Governments and central banks around the world are taking unprecedented steps to stimulate national economies in ways that they hope will bring sustainable economic growth and prosperity. Private sector companies are working hard to re-assess their commercial strategies in order to come up with winning solutions, which would allow them to gain access to new markets and to manage risks related to their business expansion plans.

Beyond the broader macroeconomic picture, it is important to ask a more specific question as to how Canada’s small and medium-sized enterprises (SMEs) – those companies that represent over 98 percent of Canada’s enterprise base – are responding to these tumultuous times. Is the European market still a viable destination for Canadian SMEs, which are so critical to Canada’s economic success?

Gauging the European waters for Canadian SMEs

In the news, we hear a great deal about the ebb and flow of our industrial mega-players, such as Air Canada, Bombardier, Blackberry, CAE, Barrick Gold, and Suncor Energy, among others. But what about our small and medium-sized of companies?

Omar Allam, CEO and founder of Allam Advisory Group (a Canadian-based global business, strategy and commercial diplomacy consulting firm), has recently published opinion pieces in Profit Guide and The Globe and Mail on the subject. He points out that all companies interested in the European markets should accept that after Brexit and CETA-related uncertainties “things will never be the same”.

However, in an ever-transitioning European economic space, times have changed. Regardless of the final outcomes of Brexit and CETA, the European economies have been and will continue to be a market for Canadian SMEs to succeed beyond their own “safe conventional borders”.

Here’s why it still makes sense to look to Europe

Based on my research and consulting work in the Canadian SME community over the past 25 years, I see a lot to be positive about when it comes to Canadian SMEs’ ability to improve their standing in the European exporting arena. The key advantages which will allow Canadian small businesses to continue to reap the benefits of exporting to Europe are:

1. A trade environment that includes a weaker Canadian Dollar, a weaker Pound-Sterling, lower energy prices and the steady economic recovery of the Eurozone;
2. Strong demand from European customers for Canadian goods, products and services in certain areas, such as: seafood and agri-food, consumer products, technology and innovation, and professional services (as identified during the CETA negotiations);
3. Increasing level of Canadian SME managers with international experience who perceive internationalization as an opportunity;
4. Privileged access by Canadian SMEs to human resources of European extraction, generated by various waves of immigration;
5. Availability of various export incentives, financial services and training to help SMEs expand globally offered by public-sector institutions like Export Development Canada (EDC), the Business Development Bank of Canada (BDC) and Canada’s Trade Commissioner Service (TCS);
6. Availability of direct financial assistance to Canadian SMEs seeking to develop new export opportunities, such as the CanExport program;
7. Privileged access to the EU opportunities and partners via the Canadian Manufacturers and Exporters (CME) Enterprise Canadian Network website.

Opportunity is out there for companies willing to seize it

The real challenge of getting more Canadian SMEs to consider opportunities in the European markets lies in their tendency to be overcautious and to underestimate their own export potential. As analyzed by the Conference Board of Canada (Macmillan, 2008), too many Canadian business executives have the perception that their products or services may not be “exportable”.

In addition, they often perceive these markets as being too risky, as they do not feel they have the skill and resource capability to internationalize. They are not ready to expand their customer base because they wish to stay small and keep their operations “manageable”.

A panel of experts gathered in May 2015 at the Toronto Region Board of Trade to share thoughts on ideas on how to better engage Canadian companies – and particularly SMEs – into the exporting realm, brought some interesting perspectives. The panel included: David Rawlings, CEO, JPMorgan Chase Canada; Dianne Craig, President and CEO, Ford Canada; and Sam Sebastian, Managing Director, Google Canada.  The panel was assembled as the Board unveiled its new Trade Accelerator Program (TAP) GTA, which was designed to assist businesses looking to get into exporting.

It seems that the solution in many of these instances lies in getting more of the small to medium-sized enterprises to think about the real advantages of doing business in the European context, and go after the opportunities which these markets represent.

What Canadian SMEs have to offer is often far more important than even they themselves may believe. In addition, the market conditions should inspire Canadian SMEs who want to accelerate their growth.

I would then leave the SME business owners who have maybe been holding back on the idea of exporting to European markets with three key recommendations:

1. Immerse yourself in your target market

Solid in-market engagement is necessary to establish the relationships, trust and brand awareness critical to building a sustainable market presence. Meetings with prospective customers and connections with potential investors and partners come much faster when you are in close proximity to the people you want to meet.

2. Invest your efforts in product validation and exposure to local competitors

Acquire awareness of the local business culture and the competition to be faced. Use the time in-market to vet and validate your product – this experience will really build your confidence.

3. Take advantage of online, technological tools to enhance your company’s marketing efforts

It is no longer about taking out an advertisement in the Yellow Pages or the local newspaper – a plethora of opportunities has opened that was not there in the past and is now right at your fingertips.

The post Canadian SMEs can overcome CETA and Brexit uncertainty in Europe appeared first on Trade Ready.

Some are quick to state that by their very nature, SMEs are too small to penetrate Asia’s diverse and complex markets.

Others would argue that the current governmental policy framework is not offering the right settings to enable SMEs to take full advantage of these lucrative market opportunities in Asia.

And finally, the SMEs themselves, highly intimidated by the scope of business activities in Asia, simply do not know where to start.

In the recently released Building Blocks for a Canada-Asia Strategy, Stewart Beck, the CEO of the Asia Pacific Foundation of Canada, said:

The rise of Asia marks one of the defining shifts of the 21st century. Within five years, Asia will represent 44 percent of the world’s gross domestic product, 54 percent of the global middle class, and will consume $4.8-trillion (U.S.) annually – 42 percent of the world’s total consumption.

The launch of this document on January 28th at the Ottawa Forum is a timely and welcome initiative which, along with British Columbia’s new Raising our Game in Asia trade strategy, will help to increase Canada’s focus on Asia.

It delivers a clear signal to the private sector to take initiative and turn opportunities into successes in this dynamic and diverse region.

The importance of Asia to the future of our economy is unquestionable, especially in the context of Asia’s current shift from an investment-led economy to a consumption and service-driven economy.

Large-scale urbanization, the expansion of the middle-class and sustained economic growth are among the key drivers of future development and wealth in Asia.

This will translate into increasing demand across various industry sectors, such as: power supply and distribution, food production and logistics, and electronics.

But the biggest demand will be in service sectors, including: computer and IT, financial and insurance, engineering, architectural and science, resource and agriculture-related services, health and education services.

These trends should be seen as the ones providing solid opportunities for Canadian businesses.

However, Asian markets are becoming increasingly complicated to access, as governments and businesses all around the world focus on the opportunities in the region.

In order to be successful in Asia, Canadian SMEs will need to find ways to operate in a more competitive environment.

Asia is not all one market and Canadian businesses must not consider it as homogenous. Each country has different cultural traditions, languages, economies and governments.

One approach or market entry strategy is not going to work across each country, or even across different regions within the same country.

Understanding the parameters of various Asian markets from a political, social, economic and technological point of view is key for Canadian SMEs to succeed in this part of the world.

3 ways to help Canadian SMEs tap into Asia

When talking to SME managers, I often hear comments pointing out three key challenges they face when trying to do business beyond our borders, and more specifically in Asia:

• low confidence and lack of international experience
• lack of knowledge and poor analysis of the Asian markets
• lack of long-term commitment

1. Think bigger

The small and medium-sized businesses in Canada at all levels of development have a confidence dilemma. Why?

Because it takes a certain skill set to go from domestic to international operations, and to shift business-changing decisions like expanding internationally from the back of business minds to front and centre.

According to the 2015 report by HSBC and the Conference Board of Canada, Selling to the World: The Keys to International Business Success, the four factors allowing us to determine the company’s readiness to go global – and what HSBC calls “a global competitive advantage”—are:

1. Skilled executives
2. Market knowledge
3. The ability to innovate
4. International networks

Canadian SMEs who master these keys will be the ones capable of creating successful operations in the Asian markets.

While every part of the “global competitive advantage” framework is important, the most crucial component to boost the confidence of a small business is the company’s managers.

Talented executives can understand the challenges of expanding internationally, play an influential role in identifying international opportunities, and boost the company’s international competencies by recruiting experienced international business employees and consultants.

That type of “out of the box” and entrepreneurial vision is a big reason why, for instance, AMP Solar Group, an experienced rooftop solar project developer from Port Credit, Ontario, has done so well.

A couple of years after its incorporation in 2009, the company started a careful process of foreign market selection and has established quality business connections in the United States, the U.K., and expanded its operations to the Asian markets of India, Japan and Thailand.

Expanding to unfamiliar Asian markets was somewhat risky and uncertain for AMP –as noted in the December Business Report of the Globe and Mail by Dave Rogers, AMP’s President and CEO.

However, the company’s managers’ strong belief that the market for renewable energy was about to take off, coupled with their solid partnerships in the U.S. and the U.K., allowed them to make confident inroads in Asia.

2. Create your own global knowledge network

Market analysis is far from easy. This is even truer when the company is facing the challenge of targeting a completely unknown market with a high level of cultural and economic differences.

Unfortunately, too many companies are making business decisions based on just a “snapshot” view of the market, which is often inaccurate.

The pace of change is so rapid in Asia that the company’s plans become obsolete before they are even fully implemented.

A lot of market analysis could be biased and poorly made, which results in failure or misalignment of the company’s international strategy.

The managers of Canadian SMEs who aspire to be successful in Asian markets need to find a way to surround themselves with people who have been already exposed to Asia and its various geographic areas.

It is essential to identify who will be your sources of market information and intelligence. This could include taking full advantage of trade promotion agencies and their various market studies and innovative tools.

It may also mean an expanded network of Canadian and Asian consultants and experts. Having a globally oriented business spirit also includes being willing to get on a plane and be physically present in your new target market in Asia.

Prospective CEOs developing the necessary level of commitment for a given market in Asia should attend international conferences and trade shows and develop local contacts which could include new local hires.

According to Ken Shields, CEO of Conifex Timber, a Vancouver-based forestry products company, travel seems to be a must.

For companies that want to expand to China, he is advising to use trade missions which are an efficient way to make connections and to stay apprised of the country’s economic and financial plans and priorities.

3. Build your presence in the market

To successfully capture the opportunities in Asia, Canadian SMEs need to create foundations for deeper and broader relationships with a given market.

Physical presence and personal contact are viewed as real assets in Asia. Setting up a local office in Asia is the most effective way to conduct business transactions, whether with customers, suppliers or partners. This is also the best way to deal with governmental authorities.

Establishing a long-term presence and making the necessary investments help SMEs prepare for tough times and avoid being left behind. This type of presence is a key factor in dealing with the market volatilities.

It is a well-known fact that when China’s economy overheated in the mid-to late 1990s, some of the Western companies started to pull back and only a few anticipated the staying power that was needed to weather the market storms.

China and other Asian markets will no doubt witness new periods of turbulence in the future, as their economies continue to grow.

A long-term presence is also a key factor in developing the necessary level of connectivity with Asian markets. There is presently a tendency to rely too much on technology to fulfill the need for communications.

However, Asian cultures, diverse as they are, have a particular preference for personal contact to establish trust and good reputation.

Nautel, a Nova-Scotia-based manufacturer of radio broadcast transmitters, became international thanks to its innovative business model using an extensive network of sales partners around the globe.

These sales agents, partners or independent contractors – according to Kevin Rodgers, the company’s President and CEO, “are the people on the ground who can interact directly with clients.”

Nautel has been relying on their sales partners’ knowledge of local language, customs and regulations, and proactively leveraging their strengths, connections and knowledge, in order to expand its business beyond Canada’s borders.

Today, Nautel operates in 177 countries, including many in Asia. The company is still on an expansion path, this time to China, one of the few countries Nautel is not yet in, says Rodgers. Nautel has recently entered into an agreement with a sales partner there.

Entry into Asia’s national or regional markets requires adequate resources on-the-ground to facilitate the company’s transaction-based commerce and selling via multinational value chains.

A lack of in-person presence, investment in local human capital, and long-term commitment to the market, may not be simply sustainable in the Asian context.

Therefore, it is understandable why so many foreign companies, which are our competitors in this part of the world, are busy growing their presence in Asia and planning to position their businesses for success in the Asian business ecosystem.

The post Build successful Asian market entry strategies with these 3 tips for SMEs appeared first on Trade Ready.

As an international business practitioner with a long-standing interest in the export activities of Canadian SMEs, I regularly encounter Canadian business executives and try to stimulate their interest in chasing the enormous business opportunities in the world’s emerging markets.

Only a few, however, have been able to make a mark internationally.

A new global business environment for Canadian SMEs

Faced with the evolving and complex business environment caused by the rise of emerging markets, Canadian SMEs have no choice but to adapt to these new business realities and think globally about every aspect of their business activities.

The world is simply becoming too interconnected for Canadian companies not to think about their businesses in global terms.

The key question would be to understand how to capture the sizable opportunities which emerging markets can offer today. The companies from these markets are growing more sophisticated in their ability to compete with developed economies, so Canadian companies must similarly adapt to compete with them.

The shift is already under way, and is likely to accelerate over the next decades. It will therefore be immensely challenging for Canadian SMEs, who are now forced to innovate their market entry strategies.

3 Strategies for SMEs to succeed in new markets

It is in this respect that I could offer three specific ideas for how executives should revisit their market approach.

1) Firstly, they should adjust their business models by targeting emerging markets beyond the BRICS countries.

The challenge of understanding and succeeding in more than 100 emerging markets can be so intimidating that most executives shy away from trying to do so.

More recently, there has been more discussion about MINT (Mexico, Indonesia, Nigeria and Turkey). Of course, no company with global aspirations can ignore China and India. However, companies should also build positions in markets that may offer better opportunities in the short term.

In addition, Canadian SMEs should be looking at the markets where the Canadian government already has trade agreements in place, including seven countries in Latin America, Mexico, South Korea and Israel.

This list continues to expand with the conclusion of negotiations for the Canada-EU partnership. It is likely that Canada will soon be the only major developed country to have preferential access to the world’s two largest markets – the European Union and the United States.

2) Secondly, don’t be afraid to hire outside help in the form of independent consultants or boutique consulting firms that can offer senior level expertise at a competitive price. As a decision maker in the C-suite, handing off work forces you to consider your domestics, global business activities and the steps taken to perform them in an objective, ruthless and systematic way.

Defining a process like this flushes out inefficiency and you will save money in the long run.

When you outsource, you can focus your time, attention and resources (human & financial capital) on your company’s core competencies. This will free you up to concentrate on setting new goals, find ways to maximize your company’s bottom line and foster personal relationship building or networking.

3) Thirdly, as part of this new and engaging approach, company executives should consider refining their footprint in emerging markets by forming local partnerships.

While the rationale and approach to a partnership agenda must be carefully considered and tailored to each company’s own context, the emerging-market landscape is already witnessing different approaches to partnering.

According to the Boston Consulting Group, one of the key challenges facing executives is to address the higher expectations of local partners.

In their May 19, 2014 article, the BCG notes:

“Today, partnerships between foreign and emerging-market companies are on a more equal footing. Local partners may inject capital or contribute valuable technology. They may even insist on a global partnership.”

Don’t wait for the future to change your strategies

This shift is already under way. If we follow its logic, it means that if a Canadian provider of waste processing equipment decided to approach a number of preferred local-partner candidates for the Philippines market, some of the Filipino companies could request not only to help build up their local business, but also to be the partner for expansion into other overseas markets.

In order to navigate the complexities of entering an emerging market successfully, Canadian SMEs need to get sufficiently familiar with the market in question, preferably through on-the ground experience.

Forging a connection with a local company can help identify potential acquisition targets, joint venture partners, contract manufacturers and agents or distributors. This connection could also assist with conducting an investigation of the operational, technical and financial strengths and market position of a potential local player.

This true ‘market immersion approach’ can definitely reduce the level of risk and help Canadian SMEs make their partnership connections in the emerging markets run smoother and in a much more mutually beneficial way.

Tapping into new markets is clearly a way to go in the future. There’s no doubt – there will be a right time to expand your company overseas. Finding the balance between caution, careful planning, and seizing overseas opportunities at the right time will be the key to international success.

What do you think executives need to do in order to create the best possible partnerships for their businesses?

The post Are Canadian SMEs ready for the new global business environment? appeared first on Trade Ready.

These markets remain an unprecedented source of economic growth across various industry sectors, and hundreds of millions of households will continue to join the ranks of the middle-class consumers in the years ahead.

According to the Monitor ICEF, while definitions and classifications of ‘emerging markets’ may vary, the general view is that the BRICS nations and a number of non-BRICS emerging markets (such as Indonesia, the Philippines, Vietnam, Mongolia, Myanmar, Nigeria, Ghana, Morocco, Turkey, and Mexico) will play a prominent role in shaping the new international trade environment.

Predicting future economic growth in emerging markets

Consider what the Monitor ICEF has to say about the growing economic power of the emerging markets:

• Between 2004 and 2013, the BRICS economies doubled in size and now collectively account for 21 percent of global GDP and 53 percent of emerging market GDP.
• Last year, emerging markets were home to 85 percent of the world’s population, and 90 percent of those under age 30. Their total population is expected to grow at three times the rate of developed economies between now and 2020.
• The BRICS countries are home to 268 million households with an income over US $10,000—a figure that is more than the US and Eurozone combined.
• Estimates from The Boston Consulting Group and the global consulting firm McKinsey & Company further predict that the middle class income group in the Association of Southeast Asian Nations (ASEAN) region will exceed 100 million people by 2020.
• McKinsey & Company has forecasted that 128 million African households will earn US $5,000 a year or more by 2020, enabling them to spend half their income on non-food items. Furthermore, Africa’s middle class families—those earning US $20,000 or more—outnumber India’s.

A shift in the central players in international trade

These powerful statistics help us better understand why the emerging markets are more important today than never before, for three main reasons:

1) Rising incomes is a real driver of emerging market economies

The Boston Consulting Group projects that in Turkey, an additional 6 million households will enter the middle and affluent classes in the next five years.

In Indonesia, they project that 68 million people—roughly equivalent to the entire population of the UK—will make a similar leap by 2020.

Thirty-seven percent of Brazil’s 60 million households will belong to the middle and affluent classes by 2020, compared with 29 percent now, and will represent a US$1.2 trillion market.

In China and India, such households will represent US$10 trillion in buying power.

2) Transformation of the emerging markets’ business ecosystems is directly affecting business models in developed countries

In most emerging markets, domestic companies with low cost structures and more advanced knowledge of local consumers are quickly improving their operations.

These young and dynamic companies are also becoming more aggressive in moving onto the world stage and in competing with the companies in the developed economies.

As emerging markets develop further, we should expect that companies based there will continue to expand their presence and compete with companies in developed countries with low-cost production.

They will be growing by invading the traditional territory of industrial countries and fine-tuning their capacity to manufacture increasingly sophisticated products and services.

3) Integration of the emerging markets’ financial institutions is reinforcing their status as central players in international trade

This new trend would allow developing countries to grow in a more financially integrated fashion and provide themselves with a competitive edge for conducting commercial operations by relying on their own financial centers and currencies.

The newly created New Development Bank operated by the BRICS states, for example, stands as an alternative to the existing US-dominated World Bank and International Monetary Fund.

How can businesses identify which emerging markets represent the best opportunities for their needs?

The post 3 ways emerging markets are aggressively re-shaping the international trade environment appeared first on Trade Ready.