PROCTER & GAMBLE in Singapore:

Critical examination of a firm that entered into a

foreign country through foreign direct
investment

1. INTRODUCTION
The decision of how to enter a foreign market can have a significant impact on
the corporations future results. Expansion into foreign markets can be
achieved via the following four mechanisms: exporting, licensing, joint venture
and direct investment.
The purpose of this report is the critical examination of a firm that entered into
a foreign country through foreign direct investment. In order for the previous
task to be completed, both the analysis of the business environment in the
foreign country and the detailed description of the facts resulted in the firms
entry into the foreign market are needed.
Foreign direct investment (FDI) is the direct ownership of facilities in the target
country. It involves the transfer of resources including capital, technology and
personnel. A firm that makes foreign direct investment and owns or controls
production activities in more than one country is a multinational or
transnational enterprise.
Procter & Gamble Company seems to be a great choice of such an enterprise
since it meets most of multinationality criteria concerning the number and the
size of the subsidiaries in foreign countries, the number of countries where the
firm is involved, the share of assets, turnovers, profits from the subsidiaries,
the internationalization degree of the management along with research and
development. It is also important that P&G operates more than 100 years and
is a leader in its sector.
Though P&G through the years entered many markets, Singapore has been
chosen to be examined since the entry took place 5 years ago so there is the
necessary time frame for the investments evaluation. On the other hand,

Singapore is one of the Asian emerging markets, which attracts not only many
investors but the whole business worlds attention.

2. PROCTER & GAMBLE

The Procter & Gamble Company (P&G) is an American multinational
manufacturer of product ranges including personal care, household, cleaning,
laundry detergents, prescription drugs and disposable nappies. It is
headquartered in downtown Cincinnati, Ohio.
P&G is the worlds largest and most profitable consumer products company
with nearly $84 billion in sales and 25 billion-dollar brands. In 2012, Fortune
magazine awarded P&G a top spot on its lists of Global Top Companies for
Leaders and Americas Largest Corporations and ranked the company at
fifth place of the Worlds Most Admired Companies list. Chief Executive
Magazine named P&G the best overall company for leadership development,
while Forbes magazine includes P&G in the top 30 Worlds Most Innovative
Companies.
P&G markets its products in more than 180 countries. The interesting thing to
be mentioned is that the companys market capitalization is greater than the
GDP of many countries. P&G seems to acknowledge the fact above along
with the responsibility that derives from it. The companys purpose is to
provide branded products and services of superior quality and value that
improve the lives of the worlds consumers, now and for generations to come.
They also believe that as a result, consumers will reward them with leadership
sales, profit and value creation, allowing their people, their shareholders and
the communities in which they live and work to prosper.

Most of P&Gs billion-dollar brands are global products available on several

continents. More specific, P&G products are available in North America, Latin
America, Europe, the Middle East, Africa, Asia, Australia and New Zealand.
However, manufacturing operations are based in the following regions: United
States, Canada, Philippines, Mexico, Latin America, Europe, China (31 wholly
owned factories) and other parts of Asia, Africa and Australia. Some of the
most famous P&Gs brands in Beauty and Grooming are: Always, Camay,
Clairol, CoverGirl, Crest, Fusion, Gillette, Head and Shoulders, Herbal
Essences, Mach 3, Olay, Old Spice, Oral-B, Pantene, Tampax, Venus, Vidal
Sassoon, Wella and many fine perfumes, while in Household Care are: Ace,
Ariel, Bounty, Charmin, Dawn, Downy, Duracell, Febreze, Gain, Iams,
Pampers, Swiffer , Tide and Vicks.
Net sales in the United States account for approximately 35% of total net
sales, while in Western Europe and Asia account for 19% and 18%,
respectively. Operations outside the United States may be affected by
changing currency values, different rates of inflation, economic growth and
political and economic uncertainties and disruptions.

3. BUSINESS ENVIRONMENT IN SINGAPORE

Singapore appears to be a global business magnet that offers an amazing
quality of life to its residents, and has only just become to assume its position
as a world leader in business and finance. The reason why those above are
true is going to be revealed by a series of data concerning not only the
business environment but also the culture and some general facts along with
the rankings that give a clear picture of Singapores performance in various

levels and segments.

Singapore is a republic with a Parliamentary system of government based on
the Westminster model. The people of Singapore are largely descendants of
immigrants from the Malay Peninsula, China and the Indian sub-continent. It
is important to mention though that from its total population (5,18 million
people), only 63% of them are citizens. The remaining 37% are either
permanent residents or foreign workers. Another fact of great importance is
that the main language of instruction in Singapore is English, which was
officially designated the first language within the local education system in
1987.
From the point of economic performance, Singapore outranks the world as an
investment destination, after coming in second for sixteen consecutive years
according to BERI (Business Environment Risk Intelligence) Report 2011 in a
ranking that assesses operations, politics and foreign exchange. Additionally,
according to the Globalization Index 2012, Singapore scores third in the world
for foreign trade and investment.
As far as competitiveness concerns, Singapore is considered to be the worlds
easiest place to do business as declared in the Doing Business 2012 Report
by the World Bank. The World Economic forum ranks Singapore the second
most competitive country in the world, through the Global Competitiveness
Report 2011-2012. Regional titles have also been given to Singapore by
other similarly respected authorities and fairly is considered to be the best
business environment in Asia Pacific and also Asias most network-ready
country.
Singapore recognizes intellectual property as an invaluable asset in shaping a

knowledge-based economy and that is why the Global Economic Forum

ranked the country Worlds No.2 and Asias No.1 for best intellectual property
protection. Another interesting recognition given is the one of Asias least
bureaucratic place to do business.
In addition to the previous fields of excellence, governments transparency
when it comes to business along with regionally good enough rankings as far
as skilled labor and motivated workforce concerns complete the overall idea
of Singapore being a heaven in starting up, expanding, investing or generally
doing business.
Even though all the aspects described above can be measured and compared
through rankings, Singapores strategic location cannot. Singapore is located
at the crossroads of the main trade and shipping routes of the world, including
the major sea route between India and China.
While examining the business environment in Singapore it would be
necessary to analyze also culture, through Hofstedes scope using the five
dimensions of culture: Power/Distance (PD), Uncertainty Avoidance (UAI),
Individualism vs. Collectivism (IDV), Masculinity vs. Feminity (MAS) and Long
term orientation vs. Short term orientation (LTO).
Singapore is a high PD country which means that inequality exists among
people with and without power and is accepted. The extremely low UAI score
indicates that the society enjoys novel events and values differences. There
are very few rules and people are encouraged to discover their own truth.
Singapore people form a society with low IDV score and as a matter of fact
there is strong group cohesion and a large amount of loyalty and respect for
its members. The group itself is larger and people take more responsibility for

each others well being. As far as MAS scores concerns, they are neither high
nor low, which means that society doesnt stick with, but values traditional
male and female roles. Judging by the high LTO score, society values longstanding traditions and values. Both, delivering on social obligations and
avoiding loss of face are considered very important. Though the addition of
the sixth dimension (Indulgence vs. Restraint) wont be helpful enough since
an intermediate one, it shows that people can satisfy freely their basic needs
and desires as long as the social norms are followed.

4. ENTRY INTO SINGAPORES MARKET

In 2007, P&G chose Singapore as the location of its first perfume
manufacturing facility in Asia. The 6500-sq-metre-plant situated along the
coastal part of the country, in Tuas, is also the first perfume plant opened by a
multinational consumer goods company in the region.
The opening of the Singapore plant was part of a long-standing relationship
between P&G and the Economic Development Board (EDB). Through that
partnership, P&G works closely with A*Stars Institute of Materials and
Engineering (IMRE), under which P&G gets preference to look at IMREs new
research and P&G similarly shares its innovations.
P&G entered into the Singapore manufacturing industry via foreign direct
investment and more specific through a Greenfield venture, since the parent
company started a new venture in Singapore by constructing new operational
facilities from the ground up.
The Singapore facility is P&Gs most technologically-advanced plant, with
state-of-the-art innovations such as advanced real-time inventory and

production control systems that monitor the production process and reflect
changes instantly.
After P&Gs entry into Singapores market, the company continued enriching
its activities in the country. Since 2010 Singapore hosts P&Gs Asia
Leadership Development Centre. The centre aims to train 500 managers from
the region annually while exposing them to a wide perspective of global
issues and giving insights to both the Eastern and the Western culture. One
year later, the company decided to invest about 200 million dollars to build a
mega innovation centre at the Biopolis, which will conduct end-to-end
innovation in beauty and is expected to be completed this year. In addition,
P&G signed a Master Research Collaboration Agreement with all fourteen
Research Institutes under A*STAR, in order to strengthen the already existing
partnership with Singapores research community, allowing the company to
leverage the strong research capabilities in the country.
Another smart move from P&Gs side took place in 2012. The company
opened the P&G Purifier of Water plant in Singapore to support P&Gs
Childrens Safe Drinking Programme. Through this P&G not only reached out
to its Asian consumers but also gained access to non-government
organizations and government partners around the world.
In 2012, P&G also announced its willingness to move its beauty business
headquarters from Ohio to Singapore. The move is significant symbolically for
a centralized company that has been working to move employees and
manufacturing facilities closer to its key customer bases.

5. CRITICAL ANALYSIS
Summing up the data given until this point about P&Gs entry in Singapore, it
wouldnt be exaggerating to characterize the market entry as a flawless one.
However, it is also important to mention that as entry in this case it is
considered the whole series of events and investments through those five
years that result in establishing leadership in the foreign market. Those steps
followed by P&G cant be anything else but a carefully designed and executed
overall intrusion strategy not only in Singapore but Asia in general.
More specific, the preparation through alliance making before the formal entry
into the foreign country not only strengthens the companys name in the
region but it is also a kind of an advertisement and as a result the local
community expects the desired entry to happen.
After a three year establishing time in the area, P&G improves its
multinational character by training more local managers via the Asia
Leadership Development Centre. It can also be characterized as an attempt
to combine two differentiated enough cultures (Table 1) in order to be
reformed and maybe create a new more efficient and even innovative
corporate culture.

Table 1. Comparison of culture indexes between USA and Singapore

U.S.A.

PDI

UAI

IDV

MAS

LTO

IVR

40

46

91

62

26

68

20

48

72

46

Singapore 74

The initial investment follows another, more fancy one accompanied by an

official partnership with local intelligence centers, which makes P&G a big
player in the region as far as authorities, governments and institutions
concerns and also a leader in the industry.
In order to both satisfy its purpose, empower its position and appeal more to
the public, P&G decides to open the P&G Purifier of Water plant and also
move one segments headquarters from U.S. to Singapore.

6. CONCLUSIONS
In conclusion, for an entry in a foreign market to be successful and also
profitable for the company a detailed strategy should be formed by its
managers, designing the steps not only after but also before the entry.
As reported above, P&G clearly understands the new world and also
appreciates the importance of adapting its strategy to the new global
environment.
Through a great evaluation of Singapores market and culture, P&G satisfied
its purpose, expanded geographically, enriched its intellectual property and
set the foundations of dominating in the industry in all Asian emerging
markets.

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