The Challenges and Benefits of Expanding to Canada
With its esteemed reputation and convenient location to the US, Canada can be seen as a great place to set your sights on when expanding your business internationally from the US.
Here, Galvin International explores the ins and outs of an expansion into Canada, from the countless benefits to the challenges that may need to be overcome.
Affluent Economy and Consumer Base
With the unemployment rate at a record low, sitting at 5.8% (the lowest it’s been since 1976), and with the minimum wage increasing, more and more consumers in Canada are financially stable – and this means they are spending more money. The economy has also been positively affected by the fact that the GDP has been rising swiftly in the past few years. Goods exports are up, and because of Canada’s large size, natural resources are plentiful and a great bolster to the economy. Companies expanding to Canada are likely to have access to a variety of resources and a welcoming consumer base.
Canada’s workforce was ranked as the second-best educated and the 10th most competitive overall by the World Economic Forum’s measure of human capital – this is very beneficial for US companies in need of staff members for their international business.
A further benefit is the lack of many restrictions and labour protections, which other countries implement, making on-demand staffing significantly easier in Canada.
Overall Low Costs
In general, costs of operations are cheaper in Canada than most places worldwide, making it ideal for international business. KPMG conducts an extensive comparison on international business location costs, and in its 2016 report, stated that Canada had the second lowest business costs, putting it ahead of the US, UK, Australia, Germany and Japan.
Canada benefits from the fact that it enjoys trade agreements with many countries. On top of being part of The North American Free Trade Agreement (NAFTA), It is also included in the Comprehensive Economic and Trade Agreement (CETA) with the European Union and the twelve-nation Trans-Pacific Partnership (TPP).
Rules Differ by Province
All companies in Canada must comply with the federal goods and services tax (GST), which is at a rate of 5%. Not only must companies adhere to federal laws and taxes, but there are also provincial laws and taxes to consider. For example, in Quebec, employees must not only be able to communicate in French, but they must ensure that everything is written in French as well – in terms of taxes, the Quebec Sales Tax must be paid on top of the GST.
Another factor to consider is Canada’s labour laws, which are dictated by each province, meaning that employee contracts will be different depending on where you choose to expand.
The Canadian dollar is a fairly stable currency, in comparison to currencies in emerging markets — however, it is sensitive as it is tied to the demand for exports, which is an everchanging variable.
While expanding your business into one of Canada’s resource reliant provinces could be advantageous, it could also be harmful to your business.
A prime example would be Alberta, a province which once had a booming economy due to the local oil industry and is now seeing reduced economic activity due to the current scarcity. Other communities who depend on their abundance of natural resources include British Columbia and the Northern Territories, which are reliant on metals and forestry products to keep their economy strong.
While there are many advantages to expanding your business internationally into Canada, including its low costs and beneficial trade agreements, there are still many challenges such as its many laws and regulations which vary by province and can be difficult to comprehend. Let Galvin International shed some light on the situation and help with all your expansion needs.
Our international expansion concierge service simplifies the daunting expansion process by offering expert advice, custom solutions and by providing the on-ground support you need to ensure the success of your expansion.
Get in touch with us today to learn how we can help you grow your business internationally.
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