Market Opportunities and Risks for Sainsbury’s Supermarket Plc in Singapore

Market Opportunities and Risks for Sainsbury’s Supermarket Plc in Singapore
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Market Opportunities and Risks for Sainsbury’s Supermarket Plc in Singapore
Introduction
The subsequent report presents an analysis of Singapore’s market study as part of the global expansion strategy of Sainsbury’s Supermarket Plc. The paper evaluates the opportunities and risks presented by the Singaporean market. The external market analysis of the selected country explains the political, economic, cultural, legal, and ethical risks which can affect the business. The business opportunities in any country can be identified through key market indicators, level of competition, consumer buying behaviors, and market demand. Based on the market research, the recommendations are made for Sainsbury’s Supermarket Plc to select a market entry strategy to enter Singapore.
Sainsbury’s Supermarket Plc is one of the largest and oldest supermarket chains in the U.K., established in 1869. The food retailer has its network partners all across the world. The supermarket expands internally through its product line extension. However, the increasing global competition shifted the corporate strategy towards external expansion. So the largest superstore retailer in the U.K. made several mergers and acquisition decisions in recent times, for instance, Asda. The merger decision aimed to reduce buyers’ prices (Zhang, 2021).
Analysis of Risks in Singapore
1 Political
Singapore is known as Asia’s most politically stable nation with a democratic political system. The country follows a unitary parliamentary system where the political power is regulated and held by parliament, and the president is the head of the state. However, the prime minister is the head of government responsible for making policies. The government is representative democracy ruled by the elected person (Singapore Government, 2022). The political risks in the country are very low, which makes it one of the most attractive locations for international business organizations. Singapore has been the most politically stable nation since its independence. The government formulates the most favorable business policies for the enterprises providing investment opportunities to foreign firms. However, the political leadership controls the freedom of speech by using terrorism and violence as a justification (Amnesty International, 2021). Singapore has established itself as a free market economy, a decentralized form of the economic system. Economic policies support entrepreneurship. Economic activities take place without any interference or regulation from the government; buyers and sellers regulate the market forces based on the supply and demand of the products (Forbes, 2018). The social system divides Singaporean society into five classes: fractional upper class, upper-middle class, intermediate, middle class, lower-middle class, and working-class (Robinson, 1975). The social system divides society into different classes based on income level and standard of living.
2 Economic
Singapore is a relatively small country, but it is a high-income economy that offers the most attractive business opportunities and regulatory environment for local and global firms. The country has achieved one of the highest GDP growth rates in the world, i.e., 9.2% in the year 2019 (World Bank, 2019). The government established a regional financial hub to promote the financial infrastructure and expertise. The country has an enormous spending budget for education, increasing its literacy rate to 97.6% in 2022 (Statista, 2021). The most successful sectors are manufacturing, finance, electronics, and engineering. Singapore is Asia’s fourth most significant global financial hub and fifth major oil refining center. Singapore’s leading business and trade partner is the U.K., with more than 5000 British organizations functioning in Singapore and a total annual trade of £15.5 billion. The world bank ranked the country as the second best and most accessible location for global businesses (U.K. Government, 2021).
Root Model proposed by Root in 1987 when applied to the Singapore business market explains the following risks:
2.2.1 Instability risk: Instability risk is lower in Singapore because there are lower chances of change in government or regulations imposed by the legislative bodies. Foreign policy interference is also low in the country.
2.2.2 Ownership/control risk: The law protects the ownership of business enterprises. There is no third-party control system active in the country. Shareholders control the organizational decisions and appoint their representatives; no one controls the corporate decisions.
2.2.3 Operations risk: Singapore has formulated the most effective business policies and processes that help business operations. However, some risks cannot be controlled, including process, personnel, legal, or external risks.
2.2.4 Transfer/repatriation risk: Transfer risk transfers a contract from one party to another. For instance, insurance purchase has unavoidable risks, but laws and policies in Singapore protect them.
3 Cultural
The power distance in Singaporean society is higher than in the U.K., which shows that Singapore strictly follows the power and rank system, and the power is distributed unequally among the members of the society, which the people widely accept. In the U.K., low power distance means the country follows a unilateral system where authority is given to individuals and supports democracy in decision-making (Zamanabadi, 2015). Singapore society is collectivist, whereas the British support individualism. The high masculinity score of the U.K. shows that culture is driven by competition and accomplishments, while Singapore has a relatively low score, favouring shared achievements and community support. Uncertainty avoidance in Singapore is very low compared to the U.K. because future situations do not threaten people. Singapore scores high in long-term orientation, making it evident that the culture supports long-term relationships, planning, and investment.
34861501524001257300361950Singapore, The United Kingdom
Figure 1: Hofstede Insights: Country comparison Singapore Vs. United Kingdom.
4 Legal
The country has a well-formulated legal system that supports the business environment of the country. The laws regarding land acquisition, foreign investments, business partnerships, acquisition of shares, taxation, and currency regulations offer promising opportunities to foreign businesses and investors. There are no legal complications in doing business. Singapore exercises strict intellectual property regulations.
5 Ethical
Singapore has strict anti-bribery and corruption policies protected by law through the corruption Act and legislation. Foreign companies in Singapore are protected by law and government regulations. Government supports the investors, so bribery is not a threat to international corporations in Singapore. Some big firms with smooth business operations in Singapore include GSK, Barclays Bank, Rolls-Royce, B, P., ACC, and Berkeley Group. The country has recently introduced the Progressive Wage Model to help workers increase their wages by introducing skill development programs (Ministry of Manpower, 2022). The Employment Act regulates the working conditions, which protects the fundamental rights of employees and workers in Singapore. The unemployment rate in Singapore is the lowest, and the people in the country enjoy a high standard of living, which shows that it offers the best working conditions. Singapore has introduced an environmental regulatory framework that promotes environmental protection and sustainability. The government introduced Singapore Green Plan 2030 for a sustainable future. The regulatory authorities strictly check that businesses comply with laws that monitor air and water pollution, climatic change, habitats and biodiversity, and waste management (Chun & Lin, 2021).
Business Opportunities
3.1 Key Economic Market Indicators
The country has achieved one of the highest GDP growth rates in the world, i.e., 9.2% in the year 2019 (World Bank, 2019). The GDP per capita of Singapore is US$72,794 (World Bank, 2021), which shows one of the highest figures in the world as an economic output shared per person. It indicates the standard of living in a country. The inflation rate is the highest since the last decade, which accounts for 7.5%. (Lin, 2022). The prices of commodities have experienced a recent surge. The central bank of Singapore is responsible for setting the monetary policy in the country. The exchange rate monetary policy of Singapore is highly effective. It uses the exchange rate as the vital instrument supporting open trade and the free flow of capital. The unemployment rate in Singapore is 2%, the lowest in the region, as the country provides fair employment opportunities to the labour market and population (Varley, 2022).
The critical economic market indicator shows that the business environment of Singapore is highly feasible for foreign organizations. In addition, the data indicated that Singapore provides more significant opportunities for Sainsbury’s Supermarket and growth prospects for the business.
3.2 Levels of Competition
Singapore established Competition and Consumer Commission which provides a value proposition to the business and fosters a healthy competitive environment in the market. It promotes market competition and business innovation, allowing local firms to compete globally. The framework also attracts foreign corporations and investors to compete in the domestic market of Singapore. As a result, the supermarkets in Singapore outsource their products from South Korea, Japan, Australia, Ge...