Tom Chung's computer networking firm had derived 55% of its business exporting American technology to countries such as Korea, Indonesia, Singapore and Thailand. But last fall, as those countries' currencies depreciated in the financial turmoil in Asia, Chung's business began to drop off. Since Chung had already planned to expand into the domestic market by introducing new technologies, he was able to shift gears early this year and, with exports now accounting for only 15% to 20% of his sales, his revenue is holding steady. Chung was interviewed by freelance writer Karen E. Klein.
For me, the Asian crisis was like sudden impact. Everything was going well and it sounded like everything was going to keep going well, and then everything collapsed. Last October we started seeing a dramatic drop in the exchange rate between the U.S. and Korea. That really hurt the Koreans' ability to purchase from us, and their orders decreased. Our major export customers do business with their governments and with major financial groups in their countries, and when those groups backed off of projects, our customers held off ordering from us.
We started seeing the same things happening with our customers in Singapore, Indonesia, Thailand and the Philippines. Our distributor who works with those countries told us they were all experiencing 50% to 70% depreciations in their exchange rates.
After being in this industry for 15 years, I knew you have to always be thinking ahead. I saw that our domestic economy was continuing to grow strongly and that computer networking was getting more and more popular in the United States. So I planned to introduce new technologies we developed that are leading the way in the high-speed networking industry.
The crisis forced me to turn my focus over to the domestic market. In order to survive you've got to turn around and respond quickly. In order to produce the new products and meet the demand I expected from the domestic market, I set up a new manufacturing site in Tecate, Mexico, in January. When we began getting large orders from our distributors we were able to achieve quick turnaround and shipments.
As the problems started showing up in Asia, I switched my sales efforts into the domestic market. Using those new products, we expanded our advertising and distribution channels nationally.
Looking ahead and planning for growth has allowed us to make up for the loss of sales overseas with the domestic sales we achieved in the first quarter of this year.
This new technology is really not in demand outside the U.S. right now, so I think that by this time next year, if the Asian countries have some recovery in the third and fourth quarter, those products will start to become in demand as export items also.
That's why I am still in close contact with my overseas distributors.
The Asian crisis surprised me, but we were planning to introduce the new products domestically this year anyway and hoping for a 20% increase in sales. As it turned out, if we do about the same amount of business as we did last year, it will be pretty lucky. But at least we haven't lost a lot of money. If the second half of this year things change and I can pick up some sales in the export division, then we will have some percentage of increased revenue.
The planning ahead that I did helped me survive the Asian crisis. It showed that I have to constantly be thinking ahead and figuring out what's coming next.
If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia 91016 or send e-mail to email@example.com.
* TROUBLED TRADE: Small businesses across the U.S. have been hard hit by the Asian crisis. D1. For more on small business: D6-D8
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AT A GLANCE
Company: Tri-Net Technology Inc.
Owner: Tom Chung
Nature of business: Manufactures and distributes computer networking products.
Location: 20529 Walnut Drive, Unit B7, Walnut
Employees: 23 full-time, 14 part-time
Annual revenue: $7.2 million