Why is location a key factor for the many multinational companies that have chosen to establish their regional headquarters in Singapore?
The case for regional headquarters
Economies of scale. Standardisation of processes. Pooling of expertise. These are just some of the reasons why many multinational companies (MNCs) have chosen to adopt a centralisation strategy and set up regional headquarters (RHQs) to better serve their key markets.
To access the rapidly growing Asian market, global MNCs have set up RHQs in order to centralise their key business functions such as technology, data analytics, customer service, operations and human resources in serving the region.
A 2016 report published by Cushman and Wakefield analysed the location considerations of RHQs in Asia Pacific. The report stated that while competition between cities to attract MNCs was already fierce, it will continue to intensify with long-term drivers of economic change shaping the regional business environment.
Yet, despite facing growing competition from Hong Kong and Shanghai, Singapore was still the top city of choice for companies looking to establish a RHQ in the Asia Pacific.
Indeed, companies such as 20th Century Fox International and Rolls-Royce are just two of the many companies who have chosen Singapore as their RHQ location.
Film distributor, 20th Century Fox International, moved its RHQ from Sydney to Singapore in September 2017, to be closer to the growing markets of Asia, particularly the booming Chinese film sector. The strong economic growth and development of Asia in recent years, has also motivated Swiss Re to set up a dedicated regional legal entity in Singapore in 2018 for its reinsurance business unit.
Power systems maker, Rolls-Royce, who employs over 2,500 people in Singapore and accounts for 15 per cent of the country’s aerospace output, centralises several group functions including finance, human resources, communications, health safety and environment in its RHQ in Singapore. Singapore is also home to the company’s Civil Aerospace and Power Systems regional hub. Bicky Bhangu, Regional Director of Southeast Asia, Pacific & South Korea, Rolls-Royce says: “Having these functions located in one city helps to save costs and allows us to make decisions in-country for [Singapore] and for the Asian and Middle Eastern regions.”
The right RHQ location: Allowing a faster GTM implementation
To implement an effective go-to-market (GTM) strategy, heightened responsiveness to local markets is crucial. Simply put, this means delivering a product or service to the customer as quickly and efficiently as possible. Geographical proximity to customers is thus an important consideration.
This is especially true for Rolls- Royce, which has more than 50 per cent of their customers from the Middle East and Asia. Singapore Airlines (SIA) is also a key Rolls-Royce customer, with nearly 80 per cent of SIA’s fleet being powered by Rolls-Royce engines. Scoot became another key customer in January 2015 when the airline received its first made-in Singapore Trent 1000 engine for its new fleet of 20 Boeing 787 Dreamliner aircraft.
Bhangu explains that “being in Singapore, we are in the right geography, right time zone and right culture to service these customers”.