How Government Can Help Small And Midsize Manufacturers Export
This article first appeared in IMPO's April 2013 issue.
In 2009, President Obama set a goal of doubling exports in 5 years. The President portrayed his initiative as a boon for small companies, likely because fewer than four percent of all service businesses export, according to the Small Business Administration.
In the mid 1990s, I did a survey of small and midsize manufacturers (SMMs) and asked “When was the last time you conducted market research?” 70 percent of the manufacturers answered “Never.” We also asked them if they had a written business plan that defined the company’s marketing strategies and 90 percent said “No.” These answers confirmed what I had discovered in my own experiences and field work with manufacturers all over the U.S. Any government program that wants to help them export should know that the vast majority of SMMs do not do market research or write business plans. So the question is — How can government agencies help SMMs export?
Jason Stoeker is the CEO of Airfloat LLC, a company in Illinois that manufactures an air bearing product that moves large products around the assembly floor for companies like Boeing, Caterpillar, and Ford Motor Company. When I called Jason recently, he had just returned from a long trip to Europe, which included developing a partnership deal with a company in Italy.
Jason feels the best way to market his type of products into foreign markets is to look for potential partners. Specifically, Jason looks for similar companies who will distribute his products in foreign markets and he will sell their products in the U.S. The partnership can be in the form of a licensing arrangement or joint venture.
I asked Jason if he had used any of the government agencies that want to help American manufacturers export. He said that he had tried to get government help, but there were two big problems. First, he said that there were too many government departments that were in the export business and it took a lot of networking time to find someone who could help him with his specific export problems. He also said that the answers he got from government agencies were too general and did not boil down to something that would help him get immediate orders.
Practically speaking, he feels that there are two ways the government can help in exporting. First, the government should spend more time and money helping the SMMs to protect their technology and intellectual property. Second, the government should invest their resources in helping to offset the costs of visiting foreign countries and attending trade shows. For instance, the state of Illinois paid for 50 percent of his travel expenses and his trade show booth costs when he visited Germany and England.
Says Jason, “Most SMMs simply do not relate to seminars, research, or export planning. They are much more interested in the services and assistance that gets them closer to getting orders.”
Another owner of a small manufacturing company has similar thoughts about government assistance. Hal Hickman is President of Powerhammer, Inc., which makes large pneumatic hammers that are designed to knock risers (pouring spouts) off large castings in foundries. Hal was literally forced into the export business because most of the foundry business moved offshore to low cost countries around the world. His customers are now foundries in Asia, South America, and Eastern Europe, and he must visit them in their markets to sell his hammers.
He has found the best method to get his products in front of international buyers is to attend foundry trade shows around the world. However, since these shows are in international locations, they require significant cost.
Hal is much like Jason Stoeker in that he feels SMMs cannot afford to do market research or strategic planning. To decide to attend a show, he needs to believe that he has a strong chance he will eventually receive an order that will justify the trip. Hal also believes that the best thing that governments can do to help manufacturers export is to help offset the costs of getting there. He was assisted by the state of Oregon’s Global Trade Department, and they paid 50 percent of his travel and trade show booth costs for various countries.
A Consultant View
Another viewpoint on the export business comes from Chad Summers. Chad is a consultant and President of the OR-based firm 2 Lane Marketing, which focuses on helping SMMs grow. He feels that government’s role in helping manufacturers export is to do more in assisting them with legal issues and technology protection. Chad says, “It can be scary not knowing where to turn if an agreement is broken and what options you have available to protect your business when not on U.S. soil.” In his experience as a company owner and consultant, he has found that SMMs do not really understand industrial marketing and most cannot afford to pay for market research. While he feels government research is sometimes interesting, “it is usually too broad and rarely provides specific market data most businesses require to take action and secure business abroad.”
From his own experience, Chad feels that most SMMs can find out how to target a country or specific customer by following U.S. companies overseas, finding out where competitors are selling, or in speaking with a U.S. consulate in a foreign country. Whether through an introduction from another U.S. company to an overseas market or through the help of a U.S. consulate in a foreign market, the objective is to find a guide who can introduce you to specific potential partners or customers for your goods, and help you understand what challenges to watch out for. Visiting foreign countries is much more expensive than making a sales call in the U.S., and offsetting those costs with government assistance could help lower one of the barriers for SMMs to begin selling abroad.
If SMMs are going to be the targets for the government’s goal of doubling exports, then government agencies should take a hard look at who they are and what they do. Manufacturers with fewer than 100 employees make up about 90 percent of manufacturing establishments. If we are really going to make progress in doubling exports, governments need to do some market research of their own to find out more about these manufacturers and what they really want and need to get into the export game.
I am very encouraged by the fact that some state governments have figured out that offsetting travel and trade show costs is something SMMs want and need, and are already achieving results.
Mike Collins is the author of Saving American Manufacturing. You can reach him on the web at firstname.lastname@example.org.