PLAYING THE EXPORT GAME
MASTERING THE LOGISTICS OF INTERNATIONAL BUSINESS CAN BE TRICKY.
Byline: Stuart Chirls
NEW YORK — For textile and apparel firms eyeing lucrative foreign markets, the processes and paradigms of international distribution require a long-term program of time, money and a companywide mind-set to succeed.
“Exporting takes a total commitment on the part of the company that wants to export, as well as a change in the culture of that company, which translates into the will to make it happen,” said Tom Tolar, a textile export consultant based in London. “It is very, very tough. It takes staying power, and more importantly, it takes considerable time and money.”
Executives first need to research prospective markets thoroughly in order to understand how their products will be received by new consumers, and how to best make sense of foreign business procedures and infrastructures.
“There are an almost unlimited number of specific issues that must be addressed when a company decides to do business in a foreign market,” said Laura Neumann, a trade consultant with Eagle’s Eye. “Cultural mores, personal and nonverbal communications, differences in problem-solving — these all have to be dealt with.”
Neumann said setting up a factory overseas, for instance, means a manufacturer might have to adjust its production schedule to accommodate unique contingencies. “In countries with a large Moslem population, for example, workers may need a break for the daily call to prayer,” he said. “A company has to be sensitive to the needs of different cultures.”
In Europe, Tolar said that when it comes to manufacturing, U.S. executives should keep in mind three things: “You can’t make it cheaper, faster or service it better in competition with European suppliers. So you must bring something new and innovative to the table.”
Flexibility and priorities are key.
“You have to fit in export dye orders between U.S. orders and be prepared to handle small dye lots of 500 yards and special colors,” said Tolar, who helped Klopman Fabrics set up European operations in the Seventies. “And don’t underestimate foreign markets. Their quality standards are higher than in the U.S. That’s a fact.”
Executives point out that the most common impediment to international strategies for companies accustomed to domestic sales often is the confusing nature of foreign business practices.
“Mumbo jumbo, I call it,” said Dennis Doran, president of Pharr Yarn Trading Co. “‘L/C,’ ‘freight forwarder’ and ‘FOB’ are just some of the terms. We had to be able to communicate internally before we could execute on exports. That was the first level of commitment.”
A letter of credit, or L/C, is a document issued by a bank guaranteeing the payment of a customer’s drafts up to a stated amount for a specified period. It substitutes the bank’s credit for the buyer’s and eliminates the seller’s risk. That can mean the difference between success and failure if the customer can’t get his shipment off the boat.
“Because factors always have an out and can put the burden of the whole transaction back on [the exporter], we use a ‘standby’ L/C,” Doran explained. “We’ll open it, hold it for 11 months, and ship on an open account, just as we do here at home. If an account’s a couple of days or weeks late paying, it’s no problem. But if they are three or four months late, then I can draw down on the L/C.”
Even with safeguards, setting up sales in overseas markets can be risky business.
“In South America, for example, you ship, you hope and you pray,” said Carl Rosen, president of marketing and sales for JPS Converter and Industrial Corp., a maker of gray goods. “Apparel manufacturers say they will pay 100 percent in 80 days, but they don’t say what year.”
While foreign markets may look tempting during a time of falling trade barriers and growing globalism, getting a foothold in another country can all depend on who you know, and how well.
“You can go to another country and try to make a deal,” Rosen said, “but frequently, the only way you can get in is to go to the local business leaders and hope to get a foot in the door of the local network. And then you play by their rules. Sometimes, it’s like making a deal with the devil.”
Bribery, while a longtime component of deal-making, particularly in Asian countries, has become less acceptable with the shift to democratic open markets. Quality, diligent agents, the experts said, are the key to opening new areas.
Even with the right infrastructure in place, international sales can still get hung up on the basics. Checking credit can be difficult, if not impossible, especially in countries where the banking systems and record-keeping are less than meticulous. For that reason alone, the experts said that Western European nations may be the least painful choice for companies breaking into the export game.
“The United Kingdom is the most logical entry point into the developed economies of the European Community,” Tolar noted. “The language is similar to our own, the logistics are easier to understand, and it has an established retail distribution network.”
The Internet may prove to be the ultimate catalyst for international sales. Web sites are rapidly becoming the virtual showroom of the future, where buyers can browse samples and designs that are presented in startling clarity and dimension. The Internet could make much of the costly elements of international sales, such as on-site offices and travel, things of the past.
“Designers can place orders directly from their computers,” said Steve Kohler, founder of the Apparel Exchange, a virtual marketplace for textiles and other related services. “If the customer is dealing with companies whose reputations for quality are well known, ordering without actually seeing the goods isn’t a problem, especially if it’s a replenishment order.”