Why Your Business Should Be Exporting

Why Your Business Should Be Exporting
By Brian Lane

A significant proportion of thriving firms today are exporting their goods and services. Here's why (and how) your business should follow suit.

Accounting firm McGladrey's Manufacturing Distribution Monitor Fall 2011 Edition reveals that 43 percent of manufacturers and distributors are thriving and growing, and a large proportion of those are exporting. What does the correlation mean for companies looking to expand into the export market?

According to McGladrey's latest survey of 511 manufacturing and distribution leaders, 71 percent of respondents are exporting to foreign countries, with most exporting to Canada (82 percent) and Mexico (54 percent), and Western Europe (excluding Germany, the Netherlands or the United Kingdom at 38 percent), the U.K. (38 percent) and China (38 percent) rounding out the top five destinations.

Notable growth markets include Brazil, Central America and South America. Meanwhile, exports to China have slowed, which McGladrey ascribes to the market becoming "ever-more sophisticated and thus harder to penetrate." The accounting firm also notes that free trade agreements (FTAs) with Colombia, Panama and South Korea were signed after the period of the survey. How these FTAs will affect exports to countries remains to be seen.

Today, the companies most likely to export are in the biotech (88 percent), industrial machinery (84 percent), textiles and apparel (83 percent) and automotive (82 percent) industries, while companies dealing with building materials (59 percent), food and beverage (57 percent) and wood, paper and printing (41 percent) are in the bottom tier of exporting companies.

According to McGladrey's findings:

•Customer and/or key client demand is the most common reason for exporting;

•Interest in exporting to Central America and South America is rising, and Brazil seems to be where mid-market manufacturers see the greatest growth potential; and

•Initial forays into offshore markets tend to focus on transactional issues, while firms' subsequent moves into additional foreign markets focus more on strategic issues.

While the majority (52 percent) of respondents reported increases in exporting activities over the past year, a striking finding is the correlation between growth in exports and organizations' health: Approximately 60 percent of the companies that are thriving have increased their exports, a sign that exporting sales is recognized as a key driver for growth.

"The takeaway is if you're not exporting, you need to think about exporting," Karen Kurek, national manufacturing leader for McGladrey, recently told IndustryWeek. "And if you are exporting, you need to think about ways you can enhance that activity."

Companies looking to expand their export sales may be intimidated by such a large undertaking, but resources for research and partnership are readily available. In a separate report, IndustryWeek asked several industry leaders who focus on exports for their advice:

1.Actively select the markets you pursue. Do research and take advantage of free trade agreements the government has with nearby countries. "The decision to go into new markets should be thought of not as one big, irreversible commitment but as a series of smaller experiments from which you can learn," according to Frank Lavin and Peter Cohan, authors of Export Now: Five Keys to Entering New Markets.

2.Recognize that different markets require different approaches. SASCO Chemical Group President Marc Skalla says that people should "learn the culture of the market [they] want to enter," as foreign markets aren't always receptive to American products.

3.Establish and nurture international relationships. Kathe Falls of the Georgia Department of Economic Development noticed a trend: American companies would enter foreign markets, develop relationships with local customers, then abandon them when the U.S. economy improved. Consistent and considerate relationship maintenance is key to avoiding this misstep.

4.Develop partnerships. Developing relationships with in-country partners can help exporters avoid a multitude of worries. "Whether it's a selling agent, distributor or wholesaler, it's always a good idea to have local expertise involved when trying to penetrate new overseas markets," Daniel L. Gardner, CEO of Ocean World Lines, says.

5.Don't overlook government resources. Because government agencies already have a foot in the door in foreign countries, they can assist companies with a wide range of services, including finding booth space at foreign conventions or providing free market research.

More information on federal support can be found through the International Trade Administration. Additionally, the White House's National Export Initiative is designed to ease restrictions and provide resources to companies looking to export.

Resources
Manufacturing & Distribution Monitor: Fall 2011 Report

McGladrey, November 2011
Business Accelerating Despite Concerns about Government Gridlock