It is customary at the end of a year to write about trends that shaped the year with predictions for the coming year. In my past business year alone, I have seen economies and exchange rates fluctuate and those that have done well are those that have adapted.
Here are three things that I noticed started happening in 2015 and which will continue to shape the future of business and communications.
Smaller Businesses and Silos Will Stay Afloat and Even Grow
The Canadian economy is in a technical recession. Big businesses with central operating units haven’t been able to adapt as quickly as smaller, more nimble businesses which have found new ways to procure goods and services at a lower price.
While competing against larger businesses with large marketing budgets and brand recognition, lower priced goods are the only way for small businesses to remain profitable, where profit comes from purchases, not sales.
Loyalty and contracts, on the other hand, are becoming a thing of the past. Customers no longer want to be bound by purchasing agreements or even pre-existing relationships. Penny differences in prices is sufficient for clients to switch suppliers. More importantly, smaller businesses are less bound by loyalty than larger corporations which makes them relatively weaker in a short-term economy. But this is not a temporary situation, I think. On the contrary, I believe the weakness in economy will continue well into 2016 which means that the situation will continue to remain dynamic.
Silo operations will outperform central operations because of the relatively higher degree of independence afforded to them. They are also more agile, can define their own budgets, marketing strategies, and sometimes even select their own vendors, allowing them to surpass performance levels of larger, central operating units.
With the open internet, importing has become easy where Minimum Order Quantity (MOQ) is no longer a barrier to trade. Ali Express and Ali Baba, for example, allow small dollar and convenience store owners to bring in merchandise for the same price as larger importers, albeit with a compromise on quality.
Standalone Apps Will Overtake Enterprise Solutions
Big businesses – those with multiple offices across a country, as well as Multi National Corporations rely heavily on intranets, communications management systems, and project management systems. This is a luxury that smaller businesses cannot afford, and often times, do not need.
Instead, to expedite communications, businesses will use smart phone apps such as WhatsApp or Viber to communicate with global vendors. The cost barrier to alternative communications has fallen and anyone with access to basic data packages on a cellular network can communicate with a counter part half way across the world using voice, video, image, and text.
In other words, expensive technologies that once gave large corporations that could afford them the advantage to trade on a global level is no longer a barrier to entry. Instead, they will now have to contend with nimble, smaller businesses that do not have to absorb technological costs into product prices.
By the same token, smaller vendors in China and Europe, for example, can trade with smaller buyers where the formalities of a large structure are not applicable. To illustrate, Shenzhen in Mainland China which was a fishing village in the 1980s has become an important industrial city that supplies high quality electronic goods all over the world thanks to the falling costs and easier access to standalone communication technologies.
The US Dollar Will Become a Smaller Determinant in International Trade
Canada is inextricably tied to its southern neighbour in terms of economics. An impact on the exchange rate determines the balance of trade with the United States. Canadians businesses also do not need to buy the US Dollar to trade with China, which now accepts the Loonie.
Further, with a devalued Loonie, importers are looking towards Europe, the Middle East, South Asia, and Southeast Asia to bring in goods that once were more convenient to import from New York and New Jersey.
The cost of producing goods in Canada is still high. Further, assuming the exchange rate between the US and Canadian Dollars, it is cheaper to reimport Canadian goods from USA than to buy them in Canada. Sometimes these Canadian goods are available only in the United States. However, with exchange rate disparity, importing from other continents is becoming more desirable.
In no way, are these trends new. But to the unseeing eye, they may pass under the radar, resulting in missed opportunities. For large businesses, it is imperative that they adapt and leave some sluggish practices for more expedited procedures. For small businesses, the opportunity lies in becoming the middleman or even broker for larger businesses, acting as liaisons between unfamiliar cultural and business practices.
It will be interesting to see how the government’s promise to take in 25,000 refugees will impact the business landscape in Canada. couple this with regular migration, I wonder if the Middle East will become a larger player in foreign trade. I would love to hear your thoughts on my observations. Maybe I’m wrong. What do you think?