Should Your SME Expand Internationally?
Part 2 of 3
When we last left off, we were discussing the situation surrounding Canada. With a retiring Baby Boomer population and current market trends, we are headed toward a technical recession. It’s going to be imperative for the survival of SMEs all over Canada to turn to international markets.
Let’s take a look at two possible markets.
- Population of 300 million
- Speaks English
- Struggling to grow
- Consumer power has decreased
- Extremely competitive
- Has seen a many-fold increase in its trade with the Asian economy & other emergine economies
- Keen to increase its trade with emerging markets
- Population of 1.2 billion
- Speaks English
- Fast-growing consumer base
- Fast-growing population base
- Keem to bring in international brands & “know-how”
- Inherited links with the Canadian Market
- A centre of technological advances
When given these two markets side by side, which one would you think is better for Canadian SMEs – Market A or Market B? Would it surprise you to find out that market A was the United States and market B was India?
The Truth About India & China
The middle class of India is the fasted growing in the world with over 400 million people. More people in India speak English than in the combined populations of America, the United Kingdom and Canada. The official language of the government and business in India is even English.
Another fast growing market for SMEs is China. While some say it might be slowing down, the middle class in China has an incredible growth rate still larger than the US and Canada combined. They manufacture everything in the world and are the biggest buyers of tourism services in the world. Due to deregulation of markets and social structure of small families, the Chinese middle class has vast buying power and disposable income. On top of that the US owes China more money than is available on hand currently.
This is readily demonstrated by strong Vancouver and Toronto real estate markets in Canada that are still booming due to investments from Chinese and Indian investors as opposed to rest of Canada.
More Emerging Markets
Another fast growing market is Dubai and the adjoining region known as GCC. Together they have a population of 47 million, a GDP of $1.6 Trillion and a GDP per capita of $33,300 with combined inflation of 2.5%. This region also happens to own around 40% of global oil and the largest gas reserves in the world.
Combined, they operate the largest network of airlines, the busiest airport in the world, one of the top 3 duty free shops in the world, and one of the highest RevPar (Revenue per available room) for hotels in the world. They will host two global events in the next 10 years and be home to many global sports events.
The area is within 4-8 hours of flying time to the world largest land mass and most populated countries such as India, China, Egypt, Turkey, and the East and West African states. Dubai’s proximity leads to a growing economic hub for the adjoining regions.
Even in the global recession, these markets grew at a 4-5% rate.
Also consider that 45% of the population was born in the 1990s. They are now old enough and ready to buy goods, cars, utilities, houses and everything else that consumers demand. This generation is forcing governments to build infrastructure at a scale never seen before.Trillions of dollars are continually funneled into current infrastructure projects.
Nearby, Turkey is another fast-growing economy which doubled its GDP between 2002 and 2014. Oddly enough they were denied entry into the EU in the early 2000s; however, since then, they have witnessed growth like has never been seen before. Not becoming part of the EU was a blessing in disguise. Otherwise they would have suffered a fate similar to PIIGS (Portugal, Italy, Ireland, Greece, Spain)
This generation especially, has a penchant for luxurious high-end products. They want to wear brands on their fashionable sleeves and keep up with the rest of the developing world. This need is leading to the fastest growing retail markets in the world. Gross leasable shopping areas tripled in the past twelve years. European and US brands litter the market. But Canada remains missing.
Economically speaking, Canadians are struggling. The sooner we accept that reality, the better.
The sooner we overcome our shock, the sooner we can start looking for opportunities and focus on growth and value building. A recent RBC paper indicated long economic struggles for Canadians as close to one million Baby Boomers will retire.
More importantly, close to 700,000 SMEs will come up for sale or go through transformation as their founders retire. This brings us to the core question: Where is growth going to come from?
Growth is not going to come from Canada or the US. Growth will come from EMERGING MARKETS.
Next in the series, I will explain HOW SMEs can connect internationally. Until then, have you experienced any international engagement with your business? If so, let us know in the comments below!