January 17, 2012

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From Here to There

Opening Foreign Markets to Your Products

Tom Haraldsen

January 17, 2012

Even though 2009 was an economic disaster for businesses pretty much nationwide, Utah led the United States in a very important category—export growth. The Brookings Institute reported that in goods alone (not counting services), Utah surpassed the nation in export growth when compared to export totals from 2008. There’s a reason for that surprising piece of news. Getting products into foreign markets doesn’t happen easily or accidentally. It takes a strong commodity, proper marketing plan, sufficient capital—and patience. It also often takes some help. Fortunately for Utah entrepreneurs, that help is available very close to home. Trade with Me The World Trade Center of Utah (WTCU) is a nonprofit funded by a number of local companies whose mission, since its inception in 2006, is to help products made in the Beehive State get into the global marketplace. Those companies have a vested interest in international business—firms such as USANA, Xango, O.C. Tanner and GPS Capital Markets. The WTCU has three goals, “to motivate, facilitate and educate,” says President and CEO Lew Cramer. “We’re a ‘first stop’ support organization and information hub,” he says. “When we get a call from someone who wants to take their product into another country, they generally ask two questions—how do I ship it and how do I get paid? We usually ask what they know about international business, what experience if any they have (and often don’t). The issue usually arises when they start to get orders over the Internet from abroad and don’t know what to do with them.” Cramer helps businesses overcome “the fear of the unknown, which is generally their biggest challenge,” he says. “I liken it to a first kiss—everyone is scared of those. Taking the first step to do business internationally is the same type of fear. We know that exporting goods means more jobs for Utah, so we really push that—we help put an end to their fears.” The center brings together the private and public sectors, working in conjunction with its partner agencies. The collaborative effort produces trade leads, market analysis, strategy development and access to foreign trade missions. Cramer says nearly 1,000 businesses throughout Utah have been assisted with some sort of help from the WTCU, including through classes and seminars. While taking a product into a foreign market clearly has more challenges, it also provides much greater opportunities. After all, as Cramer points out, “95 percent of the world exists outside the United States.” The organization starts with assessing the client’s background and experience. “We look at the legal structure of the company, its accounting practices, things like that,” he says. “One of the keys is matching the manufacturer’s products with likely customers in other countries. That’s always a critical element in getting products ‘in the door’.” Cramer says the WTCU works hand-in-hand with the U.S. Commercial Service in Washington, D.C. This service, part of the Department of Commerce, was established in 1980 and now has 200 embassies throughout the world. “One of President Obama’s goals in efforts to turn the economy around is to double the amount of U.S. exports in the next five years,” Cramer says. “That has made it increasingly easy for companies to work with the service, along with the Small Business Administration, on financing and lending.” Business relationships with those in foreign markets can’t be fully developed without personal relationships as well. Cramer calls it “‘the law of 3 feet,’ which is an international business rule around here.” That means meeting face-to-face with, dealing with and striking arrangements with individuals in foreign markets—not simply corresponding through phone calls and the Internet. Leveraging Resources One source for assistance in establishing those relationships is the Governor’s Office of Economic Development (GOED), which works in partnership with WTCU. Established by Utah Gov. Jon Huntsman, Jr. during his first term in office, GOED has a number of regional managers responsible for working with business leaders in different blocks of countries. These regional managers not only speak the business language of those on foreign soil—they also speak the language. Among the regional managers at GOED, more than a dozen languages are spoken. “We try to leverage our resources—the independent consultants in various foreign countries that work with us,” says Miguel Rovira, the regional director for the Americas (Western Hemisphere) in the international trade and diplomacy office at GOED. “Those individuals do a lot of the legwork. If a company is new to exporting, we recommend they choose a country with a free-trade agreement. Most of those happen to be in Latin America at this time.” GOED’s consultants are generally natives of those foreign countries, well versed in their business laws and networked with distribution channels. They assist Utah manufacturers not only with relationships, but also with the dynamics of packaging and labeling their products for foreign sale, including conversions of weights and sizes into metric dimensions. “The issue that most [Utah manufacturers] wrestle with is if they have the resources to penetrate a market without a local representative in that country,” Rovira says. “For small and medium-sized companies, those costs involve initial market research, costs for production, packaging and shipping … and determining a price structure that can vary greatly from developed to underdeveloped countries. Our consultants can provide answers to many of those questions, as well as with starting relationships between manufacturers and foreign distributors.” Rovira believes the cooperative effort between GOED and the World Trade Center of Utah is the reason the state’s exports level increased slightly from 2008 to 2009, even while the national numbers were off 20 percent. “The amazing part is that in the midst of a recession, we actually had an increase,” he says. “It shows that Gov. Huntsman’s strategy panned out. He took the top 10 countries that we were exporting to and told us to improve the numbers with those countries.” Among those top players were Mexico, Canada, China and India—all nations that GOED has strong relations with. Foreign Aid Cramer says WTCU does “a lot of service work—we’re a reference to others on licensing, franchising and general problem solving. We make sure a company has the right business organization set up to deal with exporting, and we hold workshops on many facets of international business. Our goal is to head off problems before they happen.” Rovira’s team holds exporting seminars every month, brown bag lunches designed to answer questions about entry into foreign markets. Subjects this year have included designing marketing plans, finding qualified buyers, the pros and cons of entering into joint ventures with a company in those countries, preparing products for export (labeling, colors of packaging, etc.), electronic changes from domestic to foreign technologies, legal considerations in international markets, shipping, pricing and terms of payment. The seminars will continue throughout the end of 2010. The program has been very well received, says Rovira. Between 30 to 35 individuals usually participate each month in the seminars, which are essentially designed for “newbie” companies but have valuable information for older firms as well. Another important element in GOED’s success are its trade missions. “We did 14 of them under Huntsman,” Rovira says. “They are clearly designed for taking a company that wants us to set up meetings and matchmaking opportunities. Leaders go to these countries for a day and a half, and hold six to eight meetings. We help set up hotels, transportation, meals and networking opportunities. These missions usually take at least six months to set up, and [with the companies paying the expenses] our service is free to the taxpayers.” Those missions help maximize the time a company’s leadership is abroad, as U.S. embassy staff and government representatives work with GOED staff members to help those Utah manufacturers gain access to local business leaders. The efforts of both GOED and WTCU can also help large companies with regulatory issues when a stalemate occurs. “Sometimes even those with an established history can’t get access to authorities,” Rovira says. “Having the state [of Utah] seal can help open doors and get the problem discussed with decision makers.” Exporting services is a bit trickier, he says. GOED can help a company set up meetings with those abroad, but “we don’t want to end up finding their customers for them,” Rovira says. “That’s not what the state is in business to do.” Recently, Salt Lake City has re-launched its Foreign Trade Zone. FTZs are locations inside the country under U.S. Customs supervision that allow merchandise to be freely moved into a zone without customs duties and/or certain excise taxes. That renewed effort bodes well for Utah exporters. “These zones clearly encourage international trade,” says Lisa Beaudry from the city’s Office of Economic Development, in announcing the relaunch effort. As for types of exported products, Utah’s strength remains in mining, which accounts for 45 percent of the state’s exports. Most of that goes to the United Kingdom, though China also has a large interest in the state’s irons, ores, slag and other raw materials. Utah companies also ship large quantities of medical products, computer components and auto parts abroad, a practice likely to continue in the nation’s most successful exporting state. Sidebar: Get Ready to Go Global World Trade Center Utah Register online for a business assessment or find out about upcoming classes at wtcut.com. GOED Exporting Seminars Want to find out what you’ve missed at GOED’s monthly exporting seminars? Visit business.utah.gov to access the seminar presentations for the entire year.
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