CASE STUDY: SCIFIT Systems Inc.

THE COMPANY

In the late 1980s, Bo Young had an idea for a business and, with some partners, approached venture capitalists in Tulsa, Oklahoma. At first, the business focused on equipment to help people with disabilities in their homes. Young remembers burning through the investment money pretty fast with limited success in building the business. He needed a new approach. In 1995, Young and his partners formed SCIFIT Systems Inc., with new product lines such as physical therapy equipment and exercise machines. Young and his colleagues predicted that the wellness market was moving toward an emphasis on physical fitness.

THE CHALLENGE

The new formula worked. SCIFIT now has 50 employees, including engineers and other specialists. The main customers are fitness clubs and hospitals. But would SCIFIT find customers overseas?

THE SOLUTION

Rather than waiting until the company was firmly established in its home market, SCIFIT pursued international sales from the beginning. To Young’s surprise, his U.S. competitors were not well known overseas. Young found his first international clients by accident: “An Irishman, who’d read about us on our Web site, called me one day from San Francisco. ‘I’ll pay your expenses if you come to visit us,’ I told him.” He came, Young paid, and the visitor became a distributor for SCIFIT.

Exporting expanded quickly. Exports now account for nearly 20 percent of sales and are growing by about 15 percent per year. SCIFIT has customers in more than 30 countries.

In these markets, SCIFIT has received assistance from trade specialists at the U.S. Commercial Service. Young recalls working with the Commercial Service years ago, before SCIFIT was an idea: “I was 30 and with a new company. I called the organization. Don’t remember why. It was telexes then, and the trade specialist sent a bunch to her colleagues abroad. I got inundated with requests, and I got into all kinds of new markets.”

To market SCIFIT abroad, Young sought Commercial Service expertise again. “Thanks to my previous work with the Commercial Service and my own experience, I know a lot about the export process, including financing, trade law, and logistics,” he says. “But the Commercial Service saves me time and money, and the legitimacy the U.S. government gives me in market after market is just invaluable.”

SCIFIT’s fastest market entry was into Brazil. In August 2005, Young did prep work with the Tulsa Commercial Service office and the Commercial Service office in São Paulo. He traveled to São Paulo later that month and attended a fitness trade show there in September. In October, he was selling products.

He was assisted in São Paulo by Commercial Service specialist Patricia Marega, who follows the Brazilian fitness industry and spends time cultivating distributors. Young used the Gold Key Matching Service in São Paulo and Rio de Janeiro and received matches with overseas buyers and distributors. “Patricia did a great job researching the market for us,” he says. “We had 20 interviews in four days. The Commercial Service people asked great questions of the candidates. If I wasn’t covering my butt, Patricia was.”

“Bo was extremely impressed with one of our local clients, Pórtico Artigos Esportivos,” says Maregas. “We went to their factory and met their distributor. The fact that the U.S. Commercial Service was accompanying Bo to this meeting made the Brazilians comfortable.”

“We settled on one distributor for the entire country,” says Young, “because we found that if you have more, they start competing with each other and pretty soon they’re cutting the prices on each other.” That distributor wanted SCIFIT’s equipment for a trade show only a month after closing the deal. A month is normally not enough time to ship large pieces of equipment, but Marega successfully expedited the goods through customs in time for the show.

LESSONS LEARNED

It took three months for SCIFIT to enter Brazil, but six years to enter Japan. Does this mean your business should forget about Japan? No, says Young, you can learn things of value about your business, your products, and yourself from every market you enter. “The Japanese will absolutely improve your product,” he says. “They can see more things wrong with what you make than any other culture. They’ll check everything. ‘On the left side of this piece of equipment you have two different screws. Why?’ If our software has 20 stages in it, they’ll suggest a way to reduce it to 10. These insights are very valuable to our competitiveness in all markets.”

SCIFIT also learned from other markets. In England, SCIFIT partnered with the U.K. government to improve its paint bases and to add instructions in Braille. “Australians helped us identify a new and better tread for our treadmill machines. We tell them, ‘Don’t be afraid to tell us how we can improve our products.’”

Young learned that international business is about relationships. “We Americans tend to be colder or in too big of a hurry,” he observes. “Building relationships has become a mantra in our company. Invite your customers home. Stay in their homes. Send flowers when they’re in the hospital. Remember birthdays of wives and children. When my daughter got married, she got gifts from my distributors.”

Young laments that U.S. businesspeople are on the whole “myopic.” “Mention a letter of credit and people’s eyes glaze over. Most people don’t even have passports. If they only knew what’s possible. I have the best job in the world. I travel around visiting friends.”

ACTION

Here are some ways you can start learning about other markets:

  • Find a Commercial Service office in your target market. Select the link for your country of interest at www. buyusa.gov/home/worldwide_us.html. On the country Web sites, you’ll find local trade events, directories of specialists in your industry, and links to other useful information. Be sure to visit the Featured U.S. Exporter showcase, which is available on most Commercial Service country Web sites and includes product descriptions and links to the exporter’s Web site.
  • Visit trade shows. Trade shows are a proven way of generating sales. The Commercial Service certifies more than 100 overseas trade shows that have U.S. pavilions, and it recruits international buyer delegations for more than 40 major U.S. trade shows. For a complete list of shows, updated weekly, visit www.export.gov/tradeevents.