Let’s say you’re a manufacturer in Owatonna and one day you get an inquiry from a potential customer in Los Angeles or Chicago or Atlanta. Do you respond? Of course you do. When business comes knocking, you answer the door. That’s a no-brainer.
But what if the inquiry comes from Toronto … or Hamburg … or Sao Paulo? What then?
“If you’re like a lot of Minnesota manufacturers, you won’t do anything at all. You’ll probably ignore it,” says Kathleen Motzenbecker, executive director of the Minnesota Trade Office, pointing out that nationwide more than half of the inquiries companies receive from potential customers in foreign markets go unanswered.
That’s as true here as it is anywhere. About 81 percent of the Minnesota’s manufacturers ship to customers in another state. But only 41 percent ship to another country. Why so few?
“A lot of small and midsized manufacturers think it will be too hard or too risky, so they get into this mindset that says ‘We just don’t do that,’” Motzenbecker explains. “Yes, you have to learn some things. But if you go about it deliberately, it’s really no more difficult than what you already do to manage your domestic operations.”There are tremendous opportunities in the international marketplace, and of all Minnesota’s core industries, manufacturers are in the best position to take advantage of them. Last year, Minnesota companies exported $32 billion in goods, services and commodities to markets worldwide. Manufactured goods accounted for nearly $19 billion (58 percent) of that total.
The impact of those foreign sales goes well beyond the balance sheet of any individual company. Let’s start with paychecks. Manufactured exports generate nearly 115,000 jobs in Minnesota. About half are manufacturing jobs, the other half support industries such as sales, marketing, transportation and logistics. Exports also generate more tax revenue for the state.
That’s an all-around great performance, no doubt. Still, Minnesota’s manufacturers are far from realizing their full exporting potential, says Motzenbecker, who is the state’s point-person on export and trade promotion. Her mission is to move more manufacturers into the ranks of exporting companies by getting them to see the opportunities and then helping them prepare to enter their target market successfully.
Understanding the Benefits
Let’s face it, everyone likes more money. When your bottom line and your company are growing, so is that smile on your face. But increased revenue and profits aren’t the only reasons manufacturers should take exporting seriously. Just as compelling: Exporting can make your company more stable and predictable by insulating it from the usual business cycle fluctuations in domestic demand – and they can be a life preserver in the event of a severe, widespread and prolonged economic downturn.
“It’s really unusual for the whole world to go into the dumps at the same time,” says Motzenbecker. “Even during the Great Recession, we had lots of companies telling us that if it hadn’t been for foreign sales (especially in Japan and other parts of Asia), they’d have had to lay-off workers or close their doors. Exports were suddenly 40 percent of their business – because domestic sales fell off a cliff.”
And executives at small and midsized companies that export often report that hustling for business in the international marketplace has made them stronger and more competitive in their home markets.
That’s the case at Delkor Systems, Inc., a leading manufacturer of food-packaging equipment based in Arden Hills, where export sales are an important driver of the company’s growth.
A decade ago, exports (mostly to customers in Canada) accounted for less than 10 percent of Delkor’s new equipment sales, says company president and CEO Dale Andersen. Today, foreign sales have grown to 25 percent, and Delkor’s export markets have broadened to include Mexico, Central and South America, Australia and New Zealand. And last year, the company was honored by Gov. Mark Dayton with an award for exporting success.
But none of it happened overnight.
By the time Andersen made the decision to invest time, money and effort in Latin America, he had visited his target markets many times over several years to assess their true potential. At industry expos, trade shows, and on trade missions he got to know customers and their needs; he learned about market constraints; he sized up his competition; and eventually, he clearly identified Delkor’s competitive niche.
It’s a game plan that Andersen thinks other Minnesota manufacturers interested in exporting would do well to employ.
“It is strategically important for a business to understand the competitive landscape outside the United States. You just can’t do that from a distance. Go to the shows. Visit the customers. You have to get out there,” says Andersen.
That kind of on-the-ground market intelligence is a crucial investment that can pay-off two ways:
- It can lay the foundation for a successful market entry
- It can keep you from making investments in markets where the timing is not right or where you never really had a chance to succeed.
Other advice that Andersen offers manufacturers considering exporting:
“It’s not for everyone, but if you do see opportunity, it’s important to explore it. Don’t rush. Don’t just jump in,” he says, noting that impulsivity can lead to costly mistakes. “Be strategic and just take it in steps.”
The MTO’s Motzenbecker couldn’t agree more. To go from thinking about exporting to getting your company export-ready and entering a market is a deliberate process that requires careful thinking all along the way, no question about it, she says.
And all processes have a beginning. “The first step is for more Minnesota manufacturers to consider the possibility – to see the full potential – of exporting their products to foreign markets,” says Motzenbecker. “The next step is to call us at the MTO. We’ll help you take it from there.”
Curious about how the Minnesota Trade Office can help you explore opportunities in exporting? Call 651-259-7499 or toll free at 800-657-3858. To speak with an international trade representative about specific market or industry questions, call the MTO’s Trade Assistance Helpline at 651-259-7498 or email Mto.TradeAssistance@state.mn.us.
The Last Word
Kathleen Motzenbecker, executive director of the Minnesota Trade Office, talks about why manufacturers are well positioned to export to foreign markets.