Singapore Inc. MBA 290G Case 2 September 12, 2007 Sarah Boyd, Vincent Escobedo, Gayathri Raghavendra, Jay Taneja.

Singapore Inc.MBA 290G Case 2

September 12, 2007

Sarah Boyd, Vincent Escobedo, Sarah Boyd, Vincent Escobedo,

Gayathri Raghavendra, Jay TanejaGayathri Raghavendra, Jay Taneja

Outline

• Singapore Today– How is it similar to or different from the SF Bay Area?

• How did Singapore become the success story it is?– Metrics of success– Porter’s Diamond– Other factors

• Where does Singapore want to be tomorrow? Are they on the right trajectory?

Singapore – A Snapshot

Singa Pura, Malay for “Lion City”

• Area: 699sq km• Population: 4

million+• Demographics:

76% Chinese, 15% Malay, 6% Indian

• Government: Parliamentary Democracy

Singapore & SF Bay Area: The Numbers

Metric Singapore Bay Area

Population 4.55 million1 6.9 million2

GDP $141.2 billion3 $401 billion4

Annual Real Growth Rate

2005: 6.6%

2006: 7.9%3

2005: 3.9%5

International Exports

$271 billion 3 $44 billion4

1. Conutryreports.org; 2. http://abag.ca.gov; 3. http://www.state.gov/r/pa/ei/bgn/2798.htm ; 4. http://www.bayareacouncil.org ; 5. http://www.beaconecon.com/products/Presentations/BAWTC01_11.pdf

Singapore and SF Bay Area: Similarities

Major Industry Clusters: Semiconductor and Biotech

Major PortsSingapore: 24,792,400 TEUs in 2006(16)

Oakland: 2,391,598 TEUs in 2006(7) (10-15% of US container cargo)

(6) www.mpa.gov.sg (7) www.portofoakland.com,

Singapore and SF Bay Area: Differences

Bay Area Singapore

R&D, Design Manufacturing, Trade

Industry clusters grow out of academic research: semiconductors in the 50’s, 60’s and 70’s, biotech and internet software in the 80’s and 90’s, nurtured by venture capital.

Industry clusters created and nurtured by government (EDB, Temasek)

Innovation Efficiency

The Rise of Singapore• Per capita GDP growth ~ 5% from 1975-1999 • 2000: 10.1% • 2001: Worldwide slump, -2.2%• 2004: Major turnaround, 8.8%

(8) Asian Economic Journal 16 (3), 267–283, (9) United Nations Statistics Div. http://unstats.un.org, (10) US Bureau of Economic Statistics

Real GDP Growth Rate

-5

0

5

10

15

1970 1980 1990 2000 2010

Year

%

Singapore

US

The Rise of Singapore: Why and How?

The Rise of Singapore: Why and How?

Factor Conditions• Location (heart of major sea lanes)• NO natural resources – had to be smart, depend on trade• Infrastructure (Physical, financial) • IP Policy• Labor pool (work ethics, trained vs untrained, skill level, foreign vs domestic)

Government• Strong ties between pro-business state & industry• Govt. is consistent and not corrupt• Govt. anticipates infrastructural needs • Actively built/crafted IP environment• Strong handling of unions, wage policies, education,

policies to attract foreign students & workers

The Rise of Singapore: Why and How?

Demand Conditions• Small domestic market led to pro-business, pro-foreign, export oriented policy • Positive for electronics, communications: early adopters, “technology crazy”, discerning and demanding• Negative for biotech: relatively new industry, no stress test for bio-ethics issues

Government• Encourages widespread use of technology• Tablet PCs in school• Curbs freedom of expression/media

The Rise of Singapore: Why and How?

Related and Supporting Industries• For biotech => Chemical Island• For hi-tech => Electronics Manufacturing• Broad based benefits from shipping and transportation industry, legal and IP services, logistics, data management, and more recently brand management

Government• Following cluster model for industry development• Targets entire value chain in an industry to offer

a stronger value proposition to individual firms

The Rise of Singapore: Why and How?

Firm Structure, Strategy, Rivalry, • Structure: Gradually moving away from state-owned • Strategy: Attract foreign investment with business friendly environment• Rivalry: Intense rivalry faced by Singapore Inc, but very low level of domestic competition for firms

Government• Primary driver of growth; salaries of policy makers tied to GDP growth

The New Singapore: What next?

Measures

• Focus on education, creative learning

• Move from dual pronged approach to Triple Helix model (State-Industry State-Industry-Academia)

• Encouraging VC & PE• Focus on specific clusters

like biotech; media

Current Strategy Goals

• Transform Singapore into a knowledge-based economy

• Move up the value chain• Encourage innovation

The New Singapore: Comments and Recommendations

Labor and Talent Pool• Increasing dependence on foreign contribution

– Young Singaporeans moving away (overbearing state, inflation)

– Shortage of home-grown entrepreneurs

• Focus on increasing local skill set and skill levels

The New Singapore: Comments and Recommendations

Focus on Biotech

Strengths

• Chemical

• Lax regulation

• Gateway to Asia

Weaknesses

• Depending on foreign talent

• Local market is a poor predictor of world market

Opportunities

• High Growth

• Early mover

Threats

• Direct competition with SV

• Very risky

The New Singapore: Comments and Recommendations

Creating an entrepreneurial mindset is a long term project, especially in a society where conformity is the form

(11) Giving Singapore a SV Mindset, BusinessWeek, August 2000

• Increase contribution from non-governmental sources• Give universities more autonomy• Reduce government stake in companies, encourage more

local competition• Deregulation is a serious challenge

The New Singapore: Comments and Recommendations

Other Concerns with current strategy

• Social backlash- widening gap between rich and poor- locals feel (43%)(12) government cares more about foreign professionals than local population- aging population that cannot support itself

• High Savings Rate-Reduces available pool of capital- Could be diverted to stem property market inflation or invest in skill enhancement programs

(12) Singapore goes back to its Roots, Financial Times, Aug 07

The New Singapore

Growth thus far has mostly been achieved by increasing inputs

• More labor, more capital, more investment, more education, more training • This cannot go on!

Need new strategy!

(12) Singapore goes back to its Roots, Financial Times, Aug 07

Singaporeans and Saving(13)

Age # of Members Balance $/Member Contribution (%)35 and below 877531 20.4 $23,247.04 3635-45 823353 32.6 $39,594.20 3645-55 626934 31.4 $50,085.02 3655-60 148726 4 $26,895.10 18.560+ 416647 3.6 $8,640.41 11Unspecified 29482 0.1 $3,391.90Total 2922673 92.1 $31,512.25

(13) 2001 CPF Annual Report via case study

Gross National Savings: 46% in 2001