minnesota global readiness survey

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Author: Adesegun Oyedele

Minnesota Manufacturing Global Readiness Survey 2011

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TABLE OF CONTENTS

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About this Survey………………………………………………………………………............................................................................ 3

Executive Summary……………………………………………………………………............................................................................ 3

REPORT-1 GENERAL COMPANY PROFILE

Company: Location, Age, and Size………………………………………………………………………………………………………….. 4

Company: Type/Ownership Status and Industry Sector Classification………………………………………………………………….. 5

REPORT-2 COMPANY PRODUCT AND EXPORT PROFILE

Company: Product line, Frequency of Export and Sales Derived from Export………………………………………………………… 6

Company: Sales Derived from Export, Intention to Export and Export Destination…………………………………………………….. 7

Company Export Destination, Comparing Export Sales by Industry Sector…………………………………………………………….. 8

Comparing Respondents’ Intention to Export by Industry…………………………………………………………………………………. 9

REPORT-3 COMPANY GLOBAL READINESS EXPORTERS VS. NON-EXPORTERS

Exporting & Non-Exporting Company Preparedness for Globalization Challenges……………………………………………………. 10

Effect of Employee Global Preparedness Factors on Company’s Intention to Export & Exporters’ Product Readiness…………... 11

Non-Exporters’ Product Readiness & Exporters’ Management Capability and Resource Availability……………………………….. 12

Non‐Exporters’ Management Capability and Resource Availability…………………………………………………………………. 13

Effect of Company’s Management Capability on Intention to Export & Exporters’ Perception of Export Risk… 14

Non-Exporter Perception of Export Risk……………………………………………………………………………………… 15

Non-Exporters’ and Exporters’ Perception of Export Cost and Finance…………………………………………………… 16

Effect of Perceived Risk on Intention to Export………………………………………………………………………………… 17

Conclusion………………………………………………………………………………………………………………………. 18

References…………………………………………………………………………………………………………………………… 19

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Minnesota Manufacturing Global Readiness Survey

About this Survey The Minnesota Manufacturing Global Readiness Survey aims to identify factors associated with export market growth for manufacturing companies in Minnesota. The responses provided will also help us understand how Minnesota’s manufacturers are reacting to global market opportunities and concerns. The contact information for manufacturers throughout Minnesota was obtained through databases from: The Association of Operations Management (APICS), a company specializing in operations management with a vast network of accomplished industry professionals; Manta.com, a company that provides free company profiles on U.S. and International companies; and Minnesota Manufacturer Alliance, a company that provides Minnesota manufacturers with practical peer-to-peer training The survey respondent pool was obtained primarily from APICS (seventy nine percent), the remaining twenty one percent were obtained from companies listed on Manta.com and Manufacturers Alliance database.

• Data was obtained primarily through emails. The survey instrument was set-up in survey monkey. We sent personalized email messages to senior executives of the companies listed in the database. In the email message, we specified that the survey results will help participating companies understand how manufacturing companies are reacting to global market opportunities. The email message also directed the respondent to the survey monkey URL link. Also, some efforts were directed at making telephone calls to senior executives from the companies listed in our contact database.

• Effective total sample size for the survey is 995 companies. A total of 142 usable completed surveys were received via survey monkey resulting in a response rate of 14 percent. We considered the response rate satisfactory considering that the respondents were contacted via email and the response rate does not deviate significantly from similar export marketing studies (Prasad et al., 2001).

Executive Summary Overall, a majority of the respondents have “high export intention” or “very high export intention.” Furthermore, the results suggest that most manufacturing companies in Minnesota are occasional exporters. The implication of this is that Minnesota companies need export services that will help manufacturing companies advance from non-exporting and occasional exporting status to active exporting status. Most importantly, this report underscores the link between respondents’ export readiness and employees’ international business skills, foreign language ability and knowledge of foreign cultures. Developing joint global marketing projects with institutions that have strong international marketing programs, well established study abroad programs and diverse student population will enable the respondent companies to have access to faculty and students with global marketing expertise and foreign language ability (See Conclusion, pp.18-19)

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Report-1 General Company Profile 1. Company Location An evaluation of the Zip code information provided by the survey respondents suggests that fifty two percent of the respondent companies are located around the Twin Cities area, 34% are located in Central Minnesota, 6% in Northern Minnesota, 5% in Southwestern Minnesota, 3% in Mid-South Minnesota and 1% Southeastern Minnesota. Figure 1 shows that a majority of the companies listed in our database are located around the Twin Cities and Central Minnesota area. Figure 1. Geographical Distribution

2. Company Age A majority of the respondent companies have been in business for more than 15 years. This suggests that most respondents are well established companies. It is

important to also note that a significant proportion of the respondent companies (21%) were established recently (< 6 years). See Figure 2.

Figure 2. Years the Company’s Establishment

3. Company Size In this study, companies with fewer than eighty employees are categorized as small and mid-sized companies (SME) while respondent companies with more than seventy nine employees are categorized as large companies. A majority of the respondent companies (61%) are in the SME category, while 39% of the respondent companies are large companies. Figure 3. Company Size by # of Employees EMPLOYEES # % Size

Under 10 40 28% SME 10 to 19 16 11% SME

20 to 39 15 11% SME 40 to 79 15 11% SME

80 to 159 16 11% Large

160 to 260 9 6% Large

Over 260 31 22% Large

Notes SME = Small and midsized enterprise.

This report reflects the global readiness status of different sized companies in Minnesota The implication of this result is that the findings from the study can be generalized across different sized manufacturers in Minnesota.

4% 15%

26% 28%

21% 6%

Year Established

1‐5years 6‐15years 16‐30years

31‐50years 51‐100years >100years

North (6%)

Central (34%)

South West (5%) South East (1%) Mid‐South (3%)

Twin Cities (52%)

Highlights: 52 % of respondent companies are located in the Twin Cities Area; 34% are located in Central Minnesota.

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4. Company Type/Ownership Status Seventy nine percent of the respondent companies are registered as corporations; 13% are sole proprietorships, 8% are partnerships and the remaining 2% represent other business entities. In terms of ownership status, thirty seven percent are family owned businesses, 30% are individually owned, 19% are closely held and 13% are publicly held. It is interesting to note that family owned (37%) and individually owned (30%) businesses account for sixty seven percent of the companies that responded to the survey. Figure 4. Company Type and Ownership Status TYPE OF COMPANY # % Corporation 112 79% Partnership 9 8% Sole Proprietorship 18 13% Other 3 2% OWNERSHIP STATUS # % Individually Owned 43 30% Family Owned 53 37% Closely Held 27 19% Publicly Held 19 13%

5. Manufacturing Sectors The respondents in this survey include companies from twelve different Minnesota manufacturing sectors (See Figure 5). Industrial equipment manufacturing (22%) has the largest representation, followed by others or miscellaneous (14%), metal fabrication (13%), building materials (11%), and medical devices (10%).The representation for each of the remaining six industry sectors is below seven percent. Chemical manufacturing has the smallest representation at one percent. This study is somewhat in line with a recent report by the U.S. Bureau of Economic Analysis (UBEA) about the top 10 Minnesota Manufacturing Sectors (Source: National Association of Manufacturers) The UBEA industry sector result is different because the percentage representation for computer/electronics and food products is high relative the industry sector results in this report. Figure 5. Industry Sector Classification

Chemicals

Plas`cs

Electrica/Electronics

Phamarceu`cal/Health‐Beauty

Prin`ng and Publishing

Food and Beverage

Transporta`on Equipments

Medical Devices

Building Materials

Metal Fabrica`on

Others

Industrial Equipment

1%

4%

4%

4%

5%

6%

6%

10%

11%

13%

14%

22%

Reponses by Industry Sector

Highlights: Family owned and individually owned businesses account for 67% of the companies that responded to the survey.

Highlights: Industrial equipment manufacturing (22%) has the largest representation, followed by others or miscellaneous (14%) and metal fabrication (13%).

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Report-2 Company Product & Export Profile1. Company Product Line Thirty four percent of respondent companies have less than five product lines; 23% have 5 to 10 product lines, 17% have 11-29 product lines, 11% have 30 to 100 product lines and 16% have more than 100 product lines. Most respondent companies have less than 11 product lines.

Figure 1. Number of Product Lines

2. Company Frequency of Export As shown in Figure 2, fifty six percent of respondent companies are involved in occasional export activities. Twenty one percent of the respondent companies indicated that they have “Never Exported,” while 12% belong to the “Almost never Exported” category. Only ten percent of the respondent companies indicated that they export “Almost every time,” while one percent of the respondents reported that are “exporting everytime. This result suggests that most manufacturing companies in Minnesota are occasional exporters.

Government and private agencies involved in developing and implementing export policies in Minnesota can use this result to better customize their export support services to manufacturing companies in Minnesota to help them advance from non-exporting and occasional exporting status to active exporting status.

Figure 2. Company Export Frequency

3. Company Sales Derived from Export The survey results revealed that thirty nine percent of respondent companies derive less than 10% of their sales from export activities. Twenty six percent of the respondent companies indicated that none of their sales components are derived from export. Thirteen percent derive 10%-19% of their sales from export, 9% derive 20%-29%, and another 9% derive 30% to 39% of their

34%

23% 17%

11%

16%

How Many Product Lines Does Your Company Have?

Less than 5 5 to 10 11 to 29

30 to 100 More than 100

Expor`ng Every`me

Expor`ng Almost Every`me

Almost Never Exported

Never Exported

Occassional Export

1%

10%

12%

21%

56%

Frequency of Export AcFviFes

Highlights: Most respondents (57%) have less than 11 product lines.

Highlights: • Most manufacturing companies in

Minnesota are occasional exporters.

• Minnesota companies need export services that will help manufacturing companies advance from non-exporting and occasional exporting status to active exporting status.

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sales from export. Only four percent of respondents derive 40% or over 40% of their sales from export. This result is consistent with the export frequency result discussed in the previous section which suggests that a majority of Minnesota manufacturing companies are occasional exporters.

Figure 3. Percentage of Sales Derived from Export

4. Company Intention to Export in the Near Future With regard to respondents’ intention to export in the near future, sixty two percent have “high intention “or “very high intention” to export. Sixteen percent indicated that they are “not likely” to export in the near future and 13% are “undecided” about their intention to export in the future. Only ten percent of the respondents indicated that they have “no intention” to export. One potential implication is that manufacturing companies in Minnesota generally have “high intention” to export, but they lack the

required capacity and resources to develop export markets.

Figure 4. Company Intention to Export

5. Company Export Destination Figure 4 shows the markets that respondent companies are exporting to. Twenty three percent of the respondent companies export their product to Mexico, Canada and

40% or Over

20% to 29%

30% to 39%

10% to 19%

None

Under 10%

4%

9%

9%

13%

26%

39%

What Percentage of Sales is Derived from Export?

No Intenòn

Undecided

Not Likely

Very High Intenòn

High Intenòn

10%

13%

16%

30%

32%

IntenFon to Export in the Near Future

Highlights: • Close to 40% of respondents derive

less than 10% of their sales from export.

• Only four percent of respondents derive 40% or over 40% of their sales from export.

Highlights: • A majority (62%) of the

manufacturing companies in Minnesota have high intention to export.

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numerous countries in Asia and Europe. Fifteen percent export to numerous countries including one or more countries in South America; 11% export to several countries including countries in Africa and the Middle-East markets, while 8% of the respondents indicated that Canada is their sole export market. Canada, Mexico, and countries in Asia and Europe are major export destinations for products manufactured in Minnesota. This result is in line with recent Minnesota manufacturing data provided by the U.S. Bureau of Economic Analysis.

Figure 5. Export Destination Export Destination # % Exporting to numerous 21 15% Mexi+CA,+Asia+Europe 32 23% Around the world & at least one South American country. 22 15% Around the world+Africa‐Middle East

16 11%

Canada Only 11 8% None 40 28%

________________________________________________________________________________________________ 6. Comparing Sales Derived from Export by Industry A comparative assessment of respondents export sales by industry sector suggests close to fifty percent of industrial equipment manufacturers in Minnesota derived over 19% of their sales from export. Figure 5 also shows that thirty to thirty five percent of respondents categorized as medical devices and electronics manufacturers derive over 19% of their sales from export. One possible assertion here is that export sales are relatively high for industrial equipment, medical devices and electronics manufacturers in Minnesota when compared to other manufacturing sectors in Minnesota. Figure 6. Percentage of Sales Derived from Export by Industry

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Food and Beverages

Plas`cs

Chemicals

Prin`ng and Publishing

Building Materials

Metal Fabrica`on

Phamarcue`cal/health

Other

Transporta`on Equipment

Electronics

Medical Devices

Industrial Equipment

>19% under10% to 19% None

Highlights: • Export sales are relatively high for industrial equipment, medical devices and electronics

manufacturers in Minnesota compared to other manufacturing sectors.

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7. Comparing Respondents’ Intention to Export by Industry Sector Analysis about respondents’ intention to export by industry sector suggests that a majority of the industrial equipment manufacturers (65%) have a “high to very intention to export. The printing and publishing manufacturers responded highest to “not likely” to export (57%), while the transportation equipment manufacturers responded highest to “undecided” (33%). Both the electronics (67%) and pharmaceutical-health (67%) manufacturers responded highest to “high intentions” to export. Overall, the manufacturers who reported the highest intention to export include: industrial equipment, electronics, and pharmaceutical-health manufacturers. Figure 7 Cross Tabulation - Intention to Export by Industry

Industry Segment No Intention Not likely Undecided High

Intention

Very High

Intention Total 0 1 2 6 5 14 Medical Devices 0% 7% 14% 43% 36% 100% 1 3 2 3 0 9 Food and Beverages 11% 33% 22% 33% 0% 100%

Plastics 1 1 0 2 1 5 20% 20% 0% 40% 20% 100% Chemicals 1 0 0 0 0 1 100% 0% 0% 0% 0% 100% Electronics 0 0 1 4 1 6 0% 0% 17% 67% 17% 100% Printing and Publishing 1 4 0 2 0 7 14% 57% 0% 29% 0% 100% Metal Fabrication 3 4 3 7 1 18 17% 22% 17% 39% 6% 100% Building Materials 3 6 2 2 3 16 19% 38% 13% 13% 19% 100% Industrial Equipment 2 0 3 6 20 31 6% 0% 10% 19% 65% 100% Transportation Equipment 0 1 3 3 2 9 0% 11% 33% 33% 22% 100% Phamarcuetical/health 0 0 1 4 1 6 0% 0% 17% 67% 17% 100% Other 2 3 1 6 8 20 10% 15% 5% 30% 40% 100%

Highlights: • Overall, the manufacturers

who reported the highest intention to export include: industrial equipment, electronics and pharmaceutical-health manufacturers.

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Report-3 Company Global Readiness Exporters Vs. Non-Exporters 1. Exporting Company Preparedness for Globalization Challenges The results show that fifty six percent of respondents involved in export activities “agree” or “strongly agree” with positive statements evaluating their employees’ international business experience; 51% “agree” or “strongly agree” with statements evaluating employees’ ability to cope with the challenges of globalization while 41% “agree” or “strongly agree” that their employees are knowledgeable about foreign cultures. The level of agreement is relatively low for statements evaluating employees’ foreign language ability. Only twenty two percent of respondents’ involved in export activities “agree” or “strongly agree” with the statements evaluating employees’ foreign language ability. Overall, the results suggest a significant proportion of manufacturing companies involved in export activities have employees with international business experience (56%). Most manufacturers involved in exporting do not have personnel with foreign language abilities. Figure 1 Exporters’ Employee Preparedness for Globalization Challenges

Measures Strongly disagree Disagree Neutral Agree

Strongly agree Total

5 23 32 30 12 102 The company’s employees are knowledgeable about foreign cultures. 5% 23% 31% 29% 12% 100%

15 44 21 12 10 102 The company’s employees have foreign language ability. 15% 43% 21% 12% 10% 100%

4 13 33 41 11 102 The company’s employees have the skills and knowledge to cope with the challenges of globalization. 4% 13% 32% 40% 11% 100%

8 21 16 41 16 102 The company’s personnel have international business experience. 8% 21% 16% 40% 16% 100%

2. Non-Exporting Company Preparedness for Globalization Challenges Unlike the results of respondent companies involved in export, Figure 2 shows that only eight percent of non-exporting respondents “agree” or “strongly agree” with statements evaluating their employees’ international business experience; 6% “agree” or “strongly agree” with statements evaluating employees’ ability to cope with the challenges of globalization, 10% “agree” with statements assessing employees’ knowledge about foreign cultures, and 5% “agree” with statements assessing employees’ foreign language ability. A comparison of the results for exporters and non-exporters suggests the level of agreement with statements assessing preparedness for globalization challenges is higher for exporters than non-exporters. One implication of this result is that manufacturing companies that are interested in going global should improve their preparedness for globalization challenges by implementing programs that will foster employees’ international business skills, foreign language ability and knowledge of foreign cultures.

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Figure 2 Non‐Exporters’ Employee Preparedness for Globalization Challenges



10 17 9 4 0 40 The company’s employees are knowledgeable about foreign cultures. 25% 43% 23% 10% 0% 100%

15 19 4 2 0 40 The company’s employees have foreign language ability. 38% 48% 10% 5% 0% 100%

10 18 10 1 1 40 The company’s employees have the skills and knowledge to cope with the challenges of globalization. 25% 45% 25% 3% 3% 100%

16 16 5 2 1 40 The company’s personnel have international business experience. 40% 40% 13% 5% 3% 100%

3. Effect of Employee Global Preparedness Factors on Company’s Intention to Export The chart in Figure 3 shows the impact of employee global preparedness factors on export intention. One hundred percent of companies that reported high preparedness (statements assessing employee preparedness are outlined in Figures 2 and 3) indicated that they have high intention to export; 92% of companies that reported medium preparedness indicated that they have high export intention, while forty six percent of respondent companies who reported low preparedness indicated that they have high intention to export. Not surprisingly, this result suggests that high levels of employee global preparedness are positively related to high export intention in manufacturing companies in Minnesota. The variables used in evaluating employee preparedness are shown in Figures 1 & 2.

Figure 3. Relationship between Export Intention and Employee Preparedness

4. Exporting Companies’ Product Readiness With reference to product readiness, the result shows that eighty two percent of respondents involved in export activities “agree” or “strongly agree” with statements evaluating the company’s capability to adapt its products to overseas markets; 77% “agree” or “strongly agree” that the company has sufficient production capacity to commit to export market and 99% “agree” or “strongly agree” that the company’s product has been successfully sold in the U.S. market (See Figure 4). This

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Low‐preparedness

Medium‐preparedness

High‐preparedness

High intension Low inten`on

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result suggests that manufacturing companies involved in export have the capability to adapt their products to overseas markets. In addition, most Minnesota manufacturing companies involved in export reported that their products have been successfully sold in the U.S. market. Figure 4 Exporters’ Product Readiness for Export



3 1 12 46 40 102 The company’s product can be adapted to overseas markets. 3% 1% 12% 45% 39% 100%

0 1 1 26 74 102 The company’s product has been successfully sold in the U.S. market. 0% 1% 1% 26% 73% 100%

2 3 18 41 38 102 The company has sufficient production capacity to commit to export market. 2% 3% 18% 40% 37% 100%

3 2 13 50 34 102 The company has capability to adapt its products to overseas markets. 3% 2% 13% 49% 33% 100%

5. Non-Exporting Company - Product Readiness The results presented in Figure 5 show that forty eight percent of non-exporting respondent “agree” or “strongly agree” with statements evaluating the company’s capability to adapt its products to overseas markets; 40% “agree” or “strongly agree” that the company has sufficient production capacity to commit to export market and 77% “agree” or “strongly agree” that the company’s product has been successfully sold in the U.S. market. Not surprisingly, the result suggests that the product readiness level for exporters is higher than the product readiness level for non-exporters. For example, eighty two percent of exporters “agree” or “strongly agree” with statements evaluating the company’s capability to adapt its product to foreign markets while 48% of non-exporters “agree” or “strongly agree” with the statements about product adaptability. One implication is that manufacturing companies that have the capacity to adapt their products to overseas markets will have a higher propensity to explore export opportunities than manufacturing companies with limited product adaptation capability. Figure 5 Non Exporter‐ Product Readiness for Export



5 1 12 18 4 40 The company’s product can be adapted to overseas markets. 13% 3% 30% 45% 10% 100%

3 2 6 14 15 40 The company’s product has been successfully sold in the U.S. market. 8% 5% 15% 35% 38% 100%

5 6 10 15 4 40 The company has the capability to adapt its products to overseas markets. 13% 15% 25% 38% 10% 100%

6 8 10 14 2 40 The company has sufficient production capacity to commit to export market. 15% 20% 25% 35% 5% 100%

6. Exporting Company – Management Capability and Resource Availability As shown in Figure 6, sixty seven of respondents involved in export activities “agree” or “strongly agree” with statements evaluating the company’s level of management commitment to export market development; 70% agree” or “strongly agree” with statements measuring management’s willingness to dedicate staff time and resources to export, while 64% report that the company has sufficient financial resources to actively support the marketing of its products to overseas customers.

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Seventy nine percent of respondents’ involved in export report that the company has the capability to arrange shipping and forwarding, while 72% report the company has the capability to handle oversea payments such as letters of credit. Overall, the results suggest that companies involved in exporting have highly dedicated management teams that are willing to devote relevant resources to export ventures. Figure 6 Exporters’ Management Capability



2 11 20 35 34 102 The company’s management is committed to developing export markets. 2% 11% 20% 34% 33% 100%

2 9 20 43 28 102 The company’s management is willing and able to dedicate staff time and resources to export markets. 2% 9% 20% 42% 28% 100%

3 12 22 38 27 102 The company has sufficient financial resources to actively support the marketing of its products to customers in a foreign country. 3% 12% 22% 37% 27% 100%

1 5 15 52 29 102 The company is able to arrange shipping and forwarding without any difficulty. 1% 5% 15% 51% 28% 100%

2 13 14 48 25 102 The company is able to prepare and handle overseas payment documentation such as negotiating letters of credit.

2% 13% 14% 47% 25% 100% 7. Non-Exporting Company – Management Capability and Resource Availability The results show that only eight percent of non-exporting respondents “agree” or “strongly agree” with statements evaluating management’s commitment to export market development; 15% agree” or “strongly agree” with statements measuring management willingness to dedicate staff time and resources to export, while 13% report that the company has sufficient financial resources to actively support the marketing of its products to overseas customers. Thirty eight percent of non-exporting respondents’ report that the company has the capability to arrange shipping and forwarding, while 20% report the company has the capability to handle oversea payments such as letters of credit (see Figure 7). Overall, the results suggest that the transition from non-exporting status to exporting status is possible if the company’s management team is committed to developing export markets. Figure 7 Non‐Exporters’ Management Capability



5 16 16 3 0 40 The company’s management is committed to developing export markets. 13% 40% 40% 8% 0% 100%

5 14 15 6 0 40 The company’s management is willing and able to dedicate staff time and resources to export markets. 13% 35% 38% 15% 0% 100%

9 14 12 5 0 40 The company has sufficient financial resources to actively support the marketing of its products to customers in a foreign country. 23% 35% 30% 13% 0% 100%

8 7 10 15 0 40 The company is able to arrange shipping and forwarding without any difficulty. 20% 18% 25% 38% 0% 100%

9 13 10 8 0 40 The company is able to prepare and handle overseas payment documentation such as negotiating letters of credit. 23% 33% 25% 20% 0% 100%

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8. Effect of Company’s Management Capability on Intention to Export As shown in Figure 8, ninety five percent of respondent companies that reported “high management capability” indicated that they have high intention to export, while 67% of companies that reported “medium management capability” indicated that they have high export intention. Only twenty one percent of respondent companies that reported “low management capability” indicated that they have high intention to export. This result suggests that high levels of management’s capability or management willingness to support export ventures is positively related to high export intention. The variables used in evaluating management global capability are shown in Figures 4-7.

Figure 8. Relationship between Export Intention and Management Capability

9. Exporting Company – Perception of Export Risk The results on the perception of export risk suggest that fifty three percent of respondents involved in exporting activities “agree” or “strongly agree” that foreign opportunities are difficult to determine, 31% “agree” or “strongly agree” that foreign consumer tastes and preferences are difficult to understand, 18% “agree” or “strongly agree” that foreign business practices are difficult to understand and 11% “agree” or “strongly agree” that different product standards make U.S. products unadaptable for export. In terms of finding foreign partners and servicing overseas customers, fifty two percent of respondents engaged in export reported that foreign partners are difficult to find, while 25% indicated that service is difficult to implement in foreign markets. Overall, the results suggest that exporters are more concerned about the risks associated with finding new opportunities and finding business partners in foreign markets than about product adaptation risks and risks of adjusting to foreign business practices (see Figure 9).

0% 20% 40% 60% 80% 100%

Low‐mgt‐capability

Meduim‐mgt‐capability

High‐mgt‐capability

High inten`on Low lnten`on

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Figure 9 Exporters’ Perceived Risk about Foreign Markets



3 21 24 51 3 102 Foreign opportunities are difficult to determine. 3% 21% 24% 50% 3% 100% 2 22 46 32 0 102 Foreign consumer tastes and preferences are

difficult to understand. 2% 22% 45% 31% 0% 100% 10 57 23 11 1 102 Different product standards and consumer habits

make U.S. products unadaptable for exports. 10% 56% 23% 11% 1% 100% 4 34 46 18 0 102 Foreign business practices are difficult to

understand. 4% 33% 45% 18% 0% 100% 2 18 29 43 10 102 Adequate representation in foreign markets is

difficult to obtain. 2% 18% 28% 42% 10% 100% 6 38 33 21 4 102 Service is difficult if not impossible in foreign

markets. 6% 37% 32% 21% 4% 100% 10. Non-Exporting Company – Perception of Export Risk As shown in Figure 10, forty eight percent of non-exporters “agree” or “strongly agree” that foreign opportunities are difficult to determine; 28% “agree” or “strongly agree” that foreign consumer tastes and preferences are difficult to understand, 20% “agree” or “strongly agree” that foreign business practices are difficult to understand, while 10% “agree” or “strongly agree” that different product standards make U.S. products unadaptable for export. In terms of risk associated with finding foreign partners and servicing overseas customers, forty three percent of non-exporting respondents reported that foreign partners are difficult to find while 26% indicated that service is difficult to implement in foreign markets. A comparative assessment of the results between exporters and non-exporters suggests that the perception of risk associated with finding new partners is slightly higher for exporters than non-exporters. Overall, non-exporters’ perception of risk is slightly higher than exporters’ perception of risk with the exception of risk related to finding partners in foreign markets. One possible explanation is that most exporters are familiar with the process of finding foreign partners while the majority of non-exporting respondents are not familiar with this process. Hence, non-exporting companies are not able to effectively evaluate the risk of finding foreign partners. Figure 10 Non‐Exporter’s Perceived Risk about Foreign Markets



2 1 18 16 3 40 Foreign opportunities are difficult to determine. 5% 3% 45% 40% 8% 100% 3 2 24 11 0 40 Foreign consumer tastes and preferences are

difficult to understand. 8% 5% 60% 28% 0% 100% 3 2 18 16 1 40 Adequate representation in foreign markets is

difficult to obtain. 8% 5% 45% 40% 3% 100% 3 9 24 4 0 40 Different product standards and consumer habits

make U.S. products unadaptable for exports. 8% 23% 60% 10% 0% 100% 2 2 28 8 0 40 Foreign business practices are difficult to

understand. 5% 5% 70% 20% 0% 100% 2 3 25 9 1 40 Service is difficult if not impossible in foreign

markets. 5% 8% 63% 23% 3% 100%

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11. Exporting Company – Perception of Export Cost and Finance The results on the perception of risk associated with cost of exporting and export finance suggest that eighteen percent of respondents involved in exporting activities “agree” or “strongly agree” that the cost of exporting is high, 23% “agree” or “strongly agree” that the process of collecting money overseas is difficult, while 7% “agree” or “strongly agree” that the conversion of U.S. dollars to other currencies is difficult. Thirty percent of respondents engaged in export reported that export licenses and other exporting paperwork require too much time to process. Overall, the results suggest a significant proportion of exporting respondents do not consider export cost and finance as a major risk factor (see Figure 11). Figure 11 Exporters – Perceived Export Cost, Finance & Time Risk



8 31 45 18 0 102 It costs too much money to get started in exporting. 8% 30% 44% 18% 0% 100% 4 30 43 22 3 102 It is difficult to collect money overseas.

4% 29% 42% 22% 3% 100% 4 32 33 31 2 102 Shipping documents, export licenses and other

paperwork require too much time. 4% 31% 32% 30% 2% 100% 12 49 34 7 0 102 It is difficult to convert some currencies into U.S.

dollars. 12% 48% 33% 7% 0% 100% 12. Non-Exporting Company – Perception of Export Cost and Finance As shown in Figure 12, twenty five percent of non-exporting respondents “agree” or “strongly agree” that the cost of exporting is high; 25% “agree” or “strongly agree” that the process of collecting money oversea is difficult while 15% “agree” or “strongly agree” that the conversion of U.S. dollars to other currencies is difficult. Thirty six percent of non-exporting respondents report that export licenses and other exporting paperwork require too much time to process However, a majority of the non-exporting companies are undecided or neutral on whether to “agree” or “disagree” with the statements evaluating respondents’ perception of the risk associated with export cost and finance. Again one possible explanation is that non-exporting respondents are not able to effectively evaluate these statements due to lack of knowledge of the cost and financing involved in exporting. Figure 12 Non‐Exporters ‐ Perceived Risk Cost, Finance & Time

Measures Strongly disagree

Disagree Neutral Agree


3 2 25 8 2 40 It costs too much money to get started in exporting. 8% 5% 63% 20% 5% 100% 3 0 27 10 0 40 It is difficult to collect money overseas.

8% 0% 68% 25% 0% 100% 2 0 24 11 3 40 Shipping documents, export licenses and other

paperwork require too much time. 5% 0% 60% 28% 8% 100% 3 6 25 6 0 40 It is difficult to convert some currencies into U.S.

dollars. 8% 15% 63% 15% 0% 100%

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13. Effect of Perceived Risk on Intention to Export As shown in Figure 13, seventy seven percent of respondent companies that reported low risk indicated that they have high intention to export; 50% of companies that reported medium risk indicated that they have high export intention, while forty seven percent of respondent companies that reported low risk indicated that they have high intention to export. This result suggests that low levels of risk perception for export ventures is positively related to high export intention The variables used in evaluating perceived risk are shown in Figures 9-12.

Figure 13. Relationship between Export Intention and Perceived Risk

0% 20% 40% 60% 80% 100%

High risk

Mid‐risk

Low risk

53%

50%

23%

47%

50%

77%

No inten`on Inten`on

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CONCLUSION

The purpose of this report was to identify factors associated with export market growth for manufacturing companies in Minnesota. The report is divided into three different parts: 1) General company profile, 2) Company product and export profile, 3) Company global readiness –exporter vs. non-exporters.

The first part of the report examines the profile of the respondent companies. The analysis about company profile include: company location, age, size, type/ownership status and industry sector classification. The analysis revealed that 52 % of respondent companies are located in the Twin Cities Area and 34% are located in Central Minnesota. Most of the respondent companies have been in business for more than 15 years. Also, the analysis suggests that a significant proportion of the respondent companies (21%) were established recently (< 6 years). A majority of the respondent companies (61%) are in the small and mid-size category, while 39% of the respondent companies are large companies. In terms of ownership status, family owned and individually owned businesses account for 67% of the companies that responded to the survey. The respondents in this report include companies from twelve different Minnesota manufacturing sectors. The industry sector results suggest that the industrial equipment manufacturing (22%) has the largest representation, followed by others or miscellaneous (14%) and metal fabrication (13%). The second part of the report evaluates the product and export profile of the respondent companies. The results about product and export profile include: company product line, frequency of export, percentage sales derived from export, export intention and export destination. The results revealed that most respondents (57%) have less than 11 product lines. With regard to respondents’ export frequency levels, most respondents’ are occasional exporters. The results about the percentage of sales derived from export suggest that only four percent of respondents derive 40% or over 40% of their sales from export. About 40% of respondents derive less than 10% of their sales from export. Export sales are relatively high for industrial equipment, medical devices and electronics manufacturers in Minnesota when compared to other manufacturing sectors in Minnesota. In terms of export intention, 62% percent have “high intention “or “very high intention” to export. The manufacturers who reported the highest intention to export include: industrial equipment, electronics and pharmaceutical-health manufacturers. Canada, Mexico, and countries in Asia and Europe are major export destinations for products manufactured in Minnesota. This result is in line with recent Minnesota manufacturing data provided by the U.S. Bureau of Economic Analysis. The third part of the report evaluates the global readiness of the respondent companies by comparing the readiness of exporters and non-exporters. The analysis about export readiness include: employee preparedness for globalization challenges, product readiness, management capability and resource availability and perception of export risk. A comparison of the results for exporters and non-exporters suggests the level of agreement with statements assessing preparedness for globalization challenges is higher for exporters than non-exporters. One implication of this result is that manufacturing companies that are interested in going global should improve their preparedness for globalization challenges by implementing programs that will foster employees’ international business skills, foreign language ability and knowledge of foreign cultures. Not surprisingly, the result suggests that the product readiness level for exporters is higher than the product readiness level for non-exporters. One implication is that manufacturing companies that have the capacity to adapt their products to overseas markets will have a higher propensity to explore export opportunities than manufacturing companies with limited product adaptation capability. With regard to the effect of management capability on intention to export, This result suggests that high levels of management’s capability or management willingness to support export ventures is positively related to high export intention. The results on the perception of export risk suggest non-exporters’ perception of risk is slightly higher than exporters’ perception of risk with the exception of risk related to finding partners in foreign markets. One possible explanation is that most exporters are familiar with the process of finding foreign partners while the majority of non-exporting respondents are not familiar with this process. Hence, non-exporting companies are not able to effectively evaluate the risk of finding foreign partners. Also the results indicate that exporters are more concerned about the risks associated with finding new opportunities and finding business partners in foreign markets than about product adaptation risks and risks of adjusting to foreign business practices.

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Overall, a majority of the respondents have “high export intention” or “very high export intention.” Furthermore, the results suggest that most manufacturing companies in Minnesota are occasional exporters. The implication of this is that Minnesota companies need export services that will help manufacturing companies advance from non-exporting and occasional exporting status to active exporting status. Most importantly, this report underscores the link between respondents’ export readiness and employees’ international business skills, foreign language ability and knowledge of foreign cultures. Developing joint global marketing projects with institution that have strong international marketing programs, well established study abroad programs and diverse student population will enable the respondent companies to have access to faculty and students with global marketing expertise and foreign language ability. References: Bilkey, W.J. and Tesar, G. (1977) 'The export behavior of smaller sized Wisconsin manufacturing firms', Journal of International

Business Studies Vol. 3, (Spring/Summer): 93-98. National Association of Manufacturers http://www.nam.org/~/media/9DD94745239A4B86B865F1776226F5C0.ashx

Downloaded 02/07/2011 Prasad, K. V., Ramamurthy, K., & Naidu, G. M. (2001). The influence of internet-marketing integration on marketing competencies and

Export,” Journal of International Marketing, Vol.9 (4), 82-110. Databases The Association of Operations Management (APICS), Manta.com, and Minnesota Manufacturer Alliance.

minnesota global readiness survey

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