For all the talk about Canada being a trading nation, we aren’t when it comes to small and medium sized enterprises. While SME’s account for roughly 95 percent of all companies in Canada, and create 65 percent of all jobs, less than 2 percent of them are involved in exporting.
When compared to U.S. SME’s at 33 percent, German firms at 20 percent and Chinese small and medium sized firms at 60 percent, it is pretty clear that Canadian firms have not caught on to the opportunities that are available from exporting.
It is also why we buy Chinese laptops, Japanese robots, South Korean smart phones and Taiwanese computer parts. In return, we sell pork bellies, oil and natural gas and raw logs. This is hardly a model for a 21st century economy.
Rethinking the entire approach to exporting
Much has been written about the causes underlying our utter lack of international activity, from an unwillingness to take any kind of risk, to cost concerns, to a lack of qualified international trade professionals and managers, and a general lack of market knowledge.
How difficult can it be to do an environmental scan of a country with potential on Google?
Then there’s the old worn out excuse of little or no government support.
These may be legitimate but in the end they are excuses. We need to fundamentally rethink how we encourage and develop the capability of Canadian SME’s to actively pursue international markets.
Let’s start from the top down.
1. There is a need for a national organization, perhaps based on the Saskatchewan STEP or Australia’s Austrade models, that works closely with SME’s in both training them to become export capable, and identifying customers in export markets.
2. No more government trade missions where the focus is on politicians. Trade missions should be business to business driven, with matchmaking and follow up incorporated in each mission.
The National Research Council used to undertake these in Asian markets and they were hugely successful.
3. Let’s start talking in the media and industry associations, and chambers of commerce, and from governments at the Federal and Provincial level about realistic markets. India and China are not realistic markets for most SME’s unless they operate in very specific niche markets.
Canadian firms need to know more about where real opportunities and real customers are.
There is a need to promote Latin and South America, East and West Europe, and the small strong markets in Asia such as Singapore, South Korea and Taiwan.
What can SME’s do?
4. Understand that we live in a competitive global world and learn about it. In a recent survey, over 75 percent of Canadians had not heard of the Trans Pacific Partnership (TPP), a trade deal that, if implemented, will fundamentally change the Canadian economy.
5. Be prepared to spend money and time gaining the necessary knowledge and training on international activities such as Incoterms, letters of credit, and freight forwarders. It’s not rocket science and it should be a part of every SME’s activity.
6. Understand the value of the impact of social media on your international marketing potential. While Canadians have the highest use of the internet on a per capita basis among OECD countries, less than 15 percent of Canadian retail firms have simple e-commerce capabilities.
It’s not that difficult to set up a PayPal account, and in twenty minutes you can identify a segment of real customers using LinkedIn – I have seen it done.
7. Understand it is not about markets; it is about reaching real customers. It doesn’t matter which country(s) you choose to sell in (except for China and India) but it does matter if they have customers.
Ask your colleagues and your networks where they sell to in the world, why they have been successful, and what lessons they have learned.
In my little corner of the world, Victoria, British Columbia, there are dozens of SME’s that sell globally and they are more than willing to share their lessons with other local firms looking to expand internationally.
Why this matters
In the next twelve to eighteen months Canada will be a signatory to two major trade agreements that will impact the domestic competitive scene.
The first is the Canada EU Free Trade Agreement. This is not like NAFTA or just a reduction in tariffs. This agreement is far reaching in areas such as foreign investment, government procurement and intellectual property.
The second is the Trans Pacific Partnership. Much of what constitutes this agreement has not been made public yet, but according to reports it will cover procurement, foreign investment, labour mobility, environmental standards and business practices.
The TPP has twelve countries at the table and Canada is not in a strong bargaining position. So, it is important that Canadian SME’s be aware of its impending implementation and what its impacts might be.
The current Canadian government is committed to trade agreements and opening up the Canadian market. The world is about to march in the door, so perhaps we should go and visit them first.
A bit of practical advice
Succeeding internationally is not that difficult if you are prepared to spend the time and resources to find real customers. A few hints in that pursuit:
8. Pick on someone your own size. Don’t go after customers in large, complicated, non-transparent markets. Choose countries that have SME’s that want to work with you.
9. Pick country(s) that have growth potential and a need for your product or service. Don’t know where to find them? Try Google.
10. Partner up. You will need agents or distributors or local partners. Find the good ones and cherish them. They will save you time, money and headaches.
11. Get competitive. Figure out what makes you the best at what you do and build on that. By the way, it’s not because you are a Canadian company. No one cares. They do care about product quality, after sales service, good communications and strong supply chains.
12. Budget for market development. Nothing is free and international markets can take time to develop.
13. Commit to staying for the long term. Good customers are hard to find, and once found are worth the effort.
Your thoughts on what Canadian SME’s need to do to play a bigger role in exports?