Expansion into new markets offers firms the opportunity to broaden their reach and serve needs that would otherwise go unmet. It is therefore not surprising that in response to competitive pressures in the markets in which they already have operations, firms usually establish a presence in new markets. While the new markets present promise and various opportunities, they also pose risks. The risks range from the lack of familiarity with the dynamics of the new markets to such other issues as political and economic volatilities. As they mull over whether they should set up operations in other markets, it is crucial for firms to conduct risk analysis. The analysis will reveal the hazards and threats that the firms are likely to encounter, thereby enabling them to develop risk management measures. As it prepares to enter the Canadian market, Terrapin Construction Supply (TCS) should recognize that this market is riddled with various risks which could hamper its expansion efforts.
1. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| Upon entering the Canadian market, TCS observes that prospective employees do not speak English. | The firm will suffer delays in the opening of the Quebec store and incur costs as it finds employees who speak English or offer English language classes. | 5. Near Certain | 4. Major | HIGH | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| It is true that in the recent past, Quebec City has grappled with staff shortages (Fletcher, 2018). This problem indicates that the firm may be unable to recruit enough French-speaking workers. To address this problem, it is suggested that the recruitment of English speakers should be limited to such high level staff as the store manager and few other employees. | If the firm fails to find enough English-speaking employees, it will offer English language training. Training is an effective tool for equipping employees with required skills, knowledge and competencies (Arslan & Uzasian, 2017). | 1. Rare | 3. Minor | LOW | |||
2. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| The firm encounters strict government regulations designed to protect local companies. For example, there are regulations forcing the firm to hire locals, and fetch its inventory from local suppliers. Quebec City has adopted stringent regulations and laws that all businesses must follow (“Doing Business in Quebec”, n.d). | TCS faces delays in opening the store as it negotiates with government representatives. There is also a risk that the company may be unable to open the store in Quebec City. | 4. Likely | 5. Catastrophic | HIGH | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| Full compliance with the regulations is among the methods for ensuring smooth launch in Canada. By complying with the legal frameworks in international markets, firms are able to operate without undue government interference (Schaffer et al., 2011) | If it finds the regulations to be unpalatable, the TSC could negotiate with the authorities for exemptions. | 2. Unlikely | 2. Minor | LOW | |||
3. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| TSC will need to construct premises that will house its Quebec City operations. Canada has stringent construction regulations and the application for permits is a lengthy and frustrating process (“Top 10 Challenges”, 2018) | Delays could occur as the company struggles to obtain permits. It is possible that the request for construction permit will be denied if the company fails to satisfy requirements. | 3. Moderate | 4. Major | HIGH | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| The company should make an application for construction permit early so as to ensure that delays do not disrupt the construction of its store. | Through negotiations with authorities, it could fast-track the granting of the construction permit. | 2. Unlikely | 2. Minor | LOW | |||
4. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| Quebec authorities require all signage to be done in French. Since English is TCS’s primary language, the company should expect some challenge complying with the policy on signage language. | The company may be barred from operating before complying with the signage requirement. | 2. Unlikely | 4. Major | MEDIUM | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| Having all its signage in French guarantees smooth operation. | The company could adopt other forms of advertising instead of relying on signage. | Rare | Insignificant | LOW | |||
5. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| The company may find it difficult to adapt to the local culture. For example, in Quebec, there are social norms that define such issues as the accepted form of greeting (“Top 10 Challenges”, 2018). | If it fails to embrace the local culture, the company may be unable to establish warm and positive relations with the local community, leading to disappointing reception and low sales. | Unlikely | Moderate | LOW | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| To facilitate assimilation into the local culture, the firm should prioritize the recruitment of locals who are familiar with the culture. | Training could be offered to employees who do not understand the local customs and traditions. | Rare | Insignificant | LOW | |||
6. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| Given that such companies as Lowe’s Home Improvement dominate the Canadian market, TCS will essentially be entering a mature market. It faces the risk of low demand for its products. | TCS’s initial financial performance may be so disappointing that the company decides to abandon the Canadian market. | Likely | Major | HIGH | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| An aggressive marketing campaign holds the key to staving off competition and thriving in Quebec City. | The company could join forces with local partners to appeal to the Canadian consumers. | Unlikely | Moderate | LOW | |||
7. Potential risk | Impact: What are potential consequences? | Risk levels if left unchecked | |||||
Likelihood | Consequence | Risk rating (uncontrolled) | |||||
| Trade tensions between the US and Canada escalate, yielding hostilities. | TCS is unable to open its store in Quebec City. | Unlikely | Major | MEDIUM | |||
Is it possible to deal with the risk? What is the method? | Other controls or tools needed | Risk levels with controls | |||||
Likelihood | Consequence | Risk rating (controlled) | |||||
| There is little that TCS can do to de-escalate the trade tensions. | The firm could engage the Canadian authorities directly, seeking friendlier policies. | Rare | Minor | LOW | |||
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The table above sheds light on various risks and challenges that TCS is likely to encounter. One of the main findings is that the regulatory environment poses the greatest challenge to the company. There are various strict laws and policies that the company must comply with. Failure to adhere to the laws could see the company denied permits or prevented from operating in Canada. Fortunately, there are a number of effective strategies that TCS could adopt as it seeks to ensure a smooth entry into the Canadian market. These strategies range from employee training to filing for permits in good time. As it adopts these strategies, TCS can expect to enter the Canadian market from a position of strength which allows it to compete effectively with other players.
References
Arslan, R., & Uzaslan, T. N. (2017). Impact of competency-based and target-oriented training on employee performance: a case study. Industry and Higher Education, 31 (5), 289-292.
Doing business in Quebec. (n.d). Blake, Cassels & Graydon LLP. Retrieved January 18, 2019 from http://www.blakesfiles.com/Guides/Blakes_Doing_Business_in_Quebec_EN.pdf
Fletcher, R. (2018). Quebec City businesses challenged by shortage of workers. (2018). Global News Canada. Retrieved January 18, 2018 from https://globalnews.ca/news/4357223/quebec-city-labour-shortage/
Schaffer, R., Agusti, F., Dhooge, L. J., & Earle, B. (2011). International business law and its environment. Boston: Cengage Learning.
Top 10 challenges of doing business in Canada. (2018). TMF Group. Retrieved January 18, 2019 from https://www.tmf-group.com/en/news-insights/articles/2018/may/top-10-challenges-of-doing-business-in-canada/
