Pennsylvania's small businesses urged to broaden their horizons
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As global trade increases and the advantages to exporting become more apparent, Pennsylvania's small businesses are looking beyond the country's borders for growth.
Led by smaller companies, the state exported $22.3 billion worth of merchandise in 2005, up 20.5 percent from 2004, making Pennsylvania the nation's ninth-largest exporting state, the latest trade statistics show. Canada ($7.7 billion, up 21.1 percent) and Mexico ($1.4 billion, up 18.4 percent) remained the top two export destinations, abetted by the North American Free Trade Agreement (Nafta). Enacted in 1994, Nafta eased tariffs and other barriers to trade among the three countries.
The success of small-business participation in international markets is crucial to both the United States and state economy, said Joe Hoeffel, deputy secretary of the state's Office of International Business Development. Nearly nine of every 10 of the 12,664 companies that exported goods from Pennsylvania in 2004 had fewer than 500 employees.
Still, thousands more small businesses in the region remain hesitant to take the leap across borders, in some cases simply for fear that "they may not get paid, or that they will get paid late," said Roger Cranville, senior vice president of global investment at the Allegheny Conference on Community Development.
Another reason companies are reluctant to begin exporting is that they lack support and guidance, said Brent Rondon, manager of the Global Business Program at Duquesne University's Small Business Development Center. In March, his office will help lead a state trade mission to two Mexican states, Aguascalientes and Jalisco.
The trade mission will include a maximum of 20 small- and medium-size manufacturers, high-tech and service companies from across Pennsylvania.
Trade missions provide the opportunity for face-to-face interaction, a distinct advantage in making deals in many parts of the world. Thar Technologies Inc., based in Harmar, has successfully marketed its products to Europe and Asia through mostly Internet-based communications and international trade shows, according to Tony De Prado, sales manager of the process division. Only recently, however, has the Latin American market shown interest in Thar's technologies for the purification of ingredients in raw materials indigenous to the region. "I realized that for many of the international markets, you need to be right in front of people to be able to sell to them and show them you are for real," he said.
Even spending time with someone in the car to and from the airport can do miracles to develop trust, said Carlos Turcios, manager of Flexon Inc, a Leetsdale-based company that has been exporting industrial high-speed doors and loading dock equipment for more than a decade to Latin America.
A slower pace of business is also a challenge that many U.S. companies face when doing business overseas. "While we in the U.S. tend to be very entrepreneurial, Mexican businesspeople are less likely to make an executive decision without consulting their co-workers," says Delia Barnett, consultant with Puentes de Negocios/Bridges to Business, a consulting company based in Murrysville that assists regional companies developing business in Mexico. "Therefore, doing business in Mexico requires patience, acceptance that your domestic quarterly goals may not be met, and a lot of buy-in from the top echelon of your company."
In addition to trade with Mexico and Canada, Pennsylvania companies have expanded exports to China by $614 million, or 192 percent, from 2001 to 2005, making it the fifth largest market for Pennsylvania exports.
But despite the growth, many companies have realized that doing business in China isn't easy either.
"China has a couple billion consumers, but its business climate and poor records of market access and compliance have made it a much tougher market," says Lyn Doverspike, director of the U.S. Commercial Service in Pittsburgh, a U.S. Department of Commerce local office of trade specialists that helps businesses interested in exporting.
In particular, China has been criticized for failing to give adequate protection to intellectual property rights such as trademarks and patents. "The chance of your product being exported, taken apart, copied, and reverse-engineered are much higher in China then anywhere else," said Larry Nelson of the Center for Trade Development, an office of the state's Department of Community and Economic Development that overseas export promotion programs.
Despite the obstacles, Pennsylvania companies often discover the benefits of exporting outweigh the costs. For instance, exporting often helps to even out the dips in the domestic economy experienced by smaller businesses.
"Once a smaller company does go international, there is no way they won't succeed," said Mr. Cranville of the Allegheny Conference. "Sometimes it just requires taking a more proactive stance to start exporting."
The state's Department of Community and Economic Development, through a new partnership between the Allegheny Conference on Community Development and the Southwestern Pennsylvania Commission, is offering support programs such as market access grants, incentive packages, and trade representative services to companies in the Pittsburgh region.
For more information, call the Business Resource Center at 1-877-392-1300. To find out more about the trade mission to Mexico, call the Small Business Development Center at 412-396-6233.Post-Gazette
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First Published January 30, 2007 12:00 am