Beyond Canada's Borders: How to Take a Piece of the Foreign Market
By Michelle Collins | January 31, 2002
An introduction to Canadian Exporting
Extensive research and planning must precede any attempt at cross-border selling. Yet when a business ready to expand, don't be afraid to look outside Canada for that prime market.
You've decided that it's time to expand your business into the foreign market. Before you jump into exporting with both feet, you need to step back and evaluate where your business is now.
Debrah Boucher, a Trade Commissioner with the Department of Foreign Affairs and International Trade (DFAIT), says the decision to export hinges on your unique sector. "If you're in a certain sector, it might take you a while to research your market to get your products across the border; it may take a long time to get distributors or dealers," says Boucher. "You don't just start up an oil and gas business overnight."
Don't cast a line in foreign waters without doing a little more exploring on the shores of your own country. Finding an untapped Canadian market may allow you to ease into exporting, before you take on foreign buyers.
Lay the foundation
As the first step, sort through what you know and what you need to learn about the international market. Building your exporting empire is going to take time, patience and money. Significant costs are involved from the time you produce the goods to the time they reach the intended audience. You already know how much it costs to produce and sell your goods in Canada. Now it's time to add the costs of shipping, international marketing, and an increase in production. Do you have the time to gain the needed skills, or should you look at hiring someone who does have the expertise?
"You don't wake up one morning and say, 'You know, I'd really like to export into India, or China, or Japan,'" says Boucher. "What you have to look at is what is your product or service and, in order to sell your service or product into that market what are all the things you're going to have to think about."
Chart the course
As with any venture, you'll want to have a plan that clearly outlines your expectations and how you're going to meet them.
Failure to plan is the number one reason companies go under, says Boucher. Don't get so caught up in your excitement to start exporting that you miss a step in the planning process. Planning will keep you prepared for every potential situation from pricing to production.
Finding a home abroad for your goods or services will require market research. By taking the time to explore the foreign market, you will be better equipped for meeting the wants and needs of potential customers. You will also have a better understanding of how much work it will take to introduce your goods to those customers.
One way to access free market research on an international level is through DFAIT, which provides 600 to 700 online market reports from countries all over the world. Each report includes the size of the market and of the country. You can also find information on major competitors in the same market. "Is it an aggressive market? Do you need to spend x amount of dollars? These are some of the cultural issues you have to worry about: this is the currency, this is the political situation of that country, and the climate," says Boucher. These market briefs are online at www.infoexport.gc.ca/menu-e.asp.
Set the right price
Another research component involves pricing. You need to set a price that makes you a competitive player in the market. How will your prices compare to other exporters and domestic suppliers? Overpricing will put you out of business, and under-pricing can create a demand you cannot meet.
Bring experts on board
The research is done; now it's time to find a buyer. You may have come across possible contacts during the research period. If not, try contacting the local Board of Trade, Chamber of Commerce, or other local business associations. Options include selling your goods to a trading house, which then sells those goods to the foreign market, or forming a partnership with another successful exporter.
When it comes time to ship your goods, a lot of paperwork is involved. Hiring a customs broker who knows exactly what's needed could save time and money. If you miss a form, the shipment could get tied up for an indefinite period with an angry buyer on the other end. Customs brokers will also pay tariffs and taxes on your behalf. They are paid through a commission on the sale of your goods.
Finding a lawyer who is well versed in international law is a must. You and your buyer will have to sign a contract that outlines the terms and conditions of the sale. If something goes wrong, you don't want to be left without your money or your goods and with no idea what to do next.
Now that all the papers are signed and the goods are ready to go, it's time to find a way of getting them there. You can transport goods via land, sea, or air. Consider your timeline and physical location to figure out the most logical means of transportation.
Collect on the deal
You've put in the time and effort, now comes the payoff. You can use several methods to collect on the sale.
Cash in advance – This is probably the most favourable option for you, yet the least favourable for the buyer. You would take all or a portion of the payment, whatever the contract dictates, before sending the goods.
Letter of credit – This payment option is set up through an agreed upon bank. A letter of credit is a common payment method when exporting outside of North America. You send the shipping documents to the bank where they are checked over and guarantee your payment.
Document collection – With this type of agreement, the buyer has more control over the payment methods than the exporter. Under this kind of financing, you would ship the goods to the buyer and the payment documents to the bank. Essentially, you are paying for the transaction until the bank gets the shipping documents.
Open account – If you and the buyer have an open account, you ship the goods to them and wait for your payment. This type of account is most common among exporters selling to the United States.
The last words
"You will need to put a disproportionate amount of time into that first shipment, because you will have to figure out how to get it across without having any problems," says Barbara Newton. Being Canadian must become completely irrelevant: if you can make the buyer feel at ease, you will be well on your way to export success.