The first question to answer is ‘Why export?’ The short answer is that it’ll make your company more robust in every way.
Branching out from Canada’s relatively small consumer market makes Canadian companies more productive, profitable, innovative and resilient.
Many entrepreneurs begin exporting because the Canadian market is relatively small—Canada’s economy represents only 1.5 per cent of the global economy—so ambitious business people look beyond our borders.
Exporting equals growth
There’s no question the limiting size of Canada’s economy is a big part of it, but research shows there are other equally compelling reasons to get into exporting — it boosts productivity, profitability, resiliency and innovation. Studies by Statistics Canada, Industry Canada, the Conference Board of Canada and Export Development Canada (EDC) have all concluded this is so.
Industry Canada found that the top 10 per cent of Canada’s exporters grew at an annual rate of more than 20 per cent between 2009 and 2011 while the top non-exporters only grew at eight per cent. Even straight revenue numbers were higher, with exporters reporting annual revenue of $3.4 million while non-exporters’ annual earnings capped at $1.6 million.
Research shows that exporting makes companies more productive, in part because it connects them to different types of markets and different customers, bringing about new ways to improve efficiency, but also inspiring completely new products based on those prospective markets.
Competitive intensity drives Canadian businesses to export
In some ways, it comes down to competitive intensity in the global market. Canada’s domestic market is small and it’s therefore not that competitive, but the global market is intensely so. If you’re competing in that field, you hone your craft, become lean and efficient and are always on the lookout for new ideas and products.
The same cause—competitive intensity—creates more innovation among exporters than their domestic-based counterparts. New knowledge of overseas markets—truly understanding what’s happening on the cutting edge of your industry—logically drives innovation in research and development, but innovation can come in other forms as well. Better production processes, upgraded services, enhanced training for workers and more sophisticated distribution systems can all be considered innovation and all have been observed in companies that export.
Challenges of doing business abroad
With all this being said, getting started in international business brings a lot of new and unfamiliar challenges. Like understanding regulations in a new market, dealing with language barriers, getting export permits, and more. Exporting is certainly complex, but this is why EDC is here to help.
In my next post, I’ll be looking at the more practical side of exporting and sharing some of the most important things that Canadian businesses need to know before they start.