After several years of a sluggish economy, Canada is still looking for a boost. “We're still not out of the woods," said David Watt, HSBC Bank Canada's Canadian chief economist, in a recent webinar focused on growth strategies for Canadian companies – to listen to the replay, click here.
A true and sustained recovery will depend on Canadian businesses' willingness to adjust to new realities and take steps to harness new opportunities. “We need Canadian businesses to overcome short-term uncertainty to seize the future," Watt said. “Canadian companies cannot wait for the global economic backdrop to improve before they begin making changes."
The Bank of Canada forecasts a tepid 1.9 percent growth for the economy in 2016, but international markets provide opportunities for Canadian companies to outperform that rate and build revenues that can be reinvested here. By prioritizing global trade and taking advantage of the strengths they have developed in this country, Canadian companies can drive a faster return to prosperity for the nation.
According to research by The Conference Board of Canada, exporting boosts Canadian companies’ sales and profits. Trade also boosts companies’ productivity and living standards, said Danielle Goldfarb, director of The Conference Board of Canada's Global Commerce Centre, who also participated in the webinar.
“The Canadian market is small, and we expect it to experience relatively slow growth - that's our new normal," Goldfarb said. “To grow, companies must look across borders."
And there are a number of places ripe for Canadian companies to participate in international trade. For instance, the U.S. economy is rebounding, with increasing demand for a wide range of products and services.
While Canadians have traditionally traded primarily with our closest neighbor, there are plenty of trade opportunities elsewhere. For instance, if the Trans Pacific Partnership (TPP) trade deal is ratified, it will open up trade access among 12 countries, including the United States and Canada, Goldfarb said.
While free-trade agreements like the TPP make it easier for Canadians to conduct business in the other countries, the benefits are moot if businesses don't take advantage of them. “Free-trade deals may open doors, but we need to adapt and innovate to seize the full benefits of global opportunities," Goldfarb said.
How to Get Started
Watt and Goldfarb provided recommendations for Canadian companies that want to harness global opportunities. They outlined five specific steps companies can take to prepare for international expansion.
1. Look for underserved, growing markets. While opportunities abound in the United States and China, Goldfarb recommends also looking beyond the “usual suspects," considering countries with smaller or newly developing economies as well. In some cases, Canadian companies have an area of expertise that is unique or niche, but which is especially well suited to international markets. To pick only one example, pet food is an industry where Canadian companies command 4 percent of the market worldwide. As emerging economies develop a larger middle class, pet ownership is bound to increase.
2. Consider implementing an in-person presence in key global markets. “A face-to-face presence is increasingly important," Goldfarb said. “Selling in person is one of the many routes to international success." That could mean sending your staff members to meet with international customers or working with a local affiliate company to provide services in another country.
3. Leverage proximity to the United States. No other country shares Canada's proximity, highly educated workforce, common language, and decades of experience in trade with the United States. Canadian companies can take advantage of U.S. demand in sectors such as communication services, food products, machinery manufacturing, and other services.
4. Invest in research and development. As trade barriers fall, there are likely to be more potential customers. There also might well be a wider range of competitors, both externally and locally. To become more competitive globally, Watt emphasized that more Canadian companies – including smaller businesses – must invest in R&D to develop new products and services, as well as new ways of boosting productivity.
5. In addition to products, think also about services. For the past 10 years, the fastest growing exports have included services, in addition to products. Those include financial services, engineering and architectural services, scientific and technical services, forestry and agricultural services, communication services, and an array of other services. Companies that have traditionally manufactured products should consider providing services that add value to their products, such as marketing, maintenance, training, and support, Goldfarb said. “Services are the most dynamic part of global trade," she said. “We can tap into the expertise we've already developed and provide those services to customers around the world."
While the global economy – including Canada's domestic economy – remains shaky, international trade offers a remedy for those willing to jump in. If Canadian companies don't step up to the challenge, “we will find ourselves 10 years down the road wondering why we didn't benefit to the extent anticipated from falling trade barriers," Watt cautioned.
Issued by HSBC Bank Canada ("HSBC")
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