Why Singapore companies flock abroad for greener pasture

The year 2012 showed a clear reflection of the general climate of economic and political uncertainty as reported in the BDO Ambition Survey 2012.

Overall, the mood for expansion plans was more subdued in 2012 compared to the prior, with only 24% of CFOs very optimistic about their expansion plans, as compared to 49% in 2011.

The BDO Ambition Survey 2012 examines how mid-sized businesses view their growth projections overseas. It highlights where established international businesses see the greatest opportunities for further expansion, what the opportunities and challenges are for investment in these markets and which countries are the riskiest investment destinations.

It also seeks recommendations from the CFOs, based on their experience on foreign investment. 

The Survey

The BDO Ambition survey questioned 1,050 CFOs from 14 countries consisting of Australia, Brazil, Canada, China, France, Germany, India, Japan, Russia, Saudi Arabia, South Africa, The Netherlands, UK and USA.

It was conducted with the main objectives of providing unique insights into how our clients are planning to expand abroad and how we can best advise them.

For the full highlights on the Ambition Survey and ways to avoid issues attributed to internationalisation, please refer to our website. 

CFOs are also finding it more difficult to conduct business abroad as compared to three years ago. They cite that poor economic situation, increased regulation, greater competition, currency fluctuations and geopolitical risks are reasons that hinder successful foreign expansion.

Nevertheless, CFOs are still under pressure to look overseas to grow their businesses and investment abroad. In turn, 66% of CFOs plan to significantly increase investment in the ‘safe haven’ markets of BRICs (especially China), US, UK and Germany, as opposed to riskier destinations such as Southern Europe (Greece) as well as the politically unstable countries of the Middle East (e.g. Iran, Iraq).

Moreover, approaching new markets with more caution means that the need for good local staff has come to the fore. Almost half of the CFOs state the need to secure good advice from reliable local people as a major insight for successful international expansion.

How does it affect your business?

With limited expansion possibilities due to size and market saturation, it is likely that Singapore companies will venture overseas for growth.

For this reason, above others, the Ambition Survey is relevant for all Singapore businesses. Considering the risks mentioned above, fewer foreign companies are venturing overseas which translates to larger opportunities for the companies that do decide to take the risk.

There are ways, however, to hedge these risks of uncertainty such as a tailored market-by-market approach and choosing companies that are culturally similar for initial international expansion plans.

Furthermore, as mentioned in the survey, nearly half of all CFOs stated that securing good advice from reliable people on the ground as their chief insight for successful international expansion.

The main insights for international expansion and overseas revenue generation are to find good local staff and ensure an adequate business and cultural understanding of the market.

The most preferred way of doing this is to seek assistance from accounting, tax professionals, and others that specialise in internationalization to allow you to focus on the core competencies and goals of your company.

Venturing abroad successfully

Many consultants have designed a unique series of frameworks and tools that help Singapore companies determine their readiness to venture overseas, analyse and build their capabilities, and provide strategies to internationalise successfully.

A holistic approach will firstly analyse Singapore companies by diagnosing its financial position, building their capabilities internally and accessing international markets with appropriate value-maximizing strategies as represented in BDO’s DCG Internationalization Model.

Although BRIC countries aren’t the only choice for firms looking to expand abroad, based on the Ambition Survey, investment overseas continues to present significant challenges.

Nevertheless, a tailored market-by-market approach will increase the likelihood of success. Subsequently, by engaging in a holistic approach, businesses can hedge their risks by raising awareness, giving them the opportunity to avert peril, before expanding overseas.

CFOs stressed the importance of doing sufficient research before entering a market, not least to ensure that they are adequately prepared as and when issues arise.

It is important to be fully abreast of the etiquette, customs and preferred way of doing business in particular countries. In line with this, a market feasibility study which conducts need assessments and data collection in the initial stages of product development or market expansion before going ahead with internationalisation is highly recommended. 

Interestingly, the Ambition Survey has also indicated that customer service excellence, innovation, speed of delivery, company brand name, and corporate social responsibility translates alike abroad.

Thus, they are seen as vital to international success and provide a gateway as to how companies can differentiate themselves.

For companies that lack the know-how on establishing a strong brand name domestically, it is highly suggested to seek consultation in international branding which encompasses re-branding to brand audits.

In addition, as companies expand and venture international, it is crucial that its human resource policies are able to support its growth. To this end, human resource consulting analyses workplace needs and organizational goals to align it with the company’s expansion plans, both domestic and international.

Lastly, one must not forget the significance of attaining local know-how as it is an essential dynamic to a smooth and successful international expansion.

Henceforth, partnering with people who really understand the local culture and working practices might hold the key to success.

BDO is confident in helping clients navigate unfamiliar markets and avoid risks when expanding overseas.

Our vast global network with presence in 138 countries, supported with strong regional ties, provides global insights and valuable regional knowledge and expertise to help businesses respond to internationalisation and investment challenges.