Trade reps can help build a knowledge-based export infrastructure to produce sustained sales.
By Jeff Henderson
It rarely fails to happen. When it comes to internationally repping small, understaffed and domestically focused USA manufacturers not conversant with the nuances and realities of foreign trade, there is a peculiar dynamic of sprinting and then stalling.
First, the rep company ‘sprints’ to get the e-mail presentation and hard copies to the foreign buyer. That’s followed by the ‘stall’ while the manufacturer comes to grips with the fact his company is woefully unprepared to handle the whole integrated export process. This persistent scenario points out an ongoing need for research and extra-representational duties to better position small manufacturer to take advantage of export opportunities that would otherwise be out of reach.
Take the example I recently heard about a Chinese environmental official who was reprimanding U.S. environmental technology companies for pitching their products to the Chinese government. “As usual,” he lectured, “you Americans come over here with world-class technology that can best help us with various environmental problems and, as usual, we are not going to be able to issue you a purchase order.” Why not? Because, as the manufacturer didn’t realize, most large-ticket items exported into China need to have outside financing lined up by the manufacturers. Savvy, foreign international competitors, more highly dependent upon international sales, knew this going in. As a result, even with inferior technology, the foreign competitors got the order because they were more export-ready.
It is misconceived and outdated for U.S. companies to believe that advanced technology will by itself channel international buying decisions in their favor. The bottom line is that if the manufacturer does not have export infrastructure in place, regardless of how superior the product is or how willing the purchaser is, it’s unlikely a deal will get consummated.
What’s the answer for small and medium-sized U.S. manufacturers who are just entering the global market? Rep firms can provide valuable input filling in vitally important gaps in export infrastructure. With their assistance, the principal is positioned to become much more export-ready and participate in private and public sales opportunities in formally unforeseen segments of the foreign marketplace. Rep firms can provide invaluable content and a globally interlinked human infrastructure for principals that, if properly tended to, will soon allow for the type of opportunity and scope that might otherwise have remained fuzzy and undefined.
What can a manufacturer expect from an export rep? In Jeff Angus’ “Rethinking Knowledge Management” he outlined “four foundations” of knowledge management (KM) that have applications for the exporting of USA products. These constitute a reasonable check-list for services to be performed
Gathering – Reading through obscure books, articles and databases;
Organizing – Filtering and linking new information to the principal’s global potential;
Refining – Contextualizing the information so principal can eventually understand, accept, acknowledge and act;
Distributing – Alerting and sharing this evolving knowledge with people and institutions that have complimentary and export-enhancing synergies and missions;
Developing the intellectual foundations for an export infrastructure for small manufacturers is something typically overlooked and grossly undervalued in the expansion of overseas sales. But when the rep makes it a part of his or her business methodology, the process adds immeasurable value to the rep/principal cooperative relationship. When chance business is displaced by a strategic plan, formerly abstract ideas and concepts become tangible and can be fastened together into multiple international sales opportunities.
To be sure, it is a time consuming process to cross-link previously unknown knowledge and export-readiness information. But it’s invaluable. Why? The short answer is what Angus called “the value of effective reuse.” The rep embeds its own specialized, international expertise into the principal’s operations so that together they form a kind of synergy capable of ‘reusing’ knowledge from both sides to fuel an infrastructural feeder system.
The payoff is putting the principal in a position to benefit from financing programs, payment insurance programs, sales referrals from domestic, foreign, bilateral and developmental banks, trade facilitators and others. From a position of such strength, the manufacturer is better able to:
Anticipate and prepare for foreign market realities;
Increase competitiveness and comprehension in dealing with new challenges from rival companies;
Enter the loop of international marketing intelligence and horizontal referrals;
Build quickly deployable and reusable templates that will make the principal into a more adept exporter;
Achieving all of the above is no small feat. Because the majority of U.S.-based principals remain ambivalent about exporting their products, typically because they are ill prepared to sell into overseas markets. This is largely because they have not been trained to think globally nor understand how all the disparate elements in the process can cohere into a unified operation. The regrettable irony in this situation is that foreign buyers do, indeed, look to buy U.S. products and services because of their advanced and patented technology. When they are unable to consummate a deal for whatever reasons, they look to alternative suppliers.
While this might seem like ‘blue sky’ stuff to hard-nosed manufacturers, applying the principles of export-readiness and developing the foundations for an export infrastructure can readily produce results. It helps align the credibility of the principal’s technology with the international business acumen to preposition itself to sell that technological product into foreign markets.
The significance of this cannot be overstated. The trade facilitators and publicly owned financial institutions involved in international trade are continually approached by companies wanting to sell into overseas markets. If these decision makers conclude that the principal has done the necessary infrastructural spadework to sustain a meaningful export program, they are more likely to by favorably disposed to lend support to the deal.
And as shrew businesspeople know, nothing succeeds like success. The first consummated deal links the manufacturer and rep into facilitation networks with other government officials, foreign principals and organizations.
These trade facilitation networks are aware that prepared U.S. principals are more likely to achieve exporting success. Consequently, companies that invest as much effort into their export readiness as they did into their patents are more likely to avoid failure and the embarrassing snafus that can cripple and unmoor global expansion efforts.
Given the chronically lopsided trade imbalance that the USA annually suffers in the ferociously competitive international marketplace, an emphasis on export-readiness deserves to be a national priority. The rep is the key to this—so long as the process combines knowledge management with other assets.
Nonetheless, domestic preconceptions about international trade remain hard to shake. To principals who has never been off of the North American continent, Sri Lanka or Seoul might seem like little more than a distant suburb of Sacramento. Mistakes ensue from thinking that the same kind of marketing and sales processes that work at home are equally appropriate abroad. Instead, each market embodies a unique subset of specialized knowledge that needs to be implemented.
That’s why the international rep relationship is so critical and needs to be approached with more seriousness than is often the case. A systematic build-out of export infrastructure is a prelude for the international sale of U.S. products. Doing this entails the rep’s time, energy and knowledge. Without these extra efforts, a manufacturer will typically remain passively dependent on arbitrary contacts from foreign customers.
But when the rep firm makes knowledge management operational and it is interwoven with various facilitators all actively advancing the cause of the client’s products, the principal’s sales process will bring the real tangible value of a reusable, export-ready apparatus into play.
WORLD TRADE MAGAZINE, SEPTEMBER, 2004