CASE STUDY: Spancrete Machinery Corporation

Construction quality in China is improving, and some of the credit for better building goes to U.S. firms like Wisconsin-based Spancrete Machinery Corporation (SMC), makers of machines that produce precast reinforced concrete floor and wall panels. How SMC engineered its way into China provides a model that may benefit other U.S. firms eager to sell to this booming market of 1.3 billion consumers.

THE COMPANY

SMC, a division of the Spancrete Group, employs 45 people in its Waukesha, Wisconsin, production facility. The firm, founded by Henry Nagy, manufactured the first precast hollow-core slabs in North America in 1952. SMC, which sells its equipment worldwide under license agreements and direct sales, is a client of the U.S. Commercial Service Export Assistance Center in Milwaukee.

SMC entered China in the late 1980s. It wanted to incorporate licensing agreements, but the Chinese government forbade such arrangements. SMC opted to sell the machinery outright. Nevertheless, SMC’s hollow core machines were the first foreign equipment of that type sold in China.

THE CHALLENGE

The early years were challenging, concedes Terry Dittrich, SMC’s international sales manager: “Our customers were state-owned enterprises, and the Chinese government encouraged them to expand into the precast construction business, despite their limited knowledge of that sector.”

THE SOLUTION

Those companies started by producing floor slabs, SMC’s most basic product, but local architects and engineers had limited experience with precast products of this type. Even in a state-controlled economic system, companies need effective marketing to generate sales. To better support the companies, SMC began assisting with seminars for these state-owned enterprises and the construction community in general.

SMC’s next achievement was to establish the China Spancrete Association, probably the first organization of its kind. The association is a nonprofit support organization for SMC’s Chinese customers, assisting them in technical, production, and marketing procedures. “At first, the Chinese didn’t understand the concept of a professional association,” explains Dittrich. “They said, ‘Why should we pay dues to belong to something like this? Why should we cooperate with people outside of our own enterprise?’ It’s not how they operated. Now they can see the value and continue to expand the association’s efforts.”

Working through the association, SMC pooled the existing knowledge for the benefit of all members. The association tackled the lack of codes and standards, making recommendations on matters like the loads that floors can safely carry and conducting research on seismic and fire-safety issues. Ultimately, SMC, with the association, achieved the registration of Spancrete-China products in the national building and design code.

Business processes are changing rapidly in China, and competitors are getting more aggressive. Also, the economic boom has moved south and west of where it started, creating more opportunities and challenges. Recently, Dittrich used the Commercial Service’s Gold Key Service and Single Company Promotion program in seven Chinese cities. The Commercial Service identified local companies interested in purchasing SMC equipment systems and coordinated meetings with key government officials. Dittrich expects significant new sales because of the introductions provided by the Commercial Service.

However, the Commercial Service alone will not ensure success. SMC must continue to build relationships, help customers succeed by finding creative solutions to their problems, and adapt its products and services to meet the needs of a dynamic marketplace.

Dittrich claims that experience in international markets has made him a more effective professional and the company more competitive. “There’s just no doubt that selling overseas has made SMC a more effective exporter and our products more competitive. Our key personnel have grown from the international experience, and we continuously bring ideas back home and apply them throughout the company.”

“Competition is tough in these markets, “Dittrich says, “but that’s where the opportunities are. Exporting is no longer an option, and America’s export future lies in these markets.”

LESSONS LEARNED

For U.S. companies attempting to sell in China, Dittrich has these recommendations:

  • Find good representation. Connections are key, as evidenced in the Chinese expression guanxi, meaning “personal relationship.”
  • Try to secure payment in advance. Equity stakes can be a problem, given the limitations of the Chinese legal framework and challenges of business transparency, and Americans need to conduct thorough due diligence.
  • Keep the product simple. The more complex the product, the more things can go wrong.
  • Talk to your Chinese business partners about taking a long-term perspective. American companies need to make a long-term and sustained commitment to these emerging markets if they are to successfully build lasting relationships. Encourage your Chinese partners to take a similar long-term perspective.

ACTION

Here’s what you can do to help your business succeed in China:

  • Visit the China Business Information Center. For useful, comprehensive information on the Chinese market, go to www.export.gov/china. Of particular interest is the self-assessment, which asks, “Are you China ready?”
  • Investigate Web sites for manufacturers. Manufacturing firms should check out the National Association of Manufacturers export portal at www.nam.org. If you’re seeking help to make your manufacturing processes more competitive, learn about the services of the U.S. Department of Commerce’s Manufacturing Extension Program at www.mep.nist.gov.