When manufacturing businesses start up, they tend to concentrate sales efforts in known markets based on known users of their products and known distributors and sales territories. As they grow, they often overlook profitable sales opportunities outside of the United States.
The U.S. enters into free trade agreements with foreign countries to reduce trade barriers between the two countries and allow open access to new markets for products produced by U.S. companies, particularly manufacturers. Yet, less than 35 percent of small- and medium-sized manufacturers (SMMs) take advantage of access to foreign markets by exporting their products. The 2006 RSM McGladrey National Manufacturing and Wholesale Distribution Survey found half of respondents expect no revenue growth in this area.
While agriculture exports $60 billion per year, manufacturing exports $60 billion per month. SMMs, which represent more than 99 percent of U.S. manufacturers, account for more than 40 percent of all manufacturing output. Yet, SMMs are particularly vulnerable to the effects of global competition on market share.
So, why aren’t more SMMs getting involved in the global economy and taking advantage of newly opened markets? To be realistic, exporting isn’t a simple or inexpensive task—especially when companies lack in-house experience.
Finding quality information about market opportunities for products can be expensive and difficult. Regulatory requirements vary from country to country and add complexity to the process. Language barriers, weak intellectual property rights, cultural differences, corruption and difficulties obtaining financing can also contribute to risk and uncertainty.
Despite these challenges, companies should still consider exporting for a number of reasons:
- In today’s worldwide market, larger and faster vessels and cargo containerization has lowered the cost of transportation.
- Overbuilding of fiber optics capacity during the dot-com boom has driven international communication costs to historically low prices.
- Demand for products produced in the U.S. increases as the standard of living increases in foreign countries.
- Incremental volume increases achieved through exporting can help SMMs improve their cost structures.
Additional opportunity involves forming links with multinational enterprises which build factories in foreign countries (typically to serve markets in those countries). These companies are often challenged to find high-quality parts locally. Forming links with such enterprises to provide parts in a timely manner is one way to access foreign markets.
Although entering into exporting can be a formidable challenge, manufacturers can access export assistance from the Department of Commerce, as well as trade associations in many states. Companies interested in exporting can also work with a growing number of professional service providers to develop markets around the world.
The U.S. Commercial Service, the trade promotion unit of the International Trade Administration and part of the Department of Commerce, has a network of export and industry specialists located in 108 U.S. offices and 150 international offices in 83 countries. The U.S. Commercial Service helps SMMs grow international sales through market research, trade events that promote products or services to qualified buyers, introduction to qualified buyers and distributors and counseling through every step of the export process.
For locations and information about U.S. Commercial Service offices and other resources, call 800-USA-TRADE or visit www.export.gov. This website serves as the U.S. government’s export portal for companies just beginning to export and those expanding their international sales. It provides online trade resources and access to one-on-one counseling.
In this increasingly competitive global environment, it’s increasingly imperative to run businesses more effectively and take advantage of every opportunity. In this case, it means becoming part of the global supply chain through exporting. IBI
