Between 2000 and 2010, 85 per cent of Canada’s exports were aimed at slow-growth markets such as the U.S., Japan, and the European Union, according to the Bank of Canada. Only eight per cent of Canadian exports went to the highly-touted fast-growing markets of such emerging nations as China, India and Brazil, with which Canada has no free-trade pacts either current or under negotiation. And yet Danielle Goldfarb, researcher at the Conference Board of Canada, notes that “the common wisdom that Canada cannot reduce its dependence on the U.S. market, and that Canada will trade little with fast-growing markets elsewhere, is starting to change.” More and more Canadian companies have been venturing into less familiar fast-growth markets – both as investors and importers. They will continue to do, even with countries that do not forge bilateral trade pacts with Canada, or participate in the multilateral Trans-Pacific Partnership.

Even before the conclusion of the new trade pacts with fast-growing Korea, or Canada’s entry into the TPP talks, many Canadian companies were becoming much more engaged in pursuing opportunities in emerging markets. “It is not just the fast-growth markets that represent great potential for Canadians. There are a whole host of countries that represent a significant potential, and that list of countries is not necessarily limited to the ones that are in the headlines all the time,” said Goldfarb. “There are a lot of faster growth markets that are quite sizable, and are growing rapidly; where there is a little less attention paid – and you can potentially make business contacts more easily.”

Goldfarb cited the example of Indonesia, a vast country (with a population of 250 million), where many Canada-based multinational companies now have a presence that they didn’t have five or ten years ago. “Even those second-tier countries beyond the BRIC markets are now gaining traction and interest” among leading Canadian firms. “But it still may be easier to make those government and business contacts in those countries because everyone has gone or is going to China, so it is little easier” to establish a presence in the next countries beyond China.

Free-trade pacts or not, Canadian firms nevertheless face significant challenges in these faster-growing markets, Goldfarb added. “All the developing, fast-growth markets are extremely challenging – but to different degrees, and you can’t paint them all with one brush stroke. And each country has its different needs. So while China and India may be very difficult markets to be in, there are areas where they have major problems and needs to solve,” which means plenty of opportunities for Canadian firms that identify and target those specific niches. For example, both China and India have real problems with energy efficiency and are looking for products and services that can make them more energy efficient.

In a recent survey of how Canadian firms are faring overseas, the Conference Board of Canada discovered that those companies that have ventured into the “emerging markets” before gaining experience in the U.S. or other developed markets have a significantly lower chance of success in these newer, fast-growing markets.

A willingness to innovate is also a major factor in overseas success. “If you introduce new products constantly, that is one of the factors likely to lead to your success.” Whenever Canadian firms did not innovate, the survey found, there was a significantly higher probability that they would eventually abandon those foreign markets before achieving their goals there. To qualify as innovators, Canadian firms did not necessarily have to develop entirely new products that were unavailable back in Canada. However, it helped significantly if they kept changing their product mix in response to the specific needs of each foreign market. One of the most popular ways to get into local supply chains was by “piggy-backing”; that is to say, by selling, first, to smaller foreign companies, and then moving onto to targeting larger firms as the Canadian company’s reputation strengthened, and they gained overseas experience.

The survey found that those Canadian firms that are succeeding in unfamiliar new markets “are selling world-leading products that have established a global reputation – and this is not so easy to do,” Goldfarb said. To achieve this goal, “You have to have very strong capabilities, especially if you are a smaller player. If you are a larger player, you can expect not to earn a profit there for a while [in a specific foreign market], knowing that you need to have a presence there for a while; knowing that eventually it will work out because you can sit through some of the political risk. But if you are a smaller player, you are going to run out of cash, and you won’t be able to take that much risk.”

In a study, the Conference Board of Canada study identified six smaller Canadian firms that have beaten the odds by providing high-quality products and/or services in less familiar foreign markets. The firms:

Forrec: This Toronto-based leader in the planning and design, recently established a strategic alliance with Shanghai-based Tongji Architectural Design Group, one of China’s foremost architectural design institutes. Forrec, which specializes in the creation of entertainment and leisure environments worldwide, has built projects in over 20 countries.

Intelysis: This Toronto-based fraud investigation firm brings together forensic accountants, researchers and lawyers on five continents, to solve problems for corporations and lawyers around the world.

Novo Plastics: Based in Markham, Ontario, this manufacturer specializes in the engineering and development of environmentally superior automotive parts. When the North American market dried up in 2008, Novo moved into India. Novo also has strategic alliances in Germany, Korea and the U.S.

Sandvine: Based in Waterloo, Ontario, Sandvine has become a leading provider of intelligent broadband network solutions for fixed and mobile operators. Sandvine’s network policy control solutions are deployed in more than 250 networks in over 90 countries, serving hundreds of millions of data subscribers worldwide.

Trojan Technologies, based in London, Ontario, manufactures water treatment solution products, and has become a significant supplier to markets in Africa and the Middle East.

Goldfarb cautioned, “Before entering unfamiliar markets outside North America, each of these companies made sure they played up their expertise and their strong reputation in the North American market.” And yet “a lot of people think you can do one of these one-off trips, and that the kind of interactions you have in North America will be the same in these new markets.” Unlike the successful firms listed above, many firms “don’t realize that they need to establish a long-term presence and personal relationships in these markets. There is an under-appreciation of how persistent you have to be. You have to be prepared to wait a long time to make that strategy work out.”