Why It's a Great Time to Go Global

A. We did set up manufacturing in China about five years ago. Our machines were being copied in China--you couldn’t tell the difference between our machines and the copies. It’s tough on a small business when that happens because you just don’t have the resources to fight them. So we set up a plant with Taiwanese management to make our own copies. It’s at a much cheaper price than we were able to provide from the States.

Q. What is your advice to similar companies about how to take advantage of the cheap dollar?

A. If you’ve got a mature product with solid market share, you want to be more aggressive in terms of holding prices even and benefiting from higher margins. Make the money. Now is a good time. If you don’t have market share, you can also afford to be aggressive on pricing and new relationships. While our machines are cheaper for the Europeans to buy, it’s more expensive for us to go there and attend trade shows. We spend $150,000 to $200,000 to attend a trade show, so that quickly uses up our marketing budget. And it is as expensive as hell to hire someone to live there because of the labor and social costs. It’s tough to open up your own operation over there. You need a distributor or a partner.

We’re about to make one deal with a European company. They also make fabric cutting machinery, but not a complete line. It’s cheaper for them to buy it from us rather than create their own. We are happy to do that. It increases our volume. It’s a way of getting into new markets that we couldn’t afford to.

So for smaller companies, I’d say look at partners. That’s not hard to do with the Internet these days. It’s a simple search. There are a lot of smaller companies that are looking for synergies and to partner up.

Q. What other kinds of partnerships are you doing?

A. An emerging area for us is blades for windmills, which are covered by a fabric, in this case woven Kevlar. Our machines cut them very well. But the fabric needs to be fed into the cutter in a certain way. There is a German company that is talking to us about whether we would provide them the cutter. They’re saying, “Gee, your product is competitive to us, but you make a good product. We don’t make the products as well as you do.” It’s good deal for both companies.

Q. So in some senses, you’re doing an international currency straddle?

A. Our mantra is if you need to sell globally, you need to source globally. There are some parts that are not technically critical to your product that you can source overseas. We’ve done that in China. Since their currency, the yuan, is tied to the dollar, our cost of importing these goods has not gone up. But in places where we are selling the equipment, like Europe and South America, the prices they are paying us are going down in their currencies, but not in dollar terms. So it’s a win-win situation for us.

Q. You see a big difference between finding a distributor for your products versus finding a true partner?

A. Yes, a partner has a bigger interest if your product adds value to his company. That’s different than a distributorship arrangement. If you’re trying to penetrate the market for the first time, for the most part distributors are going to concentrate on what they can make the most money with, meaning established products. It’s hard for a distributor to take up a new product and give it the attention you want. But if you can find a partner, and you’re adding value to their product line, you immediately get their attention and they already have distribution.

Q. So the world is demanding American products?

A. There is tremendous cache to have something made in the U.S.A., which you wouldn’t know from looking at the car industry. But for the machine tools we manufacture, “made in the U.S.A.” still has cachet. One advantage is serviceability. People know that if they deal with an established U.S. company, they are going to get service on their product. Especially if they are spending a lot of money, like $200,000 for one of our machines, they’re asking, “Is the company going to be around five years from now? Or are they just a website?” We have been around for 120 years and we are like the little mouse in the Dumbo movie, that cast a big shadow on the wall. U.S. companies have that reputation.

William J. Holstein is a New York-based business writer and author.

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