singapore inc. mba 290g case 2 september 12, 2007 sarah boyd, vincent escobedo, gayathri...
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Singapore Inc.MBA 290G Case 2
September 12, 2007
Sarah Boyd, Vincent Escobedo, Sarah Boyd, Vincent Escobedo,
Gayathri Raghavendra, Jay TanejaGayathri 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 PortsSingapore: 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%
(8) Asian Economic Journal 16 (3), 267–283, (9) United Nations Statistics Div. http://unstats.un.org, (10) US Bureau of Economic Statistics
Real GDP Growth Rate
-5
0
5
10
15
1970 1980 1990 2000 2010
Year
%
Singapore
US
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 bio-ethics 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?
Measures
• 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
Current Strategy Goals
• Transform Singapore into a knowledge-based economy
• Move up the value chain• Encourage innovation
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
(11) Giving Singapore a SV Mindset, BusinessWeek, August 2000
• Increase contribution from non-governmental sources• Give universities more autonomy• Reduce government stake in companies, encourage more
local competition• Deregulation is a serious challenge
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)
Age # of Members Balance $/Member Contribution (%)35 and below 877531 20.4 $23,247.04 3635-45 823353 32.6 $39,594.20 3645-55 626934 31.4 $50,085.02 3655-60 148726 4 $26,895.10 18.560+ 416647 3.6 $8,640.41 11Unspecified 29482 0.1 $3,391.90Total 2922673 92.1 $31,512.25
(13) 2001 CPF Annual Report via case study
Gross National Savings: 46% in 2001