The Exponential Power of Diversification

//The Exponential Power of Diversification

The Exponential Power of Diversification

The idea behind diversification is fairly simple: Never put all your eggs in one basket. But for businesses, what does that actually mean?

Here are our top 10 takeaways from Export Development Canada (EDC) research on what companies should consider when expanding internationally:

  1. Diversification = Many happy returns

Using data from Statistics Canada, based on averages between 2010 to 2015, the EDC’s economic research and analysis department findings point to the tangible results of diversification by Canadian exporters. 

The effect of selling to multiple markets:

  • 64% of exporters sell to one market and account for 12% of total export value
  • 6% of exporters sell to at least 10 markets and account for 51% of total export value
  • Exporters who sell to multiple markets have 20% higher export volumes. They also import more goods, have higher productivity, employ more people and pay higher wages.

The effect of selling multiple products:

  • 63% of exporters sell three products or less and account for 10% of total export value
  • 14% of exporters sell 10 or more products and account for 73% of total export value
  • Exporters who sell multiple products have 8% higher export volumes. They also import more goods, have higher productivity and employ more people.
  1. Advantage Canada: 1.5 billion customers await

Canada is the only G7 country that has trade agreements with all six of the other members — France, Germany, Italy, Japan, the United Kingdom and the United States.

We have 14 agreements in place with 51 countries, which ultimately connects Canadian businesses to 1.5 billion consumers globally.

Free trade agreements not only reduce or eliminate tariffs. They also provide many non-tariff advantages that help smaller Canadian companies compete globally.

When it comes to trade diversification, companies tend to focus on larger markets such as China. As a single market, the Association of Southeast Asian Nations (ASEAN) groups 10 countries with a total population of more than 650 million. With a combined GDP of US$2.8 trillion (2017) and the status as the world’s fifth-largest economy, AEEAN is a market that is not to be missed by Canadian businesses.

  1. Diversification & Innovation

Diversification is a great way to innovate and expose your business to the international market. Alongside new markets, businesses also benefit from first-hand insights on new and different approaches.

By carrying best practices and innovations across markets, companies can use their international experience to build stronger businesses.

  1. $1.1 billion more to grow Canadian exports

Canada’s new Trade Diversification Strategy is aimed at increasing overseas exports by 50% by 2025. Increased funding of $1.1 billion has been earmarked to help Canadian businesses access new markets.

Investments will be made in the infrastructure to support trade, giving Canadian businesses the resources to execute their export plans, and to enhance trade services to Canadian exporters.

  1. Make sure your business is in top trade shape

Before you venture abroad, ensure your company is operating at peak capacity and is ready to take on the challenges of doing business abroad.

Business Development Bank of Canada is focused on helping Canadian small and medium-sized businesses grow. Like most banks, they offer a wide array of financing, including business loans and working capital. They also have a division for advisory services, including digital programs to help future-proof your company.

  1. Build a better trade network

If you’re not working with the Trade Commissioner Service to expand your sales in international markets, chances are you’re not capitalising on your full potential.

The service has more than 1,000 trade officers in 160-plus offices around the world, ready to help you go global. They can provide market insights, help ensure that you’re export-ready and plug you into overseas trade networks. Take the online Export Readiness Quiz and download the Step-by-Step Guide to Exporting.

  1. Take the risk out of international business ventures

While exporting can increase your sales, it also comes with its own challenges. As international risk experts, Export Development Canada can help you overcome obstacles with risk-management, financing and working capital solutions. These include credit insurance, buyer financing and foreign exchange safeguards

  1. ASEAN offers promising markets to considerConsider ASEAN as one of the top prospects for trade diversification. Country comparisons show Singapore was the largest importer in 2017, with a 25.4% share of the ASEAN total. The next largest importers were Thailand (17.8%), Malaysia (15.6%), Vietnam (16.8%) and Indonesia (12.5%). In particular, Vietnam is one of the fastest-growing economies in the world, with average annual expansion of 6% over the last five years. Vietnam is also one of the 11 signatories of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
  2. Dip your toes in international waters

All the research in the world cannot replace the in-market intelligence you can gather at an international trade event.

Contact the Trade Commissioner Service to find out which trade missions might be of interest. Keep in mind that the CanExport Program provides financial support to small and medium-sized Canadian businesses for a wide range of export marketing activities, including reimbursing half of eligible expenses.

  1. Make the right connections

EDC’s Business Connection Program introduces committed international buyers to experienced Canadian suppliers. Since 2003, it has provided in excess of $45 billion in financing to more than 250 international companies in 47 countries. The result: It has made introductions to more than 6,000 Canadian companies.

For more details, please read the original article on EDC’s website at: https://www.edc.ca/en/article/power-of-diversification.html

2019-08-23T15:29:33+08:00