You don’t have to be big to go global. You just have to be smart about how you go about it, including avoiding going alone.
Export Development Canada (EDC) is sending that message in a bid to inspire more small and medium-sized Canadian businesses to build business internationally.
Denis L’Heureux, EDC regional vice president, small business solutions, says market expansion is no longer a choice; it’s a business imperative.
“As we saw in 2008 when the U.S. economy experienced a steep downturn, Canadian companies that were overexposed to the U.S. really suffered. To survive in the long-term, you have to look at diversifying your export markets. We especially encourage companies of all sizes to explore the emerging markets; that’s where growth is – today and for the foreseeable future.”
A growing number of SMEs are paying attention. Companies with sales under $10 million annually already represent some 60 per cent of EDC business.
Yet Mr. L’Heureux is also quick to acknowledge that expanding internationally is no small feat, especially for firms that lack financial means, international business expertise and other capacity. Further, he says entrepreneurs who take a short-term opportunistic view to export markets, or hope to expand abroad through a ‘business as usual’ approach, are off track.
“Too often, the inclination among small companies and entrepreneurs is to copy what they did to grow their business in Canada. But going international is a paradigm shift. You have to step back and ask, ‘What is going to make me successful in this new venture?’”
For starters, a well-thought-out export strategy is a must. Mr. L’Heureux says private consultants, provincial trade organizations, the Canadian Trade Commissioner Services, BDC and EDC are among the organizations that can help.
“You don’t want to over-analyze, but you should develop a strategy that identifies a foreign market where you have a competitive advantage and the greatest potential to succeed, as well as the best way to build a bridge into that market.”
While Mr. L’Heureux says each small company needs to look at all market entry options, one advantageous way is for the SME to build a strategic relationship with a larger company that already has footholds in foreign markets.
“Going direct is often costly, takes a lot of time and the risk of failure can be high. Leveraging larger companies allows small companies to focus on what they do best and stick to their core competencies,” he says, noting that partnering can take many forms – from contributing to a supply chain to providing a custom product tailored to the larger partner’s interests.
In addition to benefiting from an association with the larger company’s reputation/brand, the SME may also tap its large partner’s international business expertise, sales force and customer base, which can lead to larger and more stable deals. Eventually, the large firm may even become a source of joint training and/or investment, says Mr. L’Heureux, noting the approach also helps SMEs address potential risks such as high entry costs, non-payment, loss of goods and limited initial demand. “Ideally, you can rely on your partner instead of learning those lessons the hard way.”
While such benefits hold clear appeal, establishing a relationship with a large and willing partner “doesn’t happen overnight,” says Mr. L’Heureux.
Getting the attention of decision-makers – typically enabled through networking activities with industry associations, chambers of commerce and boards of trade – inherently requires the SME to come to the table prepared.
“You have to target companies that you are confident you can help. You have to demonstrate that you can add value to their business. Then, it’s a matter of building trust – proving to them that you will be reliable, and that you can deliver quality, on time, and that your aim is to grow through a long-term relationship.”
Achieving all that begins with some introspection.