Canada's federal housing agency, Canada Mortgage and Housing Corporation (CMHC), reports that its experts are continually fielding questions from housing industry professionals who are anxious about the state of trade relations with Canada's largest trading partner, the United States. From CMHC's viewpoint, the key question is: Do Canadian companies in the housing industry have what it takes to compete internationally?
The current state of the U.S. economy, coupled with tariffs on Canadian lumber exports, have many people wondering whether Canadian companies can expand into and survive in the U.S. market. According to CMHC, one answer to this question is found in the success of a Canadian company, Lange-Con, whose experiences over the past five years demonstrate the potential that exists.
In 1997, Lange-Con completed a total of 15 houses in the Washington area. Since then, the company has increased its U.S. sales nearly sixfold, shipping one or two homes from its factory each day.
Lange-Con, short for Lange Construction, was founded in 1983 as a construction firm concerned only with framing and on-site construction, but in recent years the company has shifted its focus to incorporate the entire home. The thinking behind this move was that the house should operate as a complete system, with each of the separate parts working together to form a whole. As a result Lange-con expanded its product line to include prefabricated and panellized housing, designing, manufacturing and shipping entire houses from the company's headquarters in Kelowna, B.C.
Here is how Lange-Con handled some of the many challenges to U.S. expansion that Canadian companies face;
Distance is a common obstacle in distribution. Lange-Con's sales are almost exclusively to the U.S., with Washington state its largest market. Rather than see distance as a challenge, company Administrative Secretary and co-owner Sara Lange views the company's location as an opportunity: "We're close to the Canadian wood industries, which means we have access to some of the best wood available, but we're also close enough to the border than we can still ship to our main export market in a short period of time."
Lack of formal representation in the U.S. marketplace can be a further disadvantage. Lange-Con has overcome this by hiring local sales representatives who operate within the Washington, California and Oregon markets.
Size may also be an issue. Although Lange-Con is one of the smaller companies in the market, it still manages to hold its own, and after-sales service
is a big part of this. Reportedly, it is not uncommon for a representative to visit the housing site up to 10 times before completion to talk with builders and clients and supervise construction to ensure that the house is built to specifications.
Differences in housing markets must also be considered. To accommodate these differences, Lange-Con elected to manufacture its panels free of insulation and wiring.
Diversification is an essential strategy. The demand has grown for housing products such as cabinets, doors and windows, as well as for mouldings and engineered wood products. Because Lange-Con sells not only the external panels but also the interior finishings, it has found a niche in the market for add-ons and renovations. Lange-Con's ability to provide the entire package enables it to save its customers time and money -- something that pays off in the long run in terms of customer satisfaction.
Border issues require special product strategies. While countervailing duties on softwood lumber apply to all raw lumber being exported, value-added goods such as manufactured products are exempt from such duties. Lange-Con manufactures the wood panels in Canada and ships the finished product, duty free, to the U.S., thus lowering the cost of its product for U.S. builders and home buyers.
In their attempts to expand into international markets, Canadian companies must also incorporate strategies to meet emerging challenges such as fluctuations of the Canadian Loonie. CMHC continues to support and encourage Canadian companies that are willing to accept these current and future challenges as they venture into new markets.
Published: January 13, 2004
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