By Mike Scott
March/April 2009
Many Michigan businesses are finding their greatest growth markets are outside of North America, including China and India.
Yet effectively targeting customers in such developing countries requires in-depth planning and knowledge of not only your own products and services, but how they can be applied globally.
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That is the message echoed by several statewide business owners and executives who have successfully built an international presence. New markets are continuing to emerge globally for everything from business consulting to energy-efficient products, while markets domestically in many industries decline.
For the past 60 years Detroit Stoker Company supplied stokers and related combustion equipment for the production of steam used in heating, industrial processing and electric power generation around the world. Global manufacturers in Europe and Southeast Asia first expressed an interest in working with Detroit Stoker more than a decade ago. As the company’s exposure grew, manufacturers in Australia and other parts of the world also contacted the Monroe-based company. Most of those relationships still exist today.
“It all goes hand in hand with the fact that renewable and alternative energy has had a much higher growth in countries without a local energy source - coal, natural gas and oil,” says President Thomas Giaier. “They need to produce electricity and power with local fuels,” Giaier says, because these countries can’t afford to import the necessary oil to meet growing energy consumption demands.
The company’s products are of particular interest to countries where such natural resources are not abundant. Getting energy out of such materials as biomass and sugarcane residue is critical in reducing the dependence those countries have on importing foreign oil.
If such investments are made for the long-term, the payback can be relatively short, as businesses and consumers save on energy costs.
“We’ve even worked with wastes from olive products as a way to create electricity,” says Giaier.
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Kyle Schwulst, founder and president of ElectroJet in Brighton, had a great idea, but no North American market in which to sell it. The company, which designs and produces low-cost electronic engine controls for applications (including motorcycles, scooters and lawn mowers) has received more than $2 million in grants from a
combination of state sources, including the Michigan Economic Development Corporation, Automation Alley and Ann Arbor SPARK.
Although the technology, which reduces emissions, improves regulatory compliance and greater fuel efficiency, has its roots in the world of automotive, ElectroJet focuses on products that use one and two-cylinder engines, explains Schwulst, its biggest share of revenues coming from selling engine controls to manufacturers of motorcycles and scooters, 75 percent of which are headquartered in China and India.
Even so, other emerging countries are key to the company’s future growth.
“China, India and other emerging countries are where our market is,” says Schwulst. “The bulk of motorcycles are made there and then used for general transportation.”
One reason is that the average income of citizens living in countries such as Vietnam and Bangladesh is so low that they can’t afford to purchase an automobile.
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The geographic location of an industry’s “new frontiers” varies, says David Hemmings, president of Pacific Rim Alliance, an Ada-based global business consultancy. Even if some U.S. manufacturers fail, Hemmings feels opportunities for manufacturing will still exist in North America in the coming years, the reason being that both facilities and knowledge will remain in the United States.
Brazil is perhaps the fastest growing market for automotive suppliers, OEMs and other manufacturers to build products, Hemmings says, who cites Brazil’s stable currency, emerging middle class and a president who uses fair trade policies to create a favorable business climate.
“Brazil has also required that its banks offer low interest loans to consumers who want to buy vehicles and to businesses investing in the country,” says Hemmings.
A growing middle class and higher wages also make Brazil one of the better markets for a variety of consumer products including automobiles, electronics and clothing.
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Auburn Hills-based Fluxtrol, Inc., a provider of induction heating solutions, has found new markets in Russia, India, China, Hungary and Slovakia, says President Robert Ruffini. He recently utilized the services of Automation Alley’s International Business Center and the U.S. Department of Commerce’s Gold Key Services for country specific trade missions.
“I know first-hand how difficult it is to get your foot in the door,” says Ruffini. “These trade missions have really helped us.”
More than 20 of Fluxtrol’s distributors are located in such countries as Poland, Turkey, Russia, Malaysia, Bulgaria and South Africa. The implementation of its strategic partnerships was executed once market information was accumulated by traveling to the countries and communicating online.
In 1991, Fluxtrol selected 10 prospective future distributors by visiting heat treating trade shows, making sales calls and setting ground rules for global distributors to follow.
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“We sent our consignment inventories and used this approach until our number of partners grew to a point that made the inventory management system very laborious to account for,” says Ruffini. “In the late 1990s we required our partners to purchase the consignment inventory if they wanted to continue to offer our products.”
Detroit Stoker Company’s market is essentially anywhere in the world where natural resources are rare and the need for alternative energy options is high. It only makes sense to have manufacturing operations there as well. The company’s research and development and engineering expertise resides in Monroe.
“We’re at the point where nearly 50 percent of our business is done outside of North America and that number grows each year,” says Giaier.
Uncovering new markets requires corporate executives to pay close attention to both the cost of energy, and where renewable energy policies are taking hold, he adds. If sugar production, ethanol, pulp and paper production are growing in certain parts of the world, those countries are immediately considered targets by Giaier.
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Author and business coach Gino Wickman has experienced international business growth in an unusual way. He is finding a market for business advice and coaching in foreign countries that have surprised him.
Wickman, creator and founder of EOS Worldwide in Livonia and author of Traction: Get a Grip on Your Business (published in October 2007), has found that there is a global need for American business coaching services in countries like Pakistan, where entrepreneurial spirit is growing by the day.
“My target is developing countries where a large percentage of its residents want to start or manage their own business,” says Wickman, who has opened a franchise in Pakistan and is planning on opening others around the world. “These people have very good business ideas, but they need the business training and know-how to ensure their ideas are properly implemented. Right now products like Franklin Covey and (business practices such as) Six Sigma are extremely popular overseas.”
Back in our hemisphere, ElectroJet’s Schwulst anticipates the market for his control systems might grow in North America as some emissions standards are strengthened to a comparable level of current European standards. Both China and India will have emissions standards in place by 2011 that will be virtually identical to Europe’s strict laws.
“But it takes years for those policies to be put in place so I don’t see North America being a great market for us until 2014,” says Schwulst.
