Domestic firms cannot afford to stay home because Canada is a trade-dependent country in a globalized economy, experts warn.Eric Fitt
Selling abroad is good for a company's bottom line: exporters typically outperform those who stay at home, according to federal government data.
Yet only 10 per cent of small and medium-sized Canadian companies exported goods or services in 2011, according to the federal department of Innovation, Science and Economic Development. With exports forecast to grow 6 per cent in 2017, according to Ottawa's Export Development Canada, why don't more Canadian companies beat a path to the world?
Trade advocates cite fear of the unknown.
"There is a lot of apprehension; it is a lack of knowledge and lack of experience and all of that can be remedied," says Lorna Wright, executive director of the Centre for Global Enterprise at York University's Schulich School of Business.
Domestic firms cannot afford to stay home because Canada is a trade-dependent country in a globalized economy, warns Philip Turi, general counsel and director of global business services for the Canadian Manufacturers and Exporters (CME).
"They have to think about international markets if they are going to continue to grow … and the sooner you can think about [going] international the better."
He and other trade experts were asked to identify common mistakes made by Canadian companies that sell abroad. Here are some examples:
1. Failure to develop an export strategy
Companies underestimate the homework required to analyze what makes their product or service unique in an international setting and who are the most likely buyers and competitors.
"What is your value proposition?" asks Julie Pottier, vice-president of commercial markets and small business for the Export Development Canada, a federal agency that lends to Canadian exporters. "You need to take the time to position your products and services and to do the [export analysis] work…You can't go into a market without the proper strategy."
2. Ignorance of available resources
Companies are surprisingly unaware of resources from federal and provincial government agencies to mitigate financing, insurance and other risks, subsidize travel to overseas trade shows and provide match-making introductions to foreign customers.
"Companies fail to take advantage of resources that are already available to them," says CME's Mr. Turi. For example, the federal government's Trade Commissioner Service operates in most foreign countries (and some provinces have their own trade representatives), providing insight on local market conditions and reliable contacts.
3. Inadequate attention to quality
In some markets, Canadian companies are up against precision-manufactured products from Germany and Japan that sell to customers with exacting standards. Canadian businesses that cannot match on quality or fail to stay ahead of changes in product specifications risk losing customers.
"If you have quality, you can sell at the price you want," says Schulich's Prof. Wright. She cites the case of a Canadian water purification company that chose to compete only on contracts that valued quality. "They have gone from strength to strength," she says.
4. Underestimating supply-chain issues
Managing the flow of goods, financing how they get to market and tracking information to ensure secure, on-time delivery is doubly challenging in an international setting.
"If there is any failure of the flow of any one of those, there is trouble in the supply chain," says Michael Haughton, a CN fellow in supply chain management at the Lazaridis School of Business and Economics at Wilfrid Laurier University.
For example, he says, a Canadian exporter who fails to secure an irrevocable line of credit before shipping goods could wind up not getting paid in full if a foreign customer reneges on a contract.
5. Failure to identify the appropriate foreign representative
Some companies fail to do the necessary due diligence to recruit agents or distributors in foreign markets. In some cases, an exporter is unaware, initially, that the chosen representative actually acts for an already-established competitor of the Canadian company.
"You really have to spend a lot of time vetting your agents," says Mel Sauvé, who worked in international sales for more than 30 years and now is president of Global Growth Results, a Burlington, Ont., export consulting firm. He urges clients to interview potential foreign representatives about their sales track-record in the industry the Canadian company is operating in. As well, says Mr. Sauvé, some Canadian companies fail to provide adequate training for overseas agents to understand what differentiates the product or service from the competition.
6. Lack of follow-up and patience
Some companies underestimate the commitment required to build sustainable relationships with customers, especially those outside North America. In emerging markets, "it may require a lot of visits," says EDC's Ms. Pottier. "It's not something that happens overnight."
Mr. Sauvé says some of his clients complain their foreign representatives are not making sales; then he discovers there has been no regular contact or goal-setting between the Canadian company and its agent.
CME's Mr. Turi notes that in some countries customers expect the exporter to set up a local office. "Having a sustained presence is really important in many countries and it is a part of doing business," he says.
Despite the potential pitfalls, experts say Canadian companies can succeed abroad with preparation and patience.
"If we throw up our hands we would never get anywhere and our domestic market is only so big," says Prof. Haughton. The challenge for exporters, he says, is to figure out "what to learn about a market to get ahead rather than looking at things that could make it difficult."