Newsletter – October 9, 2018
As I become immersed in the Utah culture of collaboration and cooperation, I am continually impressed by the forward-thinking leadership we have across so many government, business and private organizations across the state.
As we look forward, a thought that is frequently on my mind is that we are in the midst of one of the longest economic expansions in history. We have seen immense growth over the past decade. As we continue to benefit from this growth, we need to keep in mind that, thanks to the realities of the business cycle, there is going to be an economic downturn over the next 12, 24, or 36 months. Death, taxes, and the business cycle are realities of life. We need to ensure that we are using the strength of the moment to prepare for the downturn that will come.
Here at World Trade Center Utah, we view our role in Utah’s business economy as a shield to ease the economic headwinds that will inevitably come. Rarely is an economic downturn global in nature. When times are tough domestically, there are still growth opportunities internationally and smart foreign capital looking for safe investment opportunities like we have here in Utah. Thanks to the leadership of Governor Gary R. Herbert, and his economic development team led by Val Hale, Utah is well-positioned to succeed in both. Additionally, World Trade Center Utah is working hard now to connect Utah businesses with these international growth opportunities and to attract foreign capital to the many opportunities in Utah.
To be successful in this effort, it is important to have a strong team, a healthy organization, and a well-respected brand. Thanks to my predecessors’ leadership–Derek Miller and Lew Cramer–World Trade Center Utah has all three.
From this foundation, we are conducting a strategic review of our two core missions: helping Utah companies increase outbound trade and attracting inbound foreign investment. Everything we do needs to be calibrated to drive progress and create value in these two key areas. Otherwise, in the downturn that will come, we won’t be creating the value that we otherwise could.
Regarding outbound trade, we are reviewing the great work accomplished by our trade services team to ensure we have clearly defined strategic objectives, a collaborative implementation plan and key performance indicators which measure and improve success. This will allow us to develop a pipeline and processes which enhance the positive impact we have on Utah companies by assisting in their objectives to increase international trade. Whether a company is already export driven or is on the brink of international trade, WTC Utah will be able to plug that company into its pipeline, deliver services and connect the company to key partners that will enable it to realize its full potential. As a small, lean organization, WTC Utah is looking to enhance our coordination with our partners to achieve the very best outcomes for Utah businesses.
As for foreign investment, WTC Utah has a mandate to develop a foreign investment strategy for the State of Utah. We are launching a collaborative, big-tent approach so that all of our key stakeholders are a part of developing the strategy. This is essential as no strategy will succeed in delivering results unless there is well-coordinated implementation across all of “Team Utah.”
Conceptually, foreign investment can be broken down into four main buckets. Each bucket has a unique set of key stakeholders with whom WTC Utah will facilitate coordination and implementation. More often than not, there is already fantastic work going on. WTC Utah’s primary role is to ensure that our work is a well-coordinated Team Utah effort, facilitate engagements with foreign investors and potential partners and build awareness for investment opportunities in Utah across all types of foreign investment.
Let’s quickly break down the four buckets of foreign investment. The first bucket is alternative investments, e.g. private equity and venture capital investments into Utah businesses or Utah investment funds. Some examples of this type of foreign investment include Canadian-based Guardian Capital Group Limited, which acquired Alta Capital Management LLC; Northern Ontario Heritage Fund, another Canadian firm, which has invested in Salt Lake City-based Boart Longyear; and a group of investors from Malaysia and the UAE, which invested in the Lindon-based virtual reality company The Void.
The second bucket is mergers and acquisitions, where foreign companies purchase Utah businesses, but keep them located in Utah. Prismview is an example of this type of foreign investment. The company, which manufactures stadium-size LED displays, was acquired by Samsung Electronics. Another example is Miller Blue Ribbon Beef, which is a subsidiary of a U.S. holding company owned by JBS S.A., a Brazilian company.
The third bucket of foreign investment involves foreign corporations that set up headquarter locations in Utah. Some examples include Amer Sports, a Finnish company, which set up its North American Headquarters in Ogden, and Stadler US Inc., a Swiss-owned company, which also set up its U.S. headquarters in Salt Lake City. When thinking about this bucket of foreign investment, think of the great work being done by EDCUtah on corporate recruitment, relocation and site selection.
The fourth bucket involves foreign investment into large infrastructure projects. An example might be foreign investment into Utah’s Global Port, a large-scale joint venture project, or potential public-private partnerships.
An important concluding note about foreign investment: Foreign investment is not just about attracting capital. U.S. markets are awash with capital. Just ask any private equity fund about how stiff the competition is to source deals. Foreign investment brings capital AND partners into a market in which there is growth opportunity or unique expertise for whatever company is receiving the capital. Additionally, foreign investment gives the receiving company prestige as a global company and opens doors in other countries and markets where the foreign investor is active. For these and other reasons, foreign investment is a key driver in economic growth, economic diversification and increased international trade.
Utah is an incredibly attractive location for foreign investment! As WTC Utah facilitates the development of a state-wide foreign investment strategy over the coming months, we look to all of our strategic partners, stakeholders, members, and friends to participate. This must be a whole-of-state effort. If Team Utah is successful in preparing during the favorable economic times we’re experiencing now, I am confident that we will continue to compete and win domestically and globally in the years and decades to come.
Market Highlight: Gyeonggi Province
Utah leaders from WTC Utah, the Governor’s Office of Economic Development (GOED), 20 Utah businesses and six organizations visited Gyeonggi Province, South Korea in September on a trade mission that included the renewal of a 35-year-old sister-state relationship between Utah and Gyeonggi Province, the signing of a memorandum of understanding and a Korean cultural celebration.
South Korea is Utah’s 11th largest trading partner, accepting more than $347 million in Utah exports in 2017. In addition to renewing the sister-state relationship, Utah leaders hoped to boost trade with Korea and attract foreign investment to Utah. The trade mission offered opportunities for Utah companies to receive unparalleled, exclusive access to companies, government agencies and officials in the South Korean market. Activities included business visits, matchmaking meetings, networking receptions and investment roundtables. Additionally, participants visited the sites of several Utah companies that are already finding success in Korea.
Gyeonggi Province includes the area surrounding Seoul, the national capital, and is the most influential market in Korea. It is also the most populous province in South Korea and home to major companies like Samsung Electronics Co., Ltd, the world’s largest cell phone and cell phone parts manufacturer, and LG Corporation, a multinational conglomerate that manufactures electronics, chemicals and telecom products.
While in Gyeonggi Province, GOED and WTC Utah leaders hosted an investment roundtable, met with local businesses and toured the University of Utah Asia Campus. Church & State, the Salt Lake City-based business platform and resource network, has established a partnership with Rehoboth, Korea’s largest incubator and business resource center, which is headquartered in Gyeonggi Province. During the trade mission, Utah leaders visited Rehoboth’s startup campus and learned of the biotech cooperation and investment environment taking place there.
The delegation of Utah leaders also toured Samsung’s campus, where they met with Executive Vice President Won-kyong Kim and Hyung Woo (Andrew) Lee, vice president, global public affairs, corporate management.
Won-kyong Kim oversees Samsung’s engagement on public policy and sustainability issues with governments, international organizations and NGOs around the world. He also supervises the company’s Citizenship (CSR) works in global markets. Hyung Woo (Andrew) Lee is responsible for driving strategy on global issues to support Samsung Electronics’ worldwide operations. In his role, he works with public affairs teams around the world to lead advocacy and risk management initiatives of strategic importance to Samsung.
Gyeonggi Province was once the backbone of South Korea’s manufacturing complex, but much like Utah, the province now places significant emphasis on innovation and entrepreneurship. The province is now evenly diversified across industries like electronics, machining, chemicals and steel. Light industries in the province include textiles, farm, livestock and fisheries.
The top U.S. exports to Korea include machinery, computer and electronic products, chemicals, transportation equipment and food manufacturers. Korea is the United States’ seventh largest export market, according to the U.S. Commercial Service, and the third largest exporter to Korea, with an 8.6 percent market share of Korea’s total imports. Key competitors include China (17.1 percent), Japan (10.2 percent), and the EU’s 27 nations (16.2 percent).
Key challenges U.S. companies face in exporting to Korea include unique industry standards, less than transparent regulations, pressures to reduce prices and contract negotiations, according to the U.S. Commercial Service. “However, firms which are innovative, patient, and which exhibit a commitment to the Korean market generally find business to be rewarding and Koreans to be loyal customers,” the U.S. Commercial Service reports.
The Utah trade mission to Gyeonggi Province was made possible through the support of Zions Bank, the U.S. Commercial Service, Atlantic Council and the U.S. Small Business Administration.
Going Global: Kaddas Enterprises
As CEO of Kaddas Enterprises, Natalie Kaddas believes the world is her marketplace. She’s been applying that belief to her second-generation, woman-owned business since 2013, when she participated in a governor-led trade mission to Mexico.
And as a leader in heavy gauge thermoform plastic manufacturing, the global marketplace has proven to be fertile soil for Kaddas Enterprises, with exports growing 400 percent year over year. Kaddas says her company now has markets in 14 countries and the international and domestic growth has allowed her to significantly expand the company’s Salt Lake City headquarters, manufacturing and staff.
The company recently received a Utah Export Acceleration Grant from WTC Utah to attend the International Raptor Research Conference this November in South Africa. Kaddas Enterprises was invited to participate in the conference thanks to the company’s highly regarded BirdguarD products, which protect power infrastructure against animal-caused power outages. According to Kaddas, 20 percent of all power outages across the U.S. are caused by animal interaction and internationally, the reliability of power and access to power is even more problematic for consumers, businesses and the utility companies that are trying to eliminate the outages.
She says the International Raptor Research Conference is a unique opportunity for Kaddas Enterprises to enter a new continent and the grant has enabled the company to partner with WTC Utah and U.S. Commercial Services to best position Kaddas’ products, like its patented BirdguarD line, for this market. The South African government’s electrification initiatives include proactively protecting its power infrastructure to prevent animal-caused outages. What’s more, in some areas large birds of prey are critically endangered and so construction plans are designed with conservation in mind.
Kaddas Enterprises is an environmentally-conscious company that creates industrial applications for the utility, aviation and transportation industries. With BirdguarD, its success in protecting the power infrastructure also means success in protecting wildlife. But that’s not all, Kaddas says the company recycles approximately 32 tons of scrap material annually.
Carol and John Kaddas founded Kaddas Enterprises in 1966. At their retirement in 2006, the couple turned the reigns over to their daughter-in-law Natalie Kaddas, who had previously been successful in her own career. Natalie joined the company and went on to graduate from the Goldman Sachs 10,000 Small Business program. Since then she has grown Kaddas Enterprises in dramatic fashion – even garnering the attention of President Barack Obama, who in 2016 invited Natalie to represent small businesses at a private White House dinner where she presented her company’s manufacturing business model and American-made products as industry-leading examples in international trade.
Kaddas was joined at the dinner by German Chancellor Angela Merkel and other top political and business leaders from companies such as Microsoft, Honeywell and Lockheed Martin, who discussed economic growth promotion in such sectors as energy, climate and more. Shortly thereafter, Kaddas Enterprises was chosen by the Utah Governor’s Office of Economic Development as one of six companies to exhibit at Hannover Messe, the world’s largest industrial trade fair.
Kaddas credits the Goldman Sachs 10,000 Small Business program and programs administered by WTC Utah like the State Trade and Expansion Program (STEP), the Utah Export Acceleration Grant and state-led trade missions as being pivotal in the company’s international growth.
Toolbox: Tip #9 Part 2 – Adapting your Business Culture
World Trade Center Utah’s “10 Tips to Help you Think, Act and Succeed Globally” provide a deeper dive into topics that will help as you pursue international business opportunities.
Putting Cultural Differences into Practice
Understanding cultural differences is important when conducting business with other countries. That said, it is important to avoid making assumptions about an individual’s beliefs or behaviors as no one person is wholly defined by their background. Do not ignore cultural differences, but do not make them the sole reason for a decision.
High and Low Context Communication
Edward T. Hall proposes a framework for thinking about cultural differences based on the preferred level of context in communication. A high context culture places the most importance on the relationships of those communicating and not the communication itself. In these cultures, developing long-term business relationships is important. Japan and China are often cited as examples of high-context cultures.
The United States is generally considered a low-context country. Low-context cultures are rule oriented. Knowledge is often transferable, as it does not rely heavily on relationships.
When adapting from a low-context to a high-context culture, expect small, close-knit groups. These groups rely on each other for support and may find difficulty opening up to those outside the group. Take time to develop the relationships, and expect the line between work and personal life to be less clearly defined.
The Role of Corporate Culture
The ideal level of adaptation to local culture will vary by company, industry and corporate culture. In most cases, a company’s domestic corporate culture will greatly influence its international business activities. Seeking out partners around the world who embrace the company’s corporate culture will increase its likelihood of success.
For more information, or for any other help with your international expansion efforts, please contact the WTC Utah Trade Services Manager Jim Porter at email@example.com.
|Oct. 18||International Trade Conference|
|Oct. 22||Pitch Competition application due|
|Nov. 8||Utah Global Forum|
|Dec. 10-12||Discover Global Markets (DGM): Indo-Pacific|
|Jan. 7||Registration closes for the 2019 WUSATA Pavilion at SIAL China Trade Show|