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Canadian Businesses Choose Patriotism Over Profit, Even as Foreign Competition Heats Up

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 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% 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% 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% believe Canada should establish tariffs to discourage overseas exporters from accessing the Canadian market.

Pat Stanghieri, vice-president of marketing, UPS Canada, thinks this is cause for some concern. “While it is inspiring to see that Canadian businesses are so inclined to support their compatriots, it also is a bit of a red flag. 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.”

Specifically, the study found that the vast majority of all businesses — large and small — are unwilling to invest at all in internationalizing their businesses.

Stanghieri says this coincides with the results from the first two phases of the surveys conducted by Leger.  However, he was surprised to learn that 55% of decision-makers at large Canadian companies weren’t willing to make any investment at all into taking their company beyond Canada’s borders.  The survey showed that 43% of SMEs think global trade is something in which only large corporations engage.

When asked how Canada should counter the growing penetration of foreign companies into the Canadian market, 50% 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% 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.

While Canada’s trade deficit is the largest in a generation, respondents focus on manufacturing value-added and high-tech products to counter the traditional reliance on natural resources. 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 Nov. 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% 19 times out of 20.

Category: Business Insights, Global Impact, UPS News
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