Preparing your business to sell in emerging markets
6 minutes read
More than 74% of Canada’s $595 billion in exports went to the United States in 2019. But that margin has been shrinking for more than a decade as Canadian entrepreneurs realize the potential of high-growth markets in Latin America, Asia and Eastern Europe.
“Canada has the most privileged access to markets across the world,” says Robert McCubbing, Head of Innovation at the Trade Commissioner Service, Global Affairs Canada. “Recent trade deals are giving Canadian businesses a competitive advantage. There is opportunity.”
According to research by Export Development Canada, more than 60% of the world’s economic growth this decade will come from emerging markets, representing US$15.5 trillion. Eighteen emerging economies are currently outperforming global growth benchmarks.
Create an export plan
Selling outside of Canada requires a specific strategy and commitment as part of your overall business plan. Preparing to export to emerging markets may require longer timelines than you’re accustomed to in North America and parts of Europe. Key considerations in your export plan include how your business will develop local partnerships, adapt to customer needs, and address regulatory and risk issues.
“Be realistic about what it’s going to take,” says McCubbing. “You may need to modify your product, change your distribution methods, or rethink pricing.”
A good export plan articulates timeframes, but also resources required. Outline clear objectives and measurable milestones. This will help you determine if you need financing to grow in emerging markets.
“You need to know the level of commitment,” says McCubbing. “You also need to set points to re-evaluate if you find you’re not meeting your objectives.”
Risk management when exporting in emerging markets
When preparing to sell to emerging markets, consider these risks to put in place the right mitigation strategies.
Regulatory risk: Do your due diligence to ensure your business is compliant with local regulations and guidelines.
Reputational risk: Build the right relationships with reputable partners and companies so you don’t inadvertently hurt your brand. Register your intellectual property to protect your unique product, service or technology.
Political risk: Understand the relationship between government and business in your target market. In some countries, the government is directly involved in private business ventures. Even in democratic countries, a newly elected government can shape or shift the business climate quickly, depending on ideology.
Financial risk: Terms of payment are often essential to price your product competitively. You may negotiate to obtain payment up front, but payment upon receipt products or services is more common. In some cases, payment is only received after the product has been resold or distributed by a third party. Consider purchasing credit insurance to avoid non-payment by your foreign counterparts.
Select your target market
While there are high-growth opportunities in many emerging markets, finding success will depend on several factors. Considerations include ease of entry for Canadian business, risk and regulatory environments, the competition in the market, investor opportunities, and the industry you’re in and your product or service.
Canada's Trade Commissioner Service (TCS) has country and sector market information available for free to all Canadian businesses.
“An easy first step is to talk to your local TCS office,” says McCubbing. “The TCS has officers on the ground in more than 160 cities, we are connected, know of opportunities, and we can support your business from day one.”
You can seek market information online and through local chambers of commerce in your markets of interest. Your industry association may also help you find opportunities specific to your sector.
Test your market
Once you’ve determined which emerging market offers the best growth potential, it’s time to get “boots on the ground”. Traditionally, testing a new market, particularly in developing countries, has required an in-person presence.
Business culture in many parts of Asia and South America demands you demonstrate a long-term commitment to your partners and the market before any transaction takes place.
“Taking the time to build relationships is essential,” says McCubbing. “Trade missions and trade shows are often the starting point to developing your network.”
New opportunities for market discovery
Getting a foothold in a new market has been one of the barriers for Canadians historically, but new virtual engagements make it easier for Canadian businesses to access partners and customers in emerging markets.
Virtual trade missions
The TCS has long held trade missions to assist Canadian businesses with these initial in-person meetings. With global travel largely suspended in 2020 a new trend emerged. Virtual trade missions replaced in-person trips for the first time.
“We discovered there is an appetite from Canadian companies to explore new markets, but they’ve often been held back by the costs involved,” says McCubbing. “We organized a virtual trade mission to South Korea in fall 2020 and had over 215 Canadian companies participate, many times more than we would have on a traditional trade mission.”
Inexpensive virtual trade missions are a great opportunity for Canadian entrepreneurs to learn more about emerging markets and meet new contacts abroad.
Growing your business with e-commerce
E-commerce platforms can be another cost-efficient way to test your product or service in an emerging market.
“Many platforms, like Shopify and Amazon, have built-in information on selling in different countries,” says McCubbing. “It can be a low-cost way to access a market and find out which one is right for you.”
Contact the Trade Commissioner Service to get help
The TCS can help you conduct market research, start your export plan, make introductions in emerging markets, advise on regulatory issues, navigate free trade agreements and more. They also have programs available to finance your export project.
Among its other programs, the Canadian Technology Accelerators initiative can help high-potential technology businesses scale to North America, Asia and Europe through virtual accelerators in the cleantech, life sciences, and information and communications technologies/digital industries sectors.
“The Trade Commissioner Service offers a lot to motivated small and medium-sized businesses and start-ups to find and fund these export opportunities,” says McCubbing.