Canada’s Choices: Ignore or embrace the Indian customer?

CIBC Report- Canada-India Opportunity

At the IIFA Global Business Forum at Toronto’s Metro Convention Centre, CIBC released a white paper titled ” Spicing Up the Ontario-India Economic Relationship”. On this occasion Benjamin Tal, the Managing Director & Deputy Chief Economist of CIBC World Markets Inc. spoke on the highlights of the research and analysis done and the findings of the paper.

As a listener, what I found heartening was that his findings and recommendations reflected exactly my thinking which I had presented at the FITT National Conference: The Opportunity Triangle.  The parallel was unmistakable. Tal’s message was strong and clear: the reality of our trade ties with the US was that we cannot continue to rely so heavily on our southern neighbour. In his foreword to the above report he says “Ontario’s predominant focus on its major and lucrative trading partner in the US has seen it largely ignore other markets and opportunities. While much discussion has taken place over the years about the need for Ontario to broaden its trading partners, until recent times the strength of the economic relationship with the US has precluded any real need to build ties with other markets”.

What he said of Ontario, in the context of the Global Business Forum and the release of the report is indeed true for Canada itself. Juxtaposing the relative slowdown of the US market with the surge of the Indian market, Tal, a key thought leader on Canada and world economy, had some choice words comparing and contrasting what was happening in the two markets. One such comparison that stuck to my mind was “the exhausted US Customer or the enthusiastic Indian Customer”. Make no mistake- he was not saying that we forsake the US market. No, we will continue to have the US as our single biggest trading partner. But the message was that we need to open up to new markets and embrace India as one of the potentially dominant partners of the future.

Canada's export to Rest of the World- just 14%

A quick look at the graph alongside should make things crystal clear- the top 10 US export markets account for just 67% of total US exports while for Canada, just the No.1 market- the U.S. accounts for 76 % of our exports. The next four markets- Japan, Germany, the U.K. and Mexico account for another 10%  leaving a meager 14 % for the Rest of the World’s contribution to our exports!

Waxing eloquently on the subject Tal says in the foreword to the report “….However, the rapidly changing global economy is dictating the need for Ontario to broaden its trade perspectives. India should obviously be a top priority in this shift, given the size and rapid growth of the Indian economy and the many cultural and other links between the two jurisdictions. It is clearly in the interests of both economies to see trade and investment climb from current levels.

For India, Ontario has the expertise to provide many of the products and services required as it expands its economy. This includes world recognized capabilities in many of India’s highest need areas — from developing its infrastructure by expanding its power, road and rail grids, to improving the safety of the food supply chain, to expanding educational opportunities for its young population. Given the growing role of the private sector in these sectors and services, India could clearly benefit from tapping into Canada’s stable capital markets.

For Ontario, India’s continued high rate of growth provides many opportunities to expand its export capabilities. Given Ontario’s significant Indo-Canadian population and Commonwealth and English-language ties, the opportunities for Ontario industry are significant. However, the reality is Ontario firms have been slow off the mark in developing potential opportunities in India and are lagging behind many other nations”.

What’s true for Ontario is indeed true for Canada as well. As more opinion leaders like Tal take their message out to the business community, mindsets will change and Canada & India will have much more to celebrate.

For more from the CIBC Report on why Canadian business ought to embrace India, look out for the next post.

The Opportunity Triangle- Revealed.

Last week at the FITT National Conference 2011 in Ottawa, I presented the concept of how Canada-India-Middle East combined, presents an Opportunity Triangle for Canadian businesses.

One of the key barriers to Canada’s stellar performance in the global markets is our mindset of relying heavily on trade with the US market. Hence,  the lack of diversity in our country portfolio when it comes to international trade.The Top 10 markets and the level of exports done with those Top 10 for US vs. Canada says a telling story. The Top 10 US markets combined contribute to 67% of US’ total exports while US alone accounts for 76% of Canada’s exports. And therein lies the key barrier- we just need to take our wares and sell them around the globe. More countries need to know what Canada can supply or what businesses can produce in their countries.

And this point of need for diversity in our trade and global business portfolio is endorsed by EDC’s Spring Outlook for 2011, where clearly the country’s premier Export Developmental organization says that the road to global eminence is by reaching out to the high-growth emerging markets. [More on this in my presentation]

And it is in this context that India and the Middle East hold great promise. Data and analysis on a variety of sectors show that  for practically every business, irrespective of which sector you are in, the opportunity to export & tap or expand & tap exists when you look at a market like India. Take a look at the analysis and then question yourself on whether it makes sense for your business or not. In fact your outlook would be so positive that you would start seeing India as a potential second “home market”. I guarantee you that. And the concept of the Opportunity Triangle  flows directly from that thought. There exists a third option after you set up in India as your second “home market”- of tapping the GCC countries of the Middle East from India.

India could be your gateway to a slew of markets, the low hanging fruit being the UAE, Saudi Arabia and Qatar. And the rationale for this strategy is very clear and simple. Take a look at the presentation Canada- India-Middle East.The Opportunity Triangle. If you are a business in Canada or the US, you cannot say ‘no’ to this quantum growth strategy for your business that will shape its destiny for the next couple of decades!

Canada, India & the Middle East: The Opportunity Triangle

If you are in the business of International Trade or if you are a Canadian entrepreneur or SME looking to explore the potential for your business in global markets, this year’s FITT’s 14th National Conference: The Road to Trade Success must interest you. I will be one of the speakers at this event at Holiday Inn Plaza La Chaudiere, Gatineau, QC on June 7th & 8th, 2011.

Alex Alagappan, Rmagine at the FITT Conference

My presentation “Canada, India & the Middle East: The Opportunity Triangle” is to introduce to the Canadian Business community a perspective in global marketing that spotlights the links that exist between these three markets and how they can be leveraged for your business. For a business which understands this perspective will recognize the opportunity as unique. And hence the market entry strategy that the business adopts will take into account The Opportunity Triangle. And that strategy will multiply its reach in terms of the number of markets and without doubt, its sales.

Join us at the FITT conference to learn about this Opportunity Triangle and a host of other relevant subjects from diverse subject area experts. For more on the conference, the session details, speaker profiles  and to register: http://bit.ly/kImEtM

Canadian business in India: A success story

” Waiting for the world to come to us is not an option…we have to go out to the world”.

Joseph. P Repovs, the CEO and Bob Repovs, President and COO of Samco Machinery presented their India story at the breakfast meeting organized by the Toronto chapter of The Indus Entrepreneurs [TiE], last week. The Scarborough, Ontario based roll-forming machinery manufacturer’s foray into the Indian market started with the father Joe’s visit to India to start sourcing from India for their Canadian market needs in 2005.

What drove Joe to make this trip? His belief that ” Waiting for the world to come to us is not an option…we have to go out to the world”. If his belief and enthusiasm is bottled and passed around, I am sure many an entrepreneur aspiring to grow his business would take more than a swig at it. And his positive spirit met with a significant early success- supply of machinery for one of India’s largest business houses- Tata, for their celebrated launch of Nano, the car of the masses.

Samco had some clear goals- $ 3 million in sales and cost savings of at least 30%, both of which have been achieved, even surpassed.  But not before some trying times, the most significant of which was that their Indian partner was not geared to move at the pace that Samco and the business demanded. Today Samco India is a fully owned subsidiary of the Canadian parent company.

Key lessons? Pre-planning is key. Expect results in the long run, not short term gain. Need to be there, benefit from that learning curve. Be thorough in your due-diligence on your potential partner. Be prepared to document and train employees on your way of conducting business. Be flexible, understanding and appreciative of cultural differences.

Samco is now well positioned to take advantage of the India’s burgeoning auto market and the phenomenal growth projected in a variety of industries and sectors, where roll-forming machinery will be in demand. Samco’s success has had its own dose of trials as well and according to Bob, the learning continues.  Going by the what they have achieved till now in India and Bob’s enthusiasm for the future, the day when Samco India’s operation will match its base operation in Canada is not far away. Thereby proving Rmagine’s theory that many a Canadian and US company will discover that India can well be their second “home market”.

Rmagine will meet, study and present more such successes to inspire others and help in in-market learnings.

BRICS- A Dramatically Different World

The potential of the BRICS economies, circa 2003

BRIC: A term coined by Goldman Sachs in late 2001, today it rolls off the tongue of many, globally. At a time when South Africa has just joined the group [late April 2011], for it to be rechristened as BRICS, these findings from papers published by the Goldman Sachs Global Research Centre in 2003 and an update in 2007 present a historic outlook of the promise that the developing economies of Brazil, Russia, China and India held, a decade back. [Without the dubious benefit of the  global recession that only served to accentuate the potential value of the BRIC nations vis-à-vis the developed economies]

Almost presciently, the researchers had some observations on South Africa as well, in 2003 and that’s captured in the excerpts presented here.
In its entirety, the outlook for the BRICS nations, seen in the numbers projected and playing out as we speak certainly paint a dramatically different world. Click on the image to take a look at what was predicted. And soon, you will be able to take a look at the status updated on these nations, as of 2010.

Canada’s second “home market”: India.

I believe developed markets, for the sake of their own sustenance, need to look outward and have to create what I’d like to call their second ‘home market’. As growth tapers and as a product’s ‘home market’ ages, the imperative is that it has to create it’s new second ‘home market’ in today’s shifting economic sands. Products, services, technology, systems & processes and brands can be leveraged by businesses in a developed market, like Canada, to its advantage, by tapping into the growth of an emerging, growing, young market like India.

Companies that aspire to live and prosper into the next fifty or hundred years need to look at international markets as much more than tapping ‘new’ markets. And with rising oil prices impacting the supply chain costs and consequently the cost of goods,  businesses can’t just source & assemble everything in one location but start viewing markets with some old fashioned sensibility- the concept of ‘home market’. Only in this case, a truly global corporation needs to create many home markets. Each home market will then become a base for the corporation to tap a part of the globe. So companies need to view their emerging market ventures as not just a satellite  market to add to its home market volumes but as a whole new home base to venture forth into new worlds.

To start with, companies and organizations have to build their second ‘home market’. That market which they will sink roots into and make their own, not just for what that emerging market promises but to conquer new worlds and markets from there. And if one asks Canada to choose which market will serve it well as its SECOND ‘HOME MARKET’, I would like to submit that it should be INDIA.

Chew on that folks. More on this soon.

Rmagine in the media. “One. Just one reason to invest in India”

Forget the ‘twentyone’ reasons why….. to do anything. We will keep it short and simple for all those Canadian and US businesses looking to expanding into new global markets.

If you want to examine why your business may want to consider India, I have just one reason. To know more, I’d like you to take a look at my article as a guest writer and blogger on Business without Borders. I really hope  I am able to get a few businesses and entrepreneurs to get a lot more curious about India and the opportunity she holds for the wise & brave….

Emerging Markets Consumer Survey- India

Thanks to Credit Suisse Research, a research done by AC Nielsen on the Emerging Markets Consumer has some very revealing facts for Canadian and US businesses looking to India as a potential market. The survey was done among 13,000 adults in Brazil, India, China, Russia, Latin America, Indonesia and Saudi Arabia.

Key pointers:

  • Mood of Confidence- 43% of Indian consumers feel that the state of their personal finance over the next six months will be better. 54% feel that it will remain as good as it is. Only 3%, lowest for all countries surveyed, feel it will get worse.
  • The number of high-income households[HH], is more than twice that of Russia, despite the GDP per capita being 80% lower than Russia
  • Spending will move from ‘necessity’ to discretionary- survey shows that there is a clear and consistent pattern in consumption of branded goods as income levels improve. And of international brands to local brands at the affluent level.
  •  A priority that stands out for the Indian consumer is education. Household spending on education is by far the highest within the survey at around 7.5% (more than twice that of Russia, at 3.1%). Add to that is the finding that the percentage of school age population to the total population stands the highest at 20%.  Both these factors clearly point to the potential that India holds for the education sector
  • Some purchase intentions across low to affluent income groups, for the next 12 months- 61 to 67% expect to spend more on dairy products, 36 to 61% expect to spend more on feminine hygiene products, 27 to 41% on bottled water, 42 to 50% on soda-pop, 4 to 10% more on healthcare, 8 to 13% more on education and training, 18 to 28% on purchasing branded sports shoes, 2 to 4% on purchasing smart phones, 4 to 10% on purchasing computers

Consumption is certainly a big story for India, given  the huge, young population, rising affluence, increased urbanisation and change in psyche. Most products and brands of developed markets across all categories tend to benefit. Specifically the education, healthcare, food and beverage, entertainment, lifestyle products and brands form Canada and the US have a great opportunity.

More on India’s consumer from the Credit Suisse Emerging Markets Survey will be coming up in Part II. Happy hunting.

Phenomenal business growth from Saudi Arabia for Canada

The Profit magazine and Business without Borders did a short piece on ‘Canada’s Hottest Markets’ of growth in trade between 2005 and 2009, this December. Guess who came on top?

A market that had grown 164% in exports during this period.

That huge consuming machine and one of the wealthiest nations of the world- Saudi Arabia.

This was an interesting perspective that I thought I would spend some time on and look at some current figures and the categories of maximum potential.

As of Nov 2010, the year-to-date total exports [Domestic and re-exports] from Canada to Saudi Arabia was at $ 825.5 million, a growth of 51.8 % between the year-to-date figure in 2006 and 2010. A more than healthy growth. The key product categories that contributed significant numbers were:

Category                       CAN$ Millions
Vehicles, aircraft, vessels and associated transport equipment. 152
Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles. 111
Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard. 97
Vegetable products 151
Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactures tobacco substitutes. 40
Mineral products 59

The great news here is that the largest category of transportation equipment & the next category of machinery together should be music to the ears of the manufacturing sector in Canada.With infrastructure investments in Power& Water, Rail, billion dollar Oil & Gas projects and complete new cities to be built, Saudi Arabia can be a very lucrative market for our manufacturing sector.

The other element to note is the quantum of vegetable products & prepared food and beverage numbers- together amounting to close to $ 200 Million provides another clue of what Saudi Arabia needs. Packaged food and value-added processed food products should rake it in.

And it is not just the trade that we should look at. As the BWOB/Profit piece notes, the Kingdom is in the process of building “3000 schools, 100 hospitals, 6,400 km of roads and six whole cities. Substantive opportunities also exist in education, housing, food products and health-care equipment and services”. More importantly this just does not mean exports alone.

Businesses can open a whole new market for their products if they are quick to spot the opportunity and set up joint ventures in Saudi Arabia. A case in point is the project that we recently completed for a Canadian manufacturer for entry into the Middle East- their Canadian sales built over the last 30 years can perhaps be matched by the sales volume they can expect to generate from the GCC countries in just the next three years. 

Now who would like to say ‘no’ to that?

To take a look at the BWOB/Profit article, click http://www.bwob.ca/resources/metrics/canada%e2%80%99s-hottest-overseas-markets/

And look out for analysis and posts on the two other top performers in the top 3 markets for Canada- UAE and India, soon.

Canada’s & EDC’s Oracle Peter Hall, on India.

A message to Canadian business on the India Opportunity

EDC’s Vice President and Chief Economist Peter Hall does a Weekly Commentary on subjects that are of significance to Canada’s businesses, commerce and economic well-being. Maybe not just Canada’s well-being but the world’s. Earlier this year he went on this whirlwind 20 plus city tour of Canada as EDC’s one-man rock band or our own modern-day Oracle of Delphi, giving his insightful analysis & views on the Economy and where it was headed. But that’s not the reason why today’s blog at Rmagine headlines Peter Hall. Peter’s observations in today’s weekly commentary is closer home to Rmagine’s core- India.

This week’s analysis of global issues  for Canadian exporters and businesses featured Peter Hall delivering  a tribute,  a word of caution and a great promise of things to come- all on India. Titled ‘In India’s Perennial Problem, A Solution’, he has this to say [and I am paraphrasing]:

  • India’s modern-day growth path is the envy of most nations- annual GDP growth this year and the next to average 8.4% versus the much envied 6.4%, which is its past ten-year average.
  • Key inhibitors to growth: Infrastructure and soon, qualified labor.
  • Labor- the inhibitor and potentially, the key to further growth as well. While China’s labour force will soon peak, India will still be adding well over 100 million new workers each decade.
  • The bulk of India’s labor force is agricultural- 60%. And a great chasm..[exists] between these workers’ skills and the ample office-tower opportunities that exist. Painfully aware of this mismatch, the government is pulling out all the stops, vastly increasing education funding, expanding the number of educational institutions and partnering with international educators, in a determined race to stay ahead of the economy.
  • In the meantime….a wage inflation… could quickly erode or even eliminate India’s competitive edge.
  • The rest of the world may have a remedy. Many nations have a crying need for lower-skilled labour. Most fully developed nations have aging populations, and face desperate labour shortages in the next growth cycle. Until now, they have been able to rely on China, but it too faces imminent aging problems. India is among a very few nations with the potential to meet this chronic near-term global shortage.
  • And this is being addressed [by the Indian government], with a multi-year, US $1 trillion spending program that among other things may unlock India’s vast, and as-yet largely untapped, manufacturing potential.

And the final word from the Oracle: “The bottom line? India may well be on the verge of expanding in a new direction as the world seeks new means to keep its production machine functioning well. Strategists, pay attention.”

Peter Hall, in my opinion, is spot on. And the building blocks are all in place already for India to become a global engineering research and manufacturing hub. Of the global $200 billion engineering services outsourcing projected for 2020, India will have a 25%  or a $40 billion share. And it is projected that another $45 billion will be the value of R&D work that will be done by global majors in India by 2020. Another indicator is that auto component manufacturers in India are expected to produce between $20 to 25 billion worth of components for global auto companies by 2015.

And all this, much before the 100 million strong workforce becomes available after 2020, to prove Peter Hall right. I see his ‘Strategists, pay attention’ is really a call to Canada’s businesses to take note of the world of possibilities and plan their entry into India.

Going deeper into Peter Hall’s prescient outlook on India’s role in the global workforce of tomorrow is what India’s think tank of industry leaders label India’s New Opportunity– the opportunity to provide a skilled workforce and a band of knowledge workers to match the shortages that the western world will face. By 2020, it is predicted that US will face a net shortfall ranging from 8.2 to 14.3 million in its workforce! The net shortfall figure for Canada is expected to be between 1.1 and 2.8 million!

Going by these trends, in the future, countries from around the globe will be beating a path to India’s shores not just to do business there but to woo its knowledge workers as well.

If you’d like to listen to Peter Hall’s complete weekly commentary or read it:

http://www.edc.ca/english/docs/ereports/commentary/publications_20717.htm