Canada: Mid-Market CEOs Speak; Trade And Regulation

Last Updated: September 17 2019
Article by Michael R. Henry

In this environment, Canadian mid-market firms can no longer patiently wait for more certain times. Indeed, our view suggests that mid-market firms, in particular, need to be finding ways to enhance the agility and flexibility of their business models, operating models and supply chains.

That, in turn, will require better contingency planning, enhanced insight into global trade and regulatory trends, deep commercial insight and an ability to think creatively about future.

Ongoing disruption in the global trade environment is creating significant uncertainty for Canadian mid-market companies. It's not just tariffs that keep changing unpredictably; it's also many markets around the world moving towards greater protectionism.  That is having deep implications on the Canadian mid-market supply chain and sales strategy.

Indeed, viewed against a backdrop of continued trade threats from the current US administration, it would seem that the signing of the US-Mexico-Canada Agreement (USMCA) has done little to renew confidence within the Canadian mid-market.

To find out how some of Canada's leading mid-market firms are managing this uncertain trade and regulatory environment, we talked one-on-one with Canadian founders, CEOs and business leaders. We discussed the impact that tariffs have had on a select group of businesses. We explored their strategies for improving business flexibility. And, we talked about their plans for the future.

Here are five key themes and insights that we drew from our conversations:

  1. Staying put. As one respondent noted, Canada remains one of the most secure and transparent markets in which to do business as a mid-market company. Most say they have explored the advantages and disadvantages of moving their operations to the US. But the vast majority remain fully committed to their Canadian-based structure.
  2. Rethinking sourcing. Facing the potential for increased volatility on the southern border, many of the business leaders with whom we spoke have already started to look for alternative suppliers and vendors outside of the US. Some will be increasing their sourcing from within Canada. Others are focusing more on Latin America, Europe and Asia.
  3. Adjusting the strategy. Those CEOs and leaders with large export businesses have been rethinking business activity in some markets to reflect recent trade disruption. Many said they were looking for new niche products and new service-based revenue streams to rebalance their businesses due to volatile markets.
  4. Assessing pricing. When US tariffs were applied in the run-up to the USMCA, many resource-intensive mid-market companies found themselves absorbing much of the additional cost.  This was done to save customers from higher prices. Now they are rethinking their longer-term pricing models to create more flexibility in anticipation of further potential volatility.
  5. Improving relationships. As uncertainty increases, many Canadian mid-market companies are relying (at least, in part) on their trade partners to help manage the pressure. In some cases, this may mean some short-term cost sharing on prices increases. In other cases, Canadian firms have been working with suppliers to re-think batch orders to streamline the tariff process. 

The overall feeling of our discussions was perhaps best voiced by the CEO of one Ontario-based manufacturer.  He said, "we just want the uncertainty to be over." Unfortunately, all signs suggest that the current environment of trade uncertainty will only become more perilous as the US heads into the 2020 Presidential Election. Expect trade and tariffs to sit center-stage for both parties as they seek to establish their platforms.

Click here to connect with Michael Henry on LinkedIn

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