I’ve learned a lot of lessons from over a decade of observing the efforts of senior trade development professionals, combined with research that included trade mission/show follow-ups, interviews with SME exporters, and extensive conversations with foreign government trade development officials.

One of the most important is that all of these sources revealed a critical gap in export market entry.

Canada’s SME exporters still mainly rely on the traditional “push” export approach, which involves selecting a potential market, building and launching a market entry strategy, and attempting to penetrate a new market.

However, the vast majority of potential buyers, as well as Canada’s international competitors, transitioned many years ago to a “pull” procurement approach.

Buyers prefer to purchase from local suppliers who offer fast delivery, local invoicing, and produce service and warranty.

Exporters using the pull approach, rather than trying to force their way into an established and usually highly competitive market from afar, take a longer term view and become part of the local supply chain that allows them to instantly identify opportunities and pull any good or service from head office.

In contrast, the typical SME export approach is to focus on managing risk and guaranteeing ROI over the near term. This is most easily accomplished by a simple push approach that relies on selling goods into markets without a previous invitation or request, and doing so with the minimal risk or expense.

But with service exports or services integral to product exports like software, licensing, R&D, custom design and fabrication, etc. becoming an increasingly important part of international trade, companies lacking the ability to provide these services are falling behind. As more countries require a certain percentage of local or domestic involvement, many companies not already in those markets are immediately excluded. And if a buyer is looking for a supplier, they will often find several local options and limit their search to those options, rather than expanding their search further to international options.

I suggest that the focus on push exporting goods and systematically excluding other potential exporters not using the pull approach is the primary cause of why Canadian SMEs export less than SMEs in many of Canada’s primary trading partners.

By encouraging more businesses to set up local presences in international markets, new doors will open for them and their exports should increase as a result.

How pull procurement tilts the odds towards businesses with a local presence

The pull approach is nothing new and has been in common use by international competitors and large Canadian exporters for decades, but has largely been ignored by most SMEs.

The fundamental success factor in any pull application requires only that SME have an established presence in the target country that allows them to identify, quantify and access opportunities from inside that market.

They can then pull goods, services and value-added intellectual property in as required. This presence can take several forms, and is almost always much lower cost than trade missions or even trade shows.

So why does pull work so much better than push? Put simply, suppliers are easy to find in any given market: they advertise, have websites, are often members of highly effective international trade promotion groups, focus exclusively on getting product into the hands of buyers, and compared to buyers are relatively few in number.

In contrast, buyers are much greater in number, do not advertise, and the vast majority rarely, if ever, attend trade shows. But more importantly, procurement has changed and now often focuses on services or service-intensive goods that demand a local presence. In addition, the vast majority of buyers depend on local supply chains, either by preference or to comply with local regulation or procurement contracts, as mentioned above.

This puts buyers (pull) in control of the procurement relationship. With the entire world and often literally thousands of suppliers to choose from, the chance a buyer will find one specific seller is low.

How does this play out in real-world examples?

Our international market research in 15 countries has shown that most of Canada’s SME competitors have been using a “pull” approach since at least the mid-1990s. In many markets they have dominated and have effectively shut out push type export sales into these countries.

EDC has successfully used the pull approach on larger projects and foreign buyers for years, although despite their best efforts, this approach generally does not benefit the majority of SME firms as much as larger companies.

A clear example of the power of the buyer vs the supplier is a Latin American startup importer that easily identified and qualified providers and signed procurement and services agreements with over 30 suppliers in 14 countries (pull) in under 120 days. Over the next two years they grew to dominate their multi-million dollar national market, yet only one international exporter reached out to them (push) to carry their product.

Another recent example of the gap between push and pull exporters is a country actively trying to develop a new oil and gas services and support cluster, that offers excellent (potentially huge) opportunities and facilitated access to market for significant numbers of Canadian SME.

While these opportunities are obvious, easy to identify and quantify, and offer immediate revenue generation, over the past two years dozens of Canadian firms have visited this country on push type trade visits, but to date few, if any, have achieved meaningful success.

One reason is obvious: local content procurement regulations systematically eliminate push exporters, and direct procurement towards registered local pull type providers who must meet minimum local supply and service levels.

How can I take greater advantage of buyers using a pull approach?

Any effective approach must address the gap between SME needs to manage risk and provide a low cost, facilitated market entry, as well as recognize the constraints of the offshore buyers and their requirement to operate within their supply chain as pull importers.

Unfortunately, while simple and inexpensive, this is not as easy as it should be. Any SME can do it on their own, but very few will, so it usually comes down to developing a group (shared risk/cost) approach.

The most successful examples are where industry groups and associations, usually working with various levels of government engage private sector consultants who are subject matter experts in the various industries and have a strong understanding of the local and target country markets. These consultants can then package export investment opportunities and present them in a format that is easy to understand and promote.

The generic approach that has been observed to offer a success rate of well over 50% for each opportunity identified is to:

1. Assess the target sector. Identify strategic operational areas in services and value added supply chain where there is a demonstrated need that is expected to grow strongly for at least 5 years.
2. Identify the ideal profile of the target SME firms they would need to attract.
3. Review the local operating environment with respect to constraints that could restrict trade and develop effective solutions before these constraints become problems.
4. Develop a comprehensive business case on each opportunity with sufficient detail to allow an SME to make an informed decision.
5. Where possible, partner with the provincial and federal government trade promotion agencies and various industry associations to promote it to their members and constituents, as this can sharply reduce the cost of any due diligence.

The post Try this approach to improve the number of export opportunities available to your business appeared first on Trade Ready.

Having long been on the outside of global movements for cleaner technologies and methods to address climate change, India made a landmark decision during the Paris climate change negotiations late last year to put its support behind renewable energy.

The Indian government vowed that by 2022, the country would increase its renewable energy generation five-fold, producing 100 gigawatts of solar power, 60 GW of wind-powered energy and 15 GW generated by other forms of renewable energy.

With these increases, renewable energy would account for nearly 40% of India’s installed capacity by 2030.

Renewable energy currently accounts for 13% of installed capacity.

U.S. dispute over sourcing

However, a decision by the World Trade Organization on Feb. 24 may derail, or at least temporarily delay, parts of India’s implementation of this renewable energy plan.

The WTO ruled against India, instead siding with the U.S. over India’s National Solar Mission directive to source solar panels domestically.

The U.S. brought the case to the WTO in February 2013, and lodged a second challenge to the plan in February 2014.

In the Feb. 24 ruling, the WTO found that the requirement violated key terms of the General Agreement on Tariffs and Trade of 1994, as well as the Agreement on Trade-Related Investment Measures, agreed in that same year. The TRIMS agreement stipulates that domestic regulations apply to foreign investors.

Support from Greenpeace

India has protested, arguing that aiding the growth of its own renewable industries will aid global competition and improve services and pricing.

Greenpeace USA has also announced it is supporting India in the dispute.

Greenpeace India campaigner Pujarini Sen said in a statement issued by the organization:

The WTO ruling – and the U.S. decision to pursue it – is a setback to India’s renewable energy ambitions.

“The Indian government is demonstrating commitment to India’s fledgling solar manufacturing sector, which needs initial support to enable it to compete with the price of imported products and to its own roadmap for a green economy solution to global climate change.”

The U.S., however, argues that Indian solar panel manufacturers are receiving benefits from the Indian government that are not available to foreign manufacturers, thus violating trade law.

“The United States strongly supports the rapid deployment of solar energy around the world – including in India,” U.S. Trade Representative Michael Froman said in a statement.

“But discriminatory policies in the clean energy space in fact undermine our efforts to promote clean energy by requiring the use of more expensive and less efficient equipment, raising the cost of generating clean energy and making it more difficult for clean energy sources to be competitive.”

Setback won’t stop renewable energy plan

India had said in late January that it would modify its solar program to assuage U.S. concerns as a means to avoiding an unfavourable WTO ruling. This appears to have been unsuccessful.

However, one analyst pointed out that the National Solar Mission was but a bit part in an otherwise massive program to get India’s renewable strategy up and running.

The NSM only accounted for 5,000 megawatts (5 GW) of power in total, a mere 5% of the total 100 GW plan.

“What was isolated in this was an industrial policy instrument,” Ilaria Espa, a senior research fellow at the Bern-based World Trade Institute, told Climate Change News.

India has said it will appeal the ruling.

Do you think the WTO ruling is fair?

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