Export Now
There have always been people who have bet against the house – doubled down when they should have folded; bought silver when the world loved gold; took a chance on two nerds in a California garage – and made a killing. Conventional wisdom isn’t necessarily always wise.
But what about those times when the house is the U.S. economy, and betting big involves not a pocketful of quarters or even this month’s shoe money, but the future of a company and its employees? Believe it or not, betting against the house may still be the safest bet of all.
While the U.S. economy is stagnating, even falling, developing countries around the world are looking to keep their own economies growing, often at rates that far exceed anything that their homegrown industries can handle.
“It’s actually even more of a good time to look for opportunity abroad,” says Cory Churches of the U.S. Department of Commerce. “The domestic U.S. market is not growing very quickly, while economies abroad are often outpacing our own.”
“Developing countries have more rapid growth,” says Dr. Lawrence Duke, clinical associate professor of marketing at Drexel’s LeBow College. “They need stuff – capital goods, knowledge, consumer goods – and their capacity is overmatched by their needs.”
It’s the perfect opportunity for U.S. businesses, he adds. While it might seem counterintuitive for a U.S. company facing hardships at home to make a significant investment of time and capital in a venture abroad, it can often pay off in unexpected ways.
“That’s where the growth opportunities are for U.S. businesses,” Duke says. “The pie is getting bigger and bigger as these [emerging] economies come into their own.”
Ninety-seven percent of the world’s consumers live outside the United States, says U. S. Commerce Department International Trade Specialist Doug Barry, but only 1 percent of all U.S. companies export abroad at all.
“Imagine if U.S. businesses were to double from one to two percent in trade abroad. Think of the number of U.S. jobs that could be created from that growth.”
Much of the focus of U.S. investment has been in the so-called BRIC countries – Brazil, Russia, India and China – that are in various stages of economic development eager for U.S. exports. “In fact,” Duke adds, “I would say it’s more like the BRIC countries, and add Indonesia to the mix. While it’s not as advanced economically, perhaps, it is, in fact, a huge country with a growing and educated middle class with a lot of infrastructure going into place.”
“We’re becoming a global world,” adds Dr. Trina Larsen Andras, department head of marketing at LeBow College and an expert in global marketing and international business, “and [U.S.] companies can’t afford to ignore [emerging economies] anymore.”
Barry adds countries located closer to home may also make sense for U.S. companies thinking of venturing into international trade for the first time, despite the fact that our neighbors to the north and south are experiencing some of the same economic downturns.
There are arguments to be made for countries large and small, near and far; for economies at the beginning of their growth, and for countries poised at the pinnacle of their development.
“The hardest thing [can be] to pick a country to grow your customers in,” Barry says. “We can help with that.”
Staying close to home can also be a good market strategy, he adds.
“Canada is always a good market,” he continues. “It’s our number one export partner; we have similar consumer cultures, and share at least one language.” And, he adds, while Canada also experienced a significant economic turmoil over the last few years, “Their downturn was less dramatic.”
Mexico and members of CAFTA – the Central American Free Trade Agreement – are also often good places to start, Barry says, as well as other countries outside the region with which the United States has free-trade agreements.
“Without duties [import taxes] on goods, [U.S.] companies have a competitive advantage, and can often get a foot in the door.”
Venturing into countries close to home can offer an added layer of comfort for small companies, especially, who may be wary of the challenges of a large foreign market.
“China and India, in particular, are not for the faint of heart,” Barry says. “They can offer interesting challenges, and huge rewards, but they’re not often markets where small companies, especially, want to go for their first time [trading abroad].”
Sometimes it makes sense to partner with a middleman – especially for smaller companies – and let them take over the logistics of export and distribution, Duke adds, and sometimes it makes sense to take on a local company as a joint-venture partner.
“In China, for example, which is a huge and complex market, companies want to brands and technical know-how” from U.S. companies, and are often eager to enter in joint ventures and product-distribution agreements. Indeed, Duke sees a future in which the export of goods and services is outpaced by joint ventures and direct investment in foreign markets, particularly in the BRIC countries.
Eventually, he says, companies may gain enough of a feel for even these large markets “to want to start producing directly” in those countries, much as many foreign companies – like Japanese auto makers – already do in the United States. “There’s a trend towards export growth and direct investment,” in all of these countries.
In a world where so many companies are already dealing with international trade on a daily level, though, it can pay to go it alone.
The key for U.S. companies considering exporting their goods and services is research, and more research. Companies should examine their products, goods and services, as well as their corporate cultures, before heading abroad, and also think about what they are hoping to accomplish in setting up an export operation.
“You have to do your homework and see the sectors where the U.S. is a market leader . . . see what the distribution channels are like, what the business atmosphere is. You should know your sector ahead of anything,” he says. “You should know what’s going on.”
The sheer size of the global market and the possibilities for export abroad can seem intimidating to all, but the largest and most experienced businesses, but sometimes, Duke said, fate can take a hand.
“Sometimes – and some companies are embarrassed to admit this -- but they go into a country for the first time because they get a query. Someone calls them up and says, ‘Hey, I saw your product. Have you ever thought about [our country]?’ Sometimes, the businessman can’t quite place the country on the map, but that ends up being their first trade partner.”
Barry agrees that for many U.S. businesses. their first taste for trade does, in fact, come from an outside nudge.
“A lot of companies get an inquiry on the Internet from abroad. Someone thinks what they see could be useful, and wants to know if the company can ship products and supplies abroad.” That first taste of a larger world can be eye-opening.
“It’s a wake-up call, that inquiry – that there is a larger market. If that company has heard of us, maybe there’s more interest, 10 or 15 or 20 companies that want what we’re selling.”
It can be a bit of trial by fire, both agree, but it can also end up giving a company a first valuable experience in trading abroad.
“Where there’s friction, there’s also opportunity,” Duke says, and even stumbles can help provide business opportunities in the end.
Even in those situations, Duke says, market research remains the key.
This may all seem overwhelming, especially for small companies, but the good news is that there is a lot of help available for those who want to take the gamble.
“It’s never been easier to get information and to have accessibility,” Duke adds. “There’s support at the state, local and even federal levels.”
Companies looking to export abroad today can count on a variety of resources to help them with both market research and due diligence, and being armed with information can make the difference between a one-time experiment and a long-term investment.
The U.S. Department of Commerce offers a variety of programs and information for interested companies, everything from books and pamphlets to streaming Internet seminars and one-on-one consultations with trade specialists around the country.
“[The Commerce Department] website (www.export.gov) is probably the best place for a U.S. company to start,” Barry said. “There’s something for almost everyone there.”
Companies with specific questions can speak to specialized trade reps with expertise in certain sectors or regions at their local export assistance centers as well, in one of over 100 cities, large and small, around the country. They can help companies map out a plan of attack, access their readiness for international trading, and even offer low-cost or free assistance to corporations who are about to take the plunge.
One of its most popular programs matches international buyers with U.S. companies with an already-expressed interest. Several times a year, the Commerce Department hosts trade fairs that U.S. companies can attend for nominal fees to display their goods, and also their knowledge and expertise.
“We do the matchmaking,” Barry says, “We do all the legwork.” Last year, he adds, more than 80,000 buyers from abroad participated in these local and industry trade shows, generating hundreds of millions of dollars in sales for U.S. companies.
“If you’re interested, look at [our] domestic trade shows in your industry. If you see large numbers of buyers over time looking for your products, it might be time to participate yourself.”
Companies in the Philadelphia area have even more of an ally, Duke says, in the World Trade Center of Greater Philadelphia. This local offshoot of the Greater Philadelphia Chamber of Commerce offers a one-stop shop where businesses in the region, large and small, can get information and advice. Its website (www.wtcphila.org) offers everything from listing of helpful government websites to advice on customs and etiquette in a variety of countries to explanations and advice for setting up shipping and distribution channels abroad.
They also set up trade missions themselves, Duke says, allowing regional companies to travel abroad in trips arranged by sector, country and industry, which can help smaller companies especially, and allow them to experience the business culture of a country or region before even making an initial investment.
Much like the Commerce Department, with which the organization works closely, it also brings information to companies in the Philadelphia area without ever leaving home. Recent offerings have included seminars on gaining access to India’s vast markets, visits from trade representatives from the Eastern Mediterranean and Israeli regions, and a conference on clean tech. Each different offering gives regional companies a chance to dip a toe in the water – or put a nickel in the slot – of international trade.
But, as in all bets against the house, it’s best to know exactly what cards are on the table.
“Brush up on the challenges as well as the opportunities,” Duke recommends. “You should be able to pick out where your competitive advantages are, and where your weaknesses might lie.”
And exporting should be a part of a larger overall strategy for a corporation, Duke adds, not the thing that all success rests upon.
“It pays to be diversified, to insulate yourself against unfavorable circumstances.” Not putting all the eggs in one basket means being able to fall back on sales in South America when there’s a tsunami that wipes out distribution in your Asian markets, he said, and means that U.S. sales and international sales can balance each other as the global economy rises and falls.
“Learn the process,” of international trade, urges Barry. “Learn the process and suddenly it becomes very clear the way in which you have to go, and it becomes eminently possible for your company, small as it is, to be successful abroad.”
International trade offers a chance at exponential growth for U. S. companies large and small, at a time when many companies in many industries struggle to stay afloat at home. Companies willing to do the research and take the time to make a coherent business plan can take advantage of economic factors that might, under other circumstances, seem like drawback – a weak dollar, a huge trade deficit, an increase in foreign interest in investing in the United States and its corporations.
Barry urges even small companies in the United States to consider an international strategy.
“It’s easier than ever for small U.S. companies to generate international sales,” he says. “Countries in emerging markets are enjoying brisk economic growth at a time when the U.S. is struggling.” Despite the perceived risks, it’s more of a good time than ever to invest – and export – abroad.
International trade “is where the growth is,” says Duke. “That’s where all your competitors are going. Why not get there first?”
