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All Packed Up and Ready to Grow

Stefan Dubrowski
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HOW TO EXPAND INTO NEW MARKETS

Nienkämper may be headquartered in Canada, but you’ll find its furniture all over the world — including at the King Abdullah University of Science and Technology (KAUST) in Jeddah, Saudi Arabia. The Toronto-based company won a bid for the institution’s business in 2009.

Many Canadian companies are casting their sales gazes abroad —not only because the U.S. market isn’t what it used to be, but also because it may make good business sense to consider global expansion, since so many competitors around the world are doing the same thing. As businesses in Italy, China and Brazil eye the Canadian marketplace, Canadian businesses might need to think about branching out beyond Canada if they want to compete.

Of course, global expansion isn’t the only way to grow a business. Some manufacturers of secondary wood products have successfully moved into new areas within Canada as well.

So what’s the best way to break into new markets? Wherever the location —be it abroad or on home turf, the answer, say the experts we spoke with, depends on three key things: research, participation, and flexibility.

Research

Market research is an important part of any business expansion. The Department of Foreign Affairs (DFAIT), the Business Development Bank of Canada (BDC) and other government agencies feature market research on their websites — information designed to help businesses understand where they might want to go before they invest in new markets. (See “Worldwide web...” for more.)

One question many companies are asking is, does it make sense to target the U.S. these days? While the state of the economy south of the border suggests the answer is no, Carl Gravel, national director, global competitiveness at BDC, offers a different point of view. He points out that Canadian businesses often work with border states, but there are numerous other regions to consider. “There’s still a lot of room to grow in other parts —the south, the western part of the U.S., Texas and California, for example.”

But deciding where to invest is only part of the equation. The “how” also matters. And as Gravel explains, there are various ways for businesses to expand. Some methods are “unstructured,” he says. For instance, if an employee originally from South Africa expresses a desire to return to that country, it could represent an opportunity for the business to expand to a new region.

“Structured” expansions rely on market research, analysis and sometimes advice from consulting organizations like BDC. This could include a global competitiveness assessment, where BDC looks at the business’s products, its capital, and its understanding of the target market to help the company see what it needs to do to lay the groundwork for international success.

Structured or unstructured, expansions require commitment. “It takes sometimes at least two years to penetrate a new market,” Gravel says. And only solid businesses need apply. It the company is floundering in Canada, it shouldn’t be looking to the global market to boost sales. “If you’re having trouble in the domestic market and you’re not very profitable, it’s going to be harder to put resources — people and money — towards a new market for the next two years,” Gravel says.

Companies considering areas beyond Canada should participate in international tradeshows and events. These gatherings can help businesses connect with potential customers, and they give companies a sense of the market they’re thinking about tackling. AP Industries — a furniture manufacturer headquartered in Laurier-Station, Que. —went to the Index Exhibition 2010 interior design show in Dubai. “It was a good start for us to see what the market looks like, and what sorts of solutions we can provide,” says David Tanguay, AP’s marketing manager.

Furniture manufacturers and designers might benefit from international design expos such as immcologne, in Cologne, Germany (imm-cologne.com). But it might also be useful to visit secondary woodworking technology events abroad to learn new techniques and to at least visit a potential market. Events such as AWFS Las Vegas (awfsfair.org) give visitors the opportunity to learn about new business-building solutions and technologies. Ligna Hannover (in Hannover, Germany) covers building materials and new ways of working with wood (ligna.de).

Flexibility

Beyond attending international events, companies should also look into their own operations. Does the business have the flexibility to meet the needs of a new market?

That was something Nienkämper had to quickly figure out. It started with an invitation for Nienkämper to go to Paris and display its furniture for the university’s design team. It ended with the school choosing Nienkämper over rivals from the U.S. and Europe. The next thing the company knew, Nienkämper had to scramble to meet the customer’s deadline. “We had to produce this entire job within 12 weeks,” says Klaus Nienkämper, the company’s president. "That’s 6,300 pieces in three months."

“We’re very pleased our other business didn’t suffer as a result,” Klaus says." Nienkämper had the capacity to manufacture KAUST’s massive order without impacting its regular business lines. And now the company has hired a Moroccan designer to begin integrating Arabic architectural influences into its products, to make them more appealing to the Middle East market.

AP, meanwhile, has hired an international salesperson, and the company touts the flexibility of its product line as a major competitive advantage on the global stage. “The way the plant is designed here it’s quite easy for us to adapt the furniture to the needs of different contractors,” Tanguay says.

Companies need to be flexible in the way they work to meet market realities. Sometimes, that means reconsidering things at home as well as abroad. Nienkamper started closing many of its showrooms a few years ago when the company realized it needed a whole new approach to customer relations. While the company continues to sell to the public through select retailers and a few showrooms, now the firm also flies architects and designers in for a weekend in Toronto, including a tour of Nienkamper’s manufacturing facilities.

“We have a group coming in this week from Dallas,” Klaus says, explaining that Nienkamper hosts customers from all over the world. The company is now also partnering with another organization to open a showroom in Dubai. The KAUST deal went so well, it’s time for the furniture maker to make a more permanent home in the Middle East, Klaus says.

Sometimes international success hinges on the ability to retrench domestically when markets change. That’s what AP did. In the past, most of the company’s revenue came from U.S. sales. But as the Canadian dollar inched towards parity with the U.S. dollar, AP’s furniture became less of a bargain for the U.S. market. So over the last eight years or so, the company has invested in training programs for its Canadian retailers to enhance domestic sales. It worked. “Now we probably do 80 to 90 percent of our sales in Canada, while maintaining the same volume of sales,” Tanguay says.

So what does the next two years hold for AP and Nienkamper on the international front? Tanguay says his company is starting to look at the U.S. again. “We have a new sales team and new agreements that we’re promoting in the U.S. We should go back to where we were five years ago in the U.S. quite shortly with the moves that we’ve made. But we don’t know what it’s going to look like in 2011 and 2012.”

Klaus says Nienkamper is watching for an opportunity to do more in Europe. “Germany’s not so bad,” he says. “The market seems to be recovering much quicker there than other parts of the world. Maybe there’s room for us one way or another.”

Worldwide web resources

These websites provide information for companies considering expanding into new markets:

The Canadian Trade Commissioner Service: tradecommissioner.gc.ca

— Part of the Department of Foreign Affairs and International Trade, this organization presents news, access to trade offices around the world, and market reports for free.

Export Development Canada (EDC): edc.ca

— EDC offers financing and insurance for export-focused businesses. It also has information on foreign markets, and it produces a Global Export Forecast explaining market trends in various regions.

 Business Development Bank of Canada (BDC): bdc.ca

— BDC provides financing, venture capital and consulting services for Canadian businesses. Its consulting services include the global competitiveness assessment for internationally minded companies, and its website features articles on how to expand globally. Recommended reading: “Entering a foreign market.” Access this article through the BDC homepage — use the search tool to find the article by its title, “Entering a foreign market.”

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