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.
For smaller companies, the key is to identify unique strengths and differentiating points such as a tailored service, or an ability to bring the large partner added flexibility, perhaps by filling smaller orders or by customizing the large company’s products, for example. “The SME also has to differentiate itself from other smaller competitors, or in some cases combine forces for a stronger proposal,” adds Mr. L’Heureux.
The SME should also expect costs will be involved.
“Too often, SMEs dismiss the option of working with a larger partner out of fear of diminished profits or a loss of control. But you have to determine what you value most. You may have to let some things go, but this approach can be a ticket to accelerated diversification and sales growth in foreign markets.”
To that end, Mr. L’Heureux also encourages SMEs to look beyond potential Canadian partners and also consider seeking opportunities through larger foreign enterprises too.
For example, a deal with a large Brazilian company may not only result in access to other South American markets, but also could mean a gateway into other markets worldwide. “There are many large Brazilian companies trading in China today,” says Mr. L’Heureux. “It’s all about exposure. You will be seen more; that’s going to help you grow faster and build your business.”
And in the realm of international expansion, that’s the name of the game.
Valuable info for growing exporters
For small businesses seeking international sales opportunities, high-growth markets such as the Andean Region, Brazil, Chile, China, Gulf Cooperation Council, India, Mexico, Panama, Russia, South Africa, Turkey and Vietnam are fertile ground. To help small exporters take their business to new levels, a step-by-step guide published by EDC provides a primer on the most promising new markets for Canadian goods and services. Visit edc.ca/new
CASE STUDY 1: AMRIKART RC
Quebec high-tech firm measures its export potential
Montreal-based Amrikart RC has carved itself a handsome niche by providing sophisticated precision measurement services to aerospace industry players, including Bombardier. Now, the small firm is taking a measured approach of a different sort as it pursues a strategy that integrates market diversification with export expansion.
Entrepreneurs Jean-Francois Delorme and Nathalie Tremblay launched Amrikart in 1988 while the pair was still in university, initially offering office computer integration services at the dawn of the PC revolution.
In the mid-90s, Mr. Delorme and Ms. Tremblay reframed Amrikart after they became interested in metrology, the science of weights and measurements, and seized opportunity by purchasing a larger firm’s metrology department.
“The way it was managed, we both felt it could do more,” says Ms. Tremblay.
From there, Amrikart introduced metrology to Canada’s aerospace industry, initially providing technical expertise and laser tracking services to companies whose sophisticated manufacturing processes require hairline exactness. Today, Amrikart provides fully integrated metrology solutions that span dimensional measurement and 3D inspection to certification and reverse engineering services.
Being an innovator in aerospace – arguably one of the world’s most high-tech and competitive arenas – is no small feat. “We have a very professional and imaginative team,” says Ms. Tremblay, noting the company’s growth from five engineers in 2004 to a staff of 17 today. Along the way, Amrikart has leveraged its relationships with large Canadian manufacturers to build inroads with suppliers in the U.S. and Mexico. “The relationship and credibility we developed with Bombardier is a big plus.”
Pursuing its next stage of growth, Amrikart recently engaged a consultant through BDC who helped the company develop a strategic marketing plan. It identified new opportunities beyond aerospace manufacturing and outside of Canada that Amrikart will pursue, in part, by hiring a director of worldwide business development.
“Hiring a specialist who can help us expand our relationships is an important step. It’s the right time for us to invest. We are blossoming,” says Ms. Tremblay.
CASE STUDY 2: MACROTEK INC.
Relationships help cleantech innovator go global
Go big or go home? That’s not Ontario-based Macrotek Engineering’s experience. Its mantra might be better stated, ‘Stay agile, be smart and go global.’
Despite being a small company, Macrotek has built a thriving business providing custom air pollution control systems for giants ranging from Hatch Engineering to Sherritt International and Vale. Macrotek president Peter Ristevski notes, however, “We do not compete with the large players involved in mega projects. We are in the niche industrial market that is too intricate for the big guys.”
That niche strategy and a record of clean-tech excellence helped Macrotek build a global book of business.
It all started in Canada, says Mr. Ristevski. “There are a lot of head offices of multinational mining companies here, so we have gotten to know them well.”
That has paid off. For example, Macrotek’s design and delivery of pollution control systems for a Sherritt project in Cuba, facilitated through Hatch, led to Sherritt inviting Macrotek to participate in an even larger job involving Korean and Japanese partners in Madagascar. “They came to us,” says Mr. Ristevski.
Serving larger players helps Macrotek other ways too. For example, whether Macrotek is advancing a proposal, contributing to a feasibility study or designing a system, Mr. Ristevski says Macrotek’s large partners are supportive. “There is good co-operation.”
While noting that most Macrotek-designed systems are built in Canada, the project’s large partners typically offer a conduit to prequalified suppliers should a job require parts in a foreign market.
No matter how solid the partnerships, however, big budget projects involving complex joint ventures in faraway markets come with risks.
“How do we know the project is financially secure? And if letters of credit and bonding are required, these can be challenges,” says Mr. Ristevski, noting EDC provides these kinds of solutions. “When we start bidding on a project, we go through EDC to ensure the client is insurable. EDC nearly eliminates the risk.”
For more information, visit edc.ca.