HOUSE STANDING COMMITTEE ON FOREIGN AFFAIRS
CATAAlliance
The Canadian Advanced Technology Alliance is a high tech industry association with over 500 members, and represents a further 1,500 companies which belong to affiliated organisations. While most are in the telecommunications and information technology industries, we also have biotech, aerospace and advanced manufacturing companies among our membership. The vast majority of members are SME’s, the vital driving force of the new economy. They are vigorous R&D performers. We do not believe that any of our members do not export. Exports exceeding ninety percent of total revenues are not unusual. While we tend to think of multinationals as giants, these are multinational SME’s, with sales and operations in multiple countries.
Marketing Strategy
High tech companies’ marketing strategies are devoted almost exclusively to exports. The successful Canadian high tech entrepreneur treats the United States as the domestic market. The reasons are obvious. It is the world’s largest market for high tech products and services; highly innovative and willing to try new approaches; a homogeneous market which uses a common language; and, of course, close at hand and inexpensive to visit.
Once established in the States, high tech companies begin to broaden their marketing horizons. There is a simple geographical strategy. Companies in the eastern part of the country look first to Europe, those in the west to the Pacific Rim. Initial focus is on the countries with common language and cultures, the United Kingdom and France. Effort expands to other countries once success is achieved in the initial point of entry.
There are two primary entry strategies. One involves establishment of a marketing and sales office in the target country. The second involves negotiation of a strategic alliance with an established player in the market. The latter approach is generally considered less expensive, allowing more rapid penetration of multiple markets. Managing the relationship with the partners is often difficult, however. Once the market position matures, it is not unusual for companies to solidify their position by acquiring their local partners. The next step, if it can be justified by the potential of the market, is investment in local facilities.
Europe’s Market Challenge
Europe presents a significant market challenge, much more difficult thanthe U.S. While it is now bigger than the U.S., it is not a single market. It is a group of markets, united under a single trade regime, but each having its own language, customs and business practices. Each must be addressed individually. As a consequence, the cost of marketing to Europe is very high. Indeed, it is so complex and expensive that many European software companies follow the same strategy as their Canadian competitors. They focus on the American market, not their European neighbours.
The Study Objectives
CATAAlliance’s objective is to promote the export competitiveness of Canada’s high tech industry. Several of our activities address the issues which the Sub-committee proposes to study.
First, placing Canada on the European radar screen. One of our most popular services to our members is TechnoGlobe, an online strategic partnering database. Members post their profiles, identifying markets which they are interested in pursuing, and the type of relationships which they seek. It has proven highly successful. Its attractions have led to it being licensed to associations in the Netherlands and Sweden to establish Virtual Business Corridors.
Second, we support the government’s current trade priorities, which place the U.S. first on the trade agenda. As described, this approach best meets the needs of the high tech SME. We believe that Europe should be next on the trade agenda.
Third, CATAAlliance has worked with Industry Canada, DFAIT and Investment Partnerships Canada to promote partnerships between Canadian and European high tech businesses. Delegations from Europe have attended our annual conferences, for example. We have sent missions to European trade shows like CeBIT. Just last October our president was part of the Canadian delegation to SMAU, the top Italian high tech show.
Fourth, we believe that effort must be devoted to energizing negotiations for closer EU/Canada trade relations.
Fifth, we concur that there is a danger that existing trade irritants may be distracting trade officials from the overall trade relationship. In particular we believe that more effort must be devoted to trade and investment in the new economy, the high tech sector. European policies in areas like electronic commerce, trade in services, deregulation and privatization, intellectual property rights and competition rules are central to the growth prospects of the EU market for Canada’s high tech businesses.
Sixth, in examining bilateral ties between Canada and Central and Eastern European countries which are candidates for EU membership, emphasis must be placed on strengthening protection of intellectual property rights, a major barrier to trade with these countries.
Lastly, while we agree that the Common Agricultural Policy is a ludicrously expensive deterrent to trade, we would hope that this issue will not distract from expanding trade and investment opportunities in the new economy.
CATAAlliance believes that a Sub-committee study of Canada’s economic relations with Europe would be valuable. We urge that significant attention be devoted to opportunities for trade and investment in the new economy, where Canada’s high tech sector has proven globally competitive. We will be pleased to assist in any way which we can.