West Virginia's Shop Window on the World
by Fred D. BaldwinPhoto Gallery
At first glance, the front office of GTR Labs in Gassaway, West Virginia, looks something like an old-fashioned country store, the kind with a framed greenback labeled "Our First Dollar" proudly displayed near the cash register. But GTR's walls display 13 different currencies, including a Chinese yuan and a Mexican peso, plus less familiar currencies, including a Moroccan dirham, a Pakistani rupee, and a Venezuelan bolivar. The displays, accompanied by certificates signed by the governor, symbolize sales of GTR's medical imaging technology to customers in 13 foreign countries, exactly one country more than GTR has employees.
FCX Systems in Morgantown also has exotic currencies on display; it exports to more than 65 countries. FCX makes equipment that adapts externally generated electrical power to match the electronic requirements of civilian and military aircraft. It employs roughly 100 workers, all but a handful from West Virginia.
Small companies like these manufacture superior products, or they could never compete in overseas markets against corporate giants. But producing a quality product does not automatically guarantee market share. Executives at both GTR and FCX attribute some of their export success to help from the West Virginia Development Office (WVDO) in Charleston, specifically from the market-savvy staff of its International Division.
For many years, coal, chemicals, and lumber accounted for almost all of the dollar value of West Virginia exports, and these products still account for most of it. And for many years, the mission of the WVDO International Division was focused on persuading foreign firms to open plants in West Virginia, not on generating overseas sales. (Attracting foreign investment continues to be the primary role of two WVDO branch offices abroad--one in Munich, Germany, and the other in Nagoya, Japan.)
That mind-set began to change in 1996 with a grant to the WVDO from the Appalachian Regional Commission (ARC). The grant enabled the WVDO to provide small and medium-sized West Virginia firms with help in getting exposure in foreign markets and coping with the complexities of international trade.
The challenge is both technical and psychological. Making sales and delivering product to overseas customers involves pitfalls--complying with laws and standards in the customer's country, avoiding misunderstandings, and, of course, getting paid. Firms doing only domestic transactions face the same problems, but they know how to deal with them. In an unfamiliar context they seem daunting. Businesses may not only need help competing, but also reassurance that they can compete.
Meeting the Global Challenge
Steve Spence, WVDO's executive director and director of the International Division, emphasizes that West Virginia businesses are up to the challenge.
"Although we have made great strides in promoting exports," Spence says, "we've just scratched the surface. We're confident that even more of West Virginia's small and medium-sized businesses have the capability to export. We're continuing to aggressively reach out to those companies to ensure that they pursue opportunities that are available to them in the global marketplace."
How well any given West Virginia firm does in the competition for international trade is ultimately up to how well it meets the needs of customers. The WVDO offers several kinds of services to help firms get into the game and avoid fumbles once they're on the field. A few examples:
- Market research. The WVDO staff looks for international trade shows that seem likely to offer West Virginia firms the best shots at showcasing their wares. For example, West Virginia's coal-mining, manufacturing, and earth-moving firms have always contracted out much of their work to hundreds of small West Virginia businesses. These small plants--many in rural areas--have the equipment and, more important, the expertise to supply products for mining, manufacturing, and construction firms anywhere from Australia to Zanzibar.
- Trade shows. When a trade show looks attractive enough to warrant participation by several West Virginia exhibitors, the WVDO will pay booth fees and some other incidental costs. (Participating firms pay their own travel expenses.) A booth may cost $4,000 or $5,000, a significant investment for a small business. To save money, the WVDO may transport a booth of its own design that allows up to eight firms to fit into the floor space most shows allocate to three separate exhibitors. During the past few years, West Virginia has been represented at trade shows in Chile, Germany, China, and other major markets.
- "Catalog shows." As an alternative to travel abroad by West Virginia companies' representatives, a WVDO staff member attends a show organized by the U.S. Department of Commerce to answer questions and distribute catalogs describing company products in both English and the language of the host country. Catalog shows are especially appropriate for small firms with upscale but low-volume merchandise, like specialty food products.
- Trade missions. The WVDO staff facilitates high-level trade missions to foreign countries for West Virginia businesses to meet one-on-one with potential customers or representatives. These are led by the WVDO staff and occasionally an elected official.
- General technical assistance. Once a business deal seems ready to materialize, the WVDO helps small firms identify reliable sources of specialized services (e.g., language translation, legal advice, overseas freight handling, and money transfers).
Although the WVDO services are, in principle, available to any West Virginia company, large businesses have their own specialists in export trade. In practice, all of the WVDO's clients are small firms.
"These companies don't have time to do anything but run their businesses," says Leslie Drake, deputy director of the International Division. "When I call company presidents on the phone, I hear clanging and banging in the background. I know that means that they're out on the production floor, standing there with greasy hands and a hard hat on."
Spence points out that it's difficult to track all export successes, due in part to confidentiality issues of the West Virginia companies.
Nevertheless, statistics suggest that the WVDO efforts are making a positive difference. West Virginia's 2004 exports showed a 37 percent increase over 2003's, according to U.S. Department of Commerce figures. (The dollar values were $3.3 billion for 2004, compared with $2.4 billion for 2003.) The growth rate was almost triple the national average growth rate (13 percent) for the same period. Only three other states experienced a higher growth rate than West Virginia.
Although large firms will always account for most of any revenue stream measured in billions of dollars, West Virginia's export growth extends across the state's industrial sectors and geographic regions. WVDO data shows considerable diversity with respect both to products and markets. The state exports goods in about 55 broad product categories, ranging from electrical machinery ($326 million in foreign sales in 2004, a 1,300 percent increase from 2003) to fabrics (sales of which grew 50 percent between 2003 and 2004, to almost $12 million) and "photographics and cinematography" ($3.6 million in foreign sales in 2004, a 230 percent increase from the prior year). And, at one time or another over the past three years, West Virginia has shipped products to 144 countries. Mexico has become the state's second-largest market, growing 440 percent in sales from 2003 to 2004.
An Invaluable Resource
Officials at the companies assisted by the WVDO express no doubt about its usefulness.
"They give us exposure in a global market that we couldn't afford ourselves," says Ewell Ferguson, president of GTR Labs, "and they've given us leads in locating [foreign] dealers." In 2001 GTR won a "Governor's Award for Excellence in Exporting." Export sales now account for about 30 percent of GTR's sales volume, which approximated $2,250,000 in 2003 and $2,500,000 in 2004.
The dozen jobs at GTR might not sound like much in some places, but they're an important contribution to the economy in Gassaway. Moreover, they're good jobs, helping to stem the brain drain that has often plagued Appalachia's rural areas and small towns. For example, chief power engineer Tim Butcher, responsible for most of GTR's hardware and software design work, turned down an out-of-state graduate school opportunity for a chance to work in the town where he grew up. If GTR didn't exist? "I probably wouldn't be in this state," Butcher says.
FCX Systems was exporting its products before the WVDO initiative began, so president and CEO Don Gallion (who chairs the West Virginia Export Council and has received a U.S. Small Business Administration "Entrepreneur of the Year" award) and his staff are old hands at selling in international markets. But he also considers the WVDO International Division an asset for his firm. A company doing business abroad, especially with high-tech, big-ticket items in support of the aircraft business, needs above all to find reliable representatives in the customer's own country, someone who can help open doors and be trusted to manage all the details that go into closing sales and delivering product. Gallion estimates that the WVDO program, acting in concert with the U.S. Department of Commerce's Gold Key Matching Service program, saves FCX between 9 and 18 months when it's entering a new national market--an incalculable competitive advantage.
Gallion himself is a native of West Virginia, as is "at least 95 percent" of his workforce. "I never met a West Virginian," he adds with a laugh, "who, even in his youngest, most rebellious days, didn't want to come back after a few years. We could run this company anywhere in the world. But this is home."
Then Gallion, in effect putting on his West Virginia Export Council hat, turns serious. "Your competitor," he says, "is no longer down the street. He's anywhere around the world. If you're not selling on his soil, he will be selling on yours. I firmly believe that in today's world, you'll eventually do one of two things: You'll find you can compete in the global marketplace, or you'll go out of business. West Virginia companies have proven that they can compete anywhere in the world."
Fred D. Baldwin is a freelance writer based in Carlisle, Pennsylvania.