Finding the right Soviet market is one thing, getting paid is another
Published September 1, 1990 | September 1990 issue
While many American companies are simply observing, others, like Bison Instruments Inc., Minneapolis, are cautiously taking advantage of the new business opportunities in the Soviet Union.
A publicly owned company that manufactures portable geophysical instruments, Bison's decision to enter the Soviet market involved weighing two factors: the potential of the market vs. the discouraging potential for payment. "We knew there was a tremendous amount of raw materials such as gold, iron ore, oil, gas. All of these are items our instruments can locate," says Bart Hazelton, president of Bison, which does 55 percent of its business internationally.
"The biggest reason we took the risk was the potential for growth in this market if, in fact, we can continue to find money. We had one system that we sold for $85,000. We were told there was a need for 400 of those systems. That looked good to us," Hazelton says.
While the opportunities may look limitless, if payment is not forthcoming, the possibilities mean nothing. Fortunately for Bison, the Soviets are willing to spend their available hard currency on productssuch as Bison's instrumentsthat help them generate more hard currency. Instruments that help them find marketable raw materials are a priority.
Given Bison's experience overseasit has worked in India, Bangladesh, Pakistan, Indonesia and many African countriesworking with the Soviets was not too intimidating.
To be safe, though, in 1987 Bison hired a representative to help locate potential buyers in the Soviet Union. A native Russian who speaks the language, he is the president of International Marketing Systems in Andover, Mass.
"We heard a lot of the horror stories about people going into the Soviet Union and knocking their head against the wall trying to get started. You can waste a lot of time and money. We located a rep. That was crucial," Hazelton says.
The U.S. Commerce Department provided Hazelton with information about a Moscow trade show. "All sorts of geophysicists, technicians and engineers who would be interested in our product came by. We followed up with a seminar which our rep arranged," Hazelton says. At the seminar, Bison provided specific technical information about its instruments. That's where the real interest was generated.
"We were invited back after the trade show as a guest of the Soviet government. We were put into a competitive demonstration with the Japanese, the Swedish and another American company. We prevailed."
At that point, Bison proposed a system for the Soviets to try. They agreed and a "protocol" was signed.
In all, Hazelton made three trips to the Soviet Union to complete the deal. The trade show was first, with two more trips to demonstrate equipment. "We had good results from the three. We didn't spend a lot of money. In spite of what we'd heard, it was a reasonable investment," he says.
Bison had problems typical of companies doing business in the Soviet Union. Lack of a reliable means of communication was a common complaint. "Communication is probably the most difficult part because you can't just pick up the phone. You really have to coordinate your program," Hazelton says. Telexes periodically show up. Soviet counterparts may have access to a fax machine but they share it with all other workers in the building.
Because it often encountered individuals who were looking for price breaks, Bison had to rework its price structure to account for discounts, Hazelton says.
A third concern was U.S. export restrictions. The U.S. government controls exportation of various sophisticated technologies because of concern for national defense. Fortunately for Bison, its products, used for oil exploration, were not a problem.
Similarly, signing the contract went smoothly. Bison wrote its own protocol, the Soviets translated it, made revisions, and everyone reviewed it again. Finally, Bison and the Soviets agreed to a 90-day trial, after which the Soviets could pay for the equipment or send it back. Bison usually deals strictly on a letter of credit, so the protocol was a compromise.
The future for Bison in the Soviet Union looks promising, according to Hazelton. It is currently arranging a joint venture of sorts with one of its contacts in the Geology Ministry which will allow that Ministry to market Bison products to other Ministries for a commission.
Bison is making trip number four to the Soviet Union in September to exhibit at another trade show and review the marketing of its products. Hazelton is currently hesitant to invest a lot of capital, but he plans to evaluate the situation.
"Actually, the opportunities are going to be unlimited, I think. The biggest question mark is whether they can get their economy rolling. We're certainly hoping that will happen and that we'll be able to continue working with them," he says.
Hazelton cautions novices to be careful. "Even if you do have the right kind [of product], walk very carefully. Take small steps rather than big ones. The big question [to ask the Soviets] is, 'How are you going to pay?'"