Export Juggernaut : Southern California Firms Spearhead Rise in Sales Overseas
With Pentagon spending flat in 1988, the small Compton defense contractor Murdock Inc. began seeking civilian export markets to reduce its reliance on military sales.
The company began aggressively marketing its aircraft parts in Europe and Asia and later diversified into making golf clubs for sale in Japan. In four years, Murdock doubled its exports to 20% of its $40 million in sales last year.
“We realized that the global market is essential if we were going to continue to grow,” said William Bottin, Murdock’s marketing director. “We had to establish a presence, learn languages, adjust to foreign food, learn different customs--and then sell.”
With large Pentagon cuts looming, Murdock’s decision to expand its export base is considered far-sighted but not unusual for a California firm. More of the state’s small and medium-sized manufacturers have taken the export plunge in recent years. They are leading a nationwide resurgence of exports that helped reduce the trade deficit to $66.2 billion last year, the first time it had fallen below $100 billion in eight years.
California firms accounted for 15% of the record $422 billion in U.S. exports in 1991, a 7.1% increase from the prior year. The value of California exports rose 8% to $63.1 billion in 1991. Manufactured goods from industries such as high technology, industrial machinery, electronics and transportation equipment account for the bulk of U.S. exports, and such firms have a strong presence in California.
“Southern California has been a key player in export growth,” said Gregory Mignano, director of the California State World Trade Commission, which assists exporters. “For example, the metropolitan Los Angeles area is the nation’s largest manufacturing center, and small and medium-sized manufacturers have been generating most of these new sales.”
California firms began to boost their export sales in the late 1980s, largely because a fall in the value of the dollar made their products more affordable and because many nations have begun to remove trade barriers, said Mignano.
Exports help sustain about 1.2 million jobs, or 10% of those employed in California, according to some estimates. While recession has rendered thousands of Californians jobless, those losses have been partly offset by the estimated 90,000 jobs created as a result of increased exports last year, Mignano said.
Murdock has increased its work force to 420 from 275 in 1987, partly because it is selling more of its wares--aircraft parts such as engine components and machines that mold titanium metal--to foreign producers of commercial aircraft and their suppliers in Asia and Europe.
Prior to its export push, the company primarily supplied defense contractors such as Lockheed, McDonnell Douglas and Northrop. Overall, Murdock has doubled its revenue in the past four years, partly because of new export sales. Company executives expect export sales to increase another 15% by 1995.
Many San Diego-based manufacturers of sophisticated equipment also expect increases in foreign sales in 1992. Wavetek, a producer of electrical test and measurement equipment, anticipates a 5% increase in export sales this year. Overall, exports accounted for 20% of the company’s sales in 1991 and a quarter of its $55 million in sales of equipment used in the research and development of circuitry for goods such as computers.
Wavetek, which employs about 600, also produces equipment used by the cable television, cellular telephone and shortwave radio industries.
“Exports are critically important to our business,” said Ben Constantini, Wavetek’s vice president of sales. “We’re working hard to improve our (sales) penetration in the Asia-Pacific region.”
Some companies are trying to expand sales abroad to cope with flagging sales in the United States. For example, Datum Inc., an Anaheim maker of electronics devices for telephone systems, boosted its international marketing budget from $600,000 in 1990 to $1 million in 1991.
“We shifted money that would otherwise go to domestic sales effort and channeled it to international marketing programs because I saw more opportunities there,” said Datum President Louis B. Horwitz.
Datum also sent executives and technicians abroad to train company representatives in Canada, Japan, Taiwan and Latin American countries.
Apparently, the strategy worked. Export sales were only 13% of Datum’s business in 1990, but accounted for 25% of 1991 revenue of $32 million.
AST Research Inc., also Irvine-based, expects its flourishing foreign business to expand. The personal computer maker is seeking new markets in Eastern Europe. Exports represented 47% of sales in 1991, and the company expects foreign sales to account for 53% by 1993.
While companies such as AST are well-established in foreign markets, many more of the Southland’s medium-sized and small companies are just beginning to explore their export potential with the assistance of private and public agencies.
For example, the Export Managers Assn. of California, a Los Angeles-based trade organization, this year began to provide a series of six-week instruction courses designed to help companies learn the basics of the export business.
The group also teamed with the state Commerce Department and the U.S. Small Business Administration to create the Export Small Business Development Center, which has been providing trade-related assistance such as marketing advice and research on foreign markets since November.
During the first three months of 1992, 830 companies obtained assistance from the Los Angeles-based export development center. Officials expect another 1,600 to make use of their resources in the second quarter. Smaller firms are responding to such programs because they have the capacity to quickly exploit market changes abroad, said Tim Murphy, president of the export managers group.
“If a small firm has the expertise, it’s able to change directions quickly and penetrate a foreign market because it isn’t slowed by the large bureaucracies you find at large companies,” Murphy said.
Among the beneficiaries of export promotions programs is JMR Electronics, a Northridge firm that manufactures enclosures into which computer data-carrying materials such as hard or floppy disks are inserted or withdrawn. The company produces the enclosures--composed of fabricated metal, plastic and wiring--for computer manufacturers and equipment retailers.
JMR began to manufacture the enclosures in 1988 but did not begin to develop a healthy niche in foreign markets until it joined officials of the California State World Trade Commission on an export mission to a 1990 computer trade show in Germany. JMR also took part in another European computer trade show in 1991.
Using business contacts from the trade shows, JMR President Josef Rabinovitz expanded his foreign sales dramatically. Exports accounted for only 3% of the company’s $2.7 million in sales in 1988. By 1991, they generated 20% of the company’s $12 million in revenue. All of this from an enterprise that began in 1981 as a small computer store managed by Rabinovitz and his wife, Mirit.
“Small-business people are opening their eyes and realizing that foreign business can be as lucrative as the U.S. market,” Josef Rabinovitz said.
JMR, which has supplied Motorola and defense contractors such as McDonnell Douglas, also manufactures its enclosures for computer manufacturers in Britain and the Netherlands. The JMR work force has grown to 175 from 20 in 1987. And JMR’s Brussels office--staffed only by a sales representative and a secretary--will soon be expanded.
Food producers are also cashing in on foreign markets. Fruit and vegetable canners such as Tri-Valley Growers, a San Francisco-based cooperative, are well-established overseas. However, much of the new food sales are being generated by entrepreneurs who began finding foreign niches in the 1980s.
Young Man Lee, a Korean immigrant who runs a restaurant supply and seafood processing business in Santa Ana, decided that there was a Pacific market for Mexican-style food when he noticed--during a trip to Asia five years ago--that Chinese and Japanese cooks used a tortilla-looking sheet made from rice to make spring rolls.
In 1989, Lee purchased a franchise from Costa Mesa-based Del Taco Inc. to open fast food restaurants in Korea and five other Asian countries. He ships fish, tortillas, cheeses and sauces to his fast food ventures.
“The stuffing and the tortilla may be different, but the concept of wrapping food . . . is culturally accepted in those countries,” he said. “That was when I decided that Asia was ready for American-style tortillas.”
Lee’s overseas business has expanded rapidly. Exports accounted for 15% of $7.5 million in sales in 1990. However, last year, exports generated 40% of $19 million in sales.
Times staff writer Cristina Lee in Orange County contributed to this report.
California’s Top Exports
The value of products exported from California rose 8% in 1991, accounting for 15% of total U.S. exports of $421.9 billion. The following is a 1991 ranking of California’s top 10 exports, based on sales. Category: Sales (billions) Industrial machinery and computer equipment: $14.2 Electronic goods and electronic equipment: 13.0 Transportation equipment: 10.0 Instruments and related equipment: 4.7 Processed food and related products: 3.7 Crops and other unprocessed agricultural good: 2.4 Chemicals and related products: 2.3 Petroleum and coal products: 1.7 Fabricated metal products: 1.5 Scrap and waste: 1.4
Sources: California State World Trade Commission, U.S. Census Bureau
California’s Top Customers
Of the $63.1 billion shipped from the Golden State in 1991, 44% went to Pacific Rim countries while 24% went to Europe. Below are the state’s leading foreign markets. Country: 1991 Sales (in billions) Japan: $10.1 Canada: $6.5 Mexico: $5.5 South Korea: $3.9 Germany: $3.6 United Kingdom: $3.5 Taiwan: $3.5 Singapore: $2.7 France: $2.2 Netherlands: $2.0
Sources: California State World Trade Commission and U.S. Census Bureau
