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Cinde W. Ingram

Globetrotters

Executive Outlooks on International Business

Executives of leading casual Furnishings manufacturers have learned to adapt as they split their time between continents to serve their customers, who are spurred by changing consumer trends and the growing concept of outdoor living.
     Differences in language, culture and governmental policies present ongoing challenges in addition to the personal obstacles involved. Spending multiple hours on a plane en route to and from faraway places as well as so much time away from home has become de rigeur for many of today's industry leaders. Here are some of their stories.

THE JOURNEY

THE JOURNEYGloster Furniture

     "We started Gloster in the UK so everywhere is considered off shore for us," Gloster Furniture Group Managing Director Charles Vernon said. Gloster began manufacturing high-end teak furniture in Indonesia in 1986 primarily because of restrictions on teak sourcing. Production in China was added because "that is where the skills and the infrastructure were," Vernon said. "We do an increasing amount in the United States now, for example our cushion production is there because it's close to the market - and America is our biggest market."

Pride FamilyAmerican companies

     Pride Family Brands started by making outdoor furniture in Miami, but moved its production to Costa Rica 28 years ago. "Costa Rica's ‘near shore' location, great workforce and educated population make it very attractive not only for our operation, but for many large American companies as well including INTEL, Firestone, Baxter and Sara Lee," Pride Family Brands President Steve Lowsky said.
     Agio President Bob Gaylord encountered difficulties with castings and other processes integral to making metal outdoor furniture in 1986 when he built a manufacturing plant in the United States. Manufacturing in Taiwan solved those concerns until 1989 when a labor shortage there turned the manufacturer toward China.
     "Most of the import furniture business at that time was metal and done out of Taiwan so it was natural to have the Taiwanese go to China, which was in the midst of going toward capitalization," Gaylord said. "The timing couldn't have been better. It really was two things: One, the Taiwanese were the natural ones to go in there because of the language and the culture, and the other was the fact that China was open to doing our kind of business."
     Oliver Ma, president and CEO of Treasure Garden, Activa, Shademaker and other shade companies under its international umbrella, described the Chinese market as being "open to the world" when China started its economic revolution in the 1970s and '80s.
     "Since costs of material and labor kept rising at that time, the price of products became more and more expensive," Ma said. "In order to offer a more competitive price with better quality control and on-time delivery, we had to find ways to keep the cost down." Such a large, diverse labor pool "gives us a lot of options to choose the good ones to be our employees," he added. "Compared with other countries, the labor cost is lower."
     The cost of labor was less of an issue than providing jobs for family and neighbors in his native Indonesian village when Karel and Barbara Simeon founded Jewels of Java.
     "Karel had started importing small items as early as 1994," Barbara said. "Much of the local farmland was bought by the government to build a power plant and that source of livelihood was quickly lost" before they opened the Jewels of Java manufacturing facility in 1998. "The local labor force is filled with skilled woodworkers and the product quality is second to none," she said. "It is a great opportunity for us to support our family here and in Indonesia."

THE CLIMATE
     The Simeons described the Indonesian people as born entrepreneurs. "When we had the opportunity to open the factory in 1998, the casual industry was ripe with opportunity, given the skills and raw materials available in Indonesia," Barbara said. "It was a natural thing to do."
     Mainland China was not yet ready to support international business when Gaylord made his first visit in 1977 - only five years after former U.S. President Richard Nixon had led an entourage there including business leaders from Coca-Cola, Pan-Am and Sheraton.
     "I did a little bit of business but they weren't set up for exporting in any way, shape or form," Gaylord said. "They had lived with closed borders so long that they weren't set up for transportation; they didn't have adequate docks and the banking system couldn't work outside of the country. We didn't even start thinking about China until the labor challenges in Taiwan became so acute in the late '80s. When we started to seek manufacturing there, that was pretty challenging - all of it. You had to have a political officer then to get through the red tape."
     Ma found the Chinese government's policies for attracting the oversea investments to be quite favorable for building his business. He said the main reason his company keeps growing and "changing with the growing tempo of the world" is to offer the best products with competitive prices to its customers in America.
     "The only way of surviving is to keep on finding ways to make our company with more innovation, more good changes and becoming much better and stronger," Ma said. "Otherwise, the company will disappear among the fierce competition in the world."

Jewels of JavaJewels of Java President Karel Simeon, right, oversees teak furniture production in the Indonesia plant.
Treasure Garden CEO Oliver Ma discusses business with Tong Guili, deputy mayor of Hangzhou, and Jiang Fan, China ministry of commerce offi cer, at Outdoor Lifestyle Hangzhou show.
Treasure Garden
Pride FamilyPride Family Brands’ VP of Production Victor Fox and President Steve Lowsky shovel sand for use in casting frame molds in Costa Rica.
Pride Family Brands’ CEO Jamie Lowsky gets down low to review product design drawings with workers outside the company’s factory in China.
Pride Family Brands’
Agio PresidentAgio President Bob Gaylord keeps a relaxed attitude as he travels to and from China.
Charles Vernon enjoys seeing Gloster Furniture’s teak farm thrive and grow naturally in Indonesia.
Charles Vernon
The PudongThe Pudong International Airport’s departure listing is a study in geography.

     Costa Rica's government welcomed American business investments in the mid-1980s when the Lowskys were relocating their manufacturing facility. "At Pride Family Brands, our goal is to produce quality furniture with a sound warranty while maintaining a pricing level that is value justified," Lowsky said. "With our off shore manufacturing, the Castelle brand can provide great value for a high-end market by offering a lot of product for our customers' spending dollars."

THE REWARDS
     "We all do," Barbara said when asked who benefits from international business. "The factory in our village is a major employer in that region and we support our family, our employees and our customers and all of these local economies here in the states. Importers and distributors like Jewels of Java provide an important source of product that is in demand and contributes to our local economy with jobs, products to sell and by using local products and services in the process. The economy is truly global and we are a perfect example of that."
     Lowsky noted international business is not a new concept for manufacturing and predicted it will continue to expand as populations grow and become more interconnected through global communication and technologies. "American consumers benefit through the availability of great products provided by less expensive regions resulting in the ability to stretch their buying power at retail," he said, adding that international business also benefits the USA in controlling unwanted inflation. "The downside is that our country is losing jobs on the lower end of the population, resulting in a need for individuals to be retrained to handle more highly skilled type jobs in medicine, technology, aerospace and other areas."
     Vernon pointed out technological advances in communication over the past 10 years. "The world is small so doing business in different places is the most natural thing now," he said. "The biggest advantage about working in multiple markets is getting ideas from one market that can apply to another - ideas about product, about consumer behavior and about selling and marketing."
     As the world's largest shade supplier, Ma spoke from a worldwide perspective. "We think the biggest beneficiaries are: 1. The manufacturer. We diversify our markets and also increase our buying power, which puts us in a better position to offer a more competitive price to the customer. We have better leverage and greater exposure because of being involved in different markets. 2. The retailer. In today's tough economy, facing mounting competition from big box and Internet sales, it is crucial for the manufacturer to provide trendy product to help retailers attract the consumer with quality products and great value to allow them to remain profitable and competitive. 3. The end consumer, which has more options and choices than ever. Through international business, we are able to provide a variety of product lines that differentiate from mass market and Internet dealers. "
     Gaylord agreed with those views. "The American consumer benefits mainly through lower prices," he said. "I would hate to even think what we would be paying today for probably 70% of everything that we purchase (except for automobiles and food) if we were not doing international business. Obviously there are always people who suffer from it, but nobody is willing to fight about it. Whether your politics are Democrat or Republican, everyone goes for free trade. They will make certain overtures about it during political elections but nobody ever really tries to squash free trade."
     Changes underway in China to increase wages, provide medical benefits and social security to workers are creating changes that will be equally as dramatic as what has happened in telecommunications, Gaylord said. "I wouldn't be at all surprised if in 25 years wage rates in China weren't on par with the wage rates in the United States. I'd say we're a generation away. And then it just becomes a matter of whether or not we can reestablish the manufacturing base in the United States. Of course, a lot of that will have to do with freight rates."
     "I can tell you this: The Chinese government is doing nothing at all to encourage exports," Gaylord added. "They want the manufacturing to all be directed toward internal domestic consumption. They want to build Chinese products for Chinese people. They don't want to depend on America."

THE COSTS
     "Aside from getting to see our family when we travel to the factory, which is the best benefit, we meet a number of great people all over the world," Barbara said. "We have attended trade shows in Germany, China and Singapore. We have customers throughout the United States as well as Canada and Europe. This has afforded us the opportunity to expose our children and our extended family to other cultures they might not have been able to otherwise and in very tangible ways."
     Lowsky also said traveling to other countries can be exciting, but there are challenges with language and culture. "In business, translating our intellectual property rights continues to be a challenge," he said. "For the most part, the countries and their people are motivated to provide hospitality and a high level of assistance that is beneficial to all."
     Ma travels extensively to both support his production base and enlarge the shade business in other markets, which have quite different requests and consumption habits. Entering new markets requires travel for research to understand the culture and find the right partner to do business with.
     "Meanwhile, as our products are seasonal items, we also help to produce some related components for other products to cut down our slow season," Ma said. "These business opportunities require a lot of traveling. As a manufacturer or any kind of company, if we want to survive and grow up in the competitive world, it is not workable if we just fixed our minds and step without any changes."
     For at least 25 years, Gaylord has traveled to China 10 to 12 times a year, staying an average of at least two weeks. He knows many Agio employees as well as competitors who spend half of each year in China.
     "One of the things you learned was to embrace the time because it was about the only time you had to think," Gaylord said. "There was a time in business before you were hit with hundreds of emails per day and before you were expected to pick up your phone at any time. I don't know how much longer that's going to last obviously with the new capabilities they are putting on the plane. So those of us who make those trips, again making lemonade out of lemons, can say ‘Here are hours and hours I can spend without interruptions, without a new crisis.' You learn to really, really enjoy that. And of course with the 12-hour time difference, you're not going to get phone calls so you take care of the business that's on that side."
     Vernon said he doesn't have that sense of being disconnected while traveling for business six months a year. "I enjoy it. I guess that's why I do it," he said. "I use my traveling time like it's any other time. Electronic communication makes it really easy to stay in touch. I know many people who spend much of their time traveling for business, whether it's international makes no difference. Sales reps traveling from home are oft en on the road three or four days a week or even more now. You adapt. Many companies are seeing the world as a single market and that's what it is."

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