Archive for November, 2009

November 24th, 2009

Laval is abuzz

The first Rendez-vous stratégique de Laval was held on November 17 in Laval. The purpose of the conference was to come up with solutions to help companies grappling with the economic crisis. I found two of the observations particularly striking.

First, panellist Denis Durand of Jarislowsky Fraser pointed out that one of the reasons the crisis won’t be going away so soon is that companies don’t have the money to invest. We all think that the BRIC countries (Brazil, Russia, India and China) can ensure the recovery—their companies are in better shape than ours—but it’s not true. Just like the U.S., the BRIC countries account for 21% of the global economy so it’s unrealistic to think that they alone can kick start the recovery even if their domestic demand is strong.

So then how can Québec exporters manage? They could look to the BRIC countries to ensure their growth but the truth is China and India are not suitable for all Québec products. So that’s not the answer.

Second, panellist Mr. Afilalo of MEP Technologies asked Mr. Durand about the impact of a strong Canadian dollar and higher commodity prices on Québec exports. Unfortunately Mr. Durand doesn’t see the situation improving and believes exporters will continue to suffer. He had no concrete solution to offer our exporters.

So I was disappointed that nobody on the panel could come up with potential solutions for Québec exporters. What can they do to survive and grow?

In fact, we all know that the economic landscape has changed a lot and that it is very competitive. Entrepreneurs have a tendency to look to the government and banks for the same kind of help they received in the past; i.e. money to ensure their survival.

However, entrepreneurs need to understand that they must adjust to the changing times. They have to be better prepared and do a better job about planning their development abroad. Banks have every right to demand proof that their business project is viable. Are entrepreneurs ready to face this reality? I don’t think so, and I believe that’s why nobody came up this solution.

It’s easy to say entrepreneurs use their natural abilities and flair to develop their markets and that they don’t need a business plan. Nonetheless, the three entrepreneurs on the panel—MEP, LAB Research and Jarry, Bazinet Avocats—managed to combine their intuition and experience in their industry with a solid business plan and that’s why they’ve had success abroad. In today’s environment, if you want to succeed, you need to carefully plan your development in foreign markets.

November 23rd, 2009

Business opportunities in Russia at Leroy Merlin

On October 15, Christophe Boudier, a buyer at Leroy Merlin, came to Québec to meet potential Québec suppliers during a seminar on opportunities offered by his company. Four Laval companies attended.

Leroy Merlin is part of the French Adeo Group, which employs 60,000 people in 12 countries. It ranks fourth in the world, (behind Home Depot and Lowe’s, which are well known in Canada) and second in Europe in the retail construction-renovation sector. The company was the first to offer Russian consumers a full range of products at low prices. It currently has 10 stores there and plans to have 25 by 2013. The company imports 70% of its products, which could represent a great business opportunity for some SMEs.

The company grows in lock step with the construction industry. According to Christophe Boudrier, the Russian residential market is booming and has not yet reached maturity. Since 1990, the sector has grown by leaps and bounds. In the past, housing was mostly government owned but now 74% of housing belongs to private interests. And apartments in Russia are delivered as concrete shells, so consumers have a lot to buy to make them liveable.

But not all SMEs are cut out to be a Leroy Merlin supplier. The company insists on very low prices and huge volume. For example, for Moscow alone, in 2008, 100,000 items were sold, representing about 700 pallets of goods a day.

If your SME is interested in becoming a Leroy Merlin supplier, you have 3 options:

  1. Become a bulk supplier: The SME provides, on an as-needed basis, large quantities of a given product at bargain basement prices;
  2. Become a product suppler: The SME supplies all stores on the Russian market by making one or more products permanently available.
  3. Become an Adeo brand manufacturer for Russia: the SME creates products under the Leroy Merlin brand. This gives you access to all Leroy Merlin stores in the world.

But you have to remember that the process between product selection and delivery is relatively long, i.e. between 6 months and one year.

Also, to succeed you have to take into account these key points: the company’s price strategy is very aggressive; all products must be GOST-certified; you’re responsible for documentation and customs marking; you have to be able to provide huge quantities and all the documentation must be written in Russian. So while Leroy Merlin can offer huge possibilities, not all SMEs are necessarily up to the task.

November 18th, 2009

SMEs can now also export to China and India

For the past few years, everybody’s been talking about the huge market potential in China, its 300 million middle class consumers and phenomenal growth. It’s the same for India. However, although sourcing in China is quite popular, only a handful of Laval and Quebec firms sell their wares there.

The fact is that China and India are distant chaotic markets fraught with entry, cultural and other barriers. It’s not easy for a small Quebec company to find its niche in the Pacific Rim without getting burned by having others copy its products or not finding the right business partner.

That said, I’m starting to hear more and more cases of Laval companies landing big contracts in Asia and we’re fielding a growing number of questions about the legal, financial and other aspects of exporting to China.  It’s very exciting to see small businesses leverage their niche expertise to stand out on the international stage. On October 19, the Globe and Mail published an article on Canadian exports in its Report on Business. Click here to read it.

SYNERGX and JMF Cranes & Hoists are two examples of Laval companies that succeed in these markets. M. Menghini, President of JMF, was telling me how the Indian market is full of opportunities for his company. He is also considering hiring a full-time representative to develop this market and evaluating the possibility to develop a partnership with a local firm.

There are many similarities between doing business in the U.S., Europe and Asia. For instance, you must make sure to know your partner well, have a clear, complete and detailed contract, and maintain a close relationship with your customer. Just because the customer is far way, speaks another language and is from a different culture doesn’t mean the rules are different. You can make the process easier by learning about the country’s business practices and surrounding yourself with the right partners.

Although they were published in 2006 and 2007, the following guides from Export Development Canada are still very relevant for our companies: