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Sunday, 28 April 2013 22:00

Programs help companies realize opportunities beyond borders

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Exports a key opportunity to grow small, midsize businesses

 

Canada might be Michigan’s closest international neighbor and largest trading partner, but it also found itself at the center of a fierce political battle last fall.

At issue was a ballot initiative regarding a new bridge between Detroit and Windsor, Ontario. Matty Maroun, the owner of the existing Ambassador Bridge, sought to pass a proposal that would have blocked the new bridge’s construction, which was supported by Michigan Gov. Rick Snyder and a near unanimous coalition of the state’s business leaders.

While the initiative to block the new bridge ultimately failed, the issue put a spotlight on a normally routine foreign trading relationship for businesses in Michigan. That relationship extends to many companies in West Michigan, who said easing commercial traffic snarls on the important international trade crossing was good for their business, too.

Just this month, Gov. Rick Snyder announced the project, which is paid for by the Canadian government, would move forward now that the required presidential permit was in hand.

According to the Michigan Economic Development Corp., Michigan companies exported $23.4 billion in goods and services to Canada in 2011, 46 percent of the state’s total global exports. Moreover, some 243 Canadian-owned companies in Michigan employ 22,500 state residents.

In recognizing the significance of the relationship with Michigan’s largest trading partner, Gov. Snyder last November opened a Michigan Trade Office in Toronto to promote trade, tourism and cultural exchanges between the two entities.

Opportunity overseas

But while Canada is perhaps the easiest place for companies to focus their international trade efforts, experts say it poses just one of many global opportunities for firms looking to grow their business.

“There can be great opportunities strategically selling abroad,” said Sonja Johnson, executive director of the Van Andel Global Trade Institute in Grand Rapids.

While large companies like Amway, Bissell, Steelcase and Wolverine World Wide have long-standing foreign trade mechanisms in place, there are also a number of government programs and organizations aimed to assist small and medium-sized companies with increasing their exports and global trade.

Johnson said that currently there are many office furniture companies and automotive industry suppliers finding lucrative contracts in Canada, Latin America and other overseas countries.

Not surprisingly, data compiled by the Brookings Institution show that exports from the Grand Rapids metro area were down considerably as the Great Recession began. Exports in the sectors of transportation equipment and machinery — the area’s largest exporting sectors — were each down more than 24 percent. Those numbers grew considerably in 2009 and 2010 as the recession bottomed out and the auto industry emerged from its low point in 2009. Exports in the related machinery segment grew by nearly 29 percent in the same timeframe.

While the recession’s grip touched almost every business in West Michigan, those businesses with an international presence weathered the downturn better than their counterparts that were just focused domestically, Johnson told MiBiz.

“They didn’t see a downturn as quickly or as deep as those (who had no investments overseas),” Johnson said. “A lot of customers we were working with, they were still struggling, obviously. But having a global customer, (the recession) didn’t hit them as deep as a lot of their only domestic-based competitors.”

STEP up to the plate

Both the federal and state governments have decided that global trade is something worth supporting. One of President Obama’s priorities included doubling the country’s exports within five years.

To help small and middle-sized businesses penetrate new markets and increase exports on a global scale, the federal government’s National Exports Initiative (NEI) formed the State Trade Export Promotion (STEP) program as part of the Small Business Jobs Act of 2010. The feds worked in conjunction with the Michigan Economic Development Corp. to set up the state’s program.

So far, Deanna Richeson, the state export director for the MEDC, has been pleased with the results of the three-year pilot STEP program, which can support foreign trade missions, website translation fees, the design of marketing materials, trade show exhibitions and other related training and workshops.

Currently, STEP funding for fiscal year 2014, which begins Oct. 1, is being held up in Washington, Richeson said.

“(STEP) is facing a lot of competition for limited funding even though it’s one of the stellar programs that has shown an opportunity for (West Michigan) to increase our GDP,” she said.

The U.S. Small Business Association (SBA) has handed out approximately $30 million in funds to the states and territories to help with the STEP programs. Michigan received more than $1.4 million, the fourth highest award in the nation.

Chuck Hadden, CEO of the Michigan Manufacturers Association, thinks highly of the STEP program, and said he is worried that the ongoing sequester at the federal level could have a negative impact on the state’s exporting trends.

“(Michigan is) helping pull the nation out of the recession,” Hadden said. “If we had some barriers broken down and we could really go after things, I think you’d see a lot of manufacturers start looking at exporting and opening new markets. If they’ve made it this far through everything, they are going to feel pretty confident if they know what their future is. Right now, I think that’s the hardest thing for them to know.”

To qualify for STEP, firms must have fewer than 500 global employees and must have been profitable in the previous fiscal year, said Maureen Lyon, international trade development manager with the MEDC.

To receive funding assistance, a company meeting the necessary criteria must work with the MEDC on a plan to enhance the firm’s export strategy. The MEDC also assists with research and creates some barometers for the company’s success.

“We’re looking for companies with a strong domestic record and companies who have done some homework and understand the requirements,” Lyon said. “They understand international finance. … If they’re manufacturing, they have the capacity that if they do start generating sales overseas, they’re going to be able to fulfill them.”

Trade trips deepen ties

Many organizations have also found success on trade missions abroad. (See page 26 for a report on a delegation of business and political leaders who visited the Netherlands as part of a state-sponsored trade trip.) The VAGTC’s Johnson said her organization will sponsor a trade mission for Michigan business representatives to visit Brazil in May.

Arjun Dhake, vice president of business development for Plymouth-based automotive paint manufacturer Dhake Industries Inc., plans to participate in the trade mission since his company already has some South American business in Brazil and Argentina.

“(Brazil) is one of the fastest-growing automotive markets,” Dhake said, noting that his main goal on the trip is to look for new customers. “We’re also looking for an agent or representative, somebody who can sell our product there, being in the market itself.”

While it’s no surprise that transportation equipment and machinery lead the way on Michigan’s exports, other goods are seeing significant gains around the state.

Many of the automotive and manufacturing exporting companies are on the east side of the state, while West Michigan is seeing export growth in industries such as office furniture and medical supplies, said Zara Smith, technology systems manager for the Michigan Small Business and Technology Development Center.

Smith said that the Northern Michigan region, for example, is primarily focused on agricultural exports. Agriculture all around the state, however, is also on the rise. In 2010, food exports from the Grand Rapids metropolitan area accounted for $256.9 million, according to data compiled by the Brookings Institution.

“Michigan’s growing strength in agricultural exports is key as we develop a statewide export infrastructure,” Michael A. Finney, president and CEO of the MEDC, stated in a 2011 report on agricultural exports.

Don’t spread too thin

While many companies have found a great deal of success with exporting, it is not something meant for every business. Experts say it requires a long-term strategic outlook, lots of research, and the ability to actually export your product or service should you manage to get international customers.

“The small and medium-sized guys are seeing the opportunity out there where they can go after, strategically, a market share that they feel comfortable in,” said Johnson of the VAGTC. “Obviously, they have global competition, but if they’re strategic in what they’re going after, the windfalls can be pretty great.”

Lyon of the MEDC said common pitfalls include a lack of focus and research. She said it’s not unusual for companies to want to export to four or five countries, which can lead to problems. They should focus on two or three at most, she said.

“What we like to see is a company who focuses,” Lyon said. “In order to be successful, you need to do your homework and you need to focus.”

Read 5167 times Last modified on Monday, 29 April 2013 10:06

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