Survival Of The Fittest

Over There

While manufacturers struggle with sometimes incomprehensible government requirements, they must also worry about overseas competitors. Foreign competition is an acute concern for micromanufacturer Bunny Connell, whose Huntington Beach, California, company makes ceramic products sold in department stores and gift shops nationwide.

Connell is constantly trying to stay ahead of low-priced knockoffs of her ceramics. "In my bath [products] line, pricewise I'm competing with ceramics from Taiwan and Mexico. The only way I can compete is to keep my quality and service up and keep the minimum [order] down," says Connell, whose 10-year-old Pacific Coast Ceramics employs six people and has annual sales of about $150,000.

In addition, Connell says she must constantly innovate, designing new lines or adding items to existing lines, hoping to gain a solid foothold with each in the year or so she estimates it takes competitors to find and copy her work.

One design that has been particularly successful for Connell is a ceramic toilet-brush holder shaped like a cat. "We were the first on the market with it and have a copyright on it," she says. "It's a good seller because it's something unusual that has not been seen before." At the height of the product's popularity, she says, the company was producing about 200 cats a day, compared with 50 units for a typical bestseller.

In addition to assaults such as those Connell faces, small firms are also indirectly affected by foreign competition. "A lot of small manufacturers produce [goods] for larger companies," explains Jack Russell, president of the Modernization Forum, an association whose member companies help small manufacturers modernize. When foreign companies take part of the North American market from those big U.S. corporations, Russell notes, small firms are impacted as well. The auto, electronics and apparel industries are prime examples.

To remain competitive, large corporations are downsizing, right-sizing and belt-tightening. This has resulted in tremendous changes--and new opportunities--for the small and midsized manufacturers that are these companies' supplier chain, says Carr at the MEP. "[Big corporations] are outsourcing more--more products are being built outside the company," he says. "They're also beginning to rely more on smaller firms, seeing them as an integral part of the production process."

While that can translate into new customers, it also means some entrepreneurs are feeling tremendous pressure to be more quality-conscious in terms of design and production. This may mean retooling to use more sophisticated machinery--an expensive undertaking with no guarantee the major corporations will help cover the cost.

Paul Dickinson, president and CEO of H-R Industries Inc., a Richardson, Texas, manufacturer of printed circuit boards, has found the secret to giving his larger corporate clients what they need. "Our philosophy is to overservice an account. We immerse all our people in that concept, and we get very creative in terms of competitiveness," explains Dickinson, whose 21-year-old firm has 330 employees and 160 clients, including Eastman Kodak Co., Lucent Technologies and Paradyne Corp.

"For example, my engineering crew came up with a way to put [circuit board] parts together more economically, which resulted in a significant savings to Eastman Kodak," Dickinson continues. "We had a similar experience using an engineering technique that reduced costs at Lucent."

Dickinson's dedication to cost-saving innovations has paid off. In the late 1980s, H-R was one of 17 companies supplying circuit boards to Kodak and was essentially a minor player. By 1994, H-R had become one of only two circuit board suppliers to the corporation.

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This article was originally published in the September 1997 print edition of Entrepreneur with the headline: Survival Of The Fittest.

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