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Currently, Canadian companies wishing to expand across borders must face a commercial context of unprecedented complexity. In addition to the challenges caused by climate change and geopolitical conflicts, a record number of voters will go to the polls this year – and the stakes in this election are more consequential than ever. How to stand out from the game? According to two experts from Export Development Canada, several paths can lead to success. Overview.
This is unprecedented: by the end of 2024, more than 2 billion voters in more than 50 countries will have been called to the polls. Normally, elections do not shake up the trade policies of Canada’s main partners, but this time, the political climate in some of these countries is completely muddying the waters.
“In an electoral context, the risks associated with political and social changes can transform the rules of the game for companies that are active abroad, and commercial exchanges are not immune to this phenomenon,” underlines Daniel Benatuil , senior economist at Export Development Canada (EDC). “As the past has demonstrated, this is usually the case in emerging markets. But today, such changes are expected in a growing number of economically developed countries due to the growing threat of protectionism, especially with regard to tariffs. A worrying phenomenon that we have not seen for a long time. »
In addition to facing the risks caused by an increase in tariff barriers linked to protectionist policies, Canadian businesses must deal with major issues such as the long-term consequences of the pandemic, the emergence of geopolitical tensions on the chessboard global economy, rising interest rates, repeated bottlenecks in the supply chain and the fragmentation of trade.
“We are talking here about a multitude of paradigm shifts occurring simultaneously, which is unusual,” notes the economist.
Resilience requires diversification
Daniel Benatuil underlines the importance of broadening one’s scope of action when the business context becomes more complex. Local companies can thus focus on expansion across borders, and those already present on the international market can, for their part, tackle emerging markets.
“If you are aiming for growth, emerging markets offer a whole range of possibilities that can suit a wide variety of business models,” says Mr. Benatuil. And the Indo-Pacific region should definitely be on your radar. » Indeed, not only is India’s economy expected to continue to grow faster than China’s, but several Southeast Asian countries are jockeying with China to carve out a market for themselves. place of choice in global supply chains.
Good to know: For many Canadian exporters, it is the countries with which Canada has a free trade agreement that offer the best development potential. Want to know more? Global Affairs Canada has listed 15 free trade agreements covering 51 countries, including Singapore, Vietnam, Malaysia and South Korea.
More moderate growth is expected in Canada’s traditional markets – namely the United States, Mexico and Europe – but their potential is still very real. In these three markets, aerospace, agriculture, clean technologies, information and communications technologies and life sciences constitute particularly promising sectors, and other industries offer interesting prospects in the one or more of these economies. In this regard, EDC and the Trade Commissioner Service provide businesses with resources, tools and analyzes tailored to countries and sectors, to help Canadian businesses make informed choices.
Expert advisors to guide businesses
Studies play a vital role, but expert help and on-the-ground presence can make the difference between a successful project and a disaster. And this, even for experienced exporters.
Zeeshanali Fazal, regional director for the South Shore of Montreal and Estrie at EDC, emphasizes that in-depth knowledge of the market selected for an expansion project is essential, both at the national and municipal levels.
“It is essential for exporters of goods and services to familiarize themselves with the culture, language and consumption habits of a new market, and to understand the path of their products to consumers,” he explains. I know a family that has been producing maple syrup for over 20 years, and who decided to launch into exporting despite minimal knowledge of the preferences of the target consumers. Their product sat on shelves for weeks and had to be liquidated. The reason: the company name was unacceptable in this market. » Shows that the smallest detail counts in the equation.
Mr. Fazal highlights that EDC has 16 Canadian offices and 26 international offices, where the Crown corporation has established leading partnerships in the private sector as well as with local government institutions. “Every country, every city, every buyer is different from the others, and we are able to help Canadian businesses navigate these complexities,” he adds.
Domestically, EDC also works in partnership with other federal institutions such as the Trade Commissioner Service, Global Affairs Canada, the Business Development Bank of Canada and the Canadian Commercial Corporation to create resilient business solutions. These institutions offer services such as regulatory information, financing methods, financial tools, advice and webinars.
How to reduce growth risks
In addition to finding out about new target markets and consulting export experts, Canadian companies wishing to expand internationally benefit from equipping themselves with cutting-edge tools that facilitate financial management and contract management.
Thus, the uncertain political climate of some countries promising expansion activities may impact the volatility of their currencies. Exporters should therefore prepare to withstand currency fluctuations by transacting in Canadian dollars as much as possible or by using tools such as an exchange rate clause, a forward contract or a currency option. The common objective of these strategies: to increase the probability of selling goods and services at a favorable exchange rate.
That said, as Zeeshanali Fazal explains, the biggest risk to any deal with a new buyer is unpaid invoices. “Unpaid bills are a nightmare. As soon as you are waiting for a payment or a contract, the cash flow takes a hit. This has the effect of reducing the profitability of other commercial agreements, because the income they generate must be used to repay the amounts invested. » What to do in this case? Fazal recommends that businesses use credit insurance to ensure they receive payment, and he says that proof of such insurance can even make it easier to get new loans from the bank.
Remember that other business solutions, such as purchase order financing and cash flow loans, can also protect cash flow, particularly for large orders.
The key to success
In short, to spread their wings internationally, Canadian companies have every interest in surrounding themselves with partners present on the ground who are able to guide them, share their knowledge with them and help them make an entry. successful in a new market. With the right tools and support, they can even transform an uncertain climate into business opportunities.
This content was produced by the Special Publications team at Duty in collaboration with the advertiser. The editorial team of Duty had no role in the production of this content.
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