There are many ways that international manufacturer’s representatives and International Information Brokers (IIB’s) can be the missing link that is the difference between intent, inertia and actually starting or deepening your company’s commitment to exporting. United States companies and venture capitalists too bogged down and preoccupied with creating sales channels on their own home turf might want to consider one or more of the options below:
Consulting Services:Many times the reason that no export preparation takes place is because the whole process remains vague to the client. The variables can be so overwhelming that even though management wants to get started, the program remains in a kind of “warehouse of intentions”. Hourly or project based consulting can help better define the goals and programs can then be developed.
Outsourced Sales:If you think it is expensive and complicated to hire and staff people here in the USA, add orders of magnitude to doing the same overseas. Current technology, combined with international experience, allows a United States company to have their international manufacturer’s representative running their international department off site. Coupled with this can be consulting that trains regular employees to eventually run the department themselves. This can be done on a retainer basis.
SDI Services:The Selective Dissemination of Information (“current awareness”) can be used for a multitude of things. Here are two examples:
- Client wants to be educated on a specific country, industry or company overseas.
- Client wants IIB to do research to either confirm or disprove a report done internally on exports.
Finder’s Fee/1 to 2 Year Step Down Agreement:Although this is not the mainline business for International Manufacturer’s Reps, for an IIB it can be a natural fit. Even if the IIB does not have great understanding of the product, he can still spot the opportunity, leverage his international network of contacts, and influence the deal. With the majority of foreign currencies weak against the United States dollar, foreign companies are looking for inputs or enabling technology that can add value to their own products or operations.
Licensing Agreement Compensation:The rep’s customer wants the product to sell in their own country or region, but cannot afford to buy it in its finished form and/or the technology must be slightly modified to work in his part of the world. The Rep’s compensation can run in parallel with the licensing agreement between the two principals. In addition, the rep can then become an international sales representative for the new licensee (his ongoing customer through the licensing agreement) in selling the new licensed product into foreign countries.
But before further discussing how reps can make an impact in a rapidly changing world, let me offer some historical and current perspective.
At the height of the Renaissance in the 17th century, as modern times were most fully intruding as an established fact into the western world, tradition took a shot from which it has still never been fully able to recover. The obsessive zeal to track down and detain the absolute truth about life gave way to more practical concerns such as transforming the world with the new knowledge that was starting to be dispersed. As this knowledge grew and the arts flourished, the world was becoming not only more pleasant but less controlled by the narrow interest of the minority. One of the results of this was that long buried personal aspirations were able to grow thanks to the information that could no longer be as easily contained by the cartels of that time period.
Today in the United States, one would be hard pressed to declare that cartels of any kind are withholding information other than that which is proprietary. The internet, part and parcel of the cyber commons, has made the barriers to information so low that there is the threat of a continual breach in a company’s goal of the sustainable manageability of data. In the slower paced world of the 17th century, traditions had time to get entrenched and calcify; at the end of the 20th century, with the ongoing advancement of the microchip, is has become apparent that a perpetual coup is taking place against the past. Innovation is making tradition a quaint museum piece, and company executives and venture capitalists are starting to realize that these ideas and proposals that drive these technical innovations are not getting their highest possible return value on investment if they are only selling to the less than 5% of the world’s population that resides here in the North America.
This tendency comes about from a kind of cultural reflex in our collective business environment to narrow the scope of our sales efforts down to the people and companies here in the United States marketplace. That is, those things, places and people within the context of the United States culture. But with the advent of the WTO and its continued push towards liberalization of all world markets, the inevitable conclusion we will come to is this:The United States marketplace has been on loan to us, and the WTO, like a banker, is now calling it (the loan) in. Yet there is great news attached to this:The same phenomena, to one degree or another, is going to be happening to all WTO members around the world. The affected fiefdoms are up in arms and this opposition to liberalization, among various other reasons, got manifested in the raucous street protests in Seattle in December of 1999.
With the growing awareness that even relatively closed markets are an overall drag on the world economy, a deeper truth as to what the WTO is trying to achieve through their proposed legislation is the ending of relatively competition free markets amongst commercial cartels on a global basis. The opening of markets to outside competition not only makes the compensation to the producers more realistic, but it adds the very real benefit of lower prices to consumers. With this openness and accountability coming into vogue, the granting of certain concessions by governments to certain indigenous companies in certain segments of their own marketplaces was a dynamic of the Cold War that will no longer be tolerated. And although the WTO currently wields more power to act punitively against those breaking international trade laws, there is now another companion interventionist force on the world scene that is even more highly skilled at cutting away the dead weight in world markets.
In his book, “The Lexus and The Olive Tree”, Thomas Freidman calls this force the “Electronic Herd”. Piqued by opaque business practices, unconscionable governance, double accounting books, rigged bidding, bribes and egregious business management, the Herd are the banks, mutual funds, hedge funds, securities companies, foreign governments and an assortment of short and long term investors that can reward or pummel regions, countries or particular economic sectors based on the aforementioned economic policies and business practices. With the Cold War in our rearview mirror, a more exacting, brutal standard, to be sure, is now coming into being. One that says to domestic companies in their own countries that their tradition of uninterrupted gorging on their native economy is about to be opened up to allow in new commercials guests.
In short, within the framework of the WTO, the Herd is bringing about what the countries could not or would not do to negotiate an opening up of their respective economies to foreign exports and foreign investment during the Cold War. Given the reality of these new market opening forces, vis-a-vis the rather languid company exporting data in the United States, the question is whether United States companies have the wherewithal and requisite skills in international trade to take advantage of these opportunities? As is reflected below, as a percentage of our GDP (Gross Domestic Product), our exporting numbers point to neither deep or extensive international business literacy:
(COMPARATIVE GRAPH (in billions of United States dollars from United Nations Statistics) OF PHYSICAL GOODS EXPORTED, AS A PERCENTAGE OF GROSS DOMESTIC PRODUCT, IN 1998 BY GERMANY, JAPAN AND THE UNITED STATES. (Services were not factored in).
- GERMANY – 25.15%
- JAPAN – 10.26%
- USA – 7.46%
If established United States companies and freshly minted venture capitalist firms hire workers with skills and experience that are best suited for selling into and servicing domestic customers, how reasonable is it to expect that these same internal skills will serve the company well in going after foreign markets? While there is always some carry over of universal skills, it is in the nuances within cultures and the sub expertise within international trade and its innumerable variables of relationships and information where United States companies fall down.
Granted, macro economic data is very useful for broad decisions on what foreign countries to focus on. But a remote, impersonal, over reliance on such broad strokes to pick countries and partners within those countries usually means that the local anecdotal information flows – the stuff from the streets and the stores and the projects on those streets – will remain inaccessible. Information, or the right combination of amassed information, has embedded in it transactional material; a United States company would do well to keep this in mind as they budget for the necessary intelligence and right personnel who can adeptly use this information to facilitate their export program.
Products that don’t have value added to them on a systematic basis risk becoming commodities. International manufacturer’s representatives, or IIB’s, that do not niche, dig, research and, ultimately, add value to their basket of skills that they can offer to their clients risk becoming commodities themselves – pork bellies on the Chicago exchange, commercial meat. The bygone era of simpler transactions in a lumbering, less complicated, less competitive world abruptly ended in 1989 when the Eastern European cartel could no longer contain the same aspirations for freedom and expression those in the 17th century had experienced.
Since this historical awakening, not only has our nation’s product’s quality sharply improved, but the products themselves have come to embody some type of exalted laundry list of freedoms and values and aspirations much honored and yearned for by those formerly stifled by their own governments. No public relations firm could ever do what 20th century history has done to add that type of abstract and subtle value to our products. For United States companies considering auxiliary streams of revenue from exporting, this is a free, additional advantage. But it is still only part of the puzzle.
It is folly to believe that United States companies that make interesting valued added products, create employment, pay their taxes, give to charities, register as members of local business groups and exude overall commercial and civic earnestness will somehow qualify for special immunity from the rolling thunder of globalization. No such shield exists for any company in any country. Being overly vigilant only in the United States marketplace is an open invitation for a foreign competitor to feast and grow stronger on the other 95% of the world’s population, and then one day come to America and negatively rearrange your company’s life with cheaper, even inferior, products. Advancements in technology are happening so fast that there is a observable lag time before what is actually happening on the street finally gets transmitted to our teaching institutions. Similarly, the dynamics in globalization, accelerated forward by the WTO’s liberalization and the Electronic Herd, further erode the long term competitiveness of those United States companies that inadvertently cede overseas markets to competitors because they have not yet realized the historic international opportunities unfolding before them.
International trade in a globalized economy is a world of colliding data, leaned against obstructed niches sitting on top of teetering or robust companies and governments. In an ongoing attempt to create sorting mechanisms and make world trade more navigable than it currently is, the WTO and the Electronic Herd are insisting on a transparency of the commercial world unlike anything that we have seen before. In the interim between now and the relative compliance of the WTO member countries, one thing is definite:What we thought was information overload were merely just the preliminaries.
And here is another:When the Berlin Wall came down, the world entered into another epoch with liberal capitalism as the risen king of ideologies. All that is missing is an agreed upon dating system that shows that the world is one decade past that historic event which symbolically signaled a furthering of globalism’s expansion, the Electronic Herd’s ascendancy and the fact that people were no longer willing to be forced to submit to a closed down, localized existence. (If such a new dating system were put into place, the deeper understanding of the world’s dramatic shift would be more fully understood by the commercial sector of the United States. But do not expect this new dating system to appear anytime soon; our current dating system of A.D./B.C. did not come into common usage until the 11th and 17th centuries, respectfully).
With current data analysis already foreshadowing an inextricable link between valuable information and wealth creation (exports), the absolute necessity to see the world, connect the dots and strategize accordingly is becoming much more than a hallow slogan. Yet the world markets are not solely vessels for sales of United States goods and services; they are creative opportunities to positively impact the lives of multitudes of millions of people that can have their lives improved through our technologies. With the right information, the hinges on the door of international commerce will more fully swing open to not only new, value laden, innovative products, components and enabling technology, but the specialized services of international representative companies and IIB’s that have stepped into the vacuum that historical change creates to champion the products of United States companies who are too busy or not properly staffed to do so themselves.