Must remain resilient during these challenging times: KPMG survey
TORONTO, Oct. 28 /CNW/ - One half of Canadian private companies said a
downturn in the economy would not prompt them to alter their expansion plans,
according to a KPMG survey, Taking on the World: Positioning Private Companies
for Global Success.
Nearly two thirds of respondents also indicated that they plan to expand
outside Canada over the next 5 years. Respondents were senior executives, with
more than half of them CEOs presidents and/or owners.
"It is interesting to note that, regardless of the current economic
climate, private Canadian companies still see opportunities for continued
growth and revenue abroad," said Beth Wilson, National Leader of KPMG
EnterpriseTM. "In fact, one-third of the companies we surveyed indicated that
they would continue to increase their expansion activity regardless of a
A further 50 percent of survey respondents said they felt their expansion
outside of Canada to date has been successful. The greatest factors
influencing companies when deciding to do business abroad were:
- The target country's economy (53 percent)
- The organization's business growth planning (47 percent)
- The company's local economy (38 percent)
- The Canadian economy (32 percent).
However, approximately one fifth of respondents did indicate that they
abandoned their global operations, citing the following reasons as key
factors: the value of the Canadian dollar relative to foreign currencies,
challenges selling in an ailing US economy, inability to justify focusing on
foreign operations when our own economy is relatively healthy, and the rising
cost of fuel. Europe, the US, Asia, Russia, the Middle East, and Mexico were
among the most mentioned regions and countries to have been abandoned.
Another less quantifiable aspect, but often mentioned as a challenge for
conducting business in foreign markets, was the cultural difficulties faced.
Companies also noted lining up human resources as a factor that hindered their
organization's success abroad.
"Clearly, given some of the cultural differences they face abroad, many
private Canadian companies are relying on outsourced human resources to
sustain their foreign operations," said Wilson. "Over one-half of the
respondents we surveyed indicated that they have none of their employees based
in target countries, while 25 percent said they had fewer than 20 to oversee
Despite the obvious trend toward global expansion, many private companies
surveyed admitted they face some significant challenges raising revenue from
their foreign operations. One-half of companies surveyed said less than 40
percent of their revenue came from their non-Canadian operations. Moreover,
nearly one-half said they expect that their revenues from these foreign
operations will grow by less than 20 percent during the next 5 years. That
being said, a significant 34 percent of companies surveyed said more than 60
percent of their revenue was from abroad. Not surprisingly, respondents cited
currency fluctuations and financial risks as the two biggest challenges they
face when expanding their domestic operations into a foreign market.
"Aside from all the obvious risks and challenges Canadian private
companies face when expanding into foreign markets, there is clearly a strong
rationale for their continued growth abroad," said Wilson. "At one time, going
global was seen as a competitive advantage for big companies who wanted to
expand their market share and remain competitive. We are now seeing this trend
emerge among privately held Canadian companies who must also follow the same
mantra to maintain their continued growth and success."
The KPMG Enterprise survey Taking on the World consisted of two
components. The first was a telephone survey of 200 companies conducted by a
third party research firm. The second component involved one-on-one interviews
carried out by KPMG representatives and 22 executives of selected companies.
The survey questions were posed and answered in either official language. The
companies selected were already doing business outside of Canada or were
planning to do so. All regions of Canada were represented and over two-thirds
of the companies surveyed had annual revenues of less than $50 million. The
survey was conducted in May and June of 2008.
About KPMG Enterprise
KPMG Enterprise is a network of professionals devoted exclusively to
serving private companies in Canada.
KPMG LLP, a Canadian limited liability partnership established under the
laws of Ontario, is the Canadian member firm affiliated with KPMG
International, a global network of professional firms providing Audit, Tax,
and Advisory services. Member firms operate in 145 countries and have more
than 123,000 professionals working around the world.
The independent member firms of the KPMG network are affiliated with KPMG
International, a Swiss cooperative. Each KPMG firm is a legally distinct and
separate entity, and describes itself as such.
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