Haworth executive to share insight on global trade

April 29, 2011
| By Pete Daly |
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When it comes to pinpointing the hot overseas markets, one company's hot prospect may be another's cold fish.

Whether a given place is hot or not "depends on the products you are trying to sell and the nature of the market," said John Mooney, global vice president of finance at Haworth.

Mooney will talk about "Growing Your Export Sales to Hot Markets" at 1:30 p.m., Wednesday, in the Eberhard Center, as part of the 26th annual World Trade Week West Michigan Business Conference. The conference, sponsored by the Van Andel Global Trade Center at Grand Valley State University, will offer business managers practical advice on overseas business development, export financing and ways to compete on a global basis.

When it comes to hot foreign markets, Mooney said most experienced exporters usually think of the "BRIC" countries: Brazil, Russia, India and China. "Which, by the way, are rapidly growing markets, and we've seen a lot of success in those markets," said Mooney. "But they are also complicated markets, depending on the type of products you sell. And your ability to compete with local manufacturers has a big impact on how successful you can be in those markets."

Haworth, for example, is "very established" in China, he noted.

"We have the benefit of having been in China since 1997," said Mooney. "We have been able to establish a really strong presence. We've done very well in Asia markets — China and India and some areas of Southeast Asia."

Haworth Inc. isn't the largest office furniture manufacturer in the U.S. That's Steelcase, a publicly held company with sales of approximately $2.4 billion in fiscal 2011. Haworth is a private, family-owned company that had net sales of $1.2 billion in 2010, according to its website.

"For our industry, we probably have the largest global footprint (for its size) of any competitor," said Mooney. He said he believes Haworth has a larger percentage of its sales outside of the U.S. than any other office furniture maker, although he was not at liberty to state how much that was in dollars.

Mooney said Haworth's customers are multinational corporations that "like the fact that we can support them globally" by making large investments in the Asian markets.

"The same is true in South America, where Brazil is the largest economy," he said.

Brazil will soon host both the Olympic Games and soccer's World Cup and is now the world's seventh largest economy, according to a recent report by CNBC. Its GDP has quadrupled since 1993, to $2.09 trillion.

The Brazilian government overcame the hyperinflation that plagued its economy in the late 1980s and instituted the Real Plan in 1994 that helped achieve low inflation rates and ultimately led international rating agencies to designate Brazilian debt as "investment" grade in 2008, according to Carlos Pereira, an assistant professor of political science at Michigan State University and a newly appointed visiting fellow at the Brookings Institution.

However, Brazil has "very high" import duties and tariffs because its government is trying to stimulate investment within the country, making imports into Brazil more challenging than in countries such as China and India, according to Mooney.

"Strategies in each market have to be different," he said.

China, which has pegged its currency to the U.S. dollar, has a centralized government and "more of a top-down approach" that has led to a well-established process for doing business there, said Mooney. India is "more decentralized," which can make it more challenging, he said.

The weakening of the U.S. dollar worldwide is also having an impact on global trade,  including trade between the U.S. and Canada, where the currencies were trading at about par value last week.

Last week a euro was trading at one point for $1.47, marking the dollar's weakest level in Europe since December 2009, according to Bloomberg.

"The euro has changed significantly" in relation to the U.S. dollar, said Mooney, as has the Canadian dollar. That makes products made in Europe and Canada more expensive to sell in the U.S.

"We have some operations in Canada, so we certainly understand that challenge. A lot of our competitors do, as well," said Mooney.

However, he added that "most of what we sell in Europe, we manufacture in Europe, so certainly for Haworth, it's not as big an impact" there.

Mooney said he wants to leave his audience with two main points today.

The first is that it takes a broad view of the factors that make a market hot "to set the stage for being successful." That means fully understanding the type of product to be sold, in relation to the culture of the country, "and the geography — logistics," he said. China is a vast country where logistics are paramount.

Another part of the broad view is a complete understanding of the foreign nation's government toward business. Would-be importers also need to understand all the economic elements of doing business there, particularly the cost structures of competitors already established there.

The other major homework that must be done is a thorough understanding, he said, "of your own company and what your strengths and weaknesses are, because the distance element of dealing with a country far away from your core resources can be very challenging."

For some products in some countries, those challenges can be overcome "relatively easily — and in some, you can't," added Mooney.

One of the wild cards in global trade is the worldwide price of oil. Mooney said he isn't an expert on oil pricing, but he does not expect any more major spikes in the near future — although he said he thinks it is "unlikely to go down in the near future."

The impact of the current spike in oil price hasn't reached the degree of the impact felt two years ago when oil hit $140 a barrel, he said.

Crude oil for June delivery was selling at $112.31 a barrel at one point last week on the New York Mercantile Exchange. Prices are up about 36 percent over the past 12 months, according to Bloomberg.

When the economy dropped as oil prices skyrocketed back in 2009, many businesses had to "do a major rethinking of logistics and supply because of the cost of shipping products around the world," said Mooney. But that high cost of oil did not last long enough to make "fundamental changes" in global trade.

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