Tutorial: Five Steps to Export Success
tradecompass.com
To the beginning exporter, international marketing may seem complicated, difficult, and arcane.
How do we make exporting vivid and meaningful?
Business America believes the solution is to put a human face on
the process by telling the stories of seasoned exporters, with whom
beginners can identify. Knowing the power of example, Business America regularly interviews successful exporters in a feature, ''Exporting Pays Off.'' We inform readers about the techniques of companies that win the President's ''E'' Award for excellence in exporting in another feature, ''Honor Roll of Exporters,'' along with the strategy of companies that win other export awards. Elsewhere in the magazine, too, we publish stories about firms that distinguish themselves in international marketing. Our purpose is to encourage and instruct beginning exporters, as well as firms that
have not developed their full export potential.
These case studies show that certain strategies invariably are a
part of the export campaigns of successful world traders. These
techniques are incorporated in the following five basic steps that will help a firm launch its export venture in a smooth and orderly way.
The five steps are illustrated by actual stories and experiences of
successful exporters as told in the past year in Business America. We
believe that real examples and the actual words of business people bring the instructions to life.
We select our export success stories, not because we endorse any
particular firm or its business plan and activities, but because we
believe their experiences will instruct other companies to improve their export performance.
Nor do we endorse the business plan and activities of the export
trading companies and export trading organizations we describe. We cite specific firms only to illustrate the wide variety of assistance that is available to exporters.
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Five Steps to Export Success
tradecompass.com
Step 1: Assess Your Export Potential
Since exporting requires an extension of a firm's resources, it is
important 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.
A key question you should ask yourself in assessing the export
potential of your firm is whether it has a secure base of operations in this country, says L. Johan Hedberg, Director for International
Marketing for Aromance of Dallas, Tex. ''You should not get into
international marketing unless your firm is settled and comfortable in the United States,'' he said. Aromance, a small manufacturer of home- fragrance prospects, decided it was in sound shape domestically and started an export campaign last year. It hopes to sell between 10 and 20 percent of its products overseas this year.
Kane Manufacturing Co., Inc. of Des Moines, Ia., tested the
export potential of its pig feeders by advertising in the U.S.
Department of Commerce's catalog-magazine, Commercial News USA, as well as in a private-sector magazine, Pig International. The firm knew it had a winner when it received numerous replies to the ads.
How does a manufacturer of specialized scientific instruments
find out about the export demand for its products? Neuro Scan, Inc., of Herndon, Va., which makes brain research equipment, sent executives to mingle with attendees at international scientific conferences, such as the conference of the European Society of Neuroscience in Munich, Germany. The technique is working, because Neuro Scan now exports nearly half of its equipment.
Firenze Designs, Inc. of Santa Barbara, Calif., assessed the
demand for its leather jackets and dresses by attending trade shows in Japan, as well as a large international apparel show (MAGIC) in Las Vegas, Nev. The firm's booth at Las Vegas was swarmed by Japanese
buyers; in all, visitors placed orders of more than $500,000-five times the firm's sales projections for its first year. The interest shown at MAGIC encouraged the firm to proceed with plans to market in Japan and Canada, according to Boyd B. Lewis of B.B. Lewis and Company of Washington, D.C., the international marketing firm which handles the Firenze account.
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Step 2: Get Export 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
(1-800-872-8723); see page 32 for an article on the Trade Information Center.
Firms further along in the exporting process should contact the
nearest district office of the Commerce Department's International Trade Administration; see page 40 for a list of the district offices. Also, see pages 24-28 for a list of ITA's country and industry specialists, who are available for counseling.
State governments are another prime source of export assistance.
See pages 30-31 for a list of the state government offices that promote international trade.
Many other groups, both in government and the private sector, stand
ready to lend experienced, expert guidance to companies that are
starting export businesses. Industry trade associations are useful, as are private consulting firms, and the business departments within major universities. See the information on U.S. government export services in this magazine; see the box on private sector organizations that provide export assistance on page 5.
Products Finishing Corporation of Brooklyn, N.Y., went to the
U.S. Department of Commerce for pointers on how to expand the overseas sales of its luggage carriers and carts. The Department's International Trade Administration district office in New York City set up appointments with overseas customers, furnished lists of foreign retailers, and provided insights into cultural differences, foreign currency, and the domestic political situations in many countries.
In south-central Pennsylvania, 25 companies receive continuous
export counseling from the Export Development Program of the Kutztown
University Small Business Development Center in Harrisburg, Pa. Each
month, the Center also works actively with six one-time clients. The
facility has an Automated Export Identifier System, which helps local
companies find prospective overseas customers; it provides trade leads to 350 companies.
Rockland Mills Division, Rockland Industries, Inc., of Baltimore,
Md., started reaching out internationally in the early 1980s to increase sales of its curtain and drapery linings. It prepared itself by attending specialized training seminars offered by the Maryland
Department of Commerce International Division.
Bradley University, International Trade Center, in Peoria, Ill.,
works with small- and medium-sized companies ''teaching'' them how to
export. Through the use of the CORE (Company Readiness to Export)
software developed at Bradley University, and used by the U.S.
Department of Commerce nationwide, the Center determines companies'
export readiness. The Center is part of a nationwide network of Small
Business Development Centers (SBDCs), which were authorized by Congress in 1980 to provide management and technical assistance to the nation's small businesses; they are funded jointly by the federal government, through the Small Business Administration, and public and private agencies at the state and local level.
See Step 5, below, for examples of firms that have elected to hire
export specialists to do their exporting for them.
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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 Commerce Department'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 include export councils of industry trade associations, the business departments of universities, consulting firms, and market research groups.
From the time of its formation in 1978, Hallmark Sales Corporation of Houston, Tex., a wholesale exporter of industrial equipment and supplies, aimed at Latin America. It hired employees fluent in Spanish who keep in direct contact with customers; Hallmark also set up offices in Mexico and Argentina.
To find markets, Modular Mining Systems, Inc. of Tucson, Ariz.,
which manufactures mine management and control systems, analyzes
prospective mines around the world to determine which might be
candidates for its technologies. It then contacts the most promising
ones to schedule meetings and on-site presentations.
Crystal International Corporation of New Orleans, La., the export
subsidiary of Baumer Foods, Inc., began a program to strengthen exports of Baumer hot sauces, jams, jellies, and other condiments in 1989. A new management team decided to diversify the product line and develop new markets in additional geographical areas. Noting that ''Crystal'' hot sauce was popular in the Middle East, the firm made strong efforts there; it now exports the greatest volume of its products to the Middle East.
Gamble Brothers of Louisville, Ky., chose the United Kingdom as a
tryout market for its wood kitchen cabinet component parts. The 500-
employee firm obtained a U.K. agent who found there was a demand for
such American equipment. From that point, sales blossomed in Ireland,
Spain, the Benelux countries, and Greece.
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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: (1) the firm's export objectives,
both immediate and long range; (2) specific tactics the firm will use; (3) scheduling of activities, deadlines, etc., that reflect chosen objectives and tactics; and (4) allocation of resources among scheduled activities.
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.
The 19-employee SIT String Corp. of Akron, Ohio, emphasizes the
high quality of its guitar strings and seeks to develop a reputation for reliability. Robert C. Hird, Vice President, said, ''We keep trying to develop better sounding strings. Secondly, foreign customers, in particular, want to know a U.S. supplier is dependable and solid and has some longevity. It takes a while to develop this kind of reputation, but we think we are doing it, because our exports are growing.'' SIT sells 40 percent of its products overseas-in 36 countries-and Hird says, ''We are just getting started!''
A similar export strategy is used by Purafil Inc. of Atlanta,
Ga., to show that its air purification equipment is technologically
superior. ''To get the leading edge, American companies need to offer
something that is technologically ahead of the others,'' says William
Weiller, President and CEO. ''We find that technology is the key
ingredient in differentiating our product offering.'' For this reason, Purafil emphasizes quality and R&D. To get the word out, it takes part in scientific forums around the world and publishes
technical articles in international trade/scientific journals.
Second Chance Body Armor, Inc., of Central Lake, Mich., has learned how to sell a specialized product-bullet-resistant vests-to foreign countries. The 45-employee firm's strategy is to find native experts in police and military work who help them secure contracts with
official agencies in their countries.
Until 1989, Metrologic Instruments of Blackwood, N.J., had paid little attention to small countries and small customers. In that year, it made a strategic decision to concentrate on small opportunities and establish relationships with many new dealers and resellers. The refocusing was successful: within two years, Metrologic had added 70 new foreign customers; it was selling in 24 countries where it had not operated previously, and its international sales had increased 25 percent.
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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 foreign importers 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 communication in targeted countries are other factors to consider.
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
products overseas. An advantage to indirect marketing is that it gives a smaller firm with little export expertise a way to penetrate foreign markets without getting 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-government firms empowered to locate and purchase desired goods; export management companies, which act as the export department for manufacturers of non-competitive products; and export trading companies, which purchase U.S. goods for resale in foreign markets.
A key ingredient in the exporting success of SAS Institute Inc.
of Cary, N.C., is its policy of establishing wholly-owned foreign
subsidiaries; it maintains a network of subsidiaries in Canada, Europe, and the Asia/Pacific region. The strategy allows SAS to adapt its products to particular markets very effectively, because the
subsidiaries are staffed almost exclusively with nationals who have a
natural understanding of the local culture and business practices.
H.F. Henderson Industries of West Caldwell, N.J., chooses to sell
its automatic weighing systems directly to foreign customers rather than through overseas agents or distributors. For that reason, the firm emphasizes travel and a willingness to adapt to language and cultural differences. Henry F. Henderson, Jr., President and CEO, has made seven trips to China, where he has socialized with the Chinese and learned their ways of doing business. He has also traveled to Australia, South Korea, Hong Kong, France, Russia, Switzerland, Austria, Hungary, Italy, Finland, Costa Rica and Brazil, among other countries.
The Ohmart Corporation of Cincinnati, Ohio, took the opposite
tack of building a strong organization of international sales
representatives. The 130-employee manufacturer of industrial process
measurement and control systems has chosen, as its representatives,
experienced engineers capable of presenting technical data to customers' technical staffs. Ohmart's exports have been growing at a compound annual rate of more than 20 percent in the past five years.
As a practical matter, the best way for some companies to break
into international marketing is to hire specialists to do it for them. W.R. MEADOWS of Elgin, Ill., for example, imposed a limitation on itself for 65 years by not aggressively going after sales to the 95 percent of the world's population outside the United States. The family-run firm, which makes construction products for concrete and asphalt highway and building applications, corrected that problem last year by associating itself with the Jim Walter International Sales Corporation of Tampa, Fla. Results showed up immediately. In the first year, MEADOWS' sales to Latin America and the Far East expanded 300 percent.
U.S. Firms Can Get Export Help From Many Private Sector Groups
U.S. firms can get a lot of export advice and assistance from a private sector network. Much of the assistance is free or available at nominal cost.
AT&T and several multinational corporations operate ''The Export
Hotline,'' a fax information retrieval system designed to help U.S.
companies learn about worldwide markets. The database contains up-to-
date information on 50 key industries in 78 countries; it can be
accessed from anywhere in the United States 24 hours a day. Companies
can find out how to use the service by calling 1-800-USA-XPORT (1-800- 872-9767), toll-free. The only expense for users is the cost of the fax calls. The AT&T hotline complements the U.S. Department of Commerce's Trade Information Center (1-800-USA-TRADE), which offers one-on-one attention.
Several private sector organizations that focus on export and trade issues:
American Association of Exporters and Importers, 11 W. 42nd St.,
30th Floor, New York, N.Y. 10036; tel. (212) 944-2230.
Export Managers Association of California, 110 E. 9th St., Suite
A669, Los Angeles, Calif. 90079; tel. (213) 892-1388.
Federation of International Trade Associations, 1851 Alexander
Bell Drive, Reston, Va. 22091; tel. (703) 391-6108.
International Trade Facilitation Council, 1800 Diagonal Rd.,
Suite 220, Alexandria, Va. 22314; tel. (703) 519-0661.
National Customs Brokers and Forwarders Association of America,
One World Trade Center, Suite 1153, New York, N.Y. 10048; tel. (212) 432-0050.
Small Business Foundation, 1155 Fifteenth St., NW., Suite 710,
Washington, D.C. 20005; tel. 1-800-243-7232 (in Washington, D.C., call 202-223-1103). The foundation provides counseling about the export process, trade leads, agents, and marketing information. Counseling on country and market information and reference to public and private assistance programs can be obtained.
U.S. Council for International Business, 1212 Avenue of the
Americas, New York, N.Y. 10036; tel. (212) 354-4480.
World Trade Centers Association, One World Trade Center, Suite
7701, New York, N.Y. 10048; tel. 1-800-937-8886 for the association's
fax retrieval system, which will provide information on how to subscribe to the World Trade Centers Association network system. The system enables customers to access trade information and export leads on their personal computers.
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