Last updated on July 3rd, 2019 at 04:32 pm
It is not hard to see the draw of exporting for Wisconsin companies. The U.S. population is a little under 330 million while the rest of the world has another 7.23 billion people, meaning more than 95 percent of the world’s population and potential customers are outside of the United States.
Most companies also like the idea of new customers. So, when a random order shows up from China or Germany or the Middle East, the natural inclination is to find a way to fulfill it. In a situation like that, some companies might even bend from their normal payment terms, thinking the opportunity for a foothold in a new market outweighs the risk.
But the problem with that line of thinking, according to international trade experts, is even if it works perfectly, businesses filling orders in situations like that are still exporting by accident. They are not necessarily going after the best opportunities and there are still plenty of risks. Maybe the company’s product runs afoul of import regulations in the new country and ends up stuck in customs. Maybe the potential buyer misrepresented itself and had no intention of paying.
Wisconsin experts say the best way to approach exporting is to be intentional and strategic. Among the resources is ExporTech, a program run by the Wisconsin Manufacturing Extension Partnership with support from the Wisconsin Economic Development Corp. The program helps companies identify potential target markets while also helping them learn about financing, logistics, payment terms, trade agreements, regulations and documentation and other risk factors.
John Cornell, president of Grafton-based Crescendo Trade Inc., is not involved with the program but said, “It really is a soup to nuts platform to best help you succeed”
“Really the alternative is you kind of figure it out as you go. That is the exact opposite of what I would recommend,” said Cornell, whose business offers trade credit insurance.
Beyond ExporTech, there are some key approaches to having more success internationally, including targeting specific markets and understanding their nuances, having buy-in from senior leadership and using resources and partners to mitigate risk.
Which markets to target will be a decision that is specific to each company and country. Last year, for example, the top Wisconsin export to China was related to x-ray equipment, according to U.S. Census data, but to Germany it was aircraft parts and to Mexico it was parts and accessories for motor vehicles.
Just as the target markets vary by company or product, so too do cultural practices. Katy Sinnott, vice president of international business development, pointed out a German CEO is generally much more likely to be well versed in the engineering and technical aspects of a product or production than their American counterpart, potentially altering how to prepare or who to bring to a meeting.
“It’s important to understand those cultural nuances,” she said.
Cornell pointed out things like exchanging a business card in China or seeking payment in Latin America are done much differently than in the U.S. Taking the time to learn local norms or the proper pronunciation of a name can go a long way.
“You’ve got to start off respecting their norms,” he said, noting that even getting something wrong but showing an effort to do it properly will help.
With targeted markets identified and an appreciation for cultural differences, companies can set about the task of finding new business. However, Paul Byrne, global vice president of sales and marketing at Menomonee Falls-based Bradley Corp. said those new to exporting should expect things to take a little longer than planned to develop.
“You have to have patience and this is the hardest thing for senior leadership,” Byrne said during a panel discussion at the Manufacturing Matters conference presented by WMEP. “If your CFO is looking for a hard nuts ROI, it’ll come, but it won’t come early.”
Byrne said part of the return on investment comes from lessons learned in international markets that can be applied in the domestic part of the business, including new product ideas, process improvements or just ways of doing business.
“Those things are worth their weight in gold,” he said.
Patience is important, but sometimes things do not go according to plan. Brian Wagner, president and CEO of Stevens Point-based Gamber-Johnson LLC, said his company decided to target Brazil while going through the ExporTech program. When the company tried to execute on that plan, it realized the market was not as ready as expected. In that case, it was important to be impatient and fail quickly, he said. Gamber-Johnson moved on to other targets and has since returned to Brazil and found success.
“It really was just a matter of a few years, but we were just a little bit early at the beginning,” he said during the WMEP panel.
It is important to have senior leadership involved to make strategic decisions when it comes to exporting. Roxanne Baumann, director of global engagement for WMEP and moderator of the panel, said in her career she has most often seen international sales efforts fall apart when they are left isolated and on their own.
“You always want to have that executive buy-in and if you don’t you have to start cultivating it,” Baumann said. The ExporTech program, which she runs, requires at least two senior executives to attend.
While much of exporting will be the same as doing business domestically, there are key differences. A product could have different labeling or packaging requirements or perhaps freight has to be handled in a certain way.
“It can be all kinds of different things you don’t normally run into,” Byrne said. “It’s not difficult, it’s different.”
He said it is important for a business’ support function to be trained on what to expect from international orders and how to handle the differences, not necessarily for the first orders but for when the initial excitement is gone.
“You’re going to hand carry (the first few orders) through,” Bryne said. “The CEO is really interested. It’s when the CEO stops talking about it that things start to revert back, that’s when you start to have issues.”
Tom Gaglione, a consultant and former vice president for global trade at J.P. Morgan Chase, said it is important for businesses to have people from their international sales, credit, compliance, legal, treasury and finance teams all working on export deals concurrently.
“Too often I find this to be a sequential process in a lot of companies,” he said, noting that working on the deal simultaneously can help surface potential problems earlier in the process. As a banker, he said he would rather hear about an issue earlier instead of dealing with it at the last minute.
“If you come to us sooner, we can help make it easier, Gaglione said during the WMEP panel.
Having strong external partners can help mitigate the additional risks – be they compliance, political or payment related – that come with doing business internationally. Baumann said a banker that understands trade credit is important; Cornell said a strong freight forwarder is also key. Many exports pointed to available government resources like WEDC and the U.S. Commercial Service.
Sinnott said WEDC’s programs are designed to help small and medium businesses.
“They’re the ones that really need this support,” she said.
In addition to scholarships for ExporTech, WEDC also runs global trade ventures that are subsidized by the state. There are annual trips to Mexico, Canada and China while other countries are selected based on interest. The agency also has access to a network of trade representatives on a fee basis in 82 countries.