Selling to Europe is a new game As trade barriers fall, challenges arise for U.S. firms.

December 30, 1991|By Liz Atwood | Liz Atwood,Evening Sun Staff

Not long ago, Belfort Instrument Co. practically had a corner on the market when it sold meteorological instruments in Great Britain and Italy.

But all that has changed for the Baltimore-based manufacturer.

"In some cases, where we had one, two or no competitors, now we have 15 to 20," said President Barney Rae.

Their new competition is the result of the emergence of a common market in Europe, which is breaking down trade barriers among the 12 members of the European Community. Now small companies in Europe are seeing the chance to bid against Belfort for businesses in other European nations.

"We're going to have to pay more attention to the costs," Rae said.

By the end of the year, the European Community is to have approved nearly 300 legislative measures to break down trade barriers and adopt a single tax structure, a single patent process and uniform trade documents and safety regulations.

No one expects all of the regulations to be in place by the end of the year. Some, like a single European currency, are still years away. But already the common market is emerging.

The market has the potential to expand the opportunities for American firms. But firms also will encounter greater competition and the pressure to sell more cheaply. Many will have to rethink their marketing strategies and distribution systems and review their quality control standards.

"You're not going to wake up in January [to] a fait accompli, but it's a good time to look at the issue," said Andrew Gordon, director of program development for the Maryland International Division. "It's going to take more resources, more preparation to compete effectively, but if you do, the returns will be higher."

"It's a rich market. It's an opportunistic market," said Charles M. Ludolph, director of the Department of Commerce's Office of European Community Affairs. "If you know how to do it under these rules and you can find a marketing system, you can do it very, very profitably."

Maryland companies exported $1.07 billion worth of products to European Community members in 1990, about one-third of the state's total world exports.

"It's one market Maryland can't afford to ignore," Gordon said.

Some local companies have started to develop marketing plans to sell to the new Europe.

Malco Plastics Inc. in Baltimore sees the opportunity to broaden its market for plastic credit cards and magnetic strips, which it now sells to the United Kingdom through its sister company that is based there.

GSI Corp., a local defense contractor, is hoping to enter the European market in order to improve its financial situation. The company, which has been hurt by recent defense cutbacks, hopes to regroup and look to Europe. "We're hoping if Europe takes off we can participate," the company's president said.

Kirshner Medical in Timonium, which makes orthopedic devices and medical equipment, bought a distribution center in Valencia, Spain, to improve its European position.

McCormick & Co., based in Sparks, is looking to form joint ventures with European companies to increase its market penetration. "We see it as an opportunity to be a bit more #F aggressive," said James Albrecht, vice president and managing director for McCormick's International Group.

Towson-based Black & Decker, with European sales of about $1.4 billion, streamlined its European operations in order to cut costs and be more efficient. Company spokeswoman Barbara Lucas said the company expects European Community's uniform product standards will make it easier to sell there.

The united Europe presents a number of pitfalls and potential problems. Ludolph says businesses accustomed to the ease of dealing in the British market may suddenly find quality control guidelines and product standards more stringent.

Steve Hanke, an economist at Johns Hopkins University, predicts the unified market could aggravate the U.S. trade deficit. If the European community adopts a single currency in 1997 as it is scheduled to do, it probably will be a weaker currency than the dollar. That will mean relatively higher prices for U.S. exports to Europe, but lower prices for European imports.

Although individual businesses will not be able to affect currency rates or trade deficits, action can now be taken to better position firms for the unification, Gordon said.

Gordon predicts that large companies will benefit more than small companies with the unified market. Where companies may have had several offices in Europe, they now may be able to consolidate their business there.

The scenario for small companies is more complex. Some may find themselves struggling against new competition and lose their foothold in a niche market. But on the other hand, they might benefit by being able to better market their products with uniform product standards and quality guidelines.

"There will be some losers as well as some winners, but a preponderance of winners," he said.

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