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A recent survey of SunTrust Banks Inc. clients showed that 17 percent are looking to expand sales into internationally by 2020, an indication that companies’ consciousness about exporting is on the rise, according to the bank’s head for trade.
“Over the past five years there has been a confluence of factors that have led companies to seek opportunities outside the U.S. and feel more comfortable in pursuing those markets maybe more so than they have in the past,” said Susanne Keough, senior vice president and head of Global Trade Solutions at SunTrust in Atlanta. “It’s not just the very large corporates like Coca-Cola or McDonald’s or some of the household names that we hear. What’s borne out in the statistics is that an ever larger percentage of small and medium-sized companies are taking advantage of foreign markets.”
This export appetite, especially among smaller companies, had its roots in part in the downturn of 2008-09, which encouraged companies to look outside U.S. borders to fast-growing emerging markets for growth, she said.
That has propelled U.S. exports to record for the past five straight years straight, and Atlanta has been no exception. Exports of goods from the city grew by 5.5 percent (about $1.1 billion) to $19.9 billion overall in 2014, ranking Atlanta No. 18 among metro areas in export volume, according to the International Trade Administration.
But the low-hanging fruit may be gone. Today’s global macroeconomic environment presents headwinds exporters will have to face with savvy strategies and expert help.
Growth has slowed in large economies like China and Brazil, and a strengthened dollar makes U.S. products relatively more expensive versus many currencies than they have been in years, Ms. Keough said. With a weaker euro, European goods are that much more competitive against their American counterparts in head-to-head markets. China this week announced it would devalue its currency against the dollar in a bid to support exports amid slower growth.
Currency risk is always a factor in global trade, but companies shouldn’t be deterred, Ms. Keough said, as bankers can help them manage that risk and even turn it to an advantage. Offering local-currency payment terms to buyers — taking the risk out of the equation for the customer — can give firms a leg up in certain deals. Exporters often can overcome buyers’ currency concerns by offering them credit, particularly in developing countries where the financial services are more limited and interest rates are high.
As long as companies do their homework, the risk can be worth it, Ms. Keough said. Tapping a broader range of markets is a way to offset slowdowns in traditional strongholds.
“We try to advise companies to make sure they’re looking at more than one country or more than one region to understand if their products have viability or appeal in more than one market,” Ms. Keough said. “(Diversification) can make a company that much more positioned to take advantage of opportunities.”
In that vein, she has seen many clients awakening to the opportunity on the African continent, both in bidding to supply materials and engineering services for infrastructure projects and increasingly in selling to the growing middle class in certain countries.
“Look at Nigeria. It’s a huge economy — it’s oil dependent, but it generates the kind of revenue that can lead to the emergence of a middle class. In the past we’ve seen a lot of equipment — used equipment for construction and so forth — but now we’re starting to see demand for consumer products,” she said.
Despite the advantages of exporting, its growing popularity and the variety of resources available to achieve international sales, an “awareness gap” remains that will only close gradually over time as companies see the benefits first hand, she said.
“As we engage with companies we try to advise that diversifying the revenue stream beyond just domestic is a way to achieve long-term growth and potentially increase that growth beyond what would be available just being reliant on the U.S. market.”
Reach Ms. Keough at susanne.keough@suntrust.com.