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The foreign market dossier.

Building your Business on International Connections

There's a world of opportunity beyond the horizon and Manitoba businesses are taking advantage of it. Exports over the past five years have increased dramatically, mostly to the US.

International Fibreboard president Mark Smerchanski says exports are seminal to some businesses. "Freight costs to the midwestern US are less than those to Quebec," he reasons and points out a another market reality, "Minneapolis-St Paul has a combined population of seven million. That's about the population of Western Canada."

Manitoba's exports overall were $7.2 billion in 1997, a 146 per cent increase over 1992's value of $2.9 billion. That's significantly better than the national increase of 108 per cent, according to Wilf Falk, of Statistics Canada.

And the trend continued with Manitoba exports in the first eight months of 1998 up by 9.8 per cent compared to Canadian exports increase of 3.3 per cent over the same period. From 1992 to 1997, Manitoba exports to the US have increased by 186 per cent - to $5.4 billion from $1.9 billion. In 1997, 74 per cent of Manitoba's total exports were shipped to the US.

Several industries have contributed to Manitoba's export increases for the decade include: agriculture - up from $850 million to $2 billion; manufacturing up from $1.7 billion to $4.3 billion; transportation equipment- up from $274 million to $749 million, machinery including farm equipment-from $262 million to $766 million and food - from $209 to $630 million.

Says Falk, "Manitoba businesses now export to over 200 countries, including many smaller markets. The top 10 markets after the US, as noted in 1997, are: Japan - $430 million, Belgium- $142 million, China - $129 million, Iran $113 million, Mexico - $95 million, United Kingdom - $78 million, Indonesia - $69 million, South Korea $60 million and Taiwan - $47 million.

Bill Radcliff, Manitoba Government trade specialist and senior manager, says of 1997 exports to the US, 19 per cent or about $1 billion dollars went to Minnesota, 9.5 per cent or $500 million to North Dakota and 7.4 per cent or $398.6 million to Illinois. A total of 37 per cent of Manitoba's total ag exports $724 million - went to the US. So did the following: transportation equipment industry - $697 million, food industry $447 million, primary metal- $338 million, electrical and electrical products $277 million.

Manitoba Trade, a special branch of the Manitoba Government often assists new exporters, usually in entering the lucrative US market.

With a domestic market of only 1.1 million people in Manitoba, businesses wanting significant growth consider exporting.

Rod Sprange, assistant deputy minister of Trade and Tourism and Manitoba Trade president, says the export goods sector is growing dramatically and it's his objective to increase exports. "We help companies to diversify and increase sales. We encourage more firms to get into the export business. We look at the economies of many countries, then at their stability both fiscal and political. We ask ourselves if there's a need there for Manitoba products and services and if our businesses may be likely to market there at a profit."

Sprange says the US is the first port of entry for many Manitoba products because of well understood border regulations, common language, and stronger assurance of being paid. Manitoba Trade offers a NEBS - New Exporters to Border States program, educating entrepreneurs on their sector and the marketplace. They also go on a two-day visit to a US city and attend a trade show. "Forty-five per cent of Manitoba exports go to five Northern tier states. We encourage businesses to look further into the US, then to Mexico and South America where our farm equipment, machinery, educational services, engineering services and more are needed."

When exporting, consulting a customs broker is key to a smooth process, says Neil Rykiss, regional manager for Calgary-based Milne and Craighead, which is owned by trucking company, Canadian Freightways.

Says Rykiss, "Good communication with a customs broker can ensure the process is a smooth one. When shipping to the US by ground, eliminating the imaginary border line for customers is key. We would like to help you to keep the process as simple as possible for your customer to ensure repeat business."

Standard Aero is a prime example of a company which sought new markets around the world. This year, for the second time, the company won a Canada Export Award for its success. David Shaw, president and CEO, says the maintenance on aircraft turbine engines had limited growth potential in Canada. "Forty per cent of our market is now in the US and 26 per cent international," says Shaw. With a deliberate export development plan, Standard's bottom line has grown from $120 million in 1993 to $300 million in 1997 based on maintenance contracts in more than 80 countries.

For more help exporters can turn to The Export Development Corporation a federal Crown corporation with a mandate to support Canadian exporters with a focus on mitigating their risk, according to Lewis Megaw, manager for Manitoba and Saskatchewan. He says the US and Mexico are good bets these days, Indonesia is fraught with risk. Emerging markets include India for value added agriculture and Ukraine for farm equipment. Latin America is also significantly interested in Manitoba products, he says.

In 1997, the Export Development Corporation facilitated $23 billion in Canadian exports - with about $3.5 billion of that from Manitoba (60 per cent) and Saskatchewan (40 per cent). Top items dealt with include farm machinery such as tillage equipment and commodities including seed, cattle, wheat, canola, barley, peas and lentils.

Another advisor on exports is the Asia-Pacific Foundation, a non-profit organization with a mandate to increase awareness of Asian countries and to help prepare businesses to export to the region, according to Sandra Thiessen, acting program director for the Manitoba office.

The foundation provides business profiles on 15 Pacific Rim countries including information about imports and exports and economic outlook. It also provides information on the cultural differences of the region, to ensure Manitoba business people initiating relations with Asian companies know just how to present themselves. For example, in Japan a business card is considered an extension of the person and deserves the utmost respect. When introduced to someone, you say your name, bow, shake hands and exchange cards. Store your cards in a proper case and take care of them, advises Thiessen.

"In Japan, they don't separate business and personal life. It is normal to discuss family and hobbies. Start the relationship and build it. The business will come," she advises, noting it may take three to five trips back and forth to start a relationship and from six months to two years to make a deal.

Other notes for example, are that the numeric 4 in Japan and China signifies death and no gifts should be given in fours. Clocks are not great gifts in China as they signify death. So for the gei jin Japanese slang for foreigner - there are many things to learn.

The Alliance of Manufacturers and Exporters Canada has 3,500 members across Canada and 130 in Manitoba. They provide export information for business by hosting breakfasts with speakers who have exported into specific markets and share their experiences. The organization also refers members to a number of related resources, according to Jonas Sammons, vice president for the Manitoba Division.

"Manitoba has a broad spectrum of all kinds of exports. The diversity of business is good. If one industry is hit, we don't all go down," he says.

The key, according to Sammons, is "make it new, good, fast and cheap." But ensure quality, timely delivery and competitive prices. "Manitoba companies are absolutely world class operators, with world class products. And our ethnic diversity here allows us to more easily reach into new markets, for we have the people at home who know the languages and cultures of many countries."

Despite his optimism, Sammons notes that he doesn't know how long the province's export prosperity will last. With factors like world market turbulence and the impending Y2K problems, he says the Alliance's chief economist predicts it won't last forever. "Everything points to a slower economy. The last few years have been great, but there is a slowing occurring."

Things haven't slowed for International Fibreboard, according to Mark Smerchanski, company president. The seven-year-old supplier of commercial roofing materials and exterior wall sheeting has increased its exports to the US from an initial 50 per cent in its first year to 65 per cent of total production. In order to begin exporting to the US, Smerchanski says he phoned prospective clients. In doing his market research he visited with those prospective clients who expressed an interest in his building products. "In the construction business, a company must take its initiatives beyond Manitoba in order to grow its client base," he says.

When shipping across the US border, Smerchanski adds that he would not even go near Customs without the expertise of a Customs broker. And although he is currently exploring specialty work in Japan, for the most part, overseas shipping costs would prohibit him from exporting further at this time.

Although statistics on other exports from Manitoba are not considered reliable, one city engineering firm has taken their skills international.

Wardrop Engineering, currently does about 25 per cent of their business internationally and expects to increase the percentage to one third, according to John Schale, one of the managing directors currently overseeing international operations. Wardrop has projects in Africa in countries including Ghana, Nigeria, Kenya, Uganda, Eritria and Ethiopia. The company is also active in the Philippines. Past projects have taken them to rural Asia - in countries such as India, Pakistan and Sri Lanka. Most of Wardrop's African and Asian projects include basic infrastructure, potable water supplies and sanitation. In the Philippines, it does power and transportation systems.

That's about $3 million in services with a total of 15 people currently working on projects overseas. It is just one of the many examples of why exports of goods and services are germane and integral to Manitoba's economy.

(Liz Bigourdan is a Winnipeg-based freelance journalist.)
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Title Annotation:trade and industry associations help Manitoba companies in export market
Author:Bigourdan, Liz
Publication:Manitoba Business
Geographic Code:1USA
Date:Nov 1, 1998
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