The business press loves stories about exporting and often point to the benefits of 1) increased profitability, 2) spreading risk, 3) economies of scale and 4) enhanced innovation.
The Canadian government (and every other level of government below it) loves to promote international trade even more as evidenced by this quote from the Department of Foreign Affairs and International Trade’s Trade and Investment Update 2012: “Consider that, in 2011, Canada’s exports and imports of goods and services were approximately $1.1 trillion in total— which is, on average, about $31,600 for every person in Canada, or $3 billion each and every day—and that the overall size of Canada’s economy, as measured by its gross domestic product (GDP), was $1.7 trillion last year. Thus, the share of trade in the economy was about 63.3 percent in 2011.”
The report goes on to trumpet the positive effects of trade agreements on overall manufacturing productivity, wage increases associated with more trade, the increase in product selection for Canadian citizens and job creation statistics.
But, the truth is none of this resonates with individual business owners or executives. They want to know how trade will benefit their business directly.
I’ve had a hard time providing clients and prospective clients with hard data as to why they should incorporate exporting into their business strategy. Until now.
Finally, someone has quantified the benefits of exporting – to the individual company. The Conference Board of Canada has just published a report stating that that expanding internationally can increase an organization’s net income by 10 – 30% more than the other “innovation strategies.”
Using the Booz & Company Basic Model for Innovation Strategies, they found that 55% of Canadian firms surveyed pursue a user needs-driven innovation strategy, while about one-third have adopted a technology-driven innovation strategy. Only 14% adopt a territory/market expansion strategy. In other words, most companies take customer feedback to improve upon and develop their products and services. Another third create and exploit technology advances while the last and smallest group is interested in territorial market expansion.
While every company has to seek its own strategic path forward, this report proves that finding new markets is 10 – 30% more profitable than the other innovation strategies. It doesn’t say that continuous technological innovation isn’t important or that customers should be ignored, but far too many Canadian companies are leaving profits on the table because they are exclusively focused on selling domestically or in the United States.
Need more proof that global business = profits? Close to 60% of the companies on the 2013 PROFIT 500 ranking of Canada’s Fastest-Growing Companies export to the United States. Three hundred and thirteen of the companies on that list consider themselves exporters and in aggregate, 43% of overall revenues are derived from international sales. Clearly international business is a big part of these growth companies strategies.
While embarking on an international strategy can involve significant time and resources, a properly developed plan can minimize those expenses and reduce the time-to-market. The bottom line results are clearly worth it – not only for the benefit of the macro Canadian economy, but to your company as well.