A Cultural & Economic Analysis of Singapore for making Market Entry Decisions


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This document, a group presentation effort by SDMIMD students including me, was meant to be an assignment for the Capstone course. This will help marketers make a business entry decision into Singapore.

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A Cultural & Economic Analysis of Singapore for making Market Entry Decisions

  1. 1. Singapore Inc.
  2. 2. Agenda • We are going analyze Singapore’s culture and economy with various frameworks • After applying various frameworks we are going to assess their implications on a firm which wants to set up a business in Singapore • Come to a conclusion about the suitability of the reforms suggested in the case
  3. 3. Country Background • Population consists of three main ethnicities – Chinese (76.5%) – Malay (13.8%) – Indian (8%) • In 1824 it became a colony of East India Co. through Anglo-Dutch Treaty and cash payments to Sultanate. • In 1942 British surrendered it to Japan and regained its control in 1945
  4. 4. • On August 9 1965 Singapore became an independent nation • Most of the culture of Singapore was created in years after its independence. • After independence economy of Singapore was in a very bad shape with 14% unemployment rate • Singapore sought to define itself as “First world oasis in a third world region”.
  5. 5. PESTEL Analysis Singapore V/S China
  6. 6. Political Singapore China Bureaucratic, extremely centralized & socialist in approach (free housing) Socialist per se & extremely centralized Government is stable Government is stable Invited foreign investment , no import duties on 99% of imports Relatively less open and only recently the government is showing interest in opening up Government has severe laws in place and due to strict governance and associated fines less corruption Government has very strict laws, in fact human rights are questioned in State. Corruption is vehement in society Conclusion – It is easier for firms to establish in Singapore than China as they have government support.
  8. 8. Economic Analysis Singapore China Economic Freedom score-2 Economic freedom score -51 GDP-USD 222,872.48 million GDP-USD $7.9 trillion Fiscal & monetary policy are aimed at attracting foreign investment , taxation is moderate , corporate tax of 17 % More subsidies to domestic companies compared to foreign companies , corporate tax – 25 % •Unemployment – 2.2 % •Inflation-2.8 % •FDI Inflow-0.364 billion •Unemployment –4.2 % •Inflation- 5.9% •FDI Inflow-$ 108.3 billion The scale of operation and growth opportunities are constrained in case of Singapore even when policies are liberal owing to limited country size and therefore availability of factors of production
  9. 9. Overall Score
  10. 10. Trade freedom
  11. 11. Social Analysis Singapore China Distribution of wealth- 0.425 Distribution of wealth-0.4 Literacy rate- 95.9% Literacy rate-91 % Population division skewed •15% population less than 15 •75% population 15-65 years of age •10% population above 65 Population is skewed with less birth due to governments one child policy •20% population less than 15 •71% population 15-65 years of age •9% population above 65 The condition in China as well as Singapore is almost the same because people see government as oppressive in China things are comparatively bad but Singapore has other threats like communal violence because of which government is always on the back foot and impose strict norms .
  12. 12. Technological • Both the countries invest heavily in technology • Singapore has admitted that they cant compete China in technology, R&D efforts but can benefit from same by hiring human resource
  13. 13. Legal • Both the societies have strict norms • Singapore is better as rules are followed by all • Corruption level is one of the lowest in Singapore Corruption Perception Index 9.2/10 • China ranks 72nd out of 179 countries in Transparency International’s Corruption Perceptions Index. Of 3.6/10 • Employee policy favours firms in Singapore
  14. 14. Environment • Both the countries have taken the issue pretty seriously • Singapore has one of the worlds best solid waste treatment system in place • Emphasis on recycling, optimum usage etc. is encouraged as by nature the faces constraint in natural resources which includes even water
  15. 15. Political Risk Analysis Government Risk Instability Risk Firm specific  Discriminatory regulations  Creeping expropriation  Breach of contract  Sabotage  Kidnappings  Firm-specific boycotts Country level  Mass nationalizations  Regulatory changes  Currency inconvertibility  Mass labour strikes  Urban rioting  Civil wars Some regulatory changes are on the way, to sustain the growth. Race, religion relations- a sense of tension prevailing. Strict Law enforcement Stable, Long standing Government Government is strictly observing the developments in these areas
  16. 16. Rostow's stages of economic development
  17. 17. 4 A Framework Is regulation important to firm? Is firm relatively powerful? Is firm relatively powerful? Alter Ally Avoid Accede YES NO NO YES NO YES
  18. 18. Hofstede’s cultural dimensions • Power Distance – extent to which juniors accept higher power – Predominantly Confucian (Chinese population), emphasizes mutual and complimentary obligations – Power is centralized, juniors depend on bosses and rules – Control is expected and attitude towards superiors is formal – Nation before community and self
  19. 19. Hofstede’s cultural dimensions • Individualism – ‘I’ or ‘We’ – Collectivistic, belong to in-groups and expect loyalty – Paying respect, ‘saving everybody’s face’ important – Politeness takes precedence over honest feedback, ‘yes’ doesn’t necessarily mean ‘yes’
  20. 20. Hofstede’s cultural dimensions • Masculinity – ‘be the best’ or ‘do what you like’ – On feminine side: consensus, sympathy for underdog – Modest & humble; “Know-it-alls” frowned upon – Conflict avoided, being cautious is important
  21. 21. Hofstede’s cultural dimensions • Uncertainty avoidance – extent of risk aversion – Uncertain, ambiguous situations bring anxiety – Fines imposed for everything – “Singapore is a ‘fine’ city” – Dependence on US being reduced
  22. 22. Hofstede’s cultural dimensions • Long term orientation – future oriented – Perseverance valued – Importance of saving for retirement – Explains the low corruption levels
  23. 23. Hall’s cultural factors • Context – High context culture, a piece of information can have different meanings unless additional information is provided to decode – Polite, respectful, integrates by similarities/harmony, not direct • They feel people from other low context cultures are impolite, “cannot read between the lines”, naïve, no self discipline, too fast
  24. 24. Hall’s cultural factors • Time – Monochronic culture, consider time as money – Tasks processes sequentially and consecutively – Long term time planning • Space – Singaporeans seen as people with low territoriality – For example, if a person in a subway happens to doze of on another person’s shoulder, most do not wake them up for the fear of embarrassing them
  25. 25. Turner &Trompenaar’s model
  26. 26. Turner &Trompenaar’s model • Universalism versus particularism – Singaporeans are universal, hence the fines for everyone – Tend to use contracts, formal systems, and procedures to convey what they expect from others. • Affective versus neutral – Highly neutral – Emotions not expressed openly and naturally; subtle
  27. 27. Turner &Trompenaar’s model • Specific vs Diffused – The degree to which responsibility is specifically assigned or is diffusely accepted – Whole is the sum of its parts – Singapore is a diffused culture – Relationships between elements are more important than individual elements
  28. 28. Turner &Trompenaar’s model • Inner Directed versus Outer Directed – Do we control our environment or work with it? – Singaporeans would rather control the environment, hence inner directed – Believe the environment can be controlled – Cleaning of the river and reduction in carbon emissions over the years testimony to this
  29. 29. Turner &Trompenaar’s model • Achieved Status versus Ascribed Status – Do we have to prove ourselves to receive status or is it given to us? – Singapore – gives more weight to ascribed status – Which means, status is bestowed upon them and not dependent on individual achievement
  30. 30. Global political risk index
  31. 31. Ease of doing business
  32. 32. Tight v Loose Culture • “Tight” cultures have many strong norms and a low tolerance of deviant behavior whereas “Loose” cultures have weak social norms and a high tolerance of deviant behavior • From the case – Anti-spitting campaigns – Ban on the sale of chewing gums – Levying heavier fines for littering and damaging public areas – Caning for vandalism • Also, • Authorities can compel residents and tourists for random drug test • Strict penalties for possessing/carrying arms or commit crimes with them
  33. 33. Tight v Loose Culture Source: http://dienekes.blogspot.in/2011/05/tightloose-culture-influenced-by.html
  34. 34. Tight v Loose Culture • Research conducted by Michele Gelfand et al., who is a Professor of Psychology and Distinguished University Scholar Teacher at the University of Maryland, College Park • Research further showed that a nation's tightness or looseness is in part determined by the ecological and human factors that have shaped its history • Tight societies have more autocratic governments, more closed media and criminal justice systems • This means more monitoring and greater deterrence of crime
  35. 35. High Trust – Low Trust High Trust Low Trust Freedom of choice Orders Flexibility Rules and Regulations Self supervision Control, monitor, spying Personal integrity Internal turmoil(forced to do something that is not believed in) Proactive Reactive Creative freedom Strict procedures and structures Code of ethics Red tape • Singapore is a low trust society • High fines for misconduct, media censorship • “A Nanny state”, highest per capita execution rates
  36. 36. HNO-PDI framework
  37. 37. Kluckhohn and Strodtbeck model • Proposed before Hofstede’s model • Lower acceptance due to non-quantifiable measures • Perception and data-based • Managerial implications : Numbers and their relevance • Why this model can be applied?
  38. 38. Kluckhohn and Strodtbeck model Dimension Values 1. The essential nature Good/evil/mixed 2. Relationship to nature Dominant/Harmony/Subjugation 3. Relationship to other people Lineal/Collateral/Individualist 4. Modality of human activity Doing/Being/Containing 5. Temporal focus of human activity Future/Present/Past Singapore: “Mixed human nature orientation, in Harmony-with- Nature, Lineal outlook based in a Future oriented culture that focuses on Doing”
  39. 39. Business implications 1/2 • Put the greater national good over their own personal growth objectives – Businesses must significantly contribute to the nation- growth and employment • Increasing awareness of the need to be in harmony with nature – Green tech firms, pollution treatment, low carbon footprints, low water consumption
  40. 40. Business implications 2/2 • Role of the central democratic, capitalist government is very large – Ownership patterns in the country - possibility of taking them as large stakeholders • Long-term value to the nation will be critical – Shift in dependence among sectors – Orientation towards firms that can make it a hub for a major sector
  41. 41. A few observations • Increase in direct investment outflow from 2000 to 2001 is from US$4.9B to US$10.2B – Is the return commensurate with the investment? • Negative growth in trade in the last year(Exhibit 12) – GDP/Expenditure model – Difficult to bank on that for short term growth – Better to encourage consumption, since it has been on the decline (Exhibit 5) – Hence, personal income tax cuts a good measure – GST collections will offset the loss in revenue
  42. 42. A few more observations • Shift towards biomedical sciences a good move considering they are planning to be an “innovation nation” • Total factor Productivity shows direct correlation with GDP, hence the move to improve TFP a good move