Trade diversification has become a key focus of the Canadian government amid rising uncertainty with the United States, Canada’s largest trading partner. A similar story is playing out in several countries where the volatile global trade environment has given a new priority to mitigating export risk – a large part of GDPs worldwide.
Canadian companies send 75% of their goods exports to the United States.
Newly appointed Small Business and Export Diversification Minister, Mary Ng says Canadian companies should look further afield for opportunities.
“Right now, Canada has preferential market access to 14 trade agreements and 51 countries. This is a real opportunity for us. The U.S. continues to be an important export market to us, but I also think there is a great opportunity to enable our small business to access these other markets as well,” Ng said.
If that inspires you to look to new global markets beyond North America, you’re in luck. There have never been more resources, tools, advisors, and funding available for companies of all sizes to expand their business into new export markets.
But before you get started, the first thing on the agenda has to be determining – Is it feasible for my company to diversify into new global markets?
We put this question to the experts in this month’s live #TradeElite Twitter chat and got so much great advice, insights and words of wisdom, we couldn’t fit it all in one article. Highlights of the chat are below, and you can scroll through the #TradeElite hashtag to follow the entire chat.
Panelists:
Nicole Verkindt (@nicoleverkindt) Founder + CEO @Offsetmarket – A procurement platform, driving diversity in supply chains, measures and tracking economic impacts – Dragon, CBC’s NextGenDen – The Pitch – Toronto, ON
Elise Racicot (@elise_racicot) CanExport program manager, Canadian Trade Commissioner Service – Funding program of the Trade Commissioner Service that aims to assist Canadian SMEs looking to diversify their exports, enter in a new market or export for the first time – Ottawa, ON
Yvonne Gruenthaler (@TCS_YvonneG) Trade Commissioner, Clean technologies – Remediation lead, Global Affairs Canada, based in the Prairie North Region ( AB, SK, MB, and NWT) – Calgary, AB
Paul Walters (@LimeTreeEurope) Managing Director, LimeTree Europe Limited – Connecting people with product, sourcing, import, export, manufacturing and supply chain – Halifax, UK
Igor Chigrin, CITP (@winglobal_igor) Export & Import Consultant, Win Global Partners – Helping Local Businesses Become #Global by providing them with information, tools, training and coaching they need to start or expand their export and import business – Richmond Hill, ON
With so much trade uncertainty, we are hearing a lot about the need for businesses to “diversify” their markets. What does this mean exactly? What are the advantages?
A1 part 1
Who puts all their eggs in one basket? The US is one of the most difficult and competitive markets in the world. If Canadian companies can succeed in the US they can likely be successful in other global markets with the proper preparation.— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
A1 continued Plus Canadian companies have great access into other markets, through Canada’s many trade agreements with other countries and regions around the world. Truly #TradeElite are accessing other markets beyond the US, and these companies are more resilient for it.
— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
we see with #canexport program that companies that are prepared and who make the move out of their comfort zone to tackle a new market tend to obtain strong #export results #TradeElite
— Elise Racicot (@elise_racicot) July 26, 2018
#TradeElite A1 Diversification means expansion to other markets, industries, and geographies – which means more sales and lower risk. Diversification shouldn’t just stop at selling or moving your product, however: having diverse supply chain options will also reduce risk.
— OMX (@offsetmarket) July 26, 2018
A1 In the UK we are all too familiar with trade uncertainty now, what is evident it is better to have a wide portfolio of client countries rather than having all your eggs in one basket, the main advantage being if one region is quiet the others pick up the slack #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
We’ve established that it makes sense to diversify. How can businesses begin to assess whether it’s feasible for them to reach into new international markets?
Identify markets in new locations that are similar to your existing niche market and get feedback on interest in your offerings @WTCWinnipeg @StrandridgeCan
— Siddha Param (@siddhaparam) July 28, 2018
A2: Small businesses, first and foremost, need to find a customer. We believe in working with big, global companies to work with them on all of their international requirements. Is a no-brainer way to enter a new international market.
— Nicole Verkindt (@nicoleverkindt) July 26, 2018
A2 Getting all the help available whether #FITT training, preparation with support support of @tcs_sdc & parthers such as @bdc_ca @ExportDevCanada and your chamber of commerce, research & do your homework… +always reach out to the @tcs_sdc in your target market. #TradeElite
— Elise Racicot (@elise_racicot) July 26, 2018
As a starting point, have a look at ITC’s https://t.co/c8Br0FjClG. It informs about the untapped export potential a country has for a given product in new or existing target markets. Based on an assessment of demand, revenue elasticity, relative market access,… #tradeelite
— Julia Spies (@Julia_Spies) July 27, 2018
A2. I always advise look what your competitors do, if you can compete with them and they are selling in different markets then so can you. #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
A2. There is a great deal of information out there, I often point people to the CIA website which has a fund of information on markets, here in the UK we have the DIT and of course Chambers and Banks #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
A2. First of all, determine their value proposition. To succeed in #export markets the product or service must have a clear competitive advantage. Answer a question: Why would foreign buyers buy from you versus your competition? #tradeelite
— Igor Chigrin (@winglobal_igor) July 26, 2018
We heard that diversifying all starts with research! Should businesses tackle their own market research or is it helpful to outsource this type of task – particularly for SMEs with limited capacity?
A3 Personally I believe in companies keeping this market research function inhouse, because the learning curve can be onerous the first time, and if this function is outsourced than the next time a company wants to enter a new market they will still lack the necessary skills.
— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
A3 one of my favourite tasks as a consultant is building clients’ in-house research capacity – even if then they outsource it, they’ll actually be better at briefing consultants and evaluating results!
— Gaby Castro-Fontoura (@uklatinamerica) July 26, 2018
#tradeelite A3 Why not both? There’s a wealth of information out there – but someone’s always going to have to do the legwork and see what’s most relevant to your organization.
— OMX (@offsetmarket) July 26, 2018
A3 When a SME has done its own preliminary research to define their strategy for a new market, #CanExport can support some costs to help refine it further, including consulting services for market analysis with local experts. #TradeElite
— Elise Racicot (@elise_racicot) July 26, 2018
A3. Also talk to companies that work in complimentary fields they will often help. Equally if you have a trade organisation talk to them. However the best market research is getting out there and visiting or attending an exhibition #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
#TradeElite A3 tons of free resources are there but with so much to look for investing some market research dollars makes sense. @bdc_ca offers this service as well as many other research firms. Resource for your toolkit ? https://t.co/cTbIrvnnp7 https://t.co/x2TWLjfcvp
— Emiliano Introcaso CITP PLog MBA (Cand.) (@introcaso) July 26, 2018
A3 cont’d Further #TradeElite companies will learn from every new market they enter and get better at introducing their products to new markets with every iteration. Why would you want another firm to have this expertise about how to sell your product in new markets?
— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
If businesses should look beyond the U.S. for their import/export markets, where are some good opportunities for these companies?
A4: Depends on their offering, but we prefer (for SMEs) to go into markets with existing large partners and clients, so wherever they are!
— Nicole Verkindt (@nicoleverkindt) July 26, 2018
A4 Best markets/ opportunities usually depend on your own company’s value proposition… However, Canada recently negotiated new free‑trade
agreements such as #CETA and #CPTPP which open new markets and level the playing field for Canadian companies #TradeElite— Elise Racicot (@elise_racicot) July 26, 2018
A4 LatAm not usually ideal as first export market but, depending on your sector, product, etc, look at countries like Chile, lots of Canadian companies here!
— Gaby Castro-Fontoura (@uklatinamerica) July 26, 2018
A4. That depends on your market sector, anyone in the infrastructure sector I would advise places like Vietnam, Indonesia and other markets in the region who are all spending on their infrastructure and have funding from the likes of the World Bank and ADB #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
A4. We recommend study the trade flows using databases like Comtrade – https://t.co/UND9KNMNek. You can look up where other Canadians already #export similar products and trust me, you will be surprized! even though #1 market will likely be the US #tradeelite
— Igor Chigrin (@winglobal_igor) July 26, 2018
#TradeElite A4 that will really depend on where their customers will be. This is why proper marker research is so important. Analyzing where some of the potential international enquires come from could be a “clue” although not always 100% accurate. Research Research and Research! https://t.co/dUWxssDXzK
— Emiliano Introcaso CITP PLog MBA (Cand.) (@introcaso) July 26, 2018
A4 And whilst your Southern neighbours may be falling out with China there is a massive demand for Western products from the Middle Classes which number around 450 million, you don’t need a big chunk of that market to have a decent business #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
What are some key considerations for companies expanding into new global markets? Product adaptation? Regulations? Marketing/Translation?
and by the way, did you know #canexport can offset some of your financial risk by sharing the costs associted with these kinds of expenses related to the development of a new market ? #TradeElite
— Elise Racicot (@elise_racicot) July 26, 2018
A5 All of those are very relevant but one area that is often forgotten is business culture and etiquette, it is very easy to make an unintentional faux pas, do your homework in advance. #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
A5: Initially, its all about introducing your company to potential foreign customers, so in other words: marketing, marketing, marketing. #TradeElite
— Nicole Verkindt (@nicoleverkindt) July 26, 2018
Q5. All of those + understand your foreign customers. Who are they? Why do they buy? What or who motivates purchasing decisions? Chances are those customers look for something beyond the price. Use #Canada brand to your advantage. #tradeelite
— Igor Chigrin (@winglobal_igor) July 26, 2018
#TradeElite A5 distribution networks, potentially working with agents, opening storefronts, considering multi languages profiles on their websites as well as proper language(s) in their labels. It is quite a complex task that is why it is recommended to tackle one market first https://t.co/e0RGg4eW0p
— Emiliano Introcaso CITP PLog MBA (Cand.) (@introcaso) July 26, 2018
All are very important, Ability to repatriate your profit, Translational risk, All Business environment risks https://t.co/wAg5ELHPXL
— petrolawyer (@oladapoyusuf) July 26, 2018
What are some pitfalls/redflags to avoid when taking your business beyond Canada/U.S.?
A6: How long it bloody takes!!! #TradeElite #SME
— Nicole Verkindt (@nicoleverkindt) July 26, 2018
A6. Absolutely right on the time issue. First thing I always say is don’t expect exporting to be an overnight success, you need to be patient and you have to spend money first, but patience pays off and international trade can be rewarding #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
A6 Believing doing business in a new market will be « just like in Canada”, underestimating the importance of personal relationships with local partners/clients and cultural subtleties… #TradeElite
— Elise Racicot (@elise_racicot) July 26, 2018
A6. Going for a deal without a contract in writing. Emails don’t have legal power in many export markets. Only written contracts duly signed and stamped are valide. Spend $2 to by international stamp @canadapostcorp and get a piece of mind #tradeelite
— Igor Chigrin (@winglobal_igor) July 26, 2018
A6. Failure to do due diligence on a new partner. Make sure you are going to get paid. Make sure you get your paperwork right, agreements, pricing and shipping #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
A6…Funding support? Check out programs like #canexport #CIIP, #GGI, #CTA, and special programs like our Business Women in International TRADE #BWIT. Not to mention @EDC @BDC & @CCC offerings. #TradeElite!
— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
A6 Not ensuring your intellectual property is protected, overlooking the applicable regulations and underestimating the often complex and/or lenghty certification processese needed to be able to export your products or technologies #tradeelite
— Elise Racicot (@elise_racicot) July 26, 2018
#tradeelite A6 It’s all about hitting the sweet spot in terms of expansion – you don’t want to outpace your capabilities or have resources go to waste. You want stable, sustainable growth – which means stable, sustainable investments too.
— OMX (@offsetmarket) July 26, 2018
#TradeElite A6 not knowing regulations or calculating #tariffs. Using the wrong #Incoterms. Ignoring these important points can be the difference between profit and loss! https://t.co/bvwrE2lDXU
— Emiliano Introcaso CITP PLog MBA (Cand.) (@introcaso) July 26, 2018
Here’s a common concern – With the rapid trade policy changes and seemingly unstable trade environment – How can one assess country and political risk in a potential new market?
A7…Understand what the risks are &manage them accordingly – Again, @TCS-SDG can help you understand risks & take proper decisions on how to manage them- but we should not be your only source of information. Check out the local Canadian Chamber of commerce #CCOC in the market.
— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
#TradeElite companies do research before they enter a new market! The @BDC did a survey of Canadian exporters recently. Among their findings – Market preparation was the single largest factor contributing to whether a Canadian company was successful in international markets.
— Yvonne Gruenthaler (@TCS_YvonneG) July 26, 2018
A7: At the end of the day, stay close to the end user in the country and form long term partnerships with them. As the trade environment changes, hopefully they will work with you.
— Nicole Verkindt (@nicoleverkindt) July 26, 2018
A7. Very good question and it goes back to research, there will I am sure be government advice as well as from financial organisations. Mitigate the risk by, for example, taking out credit insurance. #tradeelite
— Export Paul (@LimeTreeEurope) July 26, 2018
Read the rest of the chat and join future discussions by following the #TradeElite hashtag. And stay tuned for the next #TradeElite chat, coming up Thursday, August 23 at 2:30-3:30PM ET, and if you haven’t yet, join us on Twitter at @FITTNews.
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