The report primarily delved into the economic, social and political factors that are prevalent within the nations of Singapore and Japan to determine which country would be suited towards the needs of the Australian manufacturing firm in terms of expansion. Key highlights of the study included different economic metrics such as GDP figures and inflation rates, presence of corruption and bureaucracy, nature of the judicial system and the ease of doing business among others. The analysis showed that Singapore was the better choice when compared to
Japan and a number of recommendations were formulated based on the analysis.
Table of Contents
Political and legal factors.
Business expansion and scalability are the two key objectives of companies catering to the modern business ecosystem, especially when considering the growing levels of competition within domestic market systems. The current study takes on a critical approach towards determining the more appropriate country between Japan and Singapore in the context of a large Australian manufacturing firm that is seeking to internationalise its operations and establish an overseas subsidiary. Key highlights include a sound analysis of the different legal, political and economic factors that distinguish the two chosen countries along with a set of recommendations based on the analysis followed by a concluding statement.
An assessment of the different political and legal factors existent within Japan and Singapore would be imperative towards determining the appropriate country that the Australian manufacturing company could potentially enter.
In terms of Japan, the country is a unitary state, where the majority of the Executive Power is wielded by the Prime Minister. In addition, Japan has been a signatory to the United Nations since 1956 and boasts of an extremely large diplomatic network globally (Hasegawa, 2016, p. 238). The governmental arms of the country exercise a certain degree of authority and control over corporate structures and it is important to note that Japan is widely acknowledged to be among the great powers of the world (Katada, 2018). While bureaucracy and ministerial influence is prevalent across the country, it must be stated that Japan benefits from political stability in terms of how it has mostly been under the governance of the Liberal Democratic Party (LDP) right since the end of the Second World War (Köllner, 2018. p. 1161).
Moving onto the legal factors in Japan, the country has a policy-making system that is more aligned with the parliamentary systems prevalent in Europe (Pempel, 2019). Furthermore, the country is divided into 47 prefectures and each of them comprise of different sets of local by-laws and regulations (Goodman, 2017). It is also important to note that several aspects of Japanese law are relatively different when compared to other countries. Contracts, for example, are not essentially binding in Japan but based on the principle of mutual trust that generally depict mutual intent (Milhaupt et al. 2020). However, legal restrictions relating to foreign investments are fairly relaxed and this has certainly driven the growth of business within the country over the past few decades.
Comparatively, Singapore functions as a parliamentary republic that is largely based on the Westminster system (Morgan, 2015). The President functions as the state head and yields most of the executive power. Singapore is widely considered among the Asian powerhouses, although its international influence in terms of diplomacy and geo-politics is relatively low when compared to Japan (Hof, 2018). A key aspect of the Singaporean polity is the stringent policies aimed at curbing corruption, as the country was ranked 4th in terms of low corruption rates by Transparency International (Quah, 2018). However, the governmental system is often viewed as overly controlling of the business structures as well as basic human rights such as expression and association. Singapore was also a former colony of the British, and this has shaped a major portion of its current political and legal scenario. The political environment is also fairly stable, with the People’s Action Party (PAP) being the dominant force (Tan, 2020).
In terms of the judicial system in Singapore, it is based on the common law system as prevalent in the United Kingdom, albeit with a significant amount of differences (Turner, 2015). The Singaporean judiciary is widely acclaimed to be among the most robust within Asia and bureaucracy is rarely witnessed, especially in terms of foreign business. The law enforcement within Singapore is also extremely rigorous, leading to low crime rates and high public safety (Chua and Haynie, 2016). In addition, the state city also boasts of being a world-class arbitration facility as evident in the nation’s role is several cross-border disputes (Chong and Yip, 2019). The policy-making process is relatively transparent with a clear structural system comprising of different branches such as competition, employment, intellectual property and others.
Discussing the economic factors, Japan stands out when compared to Singapore both in terms of the size and scale of the economy as well as the overall revenue generated. Japan is third largest in the world in terms of national economy with the total GDP estimates nearing $5.8 trillion as of 2020 (Schumacher et al. 2020). Japan is also the fourth largest economy in the world in terms of the purchasing power parity. Poverty and unemployment have been tackled extremely well by the government, with 2020 estimates showing unemployment rates of around 3% (Milly, 2020). The economic system within Japan is aligned with a mixed economy, where several industries are renowned across the world with the most prominent ones being automobiles and technology. However, a major drawback within the Japanese economy is the extensive dependence on imports of commodities such as oil, iron ore, aluminium and others. The inflation rate within Japan has been fairly under control, with 2019 estimates showing roughly 0.98% (Maruyama and Suganuma, 2020). The ease of doing business within Japan is also relatively difficult, as it ranks 34th globally (Reischauer, 2020). However, the Global Competitiveness Report has been favourable for the Asian powerhouse as it has constantly maintained a position within the top 10 over the years.
Singapore, on the other hand, has a developed market economy and relies heavily on international maritime trade (Maliszewska et al. 2020). 2020 estimates show the total GDP figures for the East Asian country to be around the $615 billion mark with the per capita GDP averaging in at just about $107, 600 (Statistics Singapore, 2020). The economy is essentially a free market system and extremely business-friendly. Singapore has consistently ranked number one in ease of doing business index over a very long time. In addition, Singapore has been one of the very few Asian countries to receive an AAA credit by credit rating agencies and this has led a significant amount of development within the economy (Niroomand, 2018). However, a major drawback is the extensive involvement of the government, as despite being a free market in theory, governmental operations contribute nearly 22% to the national GDP figures (Statistics Singapore, 2020). In terms of the inflation rate, Singapore has one of the most controlled levels of Asian in the world with the estimated percentages staying within the 0.50% mark. Trade and commerce is also extremely well developed in the city state, with 2020 estimates showing total merchandise trade volume beyond the $1,022 billion mark (Statistics Singapore, 2020).
Based on the analysis conducted involving the different political, legal and economic factors between Japan and Singapore, Singapore certainly stands out and would be the more appropriate country for the Australian manufacturing company. Several recommendations have been formulated in this regard that have been enlisted below and are as follows:
In conclusion, it was identified that Singapore would be the more appropriate company for the large Australian manufacturing company to establish a subsidiary owing to the currently existent political, legal and economic factors in the country. The lack of corruption, ease of doing business index, prevalence of the common law system and several other aspects were identified to be the key areas of considerations that lead to the preference of Singapore over Japan as the chosen economy. While Japan was identified to be a larger and more developed economy, the legal system and political bureaucracy were identified as key hindrances along with the overdependence on imports and the comparatively higher rate of inflation.
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