While the company’s markets continue to expand with the need for infrastructure in developing countries, there is still work to be done in branding Canada as a mechanical and technical leader, says Mr. Lupke. “Many of our major projects provide water infrastructure, for which demand continues to grow in India, Africa, China and Central and South America. But our major competitors are German companies, so we’re always fighting that ‘made in Germany’ brand, which is very strong.”
Organizations such as Corma no longer have the luxury of relying on sales in North America, he says. “Even when the economy is strong, there is high saturation. Companies have to go out and find new markets. There’s obviously more expense, but we’ve now exported to over 90 different countries.”
Partnership with Export Development Canada has enabled the company to leverage opportunity in developing markets with market research and products such as receivables insurance, contract frustration insurance and political risk insurance. “This year, less than 5 per cent of our sales occurred in Canada, and 75 per cent occurred outside of North America. EDC was involved in many of these projects in one way or another,” says Mr. Lupke.
“Even when the [North American]economy is strong, there is high saturation. Companies have to go out and find new markets. There’s obviously more expense, but we’ve now exported to over 90 different countries.” Stefan Lupke, Executive Vice-President, Corma Inc.
Before stepping out, exercise risk management strategies
When entrepreneurial companies – from the largest corporations to small startups – expand beyond their known markets, they’re leaving their comfort zone behind and taking on new risks, says Export Development Canada vice-president Daniel Primeau.
“The number one risk mitigation tool is relationship. When companies ship to the U.S. or the U.K., they may have been dealing with the same people for years – it’s primarily those relationships that allow them to sleep at night.”
When exporting to new markets, however, mitigating the risk associated with those opportunities requires different strategies, starting with thorough research. “Typically, companies aim to integrate into existing supply chains and become a designated supplier to a large buyer in that marketplace, so research is essential in order to understand the supply chain. Are you the last one in, the smallest, or a critical supplier?”
A critical research strategy that’s often overlooked, says Mr. Primeau, involves banking mechanisms. “We’re quite privileged in Canada – our banking sector has a clearing house system, and monies are seamlessly transferred between banks and accounts.”
The process in other marketplaces may be very different, and without prior research and risk mitigation strategies, may result in enormous challenges. “We often see situations in which the buyer can pay, but the monies can’t get out,” he reports.
Bankers and insurance brokers also play an essential role. “At least for the introductory period in a new market, companies require very specific risk tools such as letters of credit, credit insurance and payment guarantees. Developing the relationships that mitigate risk may take six months, a year or longer – until that circle closes, you can equip your organization with the appropriate tools to manage those risks.”
TAKING ACTION Among the trade assistance and guidance it offers Canadian businesses, Export Development Canada suggests Canadian firms take the following action when pursuing business abroad.
Find the right representative. Having a qualified country representative can make a big difference. Start by understanding the market you’re going after and its segmentation by industry, region, political or economic divisions. Pick a rep whose capabilities match your market segment. The Canadian Trade Commissioner Service, trade associations and local chambers of commerce can all help.
The Trade Commissioner Service in the local Canadian Embassy can offer information about market prospects, local companies, and can also help with visits, contact searches and face-to-face briefings.
Check buyers and manage risk.
- Before committing to a deal, verify a prospective buyer’s credit-worthiness through your bank or a bank in your customer’s country. EDC’s EXPORTCheck online service offers a cost-effective solution in select markets.
- Protect your company from non-payment through receivables insurance such as EDC’s Accounts Receivable Insurance.
- Consult a local professional on protecting your Intellectual Property in that market.
Ensure contract terms and conditions, including payment terms, are clear and precise. In some countries, serious negotiations begin only after signing a contract.
Make shipping and customs arrangements.
Hire a freight forwarder to do everything from negotiating rates with carriers to arranging insurance and finding a reputable customs broker. Refer to the Canadian International Freight Forwarders Association website. Follow general Canada Customs instructions to help ensure your exports reach your customers as quickly as possible.
ONLINE? Visit www.edc.ca for more information.