International BusinessAssessment Task 2: Group Report

Student Name:

Yihan Fang (30309283),

Rui Hu (30120878),

Rachna Gupta (30115496)

Word count: 2404

Due Date: 06/05/2015

Table of contents

Executive summary..................................................................................................................2

1.0 Introduction.......................................................................................................................3

2.0 Political environment.........................................................................................................3

3.0 Culture factors...................................................................................................................4

4.0 Economy............................................................................................................................5

4.1 Disadvantages.............................................................................................................7

5.0 Technology.........................................................................................................................7

5.1 Packaging....................................................................................................................7

6.0 Firm Strategies...................................................................................................................8

6.1 Exporting.....................................................................................................................8

7.0 The impact of the local environment on Singapore...........................................................10

7.2 The costs of local environment on Singapore.............................................................11

8.0 Conclusion........................................................................................................................11

9.0 References.......................................................................................................................13

Executive summary

This report indicates the feasibility of exporting Loving Earth chocolate to Singapore.

From the economic part, Singapore is one of the most exposed, and thus economical, markets in

the world. Singapore has virtually no natural resources, so international trade is vital for them.

Also, high technology Packaging can protect the chocolate avoid from water, oxygen, humidity,

fats and aromas during the delivery. Moreover, exporting is the most common and lowest risk

way to enter Singapore chocolate market. The profits may be lower but gives an opportunity to

learn the Singapore market before investing in higher scale. From the political part, Singapore as

Parliamentary Republic country, it has low tax rate and a corruption free business environment.

Government’s favorable attitude toward foreign investors allows foreign firms to operate under

the same rules as local firms. Next, Singapore is freedom of religion with some exceptions. It has

been described as one of the most religious countries in the world. One of them spoken language

is English, and the communication would not be a problem during the expanding plan. Finally, as

foreign direct investment, it brings two main advantages for Singapore, improving the capital

market and creating more job opportunities. On the other hand, government may worry that

foreign Multinational Enterprises can be a monopoly for increasing the price.

1.0 Introduction

This report is going to formulate a recommendation for expanding Loving earth chocolate

into Singapore market. This report is consisted by five parts, which respectively discuss the entry

strategy, political environment, economical environment, culture factors, and the impact of the

local environment of Singapore. Each part will further indicate the advantages and

disadvantages.

2.0 Political environment

According to Hill (2014), political environmental factor is very important to a country’s

attractiveness and economics. The political system of one country can change its economic and

legal systems. It can be assessed according to the degree to which they emphasize collectivism as

opposed to individualism and the degree to which they are democratic or totalitarian.

According to the political system, Singapore is seemed as Parliamentary Republic country,

their president is the head of state and the prime minister is the head of government. It is based

on English common law. The government has three branches, which are legislature, executive

and judiciary. Furthermore, Singapore’s censorship laws, it employs censorship laws against

opposition in order to impede their success. The level of government intervention with business

is low. Otherwise, Singapore offers a corruption free business environment with low tax rates

(Gao, 2014).

On the other hand, Singapore is one of the participating nations in the ASEAN free trade

area, the Singapore-European Free Trade-Association (ESFTA), the Gulf Cooperation Council

(GSFTA) with Japan, Korea, and the US. And Singapore has many free trade area agreements

with China, India, Japan, Korea, and Australia (Gao, 2014).

As our product of chocolate export to Singapore, there are some threats for our company,

which are: Singapore is an incredibly attractive business market for foreign investors (Gao,

2014). For example, the government’s favorable attitude toward foreign investors allows foreign

firms to operate under the same rules as local firms. The political system is very stable and

uninstructive, taxes are low. Otherwise, the country is centrally located and exposed to trade with

many other Asian countries. Their local people enjoy a high quality of life and are highly

educated and offer expertise in manufacturing, financial, and communications.

Furthermore, Singapore’s country risk is low such as the government plans to implement

fiscal stimulus to spur growth and is able to finance the move due to its fiscal reserves. And

Singapore’s commercial risk is moderate. The economy is highly competitive due to its global

nature; this can make it difficult for startups with poor connections.

However, there are some weaknesses we need to take notes that there will have high costs

of operating business to our company, and there are not so many local trading professionals in

Singapore.

3.0 Culture factors

According to Hill (2014), culture is defined as a system of values and norms that are shared

among a group of people and that when taken together constitute a design for living. It is quite

necessary for international business and investment. For example, it is significant point for the

people who do the international business when they need to share their information and ideas

with other people. It could be their language, religions, or traditions. These factors will influence

their communication. Thus, culture plays an important factor in international business in foreign

countries. It could identify the certain country and help determine their values and norms.

Singapore is a multilingual state. The national language is Malay, and the four languages are

Malay, English, Indian and Chinese. English is the administrative language and the medium of

instruction in schools. Their economic prosperity and political stability are associated with the

national culture, as is the Singaporean concept kiasu. It means “afraid to lose” and refers to the

wish to come in first in lines, competitions, negotiation, and so forth (Joseph, 1995).

According to Huff (1994), Singapore is freedom of religion with some exceptions. It has

been described as one of the most religious countries in the world. The major religions are Islam

(Malay), Hinduism (Indians), Buddhism, Taoism, and folk religion (Chinese), along with a

substantial number of Christians of various denominations.

Thus, they use the English as their spoken language, it is good for our company to do the

business and communicate with other people. Secondly, there are lots of westerns who like

chocolate very much, so that it will have consumers in the markets. However, we need to do

some further research to make sure whether they will accept the tastes of our product.

4.0 Economy

Singapore is one of the most exposed, and thus economical, markets in the world. The

Singapore has mixed economy however this country strongly supports free-market rules and

regulation in their practices, which is favorable for exporting our chocolate brand. Further

aspects such as the country’s strategic geographic position, trading hub statuses make it a

strategic and enormously important market for exporters. In addition an extremely skilled

workforce and a promising tax rule have produced a positive business environment for our

company. Government also encourages actively new industries to grow in Singapore for meeting

the needs of the global market. International trade is exceedingly important for Singapore, as it

has virtually no natural resources. A large percentage of trade is conducted to meet domestic

demand for energy, food, and other necessities (Focus economy 2015).

In 2010, Singapore was the third fastest growing economy in the world with a real GDP

growth rate (constant prices, national currency) of 14.471 percent The tourist dollar is an

important one for the local economy, with tourism receipts reaching an estimated S$23 billion in

2012 (about 10 per cent of which came from food and beverage receipts) (Focus economy 2015).

Singapore’s economy dropped before starting years; however, it achieved to improve in

2012 and grew a remarkable 2.3%. Subsequently the economy has been on a maintainable

growing track (Focus economy 2015).

4.1 Disadvantages

As a robust promoter of free trade, Singapore has comparatively few trade obstructions.

There is however some import limitations based mainly on health, and public environmental,

security concerns. The export of Chocolate also requires export trade policies in order to ensure

food security and price constancy (Focus economy 2015).

5.0 Technology

Loving Earth Company stated that company uses the modern technology to keep its natural

wealth longer therefore, this product gone through some clinical and scientific concept that

focused on coffee education. This chocolate contains no cane sugar or dairy, even though it is

appropriate for vegans and for those people who are health conscious because company uses

natural low organic coconut syrup for sweetened the products. Basically in process its Cacao

Beans are not roasted, which means that their natural wealth of phytonutrients remain fully

undamaged (Sustainability 2015).

5.1 Packaging

In packaging of chocolates the most important technology are using that can be integrated in

the packaging material, such as goods which prevent water, oxygen, humidity, fats and aromas

from invading the packaging, while it protects the surface from stains and bacterial growth. The

company uses the wrapper made of Luvju bars that is a compostable film ready with renewable

plant resources. These wrappers are made with cellulose from sustainably managed trees and

cornstarch polymer from non-GMO corn. Each of the cellulose and cornstarch modules are FDA

approved for food contact and the film itself is manufactured in a HACCP food safety approved

facility (Sustainability 2015).

These packaged in boxes that are printed with vegetable based inks on 100% post-consumer

recycled stuff. These boxes are recyclable. The inside bag looks like plastic but is really made

using renewable resources (such as non-GMO corn and wood cellulose) and is also compostable.

Lastly, Company uses the tiny white balls for packing is called ‘bio-fill’, which is made from

cornstarch and it is compostable. Also, the bubble wrap they use is made from 100% recycled

plastic (Sustainability 2015).

6.0 Firm Strategies

6.1 Exporting

This is the most traditional and established market entry strategy for a foreign business.

Firm’s products are manufactured in the domestic market or a third country and then transferred

either directly or indirectly to the host market. It will be exporting the products which are

manufactured in Australia. This is less risky for our product as the production done home based.

The profits may be lower but gives an opportunity to learn the Singapore market before investing

in higher scale (Hill, 2013).

There are three major types of export modes:

• Indirect export

• Direct export

• Cooperative export

Indirect export

• Manufacturing firm does not take direct care of exporting activities. Instead another

domestic company, such as an export house or trading company performs these activities, often

without the manufacturing firm’s involvement in the foreign sales of its products (Hill, 2013).

Direct export

• In the second stage our product of company can give permission for an established

chocolate manufacturer in Singapore to use their trademark and do the manufacturing, processing

and marketing. In this way there is a low risk for our brand as capital not tied up in International

operation. However company will deal with the goods being sold to local manufacture and

distributers and operating documents, physical delivery and pricing strategies (Hill, 2013).

Conversely, one disadvantage is that the company would require consuming more time and

resources to improve its connection with the overseas consumers to build up the trustworthy

relationship.

Cooperative export

• Firm’s involve collaborative agreements with other firms to produce product to export.

Small firms do not achieve sufficient scale economies in manufacturing because of the size of the

local market or the inadequacy of the management or marketing sources available. By

cooperating firms achieve higher economies of scale and form broader product concept (Hill,

2013).

The challenge is to change beyond a company’s central class and enter new ones within the

market. This is undoubting riskier attitude that will need some investment and persistence as

specific of these segments can take time to grasp critical frame.

7.0 The impact of the local environment on Singapore

7.1 The benefit of local environment on Singapore

As foreign direct investment, it brings two main advantages for the host country,

Singapore. Foreign direct investment can brings resource transfer effects, such as improving the

capital market (Hill, 2013). Amount of multinational enterprises have large size and financial

resources. In the host-country firm, these financial resources cannot use in company directly.

Thus, multinational enterprises may be able to rely on their good business reputation to borrow

money form capital markets (Hill, 2013). For Loving Earth Company, this is an Australian brand

and trade with Australian dollar. Enter into Singapore market; it is significant for company to

prepare enough cash in Singapore Dollar. Therefore, the company can borrow money from bank

and other investment company.

The other advantage of foreign direct investment is employment effects (Hill, 2013).

There are two ways to create jobs. On the one hand, due to the investment in local suppliers,

these suppliers tend to expand their business by hiring more stuff, which will create more job

opportunities (Hill, 2013). On the other hand, the spending by employees of the Multinational

Enterprises will facilitate several industries such as service industry or catering industry, which

still could build new jobs. Hence, Loving Earth company entry into Singapore that can make

more people to get a job on their firm and local suppliers.

7.2 The costs of local environment on Singapore

The host country considers one main costs of foreign direct investment, adverse effects

on competition (Hill, 2013). Local companies may have less economic power than the foreign

invest companies because these foreign invest companies belong to a multinational corporation.

Host government worry that the native companies would be gives up the market by completion

with subsidiaries of foreign Multinational Enterprises (Hill, 2013). Hence, the foreign

Multinational Enterprises can make a monopoly in the market and increasing the price. For the

host nation, it would make the economic go down and bring disadvantage on economic welfare

(Hill, 2013).

Loving Earth Company is not an indigenous competitor in Singapore. But, the company

also has less economic power than other subsidiaries of foreign MNEs (multinational

enterprises). Loving Earth Company as a Greenfield investment mode should arise

comprehensive competitiveness. Otherwise, other multinational enterprises chocolate brand take

the most market share in Singapore, Loving Earth cannot compete with them.

8.0 Conclusion

Overall, Singaporean market shows a promising opportunity to Loving Earth chocolate

company whereby its rational market regulation, positive business environment and special

domestic demand. Also, Loving earth has advanced technology such as packaging technology,

which ensures this product could be outstanding from the competitive market. Further more, this

investment can improving Singapore capital market and create more job opportunity. Due to its

positive political and culture environment and appropriate timing, Loving Earth chocolate

supposes to capture this opportunity. Singapore economic is form of the process with the dual

purpose of opening up of the economy to woo foreign investment and making the process of

global integration at a faster pace. In this background, the government has attempted to

benchmark the country's laws and regulations vis-à-vis the best global practices. It is significant

to keep pace with the changing dynamics of the lawful landscape. However, this tendency creates

a challenge and a fabulous opportunity for Australian companies.

9.0 References

Focus Economics. (2015). Economic Forecast from the World’s Leading Economists. Retrieved

from https://www.focus-economics.com/country-indicator/singapore/gdp.

Hill, C. (2013). International business: Competing in the global marketplace (9th ed.). New

York: McGraw-Hill Irwin.

Huff, W. G. (1994). The Economic Growth of Singapore: Trade and Development in the

Twentieth Century

Sustainability. (2015). Restoring Native Ecosystems. Retrieved from

https://lovingearth.net/

Tamney, Joseph B. (1995). The Struggle over Singapore's Soul: Western Modernization and

Asian Culture, 1995.

Xin Gao, (2014) .Singapore annual survey of political and economic background, Ulrich’s

International Periodicals Directory