This Editorial has Been Five Years in the Making. Whenever I tried to put my thoughts down on international business dynamics, nothing flowed. But insight finally came my way this past summer when I came upon a hobbled Dean Oskvig seated at the dinner table following a Black & Veatch-hosted charity event for Children's Mercy Hospital. Oskvig had sustained an injury while skiing with his granddaughter and was recuperating from surgery. I took pity on him and fixed him a plate. Over dinner, we had the opportunity to get caught up on all things personal and business.
When our conversation turned to global business, Oskvig shared his take, “Rick, maybe business is truly international for the very biggest companies, but for most companies, business is more transnational in nature.” This statement comes from the president of the power division of a major player in the engineering, consulting and construction business, with 10,000 employees working in 100 offices in 70 countries on six continents.
Armed with Oskvig's insight, I posed this question as I visited with suppliers at the CIGRÉ International Council on Large Electric Systems held in Paris last year: How do you decide where to transact business?
My first stop was to chat with Eduardo Marchesi, the general manager for EuroSMC, which makes substation and protection relay test equipment. EuroSMC sells to 70 countries and is very active in the United States, Korea, Eastern Europe and Spain. Marchesi believes that business moves forward based on relationships, stating, “The key is to find people with a technical profile who have an ability to work in a multicultural environment.”
EuroSMC is headquartered in Madrid, Spain, with offices in Hong Kong, the United States and Bogata, Columbia. Marchesi sees most European manufacturers living on exports; his company is no exception, bringing in 87% of the company's revenue through exports. Marchesi mentioned that having a larger footprint helps his company deal with fluctuating exchange rates, mentioning, “It is relatively inexpensive to have an office in Tulsa right now.”
André Cruz, the commercial director at Efacec, said that their factory in Portugal was completely booked, and they are presently adding capacity to build more core-type and shell-type transformers up to 600 MVA. The company is also building manufacturing facilities in the United States. States Cruz, “The state of Georgia and the governor welcomed us. We found the business policies and infrastructure, including railways, quite attractive. So, although other states wooed us, we are building a manufacturing plant in Georgia that should be in operation by late 2009 or early 2010.”
Efacec also has manufacturing facilities in Brazil, Angola, China, Argentina and Chile. It also has an assembly facility in Mozambique and a joint venture in India to make medium-voltage equipment, while transacting business in 65 countries.
Fred Carr is the operations director for transmission works at PB Power. Carr's business unit, headquartered in England, gained early experience on transmission projects in Nigeria, Zambia and Zimbabwe. PB Power also worked on a huge 500-kV project in Argentina, followed by a 500-kV project in Indonesia, then performed work in Vietnam and Thailand.
Carr believes that a gradual approach to learning each market tends to work best. Right now, he says that the Middle East is the place to be. He has 150 people in Abu Dhabi, for example. “PB Power tends to get the work that requires a higher level of technical expertise, and our biggest challenge is to develop and retain that expertise,” states Carr. He also encourages his people to get involved with organizations like CIGR Éso that they can keep up with advances in technology, share ideas and meet peers.
In the Middle East, a weak dollar causes problems for European consultancies, including PB Power, as many utilities have currencies tied to the U.S. dollar. But Carr sees business tied more to individuals than to nationalities, stating, “Sometimes relationships are formed and things come together quickly. Other times, we will spend months and months and never really connect.”
I found Peter Cunningham to have a quite personal perspective on transnational business. Cunningham is the group director for Kelman, a manufacturer of transformer monitoring equipment. I was particularly intrigued by his statement: “If someone else owns the relationship, all you're doing is selling a box. Treat others as family, and business will come.”
In discussing business, Cunningham says, “In the end, you are designing the product to meet a need, so you must find an individual who knows the value of the device to the business.” When asked to name people who fit that description, Cunningham mentioned Roger Cormack and Gert Coetzee from Eskom, South Africa, and Donald Chu and John Haufler from Con Ed in New York.
In discussing business, Cunningham says, "In the end, you are designing the product to meet a need, so you must find an individual who knows the value of the device to the business." When asked to name people who fit that description, Cunningham mentioned Roger Cormack and Gert Coetzee from Eskom, South Africa, and Donald Chu and John Haufler from Con Ed in New York.
As Kelman is led by engineers, not accountants, the company strives to find out what problems customers are having and help solve them. States Cunningham, "It is relatively easy to sell a handful of devices, but when you propose to scale up to have a product used throughout a utility, customers realize they are taking a risk, and they need to work with people who will stick with them to do whatever it takes to make it work."
Also having a local presence counts. Kelman opened a local office for Southern California Edison, and it maintains close contacts with its customers at Alabama Power. Kelman also has a presence in China, Brazil and the Middle East.
Kelman doesn't use distributors, saying that with its own staff, the company stays closer to its customers and can maintain thought leadership and technical expertise, and that takes time. Cunningham reflected on the time he had conversations with Vattenfall engineers on software tools lasting until two or three in the morning.
Recently, General Electric purchased Kelman. Cunningham met with Bob Gilligan, GE's general manager for T&D, to make sure that the Kelman team would be better served by the move. States Cunningham, "Bringing GE to Northern Ireland is important to us, and GE has committed to maintaining a center of excellence for transformer monitoring and diagnostics."
Patrick Barth, managing director of High Voltage and Accessories at Nexans, informed me that the submarine long-distance transmission market has been booming, driven by several factors, including the increased need for interconnections, the need to feed islands from shore as tourism develops, the emergence of the offshore windmill parks, and the electrification of offshore oil and gas platforms from shore.
Barth shared with me that several years ago, "Nexans faced a need to significantly increase its underground transmission cable manufacturing capacity." To localize its production to meet new market needs, particularly in the Asia-Pacific region, Nexans entered into an innovative joint venture in Japan to reuse idle capacity. This effort provided an almost-immediate 40% increase in capacity that was available for the market in addition to the historical European capacity. States Barth, "Time to market and capital limitation issues can always be addressed with innovative solutions."
Even for companies active in most markets, products must be adapted to meet local needs. Ralf Christian, CEO of Siemens' Power Distribution division, acknowledges that in Europe refurbishing 30- or 40-year-old infrastructure is foremost in utility executive minds, while utilities also are focusing on smart grid concepts, including intelligent metering.
Looking at connections between countries, Dr. Udo Niehage, CEO of Siemens' Power Transmission division, sees the emergence of ambitious bulk transmission projects that require next-generation equipment that will bring in intelligence with the ability to integrate renewable power into the grid.
Our industry is truly international in scope, but the transactions that make up business are ultimately executed by individuals. And business transactions depend on a company's products or services and the customer's needs, as well as the culture of the companies of those transacting business.