Wednesday, September 19, 2018Canada's Leading Online Business Magazine

Canada’s Services Sector – An Undervalued Expertise

By Ennio Vita-Finzi

If one looks at many key metrics in a business, there is often a minority creating a majority. Many executives know of the sales & marketing adage (known as the Pareto Principle) which claims that about 20% of customers produce 80% of a company’s sales.

In fact, the 80/20 principle is also applied to disparate activities such as relationships, diets, exercise, distribution of wealth, quality control, software, economics and other interesting sectors of our day-to-day life.

However, in Canada’s case the reverse is true. Our economic growth comes from 80% of Canadians who are playing a key role in improving our GDP by working in the Services Sector. In addition, services-producing industries account for more than 70% of Canada’s GDP.

Making a case for Services

In spite of the growing importance of the service sector, the government’s economic reports still concentrate their statistics on manufactured goods. Statistics Canada describes Canada’s economy as one “divided into two sectors: the goods-producing sector which makes tangible products and the services-producing sector which is essentially everything else”.

One of the reasons for the catch-all phrase “everything else” is that Services cannot be easily identified or tracked because they are intangible, therefore making it more difficult for statisticians to trace.

Manufactured goods such as medical and sporting equipment, metal products, petroleum/electronic/computer products, machinery, chemicals, transportation equipment, food, clothing and many other tangible products provide researchers with actual proof of manufacturing and export activity. These very specific figures are then compared to the competition and become part of Canada’s official statistics.

On the other hand, the “everything else” of the Services Sector represents untraceable activities such as R&D, engineering, telecommunications, financial services, management consulting, insurance, tourism and many others, all of which are almost invisible, untouchable and often very personal.

The importance of services

Apart from the fact that 4 out of 5 Canadians are employed by the services sector, 60% of Canada’s fastest growing exports over the last decade were Services4. Interestingly enough, un-sexy sectors like finance and insurance services represent Canada’s largest and fastest growing exports today, with management services close behind. Their commonality is that they are all hard to track.

Excelling at selling services

Selling any kind of service is much more difficult than selling a manufactured product. Goods can be touched, tested and physically compared to the competition while a service often cannot be seen. It is based almost totally on the perception or the promise created at first contact, and only later on the service delivered.

In addition, while selling services in one’s own home market can be difficult, the challenge of selling Canadian services in foreign markets is even greater. In an international situation, the service is being sold by a Canadian to a potential foreign client who speaks another language and follows different business standards and traditions. Convincing that potential client that a Canadian concept or service would work better than what is readily available in the client’s home turf is often a major undertaking.

In spite of these hurdles however, Canada seems to excel at selling services internationally since service exports now account for 44 percent of Canada’s international trade. Furthermore, over the last decade 3 out of 5 fastest growing Canadian exports were services exports.

Not the end of manufacturing

Manufactured goods represent only 30% of Canada’s economy but this is not the end of Canadian manufacturing – fortunately services and products are deeply integrated with each other. Activities like R&D, engineering, telecommunications and management consulting all help to make Canadian products more competitive abroad. Economists worry about the competition that natural resources and manufactured products exports face internationally, but it is worth noting that 60% of Canada’s fastest growing exports over the last decade were services.

Recognition

The success of the Canadian services sector has gone largely unnoticed and yet represents Canada’s strongest recent trade growth, while simultaneously protecting businesses against negative economic cycles.

The four out of five Canadians working in the Service Sector are helping to keep Canada in the forefront of international trade and are vital participants in Canada’s expanding global commerce.

They should be recognized for their importance to our economy.

Ennio Vita-Finzi was appointed as Ontario’s Trade Commissioner in Europe, Latin America and the U.S., was President of the Canadian Council for the Americas during NAFTA negotiations and then qualified as a Certified International Trade Professional (CITP). He is now a College lecturer and keynote speaker in Montreal. e.vita-finzi@sympatico.ca

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