Top 50 Exporters recognize that a strong dollar hurts their markets overseas, but they focus on marketing strategies to overcome it.
As all exporters will tell you, currency fluctuations play a substantial role in their ability to sell products abroad. It's a simple equation: The weaker the U.S. dollar, the greater the sales, because foreign buyers will get a better bang for their buck.
Not surprisingly, a strong U.S. dollar – it's up 25 percent since 1995, and remained virtually unchanged following September's terrorist attacks (see chart) – coupled with the domestic economic downturn has occasioned grumbling from trade organizations that maintain the U.S. government has artificially propped up the dollar. Groups ranging from the National Association of Manufacturers to the AFL-CIO have lobbied President George W. Bush to let the dollar fall to "reflect economic reality."
But CEOs on the Top 50 Exporters list take a more pragmatic approach. Although they recognize that a weaker greenback would pump up sales, they accept the fact that currency rates are beyond their control. Instead, they focus on marketing strategies that work in any environment.
"If [the dollar] is weak, we sell to Europe and Asia," says Antonio Gonzalez, CEO of Tire Group International, a Miami-based tire wholesaler. "If it's strong, we buy from Europe and Asia for distribution in the United States, Latin America, and the Caribbean."
For the last 24 months, Tire Group, which had exports of $19 million last year to rank number 13 among the Top 50 Exporters, has been buying heavily in Europe and Asia. "It's one of the advantages we have by working in the countries we do," says Mr. Gonzalez, who claims that fast reaction to currency swings gives him higher gross margins than his competitors. "In 1994–95, when the peso devalued, we went to Mexico for a few months and bought tires and sold them to Brazil for a 40 percent gross margin. We're very quick to jump on opportunities where currency plays a role."
For The Plaza Group, a Houston-based petroleum products distributor that ranks number 9 on the Top Exporter list, currency isn't an issue, since the global petroleum industry has traded in dollar-denominated transactions for decades. However, the recent terrorist attacks in the United States have dampened an already soft market abroad. "There's a lot of uncertainty," says CEO Randy Velarde. "Instead of being in an opportunistic mode, we'll plan with a lot more pessimism – well, maybe not pessimism, but realism."
Even though he doesn't feel currency headaches directly, the strength of the dollar affects Mr. Velarde's business. For example, the company landed a $10 million exclusive marketing arrangement in May with Petroleos de Venezuela. Since Plaza buys from Latin American producers such as Petroleos de Venezuela and then sells to Europe and Asia, both suppliers and customers pay attention to the dollar's fluctuations. "A weaker U.S. dollar would help our non-U.S. friends," says Mr. Velarde. "They could acquire more raw materials."
Exporters use a range of strategies, besides working in the petroleum industry, to limit their currency risks. Electric Machinery Enterprises of Tampa, Florida, performs most of its overseas work for large U.S.-based corporations. The company ranks number 10 on the Top 50 Exporters.
