STRUCTURAL & MACRO-ENVIRONMENTAL ANALYSIS OF THE FACTORING INDUSTRY IN SINGAPORE

Abstract

Factoring has traditionally not been well known among the business community. However the rapid expansion of the factoring industry in the late 1980s and the earlier I 990s in Singapore indicates its growing importance as a financial service. The participation by the major local banks, the incorporation of factoring in the Local Enterprise Financing (LEF) scheme and the public listing of International Factors Singapore (IFS) in 1993 all point to the increasing recognition and status of factoring. This Academic Exercise investigates the past and current status of factoring in Singapore and assesses its future prospects. The attractiveness of the industry is evaluated using Michael Porter's Five-Forces model. We conclude that the structure of the industry does not favour the existing factoring players in the market and neither does it encourage new entrants. Further analysis of the macro-environment beyond the industry's boundary, on the other hand, suggests that there are other reasons such as regionalisation to support the current optimism of the industry's growth. As an illustration of the findings, we employ the market leader. IFS as a case-study to illustrate the fact that incumbents and potential entrants need to build certain internal strengths and adopt certain strategies to be successful in the industry. These factors, together with favourable macro-environmental developments, appear to offset the disadvantages resulting from the nature of the industry structure.