As difficult as it might be to expand into foreign markets, the Asia draw isn't going away. With a middle class that's bigger than the entire population of the United States, China alone is enough reason to seek growth overseas.
"The markets in Asia have grown to a point where you really have to pay attention to them," said Greig Walsh, director of sales and marketing at Greenlight Innovation, a Burnaby-based SME and global supplier of battery-testing equipment and fuel-cell testing equipment. "So it begs the question 'Where do you start?'"
According to Walsh, people can become overwhelmed when thinking about the undertaking.
"It's an aggressive business culture, and it's much more intimidating than going to the States or to England to do business," he said.
Peter Jeffrey, vice-president, Canadian Manufacturers and Exporters, B.C. division, echoes the sentiment. He gave the example of a machine shop looking to hire an Asian factory to manufacture heavy equipment for the forestry industry.
"If you look at the part cost only, then it's a lot cheaper to have it manufactured in Asia," said Jeffrey. "The problem is that quite a few companies only look at the product cost and don't take into account all the procurement costs involved in having something manufactured in Asia and then shipped to Canada to put into final assembly."
Many companies are trying to build products just in time to meet market demand, so their success is based on their ability to be responsive while remaining efficient. According to Jeffrey, companies must consider additional logistical considerations, such as, for example, the need to fill a shipping container to reduce shipping cost.
There's also the drain on cash flow arising from the need to accommodate the Asian market's propensity for demanding payment up front. That problem is itself exacerbated by the consequent need to stock extra product at a local warehouse to mitigate the risk that the inventory transiting the high seas may not arrive in time.
Solving any problems with quality control can be complex as well, said Jeffrey. Returning products for replacement may require an operationally unrealistic amount of time, and workaround solutions such as having products reworked at a local factory can be costly.
There's the possibility that product quality can wane over time, and the reasons can be arcane and unexpected. In one case, he recounted, a Chinese company that fell behind in production was only being supplied power three days per week due to power rationing.
"If you have somebody manufacture something for you over there, then you'd better have an incredibly good agent who can go into the plant, any day of the week, and keep an eye on what's going on."
The cultural and economic dynamics of the different countries must also be considered.
"India, China, Japan, Malaysia, they should all be approached in a different manner," said Walsh.
Frank Pho, vice-president global expansion at Business Development Canada, has a similar perspective, citing China alone as a good example.
"There is this level of assumption that the Chinese markets all have a shared behaviour. This is not the case."
The variation extends across the spectrum of elements that comprise the Chinese market, said Pho. And particularly when dealing with Canadian products, which may, for example, hold more appeal for higher earning demographics than for those in middle or lower income brackets, understanding social and cultural nuances can have a deep impact on a company's bottom line.
Planning for the cost effectiveness of an investment over the long term is also important.
"China has changed so fast. In their five-year plan published last year, the Central Committee has decreed that the minimum wage in China will have to increase by a minimum of 13% each year for the next three years," said Pho.
According to Pho, to mitigate risk, businesses should use a systematic and analytical approach.
"Canadian companies should do what we call a global competitive assessment and then determine if they have the commitment to go after it," he said. Using in-depth evaluations with advisers who know the market intimately, and engaging a slow and evaluative partnership development process that he likens to finding a suitable mate are key.
It's the reason the seminars have been developed. "Whether you're large or small, there is an Asian market for your products," said Walsh, who added that pushing off the inevitable has only postponed engaging the opportunities.
