Expansion Overseas …. Tips and Tricks of the Trade
By Richard Rowe
February 2001
Expanding overseas. For many successful manufacturers, particularly those operating in limited domestic markets, the issue of taking operations abroad has to be tackled sooner rather than later. The question is how, and what steps can be taken to best prepare your company for what can be a giant leap.
There are several key considerations to take into account. Not least, a vendor must take a long, hard look at itself before committing company time, expense, and its good name.
"The fundamental consideration is a strategic consideration for the exporter itself," is the advice from Antoine Maguin, Chief Executive Officer, TLD USA. In other words, are you genuinely ready to make medium- and long-term efforts to convince an overseas market to buy your equipment?
It’s all about making sure that you are "export ready," counsels Don Gallion, President and CEO of FCX Systems, a U.S.-based manufacturer of 400 Hz equipment that does business in 52 countries.
Selling outside your domestic market can cost big money in the early years, and not just in terms of travel expenses and sales trips. As Maguin points out, there is the "quoting without results, and discovering specific requirements of the market that require engineering, setting up service capabilities, plus solving diligently all of the technical issues."
The infrastructure must be in place to avoid concluding a one-time deal only. "Dealing overseas requires strong management commitment and a long-term view," adds Maguin.
Gallion concurs. There needs to be an inherent understanding of the differences between domestic sales and exports, including freight and financial regulations and terms.
The time taken to establish an overseas business should also not be underestimated. "This is not a quick process," believes Gallion. "It takes much more time than domestic sales, and the commitment must be there for the long haul or don't even start."
Some form of local presence is also beneficial, both in terms of understanding a market, but also showing a very public commitment to a country or region. "A local presence in terms of sales/service is necessary to grow in the targeted market," agrees Maguin. In many markets, lack of service capability usually equates to a corresponding lack of sales.
"Manufacturing activity development is sometimes a good help in major markets because it provides a deeper understanding of the local requirements," believes Maguin. "However, it must be considered mainly for solving competitiveness problems, but [also] creates many issues linked to the transfer of technology."
Gallion likes the country-by-country approach. "The degree of local presence depends a lot on the country and your product," he says. "Each case is different, but a local agent and frequent visits can eliminate the need for any more local presence."
It is on the regulatory front that strong local presence, or knowledge, can prove invaluable. Many observers feel that it is almost impossible to understand European regulations while sitting pretty in the U.S. and vice versa.
"You need somebody locally to help you," says Maguin. "Most of the time, an agency network can be the right tool but they have to be very effective and accept working as a real partner."
Another option is highlighted by AAXICO Industries in the U.K. "After 20 years of manufacturing under license an American product in a 'foreign' land, it is our view that this should be one of the major considerations for manufacturers looking to take their operations/products into new, foreign markets," suggests Adrian Wells, the company’s new General Manager.
"This type of agreement allows the OEM to promote
a local manufacturing presence, receiving in return expert local knowledge of
the marketplace and any regulations that may exist, which could take years to
obtain otherwise," adds Wells.
If large enough, one solution is to develop a multicultural organization similar
to TLD, but as Maguin admits "it takes time and effort." Of course,
not all manufacturers have the kind of resources to appear American in the U.S.,
European in Europe, and Chinese in China.
In the U.S., Don Gallion recommends contacting local
Department of Commerce Export Assistance Centers (EAC) as well as State-operated
District Export Councils (DEC). "They [DECs] work closely with your EAC
and are a terrific source of information," he says. "They consist
of state business owners and service providers who do a lot of exporting. The
knowledge in these groups is unmatchable and it is totally free."
And what about the common pitfalls? These can range from a product's actual
customization (or not) to the specific market, payment risks, and the usual
language, cultural, and service issues.
Again, it comes down to being export ready and an overall familiarity with local customs, says Gallion. "You can find yourself in big trouble by doing something that seems very normal … but has a whole new meaning in another country."
A misunderstanding of international freight and/or financial terms can also be costly, sometimes without ever knowing why. Gallion again counsels U.S. manufacturers to make use of the EAC and the DEC as valuable resources.
"The best overall tip I can offer is ‘shut up and listen.’ Americans tend to talk a lot and try too hard sell the product. Hard sells don't work internationally." Even if potential customers are talking amongst themselves in a language you are not familiar with, listen and watch the body language. "You will surprise yourself at how much you will learn," adds Gallion. "And you will be surprised at how much better your sell becomes."
As a Frenchman operating in the U.S market, perhaps the last word should go to Antoine Maguin, who knows a thing or two about understanding cultural differences. Above all, he says, "Visit, respect, and understand your customer."
The rest is up to you.
