In most economic industries of the world Globalization and Internationalization has become very common. The dictionary meaning of Globalization taken from (Oxford Dictionaries, 2014) is the process by which businesses or other organizations develop international influence or start operating on an international scale and according to (Maringe & Foskett, 2012) internationalization is an approach to designing products and services that are easily adaptable to different cultures and languages across national borders. When we look at the automotive industry, pharmacy industry, electronic industry or communication industry etc. we come to know that all business models operating within them are often really globalized or at least multi-national. This can be the reason that why these multi-national companies gain commanding importance in the entire world economy.
Before we can know how well a business can operate in an economy, we need to know the place where it is operating and for this purpose this paper will consider Indonesia and Singapore from the ACEAN economic region.
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Indonesia is world’s 18th largest economy and has been remarkably growing after the Global Financial Crisis (GFC). The economy is well stable even after the GFC 2009 because of the prudent financial macroeconomic policy of the country. The country enjoys rising per capita GDP and low borrowing costs. However every country has some risks attached to business activity and they differ from one another country to country. (Forbes, 2013)
Generally speaking about Singapore’s economy has earned a well good reputation. The strong growth and flexibility of free economy has earned the small country name “Asian Tiger”. The economy of Singapore provides transparent administration and an efficient infrastructure for any reliable business and investment to grow.
Environmental Factors impacting Business
If there is something that is changing and steadfast it is change itself. Change is inevitable and those business who tend not to follow up the change are likely to fail or in terms of not having a long term survivability. There many events, scenarios or situations that occur and affect the way in which a business operates in a positive way or either negative way. Such things are called the driving forces or environmental factors.
Types of Environmental Factors
Internal: Some change occur within the business and impact it directly such changes include machinery and equipment, technological capacity, management systems, culture of organization, financial or employee management or staff moral etc.
External: Events or changes occurring outside the company and are usually not under the control of the company some of these include industry itself, the economy of the particular country in which it operates, demographics, competition, political interference.
Whatever are the causes whether they are external or internal the thing is change will occur and a company must be flexible and have a willing attitude to respond to them in an appropriate way. There are number of environmental or driving forces such as:
- Product Quality
- Distribution Channels
- Economy of the country
- Structural Changes
- Policies and Procedures
For the sake of clarity we take Political factor of the above two companies and see how this factor is impacting on any business that operates in these economies
Analysis of Political Factor on Business
For the purpose of starting a new business and entrepreneurs needs almost more than 4 months to complete the necessary paperwork as compared to Singapore which is less than 15 days. The Government of Indonesia and it policies for new foreign investments is not openly welcomed because of the ironclad rule of President Suharto which created dissent slowly and steadily within the system while Singapore welcomes any direct foreign investment that help the local cause making it more politically stable for business then Indonesia. (Doing Business, 2013)
The factor of red tapes reported by the World Bank study shows that due to low salaries at political and law level it create more chances for the officials to take bribe at every legal business transaction which further hampers the business not to take part fully in the economy. (Engel, 2012)
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The setup of Bank Restructuring Agency or IBRA by the Indonesian Government was a step ahead in the crisis to recapitalization or closure of insolvent banks and management of corporate indebtedness which makes a profitable availability of consumer credit. This led to increased business activity as more credit is available for doing business. But later the bank also could not maintain its growth since its inception due to fluctuations in the economy and policies that govern it. (New York Times, 2003)
According to Political and Economic Risk Consultancy, PERC, Singapore enjoys the least risks involved in the political sector of the country which makes to do business of any kind more encourage able. The political stability of the Singapore makes it a vital place to do investment and business. (Singapore Economic Development Board, 2013)
The Government and political status of both the concern countries are verily different meaning there is corruption and instability in Indonesia for doing business and Singapore is ranked 3rd in Asia in transparency. Political factor impact the operation of the business directly meaning if you are easily well aware of the legal and political laws for doing business in the country the business will grow otherwise investments tend to low and organization interest fade away to do business in that particular country.
Doing Business, 2013. starting a Business in indonesia. [Online] Available at: http://www.doingbusiness.org/data/exploreeconomies/indonesia/starting-a-business [Accessed 24 September 2014].
Engel, S., 2012. The World Bank and the post-Washington Consensus in Vietnam and Indonesia: Inheritance of Loss. 2nd ed. New York: Routledge.
Forbes, 2013. Indonesia. [Online] Available at: http://www.forbes.com/places/indonesia/ [Accessed 24 September 2014].
Maringe, F. & Foskett, N., 2012. Globalization and Internationalization in Higher Education: Theoretical, Strategic and Management Perspectives. New York: A&C Black.
New York Times, 2003. Indonesian Bank Agency Fading Out. [Online] Available at: http://www.nytimes.com/2003/10/02/business/indonesian-bank-agency-fading-out.html [Accessed 24 September 2014].
Oxford Dictionaries, 2014. Definition of globalization in English. [Online] Available at: http://www.oxforddictionaries.com/definition/english/globalization [Accessed 24 September 2014].
Singapore Economic Development Board, 2013. FACTS AND RANKINGS. [Online] Available at: http://www.edb.gov.sg/content/edb/en/why-singapore/about-singapore/facts-and-rankings/rankings.html [Accessed 24 September 2014].