London (Canadian) Businesses Struggle to Compete

Pointing fingers at a problem has seldom if ever resolved anything. And, for those who continue to point fingers at more local targets such the LEDC, the Mayor, or the Premier when it comes to job losses and a sluggish economy, they should perhaps consider what’s going on around the globe first. As developing countries, such as China and India, continue to step up their economic activity and innovative capacity, Canada is more and more at risk of being swept aside as our ability to compete becomes more and more hampered. Canadian businesses including many located right here in London, must become more ambitious, more aggressive and a lot more innovative to compete globally and be able to profit from the enormous opportunities offered by these faster-growing regions of the world.

The commonly accepted definition of competitiveness is the efficiency with which a country uses its human capital and natural resources to generate wealth. But true competitiveness is measured by productivity. And there’s the rub for Canada. Productivity allows a country to support high wages, attract investment and maintain a high standard of living. And it’s here where we are in serious trouble.

While Canadians once enjoyed the highest standard of living, we are now struggling to remain competitive. In the last decade, Canada’s business sector productivity growth has slowed resulting in a loss of market share. Economies in Asia and elsewhere invest heavily in science and innovation and maintain growth rates two or three times the size of ours.

Yes, we need to be concerned about the productivity of our export-oriented economy and yes, the dramatic rise of the Canadian dollar has magnified Canada’s loss in competitiveness. But the Canadian dollar is likely to remain a competitive challenge, and it’s one we can’t control. In fact, counting on a much weaker dollar to bolster business competitiveness is not a strategic business strategy at all – it’s a crap shoot.

How do we stack up on the competitiveness front?
Sadly, Canadian workers have fewer tools to do their jobs. Between 1987 and 2009, Canadian businesses invested 23% less per worker in machinery and equipment compared to their American counterparts; and 41% less per worker in information and communication technologies.

Canadian exports as a share of real Gross Domestic Product (GDP) dropped from 45% in 2000 to 33% in 2010, and Canada’s share of world exports fell from 4.3% to 2.5%. Canada also ranks a disappointing 17th among the Organization for Economic Co-operation and Development (OECD) countries when it comes to business sector R&D spending.

When it comes to innovation, we are in 19th place, far behind the U.S., Germany and Japan and we rank 20th for international patent applications per million of population. And on the export side Canada ranks 28th when it comes to the world’s export share of high-tech products.
As for hiring practices, Canadian firms lag in the employment of post-graduates, including those with PhDs, especially in sciences, engineering, and business. And the real kicker is the OECD has consistently ranked Canada as having among the most restrictive barriers to foreign direct investment among industrialized nations.

Regaining Competitiveness
Strategic investments and smart public policies have never been more urgent and more essential to regaining Canada’s competitiveness. So who should do this? Who is responsible? Fact is we all are. Building a more productive and, thus, a more internationally competitive economy is a shared undertaking. It is the responsibility of business, and government and it will require greater investment in innovative practices and technologies, equipping Canadians with the rights skills and education, in order to position Canada as an attractive environment for investors and entrepreneurs.

We are losing our place in the world economy, and we need to fight hard to reclaim our standing. Canada’s business community has to play a greater role in regaining our competitiveness. We need to work together to uncover the solutions to building a more productive and more competitive economy. We need to determine what specific policies are currently acting as barriers to Canada’s competitiveness and what should be done to change these policies to trigger better performance. We need to establish how much of the responsibility for action lies with governments and how much with business and labour.

And finally, we need to admit that doing business the way we have always done business is clearly not going to get the job done. “That’s the way we’ve always done it” may work for the standard railroad gauge of 4 feet, 8.5 inches (which is derived from the original specification for an Imperial Roman war chariot – it’s a long story), but it’s not going to get us back in the game. In my next article I hope to share with you what the top ten barriers to competitiveness are and more importantly, what we need to do to remove those barriers. Meantime, perhaps we should all take a real hard look at just what we are investing in innovative practices and technologies to see how we stack up against today’s competition — and tomorrows.


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