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In the twenty first century, the environment of the business is becoming very multifaceted, interdependent, and vibrant. Management of the business need to rearrange their policies and styles of management as per the world’s region, they are working in (Gupta, 2013). The characteristic challenges that are experienced by the management are cultural, economic, political, legal, and technological. In addition to the huge opportunities, while working in the international community, it is also related to the comparative high risks and the probable return on investments in the international market (Brown, 2013).
The report is intended towards analyzing the business environment of Singapore to identify possible business opportunities for Sainsbury. Besides this, it will highlight the advantages and disadvantages of globalization on Singapore and discussion of the how the country can encourage or restrict its international trade with other nations.
Globalization and Trade
Globalization is the procedure of integration and interaction among businesses, governments, and people worldwide. As a multifaceted phenomenon, globalization is said to be a form of capitalist expansion, which involves the national and local economies integration into a worldwide, unfettered market economy (Beck, 2018). Globalization has developed because of advances in communication and transportation technology. With improved worldwide interactions comes the expansion of international culture, trade, and ideas. Globalization is mainly an economic procedure of integration and interaction that is related to the cultural and social aspects (Stiglitz, 2015).
Advantages of Globalization for Singapore
Gross Domestic Product
Singapore is considered as one of the best examples while talking about globalization. After getting separated from Malaysia and experiencing Cold War, Singapore currently lies under the countries third world group and First World in South East Asia with positive economic growth. The globalization has supported Singapore in attaining definite economic growth by enhanced worldwide trade. Definite growth is the actual growth in Gross Domestic Product, a rightward move of Aggregate Demand curve. Growth in the net exports to the remaining world increases AD, which in return results in an equivalent rise in the GDP via the multiplier effect. For economic growth, the country is majorly dependent on exports. In spite of this, the new exports create the biggest constituent of the GDP of Singapore (Acme Themes, 2018).
Foreign Direct Investment
The huge amount of FDI i.e. foreign direct investment has supported Singapore in attaining possible economic growth. Possible or potential growth is the development of potential competencies of the economy to create output. Transmissions of technology, human capital, and physical capital from MNCs i.e. Multi-National Corporations have supported in developing the economic productive capacity of Singapore, and this moves long-run aggregate supply curve of Singapore towards the right side, which reflects its developing potential economic growth (Penalver, 2002).
Increase Labor Flows
Singapore has also been profited from improved labor flows across global borders. Importing overseas labor results to increase in the labor in Singapore, which promotes the productive capacity of the economy. It is a comparatively cost-effective and efficient manner of increasing potential growth (Perry, 2017).
Low Inflation
Globalization has supported Singapore in maintaining low inflation rate. Inflation is determined as an insistent and continued upsurge in the overall price level, and it is normally considered as an issue. By introducing raw materials from different nations at low prices, Singapore has effectively reduced its production cost, which interpreted to inferior prices for finished products. Importing provisions and other final goods support in maintaining the normal price level down (Economist, 2015). In addition, Globalization upsurges the productive capacity of the economy of Singapore, which reduces the prices.
Globalization and Trade
Low Unemployment
Globalization also supports in maintaining low unemployment in Singapore. Growing export levels move AD towards the right, which results in greater equilibrium national output. This reflects that the actual growth takes place, which moves AD towards the direction of full employment level that reduces unemployment.
Disadvantages of Globalization for Singapore
Vulnerable to External Shocks
The major dependence of Singapore on exports makes country expose towards adverse economic situations. If any of the trading partners of Singapore experience recession, the demand for its exports will fall. This decreases AD, which results in lower equilibrium national output. Therefore, the economy of Singapore is vulnerable to the demand tremors, for instance, the Gross Domestic Product of Singapore decreased at the time of the financial crisis of 2007/2008 (My Exclusive Condo, 2017).
Vulnerable to competition
While globalization offers Singapore an increased market for their exports, it also exposes it towards immense competition. Evolving nations such as China are catching up rapidly. By this time, country has blurred its comparative position in the low-to-medium end trade to speedily automating nations. If the level of exports reduces because of rivalry from the low-cost nations, it will lead to a drop in AD, which results in a decrease in overall output (Asia Biz, 2018).
Vulnerable to Global Business Shifts
Increase in the productive capacity of Singapore carried by globalization may not be enduring because the country is majorly dependent on the MNCs, which are internationally mobile in nature. These MNCs could transfer their low-cost location, along with their capital. Besides this, there is no assurance that the ‘foreign talent’ of Singapore will remain in the nation for a longer time duration. Additionally, importing immigrants to upsurge the number of labor in Singapore is indefensible in the future in terms of small land size of Singapore since the arrival of immigrants, appears to be contending with the people of Singapore for space as well as jobs, that has become a key basis of social and political discontent (Acme Themes, 2018).
Inflation
If the economy of Singapore is being functioned at or close to full employment, then an increase in AD because of enhanced exports level can probably and convincingly results in demand-pull inflation. The obstinately low unemployment rate of Singapore reflects that the economy is functioning at near to complete employment. Therefore, inflation can possibly be a potential concern (Asia Biz, 2018).
Singapore Encourages and Restrict International Trade
Import Tariffs
Singapore is commonly an open economy and a free port. In Singapore, around 99% of imports take the tax-free entry. For environmental and social causes, Singapore charges high taxes on purified wine and spirits, petroleum products, tobacco products, and motor vehicles (Export Government, 2016).
Seven% GST i.e. Goods and Service Tax is changed in Singapore. For dutiable goods, the GST taxable value is computed depending on the Cost, Insurance, and Freight that is CIT value plus overall duties along with additional levies. Considering the instance of non-dutiable products, Goods and Service Tax will be dependent on the Cost, Insurance, and Freight value plus commission and secondary levies whether or not reflected on the statement. If the products are dutiable, the Goods and Service Tax will be charged instantaneously with the duties (Export Government, 2016).
Advantages of Globalization for Singapore
Trade Barriers
Singapore is one of the countries that uphold the most generous administrations in the world; however, the companies of U.S deal with numerous trade barriers. Singapore upholds the system of tiered motorcycle operator licensing depending on the engine dislocation, which is with a road tax grounded on the size of the engine, negatively influence the motorcycles exports of the United States. In 2017, Singapore dispirited the imports of the motorcycle by establishing a system of tiered of extra fees of registration, which aid as a de facto extra tax on motorcycles and expressively upsurges their value (Export Government, 2018).
Over the years, Singapore has been experiencing an amazing economic growth. Currently, it is called as an economy with high-income. The growth is determined by numerous elements. Few of them are private consumption expenditure, investment, external and local demand. The leading sectors in Singapore such as petroleum refining and pharmaceutical industry possess a potential to influence other nations for investment (Pestle Analysis, 2018).
Political Environment
Singapore has been known as the finest city for business. According to the reports of World Bank, an entrepreneur just takes a week to start a new business within the boundary of Singapore with low costs of start-up. Considering the different factors comprising taxes, investor protection, business licensing, and credit legal rights, Singapore possess the most business welcoming guidelines in the whole world (Monetary Authority of Singapore, 2018).
Investors from other nations have arrived to escalate the high reliability and limpidity level in trade, regulatory, and economic matters in the country. A steady political structure with governmental equality, a deep-rooted legal system, and the existence of durable domestic organizations with decent corporate authority performs have created the country’s environment of the business more appealing to the worldwide financiers (Monetary Authority of Singapore, 2018).
It is very to start a business in Singapore environment. According to the Singapore Companies Act, statesperson that has attained the 18 age is eligible to list a company. The general sort of a company within the nation is normally called as a private limited company. It is extensive kind of businesses in the nation and the cause for that is the arrangement of tax for these businesses. A private limited company is a business that provides very limited liability, or authorized guard for its shareholders but that spaces convinced limitations on its ownership (Polevikova, 2013).
There are some grants offered by the government of Singapore to SMEs and Start-ups and they are as follows:
ACE Start-ups
SPRING Singapore is one of the administrative agencies. It manages the scheme of ACE Start-ups for the entrepreneurs arrived in the market first time with an innovative idea. The structure offers mentorship provision and start-up capital funding (SBS Consulting, 2018).
Capability Development Grant
The CDG that is Capability Government Grant is an arrangement for offering financial aid to start-ups for structuring competences in ten areas of the business. They are comprised of costs of equipment, training, consultancy, and costs of certification (Enterprise Singapore, 2018).
Disadvantages of Globalization for Singapore
SPRING support those start-ups that are enthusiastic to create new products under the CDG. They are allowed to apply for the funding of around 70% of the costs for new product development, the procedure of production, and designing of the product.
The ESVF that is Early Stage Venture Fund is an initiative of the Singapore to provision Enterprise and Innovation. ESVF is said to be the biggest equity arrangement by the country’s administration, which co-funds new start-ups with Venture Capital companies.
PIC i.e. Productivity and Innovation Credit
The Singapore’s Inland Revenue Authority possesses a scheme for the companies of Singapore for investments in productivity enhancements and. They can get deductions in the taxes, cash payout, and get a PIC bonus. This scheme is comprised of registration, in licensing of intellectual property, research and development, and procurement, training of staff, permitted design projects, and cost of mechanization equipment (Inland Revenue Authority of Singapore, 2018).
Technology Enterprise Commercialization Scheme
TECS is a government scholarship in Singapore to support entrepreneurs understands their ideas based on technology into capable businesses. The outline supports them in developing their business past the initial stage and then, acquires capital from the third parties to realize planned growth and revenues. The offers for the funding are graded exclusively depending on the assessment of technical idea and its viable qualities (Greenwich, 2018).
From the above analysis, it could be concluded that Singapore is one of the growing and established nations due to the presence of big MNCs and high exports level. Considering the above report, Globalization has influenced the way things work and has increased the income level of the economy. However, disadvantages of Globalization for Singapore must be considered by the country’s government in order to avoid the negative consequences on the economy.
The political situation of the country is stable and it is supporting the business environment by introducing different grants and schemes for the development of innovative start-ups and SMEs. Besides this, Singapore is commonly known as an open economy and free port. For environmental and social reasons, country charge high taxes on petroleum products, motor vehicles, and tobacco.
References
Acme Themes (2018) Globalisation And It’s Impact On Singapore [online]. Available from https://econs.com.sg/essay-writing/globalisation-impact-singapore/ [accessed 15 December 2018]
Asia Biz (2018) How Globalisation Has Affected Singapore’s Development [online]. Available from https://www.asiabiz.sg/blog/globalisation-and-singapore-development/ [accessed 15 December 2018]
Beck, U. (2018) What Is Globalization? 3rd ed. U.S: John Wiley & Sons.
Brown, G.M. (2013) The Impact of International Businesses in a Global Economy: An Interdisciplinary Analysis. Journal of Business and Management, 11(1), 27-30.
Economist (2015) Why Singapore became an economic success [online]. Available from https://www.economist.com/the-economist-explains/2015/03/26/why-singapore-became-an-economic-success [accessed 15 December 2018]
Enterprise Singapore (2018) Enterprise Development Grant [online]. Available from https://spring.enterprisesg.gov.sg/Growing-Business/Grant/Pages/capability-development-grant.aspx [accessed 15 December 2018]
Export Government (2016) Trade Regulations, Customs and Standards [online]. Available from https://2016.export.gov/singapore/doingbusinessinsingapore/traderegulationscustomsandstandards/index.asp [accessed 15 December 2018]
Export Government (2018) Singapore – Trade Barriers [online]. Available from https://www.export.gov/article?id=Singapore-Trade-Barriers [accessed 15 December 2018]
Greenwich (2018) Technology Enterprise Commercialisation Scheme (TECS) [online]. Available from https://www.greenwichco.com.au/international/greenwich-singapore/technology-enterprise-commercialisation-scheme-tecs/ [accessed 15 December 2018]
Gupta, A. (2013) International Business Environment: Challenges and Changes. Research Journal of Management Sciences, 2(11), 34-38.
Inland Revenue Authority of Singapore (2018) Productivity and Innovation Credit Scheme [online]. Available from https://www.iras.gov.sg/irashome/Schemes/Businesses/Productivity-and-Innovation-Credit-Scheme/ [accessed 15 December 2018]
Monetary Authority of Singapore (2018) Conducive Pro-Business Environment [online]. Available from https://www.mas.gov.sg/singapore-financial-centre/value-propositions/conducive-pro-business-environment.aspx [accessed 15 December 2018]
My Exclusive Condo (2017) Globalization and Impacts on Singapore [online]. Available from https://www.myexclusivecondo.com/buyer-seller-must-know/globalization-and-impacts-on-singapore/ [accessed 15 December 2018]
Penalver, M. (2002) Globalization, FDI and Growth: A Regional and Country Perspective [online]. Available from https://unpan1.un.org/intradoc/groups/public/documents/un/unpan006429.pdf [accessed 15 December 2018]
Perry, J.C. (2017) The power of globalization: Singapore’s economic rise [online]. Available from https://blog.oup.com/2017/04/singapore-globalization-economic-rise/ [accessed 15 December 2018]
Pestle Analysis (2018) Pestle Analysis of Singapore [online]. Available from https://pestleanalysis.com/pestle-analysis-of-singapore/ [accessed 15 December 2018]
Polevikova, M. (2013) Business Environment in Singapore [online]. Available from https://www.theseus.fi/bitstream/handle/10024/57443/Polevikova_Maria.pdf [accessed 15 December 2018]
SBS Consulting (2018) Top 7 Government Grants for Singapore Companies [online]. Available from https://www.sbsgroup.com.sg/blog/singapore-government-grants-for-sme-and-startups/ [accessed 15 December 2018]
Stiglitz, J. (2015) Globalization and Its Discontents 3rd ed. U.K: Penguin.
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