Some entrepreneurs who expanded too quickly into export markets now are struggling to survive, and some have soured on globalization completely. Export expert Laurel Delaney estimates it takes at least three years for a company to penetrate a foreign market. Many businesses that have used up critical resources just to break into a new country simply can't afford to wait out the current global economic slump.
"[Advocates of globalization] may rethink whether the U.S. should continue slashing trade barriers," says Robert E. Scott, international economist at the Economic Policy Institute, a research organization. However, it is unclear whether small companies would benefit from higher barriers. When the Bush administration slapped tariffs on imported steel in March 2002, hundreds of small companies that consume steel paraded to Congress to protest the regulations.
But some entrepreneurs have responded to reverse globalization with new bursts of innovation. For example, some smaller companies are rediscovering customers close to home. Other small businesses are continuing to push abroad but are focusing their attention on a few key markets and diversifying their investments in those regions. "In the past year, we have opened new sales offices in India and China, places where we know there will be strong growth," says Charles Tharp, president of Environmental Dynamics, a Columbia, Missouri, manufacturer of waste water treatment equipment that brought in $14 million in 2002. "There has been a consolidation in our business, and the companies left will be the ones that export smart, control their costs and develop connections overseas." These connections pay off: Tharp's key salesperson in China is the brother-in-law of one of his employees in the United States.
Other firms are making their operations more flexible to better accommodate foreign tastes. After all, Delaney notes, even behemoth Wal-Mart has realized selling products abroad requires flexibility. Wal-Mart, which often builds cookie-cutter stores in America, sells locally popular products in China, including turtle blood and live frogs. These entrepreneurs hope such malleability will allow them to prepare themselves for the next wave of global integration. "Perhaps compared to two years ago, the situation for small-business exporters looks bleak," says McKigney. "But when you compare it to 1989, when there was so little trade, you have to conclude that exports have been one of small businesses' biggest success stories in recent years."
|Where to Look for Advice|
companies thinking of expanding into export markets often feel lost
when they venture overseas and are forced to deal with foreign
legal environments, unfamiliar languages and new business
practices. But several organizations try to provide information,
advice and even financing for entrepreneurs focusing their vision
1. The Small Business Exporters Association is the nation's oldest and largest trade association devoted to small and midsized exporters. The SBEA lobbies Congress to help small exporters, provides networking opportunities for small companies eager to meet foreign customers, and assists entrepreneurs with some of the legal and procedural challenges of exporting.
2. The International Trade Administration of the U.S. Department of Commerce offers solutions to common global trade problems and country guides to nearly every possible export market.
3. Global TradeSource Ltd. features a newsletter full of comments from small-business people all over the globe who provide vital information about the on-the-ground business climate in various markets.
4. The SBA's Export Assistance Centers, located nationwide, help entrepreneurs get loans for export financing, research foreign markets, and make contacts with customers overseas. Export Assistance Centers are targeted toward entrepreneurs who have not set up export businesses before, so veterans of foreign markets may prefer using Global TradeSource Ltd. or the SBEA, both of which target long-timers.
Joshua Kurlantzick is foreign editor of The New Republic.