fedgazette

Looking beyond Canada: exporting as a way of life

David Fettig - Managing Editor

Published March 1, 1989  |  March 1989 issue

Vincent Graziano, Minnesota businessman, agrees that one of the immediate benefits of the U.S.-Canada Free Trade Agreement is psychological.

Any increased awareness about export markets will be beneficial to America, Graziano says, and if the Free Trade Agreement inspires increased trade across the Canadian border that's all for the better.

But he also thinks it is outrageous that some American businesses chose to wait until a tariff-reduction agreement was signed between the United States and Canada before they even considered doing business with their northern neighbor.

"If that's what it's going to take to get American companies to export, then it's going to be a long, slow process and we'll never be one of the leaders," Graziano says.

Lack of commitment

When he says "leaders," Graziano is referring to countries like Japan and West Germany, whose economies are built to export. He fears America doesn't have the commitment to rival those countries.

Graziano is president of Northern Instruments Corp., Lino Lakes, Minn., a manufacturer of chemicals used to prevent rust. The chemicals are typically used in the production of plastics, bags, film or cartons that are then used to ship or store metal parts and products. Northern Instruments exports primarily to Japan, Germany and France, and to China, Canada and other countries to a lesser degree.

For Northern Instruments, tariffs are a normal cost of doing business, just like switching on the lights in the morning. And, likewise, if there is a viable market across the U.S. border, Graziano believes a business should go after it, no matter how many lights need to be turned on.

That's how Europeans look at business, Graziano says. After spending 10 years in international business working for large American corporations in Europe until 1976, Graziano came away with a different view of the world—and a different view of doing business. In Europe, exporting is a part of life. Europeans are committed to exporting.

But not in America, he says, and he views the Free Trade Agreement as a case in point. According to Graziano, American business says: "Remove all the restrictions ... make it easier for us, and then we'll do it.

"Well, that isn't how it's done. It takes time, and I believe you have to decide to do it no matter what it is you have to do."

Don't let tariffs or the seeming hassles of exporting stand in the way of the business, Graziano says. American business must go way beyond the horizons of the Free Trade Agreement and incorporate exporting as a part of their business philosophy. Like their foreign competitors, they must be committed, he says.

Know your customer

Graziano has been called upon recently to talk with interested businesspeople about exporting. While the Free Trade Agreement and exporting to Canada have been the impetus for these gatherings, Graziano encourages his listeners to look overseas as well—wherever a market exists.

At a winter meeting of small business exporters in Moorhead, Minn., sponsored by Moorhead State University and various Minnesota and Canadian agencies, Graziano stressed the importance of knowing the business culture of each country. For example, in Japan, human relations are crucial; deals can be won or lost depending on the impression made by the American executive. He told the Moorhead audience of about 50 Upper Midwest executives about how he was expected to participate in—as well as appreciate—certain Japanese cultural customs, while French businesspeople might expect an entirely different tack.

But before a business gets to the point of studying a business culture, it will have to ask itself some questions, according to Graziano: Is there a market for my product outside the United States? If there is, would it be profitable to work in that market? Finally: How do I get in?

Those questions are not as daunting as they appear, Graziano says. The U.S. Department of Commerce, as well as state trade and economic development offices, has plenty of free information on how to export. In addition, private firms, like freight companies, will often provide information on the costs of doing business across international boundaries—so a company doesn't have to be Fortune 500 material to be able to afford research.

Definitely small, but growing

Northern Instruments is one example. With 17 employees and about $2.5 million in annual sales, the publicly traded company is definitely what Graziano considers "small business." But of that business, 25 percent comes from exporting, and the annual percentage increase in export sales has been doubling in recent years.

But even though Graziano is pleased with Northern Instruments' growing export business, things weren't always going so well. Although Graziano was well-versed in the ways of international business before joining Northern Instruments, the company still gained much of its knowledge by trial and error.

"Initially, it's a sobering experience," according to Graziano.

Today, Northern Instruments has joined with a partner in Japan to form a new company. By so doing, Northern Instruments has eliminated the need to manage the business directly from Lino Lakes, and it has become an active member of Japan's economy.

In Japan, the process of establishing a new company is elaborate and is predicated on a strong relationship with a Japanese business. In West Germany and France, where Northern Instruments has contacts, the relationship is on more of a "handshake basis," according to Graziano, but it works according to their business culture.

"I think it has been established beyond any reasonable doubt that [if you are a small five-to-10 person operation] you have to ally yourself with a Japanese company if you intend to sell in Japan. You are not going to be a small American company and walk into Japan and enjoy what Japanese companies enjoy themselves," Graziano says.

His business contact in West Germany has hopes of being able to market Northern Instruments' products to other Far Eastern countries, an eye-opening proposal for Graziano, who has learned never to doubt the exporting ambition or ability of his foreign counterparts.

Other ways of breaking into foreign markets are to get involved with another American company that will represent a product, or to contact overseas traders that are looking for products to represent. Overseas traders frequently attend various trade shows, according to Graziano.

Northern Instruments tried the first approach at one point—linking up with another company—and allowed that company to market its product, but that relationship ended when the Minnesota company decided it wanted to control its own program.

The benefits of using another company or an overseas trader are that those methods can be an easy way to break into foreign markets; the negatives are that the company or trader may not have the time or resources to adequately represent the product (at least to the degree desired).

Other benefits

In addition to the bottom line, Graziano believes foreign trade can have a positive impact on the attitudes of small business employees. It's exciting to take phone calls from overseas, to work out problems and have successes, he says. And, it's exciting to welcome overseas travelers to their shop north of Minneapolis, just as it can be a thrill to visit those same countries.

Donald Kubik, vice president of Northern Instruments and director of the company's research and development department, travels with Graziano—as do other employees—in an effort to bring Northern Instruments' expertise directly to major foreign clients, and to instill good relations with those clients.

All in all, Graziano scoffs at those who suggest that small American businesses should stay at home and tend to local markets rather than taking on the world.

"You should go into it. Your immediate objective should be to find out if there is a market. Give it an honest effort. Go into it almost wide-eyed and innocent."

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