International
International
HOT SPOTS Yes, the challenging economic situation has made life tough for many ad specialty suppliers. But, strange as it may seem, that’s why there’s no better time to take advantage of the global economy. BY JOHN MOORE
WWW.SUPPLIERGLOBALRESOURCE.COM SEPTEMBER/OCTOBER 2010
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INTERNATIONAL EMERGING MARKETS
W
hile the United States, Western Europe and Japan deal with the residual effects of the recession, demand among emerging marketplaces remains strong and is growing stronger. And, more and more North American ad specialty suppliers are taking notice. According to the U.S. Commercial Service, which helps U.S. companies expand into foreign markets, 23% of its clients exported for the first time, entered a new market or increased their international market penetration in 2009 – a 3% increase from 2008. Additionally, the number of small- and mediumsize exporters more than doubled between 1992 and 2007, and nearly three-quarters of exporters have fewer than 20 employees. “There’s a little more urgency to tap into and find additional markets,” says Larry Harding, founder and president of High Street Partners, an Annapolis, MD-based firm that consults clients on international expansion. “The ones that are coming online for the first time or have hyper growth rates are really attractive.” Expanding your business to global markets can open up new revenue streams, diversify your risk and expand your client base. You just need to know where to look. Hit the BRICs The so-called BRIC nations – Brazil, Russia, India and China – have captured a lot of attention as the supercenter of emerging nations. These four countries account for more than 40% of the world’s population (China and India alone account for more than a third). With a growing middle class (China’s middle class will reach 360 million people by 2030, according to the World Bank), opening of trade markets and an appetite for American products and services, the BRIC economies have been the focus of much international expansion for the past several years. “These countries have experienced a lot of growth the last few years, while the U.S. is going down,” says Mona Pearl, a Chicago-based globalbusiness expansion consultant. “There is a whole new group that can afford to buy. And, they’re always looking for U.S. products because they’re known for quality – and it’s just cool to own U.S. products.”
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SEPTEMBER/OCTOBER 2010 WWW.SUPPLIERGLOBALRESOURCE.COM
The National Export Initiative, an executive order signed by President Obama in March, is aimed at doubling U.S. exports in the next five years. “China is a rapidly growing market, and the second largest importer of goods,” says Bonni Shevin-Sandy, president of Dard Design/Dard Products Inc. “And India is considered to be the world’s fastest growing auto market.” Shevin-Sandy, who also runs Dard’s overseas sales and sourcing arm, adds, “China now has the world’s fastest-growing economy and is undergoing what has been described as a second industrial revolution. In the second quarter of 2010, China’s economy was valued at $1.33 trillion, ahead of the $1.28 trillion that Japan’s economy was worth. China could become the world’s largest economy sometime as early as 2030.” Experts say Brazil in particular is the hottest growth opportunity for American companies. The country moved up eight spots – the best of any BRIC economy – to rank 56th on the World Economic Forum’s (WEF) 2009-2010 Global Competitiveness Index. Also helping matters is that Brazil is closer to the U.S. than the other BRIC nations. And, with a population of more than 200 million, Brazil has the largest and the most complex market in Latin America. Brazil’s economy is expected to grow by 4%-6% every year. According to an International Monetary Fund report, the country is at the forefront in taking Latin America out of its recession. “We have seen a noticeable uptick in the amount of client expansion moving into Brazil so far this year,” Harding says. “It’s definitely becoming much more on par with China and India. The currency’s been stable for the longest time in modern history. They’ve got a pretty stable government leadership in place. And, it’s hosting the World Cup in 2014 and the Olympics in 2016.” WWW.SUPPLIERGLOBALRESOURCE.COM SEPTEMBER/OCTOBER 2010
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INTERNATIONAL EMERGING MARKETS
Red Hot BRICETS While the BRICs continue to be the focus of many businesses looking to expand globally, two new players are providing them with company. The growth of Eastern Europe and Turkey has led to the term BRICET to describe the new core of emerging markets. Among Eastern European nations, Poland stands out. Now fully committed to a market-based economy, the country moved up seven places to rank 46th on the Global Competitiveness Index. According to the WEF report, “Poland benefits from its strong educational system and large market size, and has seen measurable improvements in the quality of its public institutions, with greater confidence in the efficiency and honesty of the country’s public servants. This, along with prudent regulation of financial markets and the large size of the domestic market, has helped Poland to weather the effects of the current global downturn and become one of the most economically stable countries in the region.” Turkey, meanwhile, moved up two places to rank 61st on the Global Competitiveness Index. The WEF noted Turkey’s “strong competition and reasonably sophisticated business practices.” Ayse Oge, president of Ultimate Trade, an Encino, CA, company that assists small- and medium-size businesses in competing in international markets, notes that Turkey’s business opportunities are no longer centrally located. “There were three big cities in Turkey about 30 years ago,” she says. “Now the growth is in the eastern part, the northern part, almost everywhere. There’s a lot of untapped potential in terms of growth.” Beyond the BRICET economies, experts say companies can find several opportunities in the Middle East and Latin America. The United Arab Emirates – particularly Dubai and Abu Dhabi – are fertile ground for expansion, as is Bahrain, according to Oge. “Dubai is facing an economic bubble burst, but they have built the infrastructure,” Oge says. “There’s a lot of admiration toward American products, so the American brand means a lot. And, there’s a lot of closeness on the part of Bahrain toward the United States.” As for Latin America, Oge says that Chile has emerged as an up-and-coming international market. Since Chile signed a free-trade agreement with the U.S. in 2003, American exports to Chile have more than doubled. Finding Opportunities Shevin-Sandy points out that China is the fastest-growing pharmaceutical drug market in the world. “But, here’s the catch: It’s easy to find drug companies working in China, but not so easy to find ones that will let you profit off the trend,” she says. “Most of the world’s biggest drugmakers have antici-
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SEPTEMBER/OCTOBER 2010 WWW.SUPPLIERGLOBALRESOURCE.COM
pated this market shift for years. Pfizer, Merck, Novartis and GlaxoSmithKline have all established Chinese operations within the last decade. British-based AstraZeneca and Germany’s Bayer lead the multinational corporations in market share.” These large entities all offer sales opportunities for North American suppliers, whose products are perceived as being safer than those produced in China. Knowing which emerging international markets to enter requires a lot of research and planning. There are plenty of statistics readily available, from the WEF’s Global Competitiveness Report to the World Bank Group’s Ease of Doing Business Index (www.doingbusiness.org/economyrankings). The U.S. government is committed to helping small- and medium-size businesses precisely like supplier companies expand globally. The National Export Initiative, an executive order signed by President Obama in March, is aimed at doubling U.S. exports in the next five years. The program assists with financing and education and works to reduce trade barriers. But, Oge emphasizes that business owners must get their hands dirty before venturing into overseas markets. “They have to travel to that country and see it firsthand,” she says. “Training is crucial to get to know foreign markets. I would suggest businesses go out to trade shows, talk to people, distributors, agents. Try to look for distributors and agents who are reliable. I would not suggest you go alone, especially for small busi-
Things You Should Know Before You Expand Doing business globally is a great way to access new revenue streams and diversify during these recessionary times. But, it’s not as simple as shipping a box of products off to China. “There’s a whole list of questions that companies should ask themselves in order to find out what’s going to work for them,” says Mona Pearl, a Chicago-based global-business expansion consultant. “If they’re looking to export, they need to find a salesperson for distribution. You have to find somebody you can trust. That can take six months to one year. Not to mention all the red tape just to make sure you’ll be able to distribute and get the right contacts and people and do it right. “And, your stuff is going to come out of customs,” Pearl adds. “U.S. companies are used to shipping something to California and it’s there next week. The whole notion of six months to a year – it’s costing them money and they’re not making money.” Here are some other points to consider:
nesses. It’s always good to be connected with foreign distributors and agents.” (See sidebar, “Things You Should Know Before You Expand.”) And, as Pearl points out, the countries that offer the biggest opportunities in general terms may not be the best fit for your business. “Looking at the world, forget about the up-and-coming markets mentioned in the press,” she says. “China has billions of people, but can you actually make it happen? As many companies that made money in China, just as many lost money. Find out what you want to do. Do you want to acquire? Do you want to sell? What about pricing? Maybe there’s promise in the market, but what’s the cost of doing business?” It’s a big world, and the global opportunities for suppliers are getting bigger every day. Emerging economies in Asia, Latin America and the Middle East are increasingly becoming attractive outposts for American products and services. “They’re young and affluent, in contrast with the aging population of the United States and Japan and Western Europe,” Oge says. “They’re changing the conventional economic order. They are the fastest-expanding markets in terms of the industries they are involved in.” John Moore, a financial reporter for CNBC, is a frequent contributor to Supplier Global Resource. ßà
UÊÊ ÃÌ>L��Ã���}Ê«>ÀÌ�iÀÃ��«ÃÊ��Êv�Ài�}�Ê�>À�iÌÃÊ�ÃÊ essential for protecting your intellectual property. “Microsoft went to the Chinese market in the early ’80s and a lot of its products were pirated, and they didn’t get the cooperation of the Chinese government,” says Ayse Oge, president of Ultimate Trade, an Encino, CA, company that assists small- and medium-size businesses in competing in international markets. “But, once they had built partnerships with their Chinese counterparts and hired Chinese engineers, then they overcame the problem.” UÊÊ Õ�ÌÕÀ>�Ê`�vviÀi�ViÃÊV>�Ê�iÛiÀÊLiÊ�ÛiÀiÃÌ��>Ìi`]Ê >ÃÊÌ�iÞÊV>�Ê>vviVÌÊiÛiÀÞÌ���}ÊvÀ��Ê�>À�iÌ��}Ê �>ÌiÀ�>�ÃÊÌ�Ê«À�`ÕVÌÊ`iÃ�}�° “Here we supersize everything,” Pearl says. “In other places, cups, mugs, simple things can’t be so big.” UÊÊ �ÃÌ�Þ]Ê�̽ÃÊ>Ê�>ÌÌiÀÊ�vÊ«iÀv�À���}Ê`ÕiÊ`���}i�ViÊ Liv�ÀiÊÌ>���}ÊÌ�iÊ«�Õ�}i°Ê“Dunkin Donuts went to Brazil without doing their homework,” Oge says. “They found out at the last moment that Brazilians rarely have breakfast. They decided to change the product; they positioned the product as snacks and desserts. After a while they found out they would appeal more to consumers if they included local fruit fillings like papaya and guava, and the sales soared.” WWW.SUPPLIERGLOBALRESOURCE.COM SEPTEMBER/OCTOBER 2010
39
HOT SPOTS Yes, the challenging economic situation has made life tough for many ad specialty suppliers. But, strange as it may seem, that’s why there’s no better time to take advantage of the global economy. BY JOHN MOORE
WWW.SUPPLIERGLOBALRESOURCE.COM SEPTEMBER/OCTOBER 2010
35
INTERNATIONAL EMERGING MARKETS
W
hile the United States, Western Europe and Japan deal with the residual effects of the recession, demand among emerging marketplaces remains strong and is growing stronger. And, more and more North American ad specialty suppliers are taking notice. According to the U.S. Commercial Service, which helps U.S. companies expand into foreign markets, 23% of its clients exported for the first time, entered a new market or increased their international market penetration in 2009 – a 3% increase from 2008. Additionally, the number of small- and mediumsize exporters more than doubled between 1992 and 2007, and nearly three-quarters of exporters have fewer than 20 employees. “There’s a little more urgency to tap into and find additional markets,” says Larry Harding, founder and president of High Street Partners, an Annapolis, MD-based firm that consults clients on international expansion. “The ones that are coming online for the first time or have hyper growth rates are really attractive.” Expanding your business to global markets can open up new revenue streams, diversify your risk and expand your client base. You just need to know where to look. Hit the BRICs The so-called BRIC nations – Brazil, Russia, India and China – have captured a lot of attention as the supercenter of emerging nations. These four countries account for more than 40% of the world’s population (China and India alone account for more than a third). With a growing middle class (China’s middle class will reach 360 million people by 2030, according to the World Bank), opening of trade markets and an appetite for American products and services, the BRIC economies have been the focus of much international expansion for the past several years. “These countries have experienced a lot of growth the last few years, while the U.S. is going down,” says Mona Pearl, a Chicago-based globalbusiness expansion consultant. “There is a whole new group that can afford to buy. And, they’re always looking for U.S. products because they’re known for quality – and it’s just cool to own U.S. products.”
36
SEPTEMBER/OCTOBER 2010 WWW.SUPPLIERGLOBALRESOURCE.COM
The National Export Initiative, an executive order signed by President Obama in March, is aimed at doubling U.S. exports in the next five years. “China is a rapidly growing market, and the second largest importer of goods,” says Bonni Shevin-Sandy, president of Dard Design/Dard Products Inc. “And India is considered to be the world’s fastest growing auto market.” Shevin-Sandy, who also runs Dard’s overseas sales and sourcing arm, adds, “China now has the world’s fastest-growing economy and is undergoing what has been described as a second industrial revolution. In the second quarter of 2010, China’s economy was valued at $1.33 trillion, ahead of the $1.28 trillion that Japan’s economy was worth. China could become the world’s largest economy sometime as early as 2030.” Experts say Brazil in particular is the hottest growth opportunity for American companies. The country moved up eight spots – the best of any BRIC economy – to rank 56th on the World Economic Forum’s (WEF) 2009-2010 Global Competitiveness Index. Also helping matters is that Brazil is closer to the U.S. than the other BRIC nations. And, with a population of more than 200 million, Brazil has the largest and the most complex market in Latin America. Brazil’s economy is expected to grow by 4%-6% every year. According to an International Monetary Fund report, the country is at the forefront in taking Latin America out of its recession. “We have seen a noticeable uptick in the amount of client expansion moving into Brazil so far this year,” Harding says. “It’s definitely becoming much more on par with China and India. The currency’s been stable for the longest time in modern history. They’ve got a pretty stable government leadership in place. And, it’s hosting the World Cup in 2014 and the Olympics in 2016.” WWW.SUPPLIERGLOBALRESOURCE.COM SEPTEMBER/OCTOBER 2010
37
INTERNATIONAL EMERGING MARKETS
Red Hot BRICETS While the BRICs continue to be the focus of many businesses looking to expand globally, two new players are providing them with company. The growth of Eastern Europe and Turkey has led to the term BRICET to describe the new core of emerging markets. Among Eastern European nations, Poland stands out. Now fully committed to a market-based economy, the country moved up seven places to rank 46th on the Global Competitiveness Index. According to the WEF report, “Poland benefits from its strong educational system and large market size, and has seen measurable improvements in the quality of its public institutions, with greater confidence in the efficiency and honesty of the country’s public servants. This, along with prudent regulation of financial markets and the large size of the domestic market, has helped Poland to weather the effects of the current global downturn and become one of the most economically stable countries in the region.” Turkey, meanwhile, moved up two places to rank 61st on the Global Competitiveness Index. The WEF noted Turkey’s “strong competition and reasonably sophisticated business practices.” Ayse Oge, president of Ultimate Trade, an Encino, CA, company that assists small- and medium-size businesses in competing in international markets, notes that Turkey’s business opportunities are no longer centrally located. “There were three big cities in Turkey about 30 years ago,” she says. “Now the growth is in the eastern part, the northern part, almost everywhere. There’s a lot of untapped potential in terms of growth.” Beyond the BRICET economies, experts say companies can find several opportunities in the Middle East and Latin America. The United Arab Emirates – particularly Dubai and Abu Dhabi – are fertile ground for expansion, as is Bahrain, according to Oge. “Dubai is facing an economic bubble burst, but they have built the infrastructure,” Oge says. “There’s a lot of admiration toward American products, so the American brand means a lot. And, there’s a lot of closeness on the part of Bahrain toward the United States.” As for Latin America, Oge says that Chile has emerged as an up-and-coming international market. Since Chile signed a free-trade agreement with the U.S. in 2003, American exports to Chile have more than doubled. Finding Opportunities Shevin-Sandy points out that China is the fastest-growing pharmaceutical drug market in the world. “But, here’s the catch: It’s easy to find drug companies working in China, but not so easy to find ones that will let you profit off the trend,” she says. “Most of the world’s biggest drugmakers have antici-
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SEPTEMBER/OCTOBER 2010 WWW.SUPPLIERGLOBALRESOURCE.COM
pated this market shift for years. Pfizer, Merck, Novartis and GlaxoSmithKline have all established Chinese operations within the last decade. British-based AstraZeneca and Germany’s Bayer lead the multinational corporations in market share.” These large entities all offer sales opportunities for North American suppliers, whose products are perceived as being safer than those produced in China. Knowing which emerging international markets to enter requires a lot of research and planning. There are plenty of statistics readily available, from the WEF’s Global Competitiveness Report to the World Bank Group’s Ease of Doing Business Index (www.doingbusiness.org/economyrankings). The U.S. government is committed to helping small- and medium-size businesses precisely like supplier companies expand globally. The National Export Initiative, an executive order signed by President Obama in March, is aimed at doubling U.S. exports in the next five years. The program assists with financing and education and works to reduce trade barriers. But, Oge emphasizes that business owners must get their hands dirty before venturing into overseas markets. “They have to travel to that country and see it firsthand,” she says. “Training is crucial to get to know foreign markets. I would suggest businesses go out to trade shows, talk to people, distributors, agents. Try to look for distributors and agents who are reliable. I would not suggest you go alone, especially for small busi-
Things You Should Know Before You Expand Doing business globally is a great way to access new revenue streams and diversify during these recessionary times. But, it’s not as simple as shipping a box of products off to China. “There’s a whole list of questions that companies should ask themselves in order to find out what’s going to work for them,” says Mona Pearl, a Chicago-based global-business expansion consultant. “If they’re looking to export, they need to find a salesperson for distribution. You have to find somebody you can trust. That can take six months to one year. Not to mention all the red tape just to make sure you’ll be able to distribute and get the right contacts and people and do it right. “And, your stuff is going to come out of customs,” Pearl adds. “U.S. companies are used to shipping something to California and it’s there next week. The whole notion of six months to a year – it’s costing them money and they’re not making money.” Here are some other points to consider:
nesses. It’s always good to be connected with foreign distributors and agents.” (See sidebar, “Things You Should Know Before You Expand.”) And, as Pearl points out, the countries that offer the biggest opportunities in general terms may not be the best fit for your business. “Looking at the world, forget about the up-and-coming markets mentioned in the press,” she says. “China has billions of people, but can you actually make it happen? As many companies that made money in China, just as many lost money. Find out what you want to do. Do you want to acquire? Do you want to sell? What about pricing? Maybe there’s promise in the market, but what’s the cost of doing business?” It’s a big world, and the global opportunities for suppliers are getting bigger every day. Emerging economies in Asia, Latin America and the Middle East are increasingly becoming attractive outposts for American products and services. “They’re young and affluent, in contrast with the aging population of the United States and Japan and Western Europe,” Oge says. “They’re changing the conventional economic order. They are the fastest-expanding markets in terms of the industries they are involved in.” John Moore, a financial reporter for CNBC, is a frequent contributor to Supplier Global Resource. ßà
UÊÊ ÃÌ>L��Ã���}Ê«>ÀÌ�iÀÃ��«ÃÊ��Êv�Ài�}�Ê�>À�iÌÃÊ�ÃÊ essential for protecting your intellectual property. “Microsoft went to the Chinese market in the early ’80s and a lot of its products were pirated, and they didn’t get the cooperation of the Chinese government,” says Ayse Oge, president of Ultimate Trade, an Encino, CA, company that assists small- and medium-size businesses in competing in international markets. “But, once they had built partnerships with their Chinese counterparts and hired Chinese engineers, then they overcame the problem.” UÊÊ Õ�ÌÕÀ>�Ê`�vviÀi�ViÃÊV>�Ê�iÛiÀÊLiÊ�ÛiÀiÃÌ��>Ìi`]Ê >ÃÊÌ�iÞÊV>�Ê>vviVÌÊiÛiÀÞÌ���}ÊvÀ��Ê�>À�iÌ��}Ê �>ÌiÀ�>�ÃÊÌ�Ê«À�`ÕVÌÊ`iÃ�}�° “Here we supersize everything,” Pearl says. “In other places, cups, mugs, simple things can’t be so big.” UÊÊ �ÃÌ�Þ]Ê�̽ÃÊ>Ê�>ÌÌiÀÊ�vÊ«iÀv�À���}Ê`ÕiÊ`���}i�ViÊ Liv�ÀiÊÌ>���}ÊÌ�iÊ«�Õ�}i°Ê“Dunkin Donuts went to Brazil without doing their homework,” Oge says. “They found out at the last moment that Brazilians rarely have breakfast. They decided to change the product; they positioned the product as snacks and desserts. After a while they found out they would appeal more to consumers if they included local fruit fillings like papaya and guava, and the sales soared.” WWW.SUPPLIERGLOBALRESOURCE.COM SEPTEMBER/OCTOBER 2010
39
