3 things to consider when picking a location for a regional HQ

In an increasingly globalised economy, expansion beyond one’s home market helps to unlock revenue potential, diversify one’s customer base and broaden the scope of investment opportunities. For multinational companies with a strong international presence, the next step to cementing their positions in global markets lies in successfully establishing regional headquarters.

Schneider Electric, a global specialist in energy management systems with operations in more than 100 countries, established its regional headquarters in Singapore in 2018. At that juncture, business exposure in emerging markets had risen from 18 per cent in 1998 to 42 per cent in 2018 for the company. Its people footprint in Asia-Pacific had also grown from single digits at the turn of the century to 31 per cent that year.

And as the energy industry began to undergo dramatic change, driven by megatrends such as urbanisation, the industrialisation of new economies and the digitisation of industries and society, the time was ripe for Schneider to explore a prime location for regional growth in Southeast Asia. Despite high operating costs, Singapore was selected as the regional HQ because of its first-rate infrastructure, strategic location and business-friendly corporate ecosystem.

To analyse and document the firm’s considerations when setting up a regional HQ, as well as understand the factors in building a business ecosystem to provide complex solutions to clients, Arnoud De Meyer, University Professor and CW Chan of the Centre for Management Practice (CMP) at SMU developed the case study, Schneider Electric: Optimising Business Opportunities from its Regional HQ in Singapore.

Here are three key learnings from the study on why Schneider decided on Singapore for its regional HQ:

1. Top location for business development in the region

Singapore was primarily chosen as a regional hub due to its geographical proximity to business opportunities, serving as a key node in Schneider Electric’s global supply chain management process.

Located in the heart of ASEAN, along strategic shipping routes, the city-state is a central destination for Schneider Electric’s suppliers and customers alike to organise their resources and talent. With other MNCs also looking to expand their business footprint in the region, decision-makers could gather in Singapore when exploring strategic solutions.

Furthermore, ASEAN is home to over 600 million people and boasts an annual economic growth of 4.7 per cent. With 35 per cent of the population under 20 years of age, the region was poised to welcome a large number of middle-income consumers. And while Singapore is a cosmopolitan, developed country, it is positioned close to an emerging market cluster. This aligns with the company’s strategy to reduce dependency on mature markets and build relationships with developing countries in the region with greater potential for growth

At the regional level, the company adopts a “glocal” strategy - one that combines local and global considerations - which takes into account the different maturity levels of individual markets. Rather than creating a one-size-fits-all solution for the various markets in the region, Schneider management believes that customers and local staff may flock to its regional HQ to learn about the latest product offerings before rolling them out regionally.

2. Ready workforce

MNCs usually face the challenge of hiring the right global talents fluent in local languages, business practices and cultures to power their regional hubs. Moreover, the perfect employees would also need to combine local knowledge with competencies required for a digital economy — with the ability to support traditional business with, say, software development or data analytics skills, to enable digital transformation.

With a highly educated talent pool and the use of English as the business language, Singapore provides a globalised workforce to support its regional hub requirements. Regional workers can also be rotated around the Southeast Asian markets, with Singapore as a base, to be exposed to different cultures and business dynamics, for them to gain relevant experience.

3. A conducive business ecosystem

Although MNCs oftentimes meet with hurdles like administrative inefficiency or governmental restrictions when entering foreign markets, the Singapore government ensures a smooth transition for overseas companies setting up office in the country “by acting like a partner”, and provides readily available consultations on how the regional market is progressing.

In particular, Singapore's Economic Development Board (EDB) facilitates investments in the country, supporting existing companies to transform their operations and partnering companies to grow new corporate ventures from Singapore. EDB also helps build a local business environment that is conducive to collaboration and has been developing a dynamic start-up community to drive innovation.

For a company like Schneider that is leveraging its reputation as a digital energy management expert, another draw was the Singapore government’s investment in digital infrastructure to help the country become a smart city. As such, local projects within the hub could serve as test beds for future in-market roll-outs in the region.

As a regional hub, Schneider Electric’s Singapore office is also a showcase for the firm’s products and demonstrates how its offerings could be implemented within the business operations of regional clients. The local team also spearheads the coordination of supplier operations and centralise the planning, ordering and distribution functions for clients. Additionally, the hub manages a talent development programme where high potential employees are offered opportunities to work overseas and gain valuable international perspectives, orientation and exposure to other cultures.