Novade

Mar 27, 2022

Singapore businesses faced challenges trying to venture overseas amid a global pandemic, but there is an urgent need to grow beyond the domestic market. This article was written in partnership with Enterprise Singapore. Amid an unprecedented pandemic, Singapore's homegrown firms have run into headwinds while trying to venture overseas. Despite the challenges, some Singapore firms have continued their global march by thinking out of the box — and they could be rewarded for their efforts as economies recover. (Image: Samuel Woo) SINGAPORE: Homegrown software company Inspire-Tech had barely expanded to India in early 2020, when COVID-19 struck - stifling its business and even grinding some of its operations to a halt. The firm, founded in 2000, helps organisations with file security and messaging, among other software services. It started to sell its products and services abroad from 2008, opening overseas offices in the United States in 2015 and the United Arab Emirates (UAE) in 2018. Its chief executive officer and co-founder Sharon Teo said that the pandemic meant that many firms which they were already in talks with, both overseas and in Singapore, abandoned plans to acquire Inspire-Tech’s cloud security services. “Our cloud is a ‘private cloud’, which tends to require a bit of infrastructural investment by the customers … due to COVID, a lot of business decisions were either shelved or postponed, and it was very difficult to get hold of clients,” she said. Due to this, the company’s total revenue fell by 30 to 50 per cent in 2020, compared with the previous year. This was not helped by the lower-than-projected growth of its new business in the Indian market. “In any new market, we need to do brand awareness, and all that, so it does take time, for some projections, we didn’t meet (them),” she said. Chief executive officer and co-founder Sharon Teo said that the pandemic meant that many firms which they were already in talks with, both overseas and in Singapore, abandoned plans to acquire Inspire-Tech’s cloud security services. (Photo: TODAY/Aaron Low) Similarly, for halal food firm Pondok Abang, its expansion into Malaysia was halted unceremoniously due to a nationwide lockdown there, which was first imposed in March 2020. The firm, which manufactures halal-certified frozen ready-to-eat dishes, already has a presence there, in the form of a partnership with a Malaysian food manufacturing firm which helps supply pastries to Pondok Abang for sale in Singapore. With an eye to expanding to both Malaysia and Australia, Pondok Abang’s managing director Hasan Abdul Rahman was planning to turn a factory space, owned by the partner company, into a manufacturing facility. But border closures around that time — which devastated economies around the world — put paid to his plans. “The factory space belongs to our partner, which we were supposed to develop together, but up until now we have not yet done anything, and it is still bare,” he said. He added that the firm will first look into exporting its goods manufactured in Singapore to Malaysia, and that the Singapore Food Agency is assisting Pondok Abang in getting its products approved for export there. “This will be the mode we want to go ahead with — export first, and then we will create the demand, and then we will go and set up the factory,” he said. Inspire-Tech and Pondok Abang are among Singapore's homegrown firms which have run into headwinds while trying to venture overseas amid an unprecedented pandemic, as border closures and shifting consumer behaviour force many businesses to rethink their mode of operations. The challenges they have faced include being unable to meet up with their overseas clients physically, and unstable demand from most nations as COVID-19 waves ebb and flow. Despite these challenges, some Singapore firms have continued their global march. Statistics from Enterprise Singapore (ESG) showed that internationalisation activities among Singapore enterprises slowed down in 2020 due to global travel restrictions. That year, about 1,600 firms continued to pursue internationalisation, down from about 2,600 in 2019. The figure stayed constant in 2021, with 1,600 firms also internationalising last year. ESG is a government agency whose role includes supporting local small and medium enterprise development, and helping homegrown businesses internationalise. ESG assistant chief executive officer Tan Soon Kim said that  Singapore is a small and open economy which is vulnerable to external shocks. Therefore, firms have to be proactive to “secure their position now and in the long run”. “To do so, Singapore companies must look outwards to markets overseas, so that they can scale their business, grow their topline, and reduce concentration risks by diversifying their revenue source and supply chains to build resilience,” he said. Related: Indeed, despite the challenges posed by the pandemic, the firms interviewed still have their sights trained on going international. During the past two pandemic-stricken years, some Singapore firms have formed more extensive partnerships and acquired firms as part of further overseas expansion. They have also opened offices in new countries and ventured to traditionally less familiar markets such as Africa and the Middle East. Inspire-Tech, for example, has been forming more partnerships with system integration firms and software distributors in India, Malaysia and Indonesia, as part of its efforts to “sow the seeds” for the impending post-pandemic economic recovery, said Ms Teo, the firm's CEO. “(We partner) with mostly distributors and resellers… we need local partners to have access to the client,” she said. “If we go directly to (the client) it always doesn’t work, because they usually prefer a trusted partner that they have worked with for a long time.”  “Hopefully (our partners) will be keen to sell our products and maybe start promoting them to our clients — that kind of model is normally more successful,” she added. Over at Pondok Abang, Mr Hasan has established a partnership with a meat production firm in Australia this year, to sell its beef and mutton in Singapore. Looking forward, he hopes to leverage on the partnership and open Pondok Abang's own manufacturing plant in Australia to break into the market Down Under. “Australia is actually quite a protectionist market… they have their own meat and poultry so it’s not so easy for us to export there,” said Mr Hasan. Depending on whether border restrictions continue to be relaxed, he hopes to kickstart this process in the next two to three years. Pondok Abang’s managing director Hasan Abdul Rahman was planning to turn a factory space, owned by the partner company, into a manufacturing facility. But border closures around that time — which devastated economies around the world — put paid to his plans. (Photo: TODAY/Raj Nadarajan) COVID-19 THREW A SPANNER IN THE WORKS  From difficulty in meeting clients overseas to promote their brands to grappling with waning consumer demand, Singaporean firms had their work cut out for them as COVID-19 spread mayhem around the world. Construction management software firm Novade Solutions had already expanded to 18 countries before the pandemic. But when COVID-19 struck, it initially struggled to expand further due to the inability to physically meet clients. The firm develops cloud and mobile applications for construction industries to use on work sites, in order to streamline work processes and enhance safety measures, for example. This traditionally requires the company’s personnel to spend time at the construction sites before its product could be used there. Mr Denis Branthonne, founder and chief executive officer of Novade, said that prior to COVID-19, he and his staff had spent a lot of time with overseas clients at their construction sites to explain how the software worked. “A significant part of our time (was spent on) face-to-face engagement,” he said. “The pandemic for us was a shock … in any country we could not meet any of the clients and we could not travel and meet our (overseas) teams.”  Thus, projects in countries that they were just starting to expand into, such as Vietnam, Ivory Coast, and Ghana, were all delayed or have remained in limbo. Denis Branthonne, founder and chief executive officer of Novade, said that prior to Covid-19, he and his staff had spent a lot of time with overseas clients at their construction sites to explain how the software worked. (Photo: TODAY/Ili Nadhirah Mansor) The lack of client engagement was also a headache for Singapore noodle producer Leong Guan Food Manufacturer. The firm, which manufactures various kinds of noodles among other food products, was looking to expand into Western countries such as the US before COVID-19 struck, given the prospect of high demand for its products among the large Asian diaspora there. Mr Kevin Lim, Leong Guan’s associate manager, said that with the temporary cessation of international travel and large-scale events, they were not able to travel to trade shows to meet potential clients. “A lot of the big trade shows were postponed, and there weren’t as many attendees as the previous years,” he said. “We were unable to get our name out there.” The onset of the pandemic also saw a significant fall in demand for the goods and services offered by the likes of Leong Guan, Novade and Inspire-Tech. For Novade, many construction projects ground to a halt and companies were temporarily unable to use its product. Mr Branthonne noted, however, that different markets experienced a rise and fall in demand at different periods, corresponding to when they were hardest hit by Covid-19 infection waves. Internationalising thus helped his company to spread out the risks. “What we have seen is that with international exposure, it really helps, (because) if one country doesn't do well but the other is ok, it is easier to manage your business," he said. For instance, European countries were faring poorly in early 2020 with high COVID-19 case numbers, while Asian economies such as Hong Kong had relatively lower cases. “Europe rebounded in 2021, but Hong Kong is now in a very challenging position,” said Mr Branthonne. For Leong Guan, there was a sharp drop in demand across the board, as many food and beverage (F&B) establishments that they supplied noodles to were temporarily shut down during lockdowns. Mr Lim said that revenue fell by about 40 per cent at the start of the pandemic, but had since rebounded to 2019 levels as the economic situation improved. Related: PUSHING ON WITH OVERSEAS EXPANSION  Despite the pandemic’s devastating effects on economies the world over, COVID-19 still offered some growth opportunities for several Singaporean companies. Mr Lim from Leong Guan said that during the pandemic, the firm had to shift its focus to providing noodles for supermarkets and wholesalers, rather than F&B businesses. The change in focus has also helped the firm to expand its overseas operations. “(Before COVID-19), we had just a bit of business in the retail (supermarket) segment, but because of the shift in consumer behaviour, fewer people were dining out … so we diverted our sales more to supermarkets,” he said. Once the vaccinated travel lane scheme was rolled out in September last year, some clients from the US also flew down to Singapore to take a look at the firm’s products. Leong Guan also embraced digitalisation: Instead of setting up offices overseas, the firm made most of its deals with foreign markets through teleconferences, said Mr Lim. They would export their products to their clients, aided by a representative situated within the jurisdiction who will help with sales and account management. Thanks to these efforts, Leong Guan had been able to expand to three markets last year — the US, Hong Kong and Israel. While the company sold less than 1 per cent of its noodles overseas pre-pandemic, the figure has since risen to 5 per cent. Mr Kevin Lim, Leong Guan’s associate manager, said that with the temporary cessation of international travel and large-scale events, they were not able to travel to trade shows to meet potential clients. (Photo: TODAY/Aaron Low) For Novade, it also had to adapt its business so as to assist construction firms with their activities during the pandemic. For instance, the firm developed “restart packages”, which consist of a software in the form of a mobile application that helps construction sites keep abreast of COVID-19 safety guidelines and track workers’ vaccination statuses, among other things. “There were rules and regulations, you could not start a project without following certain checklists and guidelines,” said Mr Branthonne. “We’ve seen an acceleration (in uptake) from our existing clients… who want to double the use (of the application) for health and safety.” While many firms had to pivot their business strategy, other firms were able to benefit from the pandemic when demand for their services increased due to changes in consumer behaviour. The initial drop in consumer demand due to the pandemic was most keenly felt by ecotourism start-up Big Tiny, which manufactures tiny homes in Singapore and exports them to Australia to be deployed as tourist accommodation. These homes are "modular houses" that are about 5.8m long and have a ground area of 137 sq ft, which is the size of a camper trailer. Big Tiny co-founder Jeff Yeo said that its product saw demand nosedive after the pandemic pummelled international tourism. Related: As Australia was in lockdown, businesses there effectively shut down in April and May 2020. However, when the Australian economy reopened, there was a surge in domestic tourism. This resulted in booming business for Big Tiny, which saw bookings for their houses increase 200 per cent in June 2020 compared with pre-pandemic. This was partly because Big Tiny’s houses were typically situated away from the cities, in more remote areas closer to nature. “The trend towards ecotourism, getting reconnected with nature… this really appealed to people post-pandemic,” said Mr Yeo. “They look for places that are in a big open area, where there is less human traffic, and close to nature.” By the end of 2020, Big Tiny saw a 600 per cent jump in its bookings compared to 2019 before the pandemic. While venturing overseas is no walk in the park — especially amid the pandemic’s continuing uncertainties — all the firms interviewed agreed on the urgent need to internationalise in order for them to grow. Referring to his firm’s expansion to three foreign markets last year, Leong Guan’s Mr Lim reiterated that the Singapore market is “highly limited” in its consumer base. And while the cost of raw materials has increased in the last few years, the price of noodles has not risen as quickly, thus reducing profit margins. “Companies should focus on outside Singapore to increase their sales … companies here hurt one another when they don’t increase their prices although cost price has increased ... this price competition hurts (businesses) in Singapore,” he said. “Internationalisation is something that needs to be done no matter what, the pandemic just happens to make it more challenging.”  Big Tiny co-founder Jeff Yeo said that by the end of 2020, the company saw a 600 per cent jump in its bookings compared to 2019 before the pandemic. (Photo: TODAY/Ili Nadhirah Mansor) Agreeing, Mr Branthonne said that while Singapore has a booming construction industry, its small size means that it only takes up 0.2 per cent of the global gross domestic product for construction. Nevertheless, what Singapore lacks in market share, it makes up for it in talent and expertise, he added. CHARTING A SUCCESSFUL PATH OVERSEAS  For homegrown firms that have started their international expansion, they will not only have to pivot their business model to adapt to current challenges, but also make use of digitalisation to cultivate ties with both foreign consumers and potential partners. Mr Lim from Leong Guan said the firm moved to strengthen its online presence in order to make up for its lack of physical presence at trade shows. “For people who can’t travel, they will usually do their research on Google to find out/ more about the company, whether it’s trustworthy. “We were quite fortunate to have several articles from the press … and we also worked with food bloggers … this was indirectly helpful in letting customers know who we are,” he said. Mr Tan, ESG’s assistant chief executive officer, noted that the pandemic has also created a demand for digital solutions. These range from web conferencing and virtual events to e-commerce platforms and “omni-channel contact centres” for customer engagement. Hence, digitalisation presents new opportunities for firms looking to internationalise. “They can leverage online platforms as a quick and less resource-intensive approach to test markets and expand without a physical presence, or even develop new tech solutions to meet the rising global demand for remote services in sectors like education and healthcare,” Mr Tan said. Related: Beyond forming partnerships, firms could also consider mergers and acquisitions of either overseas firms or other local firms with an overseas presence. This was what marketplace platform Carousell did during the pandemic. Carousell co-founder Marcus Tan said in an email reply that it acquired Ox Street — a fellow homegrown marketplace platform for sneakers and streetwear — in November last year. Along with a presence in Southeast Asia, Ox Street had also “built trust by authenticating every pair of sneakers" that gets transacted on its platform. “Ox Street was founded to bring a more seamless experience to buying and selling in these categories,” said Mr Tan. “We see immense opportunity in bringing that capability and their learnings to double down on our (commerce) efforts.”  This acquisition will allow Carousell to transact sneakers and streetwear in the eight markets it serves — Singapore, Malaysia, Philippines, Taiwan, Indonesia, Vietnam, Myanmar and Hong Kong — on a “much larger scale”. Mr Branthonne from Novade agreed that partnerships are “critical” for international expansion. “In our business, developing relationships with clients takes time and is expensive. When we develop a new market, we engage partners who have existing relationships with our target market. “During the pandemic, we have strengthened engagement with international partners, and this has helped us grow our international business without being able to travel and meet directly with clients,” he added. Mr Tan from ESG agreed that finding the right partners with good networks is important, adding that his agency actively helps firms expanding overseas by facilitating connections to “credible partners and ecosystem networks such as start-up accelerators or institutes of higher learning”. ESG’s Market Readiness Assistance grant also helps companies which are expanding abroad by helping them identify foreign market partners, as well as providing support for overseas market set-up and market promotion, said Mr Tan. To succeed, companies should also look further afield at markets such as Africa, South America and the Middle East. Related: