Massachusetts exports up in
Globalization has its rewards for Central Massachusetts and Metrowest
businesses. A combination of local expertise in highly specialized,
often capital-intensive niche markets, the growing power of the Internet
as a sales tool, and the relatively weak U.S. dollar made 2005 a banner
year for exporters here, and 2006 is shaping up the same way so far.
Common wisdom holds that overseas competition has hurt U.S. business,
particularly manufacturers. But many of the region’s companies, from
software makers to biomedical firms to, yes, even manufacturers, see
foreign trade as an opportunity.
The power of the niche market
For manufacturers in specialty niches, foreign markets represent more
opportunity than crisis. Ayer-based Advanced Vacuum Systems Inc.
has been exporting vacuum furnaces used to process materials for the
aerospace, electronic, auto, and other industries for well over a
decade. Steven Levesque, owner and president AVS, says China and India
have been the company’s strongest export customers for the past three
years, but he’s concerned that China is growing at an unsustainable
clip. For now, though, its growth gives it the cash to buy AVS’
products, which are priced from $300,000 to $1 million. AVS was among
the first companies in its industry to export. "You learn a lot about
other cultures, their expectations and ways of doing business," Levesque
says. "Unless you are an expert in foreign business, you pretty much
learn as you go."
Accutech, a division of Hudson-based
Adaptive Instruments, makes highly specialized wireless
instruments used in measuring temperature and pressure. It also provides
analog electrical measurements, which are needed in refineries or large
industrial organizations. Much of the demand comes from Canada, where
Adaptive is one of the only companies to provide the wireless
technology. "Our products go hand-in-hand with the need there," says
Jennifer Rogers, Accutech’s marketing communications manager.
Worcester-based Walker Magnetics, maker of large
magnets for industrial use, exports to Japan, and much of the Asian
continent, including China, Taiwan, and Korea. Its products include the
large magnets used at construction sites to lift beams and in junk yards
to haul metal, as well as the magnets used in large conveyors. The
company, in addition to its Walker Scientific division at the Worcester
headquarters, has international offices in Ontario, Canada, the
Netherlands and the Czech Republic, as well as in California, Wisconsin,
Ohio and Pennsylvania. It exports magnets to Asia and vacuum furnaces to
Asia, China and India.
Walker Scientific President Richard Longo says
Korea, Thailand, Singapore Malaysia and other Asian manufacturing
countries are the best customers for Walker Magnetics’ products because
they’re the fastest-growing spots for regional manufacturing.
International sales make up between 10 and 15 percent of the company’s
total business. Between 2000 and 2003, those sales increased 25 percent
from its Worcester operations alone. Companywide, sales increased
between 65 and 70 percent.
Morgan Construction Co., a Worcester-based steel
mill designer, reports that even with the domestic steel industry
booming, more than half of its business comes from outside the U.S.,
according to Vice President Daniel Morgan. Its few competitors are based
in Europe, making Morgan the only domestic supplier of steel mill
infrastructure. With many clients in North America only needing upgrades
and modernization of mills that they already have, Morgan is finding
new-mill business abroad. Asia, South and Central America, South Africa,
India, Russia and Belarus buy from Morgan Construction.
The boom in biomedical exports
Biomedical products are one of the leading export categories for
Massachusetts. With about $20 million in sales and 60 employees, Luxtec
of Boylston makes surgical headlights and cables, and is expanding in
the digital imaging segment to document live surgeries. It notes a
steady 20 percent annual growth in international revenue for the past
five years, increasing from 16 percent of its total sales to 22 percent.
Craig Stevens, Luxtec’s vice president for
international sales development, says 80 percent of the company’s
business comes from Europe and Asia. Countries that spend a large
percentage of their GDP on health care are the best customers: the
European Union, Japan, Australia, Singapore and Korea. Stevens notes
that regulatory issues present the biggest obstacle to market entry.
Marlboro-based Cytyc Corp., which makes medical
devices and diagnostics in the women’s health field, says its largest
international market is Europe, followed by Asia/Pacific. While its
international sales comprise just over 10 percent of its total sales,
the international market is growing rapidly. Cytyc posted $53 million in
international sales in 2005. That represents an approximate 400 percent
growth rate over 2000 international sales.
The Internet versus "feet on the street"
Luxtec’s Stevens says when he started out in international business
development in 1989, his only search tools were the Yellow Pages. That
search method was full of risk. It was difficult to qualify overseas
distributors, and language and logistics barriers were considerable. But
Luxtec has benefited greatly from programs offered by U.S. Commercial
Service (see sidebar), Stevens says. Luxtec used the agency’s Gold Key
program, which brings prospective exporters together with foreign
distributors and buyers, to gain entry into Russia, one of several
countries in which it’s testing new products. The cost of Gold Key to
Luxtec ranges from $500 to $800. "You can’t fly there for that," Stevens
David Harding, president of Cytyc International, says the company has
had the most success selling directly into foreign markets with its
locally based international sales and marketing group. The company also
uses a network of distributors where there is higher risk or lower
potential for a direct sales force.
Internet-based trouble-shooting services extend local companies’
market reach. AVS offers computerized problem-solving over the Internet
for much of its equipment.
Westboro-based Stratus Technologies Inc., which
makes fault-tolerant systems, has seen international revenue growth of
36 percent overall since 2003. Stratus has been in foreign markets since
the pre-Internet days of the early 1980s. Stratus sells direct in Europe
but works through distributors in Asia, South American and Africa; in
Japan, it uses both strategies. "Our overseas operations are the feet on
the street that create demand and awareness," states CFO Robert Laufer.
Weak dollar, strong sales
The weakness of the U.S. dollar relative to foreign currencies makes
U.S. goods more attractive than European-made goods for many overseas
buyers. "Bad for sightseeing, but good for business," says Morgan
Construction Co. Vice President Daniel Morgan about the dollar. Coupled
with increasing demand for U.S. goods from developing countries, the
more competitive dollar means sales increases for Massachusetts
From Stratus Computer’s viewpoint, the weak dollar is a wash, since
most of the company’s competition is with other U.S.-based companies
that are also selling to overseas markets. Cytyc says foreign exchange
rates have not had a significant impact on its commercial success in its
various international markets.
New buying power
The emergence of developing countries as industrial consumers of U.S.
goods is leveling the playing field for the region’s companies. While
small manufacturers in mainstream market niches have suffered from the
effects of foreign competition, companies with specialties are
prevailing by selling their products to countries that have newfound
buying power. As many of the region’s most innovative companies are
finding out, globalization may take away with one hand, but it gives
with the other.
SIDEBAR: Exporting 101
For business owners considering entering the export market who don’t
to start, there are plenty of options. The
Massachusetts Export Center, (www.mass.gov/export),
which is part of the Small Business Development Center Network, offers
programs to companies of all sizes that are either just getting started
in exporting or want to refine their current export strategy.
Massachusetts Export Center’s step-by-step programs cover planning,
compliance law, market research, participation in overseas trade shows,
and export training. The training programs give companies an overview of
important issues of legal issues, the details of exporting,
international marketing and distribution, and other related issues.
Julia Dvorko, the
Central Massachusetts regional program director for the
Massachusetts Export Center,
says more local companies are seeking export information, and that
recent MEC training courses have consistently been sold out. She
estimates that there are now approximately 200 local area companies a
year showing interest, up sharply from the approximately 80 annually
just a few years ago.
Dvorko feels that a better understanding of international business
and a more sophisticated view of potential, promotion, and growth is key
for much of the recent surge in exporting.
At the federal level, U.S. Commercial Service offers U.S. Export
Assistance Centers for small to mid-size exporters. The U.S. Export
Assistance program is another organization that can be turned to for
advice and support. They tend to work as a counseling and consulting
service and work with the Massachusetts Export Center in some of their
Export Training Programs.
The U.S. Export Assistance Centers (regional office website is
www.buyusa.gov/newengland) offer such services as the Gold Key Service
and Platinum Key Service. The Gold Key Service (see main story) provides
companies with pre-arranged meetings with foreign buyers that may be
interested in purchasing the product. The Platinum Key Service is a
long-term initiative that aims to develop the market, launch the
product, and provide support where needed. Other services offered by the
U.S. Export Assistance program range from finding an overseas business
partner from already screened companies or doing background checks on
others, to granting access to an extensive market research library and
performing specific market research for individual companies, to
promotion assistance when products are launched. Companies are also able
to advertise through the USCS in Commercial News USA, a product catalog
sent to United States government offices worldwide, and which has
garnered considerable positive feedback.
Bill Davis, of the U.S. Export Assistance Centers of New England,
advises that prospective exporters know their product inside and out,
and should also have an established domestic marketplace. A steady
income through U.S. sales makes the transition to the global marketplace
easier. He also suggests looking to Canada and Mexico when first
beginning to export. With similar cultures, language barriers falling,
and limited duty fees, they can be easy sells, he says.