5 New Global Realities You Need to Understand

There's a world of opportunity out there, if you just know how to take it

Written by Murad Hemmadi

Wary of the complications of entering overseas markets, or burdened enough with the challenges of the domestic market, many Canadian companies are failing to take advantage of the massive opportunities of exporting. But flagging economic growth at home should prompt more firms to re-evaluate the benefits of selling to international clients.

“Canada’s exports have effectively flatlined over the last decade,” said Danielle Goldfarb, Associate Director of the Global Commerce Centre at the Conference Board of Canada, speaking at the PROFIT Executive Breakfast: Opportunity Outlook 2015 held in Toronto on March 4. “This is not just an academic issue, this is an important issue for Canadian companies—companies that export tend to be more profitable and productive.”

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Goldfarb cited Conference Board research showing that companies that exported over the last 15 years boosted overall sales and profits more than they would have been able to if they hadn’t sold to overseas markets—i.e., exporting supplemented existing domestic business, rather than replacing it.

Goldfarb identified the markets, products and strategies that offered the most opportunity for Canadian companies contemplating exporting.

Not just oil and metal

There’s more to the Canadian economy than natural resources, but you wouldn’t know it by watching the news. The desire of provincial and federal governments to find new markets for oilsands production and the falling price of oil have dominated public discussion of the economy in recent times, but Goldfarb said resources are only one part of the exporting opportunity.

“In the top five fastest-growing Canadian exports, resources and products do play a role, but we’re really talking about services,” noted Goldfarb. “The fastest-growing Canadian exports over the last 10 years are things you cannot see or touch but really are Canadian companies selling our expertise in global markets.”

The intangible opportunity is not just in sectors like consulting or legal services where services are sold independently. “Many Canadian companies sell services related to their products, and in fact are more able to sell their products because they can sell their expertise alongside those products,” said Goldfarb.

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The U.S. still matters

Exports to partners other than the U.S. have been growing, while trade with our souther neighbour has largely been flat. But Goldfarb cautions that companies should not simply ignore the U.S. market in favour of the faster growth on offer in countries further afield. “We’ve been told the world is flat, but it’s still round—geography still matters,,” she noted. “We’re still next door to this huge market, and it’s essentially going to remain our bread-and-butter market for the foreseeable future.”

The U.S. can also serve as a gateway to other opportunities for companies lacking the scale or knowledge to enter more distant economies on their own. “When Canadian companies sell into the U.S. multinationals that are active in emerging markets, that’s a way for smaller companies to have access to those markets indirectly,” said Goldfarb.

Goldfarb advised companies to act quickly if they want to make the most of that huge market. “The opportunity is really now in the U.S., because the U.S. is rebounding and we have a low-dollar situation,” she explained.

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BRIC and beyond

A new global economic order is emerging. “Emerging markets now represent half of the global economy when you measure it by purchasing power,” Goldfarb said. “It’s not just about the BRIC [Brazil, Russia, India and China]—the large emerging economic powerhouses—there’s a whole bunch of emerging economies.”

While Canadian trade with Asian markets has grown rapidly over the last two decades, the country’s market share has actually declined. That’s not a phenomenon exclusive to Canada, but it is cause for concern.

One reason for this imbalance is the nature of what Canadian companies are selling in Asia. A disproportionate percentage of Canadian exports currently consists of resources. But demographic changes mean the demand for services is set to grow rapidly. “A lot of the emerging Asian markets have growing middle classes that are looking for high-value services, and Canada has a lot of expertise in those areas,” said Goldfarb.

Emerging markets are high-risk, high-reward. Would-be exporters must ensure that their products create real value in order to find a market. “You need to go in with a world-leading product or service,” Goldfarb cautioned. “If you’re trying to differentiate yourself on low cost, it’s going to be much harder for you.”

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New is better

If price isn’t a viable arena in which to compete, companies must find other ways to differentiate themselves from the competition. One rewarding strategy: continually evolving your product or service offering. “Companies that continuously introduce new products into emerging markets were much more successful than those companies that did not introduce products rapidly,” said Goldfarb.

New product offerings are also crucial in the battle to protect yourself against cheap knock-offs and copycat competitors. “The best protection against intellectual property theft is trusted relationships and constant innovation, not necessarily thinking about legal recourse as we tend to do in North America,” Goldfarb suggested.

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Business begins at home

Don’t rush to fill a perceived overseas need before you’ve established your company in the domestic market. “Companies that did not have business experience in Canada or the U.S. before they went to emerging markets were less likely to remain in those markets—they exited very rapidly,” noted Goldfarb.

But even if you aren’t cut out for exporting, Goldfarb said that companies can still benefit from Canada’s overseas trade. “That can mean importing, it can include selling into Canadian companies that are exposed to global markets, selling into U.S. firms that are exposed to emerging markets, or setting up an office in a global market yourself,” she suggested.


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