By Kari Ready, Manager of Communications for the Hollings Manufacturing Extension Partnership (MEP)
Note: This blog entry originally appeared on the MEP Manufacturing Innovation with additional commentary from NJMEP.
Remember how much fun it was opening your own lemonade stand? You would go to the supermarket with your parents to buy the ingredients, rush home to the kitchen with your siblings to mix everything up, create your own lemonade stand sign, and then head out to the end of your driveway / sidewalk to offer neighbors a cup of watered-down lemonade for 25 cents. While 25 cents per cup wasn’t the greatest profit margin, you still felt the most successful entrepreneur in the world!
I’m not taking a trip down memory lane for nostalgia purposes. The childhood lemonade stand can actually teach us a lot about manufacturing in today’s global economy, particularly when it comes to exporting andgrowing your business.
Lemonade for the Street vs. the Neighborhood
Let’s say you live in a neighborhood of 100 houses. However, you live at the end of a private side street where there are only five houses… and cars very rarely come your way. If you just sell lemonade to those five houses, you may cover your costs and make a small profit on your stand. However, it would be hard to grow your business. In order to build a successful lemonade stand, you would have to expand to other streets throughout the neighborhood and get in front of more customers, right?
Now let’s think about today’s business world. Ninety-five percent of the world’s customers live outside the United States. This isn’t an exaggeration – if you aren’t exporting, you are currently only hitting five percent of the world’s potential customers. You’re the lemonade stand at the end of a cul-de-sac.
Misconceptions about Exporting
In today’s competitive global market, the status quo is no longer an option. It’s not about sustaining business – it’s all about growth. However, many U.S. manufacturers don’t embrace exporting as a viable business plan to increase sales. According to an International Trade Administration fact sheet, “less than one percent of America’s 30 million companies export – a percentage that is significantly lower than other developed countries.”
Why aren’t more manufacturers exporting? Misconceptions lead companies to believe that exporting isn’t right for them.
Many manufacturers think that the market is “big enough here” in the U.S. to maintain business. While our domestic market is in fact huge, we’re also one of the most competitive nations in the world. The Internet and emerging technologies have only accelerated the competition. our target customers can research their competitors and pricing information at the touch of their computers or phones. There is only so much growth potential here in the U.S., especially as only five percent of the world’s market resides here
Others avoid exporting because they believe it will be too difficult. Foreign markets have different rules, regulations, currencies, etc. The risk may be too high. This isn’t an entirely unreasonable concern; there are certainly obstacles and logistics to overcome. However, there are many resources available to help companies strategically navigate these challenges It may take a bit of time to gather exporting know how, but the process is not as difficult as many businesses presume.
Finally, companies think that because they’re a small business, they don’t have the ability to export. Exporting is only for large manufacturers, right? The truth is – ninety-seven percent of exporters are actually small or mid-sized businesses according to the National Association of Manufacturers. More than two-third of exporters are estimated to having fewer than 20 employees according to Export.gov. What companies lack in size, they make up with strategy.
The Benefits and Innovation of Exporting
The clearest benefit of embracing exporting is more sales. By entering previously untapped markets, a manufacturer can increase revenue and growth. A study by the Institute for International Economics found that, “U.S. companies that export not only grow faster, but are nearly 8.5 percent less likely to go out of business than non-exporting companies.”
There are other benefits. For instance, when companies enter different markets, they’re exposed to new cultures and buyer personas. These experiences enable an organization to develop a broader understanding of different types of consumers. This knowledge can influence how manufacturers sell domestically to their own target audiences.
Innovation is important for any manufacturer in today’s economy. Innovation is a common “buzzword,” but being innovative means solving a problem in a unique way or trying something new to improve your business. If your company wanted to try a new internal process, technology, product enhancement or even an entirely new product line, you could use the foreign market as a test. This leads to innovations you can offer to your domestic customers.
Put your “lemonade stand” in front of more thirsty customers. Exporting can help a good company grow its business and secure its future.
Additional Commentary from NJMEP:
The program will help manufacturers learn how to strategically enter international markets to increase sales. For more information or to register, click here.