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Tapping overseas markets for growth
Daniel Chan, group chairman,
IPS Group Pte Ltd
IPS GROUP is a leading player in building infrastructure equipment & industrial radiators, and in the distribution of engines, generators and security equipment in Asia and Africa. It is an engineering group principally engaged in the design, manufacturing, distribution, installation and commissioning of a wide range of infrastructure and industrial equipment, and provision of training, maintenance, rental and after-sales services.
Chee Teck Lee, chief executive officer,
Moveon Technologies Pte Ltd
With the growing significance of optical components in many electronics industries, Moveon Technologies aims to be recognised as a reliable partner in Total Lighting Management. Through its wide range of optics engineering and fabrication solutions, it caters to the evolving needs of clients and consumers alike. Moveon is a one-stop shop for optics - its services comprise design, prototyping and volume production. Since it was established in 2006, Moveon has worked with many multinational companies in a variety of industries.
Lee Chou Hock, chief executive officer,
Hotel Royal Limited
Hotel Royal was incorporated in 1968 and was subsequently listed in Singapore in the same year as a hotelier. Hotel Royal not only houses 357 exquisitely-designed and spacious guestrooms, it is also situated close to the shopping paradise of Orchard Road. The group has also expanded into Malaysia with the acquisition of Hotel Royal Kuala Lumpur, Hotel Royal Penang and The Baba House in Melaka. It also owns Hotel Royal Bangkok @ Chinatown and Burasari Resort in Phuket, Thailand. Apart from its hotels, the group has diversified into property investment as its second core business. The investment properties are located in Singapore, Malaysia and New Zealand.
Moderator: OCBC Bank
IN the face of rising costs, manpower constraints and the small Singapore market, small and medium-sized enterprises (SMEs) have been making forays into overseas markets in search of new revenue. OCBC Bank has seen an increase in the number of its SME customers expanding their footprints in the region, especially in China, Malaysia and Indonesia. According to IE Singapore, Singapore businesses invested S$33.7 billion overseas in 2013. Even as these SMEs enter new markets, they will have to navigate the regulatory, financial and business nuances of the different markets. Three Singapore companies that have operations overseas shared their thoughts on why they chose to expand overseas, the challenges they faced and their advice to fellow SMEs.
OCBC: Can you briefly share with us your growth journey? When and why did you expand your business overseas and where are your key markets?
Lee Chou Hock: Our first foray into the overseas market - specifically, Australia and New Zealand - was in the 1990s. It was a time when the property market offered very attractive yields. Subsequently, in 2004, we acquired a nine-storey boutique office building at Cecil Street as well as Hotel Royal@Queens. From 2007, we continued our overseas hotel acquisitions, such as in Malaysia and Thailand. As the Singapore market is too small for us to build our brand and hotel portfolio, Malaysia and Thailand are our biggest overseas hotel investment markets presently.
Daniel Chan: International Project Supplies (S) Pte Ltd started in July 1986 as a small trading company dealing with general supplies to international contractors in Singapore and South-east Asia. Over the years, the businesses grew and several subsidiaries were formed under its wings. The holding company was then renamed IPS Group Pte Ltd to better reflect the group's international business and organisation structure.
To grow our business, we need to tap markets outside of Singapore. We began expanding our business to countries in South-east Asia in the late 1980s. We also formed business alliances with partners as far away as Europe to bring new niche products such as Asphalt Batch Plants, Concrete Batch Plants and generators to the Asia-Pacific region. With these niche products, we managed to penetrate markets in the Far East including China in the early '90s, followed by India, the Middle East and African countries since 2000.
Chee Teck Lee: Moveon Technologies was founded in 2006 to provide customised optical engineering solutions to meet the burgeoning demands and growth potential in imaging and illumination needs in the consumer electronics and automotive industries.
We now have about 250 employees and we have grown from providing design solutions to component fabrication and module assemblies from our two plants in Singapore and Sungei Petani, Kedah. This growth was largely driven by the increasing use of optical solutions in mobile devices and computing peripherals as technologies and needs continue to evolve with the adoption of the Internet and mobile computing.
Today, our key customers are original equipment manufacturers and MNCs based in US and Europe, many of whom are Fortune 500 companies relying heavily on technology products spanning mobile computing, medical, automotive and industrial automation.
OCBC: What are some of the challenges you faced while expanding your business oversees?
Mr Lee: Some of the key challenges include adapting to the local culture, understanding the local rules and regulations, and having the patience to learn how things work in the different overseas markets. Another challenge is the need to manage the foreign exchange risk, especially when the Singapore dollar is so strong.
Mr Chan: Finding the right people to fill key positions in the different markets is a challenge. We want people who share the company's vision. To retain them, we offer them competitive salaries and provide incentives such as a profit-sharing scheme. We also invest in the training and development of our employees to ensure they have proper career development. Also, as a new player in the various overseas markets, it was not easy for us to convince the established local manufacturers to be our partners as they were not familiar with us.
Mr Chee: On a global scale, the immense opportunities are overwhelmingly met with threats from competitors. As an SME, our competitors are not only other SMEs but the bigger companies as well, regardless of the market we are in.
The key challenges in expanding overseas are the sustainability of businesses, given the dynamic nature of today's business environment, as well as growing a core management team that will function independently and effectively.
OCBC: How critical is the role of a banker when you make forays into an overseas market?
Mr Lee: Before we venture into a new market, we will speak to our OCBC relationship manager who will link us up with a staff member in charge of the operations in that particular market. They are able to share with us some local insights as they have a good understanding of the local market. They are also able to introduce us to potential business partners.
Mr Chan: It is important to work with a bank that understands your business and needs, especially in countries like China and India where we are not familiar with the local banks and vice versa. So it is easier for us to work with OCBC Bank and tap its overseas network when we expand overseas.
Mr Chee: A major challenge for any startup is cashflow management. Poor or inadequate cashflow management is probably the single biggest factor that leads to the demise of many startups. In our early years, our strategy was to innovate and develop new solutions. We didn't want to be a "Me Too" company as we realised that competing on the same technology platform is myopic and short-lived. So, we struggled between funding our R&D efforts and paying our staff.
Since 2010, when we won the Best Innovation Award at the Emerging Enterprise Award jointly organised by OCBC Bank and The Business Times, we have established a good relationship with the bank. It has supported us over the years when we undertook "calculated risk" investing in new technologies and opportunities as we expanded our business.
OCBC: There has been a lot of focus on productivity and innovation recently, with many saying that these are two value drivers critical to an SME's ability to stay ahead of the competition amid the challenging business environment. How has your company leveraged these drivers to create value and remain competitive?
Mr Lee: We do a lot of cross-selling at our hotels in Singapore, Malaysia and Thailand, and we also share best practices. For instance, if one hotel manages to garner good sales over a certain online booking portal, we would check and see if it is feasible to adopt the same promotion strategy for the other hotels.
At Hotel Royal Newton, we have installed solar heating panels for hot water on our rooftop not only because it is environmentally- friendly but it also helps to save electricity. For all the innovative and productivity initiatives that you put in place, you must not forget the importance of a better customer experience, especially in the hospitality industry. Guests have shared with us the reason why they choose to stay at our hotels - because of our friendly staff who make them feel right at home.
Mr Chan: As a Singapore company, customers may not be as receptive to us compared to a foreign brand name. So we entered into a joint venture with German company, Lintec GmbH & Co KG, to manufacture and distribute asphalt and concrete plants in the Asia-Pacific.
Lintec won the R&D Innovation Award in Germany in 2002 for building the first ISO Sea Containerised Asphalt Batch Plant in the world. Our joint venture helped to reduce shipping costs and allowed us to catch regular containerised vessels with regular shipping schedules. On our end, we have the relevant network and market know-how in the Asia-Pacific region. So we tapped each other's strengths to expand and grow our respective business operations in the Asia-Pacific.
Mr Chee: Moveon Technologies was founded on the belief that "sustained innovation" is the key to growth and survivability. In this dynamic marketplace where competition abounds, the ability to continuously generate ideas and innovate is, in our opinion, instrumental in staying relevant.
Productivity must be construed as a given. It is no longer rocket science to automate manufacturing processes or increase output through the use of high-efficiency machinery and equipment. The benefits of automation go beyond reducing cost and increasing output; it also results in higher consistency in product quality and increases yield due to a reduction in handling defects.
A key aspect of productivity is enhancing the knowledge of our employees. This will eventually lead to productivity derived from being able to stay relevant and aligned to evolving changes.
OCBC: What is your advice to SMEs looking to grow their business overseas?
Mr Lee: We have to do our homework and find out more about the new market that we are interested in venturing into. Speak to the local business owners and, if your banker has a presence there, tap their expertise. Work with a bank that is familiar with your business so that it will be easier to get the necessary support when you go overseas.
Mr Chan: It is important to set a goal and vision for your business so that there is a direction that everyone can work towards. You also need to invest in and retain the right employees by ensuring that they have good compensation as well as training and career development opportunities.
Mr Chee: Three important things we learnt from expanding beyond our shores:
- Do your homework to ensure there is a certain level of outlook and confidence regarding business sustainability in the new market that you are intending to expand into.
- Proximity to your customers is crucial. This not only gives you a logistic advantage, but also makes it easier to communicate and build rapport and relationship with your customers. Also, choose an area with less competition. We chose to be in Sungei Petani and not Penang so that we do not have to compete directly with the bigger players.
- Last but not least, nothing is possible without a raging passion for the things you do. It is important to look beyond the financial rewards and do something that you genuinely enjoy doing.