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
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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
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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
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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.
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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.
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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
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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.
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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
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
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
3.5.1. 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
3.7.1. 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
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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
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
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
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
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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
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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.
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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.
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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.
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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.
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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.
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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
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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
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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
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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.
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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.
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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.
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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
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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
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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
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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
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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
302
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