Summary
Port of Singapore Authority (PSA), once the leading maritime center in Southern Asia, is now facing stiff competition with lower-cost ports such as Port of Tanjung Pelepas (PTP) and Port Klang. China is a big business partner or source of revenue for the PSA shipment trade.
PSA trades and is in good relations with the United States, China’s economic rival (Chen & Leong, 2021). Having noticed PSA’s possible conflict of interest in choosing between China and the US, China has started developing trade routes in Malaysia. China has directly invested in the Malaysian port, Malacca Gateway, to expand its geopolitical influence. Even if China fell out of business with PSA, it still has alternative trade routes with Malaysia.
Following its increasing economic power, China has influenced at least 20 nations to develop the Belt and Road Initiative (Chen & Leong, 2021). China wants to control road and water trade routes by making the Straits of Malacca the center of trade. That way, the nation can control the trade routes to Europe and the United States. In the past, PSA was the gateway to Strait Malacca. Therefore, PSA will be left out when the Belt and Road Initiative develops an alternative route to access the port. Alex is concerned about the PSA ideology strategy that ignores the ongoing and future competition. The Strait of Malacca has become the center for friendly trade with low-cost transactions.
On the other hand, PSA continues to operate at high prices for manufacturing and distribution. Although PSA has higher capacity and efficiency than other ports, the Malaysia-Singapore rivalry could sour business operations in the port. PSA operates under an ideologic strategy that seeks to lean more on innovation to increase operational prices.
Aspects of Analysis
One of the critical aspects for analysis is a reevaluation of PSA models of trade. According to Chen & Leong (2021), for a long time, PSA pushed innovations and efficiency to cut the port’s highest costs and offer discounts to retain contracts. This strategy is a challenge because Strait of Malacca has become a low-cost trade center. Many PSA investors, including China and Europe, are trading more with this port. Furthermore, the neighboring ports, Port Klang and Port of Tanjung Pelepas, offer lower-cost trade terms, thus taking the larger market share in the industry.
Singapore has made many enemies in the region, including its mother country, Malaysia. There is an ongoing economic rivalry between China and US in which PSA has already taken the US side. A solution to this problem would be adopting pragmatism by revising its production costs and prices of goods and services. PSA must offer prices close to its rivals’ prices, or it will run out of business. Achieving these reduced prices would require resolving rivalry competition with its neighbors and developing partnerships. Collaborating with neighboring ports such as PTP would entail successful strategies, including coordinating promotions and prices, sharing information for clearance, and joint-venture operations.
Another aspect of decision-making is whether PSA can withstand or win future competition posed by Belt and Road Initiative. China is working to establish shipping routes through Malaysian ports and eliminate Singapore if necessary (Chen & Leong, 2021). PSA already experiences rivalry from Malaysia and is equally dependent on the Straits of Malacca waters for shipping. The China-Singapore relationship is based on the stability of China-US trade relations. In case of further disagreement between the two economic giants, China could cut ties with PSA.
China could cut ties with PSA before the initiative’s completion should its direct routes in Malaysia succeed. Furthermore, should the Belt and Road initiative overtake these waters, PSA will have no access to the waters. The solution to this problem would be for PSA to end its rivalry with Malaysia and China and join the initiative. Positive relations with neighbors guarantee that even when the Strait of Malacca is the main trade center, China and Europe will still trade in PSA. The continued rivalry will only ensure that PSA is closed out of business, especially by its main investors, China and South Asian countries. Singapore must be practical by acting on the current trade trends and seeking a partnership.
Closing Discussion
A pragmatic strategy is critical in handling economic-changing situations in business. Dealing with reality or being practical about an incident solves problems better than relying on old ideas. Executives in a similar sector should look for collaborative concepts that help in providing a prompt solution to a continuing problem. Business management must practice flexibility and open-mindedness in the world of changing trade trends. They should be ready to adapt the emerging trends to keep top performance. In this case, the executives must plan to leverage prices to match those of their competitors. Notably, drawing many trade boundaries expands rivalry and chances of losing economic battles. By making many enemies in the immediate business environment, PSA can either keep its model and lose trade investors or end enmity by seeking partnerships with its neighbors. Therefore, business management should work towards creating positive relations that strengthen their businesses.
Reference
Chen, M. J., & Leong, J. (2021). Port of Singapore authority: Ideology vs. pragmatism—trade, and geopolitics in the Malacca Strait. Darden Business Publishing, 1-18. Web.