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Manitoba Trade and Investment

International Trade Strategy for Manitoba
NextPrepared by The Council on International Trade

Section III Global Trends

Manitoba operates in a global environment. Importers and exporters must understand the changes currently occurring as well as those that are predicted to occur. Understanding the major trends in the global environment can help prepare Manitoba trade organizations to adapt to changing conditions. The focus in this strategic document is on those trends that are most likely to affect Manitoba's trade capability.

1.

Global Supply Chains
In recent years, the need to reduce costs and penetrate new markets has caused a major focus on supply chain management. With distribution costs often a major component of the cost to the purchaser, increasing the value-added of supply chains has developed into a major competitive tool. With increased globalization and offshore sourcing, global supply chain management has become an important issue for many businesses.18

With global supply chain management, an organization's focus is on worldwide interests and suppliers rather than just a local or national orientation. Geographic barriers have been eliminated for many products and services. Every organization is literally a potential supplier to any other organization in the world. The trend toward increasing energy costs places even greater weight on high value-added supply chains. Globalization is accelerating and is resulting in large structural shifts for global supply chain organizations and new challenges to successfully manage supply chain performance. By virtue of its geographical location and transportation infrastructure, Manitoba appears uniquely positioned to benefit from the worldwide trend toward increased use of global supply chains.

2.

Fluctuating International Currency Markets
Currency volatility is the highest it has been in recent years. Companies operating in an international environment face increased risks when engaging in foreign currency transactions. In Canada and Manitoba, the lessons of currency fluctuations have been learned all too well. Manufacturers and exporters who competed very effectively when the Canadian dollar was comparatively low found that they had to make major changes in their processes to remain competitive when the dollar value increased.

Predicting currency movements is a very high-risk business strategy; the primary risk minimization strategy is to become as efficient as possible and focus on offering customers the products and services they need. Some Manitoba businesses have adjusted well to the strong Canadian dollar by implementing lean processes and other cost reduction strategies into their operations. It follows that those organizations able to develop operational efficiencies and focus on satisfying customer needs will be better positioned to compete in an unsettled global financial environment.

3. The Demand for Fast Response Capability
One of the most dominant social and economic global trends in recent years has been the trend toward society's demand for fast response capability. Inefficient and slow processes increase costs, annoying impatient and cost-conscious consumers. The trend toward fast response capability can be seen in a diverse group of markets: MBA degrees that previously took up to three years can now be earned in less than a year; developing a new vehicle from concept to showroom used to take several years and now is regularly done in a year or less; mortgage applications used to take weeks or months and now are done in several days or less. Fast response capability is the same concept that can allow a consumer in the U.S. to purchase a computer over the Internet that is assembled in Europe, air-freighted over the polar route through Winnipeg, loaded on a truck within one hour of being on the ground, and delivered to the customer along the mid-continent trade corridor within 24 to 36 hours of the order being placed. For organizations requiring fast response capability as part of their competitive strategy, Manitoba's unique location and supporting infrastructure positions it to be a major player in global marketing, supply chain management and transportation logistics.
4. The Changing Growth of Markets
One of the most difficult aspects of international trade is predicting economic growth in specific countries or regions. Projective data are not hard to find, but they are always based on predictive models and assumptions. Normal business cycles combined with less predictable economic downturns create a situation in which inexperienced players can do themselves great harm. It is understandable that many businesses see international trade as substantially more risky that domestic trade. While it is generally agreed that China and India will likely have the highest growth rates over the next several decades, targeting primarily those areas as a trade strategy for Manitoba would be limiting. With Manitoba's diverse economy made up largely of SMEs, opportunities are more likely to be found in product/technology/ service specific markets rather than geographical regions. Healthy and growing economies should always be a major consideration, but Manitoba businesses' ability to satisfy customer needs in any area of the world will make the most of the province's distinctive competencies. The challenge for Manitoba is to continue to service existing markets while exploring new opportunities.
5. Demand for Green Energy
The increasing demand for green energy is being driven by several global forces: climate change, increasing cost of fossil fuels, perceived risks associated with nuclear fuels, and the instability of countries with major oil and gas resources, to name but a few. The United Nations Intergovernmental Panel on Climate Change predicts that the proportion of the world's energy supplied from renewable sources will increase from 13 per cent today to 43 per cent by 2030 and 77 per cent by 2050.19 With hydroelectric power as one of the primary sources of green energy, Manitoba has the potential to be a world leader.
6.

Trade Agreements
As some nations apply tariffs on goods being imported or restrict the import of goods outright, from Canada or elsewhere, goods subject to tariffs are at a competitive disadvantage. Free Trade Agreements are one means to decrease or mitigate tariffs on goods entering markets. Canada has implemented a number of FTAs, including the North America Free Trade Agreement (NAFTA) and FTAs with Israel, Chile, Costa Rica, Peru and the European Free Trade Association. Canada has also concluded negotiations with Columbia, Panama and Jordan and is in the process of implementing these agreements.

Finally, Canada is in the process of negotiations with a number of other countries including the European Union, South Korea, India, Morocco, Turkey, Ukraine, Singapore, the Dominican Republic and Caribbean countries. Canada is also exploring the launch of negotiations with other countries, including Japan. Manitoba's exporting community benefits from all these agreements by receiving enhanced market access with preferential tariffs compared to their non-Canadian competitors. Enhanced market access for Manitoba exporters in new markets may encourage them to expand their existing markets and penetrate new markets in nations where Canada has concluded free trade agreements With hydroelectric power as one of the primary sources of green energy, Manitoba has the potential to be a world leader.

7.

Spiraling Innovation
Innovation has been a key factor in the rise of developing economies and it is rapidly crossing national borders. Countries such as China and India have increasingly applied technologies to build products for sophisticated customers who need innovative goods and services at the lowest prices. According to the Institute of Competitiveness and Prosperity, trade is an important stimulant to innovation.20 It is driven by the pressure and support that result from international trade.

Pressure comes from aggressive and capable competitors who are a threat to complacency. To remain successful, businesses have to be cognizant of the best allocation of research and development spending and resources, to ensure they remain at the forefront of critical technology advances. Innovation will change the way people live, work and organize their societies in fundamental ways. Examples include wearable computers that constantly monitor one's health, artificial intelligence-driven product innovation and online government elections fuelled by social media-based campaigns.

8. The Availability of a Skilled Workforce
The world's population is growing, aging, and becoming more urban and mobile. Predictions are the majority of the growth will be in Asia, while populations will decline in the most developed economies. Businesses have to be concerned with these trends and what they mean for the markets that they intend to target in future. Additionally, they need to know the knowledge requirement to create, acquire or leverage to ensure the future success of their organization. The shift to knowledge-intensive industries highlights the importance and scarcity of well-trained talent. The increasing integration of global labor markets, however, is opening up vast new talent sources. The 33 million university-educated young professionals in developing countries is more than double the number in developed ones. For many companies and governments, global labour and talent strategies are likely to become as important as global sourcing and manufacturing strategies.21
9. Demand for Natural Resources
Corporations must be cognizant of increasing environmental concerns resulting from the need for economic growth and the implications for their businesses. As economic growth accelerates, natural resources are being used at unprecedented rates. Oil demand is projected to grow without significant discoveries or innovations in supply. There is a surge in demand for commodities, which could place the world's resources under increasing strain. Researchers contend that the world will require drastic changes in human behaviour to keep the atmosphere from further depletion and water shortages will be the key constraint to growth in many countries.

18 One survey reported average cost reductions of 17% per globalization initiative.
    (Global Supply Chain Trends 2008-10, PRTM Management Consultants, 2011.)
19 www.gogreenzine.com/77-percent-worlds-energy-demand-renewable-energy/
20 Institute of Trade and Competitiveness, 2010.
21 www.investopedia.com/articles/07/global_trends.asp

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