Ottawa, September 23 - Canadian small and medium-sized enterprises (SMEs) see increased revenues and enhanced corporate reputations as the key benefits of being suppliers to multi-national corporations (MNCs). But small suppliers also see excessive corporate bureaucracy and difficulties in establishing trust as the two biggest challenges to building stronger relationships with MNCs. Small Companies, Big Connections: The Benefits and Challenges for SMEs in Working With MNCs, published by the Conference Board's International Trade and Investment Centre in partnership with the Business Development Bank of Canada, delineates the SME perspective on supplying goods and services to MNCs.
"Developing relationships between MNCs and SMEs is essential for Canada's economic growth. A growing proportion of international trade and investment now takes place in global value chains. For Canada's small and medium sized companies – which represent the vast majority of Canadian firms - linking into the value chains of multinational corporations can open new horizons and improve their abilities to expand and prosper," said Louis Thériault, Director of the Conference Board's International Trade and Investment Centre.
"While it can offer many benefits, supplying MNCs is not without challenges, even for experienced SME suppliers. Access to additional working capital is often required as payment turnaround times may be longer," said Jérôme Nycz, Vice-President, Strategy and Enterprise Risk Management. "Financial institutions such as BDC can help SMEs manage the complexity related to working with MNCs. By supporting SMEs in their efforts to foster successful, trust-based relationships with MNCs, we increase opportunities for SMEs to expand abroad while contributing to the establishment of a strong Canadian supplier base."
The report includes the results of an online survey of 72 SME suppliers, including 50 respondents who have experience working with MNCs. Among these respondents,
the top five benefits are: increased revenues; enhanced corporate reputation; improved financial stability; expanded access to new markets; and greater economies of scale.
The top challenges identified by SMEs who have experience supplying MNCs are: dealing with excessive bureaucracy; establishing trust; minimizing the turnaround time on payments owed; maintaining long-term relationships; and relying too heavily on a few large customers.
The 22 survey respondents who are seeking to become suppliers to MNCs mentioned many of the same opportunities and challenges as experienced suppliers, but also identified differences in priorities. These would-be suppliers saw greater benefits of access to new markets than their experienced counterparts, and greater access to expertise and advice from MNCs. Not surprisingly, establishing a level of trust with MNCs was seen as the most significant challenge by SMEs without experience as suppliers.
The report includes a number of strategies to enhance MNC-SME value chain connections. SME suppliers can:
- adopt effective methods for connecting with MNCS - informal networking is seen by SMEs at all levels of experience as the most effective approach;
- develop high-quality, targeted marketing strategies - SMEs have a tendency to under-invest in marketing; and
- collaborate with one another - SMEs can share information and resources, cooperate on contract bids and proposals, make joint investments in research and technology, and subcontract for other SMEs with established MNC contracts.
For their part, MNCs can: reduce corporate bureaucracy; build trust with SME suppliers; expand supplier development; and implement supplier diversity programs.
Governments can:
- help industry groups in bringing SMEs together with MNCs;
- assist SMEs with access to financing, through federal agencies, such as Business Development Bank of Canada and Export Development Canada, and provincial organizations, such as Investissement Québec; and
- initiate new export development opportunities through, for example, the Canadian Trade Commissioners Service, and provincial agencies such as the Ontario Ministry of International Trade and Investment.
The Conference Board of Canada's International Trade and Investment Centre helps Canadian leaders better understand what global economic dynamics - such as global and regional supply chains, the U.S. and global downturn, trade barriers or tighter border security - could mean for public policy and business strategies.
BDC is Canada's business development bank. From more than 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs. BDC's Entrepreneurial Insight publication includes research about the SME sector.
A companion report, Big Gains With Small Partners: What MNCs Look For in Their SME Suppliers, looks at the MNC perspective, and was published in July 2009.
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For more Information:
Brent Dowdall
Media Relations
613- 526-3090 ext. 448
corpcomm@conferenceboard.ca
Johanne Bissonnette
Media Relations Manager
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