Plan Now For Europe 1992
When in doubt, think European
May 1 1989 by Marshall D. Butler
There are few internationally minded American companies that have not put 1992 on their strategic planning agendas. The prospect of a single European market of 323 million consumers, compared with
As the common market becomes a reality, American direct investment in
I applaud the integration of
The anticipation of the single market system is attracting venture capitalists and stimulating entrepreneurial behavior. European manufacturers are preparing for the evolution of a fiercer, more competitive environment that will include many
THE SPRINGBOARD TO
Since 1992 is just around the corner, U.S. companies looking to expand their current market presence or companies that are interested in participating in a dynamic growth arena, should begin now to exploit the opportunities of the future single European market system. Here, then, are some general observations on doing business in the EC, together with some specific experiences of AVX there. We’re a manufacturing company, but much of this will apply to any type of business.
CREATE A EUROPEAN COMPANY
First, get fully established in
Run your European company as a European organization, staff it entirely with Europeans if you can, and consider yourself-as CEO-a European. Go there often, meet the customers (corporate and governmental) as the head of a European company. If all of this sounds a bit obvious, believe me, it’s not: some American companies are, I’ve observed, handicapped by their conception of themselves as “American companies doing business in
The whole EC market will, in fact, have become a “United States of Europe” and that’s how we think of it now. I don’t foresee a common currency, or central bank, and certainly not a central government in the near future, but for most business purposes, the EC will be one big country.
After 15 years’ growing presence in Europe, AVX is now doing $100 million worth of business there, creating and manufacturing special products for such other “European” companies as IBM, Siemens, Honeywell, ITT & Plessey, as well as national governments and a host of smaller clients. Amidst such activity, the growing EC emphasis on standardization and “reciprocity” (your American-owned European company will be treated as the U.S. treats a similar European-owned American company) have already begun to cause problems, as well as opportunities, for other American companies, if not AVX. Be prepared, particularly if most or all of your components are manufactured outside the EC to establish EC-based vendors. In AVX’s case, the bulk of our materials for our European products are European and that’s a condition American-owned European companies should try to approximate; one consulting firm advises 80 percent as a desirable minimum for manufacturers.
For other products, new EC standards can sometimes present real problems. This is evidenced by the recent ban on hormone-treated American beef. It’s not guaranteed that serious American lobbying-industrial and governmental-in the EC will help avoid these types of confrontations, but our efforts here must be increased.
Information-timely and reliable is a key factor in any successful business and especially so in the fast-changing
Speaking of European managers, I can warn you from personal experience of the danger of being unduly influenced by the quality of their English-the person who speaks the best English may not always be the best manager. You should find out how well they express themselves in their own languages; this could be much more important to you than their fluency in English-reassuring as that fluency may be to you.
You maybe tempted to use consultants in
LEARNING THE MARKETS
When AVX started in
From my experiences in Great Britain, I learned a great deal about doing business in Europe; I made many contacts which were helpful to me when the management and board of AVX-a company I joined in 1974 as president and chief executive-decided to establish a manufacturing presence in Europe and selected Great Britain as the logical place to start.
My reasons for selecting the
In the mid ’70s, we recognized a huge potential market for our products by identifying European companies who manufactured the same products as our customers in the
We began by establishing a sales, marketing and stocking warehouse outside of London and shipping products from the U.S.-in order to gain qualifications and approvals from new customers as well as to supply products to our existing European customer base. The location was excellent, as we were close to transportation and shipping carriers.
In order to manufacture our products in
Within two years, AVX became the leading manufacturer of MLCs in
We have not experienced any disruptions in production due to the current political environment in that region. In fact, we have lost more production time in our factories in
Having established a firm foothold in the European electronics market, AVX is now setting its sights on 1992 and beyond and has already embarked on a plan to maximize its efforts and success in the proposed single-market system. We are expanding our sales, marketing, and product-engineering functions to include new satellite offices in the major markets within the European community. In this way, we can acquire “local knowledge” of the companies manufacturing in each region and also take the opportunity to introduce AVX and the products we manufacture to those satellite offices.
We are also making plans to centralize key operations, such as order entry, customer service and shipping, that will improve our Just In Time delivery and Ship to Stock programs and, allow us, in many cases, to offer customers next-day service. The consolidation of operations will reduce our overhead structure and improve profitability. In addition, the implementation of dedicated and focused manufacturing lines will improve production control, increase productivity and help to decrease manufacturing costs. This, we feel, will greatly sharpen AVX’s competitive edge in manufacturing high-quality, world-class products meeting uniform specifications that can be sold throughout
For American companies with quality products and services to offer,
Marshall Butler is chairman and CEO of AVX Corp., a leading international manufacturer of passive electronic components. AVX’s 1988 sales totalled $489.9 million: Approximately 25 percent was European. Prior to joining AVX,