Since the economic downturn struck, many firms have had to look far and wide for business as orders dry up and clients close their doors.
And although reports and statistics are showing that the green shoots of recovery are finally getting stronger, business is still tough for many.
One company which has taken a decision to look abroad for new avenues for its business is award-winning Newport-based Industrial Automation Control Ltd, run by managing director Peter Lewis.
The firm, which has an annual turnover of £8m, currently employs 78 people in the UK, with a further 20 overseas.
Business Argus: What has happened to traditional UK markets and why?
Peter Lewis: Investment in UK manufacturing has been declining since the 60s, and when the coal industry was decimated, we reverted to being a service state. Traditional industries are still alive and rely on quality and innovation to stay ahead of the emerging economies where labour is cheap. This will all change very soon as these economies catch up with the standard of living in the West. Now is the time to be re-investing in traditional manufacturing, but at the moment, I do not see this happening.
BA: How much of your business turnover is now generated from overseas and in satisfying export demands?
PL: On average, around 55 to 60 per cent of turnover is export, direct and through UK companies.
BA: Why did you decide to look overseas and where have you found business?
PL: We came to the conclusion that we had almost exhausted the UK market. As we are tied into supporting heavy industry, we are unable to simply advertise and take market share. We already had a substantial share, but the market was shrinking. We therefore decided that we needed to find new markets and new opportunities. Our first serious effort to infiltrate a foreign market was in South Africa. Before making a commitment, we undertook several WAG missions, as well as a couple of our own. We made contact with a number of potential customers in the country and looked at the cultural issues as well as the problems involved with exporting to the other side of the world – tax, duty, etc. We also went in with a policy of looking for partners rather than trying to establish a separate identity. We made use of the partners we currently trade with in the UK – Siemens, ABB and the like. Being receptive to others and making friends in the market place seems to ease the way to making inroads. It may not be the quickest way to infiltrate a market, but it does seem to produce a stable long term situation.
BA: What obstacles have you faced?
PL: The obvious obstacles are always there in any market. People like to buy from their own kind, so why would they want to import. In South Africa, you have a very complicated political situation as well. The Black Empowerment laws are a potential barrier to any company trying to set up in the country, but when you get to understand them, they can be used to assist you. This of course relies on you being an ethical and open organisation. If you are simply trying to make a load of money, then they will be a real barrier. If you are trying to develop a respectable company with the wellbeing and welfare of the workforce at the heart of it, then the laws can be supportive.
BA: How have you managed to identify prospects in overseas markets?
PL: By doing our homework and also finding people in the marketplace who you can trust. At the end of the day, it’s all about people. We did our research on the industries we were interested in, and we found people who wanted to work with us. We then found a suitable partner in Tiprow Controls and worked hard at developing relationships in a market which was just entering a recession. We are still not out of it in SA and it will take a few years yet before we can return to our original plan, but perseverance is the key. Overnight success usually takes several dawns before becoming reality.
BA: Have you appointed agents?
PL: We met loads of agents in SA who were offering to represent us, but in every case, we struck out when it came to finding someone who understood what we do and had the same business ethics. In China, we came across someone who had been on the other side from us for some time and had a dream to develop a company in the country. His co-operation, along with that of another previous associate was vital to our making the decision to get into China. We had always shied away from such a large and diverse market before because we did not have the people on the ground to make it work.
BA: How do you cope with language and cultural differences in places such as China, Dubai and South Africa?
PL: Cultural differences are not as difficult as 20 years ago but being aware of them is vital to prevent insulting your customers. Welsh Government briefings are useful from this very point of view, however, local knowledge is imperative. We have a Chinese national representing us in Tianjin and he is brilliant at making sure we do not screw up before we get off the ground. Having said that, we can get away with far more now than in the 80s when I first travelled there. The food is a major problem, as the Chinese palette prefers chewier meat and spicier sauces. It is usual for your Chinese hosts to put on a small banquette for you and depending on the region, the food can be totally unrecognisable. This does give you an opportunity to discuss the dishes with your host, and get in a few questions about how it was prepared. I am not worried about not eating certain dishes, particularly if I don’t recognise what it is. So far this has not been seen as an issue. They also like to toast you unrelentingly and this bit I try to join in with. Once you have seen what they are up to, you can control the situation and watch that they are not continually filling your glass. Dubai also has a lot of cultural issues which need to be addressed, but the place is so integrated that almost everything is catered for. As long as you are aware of the local customs and behave respectfully, you will do well. South Africa is somewhat different – a far more casual place, but very much more complex if you are not up on the history. Juggling the English – Africaans – African cultures can be a little taxing, but generally the people everywhere are down to earth, normal individuals, with similar issues to you or I.
BA: Do you go out to overseas markets with a specific product?
PL: As our product is primarily bespoke, we have to find out what the customer needs to solve his automation problem. In China, we have restricted ourselves to a particular market (bulk materials handling) and limited our supply to a particular design. To try and be what we are in the UK in China would be impossible. You have to be sensible about what can be undertaken.
BA: How cost effective is this form of market building?
PL: Costs can be limited, but the amount of time required is where the expense escalates. Travel and such costs can always be limited but you have to put on a show without looking too extravagant. Customers will recognise that you are what you are, and see through someone trying to be something more, so remain true to yourself and act normal.
BA: How hard has it been to secure new overseas work?
PL: It is relentless, and trying to manage everything else at the same time as developing new opportunities can be taxing. Having good people around you is also a given. Delegating the workload will help reduce the individual pressure, but also involves others in the exciting bit – opening up new opportunities.
BA: How have you been welcomed overseas?
PL: I have been warmly welcomed in Dubai, South Africa and China. Sometimes this is so good that you get the completely wrong impression – walking out of a meeting thinking the order is on the way, only to be disappointed when it goes cold. South Africans are very much like this. In China recently, we had a fantastic reception. Our reputation was certainly much higher that we had expected, and all of it was good. We have come back with three or four opportunities to work with large Chinese companies, with the level of business on offer, around about ten times that which we currently do. Obviously this involves a large amount of work at the proposal stage, but as we are limiting ourselves to only one product, this is very achievable. In this instance, the 'co-operation' element is the key. They are looking for European expertise and quality, but they also want to improve their own.
BA: What has been your biggest success to date?
Our South African operation is going well and was on course right up to the onset of this recession, which is still ongoing in South Africa. We did more than £2m over there in 2008, all of which was designed and built in the UK. This dropped clean away by 2010. However, the company we bought is still doing very well in traditional markets and making profits.
BA: How have you changed your business to cope with overseas demands?
PL: Asking your people to spend large amounts of time overseas is not necessarily easy to manage. Our youth policy has helped in that younger engineers are keen to experience other cultures and do not necessarily have the commitments of young families, etc. We limit the amount of time we require them to be away in one stint, and this works well for us. Getting the culture right is very important, and we seem to have developed exactly the right attitude. Our people all take a keen interest in the running of the company and we rarely get issues. When we do, we are always sympathetic to getting the work – life balance right.
BA: What advice would you offer to other manufacturing firms looking get into exporting?
PL: Get on with it. If you have a particular expertise, then do the research, find the right market and location, and go for it. As long as you are prepared to put in the work and have the right product, anything is achievable.
BA: How has your overseas-targeted plan befitted you business?
PL: Without the additional revenue from exports, IAC would be half the size it is now. In addition, we have grown as a knowledge centre because of our experiences overseas.
BA: How would you sum up your ‘leap of faith’ overseas plan to date?
PL: Hard, but very enjoyable work, giving lots of us here experiences which we would have missed if we had stayed local. We have made friends all over the world and seen the countries visited from the ground level – something you rarely get from the touristy experience.
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