Global Gold

Dec. 21, 2004
Small businesses capitalize on world markets.

Great walls are still being built in China, not by latter-day successors to the Ch'in Dynasty (under whose rule the Great Wall began to rise in the third century B.C.) but by a small U.S. manufacturer, Eagle Building Technologies Ltd. of Boca Raton, Fla. The tale of Eagle Building Technologies, a company that makes and distributes concrete-block building systems and products, is one of several success stories being written by U.S. small businesses in places as different as Canada, China, Japan, Mexico, Germany, and South Korea. Small companies -- firms with 500 or fewer employees --constitute a surprisingly high 90% of all U.S. exporters and account for about 30% of the total value of U.S. exports, calculates the U.S. Alliance for Trade Expansion, Washington. And a few small companies, including Kennesaw, Ga.-based Consolidated Engineering Co. (CEC), a provider of heat-process equipment and services, and sign company Colite International Ltd., West Columbia, S.C., derive a substantial percentage of their total revenues from foreign business. Small- and medium-sized U.S. companies (SMEs in commercial jargon) are able to compete "in just about every country in the world, if and when they set their minds to it," contends Simon C. Bensimon, a founding partner of the Avico Group, a Potomac, Md.-based consulting firm that develops customized export plans for small- and medium-sized U.S. firms. A decade of his data, from 1987 to 1997, shows that SMEs are present in all of the top 25 U.S. export markets -- and that Canada, Japan, and Mexico account for fully 40% of small and midsized firms' export activities. "There is no doubt that small- and medium-sized business enterprises can play -- and do play -- a significant role in the U.S. export effort," Bensimon notes. But his statistics also show that SMEs could do even better internationally. In 1997 a disconcerting 63% of the firms had sales in only one foreign market. "Many if not most of [the companies] have a limited commitment to foreign markets," Bensimon observes. Yet that need not always be the case -- as the stories of three U.S. companies in quite different industries help illustrate. Eagle Building Technologies: Success block by block International business has been at the heart of Eagle Building Technologies Ltd.'s strategic plan since its founding in 1998 as Eagle Capital International Ltd. One reason is the size of foreign market opportunities for its patented building-block systems. "Our initial contract in China is for 5 million sq ft of residential development. You don't have projects of that size here in the United States," explains Anthony D'Amato, the company's CEO. Nevertheless, its core product -- a dry, stacked, mortarless wall system developed in 1983 at Utah's Brigham Young University and licensed from Integrated Masonry Systems International, Salt Lake City, a private company -- already has been used in the U.S. construction industry. "The product has been used in 600-sq-ft homes . . . and $4 million, 18,000-sq-ft homes. It's been used in the National Guard Armory in Salt Lake City, fire stations, and schools," relates D'Amato. In China, Eagle is the majority partner in a 55%-45% joint venture between Great Wall New Building Systems, its wholly owned Chinese subsidiary, and Double Dragon Cement Works, a state-run business. The building block for the 5 million sq ft of midrise residential construction slated for this year is being manufactured at the joint venture's 12-acre facility in Beijing. "We have made a true joint venture," says D'Amato. "They put up the land, the highways, the roads, and the infrastructure. And we brought in our technology and our block equipment. And we manufacture the product jointly, market it jointly, and sell it jointly to the local marketplace." The alliance, which also will market Eagle block and conventional masonry products elsewhere in China, expects to double its capacity in 2001 and to replicate its operation in northern China's Lioaning province, where the need for energy efficiencies offered by Eagle's insulated block system is especially acute. This year, the first year in which Eagle expects to have revenues, about 90% will come from outside the U.S., D'Amato says. A figure that high "I know is a concern to some people," he acknowledges, but he contends the prospect of permanent normal trade status between China and the U.S. and China's entry into the World Trade Organization reduce the risk. Plus, adds D'Amato, as a company "we have a two-year head start. . . . We were really in on the ground floor . . . and our partner is the Chinese government." Outside the U.S., 47-employee Eagle operates in India and Mexico in addition to China. Next year, D'Amato expects to add Turkey, Croatia, and Yugoslavia. He anticipates revenues of $75 million in 2001 and more than $100 million in 2002. CEC: Hot on a global scale Beginning in the 1990s, Consolidated Engineering Co. (CEC), a 40-year-old, family-owned firm with revenues of $38 million and 162 employees, has been driven internationally by the proprietary heat-process systems it develops for the automotive-foundry industry. The pace it has set is impressive. Foreign business for CEC, a company that has grown nearly 32% annually during the last 10 years, is "still running 70% to 75%" of revenue, says Scott P. Crafton, CEC's president and CEO. In percentage terms those impressive numbers put CEC in the company of such considerably larger firms as Colgate-Palmolive Co. and Honda Motor Co. Ltd. -- and 10 percentage points better than Dow Chemical Co. and Coca-Cola Co. "We were very fortunate in many ways that the first area of expansion . . . was Europe," Crafton states. But it wasn't for the often-touted relative ease of business entry. Indeed, Crafton recalls that getting going in Europe was "very, very difficult." Particularly in Germany it is tough to satisfy companies at virtually every step of the business process, from initial sale to equipment installation to after-sales service, he explains. But having made its mark in Europe, CEC was able to take "a very strong business process" into such places as Mexico, China, and Canada, he relates. CEC serves foreign markets through a combination of export and offshore sourcing. For example, it sources control cabinets from local suppliers in foreign countries so that the look, feel, and programmable controls are familiar to customers. CEC claims 3,100 installations of heat-process systems worldwide, with 40% of its business coming from repeat customers. Spreadsheets displaying the costs and savings of CEC equipment versus the competitor's technology are one tool that the company is using to encourage customer loyalty. "We can clearly define our value-added component to them," says Crafton. Another plus for CEC: cultural diversity. Seventeen languages, for example, are spoken fluently among the 150 employees in its Kennesaw, Ga., headquarters. Colite International Ltd.: Signs of the times Martin C. Brown and his brother Peter already had some of their work on display -- in the Middle East and in Europe. But in the highly competitive sign industry their company, Colite International Ltd., really started to get noticed in 1996 when it received an order from Lucent Technologies Inc. for new corporate signs in 22 countries. "That gave us instant credibility in our industry," Martin Brown boasts. It also presented a challenge: From their home base in West Columbia, S.C., the brothers had to find even more foreign sign companies that could be trustworthy sales-and-service partners. "From there it's just been a self-fulfilling prophecy," says Brown. Indeed, the company that began with two people and a plan -- the Brown brothers bought it in 1992 -- is now a $10-million-a-year business with 55 employees. It does business in 50 countries on five continents, and in 1999 international sales accounted for $2.8 million, or 28%, of its total revenue. Non-U.S. revenue could "easily" reach 30% to 40% of total income this year, claims Brown. In addition to Lucent Technologies, Colite's clients include Alcoa Inc., Ingersoll-Rand Co., Bank of America, Siemens AG, and ITT Industries Inc. The recent rash of crossborder corporate mergers and the prospect of more has given Colite's business a boost. But even more important to the company's international success is the network of relatively informal alliances it has formed with foreign sign firms. These firms can follow up on sales leads, add such things as lighting and custom lettering to signs exported from the U.S., and provide local attention to customers. "Because we are competing with sign companies 10 times our size, we have to be faster and better in meeting the needs of our corporate customers," Brown stresses. For example, "Technology allows us to take a digital photo of a customer's signs at its job sites, change [the design] . . . and post the proposed designs on our Web site for [the client's] approval within 24 hours," he notes. A result: product delivery in three to four weeks compared with the industry average of eight to 10 weeks.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

 John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.
      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).
      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.
      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”
      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.
      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.


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