State-sponsored trade ventures abroad help northeast Wisconsin firms develop fertile foreign markets
Story by Sean Fitzgerald, New North B2B publisher
More pesos, more dollars, more yuan, more yen, more euros. Revenues to Wisconsin companies from Mexico, Canada, China, Japan and western European countries continue to increase year after year.
In 2014, exports from state firms totaled a record $23.4 billion, and opportunities abound to further increase that value. In late June, the U.S. House of Representatives approved the Trade Promotion Authority, which would set enhanced guidelines for domestic companies to negotiate deals with countries like Canada and Japan involved in the Trans-Pacific Partnership.
As daunting a task as selling to foreign customers might seem, businesses inexperienced in exporting don’t have to navigate the process alone. Wisconsin Economic Development Corp. boasts a litany of resources to help business owners and managers seek out new global markets and successfully increase their international presence.
One segment of that assistance is through state-sponsored global trade ventures, in which Wisconsin companies take arranged trips abroad to markets in which they’re targeting customers and have the intelligence of WEDC’s international division at their fingertips. Several northeast Wisconsin firms have taken advantage of these trade missions and discovered them to be a springboard for growing customer orders in the foreign markets where their high-quality products are demanded.
WEDC Chief Executive and Secretary Reed Hall said the agency has 55 contracted representatives available worldwide to assist state businesses conducting commerce in stable, emerging economies where more and more citizens are progressing into the middle class, affording them the luxury to purchase goods and services beyond the daily necessities of merely surviving. These state supported global trade representatives help conduct market analyses, make connections with key personnel at foreign-owned companies, and guide Wisconsin exporters through often confusing and complex international commerce regulations.
“They’re instrumental in the efficiency (Wisconsin firms) are able to achieve,” Hall said of such business expeditions abroad.
Gaining visibility in China
When Miller Electric Mfg. Co. of Appleton learned Gov. Scott Walker would be leading a trade mission to China in April 2013, the company aimed to capitalize on the opportunity.
The manufacturer of high-tech welding systems had already made an agreement with a Shanghai automotive manufacturer to purchase 50 of its Appleton-made welding units – and because Gov. Walker was already going to be in Shanghai – it joined the trade mission and arranged a ceremonial contract signing with its buyers and local Chinese government delegates. The stately act provided the company just the boost it needed to gain traction in one of the world’s fastest growing economies.
“We’ve been penetrating into the China market, and this was a big step for us,” said Ed Panelli, the general managing director of the automotive segment for ITW Welding, of which Miller Electric is a division. “It helped put an accent on the work we’ve been doing in China.”
Miller Electric’s largest competitor in China – the 800-pound gorilla in the country’s automotive welding segment – is a European manufacturer which owned the marketplace until Miller Electric began gaining marketshare within the past few years.
Panelli said the goodwill gained through mingling Wisconsin’s governor with local government officials and industrial leaders in Shanghai paved the way to other opportunities with robotics manufacturers designing robotic welding equipment for the Chinese automotive industry. Miller Electric is currently working with Chinese economic development officials to establish an automated automotive-welding distributor to sell its Fox Cities-manufactured products to vehicle producers across the country, Panelli said.
The Red Dragon’s potential market is enormous. Demand for automated welding robots in China is about 8,000 units annually, Panelli said. By comparison nearly 32,000 similar units were sold in the U.S. last year, a domestic market in which manufacturing technology is far more mature. As Chinese industry invests more capital in automation, Miller Electric is well positioned to be the supplier of choice.
“What the state did is give us a public relations boost, because Miller Electric was not a big name in China,” Panelli said.
Additionally, Panelli said the growing relationship with WEDC enabled it to learn the mechanics and processes of doing business in China. The experience also introduced the company to the dynamic of working with state-level trade offices, a lesson bound to assist Miller Electric as it pursues other foreign markets for its products.
Finding a market conduit
Sometimes the best approach to growing international sales is to find a local business professional to make the sale for your firm.
Shelmet Precision Casting Company of Wild Rose in Wautoma County never placed much emphasis on finding customers outside the United States.
The company had a handful of incidental customers in Mexico, Australia and Israel, but none the company actively pursued, according to Joe Klenke, sales manager for Shelmet.
Through its relationship with Wisconsin Manufacturing Extension Partnership, Shelmet enrolled last year in the organization’s ExporTech initiative, a three-session training program designed to provide small to midsize manufacturers in the state with the basic outline of a strategy to sell more goods abroad. Shelmet officials used the experience to define a market strategy in Canada.
“That was an eye-opening experience. I’d recommend to anyone to take the ExporTech program,” Klenke said.
As a niche manufacturer of short-run, highly specialized castings, Shelmet’s customers tend to come from heavy-duty industries such as automotive, forestry, mining and shipbuilding – all prominent segments of The Great White North’s gross national product. Klenke also said the NAFTA free-trade agreement as well as cultural similarities made Canada an attractive destination to test the waters of global commerce.
“We have a common language to work with,” Klenke said. “That’s a really big issue when you start working on exporting.”
Shelmet’s involvement with ExporTech brought WEDC’s international trade services to the manufacturer’s attention, and when a state-sponsored trade venture to Canada was scheduled this past March, Klenke and Shalmet Vice President Gary Oliver booked their tickets. But the two didn’t go there looking to foster direct customer relationships. Their mission was to identify a Canadian sales professional they could hire to conduct business development activities across the industries Shalmet could pursue in Canada.
Prior to departure, Klenke said WEDC’s contract representatives in Canada provided Shelmet with a list of candidates and even arranged a suitable meeting location and appointments with those individuals Klenke and Oliver wanted to meet in person.
“They scheduled a full day of meetings without us otherwise having to go there and stumble around,” Klenke said. “WEDC does a fantastic job of doing the research before you even get on a plane. If you had tried to set this trip up on your own, you could have never have been as productive.”
Klenke said the company has since identified three potential candidates for the role, and plans to hire at least one of those individuals by August. It’s an exciting pursuit for Shelmet Castings, and Klenke feels the “market is starving” for the type of high-quality, precision components it supplies. “This will allow us to go into a market that is saturated in the automotive industry.”
Building relationships face to face
Though the world feels much smaller to many in this Internet Age, the fact of the matter is that business relationships built on trust still transcends borders and cultural differences. That concept will always make face-to-face meetings critical to enhancing commerce, according to Peter Zaehringer, who recently became vice president of economic development for the Greater Green Bay Chamber this past June.
“The most efficient way (to develop an international market) is usually if you do it in person,” said Zaehringer, a German native who spent the past decade working in economic development in northeastern Ohio.
During his career Zaehringer has participated in several trade missions himself, indicating they’re an effective tool to identify potential customers, suppliers and distributors in markets which companies wouldn’t otherwise be familiar. But he advised such trips are just one component of doing business abroad, and that other efforts back at the home office are just as crucial in order to be successful in the global marketplace.
WEDC’s Hall said the agency typically plans two to three trade missions each year. This past February, a delegation of state business leaders and government officials traveled to the United Kingdom, France, Germany and Spain. Another such trade mission is planned for Japan and Taiwan this coming September.
“We’re going to the countries that we already have a relationship with, and we go there to nourish these relationships,” Hall said.
Foreign direct investment
While such global trade ventures help Wisconsin companies further penetrate foreign markets with their products and services, the trips serve a dual role for state economic development officials looking to attract foreign-owned companies to invest in Wisconsin.
As of 2014, foreign-owned companies in the state employing Wisconsin workers totaled more than 1,500, with more than 25 percent of those being Canadian-owned firms, Hall said.
It makes sense for companies from other countries to manufacture product in Wisconsin because of its positive workforce attributes and easy access to those products sold domestically in the U.S. It’s additionally valuable to those foreign firms when the value of the U.S. Dollar is weaker than their own currency, allowing for some potential cost savings when compared with manufacturing in their own countries.
Such foreign direct investments, as they’re called, build property tax base in Wisconsin communities and contribute billions of dollars in payroll to the state’s economy, enabling Wisconsin residents a healthy quality of life.
Last month Gov. Walker and representatives from WEDC lead a business development mission to Canada to meet with industry leaders from corporations owning manufacturing plants in the state. The goal was to encourage future investment in production at the companies’ Wisconsin facilities. One such meeting was with executives from Agropur, the Montreal-based dairy foods processor with facilities in Little Chute, Weyauwega and Luxemburg under the name Trega Foods.
Strengthening business relations with Canada makes good economic sense for state development officials. Canada is Wisconsin’s largest export destination, with state companies sending nearly $8 billion in goods to the country during 2014. That’s nearly a 6 percent increase from the previous year. Reciprocally, Wisconsin imported about $4.5 billion in goods from Canada in 2014, primarily plastics, paper and wood products.