67% of Singapore SMEs wants to grow overseas presence

Southeast Asia and China are key markets Singapore companies are looking to expand to, according to the survey by the International Enterprise Singapore.

The survey also showed that overseas revenue accounts for 74% of total revenue among the participating companies.

In a news release, the key findings of the 2011/12 Internationalisation Survey conducted by International Enterprise Singapore, the government agency driving the growth of Singapore‟s external economy, revealed that overseas endeavours will continue to contribute to revenue growth for Singapore companies, and create valuable employment opportunities for Singaporeans abroad. 

Overseas revenue accounts for 74% of total revenue among the companies surveyed, a significant increase from 65% in the previous year. This means that for every dollar the company earns, 74 cents comes from its overseas activities. The proportion of companies reporting growth in overseas revenue has also increased from 60% to 68% over the past year.

The increasingly global exposure of Singapore companies has led to jobs creation for Singaporeans. The percentage of Singaporeans employed overseas varies across companies. Singaporeans make up 72% of the overseas workforce for the average SME, and 45% for the average non-SME, or large company. This is because companies with larger overseas operations usually source manpower mostly from their respective markets, while SMEs tend to hire proportionally more Singaporeans due to their smaller size.

Said Mr Teo Eng Cheong, Chief Executive Officer of IE Singapore, “The survey reinforces the value of internationalisation by Singapore companies for both corporate growth and employment. Given our small domestic market, overseas investments are the natural way for our companies to create good jobs for their employees and value for shareholders. Most critically, this ensures Singapore‟s economic sustainability in today's uncertain global climate.”

Growing overseas presence of Singapore companies

Singapore companies are looking to expand into new markets, or deepen their presence in the current ones. Majority of SMEs, around 67%, target to increase the number of overseas markets they are in, an increase of 14% from the previous year. In comparison, majority of non-SMEs, 73%, will be deepening their presence in their current markets. Among these non-SMEs, inorganic growth through joint ventures or mergers and acquisitions is an expansion strategy that two in five are considering.

Southeast Asia and China are key markets that Singapore companies are looking to grow in. Within Southeast Asia, Indonesia and Vietnam remain the top markets that companies intend to focus on. In China, companies are starting to move their growth strategies further inland to West and Central China, beyond the coastal regions.

There is also a marked increase in companies that are more optimistic about the business outlook in Africa, compared to other emerging markets like the Middle East and Latin America. Within Africa, South Africa and Nigeria are the two top preferred destinations for business.

Companies positioned to meet global challenges

The survey reveals that difficulties with finding the manpower with requisite capabilities to manage overseas operations and the right business partners overseas are some of the top challenges that Singapore companies face when internationalising. In the past year, high market entry costs and the costs of doing business overseas have also emerged as one of the top concerns among the companies. Companies involved in the export of goods and services were particularly affected by currency fluctuations. SMEs were hit harder, a 13% increase compared to the previous year.

While non-SMEs are affected by rising costs too, these are outweighed by concerns over attracting the right talent as well as the economic and political stability in the overseas markets, an indication of the global market uncertainties.

Having a good understanding of the markets and strong foreign partners are the top requirements seen as success factors for overseas growth. Companies also highlighted the need to build up internal capabilities for internationalisation. This includes recruiting the right manpower and having strong branding strategy.

Said Mr Teo, “To venture abroad, a company needs to have a successful business model that can be replicated overseas. In addition, it needs to develop new internationalisation capabilities such as HR practices that are attuned to the global landscape. It also needs to have in-depth understanding of the market trends and government policies. Finally, it needs to work with the right local partners.”

To help companies rise up to external challenges, IE Singapore recently launched the Global Company Partnership to grow globally competitive companies for Singapore. The GCP outlines IE Singapore's approach to engaging Singapore-based companies proactively to understand their business strategies, and formulate comprehensive solutions for their international growth via capability building, market access and financing.