MONTRÉAL, Que– While 2012 was a growth year for Québec’s manufacturing SMEs, 2013 showed a reduction of the sector’s vitality, according to the results of the Baromètre industriel québécois, presented on May 9, by STIQ’s CEO Normand Voyer.
“Even though activity level is still good, a drop in several indicators, such as earnings, production capacity utilisation rate, and use of subcontractors suggests market stagnation. Investment is also almost at a standstill and the job market seems less favourable to workers,” noted Voyer.
“We are proud of our contribution to the data analysis for the Baromètre industriel québécois. The manufacturing sector is an important economic driver for the development of a strong and prosperous Québec. With all indicators of the manufacturing sector needing improvement, it is clear that we have to work together to nurture the full potential of our manufacturing companies. It is in everyone’s best interests,” added Emilio Imbriglio, president and CEO ofRaymond Chabot Grant Thornton, when the results were unveiled.
Global market becoming more competitive
Québec’s small businesses export very little, their primary markets being generally Québec or Canada. Moreover, those that do export, generally do so to the United States. To ensure growth, developing new markets is crucial, even though great efforts are required to achieve such a goal. The numerous free trade agreements offer new export opportunities to local businesses, but the results of the Baromètre industriel québécois show that the crucial success factor for new export attempts is to already have a well-established international presence, said the study.
Integrators – a strategic role
The use of integrators in the supply chain is an emerging trend for many global businesses. Globalization puts ever-increasing pressure on OEMs and other major companies to reduce costs. This constraint directly affects supply expenditures, leading these companies to a worldwide search for suppliers that offer a more complete product or service at the best price. Because of their smaller size, compared to other suppliers worldwide, Québec suppliers have difficulties fulfilling this important integrator role. This trend will accelerate in the years ahead due to the progressive elimination of customs barriers and the growing number of free trade agreements, the study indicated.
Need for increased investments
To increase their involvement in major projects and catch up with the rest of Canada and the United States, suppliers in Québec have to become more competitive, in particular by investing in research and development (R&D) and acquiring leading edge equipment. But for the past five years, the level of business investment has remained almost steady. In 2013, only 19% of businesses invested more than 5% of their earnings in R&D, and only 31% made the same investment in equipment. When compared with other Canadian provinces or other countries, these levels are far too low. Research carried out by the HEC Montréal Centre for Productivity and Prosperity corroborates these results, pointing out that in 2012, private investments in machines and materials accounted for 4.9% of Québec’s GDP, a drop of 40% since 1999.
Possible solutions for SMEs
Of all the companies surveyed, 62% said they have a strategic plan, an increase of 7% since last year. The same number of businesses said they had implemented governance mechanisms, such as an advisory committee or a board of directors. “To deal with the many challenges posed by the globalization, it is crucial for Québec suppliers to adopt strategic plans in order to position themselves on the market and become more competitive,” explained Voyer.