Concordville, PA-Pull up to Southco's world headquarters in this Philadelphia suburb, and the first thing you see is the cluster of international flags flapping majestically in the wind.
It isn't just for show. The century-old manufacturer of fasteners and access hardware supports 1,750 employees worldwide in 15 countries, and its OEM customers come from nearly 50 nations. The company also sells through authorized Southco distributors in some 30 countries.
In the year 2000, Southco is targeting Asia for major expansion. Undaunted by the economic "flu" that plagued the region in the 1990s, Southco is busily hiring engineers, technical trainers, and sales representatives for Asia. Says President and CEO Steve Kelly: "Asia is the world's biggest center of population, with many of the world's fastest-growing economies.''
Southco's Asian strategy takes two forms--defensive and offensive. Defensive tactics involve sales to North America OEMs that manufacture in Asia. Key targets: makers of telecommunications equipment, high-end computers and servers, and medical devices. In fact, Southco sells to 47 of the 50 largest North American electronics OEMs.
Getting American components designed into such equipment is essential, says Kelly, if North American OEMs--and their suppliers--are to maintain their technical edge. He points to the demise of the U.S. television industry, once the worldwide technology pacesetter. When U.S. television manufacturers began producing in Asia, observes Kelly, U.S. component suppliers did not follow them. Instead, Asian manufacturers became the dominant suppliers to the American OEMs, a situation that hastened the transfer of U.S. video technology to foreign competitors.
As for its offensive game plan, Southco is aggressively courting Asian OEMs in their home countries. The fastest growth so far has come from Korea, but Malaysia, Singapore, Hong Kong, and China also hold great promise. "Many of the major Asian OEMs are operating in the U.S.," says Kelly, "but most of the design work is still done back home."
In approaching Asian OEMs on their home turf, Southco uses multi-cultural engineering and sales teams that are sensitive to the many differences that exist from country to country. Kelly believes that Asian countries, like those in Europe, put a greater premium on industrial design in components they buy. Quality is also essential. "When an Asian OEM demands zero defects, they really mean it,'' he says.
Southco also finds that to be successful in Asia, it must be a part of the OEM's design team and be willing to modify and customize. Increasingly, too, Asian engineers are turning to the company website (www.southco.com) to download drawings and select products fast through its "Zoom" expert system. Southco components are often chosen for higher-end products that Asian OEMs export around the world. For that reason, Kelly adds, many Southco products earmarked for Asia offer a clear technical edge or other value added.
But focusing on Asian design engineers isn't enough. There's also a need, says Kelly, to provide strong applications support at Asian production sites to prevent problems that components might present in manufacturing and assembly.
How well is the Southco Asian strategy working? The privately-held company doesn't reveal specific figures, but Kelly notes that sales growth in Asia, as well as in Europe, is substantially higher than in the U.S., where the company continues to do very well.