CALEDONIA CALLING GLOBALISATION: NEW TRENDS Scotland is once again making its presence felt internationally - with a little help from some friends.
September 26, 2006
CALEDONIA CALLING GLOBALISATION: NEW TRENDS Scotland is once again making its presence felt internationally - with a little help from some friends.. Check it out:(The Sunday Herald Via Thomson Dialog NewsEdge) IT'S the old adage - lift the lid of an engine room, on any ship, anywhere in the world and shout Jock. "Someone will answer, " says Mark Thompson of Epeus.
And Scots are set to become more prevalent in global business if the trend toward internationalisation continues.
The founder and chief executive of the Aberdeen-based project management firm, focusing on the engineering, construction and energy sectors, has seen his company grow exponentially since it successfully negotiated the often fraught task of internationalising.
In 2006, Epeus is expecting revenue of GBP18 million and is forecasting revenue of GBP60m in 2007 this from a turnover of just GBP2m in 2005. As a result of the company's growth, Thompson is now looking at investing in the company's infrastructure abroad.
The story of growth off the back of exports, whether products or services, is being heard increasingly from all over Scotland. And a survey due out on Tuesday suggests that the decline in Scotland's export performance is bottoming out, if not reversing.
The survey, carried out by Ipsos MORI on behalf of DLA Piper Scotland, reports that over half (56-per cent) of Scottish companies trading internationally anticipate an increase in exports of more than 10-per cent for the next three years.
The poll chimes with the latest figures from the CBI's monthly industrial trends survey, which report order books across the UK at their strongest in 21 months.
The Ipsos MORI study polled executives from 245 Scottish exporters, mainly SMEs, and found that 38-per cent see potential for international growth of between 10-per cent and 25-per cent. For the majority (58-per cent), international business accounts for at least a quarter of their turnover.
But does this snapshot of export activity point to a turnaround in what has been a downward trend? And what, for those hoping to boost exports, are the best methods for achieving success abroad?
It is not possible to scale up the results from such a survey but Iain McTaggart, general manager of the Scottish Council for Development and Industry (SCDI), which collates export figures for Scotland, says that there are signs of an upturn.
"Responses to our next survey for the year, due out in late October, early November, are still coming in, " he says.
"However, from those responses that are in, about 20-per cent are predicting double digit growth. Roughly half are predicting positive growth and less than 10-per cent are expecting a decline in exports." Most companies in the Ipsos MORI poll are trading in a wide variety of countries 82-per cent operate in Central and Western Europe; 60-per cent in Asia Pacific; 60-per cent in North America; 49-per cent in the Middle East; and 47-per cent in Eastern Europe.
Epeus is quite far along with its process of internationalisation. It now has offices in Houston, Aberdeen, Singapore and Port Harcourt, Nigeria and is aiming to have an office in Abu Dhabi before the end of the year to give it global coverage.
When the company set up in 2003, its first client was in Egypt. Aberdeen became an administrative and business support unit. The original plan was to be based in Scotland and service international work from there.
Thompson said: "In 2004 we started a rethink. We were doing business in Southeast Asia, Norway and Trinidad.
We thought there might well be a case for opening a business in each of these regions. After the first year, we looked at globalisation, at establishing a globally integrated network of companies.
"In our original list we were looking at the US, Russia, the Far East and the Middle East. We thought we could support West Africa from Aberdeen. We felt that it was too risky for us to physically establish an office there." Thompson was joined by a young Malaysian graduate, Leng Forrest, who was finishing an MBA at Robert Gordon University. Forrest was charged with redrafting the company's business plan.
Thompson says: "We had to do market analysis to see where the business was. Then we had to work out how best to secure it. We needed to know the visa situations, the workforce composition, how to set up an office and what taxation issues we would face." According to the Ipso MORI poll, the most common route for international trade is exporting goods directly from Scotland, with 59-per cent of companies adopting this strategy. Twenty percent work with agents or distributors overseas, while 10-per cent have gone as far as establishing their own branches overseas.
The majority of companies, 49-per cent, seek advice from Scottish Enterprise about trading or operating internationally.
Around one in three use banks or accountants, while one in five use lawyers or the Scottish Executive.
The Ipso MORI survey also reports that a small proportion, around 6-per cent, use the Globalscot network. However, as Scottish Enterprise points out, this is a service set up and run by the economic development agency and boosts its claim to being the primary agency for helping Scottish companies expand globally.
Globalscot is a network for making Scottish connections globally, by harnessing the expertise of the many Scots and friends of Scotland active in business around the world.
The network meets for the first time this week in Edinburgh, with 150 entrepreneurs and business people in attendance.
Epeus initially approached the Energy Industry Council, a UK trade association for the energy sector, for help. It sent the company to Scottish Development International (SDI), the international wing of Scottish Enterprise.
Thompson said: "We decided to join a trade mission to Moscow. There are great opportunities out there but for us it was just too risky. Also, our core group of international clients were not in Russia at that time. When we finished our analysis we decided to discount Russia.
It is still on our radar screen though.
"We then went to Malaysia. In comparison to Singapore it was cheaper, but Singapore has a number of huge shipyards which build rigs and FPSO (floating production, storage and offloading) vessels. The yards at that time were on the verge of a boom. Our client base was in Singapore.
"In Singapore we received a lot of support from SDI and Globalscot. In the first year we invested around dollars-100,000 on offices and incorporation in Singapore.
We got revenue back of around dollars-500,000, which wasn't bad. Then, with our Globalscot's intro, we got work on the building of the Molly Brown. That was dollars-15 million to dollars-18m for just one job.
More jobs came in off the back of that as we built a brand. We found ourselves work in Korea, Indonesia and China." The Globalscot network now has about 900 members.
Martin Togneri, chief executive of SDI, says: "Most countries try to link with their diaspora. But they do it on a cocktail party basis. Everyone gathers at the embassy, they pledge their desire to help and then forget about it until the next year's function comes around.
"What we do is make it practically possible for expats to make a difference.
Each Globalscot member sits down with one of our representatives abroad and is asked what they need to deliver help.
This help could be in the form of a mentoring capacity, taking a non-executive board position in a start-up or visiting their old school to inspire the next generation to take up a career in business.
Some of the most senior members of the organisation sit down with Scottish Enterprise leaders once a year and advise on how to improve our performance.
"The whole thing costs no more than GBP300,000 a year, which is very modest for what we get back. Consultant fees for the same outcome would run into millions." Globalscots are now established in almost every corner of the world. Frank Boyland is SDI's country head in Japan, where the organisation has had a presence for more than 20 years.
Boyland says: "The latest company to come out here was Aberdeen Asset Management. The financial services market is very interested in Japan at the moment because of the privatisation of the Japanese postal service." Since the postal service in Japan is said to hold 25-per cent of the world's savings, privatising it will release a lot of new money into the world's economy and the financial services industry is positioning itself accordingly. Boyland is optimistic that Scottish companies can capitalise on the presence of a number of Scottish expats holding senior positions in Japan's financial services sector.
"We're already seeing the big boys arriving. RBS and Scottish Widows have built up their presence here recently.
We are lucky to have a number of very high profile Globalscots. Graham McNaughton is president and CEO of HSBC Japan and Gary McGregor is country head for Lloyds TSB in Japan. These are great resources for Scots to draw on." The most common obstacles/barriers facing companies when trading internationally appear to be red tape and bureaucracy (49-per cent). Other barriers include currency (eg convertibility, stability) (29-per cent), language (27-per cent), taxation (25-per cent), inadequate professional support services (24-per cent), lack of skills or experience (23-per cent), lack of political stability (23-per cent) and lack of a strong legal environment (23-per cent).
For most, language is the biggest barrier to doing business in Japan. As a result, companies tend to get involved in joint ventures or hire distributors to act for them.
"Cold calling doesn't really work out here, " says Boyland. "Japanese company executives are very respectful of government departments though, their own government departments as well as foreign governments. We can call and be listened to. It's also about understanding who the right people are.
"Culturally, companies entering the Japanese market have to understand that it's all about relationships. You can turn up here with a great story to tell and not get much of a response. That doesn't mean that nobody is interested. We advise that companies visit two or three times, they then get to see that energy starts coming back from meetings.
"The important thing to note is that business processes such as Kaizan, quality circles and just-in-time production all originated here. Everything is analysed to the nth degree. Some companies are taken by surprise by this but I tell them that if they are being quizzed in this way it means there is interest in what they are selling." But, as McTaggart points out, there are places where the business environment is less alien. "India is a market we need to focus on more. In many ways, India should be easier because it has a more familiar business culture due to historical legacies, " he says.
"We would advise companies to do their homework. Speak to the international division of their bank; ask about the best payment methods. Speak to credit insurers and logistics experts." For Thompson, the familiar culture finally swayed him towards Singapore as a Far East base.
"One of the reasons we went to Singapore was that the business culture was very similar to the UK's. It makes a difference when you go into a bar and meet so many Scots. Scots who are making a success, " he says.
The hope is that Scots will soon be in the engine rooms of many more economies around the world.
The Globalscot inaugural conference takes place at Edinburgh International Conference Centre, September 27 to 28
Copyright 2006 Newsquest Media Group. Source: Financial Times Information Limited
Related Tags: scottish enterprise, financial services, scottish companies, business, Scottish, scottish
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