Archive for May, 2011

May 24th, 2011

A great example of a company with a structured internationalization plan

During a recent meeting of the LTIBC export network, Johanne Boivin, CEO of and designer at Joanel, explained her internationalization approach to the other network members.

Joanel Inc. is the largest handbag and fashion accessory company in Québec and is considered as a leader in the Canadian handbag industry. The company markets its products under four registered trademarks: Ugo Santini, Joanel, Mouflon and Edgar & Sooky.

Boivin explained the Mercadex Internationalization Method (MIM), which she undertook as a result of a project organized in 2008 by the LAVAL TECHNOPOLE International Business Centre together with Mercadex International.  As a result of the MIM, Boivin put together an international business plan while her employees learned the ins and outs of internationalization, including best practices, and acquire tools. Boivin had set her sights on non-traditional markets for her products and wanted to make sure all the odds were stacked in her favour. The MIM made sure she picked the right markets for her products rather than chase business opportunities without a clear direction.

At the end of the process, Joanel decided on the Scandinavian markets because their consumer needs were similar to ours, i.e. they look for practical handbags with good value for the money. Another reason was the competition on the European markets, particularly in Italy and France. Joanel’s strategy for Europe is to begin on smaller markets before venturing into bigger ones.

According to Boivin, to really understand a new market, you need to see it with your own eyes. During an exploratory trip to Sweden, she realized that her marketing strategy was not optimal in order for her to succeed on international markets. She also realized that a potential distributor whom she was in discussions with did not share her business philosophy. Instead of hurrying a launch on the Swedish market, the company stepped back and spent last year reworking its image by changing the logos, overhauling its Web sites to make it transactional, and introducing her brands into the social media. It now feels better prepared and ready to resume its approach of the Swedish and international markets.

As you can see, Joanel did its homework in order to better pave the way for a successful foray abroad. If you’d like to find out more about the MIM, please contact me as we are considering offering this training and coaching workshop again this fall.

To learn more about Joanel’s diversification strategy, read the article in the April issue of Écho de Laval (French only).

Caroline Bouchard

May 19th, 2011

Enthusiasm for exports picks up

Canadian exports have been hard hit in recent years. The U.S. recession and the strong loonie made it much tougher for our SMEs to carve out a place on international markets.

In light of the situation, experts encouraged exporters to diversify their markets and to develop emerging markets, where economic growth was still robust. However, many hesitated  to venture into these more far flung, hard to reach places. Since it takes time and a long-term commitment to develop international markets, those who took the leap had to wait a while before seeing significant results. During this time, the export situation in Canada continued to deteriorate and the recovery was slow to take root.

Still, three recently published reports signal that the efforts made by Canadian businesses to diversify their export base are starting to pay off and that Canadian SMEs are increasingly open to internationalization.

First, on May 11 Statistics Canada released the country’s international merchandise trade figures for March. We find that Canada’s trade surplus increased from $356 million in February to $627 million in March, fuelled by quicker growth in exports than imports. These are extremely encouraging figures given Canada’s huge trade deficit in 2009 and 2010. Another noteworthy observation concerns U.S.-bound exports, which only rose 12.3% between March 2010 and March 2011, compared to 21.6% for all other markets. In March of this year, the U.S. accounted for just 72.6% of Canadian merchandise exports, versus 81.8% in 2005.

Separately, a day earlier EDC unveiled its spring export forecast. The inspired title of the report, The Diversification Dividend alludes to the fact that Canada’s rebound in exports is largely due to a sustained new market development effort that is starting to pay off. According to the report, from 2001 to 2008, although emerging markets accounted for just a small segment, their annual sales rose more than 12%, versus just over 1% in traditional markets. EDC also says that if this trend continues, emerging markets will account for 20% of Canadian exports in 2016 and almost 30% by 2020. If these forecasts are correct, in the next two years, Canadian export growth will be fuelled by shipments to emerging markets.

Finally, a study conducted by Angus Reid for UPS Canada reveals that 73% of the 546 SMEs surveyed feel that Canadian businesses should disregard the current strength of the loonie and put more resources into international trade and almost two thirds said they were worried about the country’s ongoing trade deficit. A fair number suggest reducing trade barriers with other countries to encourage international trade. These results are quite different from those obtained in a similar survey conducted by Léger Marketing last fall, also for UPS Canada, in which Canadian SMEs were skeptical about international trade, market opening and opportunities on emerging markets.

In conclusion, it’s encouraging to see that exports are once again playing an important role in the country’s economic growth, that Canadian exporters are much less dependent on the U.S. market and that SMEs are finally planning to take advantage of this turnaround. The next few years should be interesting indeed.

Bruno Séguin

May 17th, 2011

Let’s talk Asia

A few weeks ago I attended a conference on Asia, organized by Export Development Canada (EDC)  and the  Canada China Business Council (CCBC).

The keynote speakers included EDC’s vice-president and chief economist, Peter Hall and the CCBC’s chairman, David Fung, who used concrete examples to show why it’s important for Canadian businesses to be present on the Chinese market. He also explained that companies that don’t venture beyond Canada’s borders will have a tougher time dealing with the competition than those that take some risk by seizing the opportunities available on this massive market. Mr. Fung, himself an entrepreneur, advises exporters to step up their efforts to compensate for the weakness on the U.S. market and to capitalize on the fact that Canada is considered a part of the Asian-Pacific Rim.

Peter Hall concurred, adding that other countries in South-East Asia also offer excellent business opportunities that Chinese companies themselves are exploiting. He is also optimistic about the growth outlook after the lull that followed the  pickup fuelled by the government’s stimulus plan during the recession. Questioned about the strength of the Canadian dollar, Hall replied that a strong loonie is just one more reason for companies to diversify their exports, although in his opinion, this situation won’t last long. He believes that by next year, our currency will be trading just below parity. Incidentally, for those who are interested, Peter Hall will be in Laval on May 31 for the Let’s Talk Exports event organized by the International Business Centre with EDC.

However, what most caught my attention was a testimonial by a Quebec entrepreneur who in just a few years succeeded in setting up an independent plant in China that employs 100 workers and that serves the global market, including China’s. Here’s his advice to those looking to establish themselves in China:

1- Create a Chinese rather than a Canadian company. The WOFE (Wholly Owned Foreign Enterprise) model works well here. Avoid joint ventures unless both parties invest an equal amount.

2- Hire a good local manager and pay him well.

3- To avoid excessive requests from officials, avoid dealing with them directly on regulatory matters. A trusted local employee is better placed to do this and will cost less.

4- Fragment and compartmentalize pertinent information in order to protect your intellectual property.

5- Have enough capital available to back your project.

6-  Make sure to have an effective fund transfer mechanism in order to avoid surprises and service interruptions. EDC can be helpful in this regard.

7- Don’t transfer old technology if your goal is to differentiate yourself and remain competitive longer.

8- Since you can never be sure about the environmental liability, avoid buying out another company or an existing plant because you think it’s a good deal. A new company with a foreign name is also more appealing on the Chinese market.

9- Expect the authorities to demand more of you than of a Chinese company regarding compliance with environmental or social regulations.

10- While the ratio of Chinese to Canadian engineers is 40:1, we are way ahead in terms of expertise and capacity for innovation. However, Chinese engineers make up for this by being hard workers.

The Quebec entrepreneur seemed very happy with his decision to set up on this market, something that had become unavoidable since many of his customers had a presence there and he had to get closer to them. The fact is that this happens to many companies, which are increasingly a part of an integrated global supply chain.

In the near future, I’ll tell you about a workshop I attended on India, a market brimming with opportunities but challenges too.

Samir Naoum