Canadian manufacturers forecast a sales shift to developing countries
October 18, 2012 by Ross Marowits
Canadian manufacturers foresee a sales shift over the next three years towards Europe and developing countries such as China, India and Brazil, according to a study released Thursday by their industry’s main association.
Sales within their home provinces, to the rest of Canada and to the United States will remain the dominant markets for Canadian goods, but most companies expect to expand their reach to other markets, according to the analysis.
“Companies expect globalization pressures will propel a shift in where they do business,” says a survey of 649 Canadian companies released by the Canadian Manufacturers and Exporters association.
Asked where their customer base is located today, 89 per cent of the respondents said it was in their home province. In three years, however, the number is expected to fall 17 points to 72 per cent.
Similarly, 84 per cent of respondents said their supply base was in their home province. In three years, that’s expected to drop to 68 per cent.
The United States was identified as the biggest foreign customer and supplier base, although its importance is expected to decline slightly from current levels.
In contrast, the European Union, Eastern Europe including Russia, China, India and Brazil were all expected to be increasingly important customer bases over the next three years.
The study indicates Canadian companies also expect more of their supplier base will be outside Canada, with low-cost China, India and Eastern Europe growing.
“This will begin to transition in the coming years, as the U.S. market is expected to remain weak, and companies ramp up their search for new offshore customers,” said the survey released Thursday.
Small companies said developing new markets was key, while those with more than 500 employees identified supply chain management and logistics, cost and availability of raw materials and regulations as large challenges. Inter-provincial trade barriers was the least common concern.
Despite political promises to facilitate an improvement to cross-border trade, 34 per cent of companies said Canada-U.S. border regulations and security have worsened, compared to eight per cent which claimed an improvement.
Respondents also indicated an optimism for the future, with about three-quarters of the respondents anticipating higher profits by 2015, and 40 per cent forecasting that profits will grow by more than 10 per cent.
A strong majority of the executives said their companies expect production volumes will increase without reducing employment or investment.
More than half of the respondents have operations in Ontario and many have operations in more than one province. Nearly three quarters are manufacturers with metal and machinery companies representing more than a one third of participants.
Respondents in all provinces except Saskatchewan said the most pressing challenge facing Canadian companies is increased competition in their primary markets, followed by the strength of the Canadian dollar, attracting/retaining labour and global economic conditions.
— The Canadian Press