With geopolitical tensions reshaping supply chains, unilateral tariffs disrupting established trade agreements, and regulatory complexity increasing across regions, global business decisions carry more weight and risk than ever before.

According to the World Trade Organization, global merchandise trade volumes are projected to grow in 2026, but at a slower and more volatile pace than in previous decades, driven by geopolitical fragmentation and policy uncertainty. In other words: opportunity is there, but so is risk.

Against this backdrop, the most successful organizations are not asking whether they should grow internationally. They’re asking smarter questions about how.

1. What are some of the most important steps to take before venturing into a new market?

One of the most common mistakes in global expansion is reacting to opportunity before assessing readiness.

Before venturing into a new market, organizations should conduct a situational analysis, including assessing organizational readiness and planning and analyzing the results of international market research. This is not simply a planning exercise, it is a risk filter.

As the guide explains, “Before an organization embarks on a new initiative in international trade, it is important to assess the organization’s current conditions, attitudes, and resources”. This assessment helps determine whether the initiative is feasible and whether the potential gains justify the exposure.

Companies that skip this step often become reactive exporters, responding to inquiries without clear strategy or trade expertise. In today’s environment, readiness is a competitive advantage.

2. What international market research do you need to do before expanding into a new market?

International expansion demands structured research, not guesswork.

The guide outlines a seven-stage approach to international market research, beginning with defining the research objectives and progressing through stages such as screening potential markets, selecting the research design and data sources, and ultimately presenting conclusions to then apply the research. Each stage reinforces disciplined decision-making.

Beyond methodology, macroeconomic indicators play a critical role. The guide highlights key data points including Gross Domestic Product (GDP), GDP per capita, Household Disposable Income, market size, unemployment rate, population, and inflation rate. These metrics help businesses evaluate market suitability and purchasing power before committing resources.

In other words, expansion decisions should be evidence-based—not optimism-based.

3. How do tariffs introduced unilaterally by the U.S. government affect trade between Canada, the United States, and Mexico, even with CUSMA in force?

North America illustrates how quickly trade conditions can shift.

While CUSMA is designed to facilitate trade, recent unilateral tariff actions by the U.S. government (2025) have disrupted this predictability. Businesses that once relied on stable, tariff-free access have faced sudden cost increases and regulatory uncertainty.

As a result, companies must assume volatility. The guide notes that businesses must assume the possibility of future, unexpected tariffs and plan accordingly. Practical strategies include diversifying supply chains, strengthening trade expertise and maintaining contingency plans.

The broader lesson extends beyond North America: formal agreements do not eliminate political risk. Professionals must remain agile and informed.

4. What integrative export and FDI approaches can businesses employ when expanding into Asia?

International growth is not limited to exporting finished goods.

Organizations can expand through export, international transfer, international partnering, or through FDI. Within these pathways are multiple approaches: indirect export, direct export, licensing, franchising, strategic alliances, representative offices, greenfield investments and mergers and acquisitions.

Each model carries different levels of investment, control and exposure. For example, the guide explains that Greenfield/Brownfield investing is the riskiest and most expensive market expansion option. Conversely, indirect export may limit risk but also reduce market visibility and control.

Selecting the right strategy requires alignment between organizational capacity and long-term objectives. There is no universal blueprint, only informed decision-making.

5. When a company expands into a new market, how important are cross-cultural considerations?

Market entry is not only about economics and logistics. Cultural alignment can determine success or failure.

The guide emphasizes that understanding and adapting to cross-cultural differences is critical for success. Communication styles, consumer behaviour, marketing imagery and negotiation practices can differ significantly between markets. Ignoring these nuances risks damaging relationships before they begin.

Cultural intelligence reduces friction, accelerates trust-building and strengthens long-term positioning.

6. How are tariffs determined on products that are being exported?

Amid strategic discussions, technical fundamentals remain essential.

A tariff is the rate that is used to determine the amount of duty that will need to be paid to the government of the importing country when goods are shipped internationally. Tariffs are determined using the Harmonized System (HS) of nomenclature, an internationally standardized coding system. Many governments have online tools for importers and exporters to determine and obtain a HS code for their materials and products.

Accurate classification directly affects cost, compliance and clearance timelines. Errors can lead to delays, penalties or reputational damage. For international professionals, understanding these mechanisms is not optional, it is operational risk management.

A more disciplined approach to global growth

Across regions, from the United States to China, the Middle East and the Caribbean, the opportunities are real. So are the risks. Regulatory unpredictability, infrastructure differences and currency considerations all influence outcomes.

As the guide concludes, a well-informed and adaptable approach is central to long-term success.

For professionals navigating global markets today, the essential questions are not simply “Where can we grow?” but:

• Are we prepared internally?
• Do the macroeconomic fundamentals support entry?
• What risks exist within the regulatory and political landscape?
• Which market entry model aligns with our capabilities?
• Do we understand the cultural and compliance dimensions well enough to execute effectively?

Exploring these questions in greater depth, along with region-specific insights and practitioner perspectives, can help organizations move from reactive expansion to structured global strategy.

For readers interested in examining these issues further, the Essential International Trade Questions Answered guide offers additional context and practical insight drawn from experienced international trade professionals.

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Here are the key takeaways for businesses embarking on their international expansion journey, along with real-world examples and expert insights:

1. Conduct thorough market analysis

A deep understanding of trade dynamics, including demand patterns, competition, trade gaps, and consumer behavior, is crucial. Furthermore, demographic and geographic factors significantly impact your product or business in a particular market.

Businesses should leverage government trade data portals, market intelligence platforms, and local consultants to gain insights before market entry, which helps mitigate various risk factors and aid in the smooth launch of your project.

Example: A small trading company sought to expand its business by entering into international markets. To identify the most promising opportunities, company leveraged market intelligence reports that provide data on global demand trends, key importing countries, volume, and regulatory requirements. Equipped with these insights, the company successfully entered Middle East markets where data showed immense potential of supply within oil & gas, water treatment, and manufacturing industries. In a short span of time the company secured long term supply contracts and increased export revenue significantly.

In the early stage of expansion, companies should use trade data to strategically select the right market for their products, analyze target customers, and assess competition. This insight helps develop a tailored market entry strategy, ensuring effective product positioning, pricing and branding to maximize success.

2. Understand regulatory & compliance requirements

Each country has unique import-export laws, tax structures, and trade compliance standards. Non-compliance can lead to shipment delays, penalties, or legal action. Businesses should collaborate with trade experts and use platforms like macmap.org and government trade databases to navigate regulatory challenges.

Example:  A growing premium energy drink producer from India shipped a consignment to Malaysia, but the shipment failed to clear the customs due to a near expiry issue. In this case both the customer and shipper were unaware of the importing country’s minimum shelf life rule, which requires imported food and beverage products to have a certain % of shelf-life remaining upon arrival. As a result, the shipment was rejected, leading to disposal and consequently financial losses to the shipper. This highlights the importance of understanding destination market regulations, including product validity requirements, to ensure a smooth trade transaction.

Moreover, regulatory and compliance reviews are essential when launching or registering a new  product and getting necessary approvals before the shipment to avoid any unwanted delays and penalties at the destination. Staying updated is equally important with any amendments in policies or domestic laws to avoid disputes or rejection.

3. Build financial resilience

Expanding internationally involves costs like shipping, customs duties, currency fluctuations, and marketing. Businesses must:

• Maintain a financial buffer
• Explore trade financing options
• Hedge against currency risks

For instance, a small chemical manufacturing company secured its first export order to China in 2018 but faced challenges in financing raw material and logistics expenses. Lacking the capital to independently fund the order, the company opted for the invoice factoring option with a private lending firm which allowed them to secure 70% of the invoice value at minimal factoring fees. This provided immediate liquidity to cover the production and shipping costs. As a result, the company successfully fulfilled the order without financial strain, ensuring smooth operation and a timely delivery.

Additionally, businesses should assess their pricing models, operational costs, and return on investment in foreign markets.

Strong financial planning and disciplined cash flow management allow firms to scale operations, withstand market downturns, and reinvest profits into further expansion.

4. Consider the FDI route for market entry

Foreign Direct Investment (FDI) is an effective way to establish a strong presence in new markets. Businesses can:

• Form joint ventures with local firms to leverage market expertise
• Establish subsidiaries for better operational control
• Seek investment partnerships for credibility and funding

Example: Foreign semiconductor companies like Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung have invested heavily in US plants, particularly in regions such as Arizona. These investments not only strengthen America’s semiconductor supply chain but also bolster innovation and technological leadership in the global market.

In the clean energy space, the IRA has led to significant foreign investment in electric vehicle (EV) manufacturing. Ford’s $11 billion EV project, in partnership with South Korea-based SK On, highlights the importance of global collaboration in bringing advanced clean technologies to the US. As a result, manufacturing construction investments in the US reached a record $225 billion in early 2024.

Through the FDI route, smaller businesses can enjoy direct access to local skilled workforces as well as government incentives and support, while also contributing to local job creation and economic growth.

Moreover, FDI can help businesses mitigate risk associated with foreign exchange volatility and trade barriers by having a physical presence within the country. Strategic alliances through FDI can also lead to technology transfer, innovation synergies, and enhanced brand credibility in new markets.

5. Establish local representation

Having a trade representative, distributor, or local partner can be a game-changer. Benefits include:

• Faster regulatory approvals
• Stronger relationships with stakeholders
• Better customer service and market insights

Example: A US-based family-owned clothing brand aimed to establish a global footprint with minimal investment. Instead of setting up costly international offices, they appointed foreign trade representatives who provided valuable market insights. These representatives helped the company adapt to local preferences by furnishing designs, preferred colors, and fabrics suited to different climates. This strategy not only enhanced the brand’s visibility in new markets but also enabled it to source competitive local vendors, reducing shipment costs and minimizing carbon footprints through localized packaging. By leveraging local expertise and sustainable sourcing, the company successfully expanded internationally while maintaining financial efficiency and environmental responsibility.

A local partner or representative acts on behalf of the company, eliminating multiple barriers such as language and cultural differences while ensuring full compliance with domestic business practices.

6. Customize marketing & branding strategies

Adapting branding to cultural and consumer preferences is key. Businesses should:

• Modify brand messaging to resonate with local audiences
• Adjust visual identity (logos, colors, typography) based on regional preferences
• Launch localized digital marketing campaigns

Example: The same Indian energy drink company who lost a shipment in Malaysia, successfully gained a prominent market share in South Africa by adopting to local preferences. They modified their packaging colors and adjusted their brand messaging to resonate with the South African market, leading to a strong foothold in the region.

It’s imperative to mold your branding and promotional activities to the taste of the local market to engage your target audience. Businesses should also ensure that their brand story aligns with local values and traditions, making it more relatable.

Leveraging region-specific social media platforms, influencer partnership, and native language advertisements can enhance brand credibility and customer engagement.

7. Incorporate ESG values to attract socially conscious consumers

Environmental, Social, and Governance (ESG) values are becoming a key differentiator in international markets. Businesses should:

• Implement sustainable supply chains
• Highlight eco-friendly initiatives in marketing
• Commit to ethical sourcing and corporate responsibility

Example: Unilever integrates sustainability into its business model, reducing plastic waste and focusing on carbon-neutral operations, which has increased customer loyalty globally.

Consumers are increasingly aligning their purchasing decisions with brands that demonstrate social and environmental responsibility. Sustainable business practices such as carbon footprint reduction, responsible waste management, and fairtrade sourcing can serve as competitive advantages in new markets.

8. Leverage technology for growth

AI & ML can enhance international expansion by:

? Predicting customer behavior for targeted marketing

? Automating business operations to increase efficiency

? Optimizing logistics through smart trade platforms

Adopting technologies like AI and ML tools early in international trade expansion can keep you ahead of the competition and significantly increases your organization’s efficiency.  AI utilizes advanced machine learning and predictive analytics to make demand forecasts, streamline supply chains, and simplify customs procedures. This may lead to more effective logistics and inventory control. Furthermore, AI can automate document verification and risk analysis.

Tech driven businesses are bringing in a revolution of efficiency which will enhance the capacity and accuracy in most industries. It is here to stay and leveraging the technology in early stages of business can keep you ahead of the competition.

In international trade, AI can be applied to automate marketing activities, warehouse and inventory management, and to detect  errors in financial documents.

Final thoughts

International expansion offers tremendous opportunities, but businesses must prepare strategically to navigate market complexities. By leveraging market research, compliance expertise, financial resilience, local partnerships, FDI routes, ESG values, and technology, companies can achieve long-term success in global trade.

Are you planning your global expansion? Remember: Success isn’t about entering a market—it’s about thriving in it!

Don’t miss any steps in planning for export success. Check out this free tool to assist both novice and seasoned exporters in visualizing the critical components for international market expansion: FITT x EDC Export Vision Board

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This factor distinguishes them from indirect investments in securities, bonds, funds, or currencies. Understanding these different investment options is critical to researching which ones best suit a given organization, target market, and/or venture.

Ownership-based investments

One type of foreign direct investment is based on establishing an ownership position over an asset or assets. The following are some of the most common types of ownership-based investments:

Greenfield

The investing organization establishes a completely new operation in a target market, building it from the ground up.

Brownfield

Similar to Greenfield, this is an aggressive market entry strategy. Brownfield investments are an acquisition of existing facilities in the target country. Often this strategy involves some site remediation, such as the clean-up of soil chemicals.

Acquisition

The investor purchases an existing operation in the target market.

Joint venture

The investor identifies a partner with complementary capabilities, and they set up an entirely new operation in the target market, each of them owning a stake proportional to the value of their original contribution. The original founding organizations continue operations as entities distinct from the newly formed joint venture.

Merger

The investor identifies an operation with complementary capabilities, and the two organizations abandon their original distinct identities to join forces into a single, combined new firm. Situational Analysis

Looking to determine if your new trade opportunities are viable? Check out the FITTskills Feasibility of International Trade online course!

Investments based on strategic alliances

This is a category of investment in which resources are contributed directly but do not create a distinct asset. Usually, such investments create partnerships in which the relationship is the only real asset. Investments based on strategic alliances are as follows:

Supplier alliances

Many organizations are investing in stable long-term relationships with suppliers of parts, technology, equipment, or other key inputs. Such investments require more than simply entering into a long-term supply contract. In many cases, they involve harmonization of standards, agreements on quality control, and integration of manufacturing and delivery processes. In technology-driven industries, supplier alliances can include agreements to share research and development (R and D).

Research consortium

There is a growing number of organizations in particular sectors pooling their R and D efforts to improve their ability to face related challenges. In some cases, such consortia focus on developing common standards that allow products to interconnect and interact. In others, they organize something akin to a division of labour by apportioning research tasks to the consortium members best able to carry them out. This can be significant internationally if organizations from different countries bring different kinds of expertise into a relationship.

Co-marketing alliance

Some organizations enter into an agreement to market each other’s products or services as part of their own set of offerings. They do this to fill out product lines and to provide consumers with a comprehensive offering. When the two organizations operate in different countries, this type of arrangement allows one to sell its products in the other country without setting up its own marketing organization. Such arrangements are not cost-free; partners must invest not only in making the relationship work but also in costs such as relabeling and rebranding.

Co-production alliance

Just as organizations exchange marketing services, they can also exchange production facilities. Rather than shipping finished products to a distant market, an organization can enter into an alliance with a local manufacturer to assemble components or manufacture a complete unit according to original specifications. Again, this can be a cost-effective way of entering a market, but it requires an investment in the relationship as well as in the transfer of knowledge, skills, and design.

Bidding consortium

Perhaps the loosest form of strategic alliance occurs when organizations enter into a consortium to bid on a project that none of them could carry out individually. Such consortia are very common in large international infrastructure projects. Even though the organizations retain their distinct identities, entering into a consortium does require some longer-term commitments, especially if the bid is successful and the winners are obliged to work together for several years. The simple fact of participating in a bid can require a significant investment of time, human resources, and money, especially if bid bonds are required.

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The goal of most companies is to grow and make a profit, and this does not usually happen without customers. As a result, most firms never stop searching for new clients who will buy their products and services, taking advantage of multiple courses, thousands of publications and ongoing conferences on how to succeed at business development.

This “business development mantra” is a favorite of most companies’ marketing and sales departments, but usually doesn’t extend beyond that to become a full team effort. Instead, business development should be a company-wide team effort and not only the responsibility of the marketing and sales department.

Sharing isn’t just caring – it’s profitable

One of the most effective ways to enact this is through greater information sharing between company departments. While it is human nature for departments to be protective of their input to the company, sharing information for the benefit of all should be encouraged by upper management.

Many division managers and their staff subconsciously believe that their particular department is the only vital activity to the ongoing success of their company. For example, Manufacturing believes that without the products they produce the company simply would not exist and Sales boasts that without the clients they bring in, nothing at all would happen.

However, all departments should think of themselves as part of a large team rather than compete with each other.

Manufacturing could be looking for production technology to better produce their products and pass this information to upper management. Salespeople, who are active in the marketplace, often pick up information on market trends to pass to marketing. HR could hire multilingual staff to better serve foreign clients.  Accounting and Finance could search for better billing systems to streamline their invoicing process, and so on.

One person’s (or department’s) trash can be another’s treasure

Here’s one example of how this can have major benefits: a recent graduate was hired to work in a large bank’s telemarketing centre to find new clients. He was given lists of new company registrations to contact and told that the basic reason for a bank’s success was its ability to find new clients to whom it could offer competitive loans.

One morning a phone call was routed to his desk from a former client. The client recounted that 3 years previously the company had negotiated and successfully repaid a loan, but the firm was expanding and now was in need for more capital. The young man passed the lead on to the bank’s closest branch and recorded his first “new business” success.

He then reasoned that reactivating former clients (who were already known and approved) would bring better results than trying to convince brand new contacts to do business with his new employer. He searched the bank’s “dead files” department and found detailed records of several thousand former clients who had successfully repaid their loans, but whose files had been closed. Apparently nobody had ever followed up nor checked if the companies required other services from the bank. A further search found that half were no longer in business, but the other half were still active and had often grown considerably.

He had found a gold mine of potential “new” clients who already knew his bank and would presumably be happy to renew a relationship and hopefully do more business.

This mindset applies in the public sector too

Governments are also in the business development game, and many have active programs designed to attract foreign investment (FDI) and trade to their territory.

One such administration had appointed representatives abroad whose responsibility was to increase international business by finding potential foreign investors, interested business partners and importers. Details of these potential overseas business opportunities were publicized in a bulletin regularly mailed to many thousands of domestic manufacturers. The concept was that companies would jump on these leads, but unfortunately most executives were too busy running their domestic businesses to consider international relationships. The result was that consequent successful deals were minimal.

Tired of poor results, an entrepreneurial department manager decided to turn the system around. He found that 250 bulletin recipients had regularly inquired about some of the foreign opportunities. While few had gone further than an initial request for information, the companies’ apparent curiosity in the foreign opportunities was encouraging.

The outcome was the creation of a list of domestic manufacturers whose specific interests were then described and distributed to the overseas-based representatives. The profiles provided details of what each company was potentially interested in – foreign technology related to their business, an international partner, a possible import-export opportunity, a joint venture or licensing agreement. The number of completed partnerships increased exponentially.

The government department finally had the chance to successfully encourage domestic businesses to expand internationally by providing real opportunities. Simultaneously, the entrepreneurial manager was head-hunted and went on to a successful career in the private sector.

A team effort can make something old new and profitable again

The expression “business development” describes a vital activity that should not be contained to a few employees, but instead must be consciously done by all departments in a company or organization.

A business development mindset suggests a proactive management style, confirms a commitment by top executives to find new clients, and feeds into companies’ visceral need to always seek ways to prospect for business – be it “new” or old.

Traditional efforts to seek out new customers are important, and must be continued. But when paired with new methods to work with other departments to find new information, make processes more efficient or enact new ideas, the growth possibilities for your business become nearly endless.

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When it comes to free trade in North America and Asia, the two continents appear to be heading in opposite directions. The U.S. has withdrawn from the TPP, while the implementation of the ASEAN Economic Community (AEC) has accelerated intraregional FDI to record levels.

Canadian businesses should be participating in the ASEAN region’s robust economic growth curve despite the absence of a Canada-ASEAN FTA. I believe the Canadian government is attempting to pivot and reach out to the Asia-Pacific region through the likes of the APEC Business Advisory Council (ABAC) and Canadian International Innovation Program (CIIP).

Canadian companies are also already perceived to be innovative, collaborative and trustworthy in the ten countries comprising ASEAN.

What seems to be missing, however, is a comprehensive plan to achieve an effective market penetration across the diverse, hugely fragmented, yet inter-related ASEAN countries.

On the fast track towards economic interdependence

With a regional GDP of USD $2.5 trillion, ASEAN is the fastest growing region on the planet. After a 4.6% expansion in 2016, GDP forecasts predict 4.9% growth for both 2017 and 2018. Myanmar is expected to be the fastest growing economy in the region, with a prediction for 7.4% growth, followed by the Philippines at 6.6% and Vietnam at 6.2%. Also expected to grow at a moderately quick pace is Indonesia (5.2%), Malaysia (4.9%), Thailand (3.2%) and Singapore (2.4%).

The region is seeing unprecedented construction activity, presenting an excellent growth opportunity for companies selling construction-related products and services. Earlier this year, Marriott announced plans to open 80 new hotels in the APAC region by the end of 2017, bringing 19,000 new rooms to the region. In addition, an astonishing 437 hotels are being built across the ASEAN region, focused mainly in tourist destinations to meet growing demand. Thailand, Malaysia and Indonesia plan to open 81, 79 and 113 properties respectively in each country in the coming years.

New rail lines will make ASEAN travel easier than ever

In addition to commercial construction projects, Private Public Partnership (PPP) mega-infrastructure projects building new rail lines, airports and seaports are on the rise across the region. A new rail project connecting Bangkok with Southern China with an estimated value of USD $5.2 billion has been approved by the Thai government. Its most interesting characteristic is that China will do the design for the project, and Thailand the construction.

Chinese end-to-end control over mega-infrastructure projects is becoming a contentious issue, and serves as a vivid example of China’s One Belt One Road theory becoming a reality at a rapid pace. ASEAN countries are beginning to negotiate that China-financed infrastructure projects contain local engineering, construction and supplier content.

The Singapore to Kuala Lumpur Malaysia multi-billion-dollar high speed rail (HSR) project has been approved and the EPC (engineering, procurement and construction) contracts awarded. The most notable aspect of this project is the high probability of coinciding commercial and residential construction projects emerging in close proximity to the stations. If you provide people with efficient transportation into the cities, new outlying communities will emerge. The areas near the stations will become urbanized, creating additional commercial and residential construction projects.

Other notable mega rail projects in the region include the Hanoi Vietnam metro project valued at USD $15 billion, and Malaysia’s 600 km East Coast Rail Line (ECRL), connecting the capital city of Kuala Lumpur with Malaysia’s east coast states through 23 stations, valued at USD $12 billion.

Major plans for port expansions and FDI projects provide new opportunities

Singapore continues to invest in major infrastructure projects as well. They have just completed T4 – a new passenger terminal building at Changi Airport, and work on the new Tuas mega-container-port has begun.

The multi-billion dollar mega-port investment project includes plans to move and consolidate all port activity to South Tuas by 2027, opening progressively from 2021 until full completion by 2040.

Construction is well underway, with reclamation ongoing for two out of four phases of the development and more than three kilometres of caissons installed. Singapore is also thinking long term, building for an eventual capacity of 65 million TEU’s (standard-sized 20-foot containers) annually, anticipating significant interregional and intraregional trade expansion.

Commercial construction and infrastructure is one growth story, and foreign direct investment (FDI) is another. FDI is entering the region at record levels as interregional and intraregional manufacturing multinationals move from labor intensive and higher cost locations in Asia to ASEAN countries.

Vietnam in particular is reforming and becoming more accessible to foreign investment. Recent years have evidenced steady and increasing FDI there. In 2016, FDI in Vietnam totaled USD $24.4 billion, with 63.7% (USD $15.5 billion) invested in manufacturing and processing capabilities. South Korea is Vietnam’s largest investor and Samsung has three projects currently under construction valued at USD $5.5 billion. The South Korean electronics giant is constructing a new plant in Northern Vietnam that will employ 30,000 workers, and a research and development center in Ho Chi Minh City.

An effective and coherent strategy, not an FTA, is your key to ASEAN market entry

ASEAN is now the fifth largest automotive market, offering new growth opportunities to companies supplying both OEM (original equipment manufacturer) and aftermarket products and services. The ASEAN region produces 4 million cars and trucks each year and sells 10 million motorcycles annually. China progressed from bicycles to motorcycles to cars over a period of 20 years, and ASEAN will similarly advance from motorcycles to cars rapidly over the next decade – especially in the Philippines, Indonesia and Vietnam, in line with economic development and rising incomes.

ASEAN has arrived as the global growth engine of the next decade and beyond.

The absence of a Canada – ASEAN free trade agreement should not prevent SMEs from capitalizing on ASEAN growth opportunities. Furthermore, an FTA is not the silver bullet to establishing and growing your ASEAN business. An effective and coherent commercial strategy is.

Achieving more effective market coverage and penetration across ASEAN’s diverse, hugely fragmented, yet inter-related market is highly challenging and complex for any company. Basic templates or theoretical “cookie-cutter” market-entry formulae often falls short of delivering desired results.

What companies need is a distinctive market-entry and channel design process that caters for key variables which encompass the necessary agility to synchronize individually tailored business, multi-partner, multi-level network strategies with relevant opportunities, regional cultures and competitive scenarios – eliminating the wasted costs of trial-and-error market entry efforts.

Considering the absence of a Canada-ASEAN FTA, the federal and provincial governments might consider a funding strategy to assist Canadian companies with the expense of retaining outsourced specialty ASEAN marketing services. Procuring regional knowledge, experience, and expertise will make a major difference and help companies grow.

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The United Nations Conference on Trade and Development (UNCTAD) defines FDI on their website as, “investment made to acquire lasting interest in enterprise operations outside of the economy of the investor”.

FDI is considered inward when foreign capital is invested in domestic ventures, and outward when domestic capital is invested in foreign resources abroad.

FDI can be done in a number of ways, including:

• Acquisition of a foreign enterprise
• Start-up operations
• Greenfield investment
• Mergers

As with other foreign ventures, the terms of the investment are stipulated in an agreement.

FDI agreements are subject to the influence of host nation legislation and can prove to be quite risky if not properly researched and understood.

The advantages of getting involved in FDI

In general, the advantages of FDI for entrepreneurs are the same as other forms of foreign market entry such as joint ventures and licensing agreements.

These advantages include:

• access to foreign marketing strategies;
• new channels of supply and distribution;
• closer contact with target customer;
• access to diverse and cost-efficient labour and skills
• access to alternate and innovative technology and production; and
• tax incentives, low-interest loans and insurance risk guarantees.

Policies to attract FDI and the role of hosting countries

There is now active competition between countries to attract FDI and capital investment, as more and more nations and entrepreneurs realize the benefits associated with foreign investment. This is good news for businesses considering foreign options, because conditions and incentives are constantly improving around the world.

Many governmental trade policies, including those of developing countries, are now designed as investment incentives for foreign corporations.

Some of these incentives include low interest loans, subsidies, tax breaks and an easing of restrictions.

Less-developed countries especially want to attract “Greenfield investment”. This type of investment involves foreign capital being directly invested in new or expanding facilities. The hope is that the investment will improve their existing production methods and technology as well as provide an entry strategy into the global market for the host country.

Potential risks you’ll face with FDI

In addition to policies that lack transparency or that regulate a company’s autonomy to hire, source and remove earnings, there are a number of additional risks associated with FDI.

These three are some of the greatest fears entrepreneurs have when investing in foreign markets:

Nationalization: the act of a national government taking an industry or private company into public ownership.

The former owner is compensated, but the compensation is often an area of contention as it may not be equivalent to market value.

 Privatization: privatization is the transfer of government property or services to the private sector. It can also refer to a private majority buyout of publicly traded stock.

Expropriation: or government confiscation of privately owned assets for public use, is the most controversial example of nationalism and is one of the greatest concerns of FDI. Owners are forced to give up their assets and are often compensated far below fair market value. In worst case scenarios, owners are not compensated at all, as happens for example after a political coup or revolution.

Before deciding to invest in a foreign market, entrepreneurs must be sure to conduct a thorough investigation of the economic and political climate of the host country.

While the incentives for investment may be very appealing, they must outweigh the risks. If there is an incident, businesspeople should be aware of any regulations governing their options for compensation, and the chances of the options being enforced.

Legal protection of FDI: NAFTA Chapter 11

One of the most prominent examples of a trading block that has codified FDI protection is NAFTA. Chapter 11 of the North American Free Trade Agreement aims to facilitate foreign investment between NAFTA members by limiting a host government’s ability to discriminate against foreign investment. Chapter 11 does not provide superior treatment to foreign investors; it simply requires that governments provide foreign investors with the minimum standard of fair and equitable treatment established by international law. These standards of treatment are common in all bilateral investment treaties.

Resolution of FDI Disputes: MIGA and ICSID

The Multilateral Investment Guarantee Agency (MIGA), an affiliate of the World Bank, offers loans and insurance to eligible foreign investment projects. It is also renowned in the field of FDI dispute resolution due to its insight and knowledge of the political, legal, economic, cultural and religious dynamics of world nations.

In 1965, the World Bank held a convention that sought to lower barriers to private foreign investment, particularly the lack of dispute resolutions methods. From the resulting multilateral treaty, the International Centre for the Settlement of Investment Disputes (ICSID) was established.

Multilateral and bilateral investment treaties

The risks to foreign investors prompted the Organization for Economic Cooperation and Development (OECD—founded after World War II to foster postwar reconstruction in Europe) to negotiate a Multilateral Agreement on Investment (MIA). While it officially failed in 1998 (mostly because of FDI protection), it was the first attempt to establish internationally accepted provisions on investment.

For decades, bilateral agreements have been successfully negotiated in order to protect investors from foreign risk. To date, more than 2,000 bilateral treaty agreements have been created, mostly between developed and less developed nations.

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Today a raging debate is playing out across many stages. Is trade, particularly free trade, beneficial to the nations involved or is foreign direct investment (FDI) stealing away jobs and hurting countries’ economies?

There is no dearth of strong opinions on the matter, as evidenced by the many vocal protests of trade deals in progress and the continuing protectionist discourse during the U.S. presidential election. However, is any argument on the matter speaking from the right statistics? And what are the right statistics to give us a full picture of the economic and social impacts of trade?

Export Development Canada (EDC) decided to embark on a mission to get a more accurate picture of what foreign investment is really doing to Canada’s economy and employment levels.

In July 2015, EDC began a first-of-its-kind web-based survey of 546 Canadian companies with foreign affiliates across a wide variety of sectors. The survey asked a combination of searching questions to find out the truth about foreign affiliates’ employment, operation, wages, and competitiveness.

The findings from the survey painted a much more hopeful picture of what happens at home when Canadian companies invest abroad.

20^th century-style statistics don’t reflect today’s trade realities

“Contrary to popular belief, Canada’s international trade is remarkably diversified,” the whitepaper summary of the report begins.

Canadian companies, both large and small, have made sizeable foreign footprints and begun to tap into emerging market consumption growth and expanding South-South trade networks.

Production networks were once limited to one single country to another. In the last few decades, developments in information technology, complex global value chains, and trade and investment deals have changed the way we trade across borders. Now, production networks look much more like a web, with inputs from several different places before a final product lands in the country where it will be sold.

As Stephen Poloz said, “National economies today no longer fit inside the lines on the map. Companies are simply ignoring those geographical boundaries. This materially affects how we should look at trade and how we should interpret trade statistics.”

Measuring trade in gross terms, rather than examining the value-add inputs from countries along the supply chain, fails to tell us the whole story of where commodities actually came from and where they went. In essence, it’s giving the entire value and origin of the export to the last country that input any component before landing in its final destination.

As Pascal Lamy, former head of the WTO puts it:

Using this logic, iPhones are Chinese.

Foreign affiliate sales have changed the game for Canadian trade

The increase in foreign investment in Canada began seeing major growth in 2003 and has positively impacted the country’s trade diversification and revenue generation. The report states:

“Foreign affiliate sales grew by 61 per cent between 1999 (earliest available data) and 2013. That is nearly double the speed of Canada’s merchandise goods export growth, which came in at 33 per cent, and 1.6 times the pace of total exports (including services), which came in at 38 per cent.”

Investment through foreign affiliates overtook merchandise exports as Canada’s top revenue generator in 2006, and topped exports by almost $40 billion in 2013. This growth has a lot to do with Canadian affiliate sales in emerging markets, which nearly tripled in between 1999 and 2012.

The growth in foreign affiliate sales is largely due to an upswing in trade in services. When the financial crisis hit in 2008, foreign affiliate commodity export sales began to suffer after enjoying a period of prosperity in the previous five years.

During that same period, however, foreign affiliate service exports were steadily increasing. By 2013, they were generating revenue equal to the commodities.

To look at the impact of foreign affiliates another way, Canadian companies exporting services directly earned $160 billion less than Canadian companies with international platforms. Foreign affiliates earned 2.7 times more revenue than their domestic counterparts.

“Offshoring costing Canadian jobs” debunked?

Canadian direct investment, often referred to as offshoring, has a bad reputation for eliminating jobs at home and is commonly misconstrued with outsourcing. Where outsourcing is the practice of hiring a foreign company to produce a product or service, offshoring is when a business expands and sets up shop in a foreign country, while still remaining a branch of a Canadian-owned company.

In the past few years, a measurable downturn in Canadian manufacturing jobs has lent credence to the suspicion that increased FDI has a negative impact on employment at home.

In order to put the blame on offshoring efforts, there should be a correlating increase in manufacturing jobs with those Canadian companies abroad. However, the numbers paint a different picture. Manufacturing employment shrunk by 25% between 2005 and 2010, but since then has remained stable.

There are many economic factors that impact employment rates, but when employee registers are examined in Canadian companies overseas, it’s evident that their workforces also decreased beginning in 2005.

The trends mirror each other, and EDC argues that this makes it highly unlikely that foreign affiliates have been absorbing Canadian jobs.

Foreign investment flows both ways

Manufacturing jobs are facing an observable downward trend worldwide in developed, high-income nations. But it’s not all bad news. Foreign investment flowing into Canada has been a good thing for the country’s manufacturing sector and the data is only now starting to tell us how good.

In 2013, the latest time period we have data from, around 1.9 million Canadians – that’s one third of the total manufacturing workforce – were employed by foreign companies. It’s also notable that according to the latest data, foreign affiliates within Canada have hired 272,000 more people than Canadian affiliates abroad.

To really determine whether outbound investment has a negative or positive impact on the home country’s economy, the key is to look at the rationale behind the investment.

For example, when a company chooses to invest in offshoring in order to cut labour costs, the impact on the home economy is unsurprisingly negative. But, when a company invests abroad in order to grow, and access new markets and global value chains, the results are often positive for both the country of investment and the home country.

As the report so eloquently explains:

Direct investment abroad serves as a beachhead for market access, thus stimulating domestically produced exports and high value-added head office activities.

Want to read EDC’s detailed findings? Click here to read the full report and whitepaper.

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Licensing is a transfer-related market entry strategy. It involves a company (known as the licensor) granting permission to a company in another country to use its intellectual property for a defined time period. The intellectual property can include patented manufacturing processes, trademarked products, copyrights and technical assistance.

In return for this permission, the licensor demands a fee from the company it has granted permission to (the licensee) and periodic royalty payments.

Advantages and disadvantages

Licensing is a very attractive method for entering a target market if a company has valuable intellectual property. Being that it involves minimal initial costs and provides companies with regular income from overseas.

Licensing also has the following advantages:

• It enables a company to enter a market that has restrictions on foreign companies.
• The licensor company benefits from the licensee company’s local market knowledge. Therefore, the licensor company gains a market stronghold very rapidly.
• The licensor company’s capital is not tied up in foreign operations.
• The licensor company has the option to expand into the market further by investing in the licensee company at a later date.
• The licensor company can move into several markets at one time.

As with all forms of market entry, licensing does have some disadvantages:

• Limited entry into the target market.
• The terms of the license must be monitored over the lifetime of the agreement, and enforcement might become necessary
• The licensee company might use the intellectual property provided to become a competitor company.
• Intensive research and planning a to identify the best licensee and develop a beneficial licensing agreement.
• Companies that engage in licensing should consider the possibility of extending their market entry by moving into a joint venture with licensee companies.

When is licensing a suitable strategy?

Companies with a strategic goal of increasing market share should consider licensing if they have a proprietary product that can be manufactured easily at a foreign location. This is because licensing provides an opportunity to rapidly increase the sales volume of a product. However, this increase doesn’t result in large profits because returns are limited to a percentage of each product unit sold.

Companies that wish to expand into one or more markets with minimal risk and commitment will find that licensing could be the best market entry strategy.

The overseas licensee is responsible for all risks and expenses involved with production, distribution and marketing. However, the licensing agreement must be monitored and enforced if necessary. This is because it will not be possible for the company to withdraw from the market rapidly.

Licensing will not be suitable if the company cannot cope with the risk that its intellectual property will be lost. Similarly, it also wouldn’t be suitable for companies concerned with an increased level of competition in the future.

Want to learn more about how to encourage future sales by providing efficient delivery of purchases and customer support? Check out the FITTskills International Market Entries Strategy online course!

Ideal conditions for licensing

What are your company’s goals?

The strategic objective is to expand market share. The company must not require large profits from international trade.

What’s the size of your company?

Any size of company is suitable.

What resources do you have?

The company must be able to devote time and resources to locating licensees, negotiating contracts and monitoring the licensee. Furthermore, it does not want to, or is not able, to devote substantial monetary resources to international trade.

What stage is your product or service at?  

The product or service must be patented intellectual property, additionally it must be in demand in an international market.

What type of compensation is acceptable to you? 

The company must be happy with periodic payments based on a percentage of sales by the licensee.

What competition do you face? 

Since the product, process or service has a patent, the market should ideally have low levels of competition. However, the company must be comfortable with the potential for competing companies to steal its intellectual property.

Do you have access to intermediaries? 

The company must work with a reputable law firm experienced in international trade to negotiate and develop the license agreement.

What level of control is acceptable to you? 

The company does not need to have substantial control over production, marketing and selling activities.

What’s the total investment cost? 

The company wants to avoid having to invest substantially in international trade.

How quickly can you bring your product to market? 

The company wants to enter a market rapidly.

Can your company handle the risk? 

The company must be able to deal with the risk of business losses from theft of intellectual property.

Can your company lock into a contract? 

The company must be able to remain in the trading relationship for a set period of time.

Case study: Increasing power generation

In June 2008, Salamon Group, a U.S.-based manufacturer of electrical generating equipment, announced it had made an international licensing deal with a Canadian company. Under the terms of the deal, the Canadian licensee gained exclusive rights to produce, market and distribute Salamon’s products in Canada. The Canadian company paid Salamon an initial fee of C$15,000 and they receive royalty payments of three percent of gross sales value.

Licensing can be a quick, low-investment and financially lucrative market entry strategy.

To be successful at licencing you need a high-demand product or service, limited competition and the willingness to give up control of some of the promotional and logistical aspects of selling your commodity.

If licensing isn’t right for your company, there are lots of other investing entry strategies to choose from including franchising, subcontracting, greenfield investment, joint venture, branch office and more.

The post Have a great product or service? Licensing could be the right market entry strategy for you appeared first on Trade Ready.

As everyone focuses on China, which is facing daunting challenges in its excess industrial capacity, stock market crash, and efforts to shift from an export-driven economy to a consumer-based model, some developments in the region have remained largely unnoticed.

Yet, one of the newest stories on the continent is Vietnam, which is well positioned to become the region’s manufacturing and trade hub across a range of sectors. Here’s what you need to know.

Asia’s new manufacturing hub

Comparative advantages are not set in stone. The unprecedented rise in China’s labour costs, which have more than doubled since 2003, have opened an opportunity for more cost-competitive countries like Vietnam to attract investments.

According to fDi benchmark, a data service owned by the Financial Times, total operating costs for an automotive plant are now 40% lower in Vietnam than in China. In the case of manufacturing plants for biotech-pharmaceutical products or medical devices, costs can be as much as 50% lower.

As a result, investments into Vietnam have surged to US$ 8-9 billion per year over the last 5 years, up from virtually nothing two decades ago.

The number of greenfield investment projects doubled in 2014 to almost $24 billion, making it the second most popular investment destination in the Asia Pacific region, behind only China, and ahead of India, Indonesia, and Malaysia, not to mention Bangladesh and Cambodia.

For many investors, Vietnam is seen as a hedging replacement for China, particularly in the manufacturing sector, turning the country into the manufacturing hub of the region.

Big multinationals like Nike, Procter & Gamble and Unilever are expanding their activities there. While 40% of Nike shoes were produced in China in 2001, compared to 13% in Vietnam, by 2013 only 30% were still made in the Middle Kingdom, while 42% were instead produced in Vietnam.

An improved business environment

Many commentators cited cheap labour costs as playing a large role in Nike’s decision to move a good part of its production to Vietnam as its next business frontier.

This is turning a blind eye to other key factors that make Vietnam an attractive place: a young population of some 90 million people; Vietnam’s geographic position near global supply chains; a growing consumer market boosted by a solid economic growth of 5-6 % per year over the past 5 years; a relatively stable political and economic scene; and an improving business climate.

In 2015, for the first time, Vietnam ranked ahead of China in the World Bank’s Ease of Doing Business Index (in 78th position, 12 ranks ahead of China), with a significant head start on countries like the Philippines, Indonesia, and India.

With discretion and perseverance, the government is passing reforms to improve its business environment. A new investment law, effective July 1, for example, simplifies foreign investment procedures, relaxes licensing requirements, and ends the differentiation between domestic and foreign investors.

Opening the country for business

Vietnam’s government is also pursuing an active trade policy. In May, it signed two major free trade agreements, with Korea and with the Russian-led Eurasian Economic Union (EEU).

On August 4, 2015, it reached an agreement in principle for a free trade agreement with the European Union (EU), after two and a half years of intense negotiations. This landmark agreement will remove practically all tariffs on goods traded between the two economies, a first.

Never before had the EU negotiated a symmetrical liberalization of trade with a developing country.

The agreement will open Vietnam’s trade in various services sectors, including financial services, telecommunications, transport, and postal and courier services.

It will also lift or ease limitations on the manufacturing of goods and provide for government procurement rules largely in line with the Government Procurement Agreement of the WTO, “achieving a degree of transparency comparable to the other EU free trade agreements with developed countries and more advanced developing countries” as the EU Commission noted in its press release.

Few countries can pride themselves on having reached three major trade deals within just a few months.

Last but not least, Vietnam is one of the 12 countries in Asia and the Americas that recently reached an ambitious agreement to liberalize trans-pacific trade in the TPP negotiations. While unprecedented in its geographical scope, the Trans Pacific Partnership excludes some of Vietnam’s key competitors on the regional scene, in particular China and Indonesia.

One of the biggest winners of the TPP is likely to be Vietnam. A study by the Peterson Institute for International Economics estimates that Vietnam’s GDP could rise by an additional 10% by 2025, the largest percentage gain among TPP participants.

These various agreements will, no doubt, further contribute to improving Vietnam’s business environment and will reinforce its position as a manufacturing and trade hub in Asia.

Asia’s trade growth champion

In fact, a detailed look at trade figures shows that Vietnam has been Asia’s trade growth champion for some time already.

Merchandise exports have increased by nearly 20% per year over the period 2005-2013, the fastest growth rate in the region, well ahead of Bangladesh, India, Indonesia, the Philippines, and even China, whose exports of goods grew by “only” 14% per year on average.

While exports of services have grown at a slightly slower rate than others in the region, Vietnam still ranked first in 2012 in terms of growth of exports of goods and services combined.

No doubt, an economic rebalancing is at play in Asia. Discreetly, Vietnam is positioning itself as a key manufacturing and trade hub in the region. Yet, investing in and trading with Vietnam is not an easy go and requires careful analysis and planning.

The country may be ahead of China and India in terms of Ease of Doing Business, but it still lags far behind a country like Malaysia. Further reforms are needed to consolidate its position and transform its current cost advantage into one built on skills and technology.

Does Vietnam factor into your business’s international expansion plans? What would be the pros and cons of doing so?

The post Could Vietnam become both the world’s next factory and business frontier? appeared first on Trade Ready.

Melissa Coombs, CITP®|FIBP®, is an Economic Development Officer (Business Analyst) with the Government of Newfoundland’s Department of Innovation, Business and Rural Development.

Throughout her career, Melissa has consistently combined her business expertise with a desire to help others in a number of different ways. She has been involved in initiatives that vary from volunteering with several youth programs to creating provincial strategies for Newfoundland’s manufacturers to export internationally.

She has now had her designation for over a year, and enjoys the prestige and respect the designation brings her, as well as the opportunities to meet and learn from other CITP®|FIBP®s.

Accumulating and applying her entrepreneurship skills

Melissa began her international trade career with a marine equipment company in a small fishing community close to St. John’s called Bay Bulls, Newfoundland.

Her tasks included liaising with government officials, applying for grant programs, market research, working on their marketing plan, and planning business trips and trade show booths.

From there, Melissa joined the RED Ochre Regional Board in Parsons Pond, a non-profit association set up by the provincial government to improve regional economic development.

Her proudest accomplishment in the role was launching the Youth Venture program to encourage teenagers to become entrepreneurs.

Since 2007, she has also been a member of Junior Achievement, who offer youth education programs on entrepreneurship.

I believe that it is important that youth are given the opportunity to experience what it is like operating a business, which will help them decide in the future if they would like to own their own business.

Helping Newfoundland and Labrador businesses export internationally

In 2007, Melissa became an Economic Development Officer with the Department of Innovation, Business and Rural Development in Labrador City.

She received and analyzed business plans and proposals for funding, helped businesses establish these plans, and worked with various community groups and levels of government to implement economic development plans.

She then moved to St. John’s in 2009 to become an Industry Development Officer for the government’s Department of Business.

There she researched and developed a plan to attract more foreign direct investment (FDI) to the province, and then worked closely with various stakeholders to move the plan forward through its stages.

Melissa took on her current role in St. John’s in 2011. Building on her FDI project, she focuses on developing the province’s entire manufacturing strategy, from surveying craft producers to developing a strategy RFP, new logic models for the province’s key industries and a Manufacturing Profile for the province.

She has aided Newfoundland companies to successfully become part of the supply chain of companies like Damen Shipyards, from the Netherlands, who are currently constructing the two new provincial ferries.

Melissa also serves on the Building Products Committee for Atlantic Canada’s International Business Development Agreement (IBDA).

She analyzes applications from businesses to access funding and other assistance from the agreement, and makes recommendations.

Becoming an expert in her field through FITTskills courses and the elite CITP®|FIBP® designation

Melissa first heard about FITT from her colleagues, and she was eager to take the courses to build upon her earlier education and get up-to-date on everything she needed to know in international trade.

She took a mix of in-class and online courses, and enjoyed the opportunity to learn from, and network with, more experienced professionals in the classroom.

She also benefited from the flexibility and convenience of online courses.

The FITT online courses were beneficial, as they allowed me to complete my studies while in Labrador and also at my own pace.

Once she completed her courses, Melissa wanted to apply for her designation because she felt it would bring greater credibility to her international trade expertise. She says that being a CITP®|FIBP® is one of her proudest accomplishments.

A few months after earning it, she also took the opportunity to be part of one of our International Trade Competency Standards (ICS) Project focus groups, in Halifax. She enjoyed getting to be part of the development of the project, and to meet and connect with other trade professionals across Atlantic Canada.

Melissa is very pleased with the benefits she has enjoyed as a CITP®|FIBP® since receiving her designation over a year ago.

“My CITP®|FIBP® designation from FITT has earned me recognition among my peers at work as a trade professional. The opportunity to network and work with various CITP’s has been instrumental in my career and professional growth.”

The post Melissa Coombs, CITP|FIBP – Economic Development Officer (Business Analyst) appeared first on Trade Ready.