On May 11th, the International Trade Administration and the U.S Department of Commerce released the latest data concerning the exportation of goods and services from the U.S, and the numbers may surprise you. Overall, exports are up 4.6 percent in March 2011 reaching a record $172.7 billion since the beginning of February. Finished goods accounted for $124.9 billion which leaves $47.7 billion for services rendered during that period. Additionally, they reported that between February and March alone, $7.7 billion of goods and services were exported, reaching unprecedented levels. This is a good indication that we are heading out of this ‘rut’, and that perhaps some companies, such as small and medium sized firms, have dove head first into global distribution.
Small and Medium Enterprises
It could easily be assumed that large corporations with access to international channels of distribution and offshore affiliates across the globe would be carrying a large majority of the weight, but small businesses have helped carry exports. Small to medium enterprises, which are those companies with 500 or fewer employees, accounted for 97.6 percent of all exporters in 2009. They were responsible for 32.8 percent of all exported goods and services during the same period, resulting in $308 billion in export revenue. And unlike their larger counterparts, 92 percent of small to medium size firms operate from a single U.S location. While this is a disadvantage when competing with the larger corporations with broad access, it is still impressive that these firms are able to penetrate such expansive markets. However, their success wasn’t on merit alone; most of these firms took a risk and sought export financing for their efforts.
According to the Export-Import Bank of the United States, requests for export financing started increasing in October of 2010, when the bank processed over 1,700 applications for financing, resulting in more than $2.4 billion in export financing. For smaller enterprise during the period of October 2010 and January 2011, financing rose to $1.5 billion, up $100 million the same time the previous year. This would only occur if businesses were optimistic about growth, and seeking creative solutions to expand their operations. Most of us realize that emotions and speculation drive most markets and are valid indicators of inflation. That is why when the recession set in, companies stopped producing inventory, they were more frugal about doing business with clients with credit issues, and they were simply not optimistic. Coming out of the recession starts with the mindset that future periods are going to yield growth and profits, and executive orders follow suit.
Because the bank is an independent federal agency, the financing they provide can include export-credit insurance, which helps ease the pain of exporting goods or services. This includes dealing with trade regulations of the European Union and others, where there are added taxes and fees to protect domestic firms. One of the primary things that I would be worried about is the fluctuation in currency. Even over a period of 30 days, which is a normal payment cycle, we can easily assess a loss during currency conversion. This is something that any company faces, but those larger corporations may have the resources to better predict currency values during certain periods. On June 7th of 2010, the U.S Dollar was $.83 per Euro, but as of today, the U.S Dollar has fallen down to $.67 per Euro. This is a 20% change in just the last year and the trend continues downward.
Digital Indicators of Export Increases
Although the World Wide Web started in 1994, I hear the same things repeated year after year. Companies are turning to the internet to grow sales and expand their contact and customer base. Because we have seen an increase in global exports, I started looking for trends in the virtual world. I’ve seen many job postings for companies looking for internet marketing managers to ramp up their Google AdWords campaigns and SEO efforts, and to dive into social media outlets like Facebook and Twitter. Even small enterprises are shelling out cash to improve the attractiveness of their websites and are looking for the business directories that can get them international attention. In recent months, I’ve research keyword trends in the area of international distributors and wholesalers, which are on the rise. Although the days of ‘knowing someone in the business’ aren’t entirely gone, companies are making cold connections with companies that they have never done business with previously.
I always argued that the Internet would open small to medium size companies to the world, closing the gap that big corporations had on the little guy. To get a good perspective of this, search for your favorite brand or company on Facebook. I’ll be surprised if they don’t have a page, but then search for one of your local restaurants or coffee spots. You’re likely to find that they have a presence, and the same technologies are available to each. Many firms are driving these sales from relationship building alone, which doesn’t require a massive PPC (pay-per-click) campaign. This remains one of the only key differences in this realm. Larger corporations can still out spend the little guy, but the gap is always shrinking.
I feel that the Internet would likely be one of the drivers for economic change in the United States. Off shoring is on everyone’s mind and alongside the social changes and value system changes that we are seeing, the Internet can provide the channels of communication for firms to convince potential clients to move their operations back to the United States. News of bad experiences from Asia and other countries, concerning quality and long lead times are exposed in the news section of online sites almost daily. This is where not only the speed of information is valuable, but the wealth of information available to educate purchasing managers that is equally important. Knowing that there is more risk than may be initially thought up front could curb off shoring demand, and domestic manufacturers could reap all of the benefits. We’re starting to see some of the manufacturing to trickle back to the U.S. As a marketer and a consumer, will I play a role in this? I certainly hope so. In a globalized world there will always be that element of market saturation and low price driving, but the ability to reach clients is step 1.
For smaller firms that provide precision CNC machining or screw machine products, we can leverage the Internet to find OEM wholesalers or international distributors, or with website traffic data, we can generate leads or geo-target our advertising efforts. Moreover, we are confident that we will see a ROI on the capital that we outlay for these efforts. Instead of a push world of marketing, we can focus on potential clients pulling information from us. This relieves some of the administrative time required to attract new clientele. Also, as green energy and other sectors start to grow, we will see supporting sectors continue to emerge. Overall, I think the Internet has softened the burn for seeking clients across geographic borders.