Mr Ron Sim, Chairman of the Franchising and Licensing Association

Mr Stephen Tan, Chief Executive of Singapore Exhibition Services

Distinguished Guests

Ladies and Gentlemen

Introduction

I’m pleased to join you this morning for the opening of 6^th Global Franchising and Licensing 2004.

2       Singapore’s economic outlook continues to improve in 2004.  The recovery started last year and has gained momentum in the first half of this year.  The global economic recovery is fuelling stronger-than-expected growth for Singapore.  Despite high oil prices, low interest rates and growing confidence have led to stronger international trade and investment activities.  This bodes well for Singapore and we could expect a full year growth of between 8 to 9 percent.

Growth Opportunities in Asia

3       Our optimism stems particularly from the buoyant mood in Asia which is fast emerging as the new nexus of economic influence in the world.  China has rapidly become a major trading partner of all countries in East Asia driving much of the growth in exports and imports.  In terms of investment destinations, China has also outperformed the average.  In 2002 alone, China attracted three times more foreign direct investment than ASEAN.

4       The positive sentiment is not confined to East Asia.  India has freed itself from the shackles of its past and is fast catching up with China.  In fact, India overtook China to become Singapore’s fastest growing trade partner in 2004. 

5       To tap the vast opportunities in a growing and vibrant Asia, Singapore companies would need to accelerate and deepen our internationalization efforts.  This year has been designated as the Year of Internationalisation where one key thrust is to promote exports by leveraging on Singapore brand name.  Singapore’s excellent reputation in education services, healthcare services,   telecommunications and IT services are some examples that would have great export potential.  Over time, we will see the emergence of more home-grown multinationals, competing in many knowledge-intensive sectors.  

Franchising and Licensing as market penetration strategies

6       In tandem with rising affluence and increased spending power, consumers in Asia are demanding more lifestyle choices.  Being quick to market and having a good distribution network are essential to stay ahead of competition.  For companies that are not familiar with emerging market, but at the same time, wish to seek out business opportunities, franchising and licensing offers them quick ways to venture abroad. 

7       It is heartening to hear that Singapore has three times more franchisees as compared to five years ago.  Today, Singapore has 3,000 franchisees and 380 franchise systems.  I was told that 80 percent of Singapore FLA members have gone on to become regional or global players.  Many companies have done well either through franchising, licensing or a combination of both.  They are household brand names like 7-Eleven, Bee Cheng Hiang, Osim and Kinderland. 

8       Take Breadtalk for example, in a short span of 4 years, it has 24 corporate owned outlets in Singapore and 3 in Shanghai, China.  It also has 12 franchised outlets overseas -  8 in Indonesia, 1 each in Kuwait, Taiwan, Malaysia, and the Philippines.  Breadtalk will also open its first outlet in Hong Kong next year.  Another example is the ladies footwear retailer, Charles and Keith which already has 3 franchise outlets in Dubai, will have 11 franchise outlets in Indonesia and 6 in the Philippines by next month.  Franchising and licensing are gaining popularity as strategies to penetrate overseas markets because it is win-win collaboration between franchisor and franchisee: the franchisor expands its business at faster rate while the franchisee jump-starts a well-tested business idea.  

9       A good franchisor provides comprehensive business system to the franchisees.  Charles and Keith, for instance, has introduced an integrated branding system to ensure that every outlet projects a consistent design, look and feel.  With this systematic approach to branding and design, it is now easier and cheaper to replicate Charles and Keith outlets overseas.

 10    At the same time, the company is also developing an IT platform that will allow all its franchise outlets to enjoy automatic procurement.  When inventory hit a certain threshold level, the system will automatically alert franchisees of the need to replenish stock.  Through better inventory management, this system will allow the franchisees to minimize warehousing costs.  Franchisors need to constantly think about new ways of improving their franchisees’ operations as the success of their franchisees will be instrumental to enhance the value of the brand and the franchise.

11     Franchising and licensing are possible only if companies are proactive in managing their intellectual property (IP) for full value.  By understanding the various strategies for creation, ownership, protection and exploitation of IP, companies could then leverage on their IP to maximize their shareholders’ value.  Government agencies such as EDB, IE Singapore, and IPOS have come together to proactively engage companies in the management of their IPs.  At this preliminary stage, IPOS has developed the SCOPE IP diagnostic tool geared towards helping companies to identify the IP they own, assess their ability to manage risk associated with its IP, and adopt best practices in IP management.

Distribution for Internationalisation – IE’s new initiative

12     Franchising and licensing your IP rights is one way to extend the market reach of your products.  Companies, however, could also extend market reach by having strong distribution channel network.  While certain businesses can be grown through franchising, other products are better sold through distribution channels.  Global brands like Toyota, Coca-Cola, Sony, Rolex, Samsung and Apple have great products.  If these companies had not focused on building extensive global distribution networks, their products might not have achieved the market reach they enjoy today.

13     Establishing, managing and growing distribution channels may seem to be a mundane function.  But they are absolutely critical in marketing and delivering the products to the customers on time.  To help companies strengthen their distribution channels, IE Singapore has developed the Distribution for Internationalisation programme.  The programme will help companies devise appropriate international distribution channel strategies to extend their market reach.  

14     Both distribution channels and franchising schemes are means for business expansion. Companies will need to determine which will be a better strategy for them to expand overseas.

Conclusion

15          In conclusion, I urge all companies to take a fresh and bold approach toward regional expansion.  This includes building strong brands, identifying your intellectual property, leveraging on franchising and licensing, and developing a strategic network of distribution channels.

16     I congratulate the organisers, Singapore Exhibition Services, and the Franchising and Licensing Association of Singapore for the success of Global Franchising and Licensing show 2004.  I wish all our exhibitors and visitors a fruitful time at this event.  Thank you.