There is an interesting dichotomy taking place as the Euro continues its show of strength vs. the U.S. dollar. On the one hand, we have economic statistics indicating that European exports continue to increase as a portion of GDP. While a considerable portion of these exported goods and services are traded to members of the European community, large amounts are exported to countries outside the European community. In fact, figures indicate that since 2002, exports from what we might consider the “Euro zone” continue to outpace imports.
On the other hand, this European import/export scenario continues to play out at the same time many U.S. suppliers continue to set their sights on just their domestic markets. This is interesting given the fact that the relative strength of the Euro vs. the U.S. dollar should encourage more U.S. exports.
The question remains, why do so many U.S. companies focus their efforts on their domestic market when exporting could be so profitable?
In order to more fully understand how and why the economies of the EU and the European community are performing so well, it’s important to realize that since the inception of the Euro, the final barrier for an economical exchange of goods has vanished. Today we find that most of the economies import and export their products among each other simply and quickly. The market can actually concentrate on product and service issues without any currency exchange concerns.
Furthermore, arguments from the past no longer exist such as, “We don’t buy from Company A in country C because we don’t know what the currency exchange rate will be when we get the invoice.”
Prices and technologies are comparable in a very direct manner. Apples are apples and oranges are oranges. This is exactly what purchasing people like. An offshoot of this situation is that technological innovation occurs rapidly and allows suppliers to achieve a marketing edge over the competition.
Even economies from countries such as Switzerland, Germany and Sweden can afford to compete on a level playing field with such an attractive level of pricing.
Countries looking at this European experience often don’t realize the extent of the challenge of being successful in this market. When they attempt to enter the market, often they are surprised how tough it is to achieve entrée. The technical state-of-the-art is very high, and prices are quite reasonable. As a result, there may be a tendency for countries outside of Europe to stay home — that is, if their home market exhibits sufficient strength for them to enjoy a prosperous business.
This approach might be somewhat shortsighted, however, since an avoidance of competition may one day result in a situation where suppliers’ products or services are far from being state-of-the-art. Think for a moment of the concept of the Olympics. If you don’t participate, you don’t realize the speed of the fastest runner or the height of the bar that must be jumped. As others have said: “The important thing in the Olympic Games is not necessarily to win, but to take part.” So too is it with business.
To put these words in a marketing context, by participating, companies learn why some quotes result in business and others don’t or what technical achievements point to success.
The effort to participate may be costly, but in the end it may be a wise investment.
For the supplier who continues to focus almost entirely on his domestic market, the business may provide him with more than his “bread-and-butter” needs. But what happens as imports from other parts of the world begin to erode market share? Achieving those bread-and-butter profits will become much more challenging. What can result is that competing at home will be that much more difficult.
In the end, now is the time for foreign, (i.e., United States) manufacturers to compete in Europe. The weakness of the U.S. dollar actually provides a bonus (sometimes as much as 30%) for companies quoting in U.S. dollars. That bonus in favor of U.S. manufacturers can help offset shipping and travel expenses.
The most efficient means for the U.S. manufacturer to achieve a presence in Europe is by using a European-based independent manufacturers’ representative. Use of that rep with a thorough knowledge of the following would allow the U.S. manufacturer the most efficient means to approach the market.
- Culture
- Language
- Technology
- The metric system
- Market
Manufacturers who choose this route begin in a very focused manner. They may start with one product and one rep in a single territory. By using this approach, the manufacturer can very quickly gauge his chances for success. The strength of the product and the demand of the market can quickly be determined.
But, first things first — the manufacturer must locate the right rep to work with in Europe. The rep who is ultimately chosen must be up to the task. Certainly one way to attract the interest of qualified reps is by offering a competitive commission, not to mention a monthly retainer or shared territorial development fee.
If the relationship between U.S. manufacturer and the European-based rep is built within this type of framework, the chances for success are relatively high.
