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Foreign Exchange

The World Wide Web has allowed international competition to move in, but it just may be good for your business.
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On-line Entrepreneur

Competition from overseas has heated up on-line. That may be good news for your business

As president of Dolphin Marketing International, a Minneapolis marketing company specializing in international trade, Craig Snyder gets calls from sales managers with big dreams. "They say, 'I've been reading stories about this Internet," Snyder explains, "'and I want to sell to the world."

What they often don't realize is that while they're just starting to think about selling to the world, the world already is selling to their customers--aggressively and seamlessly. It's a jarring moment when the downside of the World Wide Web's reach presents itself along with its opportunities.

For Snyder's clients, the moment usually comes like this: he invites Internet-eager prospects to an orientation, takes them on-line--often for their first time--and launches a search on their industry. "First thing they see coming out of the engine are dozens of vendors in their sector--from all around the world--all lined up and angling for business. The sites are in American English. The prices are in dollars. And they just stare at the screen and go, 'Hey, wait a minute. Wait a minute. These guys are banging into my market!"

Yes, they are. Companies that used to have to worry only about local competition now must compete with businesses in New Zealand as well as New Jersey. All around the world, vendors in industries as varied as consumer goods, tourism and travel services, industrial supplies, software, and graphics and media design (including Web-site support) are crossing international lines with unprecedented ease.

Foreign companies have awakened to the fact that American buyers are the low-hanging fruit of Internet commerce. They have money: Jeanne Dietsch, vice-president of ActivMedia Inc., which specializes in research on on-line commerce, in Peterborough, N.H., estimates that four out of every five on-line dollars are spent by Americans. They also use a single currency, operate under a uniform commercial code, are relatively sophisticated about on-line relationships, and speak basic English.

"I think we're fairly typical," says Jim Macintyre of Tropical Jim's Remake-Shop, a Web designer in Caracas, Venezuela. "Our firm was in the red until we started selling to the American market. Now 90% of our customers are Americans, partly because salaries in this country are 10% of U.S. salaries for equivalent work. We've doubled in size and plan to do so again later this year. Our goal is to end 1997 with 18 full-time staff and double that number of freelancers."

Frank van der Velden, who gives talks to local businesses about "selling to Yanks," is director of WebMasters Ltd., a Web-design company in New Zealand. He says that U.S. Web surfers themselves have helped develop the eye on the United States. Americans are disproportionately represented in cyberspace to begin with, and they surf aggressively. The result is that they often represent a major portion of the traffic on foreign sites.

And when Web surfers see something they like, they simply make an offer. "Many visitors do not seem to care, or do not stop to think about, where you are based on the planet," observes Simon Croft of World Wide Business Communications, an on-line company headquartered in Croydon, England, that designs and builds Web sites, especially for the professional audio industry.

"People E-mail us questions like 'Where is my nearest dealer?' but then forget to mention where they live." Croft speculates that on-line visitors imagine that all sites are in their own neighborhood. "The logical extension of this is that you are as likely to sell something to a visitor from North America as anywhere else," he says. The flow of inquiries and orders almost compels a company to start thinking seriously about selling to Americans, whether it originally intended to or not.

The surge of overseas vendors actively pursuing the American market is aided by the infrastructure of the Web, which makes it easy to focus on selling to Americans. On-line stores can run on any server anywhere, and vendors are not hostage to the peculiarities of their local infrastructures. They can and do move to servers in the United States (or they set up mirror sites), giving U.S. clients the same quality of service they would get from a U.S. company.

"After experiencing over two years of appalling service from Internet providers here in Australia, our company recently moved our large virtual server to the United States," says Roslyn Wareing, director of marketing for Weblynx, a Web-development and on-line marketing company based in Australia. "Whilst this means slightly slower connection speed for some of our Australian clients, speed in the United States has dramatically increased."

The sheer density of vendors lining up in these virtual markets represents a new competitive element in the history of small to midsize businesses. A small industrial-supply company that decides to go on-line may move from being one of the few vendors of its kind in a large region to one with hundreds of competitors, all only a mouse click from one another.

In such unprecedentedly crowded markets, the textbook strategies for dealing with competition don't work well. There are too many competitors for buyouts or mergers to bring much relief. It's hard to define market differentiation with a dozen companies in every niche and new ones popping up every day. Promotion, though possible, is expensive, because the cost-effectiveness of traditional media campaigns declines drastically when target markets are dispersed over a wide area.

So what's a small company to do? The best competitive response is to recognize that the same circumstances that make competition more intense also make it easier and cheaper to get the services you need. And to know that in the long term increased competition can actually work to your advantage: bulking up to beat the guy across the Atlantic should add enough value to your business to make it more competitive at home.

"There is a myth in American culture that exports are better than imports," says Mady Jalinous, chairman of Unibex Corp. (www.unibex.com), a Web-based import-export support service with headquarters in Washington, D.C. "This is just wrong. A company can improve its revenues just as much, and often more quickly, by finding and organizing its supply chain around the best partners and products as by opening up new markets. Access to the world's vendors brings an opportunity to do that."

Jonathan Strum, whose Internet marketing, design, and development company, Interactive Marketing Partners, is based in Los Angeles, relies heavily on Jim Macintyre's Venezuelan company for his Web-design services. He marvels at the opportunities available to him today. "Not long ago I would have thought depending on a firm in Caracas for the services we need for our business was outlandish," he says. "Now I am importing all my graphic design and most of my programming from overseas."

Overseas companies know they offer American companies cheaper services and pitch themselves accordingly: "What if you could get your ideal product finished, without cutting corners, for half the cost or less?" asks Rohit Bafna on the Web site of CyberAds Studio, a company in India that creates and designs corporate Web sites.

Shopping overseas, to be sure, is still not a breeze. Global business originates from 200-odd different jurisdictions, and the explicit and implicit agreements that define a good business relationship--everything from commercial codes and export law to expectations about how quickly a company will pay its bills--vary widely among cultures and are often unarticulated.

However, new resources supporting easier and more efficient business-to-business trade appear on the Web almost weekly. For example, General Electric Information Services, a global leader in electronic-commerce services, and Thomas Publishing Co., publishers of the Thomas Register of American Manufacturers (also known as the green book), recently started an on-line company called TPN Register, headquartered in Washington, D.C. (www.tpnregister.com), that uses the descriptive line-item detail and product headings of Thomas's green book to standardize on-line trade communications.

Vendors looking for credit reports can download them from Dun & Bradstreet in a minute (www.dnb.com). Often the first phase of due diligence can be completed with information available on a potential customer's Web site. Vendors requiring regulatory information and national-standards specifications can copy the information directly from government or association sites, instead of waiting weeks for bureaucracies to turn around a paper request.

And there are newsgroups and mailing lists all over the Web with ongoing conversations about trading tactics. (To get a good overview, visit www.dmintl.com for the list that Craig Snyder put together.)

Perhaps the most ambitious of the resources is Jalinous's Unibex, which offers one-stop on-line shopping for the full range of trade services, from market research to settlement. The U.S. Chamber of Commerce (www.uschamber.org) is so enthusiastic about the system that later this year it will offer Unibex memberships at discount rates as part of a package of services to its 215,000 members. (To reach membership services, call 800-649-9719.)

Here's how Unibex works: A manager interested in shopping on the Web for a product or a service connects to the Unibex site and then downloads a client-communications program. The client guides the manager through the creation of an offer, prompting him or her to specify details such as geographic restrictions, vendor qualifications, and payment methods. All the decisions are made from standardized pull-down menus or by clicking on keywords, making it easier for parties who are new to the process or for whom English is not a first language to follow the transaction.

When the entire bid has been defined, the server searches for matching offers. If any are found, the parties negotiate by revising one another's offers with the same menu sequences.

Companies can bid for supplementary services like accounting or logistical management in the same way. Due diligence is supported with international credit services like Dun & Bradstreet or localized, specialized services or agents working directly for Unibex. None of those services replace personal phone calls or visits, but they are a starting point. Unibex agents conduct interviews and inspection visits, and arrange for audits. Companies pay Unibex a flat fee of $1,000 a year, which includes the development of a company Web site.

Robert Wan used the system recently to find a source of hiking boots for his company, Master System, a sporting-goods distributor based in Arcadia, Calif. He knew that Canadian manufacturers had a good reputation for boots, but he didn't have relationships with any companies. In the old days, to find the right supplier, he would pay a sales rep or go to a trade show--both costly in time and money--or paw through directories of manufacturers put out by trade associations and then play phone tag with random suppliers. Recently, he simply posted a bid through Unibex and found suppliers in Quebec and Montreal in less than a day. Wan is delighted with the process, which he finds much faster than his old method of cold calling.

Companies also will have to compete through quality on-line customer services. The companies that win big will be those that manage to make the on-site experience so inspiring that prospective customers lose interest in clicking farther down the list of on-line competitors. Sites have to offer product specs, application information, standards and regulation archives, frequently asked questions, downloadable software tools (like costing programs), mailing lists, references, company data, and so on.

An important emerging trend is to offer a catalog out of VRML (Virtual Reality Modeling Language) files, which allows customers to inspect products by rotating 3-D images on-line. VRML files have the added attraction of being downloadable so that customers can reuse them in their own information chain, sending them to manufacturing, training, or inventory departments in-house.

Americans, though, have no monopoly on this strategy. One of the first industrial-supply companies to offer VRML images on its Web site was Teldor Wires and Cables Ltd. And the headquarters of Teldor Wires and Cables is Kibbutz Ein Dor, in Israel.


Returns: Foreign Competition's Upside

The Internet brings a slew of new competitors into the American marketplace. But it also opens up numerous doors for Stateside businesses. Consider these benefits:

  • Access to the world's vendors makes it easier for you to get the products and services you need--at lower cost.
  • You can form partnerships with the best companies in the world.
  • Fast, bureaucracy-free, business-to-business services, from market research to settlement, are at your fingertips. Your response to increased business from overseas will likely make you more competitive at home.

Fred Hapgood (fhapgood@world.std.com) is a freelance writer based in Boston.

Last updated: Jun 15, 2000




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