Expanding abroad requires deliberate business strategy

The call by Finance Minister Heng Swee Keat for Singapore firms to team up to expand abroad is not new (S'pore firms must team up to expand abroad, says Heng, March 9).

I believe there are three main reasons why this is not already happening.

First, alliances between local companies cannot be just a reaction to a need to go abroad.

It must be a deliberate business strategy carefully cultivated in Singapore, so that the relationship is tested and enough trust is established between the parties to withstand the challenges of overseas markets.

Second, alliances are not just any business arrangements.

They demand a high degree of interdependence.

The allure of aligning with a company that is widely recognised within the industry can be hard to resist.

But doing so would not help the cause as it could lead to a partner wondering where your company would be without it.

A more workable alliance would be one with partners that have unique strengths such that the whole is greater than the sum of the individual parts.

This could involve alliances with partners up or down the value chain.

Japanese "industrial keiretsu" link suppliers with manufacturers and distributors of one industry. Their counterparts would be the Korean chaebols and the Taiwanese trade associations.

Third, alliances don't just happen. They need strong leadership supported by favourable policies that nurture them.

Instead of just dishing out grants and tax breaks to individual companies to venture abroad, the Government needs to offer such incentives only to alliances between companies.

Also, all Government-linked companies that have benefited from the Singapore market must be directed to include local small and medium-sized companies in their overseas forays.

Unless these critical issues are addressed, Mr Heng's call-to-action for Singapore companies to "hunt as a pack" when going abroad will remain yet another great idea that was never executed.

Liu Fook Thim

A version of this article appeared in the print edition of The Straits Times on March 13, 2019, with the headline 'Expanding abroad requires deliberate business strategy'. Print Edition | Subscribe