Export Management Company
Export specialists who act as an export marketing department for client firms.
The Minnesota Mining and Manufacturing Co. (3M), which makes more than 40,000 products including tape, sandpaper, medical products, and the ever-present Post-it notes, is one of the world’s great multinational operations. Today, more than 60 percent of the firm’s revenues are generated outside the United States. Although the bulk of these revenues came from foreign-based operations, 3M remains a major exporter with more than $2 billion in exports. The company often uses its exports to establish an initial presence in a foreign market, only building foreign production facilities once sales volume rises to a level that justifies local production.
The export strategy is built around simple principles. One is known as “FIDO,” which stands for First In (to a new market) Defeats Others. The essence of FIDO is to gain an advantage over other exporters by getting into a market first and learning about that country and how to sell there before others do. A second principle is “make a little, sell a little,” which is the idea of entering on a small scale with a very modest investment and pushing one basic product, such as reflective sheeting for traffic signs in Russia or scouring pads in Hungary. Once 3M believes it has learned enough about the market to reduce the risk of failure to reasonable levels, it adds additional products.
A third principle at 3M is to hire local employees to sell the firm’s products. The company normally sets up a local sales subsidiary to handle its export activities in a country. It then staffs this subsidiary with local hires because it believes they are likely to have a much better idea of how to sell in their own country than American expatriates. Because of the implementation of this principle, fewer than 200 of 3M’s 40,000 plus foreign employees are U.S. expatriates.
Another common practice at 3M is to formulate global strategic plans for the export and eventual overseas production of its products. Within the context of these plans, 3M gives local managers considerable autonomy to find the best way to sell the product within their country. Thus, when 3M first exported its Post-it notes, it planned to “sample the daylights” out of the product, but it also told local managers to find the best way of doing this. Local managers hired office cleaning crews to pass out samples in Great Britain and Germany; in Italy, office products distributors were used to pass out free samples; while in Malaysia, local managers employed young women to go from office to office handing out samples of the product. In typical 3M fashion, when the volume of Post-it notes was sufficient to justify it, exports from the United States were replaced by local production. Thus, after several years, 3M found it worthwhile to set up production facilities in France to produce Post-it notes for the European market.
Sources: R. L. Rose, “Success Abroad,” The Wall Street Journal, March 29, 1991, p. A1; T. Eiben, “US Exporters Keep On Rolling,” Fortune, June 14, 1994, pp. 128–31; 3M Company, A Century on Innovation, 3M, 2002; and 2005 10K form archived at 3M’s website at www.mmm.com.
In theory, the advantage of EMCs is that they are experienced specialists that can help the neophyte exporter identify opportunities and avoid common pitfalls. A good EMC will have a network of contacts in potential markets, have multilingual employees, have a good knowledge of different business mores, and be fully conversant with the ins and outs of the exporting process and with local business regulations. However, the quality of EMCs varies.14 While some perform their functions very well, others appear to add little value to the exporting company. Therefore, an exporter should review carefully a number of EMCs and check references. One drawback of relying on EMCs is that the company can fail to develop its own exporting capabilities.