Key to Export Growth: Intellectual Property As a Competitive Edge
July 9, 2013
U.S. manufacturers can expand sales globally by using the intellectual property (IP) of their products as a competitive edge instead of viewing it as a potential weakness. One of the concerns among exporters is that American-made products and brands are constantly replicated by customers and rivals in emerging markets. It is natural to say, "Why should we market our products if people overseas will steal our technology?" The fear of losing IP seems justified at first sight. But consider how foreign sales of American-made products actually happen and this fear is less alarming. Manufacturers will also find that the IP of U.S. products turns out to be a competitive edge, not an Achilles' heel. Go After Those that Value IP The common misstep among U.S. companies is dreaming too big. Instead, start thinking about how to get initial, profitable orders even when they are modest. Whether it is the sale of seals, sensors, bearings, or springs, don't go after thousands of potential customers in any emerging market. Pursue the leading and most sophisticated customers in a foreign market that see the value of your quality, and, namely, your IP that is part and parcel of your products. Take China as an example, where product piracy is chronic and well documented. To sell precision-engineered bearings into the market, for example, focus on China's top 10 original equipment manufacturers (OEMs) that need and want high-quality and engineered components for their machines, including turbines, compressors, and gear boxes. In a market of "billions," as China is often thought of, go after the dozen or so companies on which a profitable business can be built. This provides greater ROI than pursuing the hundreds of small and even midsize equipment makers that use locally made bearings that are replicas of highly engineered products. Those who thrive in the China and Asian markets use the "search-and-learn" tactic. These exporters accept minimum orders and ask for prepayment in full before shipment. After decades of exporting U.S. products to China, it is Asia Marketing and Management's experience that customers in Asia and elsewhere buy -- and prepay -- because they need the "real thing" and not the "pirated versions." Find the Gems in the Field One bearing component manufacturer has been selling, through Asia Marketing and Management, millions worth of Made-in-USA products to China and Asia for 30 years. Initially this U.S. bearing manufacturer met "customers" that blatantly vowed to copy without permission its products because they claimed that they could manufacture copied versions at 1/10th of the price. Undoubtedly avoid selling to these "customers." "Search" for the handful of good customers and "learn" why they need U.S. products. Exporters that use this probing strategy eventually find the right few customers, and save the money and efforts on tedious marketing research, trade missions, and irrecoverable costs for legal fees from customers breaking their contracts. This handful of customers understand that this U.S. bearing manufacturer's products can raise the capabilities of their machinery, reduce oil consumption, avoid machine vibrations, ensure stable and consistent performance, and, above all, achieve big savings from unnecessary and costly repair and maintenance. Further, they can export their machines to other emerging markets by trumpeting that they have American-made parts inside. When a power plant stops running due to bearing failure, the cost is hundreds of thousands of dollars a day. The IP, which is embedded in the bearing, is what makes the sale to large turbine makers in China that deal with high-speed and heavy-load conditions in large-scale power generation or waste recycling operations. American-made products can be successfully and cost-effectively sold into emerging markets using this "search-and-learn" strategy to turn your intellectual property into a competitive edge. James Chan, Ph.D., is president of Asia Marketing and Management, a consultancy that advises U.S. firms on global marketing with a focus on China and Asia. He teaches a special course on China at the University of Pennsylvania. He can be reached at JamesChan@AsiaMarketingManagement.com John Wiley Spiers is a self-employed small business international trader, and an adjunct lecturer on international trade at the University of California at Berkeley. He can be reached at email@example.com Chan and Spiers have a combined international selling experience of more than 70 years.