3. Environment Analysis in Singapore
To
expand mother energy drink to Singapore, Mother is essential to know general
background of the Singapore which will be discussed more detail in PESTEL. The
republic of Singapore is an independent nation in Southeast Asia, situated off
the tip of the Malay Peninsula and connected Malaysia by causeway. Formerly a
British crown colony and then part of the Fedearion of Malaysia, it became
independent in 1965. Singapore is a densely populated and wealthy nation whose
people experience one of the highest standards of living in Asia. Singapore
Island accounts for 93% of the total land area of 687km and the remaining 7% is
composed of 50 small islets. Since Singapore lies almost on the equator, its
temperature is distributed quite evenly throughout the year. English is the
main language of business, education and government, is used by more than 25%
of the adult population. Singapore is
considered as multiracial country which consist of approximately 76.8% Chinese,
13.9% Malay, 7.9% Indian and other races (The World Factbook 2011) .
3.1 Political
Singapore
is a republic, with a parliamentary system of government and an elected
President as the Head of State. The Singapore Parliament has a single house,
which is elected by general election every five years. The Parliament and the
President of Singapore are known as the Legislature. Parliament first sat on 8
December 1965, with the first general election on 13 April 1968(Singapore country brief 2010).
Unlike
many other countries that boast of their mature and institutionalized
democracies that allow for the smooth change of governments without
jeopardizing the business climate, the case of Singapore is apparently
different. Freedom House, an international NGO that publishes an annual report
on global trends in democracy: 'Citizens of Singapore cannot change their
government democratically.’ Less frequent of change in government will reduce
the political risk for Australia firm such as the threat of potential changes
of government that may result in changes in policies that may adversely affect
the country's business climate (The Tuth About The Election
System n.d.) .
In
2009, the World Bank’s Governance Matters Report showed that Singapore
scores an impressive 96.2% in political stability. Singapore also scored high
on parameters such as government efficiency, regulatory quality, rule of law,
and corruption control. Also, the governance estimates are normally distributed
with a mean of zero, a higher score signifies a less violent and politically
more stable society (Politics alters Asia’s investment
landscape 2010) .
Overall, it reflects the stability of Singapore and political changes will be
less likely to impact the business.
3.2
Economy
Singapore’s
economy is heavily engaged in the global marketplace. It is also one of the
most stable in macroeconomic terms with no foreign debt, high government
revenue and a consistently positive surplus. For the first time since its
founding in 1965, the government is dipping into its vast foreign reserve
holdings to fund a USD 13.7 billion “Resilience Package” to stimulate the
economy (Singapore country brief 2010).
Therefore, Singapore is bracing for a long recession.
The
Singapore economy rebounded by 14.5% in 2010 after contracting by 0.8% in
2009.Also, in first quarter of 2011, Singapore economy expanded by 8.5%. The
growth outlook for Singapore remains positive in 2011 with the continuing
recovery of the global economy (Department of
Statistics Singapore 2011). In addition, Singapore Gross National Income
per capita has increased continuously through the year and reaches $ 36,537USD
in 2009, world ranking of no.12 (Background Note: Singapore 2010) .Moreover, Senior Minister Goh Chok Tong
forecast that Singapore will grow real incomes by 30 per cent. By 2020,
Singapore’s per capita GDP will reach around US$55, 000 (U-Wen 2011) . Therefore, if the economy and income per capita
increase, Singaporean purchasing power will increase (U-Wen 2011) . This will lead to
demand for firm’s products increase. Hence, it will be an opportunity for
Australia firm to invest in Singapore.
Singapore inflation rate is increasing
from 3% to 4%, March 2010 and March 2011, respectively. In addition, Singapore
Central bank expects inflations accelerate to 6% in the next few months (Wong 2011). Increasing in the inflation rate
will erode value of household wealth, this may lead to Singaporeans increase
saving to restore their wealth and reduce spending. Thus, this may cause
aggregate demand fall in Singapore. Therefore, if Australia firms want to
invest in this period, they may experience loss in their profit. However,
inflation is expected to be moderated in the second half of 2011(Wong 2011). If inflation rate becomes stable,
Singaporeans will become optimistic about the future economy, thus they will
increase spending. Eventually, Australia firms will generate more profit if
they invest in this period.
It
has been observed that Singapore Currency has maintained a relatively stable
value compared to other many currencies of different countries.
Additionally, the Singapore dollar has been consistently appreciating
against major currencies including the US dollar, British pound, and Japanese
yen (Introduction to Singapore’s Economy n.d.) . Fluctuations in the
currency values, whether the home currency or the foreign currency, can either
enhance or reduce the returns associated with foreign investments and create
the risks of investing. Since Singapore dollar is one of the most stable and
reliable currencies in the region, therefore this reduce currency risk for
Australia firms to invest in Singapore (Aquino n.d.) .
3.3 Cultural
The
cultural dimensions model developed by Hofstede is based on an extensive study
of how values in workplace are influenced by culture. A particular culture will
be rated against five distinct categories. This is Power Distance (PDI),
Individualism (IDV), Masculity (MAS), Uncertainty Avoidance (UAI) and Long Term
Orientation (LTO) (Geert Hofstede™ Cultural Dimensions n.d.).
First
of all, according to the Geert Hofstede Cultural Dimension, it shows the Power
Distance Index (PDI) of Singapore on 74 which is considered at a high rank (Geert Hofstede™ Cultural Dimensions 2009). In
contrast, Australia score 36 in power distances index which is lower than
Singapore. It means Singaporean has high acceptance of inequalities among
people (Geert Hofstede’s Cultural Dimensions 2009). The relationship between
boss and subordinate is rarely close and subordinates are not given
important work and expect clear guidance from above in Singapore. However, in
Australia, superiors may often socialise with subordinates and treats
subordinates with respect and do not pull rank. Also, Subordinates are entrusted
with important assignments.
Next, Singapore has a very low score of uncertainty avoidance of 8 which reflects the fact that Singaporeans are more willing to take risks despite the relatively high level of uncertainty that may be involved in certain projects or decisions
Additionally,
according the research, the Individualistic index of Singapore is 20 whereas
individualistic index of Australia is 90 (Geert Hofstede™ Cultural Dimensions
n.d.). Hence, Singapore can be considered as individualistic society while
Australia is a collectivist cultural. Singaporean is focusing more on
individual working ability and personal achievement. However, the workers in
Australian put more efforts on group relationship when working. Again, this
show there is a wide gap between the Australia and Singapore individualistic
index.
With
regards to the aspect of masculinity and femininity, both Singapore and
Australia are considered in masculinity cultural. Masculinity can be defined as
a cultural preference for achievement, work centrality and material success
which can also means the quality of life in the country (Samson and Daft 2009).
Australia has a higher score than Singapore which the index is 61 compared to
48 (Geert Hofstede™ Cultural Dimensions n.d.). This obviously reflects that
Australia is more concentrated on their productivity and achievement.
Finally,
Singapore scores 48 and Australia sores31 in long-term orientation. Both
countries are considered as Short-term orientation cultures (Geert Hofstede™
Cultural Dimensions n.d.). This means both countries value the past and present
resulting in respect for tradition, fulfilling social obligations, and protecting
one's 'face'. Efforts should produce quick results. It is important to maintain
personal stability and happiness in the present
In
conclusion, the gap between the Australia and Singapore power distance index,
individualistic index and uncertainty index
are very wide, that means there has a big cultural different between
Australia and Singapore . Therefore, if Australia firms want to invest in
Singapore, they need a lot of adjustment to narrow down the cultural gap. Hence,
this creates high uncertainty for Australia firms to invest in Singapore.
3.4 Technology
Factors
Singapore offers the quality workforce and the competitiveness
gain the confidence of international invest in Singapore. The information
technologies assist the country to stay ahead and maintain the position. Due to
Singapore is a city-state and there is without needs of the countries nearby to
use the transport-shipment or the air traffic but they do it by choice, so
Singapore applied online procedures since early 1980's, so the process of goods
transporting is more effective and cheaper compare to other countries in the
region (Thomas and Guan 2001) . Over 78% of
household in Singapore own at least one computer and almost 71% enjoy access to
Internet, which explained the Singaporean realized the importance of
Information Technology (Info-communications Development Authority of Singapore 2011) . Majority of the companies, bank, services sectors and factory
are improving the system to be more advance, so the employers would expect
higher literacy of IT from the employees. So the ideas behind is the government
is trying to push higher computer literacy of the population so the more
competitive they would be.
3.5 Environment Factors
Singapore
is a rich country in its large quality of human resource which pushing their
country into more developed level. However, factors including, lack of land,
lack of natural resources, unsustainable demographic patterns have pose several
threat to the future development (Ibrahim and Ching. 2003, 204). Also, Singapore has a tropical rainforest
climate with almost no seasonal variation. It is always humid and warm climate
throughout the year with a daily average temperature range of 24 degrees
Celsius to 32 degrees Celsius (Goh et al.
2000, 70). Water is scarcity especially in this island state, the major source
of water is rainwater and the government is building more catchment to collect
water. However, catchment is huge which consume a lot of space and Singapore is
running short of land so the government has developing the technology of
purifying and desalination of sea water to get potable water (Chui. 1997, 173)
Furthermore,
due to the global warming Singaporean government has make effort to deliver and
sustain a healthy and clean environment and water resources for all
Singaporean. The government is focusing on water, air, energy and land.
Singapore is trying to eliminating the air pollution by impose several
regulation and standard of stringent emission, promotion of energy efficient
and introducing natural energy. The government is working on the city planning
and locations of the factories to reduce the impact of air pollution to the
country (Rao. 2004, 308). Besides, Singapore has a most efficient solid waste
management as an island state, due to the lack of land and running out, so the
land for dispose waste is becoming less and the government is trying to
recycling the waste as much as possible and use other ways to solve the wastage
problem and the target is 60% recycling and zero landfill waste by 2012
(Reginald and Hsien. 2006, 250).
3.6 Legal
Factors
Before Singapore becomes independent in 1965, it has been part
of Federation of Malaysia and British colony. After independent, Singapore kept
the British legal System, implemented the common law and Westminster model of
parliament government, although some modifies are done to suit in Singapore.
The Singapore's Constitution is a supreme written law. It indicates the basic
freedoms of individual and the structure and organization of Singapore's
Executive, Legislation and Judiciary (Worthingston. 2001, 495). Singaporean Legal System is the strong anti-corruption law
whereby the punishment for any person convicted in a corruption can be either receives
a fine up to $10000 or up to five year of imprisonment or both. If the cases
involved of parliament member or a member of public service, the punishment of
imprisonment will increase to 7 years (Quah.1995, 405). Because of the law is well enforce, so the rate of corruption
is one of the lowest in the world and the country is enjoying a corruption-free
environment. With the stable and strict
law system in Singapore, it is a best country to invest in.
To encourage investment in the region, Singapore has introduces
several incentives. Companies are allowed to transfer their workers from their
regional operation into Singapore for training at the supervisory and
managerial levels. Income obtained from these operations may eligible to
exemption from Singapore tax. Higher investment allowance can be considered for
companies, which transfer some of their operation to the region as part of an
overall program to upgrade their operation in Singapore (Ministry of Manpower.
2011).
Besides,
Singapore also implements a policy of free trade agreements (FTAs). The benefit
of this FTA is removed the barriers to trade and investment, hence creating a
more freedom on flow of goods, people, and service. Most of goods imported does
not need to required special licenses and quota restrictions. On the other
hand, endorsement from the relevant authority is required for goods such as
animals, coffee, cosmetics, some industry safety items and medicines. However,
imports duties are impose on several things like petroleum products, wine, hard
liquor and motor vehicles. Besides, There is no foreign exchange restriction in
Singapore. No approval is required for any remittance, payment or capital
transfer in any currency or to any others countries (Daquila and Huy. 2003,
911). Furthermore, Singapore has signed many free trade agreements with others
countries in the world such as Austraia, New Zeland, Japan, members of the
European Free Trade Association and the United States. As Singapore sign these agreement, business
in Singapore will likely easier to trade with and invest around the world
(International Enterprise Singapore. 2010).
3.7Competitive
Audit
Competitive
audit is used to assist company to analysis a key group of competitors to
understand their unique stories, business models, products, and services. This
is particularly useful when developing their own brand story to assure it can
outpace the competition at the level their targeting (Competitive Audit n.d.) . Rivalry among
existing competitors for energy beverage is considered high because there is
about 90 energy beverage products in Singapore such as Red Bull (energy drinks 118 Products n.d.).
All of the energy beverage brand that are sold in Singapore is considered as
direct competitors while those non-energy drink brand is known as indirect
competitors such as Milo, Pepsi and Green Tea. Also, threat of New Entrants is
high because there are a lot of potential new entrant can enter to energy drink
market easily , such as monster energy drink and ‘V’ energy drink.
No comments:
Post a Comment