Once the primary domain of large multinationals, the global marketplace is no longer an exclusive club, offering new opportunities for small businesses to increase profits, improve efficiencies and reduce costs. But globalization has to be properly understood by SMEs so that they can reap its benefits. Otherwise, poorly understood, it will become a threat with the potential to put the future of the business at risk.
What's changed over the past decade? For one, the widespread use of the Internet and other information technologies means many small companies are now born global, particularly knowledge-based and technology driven companies. Size no longer matters when doing business internationally.
Just ask the 105,000 members of the Canadian Federation of Independent Business (CFIB). When it comes to globalization, most are upbeat.
"Canada has always thrived on being a trading nation so the notion that the future is bleak is just not the case, and it's not the view our small business members take," says Catherine Swift president and CEO of the CFIB. "There are challenges, but overall our members are quite upbeat. They feel that globalization is a positive. They really believe that the fewer barriers to trade, the better."
There are also far more opportunities as a result of globalization than there were a decade ago. In the past, Canadian companies viewed it primarily as the ability to export their services or products to countries other than the United States. Today, it means looking beyond Canada's border to find ways to improve how you do business.
Some of the most significant opportunities for small businesses can be found in their supply chains. Supply chain management involves a complex flow of information, internal and external suppliers, production, distributors and customers. Incorporating more global partners into this chain can help to reduce costs, improve markets and improve productivity.
For example, a manufacturer in Canada looking for a cheaper way of getting their products to shelves may consider importing certain components of their supply chain. If you're a company that competes on labour, then it may make sense to manufacture a product overseas or locate a service support centre to a lower cost market like India.
"It's not only the output of companies that can benefit from globalization, it's now the input as well," explains Edmée Métivier, executive vice president, Financing and Consulting, at the Business Development Bank of Canada (BDC). "By defining globalization in this context, it means you now have to reflect more strategically about what you want to do, who's going to do it for you, where you want to do it and how you're going to compete."
When considering new export markets, many companies may look to emerging economies like China and Brazil. While those countries are dominating business headlines these days, Métivier says there are other countries, including Vietnam, Malaysia and Korea, which have stable markets with a growing middle class.
The upside to a high Canadian dollar
While the rising Canadian dollar has many export-reliant businesses on edge, there can be an upside. A strong Canadian dollar makes it less expensive for entrepreneurs here to import new technology or purchase knowledge or equipment that can increase their company's productivity.
"Unfortunately, this is an opportunity that we don't see enough Canadian companies taking advantage of," says Métivier. "This is worrisome because a lot of Canadian companies know that they have to reduce their operating costs, improve their processes and improve productivity overall. But there's only so much you can do without investing."
Métivier recommends that entrepreneurs seek outside advice about how to exploit the opportunities of globalization or sidestep threats. BDC Consulting, for example, can provide sound research for export markets and operational efficiency planning to improve productivity and stay lean. CFIB offers its members a free online course called the Small Exporters Management Certificate.
"There is no shortage of resources out there and many are free," adds Swift. "The important thing is for small- and medium-sized businesses to get started. You have to analyze your own business and identify the areas where you can become competitive. The opportunities have never been better for smaller businesses to benefit from globalization."
