into international markets (Dunning, 1977). The company can grow by
offering similar products, or it can expand upstream or downstream to carry out related
operations within the same supply chain. The crux of the theory focuses on the ability
of the company to tap into foreign markets for growth (the third method). Dunning
(1980, 2000, 2001) argues that this ability is linked to the company’s competitive
advantage in three areas: ownership advantages, locational advantages and
internalisation advantages.
37
Ownership advantages refer to the extent to which the company’s capabilities are
unique to it and lacking in its competitors. The more capabilities of this kind that the
company has over its rivals, the more ownership advantages it possesses. These
advantages can be in the form of certain brand names, proprietary technology,
entrepreneurial skills and resources. Locational advantages refer to the benefits the
company enjoys due to the economic, political and social conditions of the country in
which the company operates. For example, such advantages can be found in the
quantity and quality of resources in the country, the cost of labour and capital,
government policies and the demand of the local market.
After considering their ownership and locational advantages, the company must decide
whether to remain domestic or expand into foreign markets. The company also has to
decide where to manufacture its products. Lastly, the company will need to decide on
internalisation advantages, which refers to the benefits the company generates by
taking over production, rather than licensing other companies to do it. The
internalisation of its ownership advantages among companies will be more prevalent if
there are market imperfections. Market imperfections such as high transaction costs,
high information costs and public intervention tend to compel companies to internalise
their operations.
According to Dunning, a company that has only ownership advantages in a particular
country will supply that country but will not internalise the production of its products.
A company with both ownership and locational advantages in a country will choose to
have production capabilities in that country and supply that country. If the company
possesses all three advantages in a particular country, the company will tend to invest
directly into that country and internalise all operations.
38
2.6.2. Uppsala Internationalisation Framework
The Uppsala Internationalisation Framework was developed at the University of
Uppsala, Sweden by Johanson and Vahlne (1977). It is based on empirical
observations of Swedish companies. The study focused on the internationalisation
process of the company, and its gradual acquisition, integration and use of knowledge
in foreign markets. A study revealed that the companies started by exporting to the
country through an agent. These companies would then typically transition into
establishing a sales subsidiary in the foreign market, and ultimately, to operating
production capabilities in the foreign country. The study yielded an interesting
observation about setting up sales subsidiaries in foreign countries. These sales
subsidiaries were typically established as the next step employed by the company after
using sales agents to garner sales in the new foreign domains.
The study noted that companies would gather experiential knowledge about a
particular market by first exporting to the country using a sales agent. Thereafter, the
company moved on to forms of knowledge gathering that were more intensive by
establishing sales subsidiaries and production facilities. In this way, companies could
set up operations in countries that were geographically and culturally distant from the
home country.
The study also discovered that the timing of establishing sales agents and subsidiaries
is related to the ‘psychic distance’ between the home and foreign country. Psychic
distance is a term used to describe the sum of factors that restrict the information flow
to and from the market. Examples of such factors are language and cultural barriers,
level of education, acceptable business practices and maturity of industries.
39
After starting manufacturing activities in the foreign market, a company’s increase in
production levels was also incremental in nature and the manufacturing of the least
complicated items began first. More complicated manufacturing was subsequently
added to foreign production. Although this gradual intensification of
internationalisation efforts seemed deliberate, some of the companies that established
sales subsidiaries did not have an end goal of internationalisation. The companies
developed management knowledge along the way from operating these subsidiaries.
The Uppsala internationalisation process model was revisited by Johanson and Vahlne
(2009). They reviewed the changes in business practices and theoretical advances that
have taken place since 1977. Nowadays, the business environment is viewed as a web
of relationships, a network, rather than as a neoclassical market with many independent
suppliers and customers. Outsidership, in relation to the relevant network, more than
psychic distance, is the basic cause of uncertainty. The change mechanisms in the
revised model are essentially the same as those in the original version, although they
added trust building and knowledge creation, the latter to recognise the fact that new
knowledge is developed in relationships (Johanson and Vahlne, 2009).
2.7. Factors of internationalisation
Following the above review on the approaches of internationalisation, this section
describes those studies that provide evidence on the imperatives and benefits of
internationalisation. This section also includes a description of specific aspects of the
Singapore setting that may promote internationalisation. Together with the Eclectic
Paradigm and Uppsala Internationalisation Framework, the factors of
40
internationalisation are relevant to identifying research gaps and the research focus of
the study of Singaporean companies.
2.7.1. Economy of scale
Multinational expansion has been found to assist a company in increasing its output
and thus cutting unit costs (Ghoshal, 1987, Hout et al., 1982). MNCs with large
networks of subsidiary operations around the globe are able to spread the costs of
creating products over a larger base, and utilise lower cost production centres. Such
companies can then implement more avenues for division of labour, with resultant
gains from specialisation. Expanding internationally helps to increase accumulated
output as sales bases are increased. In addition, this permits the company to enjoy
another variant of economies of scale; that is, the benefit of shared experience between
different operating units. Singapore’s domestic market is very small; and its regional
markets, such as Malaysia, Indonesia and Thailand, are also considered small relative
to the global market size. Some companies call venturing into the South Asian region
regionalisation. Hence, to be competitive and to achieve a reasonable level of economy
of scale, it is expected that some Singaporean companies will choose to expand
regionally as well as internationally.
Lower production cost is deemed one of the key drivers of internationalisation (Whitla,
2003). Cost reduction is achieved by pooling production and other operational
activities into a few major plants in two or more countries. Further reductions can be
achieved by reducing the number of products manufactured, focusing production for
each plant or location. In addition, cost reduction can be achieved through flexibility in
production that allows for the shifting of manufacturing from one location to another,
on a short-term basis, to take advantage of lowest costs at any given time.
41
2.7.2. Geographical diversification
When a company diversifies geographically to another operating base overseas, it
gains the advantage of diversification of risk. According to portfolio diversification
theory, a company that owns assets with returns that are uncorrelated will reduce the
risk of failure (Markowitz 1959). To the extent that different countries have varying
economic conditions at any one time, or are less correlated across countries than within
a given country, the multinational company is likely to enjoy more stable revenues and
returns as compared to a wholly domestic company. This is particularly important in
the event of a major environmental or economic disaster, in which case the globalised
company will be better placed to withstand such shocks. Therefore, greater
multinationality is assumed to lead to better management expertise and a reduction in
business risk.
While portfolio diversity benefits are evaluated in terms of risk, any risk-reducing
effects would also have secondary beneficial effects on other aspects of a company’s
financial performance. For example, lower risk could translate into the ability to
negotiate lower borrowing rates from lenders and banks (Madura and Whyte, 1990).
Overall, it is argued that geographical diversity generates a positive effect on company
profitability and growth (Khambata and Reeb, 2000).
2.7.3. Locational advantage
Wider multinationality could improve the performance of an MNC by providing the
company with more opportunities to arbitrage locational advantage across the global
markets. By concentrating each production process or business activity (for example,
marketing, or technological research and development) in the most favourable
environment, the company can extract huge gains from multinational operations
42
(Dunning et al., 1990, Kogut, 1990, Kogut, 1983). A particular location could be
advantageous in terms of lower costs due to the availability of cheap labour and land.
Another location could provide a superior quality of technical and marketing personnel.
A third location could be ideally suited as the source of capital or raw materials and
resources. Combining these locational advantages is a powerful competitive tool for
MNCs.
2.7.4. Learning experience
Every country has different operating environments. Variation in customs, business
practices, government regulations and taxes creates distinct challenges and provides a
set of stimuli that spur learning opportunities. As a result, greater multinationality
forces an MNC to be more flexible and adaptable. It affords more opportunities for an
MNC to acquire valuable knowledge and capabilities that can subsequently be
exploited in other markets (Birkinshaw and Hood, 1998, Dunning, 1998, Hitt et al.,
1997). The acquired knowledge and capabilities can be operational or technical
knowledge, or the adaptability to deal with cross-cultural issues. This adds to the total
learning experience of the company, which, in turn, leads to the successful
management of international operations.
Learning experiences may be the consequence of having to manage and operate in
multiple locations and environments. These experiences bring an advantage that can be
arbitraged to suit a specific situation, and/or used to negotiate for favourable terms
with host governments when a company is setting up a plant overseas. Importantly, it
is expected that locational advantages have to be learnt and institutionalised within a
company. The exploitation of learning opportunities requires a more deliberate effort
on the part of the MNC to share experience across the management team. It has been
43
found that international success is contingent on aspects such as knowledge
dissemination (Cohen and Levinthal, 1990).
2.7.5. Strategic advantage
Multinationality also provides greater strategic advantage to a company. The flexibility
of being able to operate across multiple markets grants strong bargaining power to
MNCs in their dealings with suppliers, customers and governments (Kogut, 1985a,
Kogut, 1985b). MNCs can threaten to change suppliers or move their plants elsewhere.
The mere threat of shifting activities to other countries can cause local authorities to
give concessions or expedite the processing of approvals that might have taken longer
if the company had been one of its weaker competitors or a local company. Thus, by
operating across a larger number of countries, the MNC gains strategic advantages as
compared to nationally based companies.
A more important strategic advantage enjoyed by MNCs relates to the manner in which
they can compete against rival companies. MNCs operating across a larger sphere of
countries have a greatly enhanced ability to compete by using tactics such as cross-
subsidies, tax subsidies and import duties in an attack against competitors in another
host country. Greater multinationality has therefore become an increasingly important
factor for a company to guard against the aggressive tactics of other MNCs by
equalising their respective strategic advantages (Hamel and Prahalad, 1985, Prahalad
and Doz, 1987, Hout et al., 1982).
2.7.6. Options advantage
The MNC that locates in different geographical locations usually has partnerships with
reputable and large domestic companies in the host countries. Their ability to form
44
alliances with different partners is another business advantage. The MNC can react to
changes in locational advantage (for example, changes in prices of labour or in
government regulations) and extraneous factors such as exchange rates or technology
by shifting locations or partners. In response to any of these changes, the MNC could
shift its various activities from one host country to another, or change its alliances with
partners. For example, in reaction to adverse changes in government regulations, the
MNC could request its local partners (who could be linked to the government) to
extract concessions for their joint ventures. The local companies might not enjoy such
concessions. Otherwise, the MNC may transfer its manufacturing plant from the host
country to another country that is ready to offer better terms.
As a result, the MNC’s multinational scope of operations presents a series of valuable
options to vary its operational methods and strategies across many host countries. A
more extensive multinational network therefore equates to a wider pool of options. It is
noted that the value of these options is more important during times of uncertainty and
downturns. That is, the more uncertain the global environment, the more valuable are
the options (Kogut, 1983, Kogut, 1989, Kogut, 1990, Kogut and Kulatilaka, 1994).
2.7.7. Improved product quality
The focus and concentration of production, the shared learning and experience, and the
exploitation of the best knowledge and technology enables an MNC to achieve
improved quality in its products and services. These improvements add to the
competitive strengths of the MNC against rivals who are behind in the product quality
and learning curve. Such first mover advantages solidify the sustainability and
continuity of the premiums chargeable for the MNC’s products (Dunning et al., 1990,
Kogut, 1990).
45
2.7.8. Enhanced customer preference
As MNCs are located in multiple countries, the global availability of their products and,
more importantly, the global serviceability of their products will enhance customer
preference for the products. Such factors reinforce themselves with the customers and
lead to the greater recognition, acceptance and brand building of the products and
services (Kogut, 1990).
2.8. Singapore government assistance programmes
In Singapore, the government plays an active role in the development and growth of
various industries. In the early years of Singapore’s independence in the 1960s, the
private sector was small and not well developed. The Singapore government had to
take the lead to spearhead the industrialisation of the Singapore’s economy, and to
stimulate the growth of certain industrial sectors as well as to prime the expansion of
private industries in these sectors. Thus, the government, through the Ministry of
Finance and various government agencies, initiated and invested in numerous
companies such as the Development Bank of Singapore (later renamed to the present
DBS Bank), Keppel Corporation, Sembawang Corporation, and National Iron and
Steel Mills Ltd (later renamed to the present Natsteel Ltd). Over the subsequent 30 to
40 years, these companies, which are called “Government Linked Companies” (GLCs),
became successful and sizeable companies in Singapore. The government’s
shareholdings in the GLCs have been held under a company owned by the Ministry of
Finance, called Temasek Holdings Ltd. In the recent years, the Singapore government
has gradually divested some of its shareholdings in several GLCs, though many still
maintained close ties to the government. It has been a practice for retired politicians
46
and senior civil servants to be appointed to be chairmen, directors and senior
executives of the GLCs.
A unique feature of Singapore is that the Singapore government has a deliberate and
direct intention to encourage and assist Singaporean companies in venturing overseas.
This task is assigned to a large and well-organised government-funded agency called
International Enterprise Singapore (IES). IES was created from the former Trade
Development Board (TDB) and its primary mission is to assist Singaporean companies
to expand their business overseas. IES has offices in all large markets around the world,
including the US, China, India, Mexico, Brazil, the Middle East, Europe and Australia.
All GLCs have been encouraged to expand overseas aggressively. As a result of this
push, a number of GLCs have expanded to become sizeable international companies.
Several GLCs have successfully ventured overseas. Examples include Keppel
Corporation, Singapore Telecommunications, DBS Bank, Sembawang Corporation,
Capitaland Ltd, Singapore Technologies Group, and others. Singapore government
leaders, including the Prime Minister, Deputy Prime Ministers, Ministers and Deputy
Ministers regularly lead trade investments and promotion missions overseas to
countries in the Association of Southeast Asian Nations (ASEAN) region, China,
Europe, the Middle East, Russia, Latin America and elsewhere. Top executives from
the private sector are invited to join these overseas investments trips. The private trade
associations, business associations and representatives of industry and commerce
regularly conduct business missions overseas for their member companies.
IES is the leading agency responsible for driving Singapore’s external economy. It
aims to promote the overseas growth of Singapore-based enterprises and international
trade. With a global network in over 30 locations and its ‘3C’ framework of assistance
47
(Connections, Competency and Capital), IES offers services to help enterprises export,
develop business capabilities, find overseas partners and enter new markets. At the
same time, IES works to position Singapore as a base for foreign businesses to expand
into the region in partnership with Singapore-based enterprises.1
The ‘3Cs’ framework of IES encompasses Connections, Competency and Capital.
These are described in detail below:
1. Connections: IES’ global presence and extensive network of key business and
government contacts offers companies the necessary connections to venture
overseas. Enterprises can take part in business missions, networking sessions
and trade fairs to find overseas partners.
2. Competency: IES offers a wide range of assistance programmes and resources to
help Singapore-based enterprises build internationalisation competencies in
alliance formation, branding, design, export, intellectual property and manpower.
Companies can also build market knowledge by signing up as ieConnect
members to receive regular updates and access to the latest market and industry
reports and publications. They can also obtain personalised in-depth advice from
consultants at the IES’ Advisory Centre or from experts through the i-advisory
portal.
3. Capital: IES offers a range of financial tools, grants and tax incentives to help
enterprises gain access to capital, develop their financial management
capabilities and defray the developmental costs of expanding overseas.
The mission of IES is to promote the overseas growth and international trade of
Singapore-based enterprises. Its vision is for Singapore to be a thriving business hub 1 IES website reference: www.iesingapore.gov.sg
48
with globally competitive enterprises and leading international traders. IES has a set of
core values that define the shared beliefs and behaviours that guide how its staff
interact and work.
While the government incentives are available for all Singaporean companies, it is
expected that the small and medium enterprises (SMEs) will tend to need and benefit
more from such incentives and initiatives. SGX companies are generally larger, and
have more resources and capabilities to expand overseas, and therefore may have lesser
need for the government incentives.
To extend its reach and assistance to more Singapore-based companies, IES works
closely with Singapore’s Trade Associations and Chamber of Commerce, as well as
private sector partners. By supporting each other’s internationalisation-related
assistance to companies, IES and its partners collaborate to provide greater support to
companies’ overseas expansion efforts.
The association partners of IES include Singapore Business Federation, Association of
Small and Medium Enterprises, Singapore Chinese Chamber of Commerce and
Industry, Singapore Indian Chamber of Commerce and Industry, Singapore
International Chamber of Commerce, Singapore Malay Chamber of Commerce and
Industry and Singapore Manufacturers’ Federation.
The details of the specific incentives provided by IES to assist Singaporean companies
are given in Appendix 2.2.
49
2.9. Research focus
The foregoing review shows the following research gaps in the literature about the
internationalisation of companies:
1. The definition of internationalisation has been mostly one-dimensional with a
focus on comparison of foreign sales to total sales, called the ‘degree of
internationalisation’ or DOI (Annavarjula and Beladona, 2000, Pangarkar,
2008). However, sales-based evaluation appears too narrow, indicating scope to
expand the evaluation of internationalisation to wider and more varied
parameters.
2. No extensive study has been conducted on Singaporean companies, in
particular on SGX listed companies, to explore the relationship between
internationality and business strategy. In addition, the impact of the Singapore
government’s incentives and initiatives to promote the internationalisation of
domestic companies has not been explored.
3. Most authors present sectional studies conducted over a short period of one to
two years. However, additional benefits could be derived from longitudinal
studies of companies’ internationalisation programmes over a longer period of
five to ten years.
4. Many of the past studies have been quantitative in nature, whereas qualitative
approaches (such as case studies) could enable in-depth understanding of the
multi-faceted issues facing companies’ internationalisation strategies.
Research gaps can be found in the understanding of internationalisation strategies and
their impact on Singaporean companies. This study addresses these gaps by
undertaking an in-depth study of a selected number of established companies that have
attained a certain scale and size, and are listed on the SGX. Moreover, the 10-year
50
study period from 1998 to 2007 is sufficiently long to smoothen out possible short-
term influences that may affect and distort short-term performance results. The
selected period is also appropriate, as it is after the major economic shock of the Asian
Financial Crisis (1996–1997) and before the advent of the global financial crisis
initiated in the US in October 2008.
From the above literature review and analysis, the overall research emphasis for this
study is as follows:
1. To undertake a study on the underlying factors which influence the
internationalisation of Singaporean companies. What does internationalisation
mean for a Singaporean company?
2. To attain a better understanding of the impact of internationalisation on the
performance of Singaporean companies over a substantial period of time, in
view of the unique nature of Singapore due to its small domestic market.
3. To evaluate the impact of government initiatives and incentives on Singaporean
companies’ internationalisation efforts.
Arising from the literature review, the key research questions that will be important for
the research on Singaporean companies (using SGX companies as the available
database) are:
1. What are the main imperatives for the internationalisation of Singaporean
companies?
2. How do Singaporean companies formulate their internationalisation strategies?
3. How are Singaporean companies organisationally structured for
internationalisation?
51
4. Do Singapore government incentives and promotions influence the
internationalisation of Singaporean companies?
5. What are the outcomes and results of the internationalisation of Singaporean
companies?
2.10. Conclusion
Chapter 2 presented a review of the literature relating to the concept, levels,
approaches and benefits of internationalisation. Many studies have investigated
whether higher levels of internationalisation lead to better performance. Surprisingly,
the quantitative methods based research has not firmly established that greater
multinationality leads to better performance. As a result, many later studies have used a
qualitative approach to provide collaborative evidence for the quantitative results.
In this study, a long-term qualitative case study approach is used to provide an in-depth
analysis of the selected Singaporean companies’ internationalisation objectives and
achievements. This chapter concludes with a statement of the research questions to be
addressed in the study. The next chapter, Chapter 3, describes the research design and
methodology.
53
CHAPTER 3. RESEARCH DESIGN AND METHODOLOGY
3.1. Introduction
This chapter describes the research design and methodology used in studying how
Singaporean companies initiated, implemented, maintained and reviewed their
internationalisation programmes. SGX companies are used as the database. A multiple
case studies approach across a single industry is adopted. Stake (1994) defines a
qualitative case study as an intensive and holistic analysis of a single instance, entity or
social unit. This chapter is divided into two parts. In the first part (Sections 3.2–3.4),
the chapter explains the choice of a case study approach and details the three stages of
data collection and how the SGX companies were selected for in-depth one-to-one
interviews with their senior executives. The second part of the chapter (Sections 3.5–
3.9) describes relevant models used in prior research and the development of the
internationalisation model used in the current study. The chosen internationalisation
research framework is then linked to the development of the interview questions and
key research questions. The use of Nvivo software for analysing data from publicly
available documents and the interviewees, and the use of Cruciform charts for co-axial
analysis for examining the relationships between internationalisation and actual
revenue and profit growth, are also explained.
The literature review indicated that past research has employed both quantitative and
qualitative analyses to study the effect of internationalisation on the performance of
MNCs. This study explores the topic by conducting in-depth case studies of a number
of SGX companies. Case studies provide an opportunity to examine in detail the
relationships between internationalisation and performance of a particular company.
Such analysis includes investigating the company’s background, motivations,
54
objectives and plans in its internationalisation programmes and processes. The data
collected give an in-depth insight into the rationale, key drivers, processes and
outcomes of the internationalisation of Singaporean companies.
3.2. The choice of a qualitative multiple case studies methodology
3.2.1. Choice of qualitative approach
From the onset, it was necessary to decide whether a quantitative or qualitative
approach would be best suited to understanding the internationalisation of Singaporean
companies. The literature review in Chapter 2 showed that past quantitative studies
have drawn mixed conclusions about whether internationalisation has resulted in
improved performance for MNCs. In view of these results, a qualitative approach was
chosen because it was deemed more likely to reveal valuable evidence about the
internationalisation of Singaporean companies.
Another consideration was the availability of published data on the measures and
levels of the internationalisation of Singaporean companies. An examination of the
annual reports and disclosures of SGX-listed companies showed that the companies did
not provide detailed information relating to their internationalisation strategies and
levels of internationalisation (such as percentages of sales overseas, percentages of
profits derived from foreign-based plants, and how their resources were deployed
internationally). This could be due to commercial confidentiality and protection against
competitors seeking such relevant competitive information. Thus, a quantitative study
based on publicly available information would have been difficult to conduct for
Singaporean companies. There would likely have been difficulty in gathering the
amount and quality of data needed to conduct statistical testing and complete a
meaningful and substantial quantitative research project. Although a comprehensive
55
survey could possibly elicit a valuable set of data, there was concern that the senior
executives would not be ready to provide detailed disclosures about their companies in
a survey. Time availability and willingness to participate are issues that can potentially
limit the effectiveness of a survey and, given the necessity of obtaining responses from
senior executives, this could have led to problems of non-response bias (Whitla, 2003,
Yu and Cooper, 1983).
By comparison, the qualitative approach allows for greater scrutiny of the issues to be
researched (Gummesson, 1991). However, it is noted that without the support of
quantitative validations, the reliability, objectivity and generalisation of the
conclusions could be at risk (Marshall and Rossman, 1989). On balance, a qualitative
approach was chosen for this study, consistent with Zelditch (1966), who maintained
that a two-step criterion for judgement was a rigorous approach for qualitative research.
For this study, the two criteria are that the methods should be efficient for permitting
data to be collected (in terms of the costs, time, access and responsiveness of the
interviewees) and that they should achieve informational adequacy. This means that
the chosen method should lead to an adequate understanding of the topic being
researched. It is generally recognised (Ghoshal, 1987, Vernon, 1981, Grant et al., 1988)
that qualitative methods are likely to be more appropriate for process studies; that is,
studies that examine the outcomes or results following the implementation of certain
measures or strategies. This investigation of the internationalisation of Singaporean
companies falls within the definition of a process study.
The qualitative method is therefore selected as appropriate for the purpose of this study.
One of the advantages of qualitative approach is that it becomes possible to concentrate
on a smaller sample base, compared to a quantitative statistical method (which requires
56
a large database), and to analyse each company in-depth to distil more valuable
insights.
3.2.2. Rationale for a multiple case study approach
Having decided on a qualitative approach, it was then necessary to select the
appropriate method. It was assessed that the most effective approach would be the
multiple case study method. The case study method has the capability to use multiple
data collection means and sources to examine a selected number of cases in a thorough
and in-depth manner (Patton 2002). The use of the case study methodology has been
well documented by Yin (1994). He strongly emphasised the validity and reliability of
the information collected, and the use of ‘replication logic’ for multiple case analysis.
Yin’s methods and procedures are adopted in this research, especially as concerns the
selection of the sample companies, the candidates to be approached and the conduct of
interviews.
A qualitative case study methodology was selected due to its suitability for attaining
the goals of this research. A case study method facilitates a high level of appreciation
of the complex business entity, and allows for the multiple layers of issues to be
considered in a holistic manner (Yin, 2003). Yin commented that a case study has the
capability to inform and illustrate the implications and effects for practice, theory and
policy formulations, which add to the field of knowledge of the research topic. Yin
also considered that case studies are able to generate new beginnings in theory
formulations, or new branches of existing theories. The case study method can also
reveal hidden issues from insiders’ perspectives, which is normally not achievable by
using quantitative means. Earlier studies have been criticised as being unable to reveal
57
human behaviours and cultural perspectives in those internationalisation issues hidden
in the multiple levels of relationships in MNCs (Pike, 1966).
Yin (1994) commented that a case study has the capacity to accommodate a variety of
research techniques to examine contemporary phenomena within real-life contexts, and
to conduct research within defined boundaries related to the selected phenomena.
Patton (2002) described a case study as a useful qualitative method that permits an
inquiry into a chosen subject in great depth, with careful attention to detail, context and
nuance. He considered that the case study method is particularly helpful in aiding
exploration and the discovery of a general pattern of behaviour, which can lead to the
formulation of research theories. This enables rich information to be obtained for the
selected cases through collecting, organising and analysing data in a comprehensive,
systemic and detailed manner. Creswell (2008) added that a case study is an
examination of a bounded system over time, which enables detailed collection of
information from multiple sources in an information rich context. These sources can
include observations, documents, audio-visual materials and public reports.
The defined boundaries concept is appropriate for this study on SGX companies within
the period of 1998 to 2007. The boundaries in this study are defined by: the companies
selected, the theme of internationalisation, the conduct of the study in a single industry
and the research period from 1998 to 2007. These boundaries set the research into a
meaningful and manageable context, with ample avenues for the realisation of deep
and meaningful results.
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3.2.3. Level of studies – company-level and industry-level
Two major issues need to be addressed when using the case study method. The first
issue is the number of levels of the case study, and the second is how many cases to
examine. In relation to the levels of the case study, this research was conducted at two
levels: at the company level and at the industry level. This is similar to the approach of
Pettigrew (1988) in the Warwick study of competitiveness and the strategic change of
companies. Each SGX company is studied initially based on publicly available
information to obtain an understanding of the background, history and
internationalisation strategies of the company during the period 1998 to 2007. As
explained previously, this company-level case study enabled a comprehensive and
holistic understanding of each company.
Subsequently, the analysis and cross-company comparison was conducted at the
second level: within a single industry. The alternative of using multiple industry
comparisons was considered. A multiple industry study might have generated more
extensive results and conclusions, but this was deemed inappropriate for this study
because it would have also widened the research work and scope considerably. The
rationale for choosing a single industry is therefore to confine the boundaries of the
study to a manageable and meaningful level. Thus, a two-level approach (that is, at the
company level and single industry level) was chosen. This was deemed as the most
effective method to gather ample information-rich data for analysis and the drawing of
conclusions.
3.2.4. Research period 1998 to 2007
For this study, a 10-year period was selected because internationalisation is normally a
medium to long-term business strategy. Once a company has adopted a particular
59
internationalisation approach, it usually stays with the strategy and there is a lag of
some years before results emerge. Over time, the company may modify its
internationalisation approach to suit changing internal and external circumstances. In
some cases, the entire internationalisation programme may be aborted due to failure to
secure the desired results, change of shareholders or drastic shifts due to industry or
environmental factors.
The selected research period could also offer some insights into the impact of the crisis
on their internationalisation strategy, as the interviewees could be asked to describe
any internal and external factors (e.g. Asian financial crisis) that affected their
companies’ internationalisation plans during the period from 1998 to 2007.
For the above reasons, a long 10-year review period from 1998 to 2007 was chosen.
This period was deemed appropriate as it is just after the Asian financial crisis in
1996–1997, and before the start of the global financial turmoil originating with the US
financial crisis in 2008. In addition, the selected period is relatively recent, thereby
enabling the effective recall by the executives being interviewed, and increasing the
ease with which collaborative research materials could be obtained. As
internationalisation objectives and strategies can change over time, the selected 10-year
period sets the research boundary to a confined timeframe for this study, as advised by
Patton (2002) and Yin (1994). It has also been noted that internationalisation tends to
be a process, rather than a fixed point phenomenon (Pangarkar, 2008). This is another
reason for collecting data over a number of years, rather than at one fixed time. Many
studies consider several years when comparing multinationality and performance; for
example, Grant et al. (1988) studied UK manufacturing companies from 1972 to 1984,
and Geringer et al. (1989) studied US and European MNCs from 1977 to 1981.
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3.2.5. Saturation on number of cases
On the question of the number of cases to be examined, Glaser and Strauss (1967)
suggested that the number should be sufficient to achieve saturation of information.
Saturation is the point at which adding more cases only generates a marginal increment
in learning, because most of the information has already been recorded from past cases.
In other words, the size of the sample is sufficient when the point of redundancy of
data and information is reached (Lincoln and Guba, 1985). Patton (2002) further noted
that sample selection in qualitative analysis is dependent on the purpose of the study,
what is relevant, what has credibility and what is possible given the available time and
resources. The validity of insights obtainable from a study depends more on the
information richness of the cases selected and the observations and analyses derived,
rather than on the sample size. Kruger (2002) suggested that the researcher begins with
a small number of samples, before expanding gradually until information saturation or
redundancy is reached.
Hewapathirana (2009) found that saturation was achieved at 10 cases in her study on
the internationalisation of small companies in Sri Lanka. Whitla (2003) decided on 25
interviews with senior executives covering three industries, or about seven to eight
cases per industry. Fitzpatrick (2009) attained a saturation level with nine cases in his
research on the human side of value adding in Australia venture capital investments.
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3.3. Developing a three-stage research approach
Having decided on a qualitative multiple case study approach in a single industry for
SGX companies, the next step was to determine the research design. This study covers
the following three phases:
1. A pilot study of SGX companies as an initial test sample to explore certain basic
parameters for the main research, and in particular to test the relevance of the
topic to SGX companies, determine meaningful research questions, find the
appropriate saturation level of cases, and identify the issues relating to
internationalisation that are of keen interests to Singaporean executives.
2. Review data from all SGX companies to decide on the industry for the study
and which companies to approach to participate in the one-to-one in-depth
interviews. The review involves examining internationalisation factors based on
publicly available databases of SGX companies, company annual reports,
announcements, financial results and analyst reports. This phase enabled the
selection of a smaller pool of companies to be approached to participate in the
interviews.
3. Conduct interviews with selected SGX companies to gather information about
the factors affecting their decisions to internationalisation, the
internationalisation strategies they adopted and the outcomes of
internationalisation for these companies.
3.3.1. Phase 1: Pilot study of SGX companies
A pilot study was conducted through interviews with 12 senior executives from SGX-
listed companies. This pilot study enabled a better understanding of the main issues
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and factors concerning the internationalisation of SGX companies. The main
implications of the pilot study results for the current study are as follows:
1. The internationalisation strategy is indeed a major factor in business
development for SGX companies. It is a key concern not only for expansion
outside Singapore’s geographical limitations, but also a critical business
strategy for survival. Internationalisation has an influence on SGX companies,
and SGX companies have to expand internationally for sustainable growth.
2. SGX companies adopt different approaches towards internationalisation, and
each company has its rationale and strategic reasons for the approaches adopted.
3. Singaporean executives and companies are pre-occupied with and focused on
internationalisation. Companies that have grown to the size and scale to be able
to achieve listing on the SGX have to present their international strategy to the
investing public. Without outlining and clearly spelling out their strategies,
public investors and stock analysts will not be able to evaluate the potential and
sustainability of these SGX companies.
4. SGX companies appeared to associate higher levels of multinationality with
better performance. Companies adopted medium- to long-term views of their
internationalisation programmes. Therefore, the selected research period of 10
years (1998 to 2007) is appropriate and meaningful.
5. Among the various industry sectors, it seemed that the manufacturing industry
is one of the sectors most concerned about global expansion and
internationalisation issues. The senior executives in the manufacturing sector
were exposed internationally and had wide global experience.
6. From the 12 interviews conducted, it appeared that saturation of results was
achieved at about the tenth case. Therefore, for the main study, at least 10 to 12
interviews should be conducted.
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The responses from the interviewees in the pilot study were helpful in the formulation
of the key research questions and the drafting of a list of relevant questions to pose in
the interviews in the main research. The report of the abovementioned Phase 1: Pilot
Study is attached as Appendix 3.1. The tentative observations recorded in Phase 1 will
be further substantiated or refuted in the main research stage at Phase 3.
3.3.2. Phase 2: Selection of sector and companies for case study
The second phase of the research was to collect data about the factors affecting
internationalisation, the measures for the level of internationalisation and the measures
of performance outcomes for SGX companies using publicly available databases and
reports. Available sources included the Singapore National Library and the annual
reports and announcements of the listed companies. From the various databases and
information sources, details about the companies’ financial data such as market
capitalisations, annual total revenues, net profits, business strategies and performance
over the 10 years from 1998 to 2007 were collected.
Selection of a single industry for research
The SGX has over 800 listed companies (including companies listed on the Mainboard,
the Catalyst secondary board and Trust companies). It was impractical to approach all
800 companies to participate in the case study research. Therefore, a decision had to be
made on whether to conduct a multiple industry or single industry study. The SGX is
divided into several industry sectors such as manufacturing, banking, transport,
construction, services and others. As discussed earlier, a single industry approach is
better suited for case study, as it allows for the comparison of outcomes arising from
the internationalisation strategies of the SGX companies within a sector. The
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elimination of multiple industries avoids the difficulty of attempting to derive
meaningful comparisons between companies (Dickson and Albaum, 1977, Ketchen et
al., 1997).
According to Yin (2003), one of the major and critical factors in case study
methodology is the case selection. Yin proposed the adoption of numerous criteria and
procedures for the meaningful selection and screening of the final cases. Based on
Yin’s method, it is first necessary to set down the main criteria for the selection of
potential cases from the total population of about 800 companies listed on the SGX.
These criteria should involve an over-arching factor, which Yin termed the ‘unit of
analysis’ (or ‘what is the case?’). In this research, the unit of analysis is
‘internationalisation’. Therefore, the companies were shortlisted based on the
following main criteria:
1. Does the company have an over-arching, clear and deliberate
internationalisation strategy?
2. Was the company listed on the SGX prior to 1998 and still active in 2007?
(This study evaluates the internationalisation of SGX companies between 1998
and 2007).
3. What is the spread of industries? (It is intended that the final selection of
companies be from the same or related industries to provide a more
homogeneous group for analysis and comparison).
4. Is at least one (preferably more) of the selected companies a GLC? The
inclusion of GLCs is preferred as this study also considers the impact of the
Singapore government’s promotion of internationalisation.
5. What is the likelihood of obtaining the consent of management to be
interviewed and to provide assistance on the collection of company information?
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6. Has ‘replication logic’ been used to select the final cases?
Regarding this final criterion, according to Yin (2003), ‘replication logic’ requires that
the selected case demonstrate the occurrence of exemplary outcomes. This has been
cited as a critical criterion in the selection of case study participants (Ginsburg, 1989).
In this study, replication logic required that the company exhibit a strong drive on
internationalisation as a central element of the company’s business strategy. Therefore,
companies included should place a strong emphasis on internationalisation and be
targeting internationalisation outcomes that are measureable against performance
results. The outcomes are measures based on performance following from
internationalisation. Performance can vary between companies, and high performance
was not a prerequisite for participation; it was the company’s commitment to
internationalisation that was critical.
When screening and selection is properly performed, a sample of over 50 cases will
provide an excellent pool for a final shortlist of companies to approach to seek consent
for conducting the case study with their companies.
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Selecting the manufacturing sector
Since the research period is from 1998 to 2007, companies that were listed after 1998
were removed from the selection pool (because they did not provide complete
information for 10 years). As a result, the total number of companies available for
study was reduced from 800 to 168. Based on industry norms adopted by SGX, matrix
analysis was done to divide the companies by size, with large companies classified as
having a market capitalisation of above S$500 million, medium companies as between
S$100 and S$500 million and small companies as below S$100 million.
Table 3.1 : Table of Number of SGX Companies Listed Prior to 1998 by Industry
Sectors
Market Cap
Sector
Large
>S$500m
Medium
S$100m
to S$500m
Small
< S$100m
Sub-Total
Manufacturing 12 17 26 55
Commerce 5 12 15 32
Finance 6 8 1 15
Properties 9 5 1 15
Multi-industries 9 3 2 14
Hotels 3 4 2 9
Services 2 4 3 9
Construction 1 6 1 8
Others 5 5 1 11
Sub-total 52 64 52 168
Table 3.1 shows that the five largest industries were Manufacturing, Commerce,
Finance, Properties and Multi-industries with 55, 32, 15, 15 and 14 companies,
respectively.
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The following criteria were used to select a single industry from among these top five
industry segments:
1. Size (in terms of numbers). Table 3.1 shows that the third to fifth largest sectors
(Finance, Properties and Multi-industries) only have 14 to 15 cases. These
sectors may be unable to provide enough companies with executives willing to
participate. Therefore, only the Manufacturing and Commerce sectors are large
enough to provide the required respondents.
2. Size (in terms of companies’ market values). All the five shortlisted sectors
have ample spread of companies based on their market capitalisation (that is,
between 52 and 64 cases each), thus enabling a meaningful comparison
between companies. The Manufacturing and Commerce sectors have the ample
spread between small, medium and large companies.
3. Relevance to internationalisation. The Manufacturing sector is more relevant to
the subject of internationalisation as compared to the Commerce sector. The
Commerce sector comprises a varied mix of trading houses, distribution
companies and retailers. The Manufacturing sector comprises companies in the
food, oil and gas, electronics, motor, logistics and information technology (IT)
industries. These companies are likely to be involved in internationalisation
activities.
4. Likelihood of participation. As internationalisation is a very relevant business
strategy of the Manufacturing sector, this sector is chosen as the most relevant
for this study.
From the above analysis, the Manufacturing sector was selected as most suitable and as
having the greatest relevance to the topic of internationalisation. Manufacturing is also
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the largest sector and is thus likely to provide the best chance of obtaining a sufficient
number of executives consenting to participate in the research. The Phase 1 pilot study
validated that the manufacturing sector has the most engagement in global expansion
issues. Consequently, the senior executives in the manufacturing sector can be
expected to be more interested in participating in interviews when invited.
Personal letters were addressed to the Chairmen, Chief Executive Officers (CEOs) or
Managing Directors (MDs) of all the 55 companies shortlisted from the Manufacturing
sector of the SGX. To reach out directly to these senior executives, in the event that
their mailboxes were screened and blocked by secretaries and junior executives,
follow-up emails were sent about three weeks later directly to the executives’ email
addresses.
Inviting participation from only the most senior executives within each company was a
deliberate strategy to ensure a consistent and appropriately high level of contact as was
necessary for the study. As internationalisation is normally a top-level strategic policy,
it was expected that the most senior level executives would be the key persons
involved in formulating and driving the internationalisation efforts on an ongoing basis.
It is important for entity-level and industry-level comparisons that the comments and
data collected must be from individuals of a comparable level of seniority. Executives
of similar top-level positions will have the ‘helicopter’ view of internationalisation. A
sample of the Letter of Invitation to executives to participate in this research is given in
Appendix 3.2.
In the first month, about eight positive responses were received. Early rejections to
participate in the interviews were received from half of those approached. With direct
69
appeals to some outstanding cases, and some recommendations from mutual
acquaintances and referrals, 14 senior executives eventually agreed to participate in the
research. Some positive responses were received from executives that participated in
the Phase 1 pilot study stage. Two of the acceptances were from executives of GLCs.
Of the 14 executives interviewed, 10 were in the same executive positions during the
entire or most part of the 10-year period from 1998 to 2007. The remaining four
executives were senior executives in their companies and later rose to the chief or
senior executive positions. The interviews were conducted between September 2010
and December 2010. Four executives participated in both the pilot study and the main
survey. Their participation in both phases has not biased the data or findings of the
main study because the research subject is the same and questions are complementary.
A list of the names of the executives who participated in the interviews and their
companies (encoded to preserve confidentiality) is given in Appendix 3.3.
The pilot interviews were designed to test the validity of the research and the scope of
coverage. They assisted to develop the key research questions. Following from the
pilot study, the main interviews focussed on the key research questions to collect data
that could be used to derive themes and sub-themes of internationalisation employed
by the sample companies.
3.3.3. Phase 3: Multiple case study of selected SGX companies
The previous phase 1 conducted pilot interviews that were designed to test the validity
of the research and the scope of the coverage. It also assisted primarily to develop the
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key research questions. The phase 3 main interviews therefore delved into the key
research questions so as to collect data that could be used to derive themes and sub-
themes of internationalisation employed by the sample companies. This third phase and
main component of this study were the interviews with senior executives of selected
SGX companies and the analysis of the data collected in the interviews.
Multiple case study approach and research protocol
This section discusses the research approaches and protocol for conducting case studies.
Case study research is an essential form of social science inquiry, in which the aim is
to define the research topic broadly rather than narrowly, based on isolated variables.
The case study approach is thus suitable for this broadly defined study on the influence
of internationalisation on the performance of companies. In the process of
internationalisation, several intrinsic or external factors may affect a company’s
performance besides the internationalisation strategy itself.
Regarding the approach adopted, after the screening and selection stage of 55
Manufacturing and Manufacturing-related companies listed on the SGX, the case study
was narrowed to the 14 SGX companies that consented to participate in this research.
Essentially, two methods of data collection were employed:
1. One-to-one in-depth interviews with key executives
An open-ended interview style was adopted. This process is advocated by
Simon and McCall (1985), who suggested that the researcher should be explicit,
and to frame questions that are specific and answerable, objective and relevant
to the interviewee’s interests. The interviewee should be encouraged to express
himself freely. For the interview technique, a blend of the informal
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conversational approach and general interview following a guide was adopted,
as suggested by Yin (1994) and Patton (2002). Where appropriate, spontaneous
and probing follow-up questions were asked, and the interviewees were given
opportunities to reflect and repeat their thoughts and views. The data collection
through case study interviews continued until saturation of data was achieved.
In this research, the multiple case study approach facilitated the attaining of the
desired saturation level. It was noted that from about the tenth to the fourteenth
interview, the saturation of results was evident, and no or limited new data were
being obtained in the latter interviews.
Following receipt of acceptances, interviews were arranged with each of the
executives. For the purpose of privacy and convenience, most interviews were
held in the executive suites of the interviewees’ offices. In some cases, the
interviews were conducted in external locations (for example, hotels) for
mutual convenience. The interviewees were given Consent Forms, which they
signed prior to their interviews (see Appendix 3.4 for a sample of the Consent
Form).
Prior to the interviews, an Interview Guide was prepared. The purpose of the
Interview Guide was to alert the interviewees to the main questions of the
interview.
It was explained to the interviewees that the Interview Guide only served as a
guide. In the covering explanatory letter sent to them prior to each interview,
the executives were informed that they should not be constrained by the
questions in the guide. Rather the guide was only for the purpose of assisting
the flow of their responses. The executives could go outside or beyond the
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questions mentioned in the guide. A copy of the Interview Guide is given in
Appendix 3.5.
Before each interview, the annual reports of the company for 1998 to 2007
were collected and read, to provide the necessary background knowledge
regarding the business and activities of the company during the 10-year period.
This was basic preparation work for the interviews, which were conducted
personally by the researcher (interviewer), so that more relevant and pertinent
questions could be posed to the executive being interviewed.
At the start of the interview, the executive was given an informal briefing on
the purpose of the research and the style of the interviews (informal and
relaxed). At the start, to warm up to the topic, the executives were invited to
give a general discourse of their companies’ background and businesses. It was
noted that all the interviewees were well prepared on the subject and could give
very clear and comprehensive responses to the questions. Some had their
assistants or junior executives at the interviews, while others did the interviews
alone. A few executives prepared and provided written materials to supplement
the points they made during the discussions.
The one-to-one interviews lasted about 60 to 90 minutes each. Permissions
were obtained to tape record the interviews. Notes were also taken to assist the
interviewer to keep track of salient points and main themes during the interview.
At the end of interviews, the executives were thanked and informed that the
researcher might revert to them subsequently for certain clarifications or
elaborations on what they had said. All the interviewees consented readily.
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Transcripts of the recorded interviews were prepared, and any identifying
information was removed from these transcripts.
The transcripts of the interviews total nearly 200 pages. A summary table of the
interview responses is given in Appendix 3.6. The names of the interviewees
and companies have been removed to preserve confidentiality.
2. Document collection, collation and review
A wide array of publicly available documents, reports and publications were
collected for the 14 selected companies. The annual reports for 1998 to 2007
for the 14 companies served as the fundamental resource base for data on the
companies. Hard copies of the 140 annual reports were collected. These
companies also issued quarterly financial reports and made public
announcements, which were available on their websites. These websites and the
documents provided were also reviewed. The review process commenced
before the interviews and continued into the analysis stage of the thesis.
Information on the companies’ businesses, operational plans for the year, and financial
performance could be readily extracted from the annual reports. Of particular relevance
were the Chairman’s statements and CEO’s Operations review given in each annual
report. These sections were closely studied. They provided some reference to the
internationalisation efforts and plans of the companies, such as when they entered into
joint ventures or new foreign investments and the rationale for doing so.
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However, actual data on the level of internationalisation (such as percentage of sales
from domestic and overseas markets, percentage of investments made overseas, and
level of manpower and resources deployed overseas) were not published. Listed
companies do generally not publish these data on internationalisation, as they are not a
disclosure requirement for SGX-listed companies. The non-disclosure could also be for
business confidentiality reasons, as most listed companies seek to avoid providing
more company information than is necessary to satisfy the listing disclosure
requirements or good corporate governance. Hence, the data collected from direct
interviews is a critical primary source of information on the internationalisation
activities and strategies of the companies for this research. Documents and reports
serve as sources to validate and reinforce the interview data collected.
The collated data on the businesses and internationalisation strategies of the SGX
companies are presented in Chapter 4. These data were used to undertake the analysis
and comparative study of the internationalisation of the companies using the research
techniques described in the latter part of this chapter.
These documented sources were triangulated with the interview results to ensure
consistency of the results and to reinforce the findings, as described in Section 3.3.4
below. The multiple sources of information serve to validate one another. This
triangulation technique is used to improve the likelihood of accurate and reliable data.
The validity of the empirical data was checked through cross-reference to the
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descriptive statistics and the various data sources. Comments made by the executives
interviewed were checked against documented records (for example, from the
company’s annual reports and public announcements and disclosures), as the memory
can be subject to challenges and misinterpretations of past events. Ten years is a long
time, and recollections can become vague. Therefore, where necessary and possible,
the validity of the interview data was checked against documented records and
published data. Crosschecks were also made with other parties, such as in the case of
the interview with the senior executive from IES, which was conducted to understand
better the government incentives provided, and how these incentives served to
motivate Singaporean companies to internationalise.
3.3.4. Interactive data analysis
The data collected from the company reports, announcements, publications and the
interviews were analysed using the approach propounded by Miles and Huberman
(1994). The method was described as tracing the relationships among social actions
and practices based on the regularities and sequences that link them. In this approach,
the first step is data collection. Next is the data analysis stage, which consists of three
elements of data reduction: data display, and drawing and verifying findings. These
three elements interact iteratively throughout the data analysis process. The graphical
representation of these four elements is illustrated in Figure 3.1.
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Figure 3.1 : Interactive Data Analysis (Miles and Huberman 1994)
The above diagram shows that data reduction occurred continually throughout the data
analysis process. In the early stage, editing, organising, segmenting and summarising
the data was undertaken. In the middle stage, coding and identifying the themes and
sub-themes, clusters or patterns was completed. In this stage, analytical techniques
based on Nvivo software were used. The final stage included conceptualising and
explaining (Miles and Huberman, 1994, Punch, 2001). The entire process was iterative,
as preliminary conclusions drawn could loop back to suggest the need for further data
collection. With additional new data, the analysis procedure involving data display,
data reduction and verifying and drawing conclusions were repeated.
In the data analysis process described above, the data was checked through
‘triangulation’; that is, the use of data from different sources. For instance, when an
executive described the internationalisation strategy undertaken by his company, the
Data collection Data display
Data reduction
Conclusions: drawing/verifying
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public data was checked for information about actual acquisitions, mergers or
divestments of foreign investments and subsidiaries in the company’s annual reports
and announcements during the stated period. Similarly, the internationalisation strategy
described by the executives was checked against the Chairman’s statements in the
annual reports, wherein the Chairman would describe the company’s strategies and
plans. The same approach was undertaken for performance and results of
internationalisation. The financial results reported in the financial statements were
checked against the qualitative descriptions made by executives during the interviews.
The checking and validation was conducted by examining the companies’ financial
performance as given in the annual reports, as compared to the statements made by the
executives during the interviews with respect to the success of their companies’
internationalisation drives. When these executives described that they had achieved
positive results, such statements were verified against the published financial data on
turnover and profit growth. The researcher noted that there were no instances of
inconsistencies in the data between the documents and interviews.
To provide additional background and contextual information, an interview was
conducted with a senior executive of IES. He gave a clear insight into the role of IES,
how IES assisted Singaporean companies (mainly SMEs) to expand internationally,
and the reasons that some large companies did not find IES promotional activities and
incentives useful. The purpose of this interview was to assist with one key research
question: whether Singaporean companies found the government incentives to
internationalise useful, and what actions IES had taken to promote the
internationalisation of Singaporean companies.
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The above data and information formed the base information for the writing of a case
study for each company. Multiple case comparison techniques (Yin, 2003) were
applied to perform cross comparisons between the investigated companies. Such cross-
case comparisons were used to generate interesting contrasts on the different
internationalisation strategies of the companies and the performance outcomes.
Summary details of the businesses and internationalisation strategies adopted by these
14 companies are given in Sections 4.2.1 to 4.2.14 of Chapter 4. Additional details on
the yearly major developments and financial data (collated from public sources) for
these companies from 1998 to 2007 are given in Appendices 4.1 to 4.14. However, to
provide confidentiality, the names of the companies, their brands and names of related
companies and joint ventures were removed from the descriptions.
3.4. Ethical considerations
A key ethical consideration is that publicly listed companies are sensitive about their
companies’ plans and financial data. Therefore, proper consent was obtained for the
interviews from the selected companies. UWA Ethics Committee’s approval was
obtained before the commencement of the research. Interviewees were assured of
anonymity to encourage detailed responses to interview questions.
The problem of confidential company data was mitigated for data from public reports
as the data were mainly gathered from the public domain. In addition, only summaries
of the collated results will be published, to protect the anonymity of the study
participants.
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3.5. Models of internationalisation
Numerous models have been employed to research the relationships between the levels
of internationalisation and the performance of MNCs, as discussed in Chapter 2. Many
past research models are based on statistical methods using quantitative approaches,
while other studies have employed qualitative methods such as behavioural
relationships and case studies. Internationalisation is a mature research field garnering
extensive activity over five decades. This section describes two models used in past
research to demonstrate the typical models that have been used. These two models
represent possible suitable research frameworks that could be used as the basis for this
study.
3.5.1. Models in prior literature
Osegowisch model
Early studies on internationalisation mostly use quantitative methods based on
statistical techniques to show positive (or otherwise) relationships. Subsequent studies
have tended to use a mix of quantitative and qualitative methods to reinforce research
results. An example of a mixed quantitative and qualitative research approach is that
used by Osegowitsch (2003), who investigated the relationship between
internationalisation and performance in multinational professional engineering
companies. Using a combination of qualitative and quantitative techniques,
Osegowitsch found positive support on the relationship between performance and
internationalisation. For the qualitative research, he used interviews and samples to
gather data. He explained that the main purpose of the qualitative research was to
enhance the research design of the subsequent quantitative study. The results gleaned
from the qualitative interviews and information sources served to define the relevant
survey population and construct the research hypotheses for the quantitative study.
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In his qualitative approach, Osegowitsch employed a generic research model as shown
in Figure 3.2. Subsequently, he devised a structural equation model and employed
hypothesis-testing techniques based on regression analysis.
Figure 3.2 : Osegowitsch’s (2003) Model of Internationalisation and Performance
Quantitative methods employing latent constructs represented by multiple observed
indicators are commonly used in business research. For estimating relationships among
constructs and evaluating the validity of the outcomes, structural equation modelling
(SEM) is often employed to provide researchers with quantifiable results. Osegowitsch
(2003) employed this approach. He tested the co-relationships between 14 variables:
design ratio, private client ratio, value added ratio, size, international experience,
exports, organic growth ratio, multinational entropy, transfer operational staff, transfer
project components, transfer project solutions, net revenue growth, ROA and return on
net revenue. These control variables were tested against two focal variables:
profitability and growth. Osegowitsch (2003) found positive co-relationships between
multinationality and global integration against profitability and growth. He also found
Multinationality
Global integration
Organic growth ratio
Profitability/Growth
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that the profitability effects of internationalisation were enhanced when that strategy
was strongly motivated by the desire of the MNC to take advantage of internal
specialised skills; and that performance was not affected by the origin (HQ as
compared to subsidiaries) of the operational resource that constituted the
internationalisation effort.
Osegowitsch’s study is an example of research that employed a combination of
quantitative and qualitative methods to reinforce and derive deeper understanding of
the impact of internationalisation. The statistical quantitative analysis techniques
required the collection of a sizeable amount of data from a large-scale survey. The
qualitative part using interviews is similar to the case study method chosen for the
current study.
Yip’s framework model
Another research framework that has been used for qualitative research on
globalisation is Yip’s framework (Yip, 1989, Yip, 1992, Yip, 2003), as shown in
Figure 3.3. The model propounded by Yip is one of the reference frameworks for
research to understand and analyse the internationalisation strategy (Stonehouse et al.,
2000). He put forward a multi-dimensional framework that sought to explain the
underlying factors for the internationalisation of MNCs within an industry, and the
MNCs’ strategic business responses to these factors. In his framework, Yip suggested
that the internationalisation process was pushed by a number of underlying conditions
in an industry, leading to adopting international strategies (Yip, 1992). Yip referred to
these forces as global drivers, which differed in intensity by industry. Yip used
dimensions of ‘global drivers’ and ‘global levers’ to examine their relevance and
completeness in explaining the use of global strategies in MNCs.
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Figure 3.3 : Yip’s Globalisation Drivers Model
Yip’s model consists of five components, including two internal components: the
position and resources of the parent company, and the organisation’s ability to
implement a global strategy. Yip considers these two internal factors as having a
moderating effect on the ability of a company to implement internationalisation
programmes. These two components have influence on the global strategy levers.
Yip also identifies two factor components: the industry globalisation drivers and global
strategy levers. Yip’s model suggests that some industries have high potential for use
of internationalisation strategies based on the strength of their global drivers such as
market, cost, government and competitiveness. The industry drivers, together with the
two internal factors, in turn affect the global strategy drivers. The fourth component of
Position and resources of parent company Global strategy levers
Global market
participation Global
products Global location
of activities Global
marketing Global
competitive markets
Benefits/ costs of global strategy
Industry globalisation drivers Market Cost Government Competitive
Organisation’s ability to implement a global strategy
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global strategy levers refer to factors such as global market participation, products,
location of activities, marketing and corporate moves.
A fifth outcome component is benefits/costs of global strategy. This factor suggests
that companies would adopt global strategies for performance-related benefits. The
benefits could relate to economy of scale, lower production cost, focused production,
flexibility, enhanced bargaining power, product quality improvements, customer
preference and competitive advantage. However, at the same time, global strategies
carry risks, drawbacks and costs. These costs might relate to hidden production costs,
higher taxes and duties, unfamiliar regulatory regimes, higher risks, greater marketing
expenses and need for closer management controls.
The five components form an iterative process that Yip called the Globalisation
Drivers Model. Whitla (2003) is an example of a researcher who adopted Yip's
framework for a study in the international hotel, construction and advertising industries.
Using empirical evidence from these three service industries, Whitla (2003) analysed
the power of Yip's framework to help researchers explain the results of the
internationalisation strategies adopted by several MNCs. In-depth case studies were
conducted for companies in the three selected service industries. The research
questions for the case studies were formulated after discussion sessions with industry
panels, form by executives from the selected industries. The main research data were
derived from in-depth interviews with senior executives of UK-based service MNCs.
In total, 46 executives from 21 companies were interviewed. The data gathered were
analysed using QSR NUD*IST (an early version of Nvivo) software. In addition, a
cross-case analysis of the three industries was completed to examine further any
patterns in the internationalisation strategies adopted by MNCs in the service sector.
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The results suggested an interesting observation that MNCs in the international service
sectors would employ internationalisation strategies aimed to improve service quality
and enhance customer preference, but not necessarily to reduce costs.
3.5.2. Developing an alternative model
In this study, whether there was a viable alternative model to Yip’s internationalisation
framework was considered. A clear and simple framework was required to express the
relationships between the factors underlying companies’ internationalisation in a more
easily understandable manner.
Past studies of international business have demonstrated that the internationalisation of
companies is a process in which companies gradually increase their international
involvement within a three-stage framework. The first stage comprises the inherent
internal and external factors relating to resources, business operations and markets that
determine whether a company is ready to venture overseas. The second stage is an
intervening process involving strategies and actions. Finally, in the third stage, certain
outcomes are captured, such as performance results and business impacts. Therefore,
any useful model of the internationalisation of companies must integrate these factors,
processes and outcomes into a simple and easy to understand framework.
In the internationalisation process, for companies to expand and thrive overseas, they
have to develop relationships with external organisations with the potential to assist
them in business development, survival and growth. Relationships within and external
to the company are necessary owing to the vital importance of deploying and moving
resources to maximum effect. Therefore, a focus on relationships is an essential
element in the internationalisation framework to be selected. For this purpose, the
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framework formulated by MacGrath (1964) was chosen as the research model, as it
was developed with a strong bias towards examining relationships. Moreover, this
model, which is shown in Figure 3.4, also matched the need for a framework featuring
a clearer interactive cycle of Antecedents, Processes and Outcomes. The MacGrath
framework is suitable for implementation in conjunction with an in-depth case study
approach.
Figure 3.4 : McGrath General Model
McGrath’s (1964) general model consists of Antecedents, Processes and Outcomes,
and the links that connect them. Link A in Figure 3.3 signals that Antecedents affect
Processes, which in turn affect Outcomes (Link B). Finally, the two-way links C and D
represent the inter-relationship between Outcomes and Antecedents. McGrath’s
General Model is used to examine the organisational framework to structure, analyse
and integrate a small business company and its relationships with external parties.
In this model, Antecedents are the internal, organisational and environmental factors as
starting attributes. Exploiting the inherent attributes of the company leads to Processes;
that is, the formulation of strategies and the implementation of actions. The third
component, Outcomes, typically comprises financial performance results and effects
Outcomes Performance
Business Impacts
Antecedents Internal
Organisational Environment
Processes Strategies Actions
A B
C
D
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on business. Outcomes are expected to have an interactive loop back to Antecedents, at
which point, further changes, adaptations and modifications may be made accordingly
to the various internal and external factors.
Street and Cameron (2007) used the McGrath (1964) General Model to review external
Antecedents (relationships), Processes (strategies) and Outcomes (performance and
impacts) to study the effects of external relationships and business strategies on the
performance of small businesses. For example, research on small business has
suggested that environment factors such as industry (Beecham and Cordey-Hayes,
1998) or geographic location (Buick et al., 1998) have an effect on external
relationships and relationship formation. Therefore, Street and Cameron (2007)
included industry and location as Antecedents that affected external relationships.
3.5.3. Model of Internationalisation adopted for this study
For the purposes of this study, the McGrath General Model was modified and used to
identify possible relationships between factors affecting the internationalisation and
performances of companies. Using Street and Cameron’s approach, combined with an
understanding of the issues relating to internationalisation derived from the preceding
literature review and pilot study, a model of internationalisation was constructed, as
shown in Figure 3.5. Like Street and Cameron’s model, the Internationalisation
Reference Model adopted for this thesis includes Antecedents (internal, organisational
and environmental factors), Processes (strategies and actions) and Outcomes
(performance results and business impacts). Within each of the three blocks
(Antecedents, Processes and Outcomes) more sub-factors (Elements) were added to
explicitly identify the drivers potentially relevant to internationality.
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Figure 3.5 : Internationalisation Reference Model
As shown in Figure 3.5, the Antecedents in the thesis’ Internationalisation Reference
Model (to be called ‘Reference Model’ hereafter) are expected to affect Processes (via
Link A). Processes in turn influence Outcomes (via Link B). A feedback loop flows
from Outcomes to Antecedents via Link C, representing the fact that Outcomes may
cause management to reconsider the Antecedents, with any changes looping back via
Link A and then B to Outcomes. Alternatively, if the company decides that there is no
need to change the Processes (that is, they choose to maintain the current strategies),
there will be a direct return Link D from the Antecedents to further affect Outcomes.
Thus, this model clearly represents the internationalisation cycle of a company as a
continuous loop process. It can be modified or adapted over a period of time due to
Antecedents Internal Resources, Manpower, Finances Organisational Size, Management and Board Involvement, Technologies Environmental Industry status, National economic status, Government Assistance, Environmental issues
Processes Strategies Alliances, Localisation, Portfolio diversification Actions Foreign direct investments, Cost competitiveness
Outcomes Performance ROA, ROE, ROS, Sales Growth, Profitability, Profit margins Business Impacts Learning experience, Local connections, Technological advances, Cost reductions, Options
C
D
A B
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internal, environmental or regulatory factors. The internationalisation outcomes are
constantly measured, monitored and checked, and changes in processes can be made to
derive better results.
The model in Figure 3.5 is used in this study as a description of the internationalisation
process. It identifies many factors relating to Antecedents, Processes and Outcomes
that are important in the internationalisation process for SGX companies. The model is
used in formulating the questions for the Phase 3 interviews. The aim of the questions,
as explained further in Section 3.8, is to test whether the thesis model is useful in
capturing the factors affecting internationalisation and providing an overview of the
internationalisation process of SGX companies. Due to the importance of the model in
creating the framework for this study, the next sections will explain the factors that
have been included in the model and how the questions included in the Phase 3
questionnaire can be linked to each block and factor in the model.
3.6. Factors included in the Reference Model
As shown in the Reference Model depicted in Figure 3.5, the factors relevant to
internationalisation are grouped into three Blocks: Antecedents, Processes and
Outcomes. The factors included within each block have been gleaned from the review
of past research (see Chapter 2) and they comprise the most commonly described and
analysed factors thought to affect MNCs’ internationalisation activities.
3.6.1. Block 1: Antecedents of internationalisation
In the Reference Model, the initial factors that may drive the internationalisation
strategy are identified. These include the availability of internal resources such as
finance and management talent, as well as organisation factors such as the desire of the
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board of directors or the management to expand the company’s size and seek overseas
opportunities. Environmental and regulatory issues must also be considered, as
favourable and conducive government assistance programmes could encourage
companies to make the move into foreign markets.
Thus, Antecedents included the following factors and elements:
1. Internal
Elements: Resources, manpower and finances
2. Organisational
Elements: Size, management and board involvement, and technologies
3. Environmental
Elements: Industry status, national economic status, government assistance and
environmental issues
The nature and details of the various elements in the model are elaborated on during
the analysis stage in Chapter 4. The above factors and elements may not be exhaustive,
but they are likely to include the main factors and elements (that is, the sub-factors)
that can be considered Antecedents to a MNC venturing overseas. It is interesting to
understand the main factors driving SGX companies to venture overseas; for example,
these factors could be internal, organisational and environment.
Take the factor of ‘size’. Does the size of a SGX company affect its
internationalisation plans? Do companies have to attain a certain scale before they have
the internal capability to venture abroad, or do even small companies have to consider
internationalisation early in their life? In response to such questions, the purpose of
grouping the companies into different sizes is to examine whether SGX companies of
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different sizes adopt similar or dissimilar approaches to internationalisation. In addition
to size, other factors such as resources availability; leadership and support from
shareholders and board of directors; and environmental factors are expected to affect
the internationalisation of the sample companies.
In this study, the SGX companies are grouped into three categories generally adopted
by SGX: Small, Medium and Large, according to their market capitalisation of below
S$100 million; between S$100 and S$500 million; and above S$500 million,
respectively. The analysis presented in Chapter 4 explores whether companies of
different sizes have similar internationalisation motives and methods.
3.6.2. Block 2: Processes of internationalisation
The processes involved in internationalisation may reflect the availability of foreign
alliances. A company may be approached by foreign partners to form joint ventures to
enter new promising markets. Conversely, a company may deliberately decide to seek
out good local partners before it ventures into new markets. Some companies may have
portfolio or business diversification motives. Some may use localisation of the
management teams in foreign countries as their core strategy.
Processes thus included the following factors and elements:
1. Strategies
Elements: Alliances, localisation and portfolio diversification
2. Actions
Elements: Foreign direct investments and cost competitiveness
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3.6.3. Block 3: Outcomes of internationalisation
The outcomes of internationalisation may vary between companies. For some
companies, the aim may be to enhance total profits. Other companies may be driven by
survival. For yet others, access to resources or advanced technologies could be the
motivating factor. Cost reduction and economy of scale are other valid drivers of
internationalisation.
Outcomes included the following factors and elements:
1. Performance factors
Elements: ROA, ROS, sales growth, profitability and profit margins
2. Business Impacts
Elements: Learning experience, local connections, technological advances and
options
Studies have shown that performance, such as profitability, can be affected by an
MNC’s international experience (Davidson, 1980, Nachum and Rolle, 1999, Terpstra
and Yu, 1988). MNCs with a long history and large percentage of overseas operations
would have institutionalised their international experience. They would have
established strong market knowledge, local connections and deep understanding of
local regulations. More importantly, they may have localised the management team,
and learnt how to handle cross-cultural issues. Their ‘foreignness’ could be lower than
that of a new entrant MNC, thus providing competitive advantages (Zaheer, 1995,
Zaheer and Mosakowski, 1997).
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3.7. Internationalisation measures
There are many financial measures that can be used to gauge a company’s performance.
One common measure is the average annual increase in net revenue. Net growth rate
gives an indication of the expansion rate of the business group following its
internationalisation measures. However, one difficulty is to ascertain the degree that
growth can be credited to a higher level of internationalisation, as opposed to other
factors such as normal market or industry growth and business expansion due to other
external factors. One method to countercheck is to compare the company’s growth rate
against those of its competitors and the industry average for the same period. Growth
of exports is also a good indicator, but as with degree of growth, it is not easy to
ascertain whether the growth is derived from the company’s internationalisation efforts,
or from higher revenues from existing and new markets due to sales programmes alone.
Two commonly applied profitability measures are ROS and ROA. These are widely
accepted industry benchmarks and comparatives are readily available. ROS is the most
used profitability ratio in strategic management reviews. It gives an indication of a
company’s operational results and provides insight into issues such as cost control
(Blaine, 1994). These views were shared by Hofer (1983) and Venkatraman and
Ramanujam (1986), who used this ROS ratio to measure performance. ROA is another
well-accepted financial profitability ratio. It is extensively used in strategic
management reports. ROA reflects the company’s efficiency in the utilisation of its
total assets to generate profits. However, for cross-entity comparison of ROA, care
should be taken to ensure that factors such as depreciation policy and asset revaluations
are taken into account.
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Studies have shown that performance, such as profitability, can be affected by an
MNC’s international experience (Davidson, 1980, Nachum and Rolle, 1999, Terpstra
and Yu, 1988). MNCs with a long history and large percentage of overseas operations
would have garnered and institutionalised their international experience. They would
have established strong market knowledge, local connections and a good understanding
of local regulations. More importantly, they may have localised the management team
and learnt how to handle cross-cultural issues. The result would be to lower their
foreignness as compared to a new entrant MNC (Zaheer, 1995, Zaheer and
Mosakowski, 1997).
3.7.1. Measures on the level of internationalisation
An analysis of past research studies enabled conclusions to be drawn on the pertinent
quantitative measures of the level of internationalisation and the performance measures
for internationalisation.
As internationalisation is a concept, there is a need to define and quantify a company’s
level of internationalisation; that is, the DOI. Each company is organised differently
and has its own unique structure. The appropriate measures to assess the level of
internationalisation of a company in the service sector would be very different from the
measures used for companies in the manufacturing sector (Johansson and Yip, 1994).
The main parameters used to define DOI, based on the most commonly cited measures
to assess the level of internationalisation, are:
i. Percentage of turnover/sales derived from overseas
ii. Percentage of operations (number of offices and factories) based overseas
iii. Percentage of foreign direct investments overseas
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iv. Percentage headcount of manpower based overseas
3.8. Key research questions
This section describes the research questions of the thesis and links them to the
Reference Model. These research questions have been devised based on the literature
review in Chapter 2, and they have been structured in three blocks (Antecedents,
Processes and Outcomes) to match the research framework as developed from the
Reference Model. The questions to be addressed in the interviews are outlined below
and are also listed in the Interview Guide in Appendix 3.5.
3.8.1. Questions relating to antecedents
What are the main imperatives for internationalisation of Singaporean companies?
SGX companies were asked: What are the major imperatives or motivations for their
companies to embark on this internationalisation exercise during the ten years period
between 1998 and 2007?
This question was framed to discover answers to the following questions. What are the
main driving forces that motivate SGX companies to internationalise? What are the
competitive pressures that drive them to venture overseas? Multinational expansion
can enable corporations to increase output, and therefore cut unit production cost
(Ghoshal, 1987, Hout et al., 1982). The resultant spreading of costs and division of
labour allows companies to become more competitive in the international arena. Was
this a motivating factor for companies?
Is the size of the Singaporean company an important consideration in its decision to
internationalise? Related to size is the issue of economy of scale. Is economy of scale a
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major factor driving internationalisation? Is there a generally accepted size (in terms of
total revenue or sales) at which a company achieves the economy of scale necessary
for it to compete in the international market?
3.8.2. Questions relating to processes
How are Singaporean companies structured for internationalisation?
The next key question related to how the SGX companies had structured their
internationalisation plans. Were they deliberate plans? Were the plans developed in-
house, or were external consultants used?
Answers were also sought to the following questions: Who initiated the
internationalisation efforts? Who were the main drivers or leaders of the company’s
internationalisation plan? Was the board of directors consulted, and how were top and
senior management involved? During the 10-year period, were the plans regularly
updated or revised?
In addition, it was deemed interesting to understand which functions were centralised
and which were decentralised. As evidenced from the literature review of MNCs,
finance, technology and funding are centralised, whereas production control, sales and
marketing, local recruitment and human resources (HR) are decentralised.
What are the main factors or drivers for internationalisation?
The SGX companies were also asked to describe the main themes of their
internationalisation plans over the period from 1998 to 2007. What were the main
factors that drove their companies to internationalise? Are size, bulk and scale critical
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factors for competitiveness and survival? What processes did the SGX companies
adopt? How were their boards and top management involved in the processes?
Do Singapore government incentives and promotions influence the internationalisation
of Singaporean companies?
Few countries around the world or in the Asian region actively encourage their local
companies to venture overseas. There is a general concern that relocating factories and
operations would result in a loss of employment in the domestic economy. The
Singapore government’s encouragement of companies to venture abroad through
organisational and financial incentives thus runs counter to conventional practice.
However, this policy is in place for important reasons, relating to Singapore’s unique
characteristics, as discussed in Chapter 2. Briefly, these reasons include the saturation
of the manufacturing sector, the full employment situation in Singapore and the
government’s desire to relocate low-end production overseas, and to attract high value-
added MNCs to set up in Singapore. It is therefore interesting to know whether the
government initiatives for local companies to venture abroad are having an impact.
An important question thus becomes: Do government incentives and promotional
efforts influence Singaporean companies’ plans to internationalise?
3.8.3. Questions relating to outcomes
What do Singaporean companies use as the main measures to gauge the outcomes of
internationalisation?
SGX companies typically do not provide detailed information in public sources about
the major measures they use to gauge their yearly level of internationalisation. As
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reported in Section 3.7, the typical measures of level of internationalisation are
percentage of sales derived from foreign markets and percentage of the number of staff
employed in foreign domains.
Thus, a further key question is: What major measures Singaporean companies use to
evaluate the success of the outcomes of their internationalisation activities?
What are the outcomes of internationalisation?
One important question is whether Singaporean companies’ performance improves
with internationalisation. As discussed in Chapter 2, previous findings have been
mixed on this issue. Therefore, it is useful to ask: Do Singaporean companies
internationalise to enable them to achieve better performance and to safeguard against
the risk of failure?
Further, do SGX companies that are more internationalised have higher profitability?
Do more internationalised companies enjoy faster and more sustained growth? A
related question to pose would be: What are the main factors and outcomes used by the
company to measure the results of internationalisation?
Were there internal and external factors that affected internationalisation programmes
during the period from 1998 to 2007?
As this study covers a period of 10 years, the internal and/or external factors causing a
company to modify its internationalisation programme or change its strategy
completely can be known. Hence, the question is posed: During the period from 1998
to 2007, could managers recall any internal or external factors or events that affected
negatively or positively their companies’ internationalisation programmes?
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How do the Singaporean companies rate their internationalisation efforts?
Another relevant question is: How do SGX companies rate their degree of success
arising from their internationalisation exercise? To gather some reference points, the
SGX companies could be asked: Based on a scale of 1 to 10, how would you rate your
company’s level of internationalisation for 1998, 2002 and 2007. The success of the
companies’ internationalisation efforts could be rated in the same way.
What are the future directions for internationalisation?
As internationalisation is a long term process and to conclude the interviews, the senior
executives could be asked about the future directions of their companies in terms of
internationalisation?
3.9. Data analysis procedures
As outlined earlier in this chapter, two main sets of research data were collected for
this study; that is, the interview data, and the data gathered from the companies’
published annual reports, announcements and public documents. This data was
analysed using the Internationalisation Research Framework developed from the
Reference Model, as described in Sections 3.5.2, 3.5.3 and 3.6 of this Chapter. The
data analysis was conducted in two stages, with the first stage using the data from the
interview results and the second stage using the other gathered data.
For the first stage, Nvivo software was used for the development of themes and sub-
themes relating to the internationalisation of the companies. The second stage analysed
the financial, operational and strategic information obtained from the published reports,
together with the themes and sub-themes derived from stage one, to establish
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propositions on the relationship between the internationalisation and performance of
the SGX companies. The methodology employed to establish the propositions is
referred to: by Glaser (1978) as ‘theoretical codes’, or by Strauss and Corbin (1990,
1998) as ‘axial codes’. To establish axial codes, Cruciform charts are used. An
explanation of the Nvivo analysis and axial coding is given in the following sub-
sections.
3.9.1. Analysis of interview data using NVIVO
In qualitative research, there is an expected gap between the qualitative data collected
and the conclusions to be derived (Eisenhardt, 1989). It is noted by Miles and
Huberman (1984) that it is difficult for a researcher to follow methodically; various
documents covering several hundreds of pages of field notes, interviews, reports and
quotations. For the study, verbatim notes of nearly 200 pages were recorded for the
interviews. Without the use of established coding techniques, there is a risk that the
researcher could reach biased, premature or even false conclusions. The researcher
could be influenced by vivid or forceful responses (Nisbett and Ross, 1980), or by
prominent interviewees whose views might not be representative (Miles and Huberman,
1994).
As the primary source data for the study are the interview transcripts, an efficient
analysis method is to use the Nvivo software programme. This programme is one of
the most widely used and well-regarded software packages for the analysis of
qualitative data, and is well accepted for academic research such as case studies.
The application of Nvivo begins by identifying the major themes for each interview.
Within each theme (called a node), sub-themes then emerge (called baby nodes). The
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process is repeated for each interview until tree-nodes are formed, with the frequency
of reference to each theme and sub-theme indicated. This technique aims to remove
subjectivity by analysis and provide objective, reliable and quantifiable data coding.
Nvivo also allows for the extraction of meaningful and representative quotations for
use in the case studies.
The Nvivo software assisted the analysis of within-entity and cross-entity data. For the
within-entity analysis, the themes and sub-themes that emerged for each company were
noted. Each company was evaluated with regard to the executives’ responses to the
various research questions detailed in Section 3.8 above. An understanding of each
company was important before cross-entity comparisons could be made.
Next, a within-industry analysis was undertaken. The cross-case analysis of the SGX
companies in the manufacturing industry enabled differences as well as similarities in
the themes and sub-themes between cases to be observed and explained. This industry-
level analysis provided a rich and interesting array of results. Research findings and
conclusions were then made from the data.
In an attempt to quantify these themes and sub-themes, the number of occasions on
which the themes and sub-themes were quoted was recorded. A case study research
method has the capability to adopt a variety of data analysis tools to quantify the data,
depending on the nature and purpose of the research (Creswell, 2008, Denzin and
Lincoln, 2005, Patton, 2002). The frequency of occurrences generated quantifiable data
to demonstrate the strength of the themes and sub-themes. Hewapathirana used the 6-
point Likert scale to express strength in her study, with 0 assigned to those themes
stated with less frequently, and 6 assigned to those themes stated with a high level of
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frequently. The themes and sub-themes with the highest scores were selected for the
final stage of review. Whitla in comparison assigned numerical scores ranging from 0
to 5, which he called ‘Strength in Industry’ scores. A score of 0 meant that the ‘driver’
or ‘sub-driver’ would have no impact on the use of such drivers in the industry
examined. Scores of 1, 2, 3 and 4 indicated ‘Strength in industry’ of very weak, weak,
moderate, and strong, respectively. A top score of 5 indicated that the ‘driver’ had a
strong impact of its use in the industry.
For this research, it was decided that four broad categories of ‘strength of industry’
would be sufficient to provide meaningful results to be garnered from this study.
Therefore, the comparative terminology used for the four categories of ‘strength of
industry’ is ‘very strong’, ‘strong’, ‘moderate’ and ‘weak’. The themes were classified
under these four bands or categories according to the frequency of the themes being
cited by the 14 interviewees. Grouping the frequency of occurrences into four quartiles
created the four bands. Themes and sub-themes with above 10 citations were rated
‘very strong’, those with 6 to 9 citations were rated ‘strong’, those with 3 to 5 citations
were rated ‘moderate’, and those with only 1 to 2 citations were rated ‘weak’. Analysis
and discussion on the themes and sub-themes of internationalisation identified is
undertaken in Chapter 4.
A sample table of the representation of the themes and sub-themes and their relative
Strengths in industry is shown in Table 3.2 below.
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Table 3.2 : Nvivo Analysis—Sample Table
Themes/Sub-
themes
@
Levels 1/2/3/4
Frequencies
Very
strong
Strong Moderate Weak
>10 6 - 9 3 – 5 <2
Level 1:
Antecedent
Level 2:
Internal
Level 3:
Business strategy
11
Level 4:
a. Economy of
scale
b. Challenges
c. Investment
approaches
6
3
2
Table 3.2 is a sample table constructed using the main theme of Antecedent at Level 1
in the Reference Model. Below Antecedent are the themes Internal at Level 2 and
Business Strategy at Level 3. From this, the sub-themes that emerged at Level 4 are (a)
Economy of scale, (b) Challenges and (c) Investment approaches.
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The frequency of citations of the various themes and sub-themes listed were
categorised into their relative Strengths in industry under Very strong, Strong,
Moderate and Weak.
3.9.2. Data analysis using axial coding and Cruciform charts
The objective of this second stage of data analysis was to validate the propositions
regarding the relationship between internationalisation and performance emerging
from the interview data. The analysis served to connect the themes and sub-themes that
emerged at the Nvivo stage to data obtained on performance, such as revenue and
profit growth, from public documents.
Glaser (1978) described axial coding as looking for causes, contexts, contingencies,
conditions, consequences and co-variances (the six ‘Cs’) around a focal theme or sub-
theme. Strauss and Corbin (1990, 1998) suggested that looking for causes and
consequences should commence after the early phases of an analysis. The purpose was
to develop relationships between the substantial themes and sub-themes, and to search
for an explanation or answer a research question.
Cruciform charts were used to plot potential relationships between themes and
outcomes. Cruciform charts position data within two axes, so that relationships might
be evident from the points on the charts. Thus, the ratings results (Very strong, Strong,
Moderate, Weak) were presented for two themes in each chart. For example, the
plotting of the ratings versus revenue or profits would enable the detection of any
correlations or directional linkages. The aim was to identify patterns, trends, clusters or
outliners in the cases studied.
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It is noted that axial coding is not a quantitative methodology to establish relationship
in an exact manner. Thus, the trends displayed diagrammatically of correlations or
causal directions display general relationships only. They do not present precise
statistical associations. This is consistent with the case study research approach, which
does not claim to provide analysis based on rigorous statistical sampling. The charts
are a research tool for demonstrating a replication logic within which the
meaningfulness of any perceived trend, linkage or causal direction can be observed as
a basis for deducing propositions for case study analysis. A sample Cruciform chart
showing the relationship between revenue growth and level of internationalisation is
given in Figure 3.6 below.
Figure 3.6 : Sample Cruciform Chart of Revenue Growth Versus Level of
Internationalisation
Observing the patterns of the chart above enables discussion of the relationships of the
variables.
Company A Company B
Company C
Company D
Company E
Company F
Company G
Company H
Company I
Company J
Company K
Company L Company M
Company N
0
1
2
3
4
5
6
7
8
9
10
(50) - 50 100 150 200 250 300 350 400 450 500 550 600 650 700
Level of Internationalisation
Revenue Growth
Cruciform Chart - Revenue Growth vs. Level of Internationalisation Achieved
Company A Company B Company C Company D Company E Company F Company GCompany H Company I Company J Company K Company L Company M Company N
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3.10. Conclusion
This chapter described this study’s research design and methodology. It explained the
rationale, objectives and benefits of using the qualitative multiple case study method.
A central aspect of the methodology is the internationalisation research model that was
developed and used to guide the formulation of the research design. Key research
questions were also developed, and the data gathering techniques were described. The
use of Nvivo software was explained, together with the development of the themes and
sub-themes used to analyse the interview data. Finally, axial coding analysis, used to
establish propositions relating to relationships between internationalisation and
performance, was described.
The conclusion of this chapter is that ample, valid and useful data were collected from
the interviews and publicly available company data. These data formed a meaningful
pool of data for evaluation of the internationalisation of Singaporean companies. The
next chapter, Chapter 4, describes the results of the main research analysis.
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CHAPTER 4. ANALYSIS OF THE 14 SELECTED SGX COMPANIES
4.1. Introduction
The previous chapter described the research design and methodology. This chapter
presents the research analysis, which is the main focus of this study. The first part of
the chapter gives a background on the businesses and the internationalisation strategies
for the period from 1998 to 2007 for each of the 14 companies that participated in the
research. The descriptions were compiled based mainly on publicly available data
collected from the companies’ annual reports over the period 1998 to 2007. (Specific
document references are not provided in the Bibliography to protect the confidentiality
of the companies).
The second part of the chapter describes the main themes and sub-themes derived from
the interview data, along with their relative strengths. The main method of analysis
uses Nvivo9 software, contributing to a detailed analysis of the individual and
comparative internationalisation strategies of the sample companies. The analysis is
undertaken based on the Internationalisation Reference Model described in Chapter 3.
The themes and sub-themes that emerged are grouped into clusters comprising
Antecedents, Processes and Outcomes in accordance with the Reference Model
framework. Preliminary conclusions are made from the analysis of the data. Co-axial
coding using Cruciform charts was done to derive any co-relationships between
selected main themes. Findings on the key research questions were obtained following
the analysis of the data.
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4.2. Businesses and internationalisation strategies of participating SGX companies
This section gives a brief summary of the businesses and internationalisation strategies
of the 14 participating companies for the study period 1998 to 2007. The companies
are codenamed to provide confidentiality. Where specific brands, persons and
companies are mentioned, these details are also codenamed. The descriptions of their
respective internationalisation strategies provide a concise preview of these companies.
The information enables a better understanding of the companies, and assists greatly in
the analysis process in the latter part of this chapter.
The information on the companies was primarily obtained from their annual reports
from 1998 to 2007. For supplementary information, or to seek further clarity on some
investments or divestments made by the companies, the disclosures and
announcements made to the SGX by these companies (which are available on the
companies’ websites) were also examined. The annual reports of these SGX companies
typically contained the Chairman’s statements and CEO’s Operations reviews. Reading
these sections sequentially for the 10 years enabled the researcher to form an
understanding of the flow of the business plans and operations, and the expansion of
the companies internationally. This information served to provide an overview of the
internationalisation strategies of these companies. The briefs prepared on these
companies provide the basic background information on the major businesses,
developments and changes in business scope. This was supplemented with additional
information derived from the interview data.
These 14 participating companies are manufacturers and producers of food, IT, marine,
industrial and other products. A few companies provide manufacturing supporting
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services to local and international manufacturers in businesses such as logistics and
machinery. A summary of the 14 companies is given in Table 4.1 below.
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Table 4.1 : Summary Table of the 14 Participating SGX Companies
Company Industry type Country of
origin
Changes in the main
industry segment
Internationalisation
strategy
A Food; primary food
production Singapore No change
Regional
expansion
B Food and beverage
manufacturing Singapore No change Born global
C Alcoholic beverage
manufacturing Singapore No change
Regional
expansion
D Offshore and marine Singapore No change Regional
expansion
E Electronics; limestone
processing Singapore
Dry cargo container
manufacturing and
motorcycle assembly
Electronics and
limestone processing
Mergers and
acquisitions
F Heavy machinery
rental and sales Singapore No change
Regional
expansion
G
Automotive
electronics and
acoustics; battery
manufacturing
Hong Kong
Automotive electronics
and acoustics
Battery manufacturing
Mergers and
acquisitions
H Property development Singapore Information technology
Property development
Regional
expansion
I Building materials
manufacturing Singapore No change Venture capital
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Company Industry type Country of
origin
Changes in the main
industry segment
Internationalisation
strategy
J Information
technology products Singapore No change
Mergers and
acquisitions
K Integrated logistics
solutions Singapore No change
Regional
expansion
L Integrated logistics
solutions Singapore No change
Regional
expansion
M
Investment;
information
technology; technical
services; project
management; food
Singapore No change Regional
expansion
N
Technology and
manufacturing;
automotive
distribution; property
Singapore No change Venture capital
The following sections, 4.2.1 to 4.2.14, give brief descriptions of the main businesses
and internationalisation strategies of the 14 companies. Further information relating to
the summary of the financial performance and the year-by-year developments of these
companies for the period 1998 to 2007 is provided in Appendices 4.1 to 4.14.
4.2.1. Company A: A food and primary production manufacturer
Main businesses
Company A (codenamed ‘CA’) is a multi-industry food manufacturer with core
business in bakery, primary production, food manufacturing, trading and logistics.
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CA’s bakery operations are located in Singapore, Malaysia, Philippines and Australia
and the products are marketed under various brands. Besides operating five plants in
Malaysia, with a combined annual production capacity of 770 million loaves, CA also
runs a premium sandwich bakery in Singapore and a plant in the Philippines.
CA is involved with primary production through its wholly owned Australian
subsidiary, and another 80 per cent owned Australian subsidiary. CA has a fully
integrated meat production operation based in Australia that is involved with the entire
value chain of meat production from grain growing to meat distribution. Under the
food-manufacturing segment, CA’s associate company trades raw milk and
manufactures dairy products. CA’s trading and logistics business owns two companies,
which run the wholesale food distribution and cold store respectively. Other businesses
include the dairy production facility and another facility that produces apple juice
concentrates for export.
General description of internationalisation strategy
CA’s internationalisation was a necessary step because its food business was limited
by the small population size of Singapore and the highly perishable nature of its main
food products. In 1998, CA was highly dependent on the business in Singapore to drive
growth, as the turnover in Singapore compared to in Malaysia was 73 per cent to 22
per cent, respectively. As the company realised that a small country like Singapore
would limit the scope of its business, it looked towards expanding in neighbouring
countries in which CA already had a foothold.
Initially, CA did not expand by setting up new plants in countries in which it had
previously had no presence. In Malaysia and the Philippines, where it already had
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established operations, CA enlarged the scale of its operations. After expanding in
Malaysia and the Philippines, the company became more confident and moved on to
Australia, and subsequently to China. This was motivated by the company’s aim to
spread its market base to more populace countries. Moreover, Australia and China
represent two very important food manufacturing countries, and this is where much of
CA’s raw materials are produced.
The company’s internationalisation plan was all internally formulated and CA did not
formalise any plans or set any specific targets for its internationalisation programme.
CA monitored the progress of the expansion and adjusted its plans accordingly. If a
particular foreign operation was doing well, CA spent more resources expanding its
business in that country.
Besides organic growth, CA considered investing in new business opportunities,
provided they fell within the food category. From time to time, CA would also look for
new opportunities for investment by acquiring external businesses. For CA,
government plans like tax incentives and promotional efforts were not instrumental in
persuading it to expand to other countries in the region. CA was internationalising out
of necessity. However, the company did have limits in terms of its international growth
plans. CA was unlikely to venture too far from Asia to develop new business due more
to a lack of resources than any dislike of unfamiliarity.
4.2.2. Company B: A global food, beverage and frozen products manufacturer
Main businesses
Company B (codenamed ‘CB’) is a global food company that manufactures and
markets instant beverage products, frozen convenience food, confectionery and snack
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foods. CB exports its products to over 60 countries, most notably Russia, Ukraine,
Kazakhstan, China, Mongolia and the US.
CB’s products include a wide variety of beverages including regular and flavoured
coffee mixes, cappuccinos, chocolate drinks, instant breakfast cereal and tea-based
products. Besides these beverages, CB also markets snack foods such as potato crisps,
confectionery and frozen convenience food. CB’s core product is an instant coffee
beverage, which is marketed under various brands. Its best-selling brand is recognised
as a leading instant coffee brand in several key markets including Russia, Ukraine and
Kazakhstan. In addition, CB also created a range of easy-to-prepare tea in various
refreshing flavours such as peach, apple, lemon and original milk. Other beverages in
CB’s line of products include hot chocolate and breakfast cereal beverages.
In the frozen food business, the food product range includes frozen finger food and
confectionery. These frozen convenience food products are marketed under certain
brand names. This selection comprises delicacies like tail-on shrimp dumplings, crispy
seafood deli, butterfly seafood wantons, spring rolls, curry puffs and samosas. CB’s
snack food business was launched in 2003 under a brand name that comprises potato
crisps, apple chips and rice crackers. Another range comprises seafood snacks such as
dried calamari, dried shrimp and dried trevally.
Other businesses include confectionery such as coffee candies and butterscotch candies,
under brands introduced in 2000 and 2001, respectively. A second line of candy
products was launched in 2003. The range comprises chewy candies in coffee,
butterscotch, creamy and fruity flavours, as well as sugar-free strips in mint,
peppermint and strawberry mint tastes.
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General description of internationalisation strategy
CB realised that the Singapore market is limited by that country’s small size and
population base. To overcome this limitation, CB focused on directly expanding into
large emerging markets by exporting and distributing its products there, while ignoring
the development of a home base in Singapore. This company is a case of a ‘born global’
company.
After the Iron Curtain went down in Russia and the markets opened up, more goods
were flowing into Russia and the Commonwealth of Independent States (CIS)
countries. All these markets were virtually new because they had been closed for many
years under the Soviet Union. CB saw the opportunities that these markets presented in
terms of demand for goods and services and decided to expand straight into Moscow.
CB expanded into Moscow from 1991 to 1994, shortly after the Cold War ended in
1989. Using Moscow as a base, the company gained access to CIS countries like
Kazakhstan, Uzbekistan and Tajikistan.
Initially, CB faced many barriers in terms of language, regulations, customs, laws and
tariffs; but it also saw an opportunity despite these barriers. The company took these
barriers positively, considering them as helpful in filtering out competitors hoping to
enter the same market. CB also placed emphasis on its status as the first mover in the
market, to make a greater impression on its customers and reduce competitive
pressures.
CB needed many frontline staff that shared the same passion and sense of urgency to
bring these new markets to the company. Although the three founding directors
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initiated this new strategy, CB needed a proper structure to execute its plan, as well as
dynamic people willing to be stationed abroad. The staff had to be committed to
ensuring that the business would continue to be viable in those markets. CB hired
many foreigners who were willing to entrench themselves in foreign locations, which
enabled CB to integrate into local conditions. CB often selected staff to be the country
managers who were not necessarily Singaporean. These people had to be willing to
make sacrifices, live in difficult conditions and survive hardships.
Another factor that was crucial to CB’s internationalisation plans was the need for a
clear objective from the beginning. These were geared towards meeting the two main
aims that motivated the company to expand abroad: sales and profitability. To achieve
this, CB emphasised the entrenchment of the company in the local markets and the
seizure of sizeable market shares. CB also had an annual budget to guide its frontline
staff on the amount of sales that they were to achieve, and the expenses that the
company expected to incur in a year.
CB considered that government incentives encouraging companies to expand overseas
did not affect its plans for internationalisation. The company held that, if a company
needs to internationalise for the survival of the company or its profitability,
government incentives play a minor role in the company’s decision to expand. In CB’s
view, companies cannot hope for the government to lead them overseas; they
themselves must be motivated and understand the foreign markets. CB chose not to
participate in IES’s overseas missions citing that such trips tended to cause
Singaporean companies participating in the mission to compete against each other for
the same customers.
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4.2.3. Company C: A major alcoholic beverages producer
Main businesses
Company C (codenamed ‘CC’) is a key player in the alcoholic beverages industry. CC
was established in 1931 as a joint venture between a local company and a foreign
alcoholic beverage company. The company went on to open its first factory in
Singapore and launched its award-winning brand a year later.
CC took its business beyond Singapore and added new brands to its portfolio of brews.
CC was renamed in 1990. By 2007, CC operated an extensive global marketing
network spreading across 60 countries, and supported by at least 28 plants in 13
countries including Singapore, Cambodia, China, Indonesia, Laos, Malaysia, Mongolia,
New Caledonia, New Zealand, Papua New Guinea, Sri Lanka, Thailand and Vietnam.
CC has a diverse portfolio of more than 40 brands and brand variants. Its main brand is
brewed in 10 countries and is offered in 60 markets worldwide. The group also
represents a foreign brand in nine markets; namely Singapore, China, Indonesia, Laos,
Malaysia, New Caledonia, New Zealand, Thailand and Vietnam. Together with its
regional brand offerings, CC also offers local brands in Cambodia, Papua New
Guinea, New Zealand and Vietnam. CC’s wholly owned subsidiary is the global
distributor of its brands and is responsible for developing new export markets.
General description of internationalisation strategy
CC’s internationalisation was a very deliberate strategic move to diversify away from
Singapore because this main market of CC had a very small consumer base.
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Singapore’s small population base was a disadvantage to the company, to the extent
that even if the consumption of its products in Singapore doubled, the effects on CC’s
sales figures would not be substantial. Further, CC held the view that the Free Trade
Agreements pursued by the Singapore government would eventually bring
significantly more competitors into the Singapore market, severely hampering its
ability to depend on that market.
Due to its need to diversify its revenue streams away from Singapore, CC built plants
in foreign countries, to ensure its long-term involvement in those markets. CC could
not rely solely on exporting its products to the other markets for three reasons. First,
the import duties levied on imports would take away the attractiveness of selling
abroad. Second, the freshness of the products would be compromised if transported
over long distances. Third, by being able to recycle the glass bottles used for the
beverages, CC could reap the economy of scale.
Initially, CC had two brands of alcoholic beverages. Before embarking on its
internationalisation strategy, the company surveyed for the better brand to
internationalise. Market research found one brand to be more suitable. Next, CC
surveyed on this brand’s quality and found that it was consistently good. With
additional technical expertise from a foreign joint venture partner, the company
worked to ensure the quality of that brand.
Having chosen the brand to promote and ensuring its consistent quality, CC selected
the countries for expansion. CC’s strategy led them to choose countries in which there
were no strong competitors already in the market. Consequently, CC expanded into
Vietnam, Cambodia and Myanmar. CC avoided countries like America, Australia and
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Japan where there were established brands. After selecting the countries for expansion,
CC first exported to one foreign country and then set up sales offices in other locations.
The company refrained from building a plant in any country from the beginning to
avoid a situation in which the fixed investment would prevent them from pulling out of
the country if the plan failed to work. CC increased its advertising and invested in a
plant in a foreign country only once the brand started to attract a following.
During its internationalisation push, the manpower requirement was a key concern. CC
overcame this problem by borrowing technical and commercial expertise from its
foreign joint venture partner. CC trained local staff subsequently to take over from the
joint venture partner staff. Another important concern that CC executives needed to
address was the political and country risks that existed in many of CC’s target
expansion markets. However, CC was able to convince its joint venture partner that
these were calculated risks since it knew this region very well.
From 1990 to 1997, CC went through the first phase of internationalisation, entering
into the consolidation phase from 1998 to 2000. During consolidation, CC adopted a
strategy of focus on core products. The company divested non-core businesses
including a winery, retail shops and motels. Although the winery and beverages
businesses had similarities, the wine business was not one CC knew well, so they sold
it to focus on core products. Besides divesting non-core businesses, another objective
during the consolidation phase was increasing the company’s equity stake in the
businesses that it held. The second phase of internationalisation began in 2001, when
the company ventured into new countries, and grew within countries in which it
already had a presence.
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After establishing an initial foothold in a market, intra-market growth contributed a key
proportion of the growth of CC’s revenue. CC grew within its existing markets by
expanding geographically across a country and increasing its equity stakes in those
subsidiaries. Three main reasons explain the success of CC’s internationalisation. First,
CC was very clear in what it wanted to achieve, and that translated into a focused
strategy. Second, CC was very passionate about developing its main product into a
global brand. Third, CC had the full support of its foreign joint venture partner, its
chairman and the board of directors.
The company put in place certain key performance indicators (KPIs) that sought to
motivate and guide management’s actions. There were KPIs on the number of new
acquisitions and the number of countries that CC should expand into, and these were
used to supplement profitability KPIs. These KPIs were implemented during the later
stages of internationalisation, when the company was more stable in its operations
overseas and wanted to concentrate more on making profits. CC did not use the advice
of consultants for its key strategy of internationalisation. The company did not wait for
the Singapore government to encourage them to internationalise. The tax incentives
offered by the government were a small factor in its expansion plans because the need
to expand overseas was recognised by the company, before the government started to
encourage companies to venture abroad.
4.2.4. Company D: A major offshore marine company
Main businesses
Company D (codenamed ‘CD’) is one of the business divisions of a large GLC, and
contributed almost 70 per cent of the total revenue of that GLC in 2007. Its offshore
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and marine business division is further divided into four different segments: offshore,
marine, specialised shipbuilding and other services.
The offshore division provides the following services: design and construction of jack-
up rigs, semi-submersible rigs, floating production systems and other advanced vessels
such as drill ships; repair, upgrading and conversion of offshore rigs; design and
development of critical rig equipment; and fabrication of offshore structures and rig
components. The marine division offers expertise in these areas: conversion of floating
production, storage and offloading/floating storage and offloading vessels, floating
storage and re-gasification units and drill ships; repair of all types of marine vessels
including tankers, containerships, bulkers and LNG carriers; upgrading and life
extension of vessels; expansion of vessels; and fabrication of turrets and topside
modules. The specialised shipbuilding division built support vessel types such as
multi-purpose offshore support vessels; anchor handling tug/supply vessels; tugboats;
icebreakers and ice-class support vessels; floating storage offloading vessels; and
pipelay ships. The other services division within CD provides high quality and
versatile heavy lifting services; fabricates heavy steel structures; provides heat
treatment of high-end steel products; and offers harbour assistance, marine support and
coastal towage services.
General description of internationalisation strategy
The decision to internationalise CD was a natural step because the company needed to
go beyond Singapore and the region to secure more business. The nature of the
offshore and marine industry is such that 90 to 95 per cent of CD’s business is derived
from international customers and, coupled with Singapore’s small economy, expanding
internationally was inevitable. Moreover, transporting an oil rig over long distances
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around the world is simply too slow for many companies. Thus, CD had to adopt a
‘near market, near customer’ strategy.
Secondly, the offshore and marine business is heavily service-oriented and the ability
to provide repair services locally is a key factor. For example, CD set up a yard in the
US Gulf to service all the domestic rigs and drilling that took place there. The
customers demanded repairs and services on the rigs already in place, so CD could not
operate from Singapore. On other occasions, the drilling location was landlocked, so
CD could not ship the oil rig into that area, instead compelled to build a yard near the
drill.
A key strategic advantage that CD enjoyed when it internationalised was the
Singaporean workforce’s ability to cope and work with people from multi-cultural,
multi-racial and non-homogenous backgrounds. Singaporean workers had this unique
advantage because Singapore had always been short of skilled and unskilled labour, so
government policy had allowed foreign workers to work alongside Singaporean
workers. As a result, Singapore workers and managers are able to operate effectively in
a foreign environment, even when the culture is very different. The foreign yards
operating in Singapore were not as successful in their internationalisation because
lacking the experience of working alongside or within other cultures caused these
foreign businesses to be less efficient away from their home base.
CD also made the effort to co-operate with the traditions and policies of the customer’s
country, rather than trying to impose Singaporean methods on its customers. CD knew
that many countries possess certain nationalistic ambitions concerning their oil and gas
industry. These countries generally want to see benefit for their country from the
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exploitation of their oil and gas. Thus, some local oil companies only use local yards to
build and service their rigs. For example, CD set up a yard in Rio de Janeiro, Brazil to
service the major oil companies there. This business would not have been possible, due
to nationalistic sentiments, if CD had operated from Singapore.
However, CD preferred to locate its design and engineering HQ in Singapore, which is
a very cost effective base of operations for CD. The offshore and marine business
requires a high degree of design and engineering capability, project management and
execution efficiency, as well as the ability to import equipment and services from all
over the world and to integrate all those components effectively. Singapore, being a
free port and a global hub for ship repair activities, allowed CD to achieve lower costs
than its rivals.
With guidance from the board, CD’s internationalisation strategy was developed over
many years by the management. Additionally, CD used consultants to improve its
business performance and strategy because consultants have a wider understanding of
best practice in the industry. The management of CD possessed domain knowledge,
and they combined this with the inputs from the consultants to develop strategies that
suited the company. The company completed a strategic review on a regular basis and
used consultants whenever necessary.
Government promotional efforts and incentives to encourage Singaporean companies
to internationalise did not push CD to do so. Indeed, for CD, these incentives
represented only small financial sums. However, being a GLC, CD felt obligated to
support the government-initiated new globalisation programmes and activities.
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4.2.5. Company E: A manufacturer of motorcycles and motor electronics
Main businesses
Company E (codenamed ‘CE’) was incorporated in Singapore as a private limited
company. In 1981, it was listed on the SGX and it changed its name. In 1996, a major
business group from Malaysia acquired the company in a reverse takeover. It adopted
its present name at this time. In 2007, the major shareholders were Malaysian
companies listed on Bursa Malaysia Securities Bhd.
In 1998, CE was involved in the manufacture of motorcycle components and the
assembly of motorcycles in the China market through a joint venture. The company
produced and sold dry cargo containers through a wholly owned subsidiary, supplying
60 per cent of its production to the US market and 40 per cent to Southeast Asia. CE’s
international trading and distribution arm continued to engage in the trading and
distribution of metal and mineral products, food and beverage distribution, timber and
other industrial products, and seafood processing.
By 2007, CE had exited the motorcycle manufacturing business and entered into the
new divisions of electronics and limestone processing. The electronics division was
headed by a subsidiary with three segments: distribution of semiconductor and related
components, turnkey project management and network telecom product sales. The
company completed the construction of a new limestone processing plant in Malaysia,
and production of limestone began immediately. CE’s Malaysian subsidiary produced
quicklime, which was sold to the growing steel mill industry in Malaysia.
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General description of internationalisation strategy
CE was majority owned by its Malaysian parent company, which has extensive
experience doing business in China. CE benefitted from its parent’s experience and
knowledge of China, and CE’s investment in China was very much driven by that
exposure. CE invested in the production of motorcycles, trucks and multi-purpose
vehicles in China during the period between 1998 and 2007, and successfully exited
the business at a good profit. Internationalisation was a very clear strategy for CE
because it wanted to tap into the experience of its parent company.
CE chose its international markets based on several factors; most importantly, size, as
size was understood to affect the profitability of the investment directly. CE considered
that the larger the market, the better the potential profitability. However, although the
size of the market mattered when the investment required a huge capital outlay, CE
also pursued investments in smaller markets as long as it was viable.
After successfully conducting the business in China, CE was able to draw from its
experience. The company attributes its success to three key factors. First, due diligence
must be done on any investment, to serve the purpose of a proper evaluation of that
opportunity. Second, the investor must monitor the investment closely, which would
include measuring the investment with KPIs. Third, the investment must have a better
chance of success as wholly owned by the investor rather than as a joint venture or a
minority stake, because the variables in such a relationship are difficult to manage.
CE had a clear strategic direction for internationalisation due to the relationship with
the parent company, but the structuring of the investment was equally important in
ensuring its success. The company determined the involvement by considering the
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percentage ownership of the business. If the investment was wholly or majority owned,
CE took on active management of the overseas company and decided every detail of
the company’s structure. If the investment was a minority stake, the majority
shareholder appointed a General Manager, and CE appointed the Chief Financial
Officer. If the stake was not substantial, the existing management was left to manage
the company.
The company was encouraged by government agencies like IE Singapore to venture
into various emerging markets, which was done through visits to the new markets. CE
used the government initiatives to assist its penetration into new markets. It did not
utilise any monetary or tax incentives provided by the government, but it did find the
government’s drive to be effective.
4.2.6. Company F: An Asian-based construction machinery producer and distributor
Main businesses
Company F (codenamed ‘CF’) was incorporated in Singapore as a private company
limited by shares and an investment holding company for the group’s various
businesses. CF eventually became principally involved in the rental and sale of heavy
machinery, particularly cranes, and it is now one of the largest and most reputable
suppliers of mobile and crawler cranes in the Southeast Asian region. CF is also the
largest crane stockist and distributor worldwide for reputable Japanese and European
brands. The company was listed on the Australian Stock Exchange in 1997, and later
shifted its listing to Singapore. The company has operations in the Asia Pacific region,
including in Australia, China, Malaysia, Hong Kong, Indonesia, Thailand and the
Philippines.
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CF services a large range of customers engaged in the infrastructure, manufacturing,
construction and transportation industries. Its operations are mainly divided into rental
and sales. Under the rental division, CF’s services are further divided into heavy lifting
and haulage, offshore and marine, tower cranes and general equipment segments.
Under the sales division, CF holds exclusive franchises for mobile cranes, crawler
cranes and excavators. It also sells reconditioned heavy equipment and supplies spare
parts for heavy equipment.
General description of internationalisation strategy
CF’s strategy of internationalisation was driven by its need to grow its overall sales.
Given the small size of the Singapore market and the lack of support from the
Singapore government for space-intensive businesses like CF’s, this company was
forced to expand overseas to secure growth. Although the business in the Singapore
market commanded the highest margins, the expansion was necessary because the
small market size restricted growth. In 1998, CF had operations in Malaysia and
Indonesia, but these operations were not large. During the 1997 Asian financial crisis,
the company realised that it could not depend solely on the regional countries, so it
contemplated expansion into China or Australia. Eventually Australia was chosen as
the target market because China was not ready to accept a business model like CF’s at
that time.
Due to the developed nature of the countries that CF intended to enter, it was very
difficult to build the business organically in the new country. CF’s entry strategy was
to look for good companies to acquire or partner within the new country. One of its
main criteria was that the company was run professionally. CF realised that companies
with very good management systems in place would integrate better than would
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companies without them, because CF would have difficulty in bringing different
cultures and peoples into companies without a good management system.
Before CF considered internationalisation, it ensured that its products and internal
structures were well organised. The company had the capacity to expand overseas
because it had enough manpower and talent to support the eventual integration of the
new entity. In addition, CF was very fortunate to have established a strong and stable
base in Singapore with not many international competitors in the region, and it had
sound management systems. Thus, the company was able to grow its crane rental
business in this region, and expand further into the international arena.
After acquiring a foreign company, CF made sure that it used local talent in the
company. However, it maintained control in the Finance and Purchasing department by
centralising these functions under the head office. In the head office, CF also assigned
people to be directly responsible for a particular country, thus establishing a direct
channel of reporting and flattening the organisation’s structure. CF focused more on
operating efficiently and made the effort to ensure its staff reported to the correct
person to avoid layers of bureaucracy.
Having established operations overseas, CF monitored the total income level from
overseas to determine how successful its internationalisation programme was. The
company evaluated its success in a foreign country through industry surveys. Although
the company used measures such as indices, CF moderated these measures across
different countries according to the economic conditions and industry standards.
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CF was not able to use much government support or incentives because its business
model differed from the government’s emphasis on producing high value-added goods.
As CF needed a large area of storage space for its cranes, and as Singapore is land
scarce, the business was not encouraged by the government. CF also did not qualify for
most of the support schemes that the government had put in place to help small
companies grow or expand overseas. Thus, the company effectively carried out its own
internationalisation plan.
4.2.7. Company G: A motor parts and motor related producer
Main businesses
Company G (codenamed ‘CG’) is a major manufacturer of automotive electronics,
high quality car audio products and automotive wire harnesses for the car industry. CG
also produces specialty electronic products and high quality cable assemblies. In 1997,
CG diversified into the manufacture and marketing of high quality loudspeakers
through the acquisition of two branded loudspeaker business and the Asian speaker
manufacturing operations of its Hong Kong listed parent company.
CG was listed on the main board of the SGX in 1995 and it was the regional HQ and
holding company of the electronics division of its Hong Kong parent, an investment
holding company with a diversified portfolio of high quality industrial investments. In
2007, the parent company owned a 69.3 per cent interest in CG, which in turn owned a
49.2 per cent interest in a subsidiary that was engaged in the development, manufacture
and marketing of batteries. It was listed on the SGX in 1991. From 1998 to 2007, CG
expanded its presence in Europe, China and the US, to include over 10 countries in its
manufacturing and distribution network.
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General description of internationalisation strategy
CG was originally a manufacturer of electronics in Hong Kong and China, but believed
that in the long term, it would be difficult to expand and be profitable by remaining as
a manufacturer. CG was not able to control the marketing and sales of their own
products, and was limited to selling products through customers’ networks. Therefore,
CG’s long-term goal was to establish a sustainable global sales network and business
to achieve steady longer-term growth that was within their control. Secondly, CG
identified many well-known companies in developed countries like the US and Europe
who had brand equity that was under-utilised in Asia. CG sought to take advantage of
this situation by acquiring western companies and their technologies, and deploying
them in Asia for growth. As a result, CG took a step further in their internationalisation
strategy by acquiring two premium loudspeaker companies in Europe.
After the acquisitions, CG encountered the problem of not having enough people with
international and operational experience to run a business in Europe. CG had to recruit
European management, as the former management had left the acquired companies,
and CG did not have enough HQ-based management staff for deployment to the
foreign subsidiaries.
In charting the internationalisation course of the company, CG’s management proposed
the approaches and strategies while the board of directors reviewed, discussed and
endorsed them. Both management and the board agreed that to expand their business
globally was a good strategy for the company, but the execution of this strategy turned
out to be more difficult than they had expected. Managing an international business
meant that the management had to deal with many countries, which required in-depth
knowledge of these specific markets. Substantial management time and effort was
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required for CG to accumulate enough understanding about the country, and about how
to manage the company properly. They discovered that acquiring local talent was the
key to overcome this difficulty, but finding the right people required much work, time
and luck. Despite all efforts, the main feature of CG’s internationalisation process was
grappling with insufficient management capacity.
Besides ensuring that the company had competent management staff, CG practiced two
important strategies in its internationalisation plan. Firstly, it made sure that the
company had some competitive advantages when operating overseas. These
advantages included ownership, internationalisation and location advantages.
Ownership advantage came in the form of brand equity, technology and management
capability. Internationalisation advantage meant CG took its core strategic products
and tried to create an international market for the product and exploit certain market
failures. Location advantage was used so that the company was competitive enough to
operate successfully overseas. Management networks and capabilities were crucial,
guiding CG to expand to a country, and allowing them to accumulate knowledge of the
foreign markets gradually.
CG came to the conclusion that although the company could have a successful strategy
of internationalisation, it would first need to develop its competitive advantages before
implementing that strategy effectively. After acquiring competitive advantages, CG
needed understanding, knowledge and business networks in the foreign market for
successful implementation. However, to acquire such knowledge and networks took a
long time. Therefore, it was very important to find the right management talent locally
to support the company to expand.
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The company hired a number of different consultants to assist them in the earlier phase
of the acquisition of the UK companies. CG found their recommendations useful but
often focused on the short term. In addition, the varied backgrounds of the consultants
meant that they usually brought in different suggestions that did not necessarily
connect. CG did not receive any aid from the Singapore government in terms of
incentive schemes or support programmes.
4.2.8. Company H: An IT and property related company
Main businesses
Company H (codenamed ‘CH’) was incorporated in Singapore in 1985 and was listed
on the Mainboard of the SGX in 1993. The company and its subsidiaries established IT
vendors providing thin computing, 2 e-services and e-platforms, information-
communications (‘infocomm’) products and broadband systems integration
solutions. The company operates in Singapore, China, Hong Kong, the US and the UK.
Their sales and marketing network covers more than 50 countries around the world.
The thin computing operations are carried out by a wholly owned subsidiary, which
was established with the aim of being a provider of solutions that reduce the total cost
of ownership of personal computers.
E-services and e-platform operations are carried out by a wholly owned subsidiary
established in 1996. Since its inception, it has provided e-services and e-platform
2 CH marketed its thin computing solution, which is an IT service that efficiently addressed the computing needs of individuals and organisations. The competitive efficiency of the solution is attributed to its ability to link multiple users to a single host computer. Under the software products supporting thin client solutions, the solution enables two to five users to share the computing power of a single host computer.
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solutions for B2B and B2C transactions in China. The company had the ability to be a
full service provider of on-line exchange and on-line applications services and
solutions. Another wholly owned subsidiary runs the flagship core business line of
infocomm products and broadband systems integration.
By 2007, CH was heavily involved with property development and exited the e-
services and e-platform business. The revenues from thin computing accounted for
only 12 per cent of the group’s total revenue. CH started property development
operations in China in 1997 and the company’s first project was a residential cum
commercial property project that has a gross build-up area of more than 170,000
square meters.
General description of internationalisation strategy
CH was initially a manufacturer of computer hardware before 1998, after which time
CH developed their software business. In 1997, the company started property
development in China because it owned a piece of land after selling off its IT hardware
business. From 2007 onwards, CH focused mainly on its property development and
investment businesses, and it exited the IT business altogether. CH saw itself as an
internationalised business from the beginning because of the nature of its IT business.
In the IT business, the world needs to be tapped as one global market. The applications
CH developed were not restricted by any form of geographical or market barrier. The
Internet platform, which became widespread from 1998, allowed the company to
internationalise its sales and marketing, and gave it the ability to reach out to an
international audience.
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In addition, the research and development (R&D) operations of CH were developed in
the US and England because the engineering and HR needed for R&D were located in
these countries. CH brought the R&D operations to the resources instead of
centralising the resources in Singapore, where the company was based. However, less
knowledge-intensive activities like technical support needed to be situated in a place
with the advantage of lower cost of operations. Therefore, CH placed its remote,
hotline and technical support services to support its international business in Singapore.
CH can thus be regarded as a born global company.
CH was able to operate successfully in the international arena because its corporate
culture was outward looking, in terms of both market expansion and recruitment
overseas. The company was very comfortable recruiting its entire staff from the local
workforce of foreign operations, and did not send any Singaporeans overseas to work
in other countries. The company had a good management system in place and knew
how to manage people from different countries. The critical success factor for CH’s
internationalised business was the company’s ability to utilise local staff effectively in
its overseas offices. The knowledge that came from these local people was integral to
the success of CH’s internationalisation.
The culture of CH needed to be international from the onset for them to expand beyond
Singapore. The company had to work with different ethnic groups and have an
international culture. CH had staff of multi-cultural and racial backgrounds at all levels,
and English was used as the common language. Besides the culture of the company,
the same set of controls was applied across all the countries and operations. Internal
audit and financial control was tightly controlled. Budgets were used as the mean to
align everyone and track their performance.
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The company’s strategy for internationalisation was created after consultation with the
board of directors. The plan was developed from internal resources, but external
consultants were also frequently used to provide input, as well as checks and balances,
for their plans. In the foreign markets, CH used local expertise or local consultants to
help them to understand the new markets, new business sectors and the local
regulations. The company received some assistance from government organised trade
missions in the earlier days of the company’s operations. Between 1998 and 2007, CH
did not benefit from any government incentive schemes.
4.2.9. Company I: A producer of construction materials
Main businesses
Company I (codenamed ‘CI’) dates back to 1973 when it was formed as a tri-partite
joint venture in Singapore. The company was listed on the Mainboard of the SGX in
1983. Through the years, while the building materials business remains CI’s core focus,
the company’s management has strategically diversified their business platform to
encompass specialty polymer. In 1985, the company embarked on making high
technology and venture capital investments. On 17 February 2005, CI was renamed to
reflect its geographical expansion and business diversity.
Under the Products division, CI makes ordinary portland cement and high slag portland
blast furnace cement. In the Construction Materials division, the company produces
various cement, polymer or ceramic-based materials with waterproof and heat
insulating properties, for use in many construction applications. The wholly owned IT
subsidiary is involved in the Internet security, connectivity and infrastructure, and e-
commerce business. The IT subsidiary was set up like a venture capital company,
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where it explores good investment opportunities in the technologically dynamic
telecommunications, Internet software and electro-optics industries. The company has
also partnered with others to develop some properties in central London.
General description of internationalisation strategy
Originally, CI was primarily producing ordinary portland cement, which was a concern
because it was a single product business. The company changed its strategy from one
of an inward-looking company to one that was outward looking and willing to venture
into new businesses. After the change of strategy, the management sought
diversification opportunities. The company chose to expand into China after the Asian
financial crisis to benefit from the economic boom of China. In addition, the company
also looked for countries with established infrastructure and a homogenous market that
would be receptive to new and innovative ideas. Based on this approach, the company
carried out its venture capital investment activities, with the objective of finding new
investment opportunities with a higher chance of success.
CI expanded outside Singapore because the market in Singapore was small. The
company’s plan was to adopt a specific scale in this model but the small Singapore
market could not support such a model. Thus, the company focused on an outward
strategy. Sales and marketing offices were set up in Hong Kong, Shanghai and
Guangzhou and a manufacturing office was set up in Malaysia to tap into the raw
materials available there. In addition, CI was compelled to internationalise after CI’s
foreign partner divested its shareholding, leaving the company without the guidance
and protection of a large parent company. CI ventured overseas for its own survival.
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CI’s internationalisation success was a combination of a few factors: in particular: a
strong local business partner, achieving size and scale, decentralising the management,
and ability to react to the environment. CI managed to work with strong local partners
who had significant influence in the market, and this helped to accelerate the business
plan. The company realised that having a highly scalable business model was
important because without the required size and scale, the profit of operations would
not escalate very quickly. CI decentralised the management in its overseas businesses,
which allowed them to deploy local personnel who were not as costly as expatriate
staff. The local team could be trained to take over the business after some time. The
company felt it needed to be adaptable to changes in the market because there were
huge opportunities in growing economies that could easily be missed if it did not react
quickly.
The company employed the help of external consultants with respect to its new venture
into the specialty polymer business, but not for its specialty cement business. The
group did not utilise the government’s support or incentive schemes in their
internationalisation because those incentives were inward focused, meaning the
company had to set up a presence in Singapore first before venturing overseas. That
was not the strategy of CI because China rather than Singapore was its initial target
market.
4.2.10. Company J: A regional IT products producer and distributer
Main businesses
Company J (codenamed ‘CJ’) was established in Singapore in 1998 and was
subsequently structured as the holding company of a group of three companies from
Singapore, Malaysia and Thailand. CJ was listed on the Mainboard of the SGX in 2001.
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The Group is a leading e-infrastructure enabler and e-services provider, serving and
supporting Asia’s growing Internet economies. CJ acts as an IT hub, providing a range
of e-enabling infrastructure products, IT services and IT products to application service
providers, Internet service providers, commerce service providers, network service
providers, full service providers and corporate resellers in Singapore, Thailand and
Malaysia.
Under the E-enabling Infrastructure business, CJ designs, installs and implements e-
enabling infrastructures for companies interested in e-commerce, utilising a range of
enterprise servers, workgroup servers, operating systems, e-commerce application
software, systems management tools and IT security products from its IT principals.
Under the IT Services business, CJ offers IT services such as network infrastructure
design and security implementation, web to legacy integration, e-commerce-ready
infrastructure architecture and implementation, training services and maintenance
support. Under the IT Products distribution business, CJ distributes a range of IT
products including desktops, notebooks, printers and other IT peripherals. The
company has a distribution network of more than 3,000 corporate resellers and dealers
in Singapore, Thailand and Malaysia.
General description of internationalisation strategy
In 1998, CJ’s main presence was in Singapore, with operations in Singapore
contributing 48.1 per cent of revenue. During that time, there was the threat of
competition from large US MNCs; notably, the world’s top three players were all
trying to enter the Asian markets. These MNCs had a broader range of products to
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distribute and larger financial resources. CJ’s founder assessed that small local
companies would not be able to compete or even survive against these larger MNCs
unless they came together as a group to share good practices, common markets,
resources and product agencies. Therefore, out of the urgent need for survival, CJ
decided to combine with a partner in Malaysia and another in Thailand to ensure that
they were not too small to compete with the MNCs.
CJ wanted to grow larger and internationalise because it was passionate and committed
to its business, and believe that it had the ability to run and build a very good regional
business. The small size of the Singapore market was another factor in CJ’s decision to
internationalise their business, and the entry of foreign competition in the form of large
MNCs prompted the company to realise their expansion plans more quickly. The
management of the company felt an obligation to the stakeholders of CJ; namely, the
vendors, principals and staff, to manage the company well. For CJ to achieve its plans,
the company had to expand beyond the neighbouring countries and become a sizeable
distributor, as preferred by vendors.
Their internationalisation strategy was based on a four critical factors: robust selection
of partners, intentionally placing trust in partners, giving partners a stake in CJ, and
decentralising control except for as regards the accounting system. CJ believed
strongly that choosing the correct partner and trusting them to run operations in their
country was more important that strict controls. Thus, the management of CJ spent a
lot of time with potential partners, engaging them in dialogue and socialising over
dinners and golf. After selecting their partners, they made sure that the partners
continued to hold a stake in the holding company, giving them a common motivation
for the holding company to do well. CJ also invited the country CEO to join their
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executive committee or board of directors, and involved the CEO in strategic planning
meetings.
In terms of control, CJ’s strategy was to decentralise all operational, administrative and
marketing functions to the local partners, while keeping strict control on the financial
reporting standards and practices. The country CFO reports to the corporate HQ CFO,
and they also meet separately to discuss financial governance, internal audit processes
and other matters. CJ made sure that the local team was kept intact and tried not to
change the local systems.
CJ did not use external consultants when they were strategising for internationalisation,
nor did they use them during the integration phase of their merger with other
companies. The founding members, who were very experienced in the industry,
developed the plans. CJ did not utilise any government incentives or support schemes
when they internationalised. Rather, they depended on their internal strengths and
relied very little on government support or advice. CJ believed that they knew their
own business better than the government.
4.2.11. Company K: A global logistics provider
Main businesses
Company K (codenamed ‘CK’) was set up in 1970 and listed on the Stock Exchange of
Singapore in 1993. A local port operator initiated a takeover offer in March 2002. In
November 2004, a local company completed its takeover of CK, after it acquired the
port operator’s controlling stake in CK.
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By 2007, CK’s principal businesses comprised integrated logistics solutions,
international freight forwarding and engineering maintenance and facilities
management services. The integrated logistics solutions cater to customers’ specific
logistics requirements in the chemical, commodity, automotive, marine, oil and gas,
shipping and industrial sectors. The company provides customers with a spectrum of
supply chain logistics encompassing import and export processing, warehousing,
inventory management, local, regional and global distribution, collateral management
services, container logistics services and record management services.
In international freight forwarding, CK is involved in Non-Vessel Operating Common
Carrier (NVOCC) services. This business specialises in the consolidation of loose
cargoes from freight forwarders and shippers and the delivery of that cargo to specified
destinations through the company’s comprehensive global network of delivery points.
CK owns a network of delivery points that connect customers to 120 ports and over
1,200 destinations. They have established a company presence in Singapore, Australia,
Belgium, China, Germany, Hong Kong, India, Indonesia, Korea, Malaysia, Vietnam,
Pakistan, Ukraine, Russia, the Netherlands and the Middle East.
General description of internationalisation strategy
From 1998 to 2004, the company was rather stagnant in terms of revenue growth, but
they began to establish presence in many different countries during this period. After
the takeover of CK in 2004, they charted a new growth path for the company, revenue
started to grow and profitability improved. There was aggressive internationalisation
from 2004, after the company was taken over by a local private group. The company
adopted an internationalisation policy out of necessity because a freight forwarding
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business needs to be international; it had to concentrate not only on logistics movement
within the country, but more importantly, on international trade flows between
countries. These trade flows determine where CK should go and what they should be
doing. Internationalising was necessary for the company to grow.
Freight forwarding is a service-oriented business and CK needed to improve their
service offerings to their customers. The greater number of places and connections
between points that CK could offer its clients, the more profits the company could
expect to make from its customers in servicing their various logistics needs. This is the
network effect of a freight forwarding business, so the company had to expand to as
many cities as possible to give its customers a worldwide network. A large network is
also the differentiating factor between CK and its competitors because new competitors,
who do not have such a large network, cannot offer such competitive rates.
To execute its strategy of internationalisation well, the senior management of CK did
not depend only on Singaporeans to manage overseas offices because Singaporeans
might lack the required experience of running an international logistics company. CK
recruited whoever was best for that job and also hired people from its competitors. In
addition, CK tended to favour the structure of a joint venture with a local partner when
the company started to operate in a new country or city. As the local joint venture
partner already had the required knowledge to take care of local customers and
regulators, this took the local operations work away from CK. Moreover, by giving the
local partner a stake in the joint venture company, this motivates it to strive for higher
profitability.
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CK decentralised control of its overseas companies to local management, except for as
regards the buying of freight, because a centralised buying system allows CK to buy
freight cheaply, which is crucial in a freight forwarding business because the margins
are very thin.
By 2007, CK had no plans to enter any new country. CK will only expand into a
country in the future if doing so will help them to get more customers or make a
customer more dependent on them. The company did not use external consultants to
devise business strategies and CK did not find the government’s call to internationalise
relevant to them. CK needed to be in many countries to survive, so encouragement or
support schemes from the government did not apply to them, except to help defray a
small portion of the overseas development cost.
4.2.12. Company L: A global warehousing and logistic company
Main businesses
In the 1980s, Company L (codenamed ‘CL’) was set up to provide logistics services to
the government of Singapore. After the government’s projects were completed, the
company found that it had developed many systems and processes on logistics and
supply chain management, and that had many well-trained staff. The company
subsequently used these competencies to grow a sizable business. In 1998, two
business units represented CL’s integrated logistics business. These two units merged
in December 1998 to form a larger group called CL, which focuses on supply chain
management, offshore logistics and marine services. CL started operations as one
business unit in 1999.
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In 1999, CL generated substantial revenue and profit. By 2005, the company’s turnover
had increased by 25 per cent and profit increased by 50 per cent. By then, the company
had established warehouses in Singapore, India, Japan, Malaysia, South Korea,
Thailand and Vietnam. Under supply chain management, revenue contribution from
Southeast Asia was about 60 per cent of total supply chain turnover, while revenue
contribution from North Asia was about 20 per cent. Under oil and gas logistics,
revenue recorded was 10 per cent of total turnover. In 2006, an Australian company
acquired the company.
General description of internationalisation strategy
In the 1980s, CL hired a consultant to explore new areas for the company after the
completion of the logistics service support for the government. The key point presented
by the consultants to the company was that MNCs were relocating their manufacturing
plants to countries with comparative advantages and outsourcing was becoming more
widespread. As the trend pointed towards a growing logistics sector in Asia, CL put in
place plans to build an Asia-wide logistics network in the late 1990s. They also
identified China as having a large market and problems in logistics, so they decided to
move heavily into China.
In the 1990s, CL was a government-linked company under X Holdings, and the
company was given a mandate by the holding company to grow, not only locally but
overseas as well. For CL to grow, the company needed to expand overseas because the
Singapore market was very small. In addition, as a GLC, it was preferable that CL’s
growth should come from overseas, so that CL would not compete with local
companies for resources and business.
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To execute the internationalisation plan, CL engaged a reputable foreign consultancy
company to assist in formulating the plan, the business strategy and details such as
which sectors to enter and the core competencies to have to do well in those sectors.
The plan was presented to the board for endorsement before the management
embarked on the implementation. CL adopted an organised and deliberate approach in
their planning and recording of their internationalisation plan. The company tended to
structure their investments in the form of joint ventures so the local partners could be
depended on to handle local issues.
The company identified two crucial factors for the success of their internationalisation.
First, the people in the company were the key; they needed to be willing to work
overseas, well trained and have the necessary experience. The senior staff had to share
the vision of the management and be motivated enough to take on the difficult task of
setting up operations overseas. Second, good systems and processes had to be present.
In going overseas, the company needed to bring their expertise in the IT and
management systems to the foreign joint ventures. CL centralised its financial
accounting, IT systems and marketing; the company did not centralise its human
resource practices.
Another success factor identified was how closely the company tracked their
performance overseas. CL measured sales and contributions; that is, total sales of the
company and the percentage contribution from overseas. They also measured the
Economic Value-Added (EVA) of their services in each country to account for the
value they created for shareholders after taking into account the risk factors of each
country.
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Even though the company was government linked, they did not receive much from
government incentives and these incentives did not drive their plans. They were
incentivised by their need for improving performance, sales and profitability.
4.2.13. Company M: A global manufacturing services company
Main businesses
Company M (codenamed ‘CM’) was founded by an Englishman in 1828. In the late
1990s, CM had the following groups of business operations: Investment, IT, Technical
Services, Project Management, Food Marketing and Food Distribution. Their IT
division provided a broad range of products, applications, services and total spatial
solution propositions. The software services and solutions were designed to address the
needs of enterprises through the usage of Extranet, Intranet and Internet as information
distribution platforms. CM had subsidiary operations in Australia, India, Indonesia,
Malaysia, Singapore and the US. The operations in the Asia Pacific region have been
active since 1980, and CM now has more than 12,000 users of its products or services.
Under the Technical Services division, CM specialised in design, manufacture and
installation of direct fired process heaters, waste heat recovery units and associated
equipment for the oil and gas industry. CM services an international clientele. The
company has products and services that include hazard protection against fire and
depressurisation, life support and emergency evacuation systems. Yet another unit
specialises in the design and implementation of simple and complex control systems
for process industries. CM’s customers span the entire South and Southeast Asian
region.
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Under the Project Management division, CM is a project management, design and
construction services company, operating in Singapore, Malaysia and China. CM
specialises in industrial development, industrial facilities, warehousing, lease back
arrangement, clean room facilities and retrofitting works. Under the Food Marketing
division, CM owns various brands of food retail products. Under the Investment
division, CM has a 30 per cent stake in a developer of industrial parks. The Logistics
Investments division has warehouses in Indonesia and Singapore.
General description of internationalisation strategy
CM started as a trading company and over time expanded into a wide range of
businesses. The company’s activities became disparate and the direction of the
company became uncertain. Therefore, when a new owner and management took over
in 1998, they decided to reinvent the company into an engineering services company,
partly because the new management had a strong background in the engineering
business. In addition, the engineering business had high barriers to entry so the market
would not be faced with many competitors. At that time, because CM no longer had a
core business that could sustain the company after selling their original business, they
had to find other business opportunities to develop.
The Singapore market was fairly mature and small in 1998, so the management had no
choice other than to decide to internationalise their business. To survive, they had to
look outside Singapore and not be restricted to the region. More importantly, their
existing oil and gas business had to become a global business because the demand for
refineries and petrochemical plants within any particular country was not enough to
sustain their business. Coupled with the need for survival and the motivation to make
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profits for its shareholders, the company decided to internationalise their business by
focusing on the engineering services sector.
To achieve success internationally, CM needed to be cost competitive. It had to
assemble a team of people who were very capable and properly incentivised to work
hard for the company. CM realised that it did not want to compete with other low cost
manufacturers by carrying out its own manufacturing operations; instead, it chose to
rely on its strong brand name to compete, while focusing on the provision of project
management services and providing customers with turnkey solutions. The company
outsourced the manufacturing and low-end engineering jobs like fabrication, but
retained the designing, engineering and project management parts of the entire job. CM
was responsible for delivering the turnkey service to the customer and it was on this
aspect of the job that the company was able to be competitive internationally.
CM’s management team was confident about internationalising the company because a
team of capable people supported their structure and plans. The internationalisation
plan could not have been as extensive, if they had lacked quality staff. The incentive
scheme employed by CM was crucial in their internationalisation plan. They realised
that there was no way to supervise their staff who were moving around all over the
world, thus staff needed to be very self-motivated. Their interests had to be aligned
with the company. Thus, CM compensated their staff with a very attractive bonus
scheme, where as much as 30 per cent of the net profit was set aside for staff bonuses.
The staff knew that if the company did well, they would be well rewarded.
Operating in a very specialised market, CM did not employ external consultants to
assist them in planning their strategies for the company. They chose to rely on their
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own staff, which had the domain knowledge and were experts in their businesses.
Some of their businesses received some help from government incentives during the
initial stage of their internationalisation. However, the government’s assistance was
limited because CM’s main businesses were not based in Singapore. Government
agencies were able to assist CM on the networking aspect when they entered new
markets but the results were mediocre.
4.2.14. Company N: An IT products, property and car distribution conglomerate
Main businesses
Company N (codenamed ‘CN’) was founded in 1912 as a family-owned automotive
dealer. In 1998, they had three core businesses: technology and manufacturing, trading
and distribution, and property and leisure. The technology and manufacturing division
was an international network of manufacturing plants and R&D centres. Activities
include the development of data communication and networking interface microchips
and related multimedia firmwares and softwares for the telecommunication, computer
and consumer electronics industries; manufacture of a wide range of electronic and
precision engineering components; production and distribution of biotech, medical and
agritech products; design and fabrication of oil, gas and chemical processing
machinery; and management of venture capital. The trading and distribution division
covers distribution of vehicles, automotive parts and accessories; equipment for petrol
stations, construction machinery; fire safety equipment; and installation of satellite
earth stations and other specialised equipment for telecommunications. The property
and leisure division involves the development of real estate, trade exposition and
convention centres, and leisure activities.
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General description of internationalisation strategy
CN is basically involved in three lines of business: technology and manufacturing, real
estate and automotive distribution. CN chose to expand internationally because
Singapore does not have the scale or enough customers to support their growth in the
automotive distribution and real estate business. The number of Certificate of
Entitlement (COE) to be issued each year for new car owners limited the Singapore-
based automotive distribution business. COE is used by the government to control the
car population, and the number of entitlements has been decreasing over the years. The
total amount of cars sold a year in Singapore could easily be about the same as the
number of cars sold a day in China, and this prompted CN to internationalise to grow
its business. Another reason that CN shifted all of their manufacturing operations to
China from the US was the lower cost of production in China. They found that their
competencies in the US were easily transferable to China.
CN employed various strategies in their internationalisation plans that were critical to
its performance. These strategies included the employee bonus plans, human resource
utilisation and controls over the various overseas units. On the planning process, senior
management and the board discussed the strategic focus of the company and set the
annual budget. The levels of management below the CEO were held responsible for the
implementation of these plans. Their bonuses were tied to performance, which was
monitored very closely.
The success of the company depended on having the best managers to lead the
company’s various business divisions. The top manager in a division was responsible
for providing leadership, devising new ideas, turning in results and motivating the staff.
If the teams were able to achieve their tasks, they were rewarded and recognised. CN
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did not employ a strict rule about whether the local business units must be staffed with
locals or expatriates. Hiring decisions were based on the merits of the candidates and
this allowed them to be open to more opportunities. As part of sound corporate
governance and internal controls, CN strictly centralised its financial and corporate
governance, as well as its legal and human resource policies.
External consultants were utilised when CN reviewed the future strategy of the
company and planned the budget, 3-year and 5-year plans. CN also used consultants to
validate its strategies. The company’s internationalisation process was undertaken for
business and strategic reasons. The government’s effort and encouragement for
companies to expand overseas had a fairly low influence on CN’s decision making. CN
did not utilise any government incentives because the government did not have
incentive schemes to support such large companies like CN.
4.3. Analysis of research materials and interview data
This chapter has two main sections. The previous first section describes in summary
the businesses and internationalisation strategies adopted by the 14 Singapore
companies. The purpose of this first section is to derive an understanding of the nature
of the business of the companies and attain a deeper knowledge of the
internationalisation programmes and plans of these companies.
The second section uses the data collected, from SGX companies’ annual reports, the
in-depth interviews and the survey with the executives regarding their qualitative
assessment of the level of internationalisation of their respective companies, to conduct
three aspects of analysis:
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1. An analysis to examine whether the companies adopted internationalisation
practices that are similar to established theories, such as the Eclectic
Paradigm theory and the Uppsala Internationalisation Framework.
2. An analysis to derive the main themes and sub-themes of the companies’
internationalisation strategies using Nvivo9 software.
3. An analysis to examine relationships between the level of
internationalisation and performance using Cruciform charts.
4.4. Theories based on the Eclectic Paradigm and the Uppsala Internationalisation
Framework
The following section presents the findings from the analysis of the interview data and
research materials. The analysis was conducted through three main approaches. The
first approach was to compare the internationalisation processes of the 14 companies
against the established concepts of internationalisation based on the Eclectic Paradigm
and the Uppsala Internationalisation Framework. The second analysis approach was to
examine the interview data using the Internationalisation Reference Model developed
for this thesis and described in Chapter 3. For analysis of the large quantity of
interview data, Nvivo9 software was used to track and develop the themes and sub-
themes that emerged. The third analysis approach was to examine the ratings on the
level and importance of internationalisation provided by the interviewees against their
companies’ actual revenue and profit growth using Cruciform charts. This co-axial
analysis provided findings on the impact on revenue and profit growth arising from the
internationalisation efforts of the sample companies.
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The two stated theories are developed to explain behaviour of companies relating to
their internationalisation process. The companies selected for case studies were
examined to test whether their behaviour with respect to internationalisation conforms
to the theories developed. It is not proposed that the theories guide the behaviour of
these companies.
The approaches adopted by the SGX companies during the research period of 1998 to
2007 were carefully examined, with attention paid to how these companies
internationalised, with reference to the two well-accepted theories of the Eclectic
Paradigm and the Uppsala Internationalisation Framework. The assessment on whether
these two theories were applicable for SGX companies is shown in Table 4.2. It is
necessary to clarify that, as far as it is known, the management of these companies
were not aware of, nor did they deliberately adopt one or both of these theories. This
assessment of whether these companies adopted these approaches is the result of an
examination of their plans and actions from 1998 to 2007, which showed the strategies
and actions actually selected in deciding how to expand the companies externally.
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Table 4.2 : Adoption of Internationalisation Theories
Company
Theory A B C D E F G H I J K L M N
Sub-total
Yes No
Eclectic Paradigm Y N Y Y Y Y Y N Y Y Y Y Y N 11 3
Uppsala
Internationalisation
Framework
Y N Y Y Y Y Y N Y N Y Y Y N 10 4
4.4.1. Companies that adopted Eclectic Paradigm theory
Table 4.2 shows that 11 of the 14 SGX companies interviewed can be described as
using the Eclectic Paradigm approach to internationalisation. According to this theory,
companies used three methods for expansion: (1) horizontal expansion, (2) vertical
diversification and (3) growth through international markets (Dunning, 1977). These
companies exploited their competitive strengths in the three areas of ownership,
locational and internalisation advantages. For example, CA used their superior product
knowledge and entrepreneurial skills to expand into new markets where their products
would enjoy a premium in price and quality. CL embarked on a careful study of its
internal strengths and external opportunities before making major inroads in
internationalisation expansion. It developed strong internal processes and systems, and
established strong ties with the relevant government agencies in the foreign markets
where it operated, thereby taking advantage of its ownership and locational strengths.
The three exceptions that did not seem to follow the Eclectic Paradigm were
Companies B, H and N. On closer examination, it is noteworthy that these three
companies decided to adopt two other paths to internationalisation. Companies B and
H were born global companies, as they had decided from the onset to bypass entirely
the need to establish a domestic base in Singapore before internationalising. Company
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B, which entered the nascent markets of the Russian federation, encountered many
obstacles initially. However, due to this company’s persistence and hard work, as well
as its having achieved first mover advantage in these emerging markets, it eventually
achieved success and became a strong product leader in its chosen sectors. CH also
decided from the onset to look at their business structure in an international manner,
and deemed the world as its market, rather than starting from a Singaporean home base.
On the other hand, CN decided to adopt the venture capital investments approach to
expansion. They used their internal funds to invest in young companies with potential
to capture new markets. Through their venture investments, they eventually made some
excellent business choices, and were able to invest further in those companies, which
then served as their spearhead of successful expansion into overseas markets.
4.4.2. Companies that adopted Uppsala Internationalisation Framework theory
The analysis showed that 10 of the 14 SGX companies adopted an approach consistent
with the Uppsala Internationalisation Framework theory developed at Uppsala
University, Sweden (Johanson and Vahlne, 1977). This theory propounded that
companies internationalise through a gradual process of expansion by exporting to
overseas markets. Then with the knowledge of these foreign markets, they expand
either by acquisition of suitable targets or by gradually setting up their own production
units in the foreign countries.
This was the approach taken by 10 of the 14 SGX companies. For example, CC started
as a single company in 1931, and expanded to become a diversified international group
with 40 brands, operating in 10 countries, and exporting to 60 markets worldwide by
2007. The same story applies to CD, which grew to become one of the largest GLCs in
Singapore, through a process of gradual but steady expansion. CG took a different path,
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locating its HQ in Hong Kong and expanding into the huge Chinese market as its main
core strategy. Nevertheless, CG is an internationalised company, as its technologies
were derived from the products of the original SGX company.
Four companies, namely Companies B, H, J and N, did not adopt the Uppsala approach,
instead taking alternate routes. As noted in the preceding section, Companies B and H
adopted the born global concept, and CN used the international venture capital
investment method. CH also adopted a multi-pronged method by opportunistically
expanding a few new business segments. Adopting a different approach, CJ expanded
aggressively through mergers and acquisitions (M&As) of market leaders in the
countries into which it decided to expand.
The above analysis revealed that the majority of SGX companies adopted similar
approaches in expanding through a gradual build-up of their comparative strengths so
that they could gain superior competitive advantages in the international arena. This
research suggested that the majority of SGX companies in the manufacturing sector
adopted internationalisation approaches that were consistent with internationalisation
theories based on the Eclectic Paradigm and the Uppsala Internationalisation
Framework.
4.5. Analysis of interview data using Nvivo method
The 14 interview transcripts were studied closely by the researcher through repeated
readings, to acquire a deep and thorough understanding of the significant and
secondary points raised by the interviewees. Gradually, certain main themes and sub-
themes emerged. The themes were classified using the Nvivo9 software.
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Using the Reference Model, as a first step, the themes at Level 1 were grouped under:
1. Antecedents
2. Processes
3. Outcomes
To facilitate the gathering of themes into the appropriate levels, questions posed in the
Interview Guide were grouped according to Antecedents, Processes and Outcomes at
Level 1. At Level 2 for Antecedents, the interview questions were placed under the
sub-groups of Internal, Organisation and External. Further topics raised by the
interviewees under each of these sub-groups were then categorised into sub-headings,
which served as sub-themes. Nvivo9 software was used to assist in the creation of the
nodes (themes), sub-nodes or baby nodes (sub-themes) that emerged. (Hereafter, the
terminology adopted is to call the nodes and sub-nodes as themes and sub-themes
respectively). The process of creating Level 1 and Level 2 themes was replicated to
create Level 3 and 4 themes and sub-themes. For example, under the Level 2 theme of
Internal, a Level 3 sub-theme of Business strategy was created. Subsequently, under
Business strategy, a few Level 4 sub-themes on Economy of scale, Challenge to make
it work, and Venture capital investment approach emerged.
The resultant main themes and sub-themes created are shown in Tables 4.3 to 4.5 and
the frequency of the themes and sub-themes being cited is listed. The themes and sub-
themes were assigned ‘Strength in Industry’ ratings of ‘Very strong’, ‘Strong’,
‘Moderate’ and ‘Weak’ depending on the frequency with which they were cited by the
companies in the source interviews. (The explanations of these categories are given in
Section 3.9.1 of Chapter 3). The Very strong category is for themes with a frequency
of citation of above 10, Strong has a frequency of 6 to 9 citations; Moderate has a
frequency of 3 to 5, and Weak is below 2.
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Details of the themes and sub-themes created and their frequencies of citation as
derived using Nvivo9 software are given in Appendix 4.15.
Table 4.3 : Themes and Sub-themes on Antecedents
1. Antecedents: Themes and Sub-Themes Frequency Strength in Industry
1.1 Internal
1.1.1 Business strategy
1.1.1.1 Economy of scale
1.1.1.2 Challenge to make it work
1.1.1.3 Venture capital
investment approach
1.1.2 Survival
1.1.3 Sustaining profits
1.1.4 Products
1.1.4.1 Perishables
1.1.5 Brands
11
6
3
2
6
3
3
1
3
Very strong
Strong
Moderate
Weak
Strong
Moderate
Moderate
Weak
Moderate
1.2 Organisation
1.2.1 Resources
1.2.2 Shareholders
6
3
Strong
Moderate
1.3 External
1.3.1 Small Singapore market
1.3.2 Regional growth
1.3.2.1 Close to customers
1.3.2.2 Culture issues
1.3.3 Born global
1.3.3.1 First mover advantage
11
5
1
1
4
2
Very strong
Moderate
Weak
Weak
Moderate
Weak
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Table 4.4 : Themes and Sub-themes on Processes
2. Processes: Themes and Sub-Themes Frequency Strength in Industry
2.1 Planning
2.1.1 Strategy drivers
2.1.2 Formal/Informal process
2.1.3 Consultants
2.1.4 Frequency of reviews
14
7
8
8
Very strong
Strong
Strong
Strong
2.2 Structure
2.2.1 Centralised/Decentralised
2.2.2 Localisation
2.2.3 Management strength
2.2.3.1 Core values
2.2.4 M&As
2.2.4.1 Divestments
2.2.5 Business model
11
9
7
1
5
1
2
Very strong
Strong
Strong
Weak
Moderate
Weak
Weak
2.3 Influences
2.3.1 Government incentives
2.3.2 Major shifts
2.3.2.1 Shareholder changes
2.3.3 Joint Ventures/Partners
2.3.4 Success/Failure factors
2.3.5 Entry barriers
15
13
2
7
7
2
Very strong
Very strong
Weak
Strong
Strong
Weak
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Table 4.5 : Themes and Sub-themes on Outcomes
3. Outcomes: Themes and Sub-Themes Frequency Strength in Industry
3.1 Internationalisation indicators
3.1.1 Level of internationalisation
3.1.2 Success ratings
14
14
Very strong
Very strong
3.2 Performance indicators
3.2.1 ROS/ROA/ROC/EVA
3.2.2 Profitability
6
5
Strong
Moderate
3.3 Learning experience
3.3.1 Cost reduction
3.3.2 Technology sharing
3.3.3 Strategic options
3.3.4 Integration issues
3.3.5 Preferences
3
2
2
1
1
Moderate
Weak
Weak
Weak
Weak
3.4 Future plans
3.4.1 Geographical expansion
3.4.2 New products
3.4.3 Limitations
11
5
4
Very strong
Moderate
Moderate
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The graphical representation of the four levels of themes and sub-themes that evolved
for the three main blocks of analysis covering Antecedents, Processes and Outcomes
are shown in Figures 4.1 to 4.3.
The following sections discuss in detail the research results based on these main
clusters of themes in the order they are listed in the preceding section:
1.Antecedents: Internal; Organisation; External
2.Processes: Planning; Structure; Influences
3.Outcomes: Indicators; Measures; Learning experience; Future plans
4.5.1. Antecedents for the internationalisation of SGX companies
A schematic diagram of the four levels of themes and sub-themes for Antecedents is
shown in Figure 4.1.
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Figure 4.1 : Hierarchy of Themes and Sub-Themes of Internationalisation: Antecedents
Antecedents
Internal
Business strategy
Economy of scale
Challenge to make it work
Venture capital investment approach
Survival
Sustaining profits
Products Perishables
Brands
Organisation
Resources
Shareholders
External
Small Singapore
market
Regional growth
Close to customers
Culture issues
Born global First mover advantage
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1a. Antecedents (Level 1)—Internal (Level 2)
Level 3 Theme: Business strategy (Strength in industry = Very strong)
Internationalisation, as a major component and consideration of Singaporean
companies in the influence and development of their business strategy is evidently a
very strong theme. This is not unexpected, as Singaporean companies need and desire
to venture overseas. Other related strong themes are ‘Survival’ and ‘Small Singapore
market’ (Level 3) and Economy of scale (Level 4).
Many companies found that in their search for the relevant business strategy,
‘Internationalisation’ was a strong imperative and rationale for their expansion. During
the 10-year period from 1998 to 2007, as companies searched for the appropriate
business strategy to adopt, they inevitably considered international markets. It is
therefore appropriate to conclude that internationalisation is a core or central feature
for the development of business strategy for SGX companies. This finding is not
evident from the review of past internationalisation studies in other countries. However,
the theme of adopting internationalisation as a key ‘Business Strategy’ was quoted by
many of the interviewees and it is therefore important for Singaporean companies.
Executive EG summarised this point succinctly as follows:
I think the key issue on internationalisation is that, being an Asian
company, especially for medium small sized Asian companies, there are
not many role models or cases that we can learn from. We really have to
develop the knowhow as we go. So I think that is going to be a major
challenge that any Asian company who is looking at internationalisation
as a strategy needs to look after.
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He added:
We think that the driving force of the globalisation process is two-fold.
First, we believe that, long term; it is difficult to grow very big and
profitable by just being a manufacturer and not controlling the
marketing and sales of our own products. Second, we believe there are
many good companies in the more developed countries like USA and
Europe where the brands are very well known, but some of these
companies are not very big and often these brands have under-utilised
brand equity, especially in Asia. By acquiring these companies, we can
make use of the brand equities of these companies, and the technologies
that are within these companies to expand their business in Asia.
These comments drew out many interesting facets, such as that Asian companies, as
new entrants to the international arena, wish to seek out successful role models, which
are often lacking because large foreign MNCs are often driven by other considerations
and effects. The second point is that most Asian companies sought to internationalise
and adapt as they went along, modifying their approaches according to internal and
environmental changes.
Another Executive EC pointed out their perspective and chosen approaches: ‘Once we
decided to go overseas, we said we need a clear vision. We said: ‘Okay. One, the
territory is the Asia Pacific region. Two, we want to develop Premium Brand X into a
successful international brand’. Executive EF opined that:
you must have your own products, and your own business model,
because if you don’t have your own business product or model, it is very
hard to compete in the international market. For ourselves, we are very
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fortunate because we have built quite a strong base in Singapore which
is core business, and we don’t have many international competitors in
our business in this part of the world.’
In contrast, Executive EG expressed their strategy as: ‘We are looking for
opportunities to participate in global markets directly instead of being a manufacturer,
being totally dependent on the network of our local customers only’.
It is evident that these SGX companies formulated international strategies using those
basic strengths that they considered could offer them an edge over their domestic and
international competitors.
One company, CH, had indeed organised its worldwide operations in a globalised
manner by locating various operations in countries that offered strategic or tactical
advantages:
We internationalised the whole operation with respect to sales and
marketing, whereas in terms of R&D, all of that is done out of the US
and England. Whereas for technical support, we took advantage of the
lower cost here in Singapore, and better human resources, so the
technical support, remote support and hotline support are all based in
Singapore for our international operations; meaning that all our
customers from any country will get supported out of Singapore. We see
the world as one unified business place. It has different resources, and
different advantages to focus on different kinds of services. For R&D, we
use US and England, for technical support we use Singapore, whereas
for sales and marketing (especially products sales), we use the Internet
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as a platform enabling people to buy software from around the world,
and around the clock on credit card purchases.
Another company, CM, also organised their operations in an international manner:
The inherent strengths in the company, obviously that helps to build a
competitive advantage. Strategically, we try to build a business model
that will be able to compete internationally. Without being competitive
cost wise, no matter what, we will not be able to go international,
because we have to compete with so many companies from all over the
world. I would say our basic design and project management is done in
the UK. In order to be continuously competitive, we have strategically
built a back end office in Malaysia. In Malaysia, the cost is only one
tenth of the cost in the UK. So all the engineering details are being done
in Malaysia now and that will bring down our engineering cost, and we
will also be able to build a more international team as well. We have an
office in San Francisco in North America. They are principally
responsible for business development in North America. We also have
our office in South America. They are responsible for business
development in South America.
The above descriptions show the various companies’ internationalisation strategies
with respect to products, brands and operational efficiencies. Another company
reflected upon their internationalisation with regard to the geo-political situation in a
broad scenario manner.
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Executive EI expressed that:
We always look for diversification opportunities and that has been on
our mind all the time. 1998 is in fact just after the Asian financial crisis.
Singapore at that time for our industry was less affected initially.
However, that led us to focus on the regional diversification. At that time,
we saw that the ASEAN region was unlikely to turn around soon
compared to North Asia. So we focused on North Asia, riding on the
boom of the PRC [People’s Republic of China]. That’s how we started,
and within North Asia, we had the choice of Korea, China and Japan.
We decided to focus on China, and particularly the North-eastern part of
China.
An interesting strategy adopted by some companies was to band together to form a
regional grouping to be able to effectively compete against foreign MNCs. Executive
EJ described their stance:
Therefore, a few of the regional local companies, Singapore, a partner in
Malaysia who owns a Malaysian company, and our Thai friend, three of
us saw the threat that if we do not combine our resources as a group, we
would be too small and not strong enough to take on the large American
international companies that are coming to our region. If we want to
continue to grow and manage our business, we have no alternative but
for us to come together. That is, in a way we are being put in a corner to
think very seriously about going outside Singapore to regionalise
ourselves. I wouldn’t say internationalise because we are only three
companies. We just regionalise ourselves … we look at it very seriously
and realised that we are too small, and if we don’t come together as a
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group, share good practices, share common markets so that we become
sizeable, share our resources, add product agencies to the group, we
would not be able to compete.
SGX companies took great care in formulating their businesses and mapping out their
plans. One company had their internationalisation plan laid out in phases. Executive
EN, whose group encompassed a wide range of businesses, stated:
Our internationalisation plan can largely be broken down into phases.
Although the timing does not quite coincide with what you have, I would
talk about the first phase. The first phase was when we started going into
China, looking at anything and everything. We had a venture capitalist
style. The second phase was taking what we already have and trying to
build major businesses out of it. Today, over the last six years or so, we
have pretty much crystallised our thinking and strategies for our
company moving forward. If you look at our lines of businesses today,
our revenue is mostly from outside of Singapore, and profit contribution
outside of Singapore is close to 80 per cent. So you can imagine that
although we are a Singapore-listed company, most of our businesses are
outside of Singapore.
The above expositions on the many different approaches adopted with respect to
business strategy and its close association with the internationalisation motive is a
unique feature of SGX companies.
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Level 4 Sub-theme: Economy of scale (Strength in industry = Strong)
A strong sub-theme within Business strategy is ‘Economy of scale’. Companies found
that, as the Singapore market is small, they have to venture abroad to add size and
scale to their operations, to reduce costs and to achieve higher economy of scale, so
that they can remain competitive in the international arena.
This is one of the strongest themes that emerged from this study. SGX companies are
driven very much by the need to attain higher economy of scale through
internationalisation. They saw that expanding markets and sales enabled them to
enlarge the production base, and therefore their relative market share.
Executive EB commented:
I think scale and size is important. I find that in our business, you must
be number 1 or number 2. You need scale in that sense. Not only scale in
numbers or market share, or volume, or revenue, but also scale in terms
of production, scale in terms of advertising power.
Sharing the same view was Executive EE: ‘I think for all companies the size of the
market definitely matters, and the size of the market in turn will determine the
profitability of the investment. To some extent the larger the market, the higher the
profitability…’
In the same vein, Executive EI said:
I would say size and scale is one of the key factors for us to decide.
Because costs keep going up, if you don’t have a highly scalable model
that can grow with the momentum, there is no way to help you contain
your cost escalation. I would say scale is an important part. Next I would
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say is competency; you have to keep improving your competency
continuously.
It is obvious from the above comments that Singapore executives shared the common
view that scale was needed because of the small domestic base. Scale is closely linked
to other aspects of their operations, as scale is the starting point for maintaining and
sustaining a business through the strategic advantages it produces. Executive EJ
expressed that:
Scale gives us the confidence for what we believe in our business: (i) size
is critical; (ii) market coverage is important; (iii) having a broad based
network of reseller partners is very important; and (iv) the range of
quality product agencies that we carry is also very important.
Executive EL explained this issue in a clear manner by citing his experience:
For example in China, it took us three years to reach a breakeven point,
but once you reach a breakeven point, and attain a critical mass, you
definitely have economy of scale. For example, you lease a small
warehouse or a big warehouse, if you double the size means you double
the workforce so there is a scale factor.
It is understandable that most SGX companies are pre-occupied with scale, considering
the small size of the Singapore market. Companies originating from the US and Europe
have huge domestic markets and can attain a sizeable scale and the economy of scale
that comes with it in their home markets. This allows such companies to be
competitive both domestically and internationally. In contrast, companies originating
from Singapore can be market leaders domestically, but in comparison to their
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counterparts from developed countries, be tiny in size. This is one major reason for the
focus on achieving higher scale through international sales, and expanding into foreign
countries to add bulk.
Level 4 Sub-theme: Challenge to make it work (Strength in industry = Moderate)
Two companies added another dimension to the imperative to internationalise; namely,
their fervour and desire for their companies to succeed and to prove that their strategies
and business leadership models were attainable and viable. Hence, they quoted as their
driving force to venture overseas the sub-theme of to meet the challenge to succeed.
When questioned on what were the driving factors for them to venture abroad,
Executive EI said:
I would say it’s the result. They need to see the result, whether set by the
board or set by themselves. There should be a congruence of the targets
set. Once they set them, they must believe the conditions are conducive.
So they have to go and choose, like in China, and why they decided not
to go into India.
He elaborated that:
The motivation, I would say part of it, is to make it work, that they see
there are market opportunities. If we were to stay put in Singapore and
apply all these things, I don’t think you can really arouse their interest.
To motivate the people, I would say that we let them see the potential of
what they are doing, and in this case China is really a once in a lifetime
opportunity from the Singapore perspective.
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Another executive, EJ, also cited that challenge was a major driving factor:
It is the passion that we believe we like to do something meaningful,
grow a business that we enjoy doing, passion of growing a business. So
the commitment of continuing to grow the business that has already been
over 10 years old.
Level 4 Sub-theme: Venture capital investment approach (Strength in industry = Weak)
Another sub-theme that was adopted by SGX companies (as a sub-theme on Business
strategy) was the use of the venture capital approach to source new opportunities. As
Executive EN expressed it: ‘we had a venture capitalist style. The concept is taking
what successful technologies we already have, and try to build major businesses out of
it’.
The methodology is that these companies allocated some funds and manpower
resources to source for and make venture capital investments, particularly into
businesses and products that were related to their industries. From the eventual
successful ventures, they proceeded to develop and build new products and businesses
around these venture investments. Over time, the investments became core businesses
of these companies. The strategy is novel and seems unique to SGX companies. One
reason given for this approach is that SGX companies are small and relatively isolated
and are thus often unable to gain access to the good investments offered around the
world. Therefore, such companies use the venture capital approach to gain access to
new frontier technologies, business concepts and projects worldwide. In the process,
the aim is to extend their reach, and source viable and interesting cutting-edge
technologies to supplement their existing businesses.
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Executive EI explained how his company had used venture capital investments to
source advanced technologies for his company:
We decided to plant our flag in China. For the technology side, we focus
on infocomm in the US, and roughly I would say about 25 per cent of our
shareholders’ funds were earmarked to do this. We choose the US
because we see that US is the country that offers the most opportunities.
It welcomes new ideas and the infrastructure was already established as
compared to many countries. When you want to do venture capital, there
are many strong links in the US. Once the idea is conceptualised, you
can get the team formed very quickly and integrate other technologies to
apply into a fairly homogenous market. The US, I would say, is a fairly
homogenous market. So we decided to park about 25 per cent of our
shareholders’ funds to do this.
This executive placed emphasise on how his company had dealt with the venture
capital approach:
This is a deliberate attempt, not just an ad-hoc plan. First of all, we
decided to choose the strategy of outward focus because the Singapore
market is small. In order to grow, we have to adopt this outward focus
strategy and we have to test or develop the proven business model that
can be scaled. It has to be highly scalable, where there is growth. They
were all deliberate attempts.
Level 3 Theme: Survival (Strength in industry = Strong)
One of the strong themes that emerged from the research data was ‘Survival’. This was
another topic that had not been quoted in past internationalisation research with MNCs.
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Past research revealed that internationalisation was adopted for major considerations
such as cost reduction, strategic options, localisation benefits and tax/tariff advantages.
MNCs have not stated explicitly that they internationalised to survive. However, for
Singapore senior executives, this theme was prevalent. Many executives emphasised
openly and strongly that they had had to go international to survive. Reasons given
included that the companies had had to move into the international markets because the
Singaporean market was too small, or because they had been faced with an inflow of
large foreign companies, which carved away at their domestic business. Therefore, as a
protective business strategy, they had to expand outside Singapore to regain
competitive and strategic advantages.
Executive EB of an international food business group put it succinctly: ‘Most of the
time, it is always the issue of survival’. Another senior Executive EC, who is also in the
food business, commented starkly that:
You will realise that if you don’t move out from Singapore, then you will
be dead. Luckily the board realised it, because the profits are going up in
Singapore, Malaysia and elsewhere. Investment is not easy, but luckily
the board said ‘We go’.
When asked on the main imperative to internationalise, Executive EJ stressed that:
I have basically elaborated that was because of survival. We faced
international competitors who are many times stronger than us who have
broader ranges of products, and with stronger financial resources. They
are coming into our territories. Being the founder of the company, we do
have the commitment, pride and passion. We believe we can also run and
build a very good business. We believe that we can fight on.
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The business environment was seen as very fluid, competitive and dynamic.
Interviewees indicated there would constantly be fierce competitors who were ready to
enter their space and snatch away market share. Small Singaporean companies are ever
vigilant on such external threats, and find ways to protect their interests. This becomes
even more apparent when Singaporean companies are operating at the international
level, where the competition is greater and the consequences of failure more dire. As
Executive EJ proclaimed, a key motivational factor for his company was fear of defeat:
We are always looking at our competitive landscape. In business, it is
very dynamic. You are always faced with new threats and we always
evaluate the threats and look at how we can survive; how we can
compete and grow. Because if we can compete and grow successfully,
not only we survive, we can do well. When the threat came from the
international companies, we knew that if we do not compete well, the
company may just go under and all our hard work and years of effort
will be wasted. So I think survival and competition will be the first
priority for us.
Similarly, Executive EM said:
Quite obviously, the Singapore market by that time had become pretty
matured. We just have to go overseas and internationalise, purely for
survival. As I have said, it is not because of the government
encouragement and so forth. We always realised that we have to
internationalise to survive.
Executive EM proved that his internationalisation strategy had worked and CM not
only survived, it thrived in the international arena once having selected and established
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a sound business: ‘For survival as a company, of course you need to have business to
do. We had businesses and we had market access… The key imperative is just survival.’
Another perspective on the survival theme was also given by Executive EM: ‘I don’t
think we have a choice. We can’t stay in Singapore. We have to go overseas. Survival
is the driving force. As you know, in Singapore we do not have scale and customers.
Our customers need us. Basically, you can’t manufacture in Singapore because of the
cost structure.’
The above quotations demonstrate the strong theme of Survival of SGX companies.
This is a theme that has so far not been referred to in international studies on
internationalisation involving MNCs from developed countries.
Level 3 Theme: Sustaining profits (Strength in industry = Moderate)
Some SGX companies gained profitability and success in Singapore. To ensure that
they continued to maintain growth momentum, and to sustain their profits, these
companies started to look at avenues for growth in overseas markets. Sustaining profits
was quoted as one of the imperatives for internationalisation.
Executive EB stated that:
I think the motivating reason must be one of profitability, and the
motivation comes from whether you are able to sustain profitability.
Sustain profitability means that you must have a sizeable market share.
And to build this market share of course is not easy, because we have
competition already on the ground.
Executive EG considered that enjoying good profits enabled his company to invest
further in the business, thereby assisting the company to sustain its profits:
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Well, in the period 1990, 1991, the company was doing well, generally
with good progress. The board of directors was talking about how to
further invest into the company to grow its business and to make good
use of the profits that have been generated.
Level 3 Theme: Products (Strength in industry = Moderate)
Some companies used their existing products as the starting blocks to build and expand
their business. Other companies decided to acquire new products, and deliberately
based their business strategies on the new products acquired. They used the proven
existing or new products as the means to expand internationally. Therefore, spreading
their products and expansion into the new markets around the world was the main
theme of their internationalisation strategy.
When they pondered how to venture overseas, SGX companies would often ask
themselves whether they had the means and capabilities to tackle the international
markets. They would first evaluate and decide whether they had the necessary
management, manpower, marketing and sales, technical expertise and financial
resources. Then, they would ask whether they had a consistent, good quality product
and a good brand to compete against well-known foreign brands. If the answer was yes,
they could plan their move with confidence.
Level 4 Sub-theme: Perishables (Strength in industry = Weak)
Companies in the food products sector expounded that, as their food products are
perishable, have a short shelf-life and do not travel well, they had to adopt an
internationalisation approach. Therefore, they had to set up factories in the various
foreign countries to be able to serve those markets. The typical process was for them to
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establish themselves first as the premium or top market share product in the Singapore
home base. From this launching pad, they could project themselves into neighbouring
countries such as Malaysia and beyond. For these companies, their main imperative to
internationalise was thus driven by the perishable nature of their food products.
This was an imperative for internationalisation for Executive EA:
In Singapore, as you know the population size is limited and the amount
of our food product produced for the market is limited. Our product is
also something perishable, and you cannot produce it in Singapore, and
sell to other countries. So in order for us to grow, we have to go to other
countries like Malaysia, Philippines and other countries as well. That is
how we started the process you called ‘internationalisation’.
He explained:
Our internationalisation plan was more driven by the internal need to
expand the business and really out of necessity for our food business. If
we want to sell to different countries, we just have to be there. Our
product is something that is highly perishable, and not suitable to be
manufactured in a country and exported to another.
Level 3 Theme: Brands (Strength in industry = Moderate)
A consistent business strategy adopted by SGX companies was to use their strongest
and most established Singapore brands and market these in new foreign markets. They
deemed this approach as essential for successful internationalisation.
Executive EC said: ‘…we want to develop a premium brand into a successful
international brand’. He elaborated that:
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We have two brands. We did research, and Brand X went out because
there were other brands in the world with the same or similar names.
Anyway, the image of Brand X is not very good …Brand Y’s research
came out as very interesting, very unique, very mysterious, and very
Asian in a way. So we said OK, we have this very good Brand Y. Then,
we asked how is its product quality? Is it consistently good … As a
strategy, we always said ‘We are in the premium business, we prefer not
to get involved in low-end economy brand sector’.
Regarding needing a premium brand to enter the international arena, Executive EG, in
the electronic products business, described CG’s internationalisation process:
We decided to acquire two premium loudspeakers companies in the UK.
One company is called Company X and the other is called Company Y.
Company X is a premium consumer loudspeaker. Company Y was in
both consumer and professional loudspeakers. We believe by acquiring
these companies, our group’s electronics business can start expanding
internationally …the globalisation process started very shortly after
1992. We expanded in Europe, we expanded in US, and then we took the
brands back to Asia, to expand in Hong Kong, China and the ASEAN
countries. The strategy was to make use of these two companies to allow
our company to gain quick access to premium brand customers, and to
internationalise the distribution network.
Instead of using product brand names as their launching pad to internationalise, another
company used the trusted brand name of their nearly 200-year-old company as the
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platform from which to launch their selected engineering business into the international
market. Executive EM said:
After deciding on a business, the other issue is we must look for a brand.
Our venerable company itself is already a brand, and we have the
prerequisite requirements to internationalise, at least in this region. Our
company is very well known for the last 200 years. The company itself
has experience and track records in oil industries globally. That itself
gives us the impetus, we have the brand, and the competitive advantage
we ended up with.
1b. Antecedents (Level 1)—Organisation (Level 2)
Level 3 Theme: Resources (Strength in industry = Strong)
For the organisational aspect, SGX companies tended to look at their organisational
resources before they ventured abroad. They felt that the HQ in Singapore needed to
have built up a sufficient size and level of resources, such as in its management team,
financial strength, manpower and systems, before it could dare to go enter the
international market. The executives had to decide whether their organisations had
prepared themselves adequately for their global drive, as the availability and adequacy
of resources were important pre-requisites.
Executive EA commented:‘…we are not a very big company. We are not those GLCs
which are more powerful, and have more resources financially’. He explained that
they tended to be more cautious, and not very ambitious. At the commencement of
their internationalisation programme, they did not allocate a huge proportion of their
resources in the foreign country. Due to their prudent approach, they did not encounter
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problems of overstretching their resources. A similar cautious approach was adopted
by Executive EF, who said:
I think firstly is looking at the business itself. We must have a good
business model. We are able to go overseas because our business model
can go international. Secondly, internally we must have enough
manpower and talent. Because if we go to overseas, there will be need
for integration, and what we call control. We need to set up systems. We
must be ready and have a good system before we can actually integrate
with the other side.
Level 3 Theme: Shareholders (Strength in industry = Moderate)
Managers of SGX companies considered that their shareholders had a strong influence
on their internationalisation drive. The management needed the support and
endorsement of the major shareholders before they went international; as such a move
was looked upon as highly risky.
In one case, the foreign joint venture shareholder restricted the boundaries within
which the SGX Company could expand. The reason was that the foreign partner did
not want the Singaporean company to enter markets in which the partner had already
established footholds.
This was the case for CC. When they formed the joint venture in Singapore with a
foreign partner who provided the initial technical support and knowhow, they had to
make a contractual agreement with their European partner stating that the Singaporean
joint venture company would not enter the existing markets of the European partner.
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They were not permitted to set up any factories westwards from India. In other words,
CC could not set up plants in Europe.
However, the SGX companies with foreign partners or shareholders from a foreign
country were able to draw upon the experience and contacts of their foreign
shareholders to extend their international reach. CG had this experience:
Our group’s major shareholders are from Malaysia, and have extensive
exposure in China dating back to the early 80s. They have extensive
exposure and experience in China. As a result, our Singapore listed
company also benefited somewhat from that experience and exposure
through their involvement in China. The investment strategy has been
very much driven by that exposure.
In another company, the foreign partner tended to adopt a conservative approach, and
was hesitant to support the overseas expansion drive of the Singaporean-led
management. It was only after the foreign shareholder had divested their ownership
that the management could more liberally adopt an internationalisation strategy. For
Executive EI, when his Asian foreign partner divested its shares in his company, the
Singapore management was able to adopt a more aggressive internationalisation
strategy:
That (divestment of the Asian shareholder) did cause us to change our
strategy. Because instead of just focusing on Singapore, we were more
regional, more outward focused. That I would say is a main change. It
offered us the liberal thinking to address foreign opportunities that came
along.
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The divestment of the foreign partner liberated CI, enabled it to become more outward
focused and granting it more flexibility to pursue foreign investments.
1c. Antecedents (Level 1)—External (Level 2)
Level 3 Theme: Small Singapore market (Strength in industry = Very strong)
This is a very strong theme of SGX companies relating to internationalisation. Nearly
every interviewee referred to this subject and stated that the small Singapore market
was a key driving force for them to go global. This theme is related to ‘Survival’, as
these companies had to move out of Singapore to survive; a view that came out very
strongly in the interviews. This sentiment is logical as Singapore has a population of
less than 5 million people. The small size of the Singaporean market means that it does
not offer the economy of scale to enable Singapore companies to compete
internationally.
Below are the typical remarks as made by various Singapore executives:
The key thing I would say is that in terms of our thrust, our plan to go
international is out of necessity. And if you remain in Singapore, you are
always a small player particularly in our kind of business, food. We are
limited by population. No matter how big you are, there are only 5
million people.
In Singapore, as you know the population size is limited and the amount
of food products produced for the market is limited. Our food produce is
also something perishable, and you cannot produce and sell to other
countries. So in order for us to grow, we have to go to other countries…
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The biggest motivation is basically the fact that there are much bigger
markets than Singapore and what we have here in this region, and
outside of this region.
I think internationalisation is an option that can’t be avoided for
Singaporean companies. You must go global because we are very small.
We tried to build our population to 5 million, and that number is still
very small, compared to what you have in other regions here.
At that time, about 70 per cent of the group profit came from Singapore.
It was a dangerous situation because firstly, the Singapore consumer
base was very small. At that time, the Singapore population was about
3.2 million. Even if we tell all Singaporeans to drink double in-take of
our products, we still cannot sell much. Our disadvantage is our small
population base.
No choice. Because of our small country, any companies operating from
small countries have to be international. Look at all the international
Swiss companies, Dutch companies, because they are small.
I think for all companies, the size of the market definitely matters, and
the size of the market in turn will determine the profitability of the
investment. To some extent the larger the market, the higher the
profitability.
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Look at Singapore, it’s a very small market. Now, of course our board
has actually decided to look at elsewhere.
Singapore is a very small country with a small domestic market. As
Singaporeans or Singapore companies, if you want to expand your
businesses, obviously you have to go international because our domestic
market is too small.
Singapore is too small as a country. Singapore can only be used as a hub.
It can never be treated as a market for any given business where people
look at building a great company. If you are thinking of building a great
company, the Singapore market can never be your base. Singapore can
only be used as an operating hub, and naturally when we are looking at
transitioning ourselves into property and property investment, we would
never look at Singapore as one market for us. Even today we have yet to
make any investment in Singapore. It is still overseas: China, Japan, and
the United States.
As I said Singapore’s market is so small, and when we took over the
company, it had become so small and the core business is either lost or
already been made irrelevant by the change of times. In order to survive,
we have to look outside of Singapore …that’s the critical factor why we
have to be internationalised.
The common theme uniting these quotations is that, because Singapore is small, the
SGX companies had no choice but to go international. The consistency with which the
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interviewed managers raised this point and the clear importance that they placed in this
as a motivating factor for internationalisation gives a clear indication of the strength of
this theme.
Level 3 Theme: Regional growth (Strength in industry = Moderate)
One interesting difference for SGX companies as compared to MNCs in the prior
literature is that SGX companies often referred to regionalisation, rather than
internationalisation. Singaporean companies usually expanded progressively from
Singapore to the regional markets such as Malaysia, Thailand, Indonesia and Australia.
Further afield, they expanded into China, India, Korea and Japan, before moving on to
Europe and the US. Some SGX companies, unlike their MNC counterparts, were more
restrained, while some even decided that they would not venture to South America or
Africa.
Executive EC commented on his company’s gradual regional expansion:
First of all, we already have businesses in different countries like
Malaysia and the Philippines over the years. In order to pursue our
business strategy initially, we don’t necessarily expand the overseas
operations in terms of increasing the number of countries in which we
operate …Now our geographical coverage is Asia-Pacific rather than
international.
This executive put his expansion plans plainly as: ‘even though we have the world at
our feet, I always believe that we have to do something only in our front yard and
backyard. I don’t want to go further, like into Eastern Europe or America’.
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Executive EF had a similar regional expansion strategy:
During 1998, we had some operations in neighbouring countries like
Malaysia and Indonesia, but we are looking even beyond these countries.
So the first approach is that we’re looking at two new regions. One is
China and one is Australia, but we choose Australia in particular
because our business is something that we need to go to a country with a
large market, and at that time China was not ready yet.
Executive EJ also adopted a regional approach:
If we want to continue to grow and manage our business, we have no
alternative but for us to come together. That is in a way we are being put
in a corner to think very seriously about going outside Singapore to
regionalise ourselves.
Unlike large MNCs, which are truly international companies with operations spread
out widely around the world, SGX companies tend to adopt a regional approach,
finding comfort in proximity and familiarity.
Level 4 Sub-theme: Close to customers (Strength in industry = Weak)
One SGX Company, due to the particular nature of its business, had to adopt a ‘near
market, near customer’ internationalisation strategy. They proved to be very successful
in the execution of this strategy, and grew to become a dominant world player in their
sector. The sub-theme is worthwhile noting as it gives one strategic approach that
clearly justifies the internationalisation drive for any company, whether Singaporean or
foreign.
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For CD, the ‘close to customer’ approach was a critical business strategy:
Singapore is a small economy, especially for our offshore and marine
businesses, we serve international customers. In fact at any one point,
our international customer base forms over 90 per cent to 95 per cent of
the group’s business. When we adopted the strategy of near market near
customers, we decided to go to where the customers need our services
most.
Level 4 Sub-theme: Culture issues (Strength in industry = Weak)
In some past research, the cultural differences and difficulties were cited as barriers to
internationalisation (Hewapathirana, 2009), especially for small companies. It is
interesting that in this Singapore study, few companies cited cultural differences as a
barrier. Therefore, it is a ‘Weak’ theme. There could be a few reasons for the cultural
differences being a lesser issue for SGX companies:
1.Singapore has a multinational environment, with a mix of Chinese, Indians,
Malays, Europeans, Americans and Australians working in a very cosmopolitan
city.
2.English, which is the international language of business, is the common working
language of Singapore.
3.Many SGX companies have already deliberately built a multinational culture and
environment within their companies, and therefore are ready to adapt in the
foreign factories and offices.
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Executive EG overcame the potential cultural problems by employing people from
diverse countries and backgrounds:
I think we are relatively successful as a manufacturer and an exporter.
And we are very successful in that basically we train a lot of the
management from different countries, to work with the company for a
long cross-cultural experience. It is not unusual that we have senior
management who worked in the company 10, 20, 30 years. All these
people understand that as a manufacturer alone, trying to expand the
business sustainably and reliably is difficult. The team has a global
outlook. So there is good consensus within the management team about
expanding globally.
To overcome potential problems with new foreign investments and to counteract
possible integration problems, one company, CE, said that they took great effort to
screen investments and get good people to join them:
we need to develop a management team with strong cross cultural
experience, that could adequately cover all the key global markets…as a
manufacturer, we put a lot of effort into hiring, screening and developing
people, which takes time... There is always a pressure of trying to do the
best you can with insufficient management capacity, and I think that is
the main feature of the globalisation process.
Level 3 Theme: Born global (Strength in industry = Moderate)
An interesting theme that emerged was that some Singaporean companies were indeed
‘Born global’. A few companies have adopted the strategy to ‘bypass’ the small
domestic market in Singapore, instead choosing to launch themselves straight into the
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international arena. This finding is interesting as ‘born global’ companies are thought
to normally originate from developed countries, which have the professionals,
managers and entrepreneurs armed with strong technology, finances, resources and
knowhow to make a quantum leap into international markets (see the Literature
Review in Section 2.3 of Chapter 2).
In the case of Singapore, the ‘born global’ companies were essentially driven by the
non-significant domestic market size. So to seize opportunities, such as to enter new
markets that were opening up, or to capitalise on the nature of certain products (for
example, fast changing IT technology products), these ‘born global’ companies had to
take a ‘leap of faith’ and venture directly into international markets. Such companies
also tended to take more risks.
Executive EB explained the ‘born global’ case of his company:
I think Singapore as a market is very very small, and we already realise
that is a problem for us. The only question then is how to find a comfort
zone, which will allow us to be able to export and to be able to prosper
from there. So we decided that we wanted to move there [the Russian
market], when the Iron Curtain actually came down, and was dismantled.
He cautioned that it was very difficult for his group at the beginning. He felt that it was
important that his company was the first mover in the new markets. He considered that
it was therefore justifiable for them to jump into the markets at the right time. He
pointed out:
Of course, we had many barriers at that point in terms of language, in
terms of changes in regulations, in terms of customs, in terms of changes
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in laws and also regulations governing trade, tariffs which were the most
important for us.
In the case of Executive EH, the ‘born global’ approach was triggered by the nature of
their products:
When we first started, we were already been an internationalised
organisation. We embarked on the overseas market even before we
started establishing our market back home in Singapore. And, if you
trace our history from when we focused on the manufacturing of IT
products or IT solutions, the bulk of our business was generated from
overseas (from Europe, United States). And of course the IT business
was very competitive. In 1998, we faced the Asian financial crisis, and
that led the group into changing its entire business focus.
Level 4 Sub-theme: First mover advantage (Strength in industry = Weak)
One company considered that they had a first mover advantage in their
internationalisation strategy, as they had decided to go into the less developed and
more difficult markets. For example, one company targeted the Russian, East European
and former Soviet Union states at a time that these markets had just begun to open up
in the early 1980s and 1990s.
Similarly, Executive EC valued the first mover advantage in emerging markets in Asia:
‘We look at each virgin market in the same way. We seized the first mover advantage
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in Vietnam in 1981, then we went to Cambodia and we went to Laos’. He elaborated
that:
Because we are so small in Singapore, we need to find new markets.
Mongolia is a small market, and we are there. We are the biggest plant
there for our products, compared with another local brand. Sometimes in
difficult markets like Papua New Guinea, the margin is very high
because nobody dares to go, and we are the only one there. Nobody goes
because of the law and order problems.
Executive EB thought that the first mover advantage in new markets was a very
important factor for success:
Once you enter the market place, and you are comfortable with it, it will
become your comfort zone and you will find that all the other guys who
want to come in will be faced with the same barriers that you faced at the
beginning.
4.5.2. Processes for the internationalisation of SGX companies
A schematic diagram of the four levels of themes and sub-themes for Processes is
shown in Figure 4.2.
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Figure 4.2 : Hierarchy of Themes and Sub-themes of Internationalisation: Processes
Processes
Planning
Strategy drivers
Formal / informal process
Consultants
Frequency of reviews
Structure
Centralised / decentralised
Localisation
Management strength Core values
M & As Divestments
Business model
Influences
Government incentives
Major shifts Shareholder changes
JVs / Partners
Success / failure factors
Entry barriers
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2a. Processes (Level 1)—Planning (Level 2)
Level 3 Theme: Strategy drivers (Strength in industry = Very strong)
With regard to the key drivers of the internationalisation strategy of a SGX company, it
was consistently reported by the interviewees that the CEO was the main driver, with
the support of the management team. The board was regularly consulted, but usually
endorsed and supported the internationalisation programmes proposed by the CEO and
his team.
The following series of quotations from executives demonstrates that in SGX
companies, the CEO drove the business strategies, particularly in relation to
internationalisation, which was more challenging and required direction by someone
senior with the vision, drive and commitment to carry through the plans. The leader of
internationalisation also needed to have the authority and be empowered to lead the
entire management team and direct company resources.
The comments of the executives were:
It was more of a management initiative as CEO of the company, together
with my other colleagues; we pursued this strategy more vigorously.
Three of us are founders. You can say that as the founders of the
company, we are the promoters and make the difference in pushing this
effort abroad. It started from us...
I think the management team has to drive the plan because the board of
directors is there as supervisors, and anyway they are not full time. The
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board worked with our top management team, but executive directors
and the management must drive the business. The board gives guidance.
The management must take direct responsibility of the strategy, as we
are directly responsible for our performance.
The board sets the direction but I do the search and the implementation
myself.
The board has set a general direction, and all we need to do is tell them
that we are progressing well, and we are making money. So the board
has very little influence.
I think it’s the CEO, myself (who drove the internationalisation efforts)...
In our company, the culture was the management would need to develop
the strategy and how to manage the business. Then the board would
review and endorse, and make suggestions or recommendations if
needed. So the board was really on the decision side and the
management was really on the execution side. The management would
propose approaches and strategies, the board would review, debate,
discuss and endorse.
The CEO initialised the whole discussion and the board will participate
in the deliberating and articulating some of the important considerations;
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and management will also participate in looking into the aspect of
operational problems that one can expect.
The CEO of the group takes responsibility. Of course, the execution will
then be delegated down to the management level.
The CEO was the one who conceptualised, identified the need because
this was a 180 degrees change. Instead of an inward focus, it was an
outward focus. In order to adopt that, we must think of our team, do we
have the team that can perform in the foreign country?
I would say initially, the CEO drove the change, and subsequently you
need the support and endorsement of the board when you decide to scale
it up. Initially, you just play with it I would say. Until you need big
money, then you need the full board support. That was the direction.
The driver, apart from myself, will be the team of people who have been
in the industry for 30–40 years.
From the above quotations, it is evident that the CEO and his or her team led the
internationalisation drive. This is similar to foreign MNCs, as outlined in the literature
review. The above quotations also explained the roles of the board versus the CEO.
The board’s role was one of supervision and guidance, while the CEO was involved in
directing and implementing the internationalisation plans.
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It could be generally valid that the chief executives played a critical role in leading
their companies such as in their internationalisation strategies. However, it is also
possible the CEO’s role could be overstated in respect of their responses, as the CEOs
were the main informants for the interviews for the 14 sample companies.
Level 3 Theme: Formal/informal process [in figure] (Strength in industry = Strong)
Another interesting research result from the interview data was that most SGX
companies did not have a formalised approach to developing, planning and monitoring
their adopted internationalisation plans.
For such an important matter as strategy and internationalisation, it came as a surprise
that the majority of SGX companies took an informal approach to the study, initiation
and monitoring of their internationalisation strategies.
Executive EA explained:
Our approach is rather informal, but yes, we do track. Every year, we
have the numbers in front of us. So far, because of the way we pursue
internationalisation, no one country has such an alarming level of
activity or turnover that we need to backtrack or change our plan.
Another Executive EF said: ‘I think we update as we go along. The more important
thing is we are involved in the business day to day’.
Although strategy formulation was informal, monitoring was typically vigorous.
Executive EG said:
Actually, we have very extensive and regular reviews of the development
of acquired companies, and the distribution network. Because, honestly
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speaking, in the early days, they were not very profitable, and they
sometimes created losses for us. So it’s always high on the management
agenda to have regular and periodic strategic reviews and strategic
meetings as well as at least monthly review of performance. On the
review side, I would say they were very closely controlled and monitored.
However, the key issue is the development of knowhow about how to
manage these companies, and that took some time.
Level 3 Theme: Consultants (Strength in industry = Strong)
It is interesting to note that very few of the SGX companies in this study used
consultants. The management teams typically felt that they were best able to decide
and map out their own plans. When queried about whether they used external
consultants, Executive EA said: ‘It is all internal’, and Executive EB opined: ‘Actually
the best consultants are our own experience in the past’. Executive EC stated plainly:
‘We have no consultant’.
Companies that used consultants tended to be selective regarding that usage. Executive
ED said:
We develop our own strategies over many years. I think initially we use
certain consultants to improve our business performance in operations
and so on. Subsequently, we use consultants to look at strategies. We
must use consultants correctly.
Executive EK said: ‘No external consultants. As I said, it is extremely fluid. There is no
grand plan to go after a particular country. Everything is moving round, talking to
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people and very opportunistic’. Executive EM felt that for his industry, his staff was
better placed to develop their own strategies:
No, this is a niche market. I think our guys are the experts. I think
nobody is better than us. Because there are only less than a handful of
such companies in the world. How do you find external consultants? If
there are external consultants, they probably won’t survive. Too small a
market.
In contrast, one GLC did use consultants widely to assist them in their development of
an internationalisation strategy, and regularly to monitor and check on their plans.
Executive EL, who’s GLC, is in the logistic supply chain business, laid out the
company’s process of formulation of their internationalisation programme:
We engaged a consultant to help us to look into possible areas. In fact,
we conducted scenario planning where we had a consultant assess the
trend in 5 to 10 years, what will be the emergent type of business and
what we could go into … Next we had another internationally reputable
consultancy company to conduct a strategy planning exercise. They
helped us to identify the business strategy, which sector we wanted to be
in; and for each sector, what were the core competences we must have in
order to do well in the sector. We engaged a consultant for the second
phase, more to develop the strategy and the internationalisation plan.
The above is an example of external consultants being used repeatedly to study
operations, formulate strategy and propose implementation plans for a GLC’s initial
internationalisation plan. Through this process, the GLC was very successful in its
eventual overseas drive.
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Level 3 Theme: Frequency of reviews (Strength in industry = Strong)
On the issue of frequently monitoring plans, a few companies reported that they
adopted an ad hoc approach. One company CL even said: ‘We just shoot from the hip’,
and ‘it is rather very much a hit and run process...’
However, as expected, most SGX companies adopted regular and proper review
processes. Some held their reviews yearly, others every 2 or 3 years, while a few had
5–10 year plans that were reviewed and updated regularly. The following quotations
demonstrate the array of frequency of reviews:
Yes, we do track. Every year, we have the numbers in front of us. So far,
because of the way we pursue, no one country has such an alarming
level of activity or turnover that we need to backtrack or change our plan.
We do a review in maximum two years. It could be even shorter than two
years; we do an overall review of the strategy. But in China, we see that
China has still a very much centrally guided economic plan. So the five-
year plan is a good guide for us.
We have a three-year plan; a five-year plan and we have an annual
budget. We have strategic meetings. The board gets involved in the
strategy discussion. We have done it internally using some of the well-
known consultants. We use consultants to validate our strategies.
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We have a 10-year plan focusing on the priority areas, because although
we have the resources, we do not have unlimited resources, so we
prioritize the areas.
2b. Processes (Level 1)—Structure (Level 2)
Level 3 Theme: Centralised/decentralised (Strength in industry = Very strong)
On the theme of whether SGX companies tended to adopt a centralised or decentralised
approach, the interviews produced mixed results. Most companies used a mix of
centralised and decentralised operations. Finance and technology tended to be
centralised, while sales and HR were decentralised. Most companies said they
structured their foreign subsidiaries according to the need of the situation and
circumstances.
For CF, the approach was dependent on the level of ownership in the foreign
investments:
It is dependent on one factor: percentage of investment. But if it is a
wholly owned investment that we are considering, then we have to look
at the set-up and headcount issue during the due diligence stage. But if
this is not a majority share investment, then we have two options. One is
like most people do, the major shareholder will appoint the GM, then we
the minority shareholder will appoint the CFO. The other option is that if
our stake is not substantial, then you just want to leave it to the existing
management. If we hold a major stake, we manage everything.
For most SGX companies, one key area that is under central control is finance.
Executive CF stated: ‘For us, the more important thing to do is firstly to centralise our
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finance. We get closely involved in the finance part. Secondly, we get involved in the
purchasing. The rest, technology, is not an issue to us’.
Other non-critical areas, or areas requiring responsiveness to ground conditions in the
foreign country, were decentralised. For company CM:
They are mainly sales marketing units and product supply is from central.
The manufacturing arm is run by the group HQ. These business units are
self-contained; the sales marketing company has their own Profits and
Loss accounts. Their management needs to be responsible for their
individual Profit and Loss. But they all buy products from the group,
who is responsible for technology product programme, supply of
products, and supply of strategies and resources.
He added: ‘Product development is also centralised … we centralise the HR of all the
senior management within the business unit’.
For Executive EL:
We only centralise three things. First is the financial control. To us, it is
quite important. We ensure consistency in compliance because as a listed
company, we need to make sure that all the financial rules are complied
with properly. That is centralised. Secondly is IT. Because IT has to be
consistent throughout all the companies in the region so that they can
communicate and there is economy of scale. The third is the marketing
strategy.
The SGX companies usually decided from the onset those operations that should be
centralised and those needing to be independently established. Companies need to be
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flexible, while also consistently applying control measures across all countries or
operations. Most companies emphasise internal audits in addition to financial controls,
although financial control remains the most crucial and tightly controlled monitoring
measure. For example, foreign subsidiaries are required to submit budgets on a yearly
basis. Following approval by the Singapore HQ, the local operating unit must then
adhere to that budget. These budgets are used to track performance. As executive EJ
put it:
The area that we insist upon and we won’t compromise is our financial
governance. And this is where our corporate CFO’s financial standards
are being imposed onto each country’s financial standards. The CFO of
every country reports back to the Group CFO at corporate headquarters.
This is one area we don’t compromise. The CFO there will know exactly
that all the financial reporting and practices have to follow our
standards.
In cases in which companies need to protect their brand image, though sales could be
decentralised, marketing is often centralised to guide the overseas operations on
branding, advertising and various aspects relating to brand promotion and publicity.
Likewise, other companies deem other areas critical for the success of their business,
and thus centralise these areas rather than compromise on them. This was the case for
CN: ‘There are a few things that we never compromise. Financial, corporate
governance and controls are centralised. Legal and human resources have central
policies but local implementation. Those are not negotiable’.
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Level 3 Theme: Localisation (Strength in industry = Strong)
Localisation is a theme that is consistent with past research on internationalisation and
is rated as a strong theme in this study. Like other MNCs, SGX companies tended to
favour localisation. The advantages of localisation of management in foreign
subsidiaries are well accepted and understood. Some SGX companies adopted a strict
policy on this matter, while some were flexible and used a mixed approach, usually
depending on the availability of senior management to be sent to manage overseas
plants and factories.
Localisation of management is a consistent theme for SGX companies. One reason is
the lack of central resources at the Singapore HQ level. Another rationale is that the
local market could provide an excellent resource pool to tap management talent, who
are at the same time familiar with local issues and can tackle local regulations, HR and
tax issues more effectively.
Another quality that executives reported looking for in management was leadership
quality. They had to deploy, in every subsidiary, a country CEO who was competent,
because he had to know how to lead the team as well as motivate them.
For Executive EC:
We make use of a lot of local talent in our foreign production activities.
For example, we use almost entirely the local Australians in our
Australian venture. After all, they are more familiar and in this
agricultural sector, there is more talent in Australia than in Singapore.
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Executive EB rationalised:
I think it is very important factor because I don’t think the locals
themselves can do a better job, if you are talking about
internationalisation effort because we are going into so many countries.
I mean today we are operating in more than 70 countries.
Similarly, Executive EC said:
Because Singapore has so few people, everywhere we operate, we have a
large percentage of local personnel. Say in Brazil, we have 8,000 staff.
Our people seconded from Singapore make up for less than 50 persons
out of 8,000.
A few SGX companies expressed a definite preference for localisation and recruiting
from within the target country. Executive EH gave his position as:
I think the first factor that we consider is wherever we go, we must use
local people. That’s the first approach. Use local talent, the local people.
We also divide the job scope in our head office. We have certain people
in charge of certain countries. There will be direct reporting. Our
management is quite flat, that means you report to the correct guy and
need not go through too many layers.
Among the participating group of 14 SGX-listed companies, there was only one
foreign headquartered company (in Hong Kong). The rest of the sample companies are
headquartered in Singapore. However, no differences were observed between the
responses from the chief executive of the Hong Kong headquartered company and
those of Singaporean-based companies on internationalisation actions. For instance, the
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same approach on localisation was adopted. Executive EG of this Hong Kong
headquartered company said: ‘For all the business units, even the most senior manager
is a local manager. I think on the aspect of a local manager, there are certain things
that are crucial’.
In the case of CH, its CEO said:
I think everything started off with people. In today’s business, I think
knowledge is a key thing and knowledge does come from people. Our
practice is that we always use the local knowledge, people from that
particular country. We don’t want to send our people over to learn about
that location, by then it will be too late. Straight away we go into a
country, we recruit local people with the local talent and knowledge with
the ability to execute our plan. I guess that is a key importance.
From the above data, it can be seen that SGX companies adopted as much localisation
as possible. They allowed the local team to manage the business. They continued to
use the local systems, and continued to leverage on the market expertise. However,
they reviewed how to improve operational efficiency, shared best practices and sought
to improve both sides of the business by reflecting on and adopted as necessary new
best practices. Evidently, localisation is very important, as reflected in this quotation
from Executive EK:
We don’t differentiate. As far as we are concerned, this is an MNC so
this is not really a local Singapore company. If you depend on
Singaporeans to expand, you’ll be dead. Singaporeans by and large do
not like to go overseas. They tend to be extremely pampered and
preferred to stay put in Singapore. It is very difficult to find
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Singaporeans in order to go and expand your company. Furthermore, in
our business there is no other Singapore company that has that kind of
scale that we have, which means that if we wish to expand, we have to
recruit foreigners because most of the international logistics companies
are foreign companies. If we want to have talent to help us grow,
basically we take from our competition.
Level 3 Theme: Management strength (Strength in industry = Strong)
The availability of strong management before a SGX company would venture abroad
was another strong theme. SGX companies, being Asian in outlook and nature, tended
to be careful and conservative. They would not embark on an overseas expansion
programme unless they had ample local management resources. In fact, the boards
were hesitant to approve overseas investments, unless management could prove that
they had sufficient resources for diversion to the overseas projects. Many SGX
companies had management teams comprising executives from a mix of several
countries.
In the words of Executive EC:
Our company, in my opinion, is relatively successful. Number one, we
have a team, a united team. Half my corporate team members are
foreigners. We have Dutch, British, Indian, French and Canadian. In
fact, this is very sensitive if I said this a few years ago, as previously, our
company staff was 99 per cent Singaporeans and Malaysians. I don’t
think we could have succeeded if we remained that way.
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Executive ED explained: ‘We believe that our management style and our management
culture allow us to operate effectively in a foreign environment even though culturally
it is quite different from Singapore’. For Executive EH, he felt: ‘I assume that the
management team is professionally qualified and they are capable of handling all the
technicalities’.
Echoing the views of the other executives, Executive EH noted:
A key importance is that the group itself must have an internationalised
culture, in the sense that you take different ethnic people as the
corporate culture prevails, and then an international rather than ethnic
culture prevails. Unless you have a strong corporate culture, it is very
difficult for a company to expand beyond its own country.
The typical SGX company, having embarked on the internationalisation path, also
undertook efforts to evolve and develop an international culture within their company.
Such efforts allowed them to accumulate the global experiences, connections and
networks that enabled them to look easily at opportunities overseas. Thus, they also
became better at being able to evaluate and seize opportunities, and more ready to
execute overseas projects. One observation was that while many companies
encountered opportunities overseas, the question of whether they were ready to
negotiate a deal and execute their plans arose. SGX companies had to prepare a culture
and management group that was ready to evaluate, decide and execute such
opportunities, but that also suited their internal structure and preferences; that is, they
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needed the knowhow and resources to be able to get things done. This need for
readiness was expressed by Executive EJ:
We believe in getting companies that have a similar mindset. People who
are entrepreneurial, people who built their businesses on their own. But I
think what is more important to us is the quality and the integrity of the
team and the founders. We believe that we need to look for a good
company with good leadership, good people and infrastructure.
Level 4 Sub-theme: Core values (Strength in industry = Weak)
Related to the main theme of management strength, one company cited that they
deliberately focused on building a strong set of core values as their corporate culture,
and used these strong and consistent core values as the ballast to strengthen their
overseas operations. The aim was that the entire group should share common values
and beliefs. Executive ED said of CD’s use of core values to bind employees together:
Because we have a diversified workforce all over the world with different
cultures, to glue them together into the company, we roll out the core
values. These core values were discussed at top management level and
operating level, and we rolled it out to everybody so that every employee
understands what are our core values.
Level 3 Theme: Mergers & Acquisitions (Strength in industry = Moderate)
The SGX companies achieved growth through a combination of organic (that is,
internal expansion) and inorganic (that is, external acquisitions) means. In their efforts
to expand internationally, some companies adopted the strategy of growth through
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international M&As. Their strategy was to acquire additional businesses in their
existing or new areas, which would enable them to leapfrog into international markets.
Companies divest sound international businesses after building them up for profit
motives. As Executive EC said:
It (the divestment) came as an opportunity because it so happened that
we sold the business to Company X who offered a very good price. We
are in the business of making money and when there is an opportunity to
realise a huge capital gain, we saw no reason why we shouldn’t do that.
When company CA bought another brand from a competitor, the rationale was justified
as: ‘Just like the way we bought Brand Y which was a very good move … so as to
synergize an affinity to our own Brand X’.
Level 4 Sub-theme: Divestments (Strength in industry = Weak)
While some companies grew through M&As, which brought significant gains in
international coverage, some companies went in the opposite direction, to exit certain
businesses and products through divestment. The reasons given for this were varied.
Executive EG exited a certain business because it was unable to compete in that sector.
This same company later exited the industry because it found that its business concept
was unsustainable. Executive EG said:
And as a result, the container business was one of those affected in terms
of profitability and we were compelled to divest. Like many other
businesses when we are not able to compete with China, either we
continue to lose or we move out.
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When queried about the motivations or reasons for some of their divestments, one
company responded that: ‘The simple answer to that question is profitability’. Another
company explained that their divestment of an international business was because of its
decline in profitability; as a result, they were compelled to divest. Like many other
businesses when they find conditions to be difficult, such as when they are not able to
compete in foreign domains, to avoid continuing losses, companies might decide to
move out or quit those international markets, or divest, even though this would incur
losses.
Thus, it seems that companies’ divestment of businesses might not always be linked to
the internationalisation plan. It could sometimes be due to group restructuring, or
opportunistic reasons such as selling an operating unit to realise a profit. However,
some companies found themselves needing divest or close an international business
after venturing in because of adverse competition, a difficult environment or other
reasons. In these cases, the decision was made to exit to avoid further losses. In such
instances, the executives considered that the internationalisation of those businesses
had failed.
Level 3 Theme: Business model (Strength in industry = Weak)
A few companies offered the view that they had needed to develop an adequately
robust and proven business model domestically before daring to venture globally.
This theme is described by Executive EG:
We have a strong business model. Today we have a manufacturing arm,
which runs two small, high-end factories in the UK, and a big factory in
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China that makes the more mass market, high volume products. We have
individual business units in key markets, one business unit responsible
for the US market, Canada, Mexico and Latin America. One business
unit responsible for the UK because that is the most complex, with
factories, product development, technology development, one business
unit in Europe, one business unit in Asia, and one business unit in Japan.
Executive EJ felt that his company’s strength of its business model was its extensive
network: ‘The next thing that is also very important to us is the network that we have.
Having the network coverage, over 20,000 partners in the six countries, is very
important to our success’.
2c. Processes (Level 1)—Influences (Level 2)
Level 3 Theme: Government incentives (Strength in industry = Very strong)
One of the key research questions stated in Chapter 3 asked whether the Singapore
government incentives had assisted SGX companies to go global. It is a long-standing
policy of the Singapore government that incentives, assistance programmes and
overseas missions are carried out each year to help SGX companies to venture overseas.
IES was established to assist Singaporean companies find trade, investment
opportunities and business partners in overseas industries. The expectation is that these
Singapore government incentives will have had an impact on the internationalisation
plans of the SGX companies interviewed, as the promotional efforts have been ongoing
for over two decades.
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The responses from the interviewees consistently showed that they had not benefitted
from, or had not needed, the government incentives. This is a very surprising discovery.
The interviewees gave various reasons for this lack of usefulness of the incentives.
Executive EH put it bluntly: ‘As far as the Singapore government incentives are
concerned, I don’t recall we were engaged in any of these incentives programmes’. For
Executive ED, the incentives were inconsequential:
The government doesn’t really give us the extra push. The amount they
give us is very minimal. They offset, for example, your overseas expenses
and overseas losses. They allow you to offset some of your profits from
local operations but that is natural and nothing special about that.
The major reasons as reported by the SGX companies that they had not benefited from
government incentives and promotional efforts are outlined below.
Firstly, many of these companies had begun their internationalisation efforts before the
government started to promote this area. As Executive EC expressed: ‘As I said, when
we first started moving out, the government was not yet talking about
internationalisation’.
Executive EJ said:
Even though the government offered many incentives to bring people
overseas, we believe in depending on ourselves, on our internal strength,
rather than looking to the government for help. In fact, throughout the
history of our group, I think we relied very little on the government’s
support, or the government telling us to go to this place or that place. We
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believe that as businessmen, we should be able to run the business better.
We believe that as businessmen, we should know our own business better
than anyone else in the government. Government may have a vision.
Government may have certain strategies for the country to grow. If we
can complement them through our own internal vision and internal
strength, we do not really need the government unless we need financial
support or whatever, but I do not think we would need to call on that.
Second, for some companies, the nature of their businesses was such that they were not
eligible for support, or else they did not need government support and therefore the
incentives were not applicable to them.
Executive EF explained:
The Singapore government’s emphasis is different from ours.
Singapore’s land is small and they emphasise high value-added goods.
Our business is construction equipment. We need a lot of space for
storage. The government is not encouraging our kind of business, and
any scheme that they come up with, we are not qualified. So, it’s
unfortunate to say that we are on our own when going international.
Executive EK was negative too: ‘No, whether the government wants us to
internationalise or not, it is irrelevant’.
Third, some companies needed to undertake a global approach for their businesses and
therefore did not need government incentives to push. These were generally the so-
called ‘born global’ companies, as mentioned previously under the theme ‘Born global’
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in the previous Section 4.5.1. These companies had to venture out for their own
reasons and objectives; they did not wait for the government to incentivise them.
Executive EB said:
No, I don’t think the government incentives impacted what we need to do.
If you have to do it, you better do it because it is for the survival of your
own company, and it is for the good of your own profitability. By the
time you ask the government to do anything for you, I think it is too late
already.
For Executive EM:
The Singapore government’s effort has fairly low influence on us. We
decide on a place and when we go there, we will negotiate with the local
government quickly and then of course we would let IES know because
we are still part of Singapore. We are on good relationship with IES, but
I think it is difficult for them to know our business. We have to decide on
the business on commercial reasons first.
Fourth, for some of the companies, their business strategies required
internationalisation (for example, the need to be ‘close to customers’). These
companies could not wait for government incentives either. CD explained their priority
as:
No, I think the purpose of internationalisation comes from the needs of
our customers rather than from our government. We have always been
very customer-focused, and today customer focus continues to be a core
value of our group because that is the reason we exist as a business.
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Fifth, for some companies, government bureaucracy hampered their use of the
government incentives. In the words of Executive EB:
I won’t really say so. It is actually a good encouragement, I would say.
Of course, nowadays as we become more structured, we tend to use some
of the incentives. But in the past, I must say unfortunately by the time you
think of using the incentives, it is too late already. Then they would say
you haven’t complied with certain procedures, therefore you are not
qualified to apply for it and so on.
A small number of the SGX companies did benefit from the government incentives,
either directly or indirectly, and were appreciative for the assistance. In addition, as
Executive EA noted:
Not so much in terms of government incentives because it didn’t really
affect us, although some of the incentives provided by the government do
help, like tax incentives. Profits repatriated to Singapore now enjoy tax
exemption. But our internationalisation plan is not a response to the
government‘s call on this.
Executive EE also recounted a positive experience:
We are encouraged to move out to various emerging markets especially
by government agency like IES. Those markets are emerging markets
and definitely have impact. When delegates led by government agencies
go to new markets that has undoubtedly brought along a following if you
like. Of course, their lead in taking delegates to new territories, new
markets, is obviously very helpful.
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It is interesting to note that even for the GLCs in the study sample, they had not waited
for the government’s call to venture overseas; nor had they needed the government
incentives. This is clear evidence that internationalisation imperatives were stronger
driving forces than the government intervention for the companies in this study.
Executive EL who worked in a GLC gave this perspective:
In fact, the parent company has set out quite a clear vision for the whole
group that we need to grow, and to grow overseas. Singapore is a very
small market. Secondly, being a government-linked company, preferably
our growth should come from overseas so that we don’t have to compete
with the local players with regard to resources, connections and others.
The parent company therefore encouraged most of the companies to go
overseas. It is a general direction, and the management and the board
also felt that there was tremendous opportunity to go overseas anyway.
Executive ED, who was with another large GLC, commented:
GLCs do not get any special treatment from the government. In fact, for
a GLC, the Chairman usually has some government connections and if
the Prime Minister or Minister asked the company to do something, you
feel obliged to do it. So I would say the amount that you differentiate
from others is very minimal, and you have more obligations.
In an attempt to delve deeper into this important aspect of the findings, a senior
representative of IES was interviewed and questions were posed to him on why he
thought responses had indicated that many companies listed on the SGX had not
needed or used the government incentives in venturing abroad to seek out new markets
and opportunities.
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The IES representative offered the following explanation:
What do we do? How do we help? Fundamentally, there are three ways
we can help companies. First way is called Connection, second is called
Capability and third is called Capital. So you are right that some
companies don’t need capital, some companies don’t need capability. It
could be large companies, for example the GLCs didn’t need money or
incentives from IES. What they needed was connectivity. IES can link
them with some people so that they can start the conversation, and
understand their counterparts. Then we go down to companies who are
SMEs or smaller. That’s where Capability and Capital come in. Some
companies don’t even have the intellectual property properly done up, or
their brands are not properly established. IES can help them to establish
their brand and help them to get in touch with consultants to put up an
international road map. Some companies need financing. When they
expand, they will be looking for a bank financing. Again, IE has a
financing scheme to work with a bank, and this helped them to get access
to capital and also to subsidise the interest cost. Therefore, there is a
range of support. Today, 90 per cent of our capital is given to SMEs.
That in a nutshell, is roughly how we at IES help companies to
internationalise.
From this explanation, it can be seen that, by the time they made the decision to
internationalise, many of the SGX companies in this study had already expanded to a
level of self-sufficiency such that they felt themselves to be past the stage of help from
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IES. They thus relied on their own internal strengths to enter new markets, causing
them to reflect that they did not need or receive the help of government incentives.
Level 3 Theme: Major shifts (Strength in industry = Very strong)
In an effort to understand the extent to which major internal or external factors had
affected and caused major shifts in the internationalisation plans of the SGX
companies, the executives were asked to recall such major shifts during the 10-year
period from 1998 to 2007. Most of the interviewees reported that no major internal or
external factors were encountered that caused a major shift of plans.
Most SGX companies had not encountered major shifts during their
internationalisation efforts, but as public companies going international, they
encountered some regulatory inconvenience such as corporate governance compliance
and reporting requirements. Some stated that, regularly, a new situation might surface,
but that they had to take the new problems in their stride. Generally, they confided that
they needed to have a bigger appetite for risks and upheavals. In terms of changes in
the external environment, they had to accept them and overcome them as they arose. In
some cases, they would encounter problems with their foreign partners, operational
issues or new rules, such as import duty increases. They simply had to face the issues
that surfaced, and endeavour to resolve them.
Executive EG explained:
We certainly reviewed the implication of environmental conditions,
although it did not result in a dramatic change in the globalisation
strategy. For example, during the Asian financial crisis, we believed in
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the Asian markets in the long term, and it is still a belief today. But
during the Asian financial crisis, we lost a significant part of our brand
business. And that really led us to reveal and relook at our strategy and
how we should benefit from these brands. In addition, today, with the
openness of world travel, telecommunications and so on, it becomes
much more important to really invest into brand equity because now
consumers really know the background and the performance of these
brands.
Level 4 Sub-theme: Shareholder changes (Strength in industry = Weak)
The few companies that encountered major shifts in plans cited internal reasons such as
a change of shareholders or divestment by foreign joint venture partners who had
imposed certain policy constraints on them previously. For CI, the major shift in the
10-year review period was caused by the exit of the foreign partner:
The change of shareholders did cause us to change our
internationalisation strategy. Yes, because instead of just focusing on
Singapore, we are now more regionalised, and more outward focused.
The exit of the foreign partner offered us the chance to be more outward
focused and flexible and to have more liberal thinking to address
overseas opportunities that came along.
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Level 3 Theme: Joint ventures/partners (Strength in industry = Strong)
A common theme was that good local joint venture partners are important, especially
as regards their assistance in resolving domestic issues and liaising with government
and local regulators.
Executive EC described the support provided by CC’s partner:
We had great support from our foreign partner who is represented on
our board of directors. Operationally, they left it to us. They never really
interfere. For example, I only brief the Chairman once every month
about what’s happening. They don’t breathe over our necks.
Executive EK stressed the need for good partners:
Our business is so unique; practically all our deals are joint ventures.
Our partners in Burma are the generals. Our partners in Vietnam, some
of them are government, some are private, and some are government
officials. So if we don’t manage partnerships carefully, you have a
problem. I always believe that partnerships can become emotional.
In certain countries, having partners was generally evaluated as critical, as Executive
EJ said: ‘the choice of partner is an important part because of what we are doing in
China. That means the important part is a partner who understands the local
conditions, and a partner who can offer you help’.
In contrast, Executive EH preferred not to have foreign partners:
We generally go in by our own. We don’t rely on local partners. We
regard our employees as our partners already. Our corporate culture is
that we work on a partnership approach, not transactional approach. So
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when people said we needed to have a local partner, yes we do. Instead
of partnership per se, we go more into having important employees who
we regarded as partners.
Executive EJ explained the careful manner in which he chose his partners:
The first thing we decided to do is to select the partner or the company
that we want to work with. It starts all the way from the partner we select.
In the many years when we select our partner, we took our time. I
personally went through many potential target companies. I am very
careful. I would have dialogues, dinners, golf games, and socialise with
them. I looked at their business, and spent a lot of time personally with
the top people and a few middle people, to understand what they want
and whether they can be part of the team.
Most SGX companies considered that joint venture partners were very important.
Therefore, their ability to select the right local partners was critical for the success of
their overseas projects. In the foreign countries, they needed to find local partners with
strong, high-level connections to obtain benefits and resolve local issues.
Level 3 Theme: Success/failure factors (Strength in industry = Strong)
When asked what they deemed as the important success or failure factors for
internationalisation, the following list emerged:
1.Good internal controls and business models;
2.Proper and thorough prior preparation and understanding of the markets;
3.Understanding of domestic issues; and
4.Good local partners.
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Executive EG, who was erudite and could quote management theories and concepts,
explained:
This is actually very much part of my business. I think there are two
important aspects. First, to opt for a company to operate successfully in
the foreign market, we require the company to have some competitive
advantage or some competitive record, rent-generating assets that can
cover for the additional cost of running a business overseas. So that is
from a very well subscribed theory called the Eclectic Paradigm by
Professor Dunning. And he named three important categories, and I fully
agree with his view. First is the ownership advantage, which could be
brand equity, which could be technology, which could be the proprietary
ownership, for example. The management knowhow is also very much
part of that ownership advantage. The second thing is internalisation
advantage, meaning you take core strategic products, intermediate
products with core technology; you try to create an international market
and to exploit market failures. The third is location advantage. That is
the theory that describes how a company needs to be competitive enough
so that they can successfully operate overseas. The other aspect is about
management knowhow and network, and which is a theory that is
proposed by Johanson called Uppsala Internationalisation Model or the
stage model. It proposes you first go to some place where you have
closer culture distance, meaning you can communicate better and you
understand the market better. The model goes on to say the management
needs to accumulate knowledge of the foreign market and the
accumulation is gradual. Therefore, globalisation should be gradual. So
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these are western theories. But for eastern companies, we don’t have the
scale and we don’t have the breadth of management to cover more than
the business sectors that we are already in. We are very good at
manufacturing but we are probably not so good at understanding or
having hands-on experience in western markets like Europe and US, and
there is a knowledge gap that needs to be filled gradually.
The executives interviewed offered a variety of views on the success/failure factors of
internationalisation:
I think underestimating the complexity and the knowledge gap is the
major cause of failure. This is aggravated by the fact that we acquire
rather than develop. Because we acquire the company that is already
there, it is costing money and we do not have enough knowledge to run
the company. It was a problem, until we had the right knowledge, then
this company became an asset.
The key factor is to be able to seize the market opportunity. The team
should be nimble enough to react to the change of environment. We are
talking about markets being very competitive. For example in the
growing economy, you have huge opportunities but if you are not nimble
and do not react fast enough to the change, you will miss all the
opportunities.
You should have confidence, of course. You need to have enough people
to have that confidence. No matter how good the structure or the
business model, the players, the management the people who fill up the
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space and take up the positions, they have to be very capable; because if
they are not, then we won’t be able to build a team that is a force to be
reckoned with. There is also another factor that is important: the
incentives. We have come up with an incentive scheme, which I think that
has been one of the key factors why we have been growing.
The above mix of opinions on the success and failure factors demonstrates that
internationalisation is a very complex matter. Different executives have different
experiences, and as a result, they hold varied views on the success and failure factors
of internationalisation.
Level 3 Theme: Entry barriers (Strength in industry = Weak)
It is notable that concerns with entry barriers and the difficulty of doing business in a
foreign country were not cited as main constraints or causes of hesitation in
internationalisation. It seems that although entry barriers may initially deter
Singaporean companies to a small extent, once a foothold is gained in the foreign
market, entry barriers become deterrents to other foreign MNCs, and therefore
indirectly protect the Singaporean companies from further inflow of competitors.
Executive EA was not deterred:
Would the fact that the areas are in a foreign environment and you have
not been very active in those areas, be a deterrent? It wasn’t much of a
deterrent because before we moved in, we would know the environment
of the countries in which we operate.
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Executive EB related his experience on entry barriers, emphasising their advantages:
Of course, we had a lot of barriers … Despite all these, we looked at this
positively and they actually became barriers to all other new entrants of
the Russian market place. So it was in a way a barrier, which was good
for us because once you have entered the market, then you have natural
barriers that will filter all other competitors.
4.5.3. Outcomes of the internationalisation of SGX companies
A schematic diagram of the four levels of themes and sub-themes for Outcomes is
shown in Figure 4.3 below.
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Figure 4.3 : Hierarchy of Themes and Sub-themes of Internationalisation: Outcomes
Outcomes
Internationalisation indicators
Level of Internationalisation
Success ratings
Performance indicators
ROS/ROA/ROC/ EVA
Profitability
Learning experience
Cost reduction
Technology sharing
Strategic options
Integration issues
Preferences
Future plans
Geographical expansion
New products
Limitations
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3a. Outcomes (Level 1)—Internationalisation indicators (Level 2)
Level 3 Theme: Level of internationalisation (Strength in industry = Very strong)
Regarding the themes for Outcomes, an interesting finding was that SGX companies
generally did not have quantitative measures for monitoring their level of
internationalisation, nor had they set specific targets for the level of internationalisation
to be achieved. They generally felt that if they could achieve over 50 per cent of sales,
revenue or profit contributions from outside Singapore, they would deem themselves
internationalised. Most felt that if they achieved around 70 per cent sales or profit from
foreign operations, they could consider themselves well diversified outside Singapore.
This was reflected by Executive EL:
I think more than 60 per cent of group sales come from overseas. That is
an indication of how much we have actually gone overseas for sales. As
for level (of internationalisation), I think we have scored 7 or 8 out of 10.
When asked whether his company consciously used measures when they
internationalise so as to monitor their progress, Executive EA responded:
When we go into a country, we don’t necessarily say: OK, I want 30 per
cent for Malaysia, 20 per cent for China; we don’t have that kind of
formula. We tend to gauge operations, company by company. If a
company is doing well, we just upscale the production and the activities.
As for the measures used, he replied:
For our international drive, we tend to go by levels of turnover and
assets. As for the level of profitability or how successful in a particular
country, we tend to measure them in terms of by industry, rather than by
country.
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When asked the same question, Executive EB’s view was:
No, because we look at everything from a profitability point of view. So it
doesn’t make any difference to us whether the profitability comes from
outside Singapore, or within Singapore. As long as we can get the profit,
it doesn’t matter. I don’t think we were looking at internationalisation
for profit because at that time all our businesses were global. Therefore,
there was no differentiation for us as to where the profitability comes
from.
In terms of the outcomes of their internationalisation, Executive EC said:
Today, after 20 years, we have actually achieved what we had wanted to
do. It was 70 per cent of our group’s profits from Singapore and 30 per
cent from overseas 20 years ago. Now it is the reverse. Today, in fact
Singapore is only 20 per cent. It is 20:80 now; 80 per cent from overseas
that forms the larger pool of profit.
On the theme of the level of internationalisation, it is noted from a close study of the
annual reports and interview data that the SGX companies did not publish or track the
level by using any formal published or internal measures. For instance, the companies
did not seem to have data comparing international and domestic figures. The
companies did not appear to track the level of international sales versus local sales, or
the percentage spread of manpower, capital investments, factories and operations
outside Singapore.
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Executive EG clarified their approach:
Within our company, we did not have a target of how much we should
globalise. But we look for a proper mix of manufacturing business that is
naturally local from our own sales network as against sales that is from
global. By looking at that mix, we have would have a strategic target. We
are thinking probably that the best would be a 50-50 mix. When the
market conditions are favourable, we would adjust the target. Instead of
using level of globalisation as a target, we look at what is the proper mix
of global and local businesses.
Executive EH stated his company’s general approach:
We try not to put all our eggs in one basket, meaning to say that from a
territorial consideration, we try not to focus on one country. We try to
spread our risks in different countries for the same business. For
instance, we spread our risks in three countries; US, Japan and China,
not totally just focusing in China in that sense, but we did not set fixed
percentages between these three countries.
Level 3 Theme: Success ratings (Strength in industry = Very strong)
The data showed that SGX companies generally did not have or were not keen to
develop a set of quantitative indicators to measure their success rate at
internationalisation. The companies did not focus on setting success targets and
thereby rating themselves. However, they did monitor certain key financial indicators.
Most companies used profit contribution as an indicator, and this factor was linked to
the KPIs and rewards systems for their senior executives and staff assigned to work in
and manage the foreign subsidiaries.
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In an attempt to understand how the executives assessed their success on their
internationalisation programmes, they were asked to rate from one to 10 their success
as at the fifth year (2002) and the tenth year (2007), during the 10-year period from
1998 to 2007. Most of the executives found it difficult to rate themselves, and did not
answer this question directly. Among them, Executive EC gave an indication: ‘I would
say on the 5th year probably 60 per cent from a scale of 1 to 10, I would rate it 6. By
the 10th year, I would rate it 8’. Executive EF rated himself more conservatively: ‘In
2002, in the first five years period, I would give myself probably a 5. In tenth year,
maybe I give myself a 6’.
Other executives offered qualitative assessments. Executive EA said: ‘Yes, we are
reasonably happy. Without our plan to go into those overseas activities, we would not
be as successful if we entered those markets today’. Executive EE’s response was also
qualitative:
I think that at the end of the fifth year, we would have executed the full
overseas plan. Between the sixth and tenth years, we were nurturing the
investment and towards the tenth and beyond the tenth, we were
benefiting from reaping the reward from the disposal.
3b. Outcomes (Level 1)—Performance indicators (Level 2)
Level 3 Theme: ROS/ROA/ROC/EVA (Strength in industry = Strong)
While the SGX companies did not explicitly link their success rating and performance
to internationalisation per se, they did attempt to measure foreign participation by
using standard criteria such as ROS, ROA, return on capital (ROC) and EVA. The last
indicator, EVA, is commonly adopted by GLCs.
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Executive EL explained the use of EVA as a performance indicator for his GLC:
Each SBU [strategic business unit] will manage on the top line, bottom
line, degree of employment and profits after tax. All are very important
measures we use, plus, of course, the EVA generated. The EVA
generated is used very thoroughly in determining the short-term and
long-term incentives.
Executive EG’s company used a few key indicators on a monthly basis:
Well, because we measure the company’s performance very regularly at
the monthly finance and management meetings. We always look at the
performance in terms of sales revenue, margin generation, expenditure
and profitability. Therefore, we measure every month. We keep track of a
set of standard performance indicators including sales, inventory,
cashflow, inventory turnover and credit turnover. We also look at return
on investments.
Executive EH tracked their foreign investments using some key indicators: ‘In every
investment, we have our investment criteria measured against ROE or IRR. These
measures will be on a project by project basis and country by country basis’.
Executive EN is from a company that did not track and measure their level of
internationalisation, but merely monitored the outcome by performance: ‘We don’t
measure the level of internationalisation. We only have one measure: Performance. To
me, it is cash flow and internal rate of return of equity. Those are the basic measures.
Everything else is an intermediate measure’.
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Level 3 Theme: Profitability (Strength in industry = Moderate)
As described previously, profitability, profit margin or profit contribution are the main
indicators used by SGX companies to measure the performance of their foreign
subsidiaries. They explained that profit is the primary motivating factor for them to
venture abroad.
Below is a selection of comments in which executives clearly stated that profitability is
their companies’ main criterion for the measurement of the outcomes of
internationalisation:
Ultimately, of course, it is the profit growth, the revenue growth, and not
capacity growth. Capacity growth is a wrong measure.
We definitely measure the profit performance of our global business
against our local business.
Definitely, the consistent profitability is important.
3c. Outcomes (Level 1)—Learning experience (Level 2)
The internationalisation theme of ‘Learning experience’ is a well-accepted principle
used by MNCs and, as such, this has been covered quite extensively in previous
research on internationalisation. In this study, Learning experience appeared to be a
moderate driver in the industry. As Executive EG said:
It is a learning process. It is very much a learning process and it is not
only a learning process for the leaders but also a learning process for
the management in general, because they have to work with a much more
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global company. We are sending people to work overseas not only at the
top level but also even at the working level.
One reason that the theme of ‘Learning experience’ did not feature as strongly for the
SGX companies interviewed as compared to for international MNCs is that, for SGX
companies, there are other, much stronger driving themes for internationalisation, such
as the ‘Small Singapore market’, ‘Survival’ and ‘Adequacy of internal resources’.
Level 3 Theme: Cost reduction (Strength in industry = Moderate)
Cost reduction is another major theme identified in past internationalisation research.
In this study, it appears as only a ‘Moderate’ theme. Not many interviewees cited this
factor as a key consideration for internationalisation, as compared to other imperatives
such as ‘Near to customers’, ‘Perishable food products’, ‘Market size limitation’ and
‘Survival’.
Those three executives that did cite cost reduction, EB, ED and EI, said respectively:
We have to calculate whether which one will be more meaningful, in
terms of feasibility of localisation of the production.
Subcontracting is always an option for us. Subcontracting will be a
competitive option, so that in case we do production ourselves, we tell
ourselves if somebody can make it cheaper than us, why are we doing it
ourselves?
If you are not able to manage your far-flung operations effectively, then
it can cause problems. And if you are not agile enough to move to
different areas.
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As reported in the literature review in Chapter 2, studies suggest that cost reduction is
one of the major rationales for MNCs to undertake internationalisation. Thus, it is
interesting to note that for SGX companies, this theme was only a moderate factor.
This could be because this factor was overshadowed by the need to overcome the
problem of a small market size in Singapore and the need for survival.
Level 3 Theme: Technology sharing (Strength in industry = Weak)
Another ‘Weak’ theme was technology sharing. Only one interviewee cited that they
had experienced and benefited from ‘Technology sharing’ in their international drive.
Executive EC said:
Initially we would provide technical expertise, we get our people
involved, and those kinds of activities could be developed. Over time, the
locals would gradually take over. Like in the Philippines, when we
started up, we had our own specialist team setting up for them in
engineering and production. After a few years of operation, the locals
were trained up and they could manage themselves.
As in the case of ‘Cost reduction’, the interviewees appeared to focus more on other
factors than on technology sharing as a driver of internationalisation.
Level 3 Theme: Strategic options (Strength in industry = Weak)
Another ‘Weak’ theme is Strategic options. The expectation that internationalisation
enabled SGX companies to have more strategic options did not feature strongly in the
interviews of the Singaporean executives. Only one executive cited this factor.
However, importantly, the theme was cited in the context of causing his company to
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pull out of a foreign project, whereas the literature suggests that Strategic options can
be used, for example, to negotiate for better terms from the government or as a
strategic weapon against competitors.
Executive EN said:
We take India, for instance. Two and a half years back, we actually
wanted to go quite aggressively into one of the Indian cities. We started
from Chennai. Unfortunately, the crisis came … the expenses were
moving up very heavily. Therefore, we decided to pull the plug and back
out. However, we may go back there again, now that the market has
changed for the better.
Level 3 Theme: Integration issues (Strength in industry = Weak)
Like their MNC counterparts, Singaporean executives would be quite concerned about
‘Integration issues’. However, in this study, the outcome ‘Integration issue’ was only a
weak theme, a surprising result. An explanation can be found in the background of
Singapore, in that the city-state is already highly cosmopolitan, with varied cultures,
peoples, languages and professionals intermingling in the social space. Moreover,
Singaporean executives are quite well travelled, well informed and proficient in
English. As a result, most SGX companies were less concerned with integration issues
for their foreign joint ventures and subsidiaries.
Executive EG reflected on this issue:
I think many people would underestimate the amount of preparation and
the amount of differences. Once the company move into a new market,
especially with internationalisation or globalisation, once we start
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talking about many new markets, then there is a big gap for knowledge
of all these markets that companies need to have before they can operate
successfully.
Level 3 Theme: Preferences (Strength in industry = Weak)
Adaption to local preferences and taste (for food products) was cited as a weak theme.
An executive of CA alluded to the need to adapt to taste preferences in food products:
‘...we have to modify product offerings. For our product XX, the Singapore product is
not the same as in Malaysia or the Philippines. We need to change the taste.
Malaysians and Filipinos like their things a little sweeter’.
3d. Outcomes (Level 1)—Future plans (Level 2)
This interview questions delved into the future plans of the companies, with respect to
their internationalisation programmes. Most executives were quite ready to discuss this
topic in a general manner, without going into specifics in terms of products or targets.
Their responses fell into the areas of geographical expansion and further growth
through product extensions or new products.
Level 3 Theme: Geographical expansion (Strength in industry = Very strong)
Future geographical growth was a strong internationalisation theme for SGX
companies. Most companies saw their future in endeavouring to expand further
outwards in the foreign markets they were already in, or in making inroads into new
territories. The message was that internationalisation is an ongoing process, unlikely
ever to be considered finished. Markets cited for new or further expansion were China,
India, and Vietnam.
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Executive EB put it: ‘The world is our market. Anything outside of Singapore is
interesting for us because they are bigger than what we are here today’. Executive EC
shared this view: ‘…we want to grow bigger where we already are, whether in
Malaysia or Cambodia, we want to have more factories, and to sell more. We still have
to grow in the region, and into more foreign countries’. Executive EE concurred:
We are continuing to seek out suitable investment opportunities overseas,
but as far as the existing business, it has branched into a regional play
already. We are supplying to the region, previously just Malaysia, but
now we are on regional expansion.
The impression was gathered from the interview responses that integration of their
global business in the manufacturing sector was a very important strategy for many of
the participating companies. After several years of internationalisation activity, they
were established in many markets, and from those markets, companies had garnered
very useful information about technology, new product concepts, and local knowledge
and connections. Looking ahead, the issue was how to make the best use of the
learning experience and the accumulation of information and technology. Companies
could make use of the established manufacturing capability in a foreign country like
China to try to scale up, to be able to supply key international markets efficiently and
quickly while focusing on service quality and competitiveness. Many interviewees
opined that the growth potential had not yet been fully harnessed.
When reviewing the stage of their internationalisation programmes, many executives
considered that they would definitely have to continue to grow to countries not yet
entered. Many quoted new locations like Vietnam and the Indo-china countries. Others
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cited India. They considered that geographical expansion would strengthen their
groups’ overall market presence, consolidating their market positions and helping them
to build closer bonds with their vendors and customers. Evidently, a wider
geographical coverage was a key theme for their future internationalisation plans.
As Executive EL put across:
I think the company will continue with the journey we first laid out. In
fact, the company wanted to double what we were doing in the next three
to five years. There is a lot of growth potential. That is why the company
is continuing with the plan. In fact, the company is sending in more
people because we can afford to send more people overseas to help
escalate the growth of the business.
For company CM, their future focus was:
I think right now we have the key business in place to continue to grow
and I am sure that we will continue to evolve. Each of its businesses has
a life of its own, parameters to gauge on. They need to evolve. Maybe the
next wave of manufacturing will not be in China. The next wave of
manufacturing may be somewhere else, for example India.
In sharp contrast, only one executive did not have definite future plans. Executive EK
said:
Good question. I have no idea. As far as the company is concerned, we
will just carry on. As I said in the beginning, this company is an
extremely opportunistic, basically because I am like that. We do not try
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to sit in a room and suddenly decide that this is where we want to go. We
learn as we go along.
Notwithstanding the ambivalent response of the above executive, overall the interviews
revealed that the companies in this study are poised to continue their
internationalisation drive.
Level 3 Theme: New products (Strength in industry = Moderate)
Some companies mentioned their desire to develop new products or to offer product
extensions. Some executives said that while it would be necessary to remain in their
current products, they were also prepared to consider opportunities in new products,
even those not related to their current products.
Executive EA was constantly looking for acquisition targets to grow inorganically:
We are at all times looking for acquisition opportunities in Singapore or
overseas. When I say acquisition opportunities, I do not necessarily
mean the businesses that we are already in. It could be a new food
business, or it could be things that are related to the businesses we are in.
Executive EE was equally aggressive in his pursuit of future growth:
Possible areas that the group can look at are, of course, backward and
forward integration. I am talking about opportunities in backward
integration for the existing business, which will be acquisition of
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suppliers. Moving forward, integration will be into downstream products
as there are many products we could go into. All these are possibilities.
For Executive EM, being able to capitalise on CM’s international market network was
a strong motivational factor to internationalise further:
Looking ahead, we certainly want to be able to capitalise on our
international market network. The synergy within the group has not been
fully exploited. The other target is that we should look for acquisition of
businesses that would be able to ride on our international market
network.
Level 3 Theme: Limitations (Strength in industry = Moderate)
When discussing their expansion plans, some executives set limitations on the range of
their expansion. It seems that while some executives are fairly comfortable with
expanding regionally, others were hesitant to venture too far away. Some companies
wished to remain in the region, while others did not wish to venture as far as to the
Latin America countries and Africa.
Executive EF wished to expand but essentially to remain in Asia: ‘I would say it is still
Asia. We only covered some parts of Asia. Probably China and India are the areas,
which we should look at. And, beyond Asia, I don’t think we have interest to go beyond
Asia’. Executive EA also limited his group’s future areas of expansion: ‘having said
that, as a group, we would not really go to faraway places. We would not think for
example, to go to Africa to set up a food manufacturing company, or to a continent
which is far away’.
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The interviewees provided a few reasons that their companies would wish to limit the
geographical reach of their future international expansion. One obvious reason was
limited resources for management, manpower, finances and capabilities. Another
reason was the span of attention; that is, they cited the difficulty of operating in
different time zones. Another interesting reason cited was cultural differences. This
rationale was relevant for SGX companies that were Asian in their outlook, and thus
rather conservative in their view of foreign partnerships and locations. On this issue of
cultural conservatism, Executive EH commented: ‘It will continue to remain that way
unless there is a major change of the board and management, and someone brings in a
different perspective and visions into this group, otherwise we expect this to continue’.
4.5.4. Comparison of themes by ‘Strength in industry’
The above discussion has detailed the numerous themes and sub-themes relating to the
internationalisation of SGX companies. The relative strengths of these themes reveal
an interesting comparison between the companies in the study. The reported ‘Strength
in industry’ measure offers an insight into how the SGX companies in the study rated
the relative importance of the various themes (or factors) influencing
internationalisation. For these companies, the indicative strengths of themes and sub-
themes grouped into the four levels of Very strong, Strong, Moderate and Weak are
shown in Table 4.6.
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Table 4.6 : List of Themes and Sub-themes by Order of Strength in Industry
Themes Frequency
1. Very strong themes >10
1.1 Internationalisation is key business strategy
1.2 Small Singapore market
1.3 CEOs are main drivers
1.4 Mix of centralised and decentralised controls
1.5 Limited use of government incentives and assistance
1.6 Limited use of indicators on level of internationalisation
1.7 Limited use of indicators to measure performance
outcomes
1.8 Future growth by geographical expansion
11
11
14
11
15
14
14
11
2. Strong themes 6–9
2.1 Economy of scale
2.2 Survival
2.3 Adequacy of resources
2.4 Informal approach
2.5 Infrequent use of consultants
2.6 Regular reviews
2.7 Localisation
2.8 Management strength
2.9 Importance of joint venture partners
2.10 Use of ROS/ROA/ROC/EVA as performance
indicators
6
6
6
7
8
8
9
7
7
6
244
3. Moderate themes 3–5
3.1 Challenge to make it work
3.2 Use of brands
3.3 Influence of shareholders
3.4 Need for strong products
3.5 Sustaining profits
3.6 Regional growth
3.7 Born global
3.8 M&As
3.9 Change of majority shareholders
3.10 Use of profitability as performance indicators
3.11 Cost reduction
3.12 Future growth through new products
3
3
3
3
3
5
4
5
3
5
3
5
4. Weak themes <2
4.1 Venture capital investments approach
4.2 Perishable products
4.3 Culture issues
4.4 Entry barriers
4.5 Close to customers
4.6 Core values
4.7 Divestments
4.8 Business model
4.9 Technology sharing
4.10 Strategic options
2
1
1
2
1
1
1
2
2
2
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4.11 Integration issues
4.12 Preferences
1
1
It is noted that the four categories of strength in industry are based on the sample of 14
SGX companies, and may not be applicable for the entire body of Singaporean
companies. However, while the results are only applicable to these sample companies,
they nevertheless served to provide interesting data on the internationalisation of
Singaporean companies. It is also noted that a wide range of themes and sub-themes
emerged that provided very pertinent revelations on the Antecedents, Processes and
Outcomes of the internationalisation of SGX companies. Thus, the Reference Model
employed for this study does permit the gathering of valid research results applicable
to internationalisation.
As explained in Chapter 3, the classification of themes and sub-themes by ‘Strength in
industry’ is based on the number of times these were cited by the interviewees. The
strength of responses provided answers to the main research questions set out in
Chapter 3. The results provided insights on the Very strong and Strong themes, which
can also be viewed as those themes with which the SGX companies in the sample were
pre-occupied. Notable results to the research questions as provided by the Very strong
themes are as follows:
1. Antecedents
1.1 SGX companies considered internationalisation as a key business strategy.
1.2 The CEOs were the key drivers of the internationalisation plans and actions.
1.3 SGX companies used a combination of centralised and decentralised
controls for foreign subsidiaries.
1.4 SGX companies had limited use of government incentives and assistance.
246
2. Processes 2.1 SGX companies had limited use of indicators to monitor the level of
internationalisation.
3. Outcomes
3.1 SGX companies had limited use of indicators as performance measures.
3.2 SGX companies planned for future growth through geographical expansion.
In addition, it is possible to draw conclusions by examining the themes in Table 4.6
with respect to the themes for other Strengths in industry; namely, Strong, Moderate
and Weak.
In the literature review in Chapter 2, it was noted that certain themes for SGX
companies were consistent with the themes of the internationalisation programmes of
other countries’ MNCs. These themes include economy of scale, geographical
diversification, locational advantage, learning experience, strategic advantage, options
advantage, improved product quality and enhanced customer preference (see Sections
2.71 to 2.7.8 in Chapter 2). Some of the themes relating to the rationales or imperatives
for internationalisation by SGX companies are consistent with those themes reported in
past research on the subject of internationalisation of MNCs originating from the
developed economies. However, other themes that emerged from this research were
unique for Singapore. In Table 4.7 below, the themes relating to the rationale for
internationalisation are thus grouped into two clusters: those themes consistent with
international research and those themes that are unique to Singapore.
247
Table 4.7 : Comparison of Consistent and Unique Themes
1. Themes consistent with
international research
2. Themes unique to SGX companies
1.1 Economy of scale
1.2 Reduction of costs
1.3 Localisation
1.4 Strategic options
1.5 Learning experience
1.6 Culture issues
1.7 Born global
2.1 Survival
2.2 Small Singapore market
2.3 Challenge to make it work
2.4 Venture capital investments
2.5 Close to customers
2.6 Nature of products (perishables)
2.7 First mover advantage
2.8 Regional growth
The above discussion indicates that, while SGX companies were generally driven by
similar motivations to internationalise, as were other MNCs, they were also subject to
additional factors unique to Singapore.
4.5.5. Comparison of the themes by size of SGX companies
The 14 SGX companies that participated in the case study were classified as small,
medium or large by their market capitalisations (see Table 3.1 in Section 3.3.2). A
close study conducted on the themes that emerged from these 14 companies of
different sizes drew the following observations:
1.Generally, there were no sharp differences in the main imperatives on the need to
internationalise across different sized companies. The SGX companies,
irrespective of size, equally cited the themes of 'Survival' and 'Small' Singapore
market.
248
2.They were equally not overly concerned with minor themes such as ‘Integration
issues’, ‘Technology transfer’, ‘Localisation’ and ‘Cost reduction’.
3.They did not find government incentives useful or necessary, irrespective of their
size.
4.There is no indication whether they preferred to adopt a centralised or
decentralised control approach depending on company size. Neither is there any
clear indication of whether large or small companies preferred to use external
consultants. Their planning and processes also equally tended to be informal
rather than formal.
5.As for the key drivers of their internationalisation plans, generally the CEOs were
the main drivers, supported closely by their management teams. The boards
overall provided oversight and supervisory roles. This was equally true
irrespective of size.
The conclusion that can be drawn is that, for SGX companies, size did not have any
significant impact on their internationalisation decision or process.
4.6. Data analysis using Cruciform charts
As stated in Section 3.10 of Chapter 3, Cruciform charts can be used to examine the
relationships between two selected sets of variables using co-axial analysis. Such
relationships may be in the form of trend lines, clusters, dispersion or outliners. To
discover potential relationships between the level of internationalisation and the
performance of the SGX companies, the executives were asked to provide their scores
(on a scale of 1 to 10, with 1 being the lowest, 10 being the highest, and 5 being
average) regarding their assessment of their companies’ level of internationalisation,
and the importance of internationalisation to their companies over the 10-year period
from 1998 and 2007. The actual average annual growth rates for revenues and profits
249
of the 14 companies were calculated from the financial results provided in their annual
reports. Charts were plotted as co-axial graphs using these assessments on the level and
importance of internationalisation as against the average annual revenue and profit
growth achieved from 1998 to 2007. The summary data used for this analysis are given
in Appendix 4.16. The results of the responses were plotted on Cruciform charts, as
shown in Figures 4.4–4.7.
Figure 4.4 : Revenue Growth v. Level of Internationalisation Achieved
The following findings can be observed from the data at Figure 4.4 and Appendix 4.16:
1. Most of the sample companies (12 out of 14) assessed themselves as having
achieved a positive level of internationalisation (ratings of above 5 out of 10),
and 11 companies were also found to have attained high revenue growth rates
of above 20 per cent per annum.
2. The three outliers are companies D, J and N, which achieved outstanding
revenue growth due to the strategies they adopted. As discussed earlier in this
Company A Company B
Company C
Company D
Company E
Company F
Company G
Company H
Company I
Company J
Company K
Company L Company M
Company N
0
1
2
3
4
5
6
7
8
9
10
(50) - 50 100 150 200 250 300 350 400 450 500 550 600 650 700
Level of Internationalisation
Revenue Growth
Cruciform Chart: Revenue Growth v. Level of Internationalisation Achieved
Company A Company B Company C Company D Company E Company F Company GCompany H Company I Company J Company K Company L Company M Company N
250
chapter, companies J and N needed to internationalise to grow and compete
effectively. Due to the scalability of their businesses in much larger foreign
markets, the revenue of Companies J and N was able to grow very quickly.
Company J partnered with reliable local partners to expand in the foreign
market.
3. Companies E, H and I attained low or negative revenue growth. Detailed
examination of these three companies revealed that they encountered business
divestments and changes of businesses during the 10-year study period,
resulting in net decline of total revenues.
Figure 4.5 : Profit Growth v. Level of Internationalisation Achieved
Review of data from Figure 4.5 (and Appendix 4.16) indicates the following findings:
1. Most companies rated themselves as having achieved higher than 5 out of
10 score in terms of level of internationalisation. However, in terms of
Company A Company B Company C
Company D
Company E
Company F
Company G
Company H
Company I
Company J
Company K
Company L Company M
Company N
0
1
2
3
4
5
6
7
8
9
10
(10) - 10 20 30 40 50 60 70
Level of Internationalisation
Profit Growth
Cruciform Chart - Profit Growth vs. Level of Internationalisation Achieved
Company A Company B Company C Company D Company E Company F Company GCompany H Company I Company J Company K Company L Company M Company N
251
actual average rate of growth of profits, the performances achieved were
mixed (compared with revenue growth). Six companies attained low profit
growth of below 3 per cent per annum. Three companies achieved moderate
annual profit growth rate of 5 to 7 per cent. Only four companies, D, C, H
and L, had annual profit growth of above 15 per cent. This indicates that the
majority of the companies was unable to match their high revenue growth
with profit growth.
2. Companies C, D, H and L were outliers in the analysis. Generally, these
four companies, which has superior profit growth, had rated highly (above 7
to 10) their level of internationalisation achieved. This result indicates that
companies with higher perceived levels of internationisation tended to
achieve better profit growth.
3. Company C had achieved a high level of internationalisation, inspite of
certain geographical restrictions imposed by their joint venture partners and
limited their expansion to the neighbouring countries around Singapore.
However, the company managed to achieve high profit growth by focusing
on their core products and growing extensively within a country after an
initial foothold was established.
4. Companies D, L and H were motivated to internationalise due to the nature
of their business (see earlier discussion in Chapter 4). These three
companies demonstrated that when the imperative and desire to
internationalise is very strong, average return on profits is very high,
perhaps because they were motivated to work harder to achieve those
profits. Another possible explanation for the better profit performance of
these three companies is that they adopted the approach of expansion and
252
growth through aggressive acquisitions, rather than depending solely on
gradual organic growth.
5. Notably, company D was a star performer with high revenue and profit
growth. It was able to generate a high profit growth due to the large scale
required by the industry. Moreover, being a GLC allowed company D
access to capital needed for growth and benefitted by its strong
management team and well planned internationalisation strategy.
6. The outlying performers in Figure 4.5 are different to those observed in
Figure 4.4, due to the various factors that cause companies’ revenue and
profit growth performance to differ. This indicates that, while companies J
and N achieved high revenue growth arising from their overseas expansion
plans, they were unable to attain comparable results in terms of profits.
Figure 4.6 : Revenue Growth v. Importance of Internationalisation
Company A Company B
Company C
Company D
Company E
Company F
Company G Company H
Company I
Company J
Company K
Company L Company M
Company N
0
1
2
3
4
5
6
7
8
9
10
(50) - 50 100 150 200 250 300 350 400 450 500 550 600 650 700
Importance of Internationalisation
Profit Growth
Cruciform Chart: Revenue Growth v. Importance of Internationalisation
Company A Company B Company C Company D Company E Company F Company GCompany H Company I Company J Company K Company L Company M Company N
253
Based on data from Figure 4.6 above (and Appendix 4.16), the following findings were
observed:
1. As in Figure 4.4, all the companies had given a high level importance of
internationalisation for their businesses with ratings of above 7. 11 out of the 14
companies achieved high revenue growth of above 20 per cent per annum.
2. Figures 4.4 and 4.6 share the same outlying companies, D, J and N. The level
of importance of internationalisation of these outlying companies D, J and N
was correlated to their revenue growth.
Figure 4.7 : Profit Growth v. Importance of Internationalisation
Company A
Company B Company C
Company D
Company E
Company F Company G
Company H
Company I
Company J
Company K
Company L Company M
Company N
0
1
2
3
4
5
6
7
8
9
10
(10) - 10 20 30 40 50 60 70
Importance of Internationalisation
Profit Growth
Cruciform Chart: Profit Growth v. Importance of Internationalisation
Company A Company B Company C Company D Company E Company F Company GCompany H Company I Company J Company K Company L Company M Company N
254
Based on data from Figure 4.7 above (and Appendix 4.16), the following findings were
observed:
1. Similar to Figure 4.5 above, the majority (8 out of 14) companies achieved
moderate annual profit growth of 5 per cent or below, although they attained
high revenue growth.
2. All of the companies in this study viewed internationalisation as of medium to
high importance of above 7 rating, with the majority (8 out of 14) gave ratings
of 9 or 10.
3. Companies C, D, H and L gave high importance of internationalisation at either
9 or 10, and they collaborated their high ratings with commendable profit
growth rate of above 15 per cent per annum.
4.7. Answers to key research questions
In the earlier sections of this chapter, descriptions on the businesses and
internationalisation strategies of the 14 participating SGX companies were given. Then
the interview data were analysed using Nvivo9 software, with emerging themes and
sub-themes based on the Reference Model discussed in Chapter 3. Further analysis was
done with co-axial technique using Cruciform charts. The findings obtained with
regard to the level and importance of internationalisation as rated by the executives of
the 14 companies, were compared to their companies’ actual average annual revenue
and profit growth.
Based upon the findings and observations gathered, certain answers can be derived on
the key research questions.
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4.7.1. Questions relating to antecedents
Question: What are the main imperatives for internationalisation of SGX companies?
The study revealed that the main driving force that motivates SGX companies to
internationalise is the small domestic market of Singapore. Two other strong factors
were survival and economy of scale. These acted as the competitive pressures driving
companies to venture overseas. Like foreign MNCs, SGX companies found that
multinational expansion could enable them to attain better economies of scale and also
to increase their output, and therefore cut unit production cost (Ghoshal, 1987, Hout et
al., 1982). The resultant spreading of costs and division of labour allowed SGX
companies to become more competitive in the international arena.
An interesting finding is the idea that Singaporean companies internationalise in order
to “survive”. However, it should be noted that the causality between
internationalisation and survival is difficult to prove. It may be concluded that the
survival motive is one possible explanation that could be driving the efforts to
internationalise.
The conclusion is that the ability of SGX companies to increase their size is an
important consideration for their embarking on an internationalisation plan. Related to
size is the issue of economy of scale. However, it was noted that SGX companies
regardless of size, felt equally compelled to venture abroad. There is no evidence on
what the SGX companies deemed to be a generally accepted level of size of a company
in terms of total revenues or sales, such that it would have achieved the economy of
scale to be able to compete in the international market.
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4.7.2. Questions relating to processes
Question: How are SGX companies structured for internationalisation?
A second main finding is that the SGX companies strongly considered
internationalisation to be a critical business strategy. They were structured to address
their internationalisation plans and needs. Some companies had deliberate and formal
plans, while others did not. The majority did not use external consultants. The plans
were developed in-house, as they believed in their intrinsic knowledge of their
businesses. Typically, the top management initiated the internationalisation plans and
led the actions and efforts. Therefore, the main driver of the company’s
internationalisation plan was the CEO himself. The boards of directors were consulted,
and they played a guiding and monitoring role. The top and senior management were
the implementers. During the 10-year period, the plans were regularly reviewed and
revised annually. A few companies conducted three- or five-yearly reviews.
The study revealed that SGX companies considered finance, accounts and fund
management as functions requiring centralisation. For the other functions, there was no
consensus on what should be centralised or decentralised. The arrangements varied
widely among the SGX companies. In some companies, finance, technology and
funding were centralised, whereas production control, sales and marketing, local
recruitment and HR were decentralised.
The study indicated that like foreign MNCs, localisation of the management team in
the foreign subsidiaries was considered important and the preferred approach. Their
experience was that localisation produced better results for the foreign operations.
257
Question: Do Singapore government incentives and promotions influence the
internationalisation of SGX companies?
Singapore is one of the few countries around the world or in the Asian region known to
encourage local companies to venture overseas. The Singapore government actively
provides many organisational and financial incentives for companies to venture abroad.
However, contrary to expectations, the study revealed that the SGX companies felt that
they did not need the government push to expand abroad, and that they had not
benefitted much from the incentives and assistance. The main reasons provided were
that the SGX companies needed to go international to survive, seek out more
opportunities and achieve more bulk. The Singapore market was found to be too small
to sustain these businesses, should they have remained domestic.
Although it is demonstrated as a strong theme that most of the sample companies did
not need government incentives to internationalise, the overall government’s directives
and exhortations as well as the financial and supporting measures, could have played a
part in motivating Singaporean companies to internationalise.
4.7.3. Questions relating to outcomes
Question: What do SGX companies use as the main measures to gauge the outcomes of
internationalisation?
Many SGX companies do not provide detailed information in public sources about the
major measures used by the companies to gauge their yearly level of
internationalisation. As reported in Chapter 3, the typical measure of the level of
internationalisation is percentage of sales derived from foreign markets. However, the
interview results revealed that the SGX companies did not actively evaluate the
258
success of the outcomes of their internationalisation activities and not many companies
used measures to monitor results on a formal basis.
Question: What are the outcomes of internationalisation?
Another major finding from the study was that the more internationalised SGX
companies performed well in terms of revenue growth. The SGX companies declared
that they internationalised to enable them to achieve better performance and safeguard
against risk of failure. This finding was reaffirmed by the co-axial analysis using
Cruciform charts. It was noted that those companies that rated themselves to have
attained higher levels of internationalisation, and those companies that placed high
importance on internationalisation, achieved better annual revenue growth. However, it
is not evident that the companies could match their revenue growth with profit growth,
as results of their profit growth were mixed. It has to be emphasised that these findings
on revenue and profit performance, as derived from case study data and co-axial
analysis, are indicative and qualitative only. They are not subject to rigorous statistical
verification. Nevertheless, these findings provided an answer to the important question
regarding internationalisation and performance of SGX companies.
Question: Were there internal and external factors that affected internationalisation
programmes during the period from 1998 to 2007?
This study covers a period of 10 years from 1998 to 2007. It was cited that internal
factors such as change of shareholders and foreign joint venture partners did cause two
companies to modify their internationalisation programme or to change strategy
completely. Two companies changed business sectors during the period, but they did
not deviate from going international. No company reported any external factors that
259
caused them to change or terminate their internationalisation drive during the 10-year
period.
Question: How do the SGX companies rate their internationalisation efforts?
Most SGX companies in the research sample rated themselves at above average (that is
higher than 5 out of 10) on their level and importance of internationalisation. This is
evidence that the SGX companies in the manufacturing sector considered
internationalisation important and that they attained a higher than average level of
internationalisation from 1998 to 2007.
Question: What are the future directions for internationalisation?
The study found that most SGX companies in the sample planned to continue growing
by regional expansion as their main priority for internationalisation.
The analysis conducted generated very varied and interesting results regarding the
internationalisation of the 14 selected SGX companies. Answers were provided to the
main research questions posed. In most instances, SGX companies behaved like their
MNC counterparts from other companies. Certain themes however were unique to
Singapore, that is, survival, small market size, non-usage of government incentives,
and infrequent use of consultants for strategic planning of their internationalisation
efforts. It may be concluded that the Reference Model developed for this research is
valid and applicable, and could provide answers for research on internationalisation.
260
4.8. Conclusion
The first part of this chapter provided a general description of the businesses and
internationalisation strategies of the 14 selected SGX companies. This information
provided the backdrop for a better understanding of the study data from the interviews
and document reviews. The first part of the analysis indicated that SGX companies
adopted internationalisation strategies that were consistent with the two well-
recognised theories of the Eclectic Paradigm and Uppsala Internationalisation
Framework.
The second part of the chapter presented an in-depth analysis of the various main
themes and sub-themes relating to internationalisation, based on the material collected
in the interviews. The material was organised into themes and sub-themes based on the
Internationalisation Reference Model presented in Chapter 3. Nvivo9 software was
used to facilitate the process of organising the data. Certain interesting findings and
results were derived and discussed in contrast with findings from previous research on
major MNCs. Some themes were found to be similar to those considered by MNCs,
but interestingly, a number of strong internationalisation themes that emerged were
unique to the SGX companies.
The third part of the data analysis was done by co-axial technique using Cruciform
charts. Observations were made with respect to ratings on level and importance of
internationalisation as compared to actual revenue and profit growth achieved during
the 10-year period from 1998 to 2007. Based on the overview of the analysis and
results, conclusions were drawn with regard to the key research questions. Generally, it
was concluded that internationalisation was a significant and influential factor on the
261
performance of SGX companies. It was also noted that the Reference Model could be
used as a framework to conduct research on the internationalisation of companies.
The next chapter, Chapter 5, describes the results and the conclusions of the analysis.
The chapter outlines the theoretical and practical contributions of the study and its
limitations. It concludes with suggestions for future research.
263
CHAPTER 5. CONCLUSION
‘…our own companies need to go beyond Singapore into the region and
into the world, whether you are Keppel Corp, making oil drilling
platforms, … whether you are SingTel, in the IT/telecommunications
business. Singapore is too small a platform …You have to go out, you
have to be competitive with the best in the world … There is no place to
hide, however high your sea walls, however strong your barrier, the
pressure is there, and it will seep through, and we must be ready to meet
it.’
Extract from a statement made by Mr Lee Hsien Loong,
Prime Minister of Singapore, in The Straits Times, dated
6 October 2012. Titled: ‘No place to hide; Singapore’s
response to globalisation’.
5.1. Introduction
The aim of this thesis was to examine the internationalisation of companies listed on
the SGX Mainboard for the period from 1998 to 2007 using an in-depth multiple case
study approach.
Chapter 1 introduced the research rationale. It gave an overview of the scope, focus
and potential significance of the research. Chapter 2 provided a literature review of
studies on internationalisation both worldwide and in Singapore. This chapter also
described the main theories relating to internationalisation, and identified the research
gaps in the existing literature with regard to the internationalisation of Singaporean
264
companies. Finally, from this review, some initial research questions were generated to
inform the study.
In Chapter 3, the selected research design and methodology adopted were explained,
and a rationale was given for the use of an in-depth multiple case study approach.
Guided by a set of criteria, 14 SGX-listed companies in the manufacturing and related
sector were chosen to participate in the study. In the second part of Chapter 3, past
research models for internationalisation were discussed. Drawing upon the literature on
previous internationalisation research models, the selection and adoption of an
Internationalisation Reference Model for this study was undertaken. Following this, the
main research questions for this study were listed. These questions were: 1. What are
the main imperatives for the internationalisation of Singaporean companies? 2. How
are Singaporean companies structured for internationalisation? 3. Do Singapore
government incentives and promotions influence the internationalisation of
Singaporean companies? 4. What do Singaporean companies use as the main measures
to gauge the outcomes of internationalisation? 5. What are the outcomes of
internationalisation for Singaporean companies? 6. Were there internal and external
factors that affected the internationalisation programmes during the study period from
1998 to 2007? 7. How do the Singaporean companies rate their internationalisation
efforts? 8. What are the future directions for internationalisation?
In Chapter 4, the analysis of data and observations of the 14 interviews that comprise
the case studies of the research were described. The first part of this chapter gave the
background on the businesses and the internationalisation strategies from 1998 to 2007
of the 14 SGX companies. The second part described the main research themes and
sub-themes as emerged from the data using Nvivo9 software. The analysis was
265
conducted using the Reference Model developed in Chapter 3. Co-axial coding using
Cruciform charts was also done to derive any co-relationships between selected main
themes.
The purpose of this final chapter, Chapter 5, is to review the research findings and
present them in relation to the Internationalisation Reference Model. The findings of
the research in relation to the key research questions posed in Chapter 3 are then
presented in a complete manner, drawing conclusions to the key research questions
posed. Finally, the empirical and theoretical contributions of this thesis to current
research on internationalisation will be outlined.
This chapter is structured in four sections: theoretical findings and contribution;
empirical findings and contribution; implications for practitioners; and limitations and
areas for future research.
5.2. Theoretical findings and contribution
The previous chapters have described the past internationalisation models used to study
the internationalisation of companies. From the a priori literature review on previous
models, a Reference Model was devised (see Chapter 3) to study the
internationalisation of the 14 participating SGX companies. The new Reference Model
was tested using the interview data obtained. This section describes the theoretical
findings and contributions of this study to internationalisation research.
5.2.1. Theoretical findings
Using the Reference Model and Nvivo9 software, various themes and sub-themes
emerged from the interview data. Based on the number of instances of citation by the
266
interviewees, these themes and sub-themes were grouped into four categories of
‘Strength in industry’ (from Very strong to Weak). This method enabled an
examination of the relationships between the themes and sub-themes that emerged on
the internationalisation of the 14 SGX companies during the period 1998 to 2007. The
findings on these relative strengths are interesting theoretical findings for Singaporean
companies in the manufacturing sector. (See Appendices 5.1–5.4 for a graphical
representation of these findings in accordance to the Reference Model).
Themes with ‘Very Strong’ Strength in industry
The findings show that under Antecedents (as shown in Appendix 5.1); one ‘very
strong’ internationalisation theme is that internationalisation was used as key business
strategy for Singaporean companies. This means that manufacturing companies had to
look overseas for expansion and growth. CEOs were the main drivers of overseas
expansion for these companies. They planned for future growth through regional
expansion.
The second very strong theme was that Singaporean companies deployed a
combination of centralised and decentralised controls over their foreign subsidiaries. In
most instances, finance and accounts, and R&D were centrally controlled, whereas
marketing and sales, HR and operations were decentralised.
A third interesting finding was that Singaporean companies had rarely accessed
government incentives and assistance. This was a surprising finding. However, this
was explained by the fact that the Singaporean companies interviewed had had to
venture overseas of their own accord due to the small size of the Singapore market and
for their own survival. In many cases, these companies had found themselves already
267
internationalised by the time the Singapore government started its regionalisation push,
or else unable to wait for assistance or not in need of assistance to internationalise.
Under the Processes block, a very strong theme was that Singaporean companies
tended not to use indicators to measure their level of internationalisation. Similarly,
under Outcomes, despite internationalisation being recognised as a critical strategy,
Singaporean companies had limited use of indicators to measure performance relative
to their efforts. A further very strong theme was that the interviewed companies
planned to continue achieving growth through geographical expansion.
Themes with ‘Strong’ Strength in industry
Appendix 5.2 lists the themes in the ‘Strong’ category. A notable strong theme under
Antecedents is the finding that Singapore is a small market. For survival, Singaporean
companies had to venture abroad. Another strong theme is that companies ensured they
had adequate internal resources before embarking on internationalisation. Generally,
their approaches were not formal, and they had infrequent use of external consultants.
Regular annual reviews and budgets were considered non-negotiable.
Under Processes, the strong themes were internationalisation to attain economy of
scale, the localisation of management and companies’ need to develop management
strength in subsidiaries. These strong themes employed by the interviewed
Singaporean companies are also generally adopted by foreign MNCs. Also similar to
previous research findings for foreign MNCs, under Outcomes, a strong finding was
that typical performance indicators used by Singaporean companies were ROS, ROA,
ROC and EVA.
268
Themes with ‘Moderate’ Strength in industry
A total of 13 themes fell under the category of ‘Moderate’ Strength in industry. The
moderate themes under Antecedents included the challenge to make
internationalisation work, the use of brands, the influence of shareholders and
shareholder changes affecting the internationalisation strategy of Singaporean
companies. Regional growth, M&As, born global, importance of joint venture partners
and sustaining profits were moderate themes relating to Processes of
internationalisation. Under Outcomes, profitability was a moderate theme for
measuring performance, and business impacts included cost reduction and future
growth through new products.
Themes with ‘Weak’ Strength in industry
Themes with ‘Weak’ Strength in industry are those with relatively lesser importance to
Singaporean companies. The weak themes listed in this fourth category are contrasts to
the main themes (Very strong and Strong) described in the preceding sections. The
weak themes under Antecedents included using the venture capital approach as an
internationalisation strategy, which is unique to Singapore. Other weak themes were
internationalisation due to specialising in perishable products, as well as cultural issues
and entry barriers as able to be overcome by Singaporean companies, but not
necessarily by their foreign competitors.
Under Processes, being close to customers, the core values of the organisation, the
business model, for technology sharing, strategic options and divestments were
considered weak themes. For Outcomes, integration issues and preferences for certain
markets revealed themselves as weak themes.
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The above findings provide a clear account of the relative strengths, and therefore
importance of these themes and sub-themes for the internationalisation of Singaporean
companies.
5.2.2. Value of theoretical findings
The value of theoretical scholarship can best be assessed in terms of the ‘building
blocks’ of a theoretical contribution, as stated by Whetten (1989). Accordingly, a new
contribution for understanding internationalisation must offer a new perspective. In this
research, the theoretical contribution is on the internationalisation strategies of
Singaporean companies, which constitute a new variable, adding to the explanations of
past theories. In addition, the theoretical findings were obtained using a new Reference
Model, developed specifically for this thesis. This model adds to past understandings
and knowledge of internationalisation based on other models. This research also adds
to prior works by providing new variables to the explanations of past theories.
Internationalisation constructs have been widely utilised by past researchers, and this
thesis adds to the current pool of research literature by building on prior
internationalisation models and testing a new model against the experience of
Singaporean companies. In this way, this study has moved beyond the
conceptualisations found in most prior studies, testing these theories with empirical
data from Singaporean companies already having ventured into the global competitive
arena.
5.2.3. Theoretical contribution
In summary, this study makes the following theoretical contributions:
1. Developed a new internationalisation research model framework that can be
used as an alternative to other models, such as Yip’s model.
270
2. Tested the validity of the Eclectic Paradigm Theory of internationalisation with
regard to Singaporean companies.
3. Tested the relevance of the Uppsala Internationalisation Model for Singaporean
companies.
4. Analysed and examined various internationalisation strategies and rationales,
specifically considering the Singaporean environment, market constraints and
government promotional efforts.
5. Provided insights about the underlying relationship between internationalisation
and performance for Singaporean companies.
In the past research, MNCs have commonly cited rationales for internationalisation
such as portfolio diversification or the exercise of bargaining power and oligopolistic
ploys for pursuing internationalisation. These rationales are not cited as key themes for
Singaporean companies. Moreover, the Singaporean companies in this study did not
cite reliance on operational resource sharing as an important driver, whereas this factor
appears to be a major rationale in other studies of MNCs. Another interesting
revelation is that almost no companies in this study assessed governmental incentives
and promotional efforts as important contributing factors toward their global expansion
efforts.
From the above revelations, this thesis demonstrated that there is a strong case for
augmenting existing models to explore the relationship between internationalisation
and incentives in different economic environments like those in Singapore. The
Reference Model proposed in this thesis will be likely to yield greater insight and
explanatory power for internationalisation theories when applied in small and
developing economies.
271
5.3. Empirical findings and contribution
This study has shed light on the internationalisation strategies of Singaporean
companies. Internationalisation has been conceptualised and practiced by these
companies with intent and fervour, reflecting its intuitive appeal and its importance as
a key survival strategy. This thesis provides data for a comparative analysis of 14 SGX
companies. Prior studies have not explored the relationship of performance and
internationalisation of Singaporean companies in depth. Only a small number of prior
studies have been conducted in Singapore on internationalisation relationships, and
these have used differing units of analysis and research foci.
Zutshi and Gibbons (2004) examined the internationalisation processes and strategies
of two GLCs. They concluded that effective systems of corporate controls are
necessary for the development of the international capabilities of Singapore GLCs.
Kumar, Siddique and Wong (2005) researched the internationalisation of ethnic
Chinese business companies from Singapore, and examined their strategies, processes
and international competitive advantages. Pangarkar (2008) examined the relationships
between the internationalisation and performance of SMEs in Singapore for a one-year
period from 2003 to 2004. The current thesis extends this literature by using an in-
depth case study approach and a Reference Model to provide insights about
Singaporean companies in the manufacturing and related sectors for a 10-year period
from 1998 to 2007.
5.3.1. Empirical findings
The key research questions were formulated in Chapter 3, and preliminary findings
were derived from the analysis conducted in Chapter 4. This final chapter states the
empirical conclusions drawn in answer to each key research question.
272
Research question 1: What are the main imperatives for internationalisation of
Singaporean companies?
This research found that the main imperative that causes Singaporean companies to
internationalise is survival. Related to the survival imperative is the limited size of the
Singapore market and the desire to attain economy of scale, which acts as competitive
factors, driving companies to internationalise. Singaporean companies found that
internationalisation would enable better economy of scale, increase output, and
therefore cut unit production cost (Ghoshal, 1987, Hout et al., 1982), thus raising
productivity and increasing profit margins. As a result, the Singaporean companies can
become more competitive in the international arena and increase their prospects for
survival. The research found that the Singaporean companies in the study, regardless of
size, felt equally compelled to venture abroad. No indication was found in the data for
a generally expected size (in terms of total revenue or sales) before a Singaporean
company would enter the international market.
Research question 2: How are Singaporean companies structured for
internationalisation?
A second main finding is that the Singaporean companies strongly considered
internationalisation to be a critical business strategy. Some companies had deliberate
and formal plans, but others did not. The plans were developed in-house as they
believed in their intrinsic knowledge of their businesses. Therefore, the majority of the
companies did not use external consultants. In all the companies, it was the top
management, such as the CEOs, who led the internationalisation efforts. The boards of
directors were consulted, and they played an advisory role. The plans were regularly
reviewed and revised annually. A few companies conducted three or five yearly
273
reviews. The research found that Singaporean companies considered finance, accounts
and fund management as functions in need of centralisation. For other functions, the
arrangements varied widely. In some companies, finance, technology and funding were
centralised, whereas production control, sales and marketing, local recruitment and HR
were decentralised. The research found that like foreign MNCs, localisation of
management teams in foreign subsidiaries was considered important and the preferred
approach. Their experience was that localisation produced better results for the foreign
subsidiaries.
Research question 3: Do Singapore government incentives and promotions influence the
internationalisation of Singaporean companies?
Since the early 1990s, Singapore has actively encouraged local companies to venture
overseas with several incentives and promotional efforts. Contrary to expectations, this
research found that most Singaporean companies did not need the government push to
expand abroad, and many had not benefitted at all from the incentives and assistance.
The main reasons provided were that the Singaporean companies needed to go
international to survive, or that they needed to seek out more opportunities and achieve
better unit production costs. The companies interviewed found the Singapore market to
be too small to sustain their viability, making remaining domestic unviable.
Research question 4: What do Singaporean companies use as the main measures to
gauge the outcomes of internationalisation?
This research found that many Singaporean companies did not have formalised
measures to gauge their yearly level of internationalisation. A typical measure used for
274
the level of internationalisation was the percentage of sales derived from foreign
markets. However, the research found that the Singaporean companies did not actively
evaluate the success of the outcomes of their internationalisation activities.
Research question 5: What are their outcomes of internationalisation?
Another major finding from the study was that the more internationalised Singaporean
companies performed better during the 1998–2007 period. This finding was affirmed
by the co-axial analysis using Cruciform charts. It is noted that those companies that
rated themselves to have attained a higher level of internationalisation, and those
companies that placed high importance on internationalisation, achieved better annual
revenue across the 10-year period. However, in terms of the annual profit growth, their
results were mixed.
Research question 6: Were there internal and external factors that affected
internationalisation programmes during the period from 1998 to 2007?
This research found that two companies in the study cited that internal factors such as
change of shareholders and foreign joint venture partners caused them to modify their
internationalisation programme. Another two companies shifted business sectors
during the period, but did not deviate from their internationalisation strategy.
Research question 7: How do the Singaporean companies rate their internationalisation
efforts?
Most Singaporean companies in the study rated themselves at above average (that is
higher than 5 out of 10) on their level, and the importance, of internationalisation. This
275
research found that these Singaporean companies considered internationalisation to be
important and viewed themselves as having attained a higher than average level of
internationalisation between 1998 and 2007.
Research question 8: What are the future directions for internationalisation?
The study found that most Singaporean companies planned to continue growing by
regional expansion as their main priority for internationalisation.
The empirical findings of this thesis provide an array of results and conclusions on the
above-stated questions regarding how Singaporean companies conducted their
internationalisation efforts during the period from 1998 to 2007. One major finding is
that internationalisation is an important strategy for Singaporean companies. The
strategies and actions taken to internationalise had a direct effect on the performance of
Singaporean companies. In addition, this research found certain unique features of
Singaporean companies, such as the imperative for ‘survival’, which was consistently
referenced by the senior executives interviewed. Another major finding is the severe
limitation of the small home market of Singapore, which spurred these companies to
venture abroad to seek further growth opportunities.
Although these findings are consistent in certain respects with previous research on
foreign MNCs, and findings were mixed in some other areas. For example,
Singaporean companies did not find proximity to customers and technology sharing as
important as driving factors as do their MNC counterparts. Likewise, integration and
issues relating to cross-cultural problems were not considered substantial obstacles to
Singaporean companies’ international programmes.
276
5.3.2. Empirical contribution
This study has made a useful empirical contribution to understandings of how
companies in the manufacturing sector in Singapore undertake internationalisation. It
shows that internationalisation exerts a significant positive effect on revenue growth
and business competitive strategies among Singaporean companies. A significant
finding is that a clear strategy to expand by M&As can enhance international growth
when it is strongly motivated by an ambitious management determined to take
advantage of specialised skills, connections and internal strengths within the group.
The study is restricted to a defined manufacturing industry and 14 SGX Mainboard
listed companies. However, it provides an in-depth background for each of the 14
selected companies; and it includes companies in the small, medium and large size
ranges. This thesis goes beyond prior investigations by also examining whether cross-
border resources and growth were underlying motives with implications on
performance.
In summary, this thesis makes a number of empirical contributions that distinguish it
from previous research enquiries. These are as follows:
1. Conducted in-depth interviews with Singaporean top executives, who are
generally not accessible or conducive to giving private interviews due to
their very busy schedules and preference for privacy.
2. Achieved a comprehensive understanding of the internationalisation
strategies and approaches of a group of companies from an important
market segment (that is, the manufacturing sector), for which data are not
normally available in published documents and reports.
277
3. Derived an understanding and appreciation of the relationships between
internationalisation and performance for these companies, with some degree
of co-relationships established, particularly with regard to Antecedents,
Processes and Outcomes, as depicted in the Reference Model.
5.4. Implications for practitioners
The implications of the findings for managers of Singaporean companies and foreign
MNCs are as follows. First, in view of the strong and significant relationship between
internationalisation and survival, there is a need to encourage Singapore-based
companies to plan to venture abroad in the early stage of their development. In addition,
the potential benefits of sharing operational resources within the company and with
external parties cannot be over-emphasised.
Second, as governmental incentives and promotional programmes are deemed not
crucial to the impetus and effectiveness of the sample Singaporean companies’
internationalisation plans, managers could be not too reliant on such government
assistance. In fact, their internal planning, directions and determined efforts should be
expected to have a more direct effect on their success in international markets.
Third, availability of financial, manpower and other resources is a major determinant
of success in internationalisation (which, in turn, determines revenue and profit
growth). Therefore, managers should strive to increase their foreign engagement by
properly planning the utilisation and deployment of these resources. Both dimensions,
depth and breadth, of internationalisation, should be emphasised in global expansion.
In addition, there is a need to evaluate and implement measures to grow organically
and through acquisitions. Rapid expansion can be achieved by major acquisitions.
278
However, while international acquisitions evidently allow Singaporean companies to
boost their multinationality coverage rapidly, they do not necessarily lead to enhanced
profits. In fact, in some instances, international acquisitions could depress the group’s
overall profitability when the internationalisation plans were not well executed. For
Singaporean companies, multinational expansion should primarily occur through
organic growth; only where opportunities present themselves, to foster fast expansion,
should growth occur through acquisitions. When management uses multinational
expansion as a means of increasing cross-border operational resource flows, and
supplements this with determined collective effort, the group is likely to enjoy a boost
in profitability.
The interviews with top executives point to the crucial importance of top management
attitude and leadership towards internationalisation (Kotabe and Murray, 1996)
(Devinney et al., 2000). The Chairman and CEO have to be committed, and the CEO
has to be the main driver. Moreover, the endorsement of the board of directors and
major shareholders is critical. The company’s organisational design and the adequacy
of its management pool are other important factors. With regard to management’s
attitude, the findings revealed that a positive effect of international integration on
profitability is evident in companies with a strong international team and common
objectives, and these factors helped to overcome entrenched resistance.
On the issue of organisational structure, the study indicated that the companies that are
better organised and prepared for internationalisation tended to enjoy greater success
and satisfaction. The establishment of knowledge management roles, the design of
incentive systems and the introduction of the group’s core values, mission and vision
to the foreign subsidiaries ensure a better chance of success. Attention is also needed
279
on human resource management issues such as language, culture, customs and union
relations when dealing with subsidiaries in different countries. Certain functions like
finance, funds and policies should always be centralised, whereas marketing, sales and
human resource management should be decentralised. At the most fundamental level,
the cross-border exchange of operational resources, especially of funds, technology
and knowledge resources, is most likely to be used optimally when management is able
to inspire commitment and common values throughout the group.
5.5. Limitations and areas for future research
5.5.1. Limitations
In any chosen research model and the accompanying research design, there will
inevitably be a number of limitations (McGrath, 1982, Mitchell, 1985). Likewise, this
study has possible weaknesses.
Generally, a limitation is that the success of this case study is dependent upon the
quality of the interviews. Techniques have been employed to improve the responses,
such as setting the purpose and background of the research subject in the initial stage
and permitting the interviewees to speak freely during the interviews. However,
additionally, the validity of the findings and conclusions are limited by the small
sample of 14 SGX companies. The results provided valuable insights, but they cannot
be generalised to represent definitely the entire body of Singaporean companies, or to
all companies listed on the SGX.
Another limitation is that the survey was conducted with top executives whose
emphasis and viewpoints could be strong with respect to certain themes such as
280
survival and key role of the chief executives. The various other limitations are
discussed in further detail below.
Limitations on understanding on the concept of internationalisation
In this study, the internationalisation concept was defined as an intra- company cross-
border flow of operational resources; that is, resources directly related to the planning,
design, funds, knowledge and project management of group operations overseas. This
conceptualisation was driven by anecdotal evidence suggesting that the sharing of non-
operational resources; that is, those related to support activities such as central treasury,
financial controls, IT and various services, can vary across the companies studied.
Therefore, the quality of the research results is dependent on the understanding of the
interviewees on the concept of internationalisation.
Limitations on internationalisation measures
Various internationalisation measures were adopted, but these measures were
qualitatively and quantitatively different among companies. There is, therefore, a
possible variation in how these companies measure internationalisation outcomes.
While it is reasonable to assume that the stated internationalisation strategies and
measures are effective and capable of producing reliable results, there are no exact
quantifying measurements for them (Rossiter, 2000).
As pointed out previously, circumstances dictated the use of relatively crude scales for
assessing the influence of various strategies. For example, the measures of foreign
direct investments and transfer of management personnel were limited to soliciting the
approximate percentages across the worldwide projects as allocated through the global
281
spread of resources. Scales that are more refined are desirable, but it would be difficult
to derive and quantify the impacts.
Limitations on measuring performance against level of internationalisation
It is expected that measures used to assess the level of internationalisation of the
Singaporean companies would be related to the annual performance results. However,
the reliance mainly on financial performance (such as indicated by revenue and profit
growth) may not provide a complete understanding of the benefits of
internationalisation. Internationalisation programmes can generate non-financial
benefits such as retention of experienced staff, morale and motivations, and
connections and strategic options (Venkatraman and Ramanujam, 1986). These
measures cannot quantify ‘satisfaction’ (such as from employees finding international
work interesting, challenging and beneficial in terms of professional experience),
which enhances work environments and gives rise to improved productivity and a
more healthy and congenial workplace.
Limitations of regional versus international impact
Some of the Singaporean companies viewed their expansion in a regional rather than
international manner. They intentionally limited their expansion coverage to regional
countries and avoided entering farther and less familiar regions such as Africa, Europe
or Latin America. In this respect, the Singaporean companies have a different
geographical spread to their non-Singaporean MNC counterparts. It is uncertain
whether a more deliberate, focused and gradual expansion regionally would generate
better performance, or whether more synergies and gains could be derived from an
282
aggressive and far-flung global expansion approach. Since the study did not evaluate
regional versus international multinationality effects, the results may be biased owing
to asynchronous region-based business cycles or particular regional crises (Grant, 1987,
Geringer et al., 2000). Moreover, regional developments and economic recessions or
growth may have had a deeper impact on some of the companies as compared to others
due to differing foreign development influence.
Major macroeconomic turbulence such as the Asian financial crisis of 1997–1998
affected regional demand and profit margins (Tulacz, 2001). However, the impact of
such regional crises should be minimised, as this study is confined to the 10-year
period from 1998 to 2007. It is also noted that the US financial crisis occurred in 2008,
which is after the research period selected. Nevertheless, it is uncertain whether there
were ripple effects prior or post these two crises.
Limitations on measuring internal factors
Although this study focuses on measuring performance outcomes, the results could be
affected by internal factors (Hamilton and Nickerson, 2003, Shaver, 1998). The state of
the Singaporean companies’ internalised factors may affect their expected performance
outcomes. The cross-reference between the interview data and data from the
companies’ annual reports, announcements and publications enabled a certain level of
triangulation of results obtained. This gives some measure of validity to the findings.
283
Limitation of sample size
The choice in this study of a single Singapore manufacturing industry has enhanced the
detail and depth of the research, but this has come at the expense of sample size. The
final sample did impose certain limitations in terms of testing for the effects of
internationalisation approaches adopted, though saturation was deemed attained from
the twelfth case. It is gratifying to note that the top executives interviewed were very
open and co-operative in responding with clear and elaborate answers to the interview
questions, and several provided additional information and data to support their
comments. This increases the confidence in the quality of the data collected.
5.5.2. Areas for future research
This study may be extended to Singaporean private companies that are not listed.
However, as there are not many large private companies which are not listed, therefore
the study could be extended to Small and Medium Enterprises (SMEs) although it
would be expected that some very small private companies would have low capability
to internationalise.
Therefore, an area for future research is to extend this study approach to a larger pool
of non-listed SMEs in the manufacturing sector in Singapore. However, it has to be
recognised that SMEs tend to be rather small, with less resources and orientation
towards internationalisation. Nevertheless, it would be interesting to examine the
difference in the internationalisation of smaller non-listed SMEs in the manufacturing
sector as compared to the SGX listed companies. Additional insights could also be
obtained from surveys with executives in different ranks of companies, so as to gather
the perspectives of internationalisation held by lower level staff in an organisation.
284
The results of this research are necessarily limited to SGX companies in the
manufacturing sector. There is reason to expect that meaningful and interesting results
could be obtained by studying SGX companies in other sectors such as services,
financial, and transportation, shipping and hospitality. For instance, the growing
dominance of multinational competitors and strong international consolidation trends
can be observed in industries such as the financial sector. While there are certain
differences, on balance, the research findings could be tested in other sectors in
Singapore. For instance, it would be interesting to know whether the imperative of
‘survival’ and non-reliance on government incentives are similarly viewed in these
other sectors.
One of the main findings of this study is the positive relationship noted by Singaporean
companies between internationalisation and performance for the manufacturing sector.
It would be interesting to test whether this relationship exists in the service sector. It
has been suggested (Nachum, 1999b)that the MNC service industry expects similar
influence in the future as for MNCs in other industries such as computer and IT.
This study shows that in the Singaporean context, a positive relationship between
internationalisation and profitability holds for the manufacturing industry, with strong
pressures and incentives for global integration. Accordingly, in industries that lack
such pressures and incentives, it would be useful to study whether there would be a
negative (or non-significant) effect between internationalisation and performance
growth. It is well known that in numerous industries the benefits of internationalisation
only become evident once a pioneering competitor has achieved a breakthrough in a
new market or sector, thus putting pressure on the competitors to follow the pioneers
into new markets (Prahalad and Doz, 1987). Hout et al. (1982) reported that their
285
investigation into the strategies of successful MNCs indicated that a large group of
domestic companies have global potential.
To test the research findings further, it would be meaningful to examine whether this
study could be replicated in other domains. In particular, companies in small
economies such as Malaysia, Finland and New Zealand could be studied to see
whether they would view internationalisation in the same manner as Singaporean
companies, whose predominant orientation is towards the lack of growth in their very
small home market.
Another useful area for new research is to employ the Reference Model in other
research on internationalisation. Further research could test the effectiveness of this
model for internationalisation studies in other countries and other domains with respect
to their internationalisation Antecedents, Processes and Outcomes.
5.6. Conclusion
This chapter presented the theoretical and empirical findings of the thesis. It also
explained the contributions of the study.
Despite the limitations of the research explained in this chapter, the findings generate
new insights from the Singaporean perspective. The thesis adds new theoretical
concepts to internationalisation models, thus making a worthwhile contribution to the
theories of internationalisation. The new Internationalisation Reference Model
provides a new approach to examining the factors influencing internationalisation in
small and developing economies. This Reference Model may also be used for
examining MNCs from large and developed countries.
286
It is evident that, with the growth of a global economy and the rapid integration of
businesses around the world, internationalisation is a key imperative for companies
seeking long-term survival and sustainability. This has appeared to be particularly
critical for companies originating from small economies, such as that of Singapore. As
suggested for future study in this final chapter, a wealth of future research
opportunities exists to add to the body of knowledge on internationalisation.
(End)
287
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Case studies on Internationalisation of companies listed on the Stock
Exchange of Singapore for the period from 1998 to 2007
(Appendices)
Leong Horn Kee Bachelor of Technology (Production Engineering), University of Loughborough, UK
Bachelor of Science (Economics), University of London, UK Bachelor of Arts (Chinese Language and Literature), Beijing Normal University, China
Master of Business Administration, INSEAD, France Master of Business Research, University of Western Australia, Australia
UWA BUSINESS SCHOOL University of Western Australia
Supervised by: Winthrop Professor Ann Tarca
This Thesis is presented for the degree of Doctor of Business Administration of the
University of Western Australia
2013
303
LIST OF APPENDICES
Appendix Page
Appendix 2.1 : Definitions of Globalisation ........................................................ 305
Appendix 2.2 : Details of International Enterprise Singapore incentives ............ 307
Appendix 3.1 : Pilot Study ................................................................................... 309
Appendix 3.2 : Letter of Invitation ...................................................................... 333
Appendix 3.3 : List of Participating Companies* and Executives*..................... 334
Appendix 3.4 : Consent Form .............................................................................. 335
Appendix 3.5 : Interview Guide ........................................................................... 336
Appendix 3.6 : Summary table of interview responses........................................ 338
Appendix 4.1 : Summary of developments and financials of Company A .......... 359
Appendix 4.2 : Summary of developments and financials of Company B .......... 363
Appendix 4.3 : Summary of developments and financials of Company C .......... 367
Appendix 4.4 : Summary of developments and financials of Company D .......... 371
Appendix 4.5 : Summary of developments and financials of Company E .......... 375
Appendix 4.6 : Summary of developments and financials of Company F .......... 379
Appendix 4.7 : Summary of developments and financials of Company G .......... 383
Appendix 4.8 : Summary of developments and financials of Company H .......... 387
Appendix 4.9 : Summary of developments and financials of Company I ........... 391
Appendix 4.10 : Summary of developments and financials of Company J ......... 395
Appendix 4.11 : Summary of developments and financials of Company K ........ 398
Appendix 4.12 : Summary of developments and financials of Company L ........ 402
Appendix 4.13 : Summary of developments and financials of Company M ....... 406
Appendix 4.14 : Summary of developments and financials of Company N ........ 409
Appendix 4.15 : Nodes / Sub-Nodes and Sources from Nvivo9 analysis ............ 413
Appendix 4.16 : Table of 10-year Revenue and profit average annual growth
rate of return and survey results ........................................................ 419
Appendix 5.1 : Internationalisation Reference model (Strength of Themes –
Very Strong) ...................................................................................... 420
Appendix 5.2 : Internationalisation Reference model (Strength of Themes –
Strong) ............................................................................................... 421
Appendix 5.3 : Internationalisation reference model (Strength of Themes –
Medium) ............................................................................................ 422
304
Appendix 5.4 : Internationalisation reference model (Strength of Themes –
Weak) ................................................................................................ 423
305
Appendix 2.1
Appendix 2.1 : Definitions of Globalisation
Author Discipline Definition/description
Rodrik
(1997)
economics ‘…a process involving the international
integration of markets for goods,
services, and capital, which pressures
society to alter their traditional
practices.’
Dunning
(1993)
economics/
business
‘…growth of international
production…[reflecting] the way that
changes in the structure and organisation
of the world’s resources and capabilities
impinge on the cross-border production
and transaction strategies of companies.’
Giddens
(1990)
sociology ‘…intensification of worldwide social
relations… linking distant localities in
such a way that local happenings are
shaped by events occurring many miles
away and vice versa.’
Robertson
(1992)
sociology ‘…refers both to the compression of the
world and intensification of
consciousness of the world as a whole.’
Cairncross
(1997)
social
research
‘…the global diffusion of knowledge.’
306
Worsley
(1999)
Anthropology ‘…a plurality of knowledge systems
which results in cultures that transcend
the boundaries meant to constrain them,
contributing to a global mass society.’
Crystal
(1998)
Linguistics ‘The Globalisation of language is not
due to the number of people who use the
language, but who those people are.’
Jameson
and
Miyoshi
(1998)
Literature ‘…a communicational concept, which
alternatively masks and transmits
cultural or economic meanings.’ (p.55)
Dicken
(1998)
Economic
geography
‘…the geographic extension of
economic activity across national
boundaries...[and] the functional
integration of such internationally
dispersed activities.’ (pg.5)
Waters
(2001)
Sociology ‘…A social process in which the
constraints of geography on social and
cultural arrangements recede and in
which people become increasingly
aware that they are receding.’ (pg.3)
Beyer
(1994)
Religion ‘…the creation of a new global culture
with its attendant social structures.’
(pg.9)
307
Appendix 2.2
Appendix 2.2 : Details of International Enterprise Singapore incentives
Internationalisation Finance Scheme
Purpose: Financing for fixed asset investments abroad or confirmed overseas projects.
Overseas ventures are often associated with higher risks. This makes it a challenge for
companies who are looking at increasing their fixed asset investment abroad or
financing their overseas projects to obtain loans. The Internationalisation Finance (IF)
Scheme is designed to address this issue through a system of co-sharing of default risks
between IES and the Participating Financial Institutions (PFIs).
The types of credit facilities are:
1. Asset-based financing
2. Structured loans
3. Banker's guarantee
Double Tax Deduction (DTD) for Internationalisation
The DTD scheme supports overseas market and investment development expenses
incurred by Singapore-based companies. It allows a Singaporean company to enjoy tax
savings i.e. deduct twice the eligible expenses incurred against the company's taxable
income. DTD covers a wide range of activities along key stages of the company’s
overseas expansion.
International Market Immersion Programme (iMIP)
As each country has its own distinct set of business conditions and traits, a company’s
staff can enhance their effectiveness in operating in an overseas market by
308
familiarizing themselves with the market conditions and business environment. One
way to do this is to send them for in-house customized training attachments overseas.
IE Singapore co-shares the costs of certain components incurred by the company, such
as pre-departure training fees, training allowances, which include basic salary to the
trainees, and return economy airfares to the place of training of the overseas immersion
programme.
Under the International Market Immersion Programme (iMIP), trainees will gain on-
the-ground knowledge in a comprehensive, methodical manner guided by experienced
mentors. These mentors could be company employees or business associates based in
the target markets. Upon completion of their overseas immersion, trainees are deployed
to the market where they have undergone training, so that they can apply their acquired
knowledge to help expand the company’s business. Alternatively, they may be tasked
to oversee the company’s foreign operations in the market that they were trained for
from the Singapore headquarters. Enterprises that have successfully developed and
implemented the iMIP for their pioneer batch of employees will then have a framework
for subsequent staff training overseas. Over time, a Singaporean company will be able
to develop a larger pool of talent with in-depth expertise in its target overseas markets.
309
Appendix 3.1 : Pilot Study
UWA DBA COURSE
JOINT PROGRAMME WITH
PSB ACADEMY
Pilot Study – An evaluation of the influence of internationalisation on selected
companies listed on the Stock Exchange of Singapore (SGX)
Student: LEONG Horn Kee
Student No: 20339042
12 May 2007
(Pilot Study report – excluding references and attachments)
311
CONTENTS PAGE
INTRODUCTION ............................................................................................... 313
METHOD ........................................................................................................... 314
FINDINGS ........................................................................................................... 316
The 12 Selected Companies ................................................................................ 316
Reasons to Internationalise ................................................................................. 318
Structure for Internationalisation ........................................................................ 321
Measures of Level of Internationalisation .......................................................... 325
Performance Measures for Internationalisation .................................................. 327
Future Internationalisation Plans ........................................................................ 329
CONCLUSION .................................................................................................... 330
ATTACHMENTS ............................................................................................... 332
313
Pilot Study: An evaluation of the influence of internationalisation on selected
companies listed on the Stock Exchange of Singapore (SGX)
INTRODUCTION
This qualitative research project is a pilot study to examine the influence of
internationalisation on 12 selected companies listed on the Stock Exchange of
Singapore (‘SGX’) for the 10-year period from 1998 to 2007.
A brief literature review indicated that many studies have been done to understand
the influence of internationalisation on corporations. Generally, it is understood that
corporations need to go international for a variety of reasons such as for growth,
survival, competitiveness, economy of scale, proximity to markets and performance
enhancement. (Hutzschenreuter and Guenther, 2008) Numerous studies were
conducted in the Western economies, (Clark and Knowles, 2003) but no thorough
studies have yet to be conducted for companies listed on the Stock Exchange of
Singapore(‘SGX companies’).
Internationalisation has been generally defined as a strategy undertaken by a
corporation to expand overseas to take advantage of various factors such as costs and
proximity to markets in the overseas markets.(Fallah and Lechler, 2008) Most
corporations started from large domestic home markets like the USA, UK, Europe and
Japan, and one of the main objectives of internationalisation is to improve
profitability(Norbarck and Persson, 2008).
314
The motivation to internationalise may be different for SGX companies, as most if not
all, started off from a very small domestic Singapore market. This research thesis is
interesting and worthwhile, as it will enable a better understanding of the imperatives
and motivations that drive SGX companies to go international. The project aims to
undertake a qualitative evaluation of the impact of internationalisation on SGX
companies. The period of 10 years from 1998 to 2007 was selected because it will give
a sufficiently long period for a company’s internationalisation plan to take effect and
achieve results. SGX companies were selected as being listed companies; details on the
companies’ history, business scope, plans, financial data, and factories and operations
locally and overseas can be available publicly.
The shared experience of going international will enable SGX companies to learn how
to better structure their organisations to tackle the world markets, and to adopt the
correct strategies and action plans to compete better in the international environment.
The research will add to the pool of knowledge on internationalisation, and enable
further research work to be conducted in a subject who is very relevant in today’s
highly connected, technology driven and internationally competitive world market.
METHOD
The research method is to conduct one to one interviews with 12 selected senior
executives of SGX companies. Given the restricted time frame of this project, 12
companies can be accommodated which will enable a fair sample size to be collected.
Initially, a preliminary selection was made of about 25 - 30 SGX companies based on a
315
mix of different industries. The senior executives ranging from Chairmen, Chief
Executive Officers, Presidents and Executive Directors from the selected companies
were approached to request for personal one to one interviews with them to discuss
their views on their companies’ internationalisation efforts in the last 10 years from
1998 to 2007. About 15 - 20 senior executives consented to being interviewed.
Because of their heavy business work and travel schedule, a final group of 12
executives was interviewed. Before each interview, the executives were given the
Interview Guide (see Attachment 1). They were given consent forms to sign, and
assured of the confidentiality of the interviews, which will be de-identified. They were
informed that original recordings will be destroyed, and only historical, publicly
available and not confidential information and data will be used.
One to one interview method is chosen because the topic requires in-depth discussion
and reflection. Moreover, being top executives, interviews on one to one basis will
accord them the privacy of a closed-door environment. Nine interviewees are
Chairmen, CEOs, Presidents and MDs. The remaining three are Deputy Presidents and
Executive Directors. They are able to give clear, thorough discourses of their
companies’ businesses, plans and internationalisation programmes. They also
displayed deep knowledge and appreciation of the driving forces to go international,
and offered learned views on internationalisation. The duration of the 12 interviews
was between 20 minutes to 45 minutes (mostly 30 minutes), and conducted in a
business-like manner tracking questions in the Interview Guide. The transcripts of the
12 interviewees were prepared (See Attachment 2). The transcripts were analysed
using the Nvivo software for a thorough review of the main concepts, views and
opinions being raised by the executives interviewed. Tree nodes were created under
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Nvivo to classify the many issues brought up. The executives expressed several
common points on the needs and forces that drive them to internationalise their
companies. Most of the executives gave insightful comments on how
internationalisation has affected their companies in both positive and adverse manner.
The Tree Nodes of the main topics discussed are stated at Attachment 3.
The signed consent forms are at Attachment 4.
FINDINGS
The 12 Selected Companies
The 12 companies have total annual turnovers ranging from $200 million to $3 billion.
They are sizeable companies, which have been in existence for over 20 years. Two of
them have history dating back 150 to 200 years. They are established industry players,
and are able to compete effectively in the international markets. The executives
interviewed are very familiar and knowledgeable about the concept of
internationalisation.
Internationalisation Strategies
The typical internationalisation strategy adopted by most companies was to establish
first in Singapore, before venturing overseas. The rationale is that the company has to
develop a certain level of management skills, financial strengths, process controls and
market knowledge before they have the means to set foot overseas.
317
The executives described the painful experience of failures and difficulties when they
first ventured into overseas markets or attempted to set up factories and offices in
foreign soil. All, except one company, eventually succeeded. They expressed
satisfaction on their results and achievements. Through internationalisation, they
eventually went on to grow their companies by multiple of three – four times over the
10-year period from 1998 to 2007. However, one company has a disappointing
experience venturing into China. Eventually, the company sold its joint ventures in
China, and moved back to operate only in Singapore.
One interesting exception to the standard international strategy to start from a
Singapore base, is a company which completely ignore that Singapore market from day
one, initially started from Russia, and then fan outwards to the other former USSR
states, to Eastern Europe before moving back to nearer home in the South-east Asia
region. The executive commented that:
‘Our company is quite different from most of the other companies......which start
normally from domestic markets, but in our case.... our businesses are all done
overseas from the beginning. Because the Singapore domestic market here is pretty
small, having only 3m people,.....it is better for us to put our resources in those foreign
markets that will realise the biggest returns to us. ...we went to Russia in the early
1990s, we started from there .... then we move out to all the cities outside Moscow....
So we say we are internationalised, but we actually localised from Moscow and from
there we started out.....’
318
A company started in Australia, decided to be listed in SGX, and then adopted an
expansion strategy by first acquiring a target company in Singapore. The company then
‘exported’ its technical experience and management experience to the Singapore
subsidiary.
Yet another company adopted an interesting and innovative manner to
internationalise by using the venture capital approach. It invested in numerous start-
up companies. A few investments eventually succeeded and became large
international companies in the new technology segments. However, the company had
to go through the painful process of writing off several bad investments. Recently, it
embarked on a rationalization process to focus on three mainstream businesses.
One company first forays overseas failed when it tried to set up wholly owned
subsidiaries in overseas centres. Later, the company modified its strategy to acquiring
the market leaders in each of the overseas markets, and let the local management run
the foreign businesses.
The above review demonstrated that there are different paths of a successful
international strategy.
Reasons to Internationalise
1. Small Singapore Market
The 12 companies cited numerous reasons for going international. The most common
reason is that Singapore is a small market. If they stayed in Singapore, they can only be
‘a big fish in a small pond’. For long-term sustainable growth, they have to venture
outside Singapore. In a sense, most companies started by going ‘regional’ to the
319
neighbouring countries. Going regional is the first step to going ‘international’.
Therefore, in this research study, a company’s initial steps to go regional are deemed
as the start of its internationalisation strategy. There is no necessary to differentiate
the expansion plans between regional and international. The executives interviewed
did not view their plans in this manner.
2. It is survival
A striking remark made by some of the executives was that going international is
necessary for survival reasons. They feel that if they do not go overseas, they will
eventually be marginalised. All the executives strongly believed in, and implemented
international plans, and look upon their businesses in an international context. Strong
remarks made are:
‘…..in our particular experience, going international is survival.’
‘ …It is a case of, either you go international to survive, or you will die.’
3. Size does matter
Another reason cited to go overseas is that ‘size does matter’. To be competitive
against foreign competitors, Singapore companies need to grow in size. This will give
them bulk and attain the necessary economy of scale. The competitive pressure drives
them to venture overseas to seek new markets. By being bigger, they will have the
resources to compete more effectively. By operating in more than one domain, they
are better able to service that the large customers who are multinationals. The trend
of the MNCs nowadays is to select only a few suppliers to service them in a particular
region. They want to establish close ties with a select group of suppliers who can
integrate into their systems, and thereby achieving better operational efficiencies. In
320
the new world market, it is true that ‘size really matters’. One executive explains it this
way:
‘…For our business, internationalisation...is very important to us because it all
lead up to scale. In our business, size is very important and the bigger we are, the more
prominent we are in the region, the more vendors will want to deal with us. Therefore,
it is very critical for us to have the size and the market coverage. Without the market
coverage and the size, you find that big vendors … will not want to deal with us. This is
a trend in the industry where the…vendors want to deal with big regional players,
rather than many smaller players in each country… So scale and size is very important
for them and very important for us….’
4. Closer to your customers
A strong imperative to move overseas is to be closer to your foreign-based customers
and understand their needs. When a company wishes to capture contracts from
foreign-based customers, the company has to understand the local conditions, rules
and regulations. To show commitment and establish a long-term relationship, many
Singapore companies have no choice but to set up branches and offices overseas.
Many of them prefer to ‘localise’ their overseas operations by employing local CEOs,
managers and staff. As one executive said:
‘…. We must have good local management in order to manage overseas
network. Without good management, it is very hard to control your overseas network.
It is close to impossible. So, therefore step wise, it would mean that you have to
321
continue to train local people; and people not coming from Singapore alone, but
coming from other places. It means that you must be able to accept people from other
countries/nationalities. They have abilities and talents you can make use of to help you
to expand overseas...’
Some SGX companies adopted an acquisition strategy to gain access to foreign markets
and buy a ready-made management team, which is already in place in the target
companies they acquired. Other SGX companies prefer joint ventures with local
partners. For all those who chose the joint venture approach, they put great emphasis
to finding the best local partners. One executive stressed:
‘….When we go overseas, we realise that understanding the local culture and
customizing to the local requirements is quite important. The first key success factor,
which needs to be done well, is to identify local partners who are keen on this
business,.... To ensure success while we take the lead, we must make sure our partner
can contribute in areas that they are in the best position to contribute, such as handling
the human resource, and handling the local government rules and regulations......’
Structure for Internationalisation
When the SGX companies ventured overseas, they adopted a mix of both centralised
and decentralised functions for their foreign subsidiaries. The objective is to afford
some degree of flexibility for the local managers to exercise discretions in business
decisions, and be nibble to response to the market. At the same time, the SGX
companies want to maintain some degree of central control. One executive cited the
rationale of intellectual property rights as the need for central control. Another
executive mentioned the need to have an overview on risks management of the
subsidiaries.
322
1. Centralised Functions
The most common reason for centralised control is funding, financial reporting and
cost controls. As the SGX companies have to provide funds, guarantees, and other
means of financial support, they have to maintain a high degree of centralised control
on financial management and cost controls. Another important area for centralised
control is in quality control and process flow. As a group, the SGX companies want to
maintain a certain level of quality in products and services standards. They could incur
heavy losses or loss of confidence from customers if their foreign subsidiaries failed in
these crucial areas, i.e. finances, costs, product quality and customer service.
One executive mentioned that his company centralised the Research and Development
(R & D) function because it is deals with the core technology of the company. As this
executive said:
‘…. there are a few areas you have to control from Singapore. One is in terms of the
intellectual property, which you have to control very tightly. Because you have to make
sure that all the patents and trademarks, they are sovereign;...’
There are various approaches and methods to achieve that the balance between
centralised and decentralised controls. Some companies send managers from
Singapore to the foreign subsidiaries. Others have direct reporting lines from
functional managers to their bosses in Singapore. Many senior executives adopt
regular reviews and meetings to maintain the links and controls. One common
complaint is that senior executives in SGX companies have to travel too much. They
are always on the road, and away from their families. Similarly, top executives griped
323
that they are unable to find enough capable managers who are prepared to travel
extensively or be based overseas.
In summary, the common functions that are centralised are:
i. Finance and Funding
ii. Cost Control
iii. Process Flow
iv. R & D
v. Intellectual Property
Very few SGX companies adopt a totally decentralised approach, except when the
subsidiaries are publicly listed companies themselves, and therefore have their own
board of directors and corporate governance regulations to comply with.
2. Decentralised Functions
Other than the centralised functions mentioned above, most other functions are
decentralised in the foreign subsidiaries. Within the approved financial authorisation
limits, the foreign-based managers are allowed to make their own decisions. They have
to learn the local culture, practices and regulations. They have to get close to their
customers.
The functions that are usually decentralised are:
i. Sales and marketing
ii. Manufacturing
iii. Operations
iv. Local compliance
324
v. Manpower recruitment
The executives refer to the process of using local staff and management as ‘localisation’
of the foreign outfit. Many executives stated that their preference is to localise the
foreign subsidiaries as far as possible, rather than send managers from Singapore to
manage the foreign operations. Generally, this is cheaper and more effective. One
executive stressed that:
‘…..certain matters are centralised in Singapore; but by and large, it is decentralised;
they make their own decision to tackle local businesses and problems. ....Yes, the head
office is in Singapore. ... because in our kind of business,......it is localised in a way
because you utilize local facilities ..... All these are local. One other aspect of the
business, you also will have to deal with local companies....Quite a big segment of the
business comes from the institutions that are government-linked....That is why we need
local offices to tackle this kind of businesses....’
3. Outsourcing
One cost effective option compared to the setting up a foreign subsidiary is to
outsource from third parties. Many SGX companies have adopted outsourcing as they
can outsource from the cheapest, provided the quality standards and delivery
capability are dependable. Outsourcing means that a company does not have to carry
the management and staff costs, or the heavy overheads. Moreover, a company can
switch to other suppliers who can prove to cheaper and reliable. Obviously, there are
concomitant risks associated with outsourcing. Interestingly, one executive has
conceptualized his outsourcing efforts as part of his company internationalisation
325
programme. This is a novel definition of internationalisation. He described his
outsourcing needs as follows:
‘….For quality control, we would tend to outsource from countries where their
quality is not of an issue. Then the assembly we would sub-contract to Malaysian
fabricators, Thai sometimes, Chinese and also Mexicans, and so forth. That fits into the
definition of internationalisation, as we are capitalizing on outsourcing from anywhere
which can give us the best in terms of cost, efficiency and delivery services...’
Measures of Level of Internationalisation
As internationalisation is a concept, it is hard to quantify a company’s level of
internationalisation. Each company is organised differently and has its own unique
structure. Different industry operates in a different manner. One executive
explained that even his land transportation business segment could be structured
into an international business. There are successful internationalised companies
operating in the land transportation sector, although this sector is normally
protected, regulated and local in nature. Therefore, there is no one common
measure that can be used to measure across-the-board the level of
internationalisation of all companies in different sectors.
The executives were asked to give their views on appropriate measures on the
level of internationalisation of a company. As expected, they give a diverse range
of answers. The most commonly cited measures to assess the level of
internationalisation are:
i. % of turnover/sales derived from overseas
ii. % of profits derived from overseas
326
iii. % of operations based overseas
iv. % of headcount based overseas
v. % of cross-national common customers
vi. Management ability
The above points (i) to (iv) are quite self-explanatory, but points (v) and (vi) are
interesting and deserve some elaboration. For point (v), one executive clarified that
when his company went international; it enabled his company to capture the same
customers (usually MNCs) in multiple countries. This is deemed an important
justification for going international, and therefore is suitable measure. He said:
‘…..In fact, I can only think of one good point why it is so important to go
overseas. In our case, it becomes a cross border way of getting customers. In fact, more
and more multinationals position their activities in different countries; they are looking
for customers that can help them to integrate. It is not enough to just focus on
domestic needs; everybody knows Singapore market itself is so small. In a small market,
there is high competition. If we do not go overseas, we will not be able to add value
and it is the beginning of the end. So to me, internationalisation is essential, whether
you like it or not....’
For point (vi), the consensus of the executives interviewed was that a successful
international company depends heavily on the management’s ability. Therefore a truly
internationalised company must have an excellent management team who can
execute in the foreign domains. An executive commented that:
327
‘…..I think most important is management......From our past experience, if you
do not have strong infrastructure and foundation on the management, which is
important, when you grow bigger, you will find that a lot of weaknesses start to surface;
and that is where you start to lose money and lose control. Therefore, what I feel
personally, even now we really emphasize on management. How do we train our
people to be able to see things in an internationalised perspective? That means, we
must be prepared to work overseas, travel and localise, especially Singaporeans....‘
Performance Measures for Internationalisation
One of the purposes of this research thesis is to establish whether there is any
correlation between the performance of an SGX company against its level of
internationalisation. The correlation can be evaluated by quantitative means, which is
why SGX companies are selected for study, as financial data are available from the SGX
companies’ annual reports and regular announcements. This quantitative evaluation
can be undertaken using suitable quantitative business research methods.
For the purpose of the present qualitative research is to find out through interviews
with the senior executive of the 12 selected companies, whether in their assessment,
they consider their internationalisation plans in the last 10 years from 19998 to 2007,
have borne any fruits. Through these interviews, it is established that the appropriate
measures to evaluate the success of internationalisation are factors such as sales
growth, profitability, share price and assets growth. Among these four factors, the
most commonly cited factor is profitability. The executives are in unison in considering
that the imperative to go international is to earn more profits, which in turn ensure
survivability and sustainability.
328
On factors relating to rate of returns, the most quoted variables to use to measure
success are return on investments (ROI), return on equity (ROE), return on EVA, and
return on assets (ROA). These quantitative measures can be separately assessed in
future studies.
Results of Internationalisation between 1998 and 2007
All the 12 executives were asked to give an assessment (on a simple scale of 1 to 10)
what they deemed as the level of internationalisation of their companies in 1998, and
10 years later in 2007.
1. 11 positive responses on internationalisation efforts
11 of the executives assessed that their companies had indeed progress from a score
of about 3 – 4 points in 1998 to about 6 – 9 points in 2007. Only one executive gave a
regression of a low score of about 2 points in 1998, to 1 point in 2007. The reason is
this company’s joint venture overseas failed and had to be disposed of later.
When asked about their satisfaction level on the internationalisation effort in the last
10 years and the performance results, the executives of the 11 companies which
attained improvement in the level of internationalisation expressed between
‘satisfaction to very strong satisfaction’ with the results.
2. 1 failed internationalisation case
It would be interesting as further work is to attempt to go into depth and better
understand why this particular company assessed to have failed in its
internationalisation plan. Other companies have also cited early failures, but they
eventually found other routes to succeed.
329
Future Internationalisation Plans
To have a glimpse of the outlook ahead in terms of internationalisation effort, the
executives were asked to describe how they feel their companies can be more
internationalised in the coming years. Most executives opined that they have to
continue to improve their internal strengths in areas such as management depth, IT
technology capability and process flow. It is interesting that management ability is
constantly mentioned as a key factor for success in internationalisation. One reason
could be it reflects the small size of Singapore’s local population. Good and capable
managers are an invaluable asset, especially when a company needs them to venture
boldly and broadly overseas. The pertinent point is that whilst a company may have
sound strategy, strong technology, good processes and ample finances, it still needs an
excellent management to execute the plan.
The executives stated intentions to strive for both organic and inorganic growth in
future. Organic growth means to grow by internal expansion in the current territories
and markets, and gaining market share against the other competitors. This is a difficult
and gradual process.
Inorganic growth means that the companies intend to grow by acquiring other
companies, which can be in the same industry, or in other related or unrelated
industries.
The third manner of growth is to venture into new markets, introduce new products,
enter new businesses or go further afield to foreign markets. However, a few
executives said that they are presently not planning, and not ready to go too far away,
such as to Latin America. The reason is the distance and lack of resources.
330
CONCLUSION
This pilot study reveals a few interesting findings. Some of the findings are
expected but a few are interesting and enlightening.
Spread a second wing
Although the sample size of 12 is not large, it was sufficient to enable some
conclusions to be drawn. The first conclusion is that SGX companies have to
expand overseas because of the limitation of the small size of the Singapore
domestic market. A company that is predominantly based its business in
Singapore would not be able to achieve the size to satisfy the listing requirements
on the SGX. Because of the small domestic economy, all companies have
eventually to move overseas to achieve more scale. As early as the 90s, Mr Lee
Kuan Yew, Singapore’s former Prime Minister had urged Singapore companies to
venture overseas. He termed it quaintly: ‘Too spread a second wing!’
It is survival!
In the present closely connected international economy, there is an even stronger
imperative for Singapore companies to go international. To go regional in fact is
not enough, and not meaningful anymore. As many executives have put it: ‘It is a
matter of survival.’ Singapore companies need to go international just to remain
competitive and relevant. It does not matter if a company fails initially, it must
persevere. It has to internationalise to survive.
331
All paths lead out of Singapore
The third interesting conclusion is that there is no one way to internationalise.
Companies can achieve international status by internal growth, by acquisitions, by
joint venturing, and by outsourcing. Different companies adopt and adapt different
methods to achieve the same results. All roads lead to Rome. In our case, we are a very
small island. All paths lead out of Singapore.
No one standard measure for level of internationalisation
Because of the diversity of companies, there is no one single measurement to assess
the level of internationalisation of a company. Some could adopt the percentage of
turnover derived from overseas operations. Other can use management capability. It is
not an easily quantifiable concept. More literature research needs to be done to find
out whether previous research studies have established a suitable measure. Even if
there is, it may not be directly applicable in the Singapore context.
Impact of Internationalisation on Performance
Similarly, it is not easy to find a direct link between the level of internationalisation and
its impact on the company’s performance. A company could have performed well
arising from its good management, rather than from the internationalisation plan per
se. It is not clear yet that there is a link between internationalisation and performance.
Then there are external and exogenous factors such as state of economy, competitors,
regulatory controls and environment that could have affected a company’s
performance. A relevant question is what is an appropriate measure for performance
against internationalisation?
332
The road to internationalisation never ends
Finally, looking ahead, the consensus of the executives is that the drive to
internationalise never ends. There is still a long road ahead. The road to
internationalisation never ends.
REFERENCES (Excluded from this Appendix 3.1)
ATTACHMENTS
(Excluded from this Appendix 3.1)
1. Interview Guide
2. Transcripts of 12 Interviews
3. Tree Nodes of Nvivo file
4. Signed Consent Forms
334
Appendix 3.3
Appendix 3.3 : List of Participating Companies* and Executives*
S/No. Company Nature of Business Executive Designation
1 CA Food EA MD
2 CB Food & beverages EB Chairman/CEO
3 CC Alcoholic beverages EC CEO
4 CD Offshore marine ED CEO
5 CE Motor related EE
Executive
Director/
Group GM
6 CF Construction products EF Group CEO
7 CG Motor related EG MD
8 CH IT products EH Chairman/CEO
9 CI Construction
materials EI Chairman/CEO
10 CJ IT products EJ MD
11 CK Logistics EK Group CEO
12 CL Logistics EL Group CEO
13 CM Manufacturing
services EM Chairman/CEO
14 CN IT and motor products EN Group CEO
15 IES Government agency EO CEO
(*codenamed)
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Appendix 3.6
Appendix 3.6 : Summary table of interview responses
S/
N
Interview questions Company executives’ responses
A
B
1 Internationalisation
strategy (1998 –
2007)
Expanded in countries where
the company already has some
presence, in order to gain
confidence for further
expansion into relatively more
unfamiliar countries.
Expanded into countries, which
had an abundance of their raw
materials and were much larger
markets.
Targeted markets that were
virtually new to their products;
high barriers to entry in terms of
language, regulations, customs,
laws and tariffs. They aimed to
be the first mover in the market
to give a greater impression
among their customers, and
enjoy less competition. They
selected dynamic international
talent who were willing to station
abroad and work.
2 Key drivers of the
strategy
CEO and the other
management staff
.
Executive directors who were
founders of the company.
3 Major imperatives Singapore was a very small
market and difficult to grow by
remaining in Singapore.
Singapore market was limited by
its small population base and the
opening of Eastern Europe.
4 Planning processes
Informal plan.
No consultants were engaged.
No formal structured plan.
No consultants were engaged.
339
5 Use of government
incentives
Government incentives were
not instrumental.
Government incentives did not
affect their overseas plans.
6 Monitoring of plan Monitor the expansion by
comparing each company
against its competitors in the
same country.
Monitored through the help of a
local country manager, resident
sales manager, marketing and
brand manager and finance
team.
7 Success / failure
factors
Knowledge of the environment
and a cautious approach to
expansion.
Committed staff that was willing
to station overseas and
understand the local culture.
8 Structure –
centralised /
decentralised
Decentralised. Decentralised.
9 Indicators on level
of
Internationalisation
Turnover and asset levels. None.
10 Indicators of
performance
measures
Measure the company against
competitors in the same
country.
Market share and profitability.
11 Major impacts Regulatory requirements would
pose some operational
inconveniences.
Import duties and political turmoil
would affect the feasibility of
importing their products.
340
12 Rating on level of
Internationalisation
First five years – 6/10
Next five years – 8/10
No response.
13 Rating on success
of
Internationalisation
First five years – 6/10
Next five years – 8/10
No response.
14 Future plans Actively looking for acquisition
opportunities, which could be a
new business or a raw material
supply company.
Expand into new geographical
areas; considered integration into
both upstream and downstream
businesses.
341
S/
N
Interview questions Company executives’ responses
C
D
1 Internationalisation
strategy (1998 –
2007)
The company researched into
which brand to use for the
internationalisation, followed by
expansion into markets with no
strong competitors present.
Before they build a plant in the
country, they would sell through
exports and set up a sales
office. This allowed them to
build up their brand before they
invest in a plant. Throughout
the expansion, they focused
solely on their core products
which they understood well and
divested non-core businesses.
Once they had established a
foothold in the country, they
would continue to expand
within that country.
The company adopted a strategy
that allowed them to be near their
customers by setting up their
operations near where oil and
gas exploration was most active.
The company was able to offer
prompt service in the heavily
service oriented industry of oil rig
building and repairs.
In addition, the company’s multi-
racial and multi-cultural
workforce was able to work more
effectively in a foreign
environment than their
competitors’ homogenous
workforce. The company also
believed in co-operating with the
country’s policies rather than
imposing their own way.
2 Key drivers of the
strategy
Directors from company and its
parent companies.
Management drove the strategy
with the board’s guidance.
3 Major imperatives Small consumer market in
Singapore and the influx of
competitors due to Singapore’s
The industry required the
company to have proximity to
their customers and Singapore
342
Free Trade Agreements.
was far away from the oil fields.
4 Planning processes
No consultants were engaged
when the plan was formulated.
Consultants were engaged to
advise on the strategy.
5 Use of government
incentives
Government incentives were
not important to their plans.
Use of Government incentives
was very minimal to their
company.
6 Monitoring of plan No response.
Annual reviews and modifications
with the help of consultants.
7 Success / failure
factors
Scale and size of the business;
very clear objectives; staff who
were passionate about their
work; and support from their
Board and management to
make decisions.
Being able to work like a local
company in foreign countries;
diversified workforce; core values
to unite all employees.
8 Structure –
centralised /
Decentralised
Centralised for technical,
finance and the general
manager role.
Centralised for finance,
management and marketing
roles.
9 Indicators on level
of
Internationalisation
Number of acquisitions made
and countries expanded into
every year.
Do not measure level of
Internationalisation.
10 Indicators of
performance
measures
Profitability numbers like profit
before interest and tax, and net
profit.
Revenue; profits after tax.
11 Major impacts Increases in custom duties. Oil price changes and the
343
economic environment of the
country.
12 Rating on level of
Internationalisation
No response. No response.
13 Rating on success
of
Internationalisation
First five years – 5/10
Next five years – 9/10
No response.
14 Future plans
Grow regionally, intra-market
and the American market.
Expansion into countries
undergoing urbanization.
344
S/
N
Interview questions Company executives’ responses
E
F
1 Internationalisation
strategy (1998 –
2007)
The company tended to choose
larger markets to invest as
these markets yield better
profitability. The company
would take on active
management of the company if
they own the majority, and
appoint the CFO if they only
own the minority. In addition,
the company would ensure the
investment was well
researched, monitored closely
by measuring with KPIs.
The company would choose
good companies to partner with
and these companies preferably
have very good management
systems in place. Before
internationalizing, the company
made sure their products and
business model were good, and
they had the capacity to expand
in terms of manpower. After
acquiring a foreign company,
they employed local talent,
directly assigned people with
responsibilities and avoided
bureaucracy in the organisation.
2 Key drivers of the
strategy
Senior management monitored
and the board would be
consulted.
Board set the direction and the
CEO would implement.
3 Major imperatives
Major shareholders had
extensive business exposure in
China.
Singapore was a small country
with small domestic market.
4 Planning processes
Deliberate plan with changes
along the way.
Ad-hoc plan, which was
constantly reviewed.
345
5 Use of government
incentives
Received help from IE
Singapore to penetrate new
markets.
Do not use government
incentives at all.
6 Monitoring of plan
Regularly reviewed and
updated.
Plan updated along the way.
7 Success / failure
factors
Size of the market would affect
the profitability of the
investment and the ease of
obtaining funding.
Good business model that could
go international; enough
manpower and talent; controls
and systems for the overseas
entities.
8 Structure –
centralised /
decentralised
The structure of the funding
would depend on the
percentage of investment.
Insisted on using local talent.
Centralised the finance and
purchasing operations.
9 Indicators on level
of
Internationalisation
Turnover and profitability. Brand name of the company
within the local industry people,
industry surveys, and turnover
from overseas.
10 Indicators of
performance
measures
Turnover and profitability. Return on investment.
11 Major impacts
Global market downturn. Asian Financial Crisis, SARS and
the 9/11 incidents.
346
12 Rating on level of
Internationalisation
Full internationalisation by the
end of the fifth year; nurturing
of the investment towards the
tenth year, and reaping the
rewards after the tenth year.
First five years – 5/10
Next five years – 6/10
13 Rating on success
of
Internationalisation
Considered very good.
No response.
14 Future plans The company has adopted a
new corporate direction and
diversified into a resource-
based company. In addition,
the company is also assessing
the possibilities of forward and
backward integration.
The company intended to expand
into China and India, but no
interest to go beyond Asia.
347
S/
N
Interview questions Company executives’ responses
G
H
1 Internationalisation
strategy (1998 –
2007)
The company made sure that
their company had some
competitive advantage when
operating overseas, namely the
ownership, internationalisation
and location advantage. Next,
they relied on their
management network and
capabilities to expand into a
country of closer cultural
distance before expanding
further.
Outward looking corporate
culture with regard to their
expansion plans and human
resource policies, thus they were
comfortable recruiting local staff
in their overseas operations. A
good management system allows
them to utilize their local staff
effectively and their knowledge
contributed to their success. The
culture of the company was
internationalised so their staff
can work with people of different
ethnic background. A standard
set of controls needs to be
applied across all operations.
2 Key drivers of the
strategy
CEO initiated and drove the
internationalisation programme.
CEO initiated the discussion with
board and took responsibility.
3 Major imperatives
Difficult for a manufacturer to
expand a business sustainably
and reliably.
Global opportunities, challenges,
changes in the marketplace and
internal strengths.
4 Planning processes Planning was done ‘on the go’ Plan was internally derived with
348
and some consultants were
used.
frequent checks with external
consultants who were locally
based.
5 Use of government
incentives
Did not use any of the
incentives programmes.
Did not benefit from any
incentives.
6 Monitoring of plan
Extensive and regular monthly
review of performance.
Had a 2 – 3 year plan that was
reviewed yearly.
7 Success / failure
factors
The company needed to
develop a competitive
advantage that can be
combined with strategy,
implementation and
management to become
successful.
Underestimating the complexity
and the knowledge gap was the
major cause of failure.
Recruiting local talent with the
knowledge to execute the plan;
strong corporate culture that
allowed the staff to be able to
work with people of all races and
levels; and English as common
language.
8 Structure –
centralised /
decentralised
Finance, HR, product
development are centralised
while marketing is
decentralised.
Very decentralised.
9 Indicators on level
of
Internationalisation
Monitored the mix of
manufacturing business, which
is local against the global
Did not benchmark the level of
Internationalisation.
349
business.
10 Indicators of
performance
measures
Monthly finance and
management meeting that
looked at performance in terms
of sales, margin expenditure,
and profitability.
Investment criteria measured
against ROE or IRR.
11 Major impacts Asian Financial Crisis
External environmental factors.
12 Rating on level of
Internationalisation
No response.
10/10 overseas.
13 Rating on success
of
Internationalisation
Strategy was working and
paying off.
7 or 8 / 10
14 Future plans Made use of established
manufacturing capability in
China to scale. The company
wanted to supply key markets.
Remain focused on property
investment and development,
and focused on investments
overseas.
350
S/
N
Interview questions Company executives’ responses
I
J
1 Internationalisation
strategy (1998 –
2007)
The company’s success was
due to these factors – strong
local business partner,
achieving size and scale,
decentralizing the
management, and ability to
react to the environment.
The company’s
internationalisation plan was
based on a few factors – robust
selection of partners, intentionally
placing trust in their partners,
giving their partners a stake in
ECS, and decentralizing control
except for the accounting
system.
2 Key drivers of the
strategy
CEO identified the need and
drove the initial stages. Board
would endorse the initiative
before major resources were
committed.
Three founders (including CEO)
of the company had a role in the
company vision. The CEO
reported to the board and drove
it.
3 Major imperatives The need for performance and
results as a listed company.
Survival against much stronger
international competitors.
4 Planning processes
Plans developed in-house with
limited use of external
consultants.
Plans were all developed in-
house without consultant help.
5 Use of government
incentives
Very little usage of government
incentives.
Did not use the government
incentives.
351
6 Monitoring of plan Reviews were done at least
once every two years.
Emphasis was placed on
selection of partners, not on
monitoring.
7 Success / failure
factors
A highly scalable model, which
grew with momentum;
technological competencies;
powerful local partner.
Good reliable people and very
good logistics, IT, and financial
systems. Need to rely on their
systems, as their volume was
huge. Good leadership from
country CEOs.
8 Structure –
centralised /
decentralised
Centralise R&D and Quality
Control; decentralised sales,
HR, finance control and
production.
Allows localisation, or
decentralisation, as much as
possible except financial
controls.
9 Indicators on level
of
Internationalisation
Return on investment and the
production capacity.
Sales and profits.
10 Indicators of
performance
measures
Measured the outcome and the
spin off effects of the
expansion.
Consistent profitability; return on
capital employed compared with
the industry; good cash flows.
11 Major impacts
Internal change of
shareholders.
No major events except the
business viability of their
vendors.
12 Rating on level of First five years – 6 - 7/10 Based on sales and profits, the
352
Internationalisation Next five years – 6 - 7/10
company had done well on the
level of internationalisation.
13 Rating on success
of
Internationalisation
Done very well in one of the
business segments but not as
well in another segment.
Very satisfied.
14 Future plans The company engaged in more
activities related to the green
initiatives and addressed the
new opportunities in the service
sector.
Continue to grow to countries
where the company was not
operational, and look for M&A
opportunities in countries where
they were already established.
353
S/
N
Interview questions Company executives’ responses
K
L
1 Internationalisation
strategy (1998 –
2007)
The company did not depend
only on Singaporeans to
manage overseas office
because they lack the required
experience of running an
international logistics company.
The company tended to favour
overseas investment in the joint
venture structure where the
local partner would have the
required knowledge.
The company engaged a
reputable external consultant to
assist with the formulation of the
internationalisation plan. The
company preferred to depend on
the joint venture local partners. In
addition, the people of the
company must be well trained
and motivated enough for the
overseas deployment. The
company also tracked their
overseas performance closely.
2 Key drivers of the
strategy
Group CEO. Management conceptualized the
strategy with the help of external
consultants and sought approval
from the board.
3 Major imperatives The company needed to
survive and as a logistics
company, they needed a large
network of offices in many
countries to be an effective
logistics solution.
Internally, the company needed
growth, and externally, there
were opportunities available for
expansion overseas.
4 Planning processes Very opportunistic plan with no 10-year plan that focused on the
354
help from external consultants.
priority.
5 Use of government
incentives
Yes. It helped to defray minimal
costs but did not dictate their
overseas expansion plans.
No government incentives.
6 Monitoring of plan No monitoring process. A progress report to the board
done every six months.
7 Success / failure
factors
Economy of scale;
management.
The two key components to
success were people and
processes.
8 Structure –
centralised /
decentralised
Most of the overseas
operations were joint ventures,
and only buying of freight was
centralised.
Centralised three areas –
financial control, IT, and
marketing strategy.
9 Indicators on level
of
Internationalisation
Do not differentiate business in
or from outside Singapore.
Sales and profit contribution from
overseas.
10 Indicators of
performance
measures
Profit margins. Economic Value-Added, sales
and profitability creation.
11 Major impacts Fuel costs, shipping market and
the availability of financing for
trade.
SARS and any event which might
cause the government to control
movement of goods.
355
12 Rating on level of
Internationalisation
6 - 7/10 7 – 8/10
13 Rating on success
of
Internationalisation
No response. No response.
14 Future plans Did not have a concrete plan on
how to move ahead as they
were a very opportunistic
company, but they would
capitalize on what they had
built up over the last five years
and tried to achieve a
multiplying effect on their
network.
Continued with the plan and
double the business activities
that they were doing for the next
3 to 5 years.
356
S/
N
Interview questions Company executives’ responses
M
N
1 Internationalisation
strategy (1998 –
2007)
The company chose not to
compete with other low cost
manufacturers but chose to rely
on their strong brand name
instead to secure project
management jobs. Their
employees were very capable
and the incentive scheme was
crucial in aligning the interest of
the staff with the company.
The internationalisation strategy
that was critical in their
performance includes employee
bonus plans, human resource
utilization, and the controls over
the various overseas units.
2 Key drivers of the
strategy
CEO conceptualized the plan
and the management drove it.
Management drove the plan.
3 Major imperatives Survival as a company.
Survival as a company.
4 Planning processes
Management would create a
yearly business plan and a
budget, without the help of
consultants.
The company had 3-year plans,
5-year plans, annual budgets,
and strategic meetings. They
validated their strategies with
well-known consultants.
5 Use of government
incentives
Periodic usage of government
incentives to conduct studies
and evaluate projects.
Did not use government
incentives except for the OHQ
status for one of their subsidiary
357
companies.
6 Monitoring of plan Board was not actively involved
with the internationalisation
plan.
Management were held
responsible for the plans and
their annual bonuses were tied to
the plans.
7 Success / failure
factors
Employees with the confidence
and were capable, and the
appropriate incentive scheme.
Having the best persons to lead
the effort, then rewarding and
recognizing their good effort.
8 Structure –
centralised /
decentralised
Project execution and finance
were centralised; business
development and HR were not
centralised.
Finance, corporate governance,
and controls were centralised.
Legal and HR were centralised
but implemented locally.
9 Indicators on level
of
Internationalisation
Percentage of overseas sales;
number of countries covered;
percentage share of global
market size.
Do not track level of
internationalisation.
10 Indicators of
performance
measures
Bottom line (i.e. profit). Profitability, cash flow and
internal rate of return.
11 Major impacts
Management staff getting old. Competencies and resources.
12 Rating on level of No response. No response.
358
Internationalisation
13 Rating on success
of
Internationalisation
8/10 compared to companies in
the region. Personally, the
rating would be 5/10.
No response.
14 Future plans The company would want to
capitalize on their international
market network in the oil & gas,
power industries, by acquiring
more businesses that could ride
on this network. They would
also like to achieve more
synergies within the group.
The company would expand
outside of Singapore.
359
Appendix 4.1
Appendix 4.1 : Summary of developments and financials of Company A
Main developments by year (1998 to 2007 period) 1998
Postponed the proposal to build a mega plant in Shah Alam.
Set up the fourth manufacturing plant in Johor Baru, Malaysia.
Subsidiary A1 entered into a strategic alliance with foreign partner AA1.
1999
Sales of A1 bread range of products in Philippines was better than expected and
had become well established.
2000
Acquired A2 brand, a major competitor in Singapore.
Constructed a fifth plant at Bukit Kemuning, Malaysia.
Entered into a strategic alliance with Padiberas Nasional Berhad, a leading player
in the processing, trading and distribution of rice and other food products in
Malaysia.
Philippines subsidiary A2 installed a second production line.
Subsidiary A1 became one of the largest chains in Singapore.
2001
An acquired 100% of Australian company AA2, the largest producer of pork in
the region and Australia, to form subsidiary A3.
Divested 30% of A1 KL to Padiberas Nasional Berhad.
2002
A new slaughterhouse is being constructed in Melbourne.
A1 KL planned to install an additional production line.
360
A1 is clearly established in Metro Manila as the number 1 brand with a 35%
market share.
Subsidiary A4 purchased an adjacent property to expand their facilities.
2003
Subsidiary A3 suffered considerable losses due to Australian droughts and sharp
appreciation of Australian dollar.
A sold its entire interest in A1 Thailand.
A sold its entire 51% interest in subsidiary A1.
A1 KL is the 8th production line to boost capacity.
2004
Acquired A5 bakery operations in New South Wales, Australia and a 51%
interest in subsidiary A5, a dairy food producer located in Western Australia.
A1 Philippines had grown to occupy 50% market share in Metro Manila and has
started growing steadily in other provinces. They also installed a third production
line.
Acquired the entire business and assets of a dairy producer in Victoria, Australia.
Invested in A6, a Singapore listed company.
A carried out a Rights Issue that was fully subscribed.
2005
Acquired a 55% stake in A7 China, a major producer of pork and livestock in
Shandong, China.
Acquired a 51% stake in A8 China, one of the largest producers of apple juice
concentrate in both China and the world.
Acquired a strategic 22.24% in A9 China, producer of preserved and processed
vegetables, fruits and peanut oil.
361
Sales and profitability of A1 Singapore have fallen due to intense competition.
2006
Increase in A’s Operating profits is mainly attributable to food manufacturing,
primary production and trading & logistics.
A1’s operations in Malaysia and Philippines continue to see increased sales and
profits while A1 Singapore continued to lose sales and profitability.
2007
A1 KL plans to commission its 8th production line and upgrade an existing line to
cope with the increased demand.
A1 Philippines initiated the installing of its 5th bread production line.
Embarked on feasibility studies of bakeries in other Asian markets.
Revenue percentages from food manufacturing, bakery, primary production and
trading were 32%, 28%, 30% and 9% respectively.
362
Company A Financial Summary Table
(S$’mil) (Y/E
31 Dec) 1998 1999 2000 2001 2002
Total
Revenue 404 460 492 603 829
Net Profit
After Tax 5.5 15.8 16.5 19.0 18.3
Market
Capitalisation 148 226 122 124 132
Total Assets 282 270 282 540 563
(S$’mil) (Y/E
31 Dec) 2003 2004 2005 2006 2007
Total
Revenue 809 620 886 992 1,077
Net Profit
After Tax 32.6 12.3 26.3 19.5 14.1
Market
Capitalisation 144 142 183 192 198
Total Assets 581 623 955 933 1,056
363
Appendix 4.2
Appendix 4.2 : Summary of developments and financials of Company B
Main developments by year (1998 to 2007 period) 1998
Launched new products, B1 coffee range in five flavours, targeting the more
developed markets of USA, Western Europe and Singapore.
1999
Increased the stake in Company B1, one of B’s contract manufacturers, to 88% in
March 1999.
2000
Listed on the SGX Mainboard on 8 May 2000.
2001
Continued to invest in marketing activities to enhance brand portfolio
Launched many new food products.
Ventured into wholesale of frozen seafood in Singapore and overseas markets.
Disposed of subsidiary B1, an unprofitable subsidiary.
Acquired additional shares in BB2.
2002
Stepped up advertising and promotional efforts to reinforce brand positioning,
highlights would include advertisement during the FIFA World Cup 2002, on
racing cars, and marketing initiatives involving a pop music group.
Launched new products 3-in-1 coffee in stylish stick sachets, snack food like
dried calamari and jelly pudding.
Independent consumer surveys showed B1 3-in-1 instant coffee among the top
five in Russia. In Kazakhstan, B1 came in tops for the instant coffee market.
364
2003
Continued their aggressive advertising and promotion activities like wet
samplings, trade shows and sponsorships.
Launched new formulations like the freeze-dried coffee and the 100% Columbian
3-in-1 coffee.
Entered new markets like Egypt, Turkey, Hong Kong, China, USA, Middle East
and India. Set up new offices in Hungary and Uzbekistan, bringing total offices
to 14 in 13 countries.
Net profits after tax declined due to higher marketing costs, overseas
administrative and logistics costs.
2004
Moderated the amount of advertising and promotion effort
Introduced new products B2 and B3 Coffees and Ice Teas.
Acquired 49% stake in Company BB3 of Sri Lanka in a strategic move to expand
laterally.
Built a new factory in Vietnam to cater to local sales. Partnered Company BB4 of
Indonesia, to jointly market and distribute a new brand of instant coffee drinks,
named B4.
2005
Continued to market their brand strongly which contributed to increased revenue
again.
Started the construction of a new manufacturing facility in Russia in response to
the higher import duties of good entering Russia,
Divested a 35% owned associated company – Company BB5.
365
2006
Marketing and promotion expenses continued to increase as more brand building
activities are carried out, ensuring another strong growth in sales figures.
New production facility in Russia is fully operational and it employs 350 people,
capable of producing 100 million sachets of coffee per month that supplies
directly to the Russian market.
Acquired a 50% stake in the property on which the new Russia factory is located.
Raised S$22.3 million of funds through a private placement of 39.2 million new
shares to Company B6 owned by the BBB Group, an Asian conglomerate that
has interest in food processing and manufacturing.
2007
Embarked on a revamping exercise to improve market share and brand equity of
B1 brand.
Acquired its first nationalistic Russian brand of 3-in-1 instant coffee mix, B5, a
leading brand in both Russia and Ukraine.
Independent brand valuers valued B1 and other brands at S$182 million.
Forbes named B as one of the best 200 companies in Asia with turnover under
US$1 billion in 2007.
Revenue segments Russia, Eastern Europe and Central Asia and others
contributed 54.6%, 38.2% and 7.2% respectively.
366
Company B - Financial Summary Table
(S$’mil)
(Y/E 31 Dec)
1998 1999 2000 2001 2002
Total
Revenue
48 39 59 84 112
Net Profit
After Tax
4 4 5 11 15
Market
Capitalisation
- - 27 32 78
Total Assets 22 27 43 54 71
(S$’mil)
(Y/E 31 Dec)
2003 2004 2005 2006 2007
Total
Revenue
140 160 184 234 277
Net Profit
After Tax
10 15 22 27 32
Market
Capitalisation
103 103 89 195 277
Total Assets 74 98 130 179 180
367
Appendix 4.3
Appendix 4.3 : Summary of developments and financials of Company C
Main developments by year (1998 to 2007 period) 1998
Redesigned packaging for brand C1. Sponsored S-League with $5.5 million,
which is among the many sponsorships that C had carried out in its various
markets.
Acquired a 35% equity stake in company CC1 after buying out their joint venture
partner.
1999
C announced the exit from non-core businesses like the liquor brand agency and
wholesaling in New Zealand.
2000
Acquired the rights to C1 and C2 brands in Hainan, China.
Made an unconditional takeover offer for CC2 shares in New Zealand, increasing
their interest in the company to 76.63%.
Takeover offer was made for those shares of Papua New Guinea company, CC3,
that was not already owned, but the offer lapsed due to lack of interest in the
offer.
A conditional agreement was entered into to acquire 27% of CC1, which would
take C and its concerted parties’ interest to 97%.
C announced the discontinuation of its soft drinks operations.
Announced the sale of shares in company CC4.
C announced the sale of wines subsidiary CC5.
368
2001
Continued intensive advertising and sponsorship activities, especially in China
and Thailand to promote C1 and C2 brands.
Initiated plans to re-commence construction of a brewery in Hatay, Vietnam and
double the brewing capacity in Thailand.
2002
Advertised aggressively by associating their brands with the English Premier
League and FIFA World Cup.
2003
Opened new overseas offices in New York, Sydney and London. Gained
distribution in Nepal, South Africa, Ghana, Sierra Leone, Finland and Sweden.
Stepped up marketing and distribution efforts in the Middle East.
Introduced new variants of beer named C4 and C5.
Revenue, profits before tax both grew despite the SARS epidemic.
2004
Expanded production capacity by 20% and 50% in Cambodia and Hainan
respectively.
Received approvals to expand production capacity in the South Vietnam brewery.
Privatized CC6 in New Zealand by acquiring the remaining shares held by
minority shareholders.
Acquired 21.5% interest in CC7, a brewery in Guangdong province, China.
Introduced C1 to Estonia, Turkey, and Russia.
2005
Invested US$15 million in a new brewery in Mongolia for a 55% stake.
Acquired a 60% in one of Sri Lanka’s leading breweries,
369
Acquired a 40% stake in Jiangsu’s brewery, CC8, and a new plant in Wujiang.
Company CC9, of which C owns 21%, expanded its new breweries in Shantou,
Dongguan, Tianjin and Xi’an of China.
2006
Acquired Brand C6’s two breweries in central Vietnam and the Mekong Delta.
Secured licences to build breweries in Hyderabad, India; Vientiane, Laos;
Ulaanbaatar, Mongolia. CC8 is adding three more breweries in Xi’an, Chengdu
and Foshan.
2007
Acquired yet another brewery in Quang Nam province in central Vietnam.
370
Company C -Financial Summary Table
(S$’mil)
(Y/E 30 Sept)
1998 1999 2000 2001 2002
Total
Revenue
1,401 1,326 1,179 1,011 1,096
Net Profit
After Tax
64 40 66 117 106
Market
Capitalisation
866 1,099 967 1,164 1,253
Total Assets 1,449 1,242 1,038 1,014 1,056
(S$’mil)
(Y/E 30 Sept)
2003 2004 2005 2006 2007
Total
Revenue
1,261 1,371 1,436 1,526 1,784
Net Profit
After Tax
130 145 155 183 168
Market
Capitalisation
1,601 1,938 2,303 3,957 3,407
Total Assets 1,156 1,158 1,274 1,559 1,725
371
Appendix 4.4
Appendix 4.4 : Summary of developments and financials of Company D
Main developments by year (1998 to 2007 period) 1998
D merged with partner company DD1, another major Singapore shipyard, to form
Company DD2.
D sold DD3 and DD4, US subsidiaries involved in building of pleasure boats;
ceased its presence in DD5 in Australia; increased its investment in DD6
Investment to 100%; sold DD7 to DD8.
1999
The newly merged DD2 acquired the marine-related businesses of D and now
owns 18% of DD9.
Four yards in Singapore, USA, Caspian Sea and Brazil allows D to reach out to
customers in these regions.
2000
D delivered its first new rig to customer DD10.
New shipyard in Brazil had secured more than US$120 million worth of contracts.
Integration of subsidiary DD11 and company DD12.
Increased share in Port of Singapore to approximately 20%.
2001
Orders secured in 2001 will keep the DD13 division busy well into 2004.
Ongoing integration between D and DD1.
2002
D integrated its offshore and marine business units to form DD13, benefitting
from cost and revenue synergies.
372
D acquired a yard in Rotterdam, allowing D the ability to repair and convert
some of the world’s largest semi-submersibles.
DD13 successfully penetrated the Middle East offshore market with the repair of
a jack-up drilling rig.
2003
Established an offshore engineering and construction facility in Kazakhstan to
strengthen their presence in the Caspian Sea region.
Set up the fourth manufacturing plant in Johor Baru, Malaysia.
2004
Increased the 60% stake in D Brazil to 82.75%, buying out their partner in the
process.
2005
D13 acquired the remaining interest of its Brazilian operations.
D and Company DD14 combined their expertise to provide deep water and ultra-
deep water oil and gas development solutions.
DD15 boosted its capacity to meet increasing demand for specialized vessels
with the acquisition of a shipyard in Nantong, China.
2006
D entered the Indian offshore market by securing two separate contracts for
drilling contractor.
D13 acquired an additional 50% of the shares in DD16 to make a wholly owned
subsidiary, thereafter injecting capital and rebranding it into DD17 Norway.
Set up D14, a majority owned venture, on Bintan Island, Indonesia and leased a
9-hectare site in Singapore.
D signed a Letter of Intent with XX Transport Company to establish a large ship
repair yard in Qatar.
373
2007
D13 and YY formed a 20/80 joint venture to develop a shipyard in the Port of
Ras Laffan by 2010.
D Nantong was officially opened in Nantong Jiangsu province, China.
374
Company D Financial Summary Table
(S$’mil)
(Y/E 30 Sept)
1998 1999 2000 2001 2002
Total
Revenue
5992 7242 772 1,517 1,911
Profit Before
Tax1
47 44 66 101 227
Market
Capitalisation
1,488 1,500 1,154 962 1,257
Total Assets 6103 8013 2,063 3,127 2,467
(S$’mil)
(Y/E 30 Sept)
2003 2004 2005 2006 2007
Total
Revenue
1,460 2,430 4,112 5,755 7,258
Profit Before
Tax1
160 248 347 627 619
Market
Capitalisation
2,085 2,954 3,805 12,252 18,18
5
Total Assets 1,963 2,685 3,949 5,212 5,717
1 Profit after tax figures are not available, so Profit before tax was used instead.
2 Revenue figures not available, so only revenue figures for the DD segment
shown here.
3 Total Assets figures were not available, so only Net assets figures shown here.
375
Appendix 4.5
Appendix 4.5 : Summary of developments and financials of Company E
Main developments by year (1998 to 2007 period) 1998
E increased its market share in the China motorcycle manufacturing market from
2.97% to 3.46%. Entered into several strategic alliances with PRC-foreign joint
ventures that allowed E to widen the product range and quality.
The company supplies 4% of the world’s demand for dry cargo containers.
Sold the 13.53 acres of container storage yard in Port Klang and consolidated
container operations into a single plant in Penang.
1999
Listed its motorcycle operations, EE1 on the Shenzhen Stock Exchange.
Incorporated a 55% owned subsidiary, EE2, with a team of veterans in the
semiconductor industry.
2000
Ceased the dry cargo container business.
New assembly plant in Jinping area to be completed by year end.
Invested an additional S$15.7 million in EE3 through EE4.
Secured five distributorship contracts with international companies like EE5 and
EE6.
2001
Proposed to acquire EE7, which holds a 25% stake in the established light truck
manufacturer, EE8, and a 16% stake in Shanghai-listed EE9, which manufactures
automotive chassis and gearbox.
EE10, a subsidiary on E doing marine food processing, wound up non-core
businesses like distribution of metal and mineral products, food and beverages.
376
2002
Secured shareholders’ approval for the acquisition of EE11, which hold 25% in
EE12 and 16% in EE13.
E’s electronic component distribution business is expanding into India to
capitalize on the increasing demand for IT products and components in India.
EE14, the marine food processing business of E, was wound up after years of
losses.
2003
EE1 proposed to acquire 49% stake in each of its two suppliers: EE15 and EE16.
2004
Motorcycle and automobile manufacturing businesses faced intense competition
and pressure on its price.
2005
Initiated the process to dispose of the entire equity interests in the motorcycle
manufacturing associated companies. Disposal of EE4 had been completed.
E’s interest in EE13 had been diluted, by the partial conversion of their bonds by
other bondholders, to 13.82%.
Turnover in the EE division decreased by 17% to S$62.3 million.
Set up a wholly owned subsidiary, EE17, in Malaysia that was engaged in
limestone processing.
2006
E intended to expand into two new areas – automotive component trading and
scrap metal trading.
2007
The EE division achieved an 18% increase in turnover from S$69.9 million to
S$82.4 million.
377
Production began on the newly completed limestone processing plant in Banting,
Malaysia.
Automotive component trading business achieved a turnover of S$1.7 million
and earnings of $80,000 by year-end.
378
Company E - Financial Summary Table
(S$’mil)
(Y/E 30 June)
1998 1999 2000 2001 2002
Total
Revenue
188 43 31 89 85
Profit After
Tax
4.6 1.7 0.2 8.4 0.2
Market
Capitalisation
36 86 30 46 25
Total Assets 227 194 170 189 183
(S$’mil)
(Y/E 30 June)
2003 2004 2005 2006 2007
Total
Revenue
108 75 62 70 94
Profit After
Tax
(0.9) 13.5 17.1 8.0 22.2
Market
Capitalisation
56 71 69 67 105
Total Assets 237 218 223 200 268
379
Appendix 4.6
Appendix 4.6 : Summary of developments and financials of Company F
Main developments by year (1998 to 2007 period) 1998
Entered the Philippines market through the establishment of a joint venture
with FF1.
Ceased operations in Myanmar due to political uncertainty and economic
downturn.
New crane division established in Western Australia to promote sales.
Personnel and equipment withdrawn from Indonesia to Singapore due to poor
economic outlook.
1999
Entered the Taiwanese market through the establishment of a Taipei office.
Entered into the new markets of USA, India and the Middle East.
2000
Listed on the SGX as a secondary listing.
Made an extraordinary gain through the disposal of FF2, manufacturer of
hydraulic pile hammers and earth drills.
2001
Signed an agreement with FF3 (a subsidiary of FF4) in Australia to form a
joint-venture company called FF5, by merging FF6’s trading business with
FF7.
2002
Increased equipment and parts sales recorded by Australia following the
acquisition of franchises from FF7 as a result of the merger between FF7 and
FF8.
380
Acquired minority interest in FF9
Developed new markets of Japan, Hong Kong and Europe.
2003
Acquired the remaining shares in the joint venture company, FF10, from their
joint venture partners.
Disposal of FF11, the foundation equipment parts business.
2004
FF12, a 50-50 joint venture with FF13, secured an S$119 million contract to
supply mining equipment.
Plan to convert secondary listing on SGX to a primary listing.
FF14, a multinational heavy industries cranes company, appointed F as the sole
distributor of their cranes in Singapore, Australia, Hong Kong, Malaysia,
Thailand and Brunei.
Acquired FF15, a leading Australian plant hire and haulage company.
2005
Listed their wholly owned subsidiary FF16 on the ASX as FF16 Group Ltd and
delisted F from the ASX.
Established a new subsidiary and joint venture enterprise in the People’s
Republic of China, FF17.
Increased revenues in markets of Indonesia, Vietnam and in the Middle East
due to the abundance of infrastructure and oil and gas projects.
2006
Entered into two joint ventures with FF18 to secure two contracts in the oil and
gas industry.
381
FF16 acquired Queensland based equipment hire company, FF19 for S$31.7
million.
Established FF20 Middle East.
2007
Entered into a joint venture with FF21 to form a new company, FF22.
FF16 Group acquired FF23.
Acquisition of 30.2% of FF24.
Announced new joint venture agreement to acquire 76.4% stake in FF25.
Established a joint venture in Vietnam, FF26.
382
Company F - Financial Summary Table
(S$’mil)
(Y/E 31 March)
1998 1999 2000 2001 2002
Total Revenue 167 124 148 119 153
Profit After Tax 8 (1) (3) (15) 2
Market
Capitalisation
- - 96 82 93
Total Assets 240 246 256 228 249
(S$’mil)
(Y/E 31 March)
2003 2004 2005 2006 2007
Total Revenue 183 232 309 408 482
Profit After Tax 8 14 21 46 84
Market
Capitalisation
153 167 302 534 1,577
Total Assets 258 319 420 481 630
383
Appendix 4.7
Appendix 4.7 : Summary of developments and financials of Company G
Main developments by year (1998 to 2007 period) 1998
Formed a strategic alliance with GG1, a subsidiary of GG2 in Japan. The new
company was named GG3.
1999
GG4 became a new joint venture partner in GG5.
Disposed of 49% interest in GG6 to GG7 of Germany.
Acquired the Parts and Components business from parent company, G.
G acquired the remaining 5% interest in GG8.
2000
Formed a 20% new joint venture in Tianjin with GG9 and a company in
Taiwan.
Joint venture in Shanghai built an additional factory and almost trebled its
output.
Disposed 5.88% interest in GG10, an associated company listed in Taiwan.
2001
Acquired from G, its entire 42% equity interest in GG11, a related company
within Group G, and approximately 49% in GG12. These acquisitions
positioned G as the main industrial investment vehicle.
Acquired the remaining 51% interest in GG13.
Planned to build a modern, single storey factory of approximately 30,000
square meters in Huizhou, China to house the electronics assembly of the
Company.
384
2002
Established an S$200 million Medium Term Note Programme and issued S$50
million Fixed Rate Notes.
G acquired a US company with patented GG14.
G and GG15 each acquired 3% interest in GG16 of Huizhou, China.
2003
G acquired 75% of the issued capital of GG17, China’s second largest alkaline
battery manufacturer.
New plant of GG18 in China commenced production.
Acquired power switch technology and products.
2004
G entered into a 50:50 joint venture agreement with GG19 of France.
Disposed of entire effective 52.40% interest in GG’s electrical wiring devices
and installation systems business. G was renamed G1.
G Hong Kong set up a product development centre for R&D of advance
wireless electronics and digital signal processors.
2005
G increased its shareholding in G1 to more than 54%.
GG20, a wholly owned subsidiary of G, acquired a 67.27% stake in GG21, a
company that is focused on sound-related products.
Disposed of its entire 41.56% interest in CG22.
G invested a 10% interest in GG23 in Taiwan.
2006
G disposed of its entire 50% interest in GG24 to GG25.
385
2007
Completed the privatization of GG1 and became a wholly owned subsidiary of
the Company. Shares were delisted from the SGX in October 2006.
G disposed its 30% interest in GG26 and transferred its entire interest in GG27
to GG28.
G increased its interest in GG29 from 29.8% to 46.4%.
The Company’s 45.1% associate, GG30, completed the disposal of its
subsidiaries comprising GG30’s electronic cable unit.
386
Company G - Financial Summary Table
(S$’mil)
(Y/E 31 March)
1998 1999 2000 2001 2002
Total Revenue 295 257 255 340 298
Profit After Tax 16 9 56 22 18
Market
Capitalisation
60 155 185 273 275
Total Assets 240 245 339 591 621
(S$’mil)
(Y/E 31 March)
2003 2004 2005 2006 2007
Total Revenue 322 375 525 399 383
Profit After Tax 33 100 55 21 69
Market
Capitalisation
436 443 357 230 239
Total Assets 656 729 1,037 939 859
387
Appendix 4.8
Appendix 4.8 : Summary of developments and financials of Company H
Main developments by year (1998 to 2007 period) 1998
H ceased the hardware portion of the IT business by closing down the
computers and peripherals business.
Started the ‘thin computing’ client business in July 1998 for a few selected
markets in Asia.
Started a joint venture to develop a land bank in Zhuhai, PRC.
1999
Profit before interest and tax surged back to profitability due to positive
contributions from the thin computing and wireless
telecommunications/broadband systems integration business.
H entered into a strategic alliance with German technology giant HH1 that will
enable both companies to offer an enriched suite of thin computing solutions.
2000
Successfully completed its corporate restructuring programme and is now a
debt free company. The company has renewed its corporate vision and intended
to focus on developing its remaining three core businesses.
Sold the investment in HH2.
2001
The company’s thin computing product strategy changed from a combined
integrated hardware and software solution to a software offering.
The Zhuhai, PRC property was being developed into a residential cum
commercial property.
388
2002
Revenue contribution from the residential cum commercial property
development project in Zhuhai, PRC rose to approximately 56%.
Successfully listed the thin computing subsidiary HH3 on the Growth
Enterprise Market (GEM) of the Hong Kong Stock Exchange.
Amalgamated the operations of H and HH3, a provider of network terminal
products based in Shanghai.
2003
Revenue contribution from the residential cum commercial property
development project in Zhuhai, PRC rose to approximately 78%.
Revenue from IT businesses decreased 19% to S$6.1 million.
2004
Acquired HH4, a private education organisation with a 2,500 student capacity
campus.
Revenue contribution from the IT business and property development was 12%
and 85% respectively.
2005
Entered into a co-operative agreement to jointly invest and set up high schools
in the PRC.
Property development remained the main revenue contributor at 84.7%.
2006
Disposed of H building in Singapore for cash.
Property development business was affected by the Chinese government’s
measures to curb the property market.
2007
Secured a property development project in Bangkok, Thailand.
389
Education unit of H expanded through the acquisition of two education units,
HH5 and HH6, from HH7. This reduced the stake to 40% and the expanded
entity will become an associate company of H.
390
Company H - Financial Summary Table
(S$’mil)
(Y/E 31 Dec)
1998 1999 2000 2001 2002
Total Revenue 57 25 21 7 17
Profit After Tax (295) (50) 8 5 (1)
Market
Capitalisation
322 1,464 664 507 338
Total Assets 304 282 163 164 168
(S$’mil)
(Y/E 31 Dec)
2003 2004 2005 2006 2007
Total Revenue 28 33 40 30 28
Profit After Tax 1 (2) 9 (3) 2
Market
Capitalisation
550 338 114 85 71
Total Assets 188 176 181 166 156
391
Appendix 4.9
Appendix 4.9 : Summary of developments and financials of Company I
Main developments by year (1998 to 2007 period)
1998
Commissioned a new dry mixed plant II1.
Completed a new multi-million dollar, high capacity dry mix plant in Tuas.
Invested into three new venture capital funds based in the US.
Did a maiden foray into property development with joint venture partner II2,
and ended up developing a residential property in central London.
1999
Turnover for II3 division declined 25% to S$90.7 million.
Decided to bring II4 operations in the Yangtze Delta region to a halt.
Increased pace of investing in both venture capital funds and start-up
companies.
2000
Shareholders approved the Group’s plan to diversify into property development
and investment.
II5, I’s associate company, entered into a joint venture agreement with II6 to
acquire a freehold building located in the heart of London.
2001
Construction sector suffered a 39% decline in the value of contracts awarded
and the dot.com industry collapsed. These external factors caused group
turnover to fall by 35%.
Acquired a specialty chemical company.
392
2002
II7 operations ceased in the last quarter of 2002 when the bulk terminal at
Pulau Damar Laut commenced operations.
The pace of investments in venture capital funds continued to slow and not
expected to recover until 2005.
New business in specialty chemicals business has shown encouraging results.
2003
II8 joint venture was signed in Korea, while another two were signed in China.
II9, a joint venture plant with II10 was commissioned in July 2003.
II11, a similar joint venture with II12 in Shandong province will be operational
in end 2004.
II13, another joint venture with the Korean company II14 was well positioned
to address the Greater Seoul market.
2004
II15, I’s polymer compounding business, became a subsidiary from July 2004.
II15 embarked on expanding its capacity in both Singapore and Malaysia.
The venture capital business broadened its spectrum to include life science
ventures.
2005
The group adopted a new corporate identity and a new name – I*; a change
from I.
Strong demand for product I in China has prompted I* to go ahead and expand
their production capabilities in China.
II16 division formed an operation partnership with a leading global
petrochemical and chemical supply chain player. This area of business also
increased their production capacities in view of broader spectrum of demand.
393
2006
Successfully commissioned another joint venture facility in Huaian, North
Jiangsu province.
Set up a modern compounding facility in Jurong Logistics Terminal, which is a
collaboration with II17, a Belgian global chemical and industrial logistics
player.
Expected good returns from the latest Sentosa Cove condominium property
development.
2007
Product I expected to pick up due to new government initiatives to transform
Singapore into a global city with 5.5 million population.
The Product I2 business grew an average of 25% year-on-year in the past 5
years to reach a production capacity of 3.6 million tons per annum, making I
one of the leading slag cement players in China.
394
Company I - Financial Summary Table
(S$’mil)
(Y/E 31 Dec)
1998 1999 2000 2001 2002
Total Revenue 127 97 79 51 40
Profit After Tax 20 8 19 0 (34)
Market
Capitalisation
75 101 83 66 59
Total Assets 268 266 272 243 212
(S$’mil)
(Y/E 31 Dec)
2003 2004 2005 2006 2007
Total Revenue 43 47 55 73 127
Profit After Tax (22) (4) (0) (7) 8
Market
Capitalisation
61 55 50 78 124
Total Assets 176 173 177 172 182
395
Appendix 4.10
Appendix 4.10 : Summary of developments and financials of Company J
Main developments by year (1998 to 2007 period)
1998
Revenue of Financial Year 1998 derived from the enabling infrastructure
business was $63.7 million; from IT Services business was $6.6 million; from
IT Products distribution business was $117.4 million.
1999
J acquired a 60% interest in J Asia, incorporated in Singapore.
2000
Revenue contribution from Singapore was $219.0 million, accounting for
50.4% of the total revenue. Contribution from Malaysia and Thailand were
$84.5 million and $130.6 million.
Prepared for public listing on SGX Mainboard.
2001
IPO was launched in January 2001 and the shares were listed on the Main
board of SGX in February 2001. The public tranche of the IPO was 17.6 times
oversubscribed.
In July 2001, J entered into a conditional sale and purchase agreement with JJ1
to acquire 51% of JJ2 China.
2002
Acquired the balance of the shares of JJ3 and JJ4; both of these companies
became wholly owned subsidiaries. These acquisitions strengthened J’s
footholds in China and Thailand.
2003
J China was ranked as the 2nd largest IT Distributor in China by CCID
396
2004
J expanded into Indonesia by forming JJ5 together with the founders of JJ6, a
leading IT distributor in Indonesia.
JJ7 opened a world-class JJ8 Centre in Thailand
J opened a new office in Xi’an, China.
JJ9, a subsidiary of JJ10, acquired 21.35% equity stake in J.
2005
J Singapore commissioned JJ Spare Parts business and JJ11.
2006
JJ12 signed an agreement with JJ13 to provide online direct debit device.
JJ forays into IT retail with launch of its first IT concept store, JJ14 at Marina
Square.
2007
Merger between J and Hong Kong-listed JJ15 to create a formidable, full-
spectrum infocomm technology Asian MNC distribution giant. JJ12 acquired a
52.5% controlling stake in J during this merger.
397
Company J - Financial Summary Table
(S$’mil)
(Y/E 31 Dec)
1998 1999 2000 2001 2002
Total Revenue 188 133 374 552 1,185
Profit After Tax (0) 2 8 13 14
Market
Capitalisation
- - - 142 131
Total Assets 59 51 135 474 437
(S$’mil)
(Y/E 31 Dec)
2003 2004 2005 2006 2007
Total Revenue 1,423 1,866 2,036 2,339 2,789
Profit After Tax 6 15 19 22 26
Market
Capitalisation
133 106 107 138 233
Total Assets 464 517 584 569 686
398
Appendix 4.11
Appendix 4.11 : Summary of developments and financials of Company K
Main developments by year (1998 to 2007 period)
1998
Nil
1999
K’s joint venture with KK1 and a prominent Arab entrepreneur KK2
commenced operations in Dubai – UAE.
K signed a Memorandum of Understanding with KK3 to pursue a joint venture
to develop a state-of-the-art chemical logistics centre on Jurong Island.
2000
KK4, subsidiary of K has been granted operating licenses for new branch
offices in China from the Ministry of Foreign Trade and Economic Co-
operation. These new office in Dalian, Shanghai and Qingdao will complement
other offices in Tianjin, Beijing, Xi An and Shi Jia Zhuang.
KK5, K’s subsidiary in engineering services, had joined hands with KK6 and
two other entrepreneurs to pursue biomedical technology management services.
2001
K extended its global reach by opening new offices in New Delhi of India,
Bremen and Hamburg of Germany.
K entered into a joint venture with KK7 to form KK8, a world-class medical
device sterilization facility that would value add to the group’s supply chain
solution for medical devices and healthcare products.
2002
K set up a new distribution hub within the Free Trade Zone in Pasir Gudang,
Malaysia.
399
K became a subsidiary of KK9 group after a takeover from KK9.
K's subsidiary, KK4 further strengthened its foothold in China by setting up a
new office in Shenzhen.
K successfully acquired the remaining shares (34%) in KK4, making it a
wholly owned subsidiary of K, strengthening the Group’s global distribution
logistics business.
2003
In April 2003, a new subsidiary, KK10 was added to support its customers'
manufacturing and distribution operations across China.
2004
KK11 became K’s major shareholder after acquiring a total stake of 74.19% in
K.
2005
K established a 100% wholly owned Malaysian subsidiary, KK12, at Port
Klang to support customers’ operations in Malaysia.
K’s 100% owned freight forwarding subsidiary, KK4, extended its capability to
the Middle East, Korea and China’s Ningbo.
Incorporated a wholly owned subsidiary, KK13 Hong Kong, to seize the
growing logistics development in South China.
The Group took up a 21% stake in KK14.
2006
Wholly owned subsidiary, KK15 acquired 100% shareholding in KK16 to
expand the Group’s engineering business.
KK4 entered into a joint venture to spearhead its freight forwarding business in
Egypt.
K entered into a new business venture that offers packaging solutions.
400
K completed its acquisition of a 100% stake in KK16, adding commodity
logistics to the business.
KK4 established a complete freight-forwarding network in India and expanded
into Spain.
2007
K acquired the entire issued and paid up share capital in KK17 and KK18 to
further enhance its logistics & container depot businesses.
K entered into a partnership with KK19, a Ukrainian investment group to
develop good quality logistics facilities in Ukraine.
K entered into a joint venture with KK20, a consortium of local logistics
professionals to develop logistics facilities in Vietnam.
K completed a sale and purchase agreement with KK21, a Dutch integrated
commodity logistics company.
401
Company K - Financial Summary Table
(S$’mil)
(Y/E 31 Dec)
1998 1999 2000 2001 2002
Total Revenue 145 155 171 187 208
Profit After Tax 4 7 5 4 3
Market
Capitalisation
27 71 32 29 38
Total Assets 205 217 178 172 181
(S$’mil)
(Y/E 31 Dec)
2003 2004 2005 2006 2007
Total Revenue 213 240 248 327 535
Profit After Tax 1 3 10 28 37
Market
Capitalisation
30 36 45 181 591
Total Assets 167 163 197 308 495
402
Appendix 4.12
Appendix 4.12 : Summary of developments and financials of Company L
Main developments by year (1998 to 2007 period)
1998
L* announced the integration of its two logistics units through the injection of
L** into listed L***, to form L.
Under L, ferry and cruise, shipping and shipyard operations were slated for
divestment as part of the entire LL*’s focus on core businesses.
1999
L sold its entire shareholding of more than 23.3 million shares in Hong Kong
listed LL1 for S$23 million in proceeds.
L sold its entire stake in the assets and business of LL2 and LL3 for S$28.5
million.
LL4 acquired the remaining one-third stake in LL5 to make it a wholly owned
subsidiary from July 1999.
Sale of the entire stake in L*** to LL6 for S$12 million was announced.
Wholly owned subsidiary LL7 divested its entire 49% shareholding in LL8 and
LL9.
Made an application to list 51% subsidiary LL10 on SGX Mainboard.
2000
L formed a strategic alliance with a Switzerland-based international freight
forwarder by acquiring a 20% stake in LL11. LL11 took a 5% stake in L, with
options to acquire up to 20% by 2003.
LL5 entered into a 70/30 joint venture with LL12 to build a network of offshore
logistics supply bases throughout Indonesia; and another 65/35 joint venture
was formed with LL13 to set up a similar network in the Caspian Sea region.
403
2001
LL11 acquired LL14, a warehouse-based logistics service provider in North
America. Acquired a 3% stake in LL15, a provider of intermediate bulk
containers, to gain exclusive global use of their patented containers.
Disposed of their 100% interest in LL16 to LL10.
Formed a 51/49 joint venture with Malaysia-listed LL17 and another 76%
owned joint venture in Australia to provide supply chain management services
in these respective countries.
L signed a sale and purchase agreement with LL18, a subsidiary of LL19, to
sell the marine business for S$205.6 million.
Formed a 51% owned subsidiary, LL20, to offer third party wine logistics.
Formed another 49/51 joint venture company, LL21, to provide freight
forwarding services for LL22 and LL23 Group of companies.
2002
L partnered LL24 and LL25 to establish a 35.5/60/14.5 joint venture in Japan to
acquire a Japanese logistics company.
Invested S$18 million in LL26, owner of US-based technology solutions
provider LL27, to develop secure supply chain management.
Formed a 51/49 joint venture with LL28 in Taiwan.
Formed a 49/51 joint venture company with LL29 in Azerbaijan to service oil
and gas companies in the Caspian Sea region.
2003
Entered into a 51/49 joint venture with LL30 in Korea.
2004
Formed a 60/40 joint venture with logistics and trading LL31 in Vietnam.
404
Entered into a 50/50 joint venture on March 16 with LL32 in Italy to form
LL33, which will provide logistics services for metals and commodities in
Asia.
Set up a 78/22 joint venture with LL34 in Iran to provide logistics and marine
support services to oil and gas companies in Iran.
Established a wholly owned subsidiary LL35 Shanghai.
Completed the sale of 20% interest in LL11 for S$1.3 billion.
Acquired LL36, the second largest transportation company in Kyushu.
2005
Began operations at the new Guangzhou regional distribution centre and
committed to a warehouse lease in the Qingdao Free Trade Zone.
2006
L* announced that it has given irrevocable undertaking to accept the Voluntary
Conditional Cash Offer by LL37, a wholly owned subsidiary of LL38 of
Australia, for the entire 60.01% stake in L.
405
Company L - Financial Summary Table
(S$’mil) (Y/E 31
Dec)
1998 1999 2000 2001 2002
Total Revenue 212 441 448 473 417
Profit After Tax (59) 6 47 87 29
Market
Capitalisation
Total Assets 512 625 705 677 651
(S$’mil) (Y/E 31
Dec)
2003 2004 2005 2006 2007
Total Revenue 454 769 1,018 NA1 NA
Profit After Tax 90 1,1792 71 NA NA
Market
Capitalisation
Total Assets 776 2,045 952 NA NA
1 Financial figures from 2006 onwards were not available because the company
was delisted and sold to the LL1* group.
2 Figure includes extraordinary gains for sale of its stake in LL2*.
(*codenamed)
406
Appendix 4.13
Appendix 4.13 : Summary of developments and financials of Company M
Main developments by year (1998 to 2007 period)
1998
Investment into a bakery plant under brand M1 became operational in
September.
MM1 acquired M2 business and assets from MM2, enabling them to
manufacture M2 inflatable boats.
1999
Established links with MM3 and MM4 to set up the first approved foreign-
owned information technology/commercial college in Tianjin, China.
Granted a 3-month call option to purchase 70% shares in MM5.
2000
The company subscribed for 96% equity shares in MM6.
Entered into an agreement to purchase 35% shares in MM7, an Indonesia based
airline.
MM8 invested approximately US$2.5 million by subscribing 18.3% shares in
MM9, an innovative US software company.
2001
The company divested its interest in the bakery business of M1 breads.
Acquired a 39.8% interest in MM10 which is an Asian network infrastructure
services company that operates companies in Philippines, Malaysia and
Thailand.
407
2002
Investments in MM11 and MM12 were consolidated into MM13 and the
Group’s investment plan for MM14 had to be abandoned due to the collapse of
the internet-related businesses.
Acquired, in stages, a 63.46% stake in MM15, a well-established regional
specialist in water, environmental and industrial engineering.
Concluded the sale of the wholly-owned subsidiary, MM16.
2003
Divested its non-core food & beverage business, MM5.
MM15 partnered with Engineering, Procurement and Construction companies
such as MM17 and started to contribute to revenue.
2005
MM15 scaled down its UK operations and it ceased to contribute revenue.
2006
Gained 100% control of MM15.
MM18 Power Corporation, which is in the power generation business, was
divested and the proceeds were used to repay long-term loans.
2007
Sold the remaining investment in MM9 as the final divestment of their non-
core assets.
408
Company M - Financial Summary Table
(S$’mil)
(Y/E 31 March)
1998 1999 2000 2001 2002
Total Revenue 104 114 54 54 129
Profit After Tax 1 0 3 3 (5)
Market
Capitalisation
5 6 31 29 36
Total Assets 79 90 104 101 113
(S$’mil)
(Y/E 31 March)
2003 2004 2005 2006 2007
Total Revenue 201 227 227 289 344
Profit After Tax 10 13 21 39 40
Market
Capitalisation
61 63 119 182 306
Total Assets 233 239 278 280 306
409
Appendix 4.14
Appendix 4.14 : Summary of developments and financials of Company N
Main developments by year (1998 to 2007 period)
1998
N acquired 51% interest in NN1 in Australia, which produces high quality
silica sands for commercial and industrial applications.
N sold 51% of equity in NN2.
1999
Planned listing of two of the Group’s technology and manufacturing
subsidiaries – NN3 and NN4.
N disposed 26% of its 51% equity in NN5 to NN6 for US$5 million cash
payment plus 11.5 million shares in NN6 in preparation for the IPO on the
Shenzhen Stock Exchange.
Entered into a joint venture with the China-Singapore Suzhou Industrial Park to
develop a residential/commercial complex on a 20-hectare site within the
Industrial Park.
2000
N’s subsidiary, NN7, entered into an agreement to acquire NN8 that distributes
N1 cars.
Acquisition of a 30% stake in the company that has Indonesia’s N2 car
distributorship.
Formed strategic alliances with NN9 of the NN10 of China and NN11 to jointly
develop mid-priced residential projects in Guangzhou and Shanghai.
2001
NN12, a manufacturer of flexible printed circuit, successfully launched its IPO
on the SESDAQ and N’s effective interest in NN12 was diluted to 60.7%.
410
N acquired 50% of NN13, an authorized distributor of N3 cars.
2002
NN14, a 43% associate joint venture with Peking University, produces the
patented cholesterol-lowering medical preparation, Brand N1 that is patented
worldwide.
2003
Established a 50/50 joint venture between N’s China property division and the
listed property arm of NN15, a conglomerate wholly-owned by the Shanghai
Municipal Government.
NN16 strengthened its R&D capabilities by acquiring NN15, a US-based
innovator of advanced RF transceivers using low cost CMOS manufacturing
processes. NN16 also obtained the business license to start a new design office
in Shanghai.
2004
NN14 completed a GMP-certified plant in Beijing
The US-based NN15 group’s subsidiary, NN16 was listed on NASDAQ in June
2004.
NN17, together with NN16 and NN18 collaborated on R&D, training,
marketing and sales.
2005
Sold NN19 and recorded a gain of $7.2 million.
Increased the group’s shareholdings in NN7 to more than 90%. Privatized NN7
and the group have no plans to sell its interests in NN7 to regain public float
requirements.
NN4 acquired NN20 in June 2005 as part of its strategy to be a substantial
module solution provider in the expanding cell phone market.
411
N acquired an initial 19.7% stake in NN21, a leading design and manufacturing
services house.
N’s N4 theme park in Shenyang ceased operations.
Sold eight companies in China and recorded gains of $2.5 million.
2006
NN14 announced on March 2006 its intentions to acquire NN22 through a
voluntary general offer, subject to shareholders’ approval by 31 December
2006.
The electronics manufacturing services division closed three factories in
Shenzhen, Anqing and Suzhou in China.
2007
Shareholders in an EGM did not approve the acquisition of NN22 by NN4.
Sold the water business and entered into an agreement to sell the biomedical
businesses.
Formalized a joint venture with a subsidiary of NN23 to build a commercial
and residential project on a 33,473 sqm site.
Acquired the minority shares in the company’s realty subsidiary, NN24 in
Chengdu.
412
Company N - Financial Summary Table
(S$’mil) (Y/E 30
Sept)
1998 1999 2000 2001 2002
Total Revenue 668 678 908 956 984
Profit After Tax 2 19 52 4 13
Market
Capitalisation
80 335 361 297 282
Total Assets 1,150 1,178 1,319 1,374 1,382
(S$’mil) (Y/E 30
Sept)
2003 2004 2005 2006 2007
Total Revenue 1,302 1,830 1,966 2,103 2,064
Profit After Tax 52 66 10 101 (10)
Market
Capitalisation
503 548 918 932 843
Total Assets 1,594 1,845 1,947 1,917 1,914
419
Appendix 4.16 : Table of 10-year Revenue and profit average annual growth rate
of return and survey results
Average annual
growth rate Summary of managers’ view
Company
Code
Revenue
%
Profit
%
Importance of
internationalisation
(max 10)
Level of
internationalisation
achieved
(max 10)
Level of
satisfaction
achieved
(max 10)
Level of
correlation
(max 10)
Company A 71 1 8 8 7 7
Company B 26 3 9 8 7 7
Company C 45 15 9 8 8 8
Company D 692 67 10 9 6 8
Company E (3) 2 9 4 4 8
Company F 36 7 10 6 8 7
Company G 20 5 10 7 5 5
Company H (0) 18 9 10 10 10
Company I (2) (2) 8 4 6 3
Company J 311 3 9 6 6 8
Company K 32 3 7 9 8 5
Company L 86 18 10 6 5 8
Company M 29 5 10 6 6 5
Company N 186 3 8 8 8 7
420
Appendix 5.1
Appendix 5.1 : Internationalisation Reference model (Strength of Themes – Very
Strong)
TT
Processes Strategies 1.Limited use of
indicators on level of internationalisation
Actions 1. Nil
Outcomes Performance 1. Limited use of
indicators as performance measures
Business Impacts 1. Future growth by
geographical expansion
Antecedents Internal 1.Internationalisation
as key business strategy
2.CEOs are main drivers
Organisational 1. Mix of centralised
and decentralised controls
Environmental 1. Limited use of
government incentives and assistance
A B
C
D
421
Appendix 5.2
Appendix 5.2 : Internationalisation Reference model (Strength of Themes – Strong)
Processes
Strategies 1. Economy of scale 2. Localisation 3. Management
strength Actions 1. Nil
C
D
Outcomes Performance 1. ROS/ROA/ROC/E
VA as performance indicators
Business Impacts 1. Nil
Antecedents Internal 1. Survival 2. Adequacy of resources Organisational 1.Informal approach 2.Infrequent use of
external consultants
3.Regular reviews Environmental 1.Small Singapore
Market
A B
422
Appendix 5.3
Appendix 5.3 : Internationalisation reference model (Strength of Themes – Medium)
A
Processes
Strategies 1. Regional growth 2. Born global 3. M&As 4. Importance of jv
partners
Actions 1. Sustaining profits
Outcomes Performance 1. Use of
profitability as performance indicators
Business Impacts 1. Cost reduction 2. Future growth
through new products
Antecedents Internal 1. Challenge to
make it work Organisational 1. Use of brands 2. Influence of
shareholders 3. Need for strong
products Environmental 1. Major shift in
shareholders
B
A
C
D
423
Appendix 5.4
Appendix 5.4 : Internationalisation reference model (Strength of Themes – Weak)
Processes Strategies 1. Close to customers 2. Core values of
organisation 3. Business model 4. Technology
sharing 5. Strategic options Actions 1. Divestments
D
Outcomes Performance 1. Integration issues Business Impacts 1. Preferences for certain market and approaches
Antecedents Internal 1.Venture capital
investments approach
Organisational 1. Perishable
products 2. Cultural issues
Environmental 1. Entry barriers
A B
C