At the crossroads: Istanbul, sitting between Europe and the Middle East, has been an international trade hub for centuries.
For a glimpse into the future of American manufacturing, head to West Salem, Ohio, in the state's northeast corner. Economic news is worrisome. Foreclosures are up in West Salem - and throughout the state, where unemployment is 6 percent, 1 percentage point above the national average, according to the Bureau of Labor and Statistics. Ohio lost about 3,900 jobs in December alone.
But Dan Sharpe, international sales manager for
American Augers Inc., is optimistic. A manufacturer of huge drills and trenchers used to install pipes under highways and railway lines, American Augers is hiring.
"We've gone from around 100 people a few years ago to 175 today," he says. The success, Sharpe says, stems from a decision that company executives made about four years ago. They launched a push into global markets to expand the 38-year-old manufacturer, a unit of
Astec Industries Inc. of Chattanooga, Tenn. The strategy appears to be working. In 2007, exports accounted for $19 million in sales, up from about $3 million in 2004.
Seeking global markets
American Augers is not the only manufacturer to thrive despite a slow domestic economy. "People I talk to are becoming more and more active in international commerce. Right now they have a great advantage with the low value of the dollar," Sharpe says. Plus, advances in telecommunications, air travel and supply chain management help companies do business with partners in parts of the world that an earlier generation of entrepreneurs may have known only through the pages of National Geographic.
Colombia, South Africa and Turkey are three developing countries with huge potential, experts say. With development comes investment in transportation, power and the services sector. These three, considered among the more financially stable developing nations by the
International Monetary Fund, also have growing middle classes of consumers with money to purchase such things as imported motorcycles and handbags. For small U.S. companies that can't afford to set up shop abroad, exports offer a much cheaper and lower-risk entry into a new market.
Developing consumerism
Closest to home, Colombia offers tremendous potential for U.S. exports, experts say. Numbers back that up. Exports from the United States to Colombia have increased 87 percent since 2002. "Colombians are sophisticated consumers. They watch World Cup soccer on DirecTV, eat at McDonald's and are predisposed to buying American goods," says Maggie Hanson-Muse, commercial counselor at the U.S. Embassy in Bogota.
Plus, products made in the United States are competing against European- and Japanese-manufactured goods that often carry a higher price tag because of the low value of the dollar against the euro and the yen.
The story is much the same in South Africa, where American Augers sends some of its goods. The
U.S. Commercial Service cites three reasons: the global commodities boom, the emergence of a black middle class and significant spending on infrastructure. South Africa has some of the world's largest reserves of gold, iron ore and platinum, all of which are trading at record levels. The country is selling a good deal of those commodities to China and India and investing the proceeds in everything from power plants to railroads to mining equipment.
"South Africa is going to be an entry hub for all of Africa, like Singapore is for Asia, or Dubai is for the Middle East," says Sharpe. "We have high expectations."
Turkish delight
Expectations for global sales also run high at
Knit-Rite Inc., a Kansas City, Kan.-based maker of medical equipment. In four years, Knit-Rite's annual exports increased 40 percent to about $1.6 million in 2006. The company now counts customers in 42 countries. Co-owner Ron Hercules says that is a significant shift for the 85-year-old manufacturer of high-tech garment knee braces and prosthetic socks. With money coming in from foreign customers, Knit-Rite executives started heading for trade shows and lined up a commissioned sales agent to find business in Europe. Hercules says that in 2005 an agent brought in an order from Turkey for an anti-embolism stocking. Hercules was impressed when he looked into the country's potential.
Turkey has a population of about 72 million, a thriving entrepreneurial sector and a rapidly diversifying economy. The nation, at the crossroads of Europe and the Middle East, has a long history of international trade. For most of this decade, Turkey has averaged more than 7 percent annual GDP growth.
Hercules says that in addition to trade shows, international distributors and agents, many queries from abroad now come via Knit-Rite's Internet site.
Undertapped opportunity
Despite the promise of foreign markets and the advantages offered by a weak dollar, many small and midsize companies in the United States haven't yet tried international sales. Aside from losing potential sales, they may be missing out on new trade practices and other innovations that come from global business.
A 2007 UPS survey reveals that just 33 percent of responding small to midsize enterprises are engaging in cross-border trade. Of those, only 9 percent are exporting. "The survey shows that many American small to midsize enterprises haven't gone global yet," says David Abney, chief operating officer of UPS. "And if they don't take part in trade, they stand to lose their competitive edge in a business environment that continues to transcend international borders."
By the numbers
In 2007, U.S. exports were on the upswing:
Turkey: $6.6 billion (up 15 percent from '06)
Colombia: $8.6 billion (up 27 percent)
South Africa: $5.6 billion (up 23 percent)
Source: U.S. Census Bureau
This story was originally published in the spring 2008 print edition of Compass.
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