TEXTILES.ORG
As the world shrinks, businesses can capitalize on widening their pool of customers.
By Janice Kleinschmidt
If we needed proof that we’re in an economic environment where lines on a map lose significance, September and October delivered. Though perhaps first to the trough, the United States held no monopoly on failed financial institutions and crashing stock markets. While there are many lessons to be learned, key for businesses in the specialty fabrics arena is how global the marketplace has become.
“I see a world just continuing to become smaller and smaller,” says Marco Alvarez, president and CEO of Fabric Images Inc. “Our ability to continue to grow our business globally is going to be important as costs and budgets continue to be squeezed.”
A lot of U.S. commodities transitioned to the global front years ago, says Joey Underwood, vice president of Safety Components Fabric Technologies Inc. in Greenville, S.C., a division of International Textiles Group (ITG), with operations in the United States, Germany, Romania, the Czech Republic, China and South Africa. Now, he says, “the specialty markets to some degree are transitioning.
“I think a lot of markets went to developing parts of the world for cost purposes only. As costs rise, we will see some of those products come back to North America. We’re starting to see some of that already. That said, 95 percent of the world’s growth over the next 5, 10, 20 years is going to occur outside the U.S., so the infrastructure that’s going to these developing countries will be used in large part to supply those emerging markets.”
According to Mary Lynn Landgraf, a senior international trade specialist in the U.S. Department of Commerce’s Office of Textiles and Apparel, “The global marketplace changes daily, which has become more evident over the last five years. New emerging markets continually join the global marketplace. Brazil, Russia, India and China are currently the major players with rapidly growing economies and internal growth. Much of this growth can only be served by imports.”
Participation in global markets benefits companies
Fabric Images entered the worldwide marketplace five years ago. Based in Elgin, Ill., the 16-year-old company now operates a manufacturing facility in Mexico and a sales office in Japan. “It’s been good because the product that we offer [a fabric alternative to hard-wall construction] is still in the infancy stage on a global basis,” Alvarez says, noting that a manufacturing and sales facility in Milan, Italy, is on the books for 2009.
“American companies need to sell to the global marketplace to keep up with competition, create awareness of our innovative products and establish joint ventures and business alliances,” Landgraf says. “Selling globally is critical to remaining competitive. History proves that companies involved in exporting are more likely to remain in business.”
Ted Anderson, president of BondCote Corp., a Pulaski, Va.-based manufacturer of coated and laminated fabrics, says that fabrication suppliers have tended to follow as fabricators move production overseas for lower labor costs. To deal with the changing dynamics of a global marketplace, companies need to continue driving cost reductions and product innovations, he says, adding that one way to reduce costs is through global sourcing of materials.
Companies can adapt to rapidly changing global dynamics by being a participant instead of a bystander, Landgraf says. “This means involvement in their [trade] association’s educational programs, exhibiting at trade shows, participating on trade missions, attending export/business seminars and aggressively working the market.” Critical to the success of the program, she adds, is having designated staff to lead the international marketing of the company’s products.
Fabric Images tries to come up with alternative business strategies with customers, Alvarez says, “whether it’s terms, leasing programs or looking at products and materials to do things more cost effectively—to value-engineer projects a little better.
“We have to keep reinventing ourselves. We have to continue to look at how do we change the product, change the offering to meet the market conditions.”
For example, Fabric Images introduced a program in October it calls “freestyle leasing,” which allows customers to lease a display rather than buying one. According to Alvarez, meeting turbulence head-on means “coming up with this type of program and being sensitive to what’s going on in the marketplace and being able to respond to that immediately.”
Chris Nolan, managing director of Nolan Warehouses, an industrial textiles company based in Sydney, Australia, says foreign business has improved and deteriorated during the 20 years his company has been doing business outside the country.
“Due to the Internet revolution, communication has improved enormously,” he says. “Government bureaucracy has become less intrusive, but transport logistics have worsened considerably and become, recently, much more expensive.”
The company’s foreign customers are located in Oceania, and Nolan says there are opportunities as its ASEAN neighbors become more prosperous. “To exploit it to its full potential, we would seriously need to consider establishing a formal presence, say, in Indonesia.”
Companies face challenges in global markets
Establishing foreign operations demands its own considerations. “The largest issue is hiring/training the right local management team, establishing the proper quality procedures and adherence to those procedures, and financing the operation during the start-up phase,” Underwood says.
For Anderson, the challenge lies in differing criteria for products. “Pricing is an issue from the standpoint that product expectations in emerging economies may not be as high as U.S. expectations,” he says. “Their costs may be lower because the market doesn’t require the same level of technology.” However, he foresees change in the next five to 10 years, with global customers requiring higher-performance products, accompanied by intensified competition for those customers.
How the recent economic crisis unfolds in coming months will undoubtedly affect the global marketplace, but Underwood for one believes that forward-looking companies will continue viewing the world as their marketplace and investing in foreign operations.
“[ITG’s] long-term philosophy is to provide products for local markets wherever they may be,” he says. “We have to do that with on-site manufacturing capability.” According to Underwood, in addition to curtailing transportation costs and delivery times, there are politics to consider. “Americans tend to buy from anybody,” he says, “but a lot of foreign markets would prefer to have local content. All things being equal, they would prefer to source from a local manufacturer.”
Landgraf foresees that in the next five to 10 years trade will increase between the United States and previously untapped markets. “The United States will have to be increasingly aggressive in global marketing efforts,” she says. “In return, we will see a renewed interest in strategic business alliances through joint ventures, acquisitions and technology transfers. Companies need to prepare themselves to think—and act—globally. This includes staff that is focused on export development.”
“If you want to succeed where 95 percent of the world’s growth is going to be—outside of North America—you just have to plan to participate, and the only way is to have infrastructure,” Underwood says. “If you are not looking outside the U.S. borders, the probability of shrinking is greater than the probability of growing.”