STRATEGY
Singapore Market Entry (Cultural Factors)

Singapore Market Entry (Cultural Factors)
 

Introduction

Marketers entering Asia and Singapore in particular are now faced with a plethora of uncertain macro environmental factors like numerous Free Trade Agreements (in which reduced trade barriers are expected to benefit some nations and markets but not all) and tightened legislative requirements in view of heightened terrorism (that may lengthen supply chains and impede ‘to market’ speed).

Some marketers also insist that strategic marketing’s ‘silver bullets’ are internal environmental factors like enhanced customer service through CRM solutions, branding or price cuts. The truth is, business and management is increasingly getting more complicated, exacerbated by improving technology, dynamic economies, and shifting market preferences. With no single, universal ‘one-size-fits-all’ approach or solution, strategic and marketing decisions to enter Singapore rarely emphasise the cultural factor.

However, Singapore has distinctive and unique cultural characteristics which potential foreign entrants should be aware of. We attempt to identify the Singaporean culture and some market entry implications for marketers.

Identifying Singaporean Culture

‘More than meets the eye’. At first impression, foreigners who arrive on short marketing reconnaissance field trips routinely conclude that there is a core three-strand Singapore ethnic mix of Chinese, Malay and Indian ethnic groups, that there is a socially-engineered inter-ethnic and religious harmony, a distinctly one ‘Singaporean culture’ that promotes societal and cultural unity and an efficient workforce staffed by locals and foreign talents. The roots of this culture is largely a result of the government’s cultural development efforts, arising out of the earlier 1965 independence and consensus building to ensure survival and preservation of ethnic stress by offering an attractive substitute culture. This culture also provided the strength and versatility needed to gel Singapore’s globalisation, economic openness, social cosmopolisation, and local citizens’ limitations.

United subcultures and limited ethnic disparities have added complexity to the foreign marketer or entrant who attempts to understand the Singaporean culture. He is facing a local market that not only is bracing itself for the uncertain impacts of the regional Asian market to be caused by free trade agreements but also one that has three large ethnic groups, at least six religious groups, a multitude of languages and dialects, elements of a globalising and cosmopolitan culture, several psychographic or lifestyle segments and the one uniting Singaporean culture.

Kotler et. Al. (1999:200) name seven Singapore psychographic or lifestyle segments. They are:

1. Middle Singaporeans, mainly professionals and executives, strive to keep up and not loose out to others 2. Hard-pressed Providers are struggling to keep afloat and do not see a bright future

3. Disciplined Conservatives who value filial piety, marriage and education

4. Ambitious Strivers, success-oriented, competitive, and energetic, working hard and playing hard

5. Old Drifters who lack motivation and believe in fate

6. Disaffected who, frustrated by the rat race are materialistic and spendthrift

7. Contended Nesters who are happy with their state in life and who are dependent on others.

Other authors (Kwon, Wirtz, Tan & Kau 1999) identified also seven distinct lifestyle groups - the Traditional Family-Oriented, the New Age Family-Oriented, the Entrepreneurs, the Aspirers, the Materialists, the Pragmatists and the Independents - which all show distinct behavioral patterns. As these groups show distinct values, attitudes and behavior within borders derived from income groups and consumption patterns and at the same time stretch across different ethnic, language and religious boundaries, they add even more complexity for the foreign individual aiming to understand Singaporean culture.

The Impact of Cultural Factors on Doing Business in Singapore

International market entry is a subject matter of high importance to corporations worldwide, but also a task of high complexity. While many companies have found market entry into Singapore an easy task, others have experienced difficulties or even failure. One of the many reasons for inefficiencies in foreign market entry is poor preparation which includes the oversight of the importance of the fact that local customers’ – be they consumers or companies - behaviour is governed by local rules, sometimes legal, sometimes technical, many times cultural. Unfortunately little is generally known about Asian consumers and only slowly do corporations which have replaced the political imperialism of nations in the past by ethnocentric business strategies realize the importance of learning more about their Asian markets.

In the case of Singapore, one of the most important trading hubs of the world, foreign companies will find a market which is wooed by many other foreign companies. In fact, so many that newly entering companies often mistake this for an indicator of a strong cultural similarity where in fact only those foreign corporations will succeed in their endeavour that adapt best to local conditions. Despite the ethnic diversity, many guiding principles in Singapore business that have validity for all of Singapore stem from Chinese culture.

Ethnic Chinese in particular, use a number of strategies which may not necessarily be applied consciously, but which are entrenched so deeply into the Chinese soul that most of the businessmen would be able to recite the ancient proverbs and relate the underlying stories which build the bases of these strategies.

“Stealing a goat on the way” is one such strategy; it is a popular saying, referring to the fact that especially a Chinese Singaporean would never let a business opportunity pass unseized. What they are looking for as targets of international marketing is outlined in the form of some pointers concerning the four dimensions of the marketing mix.

Products and Services Singaporeans Want

Despite the fact that Singapore itself has no natural resources whatsoever it has raised discerning consumers which are used to select among an extraordinarily broad range of products. Having served as the most important trading hub for more than a century and as a highly specialized manufacturing location for a few key industries for several decades Singapore’s citizens and corporations like to exercise their right of choice when it comes to consumption and procurement.

In addressing what kinds of products and services Singaporeans prefer lies probably the best reflection of cultural paradoxes. First, there is the duality of elitism and egalitarianism. In Singapore one can go from branded luxury goods to cheap plastic watches from mainland China and from some backyard garage to a hi-tech business park within just ten minutes time. Furthermore, there are product categories in which one would find a large number of variations catering to different income levels, but there are also categories with fairly uniform products.

By and large, though, Singaporeans show a preference for products which relay status and sophistication. If they shop for goods or services which are visible in public life they usually want the best their money can buy them relative to their status. Mostly, this means that Singaporeans are seeking out branded goods or services, fashionable and trendy items, expressive and high-quality products if these are likely to underline their place in society. In fact, packaging and branding, luxury treatments and perks in the form of added benefits have been singled out as the most important factors in buying decisions. In some cases this has reached beyond the level of status-adequacy and transformed into blunt materialistic behaviour, showing off with slightly ostentatious styles (Kotler et. al. 1999:194). If they are shopping for fungible goods less visible to others, however, it is very likely that the Singaporean consumer is satisfied with a combination of reliability, low price and – increasingly – environmentally friendly.

Ideally, if the distribution of products and services is expected to go beyond an elite target group, they are well advised to credibly span the distance between the conveyance of style, status and luxury on the one hand and being economical but not cheap on the other hand. Consumer goods or services which are distributed through franchise outlets strike this culturally important balance between the two extremes of elitist and egalitarian consumer behaviour and are therefore very successful in Singapore. They cater to the brand consciousness of Singaporeans and at the same time recognize the need to offer standardized quality at relatively low prices. In addition, individualistic shopping behaviour driven by the need to be always different from others has dramatically increased the turnover of inventory. In order to enable consumers to be at the forefront of the latest styles all the time companies are well advised to cater to this demand by permanently adding variations of their products or services. As the Singaporean is also brand-conscious (and to a certain extent traditional in his behaviour) this must be done, however, without diluting the general brand image.

In areas which are less-driven by trends and fashion (e. g. industrial goods) sometimes the opposite applies. Products and services often are kept longer than what is good for the company in order to save face (Kotler et. al. 1999:194). What also makes the Singaporean consumer something of an individualist is the fact that increasingly he likes the feeling of being at the centre of attention of the companies from which he is purchasing. Customer relationship management programs that enhance customer loyalty are therefore becoming more and more popular in Singapore. At the same time, the Singaporean consumer is also a collectivist who is much less trouble for a company than a pure individualist. Up to a certain limit they are putting up with much more than other consumers and will likely produce fewer complaints as harmony in society is generally strived for (Kotler et. al. 1999:194) and nobody wants anybody else to loose face. Companies which aim to be successful should cater to this fact by creating mechanisms which allow the consumer to relay honest feedback to the company without seeming to be overly critical or running the danger of making anyone lose face.

As far as the risk-taking and the risk-averse sides in the Singaporean are concerned it can be said that Singaporeans generally make no good early adopters of innovative technologies unless they are endorsed by opinion leaders or authorities, thus again playing with the obedient side of Singaporean culture. Once such endorsements are credibly made demand will quickly rise.

At the same time, Singaporeans are risk-takers in the sense that they have relatively low brand-loyalty. If a new brand caters better to their needs, i. e. relays status more effectively and/or offers more favourable prices, Singaporean consumers show a high likeliness to switch from their old brands. As has been indicated, the modern cosmopolitan Singaporean consumer is always on the watch for new products which fit his needs.

As there is a general tendency to attribute higher status to products manufactured outside of Singapore and Asia (ideally in Europe or the United States) this has made the Singaporean market very receptive towards foreign products.

The local traditional, however, is not completely left out of the equation. First the traditional orientation manifests itself in the importance of advancement among elites and consumers itself, resulting in a preference for the ambitious and daring, the big and fast, the exquisite and rare (and expensive), but also in the fact that role behaviour is very traditional. Men are supposed to earn income and women to spend it, however, with men still making the major and women the minor buying decisions. Secondly, Singaporeans are traditional in the sense that they want to see some of their cultural roots reflected in products and services they consume. Above all, foreign companies have to observe some ethnic and religious limitations. First among these are product adaptations necessary due to religious guidelines, such as the restrictions concerning alcohol and pork for Muslims or beef for Hindus along with further requirements concerning food processing. In addition, consumers in Singapore also like to see a reflection of their own cultural traditions in products up to a certain extent (e. g. use of preferred colours or flavours). As a foreign brand one must be careful, however, not to lose the advantage of being an international product by adapting products or services beyond the level of the sublime.

How to get there: Distribution in Singapore

Singapore has been a trading hub and a nodal point for foreign companies ever since it was first developed by its founding father, Sir Stamford Raffles. Based on Anglo-Saxon legal traditions its openness towards newcomers has created a number of viable distribution possibilities for access to its markets. Depending on product or service category and the preferences of the target groups virtually all functional (exporting, licensing, franchising) but also institutional entry modes (acquisitions, joint-ventures and direct investment) are accessible to the entering foreign company. Well established distribution channels on many levels, such as importers (who often act as wholesalers at the same time), independent wholesalers and retailers are as easily available as a foreign company could set up their own local operations.

For a foreign company, there are a number of options including the following:

Representative office: a representative office is a local entity for the sole purpose of promotion, marketing and marketing coordination. It can be set up very fast and easy via the International Enterprise (IE), a statutory body, nowadays even via the internet. Representative offices can employ foreign personnel, must not, however, engage in any sales activities. Representative offices are meant to be a low-cost opportunity to try out the waters in Singapore. If functioning well, they are usually approached by IE for the purpose of converting the representative office into a more permanent and complete local operation.

Foreign branch office: a foreign branch office is, as the name suggests, the local branch of a company located outside Singapore. As such it is not incorporated in Singapore, can however act like a fully-fledged local company. The status of branch office has certain advantages and disadvantages. Among the advantages are the fact that a branch can carry the name of the mother company, tighter management control can be applied, auditing doesn’t have to be done by a qualified professional from Singapore and discontinuation of operations is easier. Main disadvantages of the foreign branch office include higher set-up fees, restricted access to investment incentives, and, above all, liability of the mother company.

Foreign owned local corporation: Singaporean company law is rather flexible and allows the fast and relatively cheap set-up of closed stock corporations. They can be wholly foreign-owned or in the form of joint-ventures with Singaporean companies or individuals and do not have any of the disadvantages of the foreign branch-office. The major shortcomings of the local corporation are that management control is not possible to the extent of a foreign branch office and that local reporting and auditing requirements apply in full and that liquidation is a rather complex affair. Although setting up a corporation in Singapore can generally be done without the services of attorney, foreign companies are advised to seek such services, or at least make use of service companies specialized in incorporations.

The fact that Singapore is making it easy for foreign companies to set up local operations is an expression of their low resistance to uncertainty. Foreign companies must not be lured into setting-up a local entity too fast. Except for purposes of administration or in areas where local assembly or production is necessary, where there is a strong need to have tight control over marketing activities or where it is important to hold close, personal customer contact or provide after sales-service it is, not necessary to set up local operations. First, although start-up costs are generally low, the fixed costs of running local operations in Singapore are high and therefore not easily justifiable. Secondly, for many product and service lines there are existing distribution channels and marketing companies, some even with functioning ties in the wider South-East Asian market, which makes exporting a feasible entry strategy for Singapore. Working with importers, wholesalers and distributors (which are often one and the same) follows certain rules which are partly determined by the cultural paradoxes outlined previously, partly by certain practices in specific industry areas. (Entering via institutional entry modes (in the case of Singapore representative offices, branch offices, joint-ventures or wholly-owned subsidiaries) employing Singaporeans would entail the additional cultural complexity of managing a Singaporean workforce. For reasons of focus this topic will not be elaborated here.)

Regarding Asia market entry it is often noted that the most important rule of the game is relationship-building with a long-term view. Singapore begs to differ. As in most cultures Singaporeans, too, would of course prefer a few long-lasting corporate relationships instead of a large number of short-term interactions which is an expression of the more collectivist, risk-avoiding, traditional, idealist side. And in fact, there are the bamboo networks – companies that are built on personal relationships, often with relatives, in which accountability and responsibility first are towards those in the network and not shareholders, customers or other stakeholders. Nevertheless, Singaporean firms are usually quite aggressive when it comes to representing new products with high market potential or negotiating the contractual terms of such a representation. They would even try to renegotiate should the context of an original agreement change or cut-off existing ties with a company should a relationship with a competitor be more advantageous. In these cases the individualist, risk-taking, materialist side is activated. But even then, Singaporeans work by some more traditional principles. Status remains important. Business partners want foreign companies to go the extra mile and expect to be wooed according to their status in society. Usually it is advisable to work with a top-down approach because the common understanding in Singapore still is that in order to win the entire organization one must first win the leader. It is therefore important, that market entry into Singapore is directed by appropriate levels in the hierarchy of the entering, foreign company as it would be difficult for a lower-ranking foreign representative to deal with a higher-ranking Singaporean.

Sometimes, especially if one is dealing with Chinese dominated and rather traditional organizational environments, it is advisable to use middlemen in establishing a business relationship. Using middlemen is a strategy preferred in order to break down barriers by mediating cultures and interests, but more importantly to prevent (potential) business partners from loosing face in negotiations (Kotler et. al. 1999:194) which must be avoided at all times or - should negotiations fail to have a hired scapegoat. Thereby, risk is reduced at least partly which works well with the elitist status-orientation and the risk-averse side of Singapore. Even the preference for entry modes such as licensing, franchising and joint-ventures must be seen in this context – they all are alternatives which offer the advantage of shared, dispersed responsibility. A similar strategy, very common in high-risk environments is the use of corporate shells or project-based companies (e. g. construction and engineering) which are set up to dilute responsibility.

In retailing, one must recognize that shopping is very important to Singaporeans and that the retail environment therefore has to be enjoyable and convenient. With heavy competition all over the island, Singaporean consumers as hierarchists, individualists, materialists and cosmopolitans have low tolerance for less than ideal shopping conditions. For retailers this poses problems since good store-space is permanently scarce and very expensive in Singapore. Together with Singapore’s cultural affinity towards hierarchies this fact has shaped the retail landscape in Singapore. There is a clear understanding of where the good retail areas in Singapore are and even within these areas, where the prime spots are located. Not necessary to say, these factors are clearly reflected in property prices. The fact that Singaporean consumers increasingly show individualistic behaviour has led to a visible specialization of shops catering to every need of consumers. In some product or service categories this has even led to specialized shopping malls (e. g. computer malls, consumer electronics, furniture, fashion, etc.) throughout Singapore.

As has been outlined previously, as status-conscious in his buying behaviour the Singaporean consumer may be, he is easily convinced otherwise by lower prices. This has made franchising a market entry mode which has been highly successful for Singapore as they offer both brand recognition, usually relatively high – because tightly controlled – standardized quality at affordable prices. Innovations in retailing, such as home shopping (television or catalog-based) or internet shopping have not fully caught on in Singapore. It can be assumed that this has less to do with Singaporeans’ attitudes towards risk, but more with the fact that retail outlets for all product and service categories are easily accessible, most of them seven days a week. However, there may be a cultural component in this, too. Singaporeans love to bargain over prices and this behaviour surprisingly is sometimes tolerated even in exclusive retail environments. This is, of course, only possible in face to face-interactions and not in home or internet shopping which may make these alternatives currently less viable in Singapore.

Pricing: Creaming off wealthy Singaporeans?

There is a common expectation that pricing strategies in Singapore are easy to design and implement because it is assumed that in such a wealthy country automatically any product or service can be sold in the top segment. Regardless of whether one is dealing with retail or B2B-environments, pricing in Singapore, however, is one of the most difficult activities in market entry for several reasons between culture and economic reality. It is true, of course, that Singapore is one of the wealthiest countries of the world with an impressive presence of luxury brands. At the same time it must be acknowledged that the target groups which have both income and willingness to pay premium prices are not equally large for all product or service categories. Also, these target groups are usually at the centre of attention of a large number of competitors which sets limits to the ability to set prices freely. Furthermore, if one is working with local distribution channels one has to calculate with certain price mark-ups, which range from 30-60 percent for importers, while retail mark-ups are often more than 100 and go up as high as 200 percent. In addition, it is a fact that high price strategies are only possible for some products which have unique market positions and brand value, but that the Singaporean market is very price-sensitive for most other products or services. Even in luxury goods categories Singaporeans are used to be offered sales promotions which are normally found in more competitive mass retailing. One therefore finds heavy use of a number of purchasing incentives which are quite common for most products and highly popular such as discounts, sales (such as After-Christmas-Sale, Chinese New Year-Sale or the Great Singapore Sale in July), lucky draws, tie-in promotions, gifts with purchases or other perks. From a product perspective, Singaporean consumers behave as cosmopolitan, status-conscious individualists, from a price perspective however, they show differing behaviour. That buyers are receptive for added value, however, can also work to the advantage of companies. It offers the opportunity to apply mass-retailing strategies to luxury goods without diluting brand image too much, but also strategies like product and service bundling where companies would make little sacrifices on the initial purchasing price in order to reap larger benefits from tied-in services.

In a B2B environment, too, high quality of a product often is only the precondition. What is more important are prices and after sales-service. As Singapore is of strategic importance to many companies not only is pricing usually very competitive but hard bargaining is very common, too. Interestingly, there is anecdotal evidence that with increasingly limited possibilities in pricing and with after sales-service being more and more commoditized, product quality itself may be becoming more important again.

You don’t sell the steak, you sell the sizzle: Advertising and promotion

Advertising, public relations, sales promotion and personal sales and direct marketing as the main elements of the communication mix can take on many different forms. Much more than in other areas such as product design, pricing or distribution, market communication is utilizing the traits of Singaporean culture.

As far as the content of communication instruments are concerned status-consciousness and elitist attitudes must be mentioned first. As Singaporeans generally expect to follow rather than make decisions, consumers in Singapore have strong confidence in market communication, especially in advertising. They are not only very receptive to advertising in general, but also respond readily to the related themes of status and power. Clever advertising campaigns usually kill two birds with one stone. First, they make use of referent others such as power elite figures, celebrities or other opinion leaders for product endorsements (Kotler et. al. 1999:194) and secondly they convey status upon the potential customer at the same time – a combination of psychological imagery that Singaporeans can hardly resist. The individualistic side of the Singaporean soul is catered well to in market communication through modernity. As even Singapore’s national anthem is based on this theme (source: Majulah Singapura – Onward Singapore!), a reflection of the forward-looking nature of the country is a popular thrust in advertising. The collectivist, but also the traditional and the idealist sides in the Singaporean consumer are activated by market communication that focuses on group harmony – unity and happiness in school, in the workplace or in the family as well as the portrayal of external and internal beauty are common themes that work well. Very important also are the use of superstitions (e. g. lucky numbers) and metaphors from ethnic or religious traditions. Very seldom is advertising overly aggressive and comparative advertising is hardly ever seen as it would be insulting to the moral character of the advertised brand (Kotler et. al. 1999:194). Other topics that must be avoided at all times are sexual stimuli, religion or racial controversy.

The packaging of the communication is very important, too: what Singaporeans are suspicious of is informational advertising as empirical evidence suggests. Singaporeans relate much better to emotional advertising which is why advertisements generally also tend to come in a greater variety, and most of the time tell short stories rather than just focus on the conveyance of product or service-related information.

Concerning the media selection through which the communication goals are achieved it can be stated that one of the results of high tolerance for power distance is that Singaporean consumers are readier to accept media content without questioning it as they are used to being told in different environments (family, company, national service, government). A consequence of this is that television which still is truly one-directional is fairly popular, also for advertising and especially for emotional advertisements. Newspapers are equally important, but offer more informational advertising; Billboards and direct marketing, however, are not very common in Singapore.

In sales promotions which are of at least equal importance compared to advertising in Singapore almost everything works. Consumers love to be lured by free samples, “buy one, get one free”-strategies or special offers and packages, even if they are getting things they don’t need or end up paying higher prices. Companies marketing their products or services must acknowledge this plus the fact consumers will actively compare sales promotion strategies of different companies and turn to those who offer most value. Smart acting companies will turn the consumers’ craving into an opportunity by applying deceptive strategies such as special “one-time offers” and packages, selling basic units with the built-in need to upgrade, free trial periods with money-back guarantee, or marketing ploys like “Sale, 50 % off”, “3 days only” or “Special offers for the first 100 customers only”.

Conclusions, Restrictions and Recommendations

Kotkin (1992) speaks of the fact that certain tribes are at advantage in navigating successfully in this global marketplace by combining cosmopolitan perspectives with a strive for cohesive ethnic identity. Singapore may not have one such cohesive identity, but several ones plus a strongly promoted national identity that make valuable assets from a Singaporean perspective but create a cultural barrier for entrants that is sometimes not easily understood. It has been the purpose of this article to highlight the most important of these restraining cultural factors for foreign companies entering the Singaporean market.

Singapore is not only a place of cultural diversity, but also of cultural contradictions which makes it hard to offer one advice for any and all situations. Many times Singaporeans are caught in the middle of cultural paradoxes – they look for status, individualism, modern and idealist lifestyles, but many times end up doing what can better be described as egalitarian, collective, traditional and materialistic. This is caused by its ethnic and religious diversity, by the fact of a highly stratified society, by the existence of several known lifestyle groups, but also by the fact that the “project Singapore” is not completed yet. Its relatively small size gives Singapore not only the versatility needed to navigate successfully through uncharted waters, but makes it also very vulnerable to influences from the outside. Thus, the inner complexity and the outer impact of globalization and cosmopolitanism on Singaporean culture create paradoxes between the old and the new, the Eastern and the Western in Singapore that are sometimes hard to understand even for Singaporeans themselves.

In addition, it is also difficult to make exact predictions about Singaporean behaviour for several other reasons. First, it must be said that although cultures show relatively high long-term stability and seldom change radically, cultural assumptions, values and behaviour may change over time. It is a likely prediction that the Singaporean culture will change along the lines of its cultural roots, but will most likely see some influence from rising wealth. For instance, as other authors have noted, Singaporeans of the future will remain to be status conscious and will increasingly be individualistic, brand conscious, discerning in their consumption, more health-conscious and will place more emphasis on leisure activities. Also, as globalization as a commercial, political and societal process always brings not only homogenization but also enhances heterogenization and because of increasing income disparities, we can also expect considerable reinforcement of local traditions in Singapore. This new “Asianisation”, a rediscovery of Asian values, is, in fact, already taking place.

Irrespective of these restrictions the main message remains the same: understanding Singaporean culture is an imperative if one wants not only to reap short-term benefits but build long-term success when doing business in Singapore.