Selling Canada globally

By David K. Foot

A deep understanding of demographics will be key to this country's success in the marketplace of the future, argues David K. Foot, professor of economics at the University of Toronto and co-author of the best-selling Boom, Bust & Echo: How to Profit from the Coming Demographic Shift.

When Canada sent a trade delegation to Italy last month, a debate raged over its purpose. Was it an expensive junket at taxpayers' expense or an essential ingredient in Canada's ongoing commitment to international trade? Undoubtedly, the pundits will continue to rally for their respective positions, but a careful analysis of Italy's people and their future needs was curiously absent from those discussions. In fact, a careful understanding of the market needs of many of Canada's trading partners is seldom presented during discussions of potential trade opportunities. Even at last year's APEC meeting in Vancouver, the demographics of the member countries and the varied needs of their populations played no role in the final communiqué. Because the boomer generation also exists in the United States, there is a tendency to assume that it plays a huge role everywhere, at least in the developed world. But what does the marketplace of Italy or the United Kingdom look like? And what about Japan or China? Understanding customers is a fundamental tenet of effective marketing, both locally and globally. Success in the global marketplace of the new millennium will depend crucially on having an awareness of the diverse needs of the world's customers. And Canada is in a unique position to understand those needs.

Most Canadians are intuitively aware that Western Canada is younger than Eastern Canada. Some may even be aware that the echo generation exists in Ontario but not in Quebec. But few seem to know that it exists in all western provinces and not in any eastern provinces. For that reason, school enrolments have been increasing in Alberta, but declining in New Brunswick. Consequently, closing schools has been easier in New Brunswick than in Alberta. Similarly, the needs for school materials or teacher services is greater in the West than in the East. Many Canadians are also aware that those of Italian origin comprise one of the largest immigrant communities in Canada. The 1996 census revealed that in terms of usage, Italian was the fourth most common language, having been surpassed by Chinese in the 1990s. As a result, cultural ties between Canada and Italy continue to be important. Perhaps this is reason enough for the recent mission.

Since demographics provide a window on current and future needs, global demographics are an essential ingredient of developing effective trade opportunities as we enter the new millennium. How many Canadians are aware that Italy and Spain now have the world's lowest fertility rates? At 1.2 children per woman, they sit below Newfoundland, the lowest province on the fertility scale. How many realize that the serious health-care and pension challenges facing Canada pale in comparison to those facing Italy? Today, seniors comprise 17 per cent of the Italian population, compared with only 12 per cent of the Canadian population.

But perhaps more importantly, the boomers in Canada have spawned a generation of children -- the echo generation -- who represent the foundation for future workforce and economic growth. No such boom and, therefore, no such echo exist in Italy. Italy is not a country that has a growing need for educational services: the population under age 15 sits at only 15 per cent compared with Canada's 20 per cent. In fact, the population of Italy -- like a number of its European neighbors -- is now declining.

Most Canadians can list China and India as the most populous countries in the world and, with a little thought, the United States as number 3. But before the recent turmoil, how many would have known that Indonesia was the fourth-largest market in the world? And how many can name number 5, which is Brazil? Indonesia is much younger than Japan. A substantial 34 per cent of Indonesia's population is under age 15. On the other hand, the percentage of seniors age 65 and over is currently 16 per cent of the Japanese population, and rising: they have the longest life expectancy at an average of 80 years.

Such demographic differences can have major implications for the growth and needs of countries. They can determine which social and political issues are likely to emerge and where trading opportunities are most likely to be found. Creating jobs for young people is vital in Indonesia, whereas cashing out in the stock market to pay for rising health-care needs is a high priority in Japan. Needless to say, the export of pharmaceuticals and pension management services would be best aimed at the Japanese.

This information is the essence of global marketing. And while Canada is firmly established as an important trading nation -- as epitomized by its being the Group of Seven country with the smallest population -- future success is likely to fall to those who best understand the needs of the nations where their products could be exported. In recent decades, international trade has driven international markets closer to home: the made-in-China label first became visible on children's toys, then on clothes, automobiles, electronics and even souvenirs -- made in a country other than the one they are designed to promote.

Canada has always been a trading nation. Back in the late 1950s when international commerce was at its postwar nadir, 17 per cent of Canadian production was traded. During the 1970s, the figure gradually rose to 25 per cent, encouraged in large part by various trade liberalization edicts supported by the General Agreement on Tariffs and Trade. In the 1980s, the Conservative government of Brian Mulroney brought the trading issue into sharper focus through the negotiation of the Free Trade Agreement with the United States. In the 1990s, there came the inclusion of Mexico into a North American Free Trade Agreement and the birth of the World Trade Organization out of the GATT. The establishment of the WTO extended trade liberalization to include services.

Poised to enter the new millennium, Canada has the global marketplace on its doorstep -- like it or not. The knocks on the door have been largely welcomed, even though they have occasionally resulted in the relocation of Canadian production to other countries. The furniture industry, for example, saw much of its lower-value production move south of the border, while the WTO removal of tariffs and quotas on cottons and synthetics hastened the decline of Canada's textile and apparel industry.

A number of Canadian companies have taken advantage of the opportunities for offshore expansion. Magna International established manufacturing plants in Mexico and the Far East, and Northern Telecom now produces hardware in Brazil. But many of the research and development jobs still remain in Canada. While the benefits and costs for Canada of increased trade continue to be disputed, the fact of increased trade does not. Today, Canada trades almost 40 per cent of its production.

Globalization is an undisputed reality of Canada's future. While we have embraced it in the past -- sometimes with temerity, sometimes with trepidation -- capturing the trade benefits is an important key to future domestic prosperity. What will pay for future pensions and public health care? Trade in auto parts, lumber, paper and computer hardware and software, plus the selling of services: architectural, financial, communications and business consulting.

Trading is one thing; marketing is another. Marketing success demands an understanding of your customer's needs, both current and future. Do we as a country understand the marketplaces of the global realm? With all the demographic, economic and cultural differences that exist globally, it is impossible to do justice to this vast issue. However, target markets can be identified through a careful understanding of demographic differences between nations. Negotiation credits can be used wisely and efficient trading patterns established that take into account Canadian interests. Demographics can provide a solid foundation on which to build trade routes into the future.

The 10 most populous countries each have in excess of 100 million citizens -- which is more than three times the size of Canada's population. By 2010, Pakistan will bump down Brazil, while Nigeria and Bangladesh are expected to push Russia and Japan back into lower positions. Mexico is expected to enter the 100-million club, and both the Philippines and Vietnam will be knocking on the door. Of course, while a large population inevitably means a substantial market size, it does not automatically translate into ability to pay. Brazilians today have more than five times the per-capita income of the Chinese. Indonesians have more than one-third more income than the Chinese, although with the recent demise of the rupiah, that estimate may be on the high side.

World's most populous countries
Current Rank/CountryPopulation (in millions)Percentage under 15Percentage over 65Annual Income ($ per capita)Population in 2010Rank in 2010
1. China1,2432661,1101,3941
2. India9893655601,1972
3. U.S.A.270221341,5002983
4. Indonesia2073441,6002394
5. Brazil1623266,5001846
6. Russia14720123,6001429
7. Pakistan1424147101935
8. Japan126151660,60012810
9. Bangladesh1234344001488
10. Nigeria12246 33501507

Source: Population Reference Bureau

And size alone tells little about the needs of a specific marketplace. Many births signal the need for maternity wards; a large preteen population translates into a tremendous demand for schools and teachers; a high proportion of youth in their late teens and early 20s creates a demand for new jobs -- and, in turn, a demand for transportation systems to ferry the new workers to their workplaces. Those in their 20s and early 30s, focused on new family formation, add pressure to the construction and housing sectors, plus continue demands on road, rail and communications networks, including computer services. The fortysomethings foster the eyeglass and travel industries, while those in their 50s inevitably increase the demand for financial planning.

Typically, children continue the cycle, providing the workforce of the future. But if there are too many children, they can tax any society's ability to provide the necessary ingredients to successfully integrate them into the workplace. Similarly, the elders of society, whose active work years are behind them, need support from current workers. A high proportion of elders inevitably results in demands on income support systems and the provision of health-care facilities. The provision of those facilities and services taxes the current workers.

In the extended family, both the grandparents and the grandchildren are the responsibility of the working members of the household, whether they are tilling the fields or working in offices. But modern society has moved away from the extended family and increasingly has turned to government to ensure that all members of society share in the wealth -- or poverty. Whether it is schools for the children or income support for the elderly, current workers must be taxed to pay for these programs. Inevitably, a high percentage of youth or seniors results in higher taxes on the current generation of workers.

How these needs are satisfied by church, community, corporation or country -- whether by the public or private sectors -- may vary significantly across countries. But while traditions and cultures may differ around the globe, many basic needs do not. Demographics provide a clear indication of what those needs are likely to be. Young societies need education, manufactured and technology products whereas older societies need travel, financial and health-care services.

While no vision is perfect, the demographic vision is likely to be unmatched in its accuracy. Dramatic changes such as the breakup of the former Soviet Union or the recent Asian flu can significantly influence the ability to provide for basic needs, but they do not abrogate them. The elders in Eastern Europe need income support, while the youth in Indonesia need jobs, regardless of the economic turmoil that surrounds them.

Asia accounts for 60 per cent of the world's population of 5.926 billion, and North and South America combined have a larger population than either Africa or Europe. Globally, 32 per cent of the world's population is under age 15 and seven per cent is 65 and over. As a result, there are 1.56 workers for every young person and senior. The youngest region of the world is Africa. With a regional fertility rate of 5.6 children per woman, it is not surprising that 44 per cent of its population is under age 15. However, because life expectancy in Africa is only 52 years, 14 years below the world average, only three per cent of the population reaches its senior years. Needs focus almost exclusively on the young, but there are only 1.13 providers per dependant.

At the other extreme is Europe, the oldest region of the world, thanks to low fertility. Even though life expectancy is somewhat shorter than in North America, Europe has the highest proportion of seniors in the world (14 per cent), but also the lowest proportion of young people. As a result, it has more than two workers per dependant, the most favorable ratio in the world. But providing pensions and health care to seniors can be expensive; numbers alone do not tell the whole story.

The next most favored region demographically is North America, where there are 1.94 workers for every dependant. Since fertility is higher in the United States (2 children per woman) than in Canada (1.6 children per woman), the echo generation is larger south of the border. And in spite of a lower life expectancy (76 versus Canada's 78), the Americans have a slightly larger share of seniors (13 per cent as opposed to 12 per cent in Canada). As a result, Canada has 2.13 workers per dependant, better than both the United States and Europe.

World fertility, life expectancy and dependency 1998
RegionPopulation (millions)Fertility rate (children per woman)Percentage under 15Life expectancyPercentage over 65Workers per dependent
North America30122176131.94
South America*5003346951.56

*includes the Caribbean

Source: Population Reference Bureau

The conclusion? Canada is in a unique position entering the new millennium of global trade. Demographically, it is one of the most favored countries in the world, with a relatively low share of young and seniors, and a high share of the population of working age. The massive boomer generation is now in its prime working years. Born between 1947 and 1966, they are predominantly in their 30s and 40s. The first boomer reached 50 in 1997 and is still a long way from the senior years.

Canada has a golden opportunity to market to the world over the next decade. The challenge is to take advantage of our age structure. Being between the younger marketplaces of Africa, Asia and South America and the older marketplace of Europe, Canada is in an excellent position to understand the needs of all countries, whether it be schools for the young, houses and cars for the young adults, communications and management services in the workplace, or offering retraining for older workers and pharmaceuticals for seniors.

Moreover, the boomers' children -- the echo generation -- are entering the workforce, growing the Canadian economy. Meanwhile, the boomers themselves are entering their prime savings years, generating the wealth to support economic growth. The tax base can expand again if we ensure that these workers have productive jobs. With the unemployment rate remaining high for younger workers and drifting upward for older workers, this remains a big challenge, but one the nation must confront to take advantage of its golden era in global trade.

Canada has many other advantages in the expanding global marketplace. The population is, on average, well educated and poised to participate in the knowledge-based economy of the new millennium. Besides the economic advantages of a well-educated workforce and an attractive exchange rate, past immigration policies have left their mark both linguistically and culturally. Such diversity is a major asset: whether in Chile, China or Chad, Hong Kong, Holland or Honduras, Uganda, Uruguay or Ukraine, or even Mali, Malta or Moldavia, Canada has the potential to draw on that diversity to underpin the success of any trade mission.

But to ensure success in a competitive global marketplace, it is necessary to have an effective marketing strategy. Business leaders, trade negotiators and politicians must understand the needs of the world's customers. Knowing that Italy is much older than Indonesia and that Japan is much older than Mexico can go a long way to understanding the trends, issues and needs of each market. Demographic information can provide a solid foundation to a focused approach, an essential window on the global customers of today and, perhaps even more importantly, of tomorrow. Failure to do so will lower Canada's stature in the new millennium; doing so will secure our position as the most envied and respected trading country in the world.