How to expand overseas the smart way
IT was Albert Einstein who observed that not everything that can be counted counts, and not everything that counts can be counted. It is a statement that rings true for business today. Many companies know that their most important assets are intangible.
Take a company’s reputation, for instance. A good name developed assiduously over many years can be the difference between getting a deal done or having it fall through. When moving into a new market, your company’s reputation plays a big part in the number and quality of opportunities you are likely to secure.
Judgement and instinct are two other qualities that cannot be easily measured, but which may be critical factors in the success or failure of a business venture. Another is local knowledge – knowing the right way to approach a problem varies markedly from country to country.
When all these intangible elements come together in one company, the results can be spectacular. An example of such a company is SSH Corporation (SSH) – one of the largest industrial material and welding products suppliers in the region. It operates in the intensely competitive oil and gas, petrochemical and marine industries.
SSH’s reputation has been developed over 60 years. The experienced management team has shown both judgement and sound instincts in its quest to become a major international player.
The company has grown rapidly in recent years, and expanded its reach to China, Thailand and Malaysia. Headquartered in Singapore, SSH’s geographical presence now covers China, Indonesia, Malaysia, Papua New Guinea, Thailand and Vietnam.
SSH is a wholly-owned subsidiary of KS Distribution and a member of the KS Energy Group, one of the leading distributors of oil and gas equipment, spare parts, consumables and industrial products in the region. Listed on the mainboard of the Singapore Exchange, the KS Energy Group distributes more than 70,000 oil and gas-related products under more than 300 international brands.
SSH got another boost last week when it won the inaugural HSBC Leading International Business Award at the Singapore 1000 gala dinner. The award recognises the company’s success in venturing the risks associated with any overseas venture – in addition to maintaining a sound a reputable business in Singapore.
In order to win the award, SSH had to secure the highest possible credit rating for a company in Singapore – the prestigious DP1 rating. It also had to demonstrate that it was a dynamic and growing company, ahead of its competition with overseas revenue of at least S$100 million. The award was presented to SSH by HSBC Singapore’s group general manager and chief executive office Alex Hungate.
Working with partners
One quality observed about SSH’s management staff is that they do things the right way – taking steps to develop their capacity while understanding and providing for the risks involved. There are many lessons to be learnt from studying SSH’s internationalisation. In fact, the company is a case study on what to do right when expanding internationally.
When expanding its operations abroad, SSH makes smart use of the local knowledge its banking partners have in each of the countries it is interested in. Getting the right advice on the requirements of doing business and trade in different countries saves the management from having to learn the hard way when something goes wrong because one is unfamiliar with a particular country’s way of doing things.
The company understands the benefits of using trade finance and import/export facilities to manage its high volume of sales, as well as ensuring that it has sufficient cashflow to continue on its grow path.
Asked about the group’s biggest hurdle in expanding overseas, SSH chairman Kris Wiluan says: “Our greatest challenge was the need to understand and adapt to different cultures and business practices both internally and externally. Communicating between different cultures adds an element of complexity that is less prevalent in a domestically focused company.”
So what advice can Mr Wiluan offer to other companies seeking to enter the global market?
“Be prepared with a business plan supported by a strong cohesive management team. Demonstrate awareness of the other culture and an understanding of the foreign market you are preparing to enter without losing sight of the company’s core values.”
A rapid way of gaining an understanding of a new market is to work with an international banking partner that already has experts on the ground. As Mr Wiluan explains: “HSBC’s global network facilitated our international growth strategy by providing us the assistance we needed to expand into markets previously unreachable.”
HSBC has helped the company with the customisation of its trade documentation – a technical area which may seem complicated to the uninitiated, but which will make all the difference if something goes wrong.
Then there are the ever present risks associated with currency fluctuations. This is a risk that any company can take steps to manage by working with a banking partner that understands how different currency instruments can be used to achieve a company’s objectives.
By examining the risks inherent in international trade, and putting in place measures to manage them, SSH is an example of a company that has made the right moves and reaped the benefits.
By Tan Siew Meng, Head of Commercial banking for HSBC Singapore | 25 January 2011
Source: The Business Times