The recent escalation of trade tensions under United States President Donald Trump has significantly increased uncertainty for Canadian SMEs (small- and medium-sized enterprises), particularly in the high-value service sector.
Authors
- Michael Joseph Dominic Roberts
Associate Dean & Associate Professor, Faculty of Business and Communications Studies, Mount Royal University
- Etayankara Muralidharan
Associate Professor, Department of International Business, Marketing, Strategy & Law, MacEwan University
Examples of this sector include financial technology and investment services, aerospace and advanced manufacturing, and clean technology sectors focused on renewable energy and sustainable resource management.
For decades, Canadian businesses have relied on a stable trade relationship with the U.S. But under Trump's "America First" protectionist policies , that stability has crumbled.
With tariffs, trade barriers and shifting political dynamics making North American markets increasingly unpredictable, many Canadian businesses are searching for ways to reduce their dependence on the U.S. and expand elsewhere.
Expanding into Asia
Asia has emerged as an attractive alternative for businesses due to its rapidly expanding middle class, growing investments in infrastructure and technology, and rising demand for specialized expertise.
This trend is particularly evident in the energy sector . The Asia-Pacific region - though currently accounting for only eight per cent of the global market - is expected to grow significantly as countries expand energy infrastructure and seek advanced technologies to improve resource extraction for environmental sustainability.
This presents promising growth opportunities for Canadian businesses in sectors like engineering consulting, technology, energy and environmental services, where they already have a competitive edge.
However, entering Asian markets presents unique challenges, requiring businesses to rethink their strategies.
Breaking into Asian markets
Expanding into Asian markets is no easy task for SMEs. These businesses face substantial barriers , including significant differences in regulatory environments, business practices and customer expectations.
For service-based businesses, the challenge is even greater. Unlike physical products, which can be easily displayed and tested, services are harder to quantify and prove to new clients. This makes it more difficult for SMEs to build credibility and demonstrate their value in unfamiliar markets.
Our recent study explored how Canadian SMEs in the service sector can successfully overcome these barriers when entering Asian markets like China, India and South Korea.
We brought together industry experts, government officials and senior executives from SMEs already operating successfully in Asia for a two-day workshop. We analyzed their firsthand experiences, challenges and recommendations to develop a clear and actionable framework called the 4P strategy (potential, proposition, presence and policy).
These four steps offer SMEs a structured approach to understanding local conditions, differentiating offerings, establishing trusted partnerships and gaining government support.
1. Potential: Understand the local market
SMEs must understand Asian market regulations, business culture and market structures. Unlike North America's relatively stable environment, Asian markets often feature rapidly evolving regulations and unpredictable policy changes.
Businesses should balance these regulatory uncertainties against economic opportunities and be prepared to swiftly adapt when necessary. For example, policy changes in Asian markets, such as shifting foreign investment regulations or evolving environmental standards, can create uncertainty for SMEs operating abroad.
Companies must remain agile to navigate regulatory shifts while leveraging the relative economic stability of the region.
Patience and flexibility are also critical. In many Asian markets, business deals take longer to close due to hierarchical, relationship-driven decision-making. SMEs should anticipate these extended timelines and factor them into their planning.
Our study found that deals that might be finalized quickly in North America can take years to develop in Asia, requiring firms to exercise patience before realizing significant profits. Successful market entry depends on a long-term approach and the ability to adapt to extended gestation periods.
2. Proposition: Adapt services to fit local needs
SMEs need to localize their offerings beyond language translation, adapting their branding, marketing and customer-engagement strategies to fit local contexts.
A clearly defined and differentiated service offering is critical. Businesses must clearly define what sets them apart from local competitors and ensure their services address specific market needs.
Pricing strategies should also align with local market expectations. Many Asian markets, especially in business-to-business services , are highly price-sensitive. SMEs must balance competitive pricing with value.
In some cases, businesses may need to use performance-based pricing models - where clients pay based on results rather than a fixed fee - to remain competitive while protecting profit margins.
3. Presence: Build a local network and partnerships
A strong local presence is vital for success in Asia. SMEs should invest in trusted local partnerships or regional offices to build credibility, facilitate smoother operations and better understand local customer needs.
Relationships play a central role in doing business in Asia. Unlike in North America, where successful transactions often lead to partnerships, in Asia, relationships must be built first.
This relationship-first approach is deeply embedded in business culture, requiring firms to prioritize long-term engagement over immediate gains. Research has shown that trust-building is essential for long-term success in Asian markets , as strong relationships ultimately lead to transactions.
Canadian SMEs entering these markets should be prepared to shift their approach, recognizing that sustained commitment and relationship-building are key to unlocking business opportunities.
4. Policy: Take advantage of government support
Many Canadian SMEs underestimate the extent of available government support and miss out on resources that reduce risks and make it easier to establish a foothold abroad.
Our study found that SMEs expanding to Asia can access valuable support from government departments and trade commissioners at Canadian embassies. In energy services subsectors, government and non-governmental organizations can assist SMEs in forming partnerships with Asian firms.
Additionally, agencies like Export Development Canada offer training, financial support and market-entry resources that many SMEs overlook. Taking advantage of these programs can help businesses navigate regulatory challenges and accelerate their international expansion.
Government-backed programs also support research, development and technology adaptation to help businesses tailor their services to local markets. Our study found that making use of these resources reduces barriers, lowers entry risks and significantly enhances businesses' likelihood of success in Asia.
Seizing the opportunity
Rather than merely serving as an alternative to the increasingly restrictive U.S. market, Asia presents significant growth opportunities for Canadian SMEs but demands strategic patience, adaptability and sustained commitment.
However, success in Asia won't come overnight. Unlike the relatively familiar North American market, expanding into Asia requires a patience, adaptability and a willingness to learn a different business culture.
By adopting the 4P strategies, Canadian businesses can effectively navigate market-entry barriers and position themselves for success in an era of shifting global trade dynamics.
Etayankara Muralidharan receives funding from Social Sciences and Humanities Research Council (SSHRC).
Michael Joseph Dominic Roberts does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
