In Singapore, institutions such Enterprise SG are placing hot coals under the feet of even the smallest companies to go look beyond Singapore’s borders for business growth opportunities. “Lower for Longer,” is the mantra about the prospects for long-term domestic growth in the face of a rapidly ageing population.
For a retailer of non-essential goods, a half dozen outlets may be the point of diminishing returns. For a digital player, as few as 50,000 app downloads could present 50% of domestic TAM. As an enterprise-grade B2B player, the limitations are even clearer: there’s only 108 Singapore-listed firms with a market cap north of a billion dollars, or 164 when counting from a half billion (of which several are not based in Singapore).
With a finite domestic market, and deteriorating conditions for high GDP growth, the hot coals make sense.
Singapore has many apparent advantages, situated geographically in the middle of the 650M inhabitants of the ASEAN region. From the perspective of an existing multinational, it’s an island of perfect calm from which to operate a regional base.
Yet, for Singapore’s homegrown SMEs, who frequently start by optimising their business model to succeed in the domestic market, the island’s stark differences with its neighbors may be a hidden handicap.
At the heart of any business model is a value proposition that meets a certain customer’s needs, and which is delivered in a certain way. Wrapped around that core are the mechanics of profitability and the activities & resources required to make it happen. Because of Singapore’s uniqueness within the region, the odds are multiple dimensions of any working business model in Singapore will need to be rethought to succeed in broader SE Asia.
It’s perhaps unsurprising that the the top destination for Singapore’s outgoing Foreign Direct Investment isn’t within ASEAN at all; it’s to China.
Despite the challenges, a 2017 survey by International Enterprise Singapore revealed that revenue growth outside Singapore grew more than 300% faster than domestic revenue growth among the 700 Singaporean firms surveyed.
Getting it right is clearly important.
The key to a successful inter-region Go Global Strategy is understanding how to stress-test each facet of a business model within the operating context of other ASEAN countries. The differences range from consumer behaviors & purchasing power, to cost structures, to distribution infrastructure, to the regulatory and banking environments, through to cultural differences.
Start with probing questions. For example, “is my value proposition valid in an environment where labor costs are a quarter of what they are in Singapore?” This question is a particular challenge for B2B services where the core value proposition is improvements to operating efficiency. A 30% efficiency gain is far more valuable in the context of high wages.
The opposite might be true for other business models where cost of labor is primarily a determinant of the cost structure: lower revenues operating in a country like Myanmar or Vietnam may be fully offset by a lower cost of delivering the value proposition through inexpensive labor.
Each layer of the business model needs to be subjected to this scrutiny and critical thinking a global..
With deep operating expertise across Southeast Asia, Sibyl Entertainment provides Go Global advisory services to small-mid sized Singaporean firms planning.