International Business Environment: Advantages and Disadvantages of Globalization for Singapore

This report analyzes the business environment of Singapore and discusses the advantages and disadvantages of globalization on the country. It also highlights how Singapore can encourage or restrict its international trade with other nations.

Running head: BUSINESS ENVIRONMENT
International Business Environment
12/15/2018

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Table of Contents
International Business Environment..........................................................................................2
Task 1: Globalization and Trade................................................................................................2
Advantages of Globalization for Singapore...........................................................................3
Gross Domestic Product.....................................................................................................3
Foreign Direct Investment..................................................................................................4
Increase Labor Flows.........................................................................................................4
Low Inflation......................................................................................................................5
Low Unemployment...........................................................................................................6
Disadvantages of Globalization for Singapore......................................................................6
Vulnerable to External Shocks...........................................................................................6
Vulnerable to competition..................................................................................................7
Vulnerable to Global Business Shifts................................................................................7
Inflation..............................................................................................................................7
Singapore Encourages and Restrict International Trade........................................................8
Import Tariffs.....................................................................................................................8
Trade Barriers.....................................................................................................................8
Task 2 Environments..................................................................................................................9
Political Environment.............................................................................................................9
ACE Start-ups..................................................................................................................10
Capability Development Grant........................................................................................10
Early-Stage Venture Grant...............................................................................................11
PIC i.e. Productivity and Innovation Credit.....................................................................11
Technology Enterprise Commercialization Scheme........................................................11
References................................................................................................................................13

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International Business Environment
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.
Task 1: 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).

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Advantages of Globalization for Singapore
Gross Domestic Product
Source [((Acme Themes, 2018)]
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).

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Foreign Direct Investment
Source [((Acme Themes, 2018)]
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

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Source [((Acme Themes, 2018)]
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
Source [((Acme Themes, 2018)]

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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.
Low Unemployment
Source [((Acme Themes, 2018)]
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

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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

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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).
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).

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Task 2 Environments
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

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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:
Source [(SBS Consulting, 2018)]
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).
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.

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Early-Stage Venture Grant
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

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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.

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References
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2018]
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[accessed 15 December 2018]
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Enterprise Singapore (2018) Enterprise Development Grant [online]. Available from
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dards/index.asp [accessed 15 December 2018]

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December 2018]

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