Studies & Reports
Canadian businesses willing to pay more for Canadian-made goods, survey says
By Mary Del
A strong majority of Canadian business decision makers say they would rather pay more money to buy materials from Canadian suppliers than source less expensive goods from overseas manufacturers to widen profit margins. The revelations come out of the third and final phase of a series of surveys conducted by Leger Marketing on behalf of UPS Canada that shows 63 percent of businesses would prefer to support their fellow domestic enterprises even if doing so means being less cost effective.
The numbers corroborate data from previous phases of the study that showed almost 40 percent of small to medium-sized enterprises (SMEs) believed they should confine their commerce within Canada in order to sustain the country’s currently strong level of competitiveness, and that 51 percent believe Canada should establish tariffs to discourage overseas exporters from accessing the Canadian market.
"While it is inspiring to see that Canadian businesses are so inclined to support their compatriots, it is also a bit of a red flag," said Pat Stanghieri, vice-president of marketing, UPS Canada. "The reality is that competing businesses based in other countries – including the United States – are leveraging the lower cost of goods and labour in emerging economies to achieve competitive price advantages."
The Leger study further reveals that Canadian businesses’ indifference to the growing influence of foreign competitors in the Canadian market is a symptom of a much greater apathy toward the globalization of business. Specifically, the study found that the vast majority of all businesses – large and small – are unwilling to invest at all in internationalizing their businesses.
"The inhibitions of SMEs toward global trade were very evident in the first two phases of this study; however, we were surprised to learn that 55 percent of decision makers at large Canadian companies weren’t willing to make any investment at all into taking their company beyond Canada’s borders," said Stanghieri, who also noted that 43 percent of SMEs think global trade is something in which only large corporations engage.
When asked how they believe Canada should counter the growing penetration of foreign companies into the Canadian market, 50 percent of big-business respondents (companies with at least 100 employees) said there should be more private and public investment in innovation to increase productivity. Meanwhile, 27 percent of the big-business respondents said nothing should be done to counter the penetration of foreign companies into the Canadian market because foreign investment is a net benefit for Canadian business prospects.
Meanwhile, a focus on manufacturing value-added and high-tech products to counter the traditional reliance on natural resources was cited as the most effective means of countering Canada’s current trade deficit – its largest in a generation. Establishing more government-generated incentives to get business involved in trade was noted by the second highest number of respondents.
"It’s clear that for many businesses, going beyond Canada’s borders is unlikely unless there’s little financial risk on their part. Much of that stems from the common misperception that global trade is an expensive endeavour," said Stanghieri. "The truth is global trade can be very affordable if businesses leverage already existing third-party supply chain infrastructure so that they don’t have to invest in their own."
The Leger survey was conducted from November 8 – 29, 2010, polling 300 businesses across Canada and across a variety of industries, including hospitality/tourism, construction and engineering, manufacturing, wholesale/retail, business/professional services, IT/communications and more. The study yields a maximum margin of error of +/- 5.7 percent, 19 times out of 20.