Original story at Globe and Mail
In 2015, Vancouver-based amusement-ride developer Dynamic Attractions opened an office in Orlando, Fla., as part of its U.S. expansion plan. A year later, the company rolled out its 80,000-square-foot Attractions Development Center in the same city.
Dynamic Attractions’s main customers are major theme park operators such as Disney, Universal Studios and Six Flags, so expanding into the United States was a natural progression, and one that many Canadian companies adopt when they look to grow internationally.
“Being close to your customers is very helpful,” says executive chairman and chief executive officer of Dynamic Attractions, Guy Nelson. “So in hindsight, the move to Orlando, which was a very significant investment in space and people, was a good thing.”
But current trade restrictions and tensions with the United States have made some Canadian companies question the feasibility of opening offices there – or a “boots on the ground” approach to U.S. expansion. While changes to the North American trade agreement are one element, experts say Canadian companies expanding their reach into the United States have to look at the broader context of trade, politics and market share, as well as place an emphasis on product differentiation to really succeed.
Canadian businesses need to look at the whole picture of what’s happening in the United States and do their own risk assessment, says Jonathan Calof, professor of international business and strategy at the Telfer School of Management at the University of Ottawa.
A revamped version of the North American free-trade agreement – now the proposed United States-Mexico-Canada Agreement, or USMCA – coupled with the U.S. Supreme Court’s decision to uphold President Donald Trump’s ban on travel to the United States from seven countries (North Korea, Syria, Iran, Yemen, Libya, Somalia and Venezuela) have changed the way Canadian companies may approach opening U.S. offices. In particular, Dr. Calof says, this last development could have human resource implications if citizens of those countries are on staff at a Canadian business.
“There is so much going on in the United States that it does impact decisions,” he explains. “It’s one thing to say you want ‘boots on the ground’, but it’s another to say, ‘if I can’t get my people in there, and my executives aren’t free to go to the country,’ it becomes a liability.”
Canada’s exports to the United States amounted to $394-billion in 2016 and imports were valued at $278-billion, making up more than 75 per cent of Canada’s total exports and 52 per cent of total imports, according to Statistics Canada.
This high level of import/export business may have created a level of tunnel vision for Canadian companies when it comes to international expansion. There has long been a dialogue around the need for Canadian companies to look to other countries for growth, Dr. Calof explains, but “most are still saying, ‘We still need to get into the U.S.’”
While some decision makers may simply look at the data, others may weigh how they or their staff feel about the current political climate. There is no one right answer, he says, and business leaders need to weigh all of the factors – political, economical and societal – when it comes to considering a place to expand, to ensure the business can succeed.
“My advice to companies has always been that you get to choose the market you compete in, that’s your choice, but you can’t get away from the … realities.”
In his approach to Canadian companies looking to expand south, Keith Head, professor in the Strategy and Business Economics Division at the University of British Columbia’s Sauder School of Business, stresses that interpersonal relationships may be needed now more than ever.
He says what is needed are “ambassadors” who can garner the trust of new clients and customers. For him, there will always be a place for opening offices in the market in which a company hopes to gain ground, and face-to-face interactions may be even more necessary in times of trade turmoil.
“You don’t add to your set of customers by sitting back and doing nothing; firms need to go out and network and they need to find the people that want the things that they make,” says Dr. Head.
“That kind of matchmaking process still happens, to a large extent, face-to-face,” he continues, “and that’s going to remain important even in an environment where we have more trade restrictions or more trade uncertainty … because you’re going to need to hold the hands of your new customers and convince them that going with a Canadian firm is not too risky a thing for them to take on.”
U.S.-based offices also allow Canadian companies to put more emphasis on why their products are unique in comparison with their American counterparts.
It is cheaper to manufacture T-shirts in China and Bangladesh, “so in Canada, what are we going to say is our forte?” Dr. Head asks. “We make a lot of the same stuff that Americans make in terms of manufacturing, so we are going to have to convince them that our firms are worth the extra risk, now that we’ve got this uncertainty imposed by Trump tariffs. And I don’t see how you do that without having face-to-face interactions or ambassadors on the ground.”
Since its success in Orlando, Dynamic Attractions, a subsidiary of Winnipeg-based Empire Industries Ltd., has opened a parts and services office in Arlington, Tex., and is “working on a strategic alliance in the U.S. for manufacturing capabilities down there,” Mr. Nelson says.
The company, which designs experiences such as the Motion Theatre, a round theatre that lifts, tilts, drops and rotates, and the Flying Theatre, which flips up, suspending riders in the air as a movie plays around them, says it is moving forward with expansion plans with cautious optimism, especially with the U.S. economy moving forward “quite aggressively.”
“It’s tough to throw more work in there and think you can make things in the U.S. when they’re at full capacity already.”