While manufacturers and dealers are constantly attempting to expand their markets and bring new markets into the purview of their distribution and sales networks, the global or international market is an expansion avenue that is often overlooked by U.S.-based companies. My past two columns have featured the theme of building and sustaining a small, task-oriented vehicle business. The global market place is a major opportunity for our industry, which is dominated by relatively small manufacturers and their sales networks.
Most people in business recognize that international trade, as a complementary addition to their portfolio of potential markets, has been driven by cost-reducing technologies such as microprocessor/digital-based documentation, containerization and other transportation technologies, mobile communications platforms, and cloud-based data storage systems. In addition in the policy arena, trade barriers of various sorts have, over the long run, also been greatly reduced. Among developed economies, our major trading partners, excepting Canada and Mexico, average tariff rates on manufactured products have fallen dramatically, as seen in the table shown above.
Responding to these trends, the volume in world traded has grown at twice the rate of the overall world economy, since 1950, according to the World Trade Organization (WTO)—which implies that by 2012, the volume of trade was over 30 times larger than in 1950, whereas the world economy was just under nine times its 1950 size. In a more recent time period, in the past two decades world trade has grown at an annual average rate of 5.3% in the midst of a world economy growing at 2.2% (both in inflation-adjusted, real terms).
Rise of the Small Multinational Company
A multinational enterprise is often defined as a company with manufacturing and/or servicing activities in two or more countries. The multinational enterprise, or MNE, is more often associated with large, complex companies, such as General Electric, the auto companies, chemicals, textiles, and so on. Less recognized is the fact that small to medium-sized companies have also initiated and increased their international business.
This growth in international business by small to medium-sized companies has not gone unnoticed by the financial investment community. Put in your browser “small cap companies international trade”, or some similar combination of words and phrases, and you will come up with a host of pages populated mainly by financial investment companies touting small cap stock portfolios. This strongly suggests that any small company that builds a track record in international business will generate the interest of a very dedicated sector of the financial investment community, and thus establish a platform for future manufacturing expansion.
Marketing Barriers Come Tumbling Down
One of the most significant development in the opening up of international market opportunities is the internet. While I may be accused of stating the obvious, experience has shown me that few in the small, task-oriented vehicle (STOV) industry actually understand the power of driving sales and sales leads through a medium that is totally trackable and is, itself, growing by leaps and bounds. In the context of retailers in a wide range of industries complaining that their outlets have become merely a showroom for internet-based sales direct from the factory, STOV manufacturers, for the most part, are reluctant take full advantage of the benefits of properly structured internet strategies could bring them.
Further, there is no reason for dealers to worry that their fate might be the same as other retail networks, i.e., losing business to direct from the manufacturer sales. The reasons are two-fold: First, most customers, even commercial customers (who may need to be approached differently), want the touchy-feely opportunity to test drive and otherwise inspect a vehicle. Second, the real anchor, that will guarantee manufacturer dependence on dealers, is service. (Manufacturers that ignore this, and there is growing evidence that one the majors is so doing, will ultimately suffer the competitive consequences.)
Needed Growth Strategies
You might object, as a small cap manufacturer or a start-up, that in the investment community small cap is defined as companies with up to $2 billion in capitalization. Hey, my cap is in the low 100s of thousands (and maybe several $million) and no more. And, I’m not listed on any exchange.
Here is where strategic planning and positioning becomes the sine qua non of growth. It requires taking advantage of the edge you have in the market you deal in (STOVs or parts, components, accessories, etc.). The outreach to international markets is breathtakingly cheap compared to former times. Set goals. Begin the process. What are you waiting for?