Making the decision to take your business to international customers is exciting. There’s potential for rapid growth as you reach beyond Canada’s domestic population to an entire world of new buyers. Even if you sell only in Canada, it’s hard to escape the trends in international business. Supply chains, the internet and monetary policies all have an impact on even the smallest of Canadian firms.
Next week, leaders of some of the world’s largest companies will sit down at the Fortune Global Forum in Toronto to consider some of the key trends affecting business worldwide. The Forum is hosted by Prime Minister Justin Trudeau, sponsored by Export Development Canada, Invest in Canada and Destination Canada, and brings together business leaders to talk about the burning issues facing buyers and sellers across the globe. It’s a chance to sift through some of the key challenges and opportunities affecting businesses of all sizes, regardless of where they sell.
5 trends affecting your business
As you prepare your international growth strategy – or even if you’re only selling in Canada for the moment -- it’s worth considering how the following trends could affect your business.
Managing political risk
It’s both an understatement and a cliché to say that the world is hyperconnected. A political election halfway around the world, a fluctuation in a country’s currency or a data breach in Southern California have the potential to disrupt Canadian business, regardless of whether you’re actively operating in international markets or not.
Managing market risk as part of your overall business strategy is good practice. If you’re selling abroad, you’ll consider the countries where you operate or have investments. There are resources available to help you create a risk management plan. If you like to dive deep into the numbers on your own, take a look at EDC’s Country Risk Quarterly.
Many Canadian businesses that sell or invest internationally choose to go to the United States. It’s certainly convenient to live next to the world’s largest market. But, even as growth in the U.S. is picking up, it can’t beat the rate of growth in emerging markets. India, United Arab Emirates and Chile are just a few of the fastest-growing economies in the world. The middle-class is increasing, and there is increased demand for quality Canadian goods and services.
The UAE is actively seeking investment, and offers incentives to foreign companies in the form of free trade zones, where international companies get preferred tax and customs treatment.
India is making huge investments in infrastructure. With an ever-growing population, it’s looking to Canada’s agri-food sector as a key supplier.
Free trade agreements
Goods and services are moving ever-freer across borders. Canada, for its part, has signed onto new trade agreements with the European Union, as well as 10 countries that border on the Pacific Ocean, within the past 18 months. The recent announcement of a new U.S.-Mexico-Canada Agreement (USMCA) means a continuity and stability with our largest trading partner.
The Comprehensive and Economic Trade Agreement (CETA) with the EU allows Canadian companies selling or buying from the EU can get preferential treatment in 28 member countries. Canadian firms will be considered on par with local companies when bidding on procurement projects at all levels of government in the European Union member countries. You can also hire Europeans or have your people work in the EU for up to six months without establishing an office or a work permit, allowing for easy movement of people and goods across our borders.
Earlier this year Canada signed onto the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a free trade deal with 10 countries, including Malaysia, Japan and Singapore, which is a huge step toward increasing our business in Asia. It also stands to bring over $4 billion to Canada within the next few years. The removal of tariffs allows Canadian firms to buy inputs and services more cheaply from these countries, while Canadian firms selling internationally can price their goods and services more competitively in those partner countries.
The need to innovate to compete
Canadian firms compete with international companies whether they choose to or not. Consumers are global, sourcing goods and services easily on the internet, looking for the best price and goods that are customized to their needs, regardless of their country of origin.
Innovation may seem like a buzz word, but companies are recognizing the need to constantly evolve to respond to demands of customers to create, refine and adapt products and services that satisfy varying needs and remain competitive.
The rise of e-Commerce and China
China is home to the largest e-commerce market in the world, accounting for 40% of total global e-commerce spending. It’s projected to reach $1.6 trillion USD in the next two years. This represents huge potential for Canadian firms seeking customers. But the rise of China also raises challenges.
As China becomes a growing global force, regulators there are considering how to better regulate things like intellectual property protections, to encourage more foreign investment there.
Watch this space
As business leaders offer their latest input at the Fortune Global Forum, we’ll be covering each of these topics in more detail. Register for our TradeInsights eNewsletter to stay up-to-date on the trends affecting your Canadian business.