The world is yours

Posted on May 1, 2014 :: Cover Story
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Posted by , Insight on Manufacturing Staff Writer

If you’re a New North company with a great product or service that could appeal to clients anywhere in the world, economic development officials want you to consider exporting.

Yes, you.

Global New North, an initiative of New North Inc. and regional economic partnerships, is organizing a trade venture to South America in September. The trip was developed after a study on exporting completed by Newmark Knight Frank (now Newmark Grubb Knight Frank) in 2010. One of the key findings of the study was that New North manufacturers and other companies weren’t really talking much about exporting yet.

“I think in general this region tends to be somewhat conservative and a little bit risk-averse,” says Dani Long, owner of the Chilton-based International Business Development, Inc., which is helping to organize the trip. “I think that leads to the mindset of, ‘Well, we haven’t conquered all of the U.S. – why would we look outside of the U.S., because we haven’t even engaged every single potential market here?’”

But programs and initiatives designed to get the word out about exporting are starting to shift that perception, Long says.

“I think this is what’s changing – the awareness of the potential of those international markets,” Long says. “As people become more aware of exporting as an option, their view of it as a risky venture diminishes and they become more willing to try.”

Global New North hopes to recruit about 10 New North-based companies for the 10-day trade venture in Colombia, Peru and Chile. A Wisconsin Economic Development Corporation grant will cover part of the cost of the mission, which includes individualized market assessments, partner searches and meetings with companies whose needs match with products or  services offered by businesses in the New North.

“The Global New North initiative is really about diversifying the customer base or the market base for the New North, so this is really an extension of some of the work that we’ve done in targeting different markets or new markets for resident business and industry,” says Jerry Murphy, executive director of New North.

Many companies fall into exporting for no other reason than someone asked them to ship a product internationally, says Tom Baron, associate planner at the East Central Wisconsin Regional Planning Commission and co-chair of Global New North. “So it really wasn’t an awareness – it was more a reaction to something.”

That’s been part of the reason why exporting has remained underdeveloped in the New North, Murphy says.

“I think everybody understands that diversifying a market, including new targets who are off-shore, is something strategic,” he says. “It’s something that should be well-laid-out, logical and should be a complement to the type of business and industry that are our strengths.”

The exporting study was an attempt to put some strategy into export diversification, he says.

“That study essentially said that our cluster industries within the New North genuinely have export market potential, but that won’t happen as fast as you might want it to, or as strategically, synergistically or efficiently as you might want it to, without interjecting some organizational capacity,” Murphy says.

That meant getting local economic development officials involved because they have contact with local markets and know what the capabilities are and then connecting them to the offshore market potential, he says.

“The last piece has been oriented to two things: One is recruiting companies to a specific trade venture, and the other is providing tools that would help local developers and companies accelerate their learning curve around what exporting is and is not, and what the available resources are,” Murphy says.

A lack of awareness has been one of the main barriers to attracting companies to exporting – as well as working through issues such as financing, communication and political stability, Baron says.

“We really wanted to just uncover what’s happening currently with exporting, where do we see opportunities, and I think we learned quite a bit more than we even thought we would – that to some extent in the region those conversations aren’t happening,” Baron says. “So part of our work is focused on training or trying to get those discussions going.”

Those conversations have started happening during the past few years, Long says.

“There’s been more of a push for an awareness of international markets as a viable option in Northeast Wisconsin in particular,” she says. “It’s kind of funny because about the time Global New North was doing their study, we were writing our business plan. And in our research, we found that statistically Northeast Wisconsin is well above the national average for manufacturing, but they’re also well below average for exporting. People are not taking full advantage of the markets that are available.”

Mark Rhoda-Reis of WEDC says about 8,000 to 8,500 Wisconsin companies export products, and exports in 2012 were $23 billion. “We believe there are upwards of 14,000 companies that could potentially be an exporter,” he says.

But a lot of companies that are exporting may be doing only one or two shipments or ship to one or two countries, he says.

“Part of our work is to get more companies exporting, period – just looking internationally,” Rhoda-Reis says. “And then the other part of it is to work with companies to help them grow their global footprint. The common statistic everyone’s talking about is that 95 percent of world consumers are outside of the U.S.”

Global New North and the WEDC hope to offer trade ventures annually, alternating between missions geared toward companies with some experience in exporting and those new to it. New exporters may find it easier to start with Mexico or Canada, because of proximity and fewer cultural barriers, says Dave Thiel, co-chair of Global New North. A venture already is being planned to Toronto and Montreal in 2015.

The trade ventures offer a controlled environment in which potential partner companies already have been screened, Thiel says. “They already know about your product and what you do, and they’re interested, and they believe that your product is worthwhile. Wisconsin has long been known as one of the top manufacturing states in the country, so we’ve been recognized for a long time as making really good products.”

While exporting is a more attainable goal than some companies might initially believe, it’s not for everyone.

“I think if someone has a problem in their production or their design, or they have some financial difficulties, then sometimes they’ll say, ‘Well, if I go overseas, maybe I can get these huge orders and that’ll make the company great, and I’ll sell my way through these financial problems,’” Rhoda-Reis says.

But it takes time to develop overseas relationships, and it does cost something, particularly if you need to adjust to different labeling requirements or modify a product. If you don’t get a return on revenue until a year or 18 months later, that’s not really helping yourself out, he says.

For companies ready to start or to expand their exporting capabilities, working with Global New North and joining the trade venture can be the next step. Additionally, programs like the Export Development Strategy and Market Entry Planning (ExporTech), offered by WMEP, are a good way for new-to-exporting companies to start.

“Our favorite people to work with are ones who have been to ExporTech, for example, because they’ve already invested in the idea of growing globally,” Long says. “But it can be the kind of thing where you end up with an export plan in a binder on the shelf, and unless someone is there actively pushing to give it some legs, it may never come to fruition.”

Desired Industries
How do you know if your company makes something or provides a service that would be popular in South America?

“There are areas that have been traditionally solid in (South American) markets, and we’ve identified some of those industries,” says Dave Thiel, co-chair of Global New North. “But we never want to leave out the fact that there are opportunities for all kinds of businesses. If you have a great product or service, you can probably sell that anywhere around the world. You just need help connecting with the right people.”

Targeted industries include:
» Processed foods
» Aviation and aerospace
» Industrial and electrical machinery
» Agricultural goods and equipment
» Mining and construction equipment
» Water and environmental technologies
» Engineering, architectural, IT, financial and business development services

New Trade Agreements
U.S. officials are examining two trade agreements similar to NAFTA, or the North American Free Trade Agreement, the U.S. entered into with Mexico and Canada.

The Trans-Pacific Partnership Free Trade Agreement, or TPP, would join the United States with 11 Pacific Rim nations, including Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and Japan, and would also include Mexico and Canada. A pact with the European Union, the Transatlantic Trade and Investment Partnership, would allow free trade with those nations. Both pacts would help boost American exports, but discussions also are weighted with issues encompassing organized labor, environmental protection, worker safety/human rights and the impact overall on the American economy.

“I think in general these agreements are beneficial,” says Mark Rhoda-Reis, market development director for the Americas and Europe, Wisconsin Economic Development Corporation.

Anything that can help U.S. companies overcome trade barriers will help boost exports, Rhoda-Reis says. It’s not always about removing tariffs, which aren’t necessarily high, he says, but it can be about removing other obstacles to doing business.

“Some of it’s because of the way their regulations work versus ours,” Rhoda-Reis says. “Not that they’re trying to toss everything out and make everything unsafe, but it’s really more about harmonizing those regulations so that everyone knows the rules of the road.”

While there’s optimism these agreements will be approved, they are complex with a multitude of regulations, all with things the partner countries and the U.S. feel are important. While NAFTA gets some hard knocks, the newer agreements have incorporated some of those earlier concerns about labor and the environment to give everyone a level playing field, Rhoda-Reis says. “Because so many countries are involved, the hard part’s going to be reconciling all those differences in some key areas,” he says. “But we’re optimistic we’ll be able to get it done.”

Learn more
For an application to participate in Global New North’s Trade Venture 2014, which will visit South America from Sept. 13 to Sept. 23, contact Dani Long of International Business Development, Inc. at [email protected] or at (920) 358-5128. The state provides up to $10,000 in grant funding for the program. The cost after grant funding is $4,765 per company for the market assessment, partner search and other fees and costs, plus $5,770 per person for airfare, hotel and meals.

Read more about the trade venture and Global New North at www.thenewnorth.com/strategic-initiatives/global-new-north.

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