"overseas Customers Prefer Small Companies"
If every small company in the United States hasn't yet heard that opulent foreign markets are eager to snap up American goods, it's not Maureen Reagan's fault. Nor will Reagan be to blame if the buyers on five continents haven't learned by the end of this year that American small business is newly determined to compete throughout the world.
As chief executive officer of Sell Overseas America, a "trading partnership" of American suppliers and foreign customers, she's been urging manufacturers and distributors here for several years to start tapping the rich export lode. Her message: Podunk, U.S.A., may be saturated, but Sri Lanka is starving for your products, and the welcome mat is out for small companies in particular.
Promoting exports is Reagan's business, but her fervor makes it plain that she's not merely addressing her own interests. The United States has no choice but to increase exports quickly, she's convinced, to meet its top-priority goals of renewed growth and prosperity.
Though she is close to her father politically on this issue, her concern with foreign trade, she insists, is not connected with politics, and in fact predates the Reagan presidency. Nor does she seek federal support for her efforts, which bear no link to Commerce or State Department programs. On the contrary, Maureen Reagan is an outspoken opponent of government involvement in the private sector. "Only business can lead business," she says.
The daughter of actress Jane Wyman, Reagan started out on the stage, moved through radio and television talk shows and into lecturing and magazine writing. Then, in the mid-1970s, with a deepening interest in journalism and business, she sought a career change.
She found it late in 1977 when two West Coast entrepreneurs, Edward Schwartz and George St. Johns, approached her with an idea for a new magazine. To be circulated around the world, it would aim to stimulate interest in California products unknown beyond these shores. Reagan agreed to join them in creating the editorial product.
Initially, she was intrigued by the project's nongovernmental nature. "This was the first time in the private sector that a magazine was designed to push smaller and medium-sized companies into export," she says. Apparently the time was right. The bimonthly Showcase, launched in January 1978, developed advertising support quickly as it drew a heavy response from prospective buyers in the 137 countries of its distribution.
But the magazine could make no impact on the long-standing problems hindering American participation in international trade. Rather, the interest it evoked highlighted difficulties clearly beyond its scope. Having glimpsed the opportunities, however, Showcase' s founders were determined to grasp them. What they saw was a chance to stake out a position for American products in world markets, reaping a profit and making a sizable dent in the U.S. trade deficit. The way to do it, they concluded, was to draw American manufacturers and foreign buyers into a single federation. Reagan, Schwartz, and St. Johns, along with a new partner, Norman E. Watts, Jr., proceeded to organize Sell Overseas America, the Association of American Export.
With funding and support from large corporations serving as charter members, the group set out to sign up small companies as members, and overseas buyers as associates, and to work toward its goal of guiding the small companies into foreign commerce. "We'll hold their hands all the way to the wharf," Reagan promised at the outset, in April 1980.
After more than a year of guiding others to the wharf, Reagan headed there herself in June to begin her trade missions. As the ambassador of small business to major international trade centers, she's seeking, by her presence and her programs, to drive home the message that the United States stands ready "to produce anything we can and sell it to anyone who will buy."
That's a big task in anyone's language, achievable only with the cooperation of American business. What opportunities await the venturesome companies prepared to cooperate? To find out, INC. contributor Joan Ford interviewed Maureen Reagan in New York, just before she left on a trade mission to Asia.
INC: How do American companies stack up in the world marketplace?
Reagan: We're just not competing. We're completely dependent on agriculture, aircraft, and high technology. That has to change; we can't go on being a sponge for everyone else's products. Our exports last year were only 6.7% of our $1-trillion gross national product, the lowest of any industrial country, and our trade deficit was $28 billion. Since each $1 billion meant the loss of 50,000 jobs, the deficit deprived nearly 1.5 million Americans of the chance to work in 1980.
We're taking all kinds of steps toward economic recovery now. We're giving tax incentives to industry, tax cuts to individuals, getting the government out of the money market -- and that's all very well. But if we don't expand our markets, there will be no new jobs and no economic stability, no matter what else we do. If we have to pur our machines together with bobby pins and rubber bands, let's do it. Let's go out there and sell our products and then we'll be able to finance reindustrialization and everything else.
INC: What are the chances of expanding our markets?
Reagan: We can do it -- there's no question about that -- if we're willing to work to regain the spirit that made this country great. The export market has traditionally been secondary to us because we've always been able to absorb our own production. So we got lazy and just sold within our own shores. Well, we can't do that any more; the domestic market is saturated now, and we have to look beyond our borders.
INC: What role can small companies play?
Reagan: There's a major role for small companies willing to take it on. Last year we guided 740 of them into export trade, from the market research stage to completion of sale and final payment on their first transaction.
Many overseas buyers, when they have a choice, prefer to do business with smaller companies. There are some very good reasons for this. first, there's the quick turnaround. Large corporations take a year or more to deliver, but smaller companies are often able to ship the first order right away. Second, the personal element counts.Overseas buyers enjoy dealing with individuals instead of with corporate bureaucracies. They also like the wider variety small companies offer.
So these companies really have the best opportunity to sell overseas. Unfortunately, very few of them are taking it. There are about 380,000 companies in the United States, but only about 28,000 sell overseas. We believe that just about every manufacturer could sell overseas, and all of them should look abroad for markets because that's where the customers have gone.
By any measure, the domestic market is shrinking in relation to foreign markets. In 1970, we consumed one-half of all industrial-country output, but now we consume barely one-third. And our annual growth rate is 2% to 3% while some other countries -- Brazil, Mexico, and South Korea, for example -- show a growth rate of 7% to 10%. We should be out there taking advantage of their growth. Latin America buys textiles from Japan -- why not from us? There's a lot of business in that area for alert small companies.
INC: If the opportunities overseas are so big, why are there so few takers among American companies?
Reagan: Part of the answer is simply that so much of small business is still unaware of these opportunities. Those of us responsible for communicating with them just haven't done a good enough job.
Even when we get through, though, there's another inhibiting factor. At first glance the obstacles look enormous -- much greater for American companies trying to go overseas than for foreign companies coming here. To sell here, a foreign company needs to learn only one language, one set of customs, one way to sell.But an American company looks at Europe and sees 30 languages to learn. Just to sell in a few Western European countries, an American company thinks about putting out five catalogs in five languages, and teaching salespeople to speak all of them. It seems impossible.
We've found a way to deal with this. We say, "Okay, you don't have to sell to everyone at once. Start small." We suggest starting in Latin America where there are only two languages -- and you can get along with one -- and just one social background. We know that the first sale is the hardest, that once these people get out and get their feet wet they'll keep going because it will be fun as well as profitable. A small company executive will find himself the center of attention at a dinner party when he says, "On my last trip to Caracas..." Then he'll start thinking, "Well, I always wanted to see Italy," and he'll be off to another market.
INC: Even if they're primed to ease into foreign trade one country at a time, do our companies still run into special problems just because they're American?
Reagan: The only special problems we have to worry about are matters of credibility. In trying to help foreign companies follow up on trade inquiries, Sell Overseas America has found that the products they want are not always available for export, or that they've been taken off the product line entirely, or that they're imported from another country and have to be ordered from somewhere else. This has happened often enough to make some potential foreign buyers very doubtful of the American commitment to international trade.
There's another aspect to our credibility problem as well. Not only our commitment, but also our quality is called into question in some places where they accuse us of using them as dumping grounds for second-rate goods. There's some justice in that complaint, but American business is only partly to blame. Our government bears even more of the responsibility. In the past, we've taken some of these countries for granted and haven't treated them as sovereign nations. Somehow, what government does to government, or people do to people, carries over into trade.
This is a problem in Mexico and in Canada, too. The long-range solution was suggested by President Reagan the night he announced his candidacy -- that we should form a Western Common Market consisting of the United States, Mexico, and Canada.
The "dumping grounds" charge is a problem right now in West Africa, too. Of course, it only has to happen once, and all American business is painted with the same brush and all West Africa knows about it. Then we have some difficult times until we overcome the image. We have to learn how West Africans do things. They're particularly sensitive to any hint of being taken for granted, and they like to know the people they're doing business with. Not long ago, two West Africans flew all the way to the Midwest for one day, just to meet the people and see the plant they're buying from. West Africa offers excellent markets for American companies -- there are a lot of petrodollars in Nigeria -- but if you want to sell there, you have to make the trip and introduce yourself to the buyers.
These are real problems for American companies, but they're not insurmountable ones.
INC: In addition to these problems that affect all American business, are there others that pose special difficulties for small companies?
Reagan: Yes: Financing problems. While financing may create difficulties for any company, small companies have fewer places to go for help. Many banks won't even discuss contracts under $1 million, but many small company contracts don't approach half that figure. One of the big things we've done in Sell Overseas America is to set up some criteria for banks that want to join. They must agree to consider small contracts, so we can refer companies to them. We've also collected a lot of information on financing for small companies that don't know a letter of credit from a sight draft, for instance.
Beyond that, however, American companies are at a disadvantage compared with foreign companies whose governments guarantee loans. Our companies, in effect, are competing with foreign governments, and small companies suffer most. Our government isn't geared to working with them.When the Commerce Department organizes a program, it has to be for all people, and it doesn't help the little guy. That's why we set up our bank referral program. But we think banks should be doing much more to help than they're doing now.
INC: The export trading company bill, introduced in Congress last year, allows for the formation of companies that would function as middlemen by buying products from manufacturers and then selling them overseas. Do you think this would be of assistance to small businesses?
Reagan: We're ready to support anything that can get small manufacturers involved with overseas trade, but I don't think a new law is needed. For one thing, American trading companies could form right now -- we already have export management firms that are trading companies in all but size.
I also have another reservation about that bill. In this country, we like simple solutions, and I'm afraid this legislation would be perceived as a panacea. People will say, "Okay, we've set up trading companies and now we can forget about export. The problem is solved." Well, it would be far from solved, and I don't want to risk that.
INC: How do you feel about the attention being focused right now on protectionism?
Reagan: I think protectionism is dangerous; I'm very much opposed to it. Trade restrictions breed more trade restrictions. Many of the restraints in force around the world today are a result of those we imposed in the '30s, and they're still there.
The answer is not to prevent other countries from selling to us; the answer is to make sure that we sell them as much as they sell us. The big pressures now are coming from the automobile industry, but we don't need regulations to limit Japanese imports. The Japanese aren't dumb -- they've set up their own voluntary limits. They'll also invest more money here in joint ventures, and they'll buy more from us. They've begun to do that already. Our representative in Japan says interest in our products has increased dramatically in the past couple of months, and we've been there for a year.
INC: Are there some ways in which you'd like to see the government help small companies move into foreign commerce?
Reagan: Not really. I think the government should stay out of business. I'm always surprised when business invites the government in, as it does repeatedly, and then wonders what's happened when the dinosaur takes over. Government's role in export should be confined to two functions. First, they should see to it that agreements made among nations are fair and equitable -- we shouldn't let others come here if we can't go there. Second, they have to make sure of our national security. There's nothing else we need the government to do.