Transcript Singapore Inc. MBA 290G Case 2

Singapore Inc.
MBA 290G Case 2
September 12, 2007
Sarah Boyd, Vincent Escobedo,
Gayathri Raghavendra, Jay Taneja
Outline
• Singapore Today
– How is it similar to or different from the SF Bay Area?
• How did Singapore become the success story it is?
– Metrics of success
– Porter’s Diamond
– Other factors
• Where does Singapore want to be tomorrow? Are they
on the right trajectory?
Singapore – A Snapshot
Singa Pura, Malay for
“Lion City”
• Area: 699sq km
• Population: 4
million+
• Demographics:
76% Chinese, 15%
Malay, 6% Indian
• Government:
Parliamentary
Democracy
Singapore & SF Bay Area: The Numbers
Metric
Singapore
Bay Area
Population
4.55 million1
6.9 million2
GDP
$141.2 billion3
$401 billion4
Annual Real
Growth Rate
2005: 6.6%
2006: 7.9%3
2005: 3.9%5
International
Exports
$271 billion 3
$44 billion4
1. Conutryreports.org; 2. http://abag.ca.gov; 3. http://www.state.gov/r/pa/ei/bgn/2798.htm ; 4.
http://www.bayareacouncil.org ; 5. http://www.beaconecon.com/products/Presentations/BAWTC01_11.pdf
Singapore and SF Bay Area: Similarities
Major Industry Clusters: Semiconductor and
Biotech
Major Ports
Singapore: 24,792,400 TEUs in 2006(16)
Oakland: 2,391,598 TEUs in 2006(7) (10-15% of US
container cargo)
(6) www.mpa.gov.sg (7) www.portofoakland.com,
Singapore and SF Bay Area: Differences
Bay Area
Singapore
R&D, Design
Manufacturing, Trade
Industry clusters grow out of
academic research:
semiconductors in the 50’s,
60’s and 70’s, biotech and
internet software in the 80’s
and 90’s, nurtured by venture
capital.
Industry clusters created and
nurtured by government (EDB,
Temasek)
Innovation
Efficiency
The Rise of Singapore
•
•
•
•
Per capita GDP growth ~ 5% from 1975-1999
2000: 10.1%
2001: Worldwide slump, -2.2%
2004: Major turnaround, 8.8%
Real GDP Growth Rate
15
%
10
Singapore
5
US
0
-5
1970
1980
1990
2000
2010
Year
(8) Asian Economic Journal 16 (3), 267–283, (9) United Nations Statistics Div. http://unstats.un.org,
(10) US Bureau of Economic Statistics
The Rise of Singapore: Why and How?
The Rise of Singapore: Why and How?
Factor Conditions
• Location (heart of major sea lanes)
• NO natural resources – had to be smart, depend on trade
• Infrastructure (Physical, financial)
• IP Policy
• Labor pool (work ethics, trained vs untrained, skill level, foreign vs domestic)
Government
• Strong ties between pro-business state & industry
• Govt. is consistent and not corrupt
• Govt. anticipates infrastructural needs
• Actively built/crafted IP environment
• Strong handling of unions, wage policies, education,
policies to attract foreign students & workers
The Rise of Singapore: Why and How?
Demand Conditions
• Small domestic market led to pro-business, pro-foreign, export
oriented policy
• Positive for electronics, communications: early adopters, “technology
crazy”, discerning and demanding
• Negative for biotech: relatively new industry, no stress test for bioethics issues
Government
• Encourages widespread use of technology
• Tablet PCs in school
• Curbs freedom of expression/media
The Rise of Singapore: Why and How?
Related and Supporting Industries
• For biotech => Chemical Island
• For hi-tech => Electronics Manufacturing
• Broad based benefits from shipping and transportation industry, legal and
IP services, logistics, data management, and more recently brand
management
Government
• Following cluster model for industry development
• Targets entire value chain in an industry to offer
a stronger value proposition to
individual firms
The Rise of Singapore: Why and How?
Firm Structure, Strategy, Rivalry,
• Structure: Gradually moving away from state-owned
• Strategy: Attract foreign investment with business friendly environment
• Rivalry: Intense rivalry faced by Singapore Inc, but very low level of
domestic competition for firms
Government
• Primary driver of growth; salaries of policy makers
tied to GDP growth
The New Singapore: What next?
Current Strategy Goals
Measures
• Transform Singapore into
a knowledge-based
economy
• Move up the value chain
• Encourage innovation
• Focus on education,
creative learning
• Move from dual pronged
approach to Triple Helix
model (State-Industry 
State-Industry-Academia)
• Encouraging VC & PE
• Focus on specific clusters
like biotech; media
The New Singapore: Comments and
Recommendations
Labor and Talent Pool
• Increasing dependence on foreign contribution
– Young Singaporeans moving away (overbearing state,
inflation)
– Shortage of home-grown entrepreneurs
• Focus on increasing local skill set and skill levels
The New Singapore: Comments and
Recommendations
Focus on Biotech
Strengths
• Chemical
• Lax regulation
• Gateway to Asia
Weaknesses
• Depending on foreign
talent
• Local market is a poor
predictor of world market
Opportunities
• High Growth
• Early mover
Threats
• Direct competition with
SV
• Very risky
The New Singapore: Comments and
Recommendations
Creating an entrepreneurial mindset is a long term project, especially
in a society where conformity is the form
• Increase contribution from non-governmental sources
• Give universities more autonomy
• Reduce government stake in companies, encourage more
local competition
• Deregulation is a serious challenge
(11) Giving Singapore a SV Mindset, BusinessWeek, August 2000
The New Singapore: Comments and
Recommendations
Other Concerns with current strategy
• Social backlash
- widening gap between rich and poor
- locals feel (43%)(12) government cares more about foreign
professionals than local population
- aging population that cannot support itself
• High Savings Rate
-Reduces available pool of capital
- Could be diverted to stem property market inflation or invest in
skill enhancement programs
(12) Singapore goes back to its Roots, Financial Times, Aug 07
The New Singapore
Growth thus far has mostly been achieved by increasing inputs
• More labor, more capital, more investment, more education, more
training
• This cannot go on!
Need new strategy!
(12) Singapore goes back to its Roots, Financial Times, Aug 07
Singaporeans and Saving(13)
A ge
# of Members Balance $/Member
Cont ribut ion (%)
3 5 and below
877531
2 0 .4 $ 2 3 ,2 4 7 .0 4
36
35-45
823353
3 2 .6 $ 3 9 ,5 9 4 .2 0
36
45-55
626934
3 1 .4 $ 5 0 ,0 8 5 .0 2
36
55-60
148726
4
$ 2 6 ,8 9 5 .1 0
1 8 .5
60+
416647
3 .6
$ 8 ,6 4 0 .4 1
11
U ns pec ified
29482
0 .1
$ 3 ,3 9 1 .9 0
T otal
2922673
9 2 .1 $ 3 1 ,5 1 2 .2 5
Gross National Savings: 46% in 2001
(13) 2001 CPF Annual Report via case study