On the 21st October 2015 we, Vassili and Felix Lukas(exchange student from Germany), were invited to represent Camosun College at the Greater Victoria Development Agency’s (GVDA) seminar: “Selling to Europe”, sponsored by PWC and HSBC. The main topic of the day was the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and how it impacts Canadian businesses. Speakers with exporting experience shared their insights on overcoming trade barriers, common mistakes when entering new markets and hedging business risk/protecting your assets. This is especially relevant for small Canadian businesses since SME create the largest share of the Canadian GDP, but only 2 percent of them are engaged in exports.
Understanding Cultural Differences and Building Relationships:
The seminar was led by Doug Taylor, he is the managing director at Pacific Business Intelligence and an adjunct professor in the Business faculty at the University of Victoria. Mr Taylor elucidated that most businesses are still based on the personal relationships producers have with their customers. Cultural differences, personal experiences, and trust challenges the potential Canadian exporters looking for personal counterparts and contacts in the desired country. Furthermore he explained that Europe is often misunderstood as one country – even though it actually consists of 28 different countries and cultures which have to be treated very differently with an eye on cultural specifics. He divided Europe roughly in two blocks in order to make it easier for exporters to navigate through cultural differences: Eastern and Western Europe, explaining that there are many business opportunities for small firms in Eastern Europe due to their young, unsaturated markets.
Graham Howe of AXYS Technologies later portrayed the difficulties that come along with doing business in different cultures with a practical example when his company tried to enter the Saudi Arabian market. He experienced it as extremely difficult to enter this market due to unclear and complex Visa regulations and – for a western person – very uncommon business practises, for example drinking tea and making small talk about minor matters and personal topics for several hours before talking about business. In the end, they conceded attempts to enter this market directly, and engaged skilled local commissioners that were very familiar with the customs and business environment.
Institutions that help Firms Operate Overseas
Businesses that are new to exporting are seldom aware of the federal and provincial government organisations created to help Canadian industries. Marilyn Denton of the Trade Commissioner’s Service (TCS) and Heather stokes from Export Development Canada (EDC) shared their solutions for growing firms.
The Canadian Trade Commissioner Service (TCS) provides on-the-ground intelligence and practical advice on foreign markets to help firms make better, timelier and cost-effective decisions in order to achieve their goals abroad. They have a presence in 161 countries and offices located across Canada. Their network covers specialists is several areas as well as privileged access to foreign governments, key business leaders, potential customers, distributors, sources of finance or investment, technology partners and intermediaries. This is a free service funded by your tax dollars and it can be instrumental in finding foreign trade partners.
Export Development Canada, Canada´s exporting agency provides insurance and financial services, bonding products and small business solutions to Canadian exporters and investors and their international buyers. In 2014 EDC helped more than 7,400 Canadian companies do business in 187 countries. The majority of these companies were small business, and more than 30 per cent of this business was conducted in fast-growing emerging markets. One of EDC’s strategies is to help make these connections through match-making sessions with the Canadian Trade Commissioners’ Service, through equity investments and by leveraging financial relationships with foreign buyers to encourage them to procure from Canadian suppliers.
Avoiding Costly Mistakes with Careful Planning
Julia Herzig from Price Waterhouse Cooper (PWC) had three important points for business working overseas
Canada and British Columbia are a good place to do business from. Our province has an overabundance of natural resources and we are in a perfect location to trade with Asian markets other the other side of the Pacific Ocean.
Never let your intellectual property take you across borders. When the rights to intellectual property are held in a different country, that property can be subject to the foreign country’s laws and regulations. Give your subsidiaries licenses rather than full ownership rights to avoid plagiarism and copyright problems.
Check tax regulations of the countries you are working in and avoid “double taxation”. Double taxation and bilateral double taxation agreements are important to consider before entering a new market; sometimes there are beneficial effects of bilateral taxation agreements for exporters like lower tax rates.
In Julia’s point of view, the most important aspect to look at for a software company is that the intellectual property is at home or at least in a country where the regulations and copyright laws are very clear and safe. The best way to operate is to keep the intellectual property at home while earning license payments for the usage.
Finally, Graham Howe, from AXYS technologies, held a very interesting speech about how his company expanded into Europe. AXYS tech is a producer of remote environmental monitoring systems, which leads to a very complicated and specific product. He pointed out that even though it is possible to sell simple products via Internet, this approach does not fit to a complex product that requires expertise, personal presence and knowhow which is assured by an independent salesman or commissioner.
In conclusion; being aware of the various agencies and organisations available to help Canadian firms to export can save time and money. However it is important to be prepared when approaching them for help; know your customers and have a business plan. Doug Taylor made an interesting point on the topic of knowing your business. “When a huge corporation enters your market, you will be out of business unless you have the financial capital to keep up.” this highlights the importance of knowing your competitive advantage and how to exploit it. There are many resources for businesses looking to export out of Canada and learning to use them can yield great success.