Looking to grow globally? India is a good place to start
by Michael Ouellette
English-speaking India—a 15-hour flight from Toronto—is a prime target for small- and medium-sized Canadian manufacturers to get their international feet wet.
Toronto—Opportunities for small and medium-sized businesses to succeed in emerging markets are manifold, and companies employing the right mix of patience, diligence and decisiveness are poised to take advantage.
Lets hope they do, because companies from around the world are already investing heavily in these markets and many Canadian firms need a piece of this growth to operate profitably against global competition.
Just ask Rick Waugh, CEO of Scotiabank and major proponent of the “seize on international opportunities now” strategy.
Waugh expressed just such sentiments at Scotiabank’s annual shareholder meet, where he said Canadian companies have to be in the places where economic growth is happening, and “by mid-century, emerging markets are predicted to account for 70 per cent of global trade.”
Currently less than 12 per cent of Canada’s exports go to those markets.
But in a nation of small businesses, the consequences of failure in such a strategy are sobering.
The typical small Canadian manufacturer does not sit on a huge pile of cash like many of the state-owned firms it competes against, meaning a blip in the bottom line during a foray overseas could be devastating.
Language barriers, corruption trouble and cultural variations all scare the bejesus out of even the most resolute industrialist when they threaten the ledger.
But removing the risk of these unknowns, even just a smidge, could improve the comfort level greatly.
English-speaking India—a 15-hour flight from Toronto—is one such country where these concerns are somewhat mitigated, and Peter Sutherland thinks it’s a prime target for small and medium-sized Canadian manufacturers to get their international feet wet.
Sutherland, vice-chairman of the Canada-India Business Council and senior business advisor at Toronto law firm Aird & Berlis LLP, has seen plenty of successes in the region.
Canada and India currently swap about $5-billion annually, but the target is closer to $15-billion by 2015.
Sutherland says the target is modest.
“We can do better but its a tough one because everyone is trying to be in this market,” he says. “We are doing well in India, but not as well as we could be. There is huge potential there.”
He says there are several keys to doing business in India. Small operators that pay attention can make a big splash, and the bank deposits that go with it.
Conduct research in the target market
Sutherland doesn’t mean the country, either. India is massive and very diverse with 16 official languages, but English is the main language. It’s important to hone in on a market to cut your teeth—narrow the focus for your product and find Indian states that are business-friendly.
Must your product be near a port? Does it require shipment by air? Consider the smallest details and how they interact with the jurisdiction in which you hope to operate.
Find a reliable partner
Sutherland says this is crucial.
“[Local partners] have the business intelligence you need, but select them carefully because you will rely on them,” Sutherland says. But having the right partner doesn’t remove the need to invest time and resources in the market—you must build relationships.
“Once those relationships are established you can do business, but it takes time, money, resources and commitment,” he says.
The big win
The payoff is access to a monster marketplace with 150 million middle-class consumers. India is a major food market where cold storage and logistics are huge opportunities.
Companies will also find success supplying bits-and-pieces to infrastructure, environment, transportation segments.
Another bonus to operating from India is its proximity to the many surging ASEAN markets. India has negotiated a number of trade agreements with these countries and Canadians working from India benefit from these agreements.
However, the risks are real and serious. The subcontinent is infamous for rampant corruption that has hampered business for years. The problem is not insurmountable and Sutherland says high profile scandals have brought public sector corruption to forefront. India’s government has taken a number of steps to control it and is now extra cautious.
Another huge risk is choosing the wrong partner, or simply going it alone. An unscrupulous representative may opt to start a competing business on your dime and with your assets. Sutherland suggests using trade officers and consular services to help find partners and identify who might not be suitable.
Indeed, underestimating the time and commitment level to be successful is a big mistake. A well-considered move to open operations oversees takes senior management time, sufficient working capital and is generally a major commitment.
But accessing a global customer base in growing economic regions is a prize worth chasing for many smaller operators with growth on the agenda.
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