UWA BUSINESS SCHOOL University of Western Australia ...

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

1.1. Introduction ............................................................................................................ 1 1.2. Overview ................................................................................................................ 1 1.3. Topic ...................................................................................................................... 2 1.4. Potential significance ............................................................................................. 4 1.5. Structure ................................................................................................................. 5 1.6. Conclusion.............................................................................................................. 8

CHAPTER 2. LITERATURE REVIEW ...................................................................... 9 2.1. Introduction ............................................................................................................ 9 2.2. Defining multinationality, globalisation and internationalisation .......................... 9

2.2.1. Multinationality ............................................................................................. 10 2.2.2. Globalisation ................................................................................................. 11 2.2.3. Internationalisation ........................................................................................ 13

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

2.5.1. Multiple-industries level studies ................................................................... 34 2.5.2. Industry-level studies .................................................................................... 34 2.5.3. Company-level studies .................................................................................. 35 2.5.4. Subsidiary-level studies ................................................................................ 35

2.6. Imperatives of internationalisation ....................................................................... 36

2.6.1. Eclectic Paradigm ......................................................................................... 36 2.6.2. Uppsala Internationalisation Framework ...................................................... 38

2.7. Factors of internationalisation .............................................................................. 39

2.7.1. Economy of scale .......................................................................................... 40 2.7.2. Geographical diversification ......................................................................... 41 2.7.3. Locational advantage .................................................................................... 41 2.7.4. Learning experience ...................................................................................... 42

2.7.5. Strategic advantage ....................................................................................... 43

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2.7.6. Options advantage ......................................................................................... 43 2.7.7. Improved product quality .............................................................................. 44

2.7.8. Enhanced customer preference ..................................................................... 45 2.8. Singapore government assistance programmes ................................................... 45 2.9. Research focus ..................................................................................................... 49 2.10. Conclusion ......................................................................................................... 51

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

3.4. Ethical considerations .......................................................................................... 78 3.5. Models of internationalisation ............................................................................. 79

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. Internationalisation measures ............................................................................... 92

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

4.8. Conclusion.......................................................................................................... 260

CHAPTER 5. CONCLUSION ................................................................................... 263 5.1. Introduction ........................................................................................................ 263 5.2. Theoretical findings and contribution ................................................................ 265

5.2.1. Theoretical findings .................................................................................... 265 5.2.2. Value of theoretical findings ....................................................................... 269

5.2.3. Theoretical contribution .............................................................................. 269 5.3. Empirical findings and contribution................................................................... 271

5.3.1. Empirical findings ....................................................................................... 271 5.3.2. Empirical contribution ................................................................................ 276

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

BIBLIOGRAPHY ....................................................................................................... 287

LIST OF APPENDICES ............................................................................................ 303

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LIST OF FIGURES

Figure 3.1 : Interactive Data Analysis (Miles and Huberman 1994) ..................... 76

Figure 3.2 : Osegowitsch’s (2003) Model of Internationalisation and

Performance ........................................................................................ 80

Figure 3.3 : Yip’s Globalisation Drivers Model .................................................... 82

Figure 3.4 : McGrath General Model ..................................................................... 85

Figure 3.5 : Internationalisation Reference Model ................................................ 87

Figure 3.6 : Sample Cruciform Chart of Revenue Growth Versus Level of

Internationalisation ............................................................................ 104

Figure 4.1 : Hierarchy of Themes and Sub-Themes of Internationalisation:

Antecedents ....................................................................................... 162

Figure 4.2 : Hierarchy of Themes and Sub-themes of Internationalisation:

Processes ........................................................................................... 193

Figure 4.3 : Hierarchy of Themes and Sub-themes of Internationalisation:

Outcomes ........................................................................................... 227

Figure 4.4 : Revenue Growth v. Level of Internationalisation Achieved ............ 249

Figure 4.5 : Profit Growth v. Level of Internationalisation Achieved ................. 250

Figure 4.6 : Revenue Growth v. Importance of Internationalisation ................... 252

Figure 4.7 : Profit Growth v. Importance of Internationalisation ........................ 253

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LIST OF TABLES

Table 2.1 : Studies of Internationalisation and Performance ................................. 30

Table 3.1 : Table of Number of SGX Companies Listed Prior to 1998 by

Industry Sectors ................................................................................... 66

Table 3.2 : Nvivo Analysis—Sample Table ........................................................ 102

Table 4.1 : Summary Table of the 14 Participating SGX Companies ................. 110

Table 4.2 : Adoption of Internationalisation Theories ......................................... 154

Table 4.3 : Themes and Sub-themes on Antecedents .......................................... 158

Table 4.4 : Themes and Sub-themes on Processes ............................................... 159

Table 4.5 : Themes and Sub-themes on Outcomes .............................................. 160

Table 4.6 : List of Themes and Sub-themes by Order of Strength in Industry .... 243

Table 4.7 : Comparison of Consistent and Unique Themes................................. 247

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LIST OF ABBREVIATIONS

ASEAN Association of Southeast Asian Nations

CEO Chief Executive Officer

CFO Chief Financial Officer

CIS Commonwealth of Independent States

COE Certificate of Entitlement

DOI degree of internationalisation

DTD Double Tax Deduction

EVA Economic Value-Added

GEM Growth Enterprise Market

GLC government-linked companies

HR human resource

ICSB International Council for Small Business

IES International Enterprise Singapore

KPI key performance indicator

M&A merger and acquisition

MD Managing Director

MNC multinational company

NVOCC Non-Vessel Operating Common Carrier

PATMI profit after tax and minority interest

PFI Participating Financial Institution

PRC People’s Republic of China

R&D research and development

ROA return on assets

ROE return on equity

xviii

ROI return on investments

ROS return on sales

SBU strategic business unit

SGX Stock Exchange of Singapore

SEM structural equation modelling

SME small- and medium-sized enterprise

TCA transaction cost analysis

UK United Kingdom

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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

Appendix 3.5 : Interview Guide ........................................................................... 336

Appendix 3.6 : Summary table of interview responses........................................ 338

Appendix 4.1 : Summary of developments and financials of Company A .......... 359

Appendix 4.2 : Summary of developments and financials of Company B .......... 363

Appendix 4.3 : Summary of developments and financials of Company C .......... 367

Appendix 4.4 : Summary of developments and financials of Company D .......... 371

Appendix 4.5 : Summary of developments and financials of Company E .......... 375

Appendix 4.6 : Summary of developments and financials of Company F .......... 379

Appendix 4.7 : Summary of developments and financials of Company G .......... 383

Appendix 4.8 : Summary of developments and financials of Company H .......... 387

Appendix 4.9 : Summary of developments and financials of Company I ........... 391

Appendix 4.10 : Summary of developments and financials of Company J ......... 395

Appendix 4.11 : Summary of developments and financials of Company K ........ 398

Appendix 4.12 : Summary of developments and financials of Company L ........ 402

Appendix 4.13 : Summary of developments and financials of Company M ....... 406

Appendix 4.14 : Summary of developments and financials of Company N ........ 409

Appendix 4.15 : Nodes / Sub-Nodes and Sources from Nvivo9 analysis ............ 413

Appendix 4.16 : Table of 10-year Revenue and profit average annual growth

rate of return and survey results ........................................................ 419

Appendix 5.1 : Internationalisation Reference model (Strength of Themes –

Very Strong) ...................................................................................... 420


Strong) ............................................................................................... 421

Appendix 5.3 : Internationalisation reference model (Strength of Themes –

Medium) ............................................................................................ 422

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Weak) ................................................................................................ 423

xxi

DEDICATION

Dedicated to my wife Lee Eng, and my four children, Celine, Alvin, Bessie and

Delphine.

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CHAPTER 1. RESEARCH RATIONALE

1.1. Introduction

This chapter explains the motivation for my study. It gives an overview of the scope of

the thesis and explains the research topic and its significance. This is followed by a

description of the structure of the research.

1.2. Overview

Over the past several decades, there has been a large increase in the number of

companies that have expanded beyond their national boundaries to locate parts of their

operations in other countries. Many reasons are given for internationalisation, such as

to be closer to customers or to take advantage of lower production costs or other

strategic and operational factors. Some companies have also sought to establish closer

and longer-term business relationships with their overseas partners (Wheatley, 1991,

Williams et al., 1998).

To leverage on their competitive advantages and ensure business survival in the fast

changing global economic environment, corporations have been shifting away from

depending on their domestic markets to develop a more globalised reach. This allows

them to diversify factor input sources and markets and to derive production capabilities

in different locations, technological knowhow and competitive strengths. As a result,

whether through organic growth or acquisitions, we have observed a major

international consolidation of companies, which has created truly multinational

companies (MNCs).

2

Multinationality started in developed countries such as the United States (US), United

Kingdom (UK), Japan and Germany. In recent years, even companies in small

countries such as Singapore have ventured overseas, seeking the benefits to be derived

from internationalisation. International business relationships are increasingly looked

upon as a strategic option equivalent to other business strategies like knowhow,

products and technologies (Friedman, 2005, Webster, 1992, Zain and Ng, 2006).

The primary focus of my thesis is to explore the global integration and

internationalisation strategies, processes and outcomes of Singaporean companies

during the period from 1998 to 2007. This is particularly pertinent because Singapore

has a very small and limited domestic market, and the Singapore government has been

promoting the internationalisation of local companies for the past three decades.

1.3. Topic

My study examines the influence of internationalisation on the performance of

companies listed on the Stock Exchange of Singapore (SGX) for the 10-year period

from 1998 to 2007. Singapore is evaluated by Foreign Policy, a US-based magazine,

and AT Kearny as one of the countries with the highest level of internationalisation

based on the International Cities Index (Foreign Policy, 2006). Internationalisation is a

strategic variable that affects the competitiveness of a country. Numerous aspects of

internationalisation have been explored in the past in the industrialised countries. As

Singapore is a newly developed economy, it is interesting to explore how

internationalisation has influenced Singapore-incorporated companies. There are

currently over 800 companies listed on the SGX. They constitute a sizeable base of

companies with publicly available market, business and company data to support the

research.

3

Numerous studies have investigated the motivations for corporations to become

international and the resulting influence of internationalisation on these companies.

Companies need or choose to become international for a variety of reasons such as

growth, survival, competitiveness, economies of scale, proximity to markets and

performance enhancement (Hutzschenreuter and Guenther, 2008, Kogut, 1989, Kogut,

1999).

Internationalisation has been generally defined as ‘a strategy undertaken by a

corporation to expand overseas to take advantage of various factors such as costs and

proximity to markets in the overseas markets’ (Fallah and Lechler, 2008).

Internationalisation refers to the overall extent of a company’s international

engagement. It can be represented by the amount of foreign-based assets as compared

to its total assets; the percentage of foreign-based sales as compared to total sales; or

the percentage of its operations located in foreign countries compared to total

operations. Most corporations started from large domestic home markets like the US,

UK, Europe and Japan. One of the main objectives of internationalisation is to improve

profitability (Norbarck and Persson, 2008). Only a limited number of studies have been

done on Southeast Asian and Singaporean companies (Siew Meng and Chin Tiong,

1993, Birkinshaw, 1995).

Publicly listed companies were selected for study because some details on the

companies’ history, business scope, plans, financial data, factories and operations

locally and overseas are available publicly in their annual reports.

4

This research is interesting and worthwhile, as it will enable managers to have a better

understanding of the imperatives and motivations that drive Singaporean companies to

become international. It also extends the literature by providing a comparison with

previous studies on this subject done by other researchers in Singapore and overseas.

The differences in experiences, strategies and performance results will enable the

formulation of a set of internationalisation strategies that could be more relevant for

Singapore-based companies.

1.4. Potential significance

From the onset, internationalisation has caused geographical boundaries to fade as new

business paradigms emerge. The traditional method of doing business within national

borders, dependent solely on huge domestic markets (for example, the US is a large

market in itself), has changed with the emergence of the global village (Friedman,

2005). To prepare companies to exit their national borders, it is important for them to

understand the effects, relationships and implications of the internationalisation

phenomenon, and to equip themselves with the knowledge and competencies to

overcome likely changes and challenges.

In Singapore’s context, internationalisation is a policy issue that has great significance.

As early as in 1992, Mr Lee Kuan Yew (Singapore’s former Prime Minister) urged

Singaporean companies to venture overseas. He termed it quaintly as ‘to spread a

second wing, that is an external wing’. Since then, the Singapore government has been

actively promoting the internationalisation of Singaporean companies through

government initiatives and policies aimed at encouraging and incentivising companies

to expand overseas. In particular, Singapore’s government-linked companies (GLCs)

have been encouraged to expand more actively overseas. This study examines the

5

measures undertaken by the Singapore government to promote internationalisation,

whether these initiatives had been effective, and the policy implications that can be

concluded from the analysis of the evidence and results.

This thesis therefore examines both the efforts directed by the Singapore government

as well as the private sector’s initiatives towards internationalisation as a business

strategy. The shared experience of becoming international will enable Singaporean

companies to better structure their organisations to tackle the world market and to

adopt the right strategies and action plans to compete well in the international arena.

The research will add to current knowledge on internationalisation and enable further

research in an area that is becoming increasingly relevant in today’s highly connected,

technology-driven and internationally competitive world market.

1.5. Structure

The study is structured into five main chapters. Following Chapter 1, which gives an

overview of the research rationale, Chapter 2 presents the literature review of relevant

research, from the seminal work by Vernon (1971) to the numerous studies looking at

the relationship between performance of large MNCs and their level of

internationalisation. The chapter describes the theoretical foundations of the research

on internationalisation. Noteworthy is the revelation that quantitative methods of

research have led to different results about the impact on the performance of

corporations. This subsequently led to more studies being conducted using qualitative

methods to derive deeper insights on internationalisation theories and strategies. The

two recognised theories on internationalisation are the Eclectic Paradigm and the

Uppsala Internationalisation Framework (Johanson and Vahlne, 2009). The chapter

ends by stating the perceived research gaps and intended research emphasis.

6

Chapter 3 describes the rationale for the selection of the qualitative case study

approach. The research is conducted in three phases:

1. A pilot study is undertaken to test the primary research parameters such as the

saturation level on the potential number of companies to be interviewed, the

relevant questions and issues to be posed, and the appropriateness of the

companies and interviewees to be selected.

2. An analysis of all SGX companies is conducted by examining the

internationalisation factors and performance measures based on data from

publicly available databases of SGX companies. This exercise enabled the

selection and invitation of an appropriate group of target companies for

participation in the case study research.

3. An in-depth qualitative study is conducted by using the case study approach to

examine in detail the purposes, processes and outcomes of the

internationalisation of selected SGX companies, by conducting one-to-one in-

depth interviews with the key senior executives of the participating companies.

Phase 1 (Pilot study) is meant to be a brief study, and Phase 2 is to examine the

publicly available data on the internationalisation of SGX companies and provide the

basis for the selection of an appropriate cluster of companies for the main part of the

research. Phase 3 is to conduct an in-depth study into selected companies. The main

results and findings are derived from the research materials gathered in Phase 2 and

from the in-depth case study interviews in Phase 3.

In the latter part of Chapter 3, certain previous quantitative and qualitative research

methodologies are examined, and a Reference Model is developed that is deemed

7

suitable for use in this study. The Reference Model displays the internationalisation

process in three blocks: Antecedents, Processes and Outcomes.

Following the Reference Model, key research questions are formulated. The first key

research question is ‘Does internationalisation result in better performance for

Singaporean companies?’ The two key research questions that follow are ‘What are the

main motivations for a Singaporean company to go international?’ and ‘What are the

outcomes of the internationalisation process?’ Another relevant and interesting

question is ‘As the Singapore government actively promotes internationalisation, do

government initiatives have any impact on the push of Singaporean companies to

internationalise?’

Chapter 3 concludes with a description of the data gathering techniques and procedures

using Nvivo9 software and co-axial analysis.

Chapter 4 provides the summary information on the selected SGX companies and

gives an analysis of the survey results using Nvivo9 software. The analysis provides

the answers to the various key research questions, and describes the themes and sub-

themes emerging from the interviews. Further analysis is conducted using co-axial

analysis, comparing the rated level and importance of internationalisation against the

actual performance of the companies.

Chapter 5 provides a summary of the main findings and their implications, and the

contributions of the thesis to the current body of research on internationalisation.

8

1.6. Conclusion

This chapter explains the research rationale and structure of the study. The research is a

worthwhile project because it adds to the knowledge and understanding of

internationalisation for companies in a small economy like Singapore. The next chapter

explores the literature in depth, considering both pioneering and current research on the

topic of internationalisation.

9

CHAPTER 2. LITERATURE REVIEW

2.1. Introduction

This chapter provides an overview of prior research undertaken in the area of

internationalisation. The chapter begins by explaining the meaning of

internationalisation, multinational corporations and globalisation. It then outlines the

key theoretical concepts and provides a review of the early quantitative studies that

compared the relationship between multinationality and internationalisation. The

review covers the research on internationalisation at the company, subsidiary, industry

and multiple-industries levels, and discusses the benefits of internationalisation in

many country settings. This chapter also discusses the research on the

internationalisation of Singaporean companies and the Singapore government’s

assistance for companies’ internationalisation objectives. The chapter concludes by

identifying the research gaps in the literature that led to the choice of research

emphasis for this thesis.

2.2. Defining multinationality, globalisation and internationalisation

One of the early pioneers of the globalisation literature was Fayerweather (1969), who

described globalisation as a ‘unification idea’ in which an MNC presents a completely

unified stance in all countries in which it does business, with standardised products

based on concentrated production. Another well-recognised early article on global

strategy was by Levitt (1983), who discussed the concept of the global village and

suggested that the use of a global strategy was inevitable, and that all companies would

one day be producing globally standardised products for unified markets. Cvar (1986)

further expressed the view that a global company is one organised in such a way as to

take maximum advantage of efficiencies through the reduction of costs wherever

10

possible. Thereafter, there was a strong groundswell by MNCs to standardise their

products and procedures across the globe.

In the past, globalisation and global strategy were viewed together as a generic

international strategy adopted by multinational companies as an alternative to ‘multi-

domestic’ or ‘multi-local’ strategies, by locating their operations or plants in different

countries. This status of a company is generally termed as ‘multinationality’. It was

further expounded that multinationals, which put local responsiveness first, would

choose a multi-local strategy, while companies that decided to pursue lower costs

would choose an internationalisation strategy. This uni-dimensional view looked upon

the choice to adopt a global strategy as a conscious decision to base the company’s

international competitive strategy on the main objective of lowering costs through

concentration of production and a drive towards standardisation of production and

marketing policies.

2.2.1. Multinationality

‘Multinationality’ was defined in a 1973 United Nations article on ‘Multinational

Corporations in World Development’ as the status of a corporation or enterprise that is

involved in activities in more than one nation. It stated that there are certain qualifying

criteria to be used in respect of the type of activities or the importance of the foreign

component in the total activity. These activities may be related to sales, assets,

production, employment or profits generated by the foreign branches and affiliates. A

foreign branch is defined as that part of the corporation that operates abroad. An

affiliate is the part of the corporation under effective control of the parent company and

may be either a subsidiary (with the parent holding a majority of shares or a lesser

portion), or an associate (in which the investor holds 20 per cent or less of shares).

11

Deriving from this definition, any corporation with one or more foreign branches or

affiliates engaged in any of the activities mentioned will qualify as ‘multinational’.

2.2.2. Globalisation

There have been many discussions of the definitions of globalisation in numerous

research papers and reports (Beyer, 1994, Cairncross, 1997, Dicken, 1998, Dunning,

1993a, Giddens, 1990, Jameson and Miyoshi, 1998, Robertson, 1992, Walters, 2002).

These have covered a wide range of perspectives and definitions of globalisation from

a variety of academic, linguistic, economic and religious fields and have demonstrated

a considerable variance in concepts and approaches (see Appendix 2.1: Definitions of

Globalisation). However, three common factors are evident: (1): the integration of a

previously insular national or regional phenomenon (for example, culture, interest rates,

technology, ideas, consumption patterns, diseases or standards) into some sort of

worldwide, or near worldwide structure; (2) the process by which this integration

occurs; and (3) identification of a set of integrating mechanisms (for example, disease

paths, exchange rates, trade, foreign direct investment, books, movies, travel or internet)

that facilitate the integration by transmitting influence (for example, disease pathogens,

inflationary pressure, fashions or behaviours) from one location to another.

Building on these points, the following general description of globalisation is offered

by a practitioner article (Clark and Knowles, 2003). Globalisation is the process by

which economic, political, cultural, social and other relevant systems of nations are

integrating into world systems. It has the following two elements:

(a) A world system, which is a planet-wide complex of channels capable of

transmitting stimuli simultaneously to many locations at wide geographic distances;

and

12

(b) A degree of globalisation, which is the extent to which the economic, political,

cultural, social and other relevant systems of nations are actually integrated into world

systems. This degree varies considerably.

This description has the virtue of being general, in that it does not limit globalisation to

any particular metric, observable phenomenon, model, theory or disciplinary

perspective; yet, it captures the basic idea that all fields are grappling with and

attempting to model into their own academic context. The description also recognises

globalisation as a dynamic process that affects different phenomena to varying degrees,

occurring in economic, cultural or social domains. The description also provides a

framework for capturing the rate at which the process is advancing in particular

contexts. Emerging and existing world systems include inflation, interest rates,

business cycles, fashion, pop music, technical and professional standards, consumption

behaviours, diseases and media.

In recent years, with the rise of the green movement and concerns about environment

protection, the process of globalisation has been blamed as the cause of the spread of

diseases, the breakdown of cultures and changes in geo-political power across nations.

Numerous sociologists, scientists, anthropologists and environmentalists have

examined the topic and sought to identify the impact of globalisation in their respective

fields (Friedman, 1999). Giddens (1999) opined that the widespread usage and

coverage of the term globalisation has led to referring to it as a ‘runaway force’, which

leads to the convergent view that globalisation has been overly faulted for all cross-

border ills in cultural, social, political and economic arenas.

13

Globalisation has been generally employed as a broad-based term for the process

whereby global forces or developments interact and give rise to the social advent called

‘globalisation’, a phenomenon involving different organisations, nations or entities.

2.2.3. Internationalisation

Internationalisation has been generally interpreted in a variety of ways, with the most

common concept being the optimisation of various resources by MNCs to be located in

different countries (Ghoshal, 1987, Ghoshal and Bartlett, 1988a). According to Kobrin

(1991), an internationalised company contains subunits that can be incomplete

economic entities, and their value is, as part of the entire organisation, derived from

their relationships with others, to produce maximum returns for the group. Therefore,

increasing and strengthening integration should result in increased intra-unit exchanges

of people, raw materials, resources, technologies, components and finished products.

However, these views alone do not define what internationalisation actually is. Among

other things, internationalisation can be a negative connotation. It has been described

as the advent of a force that has led, on the premise of worldwide economic

advancement and integration, to global environmental degradation and economic

exploitation.

Bartlett and Ghoshal (1989) proposed an organisational form they termed the

transnational, and re-iterated the conventional view that in the internationalised

organisation, the cost and quality advantages of global efficiency are expected to

provide optimal value that customers will eschew differences in preferences and accept

standard products. The current conventional wisdom tends to continue to equate

internationalisation with lowering of costs and standardisation, with Hill and Jones’s

(2000) widely used text on strategic management being one such example. Birkinshaw

14

(1995) provided additional support where he stated that economy of scale was the most

significant driver of international integration in his study of US manufacturing

companies.

It is therefore understandably difficult to define a term that in recent years has come to

mean many different things. For the purposes of this study, it is necessary to

concentrate on the application of the term ‘internationalisation’ with regard to how it

has affected Singapore-based international business corporations, and in particular, to

focus on what is understood by the term ‘internationalisation strategy’. This approach

does not seek to ignore the wider social and technological impacts of

internationalisation. However, it aims to focus primarily on business and management

literature in which business strategies have been placed at the core of this

internationalisation research. This is in accordance with Bartlett and Ghoshal (1989),

who have ventured to term multinational corporations as the ‘dominant vehicle’ of

internationalisation.

In summary, this study defines internationalisation as:

A strategy undertaken by a corporation to expand overseas to take

advantage of various factors such as costs of production, drawing upon

domestic resources, manpower and regulatory advantages, sharing of

technologies and knowhow across borders, and proximity to markets in

the overseas markets.

For the purpose of this thesis, the term ‘internationalisation’ is used as a business-

related concept that refers to the process of MNCs expanding and shifting their

operations overseas. Therefore, throughout this thesis, the term internationalisation is

15

use for the study of MNCs. In summary, globalisation is used to describe a social

phenomenon, whereas internationalisation describes a business process.

In terms of the relationship between multinationality and internationalisation, in this

thesis, internationalisation describes the process through which MNCs expanded out of

their domestic markets and established branches or affiliates overseas.

2.3. Theoretical foundation of early research

The study of the internationalisation of companies has traditionally focused on

manufacturing MNCs, although later studies have extended the scope to services and

other sectors. Early studies tended to compare the level of internationalisation against

performance, and explored issues relating to the motivations for, and benefits of,

internationalisation. Typically, the main proposition underpinning the research was that

more internationalisation should lead to better performance. Later studies became more

interdisciplinary in nature and encompassed areas such as strategic management,

international business concepts, international finance and economics. Other research

has also ventured into the various cultural and cross-cultural aspects of

internationalisation (Gaines and Liu, 2000, Hewapathirana, 2009, Pei-Wen, 2004).

Vernon’s pioneering seminal work investigated the association between

internationalisation and performance (Vernon, 1971, Vernon, 1981). He made a

comparison of the Return on Assets (ROA) of domestic companies and MNCs, and

found the latter to have superior performance.

The subsequent studies by Vernon and others investigating the influence of

internationalisation on corporations tended to adopt comparative approaches. For

16

example (Grant et al., 1988) examined the relative performance of corporations that

had remained domestic against those that had become international. The early research

was mainly conducted on European and US companies. Later research expanded the

coverage to Japan and other countries, as these countries started to produce several

large international companies. Recent research has tended to focus on MNCs and to

adopt control approaches. Researchers have used operational multinationality as a

continuous variable for comparison against performance. The theoretical foundation

underpinning the examination of the internationalisation of companies and their

performance rests on two key concepts. The first is the transaction cost analysis theory

(TCA), which states that a company’s decision either to undertake a transaction

themselves in their internal structure between related entities or to let the market

perform the transaction is based on transaction cost differentials (Coase, 1937,

Williamson, 1976). According to this theory, the cost benefit advantages of

internationalisation have to be greater than the additional direct costs brought by the

complexities and uncertainties caused by internationalisation.

2.3.1. Transaction cost analysis theory

Williamson (1975, 1985) explained that TCA is based on the premise that a company

will internalise those activities that it is able to conduct at a lower cost, and rely on

external providers for activities in which such providers have an advantage. TCA is

developed on a micro-analytic framework with strong links to observed behaviour.

Companies are assumed to be subject to bounded rationality. In addition, at least some

companies are assumed to be opportunistic if given the chance. Similarly, imperfect or

asymmetric market information will give some companies the opportunity to exploit

advantages (especially financial) in their dealings with other companies.

17

Transaction costs (such as the costs governing a production system) tend to be low in

highly competitive markets, and therefore provide minimal or no cost advantage or

incentive to substitute internal organisation for market exchange. In comparison, when

confronted with an imperfect market or market intelligence, companies are expected to

internalise transactions to reduce costs of exchange. The objective of forward

integration of operations is to minimise the sum of transaction costs (John and Weitz,

1988, Williamson, 1985). The higher the cost of contracting externally, the greater will

be the incentive to internalise transactions.

Forward integration means that a company may decide to invest into businesses that

relate to its main products, such as into other similar and related products or services,

or those that are downstream businesses to the main production output of the company.

Backward integration is the business direction where the company invests into sub-

components, supplies and support services that lead to the production of its main

products.

However, unlike production costs, transaction costs are very difficult to measure and

estimate precisely, because they represent the potential outcomes of alternative

decisions. John and Weitz (1988) said that studying transaction cost issues often cannot

measure such costs directly, instead only testing whether organisational relations align

with the attributes of transactions as predicted by the transaction cost rationale.

Studies of TCA in terms of asset specificity and internal uncertainty have been

conducted by numerous researchers (Anderson, 1985, John and Weitz, 1988, Anderson

and Coughlan, 1987). Asset specificity refers to the extent to which specialised internal

18

investments are required to support a transaction, whereas uncertainty refers to the

ability to predict the relevant contingencies, both internal and external to the company.

2.3.2. Foreign direct investments theory

The second research approach employed in the early period is the theory of foreign

direct investments, which is focused on how MNCs conduct business internationally.

Hymer (1976) initiated the concept of market imperfections and considered that the

TCA of internationalisation concept propounded by Coase (1937) can be extended to a

theory of foreign direct investments (Hymer, 1976, Hymer, 1960). This theory posits

that companies can exploit differential advantages in labour, land, resources, tax, local

knowledge and other factors through foreign direct investments into foreign markets.

Companies undertake cross-border geographical diversification because they can

exploit unique advantages of proprietary knowledge, technological advantages,

managerial skills, availability of resources, supply of raw materials and other

intangible assets, which enable them to make extraordinary performance gains.

Aharoni (1966) presented a discourse on the definition and process of foreign direct

investments. He suggested that the foreign investment decision process was not a

single identifiable act, and viewed it as a complex succession of acts involving a

dynamic social and interactive process of mutual influences among various executives

of a company, constrained by the company’s business strategy, resources and the

management or manpower capacity, goals and needs of its members, throughout which

choices emerge (Aharoni, 1966).

The foreign investment decision process is undertaken by a group of executives in a

company, who typically have different backgrounds, knowledge, experience and

19

orientations. It is a long process and involves different organisational levels. Decisions

are made under uncertainty because of the lack of information and the limited capacity

of the management team.

According to Aharoni (1966), the decision process starts because of an outside factor

that causes a decision-maker to look overseas. The strength of this force determines the

investigation process, throughout which management accumulates psychological

commitments toward other organisations and entities. The more committed they

become, the higher the probability of a decision to invest. Thus, if the force that caused

the manager to look abroad is strong enough, the decision to invest abroad is gradually

formed, and the investigation process may concentrate on minimising the size of the

investment and the risks involved. The process changes with the accumulation of

experience and the result of organisational modifications such as the creation of an

international division.

Aharoni (1966) considers that a foreign investment decision process includes several

elements. First, any choice made by a company depends on its internal systems. These

systems comprise management’s relations with other individuals and entities both

within and outside the company, including customers, suppliers, banks, competitors

and government agencies in host and home countries. Second, the process evolves over

a certain (and potentially extended) period of time. Third, decisions are made under

uncertainty, which means that the management’s perception of uncertainty is a major

element in the process. This perception changes as a result of experience and

knowledge, and management’s level of interest can vary over time, reflecting how

comfortable they are with the uncertainty surrounding the decision. Fourth, companies

20

have goals and objectives. Finally, there are many constraints on the freedom of action

of the management.

The decision-making process is spread over a long period (Aharoni, 1966). Implicit

and explicit negotiations, both inside the company and with outsiders, may cause the

process to become extended. During that period, there can be many changes; it is often

found that certain factors were not taken into account, were taken over by events or

proved to be unpredictable. These changes invariably require more modifications,

more approvals and sometimes a new round of negotiations has to be started.

When a series of investment decisions are examined, another important factor emerges

which is the accumulation of experience by executives in various echelons regarding

foreign investments creates profound changes in the company itself. Gradually,

companies evolve into multinational corporations, after successfully establishing or

acquiring operations and business opportunities abroad (Aharoni, 1966).

Organisations learn, and with learning the perception of uncertainty in foreign

operations changes; that is, investments previously perceived as risky become

acceptable. When the process is put in a historical perspective, it may be observed that

the company commenced to look overseas after it received significant export orders

over a period of time. Alternatively, a foreign agent might have developed an overseas

market, with the management paying little or no attention to this foreign development.

With the growth of export business, sometimes even without any deliberate action

from headquarters (HQ), an export department may have been created. This, in turn,

forms a group of people in the company who feel obligated, driven by their vested

21

interest, to expand the company’s international operations. The very existence of an

international division gives a momentum to international operations, which are

subsequently expanded. The assignment of a group of executives to an international

division creates several institutional and individual commitments. The cost of

investigation in an international division is generally lower, as knowledge has been

accumulated from previous investigations. Further, because of their role and

experience, the international executives perceive the risk of foreign operations to be

lower; they have more knowledge about remote control operations. With time, foreign

investments become a substantial part of total operations. The level of the international

division in the company’s hierarchy becomes much higher and the involvement of top

management increases. When evaluating the expansion of existing foreign operations

is considered, the investigation becomes much more favourable.

The location pattern also evolves and, very often, the first subsidiary selected for

foreign operations may change. The foreign subsidiary may have accumulated

considerable experience in foreign operations in its domestic location and in other

countries. This phenomenon can be attributed to the idea of experience first, where

companies may prefer to ‘get their feet wet in safer water’ (Aharoni, 1966). Thus,

because of path dependence, the history of the company is an important variable.

Aharoni studied US companies. A similar incremental process of learning and

experience, and the choice of familiar countries first, were found by Johanson and

Vahlne (1977) in their observations of Swedish companies. They concluded that

companies were inhibited by lack of knowledge about markets. Therefore, companies

proceeded in small steps, adjusting their actions as they gained knowledge through

experience. Thus, internationalisation is an evolutionary, continuous process from

22

export to joint venture representation, to sales subsidiary, to resource development

subsidiary. Further, based on experience and knowledge acquisition, companies

entered new markets with successively greater psychic distance. These explanations

were considered at the company level, rather than at the individual level. As stated by

the authors that in their model, they considered knowledge to be vested in the decision-

making system. They did not deal explicitly with the individual decision maker

(Johanson and Vahlne, 1977).

In subsequent works, Johanson and Vahlne (1990, 2009) expanded the notion of

knowledge development to include knowledge gained through relationships with other

bodies in the foreign market. They viewed markets as networks of relationships among

companies. They argued that the localisation process in relevant networks was

necessary for successful internationalisation. Relationships offered potential for

building trust and commitments, which, in turn, shaped a company’s market

knowledge.

Following the theoretical concepts described above (which take the approach that

companies customarily focus on domestic beginnings and then grow incrementally

towards internationalisation, thus becoming a MNC), researchers started to

conceptualise a new breed of companies called ‘born-global companies’ (Zhou et al.,

2007). Zhou (2007) defined born-global companies as young, small entrepreneurial

companies that, from the onset, are organised and structured such that a substantial

amount of their total revenues were drawn from multiple countries. Zhou argued that

this new global phenomenon was due to experienced entrepreneurs having established

international connections and networks, which enabled them to form companies or

joint ventures with international visions, worldwide acceptable innovative products and

23

a focus on international sales from their inception. Therefore, these born-global

companies could leapfrog the domestic growth route and launch into the international

arena from the outset (Oviatt and McDougall, 2005a, Oviatt and McDougall, 2005b).

The early research was mainly quantitative, examining the relationship between

internationalisation and performance based on comparative studies of MNCs. The

control approach was adopted to enable researchers to study the impact of different

levels of internationalisation on a company’s performance. However, as evidence was

mixed about the influence of internationalisation on performance, the later research

tended to become qualitative, and the earlier comparative and control approaches were

sidelined. As an alternative, case study approaches were used in an attempt to gain a

better and more in-depth understanding of internationalisation as a business strategy.

The next section of this literature review examines the research on the control approach;

that is, those studies that investigate the extent to which different degrees or levels of

internationalisation have affected companies’ performance. These studies are listed in

Table 2.1 and discussed below.

2.4. Multinationality and performance

There has been considerable research on the relationship between multinationality and

performance. As explained above, the term ‘multinationality’ is generally used to

describe the extent of a company’s foreign-based investments in overseas markets, and

the degree of internationalisation (DOI) usually refers to the geographical

diversification of the company. In the area of international finance, a significant

amount of research has examined the relationship between multinationality and

market-based measures of performance such as market capitalisation or stock market

24

returns (Errunza and Senbet, 1981, Errunza and Senbet, 1984, Doukas et al., 1999,

Morck and Yeung, 1991, Morck and Yeung, 1992). The studies are discussed below,

grouped by country or region.

2.4.1. World/USA studies

Studies based on an international sample or on US companies provide mixed evidence

about the relationship of internationality and performance. In a large cross-country

study, Buckley, Dunning and Pearce (1977) examined 387 of the world’s largest

industrial companies and compared their foreign subsidiary sales ratios to their

performance measures, ROA and sales growth for the period 1962 to 1972. The survey

contains both US and non-US companies. They concluded that there was a positive

relationship between degree of internationalisation and return on assets for the full

sample. However, when the sub-samples of US and non-US companies were tested

separately, there was no correlation found between internationalisation and return on

assets. They also found a positive relationship between internationalisation and sales

growth for the 1967 to 1972 period, but inconsistent outcomes on the direct

relationship between internationalisation and performance for the full 1962 to 1972

period.

Studies of US companies have reported no relationship of internationality and growth

or even a negative relationship. Severn and Laurence (1974) examined 62 US

manufacturing MNCs and compared their foreign asset ratios to the performance

measure of ROA. They concluded that there was no significant relationship between

profitability and internationalisation. Siddhartan and Lall (Siddharthan and Lall, 1982)

examined the 74 largest US manufacturing MNCs, compared their foreign sales ratio to

sales growth and concluded that there was a negative relationship between

25

internationalisation and growth. Chang and Thomas (1989) investigated 64 US

manufacturing companies, compared their growth in foreign sales ratio with their

growth in ROA and found a negative relationship between growth in internationality

and profitability.

2.4.2. European and other country studies

Studies in other countries have also reported mixed results. Kumar (1984) studied 672

UK manufacturing MNCs, comparing their foreign sales ratio to ROA, return on sales

(ROS) and sales growth. The study concluded that there was no significant relationship

between internationalisation and profitability or sales growth.

Grant (1987) studied 304 UK manufacturing companies by comparing the level of

sales to ROA and return on equity (ROE). He found a positive relationship between

multinationality and profitability. Geringer, Beamish and da Costa (1989), who

compared foreign sales ratio and ROA, also found a positive relationship.

Lu and Beamish (2001) studied 95 listed Japanese companies and compared the

number of foreign direct investments and number of host countries with the

performance measures, ROA and ROS. The authors concluded that there was a u-

shaped relationship between internationalisation and profitability, which meant that the

correlation was valid for the smallest and largest companies, but not for the mid-range

companies. The results were interpreted as follows: smaller companies can be more

focused and start from smaller bases, and thus can enjoy relatively significant benefits

from internationalisation. The largest companies can also derive benefit from

internationalisation owing to their resources and scale.

26

2.4.3. Singaporean studies

The preceding section demonstrates that there is already a very large body of research

examining the relationships between internationalisation and measures of corporations’

performance. However, a literature search indicated that not many studies have been

conducted on this subject for Singapore-based companies.

The first general pool of studies in Singapore focused on the competitiveness of

Singapore as a country (Blomqvist, 2002, Robert and Dick, 2005). They described how

Singapore’s economic policies have assisted companies to sustain international

competitiveness in the new internationalised world economy.

Zutshi and Gibbons (2004) commented that western management theories of

internationalisation do not fully explain the evolution of Asian MNCs, and they held

Singapore as a model of internationalised economic expansion. The authors studied the

internationalisation process and strategies of two GLCs.

Singaporean corporations have been strongly encouraged by the Singapore government

to regionalise their operations. Using Singapore’s public enterprise sector as a case

study, Roberts and Dick (2005) described the internationalisation strategies of

Singaporean GLCs. The authors concluded that effective systems of corporate controls

are necessary for the development of the international capabilities of Singapore GLCs.

Another study examined the success of Singaporean companies making investment

inroads into China as a form of international strategy. Kumar, Siddique and Wong

(2005) examined the internationalisation of ethnic Chinese business companies from

Singapore and delved into their strategies, processes and international competitive

advantages. Lim and Ng (2001) made a specific industry-level study on the factors

27

influencing the internationalisation decisions of small- and medium-sized enterprises

(SMEs) in Singapore, with particular reference to the plastic engineering industry.

Pangarkar (2008) examined the relationship between the internationalisation and

performance of SMEs in Singapore. He studied the relationship between the DOI and

performance of 94 SMEs in Singapore, using a DOI measure based on the dispersion

of sales across geographic regions. He found that DOI had a positive impact on the

performance (ROA and profit growth) of these companies. The analysis was conducted

by comparing the companies’ level of internationalisation in 2003 (the survey was

conducted in mid-2005) with their corresponding performance metrics for 2004 (a

study period of one year). Pangarkar’s first focus was on smaller SMEs with limited

resources and little to no internationalisation history. The second focus, which is also a

limitation, is that the study was conducted over a short period (that is, 2003–2004).

The above review shows that studies on SGX companies have focused on certain

industry types (for example, plastic engineering industry) and specific aspects of

internationalisation (for example, the responses of Singapore GLCs to the

government’s call to become international). Thus, the existing studies can be classified

as limited cross-sectional studies. A relevant and recent study by Pangarkar (2008)

limited itself to investigating smaller SMEs over a short period of one year (2003–

2004).

An overview of the past research indicated that studies using profitability and sales

growth as dependent variables generally supported Vernon’s results (Wolf, 1977,

Capar and Kotabe, 2003). However, some studies found domestic companies to be

superior performers (Hughes et al., 1975, Siddharthan and Lall, 1982, Al-Obaidan and

28

Scully, 1995). Interestingly, a third group of researchers found no significant

differences between the performance of domestic and internationalised companies

(Horst, 1972, Rugman, 1983, Shaked, 1986). Many reasons were postulated for the

causes of the inconsistent results. Some researchers attributed the poor results to the

fact that the relationship between performance and multinationality is more

complicated than was allowed for in the empirical testing (Al-Obaidan and Scully,

1995). There could also be several other factors that might account for, or contribute to,

performance differentials besides internationalisation. Therefore, the empirical

evidence suggests that proxies for the multinational effect are inadequate as the sole

explanation for performance.

Early studies on measuring the impact of multinationality on performance assumed a

beneficial linear relationship. Subsequently, a school of thought emerged that rejected

the linear association between multinationality and performance. Some researchers

favoured a deterministic association, and argued that the relationship was the shape of

an inverted ‘u’. Their proposition was that performance rises initially with growth in

multinationality before it reaches a threshold at which point it starts to decline. In the

beginning, companies would expand into new markets or production locations

characterised by similar production methods, consumer taste, markets and institutions

or regulations. These new ventures enabled the use of existing methods, techniques and

operations without substantial adaptation, and required no substantial modification of

existing structures and systems. Therefore, the political and environmental risks were

potentially reduced, allowing companies the opportunity to make extraordinary gains

from the initial expansion projects (Gomes and Ramaswamy, 1999). In contrast, the

later stages of international expansion would be increasingly difficult due to the

involvement of dissimilar countries. Instead of having to make only small or

29

incremental changes and capital injections, companies must make more adjustments,

take higher risks and inject more capital. As a result, the performance gain could be

marginal or negative.

Another group of researchers argued that the relationship between multinationality and

performance is influenced by learning processes and cost-benefit trends, which can be

changed by capable managers who adopt superior processes and methods (Ruigrok and

Wagner, 2003). These researchers rejected the deterministic theory, and disagreed with

the concept of threshold of internationalisation benefits. They contended that astute

and proactive management could overcome the limitations and difficulties of threshold

of gains to be derived (Hitt et al., 1997, Sullivan, 1994a, Sullivan, 1994b).

30

Table 2.1 : Studies of Internationalisation and Performance

Authors,

Year Companies

Internationalisation

Measures

Performance

Measures Results

1. World/US

Cantwell

and

Randaccio,

1993

143 world large

industrial

companies

Foreign production

ratio Sales growth

No significant

relationship

between

internationalisation

and sales growth,

except for a sample

sub-set with a

strong global

presence

Buckley,

Dunning

and Pearce,

1978

387 world large

industrial

companies

Foreign subsidiary

sales ratio

ROA sales

growth

Positive

relationship

between


and ROA

Chang and

Thomas,

1989

64 US

manufacturing

companies

Foreign sales growth

ratio ROA growth

Negative

relationship

between


and ROA

Daniels

and

Bracker,

1989

116 US

manufacturing

companies

Foreign sales ratio,

foreign assets ratio ROS, ROA

Positive

relationship

between


and ROS/ROA

31

Authors,

Year Companies


Measures

Performance

Measures Results

Siddhartan

and Lall,

1982

74 large US

manufacturing

MNCs

Foreign sales ratio Sales growth

Negative

relationship

between


and sales growth

Han, Lee

and Suk,

1998

2,643 large

manufacturing

companies

Canada, Japan,

UK, USA,

Germany, Italy

Foreign sales ratio ROA No significant

relationship

2. Europe

Kumar,

1984

672 UK

manufacturing

companies

Foreign sales growth ROA, ROS,

sales growth

No significant

relationship

between


and ROA only

Grant,

Jammine

and

Thomas,

1988

304 UK

manufacturing

companies

Subsidiary sales ratio Return on net

assets

Positive

relationship

between


and ROA

Buhner,

1987

40 German listed

manufacturing

companies

Regional sales index

Return on

assets, return

on equity

Positive

relationship

between


and ROA/ROE

32

Authors,

Year Companies


Measures

Performance

Measures Results

Riahi-

Belkaoui,

1996

31 French

companies Foreign sales ratio ROA

Positive

relationship

between


and ROA

3. Other Countries

Delios and

Beamish,

1999

399 Japanese-

listed

manufacturing

companies

Number of foreign

direct divestments,

number of host

countries

ROA, ROS,

ROE

Positive

relationship

between


and all profitability

measures

Li

Mingfang,

2004

250 Chinese

multi-industry

companies

Foreign sales ratio ROA

Positive

relationship

between


and ROA

Lu and

Beamish,

2001

95 listed Japanese

companies

Number of foreign

direct investments,

number of host

countries

ROA, ROS

U-shaped

relationship

between


and ROA/ROS

33

4. Singapore

Roberts

and Dick,

2005


of Singaporean

GLCs

Sales growth

overseas ROA

Qualitative

assessment of

positive impact

Lim and

Ng, 2001

15 Singapore plastic

engineering

companies

Sales overseas ROA

Positive

relationship of


and ROA

Pangarkar,

2008 94 Singapore SMEs

Sales across

geographic regions

ROA, profit

growth

Positive

relationship

between


and ROA/profit

growth

2.4.4. Quantitative and qualitative studies

The above review shows that the early quantitative studies produced varying results

about the question of the impact of internationalisation on performance. The trend by

subsequent researchers has been to adopt a combination of qualitative and quantitative,

or solely qualitative, methods in their studies on the link between internationalisation

and performance (Ghoshal, 1987). For example, Osegowitsch (2003) used a

combination of qualitative case study and quantitative analysis to examine the

relationships between global integration and performance in multinational professional

engineering companies. Whitla (2003) used a qualitative case study approach to study

globalisation in service industries, while Hewapathirana (2009) also used the case

study method in her study on the internationalisation of small businesses in Sri Lanka.

34

2.5. Various levels of internationalisation studies

Studies on internationalisation have been conducted at a number of different levels,

including at the multiple-industries level, industry level, company level and subsidiary

level. As the scope of each research focus can be large, there is a need for each

research effort to narrow and define its scope so that the research is manageable and

the research results are capable of meaningful comparison and analysis.

2.5.1. Multiple-industries level studies

Some researchers have ventured to compare the relationship between

internationalisation and performance among a few industries. For example, Whitla

(2003) studied globalisation in service industries, covering three different industry

types: the hotel industry, the advertising industry and the construction industry. He

found different degrees of relationship and impact of internationalisation and

performance within each of these industries, and demonstrated the differences in the

influence of internationalisation on performance.

2.5.2. Industry-level studies

Most early studies covered manufacturing companies, as the advent of MNCs was

propelled by the initial desire of companies in this sector to expand overseas to take

advantage of cheaper labour and costs of production in less developed countries as

compared to the country of origin. Thus, many studies are comparative studies at the

industry level (Grant, 1987, Sambharya, 1995, Sullivan, 1994a, Sullivan, 1994b).

Subsequent research broadened into other industries such as services (Contractor et al.,

2003), pharmaceuticals (Ramaswamy, 1995) and the non-financial sector (Ramirez-

Aleson and Espitia-Escuer, 2001). These studies provided a wealth of evidence about

the relationships between multinationality and performance within a selected industry.

35

2.5.3. Company-level studies

A limited number of later studies investigated internationalisation strategy formulation,

dissemination and implementation using a single-company approach. These studies

provided in-depth knowledge of internationalisation at the company level. However,

such studies tended to be narrow and limited in scope for providing cross-company

comparisons or drawing conclusions that would be beneficial to an industry, though

they do give valuable insights into how an individual entity or company addressed and

implemented its internationalisation strategy. For example, Li (2011) conducted a

study on the influence of internationalisation across different divisions of a Hong Kong

based company. He noted that the rationale, appreciation and influence of the

company’s internationalisation strategy were felt differently among the various levels

of the company’s management and personnel.

2.5.4. Subsidiary-level studies

Another approach has been to examine how foreign subsidiaries of major MNCs

perform relative to the intra-company sourcing of services and production from

internal units of production (Kotabe, 1989, Kotabe and Murray, 1990, Kotabe and

Murray, 1996). These studies found positive relationships between internal sourcing

and the performance of the subsidiaries. However, when considering these studies, it is

necessary to note that their focus was on a particular product or component. The

studies did not test the effects of international sourcing as compared to the internal

intra-company sourcing of services and the resultant benefits of such practices.

A subsidiary-level study by Grosse (1996) investigated the relationship between

international intra-company knowledge and technology flows and market share in the

36

banking, hotel, advertising, consulting and software industries. He concluded that

better performance was associated with greater knowledge and technology transfer.

2.6. Imperatives of internationalisation

This section reviews the past research examining the benefits and imperatives that

drive companies to internationalise. The concepts discussed in this section will act as

reference points for the examination of the internationalisation of SGX companies later

in this thesis.

Two well-documented and established theories are reviewed for studying the sample

companies’ main approaches towards internationalisation. These are the Eclectic

Paradigm by Dunning (1977) and the Uppsala Internationalisation Model by Johanson

and Vahlne (1977). These two concepts are discussed below.

2.6.1. Eclectic Paradigm

The Eclectic Paradigm approach to the theory of international production proposes that

a company can tap three methods for growth: horizontal and vertical diversification, or

expansion into international markets (Dunning, 1977). The company can grow by

offering similar products, or it can expand upstream or downstream to carry out related

operations within the same supply chain. The crux of the theory focuses on the ability

of the company to tap into foreign markets for growth (the third method). Dunning

(1980, 2000, 2001) argues that this ability is linked to the company’s competitive

advantage in three areas: ownership advantages, locational advantages and

internalisation advantages.

37

Ownership advantages refer to the extent to which the company’s capabilities are

unique to it and lacking in its competitors. The more capabilities of this kind that the

company has over its rivals, the more ownership advantages it possesses. These

advantages can be in the form of certain brand names, proprietary technology,

entrepreneurial skills and resources. Locational advantages refer to the benefits the

company enjoys due to the economic, political and social conditions of the country in

which the company operates. For example, such advantages can be found in the

quantity and quality of resources in the country, the cost of labour and capital,

government policies and the demand of the local market.

After considering their ownership and locational advantages, the company must decide

whether to remain domestic or expand into foreign markets. The company also has to

decide where to manufacture its products. Lastly, the company will need to decide on

internalisation advantages, which refers to the benefits the company generates by

taking over production, rather than licensing other companies to do it. The

internalisation of its ownership advantages among companies will be more prevalent if

there are market imperfections. Market imperfections such as high transaction costs,

high information costs and public intervention tend to compel companies to internalise

their operations.

According to Dunning, a company that has only ownership advantages in a particular

country will supply that country but will not internalise the production of its products.

A company with both ownership and locational advantages in a country will choose to

have production capabilities in that country and supply that country. If the company

possesses all three advantages in a particular country, the company will tend to invest

directly into that country and internalise all operations.

38

2.6.2. Uppsala Internationalisation Framework

The Uppsala Internationalisation Framework was developed at the University of

Uppsala, Sweden by Johanson and Vahlne (1977). It is based on empirical

observations of Swedish companies. The study focused on the internationalisation

process of the company, and its gradual acquisition, integration and use of knowledge

in foreign markets. A study revealed that the companies started by exporting to the

country through an agent. These companies would then typically transition into

establishing a sales subsidiary in the foreign market, and ultimately, to operating

production capabilities in the foreign country. The study yielded an interesting

observation about setting up sales subsidiaries in foreign countries. These sales

subsidiaries were typically established as the next step employed by the company after

using sales agents to garner sales in the new foreign domains.

The study noted that companies would gather experiential knowledge about a

particular market by first exporting to the country using a sales agent. Thereafter, the

company moved on to forms of knowledge gathering that were more intensive by

establishing sales subsidiaries and production facilities. In this way, companies could

set up operations in countries that were geographically and culturally distant from the

home country.

The study also discovered that the timing of establishing sales agents and subsidiaries

is related to the ‘psychic distance’ between the home and foreign country. Psychic

distance is a term used to describe the sum of factors that restrict the information flow

to and from the market. Examples of such factors are language and cultural barriers,

level of education, acceptable business practices and maturity of industries.

39

After starting manufacturing activities in the foreign market, a company’s increase in

production levels was also incremental in nature and the manufacturing of the least

complicated items began first. More complicated manufacturing was subsequently

added to foreign production. Although this gradual intensification of

internationalisation efforts seemed deliberate, some of the companies that established

sales subsidiaries did not have an end goal of internationalisation. The companies

developed management knowledge along the way from operating these subsidiaries.

The Uppsala internationalisation process model was revisited by Johanson and Vahlne

(2009). They reviewed the changes in business practices and theoretical advances that

have taken place since 1977. Nowadays, the business environment is viewed as a web

of relationships, a network, rather than as a neoclassical market with many independent

suppliers and customers. Outsidership, in relation to the relevant network, more than

psychic distance, is the basic cause of uncertainty. The change mechanisms in the

revised model are essentially the same as those in the original version, although they

added trust building and knowledge creation, the latter to recognise the fact that new

knowledge is developed in relationships (Johanson and Vahlne, 2009).

2.7. Factors of internationalisation

Following the above review on the approaches of internationalisation, this section

describes those studies that provide evidence on the imperatives and benefits of

internationalisation. This section also includes a description of specific aspects of the

Singapore setting that may promote internationalisation. Together with the Eclectic

Paradigm and Uppsala Internationalisation Framework, the factors of

40

internationalisation are relevant to identifying research gaps and the research focus of

the study of Singaporean companies.

2.7.1. Economy of scale

Multinational expansion has been found to assist a company in increasing its output

and thus cutting unit costs (Ghoshal, 1987, Hout et al., 1982). MNCs with large

networks of subsidiary operations around the globe are able to spread the costs of

creating products over a larger base, and utilise lower cost production centres. Such

companies can then implement more avenues for division of labour, with resultant

gains from specialisation. Expanding internationally helps to increase accumulated

output as sales bases are increased. In addition, this permits the company to enjoy

another variant of economies of scale; that is, the benefit of shared experience between

different operating units. Singapore’s domestic market is very small; and its regional

markets, such as Malaysia, Indonesia and Thailand, are also considered small relative

to the global market size. Some companies call venturing into the South Asian region

regionalisation. Hence, to be competitive and to achieve a reasonable level of economy

of scale, it is expected that some Singaporean companies will choose to expand

regionally as well as internationally.

Lower production cost is deemed one of the key drivers of internationalisation (Whitla,

2003). Cost reduction is achieved by pooling production and other operational

activities into a few major plants in two or more countries. Further reductions can be

achieved by reducing the number of products manufactured, focusing production for

each plant or location. In addition, cost reduction can be achieved through flexibility in

production that allows for the shifting of manufacturing from one location to another,

on a short-term basis, to take advantage of lowest costs at any given time.

41

2.7.2. Geographical diversification

When a company diversifies geographically to another operating base overseas, it

gains the advantage of diversification of risk. According to portfolio diversification

theory, a company that owns assets with returns that are uncorrelated will reduce the

risk of failure (Markowitz 1959). To the extent that different countries have varying

economic conditions at any one time, or are less correlated across countries than within

a given country, the multinational company is likely to enjoy more stable revenues and

returns as compared to a wholly domestic company. This is particularly important in

the event of a major environmental or economic disaster, in which case the globalised

company will be better placed to withstand such shocks. Therefore, greater

multinationality is assumed to lead to better management expertise and a reduction in

business risk.

While portfolio diversity benefits are evaluated in terms of risk, any risk-reducing

effects would also have secondary beneficial effects on other aspects of a company’s

financial performance. For example, lower risk could translate into the ability to

negotiate lower borrowing rates from lenders and banks (Madura and Whyte, 1990).

Overall, it is argued that geographical diversity generates a positive effect on company

profitability and growth (Khambata and Reeb, 2000).

2.7.3. Locational advantage

Wider multinationality could improve the performance of an MNC by providing the

company with more opportunities to arbitrage locational advantage across the global

markets. By concentrating each production process or business activity (for example,

marketing, or technological research and development) in the most favourable

environment, the company can extract huge gains from multinational operations

42

(Dunning et al., 1990, Kogut, 1990, Kogut, 1983). A particular location could be

advantageous in terms of lower costs due to the availability of cheap labour and land.

Another location could provide a superior quality of technical and marketing personnel.

A third location could be ideally suited as the source of capital or raw materials and

resources. Combining these locational advantages is a powerful competitive tool for

MNCs.

2.7.4. Learning experience

Every country has different operating environments. Variation in customs, business

practices, government regulations and taxes creates distinct challenges and provides a

set of stimuli that spur learning opportunities. As a result, greater multinationality

forces an MNC to be more flexible and adaptable. It affords more opportunities for an

MNC to acquire valuable knowledge and capabilities that can subsequently be

exploited in other markets (Birkinshaw and Hood, 1998, Dunning, 1998, Hitt et al.,

1997). The acquired knowledge and capabilities can be operational or technical

knowledge, or the adaptability to deal with cross-cultural issues. This adds to the total

learning experience of the company, which, in turn, leads to the successful

management of international operations.

Learning experiences may be the consequence of having to manage and operate in

multiple locations and environments. These experiences bring an advantage that can be

arbitraged to suit a specific situation, and/or used to negotiate for favourable terms

with host governments when a company is setting up a plant overseas. Importantly, it

is expected that locational advantages have to be learnt and institutionalised within a

company. The exploitation of learning opportunities requires a more deliberate effort

on the part of the MNC to share experience across the management team. It has been

43

found that international success is contingent on aspects such as knowledge

dissemination (Cohen and Levinthal, 1990).

2.7.5. Strategic advantage

Multinationality also provides greater strategic advantage to a company. The flexibility

of being able to operate across multiple markets grants strong bargaining power to

MNCs in their dealings with suppliers, customers and governments (Kogut, 1985a,

Kogut, 1985b). MNCs can threaten to change suppliers or move their plants elsewhere.

The mere threat of shifting activities to other countries can cause local authorities to

give concessions or expedite the processing of approvals that might have taken longer

if the company had been one of its weaker competitors or a local company. Thus, by

operating across a larger number of countries, the MNC gains strategic advantages as

compared to nationally based companies.

A more important strategic advantage enjoyed by MNCs relates to the manner in which

they can compete against rival companies. MNCs operating across a larger sphere of

countries have a greatly enhanced ability to compete by using tactics such as cross-

subsidies, tax subsidies and import duties in an attack against competitors in another

host country. Greater multinationality has therefore become an increasingly important

factor for a company to guard against the aggressive tactics of other MNCs by

equalising their respective strategic advantages (Hamel and Prahalad, 1985, Prahalad

and Doz, 1987, Hout et al., 1982).

2.7.6. Options advantage

The MNC that locates in different geographical locations usually has partnerships with

reputable and large domestic companies in the host countries. Their ability to form

44

alliances with different partners is another business advantage. The MNC can react to

changes in locational advantage (for example, changes in prices of labour or in

government regulations) and extraneous factors such as exchange rates or technology

by shifting locations or partners. In response to any of these changes, the MNC could

shift its various activities from one host country to another, or change its alliances with

partners. For example, in reaction to adverse changes in government regulations, the

MNC could request its local partners (who could be linked to the government) to

extract concessions for their joint ventures. The local companies might not enjoy such

concessions. Otherwise, the MNC may transfer its manufacturing plant from the host

country to another country that is ready to offer better terms.

As a result, the MNC’s multinational scope of operations presents a series of valuable

options to vary its operational methods and strategies across many host countries. A

more extensive multinational network therefore equates to a wider pool of options. It is

noted that the value of these options is more important during times of uncertainty and

downturns. That is, the more uncertain the global environment, the more valuable are

the options (Kogut, 1983, Kogut, 1989, Kogut, 1990, Kogut and Kulatilaka, 1994).

2.7.7. Improved product quality

The focus and concentration of production, the shared learning and experience, and the

exploitation of the best knowledge and technology enables an MNC to achieve

improved quality in its products and services. These improvements add to the

competitive strengths of the MNC against rivals who are behind in the product quality

and learning curve. Such first mover advantages solidify the sustainability and

continuity of the premiums chargeable for the MNC’s products (Dunning et al., 1990,

Kogut, 1990).

45

2.7.8. Enhanced customer preference

As MNCs are located in multiple countries, the global availability of their products and,

more importantly, the global serviceability of their products will enhance customer

preference for the products. Such factors reinforce themselves with the customers and

lead to the greater recognition, acceptance and brand building of the products and

services (Kogut, 1990).

2.8. Singapore government assistance programmes

In Singapore, the government plays an active role in the development and growth of

various industries. In the early years of Singapore’s independence in the 1960s, the

private sector was small and not well developed. The Singapore government had to

take the lead to spearhead the industrialisation of the Singapore’s economy, and to

stimulate the growth of certain industrial sectors as well as to prime the expansion of

private industries in these sectors. Thus, the government, through the Ministry of

Finance and various government agencies, initiated and invested in numerous

companies such as the Development Bank of Singapore (later renamed to the present

DBS Bank), Keppel Corporation, Sembawang Corporation, and National Iron and

Steel Mills Ltd (later renamed to the present Natsteel Ltd). Over the subsequent 30 to

40 years, these companies, which are called “Government Linked Companies” (GLCs),

became successful and sizeable companies in Singapore. The government’s

shareholdings in the GLCs have been held under a company owned by the Ministry of

Finance, called Temasek Holdings Ltd. In the recent years, the Singapore government

has gradually divested some of its shareholdings in several GLCs, though many still

maintained close ties to the government. It has been a practice for retired politicians

46

and senior civil servants to be appointed to be chairmen, directors and senior

executives of the GLCs.

A unique feature of Singapore is that the Singapore government has a deliberate and

direct intention to encourage and assist Singaporean companies in venturing overseas.

This task is assigned to a large and well-organised government-funded agency called

International Enterprise Singapore (IES). IES was created from the former Trade

Development Board (TDB) and its primary mission is to assist Singaporean companies

to expand their business overseas. IES has offices in all large markets around the world,

including the US, China, India, Mexico, Brazil, the Middle East, Europe and Australia.

All GLCs have been encouraged to expand overseas aggressively. As a result of this

push, a number of GLCs have expanded to become sizeable international companies.

Several GLCs have successfully ventured overseas. Examples include Keppel

Corporation, Singapore Telecommunications, DBS Bank, Sembawang Corporation,

Capitaland Ltd, Singapore Technologies Group, and others. Singapore government

leaders, including the Prime Minister, Deputy Prime Ministers, Ministers and Deputy

Ministers regularly lead trade investments and promotion missions overseas to

countries in the Association of Southeast Asian Nations (ASEAN) region, China,

Europe, the Middle East, Russia, Latin America and elsewhere. Top executives from

the private sector are invited to join these overseas investments trips. The private trade

associations, business associations and representatives of industry and commerce

regularly conduct business missions overseas for their member companies.

IES is the leading agency responsible for driving Singapore’s external economy. It

aims to promote the overseas growth of Singapore-based enterprises and international

trade. With a global network in over 30 locations and its ‘3C’ framework of assistance

47

(Connections, Competency and Capital), IES offers services to help enterprises export,

develop business capabilities, find overseas partners and enter new markets. At the

same time, IES works to position Singapore as a base for foreign businesses to expand

into the region in partnership with Singapore-based enterprises.1

The ‘3Cs’ framework of IES encompasses Connections, Competency and Capital.

These are described in detail below:

1. Connections: IES’ global presence and extensive network of key business and

government contacts offers companies the necessary connections to venture

overseas. Enterprises can take part in business missions, networking sessions

and trade fairs to find overseas partners.

2. Competency: IES offers a wide range of assistance programmes and resources to

help Singapore-based enterprises build internationalisation competencies in

alliance formation, branding, design, export, intellectual property and manpower.

Companies can also build market knowledge by signing up as ieConnect

members to receive regular updates and access to the latest market and industry

reports and publications. They can also obtain personalised in-depth advice from

consultants at the IES’ Advisory Centre or from experts through the i-advisory

portal.

3. Capital: IES offers a range of financial tools, grants and tax incentives to help

enterprises gain access to capital, develop their financial management

capabilities and defray the developmental costs of expanding overseas.

The mission of IES is to promote the overseas growth and international trade of

Singapore-based enterprises. Its vision is for Singapore to be a thriving business hub 1 IES website reference: www.iesingapore.gov.sg

48

with globally competitive enterprises and leading international traders. IES has a set of

core values that define the shared beliefs and behaviours that guide how its staff

interact and work.

While the government incentives are available for all Singaporean companies, it is

expected that the small and medium enterprises (SMEs) will tend to need and benefit

more from such incentives and initiatives. SGX companies are generally larger, and

have more resources and capabilities to expand overseas, and therefore may have lesser

need for the government incentives.

To extend its reach and assistance to more Singapore-based companies, IES works

closely with Singapore’s Trade Associations and Chamber of Commerce, as well as

private sector partners. By supporting each other’s internationalisation-related

assistance to companies, IES and its partners collaborate to provide greater support to

companies’ overseas expansion efforts.

The association partners of IES include Singapore Business Federation, Association of

Small and Medium Enterprises, Singapore Chinese Chamber of Commerce and

Industry, Singapore Indian Chamber of Commerce and Industry, Singapore

International Chamber of Commerce, Singapore Malay Chamber of Commerce and

Industry and Singapore Manufacturers’ Federation.

The details of the specific incentives provided by IES to assist Singaporean companies

are given in Appendix 2.2.

49

2.9. Research focus

The foregoing review shows the following research gaps in the literature about the

internationalisation of companies:

1. The definition of internationalisation has been mostly one-dimensional with a

focus on comparison of foreign sales to total sales, called the ‘degree of

internationalisation’ or DOI (Annavarjula and Beladona, 2000, Pangarkar,

2008). However, sales-based evaluation appears too narrow, indicating scope to

expand the evaluation of internationalisation to wider and more varied

parameters.

2. No extensive study has been conducted on Singaporean companies, in

particular on SGX listed companies, to explore the relationship between

internationality and business strategy. In addition, the impact of the Singapore

government’s incentives and initiatives to promote the internationalisation of

domestic companies has not been explored.

3. Most authors present sectional studies conducted over a short period of one to

two years. However, additional benefits could be derived from longitudinal

studies of companies’ internationalisation programmes over a longer period of

five to ten years.

4. Many of the past studies have been quantitative in nature, whereas qualitative

approaches (such as case studies) could enable in-depth understanding of the

multi-faceted issues facing companies’ internationalisation strategies.

Research gaps can be found in the understanding of internationalisation strategies and

their impact on Singaporean companies. This study addresses these gaps by

undertaking an in-depth study of a selected number of established companies that have

attained a certain scale and size, and are listed on the SGX. Moreover, the 10-year

50

study period from 1998 to 2007 is sufficiently long to smoothen out possible short-

term influences that may affect and distort short-term performance results. The

selected period is also appropriate, as it is after the major economic shock of the Asian

Financial Crisis (1996–1997) and before the advent of the global financial crisis

initiated in the US in October 2008.

From the above literature review and analysis, the overall research emphasis for this

study is as follows:

1. To undertake a study on the underlying factors which influence the

internationalisation of Singaporean companies. What does internationalisation

mean for a Singaporean company?

2. To attain a better understanding of the impact of internationalisation on the

performance of Singaporean companies over a substantial period of time, in

view of the unique nature of Singapore due to its small domestic market.

3. To evaluate the impact of government initiatives and incentives on Singaporean

companies’ internationalisation efforts.

Arising from the literature review, the key research questions that will be important for

the research on Singaporean companies (using SGX companies as the available

database) are:

1. What are the main imperatives for the internationalisation of Singaporean

companies?

2. How do Singaporean companies formulate their internationalisation strategies?

3. How are Singaporean companies organisationally structured for

internationalisation?

51

4. Do Singapore government incentives and promotions influence the

internationalisation of Singaporean companies?

5. What are the outcomes and results of the internationalisation of Singaporean

companies?

2.10. Conclusion

Chapter 2 presented a review of the literature relating to the concept, levels,

approaches and benefits of internationalisation. Many studies have investigated

whether higher levels of internationalisation lead to better performance. Surprisingly,

the quantitative methods based research has not firmly established that greater

multinationality leads to better performance. As a result, many later studies have used a

qualitative approach to provide collaborative evidence for the quantitative results.

In this study, a long-term qualitative case study approach is used to provide an in-depth

analysis of the selected Singaporean companies’ internationalisation objectives and

achievements. This chapter concludes with a statement of the research questions to be

addressed in the study. The next chapter, Chapter 3, describes the research design and

methodology.

53

CHAPTER 3. RESEARCH DESIGN AND METHODOLOGY

3.1. Introduction

This chapter describes the research design and methodology used in studying how

Singaporean companies initiated, implemented, maintained and reviewed their

internationalisation programmes. SGX companies are used as the database. A multiple

case studies approach across a single industry is adopted. Stake (1994) defines a

qualitative case study as an intensive and holistic analysis of a single instance, entity or

social unit. This chapter is divided into two parts. In the first part (Sections 3.2–3.4),

the chapter explains the choice of a case study approach and details the three stages of

data collection and how the SGX companies were selected for in-depth one-to-one

interviews with their senior executives. The second part of the chapter (Sections 3.5–

3.9) describes relevant models used in prior research and the development of the

internationalisation model used in the current study. The chosen internationalisation

research framework is then linked to the development of the interview questions and

key research questions. The use of Nvivo software for analysing data from publicly

available documents and the interviewees, and the use of Cruciform charts for co-axial

analysis for examining the relationships between internationalisation and actual

revenue and profit growth, are also explained.

The literature review indicated that past research has employed both quantitative and

qualitative analyses to study the effect of internationalisation on the performance of

MNCs. This study explores the topic by conducting in-depth case studies of a number

of SGX companies. Case studies provide an opportunity to examine in detail the

relationships between internationalisation and performance of a particular company.

Such analysis includes investigating the company’s background, motivations,

54

objectives and plans in its internationalisation programmes and processes. The data

collected give an in-depth insight into the rationale, key drivers, processes and

outcomes of the internationalisation of Singaporean companies.

3.2. The choice of a qualitative multiple case studies methodology

3.2.1. Choice of qualitative approach

From the onset, it was necessary to decide whether a quantitative or qualitative

approach would be best suited to understanding the internationalisation of Singaporean

companies. The literature review in Chapter 2 showed that past quantitative studies

have drawn mixed conclusions about whether internationalisation has resulted in

improved performance for MNCs. In view of these results, a qualitative approach was

chosen because it was deemed more likely to reveal valuable evidence about the

internationalisation of Singaporean companies.

Another consideration was the availability of published data on the measures and

levels of the internationalisation of Singaporean companies. An examination of the

annual reports and disclosures of SGX-listed companies showed that the companies did

not provide detailed information relating to their internationalisation strategies and

levels of internationalisation (such as percentages of sales overseas, percentages of

profits derived from foreign-based plants, and how their resources were deployed

internationally). This could be due to commercial confidentiality and protection against

competitors seeking such relevant competitive information. Thus, a quantitative study

based on publicly available information would have been difficult to conduct for

Singaporean companies. There would likely have been difficulty in gathering the

amount and quality of data needed to conduct statistical testing and complete a

meaningful and substantial quantitative research project. Although a comprehensive

55

survey could possibly elicit a valuable set of data, there was concern that the senior

executives would not be ready to provide detailed disclosures about their companies in

a survey. Time availability and willingness to participate are issues that can potentially

limit the effectiveness of a survey and, given the necessity of obtaining responses from

senior executives, this could have led to problems of non-response bias (Whitla, 2003,

Yu and Cooper, 1983).

By comparison, the qualitative approach allows for greater scrutiny of the issues to be

researched (Gummesson, 1991). However, it is noted that without the support of

quantitative validations, the reliability, objectivity and generalisation of the

conclusions could be at risk (Marshall and Rossman, 1989). On balance, a qualitative

approach was chosen for this study, consistent with Zelditch (1966), who maintained

that a two-step criterion for judgement was a rigorous approach for qualitative research.

For this study, the two criteria are that the methods should be efficient for permitting

data to be collected (in terms of the costs, time, access and responsiveness of the

interviewees) and that they should achieve informational adequacy. This means that

the chosen method should lead to an adequate understanding of the topic being

researched. It is generally recognised (Ghoshal, 1987, Vernon, 1981, Grant et al., 1988)

that qualitative methods are likely to be more appropriate for process studies; that is,

studies that examine the outcomes or results following the implementation of certain

measures or strategies. This investigation of the internationalisation of Singaporean

companies falls within the definition of a process study.

The qualitative method is therefore selected as appropriate for the purpose of this study.

One of the advantages of qualitative approach is that it becomes possible to concentrate

on a smaller sample base, compared to a quantitative statistical method (which requires

56

a large database), and to analyse each company in-depth to distil more valuable

insights.

3.2.2. Rationale for a multiple case study approach

Having decided on a qualitative approach, it was then necessary to select the

appropriate method. It was assessed that the most effective approach would be the

multiple case study method. The case study method has the capability to use multiple

data collection means and sources to examine a selected number of cases in a thorough

and in-depth manner (Patton 2002). The use of the case study methodology has been

well documented by Yin (1994). He strongly emphasised the validity and reliability of

the information collected, and the use of ‘replication logic’ for multiple case analysis.

Yin’s methods and procedures are adopted in this research, especially as concerns the

selection of the sample companies, the candidates to be approached and the conduct of

interviews.

A qualitative case study methodology was selected due to its suitability for attaining

the goals of this research. A case study method facilitates a high level of appreciation

of the complex business entity, and allows for the multiple layers of issues to be

considered in a holistic manner (Yin, 2003). Yin commented that a case study has the

capability to inform and illustrate the implications and effects for practice, theory and

policy formulations, which add to the field of knowledge of the research topic. Yin

also considered that case studies are able to generate new beginnings in theory

formulations, or new branches of existing theories. The case study method can also

reveal hidden issues from insiders’ perspectives, which is normally not achievable by

using quantitative means. Earlier studies have been criticised as being unable to reveal

57

human behaviours and cultural perspectives in those internationalisation issues hidden

in the multiple levels of relationships in MNCs (Pike, 1966).

Yin (1994) commented that a case study has the capacity to accommodate a variety of

research techniques to examine contemporary phenomena within real-life contexts, and

to conduct research within defined boundaries related to the selected phenomena.

Patton (2002) described a case study as a useful qualitative method that permits an

inquiry into a chosen subject in great depth, with careful attention to detail, context and

nuance. He considered that the case study method is particularly helpful in aiding

exploration and the discovery of a general pattern of behaviour, which can lead to the

formulation of research theories. This enables rich information to be obtained for the

selected cases through collecting, organising and analysing data in a comprehensive,

systemic and detailed manner. Creswell (2008) added that a case study is an

examination of a bounded system over time, which enables detailed collection of

information from multiple sources in an information rich context. These sources can

include observations, documents, audio-visual materials and public reports.

The defined boundaries concept is appropriate for this study on SGX companies within

the period of 1998 to 2007. The boundaries in this study are defined by: the companies

selected, the theme of internationalisation, the conduct of the study in a single industry

and the research period from 1998 to 2007. These boundaries set the research into a

meaningful and manageable context, with ample avenues for the realisation of deep

and meaningful results.

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3.2.3. Level of studies – company-level and industry-level

Two major issues need to be addressed when using the case study method. The first

issue is the number of levels of the case study, and the second is how many cases to

examine. In relation to the levels of the case study, this research was conducted at two

levels: at the company level and at the industry level. This is similar to the approach of

Pettigrew (1988) in the Warwick study of competitiveness and the strategic change of

companies. Each SGX company is studied initially based on publicly available

information to obtain an understanding of the background, history and

internationalisation strategies of the company during the period 1998 to 2007. As

explained previously, this company-level case study enabled a comprehensive and

holistic understanding of each company.

Subsequently, the analysis and cross-company comparison was conducted at the

second level: within a single industry. The alternative of using multiple industry

comparisons was considered. A multiple industry study might have generated more

extensive results and conclusions, but this was deemed inappropriate for this study

because it would have also widened the research work and scope considerably. The

rationale for choosing a single industry is therefore to confine the boundaries of the

study to a manageable and meaningful level. Thus, a two-level approach (that is, at the

company level and single industry level) was chosen. This was deemed as the most

effective method to gather ample information-rich data for analysis and the drawing of

conclusions.

3.2.4. Research period 1998 to 2007

For this study, a 10-year period was selected because internationalisation is normally a

medium to long-term business strategy. Once a company has adopted a particular

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internationalisation approach, it usually stays with the strategy and there is a lag of

some years before results emerge. Over time, the company may modify its

internationalisation approach to suit changing internal and external circumstances. In

some cases, the entire internationalisation programme may be aborted due to failure to

secure the desired results, change of shareholders or drastic shifts due to industry or

environmental factors.

The selected research period could also offer some insights into the impact of the crisis

on their internationalisation strategy, as the interviewees could be asked to describe

any internal and external factors (e.g. Asian financial crisis) that affected their

companies’ internationalisation plans during the period from 1998 to 2007.

For the above reasons, a long 10-year review period from 1998 to 2007 was chosen.

This period was deemed appropriate as it is just after the Asian financial crisis in

1996–1997, and before the start of the global financial turmoil originating with the US

financial crisis in 2008. In addition, the selected period is relatively recent, thereby

enabling the effective recall by the executives being interviewed, and increasing the

ease with which collaborative research materials could be obtained. As

internationalisation objectives and strategies can change over time, the selected 10-year

period sets the research boundary to a confined timeframe for this study, as advised by

Patton (2002) and Yin (1994). It has also been noted that internationalisation tends to

be a process, rather than a fixed point phenomenon (Pangarkar, 2008). This is another

reason for collecting data over a number of years, rather than at one fixed time. Many

studies consider several years when comparing multinationality and performance; for

example, Grant et al. (1988) studied UK manufacturing companies from 1972 to 1984,

and Geringer et al. (1989) studied US and European MNCs from 1977 to 1981.

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3.2.5. Saturation on number of cases

On the question of the number of cases to be examined, Glaser and Strauss (1967)

suggested that the number should be sufficient to achieve saturation of information.

Saturation is the point at which adding more cases only generates a marginal increment

in learning, because most of the information has already been recorded from past cases.

In other words, the size of the sample is sufficient when the point of redundancy of

data and information is reached (Lincoln and Guba, 1985). Patton (2002) further noted

that sample selection in qualitative analysis is dependent on the purpose of the study,

what is relevant, what has credibility and what is possible given the available time and

resources. The validity of insights obtainable from a study depends more on the

information richness of the cases selected and the observations and analyses derived,

rather than on the sample size. Kruger (2002) suggested that the researcher begins with

a small number of samples, before expanding gradually until information saturation or

redundancy is reached.

Hewapathirana (2009) found that saturation was achieved at 10 cases in her study on

the internationalisation of small companies in Sri Lanka. Whitla (2003) decided on 25

interviews with senior executives covering three industries, or about seven to eight

cases per industry. Fitzpatrick (2009) attained a saturation level with nine cases in his

research on the human side of value adding in Australia venture capital investments.

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3.3. Developing a three-stage research approach

Having decided on a qualitative multiple case study approach in a single industry for

SGX companies, the next step was to determine the research design. This study covers

the following three phases:

1. A pilot study of SGX companies as an initial test sample to explore certain basic

parameters for the main research, and in particular to test the relevance of the

topic to SGX companies, determine meaningful research questions, find the

appropriate saturation level of cases, and identify the issues relating to

internationalisation that are of keen interests to Singaporean executives.

2. Review data from all SGX companies to decide on the industry for the study

and which companies to approach to participate in the one-to-one in-depth

interviews. The review involves examining internationalisation factors based on

publicly available databases of SGX companies, company annual reports,

announcements, financial results and analyst reports. This phase enabled the

selection of a smaller pool of companies to be approached to participate in the

interviews.

3. Conduct interviews with selected SGX companies to gather information about

the factors affecting their decisions to internationalisation, the

internationalisation strategies they adopted and the outcomes of

internationalisation for these companies.

3.3.1. Phase 1: Pilot study of SGX companies

A pilot study was conducted through interviews with 12 senior executives from SGX-

listed companies. This pilot study enabled a better understanding of the main issues

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and factors concerning the internationalisation of SGX companies. The main

implications of the pilot study results for the current study are as follows:

1. The internationalisation strategy is indeed a major factor in business

development for SGX companies. It is a key concern not only for expansion

outside Singapore’s geographical limitations, but also a critical business

strategy for survival. Internationalisation has an influence on SGX companies,

and SGX companies have to expand internationally for sustainable growth.

2. SGX companies adopt different approaches towards internationalisation, and

each company has its rationale and strategic reasons for the approaches adopted.

3. Singaporean executives and companies are pre-occupied with and focused on

internationalisation. Companies that have grown to the size and scale to be able

to achieve listing on the SGX have to present their international strategy to the

investing public. Without outlining and clearly spelling out their strategies,

public investors and stock analysts will not be able to evaluate the potential and

sustainability of these SGX companies.

4. SGX companies appeared to associate higher levels of multinationality with

better performance. Companies adopted medium- to long-term views of their

internationalisation programmes. Therefore, the selected research period of 10

years (1998 to 2007) is appropriate and meaningful.

5. Among the various industry sectors, it seemed that the manufacturing industry

is one of the sectors most concerned about global expansion and

internationalisation issues. The senior executives in the manufacturing sector

were exposed internationally and had wide global experience.

6. From the 12 interviews conducted, it appeared that saturation of results was

achieved at about the tenth case. Therefore, for the main study, at least 10 to 12

interviews should be conducted.

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The responses from the interviewees in the pilot study were helpful in the formulation

of the key research questions and the drafting of a list of relevant questions to pose in

the interviews in the main research. The report of the abovementioned Phase 1: Pilot

Study is attached as Appendix 3.1. The tentative observations recorded in Phase 1 will

be further substantiated or refuted in the main research stage at Phase 3.

3.3.2. Phase 2: Selection of sector and companies for case study

The second phase of the research was to collect data about the factors affecting

internationalisation, the measures for the level of internationalisation and the measures

of performance outcomes for SGX companies using publicly available databases and

reports. Available sources included the Singapore National Library and the annual

reports and announcements of the listed companies. From the various databases and

information sources, details about the companies’ financial data such as market

capitalisations, annual total revenues, net profits, business strategies and performance

over the 10 years from 1998 to 2007 were collected.

Selection of a single industry for research

The SGX has over 800 listed companies (including companies listed on the Mainboard,

the Catalyst secondary board and Trust companies). It was impractical to approach all

800 companies to participate in the case study research. Therefore, a decision had to be

made on whether to conduct a multiple industry or single industry study. The SGX is

divided into several industry sectors such as manufacturing, banking, transport,

construction, services and others. As discussed earlier, a single industry approach is

better suited for case study, as it allows for the comparison of outcomes arising from

the internationalisation strategies of the SGX companies within a sector. The

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elimination of multiple industries avoids the difficulty of attempting to derive

meaningful comparisons between companies (Dickson and Albaum, 1977, Ketchen et

al., 1997).

According to Yin (2003), one of the major and critical factors in case study

methodology is the case selection. Yin proposed the adoption of numerous criteria and

procedures for the meaningful selection and screening of the final cases. Based on

Yin’s method, it is first necessary to set down the main criteria for the selection of

potential cases from the total population of about 800 companies listed on the SGX.

These criteria should involve an over-arching factor, which Yin termed the ‘unit of

analysis’ (or ‘what is the case?’). In this research, the unit of analysis is

‘internationalisation’. Therefore, the companies were shortlisted based on the

following main criteria:

1. Does the company have an over-arching, clear and deliberate

internationalisation strategy?

2. Was the company listed on the SGX prior to 1998 and still active in 2007?

(This study evaluates the internationalisation of SGX companies between 1998

and 2007).

3. What is the spread of industries? (It is intended that the final selection of

companies be from the same or related industries to provide a more

homogeneous group for analysis and comparison).

4. Is at least one (preferably more) of the selected companies a GLC? The

inclusion of GLCs is preferred as this study also considers the impact of the

Singapore government’s promotion of internationalisation.

5. What is the likelihood of obtaining the consent of management to be

interviewed and to provide assistance on the collection of company information?

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6. Has ‘replication logic’ been used to select the final cases?

Regarding this final criterion, according to Yin (2003), ‘replication logic’ requires that

the selected case demonstrate the occurrence of exemplary outcomes. This has been

cited as a critical criterion in the selection of case study participants (Ginsburg, 1989).

In this study, replication logic required that the company exhibit a strong drive on

internationalisation as a central element of the company’s business strategy. Therefore,

companies included should place a strong emphasis on internationalisation and be

targeting internationalisation outcomes that are measureable against performance

results. The outcomes are measures based on performance following from

internationalisation. Performance can vary between companies, and high performance

was not a prerequisite for participation; it was the company’s commitment to

internationalisation that was critical.

When screening and selection is properly performed, a sample of over 50 cases will

provide an excellent pool for a final shortlist of companies to approach to seek consent

for conducting the case study with their companies.

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Selecting the manufacturing sector

Since the research period is from 1998 to 2007, companies that were listed after 1998

were removed from the selection pool (because they did not provide complete

information for 10 years). As a result, the total number of companies available for

study was reduced from 800 to 168. Based on industry norms adopted by SGX, matrix

analysis was done to divide the companies by size, with large companies classified as

having a market capitalisation of above S$500 million, medium companies as between

S$100 and S$500 million and small companies as below S$100 million.

Table 3.1 : Table of Number of SGX Companies Listed Prior to 1998 by Industry

Sectors

Market Cap

Sector

Large

>S$500m

Medium

S$100m

to S$500m

Small

< S$100m

Sub-Total

Manufacturing 12 17 26 55

Commerce 5 12 15 32

Finance 6 8 1 15

Properties 9 5 1 15

Multi-industries 9 3 2 14

Hotels 3 4 2 9

Services 2 4 3 9

Construction 1 6 1 8

Others 5 5 1 11

Sub-total 52 64 52 168

Table 3.1 shows that the five largest industries were Manufacturing, Commerce,

Finance, Properties and Multi-industries with 55, 32, 15, 15 and 14 companies,

respectively.

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The following criteria were used to select a single industry from among these top five

industry segments:

1. Size (in terms of numbers). Table 3.1 shows that the third to fifth largest sectors

(Finance, Properties and Multi-industries) only have 14 to 15 cases. These

sectors may be unable to provide enough companies with executives willing to

participate. Therefore, only the Manufacturing and Commerce sectors are large

enough to provide the required respondents.

2. Size (in terms of companies’ market values). All the five shortlisted sectors

have ample spread of companies based on their market capitalisation (that is,

between 52 and 64 cases each), thus enabling a meaningful comparison

between companies. The Manufacturing and Commerce sectors have the ample

spread between small, medium and large companies.

3. Relevance to internationalisation. The Manufacturing sector is more relevant to

the subject of internationalisation as compared to the Commerce sector. The

Commerce sector comprises a varied mix of trading houses, distribution

companies and retailers. The Manufacturing sector comprises companies in the

food, oil and gas, electronics, motor, logistics and information technology (IT)

industries. These companies are likely to be involved in internationalisation

activities.

4. Likelihood of participation. As internationalisation is a very relevant business

strategy of the Manufacturing sector, this sector is chosen as the most relevant

for this study.

From the above analysis, the Manufacturing sector was selected as most suitable and as

having the greatest relevance to the topic of internationalisation. Manufacturing is also

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the largest sector and is thus likely to provide the best chance of obtaining a sufficient

number of executives consenting to participate in the research. The Phase 1 pilot study

validated that the manufacturing sector has the most engagement in global expansion

issues. Consequently, the senior executives in the manufacturing sector can be

expected to be more interested in participating in interviews when invited.

Personal letters were addressed to the Chairmen, Chief Executive Officers (CEOs) or

Managing Directors (MDs) of all the 55 companies shortlisted from the Manufacturing

sector of the SGX. To reach out directly to these senior executives, in the event that

their mailboxes were screened and blocked by secretaries and junior executives,

follow-up emails were sent about three weeks later directly to the executives’ email

addresses.

Inviting participation from only the most senior executives within each company was a

deliberate strategy to ensure a consistent and appropriately high level of contact as was

necessary for the study. As internationalisation is normally a top-level strategic policy,

it was expected that the most senior level executives would be the key persons

involved in formulating and driving the internationalisation efforts on an ongoing basis.

It is important for entity-level and industry-level comparisons that the comments and

data collected must be from individuals of a comparable level of seniority. Executives

of similar top-level positions will have the ‘helicopter’ view of internationalisation. A

sample of the Letter of Invitation to executives to participate in this research is given in

Appendix 3.2.

In the first month, about eight positive responses were received. Early rejections to

participate in the interviews were received from half of those approached. With direct

69

appeals to some outstanding cases, and some recommendations from mutual

acquaintances and referrals, 14 senior executives eventually agreed to participate in the

research. Some positive responses were received from executives that participated in

the Phase 1 pilot study stage. Two of the acceptances were from executives of GLCs.

Of the 14 executives interviewed, 10 were in the same executive positions during the

entire or most part of the 10-year period from 1998 to 2007. The remaining four

executives were senior executives in their companies and later rose to the chief or

senior executive positions. The interviews were conducted between September 2010

and December 2010. Four executives participated in both the pilot study and the main

survey. Their participation in both phases has not biased the data or findings of the

main study because the research subject is the same and questions are complementary.

A list of the names of the executives who participated in the interviews and their

companies (encoded to preserve confidentiality) is given in Appendix 3.3.

The pilot interviews were designed to test the validity of the research and the scope of

coverage. They assisted to develop the key research questions. Following from the

pilot study, the main interviews focussed on the key research questions to collect data

that could be used to derive themes and sub-themes of internationalisation employed

by the sample companies.

3.3.3. Phase 3: Multiple case study of selected SGX companies

The previous phase 1 conducted pilot interviews that were designed to test the validity

of the research and the scope of the coverage. It also assisted primarily to develop the

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key research questions. The phase 3 main interviews therefore delved into the key

research questions so as to collect data that could be used to derive themes and sub-

themes of internationalisation employed by the sample companies. This third phase and

main component of this study were the interviews with senior executives of selected

SGX companies and the analysis of the data collected in the interviews.

Multiple case study approach and research protocol

This section discusses the research approaches and protocol for conducting case studies.

Case study research is an essential form of social science inquiry, in which the aim is

to define the research topic broadly rather than narrowly, based on isolated variables.

The case study approach is thus suitable for this broadly defined study on the influence

of internationalisation on the performance of companies. In the process of

internationalisation, several intrinsic or external factors may affect a company’s

performance besides the internationalisation strategy itself.

Regarding the approach adopted, after the screening and selection stage of 55

Manufacturing and Manufacturing-related companies listed on the SGX, the case study

was narrowed to the 14 SGX companies that consented to participate in this research.

Essentially, two methods of data collection were employed:

1. One-to-one in-depth interviews with key executives

An open-ended interview style was adopted. This process is advocated by

Simon and McCall (1985), who suggested that the researcher should be explicit,

and to frame questions that are specific and answerable, objective and relevant

to the interviewee’s interests. The interviewee should be encouraged to express

himself freely. For the interview technique, a blend of the informal

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conversational approach and general interview following a guide was adopted,

as suggested by Yin (1994) and Patton (2002). Where appropriate, spontaneous

and probing follow-up questions were asked, and the interviewees were given

opportunities to reflect and repeat their thoughts and views. The data collection

through case study interviews continued until saturation of data was achieved.

In this research, the multiple case study approach facilitated the attaining of the

desired saturation level. It was noted that from about the tenth to the fourteenth

interview, the saturation of results was evident, and no or limited new data were

being obtained in the latter interviews.

Following receipt of acceptances, interviews were arranged with each of the

executives. For the purpose of privacy and convenience, most interviews were

held in the executive suites of the interviewees’ offices. In some cases, the

interviews were conducted in external locations (for example, hotels) for

mutual convenience. The interviewees were given Consent Forms, which they

signed prior to their interviews (see Appendix 3.4 for a sample of the Consent

Form).

Prior to the interviews, an Interview Guide was prepared. The purpose of the

Interview Guide was to alert the interviewees to the main questions of the

interview.

It was explained to the interviewees that the Interview Guide only served as a

guide. In the covering explanatory letter sent to them prior to each interview,

the executives were informed that they should not be constrained by the

questions in the guide. Rather the guide was only for the purpose of assisting

the flow of their responses. The executives could go outside or beyond the

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questions mentioned in the guide. A copy of the Interview Guide is given in

Appendix 3.5.

Before each interview, the annual reports of the company for 1998 to 2007

were collected and read, to provide the necessary background knowledge

regarding the business and activities of the company during the 10-year period.

This was basic preparation work for the interviews, which were conducted

personally by the researcher (interviewer), so that more relevant and pertinent

questions could be posed to the executive being interviewed.

At the start of the interview, the executive was given an informal briefing on

the purpose of the research and the style of the interviews (informal and

relaxed). At the start, to warm up to the topic, the executives were invited to

give a general discourse of their companies’ background and businesses. It was

noted that all the interviewees were well prepared on the subject and could give

very clear and comprehensive responses to the questions. Some had their

assistants or junior executives at the interviews, while others did the interviews

alone. A few executives prepared and provided written materials to supplement

the points they made during the discussions.

The one-to-one interviews lasted about 60 to 90 minutes each. Permissions

were obtained to tape record the interviews. Notes were also taken to assist the

interviewer to keep track of salient points and main themes during the interview.

At the end of interviews, the executives were thanked and informed that the

researcher might revert to them subsequently for certain clarifications or

elaborations on what they had said. All the interviewees consented readily.

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Transcripts of the recorded interviews were prepared, and any identifying

information was removed from these transcripts.

The transcripts of the interviews total nearly 200 pages. A summary table of the

interview responses is given in Appendix 3.6. The names of the interviewees

and companies have been removed to preserve confidentiality.

2. Document collection, collation and review

A wide array of publicly available documents, reports and publications were

collected for the 14 selected companies. The annual reports for 1998 to 2007

for the 14 companies served as the fundamental resource base for data on the

companies. Hard copies of the 140 annual reports were collected. These

companies also issued quarterly financial reports and made public

announcements, which were available on their websites. These websites and the

documents provided were also reviewed. The review process commenced

before the interviews and continued into the analysis stage of the thesis.

Information on the companies’ businesses, operational plans for the year, and financial

performance could be readily extracted from the annual reports. Of particular relevance

were the Chairman’s statements and CEO’s Operations review given in each annual

report. These sections were closely studied. They provided some reference to the

internationalisation efforts and plans of the companies, such as when they entered into

joint ventures or new foreign investments and the rationale for doing so.

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However, actual data on the level of internationalisation (such as percentage of sales

from domestic and overseas markets, percentage of investments made overseas, and

level of manpower and resources deployed overseas) were not published. Listed

companies do generally not publish these data on internationalisation, as they are not a

disclosure requirement for SGX-listed companies. The non-disclosure could also be for

business confidentiality reasons, as most listed companies seek to avoid providing

more company information than is necessary to satisfy the listing disclosure

requirements or good corporate governance. Hence, the data collected from direct

interviews is a critical primary source of information on the internationalisation

activities and strategies of the companies for this research. Documents and reports

serve as sources to validate and reinforce the interview data collected.

The collated data on the businesses and internationalisation strategies of the SGX

companies are presented in Chapter 4. These data were used to undertake the analysis

and comparative study of the internationalisation of the companies using the research

techniques described in the latter part of this chapter.

These documented sources were triangulated with the interview results to ensure

consistency of the results and to reinforce the findings, as described in Section 3.3.4

below. The multiple sources of information serve to validate one another. This

triangulation technique is used to improve the likelihood of accurate and reliable data.

The validity of the empirical data was checked through cross-reference to the

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descriptive statistics and the various data sources. Comments made by the executives

interviewed were checked against documented records (for example, from the

company’s annual reports and public announcements and disclosures), as the memory

can be subject to challenges and misinterpretations of past events. Ten years is a long

time, and recollections can become vague. Therefore, where necessary and possible,

the validity of the interview data was checked against documented records and

published data. Crosschecks were also made with other parties, such as in the case of

the interview with the senior executive from IES, which was conducted to understand

better the government incentives provided, and how these incentives served to

motivate Singaporean companies to internationalise.

3.3.4. Interactive data analysis

The data collected from the company reports, announcements, publications and the

interviews were analysed using the approach propounded by Miles and Huberman

(1994). The method was described as tracing the relationships among social actions

and practices based on the regularities and sequences that link them. In this approach,

the first step is data collection. Next is the data analysis stage, which consists of three

elements of data reduction: data display, and drawing and verifying findings. These

three elements interact iteratively throughout the data analysis process. The graphical

representation of these four elements is illustrated in Figure 3.1.

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Figure 3.1 : Interactive Data Analysis (Miles and Huberman 1994)

The above diagram shows that data reduction occurred continually throughout the data

analysis process. In the early stage, editing, organising, segmenting and summarising

the data was undertaken. In the middle stage, coding and identifying the themes and

sub-themes, clusters or patterns was completed. In this stage, analytical techniques

based on Nvivo software were used. The final stage included conceptualising and

explaining (Miles and Huberman, 1994, Punch, 2001). The entire process was iterative,

as preliminary conclusions drawn could loop back to suggest the need for further data

collection. With additional new data, the analysis procedure involving data display,

data reduction and verifying and drawing conclusions were repeated.

In the data analysis process described above, the data was checked through

‘triangulation’; that is, the use of data from different sources. For instance, when an

executive described the internationalisation strategy undertaken by his company, the

Data collection Data display

Data reduction

Conclusions: drawing/verifying

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public data was checked for information about actual acquisitions, mergers or

divestments of foreign investments and subsidiaries in the company’s annual reports

and announcements during the stated period. Similarly, the internationalisation strategy

described by the executives was checked against the Chairman’s statements in the

annual reports, wherein the Chairman would describe the company’s strategies and

plans. The same approach was undertaken for performance and results of

internationalisation. The financial results reported in the financial statements were

checked against the qualitative descriptions made by executives during the interviews.

The checking and validation was conducted by examining the companies’ financial

performance as given in the annual reports, as compared to the statements made by the

executives during the interviews with respect to the success of their companies’

internationalisation drives. When these executives described that they had achieved

positive results, such statements were verified against the published financial data on

turnover and profit growth. The researcher noted that there were no instances of

inconsistencies in the data between the documents and interviews.

To provide additional background and contextual information, an interview was

conducted with a senior executive of IES. He gave a clear insight into the role of IES,

how IES assisted Singaporean companies (mainly SMEs) to expand internationally,

and the reasons that some large companies did not find IES promotional activities and

incentives useful. The purpose of this interview was to assist with one key research

question: whether Singaporean companies found the government incentives to

internationalise useful, and what actions IES had taken to promote the

internationalisation of Singaporean companies.

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The above data and information formed the base information for the writing of a case

study for each company. Multiple case comparison techniques (Yin, 2003) were

applied to perform cross comparisons between the investigated companies. Such cross-

case comparisons were used to generate interesting contrasts on the different

internationalisation strategies of the companies and the performance outcomes.

Summary details of the businesses and internationalisation strategies adopted by these

14 companies are given in Sections 4.2.1 to 4.2.14 of Chapter 4. Additional details on

the yearly major developments and financial data (collated from public sources) for

these companies from 1998 to 2007 are given in Appendices 4.1 to 4.14. However, to

provide confidentiality, the names of the companies, their brands and names of related

companies and joint ventures were removed from the descriptions.

3.4. Ethical considerations

A key ethical consideration is that publicly listed companies are sensitive about their

companies’ plans and financial data. Therefore, proper consent was obtained for the

interviews from the selected companies. UWA Ethics Committee’s approval was

obtained before the commencement of the research. Interviewees were assured of

anonymity to encourage detailed responses to interview questions.

The problem of confidential company data was mitigated for data from public reports

as the data were mainly gathered from the public domain. In addition, only summaries

of the collated results will be published, to protect the anonymity of the study

participants.

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3.5. Models of internationalisation

Numerous models have been employed to research the relationships between the levels

of internationalisation and the performance of MNCs, as discussed in Chapter 2. Many

past research models are based on statistical methods using quantitative approaches,

while other studies have employed qualitative methods such as behavioural

relationships and case studies. Internationalisation is a mature research field garnering

extensive activity over five decades. This section describes two models used in past

research to demonstrate the typical models that have been used. These two models

represent possible suitable research frameworks that could be used as the basis for this

study.

3.5.1. Models in prior literature

Osegowisch model

Early studies on internationalisation mostly use quantitative methods based on

statistical techniques to show positive (or otherwise) relationships. Subsequent studies

have tended to use a mix of quantitative and qualitative methods to reinforce research

results. An example of a mixed quantitative and qualitative research approach is that

used by Osegowitsch (2003), who investigated the relationship between

internationalisation and performance in multinational professional engineering

companies. Using a combination of qualitative and quantitative techniques,

Osegowitsch found positive support on the relationship between performance and

internationalisation. For the qualitative research, he used interviews and samples to

gather data. He explained that the main purpose of the qualitative research was to

enhance the research design of the subsequent quantitative study. The results gleaned

from the qualitative interviews and information sources served to define the relevant

survey population and construct the research hypotheses for the quantitative study.

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In his qualitative approach, Osegowitsch employed a generic research model as shown

in Figure 3.2. Subsequently, he devised a structural equation model and employed

hypothesis-testing techniques based on regression analysis.

Figure 3.2 : Osegowitsch’s (2003) Model of Internationalisation and Performance

Quantitative methods employing latent constructs represented by multiple observed

indicators are commonly used in business research. For estimating relationships among

constructs and evaluating the validity of the outcomes, structural equation modelling

(SEM) is often employed to provide researchers with quantifiable results. Osegowitsch

(2003) employed this approach. He tested the co-relationships between 14 variables:

design ratio, private client ratio, value added ratio, size, international experience,

exports, organic growth ratio, multinational entropy, transfer operational staff, transfer

project components, transfer project solutions, net revenue growth, ROA and return on

net revenue. These control variables were tested against two focal variables:

profitability and growth. Osegowitsch (2003) found positive co-relationships between

multinationality and global integration against profitability and growth. He also found

Multinationality

Global integration

Organic growth ratio

Profitability/Growth

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that the profitability effects of internationalisation were enhanced when that strategy

was strongly motivated by the desire of the MNC to take advantage of internal

specialised skills; and that performance was not affected by the origin (HQ as

compared to subsidiaries) of the operational resource that constituted the

internationalisation effort.

Osegowitsch’s study is an example of research that employed a combination of

quantitative and qualitative methods to reinforce and derive deeper understanding of

the impact of internationalisation. The statistical quantitative analysis techniques

required the collection of a sizeable amount of data from a large-scale survey. The

qualitative part using interviews is similar to the case study method chosen for the

current study.

Yip’s framework model

Another research framework that has been used for qualitative research on

globalisation is Yip’s framework (Yip, 1989, Yip, 1992, Yip, 2003), as shown in

Figure 3.3. The model propounded by Yip is one of the reference frameworks for

research to understand and analyse the internationalisation strategy (Stonehouse et al.,

2000). He put forward a multi-dimensional framework that sought to explain the

underlying factors for the internationalisation of MNCs within an industry, and the

MNCs’ strategic business responses to these factors. In his framework, Yip suggested

that the internationalisation process was pushed by a number of underlying conditions

in an industry, leading to adopting international strategies (Yip, 1992). Yip referred to

these forces as global drivers, which differed in intensity by industry. Yip used

dimensions of ‘global drivers’ and ‘global levers’ to examine their relevance and

completeness in explaining the use of global strategies in MNCs.

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Figure 3.3 : Yip’s Globalisation Drivers Model

Yip’s model consists of five components, including two internal components: the

position and resources of the parent company, and the organisation’s ability to

implement a global strategy. Yip considers these two internal factors as having a

moderating effect on the ability of a company to implement internationalisation

programmes. These two components have influence on the global strategy levers.

Yip also identifies two factor components: the industry globalisation drivers and global

strategy levers. Yip’s model suggests that some industries have high potential for use

of internationalisation strategies based on the strength of their global drivers such as

market, cost, government and competitiveness. The industry drivers, together with the

two internal factors, in turn affect the global strategy drivers. The fourth component of

Position and resources of parent company Global strategy levers

Global market

participation Global

products Global location

of activities Global

marketing Global

competitive markets

Benefits/ costs of global strategy

Industry globalisation drivers Market Cost Government Competitive

Organisation’s ability to implement a global strategy

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global strategy levers refer to factors such as global market participation, products,

location of activities, marketing and corporate moves.

A fifth outcome component is benefits/costs of global strategy. This factor suggests

that companies would adopt global strategies for performance-related benefits. The

benefits could relate to economy of scale, lower production cost, focused production,

flexibility, enhanced bargaining power, product quality improvements, customer

preference and competitive advantage. However, at the same time, global strategies

carry risks, drawbacks and costs. These costs might relate to hidden production costs,

higher taxes and duties, unfamiliar regulatory regimes, higher risks, greater marketing

expenses and need for closer management controls.

The five components form an iterative process that Yip called the Globalisation

Drivers Model. Whitla (2003) is an example of a researcher who adopted Yip's

framework for a study in the international hotel, construction and advertising industries.

Using empirical evidence from these three service industries, Whitla (2003) analysed

the power of Yip's framework to help researchers explain the results of the

internationalisation strategies adopted by several MNCs. In-depth case studies were

conducted for companies in the three selected service industries. The research

questions for the case studies were formulated after discussion sessions with industry

panels, form by executives from the selected industries. The main research data were

derived from in-depth interviews with senior executives of UK-based service MNCs.

In total, 46 executives from 21 companies were interviewed. The data gathered were

analysed using QSR NUD*IST (an early version of Nvivo) software. In addition, a

cross-case analysis of the three industries was completed to examine further any

patterns in the internationalisation strategies adopted by MNCs in the service sector.

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The results suggested an interesting observation that MNCs in the international service

sectors would employ internationalisation strategies aimed to improve service quality

and enhance customer preference, but not necessarily to reduce costs.

3.5.2. Developing an alternative model

In this study, whether there was a viable alternative model to Yip’s internationalisation

framework was considered. A clear and simple framework was required to express the

relationships between the factors underlying companies’ internationalisation in a more

easily understandable manner.

Past studies of international business have demonstrated that the internationalisation of

companies is a process in which companies gradually increase their international

involvement within a three-stage framework. The first stage comprises the inherent

internal and external factors relating to resources, business operations and markets that

determine whether a company is ready to venture overseas. The second stage is an

intervening process involving strategies and actions. Finally, in the third stage, certain

outcomes are captured, such as performance results and business impacts. Therefore,

any useful model of the internationalisation of companies must integrate these factors,

processes and outcomes into a simple and easy to understand framework.

In the internationalisation process, for companies to expand and thrive overseas, they

have to develop relationships with external organisations with the potential to assist

them in business development, survival and growth. Relationships within and external

to the company are necessary owing to the vital importance of deploying and moving

resources to maximum effect. Therefore, a focus on relationships is an essential

element in the internationalisation framework to be selected. For this purpose, the

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framework formulated by MacGrath (1964) was chosen as the research model, as it

was developed with a strong bias towards examining relationships. Moreover, this

model, which is shown in Figure 3.4, also matched the need for a framework featuring

a clearer interactive cycle of Antecedents, Processes and Outcomes. The MacGrath

framework is suitable for implementation in conjunction with an in-depth case study

approach.

Figure 3.4 : McGrath General Model

McGrath’s (1964) general model consists of Antecedents, Processes and Outcomes,

and the links that connect them. Link A in Figure 3.3 signals that Antecedents affect

Processes, which in turn affect Outcomes (Link B). Finally, the two-way links C and D

represent the inter-relationship between Outcomes and Antecedents. McGrath’s

General Model is used to examine the organisational framework to structure, analyse

and integrate a small business company and its relationships with external parties.

In this model, Antecedents are the internal, organisational and environmental factors as

starting attributes. Exploiting the inherent attributes of the company leads to Processes;

that is, the formulation of strategies and the implementation of actions. The third

component, Outcomes, typically comprises financial performance results and effects

Outcomes Performance

Business Impacts

Antecedents Internal

Organisational Environment

Processes Strategies Actions

A B

C

D

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on business. Outcomes are expected to have an interactive loop back to Antecedents, at

which point, further changes, adaptations and modifications may be made accordingly

to the various internal and external factors.

Street and Cameron (2007) used the McGrath (1964) General Model to review external

Antecedents (relationships), Processes (strategies) and Outcomes (performance and

impacts) to study the effects of external relationships and business strategies on the

performance of small businesses. For example, research on small business has

suggested that environment factors such as industry (Beecham and Cordey-Hayes,

1998) or geographic location (Buick et al., 1998) have an effect on external

relationships and relationship formation. Therefore, Street and Cameron (2007)

included industry and location as Antecedents that affected external relationships.

3.5.3. Model of Internationalisation adopted for this study

For the purposes of this study, the McGrath General Model was modified and used to

identify possible relationships between factors affecting the internationalisation and

performances of companies. Using Street and Cameron’s approach, combined with an

understanding of the issues relating to internationalisation derived from the preceding

literature review and pilot study, a model of internationalisation was constructed, as

shown in Figure 3.5. Like Street and Cameron’s model, the Internationalisation

Reference Model adopted for this thesis includes Antecedents (internal, organisational

and environmental factors), Processes (strategies and actions) and Outcomes

(performance results and business impacts). Within each of the three blocks

(Antecedents, Processes and Outcomes) more sub-factors (Elements) were added to

explicitly identify the drivers potentially relevant to internationality.

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Figure 3.5 : Internationalisation Reference Model

As shown in Figure 3.5, the Antecedents in the thesis’ Internationalisation Reference

Model (to be called ‘Reference Model’ hereafter) are expected to affect Processes (via

Link A). Processes in turn influence Outcomes (via Link B). A feedback loop flows

from Outcomes to Antecedents via Link C, representing the fact that Outcomes may

cause management to reconsider the Antecedents, with any changes looping back via

Link A and then B to Outcomes. Alternatively, if the company decides that there is no

need to change the Processes (that is, they choose to maintain the current strategies),

there will be a direct return Link D from the Antecedents to further affect Outcomes.

Thus, this model clearly represents the internationalisation cycle of a company as a

continuous loop process. It can be modified or adapted over a period of time due to

Antecedents Internal Resources, Manpower, Finances Organisational Size, Management and Board Involvement, Technologies Environmental Industry status, National economic status, Government Assistance, Environmental issues

Processes Strategies Alliances, Localisation, Portfolio diversification Actions Foreign direct investments, Cost competitiveness

Outcomes Performance ROA, ROE, ROS, Sales Growth, Profitability, Profit margins Business Impacts Learning experience, Local connections, Technological advances, Cost reductions, Options

C

D

A B

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internal, environmental or regulatory factors. The internationalisation outcomes are

constantly measured, monitored and checked, and changes in processes can be made to

derive better results.

The model in Figure 3.5 is used in this study as a description of the internationalisation

process. It identifies many factors relating to Antecedents, Processes and Outcomes

that are important in the internationalisation process for SGX companies. The model is

used in formulating the questions for the Phase 3 interviews. The aim of the questions,

as explained further in Section 3.8, is to test whether the thesis model is useful in

capturing the factors affecting internationalisation and providing an overview of the

internationalisation process of SGX companies. Due to the importance of the model in

creating the framework for this study, the next sections will explain the factors that

have been included in the model and how the questions included in the Phase 3

questionnaire can be linked to each block and factor in the model.

3.6. Factors included in the Reference Model

As shown in the Reference Model depicted in Figure 3.5, the factors relevant to

internationalisation are grouped into three Blocks: Antecedents, Processes and

Outcomes. The factors included within each block have been gleaned from the review

of past research (see Chapter 2) and they comprise the most commonly described and

analysed factors thought to affect MNCs’ internationalisation activities.

3.6.1. Block 1: Antecedents of internationalisation

In the Reference Model, the initial factors that may drive the internationalisation

strategy are identified. These include the availability of internal resources such as

finance and management talent, as well as organisation factors such as the desire of the

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board of directors or the management to expand the company’s size and seek overseas

opportunities. Environmental and regulatory issues must also be considered, as

favourable and conducive government assistance programmes could encourage

companies to make the move into foreign markets.

Thus, Antecedents included the following factors and elements:

1. Internal

Elements: Resources, manpower and finances

2. Organisational

Elements: Size, management and board involvement, and technologies

3. Environmental

Elements: Industry status, national economic status, government assistance and

environmental issues

The nature and details of the various elements in the model are elaborated on during

the analysis stage in Chapter 4. The above factors and elements may not be exhaustive,

but they are likely to include the main factors and elements (that is, the sub-factors)

that can be considered Antecedents to a MNC venturing overseas. It is interesting to

understand the main factors driving SGX companies to venture overseas; for example,

these factors could be internal, organisational and environment.

Take the factor of ‘size’. Does the size of a SGX company affect its

internationalisation plans? Do companies have to attain a certain scale before they have

the internal capability to venture abroad, or do even small companies have to consider

internationalisation early in their life? In response to such questions, the purpose of

grouping the companies into different sizes is to examine whether SGX companies of

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different sizes adopt similar or dissimilar approaches to internationalisation. In addition

to size, other factors such as resources availability; leadership and support from

shareholders and board of directors; and environmental factors are expected to affect

the internationalisation of the sample companies.

In this study, the SGX companies are grouped into three categories generally adopted

by SGX: Small, Medium and Large, according to their market capitalisation of below

S$100 million; between S$100 and S$500 million; and above S$500 million,

respectively. The analysis presented in Chapter 4 explores whether companies of

different sizes have similar internationalisation motives and methods.

3.6.2. Block 2: Processes of internationalisation

The processes involved in internationalisation may reflect the availability of foreign

alliances. A company may be approached by foreign partners to form joint ventures to

enter new promising markets. Conversely, a company may deliberately decide to seek

out good local partners before it ventures into new markets. Some companies may have

portfolio or business diversification motives. Some may use localisation of the

management teams in foreign countries as their core strategy.

Processes thus included the following factors and elements:

1. Strategies

Elements: Alliances, localisation and portfolio diversification

2. Actions

Elements: Foreign direct investments and cost competitiveness

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3.6.3. Block 3: Outcomes of internationalisation

The outcomes of internationalisation may vary between companies. For some

companies, the aim may be to enhance total profits. Other companies may be driven by

survival. For yet others, access to resources or advanced technologies could be the

motivating factor. Cost reduction and economy of scale are other valid drivers of


Outcomes included the following factors and elements:

1. Performance factors

Elements: ROA, ROS, sales growth, profitability and profit margins

2. Business Impacts

Elements: Learning experience, local connections, technological advances and

options

Studies have shown that performance, such as profitability, can be affected by an

MNC’s international experience (Davidson, 1980, Nachum and Rolle, 1999, Terpstra

and Yu, 1988). MNCs with a long history and large percentage of overseas operations

would have institutionalised their international experience. They would have

established strong market knowledge, local connections and deep understanding of

local regulations. More importantly, they may have localised the management team,

and learnt how to handle cross-cultural issues. Their ‘foreignness’ could be lower than

that of a new entrant MNC, thus providing competitive advantages (Zaheer, 1995,

Zaheer and Mosakowski, 1997).

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3.7. Internationalisation measures

There are many financial measures that can be used to gauge a company’s performance.

One common measure is the average annual increase in net revenue. Net growth rate

gives an indication of the expansion rate of the business group following its

internationalisation measures. However, one difficulty is to ascertain the degree that

growth can be credited to a higher level of internationalisation, as opposed to other

factors such as normal market or industry growth and business expansion due to other

external factors. One method to countercheck is to compare the company’s growth rate

against those of its competitors and the industry average for the same period. Growth

of exports is also a good indicator, but as with degree of growth, it is not easy to

ascertain whether the growth is derived from the company’s internationalisation efforts,

or from higher revenues from existing and new markets due to sales programmes alone.

Two commonly applied profitability measures are ROS and ROA. These are widely

accepted industry benchmarks and comparatives are readily available. ROS is the most

used profitability ratio in strategic management reviews. It gives an indication of a

company’s operational results and provides insight into issues such as cost control

(Blaine, 1994). These views were shared by Hofer (1983) and Venkatraman and

Ramanujam (1986), who used this ROS ratio to measure performance. ROA is another

well-accepted financial profitability ratio. It is extensively used in strategic

management reports. ROA reflects the company’s efficiency in the utilisation of its

total assets to generate profits. However, for cross-entity comparison of ROA, care

should be taken to ensure that factors such as depreciation policy and asset revaluations

are taken into account.

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Studies have shown that performance, such as profitability, can be affected by an

MNC’s international experience (Davidson, 1980, Nachum and Rolle, 1999, Terpstra

and Yu, 1988). MNCs with a long history and large percentage of overseas operations

would have garnered and institutionalised their international experience. They would

have established strong market knowledge, local connections and a good understanding

of local regulations. More importantly, they may have localised the management team

and learnt how to handle cross-cultural issues. The result would be to lower their

foreignness as compared to a new entrant MNC (Zaheer, 1995, Zaheer and

Mosakowski, 1997).

3.7.1. Measures on the level of internationalisation

An analysis of past research studies enabled conclusions to be drawn on the pertinent

quantitative measures of the level of internationalisation and the performance measures

for internationalisation.

As internationalisation is a concept, there is a need to define and quantify a company’s

level of internationalisation; that is, the DOI. Each company is organised differently

and has its own unique structure. The appropriate measures to assess the level of

internationalisation of a company in the service sector would be very different from the

measures used for companies in the manufacturing sector (Johansson and Yip, 1994).

The main parameters used to define DOI, based on the most commonly cited measures

to assess the level of internationalisation, are:

i. Percentage of turnover/sales derived from overseas

ii. Percentage of operations (number of offices and factories) based overseas

iii. Percentage of foreign direct investments overseas

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iv. Percentage headcount of manpower based overseas

3.8. Key research questions

This section describes the research questions of the thesis and links them to the

Reference Model. These research questions have been devised based on the literature

review in Chapter 2, and they have been structured in three blocks (Antecedents,

Processes and Outcomes) to match the research framework as developed from the

Reference Model. The questions to be addressed in the interviews are outlined below

and are also listed in the Interview Guide in Appendix 3.5.

3.8.1. Questions relating to antecedents

What are the main imperatives for internationalisation of Singaporean companies?

SGX companies were asked: What are the major imperatives or motivations for their

companies to embark on this internationalisation exercise during the ten years period

between 1998 and 2007?

This question was framed to discover answers to the following questions. What are the

main driving forces that motivate SGX companies to internationalise? What are the

competitive pressures that drive them to venture overseas? Multinational expansion

can enable corporations to increase output, and therefore cut unit production cost

(Ghoshal, 1987, Hout et al., 1982). The resultant spreading of costs and division of

labour allows companies to become more competitive in the international arena. Was

this a motivating factor for companies?

Is the size of the Singaporean company an important consideration in its decision to

internationalise? Related to size is the issue of economy of scale. Is economy of scale a

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major factor driving internationalisation? Is there a generally accepted size (in terms of

total revenue or sales) at which a company achieves the economy of scale necessary

for it to compete in the international market?

3.8.2. Questions relating to processes

How are Singaporean companies structured for internationalisation?

The next key question related to how the SGX companies had structured their

internationalisation plans. Were they deliberate plans? Were the plans developed in-

house, or were external consultants used?

Answers were also sought to the following questions: Who initiated the

internationalisation efforts? Who were the main drivers or leaders of the company’s

internationalisation plan? Was the board of directors consulted, and how were top and

senior management involved? During the 10-year period, were the plans regularly

updated or revised?

In addition, it was deemed interesting to understand which functions were centralised

and which were decentralised. As evidenced from the literature review of MNCs,

finance, technology and funding are centralised, whereas production control, sales and

marketing, local recruitment and human resources (HR) are decentralised.

What are the main factors or drivers for internationalisation?

The SGX companies were also asked to describe the main themes of their

internationalisation plans over the period from 1998 to 2007. What were the main

factors that drove their companies to internationalise? Are size, bulk and scale critical

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factors for competitiveness and survival? What processes did the SGX companies

adopt? How were their boards and top management involved in the processes?

Do Singapore government incentives and promotions influence the internationalisation

of Singaporean companies?

Few countries around the world or in the Asian region actively encourage their local

companies to venture overseas. There is a general concern that relocating factories and

operations would result in a loss of employment in the domestic economy. The

Singapore government’s encouragement of companies to venture abroad through

organisational and financial incentives thus runs counter to conventional practice.

However, this policy is in place for important reasons, relating to Singapore’s unique

characteristics, as discussed in Chapter 2. Briefly, these reasons include the saturation

of the manufacturing sector, the full employment situation in Singapore and the

government’s desire to relocate low-end production overseas, and to attract high value-

added MNCs to set up in Singapore. It is therefore interesting to know whether the

government initiatives for local companies to venture abroad are having an impact.

An important question thus becomes: Do government incentives and promotional

efforts influence Singaporean companies’ plans to internationalise?

3.8.3. Questions relating to outcomes

What do Singaporean companies use as the main measures to gauge the outcomes of


SGX companies typically do not provide detailed information in public sources about

the major measures they use to gauge their yearly level of internationalisation. As

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reported in Section 3.7, the typical measures of level of internationalisation are

percentage of sales derived from foreign markets and percentage of the number of staff

employed in foreign domains.

Thus, a further key question is: What major measures Singaporean companies use to

evaluate the success of the outcomes of their internationalisation activities?

What are the outcomes of internationalisation?

One important question is whether Singaporean companies’ performance improves

with internationalisation. As discussed in Chapter 2, previous findings have been

mixed on this issue. Therefore, it is useful to ask: Do Singaporean companies

internationalise to enable them to achieve better performance and to safeguard against

the risk of failure?

Further, do SGX companies that are more internationalised have higher profitability?

Do more internationalised companies enjoy faster and more sustained growth? A

related question to pose would be: What are the main factors and outcomes used by the

company to measure the results of internationalisation?

Were there internal and external factors that affected internationalisation programmes

during the period from 1998 to 2007?

As this study covers a period of 10 years, the internal and/or external factors causing a

company to modify its internationalisation programme or change its strategy

completely can be known. Hence, the question is posed: During the period from 1998

to 2007, could managers recall any internal or external factors or events that affected

negatively or positively their companies’ internationalisation programmes?

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How do the Singaporean companies rate their internationalisation efforts?

Another relevant question is: How do SGX companies rate their degree of success

arising from their internationalisation exercise? To gather some reference points, the

SGX companies could be asked: Based on a scale of 1 to 10, how would you rate your

company’s level of internationalisation for 1998, 2002 and 2007. The success of the

companies’ internationalisation efforts could be rated in the same way.

What are the future directions for internationalisation?

As internationalisation is a long term process and to conclude the interviews, the senior

executives could be asked about the future directions of their companies in terms of


3.9. Data analysis procedures

As outlined earlier in this chapter, two main sets of research data were collected for

this study; that is, the interview data, and the data gathered from the companies’

published annual reports, announcements and public documents. This data was

analysed using the Internationalisation Research Framework developed from the

Reference Model, as described in Sections 3.5.2, 3.5.3 and 3.6 of this Chapter. The

data analysis was conducted in two stages, with the first stage using the data from the

interview results and the second stage using the other gathered data.

For the first stage, Nvivo software was used for the development of themes and sub-

themes relating to the internationalisation of the companies. The second stage analysed

the financial, operational and strategic information obtained from the published reports,

together with the themes and sub-themes derived from stage one, to establish

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propositions on the relationship between the internationalisation and performance of

the SGX companies. The methodology employed to establish the propositions is

referred to: by Glaser (1978) as ‘theoretical codes’, or by Strauss and Corbin (1990,

1998) as ‘axial codes’. To establish axial codes, Cruciform charts are used. An

explanation of the Nvivo analysis and axial coding is given in the following sub-

sections.

3.9.1. Analysis of interview data using NVIVO

In qualitative research, there is an expected gap between the qualitative data collected

and the conclusions to be derived (Eisenhardt, 1989). It is noted by Miles and

Huberman (1984) that it is difficult for a researcher to follow methodically; various

documents covering several hundreds of pages of field notes, interviews, reports and

quotations. For the study, verbatim notes of nearly 200 pages were recorded for the

interviews. Without the use of established coding techniques, there is a risk that the

researcher could reach biased, premature or even false conclusions. The researcher

could be influenced by vivid or forceful responses (Nisbett and Ross, 1980), or by

prominent interviewees whose views might not be representative (Miles and Huberman,

1994).

As the primary source data for the study are the interview transcripts, an efficient

analysis method is to use the Nvivo software programme. This programme is one of

the most widely used and well-regarded software packages for the analysis of

qualitative data, and is well accepted for academic research such as case studies.

The application of Nvivo begins by identifying the major themes for each interview.

Within each theme (called a node), sub-themes then emerge (called baby nodes). The

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process is repeated for each interview until tree-nodes are formed, with the frequency

of reference to each theme and sub-theme indicated. This technique aims to remove

subjectivity by analysis and provide objective, reliable and quantifiable data coding.

Nvivo also allows for the extraction of meaningful and representative quotations for

use in the case studies.

The Nvivo software assisted the analysis of within-entity and cross-entity data. For the

within-entity analysis, the themes and sub-themes that emerged for each company were

noted. Each company was evaluated with regard to the executives’ responses to the

various research questions detailed in Section 3.8 above. An understanding of each

company was important before cross-entity comparisons could be made.

Next, a within-industry analysis was undertaken. The cross-case analysis of the SGX

companies in the manufacturing industry enabled differences as well as similarities in

the themes and sub-themes between cases to be observed and explained. This industry-

level analysis provided a rich and interesting array of results. Research findings and

conclusions were then made from the data.

In an attempt to quantify these themes and sub-themes, the number of occasions on

which the themes and sub-themes were quoted was recorded. A case study research

method has the capability to adopt a variety of data analysis tools to quantify the data,

depending on the nature and purpose of the research (Creswell, 2008, Denzin and

Lincoln, 2005, Patton, 2002). The frequency of occurrences generated quantifiable data

to demonstrate the strength of the themes and sub-themes. Hewapathirana used the 6-

point Likert scale to express strength in her study, with 0 assigned to those themes

stated with less frequently, and 6 assigned to those themes stated with a high level of

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frequently. The themes and sub-themes with the highest scores were selected for the

final stage of review. Whitla in comparison assigned numerical scores ranging from 0

to 5, which he called ‘Strength in Industry’ scores. A score of 0 meant that the ‘driver’

or ‘sub-driver’ would have no impact on the use of such drivers in the industry

examined. Scores of 1, 2, 3 and 4 indicated ‘Strength in industry’ of very weak, weak,

moderate, and strong, respectively. A top score of 5 indicated that the ‘driver’ had a

strong impact of its use in the industry.

For this research, it was decided that four broad categories of ‘strength of industry’

would be sufficient to provide meaningful results to be garnered from this study.

Therefore, the comparative terminology used for the four categories of ‘strength of

industry’ is ‘very strong’, ‘strong’, ‘moderate’ and ‘weak’. The themes were classified

under these four bands or categories according to the frequency of the themes being

cited by the 14 interviewees. Grouping the frequency of occurrences into four quartiles

created the four bands. Themes and sub-themes with above 10 citations were rated

‘very strong’, those with 6 to 9 citations were rated ‘strong’, those with 3 to 5 citations

were rated ‘moderate’, and those with only 1 to 2 citations were rated ‘weak’. Analysis

and discussion on the themes and sub-themes of internationalisation identified is

undertaken in Chapter 4.

A sample table of the representation of the themes and sub-themes and their relative

Strengths in industry is shown in Table 3.2 below.

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Table 3.2 : Nvivo Analysis—Sample Table

Themes/Sub-

themes

@

Levels 1/2/3/4

Frequencies

Very

strong

Strong Moderate Weak

>10 6 - 9 3 – 5 <2

Level 1:

Antecedent

Level 2:

Internal

Level 3:

Business strategy

11

Level 4:

a. Economy of

scale

b. Challenges

c. Investment

approaches

6

3

2

Table 3.2 is a sample table constructed using the main theme of Antecedent at Level 1

in the Reference Model. Below Antecedent are the themes Internal at Level 2 and

Business Strategy at Level 3. From this, the sub-themes that emerged at Level 4 are (a)

Economy of scale, (b) Challenges and (c) Investment approaches.

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The frequency of citations of the various themes and sub-themes listed were

categorised into their relative Strengths in industry under Very strong, Strong,

Moderate and Weak.

3.9.2. Data analysis using axial coding and Cruciform charts

The objective of this second stage of data analysis was to validate the propositions

regarding the relationship between internationalisation and performance emerging

from the interview data. The analysis served to connect the themes and sub-themes that

emerged at the Nvivo stage to data obtained on performance, such as revenue and

profit growth, from public documents.

Glaser (1978) described axial coding as looking for causes, contexts, contingencies,

conditions, consequences and co-variances (the six ‘Cs’) around a focal theme or sub-

theme. Strauss and Corbin (1990, 1998) suggested that looking for causes and

consequences should commence after the early phases of an analysis. The purpose was

to develop relationships between the substantial themes and sub-themes, and to search

for an explanation or answer a research question.

Cruciform charts were used to plot potential relationships between themes and

outcomes. Cruciform charts position data within two axes, so that relationships might

be evident from the points on the charts. Thus, the ratings results (Very strong, Strong,

Moderate, Weak) were presented for two themes in each chart. For example, the

plotting of the ratings versus revenue or profits would enable the detection of any

correlations or directional linkages. The aim was to identify patterns, trends, clusters or

outliners in the cases studied.

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It is noted that axial coding is not a quantitative methodology to establish relationship

in an exact manner. Thus, the trends displayed diagrammatically of correlations or

causal directions display general relationships only. They do not present precise

statistical associations. This is consistent with the case study research approach, which

does not claim to provide analysis based on rigorous statistical sampling. The charts

are a research tool for demonstrating a replication logic within which the

meaningfulness of any perceived trend, linkage or causal direction can be observed as

a basis for deducing propositions for case study analysis. A sample Cruciform chart

showing the relationship between revenue growth and level of internationalisation is

given in Figure 3.6 below.

Figure 3.6 : Sample Cruciform Chart of Revenue Growth Versus Level of


Observing the patterns of the chart above enables discussion of the relationships of the

variables.

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

(50) - 50 100 150 200 250 300 350 400 450 500 550 600 650 700

Level of Internationalisation

Revenue Growth

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.

110

Table 4.1 : Summary Table of the 14 Participating SGX Companies

Company Industry type Country of

origin

Changes in the main

industry segment


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


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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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.


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.


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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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

126

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.


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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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.


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.


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

enterprise servers, workgroup servers, operating systems, e-commerce application

software, systems management tools and IT security products from its IT principals.

Under the IT Services business, CJ offers IT services such as network infrastructure

design and security implementation, web to legacy integration, e-commerce-ready

infrastructure architecture and implementation, training services and maintenance

support. Under the IT Products distribution business, CJ distributes a range of IT

products including desktops, notebooks, printers and other IT peripherals. The

company has a distribution network of more than 3,000 corporate resellers and dealers

in Singapore, Thailand and Malaysia.


In 1998, CJ’s main presence was in Singapore, with operations in Singapore

contributing 48.1 per cent of revenue. During that time, there was the threat of

competition from large US MNCs; notably, the world’s top three players were all

trying to enter the Asian markets. These MNCs had a broader range of products to

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distribute and larger financial resources. CJ’s founder assessed that small local

companies would not be able to compete or even survive against these larger MNCs

unless they came together as a group to share good practices, common markets,

resources and product agencies. Therefore, out of the urgent need for survival, CJ

decided to combine with a partner in Malaysia and another in Thailand to ensure that

they were not too small to compete with the MNCs.

CJ wanted to grow larger and internationalise because it was passionate and committed

to its business, and believe that it had the ability to run and build a very good regional

business. The small size of the Singapore market was another factor in CJ’s decision to

internationalise their business, and the entry of foreign competition in the form of large

MNCs prompted the company to realise their expansion plans more quickly. The

management of the company felt an obligation to the stakeholders of CJ; namely, the

vendors, principals and staff, to manage the company well. For CJ to achieve its plans,

the company had to expand beyond the neighbouring countries and become a sizeable

distributor, as preferred by vendors.

Their internationalisation strategy was based on a four critical factors: robust selection

of partners, intentionally placing trust in partners, giving partners a stake in CJ, and

decentralising control except for as regards the accounting system. CJ believed

strongly that choosing the correct partner and trusting them to run operations in their

country was more important that strict controls. Thus, the management of CJ spent a

lot of time with potential partners, engaging them in dialogue and socialising over

dinners and golf. After selecting their partners, they made sure that the partners

continued to hold a stake in the holding company, giving them a common motivation

for the holding company to do well. CJ also invited the country CEO to join their

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executive committee or board of directors, and involved the CEO in strategic planning

meetings.

In terms of control, CJ’s strategy was to decentralise all operational, administrative and

marketing functions to the local partners, while keeping strict control on the financial

reporting standards and practices. The country CFO reports to the corporate HQ CFO,

and they also meet separately to discuss financial governance, internal audit processes

and other matters. CJ made sure that the local team was kept intact and tried not to

change the local systems.

CJ did not use external consultants when they were strategising for internationalisation,

nor did they use them during the integration phase of their merger with other

companies. The founding members, who were very experienced in the industry,

developed the plans. CJ did not utilise any government incentives or support schemes

when they internationalised. Rather, they depended on their internal strengths and

relied very little on government support or advice. CJ believed that they knew their

own business better than the government.

4.2.11. Company K: A global logistics provider

Main businesses

Company K (codenamed ‘CK’) was set up in 1970 and listed on the Stock Exchange of

Singapore in 1993. A local port operator initiated a takeover offer in March 2002. In

November 2004, a local company completed its takeover of CK, after it acquired the

port operator’s controlling stake in CK.

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By 2007, CK’s principal businesses comprised integrated logistics solutions,

international freight forwarding and engineering maintenance and facilities

management services. The integrated logistics solutions cater to customers’ specific

logistics requirements in the chemical, commodity, automotive, marine, oil and gas,

shipping and industrial sectors. The company provides customers with a spectrum of

supply chain logistics encompassing import and export processing, warehousing,

inventory management, local, regional and global distribution, collateral management

services, container logistics services and record management services.

In international freight forwarding, CK is involved in Non-Vessel Operating Common

Carrier (NVOCC) services. This business specialises in the consolidation of loose

cargoes from freight forwarders and shippers and the delivery of that cargo to specified

destinations through the company’s comprehensive global network of delivery points.

CK owns a network of delivery points that connect customers to 120 ports and over

1,200 destinations. They have established a company presence in Singapore, Australia,

Belgium, China, Germany, Hong Kong, India, Indonesia, Korea, Malaysia, Vietnam,

Pakistan, Ukraine, Russia, the Netherlands and the Middle East.


From 1998 to 2004, the company was rather stagnant in terms of revenue growth, but

they began to establish presence in many different countries during this period. After

the takeover of CK in 2004, they charted a new growth path for the company, revenue

started to grow and profitability improved. There was aggressive internationalisation

from 2004, after the company was taken over by a local private group. The company

adopted an internationalisation policy out of necessity because a freight forwarding

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business needs to be international; it had to concentrate not only on logistics movement

within the country, but more importantly, on international trade flows between

countries. These trade flows determine where CK should go and what they should be

doing. Internationalising was necessary for the company to grow.

Freight forwarding is a service-oriented business and CK needed to improve their

service offerings to their customers. The greater number of places and connections

between points that CK could offer its clients, the more profits the company could

expect to make from its customers in servicing their various logistics needs. This is the

network effect of a freight forwarding business, so the company had to expand to as

many cities as possible to give its customers a worldwide network. A large network is

also the differentiating factor between CK and its competitors because new competitors,

who do not have such a large network, cannot offer such competitive rates.

To execute its strategy of internationalisation well, the senior management of CK did

not depend only on Singaporeans to manage overseas offices because Singaporeans

might lack the required experience of running an international logistics company. CK

recruited whoever was best for that job and also hired people from its competitors. In

addition, CK tended to favour the structure of a joint venture with a local partner when

the company started to operate in a new country or city. As the local joint venture

partner already had the required knowledge to take care of local customers and

regulators, this took the local operations work away from CK. Moreover, by giving the

local partner a stake in the joint venture company, this motivates it to strive for higher

profitability.

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CK decentralised control of its overseas companies to local management, except for as

regards the buying of freight, because a centralised buying system allows CK to buy

freight cheaply, which is crucial in a freight forwarding business because the margins

are very thin.

By 2007, CK had no plans to enter any new country. CK will only expand into a

country in the future if doing so will help them to get more customers or make a

customer more dependent on them. The company did not use external consultants to

devise business strategies and CK did not find the government’s call to internationalise

relevant to them. CK needed to be in many countries to survive, so encouragement or

support schemes from the government did not apply to them, except to help defray a

small portion of the overseas development cost.

4.2.12. Company L: A global warehousing and logistic company

Main businesses

In the 1980s, Company L (codenamed ‘CL’) was set up to provide logistics services to

the government of Singapore. After the government’s projects were completed, the

company found that it had developed many systems and processes on logistics and

supply chain management, and that had many well-trained staff. The company

subsequently used these competencies to grow a sizable business. In 1998, two

business units represented CL’s integrated logistics business. These two units merged

in December 1998 to form a larger group called CL, which focuses on supply chain

management, offshore logistics and marine services. CL started operations as one

business unit in 1999.

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In 1999, CL generated substantial revenue and profit. By 2005, the company’s turnover

had increased by 25 per cent and profit increased by 50 per cent. By then, the company

had established warehouses in Singapore, India, Japan, Malaysia, South Korea,

Thailand and Vietnam. Under supply chain management, revenue contribution from

Southeast Asia was about 60 per cent of total supply chain turnover, while revenue

contribution from North Asia was about 20 per cent. Under oil and gas logistics,

revenue recorded was 10 per cent of total turnover. In 2006, an Australian company

acquired the company.


In the 1980s, CL hired a consultant to explore new areas for the company after the

completion of the logistics service support for the government. The key point presented

by the consultants to the company was that MNCs were relocating their manufacturing

plants to countries with comparative advantages and outsourcing was becoming more

widespread. As the trend pointed towards a growing logistics sector in Asia, CL put in

place plans to build an Asia-wide logistics network in the late 1990s. They also

identified China as having a large market and problems in logistics, so they decided to

move heavily into China.

In the 1990s, CL was a government-linked company under X Holdings, and the

company was given a mandate by the holding company to grow, not only locally but

overseas as well. For CL to grow, the company needed to expand overseas because the

Singapore market was very small. In addition, as a GLC, it was preferable that CL’s

growth should come from overseas, so that CL would not compete with local

companies for resources and business.

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To execute the internationalisation plan, CL engaged a reputable foreign consultancy

company to assist in formulating the plan, the business strategy and details such as

which sectors to enter and the core competencies to have to do well in those sectors.

The plan was presented to the board for endorsement before the management

embarked on the implementation. CL adopted an organised and deliberate approach in

their planning and recording of their internationalisation plan. The company tended to

structure their investments in the form of joint ventures so the local partners could be

depended on to handle local issues.

The company identified two crucial factors for the success of their internationalisation.

First, the people in the company were the key; they needed to be willing to work

overseas, well trained and have the necessary experience. The senior staff had to share

the vision of the management and be motivated enough to take on the difficult task of

setting up operations overseas. Second, good systems and processes had to be present.

In going overseas, the company needed to bring their expertise in the IT and

management systems to the foreign joint ventures. CL centralised its financial

accounting, IT systems and marketing; the company did not centralise its human

resource practices.

Another success factor identified was how closely the company tracked their

performance overseas. CL measured sales and contributions; that is, total sales of the

company and the percentage contribution from overseas. They also measured the

Economic Value-Added (EVA) of their services in each country to account for the

value they created for shareholders after taking into account the risk factors of each

country.

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Even though the company was government linked, they did not receive much from

government incentives and these incentives did not drive their plans. They were

incentivised by their need for improving performance, sales and profitability.

4.2.13. Company M: A global manufacturing services company

Main businesses

Company M (codenamed ‘CM’) was founded by an Englishman in 1828. In the late

1990s, CM had the following groups of business operations: Investment, IT, Technical

Services, Project Management, Food Marketing and Food Distribution. Their IT

division provided a broad range of products, applications, services and total spatial

solution propositions. The software services and solutions were designed to address the

needs of enterprises through the usage of Extranet, Intranet and Internet as information

distribution platforms. CM had subsidiary operations in Australia, India, Indonesia,

Malaysia, Singapore and the US. The operations in the Asia Pacific region have been

active since 1980, and CM now has more than 12,000 users of its products or services.

Under the Technical Services division, CM specialised in design, manufacture and

installation of direct fired process heaters, waste heat recovery units and associated

equipment for the oil and gas industry. CM services an international clientele. The

company has products and services that include hazard protection against fire and

depressurisation, life support and emergency evacuation systems. Yet another unit

specialises in the design and implementation of simple and complex control systems

for process industries. CM’s customers span the entire South and Southeast Asian

region.

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Under the Project Management division, CM is a project management, design and

construction services company, operating in Singapore, Malaysia and China. CM

specialises in industrial development, industrial facilities, warehousing, lease back

arrangement, clean room facilities and retrofitting works. Under the Food Marketing

division, CM owns various brands of food retail products. Under the Investment

division, CM has a 30 per cent stake in a developer of industrial parks. The Logistics

Investments division has warehouses in Indonesia and Singapore.


CM started as a trading company and over time expanded into a wide range of

businesses. The company’s activities became disparate and the direction of the

company became uncertain. Therefore, when a new owner and management took over

in 1998, they decided to reinvent the company into an engineering services company,

partly because the new management had a strong background in the engineering

business. In addition, the engineering business had high barriers to entry so the market

would not be faced with many competitors. At that time, because CM no longer had a

core business that could sustain the company after selling their original business, they

had to find other business opportunities to develop.

The Singapore market was fairly mature and small in 1998, so the management had no

choice other than to decide to internationalise their business. To survive, they had to

look outside Singapore and not be restricted to the region. More importantly, their

existing oil and gas business had to become a global business because the demand for

refineries and petrochemical plants within any particular country was not enough to

sustain their business. Coupled with the need for survival and the motivation to make

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profits for its shareholders, the company decided to internationalise their business by

focusing on the engineering services sector.

To achieve success internationally, CM needed to be cost competitive. It had to

assemble a team of people who were very capable and properly incentivised to work

hard for the company. CM realised that it did not want to compete with other low cost

manufacturers by carrying out its own manufacturing operations; instead, it chose to

rely on its strong brand name to compete, while focusing on the provision of project

management services and providing customers with turnkey solutions. The company

outsourced the manufacturing and low-end engineering jobs like fabrication, but

retained the designing, engineering and project management parts of the entire job. CM

was responsible for delivering the turnkey service to the customer and it was on this

aspect of the job that the company was able to be competitive internationally.

CM’s management team was confident about internationalising the company because a

team of capable people supported their structure and plans. The internationalisation

plan could not have been as extensive, if they had lacked quality staff. The incentive

scheme employed by CM was crucial in their internationalisation plan. They realised

that there was no way to supervise their staff who were moving around all over the

world, thus staff needed to be very self-motivated. Their interests had to be aligned

with the company. Thus, CM compensated their staff with a very attractive bonus

scheme, where as much as 30 per cent of the net profit was set aside for staff bonuses.

The staff knew that if the company did well, they would be well rewarded.

Operating in a very specialised market, CM did not employ external consultants to

assist them in planning their strategies for the company. They chose to rely on their

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own staff, which had the domain knowledge and were experts in their businesses.

Some of their businesses received some help from government incentives during the

initial stage of their internationalisation. However, the government’s assistance was

limited because CM’s main businesses were not based in Singapore. Government

agencies were able to assist CM on the networking aspect when they entered new

markets but the results were mediocre.

4.2.14. Company N: An IT products, property and car distribution conglomerate

Main businesses

Company N (codenamed ‘CN’) was founded in 1912 as a family-owned automotive

dealer. In 1998, they had three core businesses: technology and manufacturing, trading

and distribution, and property and leisure. The technology and manufacturing division

was an international network of manufacturing plants and R&D centres. Activities

include the development of data communication and networking interface microchips

and related multimedia firmwares and softwares for the telecommunication, computer

and consumer electronics industries; manufacture of a wide range of electronic and

precision engineering components; production and distribution of biotech, medical and

agritech products; design and fabrication of oil, gas and chemical processing

machinery; and management of venture capital. The trading and distribution division

covers distribution of vehicles, automotive parts and accessories; equipment for petrol

stations, construction machinery; fire safety equipment; and installation of satellite

earth stations and other specialised equipment for telecommunications. The property

and leisure division involves the development of real estate, trade exposition and

convention centres, and leisure activities.

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CN is basically involved in three lines of business: technology and manufacturing, real

estate and automotive distribution. CN chose to expand internationally because

Singapore does not have the scale or enough customers to support their growth in the

automotive distribution and real estate business. The number of Certificate of

Entitlement (COE) to be issued each year for new car owners limited the Singapore-

based automotive distribution business. COE is used by the government to control the

car population, and the number of entitlements has been decreasing over the years. The

total amount of cars sold a year in Singapore could easily be about the same as the

number of cars sold a day in China, and this prompted CN to internationalise to grow

its business. Another reason that CN shifted all of their manufacturing operations to

China from the US was the lower cost of production in China. They found that their

competencies in the US were easily transferable to China.

CN employed various strategies in their internationalisation plans that were critical to

its performance. These strategies included the employee bonus plans, human resource

utilisation and controls over the various overseas units. On the planning process, senior

management and the board discussed the strategic focus of the company and set the

annual budget. The levels of management below the CEO were held responsible for the

implementation of these plans. Their bonuses were tied to performance, which was

monitored very closely.

The success of the company depended on having the best managers to lead the

company’s various business divisions. The top manager in a division was responsible

for providing leadership, devising new ideas, turning in results and motivating the staff.

If the teams were able to achieve their tasks, they were rewarded and recognised. CN

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did not employ a strict rule about whether the local business units must be staffed with

locals or expatriates. Hiring decisions were based on the merits of the candidates and

this allowed them to be open to more opportunities. As part of sound corporate

governance and internal controls, CN strictly centralised its financial and corporate

governance, as well as its legal and human resource policies.

External consultants were utilised when CN reviewed the future strategy of the

company and planned the budget, 3-year and 5-year plans. CN also used consultants to

validate its strategies. The company’s internationalisation process was undertaken for

business and strategic reasons. The government’s effort and encouragement for

companies to expand overseas had a fairly low influence on CN’s decision making. CN

did not utilise any government incentives because the government did not have

incentive schemes to support such large companies like CN.

4.3. Analysis of research materials and interview data

This chapter has two main sections. The previous first section describes in summary

the businesses and internationalisation strategies adopted by the 14 Singapore

companies. The purpose of this first section is to derive an understanding of the nature

of the business of the companies and attain a deeper knowledge of the

internationalisation programmes and plans of these companies.

The second section uses the data collected, from SGX companies’ annual reports, the

in-depth interviews and the survey with the executives regarding their qualitative

assessment of the level of internationalisation of their respective companies, to conduct

three aspects of analysis:

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1. An analysis to examine whether the companies adopted internationalisation

practices that are similar to established theories, such as the Eclectic

Paradigm theory and the Uppsala Internationalisation Framework.

2. An analysis to derive the main themes and sub-themes of the companies’

internationalisation strategies using Nvivo9 software.

3. An analysis to examine relationships between the level of

internationalisation and performance using Cruciform charts.

4.4. Theories based on the Eclectic Paradigm and the Uppsala Internationalisation

Framework

The following section presents the findings from the analysis of the interview data and

research materials. The analysis was conducted through three main approaches. The

first approach was to compare the internationalisation processes of the 14 companies

against the established concepts of internationalisation based on the Eclectic Paradigm

and the Uppsala Internationalisation Framework. The second analysis approach was to

examine the interview data using the Internationalisation Reference Model developed

for this thesis and described in Chapter 3. For analysis of the large quantity of

interview data, Nvivo9 software was used to track and develop the themes and sub-

themes that emerged. The third analysis approach was to examine the ratings on the

level and importance of internationalisation provided by the interviewees against their

companies’ actual revenue and profit growth using Cruciform charts. This co-axial

analysis provided findings on the impact on revenue and profit growth arising from the

internationalisation efforts of the sample companies.

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The two stated theories are developed to explain behaviour of companies relating to

their internationalisation process. The companies selected for case studies were

examined to test whether their behaviour with respect to internationalisation conforms

to the theories developed. It is not proposed that the theories guide the behaviour of

these companies.

The approaches adopted by the SGX companies during the research period of 1998 to

2007 were carefully examined, with attention paid to how these companies

internationalised, with reference to the two well-accepted theories of the Eclectic

Paradigm and the Uppsala Internationalisation Framework. The assessment on whether

these two theories were applicable for SGX companies is shown in Table 4.2. It is

necessary to clarify that, as far as it is known, the management of these companies

were not aware of, nor did they deliberately adopt one or both of these theories. This

assessment of whether these companies adopted these approaches is the result of an

examination of their plans and actions from 1998 to 2007, which showed the strategies

and actions actually selected in deciding how to expand the companies externally.

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Table 4.2 : Adoption of Internationalisation Theories

Company

Theory A B C D E F G H I J K L M N

Sub-total

Yes No

Eclectic Paradigm Y N Y Y Y Y Y N Y Y Y Y Y N 11 3

Uppsala


Framework

Y N Y Y Y Y Y N Y N Y Y Y N 10 4

4.4.1. Companies that adopted Eclectic Paradigm theory

Table 4.2 shows that 11 of the 14 SGX companies interviewed can be described as

using the Eclectic Paradigm approach to internationalisation. According to this theory,

companies used three methods for expansion: (1) horizontal expansion, (2) vertical

diversification and (3) growth through international markets (Dunning, 1977). These

companies exploited their competitive strengths in the three areas of ownership,

locational and internalisation advantages. For example, CA used their superior product

knowledge and entrepreneurial skills to expand into new markets where their products

would enjoy a premium in price and quality. CL embarked on a careful study of its

internal strengths and external opportunities before making major inroads in

internationalisation expansion. It developed strong internal processes and systems, and

established strong ties with the relevant government agencies in the foreign markets

where it operated, thereby taking advantage of its ownership and locational strengths.

The three exceptions that did not seem to follow the Eclectic Paradigm were

Companies B, H and N. On closer examination, it is noteworthy that these three

companies decided to adopt two other paths to internationalisation. Companies B and

H were born global companies, as they had decided from the onset to bypass entirely

the need to establish a domestic base in Singapore before internationalising. Company

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B, which entered the nascent markets of the Russian federation, encountered many

obstacles initially. However, due to this company’s persistence and hard work, as well

as its having achieved first mover advantage in these emerging markets, it eventually

achieved success and became a strong product leader in its chosen sectors. CH also

decided from the onset to look at their business structure in an international manner,

and deemed the world as its market, rather than starting from a Singaporean home base.

On the other hand, CN decided to adopt the venture capital investments approach to

expansion. They used their internal funds to invest in young companies with potential

to capture new markets. Through their venture investments, they eventually made some

excellent business choices, and were able to invest further in those companies, which

then served as their spearhead of successful expansion into overseas markets.

4.4.2. Companies that adopted Uppsala Internationalisation Framework theory

The analysis showed that 10 of the 14 SGX companies adopted an approach consistent

with the Uppsala Internationalisation Framework theory developed at Uppsala

University, Sweden (Johanson and Vahlne, 1977). This theory propounded that

companies internationalise through a gradual process of expansion by exporting to

overseas markets. Then with the knowledge of these foreign markets, they expand

either by acquisition of suitable targets or by gradually setting up their own production

units in the foreign countries.

This was the approach taken by 10 of the 14 SGX companies. For example, CC started

as a single company in 1931, and expanded to become a diversified international group

with 40 brands, operating in 10 countries, and exporting to 60 markets worldwide by

2007. The same story applies to CD, which grew to become one of the largest GLCs in

Singapore, through a process of gradual but steady expansion. CG took a different path,

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locating its HQ in Hong Kong and expanding into the huge Chinese market as its main

core strategy. Nevertheless, CG is an internationalised company, as its technologies

were derived from the products of the original SGX company.

Four companies, namely Companies B, H, J and N, did not adopt the Uppsala approach,

instead taking alternate routes. As noted in the preceding section, Companies B and H

adopted the born global concept, and CN used the international venture capital

investment method. CH also adopted a multi-pronged method by opportunistically

expanding a few new business segments. Adopting a different approach, CJ expanded

aggressively through mergers and acquisitions (M&As) of market leaders in the

countries into which it decided to expand.

The above analysis revealed that the majority of SGX companies adopted similar

approaches in expanding through a gradual build-up of their comparative strengths so

that they could gain superior competitive advantages in the international arena. This

research suggested that the majority of SGX companies in the manufacturing sector

adopted internationalisation approaches that were consistent with internationalisation

theories based on the Eclectic Paradigm and the Uppsala Internationalisation

Framework.

4.5. Analysis of interview data using Nvivo method

The 14 interview transcripts were studied closely by the researcher through repeated

readings, to acquire a deep and thorough understanding of the significant and

secondary points raised by the interviewees. Gradually, certain main themes and sub-

themes emerged. The themes were classified using the Nvivo9 software.

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Using the Reference Model, as a first step, the themes at Level 1 were grouped under:

1. Antecedents

2. Processes

3. Outcomes

To facilitate the gathering of themes into the appropriate levels, questions posed in the

Interview Guide were grouped according to Antecedents, Processes and Outcomes at

Level 1. At Level 2 for Antecedents, the interview questions were placed under the

sub-groups of Internal, Organisation and External. Further topics raised by the

interviewees under each of these sub-groups were then categorised into sub-headings,

which served as sub-themes. Nvivo9 software was used to assist in the creation of the

nodes (themes), sub-nodes or baby nodes (sub-themes) that emerged. (Hereafter, the

terminology adopted is to call the nodes and sub-nodes as themes and sub-themes

respectively). The process of creating Level 1 and Level 2 themes was replicated to

create Level 3 and 4 themes and sub-themes. For example, under the Level 2 theme of

Internal, a Level 3 sub-theme of Business strategy was created. Subsequently, under

Business strategy, a few Level 4 sub-themes on Economy of scale, Challenge to make

it work, and Venture capital investment approach emerged.

The resultant main themes and sub-themes created are shown in Tables 4.3 to 4.5 and

the frequency of the themes and sub-themes being cited is listed. The themes and sub-

themes were assigned ‘Strength in Industry’ ratings of ‘Very strong’, ‘Strong’,

‘Moderate’ and ‘Weak’ depending on the frequency with which they were cited by the

companies in the source interviews. (The explanations of these categories are given in

Section 3.9.1 of Chapter 3). The Very strong category is for themes with a frequency

of citation of above 10, Strong has a frequency of 6 to 9 citations; Moderate has a

frequency of 3 to 5, and Weak is below 2.

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Details of the themes and sub-themes created and their frequencies of citation as

derived using Nvivo9 software are given in Appendix 4.15.

Table 4.3 : Themes and Sub-themes on Antecedents

1. Antecedents: Themes and Sub-Themes Frequency Strength in Industry

1.1 Internal

1.1.1 Business strategy

1.1.1.1 Economy of scale

1.1.1.2 Challenge to make it work

1.1.1.3 Venture capital

investment approach

1.1.2 Survival

1.1.3 Sustaining profits

1.1.4 Products

1.1.4.1 Perishables

1.1.5 Brands

11

6

3

2

6

3

3

1

3

Very strong

Strong

Moderate

Weak

Strong

Moderate

Moderate

Weak

Moderate

1.2 Organisation

1.2.1 Resources

1.2.2 Shareholders

6

3

Strong

Moderate

1.3 External

1.3.1 Small Singapore market

1.3.2 Regional growth

1.3.2.1 Close to customers

1.3.2.2 Culture issues

1.3.3 Born global

1.3.3.1 First mover advantage

11

5

1

1

4

2

Very strong

Moderate

Weak

Weak

Moderate

Weak

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Table 4.4 : Themes and Sub-themes on Processes

2. Processes: Themes and Sub-Themes Frequency Strength in Industry

2.1 Planning

2.1.1 Strategy drivers

2.1.2 Formal/Informal process

2.1.3 Consultants

2.1.4 Frequency of reviews

14

7

8

8

Very strong

Strong

Strong

Strong

2.2 Structure

2.2.1 Centralised/Decentralised

2.2.2 Localisation

2.2.3 Management strength

2.2.3.1 Core values

2.2.4 M&As

2.2.4.1 Divestments

2.2.5 Business model

11

9

7

1

5

1

2

Very strong

Strong

Strong

Weak

Moderate

Weak

Weak

2.3 Influences

2.3.1 Government incentives

2.3.2 Major shifts

2.3.2.1 Shareholder changes

2.3.3 Joint Ventures/Partners

2.3.4 Success/Failure factors

2.3.5 Entry barriers

15

13

2

7

7

2

Very strong

Very strong

Weak

Strong

Strong

Weak

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Table 4.5 : Themes and Sub-themes on Outcomes

3. Outcomes: Themes and Sub-Themes Frequency Strength in Industry

3.1 Internationalisation indicators

3.1.1 Level of internationalisation

3.1.2 Success ratings

14

14

Very strong

Very strong

3.2 Performance indicators

3.2.1 ROS/ROA/ROC/EVA

3.2.2 Profitability

6

5

Strong

Moderate

3.3 Learning experience

3.3.1 Cost reduction

3.3.2 Technology sharing

3.3.3 Strategic options

3.3.4 Integration issues

3.3.5 Preferences

3

2

2

1

1

Moderate

Weak

Weak

Weak

Weak

3.4 Future plans

3.4.1 Geographical expansion

3.4.2 New products

3.4.3 Limitations

11

5

4

Very strong

Moderate

Moderate

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The graphical representation of the four levels of themes and sub-themes that evolved

for the three main blocks of analysis covering Antecedents, Processes and Outcomes

are shown in Figures 4.1 to 4.3.

The following sections discuss in detail the research results based on these main

clusters of themes in the order they are listed in the preceding section:

1.Antecedents: Internal; Organisation; External

2.Processes: Planning; Structure; Influences

3.Outcomes: Indicators; Measures; Learning experience; Future plans

4.5.1. Antecedents for the internationalisation of SGX companies

A schematic diagram of the four levels of themes and sub-themes for Antecedents is

shown in Figure 4.1.

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Figure 4.1 : Hierarchy of Themes and Sub-Themes of Internationalisation: Antecedents

Antecedents

Internal

Business strategy

Economy of scale

Challenge to make it work

Venture capital investment approach

Survival

Sustaining profits

Products Perishables

Brands

Organisation

Resources

Shareholders

External

Small Singapore

market

Regional growth

Close to customers

Culture issues

Born global First mover advantage

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1a. Antecedents (Level 1)—Internal (Level 2)

Level 3 Theme: Business strategy (Strength in industry = Very strong)

Internationalisation, as a major component and consideration of Singaporean

companies in the influence and development of their business strategy is evidently a

very strong theme. This is not unexpected, as Singaporean companies need and desire

to venture overseas. Other related strong themes are ‘Survival’ and ‘Small Singapore

market’ (Level 3) and Economy of scale (Level 4).

Many companies found that in their search for the relevant business strategy,

‘Internationalisation’ was a strong imperative and rationale for their expansion. During

the 10-year period from 1998 to 2007, as companies searched for the appropriate

business strategy to adopt, they inevitably considered international markets. It is

therefore appropriate to conclude that internationalisation is a core or central feature

for the development of business strategy for SGX companies. This finding is not

evident from the review of past internationalisation studies in other countries. However,

the theme of adopting internationalisation as a key ‘Business Strategy’ was quoted by

many of the interviewees and it is therefore important for Singaporean companies.

Executive EG summarised this point succinctly as follows:

I think the key issue on internationalisation is that, being an Asian

company, especially for medium small sized Asian companies, there are

not many role models or cases that we can learn from. We really have to

develop the knowhow as we go. So I think that is going to be a major

challenge that any Asian company who is looking at internationalisation

as a strategy needs to look after.

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He added:

We think that the driving force of the globalisation process is two-fold.

First, we believe that, long term; it is difficult to grow very big and

profitable by just being a manufacturer and not controlling the

marketing and sales of our own products. Second, we believe there are

many good companies in the more developed countries like USA and

Europe where the brands are very well known, but some of these

companies are not very big and often these brands have under-utilised

brand equity, especially in Asia. By acquiring these companies, we can

make use of the brand equities of these companies, and the technologies

that are within these companies to expand their business in Asia.

These comments drew out many interesting facets, such as that Asian companies, as

new entrants to the international arena, wish to seek out successful role models, which

are often lacking because large foreign MNCs are often driven by other considerations

and effects. The second point is that most Asian companies sought to internationalise

and adapt as they went along, modifying their approaches according to internal and

environmental changes.

Another Executive EC pointed out their perspective and chosen approaches: ‘Once we

decided to go overseas, we said we need a clear vision. We said: ‘Okay. One, the

territory is the Asia Pacific region. Two, we want to develop Premium Brand X into a

successful international brand’. Executive EF opined that:

you must have your own products, and your own business model,

because if you don’t have your own business product or model, it is very

hard to compete in the international market. For ourselves, we are very

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fortunate because we have built quite a strong base in Singapore which

is core business, and we don’t have many international competitors in

our business in this part of the world.’

In contrast, Executive EG expressed their strategy as: ‘We are looking for

opportunities to participate in global markets directly instead of being a manufacturer,

being totally dependent on the network of our local customers only’.

It is evident that these SGX companies formulated international strategies using those

basic strengths that they considered could offer them an edge over their domestic and

international competitors.

One company, CH, had indeed organised its worldwide operations in a globalised

manner by locating various operations in countries that offered strategic or tactical

advantages:

We internationalised the whole operation with respect to sales and

marketing, whereas in terms of R&D, all of that is done out of the US

and England. Whereas for technical support, we took advantage of the

lower cost here in Singapore, and better human resources, so the

technical support, remote support and hotline support are all based in

Singapore for our international operations; meaning that all our

customers from any country will get supported out of Singapore. We see

the world as one unified business place. It has different resources, and

different advantages to focus on different kinds of services. For R&D, we

use US and England, for technical support we use Singapore, whereas

for sales and marketing (especially products sales), we use the Internet

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as a platform enabling people to buy software from around the world,

and around the clock on credit card purchases.

Another company, CM, also organised their operations in an international manner:

The inherent strengths in the company, obviously that helps to build a

competitive advantage. Strategically, we try to build a business model

that will be able to compete internationally. Without being competitive

cost wise, no matter what, we will not be able to go international,

because we have to compete with so many companies from all over the

world. I would say our basic design and project management is done in

the UK. In order to be continuously competitive, we have strategically

built a back end office in Malaysia. In Malaysia, the cost is only one

tenth of the cost in the UK. So all the engineering details are being done

in Malaysia now and that will bring down our engineering cost, and we

will also be able to build a more international team as well. We have an

office in San Francisco in North America. They are principally

responsible for business development in North America. We also have

our office in South America. They are responsible for business

development in South America.

The above descriptions show the various companies’ internationalisation strategies

with respect to products, brands and operational efficiencies. Another company

reflected upon their internationalisation with regard to the geo-political situation in a

broad scenario manner.

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Executive EI expressed that:

We always look for diversification opportunities and that has been on

our mind all the time. 1998 is in fact just after the Asian financial crisis.

Singapore at that time for our industry was less affected initially.

However, that led us to focus on the regional diversification. At that time,

we saw that the ASEAN region was unlikely to turn around soon

compared to North Asia. So we focused on North Asia, riding on the

boom of the PRC [People’s Republic of China]. That’s how we started,

and within North Asia, we had the choice of Korea, China and Japan.

We decided to focus on China, and particularly the North-eastern part of

China.

An interesting strategy adopted by some companies was to band together to form a

regional grouping to be able to effectively compete against foreign MNCs. Executive

EJ described their stance:

Therefore, a few of the regional local companies, Singapore, a partner in

Malaysia who owns a Malaysian company, and our Thai friend, three of

us saw the threat that if we do not combine our resources as a group, we

would be too small and not strong enough to take on the large American

international companies that are coming to our region. If we want to

continue to grow and manage our business, we have no alternative but

for us to come together. That is, in a way we are being put in a corner to

think very seriously about going outside Singapore to regionalise

ourselves. I wouldn’t say internationalise because we are only three

companies. We just regionalise ourselves … we look at it very seriously

and realised that we are too small, and if we don’t come together as a

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group, share good practices, share common markets so that we become

sizeable, share our resources, add product agencies to the group, we

would not be able to compete.

SGX companies took great care in formulating their businesses and mapping out their

plans. One company had their internationalisation plan laid out in phases. Executive

EN, whose group encompassed a wide range of businesses, stated:

Our internationalisation plan can largely be broken down into phases.

Although the timing does not quite coincide with what you have, I would

talk about the first phase. The first phase was when we started going into

China, looking at anything and everything. We had a venture capitalist

style. The second phase was taking what we already have and trying to

build major businesses out of it. Today, over the last six years or so, we

have pretty much crystallised our thinking and strategies for our

company moving forward. If you look at our lines of businesses today,

our revenue is mostly from outside of Singapore, and profit contribution

outside of Singapore is close to 80 per cent. So you can imagine that

although we are a Singapore-listed company, most of our businesses are

outside of Singapore.

The above expositions on the many different approaches adopted with respect to

business strategy and its close association with the internationalisation motive is a

unique feature of SGX companies.

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Level 4 Sub-theme: Economy of scale (Strength in industry = Strong)

A strong sub-theme within Business strategy is ‘Economy of scale’. Companies found

that, as the Singapore market is small, they have to venture abroad to add size and

scale to their operations, to reduce costs and to achieve higher economy of scale, so

that they can remain competitive in the international arena.

This is one of the strongest themes that emerged from this study. SGX companies are

driven very much by the need to attain higher economy of scale through

internationalisation. They saw that expanding markets and sales enabled them to

enlarge the production base, and therefore their relative market share.

Executive EB commented:

I think scale and size is important. I find that in our business, you must

be number 1 or number 2. You need scale in that sense. Not only scale in

numbers or market share, or volume, or revenue, but also scale in terms

of production, scale in terms of advertising power.

Sharing the same view was Executive EE: ‘I think for all companies the size of the

market definitely matters, and the size of the market in turn will determine the

profitability of the investment. To some extent the larger the market, the higher the

profitability…’

In the same vein, Executive EI said:

I would say size and scale is one of the key factors for us to decide.

Because costs keep going up, if you don’t have a highly scalable model

that can grow with the momentum, there is no way to help you contain

your cost escalation. I would say scale is an important part. Next I would

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say is competency; you have to keep improving your competency

continuously.

It is obvious from the above comments that Singapore executives shared the common

view that scale was needed because of the small domestic base. Scale is closely linked

to other aspects of their operations, as scale is the starting point for maintaining and

sustaining a business through the strategic advantages it produces. Executive EJ

expressed that:

Scale gives us the confidence for what we believe in our business: (i) size

is critical; (ii) market coverage is important; (iii) having a broad based

network of reseller partners is very important; and (iv) the range of

quality product agencies that we carry is also very important.

Executive EL explained this issue in a clear manner by citing his experience:

For example in China, it took us three years to reach a breakeven point,

but once you reach a breakeven point, and attain a critical mass, you

definitely have economy of scale. For example, you lease a small

warehouse or a big warehouse, if you double the size means you double

the workforce so there is a scale factor.

It is understandable that most SGX companies are pre-occupied with scale, considering

the small size of the Singapore market. Companies originating from the US and Europe

have huge domestic markets and can attain a sizeable scale and the economy of scale

that comes with it in their home markets. This allows such companies to be

competitive both domestically and internationally. In contrast, companies originating

from Singapore can be market leaders domestically, but in comparison to their

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counterparts from developed countries, be tiny in size. This is one major reason for the

focus on achieving higher scale through international sales, and expanding into foreign

countries to add bulk.

Level 4 Sub-theme: Challenge to make it work (Strength in industry = Moderate)

Two companies added another dimension to the imperative to internationalise; namely,

their fervour and desire for their companies to succeed and to prove that their strategies

and business leadership models were attainable and viable. Hence, they quoted as their

driving force to venture overseas the sub-theme of to meet the challenge to succeed.

When questioned on what were the driving factors for them to venture abroad,

Executive EI said:

I would say it’s the result. They need to see the result, whether set by the

board or set by themselves. There should be a congruence of the targets

set. Once they set them, they must believe the conditions are conducive.

So they have to go and choose, like in China, and why they decided not

to go into India.

He elaborated that:

The motivation, I would say part of it, is to make it work, that they see

there are market opportunities. If we were to stay put in Singapore and

apply all these things, I don’t think you can really arouse their interest.

To motivate the people, I would say that we let them see the potential of

what they are doing, and in this case China is really a once in a lifetime

opportunity from the Singapore perspective.

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Another executive, EJ, also cited that challenge was a major driving factor:

It is the passion that we believe we like to do something meaningful,

grow a business that we enjoy doing, passion of growing a business. So

the commitment of continuing to grow the business that has already been

over 10 years old.

Level 4 Sub-theme: Venture capital investment approach (Strength in industry = Weak)

Another sub-theme that was adopted by SGX companies (as a sub-theme on Business

strategy) was the use of the venture capital approach to source new opportunities. As

Executive EN expressed it: ‘we had a venture capitalist style. The concept is taking

what successful technologies we already have, and try to build major businesses out of

it’.

The methodology is that these companies allocated some funds and manpower

resources to source for and make venture capital investments, particularly into

businesses and products that were related to their industries. From the eventual

successful ventures, they proceeded to develop and build new products and businesses

around these venture investments. Over time, the investments became core businesses

of these companies. The strategy is novel and seems unique to SGX companies. One

reason given for this approach is that SGX companies are small and relatively isolated

and are thus often unable to gain access to the good investments offered around the

world. Therefore, such companies use the venture capital approach to gain access to

new frontier technologies, business concepts and projects worldwide. In the process,

the aim is to extend their reach, and source viable and interesting cutting-edge

technologies to supplement their existing businesses.

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Executive EI explained how his company had used venture capital investments to

source advanced technologies for his company:

We decided to plant our flag in China. For the technology side, we focus

on infocomm in the US, and roughly I would say about 25 per cent of our

shareholders’ funds were earmarked to do this. We choose the US

because we see that US is the country that offers the most opportunities.

It welcomes new ideas and the infrastructure was already established as

compared to many countries. When you want to do venture capital, there

are many strong links in the US. Once the idea is conceptualised, you

can get the team formed very quickly and integrate other technologies to

apply into a fairly homogenous market. The US, I would say, is a fairly

homogenous market. So we decided to park about 25 per cent of our

shareholders’ funds to do this.

This executive placed emphasise on how his company had dealt with the venture

capital approach:

This is a deliberate attempt, not just an ad-hoc plan. First of all, we

decided to choose the strategy of outward focus because the Singapore

market is small. In order to grow, we have to adopt this outward focus

strategy and we have to test or develop the proven business model that

can be scaled. It has to be highly scalable, where there is growth. They

were all deliberate attempts.

Level 3 Theme: Survival (Strength in industry = Strong)

One of the strong themes that emerged from the research data was ‘Survival’. This was

another topic that had not been quoted in past internationalisation research with MNCs.

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Past research revealed that internationalisation was adopted for major considerations

such as cost reduction, strategic options, localisation benefits and tax/tariff advantages.

MNCs have not stated explicitly that they internationalised to survive. However, for

Singapore senior executives, this theme was prevalent. Many executives emphasised

openly and strongly that they had had to go international to survive. Reasons given

included that the companies had had to move into the international markets because the

Singaporean market was too small, or because they had been faced with an inflow of

large foreign companies, which carved away at their domestic business. Therefore, as a

protective business strategy, they had to expand outside Singapore to regain

competitive and strategic advantages.

Executive EB of an international food business group put it succinctly: ‘Most of the

time, it is always the issue of survival’. Another senior Executive EC, who is also in the

food business, commented starkly that:

You will realise that if you don’t move out from Singapore, then you will

be dead. Luckily the board realised it, because the profits are going up in

Singapore, Malaysia and elsewhere. Investment is not easy, but luckily

the board said ‘We go’.

When asked on the main imperative to internationalise, Executive EJ stressed that:

I have basically elaborated that was because of survival. We faced

international competitors who are many times stronger than us who have

broader ranges of products, and with stronger financial resources. They

are coming into our territories. Being the founder of the company, we do

have the commitment, pride and passion. We believe we can also run and

build a very good business. We believe that we can fight on.

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The business environment was seen as very fluid, competitive and dynamic.

Interviewees indicated there would constantly be fierce competitors who were ready to

enter their space and snatch away market share. Small Singaporean companies are ever

vigilant on such external threats, and find ways to protect their interests. This becomes

even more apparent when Singaporean companies are operating at the international

level, where the competition is greater and the consequences of failure more dire. As

Executive EJ proclaimed, a key motivational factor for his company was fear of defeat:

We are always looking at our competitive landscape. In business, it is

very dynamic. You are always faced with new threats and we always

evaluate the threats and look at how we can survive; how we can

compete and grow. Because if we can compete and grow successfully,

not only we survive, we can do well. When the threat came from the

international companies, we knew that if we do not compete well, the

company may just go under and all our hard work and years of effort

will be wasted. So I think survival and competition will be the first

priority for us.

Similarly, Executive EM said:

Quite obviously, the Singapore market by that time had become pretty

matured. We just have to go overseas and internationalise, purely for

survival. As I have said, it is not because of the government

encouragement and so forth. We always realised that we have to

internationalise to survive.

Executive EM proved that his internationalisation strategy had worked and CM not

only survived, it thrived in the international arena once having selected and established

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a sound business: ‘For survival as a company, of course you need to have business to

do. We had businesses and we had market access… The key imperative is just survival.’

Another perspective on the survival theme was also given by Executive EM: ‘I don’t

think we have a choice. We can’t stay in Singapore. We have to go overseas. Survival

is the driving force. As you know, in Singapore we do not have scale and customers.

Our customers need us. Basically, you can’t manufacture in Singapore because of the

cost structure.’

The above quotations demonstrate the strong theme of Survival of SGX companies.

This is a theme that has so far not been referred to in international studies on

internationalisation involving MNCs from developed countries.

Level 3 Theme: Sustaining profits (Strength in industry = Moderate)

Some SGX companies gained profitability and success in Singapore. To ensure that

they continued to maintain growth momentum, and to sustain their profits, these

companies started to look at avenues for growth in overseas markets. Sustaining profits

was quoted as one of the imperatives for internationalisation.

Executive EB stated that:

I think the motivating reason must be one of profitability, and the

motivation comes from whether you are able to sustain profitability.

Sustain profitability means that you must have a sizeable market share.

And to build this market share of course is not easy, because we have

competition already on the ground.

Executive EG considered that enjoying good profits enabled his company to invest

further in the business, thereby assisting the company to sustain its profits:

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Well, in the period 1990, 1991, the company was doing well, generally

with good progress. The board of directors was talking about how to

further invest into the company to grow its business and to make good

use of the profits that have been generated.

Level 3 Theme: Products (Strength in industry = Moderate)

Some companies used their existing products as the starting blocks to build and expand

their business. Other companies decided to acquire new products, and deliberately

based their business strategies on the new products acquired. They used the proven

existing or new products as the means to expand internationally. Therefore, spreading

their products and expansion into the new markets around the world was the main

theme of their internationalisation strategy.

When they pondered how to venture overseas, SGX companies would often ask

themselves whether they had the means and capabilities to tackle the international

markets. They would first evaluate and decide whether they had the necessary

management, manpower, marketing and sales, technical expertise and financial

resources. Then, they would ask whether they had a consistent, good quality product

and a good brand to compete against well-known foreign brands. If the answer was yes,

they could plan their move with confidence.

Level 4 Sub-theme: Perishables (Strength in industry = Weak)

Companies in the food products sector expounded that, as their food products are

perishable, have a short shelf-life and do not travel well, they had to adopt an

internationalisation approach. Therefore, they had to set up factories in the various

foreign countries to be able to serve those markets. The typical process was for them to

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establish themselves first as the premium or top market share product in the Singapore

home base. From this launching pad, they could project themselves into neighbouring

countries such as Malaysia and beyond. For these companies, their main imperative to

internationalise was thus driven by the perishable nature of their food products.

This was an imperative for internationalisation for Executive EA:

In Singapore, as you know the population size is limited and the amount

of our food product produced for the market is limited. Our product is

also something perishable, and you cannot produce it in Singapore, and

sell to other countries. So in order for us to grow, we have to go to other

countries like Malaysia, Philippines and other countries as well. That is

how we started the process you called ‘internationalisation’.

He explained:

Our internationalisation plan was more driven by the internal need to

expand the business and really out of necessity for our food business. If

we want to sell to different countries, we just have to be there. Our

product is something that is highly perishable, and not suitable to be

manufactured in a country and exported to another.

Level 3 Theme: Brands (Strength in industry = Moderate)

A consistent business strategy adopted by SGX companies was to use their strongest

and most established Singapore brands and market these in new foreign markets. They

deemed this approach as essential for successful internationalisation.

Executive EC said: ‘…we want to develop a premium brand into a successful

international brand’. He elaborated that:

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We have two brands. We did research, and Brand X went out because

there were other brands in the world with the same or similar names.

Anyway, the image of Brand X is not very good …Brand Y’s research

came out as very interesting, very unique, very mysterious, and very

Asian in a way. So we said OK, we have this very good Brand Y. Then,

we asked how is its product quality? Is it consistently good … As a

strategy, we always said ‘We are in the premium business, we prefer not

to get involved in low-end economy brand sector’.

Regarding needing a premium brand to enter the international arena, Executive EG, in

the electronic products business, described CG’s internationalisation process:

We decided to acquire two premium loudspeakers companies in the UK.

One company is called Company X and the other is called Company Y.

Company X is a premium consumer loudspeaker. Company Y was in

both consumer and professional loudspeakers. We believe by acquiring

these companies, our group’s electronics business can start expanding

internationally …the globalisation process started very shortly after

1992. We expanded in Europe, we expanded in US, and then we took the

brands back to Asia, to expand in Hong Kong, China and the ASEAN

countries. The strategy was to make use of these two companies to allow

our company to gain quick access to premium brand customers, and to

internationalise the distribution network.

Instead of using product brand names as their launching pad to internationalise, another

company used the trusted brand name of their nearly 200-year-old company as the

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platform from which to launch their selected engineering business into the international

market. Executive EM said:

After deciding on a business, the other issue is we must look for a brand.

Our venerable company itself is already a brand, and we have the

prerequisite requirements to internationalise, at least in this region. Our

company is very well known for the last 200 years. The company itself

has experience and track records in oil industries globally. That itself

gives us the impetus, we have the brand, and the competitive advantage

we ended up with.

1b. Antecedents (Level 1)—Organisation (Level 2)

Level 3 Theme: Resources (Strength in industry = Strong)

For the organisational aspect, SGX companies tended to look at their organisational

resources before they ventured abroad. They felt that the HQ in Singapore needed to

have built up a sufficient size and level of resources, such as in its management team,

financial strength, manpower and systems, before it could dare to go enter the

international market. The executives had to decide whether their organisations had

prepared themselves adequately for their global drive, as the availability and adequacy

of resources were important pre-requisites.

Executive EA commented:‘…we are not a very big company. We are not those GLCs

which are more powerful, and have more resources financially’. He explained that

they tended to be more cautious, and not very ambitious. At the commencement of

their internationalisation programme, they did not allocate a huge proportion of their

resources in the foreign country. Due to their prudent approach, they did not encounter

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problems of overstretching their resources. A similar cautious approach was adopted

by Executive EF, who said:

I think firstly is looking at the business itself. We must have a good

business model. We are able to go overseas because our business model

can go international. Secondly, internally we must have enough

manpower and talent. Because if we go to overseas, there will be need

for integration, and what we call control. We need to set up systems. We

must be ready and have a good system before we can actually integrate

with the other side.

Level 3 Theme: Shareholders (Strength in industry = Moderate)

Managers of SGX companies considered that their shareholders had a strong influence

on their internationalisation drive. The management needed the support and

endorsement of the major shareholders before they went international; as such a move

was looked upon as highly risky.

In one case, the foreign joint venture shareholder restricted the boundaries within

which the SGX Company could expand. The reason was that the foreign partner did

not want the Singaporean company to enter markets in which the partner had already

established footholds.

This was the case for CC. When they formed the joint venture in Singapore with a

foreign partner who provided the initial technical support and knowhow, they had to

make a contractual agreement with their European partner stating that the Singaporean

joint venture company would not enter the existing markets of the European partner.

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They were not permitted to set up any factories westwards from India. In other words,

CC could not set up plants in Europe.

However, the SGX companies with foreign partners or shareholders from a foreign

country were able to draw upon the experience and contacts of their foreign

shareholders to extend their international reach. CG had this experience:

Our group’s major shareholders are from Malaysia, and have extensive

exposure in China dating back to the early 80s. They have extensive

exposure and experience in China. As a result, our Singapore listed

company also benefited somewhat from that experience and exposure

through their involvement in China. The investment strategy has been

very much driven by that exposure.

In another company, the foreign partner tended to adopt a conservative approach, and

was hesitant to support the overseas expansion drive of the Singaporean-led

management. It was only after the foreign shareholder had divested their ownership

that the management could more liberally adopt an internationalisation strategy. For

Executive EI, when his Asian foreign partner divested its shares in his company, the

Singapore management was able to adopt a more aggressive internationalisation

strategy:

That (divestment of the Asian shareholder) did cause us to change our

strategy. Because instead of just focusing on Singapore, we were more

regional, more outward focused. That I would say is a main change. It

offered us the liberal thinking to address foreign opportunities that came

along.

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The divestment of the foreign partner liberated CI, enabled it to become more outward

focused and granting it more flexibility to pursue foreign investments.

1c. Antecedents (Level 1)—External (Level 2)

Level 3 Theme: Small Singapore market (Strength in industry = Very strong)

This is a very strong theme of SGX companies relating to internationalisation. Nearly

every interviewee referred to this subject and stated that the small Singapore market

was a key driving force for them to go global. This theme is related to ‘Survival’, as

these companies had to move out of Singapore to survive; a view that came out very

strongly in the interviews. This sentiment is logical as Singapore has a population of

less than 5 million people. The small size of the Singaporean market means that it does

not offer the economy of scale to enable Singapore companies to compete

internationally.

Below are the typical remarks as made by various Singapore executives:

The key thing I would say is that in terms of our thrust, our plan to go

international is out of necessity. And if you remain in Singapore, you are

always a small player particularly in our kind of business, food. We are

limited by population. No matter how big you are, there are only 5

million people.

In Singapore, as you know the population size is limited and the amount

of food products produced for the market is limited. Our food produce is

also something perishable, and you cannot produce and sell to other

countries. So in order for us to grow, we have to go to other countries…

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The biggest motivation is basically the fact that there are much bigger

markets than Singapore and what we have here in this region, and

outside of this region.

I think internationalisation is an option that can’t be avoided for

Singaporean companies. You must go global because we are very small.

We tried to build our population to 5 million, and that number is still

very small, compared to what you have in other regions here.

At that time, about 70 per cent of the group profit came from Singapore.

It was a dangerous situation because firstly, the Singapore consumer

base was very small. At that time, the Singapore population was about

3.2 million. Even if we tell all Singaporeans to drink double in-take of

our products, we still cannot sell much. Our disadvantage is our small

population base.

No choice. Because of our small country, any companies operating from

small countries have to be international. Look at all the international

Swiss companies, Dutch companies, because they are small.

I think for all companies, the size of the market definitely matters, and

the size of the market in turn will determine the profitability of the

investment. To some extent the larger the market, the higher the

profitability.

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Look at Singapore, it’s a very small market. Now, of course our board

has actually decided to look at elsewhere.

Singapore is a very small country with a small domestic market. As

Singaporeans or Singapore companies, if you want to expand your

businesses, obviously you have to go international because our domestic

market is too small.

Singapore is too small as a country. Singapore can only be used as a hub.

It can never be treated as a market for any given business where people

look at building a great company. If you are thinking of building a great

company, the Singapore market can never be your base. Singapore can

only be used as an operating hub, and naturally when we are looking at

transitioning ourselves into property and property investment, we would

never look at Singapore as one market for us. Even today we have yet to

make any investment in Singapore. It is still overseas: China, Japan, and

the United States.

As I said Singapore’s market is so small, and when we took over the

company, it had become so small and the core business is either lost or

already been made irrelevant by the change of times. In order to survive,

we have to look outside of Singapore …that’s the critical factor why we

have to be internationalised.

The common theme uniting these quotations is that, because Singapore is small, the

SGX companies had no choice but to go international. The consistency with which the

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interviewed managers raised this point and the clear importance that they placed in this

as a motivating factor for internationalisation gives a clear indication of the strength of

this theme.

Level 3 Theme: Regional growth (Strength in industry = Moderate)

One interesting difference for SGX companies as compared to MNCs in the prior

literature is that SGX companies often referred to regionalisation, rather than

internationalisation. Singaporean companies usually expanded progressively from

Singapore to the regional markets such as Malaysia, Thailand, Indonesia and Australia.

Further afield, they expanded into China, India, Korea and Japan, before moving on to

Europe and the US. Some SGX companies, unlike their MNC counterparts, were more

restrained, while some even decided that they would not venture to South America or

Africa.

Executive EC commented on his company’s gradual regional expansion:

First of all, we already have businesses in different countries like

Malaysia and the Philippines over the years. In order to pursue our

business strategy initially, we don’t necessarily expand the overseas

operations in terms of increasing the number of countries in which we

operate …Now our geographical coverage is Asia-Pacific rather than

international.

This executive put his expansion plans plainly as: ‘even though we have the world at

our feet, I always believe that we have to do something only in our front yard and

backyard. I don’t want to go further, like into Eastern Europe or America’.

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Executive EF had a similar regional expansion strategy:

During 1998, we had some operations in neighbouring countries like

Malaysia and Indonesia, but we are looking even beyond these countries.

So the first approach is that we’re looking at two new regions. One is

China and one is Australia, but we choose Australia in particular

because our business is something that we need to go to a country with a

large market, and at that time China was not ready yet.

Executive EJ also adopted a regional approach:

If we want to continue to grow and manage our business, we have no

alternative but for us to come together. That is in a way we are being put

in a corner to think very seriously about going outside Singapore to

regionalise ourselves.

Unlike large MNCs, which are truly international companies with operations spread

out widely around the world, SGX companies tend to adopt a regional approach,

finding comfort in proximity and familiarity.

Level 4 Sub-theme: Close to customers (Strength in industry = Weak)

One SGX Company, due to the particular nature of its business, had to adopt a ‘near

market, near customer’ internationalisation strategy. They proved to be very successful

in the execution of this strategy, and grew to become a dominant world player in their

sector. The sub-theme is worthwhile noting as it gives one strategic approach that

clearly justifies the internationalisation drive for any company, whether Singaporean or

foreign.

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For CD, the ‘close to customer’ approach was a critical business strategy:

Singapore is a small economy, especially for our offshore and marine

businesses, we serve international customers. In fact at any one point,

our international customer base forms over 90 per cent to 95 per cent of

the group’s business. When we adopted the strategy of near market near

customers, we decided to go to where the customers need our services

most.

Level 4 Sub-theme: Culture issues (Strength in industry = Weak)

In some past research, the cultural differences and difficulties were cited as barriers to

internationalisation (Hewapathirana, 2009), especially for small companies. It is

interesting that in this Singapore study, few companies cited cultural differences as a

barrier. Therefore, it is a ‘Weak’ theme. There could be a few reasons for the cultural

differences being a lesser issue for SGX companies:

1.Singapore has a multinational environment, with a mix of Chinese, Indians,

Malays, Europeans, Americans and Australians working in a very cosmopolitan

city.

2.English, which is the international language of business, is the common working

language of Singapore.

3.Many SGX companies have already deliberately built a multinational culture and

environment within their companies, and therefore are ready to adapt in the

foreign factories and offices.

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Executive EG overcame the potential cultural problems by employing people from

diverse countries and backgrounds:

I think we are relatively successful as a manufacturer and an exporter.

And we are very successful in that basically we train a lot of the

management from different countries, to work with the company for a

long cross-cultural experience. It is not unusual that we have senior

management who worked in the company 10, 20, 30 years. All these

people understand that as a manufacturer alone, trying to expand the

business sustainably and reliably is difficult. The team has a global

outlook. So there is good consensus within the management team about

expanding globally.

To overcome potential problems with new foreign investments and to counteract

possible integration problems, one company, CE, said that they took great effort to

screen investments and get good people to join them:

we need to develop a management team with strong cross cultural

experience, that could adequately cover all the key global markets…as a

manufacturer, we put a lot of effort into hiring, screening and developing

people, which takes time... There is always a pressure of trying to do the

best you can with insufficient management capacity, and I think that is

the main feature of the globalisation process.

Level 3 Theme: Born global (Strength in industry = Moderate)

An interesting theme that emerged was that some Singaporean companies were indeed

‘Born global’. A few companies have adopted the strategy to ‘bypass’ the small

domestic market in Singapore, instead choosing to launch themselves straight into the

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international arena. This finding is interesting as ‘born global’ companies are thought

to normally originate from developed countries, which have the professionals,

managers and entrepreneurs armed with strong technology, finances, resources and

knowhow to make a quantum leap into international markets (see the Literature

Review in Section 2.3 of Chapter 2).

In the case of Singapore, the ‘born global’ companies were essentially driven by the

non-significant domestic market size. So to seize opportunities, such as to enter new

markets that were opening up, or to capitalise on the nature of certain products (for

example, fast changing IT technology products), these ‘born global’ companies had to

take a ‘leap of faith’ and venture directly into international markets. Such companies

also tended to take more risks.

Executive EB explained the ‘born global’ case of his company:

I think Singapore as a market is very very small, and we already realise

that is a problem for us. The only question then is how to find a comfort

zone, which will allow us to be able to export and to be able to prosper

from there. So we decided that we wanted to move there [the Russian

market], when the Iron Curtain actually came down, and was dismantled.

He cautioned that it was very difficult for his group at the beginning. He felt that it was

important that his company was the first mover in the new markets. He considered that

it was therefore justifiable for them to jump into the markets at the right time. He

pointed out:

Of course, we had many barriers at that point in terms of language, in

terms of changes in regulations, in terms of customs, in terms of changes

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in laws and also regulations governing trade, tariffs which were the most

important for us.

In the case of Executive EH, the ‘born global’ approach was triggered by the nature of

their products:

When we first started, we were already been an internationalised

organisation. We embarked on the overseas market even before we

started establishing our market back home in Singapore. And, if you

trace our history from when we focused on the manufacturing of IT

products or IT solutions, the bulk of our business was generated from

overseas (from Europe, United States). And of course the IT business

was very competitive. In 1998, we faced the Asian financial crisis, and

that led the group into changing its entire business focus.

Level 4 Sub-theme: First mover advantage (Strength in industry = Weak)

One company considered that they had a first mover advantage in their

internationalisation strategy, as they had decided to go into the less developed and

more difficult markets. For example, one company targeted the Russian, East European

and former Soviet Union states at a time that these markets had just begun to open up

in the early 1980s and 1990s.

Similarly, Executive EC valued the first mover advantage in emerging markets in Asia:

‘We look at each virgin market in the same way. We seized the first mover advantage

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in Vietnam in 1981, then we went to Cambodia and we went to Laos’. He elaborated

that:

Because we are so small in Singapore, we need to find new markets.

Mongolia is a small market, and we are there. We are the biggest plant

there for our products, compared with another local brand. Sometimes in

difficult markets like Papua New Guinea, the margin is very high

because nobody dares to go, and we are the only one there. Nobody goes

because of the law and order problems.

Executive EB thought that the first mover advantage in new markets was a very

important factor for success:

Once you enter the market place, and you are comfortable with it, it will

become your comfort zone and you will find that all the other guys who

want to come in will be faced with the same barriers that you faced at the

beginning.

4.5.2. Processes for the internationalisation of SGX companies

A schematic diagram of the four levels of themes and sub-themes for Processes is

shown in Figure 4.2.

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Figure 4.2 : Hierarchy of Themes and Sub-themes of Internationalisation: Processes

Processes

Planning

Strategy drivers

Formal / informal process

Consultants

Frequency of reviews

Structure

Centralised / decentralised

Localisation

Management strength Core values

M & As Divestments

Business model

Influences

Government incentives

Major shifts Shareholder changes

JVs / Partners

Success / failure factors

Entry barriers

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2a. Processes (Level 1)—Planning (Level 2)

Level 3 Theme: Strategy drivers (Strength in industry = Very strong)

With regard to the key drivers of the internationalisation strategy of a SGX company, it

was consistently reported by the interviewees that the CEO was the main driver, with

the support of the management team. The board was regularly consulted, but usually

endorsed and supported the internationalisation programmes proposed by the CEO and

his team.

The following series of quotations from executives demonstrates that in SGX

companies, the CEO drove the business strategies, particularly in relation to

internationalisation, which was more challenging and required direction by someone

senior with the vision, drive and commitment to carry through the plans. The leader of

internationalisation also needed to have the authority and be empowered to lead the

entire management team and direct company resources.

The comments of the executives were:

It was more of a management initiative as CEO of the company, together

with my other colleagues; we pursued this strategy more vigorously.

Three of us are founders. You can say that as the founders of the

company, we are the promoters and make the difference in pushing this

effort abroad. It started from us...

I think the management team has to drive the plan because the board of

directors is there as supervisors, and anyway they are not full time. The

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board worked with our top management team, but executive directors

and the management must drive the business. The board gives guidance.

The management must take direct responsibility of the strategy, as we

are directly responsible for our performance.

The board sets the direction but I do the search and the implementation

myself.

The board has set a general direction, and all we need to do is tell them

that we are progressing well, and we are making money. So the board

has very little influence.

I think it’s the CEO, myself (who drove the internationalisation efforts)...

In our company, the culture was the management would need to develop

the strategy and how to manage the business. Then the board would

review and endorse, and make suggestions or recommendations if

needed. So the board was really on the decision side and the

management was really on the execution side. The management would

propose approaches and strategies, the board would review, debate,

discuss and endorse.

The CEO initialised the whole discussion and the board will participate

in the deliberating and articulating some of the important considerations;

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and management will also participate in looking into the aspect of

operational problems that one can expect.

The CEO of the group takes responsibility. Of course, the execution will

then be delegated down to the management level.

The CEO was the one who conceptualised, identified the need because

this was a 180 degrees change. Instead of an inward focus, it was an

outward focus. In order to adopt that, we must think of our team, do we

have the team that can perform in the foreign country?

I would say initially, the CEO drove the change, and subsequently you

need the support and endorsement of the board when you decide to scale

it up. Initially, you just play with it I would say. Until you need big

money, then you need the full board support. That was the direction.

The driver, apart from myself, will be the team of people who have been

in the industry for 30–40 years.

From the above quotations, it is evident that the CEO and his or her team led the

internationalisation drive. This is similar to foreign MNCs, as outlined in the literature

review. The above quotations also explained the roles of the board versus the CEO.

The board’s role was one of supervision and guidance, while the CEO was involved in

directing and implementing the internationalisation plans.

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It could be generally valid that the chief executives played a critical role in leading

their companies such as in their internationalisation strategies. However, it is also

possible the CEO’s role could be overstated in respect of their responses, as the CEOs

were the main informants for the interviews for the 14 sample companies.

Level 3 Theme: Formal/informal process [in figure] (Strength in industry = Strong)

Another interesting research result from the interview data was that most SGX

companies did not have a formalised approach to developing, planning and monitoring

their adopted internationalisation plans.

For such an important matter as strategy and internationalisation, it came as a surprise

that the majority of SGX companies took an informal approach to the study, initiation

and monitoring of their internationalisation strategies.

Executive EA explained:

Our approach is rather informal, but yes, we do track. Every year, we

have the numbers in front of us. So far, because of the way we pursue

internationalisation, no one country has such an alarming level of

activity or turnover that we need to backtrack or change our plan.

Another Executive EF said: ‘I think we update as we go along. The more important

thing is we are involved in the business day to day’.

Although strategy formulation was informal, monitoring was typically vigorous.

Executive EG said:

Actually, we have very extensive and regular reviews of the development

of acquired companies, and the distribution network. Because, honestly

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speaking, in the early days, they were not very profitable, and they

sometimes created losses for us. So it’s always high on the management

agenda to have regular and periodic strategic reviews and strategic

meetings as well as at least monthly review of performance. On the

review side, I would say they were very closely controlled and monitored.

However, the key issue is the development of knowhow about how to

manage these companies, and that took some time.

Level 3 Theme: Consultants (Strength in industry = Strong)

It is interesting to note that very few of the SGX companies in this study used

consultants. The management teams typically felt that they were best able to decide

and map out their own plans. When queried about whether they used external

consultants, Executive EA said: ‘It is all internal’, and Executive EB opined: ‘Actually

the best consultants are our own experience in the past’. Executive EC stated plainly:

‘We have no consultant’.

Companies that used consultants tended to be selective regarding that usage. Executive

ED said:

We develop our own strategies over many years. I think initially we use

certain consultants to improve our business performance in operations

and so on. Subsequently, we use consultants to look at strategies. We

must use consultants correctly.

Executive EK said: ‘No external consultants. As I said, it is extremely fluid. There is no

grand plan to go after a particular country. Everything is moving round, talking to

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people and very opportunistic’. Executive EM felt that for his industry, his staff was

better placed to develop their own strategies:

No, this is a niche market. I think our guys are the experts. I think

nobody is better than us. Because there are only less than a handful of

such companies in the world. How do you find external consultants? If

there are external consultants, they probably won’t survive. Too small a

market.

In contrast, one GLC did use consultants widely to assist them in their development of

an internationalisation strategy, and regularly to monitor and check on their plans.

Executive EL, who’s GLC, is in the logistic supply chain business, laid out the

company’s process of formulation of their internationalisation programme:

We engaged a consultant to help us to look into possible areas. In fact,

we conducted scenario planning where we had a consultant assess the

trend in 5 to 10 years, what will be the emergent type of business and

what we could go into … Next we had another internationally reputable

consultancy company to conduct a strategy planning exercise. They

helped us to identify the business strategy, which sector we wanted to be

in; and for each sector, what were the core competences we must have in

order to do well in the sector. We engaged a consultant for the second

phase, more to develop the strategy and the internationalisation plan.

The above is an example of external consultants being used repeatedly to study

operations, formulate strategy and propose implementation plans for a GLC’s initial

internationalisation plan. Through this process, the GLC was very successful in its

eventual overseas drive.

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Level 3 Theme: Frequency of reviews (Strength in industry = Strong)

On the issue of frequently monitoring plans, a few companies reported that they

adopted an ad hoc approach. One company CL even said: ‘We just shoot from the hip’,

and ‘it is rather very much a hit and run process...’

However, as expected, most SGX companies adopted regular and proper review

processes. Some held their reviews yearly, others every 2 or 3 years, while a few had

5–10 year plans that were reviewed and updated regularly. The following quotations

demonstrate the array of frequency of reviews:

Yes, we do track. Every year, we have the numbers in front of us. So far,

because of the way we pursue, no one country has such an alarming

level of activity or turnover that we need to backtrack or change our plan.

We do a review in maximum two years. It could be even shorter than two

years; we do an overall review of the strategy. But in China, we see that

China has still a very much centrally guided economic plan. So the five-

year plan is a good guide for us.

We have a three-year plan; a five-year plan and we have an annual

budget. We have strategic meetings. The board gets involved in the

strategy discussion. We have done it internally using some of the well-

known consultants. We use consultants to validate our strategies.

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We have a 10-year plan focusing on the priority areas, because although

we have the resources, we do not have unlimited resources, so we

prioritize the areas.

2b. Processes (Level 1)—Structure (Level 2)

Level 3 Theme: Centralised/decentralised (Strength in industry = Very strong)

On the theme of whether SGX companies tended to adopt a centralised or decentralised

approach, the interviews produced mixed results. Most companies used a mix of

centralised and decentralised operations. Finance and technology tended to be

centralised, while sales and HR were decentralised. Most companies said they

structured their foreign subsidiaries according to the need of the situation and

circumstances.

For CF, the approach was dependent on the level of ownership in the foreign

investments:

It is dependent on one factor: percentage of investment. But if it is a

wholly owned investment that we are considering, then we have to look

at the set-up and headcount issue during the due diligence stage. But if

this is not a majority share investment, then we have two options. One is

like most people do, the major shareholder will appoint the GM, then we

the minority shareholder will appoint the CFO. The other option is that if

our stake is not substantial, then you just want to leave it to the existing

management. If we hold a major stake, we manage everything.

For most SGX companies, one key area that is under central control is finance.

Executive CF stated: ‘For us, the more important thing to do is firstly to centralise our

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finance. We get closely involved in the finance part. Secondly, we get involved in the

purchasing. The rest, technology, is not an issue to us’.

Other non-critical areas, or areas requiring responsiveness to ground conditions in the

foreign country, were decentralised. For company CM:

They are mainly sales marketing units and product supply is from central.

The manufacturing arm is run by the group HQ. These business units are

self-contained; the sales marketing company has their own Profits and

Loss accounts. Their management needs to be responsible for their

individual Profit and Loss. But they all buy products from the group,

who is responsible for technology product programme, supply of

products, and supply of strategies and resources.

He added: ‘Product development is also centralised … we centralise the HR of all the

senior management within the business unit’.

For Executive EL:

We only centralise three things. First is the financial control. To us, it is

quite important. We ensure consistency in compliance because as a listed

company, we need to make sure that all the financial rules are complied

with properly. That is centralised. Secondly is IT. Because IT has to be

consistent throughout all the companies in the region so that they can

communicate and there is economy of scale. The third is the marketing

strategy.

The SGX companies usually decided from the onset those operations that should be

centralised and those needing to be independently established. Companies need to be

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flexible, while also consistently applying control measures across all countries or

operations. Most companies emphasise internal audits in addition to financial controls,

although financial control remains the most crucial and tightly controlled monitoring

measure. For example, foreign subsidiaries are required to submit budgets on a yearly

basis. Following approval by the Singapore HQ, the local operating unit must then

adhere to that budget. These budgets are used to track performance. As executive EJ

put it:

The area that we insist upon and we won’t compromise is our financial

governance. And this is where our corporate CFO’s financial standards

are being imposed onto each country’s financial standards. The CFO of

every country reports back to the Group CFO at corporate headquarters.

This is one area we don’t compromise. The CFO there will know exactly

that all the financial reporting and practices have to follow our

standards.

In cases in which companies need to protect their brand image, though sales could be

decentralised, marketing is often centralised to guide the overseas operations on

branding, advertising and various aspects relating to brand promotion and publicity.

Likewise, other companies deem other areas critical for the success of their business,

and thus centralise these areas rather than compromise on them. This was the case for

CN: ‘There are a few things that we never compromise. Financial, corporate

governance and controls are centralised. Legal and human resources have central

policies but local implementation. Those are not negotiable’.

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Level 3 Theme: Localisation (Strength in industry = Strong)

Localisation is a theme that is consistent with past research on internationalisation and

is rated as a strong theme in this study. Like other MNCs, SGX companies tended to

favour localisation. The advantages of localisation of management in foreign

subsidiaries are well accepted and understood. Some SGX companies adopted a strict

policy on this matter, while some were flexible and used a mixed approach, usually

depending on the availability of senior management to be sent to manage overseas

plants and factories.

Localisation of management is a consistent theme for SGX companies. One reason is

the lack of central resources at the Singapore HQ level. Another rationale is that the

local market could provide an excellent resource pool to tap management talent, who

are at the same time familiar with local issues and can tackle local regulations, HR and

tax issues more effectively.

Another quality that executives reported looking for in management was leadership

quality. They had to deploy, in every subsidiary, a country CEO who was competent,

because he had to know how to lead the team as well as motivate them.

For Executive EC:

We make use of a lot of local talent in our foreign production activities.

For example, we use almost entirely the local Australians in our

Australian venture. After all, they are more familiar and in this

agricultural sector, there is more talent in Australia than in Singapore.

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Executive EB rationalised:

I think it is very important factor because I don’t think the locals

themselves can do a better job, if you are talking about

internationalisation effort because we are going into so many countries.

I mean today we are operating in more than 70 countries.

Similarly, Executive EC said:

Because Singapore has so few people, everywhere we operate, we have a

large percentage of local personnel. Say in Brazil, we have 8,000 staff.

Our people seconded from Singapore make up for less than 50 persons

out of 8,000.

A few SGX companies expressed a definite preference for localisation and recruiting

from within the target country. Executive EH gave his position as:

I think the first factor that we consider is wherever we go, we must use

local people. That’s the first approach. Use local talent, the local people.

We also divide the job scope in our head office. We have certain people

in charge of certain countries. There will be direct reporting. Our

management is quite flat, that means you report to the correct guy and

need not go through too many layers.

Among the participating group of 14 SGX-listed companies, there was only one

foreign headquartered company (in Hong Kong). The rest of the sample companies are

headquartered in Singapore. However, no differences were observed between the

responses from the chief executive of the Hong Kong headquartered company and

those of Singaporean-based companies on internationalisation actions. For instance, the

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same approach on localisation was adopted. Executive EG of this Hong Kong

headquartered company said: ‘For all the business units, even the most senior manager

is a local manager. I think on the aspect of a local manager, there are certain things

that are crucial’.

In the case of CH, its CEO said:

I think everything started off with people. In today’s business, I think

knowledge is a key thing and knowledge does come from people. Our

practice is that we always use the local knowledge, people from that

particular country. We don’t want to send our people over to learn about

that location, by then it will be too late. Straight away we go into a

country, we recruit local people with the local talent and knowledge with

the ability to execute our plan. I guess that is a key importance.

From the above data, it can be seen that SGX companies adopted as much localisation

as possible. They allowed the local team to manage the business. They continued to

use the local systems, and continued to leverage on the market expertise. However,

they reviewed how to improve operational efficiency, shared best practices and sought

to improve both sides of the business by reflecting on and adopted as necessary new

best practices. Evidently, localisation is very important, as reflected in this quotation

from Executive EK:

We don’t differentiate. As far as we are concerned, this is an MNC so

this is not really a local Singapore company. If you depend on

Singaporeans to expand, you’ll be dead. Singaporeans by and large do

not like to go overseas. They tend to be extremely pampered and

preferred to stay put in Singapore. It is very difficult to find

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Singaporeans in order to go and expand your company. Furthermore, in

our business there is no other Singapore company that has that kind of

scale that we have, which means that if we wish to expand, we have to

recruit foreigners because most of the international logistics companies

are foreign companies. If we want to have talent to help us grow,

basically we take from our competition.

Level 3 Theme: Management strength (Strength in industry = Strong)

The availability of strong management before a SGX company would venture abroad

was another strong theme. SGX companies, being Asian in outlook and nature, tended

to be careful and conservative. They would not embark on an overseas expansion

programme unless they had ample local management resources. In fact, the boards

were hesitant to approve overseas investments, unless management could prove that

they had sufficient resources for diversion to the overseas projects. Many SGX

companies had management teams comprising executives from a mix of several

countries.

In the words of Executive EC:

Our company, in my opinion, is relatively successful. Number one, we

have a team, a united team. Half my corporate team members are

foreigners. We have Dutch, British, Indian, French and Canadian. In

fact, this is very sensitive if I said this a few years ago, as previously, our

company staff was 99 per cent Singaporeans and Malaysians. I don’t

think we could have succeeded if we remained that way.

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Executive ED explained: ‘We believe that our management style and our management

culture allow us to operate effectively in a foreign environment even though culturally

it is quite different from Singapore’. For Executive EH, he felt: ‘I assume that the

management team is professionally qualified and they are capable of handling all the

technicalities’.

Echoing the views of the other executives, Executive EH noted:

A key importance is that the group itself must have an internationalised

culture, in the sense that you take different ethnic people as the

corporate culture prevails, and then an international rather than ethnic

culture prevails. Unless you have a strong corporate culture, it is very

difficult for a company to expand beyond its own country.

The typical SGX company, having embarked on the internationalisation path, also

undertook efforts to evolve and develop an international culture within their company.

Such efforts allowed them to accumulate the global experiences, connections and

networks that enabled them to look easily at opportunities overseas. Thus, they also

became better at being able to evaluate and seize opportunities, and more ready to

execute overseas projects. One observation was that while many companies

encountered opportunities overseas, the question of whether they were ready to

negotiate a deal and execute their plans arose. SGX companies had to prepare a culture

and management group that was ready to evaluate, decide and execute such

opportunities, but that also suited their internal structure and preferences; that is, they

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needed the knowhow and resources to be able to get things done. This need for

readiness was expressed by Executive EJ:

We believe in getting companies that have a similar mindset. People who

are entrepreneurial, people who built their businesses on their own. But I

think what is more important to us is the quality and the integrity of the

team and the founders. We believe that we need to look for a good

company with good leadership, good people and infrastructure.

Level 4 Sub-theme: Core values (Strength in industry = Weak)

Related to the main theme of management strength, one company cited that they

deliberately focused on building a strong set of core values as their corporate culture,

and used these strong and consistent core values as the ballast to strengthen their

overseas operations. The aim was that the entire group should share common values

and beliefs. Executive ED said of CD’s use of core values to bind employees together:

Because we have a diversified workforce all over the world with different

cultures, to glue them together into the company, we roll out the core

values. These core values were discussed at top management level and

operating level, and we rolled it out to everybody so that every employee

understands what are our core values.

Level 3 Theme: Mergers & Acquisitions (Strength in industry = Moderate)

The SGX companies achieved growth through a combination of organic (that is,

internal expansion) and inorganic (that is, external acquisitions) means. In their efforts

to expand internationally, some companies adopted the strategy of growth through

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international M&As. Their strategy was to acquire additional businesses in their

existing or new areas, which would enable them to leapfrog into international markets.

Companies divest sound international businesses after building them up for profit

motives. As Executive EC said:

It (the divestment) came as an opportunity because it so happened that

we sold the business to Company X who offered a very good price. We

are in the business of making money and when there is an opportunity to

realise a huge capital gain, we saw no reason why we shouldn’t do that.

When company CA bought another brand from a competitor, the rationale was justified

as: ‘Just like the way we bought Brand Y which was a very good move … so as to

synergize an affinity to our own Brand X’.

Level 4 Sub-theme: Divestments (Strength in industry = Weak)

While some companies grew through M&As, which brought significant gains in

international coverage, some companies went in the opposite direction, to exit certain

businesses and products through divestment. The reasons given for this were varied.

Executive EG exited a certain business because it was unable to compete in that sector.

This same company later exited the industry because it found that its business concept

was unsustainable. Executive EG said:

And as a result, the container business was one of those affected in terms

of profitability and we were compelled to divest. Like many other

businesses when we are not able to compete with China, either we

continue to lose or we move out.

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When queried about the motivations or reasons for some of their divestments, one

company responded that: ‘The simple answer to that question is profitability’. Another

company explained that their divestment of an international business was because of its

decline in profitability; as a result, they were compelled to divest. Like many other

businesses when they find conditions to be difficult, such as when they are not able to

compete in foreign domains, to avoid continuing losses, companies might decide to

move out or quit those international markets, or divest, even though this would incur

losses.

Thus, it seems that companies’ divestment of businesses might not always be linked to

the internationalisation plan. It could sometimes be due to group restructuring, or

opportunistic reasons such as selling an operating unit to realise a profit. However,

some companies found themselves needing divest or close an international business

after venturing in because of adverse competition, a difficult environment or other

reasons. In these cases, the decision was made to exit to avoid further losses. In such

instances, the executives considered that the internationalisation of those businesses

had failed.

Level 3 Theme: Business model (Strength in industry = Weak)

A few companies offered the view that they had needed to develop an adequately

robust and proven business model domestically before daring to venture globally.

This theme is described by Executive EG:

We have a strong business model. Today we have a manufacturing arm,

which runs two small, high-end factories in the UK, and a big factory in

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China that makes the more mass market, high volume products. We have

individual business units in key markets, one business unit responsible

for the US market, Canada, Mexico and Latin America. One business

unit responsible for the UK because that is the most complex, with

factories, product development, technology development, one business

unit in Europe, one business unit in Asia, and one business unit in Japan.

Executive EJ felt that his company’s strength of its business model was its extensive

network: ‘The next thing that is also very important to us is the network that we have.

Having the network coverage, over 20,000 partners in the six countries, is very

important to our success’.

2c. Processes (Level 1)—Influences (Level 2)

Level 3 Theme: Government incentives (Strength in industry = Very strong)

One of the key research questions stated in Chapter 3 asked whether the Singapore

government incentives had assisted SGX companies to go global. It is a long-standing

policy of the Singapore government that incentives, assistance programmes and

overseas missions are carried out each year to help SGX companies to venture overseas.

IES was established to assist Singaporean companies find trade, investment

opportunities and business partners in overseas industries. The expectation is that these

Singapore government incentives will have had an impact on the internationalisation

plans of the SGX companies interviewed, as the promotional efforts have been ongoing

for over two decades.

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The responses from the interviewees consistently showed that they had not benefitted

from, or had not needed, the government incentives. This is a very surprising discovery.

The interviewees gave various reasons for this lack of usefulness of the incentives.

Executive EH put it bluntly: ‘As far as the Singapore government incentives are

concerned, I don’t recall we were engaged in any of these incentives programmes’. For

Executive ED, the incentives were inconsequential:

The government doesn’t really give us the extra push. The amount they

give us is very minimal. They offset, for example, your overseas expenses

and overseas losses. They allow you to offset some of your profits from

local operations but that is natural and nothing special about that.

The major reasons as reported by the SGX companies that they had not benefited from

government incentives and promotional efforts are outlined below.

Firstly, many of these companies had begun their internationalisation efforts before the

government started to promote this area. As Executive EC expressed: ‘As I said, when

we first started moving out, the government was not yet talking about

internationalisation’.

Executive EJ said:

Even though the government offered many incentives to bring people

overseas, we believe in depending on ourselves, on our internal strength,

rather than looking to the government for help. In fact, throughout the

history of our group, I think we relied very little on the government’s

support, or the government telling us to go to this place or that place. We

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believe that as businessmen, we should be able to run the business better.

We believe that as businessmen, we should know our own business better

than anyone else in the government. Government may have a vision.

Government may have certain strategies for the country to grow. If we

can complement them through our own internal vision and internal

strength, we do not really need the government unless we need financial

support or whatever, but I do not think we would need to call on that.

Second, for some companies, the nature of their businesses was such that they were not

eligible for support, or else they did not need government support and therefore the

incentives were not applicable to them.

Executive EF explained:

The Singapore government’s emphasis is different from ours.

Singapore’s land is small and they emphasise high value-added goods.

Our business is construction equipment. We need a lot of space for

storage. The government is not encouraging our kind of business, and

any scheme that they come up with, we are not qualified. So, it’s

unfortunate to say that we are on our own when going international.

Executive EK was negative too: ‘No, whether the government wants us to

internationalise or not, it is irrelevant’.

Third, some companies needed to undertake a global approach for their businesses and

therefore did not need government incentives to push. These were generally the so-

called ‘born global’ companies, as mentioned previously under the theme ‘Born global’

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in the previous Section 4.5.1. These companies had to venture out for their own

reasons and objectives; they did not wait for the government to incentivise them.

Executive EB said:

No, I don’t think the government incentives impacted what we need to do.

If you have to do it, you better do it because it is for the survival of your

own company, and it is for the good of your own profitability. By the

time you ask the government to do anything for you, I think it is too late

already.

For Executive EM:

The Singapore government’s effort has fairly low influence on us. We

decide on a place and when we go there, we will negotiate with the local

government quickly and then of course we would let IES know because

we are still part of Singapore. We are on good relationship with IES, but

I think it is difficult for them to know our business. We have to decide on

the business on commercial reasons first.

Fourth, for some of the companies, their business strategies required

internationalisation (for example, the need to be ‘close to customers’). These

companies could not wait for government incentives either. CD explained their priority

as:

No, I think the purpose of internationalisation comes from the needs of

our customers rather than from our government. We have always been

very customer-focused, and today customer focus continues to be a core

value of our group because that is the reason we exist as a business.

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Fifth, for some companies, government bureaucracy hampered their use of the

government incentives. In the words of Executive EB:

I won’t really say so. It is actually a good encouragement, I would say.

Of course, nowadays as we become more structured, we tend to use some

of the incentives. But in the past, I must say unfortunately by the time you

think of using the incentives, it is too late already. Then they would say

you haven’t complied with certain procedures, therefore you are not

qualified to apply for it and so on.

A small number of the SGX companies did benefit from the government incentives,

either directly or indirectly, and were appreciative for the assistance. In addition, as

Executive EA noted:

Not so much in terms of government incentives because it didn’t really

affect us, although some of the incentives provided by the government do

help, like tax incentives. Profits repatriated to Singapore now enjoy tax

exemption. But our internationalisation plan is not a response to the

government‘s call on this.

Executive EE also recounted a positive experience:

We are encouraged to move out to various emerging markets especially

by government agency like IES. Those markets are emerging markets

and definitely have impact. When delegates led by government agencies

go to new markets that has undoubtedly brought along a following if you

like. Of course, their lead in taking delegates to new territories, new

markets, is obviously very helpful.

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It is interesting to note that even for the GLCs in the study sample, they had not waited

for the government’s call to venture overseas; nor had they needed the government

incentives. This is clear evidence that internationalisation imperatives were stronger

driving forces than the government intervention for the companies in this study.

Executive EL who worked in a GLC gave this perspective:

In fact, the parent company has set out quite a clear vision for the whole

group that we need to grow, and to grow overseas. Singapore is a very

small market. Secondly, being a government-linked company, preferably

our growth should come from overseas so that we don’t have to compete

with the local players with regard to resources, connections and others.

The parent company therefore encouraged most of the companies to go

overseas. It is a general direction, and the management and the board

also felt that there was tremendous opportunity to go overseas anyway.

Executive ED, who was with another large GLC, commented:

GLCs do not get any special treatment from the government. In fact, for

a GLC, the Chairman usually has some government connections and if

the Prime Minister or Minister asked the company to do something, you

feel obliged to do it. So I would say the amount that you differentiate

from others is very minimal, and you have more obligations.

In an attempt to delve deeper into this important aspect of the findings, a senior

representative of IES was interviewed and questions were posed to him on why he

thought responses had indicated that many companies listed on the SGX had not

needed or used the government incentives in venturing abroad to seek out new markets

and opportunities.

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The IES representative offered the following explanation:

What do we do? How do we help? Fundamentally, there are three ways

we can help companies. First way is called Connection, second is called

Capability and third is called Capital. So you are right that some

companies don’t need capital, some companies don’t need capability. It

could be large companies, for example the GLCs didn’t need money or

incentives from IES. What they needed was connectivity. IES can link

them with some people so that they can start the conversation, and

understand their counterparts. Then we go down to companies who are

SMEs or smaller. That’s where Capability and Capital come in. Some

companies don’t even have the intellectual property properly done up, or

their brands are not properly established. IES can help them to establish

their brand and help them to get in touch with consultants to put up an

international road map. Some companies need financing. When they

expand, they will be looking for a bank financing. Again, IE has a

financing scheme to work with a bank, and this helped them to get access

to capital and also to subsidise the interest cost. Therefore, there is a

range of support. Today, 90 per cent of our capital is given to SMEs.

That in a nutshell, is roughly how we at IES help companies to

internationalise.

From this explanation, it can be seen that, by the time they made the decision to

internationalise, many of the SGX companies in this study had already expanded to a

level of self-sufficiency such that they felt themselves to be past the stage of help from

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IES. They thus relied on their own internal strengths to enter new markets, causing

them to reflect that they did not need or receive the help of government incentives.

Level 3 Theme: Major shifts (Strength in industry = Very strong)

In an effort to understand the extent to which major internal or external factors had

affected and caused major shifts in the internationalisation plans of the SGX

companies, the executives were asked to recall such major shifts during the 10-year

period from 1998 to 2007. Most of the interviewees reported that no major internal or

external factors were encountered that caused a major shift of plans.

Most SGX companies had not encountered major shifts during their

internationalisation efforts, but as public companies going international, they

encountered some regulatory inconvenience such as corporate governance compliance

and reporting requirements. Some stated that, regularly, a new situation might surface,

but that they had to take the new problems in their stride. Generally, they confided that

they needed to have a bigger appetite for risks and upheavals. In terms of changes in

the external environment, they had to accept them and overcome them as they arose. In

some cases, they would encounter problems with their foreign partners, operational

issues or new rules, such as import duty increases. They simply had to face the issues

that surfaced, and endeavour to resolve them.

Executive EG explained:

We certainly reviewed the implication of environmental conditions,

although it did not result in a dramatic change in the globalisation

strategy. For example, during the Asian financial crisis, we believed in

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the Asian markets in the long term, and it is still a belief today. But

during the Asian financial crisis, we lost a significant part of our brand

business. And that really led us to reveal and relook at our strategy and

how we should benefit from these brands. In addition, today, with the

openness of world travel, telecommunications and so on, it becomes

much more important to really invest into brand equity because now

consumers really know the background and the performance of these

brands.

Level 4 Sub-theme: Shareholder changes (Strength in industry = Weak)

The few companies that encountered major shifts in plans cited internal reasons such as

a change of shareholders or divestment by foreign joint venture partners who had

imposed certain policy constraints on them previously. For CI, the major shift in the

10-year review period was caused by the exit of the foreign partner:

The change of shareholders did cause us to change our

internationalisation strategy. Yes, because instead of just focusing on

Singapore, we are now more regionalised, and more outward focused.

The exit of the foreign partner offered us the chance to be more outward

focused and flexible and to have more liberal thinking to address

overseas opportunities that came along.

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Level 3 Theme: Joint ventures/partners (Strength in industry = Strong)

A common theme was that good local joint venture partners are important, especially

as regards their assistance in resolving domestic issues and liaising with government

and local regulators.

Executive EC described the support provided by CC’s partner:

We had great support from our foreign partner who is represented on

our board of directors. Operationally, they left it to us. They never really

interfere. For example, I only brief the Chairman once every month

about what’s happening. They don’t breathe over our necks.

Executive EK stressed the need for good partners:

Our business is so unique; practically all our deals are joint ventures.

Our partners in Burma are the generals. Our partners in Vietnam, some

of them are government, some are private, and some are government

officials. So if we don’t manage partnerships carefully, you have a

problem. I always believe that partnerships can become emotional.

In certain countries, having partners was generally evaluated as critical, as Executive

EJ said: ‘the choice of partner is an important part because of what we are doing in

China. That means the important part is a partner who understands the local

conditions, and a partner who can offer you help’.

In contrast, Executive EH preferred not to have foreign partners:

We generally go in by our own. We don’t rely on local partners. We

regard our employees as our partners already. Our corporate culture is

that we work on a partnership approach, not transactional approach. So

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when people said we needed to have a local partner, yes we do. Instead

of partnership per se, we go more into having important employees who

we regarded as partners.

Executive EJ explained the careful manner in which he chose his partners:

The first thing we decided to do is to select the partner or the company

that we want to work with. It starts all the way from the partner we select.

In the many years when we select our partner, we took our time. I

personally went through many potential target companies. I am very

careful. I would have dialogues, dinners, golf games, and socialise with

them. I looked at their business, and spent a lot of time personally with

the top people and a few middle people, to understand what they want

and whether they can be part of the team.

Most SGX companies considered that joint venture partners were very important.

Therefore, their ability to select the right local partners was critical for the success of

their overseas projects. In the foreign countries, they needed to find local partners with

strong, high-level connections to obtain benefits and resolve local issues.

Level 3 Theme: Success/failure factors (Strength in industry = Strong)

When asked what they deemed as the important success or failure factors for

internationalisation, the following list emerged:

1.Good internal controls and business models;

2.Proper and thorough prior preparation and understanding of the markets;

3.Understanding of domestic issues; and

4.Good local partners.

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Executive EG, who was erudite and could quote management theories and concepts,

explained:

This is actually very much part of my business. I think there are two

important aspects. First, to opt for a company to operate successfully in

the foreign market, we require the company to have some competitive

advantage or some competitive record, rent-generating assets that can

cover for the additional cost of running a business overseas. So that is

from a very well subscribed theory called the Eclectic Paradigm by

Professor Dunning. And he named three important categories, and I fully

agree with his view. First is the ownership advantage, which could be

brand equity, which could be technology, which could be the proprietary

ownership, for example. The management knowhow is also very much

part of that ownership advantage. The second thing is internalisation

advantage, meaning you take core strategic products, intermediate

products with core technology; you try to create an international market

and to exploit market failures. The third is location advantage. That is

the theory that describes how a company needs to be competitive enough

so that they can successfully operate overseas. The other aspect is about

management knowhow and network, and which is a theory that is

proposed by Johanson called Uppsala Internationalisation Model or the

stage model. It proposes you first go to some place where you have

closer culture distance, meaning you can communicate better and you

understand the market better. The model goes on to say the management

needs to accumulate knowledge of the foreign market and the

accumulation is gradual. Therefore, globalisation should be gradual. So

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these are western theories. But for eastern companies, we don’t have the

scale and we don’t have the breadth of management to cover more than

the business sectors that we are already in. We are very good at

manufacturing but we are probably not so good at understanding or

having hands-on experience in western markets like Europe and US, and

there is a knowledge gap that needs to be filled gradually.

The executives interviewed offered a variety of views on the success/failure factors of

internationalisation:

I think underestimating the complexity and the knowledge gap is the

major cause of failure. This is aggravated by the fact that we acquire

rather than develop. Because we acquire the company that is already

there, it is costing money and we do not have enough knowledge to run

the company. It was a problem, until we had the right knowledge, then

this company became an asset.

The key factor is to be able to seize the market opportunity. The team

should be nimble enough to react to the change of environment. We are

talking about markets being very competitive. For example in the

growing economy, you have huge opportunities but if you are not nimble

and do not react fast enough to the change, you will miss all the

opportunities.

You should have confidence, of course. You need to have enough people

to have that confidence. No matter how good the structure or the

business model, the players, the management the people who fill up the

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space and take up the positions, they have to be very capable; because if

they are not, then we won’t be able to build a team that is a force to be

reckoned with. There is also another factor that is important: the

incentives. We have come up with an incentive scheme, which I think that

has been one of the key factors why we have been growing.

The above mix of opinions on the success and failure factors demonstrates that

internationalisation is a very complex matter. Different executives have different

experiences, and as a result, they hold varied views on the success and failure factors

of internationalisation.

Level 3 Theme: Entry barriers (Strength in industry = Weak)

It is notable that concerns with entry barriers and the difficulty of doing business in a

foreign country were not cited as main constraints or causes of hesitation in

internationalisation. It seems that although entry barriers may initially deter

Singaporean companies to a small extent, once a foothold is gained in the foreign

market, entry barriers become deterrents to other foreign MNCs, and therefore

indirectly protect the Singaporean companies from further inflow of competitors.

Executive EA was not deterred:

Would the fact that the areas are in a foreign environment and you have

not been very active in those areas, be a deterrent? It wasn’t much of a

deterrent because before we moved in, we would know the environment

of the countries in which we operate.

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Executive EB related his experience on entry barriers, emphasising their advantages:

Of course, we had a lot of barriers … Despite all these, we looked at this

positively and they actually became barriers to all other new entrants of

the Russian market place. So it was in a way a barrier, which was good

for us because once you have entered the market, then you have natural

barriers that will filter all other competitors.

4.5.3. Outcomes of the internationalisation of SGX companies

A schematic diagram of the four levels of themes and sub-themes for Outcomes is

shown in Figure 4.3 below.

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Figure 4.3 : Hierarchy of Themes and Sub-themes of Internationalisation: Outcomes

Outcomes

Internationalisation indicators


Success ratings

Performance indicators

ROS/ROA/ROC/ EVA

Profitability

Learning experience

Cost reduction

Technology sharing

Strategic options

Integration issues

Preferences

Future plans

Geographical expansion

New products

Limitations

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3a. Outcomes (Level 1)—Internationalisation indicators (Level 2)

Level 3 Theme: Level of internationalisation (Strength in industry = Very strong)

Regarding the themes for Outcomes, an interesting finding was that SGX companies

generally did not have quantitative measures for monitoring their level of

internationalisation, nor had they set specific targets for the level of internationalisation

to be achieved. They generally felt that if they could achieve over 50 per cent of sales,

revenue or profit contributions from outside Singapore, they would deem themselves

internationalised. Most felt that if they achieved around 70 per cent sales or profit from

foreign operations, they could consider themselves well diversified outside Singapore.

This was reflected by Executive EL:

I think more than 60 per cent of group sales come from overseas. That is

an indication of how much we have actually gone overseas for sales. As

for level (of internationalisation), I think we have scored 7 or 8 out of 10.

When asked whether his company consciously used measures when they

internationalise so as to monitor their progress, Executive EA responded:

When we go into a country, we don’t necessarily say: OK, I want 30 per

cent for Malaysia, 20 per cent for China; we don’t have that kind of

formula. We tend to gauge operations, company by company. If a

company is doing well, we just upscale the production and the activities.

As for the measures used, he replied:

For our international drive, we tend to go by levels of turnover and

assets. As for the level of profitability or how successful in a particular

country, we tend to measure them in terms of by industry, rather than by

country.

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When asked the same question, Executive EB’s view was:

No, because we look at everything from a profitability point of view. So it

doesn’t make any difference to us whether the profitability comes from

outside Singapore, or within Singapore. As long as we can get the profit,

it doesn’t matter. I don’t think we were looking at internationalisation

for profit because at that time all our businesses were global. Therefore,

there was no differentiation for us as to where the profitability comes

from.

In terms of the outcomes of their internationalisation, Executive EC said:

Today, after 20 years, we have actually achieved what we had wanted to

do. It was 70 per cent of our group’s profits from Singapore and 30 per

cent from overseas 20 years ago. Now it is the reverse. Today, in fact

Singapore is only 20 per cent. It is 20:80 now; 80 per cent from overseas

that forms the larger pool of profit.

On the theme of the level of internationalisation, it is noted from a close study of the

annual reports and interview data that the SGX companies did not publish or track the

level by using any formal published or internal measures. For instance, the companies

did not seem to have data comparing international and domestic figures. The

companies did not appear to track the level of international sales versus local sales, or

the percentage spread of manpower, capital investments, factories and operations

outside Singapore.

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Executive EG clarified their approach:

Within our company, we did not have a target of how much we should

globalise. But we look for a proper mix of manufacturing business that is

naturally local from our own sales network as against sales that is from

global. By looking at that mix, we have would have a strategic target. We

are thinking probably that the best would be a 50-50 mix. When the

market conditions are favourable, we would adjust the target. Instead of

using level of globalisation as a target, we look at what is the proper mix

of global and local businesses.

Executive EH stated his company’s general approach:

We try not to put all our eggs in one basket, meaning to say that from a

territorial consideration, we try not to focus on one country. We try to

spread our risks in different countries for the same business. For

instance, we spread our risks in three countries; US, Japan and China,

not totally just focusing in China in that sense, but we did not set fixed

percentages between these three countries.

Level 3 Theme: Success ratings (Strength in industry = Very strong)

The data showed that SGX companies generally did not have or were not keen to

develop a set of quantitative indicators to measure their success rate at

internationalisation. The companies did not focus on setting success targets and

thereby rating themselves. However, they did monitor certain key financial indicators.

Most companies used profit contribution as an indicator, and this factor was linked to

the KPIs and rewards systems for their senior executives and staff assigned to work in

and manage the foreign subsidiaries.

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In an attempt to understand how the executives assessed their success on their

internationalisation programmes, they were asked to rate from one to 10 their success

as at the fifth year (2002) and the tenth year (2007), during the 10-year period from

1998 to 2007. Most of the executives found it difficult to rate themselves, and did not

answer this question directly. Among them, Executive EC gave an indication: ‘I would

say on the 5th year probably 60 per cent from a scale of 1 to 10, I would rate it 6. By

the 10th year, I would rate it 8’. Executive EF rated himself more conservatively: ‘In

2002, in the first five years period, I would give myself probably a 5. In tenth year,

maybe I give myself a 6’.

Other executives offered qualitative assessments. Executive EA said: ‘Yes, we are

reasonably happy. Without our plan to go into those overseas activities, we would not

be as successful if we entered those markets today’. Executive EE’s response was also

qualitative:

I think that at the end of the fifth year, we would have executed the full

overseas plan. Between the sixth and tenth years, we were nurturing the

investment and towards the tenth and beyond the tenth, we were

benefiting from reaping the reward from the disposal.

3b. Outcomes (Level 1)—Performance indicators (Level 2)

Level 3 Theme: ROS/ROA/ROC/EVA (Strength in industry = Strong)

While the SGX companies did not explicitly link their success rating and performance

to internationalisation per se, they did attempt to measure foreign participation by

using standard criteria such as ROS, ROA, return on capital (ROC) and EVA. The last

indicator, EVA, is commonly adopted by GLCs.

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Executive EL explained the use of EVA as a performance indicator for his GLC:

Each SBU [strategic business unit] will manage on the top line, bottom

line, degree of employment and profits after tax. All are very important

measures we use, plus, of course, the EVA generated. The EVA

generated is used very thoroughly in determining the short-term and

long-term incentives.

Executive EG’s company used a few key indicators on a monthly basis:

Well, because we measure the company’s performance very regularly at

the monthly finance and management meetings. We always look at the

performance in terms of sales revenue, margin generation, expenditure

and profitability. Therefore, we measure every month. We keep track of a

set of standard performance indicators including sales, inventory,

cashflow, inventory turnover and credit turnover. We also look at return

on investments.

Executive EH tracked their foreign investments using some key indicators: ‘In every

investment, we have our investment criteria measured against ROE or IRR. These

measures will be on a project by project basis and country by country basis’.

Executive EN is from a company that did not track and measure their level of

internationalisation, but merely monitored the outcome by performance: ‘We don’t

measure the level of internationalisation. We only have one measure: Performance. To

me, it is cash flow and internal rate of return of equity. Those are the basic measures.

Everything else is an intermediate measure’.

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Level 3 Theme: Profitability (Strength in industry = Moderate)

As described previously, profitability, profit margin or profit contribution are the main

indicators used by SGX companies to measure the performance of their foreign

subsidiaries. They explained that profit is the primary motivating factor for them to

venture abroad.

Below is a selection of comments in which executives clearly stated that profitability is

their companies’ main criterion for the measurement of the outcomes of

internationalisation:

Ultimately, of course, it is the profit growth, the revenue growth, and not

capacity growth. Capacity growth is a wrong measure.

We definitely measure the profit performance of our global business

against our local business.

Definitely, the consistent profitability is important.

3c. Outcomes (Level 1)—Learning experience (Level 2)

The internationalisation theme of ‘Learning experience’ is a well-accepted principle

used by MNCs and, as such, this has been covered quite extensively in previous

research on internationalisation. In this study, Learning experience appeared to be a

moderate driver in the industry. As Executive EG said:

It is a learning process. It is very much a learning process and it is not

only a learning process for the leaders but also a learning process for

the management in general, because they have to work with a much more

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global company. We are sending people to work overseas not only at the

top level but also even at the working level.

One reason that the theme of ‘Learning experience’ did not feature as strongly for the

SGX companies interviewed as compared to for international MNCs is that, for SGX

companies, there are other, much stronger driving themes for internationalisation, such

as the ‘Small Singapore market’, ‘Survival’ and ‘Adequacy of internal resources’.

Level 3 Theme: Cost reduction (Strength in industry = Moderate)

Cost reduction is another major theme identified in past internationalisation research.

In this study, it appears as only a ‘Moderate’ theme. Not many interviewees cited this

factor as a key consideration for internationalisation, as compared to other imperatives

such as ‘Near to customers’, ‘Perishable food products’, ‘Market size limitation’ and

‘Survival’.

Those three executives that did cite cost reduction, EB, ED and EI, said respectively:

We have to calculate whether which one will be more meaningful, in

terms of feasibility of localisation of the production.

Subcontracting is always an option for us. Subcontracting will be a

competitive option, so that in case we do production ourselves, we tell

ourselves if somebody can make it cheaper than us, why are we doing it

ourselves?

If you are not able to manage your far-flung operations effectively, then

it can cause problems. And if you are not agile enough to move to

different areas.

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As reported in the literature review in Chapter 2, studies suggest that cost reduction is

one of the major rationales for MNCs to undertake internationalisation. Thus, it is

interesting to note that for SGX companies, this theme was only a moderate factor.

This could be because this factor was overshadowed by the need to overcome the

problem of a small market size in Singapore and the need for survival.

Level 3 Theme: Technology sharing (Strength in industry = Weak)

Another ‘Weak’ theme was technology sharing. Only one interviewee cited that they

had experienced and benefited from ‘Technology sharing’ in their international drive.

Executive EC said:

Initially we would provide technical expertise, we get our people

involved, and those kinds of activities could be developed. Over time, the

locals would gradually take over. Like in the Philippines, when we

started up, we had our own specialist team setting up for them in

engineering and production. After a few years of operation, the locals

were trained up and they could manage themselves.

As in the case of ‘Cost reduction’, the interviewees appeared to focus more on other

factors than on technology sharing as a driver of internationalisation.

Level 3 Theme: Strategic options (Strength in industry = Weak)

Another ‘Weak’ theme is Strategic options. The expectation that internationalisation

enabled SGX companies to have more strategic options did not feature strongly in the

interviews of the Singaporean executives. Only one executive cited this factor.

However, importantly, the theme was cited in the context of causing his company to

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pull out of a foreign project, whereas the literature suggests that Strategic options can

be used, for example, to negotiate for better terms from the government or as a

strategic weapon against competitors.

Executive EN said:

We take India, for instance. Two and a half years back, we actually

wanted to go quite aggressively into one of the Indian cities. We started

from Chennai. Unfortunately, the crisis came … the expenses were

moving up very heavily. Therefore, we decided to pull the plug and back

out. However, we may go back there again, now that the market has

changed for the better.

Level 3 Theme: Integration issues (Strength in industry = Weak)

Like their MNC counterparts, Singaporean executives would be quite concerned about

‘Integration issues’. However, in this study, the outcome ‘Integration issue’ was only a

weak theme, a surprising result. An explanation can be found in the background of

Singapore, in that the city-state is already highly cosmopolitan, with varied cultures,

peoples, languages and professionals intermingling in the social space. Moreover,

Singaporean executives are quite well travelled, well informed and proficient in

English. As a result, most SGX companies were less concerned with integration issues

for their foreign joint ventures and subsidiaries.

Executive EG reflected on this issue:

I think many people would underestimate the amount of preparation and

the amount of differences. Once the company move into a new market,

especially with internationalisation or globalisation, once we start

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talking about many new markets, then there is a big gap for knowledge

of all these markets that companies need to have before they can operate

successfully.

Level 3 Theme: Preferences (Strength in industry = Weak)

Adaption to local preferences and taste (for food products) was cited as a weak theme.

An executive of CA alluded to the need to adapt to taste preferences in food products:

‘...we have to modify product offerings. For our product XX, the Singapore product is

not the same as in Malaysia or the Philippines. We need to change the taste.

Malaysians and Filipinos like their things a little sweeter’.

3d. Outcomes (Level 1)—Future plans (Level 2)

This interview questions delved into the future plans of the companies, with respect to

their internationalisation programmes. Most executives were quite ready to discuss this

topic in a general manner, without going into specifics in terms of products or targets.

Their responses fell into the areas of geographical expansion and further growth

through product extensions or new products.

Level 3 Theme: Geographical expansion (Strength in industry = Very strong)

Future geographical growth was a strong internationalisation theme for SGX

companies. Most companies saw their future in endeavouring to expand further

outwards in the foreign markets they were already in, or in making inroads into new

territories. The message was that internationalisation is an ongoing process, unlikely

ever to be considered finished. Markets cited for new or further expansion were China,

India, and Vietnam.

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Executive EB put it: ‘The world is our market. Anything outside of Singapore is

interesting for us because they are bigger than what we are here today’. Executive EC

shared this view: ‘…we want to grow bigger where we already are, whether in

Malaysia or Cambodia, we want to have more factories, and to sell more. We still have

to grow in the region, and into more foreign countries’. Executive EE concurred:

We are continuing to seek out suitable investment opportunities overseas,

but as far as the existing business, it has branched into a regional play

already. We are supplying to the region, previously just Malaysia, but

now we are on regional expansion.

The impression was gathered from the interview responses that integration of their

global business in the manufacturing sector was a very important strategy for many of

the participating companies. After several years of internationalisation activity, they

were established in many markets, and from those markets, companies had garnered

very useful information about technology, new product concepts, and local knowledge

and connections. Looking ahead, the issue was how to make the best use of the

learning experience and the accumulation of information and technology. Companies

could make use of the established manufacturing capability in a foreign country like

China to try to scale up, to be able to supply key international markets efficiently and

quickly while focusing on service quality and competitiveness. Many interviewees

opined that the growth potential had not yet been fully harnessed.

When reviewing the stage of their internationalisation programmes, many executives

considered that they would definitely have to continue to grow to countries not yet

entered. Many quoted new locations like Vietnam and the Indo-china countries. Others

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cited India. They considered that geographical expansion would strengthen their

groups’ overall market presence, consolidating their market positions and helping them

to build closer bonds with their vendors and customers. Evidently, a wider

geographical coverage was a key theme for their future internationalisation plans.

As Executive EL put across:

I think the company will continue with the journey we first laid out. In

fact, the company wanted to double what we were doing in the next three

to five years. There is a lot of growth potential. That is why the company

is continuing with the plan. In fact, the company is sending in more

people because we can afford to send more people overseas to help

escalate the growth of the business.

For company CM, their future focus was:

I think right now we have the key business in place to continue to grow

and I am sure that we will continue to evolve. Each of its businesses has

a life of its own, parameters to gauge on. They need to evolve. Maybe the

next wave of manufacturing will not be in China. The next wave of

manufacturing may be somewhere else, for example India.

In sharp contrast, only one executive did not have definite future plans. Executive EK

said:

Good question. I have no idea. As far as the company is concerned, we

will just carry on. As I said in the beginning, this company is an

extremely opportunistic, basically because I am like that. We do not try

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to sit in a room and suddenly decide that this is where we want to go. We

learn as we go along.

Notwithstanding the ambivalent response of the above executive, overall the interviews

revealed that the companies in this study are poised to continue their

internationalisation drive.

Level 3 Theme: New products (Strength in industry = Moderate)

Some companies mentioned their desire to develop new products or to offer product

extensions. Some executives said that while it would be necessary to remain in their

current products, they were also prepared to consider opportunities in new products,

even those not related to their current products.

Executive EA was constantly looking for acquisition targets to grow inorganically:

We are at all times looking for acquisition opportunities in Singapore or

overseas. When I say acquisition opportunities, I do not necessarily

mean the businesses that we are already in. It could be a new food

business, or it could be things that are related to the businesses we are in.

Executive EE was equally aggressive in his pursuit of future growth:

Possible areas that the group can look at are, of course, backward and

forward integration. I am talking about opportunities in backward

integration for the existing business, which will be acquisition of

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suppliers. Moving forward, integration will be into downstream products

as there are many products we could go into. All these are possibilities.

For Executive EM, being able to capitalise on CM’s international market network was

a strong motivational factor to internationalise further:

Looking ahead, we certainly want to be able to capitalise on our

international market network. The synergy within the group has not been

fully exploited. The other target is that we should look for acquisition of

businesses that would be able to ride on our international market

network.

Level 3 Theme: Limitations (Strength in industry = Moderate)

When discussing their expansion plans, some executives set limitations on the range of

their expansion. It seems that while some executives are fairly comfortable with

expanding regionally, others were hesitant to venture too far away. Some companies

wished to remain in the region, while others did not wish to venture as far as to the

Latin America countries and Africa.

Executive EF wished to expand but essentially to remain in Asia: ‘I would say it is still

Asia. We only covered some parts of Asia. Probably China and India are the areas,

which we should look at. And, beyond Asia, I don’t think we have interest to go beyond

Asia’. Executive EA also limited his group’s future areas of expansion: ‘having said

that, as a group, we would not really go to faraway places. We would not think for

example, to go to Africa to set up a food manufacturing company, or to a continent

which is far away’.

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The interviewees provided a few reasons that their companies would wish to limit the

geographical reach of their future international expansion. One obvious reason was

limited resources for management, manpower, finances and capabilities. Another

reason was the span of attention; that is, they cited the difficulty of operating in

different time zones. Another interesting reason cited was cultural differences. This

rationale was relevant for SGX companies that were Asian in their outlook, and thus

rather conservative in their view of foreign partnerships and locations. On this issue of

cultural conservatism, Executive EH commented: ‘It will continue to remain that way

unless there is a major change of the board and management, and someone brings in a

different perspective and visions into this group, otherwise we expect this to continue’.

4.5.4. Comparison of themes by ‘Strength in industry’

The above discussion has detailed the numerous themes and sub-themes relating to the

internationalisation of SGX companies. The relative strengths of these themes reveal

an interesting comparison between the companies in the study. The reported ‘Strength

in industry’ measure offers an insight into how the SGX companies in the study rated

the relative importance of the various themes (or factors) influencing

internationalisation. For these companies, the indicative strengths of themes and sub-

themes grouped into the four levels of Very strong, Strong, Moderate and Weak are

shown in Table 4.6.

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Table 4.6 : List of Themes and Sub-themes by Order of Strength in Industry

Themes Frequency

1. Very strong themes >10

1.1 Internationalisation is key business strategy

1.2 Small Singapore market

1.3 CEOs are main drivers

1.4 Mix of centralised and decentralised controls

1.5 Limited use of government incentives and assistance

1.6 Limited use of indicators on level of internationalisation

1.7 Limited use of indicators to measure performance

outcomes

1.8 Future growth by geographical expansion

11

11

14

11

15

14

14

11

2. Strong themes 6–9

2.1 Economy of scale

2.2 Survival

2.3 Adequacy of resources

2.4 Informal approach

2.5 Infrequent use of consultants

2.6 Regular reviews

2.7 Localisation

2.8 Management strength

2.9 Importance of joint venture partners

2.10 Use of ROS/ROA/ROC/EVA as performance

indicators

6

6

6

7

8

8

9

7

7

6

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3. Moderate themes 3–5

3.1 Challenge to make it work

3.2 Use of brands

3.3 Influence of shareholders

3.4 Need for strong products

3.5 Sustaining profits

3.6 Regional growth

3.7 Born global

3.8 M&As

3.9 Change of majority shareholders

3.10 Use of profitability as performance indicators

3.11 Cost reduction

3.12 Future growth through new products

3

3

3

3

3

5

4

5

3

5

3

5

4. Weak themes <2

4.1 Venture capital investments approach

4.2 Perishable products

4.3 Culture issues

4.4 Entry barriers

4.5 Close to customers

4.6 Core values

4.7 Divestments

4.8 Business model

4.9 Technology sharing

4.10 Strategic options

2

1

1

2

1

1

1

2

2

2

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4.11 Integration issues

4.12 Preferences

1

1

It is noted that the four categories of strength in industry are based on the sample of 14

SGX companies, and may not be applicable for the entire body of Singaporean

companies. However, while the results are only applicable to these sample companies,

they nevertheless served to provide interesting data on the internationalisation of

Singaporean companies. It is also noted that a wide range of themes and sub-themes

emerged that provided very pertinent revelations on the Antecedents, Processes and

Outcomes of the internationalisation of SGX companies. Thus, the Reference Model

employed for this study does permit the gathering of valid research results applicable

to internationalisation.

As explained in Chapter 3, the classification of themes and sub-themes by ‘Strength in

industry’ is based on the number of times these were cited by the interviewees. The

strength of responses provided answers to the main research questions set out in

Chapter 3. The results provided insights on the Very strong and Strong themes, which

can also be viewed as those themes with which the SGX companies in the sample were

pre-occupied. Notable results to the research questions as provided by the Very strong

themes are as follows:

1. Antecedents

1.1 SGX companies considered internationalisation as a key business strategy.

1.2 The CEOs were the key drivers of the internationalisation plans and actions.

1.3 SGX companies used a combination of centralised and decentralised

controls for foreign subsidiaries.

1.4 SGX companies had limited use of government incentives and assistance.

246

2. Processes 2.1 SGX companies had limited use of indicators to monitor the level of


3. Outcomes

3.1 SGX companies had limited use of indicators as performance measures.

3.2 SGX companies planned for future growth through geographical expansion.

In addition, it is possible to draw conclusions by examining the themes in Table 4.6

with respect to the themes for other Strengths in industry; namely, Strong, Moderate

and Weak.

In the literature review in Chapter 2, it was noted that certain themes for SGX

companies were consistent with the themes of the internationalisation programmes of

other countries’ MNCs. These themes include economy of scale, geographical

diversification, locational advantage, learning experience, strategic advantage, options

advantage, improved product quality and enhanced customer preference (see Sections

2.71 to 2.7.8 in Chapter 2). Some of the themes relating to the rationales or imperatives

for internationalisation by SGX companies are consistent with those themes reported in

past research on the subject of internationalisation of MNCs originating from the

developed economies. However, other themes that emerged from this research were

unique for Singapore. In Table 4.7 below, the themes relating to the rationale for

internationalisation are thus grouped into two clusters: those themes consistent with

international research and those themes that are unique to Singapore.

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Table 4.7 : Comparison of Consistent and Unique Themes

1. Themes consistent with

international research

2. Themes unique to SGX companies

1.1 Economy of scale

1.2 Reduction of costs

1.3 Localisation

1.4 Strategic options

1.5 Learning experience

1.6 Culture issues

1.7 Born global

2.1 Survival

2.2 Small Singapore market

2.3 Challenge to make it work

2.4 Venture capital investments

2.5 Close to customers

2.6 Nature of products (perishables)

2.7 First mover advantage

2.8 Regional growth

The above discussion indicates that, while SGX companies were generally driven by

similar motivations to internationalise, as were other MNCs, they were also subject to

additional factors unique to Singapore.

4.5.5. Comparison of the themes by size of SGX companies

The 14 SGX companies that participated in the case study were classified as small,

medium or large by their market capitalisations (see Table 3.1 in Section 3.3.2). A

close study conducted on the themes that emerged from these 14 companies of

different sizes drew the following observations:

1.Generally, there were no sharp differences in the main imperatives on the need to

internationalise across different sized companies. The SGX companies,

irrespective of size, equally cited the themes of 'Survival' and 'Small' Singapore

market.

248

2.They were equally not overly concerned with minor themes such as ‘Integration

issues’, ‘Technology transfer’, ‘Localisation’ and ‘Cost reduction’.

3.They did not find government incentives useful or necessary, irrespective of their

size.

4.There is no indication whether they preferred to adopt a centralised or

decentralised control approach depending on company size. Neither is there any

clear indication of whether large or small companies preferred to use external

consultants. Their planning and processes also equally tended to be informal

rather than formal.

5.As for the key drivers of their internationalisation plans, generally the CEOs were

the main drivers, supported closely by their management teams. The boards

overall provided oversight and supervisory roles. This was equally true

irrespective of size.

The conclusion that can be drawn is that, for SGX companies, size did not have any

significant impact on their internationalisation decision or process.

4.6. Data analysis using Cruciform charts

As stated in Section 3.10 of Chapter 3, Cruciform charts can be used to examine the

relationships between two selected sets of variables using co-axial analysis. Such

relationships may be in the form of trend lines, clusters, dispersion or outliners. To

discover potential relationships between the level of internationalisation and the

performance of the SGX companies, the executives were asked to provide their scores

(on a scale of 1 to 10, with 1 being the lowest, 10 being the highest, and 5 being

average) regarding their assessment of their companies’ level of internationalisation,

and the importance of internationalisation to their companies over the 10-year period

from 1998 and 2007. The actual average annual growth rates for revenues and profits

249

of the 14 companies were calculated from the financial results provided in their annual

reports. Charts were plotted as co-axial graphs using these assessments on the level and

importance of internationalisation as against the average annual revenue and profit

growth achieved from 1998 to 2007. The summary data used for this analysis are given

in Appendix 4.16. The results of the responses were plotted on Cruciform charts, as

shown in Figures 4.4–4.7.

Figure 4.4 : Revenue Growth v. Level of Internationalisation Achieved

The following findings can be observed from the data at Figure 4.4 and Appendix 4.16:

1. Most of the sample companies (12 out of 14) assessed themselves as having

achieved a positive level of internationalisation (ratings of above 5 out of 10),

and 11 companies were also found to have attained high revenue growth rates

of above 20 per cent per annum.

2. The three outliers are companies D, J and N, which achieved outstanding

revenue growth due to the strategies they adopted. As discussed earlier in this

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

(50) - 50 100 150 200 250 300 350 400 450 500 550 600 650 700


Revenue Growth

Cruciform Chart: Revenue Growth v. Level of Internationalisation Achieved


250

chapter, companies J and N needed to internationalise to grow and compete

effectively. Due to the scalability of their businesses in much larger foreign

markets, the revenue of Companies J and N was able to grow very quickly.

Company J partnered with reliable local partners to expand in the foreign

market.

3. Companies E, H and I attained low or negative revenue growth. Detailed

examination of these three companies revealed that they encountered business

divestments and changes of businesses during the 10-year study period,

resulting in net decline of total revenues.

Figure 4.5 : Profit Growth v. Level of Internationalisation Achieved

Review of data from Figure 4.5 (and Appendix 4.16) indicates the following findings:

1. Most companies rated themselves as having achieved higher than 5 out of

10 score in terms of level of internationalisation. However, in terms of

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


Profit Growth

Cruciform Chart - Profit Growth vs. Level of Internationalisation Achieved


251

actual average rate of growth of profits, the performances achieved were

mixed (compared with revenue growth). Six companies attained low profit

growth of below 3 per cent per annum. Three companies achieved moderate

annual profit growth rate of 5 to 7 per cent. Only four companies, D, C, H

and L, had annual profit growth of above 15 per cent. This indicates that the

majority of the companies was unable to match their high revenue growth

with profit growth.

2. Companies C, D, H and L were outliers in the analysis. Generally, these

four companies, which has superior profit growth, had rated highly (above 7

to 10) their level of internationalisation achieved. This result indicates that

companies with higher perceived levels of internationisation tended to

achieve better profit growth.

3. Company C had achieved a high level of internationalisation, inspite of

certain geographical restrictions imposed by their joint venture partners and

limited their expansion to the neighbouring countries around Singapore.

However, the company managed to achieve high profit growth by focusing

on their core products and growing extensively within a country after an

initial foothold was established.

4. Companies D, L and H were motivated to internationalise due to the nature

of their business (see earlier discussion in Chapter 4). These three

companies demonstrated that when the imperative and desire to

internationalise is very strong, average return on profits is very high,

perhaps because they were motivated to work harder to achieve those

profits. Another possible explanation for the better profit performance of

these three companies is that they adopted the approach of expansion and

252

growth through aggressive acquisitions, rather than depending solely on

gradual organic growth.

5. Notably, company D was a star performer with high revenue and profit

growth. It was able to generate a high profit growth due to the large scale

required by the industry. Moreover, being a GLC allowed company D

access to capital needed for growth and benefitted by its strong

management team and well planned internationalisation strategy.

6. The outlying performers in Figure 4.5 are different to those observed in

Figure 4.4, due to the various factors that cause companies’ revenue and

profit growth performance to differ. This indicates that, while companies J

and N achieved high revenue growth arising from their overseas expansion

plans, they were unable to attain comparable results in terms of profits.

Figure 4.6 : Revenue 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

(50) - 50 100 150 200 250 300 350 400 450 500 550 600 650 700

Importance of Internationalisation

Profit Growth

Cruciform Chart: Revenue Growth v. Importance of Internationalisation


253

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


254

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.

255

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.

257

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


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

259

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.

260

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

261

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.

263

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

264

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

265

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

266

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

267

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.

268

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.

269

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.

271

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


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

273

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

274

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

275

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.

276

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.

277

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.

278

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

279

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

280

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

281

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

282

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

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

Appendix 3.5 : Interview Guide ........................................................................... 336

Appendix 3.6 : Summary table of interview responses........................................ 338

Appendix 4.1 : Summary of developments and financials of Company A .......... 359

Appendix 4.2 : Summary of developments and financials of Company B .......... 363

Appendix 4.3 : Summary of developments and financials of Company C .......... 367

Appendix 4.4 : Summary of developments and financials of Company D .......... 371

Appendix 4.5 : Summary of developments and financials of Company E .......... 375

Appendix 4.6 : Summary of developments and financials of Company F .......... 379

Appendix 4.7 : Summary of developments and financials of Company G .......... 383

Appendix 4.8 : Summary of developments and financials of Company H .......... 387

Appendix 4.9 : Summary of developments and financials of Company I ........... 391

Appendix 4.10 : Summary of developments and financials of Company J ......... 395

Appendix 4.11 : Summary of developments and financials of Company K ........ 398

Appendix 4.12 : Summary of developments and financials of Company L ........ 402

Appendix 4.13 : Summary of developments and financials of Company M ....... 406

Appendix 4.14 : Summary of developments and financials of Company N ........ 409

Appendix 4.15 : Nodes / Sub-Nodes and Sources from Nvivo9 analysis ............ 413

Appendix 4.16 : Table of 10-year Revenue and profit average annual growth

rate of return and survey results ........................................................ 419


Very Strong) ...................................................................................... 420


Strong) ............................................................................................... 421


Medium) ............................................................................................ 422

304


Weak) ................................................................................................ 423

305

Appendix 2.1

Appendix 2.1 : Definitions of Globalisation

Author Discipline Definition/description

Rodrik

(1997)

economics ‘…a process involving the international

integration of markets for goods,

services, and capital, which pressures

society to alter their traditional

practices.’

Dunning

(1993)

economics/

business

‘…growth of international

production…[reflecting] the way that

changes in the structure and organisation

of the world’s resources and capabilities

impinge on the cross-border production

and transaction strategies of companies.’

Giddens

(1990)

sociology ‘…intensification of worldwide social

relations… linking distant localities in

such a way that local happenings are

shaped by events occurring many miles

away and vice versa.’

Robertson

(1992)

sociology ‘…refers both to the compression of the

world and intensification of

consciousness of the world as a whole.’

Cairncross

(1997)

social

research

‘…the global diffusion of knowledge.’

306

Worsley

(1999)

Anthropology ‘…a plurality of knowledge systems

which results in cultures that transcend

the boundaries meant to constrain them,

contributing to a global mass society.’

Crystal

(1998)

Linguistics ‘The Globalisation of language is not

due to the number of people who use the

language, but who those people are.’

Jameson

and

Miyoshi

(1998)

Literature ‘…a communicational concept, which

alternatively masks and transmits

cultural or economic meanings.’ (p.55)

Dicken

(1998)

Economic

geography

‘…the geographic extension of

economic activity across national

boundaries...[and] the functional

integration of such internationally

dispersed activities.’ (pg.5)

Waters

(2001)

Sociology ‘…A social process in which the

constraints of geography on social and

cultural arrangements recede and in

which people become increasingly

aware that they are receding.’ (pg.3)

Beyer

(1994)

Religion ‘…the creation of a new global culture

with its attendant social structures.’

(pg.9)

307

Appendix 2.2

Appendix 2.2 : Details of International Enterprise Singapore incentives

Internationalisation Finance Scheme

Purpose: Financing for fixed asset investments abroad or confirmed overseas projects.

Overseas ventures are often associated with higher risks. This makes it a challenge for

companies who are looking at increasing their fixed asset investment abroad or

financing their overseas projects to obtain loans. The Internationalisation Finance (IF)

Scheme is designed to address this issue through a system of co-sharing of default risks

between IES and the Participating Financial Institutions (PFIs).

The types of credit facilities are:

1. Asset-based financing

2. Structured loans

3. Banker's guarantee

Double Tax Deduction (DTD) for Internationalisation

The DTD scheme supports overseas market and investment development expenses

incurred by Singapore-based companies. It allows a Singaporean company to enjoy tax

savings i.e. deduct twice the eligible expenses incurred against the company's taxable

income. DTD covers a wide range of activities along key stages of the company’s

overseas expansion.

International Market Immersion Programme (iMIP)

As each country has its own distinct set of business conditions and traits, a company’s

staff can enhance their effectiveness in operating in an overseas market by

308

familiarizing themselves with the market conditions and business environment. One

way to do this is to send them for in-house customized training attachments overseas.

IE Singapore co-shares the costs of certain components incurred by the company, such

as pre-departure training fees, training allowances, which include basic salary to the

trainees, and return economy airfares to the place of training of the overseas immersion

programme.

Under the International Market Immersion Programme (iMIP), trainees will gain on-

the-ground knowledge in a comprehensive, methodical manner guided by experienced

mentors. These mentors could be company employees or business associates based in

the target markets. Upon completion of their overseas immersion, trainees are deployed

to the market where they have undergone training, so that they can apply their acquired

knowledge to help expand the company’s business. Alternatively, they may be tasked

to oversee the company’s foreign operations in the market that they were trained for

from the Singapore headquarters. Enterprises that have successfully developed and

implemented the iMIP for their pioneer batch of employees will then have a framework

for subsequent staff training overseas. Over time, a Singaporean company will be able

to develop a larger pool of talent with in-depth expertise in its target overseas markets.

309

Appendix 3.1 : Pilot Study

UWA DBA COURSE

JOINT PROGRAMME WITH

PSB ACADEMY

Pilot Study – An evaluation of the influence of internationalisation on selected

companies listed on the Stock Exchange of Singapore (SGX)

Student: LEONG Horn Kee

Student No: 20339042

12 May 2007

(Pilot Study report – excluding references and attachments)

311

CONTENTS PAGE

INTRODUCTION ............................................................................................... 313

METHOD ........................................................................................................... 314

FINDINGS ........................................................................................................... 316

The 12 Selected Companies ................................................................................ 316

Reasons to Internationalise ................................................................................. 318

Structure for Internationalisation ........................................................................ 321

Measures of Level of Internationalisation .......................................................... 325

Performance Measures for Internationalisation .................................................. 327

Future Internationalisation Plans ........................................................................ 329

CONCLUSION .................................................................................................... 330

ATTACHMENTS ............................................................................................... 332

313

Pilot Study: An evaluation of the influence of internationalisation on selected

companies listed on the Stock Exchange of Singapore (SGX)

INTRODUCTION

This qualitative research project is a pilot study to examine the influence of

internationalisation on 12 selected companies listed on the Stock Exchange of

Singapore (‘SGX’) for the 10-year period from 1998 to 2007.

A brief literature review indicated that many studies have been done to understand

the influence of internationalisation on corporations. Generally, it is understood that

corporations need to go international for a variety of reasons such as for growth,

survival, competitiveness, economy of scale, proximity to markets and performance

enhancement. (Hutzschenreuter and Guenther, 2008) Numerous studies were

conducted in the Western economies, (Clark and Knowles, 2003) but no thorough

studies have yet to be conducted for companies listed on the Stock Exchange of

Singapore(‘SGX companies’).

Internationalisation has been generally defined as a strategy undertaken by a

corporation to expand overseas to take advantage of various factors such as costs and

proximity to markets in the overseas markets.(Fallah and Lechler, 2008) Most

corporations started from large domestic home markets like the USA, UK, Europe and

Japan, and one of the main objectives of internationalisation is to improve

profitability(Norbarck and Persson, 2008).

314

The motivation to internationalise may be different for SGX companies, as most if not

all, started off from a very small domestic Singapore market. This research thesis is

interesting and worthwhile, as it will enable a better understanding of the imperatives

and motivations that drive SGX companies to go international. The project aims to

undertake a qualitative evaluation of the impact of internationalisation on SGX

companies. The period of 10 years from 1998 to 2007 was selected because it will give

a sufficiently long period for a company’s internationalisation plan to take effect and

achieve results. SGX companies were selected as being listed companies; details on the

companies’ history, business scope, plans, financial data, and factories and operations

locally and overseas can be available publicly.

The shared experience of going international will enable SGX companies to learn how

to better structure their organisations to tackle the world markets, and to adopt the

correct strategies and action plans to compete better in the international environment.

The research will add to the pool of knowledge on internationalisation, and enable

further research work to be conducted in a subject who is very relevant in today’s

highly connected, technology driven and internationally competitive world market.

METHOD

The research method is to conduct one to one interviews with 12 selected senior

executives of SGX companies. Given the restricted time frame of this project, 12

companies can be accommodated which will enable a fair sample size to be collected.

Initially, a preliminary selection was made of about 25 - 30 SGX companies based on a

315

mix of different industries. The senior executives ranging from Chairmen, Chief

Executive Officers, Presidents and Executive Directors from the selected companies

were approached to request for personal one to one interviews with them to discuss

their views on their companies’ internationalisation efforts in the last 10 years from

1998 to 2007. About 15 - 20 senior executives consented to being interviewed.

Because of their heavy business work and travel schedule, a final group of 12

executives was interviewed. Before each interview, the executives were given the

Interview Guide (see Attachment 1). They were given consent forms to sign, and

assured of the confidentiality of the interviews, which will be de-identified. They were

informed that original recordings will be destroyed, and only historical, publicly

available and not confidential information and data will be used.

One to one interview method is chosen because the topic requires in-depth discussion

and reflection. Moreover, being top executives, interviews on one to one basis will

accord them the privacy of a closed-door environment. Nine interviewees are

Chairmen, CEOs, Presidents and MDs. The remaining three are Deputy Presidents and

Executive Directors. They are able to give clear, thorough discourses of their

companies’ businesses, plans and internationalisation programmes. They also

displayed deep knowledge and appreciation of the driving forces to go international,

and offered learned views on internationalisation. The duration of the 12 interviews

was between 20 minutes to 45 minutes (mostly 30 minutes), and conducted in a

business-like manner tracking questions in the Interview Guide. The transcripts of the

12 interviewees were prepared (See Attachment 2). The transcripts were analysed

using the Nvivo software for a thorough review of the main concepts, views and

opinions being raised by the executives interviewed. Tree nodes were created under

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Nvivo to classify the many issues brought up. The executives expressed several

common points on the needs and forces that drive them to internationalise their

companies. Most of the executives gave insightful comments on how

internationalisation has affected their companies in both positive and adverse manner.

The Tree Nodes of the main topics discussed are stated at Attachment 3.

The signed consent forms are at Attachment 4.

FINDINGS

The 12 Selected Companies

The 12 companies have total annual turnovers ranging from $200 million to $3 billion.

They are sizeable companies, which have been in existence for over 20 years. Two of

them have history dating back 150 to 200 years. They are established industry players,

and are able to compete effectively in the international markets. The executives

interviewed are very familiar and knowledgeable about the concept of


Internationalisation Strategies

The typical internationalisation strategy adopted by most companies was to establish

first in Singapore, before venturing overseas. The rationale is that the company has to

develop a certain level of management skills, financial strengths, process controls and

market knowledge before they have the means to set foot overseas.

317

The executives described the painful experience of failures and difficulties when they

first ventured into overseas markets or attempted to set up factories and offices in

foreign soil. All, except one company, eventually succeeded. They expressed

satisfaction on their results and achievements. Through internationalisation, they

eventually went on to grow their companies by multiple of three – four times over the

10-year period from 1998 to 2007. However, one company has a disappointing

experience venturing into China. Eventually, the company sold its joint ventures in

China, and moved back to operate only in Singapore.

One interesting exception to the standard international strategy to start from a

Singapore base, is a company which completely ignore that Singapore market from day

one, initially started from Russia, and then fan outwards to the other former USSR

states, to Eastern Europe before moving back to nearer home in the South-east Asia

region. The executive commented that:

‘Our company is quite different from most of the other companies......which start

normally from domestic markets, but in our case.... our businesses are all done

overseas from the beginning. Because the Singapore domestic market here is pretty

small, having only 3m people,.....it is better for us to put our resources in those foreign

markets that will realise the biggest returns to us. ...we went to Russia in the early

1990s, we started from there .... then we move out to all the cities outside Moscow....

So we say we are internationalised, but we actually localised from Moscow and from

there we started out.....’

318

A company started in Australia, decided to be listed in SGX, and then adopted an

expansion strategy by first acquiring a target company in Singapore. The company then

‘exported’ its technical experience and management experience to the Singapore

subsidiary.

Yet another company adopted an interesting and innovative manner to

internationalise by using the venture capital approach. It invested in numerous start-

up companies. A few investments eventually succeeded and became large

international companies in the new technology segments. However, the company had

to go through the painful process of writing off several bad investments. Recently, it

embarked on a rationalization process to focus on three mainstream businesses.

One company first forays overseas failed when it tried to set up wholly owned

subsidiaries in overseas centres. Later, the company modified its strategy to acquiring

the market leaders in each of the overseas markets, and let the local management run

the foreign businesses.

The above review demonstrated that there are different paths of a successful

international strategy.

Reasons to Internationalise

1. Small Singapore Market

The 12 companies cited numerous reasons for going international. The most common

reason is that Singapore is a small market. If they stayed in Singapore, they can only be

‘a big fish in a small pond’. For long-term sustainable growth, they have to venture

outside Singapore. In a sense, most companies started by going ‘regional’ to the

319

neighbouring countries. Going regional is the first step to going ‘international’.

Therefore, in this research study, a company’s initial steps to go regional are deemed

as the start of its internationalisation strategy. There is no necessary to differentiate

the expansion plans between regional and international. The executives interviewed

did not view their plans in this manner.

2. It is survival

A striking remark made by some of the executives was that going international is

necessary for survival reasons. They feel that if they do not go overseas, they will

eventually be marginalised. All the executives strongly believed in, and implemented

international plans, and look upon their businesses in an international context. Strong

remarks made are:

‘…..in our particular experience, going international is survival.’

‘ …It is a case of, either you go international to survive, or you will die.’

3. Size does matter

Another reason cited to go overseas is that ‘size does matter’. To be competitive

against foreign competitors, Singapore companies need to grow in size. This will give

them bulk and attain the necessary economy of scale. The competitive pressure drives

them to venture overseas to seek new markets. By being bigger, they will have the

resources to compete more effectively. By operating in more than one domain, they

are better able to service that the large customers who are multinationals. The trend

of the MNCs nowadays is to select only a few suppliers to service them in a particular

region. They want to establish close ties with a select group of suppliers who can

integrate into their systems, and thereby achieving better operational efficiencies. In

320

the new world market, it is true that ‘size really matters’. One executive explains it this

way:

‘…For our business, internationalisation...is very important to us because it all

lead up to scale. In our business, size is very important and the bigger we are, the more

prominent we are in the region, the more vendors will want to deal with us. Therefore,

it is very critical for us to have the size and the market coverage. Without the market

coverage and the size, you find that big vendors … will not want to deal with us. This is

a trend in the industry where the…vendors want to deal with big regional players,

rather than many smaller players in each country… So scale and size is very important

for them and very important for us….’

4. Closer to your customers

A strong imperative to move overseas is to be closer to your foreign-based customers

and understand their needs. When a company wishes to capture contracts from

foreign-based customers, the company has to understand the local conditions, rules

and regulations. To show commitment and establish a long-term relationship, many

Singapore companies have no choice but to set up branches and offices overseas.

Many of them prefer to ‘localise’ their overseas operations by employing local CEOs,

managers and staff. As one executive said:

‘…. We must have good local management in order to manage overseas

network. Without good management, it is very hard to control your overseas network.

It is close to impossible. So, therefore step wise, it would mean that you have to

321

continue to train local people; and people not coming from Singapore alone, but

coming from other places. It means that you must be able to accept people from other

countries/nationalities. They have abilities and talents you can make use of to help you

to expand overseas...’

Some SGX companies adopted an acquisition strategy to gain access to foreign markets

and buy a ready-made management team, which is already in place in the target

companies they acquired. Other SGX companies prefer joint ventures with local

partners. For all those who chose the joint venture approach, they put great emphasis

to finding the best local partners. One executive stressed:

‘….When we go overseas, we realise that understanding the local culture and

customizing to the local requirements is quite important. The first key success factor,

which needs to be done well, is to identify local partners who are keen on this

business,.... To ensure success while we take the lead, we must make sure our partner

can contribute in areas that they are in the best position to contribute, such as handling

the human resource, and handling the local government rules and regulations......’

Structure for Internationalisation

When the SGX companies ventured overseas, they adopted a mix of both centralised

and decentralised functions for their foreign subsidiaries. The objective is to afford

some degree of flexibility for the local managers to exercise discretions in business

decisions, and be nibble to response to the market. At the same time, the SGX

companies want to maintain some degree of central control. One executive cited the

rationale of intellectual property rights as the need for central control. Another

executive mentioned the need to have an overview on risks management of the

subsidiaries.

322

1. Centralised Functions

The most common reason for centralised control is funding, financial reporting and

cost controls. As the SGX companies have to provide funds, guarantees, and other

means of financial support, they have to maintain a high degree of centralised control

on financial management and cost controls. Another important area for centralised

control is in quality control and process flow. As a group, the SGX companies want to

maintain a certain level of quality in products and services standards. They could incur

heavy losses or loss of confidence from customers if their foreign subsidiaries failed in

these crucial areas, i.e. finances, costs, product quality and customer service.

One executive mentioned that his company centralised the Research and Development

(R & D) function because it is deals with the core technology of the company. As this

executive said:

‘…. there are a few areas you have to control from Singapore. One is in terms of the

intellectual property, which you have to control very tightly. Because you have to make

sure that all the patents and trademarks, they are sovereign;...’

There are various approaches and methods to achieve that the balance between

centralised and decentralised controls. Some companies send managers from

Singapore to the foreign subsidiaries. Others have direct reporting lines from

functional managers to their bosses in Singapore. Many senior executives adopt

regular reviews and meetings to maintain the links and controls. One common

complaint is that senior executives in SGX companies have to travel too much. They

are always on the road, and away from their families. Similarly, top executives griped

323

that they are unable to find enough capable managers who are prepared to travel

extensively or be based overseas.

In summary, the common functions that are centralised are:

i. Finance and Funding

ii. Cost Control

iii. Process Flow

iv. R & D

v. Intellectual Property

Very few SGX companies adopt a totally decentralised approach, except when the

subsidiaries are publicly listed companies themselves, and therefore have their own

board of directors and corporate governance regulations to comply with.

2. Decentralised Functions

Other than the centralised functions mentioned above, most other functions are

decentralised in the foreign subsidiaries. Within the approved financial authorisation

limits, the foreign-based managers are allowed to make their own decisions. They have

to learn the local culture, practices and regulations. They have to get close to their

customers.

The functions that are usually decentralised are:

i. Sales and marketing

ii. Manufacturing

iii. Operations

iv. Local compliance

324

v. Manpower recruitment

The executives refer to the process of using local staff and management as ‘localisation’

of the foreign outfit. Many executives stated that their preference is to localise the

foreign subsidiaries as far as possible, rather than send managers from Singapore to

manage the foreign operations. Generally, this is cheaper and more effective. One

executive stressed that:

‘…..certain matters are centralised in Singapore; but by and large, it is decentralised;

they make their own decision to tackle local businesses and problems. ....Yes, the head

office is in Singapore. ... because in our kind of business,......it is localised in a way

because you utilize local facilities ..... All these are local. One other aspect of the

business, you also will have to deal with local companies....Quite a big segment of the

business comes from the institutions that are government-linked....That is why we need

local offices to tackle this kind of businesses....’

3. Outsourcing

One cost effective option compared to the setting up a foreign subsidiary is to

outsource from third parties. Many SGX companies have adopted outsourcing as they

can outsource from the cheapest, provided the quality standards and delivery

capability are dependable. Outsourcing means that a company does not have to carry

the management and staff costs, or the heavy overheads. Moreover, a company can

switch to other suppliers who can prove to cheaper and reliable. Obviously, there are

concomitant risks associated with outsourcing. Interestingly, one executive has

conceptualized his outsourcing efforts as part of his company internationalisation

325

programme. This is a novel definition of internationalisation. He described his

outsourcing needs as follows:

‘….For quality control, we would tend to outsource from countries where their

quality is not of an issue. Then the assembly we would sub-contract to Malaysian

fabricators, Thai sometimes, Chinese and also Mexicans, and so forth. That fits into the

definition of internationalisation, as we are capitalizing on outsourcing from anywhere

which can give us the best in terms of cost, efficiency and delivery services...’

Measures of Level of Internationalisation

As internationalisation is a concept, it is hard to quantify a company’s level of

internationalisation. Each company is organised differently and has its own unique

structure. Different industry operates in a different manner. One executive

explained that even his land transportation business segment could be structured

into an international business. There are successful internationalised companies

operating in the land transportation sector, although this sector is normally

protected, regulated and local in nature. Therefore, there is no one common

measure that can be used to measure across-the-board the level of

internationalisation of all companies in different sectors.

The executives were asked to give their views on appropriate measures on the

level of internationalisation of a company. As expected, they give a diverse range

of answers. The most commonly cited measures to assess the level of

internationalisation are:

i. % of turnover/sales derived from overseas

ii. % of profits derived from overseas

326

iii. % of operations based overseas

iv. % of headcount based overseas

v. % of cross-national common customers

vi. Management ability

The above points (i) to (iv) are quite self-explanatory, but points (v) and (vi) are

interesting and deserve some elaboration. For point (v), one executive clarified that

when his company went international; it enabled his company to capture the same

customers (usually MNCs) in multiple countries. This is deemed an important

justification for going international, and therefore is suitable measure. He said:

‘…..In fact, I can only think of one good point why it is so important to go

overseas. In our case, it becomes a cross border way of getting customers. In fact, more

and more multinationals position their activities in different countries; they are looking

for customers that can help them to integrate. It is not enough to just focus on

domestic needs; everybody knows Singapore market itself is so small. In a small market,

there is high competition. If we do not go overseas, we will not be able to add value

and it is the beginning of the end. So to me, internationalisation is essential, whether

you like it or not....’

For point (vi), the consensus of the executives interviewed was that a successful

international company depends heavily on the management’s ability. Therefore a truly

internationalised company must have an excellent management team who can

execute in the foreign domains. An executive commented that:

327

‘…..I think most important is management......From our past experience, if you

do not have strong infrastructure and foundation on the management, which is

important, when you grow bigger, you will find that a lot of weaknesses start to surface;

and that is where you start to lose money and lose control. Therefore, what I feel

personally, even now we really emphasize on management. How do we train our

people to be able to see things in an internationalised perspective? That means, we

must be prepared to work overseas, travel and localise, especially Singaporeans....‘

Performance Measures for Internationalisation

One of the purposes of this research thesis is to establish whether there is any

correlation between the performance of an SGX company against its level of

internationalisation. The correlation can be evaluated by quantitative means, which is

why SGX companies are selected for study, as financial data are available from the SGX

companies’ annual reports and regular announcements. This quantitative evaluation

can be undertaken using suitable quantitative business research methods.

For the purpose of the present qualitative research is to find out through interviews

with the senior executive of the 12 selected companies, whether in their assessment,

they consider their internationalisation plans in the last 10 years from 19998 to 2007,

have borne any fruits. Through these interviews, it is established that the appropriate

measures to evaluate the success of internationalisation are factors such as sales

growth, profitability, share price and assets growth. Among these four factors, the

most commonly cited factor is profitability. The executives are in unison in considering

that the imperative to go international is to earn more profits, which in turn ensure

survivability and sustainability.

328

On factors relating to rate of returns, the most quoted variables to use to measure

success are return on investments (ROI), return on equity (ROE), return on EVA, and

return on assets (ROA). These quantitative measures can be separately assessed in

future studies.

Results of Internationalisation between 1998 and 2007

All the 12 executives were asked to give an assessment (on a simple scale of 1 to 10)

what they deemed as the level of internationalisation of their companies in 1998, and

10 years later in 2007.

1. 11 positive responses on internationalisation efforts

11 of the executives assessed that their companies had indeed progress from a score

of about 3 – 4 points in 1998 to about 6 – 9 points in 2007. Only one executive gave a

regression of a low score of about 2 points in 1998, to 1 point in 2007. The reason is

this company’s joint venture overseas failed and had to be disposed of later.

When asked about their satisfaction level on the internationalisation effort in the last

10 years and the performance results, the executives of the 11 companies which

attained improvement in the level of internationalisation expressed between

‘satisfaction to very strong satisfaction’ with the results.

2. 1 failed internationalisation case

It would be interesting as further work is to attempt to go into depth and better

understand why this particular company assessed to have failed in its

internationalisation plan. Other companies have also cited early failures, but they

eventually found other routes to succeed.

329

Future Internationalisation Plans

To have a glimpse of the outlook ahead in terms of internationalisation effort, the

executives were asked to describe how they feel their companies can be more

internationalised in the coming years. Most executives opined that they have to

continue to improve their internal strengths in areas such as management depth, IT

technology capability and process flow. It is interesting that management ability is

constantly mentioned as a key factor for success in internationalisation. One reason

could be it reflects the small size of Singapore’s local population. Good and capable

managers are an invaluable asset, especially when a company needs them to venture

boldly and broadly overseas. The pertinent point is that whilst a company may have

sound strategy, strong technology, good processes and ample finances, it still needs an

excellent management to execute the plan.

The executives stated intentions to strive for both organic and inorganic growth in

future. Organic growth means to grow by internal expansion in the current territories

and markets, and gaining market share against the other competitors. This is a difficult

and gradual process.

Inorganic growth means that the companies intend to grow by acquiring other

companies, which can be in the same industry, or in other related or unrelated

industries.

The third manner of growth is to venture into new markets, introduce new products,

enter new businesses or go further afield to foreign markets. However, a few

executives said that they are presently not planning, and not ready to go too far away,

such as to Latin America. The reason is the distance and lack of resources.

330

CONCLUSION

This pilot study reveals a few interesting findings. Some of the findings are

expected but a few are interesting and enlightening.

Spread a second wing

Although the sample size of 12 is not large, it was sufficient to enable some

conclusions to be drawn. The first conclusion is that SGX companies have to

expand overseas because of the limitation of the small size of the Singapore

domestic market. A company that is predominantly based its business in

Singapore would not be able to achieve the size to satisfy the listing requirements

on the SGX. Because of the small domestic economy, all companies have

eventually to move overseas to achieve more scale. As early as the 90s, Mr Lee

Kuan Yew, Singapore’s former Prime Minister had urged Singapore companies to

venture overseas. He termed it quaintly: ‘Too spread a second wing!’

It is survival!

In the present closely connected international economy, there is an even stronger

imperative for Singapore companies to go international. To go regional in fact is

not enough, and not meaningful anymore. As many executives have put it: ‘It is a

matter of survival.’ Singapore companies need to go international just to remain

competitive and relevant. It does not matter if a company fails initially, it must

persevere. It has to internationalise to survive.

331

All paths lead out of Singapore

The third interesting conclusion is that there is no one way to internationalise.

Companies can achieve international status by internal growth, by acquisitions, by

joint venturing, and by outsourcing. Different companies adopt and adapt different

methods to achieve the same results. All roads lead to Rome. In our case, we are a very

small island. All paths lead out of Singapore.

No one standard measure for level of internationalisation

Because of the diversity of companies, there is no one single measurement to assess

the level of internationalisation of a company. Some could adopt the percentage of

turnover derived from overseas operations. Other can use management capability. It is

not an easily quantifiable concept. More literature research needs to be done to find

out whether previous research studies have established a suitable measure. Even if

there is, it may not be directly applicable in the Singapore context.

Impact of Internationalisation on Performance

Similarly, it is not easy to find a direct link between the level of internationalisation and

its impact on the company’s performance. A company could have performed well

arising from its good management, rather than from the internationalisation plan per

se. It is not clear yet that there is a link between internationalisation and performance.

Then there are external and exogenous factors such as state of economy, competitors,

regulatory controls and environment that could have affected a company’s

performance. A relevant question is what is an appropriate measure for performance

against internationalisation?

332

The road to internationalisation never ends

Finally, looking ahead, the consensus of the executives is that the drive to

internationalise never ends. There is still a long road ahead. The road to

internationalisation never ends.

REFERENCES (Excluded from this Appendix 3.1)

ATTACHMENTS

(Excluded from this Appendix 3.1)

1. Interview Guide

2. Transcripts of 12 Interviews

3. Tree Nodes of Nvivo file

4. Signed Consent Forms

333

Appendix 3.2 Appendix 3.2 : Letter of Invitation

334

Appendix 3.3

Appendix 3.3 : List of Participating Companies* and Executives*

S/No. Company Nature of Business Executive Designation

1 CA Food EA MD

2 CB Food & beverages EB Chairman/CEO

3 CC Alcoholic beverages EC CEO

4 CD Offshore marine ED CEO

5 CE Motor related EE

Executive

Director/

Group GM

6 CF Construction products EF Group CEO

7 CG Motor related EG MD

8 CH IT products EH Chairman/CEO

9 CI Construction

materials EI Chairman/CEO

10 CJ IT products EJ MD

11 CK Logistics EK Group CEO

12 CL Logistics EL Group CEO

13 CM Manufacturing

services EM Chairman/CEO

14 CN IT and motor products EN Group CEO

15 IES Government agency EO CEO

(*codenamed)

335

Appendix 3.4

Appendix 3.4 : Consent Form

336

Appendix 3.5

Appendix 3.5 : Interview Guide

338

Appendix 3.6

Appendix 3.6 : Summary table of interview responses

S/

N

Interview questions Company executives’ responses

A

B

1 Internationalisation

strategy (1998 –

2007)

Expanded in countries where

the company already has some

presence, in order to gain

confidence for further

expansion into relatively more

unfamiliar countries.

Expanded into countries, which

had an abundance of their raw

materials and were much larger

markets.

Targeted markets that were

virtually new to their products;

high barriers to entry in terms of

language, regulations, customs,

laws and tariffs. They aimed to

be the first mover in the market

to give a greater impression

among their customers, and

enjoy less competition. They

selected dynamic international

talent who were willing to station

abroad and work.

2 Key drivers of the

strategy

CEO and the other

management staff

.

Executive directors who were

founders of the company.

3 Major imperatives Singapore was a very small

market and difficult to grow by

remaining in Singapore.

Singapore market was limited by

its small population base and the

opening of Eastern Europe.

4 Planning processes

Informal plan.

No consultants were engaged.

No formal structured plan.

No consultants were engaged.

339

5 Use of government

incentives

Government incentives were

not instrumental.

Government incentives did not

affect their overseas plans.

6 Monitoring of plan Monitor the expansion by

comparing each company

against its competitors in the

same country.

Monitored through the help of a

local country manager, resident

sales manager, marketing and

brand manager and finance

team.

7 Success / failure

factors

Knowledge of the environment

and a cautious approach to

expansion.

Committed staff that was willing

to station overseas and

understand the local culture.

8 Structure –

centralised /

decentralised

Decentralised. Decentralised.

9 Indicators on level

of


Turnover and asset levels. None.

10 Indicators of

performance

measures

Measure the company against

competitors in the same

country.

Market share and profitability.

11 Major impacts Regulatory requirements would

pose some operational

inconveniences.

Import duties and political turmoil

would affect the feasibility of

importing their products.

340

12 Rating on level of


First five years – 6/10

Next five years – 8/10

No response.

13 Rating on success

of




No response.

14 Future plans Actively looking for acquisition

opportunities, which could be a

new business or a raw material

supply company.

Expand into new geographical

areas; considered integration into

both upstream and downstream

businesses.

341

S/

N


C

D


strategy (1998 –

2007)

The company researched into

which brand to use for the

internationalisation, followed by

expansion into markets with no

strong competitors present.

Before they build a plant in the

country, they would sell through

exports and set up a sales

office. This allowed them to

build up their brand before they

invest in a plant. Throughout

the expansion, they focused

solely on their core products

which they understood well and

divested non-core businesses.

Once they had established a

foothold in the country, they

would continue to expand

within that country.

The company adopted a strategy

that allowed them to be near their

customers by setting up their

operations near where oil and

gas exploration was most active.

The company was able to offer

prompt service in the heavily

service oriented industry of oil rig

building and repairs.

In addition, the company’s multi-

racial and multi-cultural

workforce was able to work more

effectively in a foreign

environment than their

competitors’ homogenous

workforce. The company also

believed in co-operating with the

country’s policies rather than

imposing their own way.


strategy

Directors from company and its

parent companies.

Management drove the strategy

with the board’s guidance.

3 Major imperatives Small consumer market in

Singapore and the influx of

competitors due to Singapore’s

The industry required the

company to have proximity to

their customers and Singapore

342

Free Trade Agreements.

was far away from the oil fields.


No consultants were engaged

when the plan was formulated.

Consultants were engaged to

advise on the strategy.

5 Use of government

incentives

Government incentives were

not important to their plans.

Use of Government incentives

was very minimal to their

company.

6 Monitoring of plan No response.

Annual reviews and modifications

with the help of consultants.

7 Success / failure

factors

Scale and size of the business;

very clear objectives; staff who

were passionate about their

work; and support from their

Board and management to

make decisions.

Being able to work like a local

company in foreign countries;

diversified workforce; core values

to unite all employees.

8 Structure –

centralised /

Decentralised

Centralised for technical,

finance and the general

manager role.

Centralised for finance,

management and marketing

roles.


of


Number of acquisitions made

and countries expanded into

every year.

Do not measure level of

Internationalisation.

10 Indicators of

performance

measures

Profitability numbers like profit

before interest and tax, and net

profit.

Revenue; profits after tax.

11 Major impacts Increases in custom duties. Oil price changes and the

343

economic environment of the

country.



No response. No response.


of




No response.

14 Future plans

Grow regionally, intra-market

and the American market.

Expansion into countries

undergoing urbanization.

344

S/

N


E

F


strategy (1998 –

2007)

The company tended to choose

larger markets to invest as

these markets yield better

profitability. The company

would take on active

management of the company if

they own the majority, and

appoint the CFO if they only

own the minority. In addition,

the company would ensure the

investment was well

researched, monitored closely

by measuring with KPIs.

The company would choose

good companies to partner with

and these companies preferably

have very good management

systems in place. Before

internationalizing, the company

made sure their products and

business model were good, and

they had the capacity to expand

in terms of manpower. After

acquiring a foreign company,

they employed local talent,

directly assigned people with

responsibilities and avoided

bureaucracy in the organisation.


strategy

Senior management monitored

and the board would be

consulted.

Board set the direction and the

CEO would implement.

3 Major imperatives

Major shareholders had

extensive business exposure in

China.

Singapore was a small country

with small domestic market.


Deliberate plan with changes

along the way.

Ad-hoc plan, which was

constantly reviewed.

345

5 Use of government

incentives

Received help from IE

Singapore to penetrate new

markets.

Do not use government

incentives at all.

6 Monitoring of plan

Regularly reviewed and

updated.

Plan updated along the way.

7 Success / failure

factors

Size of the market would affect

the profitability of the

investment and the ease of

obtaining funding.

Good business model that could

go international; enough

manpower and talent; controls

and systems for the overseas

entities.

8 Structure –

centralised /

decentralised

The structure of the funding

would depend on the

percentage of investment.

Insisted on using local talent.

Centralised the finance and

purchasing operations.


of


Turnover and profitability. Brand name of the company

within the local industry people,

industry surveys, and turnover

from overseas.

10 Indicators of

performance

measures

Turnover and profitability. Return on investment.

11 Major impacts

Global market downturn. Asian Financial Crisis, SARS and

the 9/11 incidents.

346



Full internationalisation by the

end of the fifth year; nurturing

of the investment towards the

tenth year, and reaping the

rewards after the tenth year.




of


Considered very good.

No response.

14 Future plans The company has adopted a

new corporate direction and

diversified into a resource-

based company. In addition,

the company is also assessing

the possibilities of forward and

backward integration.

The company intended to expand

into China and India, but no

interest to go beyond Asia.

347

S/

N


G

H


strategy (1998 –

2007)

The company made sure that

their company had some

competitive advantage when

operating overseas, namely the

ownership, internationalisation

and location advantage. Next,

they relied on their

management network and

capabilities to expand into a

country of closer cultural

distance before expanding

further.

Outward looking corporate

culture with regard to their

expansion plans and human

resource policies, thus they were

comfortable recruiting local staff

in their overseas operations. A

good management system allows

them to utilize their local staff

effectively and their knowledge

contributed to their success. The

culture of the company was

internationalised so their staff

can work with people of different

ethnic background. A standard

set of controls needs to be

applied across all operations.


strategy

CEO initiated and drove the

internationalisation programme.

CEO initiated the discussion with

board and took responsibility.

3 Major imperatives

Difficult for a manufacturer to

expand a business sustainably

and reliably.

Global opportunities, challenges,

changes in the marketplace and

internal strengths.

4 Planning processes Planning was done ‘on the go’ Plan was internally derived with

348

and some consultants were

used.

frequent checks with external

consultants who were locally

based.

5 Use of government

incentives

Did not use any of the

incentives programmes.

Did not benefit from any

incentives.

6 Monitoring of plan

Extensive and regular monthly

review of performance.

Had a 2 – 3 year plan that was

reviewed yearly.

7 Success / failure

factors

The company needed to

develop a competitive

advantage that can be

combined with strategy,

implementation and

management to become

successful.

Underestimating the complexity

and the knowledge gap was the

major cause of failure.

Recruiting local talent with the

knowledge to execute the plan;

strong corporate culture that

allowed the staff to be able to

work with people of all races and

levels; and English as common

language.

8 Structure –

centralised /

decentralised

Finance, HR, product

development are centralised

while marketing is

decentralised.

Very decentralised.


of


Monitored the mix of

manufacturing business, which

is local against the global

Did not benchmark the level of

Internationalisation.

349

business.

10 Indicators of

performance

measures

Monthly finance and

management meeting that

looked at performance in terms

of sales, margin expenditure,

and profitability.

Investment criteria measured

against ROE or IRR.

11 Major impacts Asian Financial Crisis

External environmental factors.



No response.

10/10 overseas.


of


Strategy was working and

paying off.

7 or 8 / 10

14 Future plans Made use of established

manufacturing capability in

China to scale. The company

wanted to supply key markets.

Remain focused on property

investment and development,

and focused on investments

overseas.

350

S/

N


I

J


strategy (1998 –

2007)

The company’s success was

due to these factors – strong

local business partner,

achieving size and scale,

decentralizing the

management, and ability to

react to the environment.

The company’s

internationalisation plan was

based on a few factors – robust

selection of partners, intentionally

placing trust in their partners,

giving their partners a stake in

ECS, and decentralizing control

except for the accounting

system.


strategy

CEO identified the need and

drove the initial stages. Board

would endorse the initiative

before major resources were

committed.

Three founders (including CEO)

of the company had a role in the

company vision. The CEO

reported to the board and drove

it.

3 Major imperatives The need for performance and

results as a listed company.

Survival against much stronger

international competitors.


Plans developed in-house with

limited use of external

consultants.

Plans were all developed in-

house without consultant help.

5 Use of government

incentives

Very little usage of government

incentives.

Did not use the government

incentives.

351

6 Monitoring of plan Reviews were done at least

once every two years.

Emphasis was placed on

selection of partners, not on

monitoring.

7 Success / failure

factors

A highly scalable model, which

grew with momentum;

technological competencies;

powerful local partner.

Good reliable people and very

good logistics, IT, and financial

systems. Need to rely on their

systems, as their volume was

huge. Good leadership from

country CEOs.

8 Structure –

centralised /

decentralised

Centralise R&D and Quality

Control; decentralised sales,

HR, finance control and

production.

Allows localisation, or

decentralisation, as much as

possible except financial

controls.


of


Return on investment and the

production capacity.

Sales and profits.

10 Indicators of

performance

measures

Measured the outcome and the

spin off effects of the

expansion.

Consistent profitability; return on

capital employed compared with

the industry; good cash flows.

11 Major impacts

Internal change of

shareholders.

No major events except the

business viability of their

vendors.

12 Rating on level of First five years – 6 - 7/10 Based on sales and profits, the

352

Internationalisation Next five years – 6 - 7/10

company had done well on the

level of internationalisation.


of


Done very well in one of the

business segments but not as

well in another segment.

Very satisfied.

14 Future plans The company engaged in more

activities related to the green

initiatives and addressed the

new opportunities in the service

sector.

Continue to grow to countries

where the company was not

operational, and look for M&A

opportunities in countries where

they were already established.

353

S/

N


K

L


strategy (1998 –

2007)

The company did not depend

only on Singaporeans to

manage overseas office

because they lack the required

experience of running an

international logistics company.

The company tended to favour

overseas investment in the joint

venture structure where the

local partner would have the

required knowledge.

The company engaged a

reputable external consultant to

assist with the formulation of the

internationalisation plan. The

company preferred to depend on

the joint venture local partners. In

addition, the people of the

company must be well trained

and motivated enough for the

overseas deployment. The

company also tracked their

overseas performance closely.


strategy

Group CEO. Management conceptualized the

strategy with the help of external

consultants and sought approval

from the board.

3 Major imperatives The company needed to

survive and as a logistics

company, they needed a large

network of offices in many

countries to be an effective

logistics solution.

Internally, the company needed

growth, and externally, there

were opportunities available for

expansion overseas.

4 Planning processes Very opportunistic plan with no 10-year plan that focused on the

354

help from external consultants.

priority.

5 Use of government

incentives

Yes. It helped to defray minimal

costs but did not dictate their

overseas expansion plans.

No government incentives.

6 Monitoring of plan No monitoring process. A progress report to the board

done every six months.

7 Success / failure

factors

Economy of scale;

management.

The two key components to

success were people and

processes.

8 Structure –

centralised /

decentralised

Most of the overseas

operations were joint ventures,

and only buying of freight was

centralised.

Centralised three areas –

financial control, IT, and

marketing strategy.


of


Do not differentiate business in

or from outside Singapore.

Sales and profit contribution from

overseas.

10 Indicators of

performance

measures

Profit margins. Economic Value-Added, sales

and profitability creation.

11 Major impacts Fuel costs, shipping market and

the availability of financing for

trade.

SARS and any event which might

cause the government to control

movement of goods.

355



6 - 7/10 7 – 8/10


of


No response. No response.

14 Future plans Did not have a concrete plan on

how to move ahead as they

were a very opportunistic

company, but they would

capitalize on what they had

built up over the last five years

and tried to achieve a

multiplying effect on their

network.

Continued with the plan and

double the business activities

that they were doing for the next

3 to 5 years.

356

S/

N


M

N


strategy (1998 –

2007)

The company chose not to

compete with other low cost

manufacturers but chose to rely

on their strong brand name

instead to secure project

management jobs. Their

employees were very capable

and the incentive scheme was

crucial in aligning the interest of

the staff with the company.

The internationalisation strategy

that was critical in their

performance includes employee

bonus plans, human resource

utilization, and the controls over

the various overseas units.


strategy

CEO conceptualized the plan

and the management drove it.

Management drove the plan.

3 Major imperatives Survival as a company.

Survival as a company.


Management would create a

yearly business plan and a

budget, without the help of

consultants.

The company had 3-year plans,

5-year plans, annual budgets,

and strategic meetings. They

validated their strategies with

well-known consultants.

5 Use of government

incentives

Periodic usage of government

incentives to conduct studies

and evaluate projects.

Did not use government

incentives except for the OHQ

status for one of their subsidiary

357

companies.

6 Monitoring of plan Board was not actively involved

with the internationalisation

plan.

Management were held

responsible for the plans and

their annual bonuses were tied to

the plans.

7 Success / failure

factors

Employees with the confidence

and were capable, and the

appropriate incentive scheme.

Having the best persons to lead

the effort, then rewarding and

recognizing their good effort.

8 Structure –

centralised /

decentralised

Project execution and finance

were centralised; business

development and HR were not

centralised.

Finance, corporate governance,

and controls were centralised.

Legal and HR were centralised

but implemented locally.


of


Percentage of overseas sales;

number of countries covered;

percentage share of global

market size.

Do not track level of


10 Indicators of

performance

measures

Bottom line (i.e. profit). Profitability, cash flow and

internal rate of return.

11 Major impacts

Management staff getting old. Competencies and resources.

12 Rating on level of No response. No response.

358



of


8/10 compared to companies in

the region. Personally, the

rating would be 5/10.

No response.

14 Future plans The company would want to

capitalize on their international

market network in the oil & gas,

power industries, by acquiring

more businesses that could ride

on this network. They would

also like to achieve more

synergies within the group.

The company would expand

outside of Singapore.

359

Appendix 4.1

Appendix 4.1 : Summary of developments and financials of Company A

Main developments by year (1998 to 2007 period) 1998

Postponed the proposal to build a mega plant in Shah Alam.

Set up the fourth manufacturing plant in Johor Baru, Malaysia.

Subsidiary A1 entered into a strategic alliance with foreign partner AA1.

1999

Sales of A1 bread range of products in Philippines was better than expected and

had become well established.

2000

Acquired A2 brand, a major competitor in Singapore.

Constructed a fifth plant at Bukit Kemuning, Malaysia.

Entered into a strategic alliance with Padiberas Nasional Berhad, a leading player

in the processing, trading and distribution of rice and other food products in

Malaysia.

Philippines subsidiary A2 installed a second production line.

Subsidiary A1 became one of the largest chains in Singapore.

2001

An acquired 100% of Australian company AA2, the largest producer of pork in

the region and Australia, to form subsidiary A3.

Divested 30% of A1 KL to Padiberas Nasional Berhad.

2002

A new slaughterhouse is being constructed in Melbourne.

A1 KL planned to install an additional production line.

360

A1 is clearly established in Metro Manila as the number 1 brand with a 35%

market share.

Subsidiary A4 purchased an adjacent property to expand their facilities.

2003

Subsidiary A3 suffered considerable losses due to Australian droughts and sharp

appreciation of Australian dollar.

A sold its entire interest in A1 Thailand.

A sold its entire 51% interest in subsidiary A1.

A1 KL is the 8th production line to boost capacity.

2004

Acquired A5 bakery operations in New South Wales, Australia and a 51%

interest in subsidiary A5, a dairy food producer located in Western Australia.

A1 Philippines had grown to occupy 50% market share in Metro Manila and has

started growing steadily in other provinces. They also installed a third production

line.

Acquired the entire business and assets of a dairy producer in Victoria, Australia.

Invested in A6, a Singapore listed company.

A carried out a Rights Issue that was fully subscribed.

2005

Acquired a 55% stake in A7 China, a major producer of pork and livestock in

Shandong, China.

Acquired a 51% stake in A8 China, one of the largest producers of apple juice

concentrate in both China and the world.

Acquired a strategic 22.24% in A9 China, producer of preserved and processed

vegetables, fruits and peanut oil.

361

Sales and profitability of A1 Singapore have fallen due to intense competition.

2006

Increase in A’s Operating profits is mainly attributable to food manufacturing,

primary production and trading & logistics.

A1’s operations in Malaysia and Philippines continue to see increased sales and

profits while A1 Singapore continued to lose sales and profitability.

2007

A1 KL plans to commission its 8th production line and upgrade an existing line to

cope with the increased demand.

A1 Philippines initiated the installing of its 5th bread production line.

Embarked on feasibility studies of bakeries in other Asian markets.

Revenue percentages from food manufacturing, bakery, primary production and

trading were 32%, 28%, 30% and 9% respectively.

362

Company A Financial Summary Table

(S$’mil) (Y/E

31 Dec) 1998 1999 2000 2001 2002

Total

Revenue 404 460 492 603 829

Net Profit

After Tax 5.5 15.8 16.5 19.0 18.3

Market

Capitalisation 148 226 122 124 132

Total Assets 282 270 282 540 563

(S$’mil) (Y/E

31 Dec) 2003 2004 2005 2006 2007

Total

Revenue 809 620 886 992 1,077

Net Profit

After Tax 32.6 12.3 26.3 19.5 14.1

Market

Capitalisation 144 142 183 192 198

Total Assets 581 623 955 933 1,056

363

Appendix 4.2

Appendix 4.2 : Summary of developments and financials of Company B


Launched new products, B1 coffee range in five flavours, targeting the more

developed markets of USA, Western Europe and Singapore.

1999

Increased the stake in Company B1, one of B’s contract manufacturers, to 88% in

March 1999.

2000

Listed on the SGX Mainboard on 8 May 2000.

2001

Continued to invest in marketing activities to enhance brand portfolio

Launched many new food products.

Ventured into wholesale of frozen seafood in Singapore and overseas markets.

Disposed of subsidiary B1, an unprofitable subsidiary.

Acquired additional shares in BB2.

2002

Stepped up advertising and promotional efforts to reinforce brand positioning,

highlights would include advertisement during the FIFA World Cup 2002, on

racing cars, and marketing initiatives involving a pop music group.

Launched new products 3-in-1 coffee in stylish stick sachets, snack food like

dried calamari and jelly pudding.

Independent consumer surveys showed B1 3-in-1 instant coffee among the top

five in Russia. In Kazakhstan, B1 came in tops for the instant coffee market.

364

2003

Continued their aggressive advertising and promotion activities like wet

samplings, trade shows and sponsorships.

Launched new formulations like the freeze-dried coffee and the 100% Columbian

3-in-1 coffee.

Entered new markets like Egypt, Turkey, Hong Kong, China, USA, Middle East

and India. Set up new offices in Hungary and Uzbekistan, bringing total offices

to 14 in 13 countries.

Net profits after tax declined due to higher marketing costs, overseas

administrative and logistics costs.

2004

Moderated the amount of advertising and promotion effort

Introduced new products B2 and B3 Coffees and Ice Teas.

Acquired 49% stake in Company BB3 of Sri Lanka in a strategic move to expand

laterally.

Built a new factory in Vietnam to cater to local sales. Partnered Company BB4 of

Indonesia, to jointly market and distribute a new brand of instant coffee drinks,

named B4.

2005

Continued to market their brand strongly which contributed to increased revenue

again.

Started the construction of a new manufacturing facility in Russia in response to

the higher import duties of good entering Russia,

Divested a 35% owned associated company – Company BB5.

365

2006

Marketing and promotion expenses continued to increase as more brand building

activities are carried out, ensuring another strong growth in sales figures.

New production facility in Russia is fully operational and it employs 350 people,

capable of producing 100 million sachets of coffee per month that supplies

directly to the Russian market.

Acquired a 50% stake in the property on which the new Russia factory is located.

Raised S$22.3 million of funds through a private placement of 39.2 million new

shares to Company B6 owned by the BBB Group, an Asian conglomerate that

has interest in food processing and manufacturing.

2007

Embarked on a revamping exercise to improve market share and brand equity of

B1 brand.

Acquired its first nationalistic Russian brand of 3-in-1 instant coffee mix, B5, a

leading brand in both Russia and Ukraine.

Independent brand valuers valued B1 and other brands at S$182 million.

Forbes named B as one of the best 200 companies in Asia with turnover under

US$1 billion in 2007.

Revenue segments Russia, Eastern Europe and Central Asia and others

contributed 54.6%, 38.2% and 7.2% respectively.

366

Company B - Financial Summary Table

(S$’mil)

(Y/E 31 Dec)

1998 1999 2000 2001 2002

Total

Revenue

48 39 59 84 112

Net Profit

After Tax

4 4 5 11 15

Market

Capitalisation

- - 27 32 78

Total Assets 22 27 43 54 71

(S$’mil)

(Y/E 31 Dec)

2003 2004 2005 2006 2007

Total

Revenue

140 160 184 234 277

Net Profit

After Tax

10 15 22 27 32

Market

Capitalisation

103 103 89 195 277

Total Assets 74 98 130 179 180

367

Appendix 4.3

Appendix 4.3 : Summary of developments and financials of Company C


Redesigned packaging for brand C1. Sponsored S-League with $5.5 million,

which is among the many sponsorships that C had carried out in its various

markets.

Acquired a 35% equity stake in company CC1 after buying out their joint venture

partner.

1999

C announced the exit from non-core businesses like the liquor brand agency and

wholesaling in New Zealand.

2000

Acquired the rights to C1 and C2 brands in Hainan, China.

Made an unconditional takeover offer for CC2 shares in New Zealand, increasing

their interest in the company to 76.63%.

Takeover offer was made for those shares of Papua New Guinea company, CC3,

that was not already owned, but the offer lapsed due to lack of interest in the

offer.

A conditional agreement was entered into to acquire 27% of CC1, which would

take C and its concerted parties’ interest to 97%.

C announced the discontinuation of its soft drinks operations.

Announced the sale of shares in company CC4.

C announced the sale of wines subsidiary CC5.

368

2001

Continued intensive advertising and sponsorship activities, especially in China

and Thailand to promote C1 and C2 brands.

Initiated plans to re-commence construction of a brewery in Hatay, Vietnam and

double the brewing capacity in Thailand.

2002

Advertised aggressively by associating their brands with the English Premier

League and FIFA World Cup.

2003

Opened new overseas offices in New York, Sydney and London. Gained

distribution in Nepal, South Africa, Ghana, Sierra Leone, Finland and Sweden.

Stepped up marketing and distribution efforts in the Middle East.

Introduced new variants of beer named C4 and C5.

Revenue, profits before tax both grew despite the SARS epidemic.

2004

Expanded production capacity by 20% and 50% in Cambodia and Hainan

respectively.

Received approvals to expand production capacity in the South Vietnam brewery.

Privatized CC6 in New Zealand by acquiring the remaining shares held by

minority shareholders.

Acquired 21.5% interest in CC7, a brewery in Guangdong province, China.

Introduced C1 to Estonia, Turkey, and Russia.

2005

Invested US$15 million in a new brewery in Mongolia for a 55% stake.

Acquired a 60% in one of Sri Lanka’s leading breweries,

369

Acquired a 40% stake in Jiangsu’s brewery, CC8, and a new plant in Wujiang.

Company CC9, of which C owns 21%, expanded its new breweries in Shantou,

Dongguan, Tianjin and Xi’an of China.

2006

Acquired Brand C6’s two breweries in central Vietnam and the Mekong Delta.

Secured licences to build breweries in Hyderabad, India; Vientiane, Laos;

Ulaanbaatar, Mongolia. CC8 is adding three more breweries in Xi’an, Chengdu

and Foshan.

2007

Acquired yet another brewery in Quang Nam province in central Vietnam.

370

Company C -Financial Summary Table

(S$’mil)

(Y/E 30 Sept)

1998 1999 2000 2001 2002

Total

Revenue

1,401 1,326 1,179 1,011 1,096

Net Profit

After Tax

64 40 66 117 106

Market

Capitalisation

866 1,099 967 1,164 1,253

Total Assets 1,449 1,242 1,038 1,014 1,056

(S$’mil)

(Y/E 30 Sept)

2003 2004 2005 2006 2007

Total

Revenue

1,261 1,371 1,436 1,526 1,784

Net Profit

After Tax

130 145 155 183 168

Market

Capitalisation

1,601 1,938 2,303 3,957 3,407

Total Assets 1,156 1,158 1,274 1,559 1,725

371

Appendix 4.4

Appendix 4.4 : Summary of developments and financials of Company D


D merged with partner company DD1, another major Singapore shipyard, to form

Company DD2.

D sold DD3 and DD4, US subsidiaries involved in building of pleasure boats;

ceased its presence in DD5 in Australia; increased its investment in DD6

Investment to 100%; sold DD7 to DD8.

1999

The newly merged DD2 acquired the marine-related businesses of D and now

owns 18% of DD9.

Four yards in Singapore, USA, Caspian Sea and Brazil allows D to reach out to

customers in these regions.

2000

D delivered its first new rig to customer DD10.

New shipyard in Brazil had secured more than US$120 million worth of contracts.

Integration of subsidiary DD11 and company DD12.

Increased share in Port of Singapore to approximately 20%.

2001

Orders secured in 2001 will keep the DD13 division busy well into 2004.

Ongoing integration between D and DD1.

2002

D integrated its offshore and marine business units to form DD13, benefitting

from cost and revenue synergies.

372

D acquired a yard in Rotterdam, allowing D the ability to repair and convert

some of the world’s largest semi-submersibles.

DD13 successfully penetrated the Middle East offshore market with the repair of

a jack-up drilling rig.

2003

Established an offshore engineering and construction facility in Kazakhstan to

strengthen their presence in the Caspian Sea region.

Set up the fourth manufacturing plant in Johor Baru, Malaysia.

2004

Increased the 60% stake in D Brazil to 82.75%, buying out their partner in the

process.

2005

D13 acquired the remaining interest of its Brazilian operations.

D and Company DD14 combined their expertise to provide deep water and ultra-

deep water oil and gas development solutions.

DD15 boosted its capacity to meet increasing demand for specialized vessels

with the acquisition of a shipyard in Nantong, China.

2006

D entered the Indian offshore market by securing two separate contracts for

drilling contractor.

D13 acquired an additional 50% of the shares in DD16 to make a wholly owned

subsidiary, thereafter injecting capital and rebranding it into DD17 Norway.

Set up D14, a majority owned venture, on Bintan Island, Indonesia and leased a

9-hectare site in Singapore.

D signed a Letter of Intent with XX Transport Company to establish a large ship

repair yard in Qatar.

373

2007

D13 and YY formed a 20/80 joint venture to develop a shipyard in the Port of

Ras Laffan by 2010.

D Nantong was officially opened in Nantong Jiangsu province, China.

374

Company D Financial Summary Table

(S$’mil)

(Y/E 30 Sept)

1998 1999 2000 2001 2002

Total

Revenue

5992 7242 772 1,517 1,911

Profit Before

Tax1

47 44 66 101 227

Market

Capitalisation

1,488 1,500 1,154 962 1,257

Total Assets 6103 8013 2,063 3,127 2,467

(S$’mil)

(Y/E 30 Sept)

2003 2004 2005 2006 2007

Total

Revenue

1,460 2,430 4,112 5,755 7,258

Profit Before

Tax1

160 248 347 627 619

Market

Capitalisation

2,085 2,954 3,805 12,252 18,18

5

Total Assets 1,963 2,685 3,949 5,212 5,717

1 Profit after tax figures are not available, so Profit before tax was used instead.

2 Revenue figures not available, so only revenue figures for the DD segment

shown here.

3 Total Assets figures were not available, so only Net assets figures shown here.

375

Appendix 4.5

Appendix 4.5 : Summary of developments and financials of Company E


E increased its market share in the China motorcycle manufacturing market from

2.97% to 3.46%. Entered into several strategic alliances with PRC-foreign joint

ventures that allowed E to widen the product range and quality.

The company supplies 4% of the world’s demand for dry cargo containers.

Sold the 13.53 acres of container storage yard in Port Klang and consolidated

container operations into a single plant in Penang.

1999

Listed its motorcycle operations, EE1 on the Shenzhen Stock Exchange.

Incorporated a 55% owned subsidiary, EE2, with a team of veterans in the

semiconductor industry.

2000

Ceased the dry cargo container business.

New assembly plant in Jinping area to be completed by year end.

Invested an additional S$15.7 million in EE3 through EE4.

Secured five distributorship contracts with international companies like EE5 and

EE6.

2001

Proposed to acquire EE7, which holds a 25% stake in the established light truck

manufacturer, EE8, and a 16% stake in Shanghai-listed EE9, which manufactures

automotive chassis and gearbox.

EE10, a subsidiary on E doing marine food processing, wound up non-core

businesses like distribution of metal and mineral products, food and beverages.

376

2002

Secured shareholders’ approval for the acquisition of EE11, which hold 25% in

EE12 and 16% in EE13.

E’s electronic component distribution business is expanding into India to

capitalize on the increasing demand for IT products and components in India.

EE14, the marine food processing business of E, was wound up after years of

losses.

2003

EE1 proposed to acquire 49% stake in each of its two suppliers: EE15 and EE16.

2004

Motorcycle and automobile manufacturing businesses faced intense competition

and pressure on its price.

2005

Initiated the process to dispose of the entire equity interests in the motorcycle

manufacturing associated companies. Disposal of EE4 had been completed.

E’s interest in EE13 had been diluted, by the partial conversion of their bonds by

other bondholders, to 13.82%.

Turnover in the EE division decreased by 17% to S$62.3 million.

Set up a wholly owned subsidiary, EE17, in Malaysia that was engaged in

limestone processing.

2006

E intended to expand into two new areas – automotive component trading and

scrap metal trading.

2007

The EE division achieved an 18% increase in turnover from S$69.9 million to

S$82.4 million.

377

Production began on the newly completed limestone processing plant in Banting,

Malaysia.

Automotive component trading business achieved a turnover of S$1.7 million

and earnings of $80,000 by year-end.

378

Company E - Financial Summary Table

(S$’mil)

(Y/E 30 June)

1998 1999 2000 2001 2002

Total

Revenue

188 43 31 89 85

Profit After

Tax

4.6 1.7 0.2 8.4 0.2

Market

Capitalisation

36 86 30 46 25

Total Assets 227 194 170 189 183

(S$’mil)

(Y/E 30 June)

2003 2004 2005 2006 2007

Total

Revenue

108 75 62 70 94

Profit After

Tax

(0.9) 13.5 17.1 8.0 22.2

Market

Capitalisation

56 71 69 67 105

Total Assets 237 218 223 200 268

379

Appendix 4.6

Appendix 4.6 : Summary of developments and financials of Company F


Entered the Philippines market through the establishment of a joint venture

with FF1.

Ceased operations in Myanmar due to political uncertainty and economic

downturn.

New crane division established in Western Australia to promote sales.

Personnel and equipment withdrawn from Indonesia to Singapore due to poor

economic outlook.

1999

Entered the Taiwanese market through the establishment of a Taipei office.

Entered into the new markets of USA, India and the Middle East.

2000

Listed on the SGX as a secondary listing.

Made an extraordinary gain through the disposal of FF2, manufacturer of

hydraulic pile hammers and earth drills.

2001

Signed an agreement with FF3 (a subsidiary of FF4) in Australia to form a

joint-venture company called FF5, by merging FF6’s trading business with

FF7.

2002

Increased equipment and parts sales recorded by Australia following the

acquisition of franchises from FF7 as a result of the merger between FF7 and

FF8.

380

Acquired minority interest in FF9

Developed new markets of Japan, Hong Kong and Europe.

2003

Acquired the remaining shares in the joint venture company, FF10, from their

joint venture partners.

Disposal of FF11, the foundation equipment parts business.

2004

FF12, a 50-50 joint venture with FF13, secured an S$119 million contract to

supply mining equipment.

Plan to convert secondary listing on SGX to a primary listing.

FF14, a multinational heavy industries cranes company, appointed F as the sole

distributor of their cranes in Singapore, Australia, Hong Kong, Malaysia,

Thailand and Brunei.

Acquired FF15, a leading Australian plant hire and haulage company.

2005

Listed their wholly owned subsidiary FF16 on the ASX as FF16 Group Ltd and

delisted F from the ASX.

Established a new subsidiary and joint venture enterprise in the People’s

Republic of China, FF17.

Increased revenues in markets of Indonesia, Vietnam and in the Middle East

due to the abundance of infrastructure and oil and gas projects.

2006

Entered into two joint ventures with FF18 to secure two contracts in the oil and

gas industry.

381

FF16 acquired Queensland based equipment hire company, FF19 for S$31.7

million.

Established FF20 Middle East.

2007

Entered into a joint venture with FF21 to form a new company, FF22.

FF16 Group acquired FF23.

Acquisition of 30.2% of FF24.

Announced new joint venture agreement to acquire 76.4% stake in FF25.

Established a joint venture in Vietnam, FF26.

382

Company F - Financial Summary Table

(S$’mil)

(Y/E 31 March)

1998 1999 2000 2001 2002

Total Revenue 167 124 148 119 153

Profit After Tax 8 (1) (3) (15) 2

Market

Capitalisation

- - 96 82 93

Total Assets 240 246 256 228 249

(S$’mil)

(Y/E 31 March)

2003 2004 2005 2006 2007

Total Revenue 183 232 309 408 482

Profit After Tax 8 14 21 46 84

Market

Capitalisation

153 167 302 534 1,577

Total Assets 258 319 420 481 630

383

Appendix 4.7

Appendix 4.7 : Summary of developments and financials of Company G


Formed a strategic alliance with GG1, a subsidiary of GG2 in Japan. The new

company was named GG3.

1999

GG4 became a new joint venture partner in GG5.

Disposed of 49% interest in GG6 to GG7 of Germany.

Acquired the Parts and Components business from parent company, G.

G acquired the remaining 5% interest in GG8.

2000

Formed a 20% new joint venture in Tianjin with GG9 and a company in

Taiwan.

Joint venture in Shanghai built an additional factory and almost trebled its

output.

Disposed 5.88% interest in GG10, an associated company listed in Taiwan.

2001

Acquired from G, its entire 42% equity interest in GG11, a related company

within Group G, and approximately 49% in GG12. These acquisitions

positioned G as the main industrial investment vehicle.

Acquired the remaining 51% interest in GG13.

Planned to build a modern, single storey factory of approximately 30,000

square meters in Huizhou, China to house the electronics assembly of the

Company.

384

2002

Established an S$200 million Medium Term Note Programme and issued S$50

million Fixed Rate Notes.

G acquired a US company with patented GG14.

G and GG15 each acquired 3% interest in GG16 of Huizhou, China.

2003

G acquired 75% of the issued capital of GG17, China’s second largest alkaline

battery manufacturer.

New plant of GG18 in China commenced production.

Acquired power switch technology and products.

2004

G entered into a 50:50 joint venture agreement with GG19 of France.

Disposed of entire effective 52.40% interest in GG’s electrical wiring devices

and installation systems business. G was renamed G1.

G Hong Kong set up a product development centre for R&D of advance

wireless electronics and digital signal processors.

2005

G increased its shareholding in G1 to more than 54%.

GG20, a wholly owned subsidiary of G, acquired a 67.27% stake in GG21, a

company that is focused on sound-related products.

Disposed of its entire 41.56% interest in CG22.

G invested a 10% interest in GG23 in Taiwan.

2006

G disposed of its entire 50% interest in GG24 to GG25.

385

2007

Completed the privatization of GG1 and became a wholly owned subsidiary of

the Company. Shares were delisted from the SGX in October 2006.

G disposed its 30% interest in GG26 and transferred its entire interest in GG27

to GG28.

G increased its interest in GG29 from 29.8% to 46.4%.

The Company’s 45.1% associate, GG30, completed the disposal of its

subsidiaries comprising GG30’s electronic cable unit.

386

Company G - Financial Summary Table

(S$’mil)

(Y/E 31 March)

1998 1999 2000 2001 2002

Total Revenue 295 257 255 340 298


Market

Capitalisation

60 155 185 273 275

Total Assets 240 245 339 591 621

(S$’mil)

(Y/E 31 March)

2003 2004 2005 2006 2007

Total Revenue 322 375 525 399 383


Market

Capitalisation

436 443 357 230 239

Total Assets 656 729 1,037 939 859

387

Appendix 4.8

Appendix 4.8 : Summary of developments and financials of Company H


H ceased the hardware portion of the IT business by closing down the

computers and peripherals business.

Started the ‘thin computing’ client business in July 1998 for a few selected

markets in Asia.

Started a joint venture to develop a land bank in Zhuhai, PRC.

1999

Profit before interest and tax surged back to profitability due to positive

contributions from the thin computing and wireless

telecommunications/broadband systems integration business.

H entered into a strategic alliance with German technology giant HH1 that will

enable both companies to offer an enriched suite of thin computing solutions.

2000

Successfully completed its corporate restructuring programme and is now a

debt free company. The company has renewed its corporate vision and intended

to focus on developing its remaining three core businesses.

Sold the investment in HH2.

2001

The company’s thin computing product strategy changed from a combined

integrated hardware and software solution to a software offering.

The Zhuhai, PRC property was being developed into a residential cum

commercial property.

388

2002

Revenue contribution from the residential cum commercial property

development project in Zhuhai, PRC rose to approximately 56%.

Successfully listed the thin computing subsidiary HH3 on the Growth

Enterprise Market (GEM) of the Hong Kong Stock Exchange.

Amalgamated the operations of H and HH3, a provider of network terminal

products based in Shanghai.

2003

Revenue contribution from the residential cum commercial property

development project in Zhuhai, PRC rose to approximately 78%.

Revenue from IT businesses decreased 19% to S$6.1 million.

2004

Acquired HH4, a private education organisation with a 2,500 student capacity

campus.

Revenue contribution from the IT business and property development was 12%

and 85% respectively.

2005

Entered into a co-operative agreement to jointly invest and set up high schools

in the PRC.

Property development remained the main revenue contributor at 84.7%.

2006

Disposed of H building in Singapore for cash.

Property development business was affected by the Chinese government’s

measures to curb the property market.

2007

Secured a property development project in Bangkok, Thailand.

389

Education unit of H expanded through the acquisition of two education units,

HH5 and HH6, from HH7. This reduced the stake to 40% and the expanded

entity will become an associate company of H.

390

Company H - Financial Summary Table

(S$’mil)

(Y/E 31 Dec)

1998 1999 2000 2001 2002

Total Revenue 57 25 21 7 17

Profit After Tax (295) (50) 8 5 (1)

Market

Capitalisation

322 1,464 664 507 338

Total Assets 304 282 163 164 168

(S$’mil)

(Y/E 31 Dec)

2003 2004 2005 2006 2007


Profit After Tax 1 (2) 9 (3) 2

Market

Capitalisation

550 338 114 85 71

Total Assets 188 176 181 166 156

391

Appendix 4.9

Appendix 4.9 : Summary of developments and financials of Company I

Main developments by year (1998 to 2007 period)

1998

Commissioned a new dry mixed plant II1.

Completed a new multi-million dollar, high capacity dry mix plant in Tuas.

Invested into three new venture capital funds based in the US.

Did a maiden foray into property development with joint venture partner II2,

and ended up developing a residential property in central London.

1999

Turnover for II3 division declined 25% to S$90.7 million.

Decided to bring II4 operations in the Yangtze Delta region to a halt.

Increased pace of investing in both venture capital funds and start-up

companies.

2000

Shareholders approved the Group’s plan to diversify into property development

and investment.

II5, I’s associate company, entered into a joint venture agreement with II6 to

acquire a freehold building located in the heart of London.

2001

Construction sector suffered a 39% decline in the value of contracts awarded

and the dot.com industry collapsed. These external factors caused group

turnover to fall by 35%.

Acquired a specialty chemical company.

392

2002

II7 operations ceased in the last quarter of 2002 when the bulk terminal at

Pulau Damar Laut commenced operations.

The pace of investments in venture capital funds continued to slow and not

expected to recover until 2005.

New business in specialty chemicals business has shown encouraging results.

2003

II8 joint venture was signed in Korea, while another two were signed in China.

II9, a joint venture plant with II10 was commissioned in July 2003.

II11, a similar joint venture with II12 in Shandong province will be operational

in end 2004.

II13, another joint venture with the Korean company II14 was well positioned

to address the Greater Seoul market.

2004

II15, I’s polymer compounding business, became a subsidiary from July 2004.

II15 embarked on expanding its capacity in both Singapore and Malaysia.

The venture capital business broadened its spectrum to include life science

ventures.

2005

The group adopted a new corporate identity and a new name – I*; a change

from I.

Strong demand for product I in China has prompted I* to go ahead and expand

their production capabilities in China.

II16 division formed an operation partnership with a leading global

petrochemical and chemical supply chain player. This area of business also

increased their production capacities in view of broader spectrum of demand.

393

2006

Successfully commissioned another joint venture facility in Huaian, North

Jiangsu province.

Set up a modern compounding facility in Jurong Logistics Terminal, which is a

collaboration with II17, a Belgian global chemical and industrial logistics

player.

Expected good returns from the latest Sentosa Cove condominium property

development.

2007

Product I expected to pick up due to new government initiatives to transform

Singapore into a global city with 5.5 million population.

The Product I2 business grew an average of 25% year-on-year in the past 5

years to reach a production capacity of 3.6 million tons per annum, making I

one of the leading slag cement players in China.

394

Company I - Financial Summary Table

(S$’mil)

(Y/E 31 Dec)

1998 1999 2000 2001 2002


Profit After Tax 20 8 19 0 (34)

Market

Capitalisation

75 101 83 66 59

Total Assets 268 266 272 243 212

(S$’mil)

(Y/E 31 Dec)

2003 2004 2005 2006 2007


Profit After Tax (22) (4) (0) (7) 8

Market

Capitalisation

61 55 50 78 124

Total Assets 176 173 177 172 182

395

Appendix 4.10

Appendix 4.10 : Summary of developments and financials of Company J


1998

Revenue of Financial Year 1998 derived from the enabling infrastructure

business was $63.7 million; from IT Services business was $6.6 million; from

IT Products distribution business was $117.4 million.

1999

J acquired a 60% interest in J Asia, incorporated in Singapore.

2000

Revenue contribution from Singapore was $219.0 million, accounting for

50.4% of the total revenue. Contribution from Malaysia and Thailand were

$84.5 million and $130.6 million.

Prepared for public listing on SGX Mainboard.

2001

IPO was launched in January 2001 and the shares were listed on the Main

board of SGX in February 2001. The public tranche of the IPO was 17.6 times

oversubscribed.

In July 2001, J entered into a conditional sale and purchase agreement with JJ1

to acquire 51% of JJ2 China.

2002

Acquired the balance of the shares of JJ3 and JJ4; both of these companies

became wholly owned subsidiaries. These acquisitions strengthened J’s

footholds in China and Thailand.

2003

J China was ranked as the 2nd largest IT Distributor in China by CCID

396

2004

J expanded into Indonesia by forming JJ5 together with the founders of JJ6, a

leading IT distributor in Indonesia.

JJ7 opened a world-class JJ8 Centre in Thailand

J opened a new office in Xi’an, China.

JJ9, a subsidiary of JJ10, acquired 21.35% equity stake in J.

2005

J Singapore commissioned JJ Spare Parts business and JJ11.

2006

JJ12 signed an agreement with JJ13 to provide online direct debit device.

JJ forays into IT retail with launch of its first IT concept store, JJ14 at Marina

Square.

2007

Merger between J and Hong Kong-listed JJ15 to create a formidable, full-

spectrum infocomm technology Asian MNC distribution giant. JJ12 acquired a

52.5% controlling stake in J during this merger.

397

Company J - Financial Summary Table

(S$’mil)

(Y/E 31 Dec)

1998 1999 2000 2001 2002

Total Revenue 188 133 374 552 1,185

Profit After Tax (0) 2 8 13 14

Market

Capitalisation

- - - 142 131

Total Assets 59 51 135 474 437

(S$’mil)

(Y/E 31 Dec)

2003 2004 2005 2006 2007

Total Revenue 1,423 1,866 2,036 2,339 2,789


Market

Capitalisation

133 106 107 138 233

Total Assets 464 517 584 569 686

398

Appendix 4.11

Appendix 4.11 : Summary of developments and financials of Company K


1998

Nil

1999

K’s joint venture with KK1 and a prominent Arab entrepreneur KK2

commenced operations in Dubai – UAE.

K signed a Memorandum of Understanding with KK3 to pursue a joint venture

to develop a state-of-the-art chemical logistics centre on Jurong Island.

2000

KK4, subsidiary of K has been granted operating licenses for new branch

offices in China from the Ministry of Foreign Trade and Economic Co-

operation. These new office in Dalian, Shanghai and Qingdao will complement

other offices in Tianjin, Beijing, Xi An and Shi Jia Zhuang.

KK5, K’s subsidiary in engineering services, had joined hands with KK6 and

two other entrepreneurs to pursue biomedical technology management services.

2001

K extended its global reach by opening new offices in New Delhi of India,

Bremen and Hamburg of Germany.

K entered into a joint venture with KK7 to form KK8, a world-class medical

device sterilization facility that would value add to the group’s supply chain

solution for medical devices and healthcare products.

2002

K set up a new distribution hub within the Free Trade Zone in Pasir Gudang,

Malaysia.

399

K became a subsidiary of KK9 group after a takeover from KK9.

K's subsidiary, KK4 further strengthened its foothold in China by setting up a

new office in Shenzhen.

K successfully acquired the remaining shares (34%) in KK4, making it a

wholly owned subsidiary of K, strengthening the Group’s global distribution

logistics business.

2003

In April 2003, a new subsidiary, KK10 was added to support its customers'

manufacturing and distribution operations across China.

2004

KK11 became K’s major shareholder after acquiring a total stake of 74.19% in

K.

2005

K established a 100% wholly owned Malaysian subsidiary, KK12, at Port

Klang to support customers’ operations in Malaysia.

K’s 100% owned freight forwarding subsidiary, KK4, extended its capability to

the Middle East, Korea and China’s Ningbo.

Incorporated a wholly owned subsidiary, KK13 Hong Kong, to seize the

growing logistics development in South China.

The Group took up a 21% stake in KK14.

2006

Wholly owned subsidiary, KK15 acquired 100% shareholding in KK16 to

expand the Group’s engineering business.

KK4 entered into a joint venture to spearhead its freight forwarding business in

Egypt.

K entered into a new business venture that offers packaging solutions.

400

K completed its acquisition of a 100% stake in KK16, adding commodity

logistics to the business.

KK4 established a complete freight-forwarding network in India and expanded

into Spain.

2007

K acquired the entire issued and paid up share capital in KK17 and KK18 to

further enhance its logistics & container depot businesses.

K entered into a partnership with KK19, a Ukrainian investment group to

develop good quality logistics facilities in Ukraine.

K entered into a joint venture with KK20, a consortium of local logistics

professionals to develop logistics facilities in Vietnam.

K completed a sale and purchase agreement with KK21, a Dutch integrated

commodity logistics company.

401

Company K - Financial Summary Table

(S$’mil)

(Y/E 31 Dec)

1998 1999 2000 2001 2002

Total Revenue 145 155 171 187 208


Market

Capitalisation

27 71 32 29 38

Total Assets 205 217 178 172 181

(S$’mil)

(Y/E 31 Dec)

2003 2004 2005 2006 2007

Total Revenue 213 240 248 327 535


Market

Capitalisation

30 36 45 181 591

Total Assets 167 163 197 308 495

402

Appendix 4.12

Appendix 4.12 : Summary of developments and financials of Company L


1998

L* announced the integration of its two logistics units through the injection of

L** into listed L***, to form L.

Under L, ferry and cruise, shipping and shipyard operations were slated for

divestment as part of the entire LL*’s focus on core businesses.

1999

L sold its entire shareholding of more than 23.3 million shares in Hong Kong

listed LL1 for S$23 million in proceeds.

L sold its entire stake in the assets and business of LL2 and LL3 for S$28.5

million.

LL4 acquired the remaining one-third stake in LL5 to make it a wholly owned

subsidiary from July 1999.

Sale of the entire stake in L*** to LL6 for S$12 million was announced.

Wholly owned subsidiary LL7 divested its entire 49% shareholding in LL8 and

LL9.

Made an application to list 51% subsidiary LL10 on SGX Mainboard.

2000

L formed a strategic alliance with a Switzerland-based international freight

forwarder by acquiring a 20% stake in LL11. LL11 took a 5% stake in L, with

options to acquire up to 20% by 2003.

LL5 entered into a 70/30 joint venture with LL12 to build a network of offshore

logistics supply bases throughout Indonesia; and another 65/35 joint venture

was formed with LL13 to set up a similar network in the Caspian Sea region.

403

2001

LL11 acquired LL14, a warehouse-based logistics service provider in North

America. Acquired a 3% stake in LL15, a provider of intermediate bulk

containers, to gain exclusive global use of their patented containers.

Disposed of their 100% interest in LL16 to LL10.

Formed a 51/49 joint venture with Malaysia-listed LL17 and another 76%

owned joint venture in Australia to provide supply chain management services

in these respective countries.

L signed a sale and purchase agreement with LL18, a subsidiary of LL19, to

sell the marine business for S$205.6 million.

Formed a 51% owned subsidiary, LL20, to offer third party wine logistics.

Formed another 49/51 joint venture company, LL21, to provide freight

forwarding services for LL22 and LL23 Group of companies.

2002

L partnered LL24 and LL25 to establish a 35.5/60/14.5 joint venture in Japan to

acquire a Japanese logistics company.

Invested S$18 million in LL26, owner of US-based technology solutions

provider LL27, to develop secure supply chain management.

Formed a 51/49 joint venture with LL28 in Taiwan.

Formed a 49/51 joint venture company with LL29 in Azerbaijan to service oil

and gas companies in the Caspian Sea region.

2003

Entered into a 51/49 joint venture with LL30 in Korea.

2004

Formed a 60/40 joint venture with logistics and trading LL31 in Vietnam.

404

Entered into a 50/50 joint venture on March 16 with LL32 in Italy to form

LL33, which will provide logistics services for metals and commodities in

Asia.

Set up a 78/22 joint venture with LL34 in Iran to provide logistics and marine

support services to oil and gas companies in Iran.

Established a wholly owned subsidiary LL35 Shanghai.

Completed the sale of 20% interest in LL11 for S$1.3 billion.

Acquired LL36, the second largest transportation company in Kyushu.

2005

Began operations at the new Guangzhou regional distribution centre and

committed to a warehouse lease in the Qingdao Free Trade Zone.

2006

L* announced that it has given irrevocable undertaking to accept the Voluntary

Conditional Cash Offer by LL37, a wholly owned subsidiary of LL38 of

Australia, for the entire 60.01% stake in L.

405

Company L - Financial Summary Table

(S$’mil) (Y/E 31

Dec)

1998 1999 2000 2001 2002

Total Revenue 212 441 448 473 417

Profit After Tax (59) 6 47 87 29

Market

Capitalisation

Total Assets 512 625 705 677 651

(S$’mil) (Y/E 31

Dec)

2003 2004 2005 2006 2007

Total Revenue 454 769 1,018 NA1 NA

Profit After Tax 90 1,1792 71 NA NA

Market

Capitalisation

Total Assets 776 2,045 952 NA NA

1 Financial figures from 2006 onwards were not available because the company

was delisted and sold to the LL1* group.

2 Figure includes extraordinary gains for sale of its stake in LL2*.

(*codenamed)

406

Appendix 4.13

Appendix 4.13 : Summary of developments and financials of Company M


1998

Investment into a bakery plant under brand M1 became operational in

September.

MM1 acquired M2 business and assets from MM2, enabling them to

manufacture M2 inflatable boats.

1999

Established links with MM3 and MM4 to set up the first approved foreign-

owned information technology/commercial college in Tianjin, China.

Granted a 3-month call option to purchase 70% shares in MM5.

2000

The company subscribed for 96% equity shares in MM6.

Entered into an agreement to purchase 35% shares in MM7, an Indonesia based

airline.

MM8 invested approximately US$2.5 million by subscribing 18.3% shares in

MM9, an innovative US software company.

2001

The company divested its interest in the bakery business of M1 breads.

Acquired a 39.8% interest in MM10 which is an Asian network infrastructure

services company that operates companies in Philippines, Malaysia and

Thailand.

407

2002

Investments in MM11 and MM12 were consolidated into MM13 and the

Group’s investment plan for MM14 had to be abandoned due to the collapse of

the internet-related businesses.

Acquired, in stages, a 63.46% stake in MM15, a well-established regional

specialist in water, environmental and industrial engineering.

Concluded the sale of the wholly-owned subsidiary, MM16.

2003

Divested its non-core food & beverage business, MM5.

MM15 partnered with Engineering, Procurement and Construction companies

such as MM17 and started to contribute to revenue.

2005

MM15 scaled down its UK operations and it ceased to contribute revenue.

2006

Gained 100% control of MM15.

MM18 Power Corporation, which is in the power generation business, was

divested and the proceeds were used to repay long-term loans.

2007

Sold the remaining investment in MM9 as the final divestment of their non-

core assets.

408

Company M - Financial Summary Table

(S$’mil)

(Y/E 31 March)

1998 1999 2000 2001 2002

Total Revenue 104 114 54 54 129


Market

Capitalisation

5 6 31 29 36

Total Assets 79 90 104 101 113

(S$’mil)

(Y/E 31 March)

2003 2004 2005 2006 2007

Total Revenue 201 227 227 289 344


Market

Capitalisation

61 63 119 182 306

Total Assets 233 239 278 280 306

409

Appendix 4.14

Appendix 4.14 : Summary of developments and financials of Company N


1998

N acquired 51% interest in NN1 in Australia, which produces high quality

silica sands for commercial and industrial applications.

N sold 51% of equity in NN2.

1999

Planned listing of two of the Group’s technology and manufacturing

subsidiaries – NN3 and NN4.

N disposed 26% of its 51% equity in NN5 to NN6 for US$5 million cash

payment plus 11.5 million shares in NN6 in preparation for the IPO on the

Shenzhen Stock Exchange.

Entered into a joint venture with the China-Singapore Suzhou Industrial Park to

develop a residential/commercial complex on a 20-hectare site within the

Industrial Park.

2000

N’s subsidiary, NN7, entered into an agreement to acquire NN8 that distributes

N1 cars.

Acquisition of a 30% stake in the company that has Indonesia’s N2 car

distributorship.

Formed strategic alliances with NN9 of the NN10 of China and NN11 to jointly

develop mid-priced residential projects in Guangzhou and Shanghai.

2001

NN12, a manufacturer of flexible printed circuit, successfully launched its IPO

on the SESDAQ and N’s effective interest in NN12 was diluted to 60.7%.

410

N acquired 50% of NN13, an authorized distributor of N3 cars.

2002

NN14, a 43% associate joint venture with Peking University, produces the

patented cholesterol-lowering medical preparation, Brand N1 that is patented

worldwide.

2003

Established a 50/50 joint venture between N’s China property division and the

listed property arm of NN15, a conglomerate wholly-owned by the Shanghai

Municipal Government.

NN16 strengthened its R&D capabilities by acquiring NN15, a US-based

innovator of advanced RF transceivers using low cost CMOS manufacturing

processes. NN16 also obtained the business license to start a new design office

in Shanghai.

2004

NN14 completed a GMP-certified plant in Beijing

The US-based NN15 group’s subsidiary, NN16 was listed on NASDAQ in June

2004.

NN17, together with NN16 and NN18 collaborated on R&D, training,

marketing and sales.

2005

Sold NN19 and recorded a gain of $7.2 million.

Increased the group’s shareholdings in NN7 to more than 90%. Privatized NN7

and the group have no plans to sell its interests in NN7 to regain public float

requirements.

NN4 acquired NN20 in June 2005 as part of its strategy to be a substantial

module solution provider in the expanding cell phone market.

411

N acquired an initial 19.7% stake in NN21, a leading design and manufacturing

services house.

N’s N4 theme park in Shenyang ceased operations.

Sold eight companies in China and recorded gains of $2.5 million.

2006

NN14 announced on March 2006 its intentions to acquire NN22 through a

voluntary general offer, subject to shareholders’ approval by 31 December

2006.

The electronics manufacturing services division closed three factories in

Shenzhen, Anqing and Suzhou in China.

2007

Shareholders in an EGM did not approve the acquisition of NN22 by NN4.

Sold the water business and entered into an agreement to sell the biomedical

businesses.

Formalized a joint venture with a subsidiary of NN23 to build a commercial

and residential project on a 33,473 sqm site.

Acquired the minority shares in the company’s realty subsidiary, NN24 in

Chengdu.

412

Company N - Financial Summary Table

(S$’mil) (Y/E 30

Sept)

1998 1999 2000 2001 2002

Total Revenue 668 678 908 956 984


Market

Capitalisation

80 335 361 297 282

Total Assets 1,150 1,178 1,319 1,374 1,382

(S$’mil) (Y/E 30

Sept)

2003 2004 2005 2006 2007

Total Revenue 1,302 1,830 1,966 2,103 2,064


Market

Capitalisation

503 548 918 932 843

Total Assets 1,594 1,845 1,947 1,917 1,914

413

Appendix 4.15

Appendix 4.15 : Nodes / Sub-Nodes and Sources from Nvivo9 analysis

419

Appendix 4.16 : Table of 10-year Revenue and profit average annual growth rate

of return and survey results

Average annual

growth rate Summary of managers’ view

Company

Code

Revenue

%

Profit

%

Importance of


(max 10)

Level of


achieved

(max 10)

Level of

satisfaction

achieved

(max 10)

Level of

correlation

(max 10)

Company A 71 1 8 8 7 7

Company B 26 3 9 8 7 7

Company C 45 15 9 8 8 8

Company D 692 67 10 9 6 8

Company E (3) 2 9 4 4 8

Company F 36 7 10 6 8 7

Company G 20 5 10 7 5 5

Company H (0) 18 9 10 10 10

Company I (2) (2) 8 4 6 3

Company J 311 3 9 6 6 8

Company K 32 3 7 9 8 5

Company L 86 18 10 6 5 8

Company M 29 5 10 6 6 5

Company N 186 3 8 8 8 7

420

Appendix 5.1

Appendix 5.1 : Internationalisation Reference model (Strength of Themes – Very

Strong)

TT

Processes Strategies 1.Limited use of

indicators on level of internationalisation

Actions 1. Nil

Outcomes Performance 1. Limited use of

indicators as performance measures

Business Impacts 1. Future growth by

geographical expansion

Antecedents Internal 1.Internationalisation

as key business strategy

2.CEOs are main drivers

Organisational 1. Mix of centralised

and decentralised controls

Environmental 1. Limited use of

government incentives and assistance

A B

C

D

421

Appendix 5.2

Appendix 5.2 : Internationalisation Reference model (Strength of Themes – Strong)

Processes

Strategies 1. Economy of scale 2. Localisation 3. Management

strength Actions 1. Nil

C

D

Outcomes Performance 1. ROS/ROA/ROC/E

VA as performance indicators

Business Impacts 1. Nil

Antecedents Internal 1. Survival 2. Adequacy of resources Organisational 1.Informal approach 2.Infrequent use of

external consultants

3.Regular reviews Environmental 1.Small Singapore

Market

A B

422

Appendix 5.3

Appendix 5.3 : Internationalisation reference model (Strength of Themes – Medium)

A

Processes

Strategies 1. Regional growth 2. Born global 3. M&As 4. Importance of jv

partners

Actions 1. Sustaining profits

Outcomes Performance 1. Use of

profitability as performance indicators

Business Impacts 1. Cost reduction 2. Future growth

through new products

Antecedents Internal 1. Challenge to

make it work Organisational 1. Use of brands 2. Influence of

shareholders 3. Need for strong

products Environmental 1. Major shift in

shareholders

B

A

C

D

423

Appendix 5.4

Appendix 5.4 : Internationalisation reference model (Strength of Themes – Weak)

Processes Strategies 1. Close to customers 2. Core values of

organisation 3. Business model 4. Technology

sharing 5. Strategic options Actions 1. Divestments

D

Outcomes Performance 1. Integration issues Business Impacts 1. Preferences for certain market and approaches

Antecedents Internal 1.Venture capital

investments approach

Organisational 1. Perishable

products 2. Cultural issues

Environmental 1. Entry barriers

A B

C

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