THE ABCS OF EXPORTING!FIVE BASIC EXPORTING STEPS THAT WILL HELP GET YOUR COMPANIES FIRST EXPORTING VENTURE OFF ON A SMOOTH, ORDERLY COURSE!
If that firm can export, why can't we do it too?" Now you can! The following five basic steps will help your company get its first exporting venture off on a smooth, orderly course. These five steps are illustrated by actual stories and experiences of successful businesses.
NOTE: We do not specifically endorse any particular firm or its business plan and activities, nor do we endorse the business plan and activities of the export trading companies and export training organizations described. The examples are provided to help other companies improve their export performance and to illustrate the wide variety of assistance that is available to exporters.
STEP 1: ASSESS YOUR EXPORT POTENTIAL
Since exporting requires an extension of a firm's resources, it is important that you first assess your export potential. This assessment should include a look at industry trends, the firm's domestic position in the industry, the effects exporting may have on present operations, the status of resources, and the anticipated export potential of the product.
Unarco Commercial Products of Oklahoma City, OK, figured out that its shopping carts should sell in countries that are beginning to move into U.S.-style mass merchandising. Marvin Weiss, president, said, "As recently as five years ago, merchandising in the Pacific Rim countries was done by lots of little service stores, where sales clerks would take products off the shelves and bring them to the customer. Now those countries are coming out with major self-service stores similar to those in the United States. However, they aren't as large, and we have to adjust our products. For example, we make smaller shopping carts for them." Unarco is examining the market in Mexico, which is switching toward mass merchandising.
Sun Metal Products, Inc., of Warsaw, IN, believes that overseas trade shows are a good way to test the export potential of products. By participating in IFMA, the major bicycle trade show in Germany, in 1988 and again in 1990, the manufacturer of wire spoke wheels and alloy and steel rims for bicycles made sales to 11 different European markets. Since then, Sun Metal's participation in the 1991 Taipei Cycle Show has led to an active Far East marketing program. When Mike Carlton, founder of the Carlton companies of Chagrin Falls, OH, faced a soft market in the United States for his business services to advertising agencies, he got an inspiration: Why not offer them where they are most needed -- in developing countries? "We believe that, in the developing parts of the world, advertising will grow faster than in the United States, where it is a mature industry," Carlton said. "It's just more effective for us to grow in developing markets than in mature ones." The Carlton companies focused on Indonesia, where they are carving out a niche for themselves. Now Mike Carlton is looking at the developing countries of Latin America and Southeast Asia as promising markets.
LIFE Corporation of Milwaukee, WI, tried out the export appeal of its emergency oxygen packs by placing an ad in the U.S. Department of Commerce's catalog-magazine, Commercial News USA. LIFE received inquiries from every continent about its "oxy-pacs." John Kirchgeorg, president, realized he had a highly exportable product. Forty percent of the firm's products now go to foreign countries.
STEP 2: GET EXPERT COUNSELING
Once a company has assessed its export potential and made a firm decision to commit time and resources, the next step is to get expert counseling and assistance immediately. Firms that are entirely new to exporting should call the U.S. government's Trade Information Center, toll-free, on 1-800-USA-TRADE (872-8723). Firms further along in the exporting process should contact the nearest district office of the Department of Commerce's International Trade Administration. ITA's industry specialists are available for expert counseling.
State governments are another prime source of export assistance. Many other groups, both in government and the private sector, stand ready to lend experienced, expert guidance to companies that are starting an export business. Industry trade associations are also useful, as are private consulting firms and the business departments within major universities.
What is the first step a small company should take to break into exporting? Marty McCann, president of Buckles of America, a 23-employee firm from Rocklin, CA, replies, "Work with the Commerce Department's International Trade Administration. When I was very green, I received some good guidance from Mitch Larsen (trade specialist) at the San Francisco District Office of ITA."
The U.S. Department of Commerce showed its willingness and ability "to go right down into the trenches with us," says Bob Ellis, executive vice president of National Orthotic Laboratories of Winter Haven, FL, which makes orthopedic appliances. The firm never would have ventured into the "uncharted waters" of overseas markets, Ellis said, without the help received from the EUROpportunity program (under which the Commerce Department's Europe country desk officers provide specific market opportunities); the International Trade Administration's district office in Miami; industry trade specialists; and U.S. and Foreign Commercial Service personnel in Europe.
A training and assistance program to prepare U.S. companies for the global market over an 18-month period is offered by Export Resource Associates Inc., a small St. Paul, MN, company in its third year of operation (it also has an office in Chicago). "International departments can often be `lone rangers' within a company," according to Sandra Renner, president. "Our aim is to internationalize the entire company -- that is, to get everyone involved, from the boardroom to the production floor." Export Resource Associates shows all employees in client firms the practical things they must do to change their products and work habits so as to make the most of foreign market opportunities. Export Resource Associates has developed a step-by-step program for its client firms which it calls "Fast Track Exporting."
Hal Herron, president of Brunton USA, gives the Wyoming state government major credit for his firm's rising exports of compasses. "The state's trade staff has provided us with trade leads and encouraged us to participate in overseas trade shows," Herron said. "The trade staff is unlike any government I've ever worked with -- they operate almost like the private sector. They're constantly on the phone with us, telling us about things that are coming up and might benefit us." Susan Olesen of Boca Rotan, FL, gives high marks to the Florida Department of Commerce for helping her get started with her company, Global Computer Products, Inc., two years ago. The Department's trade specialists encouraged her to participate in successful trade missions to Mexico, Antigua, and Jamaica. She has also received assistance from the Miami District Office of the U.S. Department of Commerce's International Trade Administration, and Florida Atlantic University's International Trade Program. Global Computer Products buys computer systems, network products, cable products, UPS systems, and other peripherals from various U.S. companies and resells them overseas.
The INTERMARK Group of Rolling Hills, CA, is an example of a private sector consulting firm that helps companies get their bearings in international marketing. It does not export -- it shows other firms how to do it. James C. McKay, founder of INTERMARK, explained, "A client comes to us and says, `Hey, what countries should we go out and sell to?' We do market research and help him identify his best overseas markets. We deal with every type of product, service, and technology. We give individual treatment -- customized service. We arrange to get the job done, whatever the job a client wants accomplished. We tell them we can substantially reduce their costs, problems, and uncertainties."
The New York City Department of Ports and Trade helps exporters get started. An agency official explained, "We believe that what new- to-export companies really need is someone to stand beside them with advice and encouragement during all phases of the export transaction. Our ultimate goal is the self-sufficiency of our client companies in the conduct of international trade."
Four volunteer business executives helped The Crowning Touch, Inc., of Medford, OR, set up its domestic and international sales program under the auspices of the Service Corps of Retired Executives (SCORE), a private organization sponsored by the U.S. Small Business Administration. The five-employee firm, which makes sewing tools, sells in Japan, Australia, the Netherlands, Canada, and the United Kingdom, among other countries. Crowning Touch also has received export counseling from the U.S. Department of Commerce through the Portland District Office of the International Trade Administration.
The Tampa Bay International Trade Council counsels exporters, sponsors trade seminars, workshops, and conferences, and organizes trade missions. It maintains a trade reference library and exchanges inquiries with more than 1,000 trade organizations and chambers of commerce in 80 countries.
STEP 3: SELECT MARKETS
After a firm has received expert counseling, it must select one or two "ideal" markets from the hundreds available. Language and cultural differences, special trade regulations, local competition and economic conditions, and other vital factors must be evaluated to maximize success abroad. The district offices of the U.S. Department of Commerce's International Trade Administration are an excellent place to begin. The Department offers a wide range of market research programs. In addition, it maintains a global network of U.S. and Foreign Commercial Service Officers and other international trade specialists who conduct overseas market research and gather commercial data of broad interest to U.S. exporters. The Department's industry specialists in Washington can provide U.S. firms with a unique industry-oriented perspective on the best prospective markets for their products.
The Commerce Department also offers a variety of trade promotion programs that help new exporters test foreign markets and evaluate their export potential within a specific geographical area. Other sources that are helpful to firms involved in the selection of potential markets include export councils of industry trade associations, the business departments of universities, consulting firms, and market research groups.
Octocom Systems, Inc., of Wilmington, DE, aimed at small-and medium-sized individual markets throughout the world that large U.S.- based communications companies had not considered worth the effort and resources to cultivate. The strategy paid off. Octocom has become the dominant data communications vendor in many lucrative markets of all sizes. Fleming Manufacturing Co. of Cuba, MO, spotted major business opportunities in the political developments in Eastern Europe, the former U.S.S.R., and the Middle East and is going after them. Ariel Campos, international trade director, said, "Take the countries of Eastern Europe; they are 40 years behind in construction and are very eager to do a lot of building at a low cost and are very eager for U.S. technology. Turkey is another example of a market that is opening up. As a result of being a key ally in the Gulf War, Turkey is looking more to the United States. We are going about our international marketing in a more scientific way. We are looking carefully at the political situations in certain regions. We are searching for stability and searching out developing areas." The firm makes specialty concrete product machinery and equipment. Three years ago, Rust Evader Corporation of Altoona, PA., made a calculation that its rust-prevention devices for motor vehicles might have better potential abroad than here. Dan Emanuelson, president of the 37-employee firm, explained, "Overseas, automobiles are mre expensive. People keep them longer. There are many backyard mechanics who like to tinker with their cars. They are more apt to keep their cars for 10 years. Overseas, there is less of the planned obsolescence that we have in this country." Rust Evader now sells most of its products overseas.
Laboratory Tops, Inc., of Taylor, TX, began using the services of the U.S. Department of Commerce to select overseas markets two years ago. The firm, which manufactures chemical-resistant epoxy-resin countertops and sinks used in laboratories, bought the Department's Comparison Shopping Service, a customized service assessing a product's export potential, in both the United Kingdom and Germany. It learned about market potential and other basics of exporting at Commerce Department seminars, and it took part in British Lab Week, a trade fair in which the Department organized participation by U.S. exhibitors. In addition to the United Kingdom and Germany, the firm now exports to the Netherlands, Korea, Taiwan, and Australia.
STEP 4: FORMULATE AN EXPORT STRATEGY
The formulation of an export strategy is the next step. In general, a successful export marketing strategy identifies and correlates at least four factors that jointly determine the most suitable kind of export operation:
The marketing plan and schedule of activities should cover a two- to-five-year period, depending on the kind of product exported, the strength of the competitors, conditions in the target markets, and other factors.
New management at Global Manufacturing, Inc., of Little Rock, AR, has developed an international marketing plan targeted at the major industries worldwide that use the type of equipment it makes to reduce friction and facilitate the flow of bulk solids. It is searching for new markets in many countries through trade/catalog shows, and it watches for opportunities in foreign government projects. In five years, the firm hopes to be selling one-half of its equipment overseas. Maura Lozano-Yancy, international sales director, said, "We have in place managerial commitment, excellence in product, and worldwide marketing, and we have the persistence to succeed."
Six years ago, the management of Ohsman & Sons Company, Inc., of Cedar Rapids, IA, decided to make a commitment to find and develop more overseas markets for its products (hides, fur, and wool). In a deliberate and orderly way, the 12-employee firm tackled such problems as export financing; tough competition; arranging timely shipping; and finding new employees who have at least a basic knowledge of the languages of foreign trading partners, including Japanese, Korean, Spanish, and Russian. In a three-year period, Ohsman's exports grew from 30 percent of total shipments to more than 50 percent.
Faced with an eroding customer base in the United States, Greenville Machinery Corporation of Greer, SC, which makes textile machinery, developed a plan to transform the firm into an international company. The plan, which set a goal of exporting half of the firm's production in five years, involved upgrading quality, using the metric standard for foreign markets, and extensive market research to establish priorities. The commitment has resulted in the export of well more than half of the company's production.
Leave your firm's export strategy to us, argues Paul Brauner, president of Brauner Export Company, Inc., of St. Louis, MO, a 19- employee export management company that now is concentrating on sporting goods and home fitness products. "We work with U.S. manufacturers in blending their domestic resources with international opportunities in a global strategy," Brauner said. "We counsel with our client, like a partner. We set up a budget for trade shows and mutual travel. We set sales goals for the year."
STEP 5: SELECT A SELLING TECHNIQUE
After investigating and selecting foreign markets for your products, the fifth step in an export venture is to select a selling technique. There are two basic selling techniques in exporting: indirect and direct selling. The decision to market products directly, or alternatively, to utilize the services of an intermediary, should be made on the basis of several important factors: the size of the firm, the nature of its products, previous export experience and expertise, and business conditions in the selected overseas markets.
In direct selling, the U.S. firm deals with a foreign importer and is usually responsible for shipping the products overseas. However, direct selling may include utilizing the services of foreign sales representatives or agents. In selecting the method, the product involved and the way it is marketed in the United States will provide a clue as to how it might be marketed internationally. The customary business methods and established channels of distribution in targeted countries may also have a bearing on the marketing channel selected. Some of the available methods of direct selling are: sales representatives or agents, the equivalent of a U.S. manufacturer's representative; distributors, who purchase merchandise from a U.S. manufacturer at the greatest possible discount and resell it at a profit; dealing with foreign retailers, relying mainly on traveling sales representatives who directly contact the foreign retailer; direct sales to end-users; and state-controlled trading companies in countries that have state trading monopolies, and where business is conducted by a few government-sanctioned and controlled trading entities.
In the indirect selling method, the U.S. firm with a product to export relies on another firm that acts as a sales intermediary and normally will assume responsibility for marketing and shipping the product overseas. The principal advantage to indirect marketing is that it gives a smaller firm with little export expertise a way to penetrate foreign markets without having to get directly involved in the complexities of exporting.
There are several distinct types of intermediary firms, each with its own advantage for the manufacturer: commission agents, who are "finders" for foreign firms that want to purchase U.S. products; country-controlled buying agents, which are foreign government agencies or quasi-governmental firms empowered to locate and purchase desired goods; export management companies, which act as the export department for several manufacturers of non-competitive products; and export trading companies, which purchase U.S. goods for resale in foreign markets. Sending letters, with brochures, to a select list of prospective overseas customers, is the selling technique of Sabo International, a two-person Connecticut firm that buys U.S. gas turbine maintenance equipment and resells it abroad. James Taylor, founder of the firm, bought a list of names and addresses of potential overseas customers. Every few months, he sends letters to the names on the list. He has made sizeable sales to many of the firms and government agencies on the list.
Systems Center, Inc., of Reston, VA., which makes computer software for mainframe computers, attributes much of its export success to its international network of sales agents. Says Gillian Parillo, vice president, international agent operations: "We treat our overseas agents as if they were business partners in the United States. We provide them with information and materials exactly as we do with our U.S. sales people. We always keep in mind that our agents sell for other firms and that we are competing for their time. So, we try to make them feel special. We try to provide them with better service than any other company they represent. We keep in touch with them all the time -- we send a newspaper each week." The firm has 39 agents, all natives of the country or region, who receive a percentage of their sales.
Manufacturers reluctant to go into exporting are given an easy option by Medical International Inc. of Spring Lake, NJ, which will buy their products outright and market them overseas. Carol Myers, export manager of the export management and trading company, said, "Small- and medium-size U.S. companies think it's great to have our expertise selling their products. Many of them wouldn't export at all on their own. Some get an unsolicited foreign order, and it sits on their desks for a long time and ends up in the trash can. The smaller companies don't know about such matters as letters of credit. They just don't feel comfortable with international marketing." IKR Corporation of Houston, TX, gives its client firms (producers of firefighting equipment and industrial equipment) a choice: (1) it will buy their products and resell them outright to overseas customers; or (2) it will help them set up export departments or expand their overseas marketing. "We get totally involved with our client firms," Richard Koehler, IKR president, said. "We participate in their operations to the extent they want us to."
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