Think Global
A small corps of multilingual, culture-hopping
deal brokers works around the world to connect Kentucky companies
with global markets. Their service brings the state millions
of dollars – and it's free for any business that wants it.
The
only time James P. Barrett traveled out of the country before
this year, he went fishing in Canada. But already in the first
half of 2006, Barrett, the CEO of McKee-based BK Manufacturing,
has journeyed to Mexico, Guatemala and El Salvador in an effort
to win orders for his plastic injection molding company in south
central Kentucky.
Plying the tropics for clients could easily have been a fruitless
venture, were Barrett left to go it alone. But his trips were
part of efforts by the Cabinet for Economic Development to generate
export trade for Kentucky businesses and attract foreign direct
investment in the state.
In March, BK Manufacturing was one of the Kentucky companies
the state put on display at Expo Manufactura, a manufacturing
trade show in Monterrey, Mexico. Bennett received about 20 requests
to bid on making molded parts from Mexican companies looking
to source subcomponents for assemblies they manufacture.
That trip went so well, in fact, the cabinet’s International
Trade Division selected BK Manufacturing as one of two state
companies to join Gov. Fletcher’s Export Kentucky initiative,
part of a U.S. Chamber of Commerce program intended to boost
awareness of global trade on a local level. So in May, Bennett
and representatives of 12 other companies from seven states
ventured to Guatemala and El Salvador on a weeklong trade mission.
“The export part of this is all new to us,” Barrett said. “My
purpose was to make contacts, and I have friends down there
now. If the need ever comes up to where there’s a product one
of these companies needs made and they can’t do it, we have
offered our facilities to help them out.”
Trade offices provide global assistance
BK Manufacturing is one of hundreds of Kentucky businesses
that are scrambling to find export markets for goods and services,
relying on state and federal agencies for research, relationships
and cutting through red tape.
The
government employees at their service are the unsung protagonists
of international trade, generally working behind the scenes
and in office towers overseas to build the relationships that
bring millions of foreign dollars to Kentucky every year.
Kentucky’s efforts to attract new businesses and develop export
markets for existing business are managed by the Kentucky Cabinet
for Economic Development, headed by Secretary Gene Strong. It
operates three foreign offices to assist companies looking to
export their products, and two offices tasked with leading foreign
companies to invest in the state. The export-oriented offices
in Guadalajara, Mexico; Santiago, Chile; and Beijing, China
are operated by the Department for Existing Business Development,
led by Commissioner J.R. Wilhite.
Unlike many states that rely on consultants who split their
attention between various clients, Kentucky employs full-time
officers to work for the businesses. “The benefit there is the
staff is focused on helping Kentucky exporters so they’re not
competing for someone’s time,” said Sara Moreno, international
trade specialist with the Lexington U.S Export Assistance Center
of the U.S. Department of Commerce. “I lean on the state to
help with companies that are new to exporting.”
Offices
in Brussels, Belgium, and Tokyo, Japan, are geared toward attracting
investment in the state, under the direction of John McCarty,
commissioner of the Department for New Business Development.
While it may seem like the result of a bureaucratic turf war
to have the foreign offices operate under two different departments,
officials say the setup reflects the reality of international
trade.
“In Mexico and South America, 99 percent of that business is
related to assisting existing companies gain market share,”
Strong said. “In Europe and Japan, 99 percent of the business
is related to attracting new investment, although we would assist
a company on a trade issue if they needed us to.”
Trade spurs state’s economy
Kentucky has come a long way with global trade in the past
10 to 15 years, and that’s starting to show in the state’s economic
performance.
In 2005, Kentucky companies exported an estimated $14.9 billion
worth of goods and services, which accounted for 158,000 jobs,
according to the cabinet. That trickles down to $860 million
in state and local taxes.
Between 1996 and 2005, Kentucky exports grew 133 percent, compared
to the national average growth of 45 percent during the same
period.
Kentucky has attracted about 350 international companies, including
Toyota and 143 others from Japan, the state’s largest foreign
investor. Another 160 companies from Europe have a presence,
as well as companies from Mexico, South America and Canada.
“The state’s record with Japanese foreign direct investment
speaks for itself,” said Adam Bruns, managing editor of Site
Selection magazine, a publication devoted to expansion planning.
“It’s helped along not just by Toyota but by companies that
have stepped in and really gone the extra mile and serviced
the Japanese sector, and used their experience with Japanese
customers to their advantage in attracting further business.”
The
latest figures available from the U.S. Census Bureau in 2002
indicate that foreign investment in Kentucky generated about
87,000 jobs and $23.7 billion in investment. That’s about 5
percent of the state’s total workforce of 2.1 million people
attributed to foreign direct investment.
The budget to run the three export business offices is about
$860,000 a year, and the budget for the investment offices is
similar, at about $875,000 per year.
Trade representatives open doors
Kentucky takes a different approach for its foreign offices,
compared to some other states. The overseas representatives
work full-time for Kentucky, instead of acting as part-time
consultants serving other clients at the same time.
For companies seeking export markets for good and services,
the representative offices help open doors and make connections.
“Our common mission is to help Kentucky businesses find markets
for products and services,” Wilhite said. “Every time a product
or service produced in Kentucky is sold overseas, it supports
that market and produces additional jobs in Kentucky.”
The
representatives host business people visiting the country, either
one-on-one or as part of a larger trade mission group. They
also represent the state at trade shows and meetings.
“States more and more are embarking on new offices in foreign
countries or an increased frequency of trade missions to other
countries,” Bruns said. “Part of that is attracting investment
from large companies in those countries as well as facilitating
two-way trade.”
The most important attributes a foreign representative brings
is knowledge of Kentucky’s economy and connections to business
leaders and government officials in the export market. For instance,
Jiro Hashimoto, chief representative in the Far East Representative
Office in Tokyo, has developed extensive contacts in Kentucky
and Japan during his 20 years of work for the state.
Elsewhere, other trade reps with extensive experience overseas
are making it easier for Kentucky to find an audience for its
products and franchises.
Will Arvin, president of Contours Express International in
Nicholasville, makes at least one overseas trip a month to meet
potential master franchisers for the women-only fitness centers
that operates in 20 countries. He has relied on the offices
in Argentina and Mexico to help staff trade shows and make connections.
“At a trade show in Argentina, the representative sat with
me at the booth, helped with translations and helped me screen
candidates for a franchiser,” Arvin said. “The Mexico office
helped us find a manufacturer for our equipment, and they’ve
been with us every step of the way.”
The foreign representatives travel to Kentucky as least twice
a year to meet with companies and learn about their products
and potential markets, and then look for connections back home.
The office in Mexico is operated jointly with the Department
of Agriculture because the state of Jalisco is known for its
livestock farms and as a manufacturing center.
“The staff may discuss horses or cattle at appropriate times
or they may be talking about manufactured products or environmental
services,” Wilhite said.
The offices will conduct trade shows for specific industries
to showcase Kentucky products and manufacturers.
“We did trade show for manufacturers in Mexico and had one
last October in South America for food and beverage production,”
Wilhite said. “In a trade show companies can meet more of their
customers at one time.”
Richard Grana is president of IMPEX, a Paducah company that
acts as the international sales manager for Arch Environmental
Equipment in Paducah and for IBGS of Texas, which make conveyor-system
components and design plant installations and custom material-handling
equipment.
Grana has found about 35 distributors in Chile for its material
handling equipment used in mining, cement manufacturing, food
production and other industries. He plans on entering markets
in Peru next, as well as finding partners in the United Kingdom
and Greece.
In South America, Grana has relied on Senén Cornejo,
the representative for South America based in Santiago, to make
contacts with potential clients with the help of associates
in Argentina and Brazil.
“We knew about a mine expansion in Argentina, but we never
could get to the right people,” Grana said. “They happened to
know the people who worked there. We’ve sent a letter to the
mine referencing our contact. We’ll see how that works.”
Grana has participated in trade shows in South America to make
contacts with potential clients and distributors.
“It helps us to get to people we need to see at least to do
some talking,” he said. “It helps open a door.”
For foreign investment, leads often come from companies who
do business with suppliers overseas. The Kentucky company can
ask one of the trade offices to make contact with the supplier
to talk about locating a factory or warehouse closer to the
user.
“Companies who have suppliers in Europe who would like to have
them close for just-in-time delivery can ask us to discuss with
those companies the possibility of establishing a presence in
Kentucky to make life easier for everyone,” said Paul Pilkauskas,
director of Kentucky’s European representative office.
To get the best results from the trade offices, Kentucky companies
must rely on the expertise of the representatives.
“We need sufficient background information on the products
and the company itself so we can convince others the Kentucky
products are the best,” Cornejo said. “We are part of the team,
sort of like on-site sales agents.”
The state’s well-known events, such as the Kentucky Derby and
the upcoming Ryder Cup and World Equestrian Games, are an opportunity
to educate business people about the benefits of locating a
factory here. Strong and members of the economic development
and commerce cabinets are already planning for the Ryder Cup
in 2008. The process starts with a booth at this year’s tournament
in Ireland. About 40,000 people will attend the five-day tournament,
and Kentucky will have a presence there as the host of the next
event.
“We insisted on having a U.S. map with a big red star on Kentucky,”
Strong said. “We want to show where we are and how you get here.
Once they learn that it’s a state within a day’s drive of 65
percent of population and we have one of the best locations
in North America, then our job gets a little easier.”
As Kentucky business people look for ways to grow their business,
they’re finding that doing business around the world is surprisingly
feasible no matter the size of the company.
At least James Barrett, whose BK Manufacturing has just 12
employees, thinks so.
“We have good workers in Kentucky, and there’s a whole big
world out there,” he said.
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Say what en Español?
How Big Ass Fan Co. takes its name to the world
Some brands just don’t transfer well to other languages. With
a name like Big Ass Fan Co., for instance, a lot of what might
be called nuance is lost in translation.
Despite
its colloquial moniker, however, the Lexington-based manufacturer
of oversized fans counts on exports for about a tenth of its
sales. In June, the company’s export success even earned it
the World Trade Success Award from the Kentucky World Trade
Center.
To overcome cross-cultural barriers, Big Ass Fans relies on
the center as well as the Cabinet for Economic Development and
the U.S. Department of Commerce for help finding customers and
distributors for its products.
The company manufactures and markets its high-volume, low-speed
fans for use in warehouses, retail stores, distribution centers
and other buildings too large to cool with air conditioning.
They’ve been popular in warm regions such as Australia, South
America and Mexico, but are finding a growing market in colder
climates like the United Kingdom.
Bill Buell, “international guy” for Big Ass Fans, said exports
make up about 10 percent of the company’s sales, a figure that’s
stayed constant during the company’s growth from about six employees
in 2002 to over 60 employees now. The international trade offices
operated by the Cabinet for Economic Development have provided
a wide range of services as the company looks for new customers
and distributors.
“Senén Cornejo in Chile has done wonders for us in terms
of opening up the South American market,” Buell said, referring
to the Santiago, Chile-based trade representative. “There are
many times I get a lead here in Chile and call him to see if
knows the people. If he doesn’t, he’ll call them and call me
back within an hour.”
In addition to making business connections, the foreign offices
do their best to help minimize cultural blunders and translation
embarrassments. For example, Buell had Cornejo review a draft
of a Spanish-language marketing brochure for Chile before it
went to the printer.
“He said the wording read that the fans provide no air movement,”
Buell recalled. “If we would have gone to press with that, it
would have been a disaster.”
Buell credits the office with much of Big Ass Fans’ ability
to continue growing its export business with relatively few
headaches on his part.
“I didn’t know much about them for a long time, and I told
them, ‘You’re the best-kept secret in the state of Kentucky.’”
How to Do Business Abroad
The Kentucky World Trade Center wants to get companies
on board with globalization
Former Gov. Martha Layne Collins made her first visit to China
when she was in office in 1984. This June, as CEO of the Kentucky
World Trade Center, she led a trade mission back to the country
to help educate Kentucky business people, educators and legislators
about doing business there.
Done in partnership with the University of Kentucky’s Asia
Center, the mission was, in Collins’ view, a classic example
of what the trade center does for Kentucky companies.
“We’re constantly looking for opportunities and trying to build
relationships and connections to help companies who are interested
in doing business over there, whether they want to sell a product
over there or find a better source for a product they need.”
The Kentucky World Trade Center is a nonprofit membership organization
helping Kentucky companies import, export and establish overseas
operations. Staff in the offices in Lexington, Louisville and
Murray coordinate efforts with the Cabinet for Economic Development
and the U.S. Department of Commerce.
“Our services all complement each other, so that Kentucky companies
have a very well rounded network of international trade assistance,”
said Susan Cook, a senior trade specialist and manager of the
center’s Louisville office.
The center provides members with services including market
research, credit and background checks, and help with translation
and interpretation. Staff at the center can act as private consultants
for members, researching databases and identifying opportunities
that might otherwise go untapped.
“One company asked us to find sources for three different commodities
they wanted to import, so we did the market research, got quotes
for them and presented them with the options,” Cook said.
The center has about 300 members, from small companies to some
of the state’s largest employers.
“We have companies as small as two employees where exporting
makes up 30 percent of their sales,” said Holley Groshek, executive
director. “They understand the international markets are growing
four times faster than the U.S. market.”
As Collins prepared to leave for China, she said she was eager
to help Kentucky business people see the necessity of using
international trade for a competitive advantage.
“I know the world is getting smaller and smaller, and the competition
is getting tougher every day,” she said.
