‘Hunt in a pack’: How SMEs can collaborate to find success in global expansion

When it comes to expanding overseas, small businesses can benefit significantly from banding together – particularly when collaborating with larger, more established corporations.

The right partnerships can give Singapore small and medium-sized enterprises (SMEs) an edge by helping them understand local customers, plug into local supply chains, and navigate hiring and tax regimes in the unfamiliar markets, says Mr Jimmy Koh, head of Network Partnerships and Strategic Marketing, Group Foreign Direct Investment (FDI) Advisory at UOB.

“SMEs need to find partners who can cushion the challenges of going overseas. They will have a much better chance of survival,” says Mr Koh.

This has been proven true by a group of small local businesses that have found success by tapping the expertise of established banks like UOB to expand regionally. 

Take, for instance, Five Star Hainanese Kampung Chicken Rice Restaurant, which entered Indonesia in 2023, in its first foray overseas.

The Singapore restaurant chain, which wanted to tap Indonesia’s potentially huge customer base, initially found it challenging obtaining legal advice and identifying shop locations in an unfamiliar market. UOB stepped in to provide market entry insights and, through its ecosystem of strategic partners, connected Five Star to a law firm and other stakeholders in the supply chain when sourcing for products domestically. 

Five Star has seen revenues and profits in Indonesia rise steadily since March 2024. It is looking to grow beyond its current shop at Thamrin Residences as it mulls plans to enter other markets in the region.

Ms Ann Yeo, managing director of Five Star, says: “Having the right business partner is of paramount importance to an SME like us. UOB helped us understand the different cultural needs and nuances as we set foot in Indonesia. This made it a lot easier for us to set up shop overseas. We hope UOB will be in the countries we intend to enter in the near future as we continue our expansion plans.”

The initial difficulties mentioned by Five Star cut across the SME community. According to the UOB Business Outlook Study 2024 (SME & Large Enterprises), most Singapore businesses wanted to expand overseas, but struggled to find the right partners and understand overseas customers.

Recognising this knowledge gap, UOB’s FDI Advisory unit works closely with small local businesses with ambitions to expand abroad advising them on pertinent issues such as taxes, rebates, grants and human resources.

In addition, the unit, which also works closely with the Singapore Business Federation to help local SMEs gain a foothold overseas, provides the businesses with market insights and connects them to local supply chains. With the groundwork laid out for them and access to an important network of contacts in a foreign country, local companies can set up an overseas presence more quickly and seamlessly, allowing the business to start operating sooner than later. 

“Banking has become more commoditised. We differentiate ourselves by offering services beyond banking,” explains Mr Koh.

Given the initial challenges faced by Five Star and other SMEs in their business expansion plans, Mr Koh is encouraged by recent enhancements to Budget 2024, singling out the Partnerships for Capability Transformation (PACT) scheme.

Prime Minister Lawrence Wong announced in February several enhancements to government measures to help SMEs cope with high costs and a more complex global environment. 

In the new Budget, the PACT scheme – which promotes collaborations between larger companies and SMEs – will now provide funding support not only for supplier development and co-innovation, but also capability training, corporate venturing and internationalisation.

The enhanced scheme, says Mr Koh, should spur companies “to hunt in a pack and move as an entire value chain, to give themselves better chances of succeeding”.

As local SMEs look to diversify overseas, foreign companies are also using Singapore as a regional hub and launchpad into other countries. 

This is because businesses are keen to capture the overarching trend of the rising middle classes in South-east Asia, explains Mr Koh.

At the same time, ongoing geopolitical tensions have reshaped global supply chains, with many companies diversifying out of traditional manufacturing centres, he adds.

The bank has helped companies like Five Star expand regionally, using Singapore as a base to enter neighbouring markets such as Malaysia, Indonesia and Vietnam. These companies are keen to tap not only growing demand for unique and elevated consumer experiences, but also new pools of young talent. 

“Whether it is Singapore companies going overseas, or overseas companies coming into the region using Singapore as a springboard, we make the connections for them to succeed,” says Mr Koh.