The President's "E" Award - Locknetics Security Engineering, Fire-Lite Alarms Inc./Notifier

The "E" Award, presented by the President to recognize outstanding export success, is the highest honor American companies and organizations can receive.

Winners of these awards are helping their country as well as themselves. To qualify for an "E" Award, a manufacturer must show evidence of a substantial increase in volume of exports over a four-year period. Exports should continue a significant portion of total product sales and/or be materially in excess of the industry's average percentage. The company also should demonstrate breakthroughs in especially competitive markets, introduce a new product into U.S. export trade, or open a new market. Two stories follow, which illustrate the steps Locknetics Security Engineering and Fire-Lite Alarms, Inc./Notifier took to reach exporting success and receive this coveted award. For more information on the "E" Award program, contact your local Export Assistance Center or Angela Pinckney, "E" Award Program Office, Office of Domestic Operations, Room 3810, U.S. Department of Commerce, Washington, D.C. 20230.

Locknetics Security Engineering, the world's leading manufacturer of electromagnetic security hardware systems and components, was given the President's Award for Excellence in Exporting ("E" Award) in December 1997. "It is a great honor to receive this award, which is a testament to our success in the international marketplace," said Jim Scott, President of Locknetics.

Locknetics Security Engineering, an autonomous division of Harrow Products, Inc., of Grand Rapids, Mich., is the result of Harrow's acquisition and merger of two entrepreneurially developed businesses in the electronic security hardware industry, Locknetics in 1982, and Security Engineering in 1988. In 1988, Locknetics Security Engineering developed a strategic marketing plan with the goal of becoming the world's leading manufacturer of electronic security hardware. In 1988, Locknetics' total employment was 50 and export sales accounted for 4.2 percent of total revenue; in 1998, total employment numbers 140, and export sales account for approximately 20 percent of total revenue. Locknetics estimates that 10 percent of its workforce is directly attributed to export sales. "In short, as a direct result of our global marketing effort, we have created high-wage U.S. jobs while increasing our productivity, a trend which we will strive to continue in the future," says Jim Scott.

In 1988, Locknetics exported its products and accessories to only two countries, and now, 10 years later, the firm exports to 43 countries worldwide. Locknetics has firmly established distribution networks on all continents and is now looking to expand international sales to emerging markets in Asia, Eastern Europe, and Africa. Locknetics' export success is directly attributed to the company's ability to overcome the obstacles that confront a small firm when it is attempting to break into new markets and increase sales in other markets. In 1990, Locknetics developed an international marketing plan, which incorporated five challenges that would ultimately determine the extent of the company's export success. These challenges included market research, selecting export channels of distribution, obtaining foreign distribution, dealer (distributor) relations, and product design.

Market Research

The task of gathering useful market information and intelligence can be both difficult and time consuming. Locknetics sells directly to contract hardware dealers, locksmith wholesalers, and security/alarm distributors. Determining which were the best to sell to in each country and how to get in contact with them presented a formidable challenge. Through counseling sessions with the Middletown Export Assistance Center (EAC), formerly the Hartford District Office, Locknetics learned about the National Trade Data Bank (NTDB), a comprehensive source of international business information compiled from various government sources. The Middletown EAC supplied Locknetics with several country-specific market research reports that provided an in-depth overview and analysis of the safety and security sectors -- these reports are Country Commercial Guides, which rank U.S. exports to a specified country and include information on conducting business in that country.

The Middletown EAC also assisted Locknetics in determining its Schedule B numbers, and furnished them with export statistics, by Schedule B number, which provided insight on the largest import markets for Locknetics' product types. Scott conveyed, "Now that we were able to obtain a comprehensive overview of each foreign market, we were able to further clarify which of the market segments to target in our international marketing efforts. The importance of international market research has been demonstrated and, through the standardization of our international marketing research methodology, it became apparent that there were export opportunities in many more countries than we had originally envisioned."

Export Channels of Distribution

The second challenge involved selecting export channels of distribution, and even though the best prospects were identified through international market research, Locknetics needed further advisory assistance to reaffirm the best export channels through which to distribute its products. Jim Scott again turned to the Middletown EAC, which was helpful in identifying the best way to proceed and how programs offered by the U.S. Department of Commerce would assist in the company's efforts. The Middletown EAC also recommended that Jim Scott visit the U.S. Department of Commerce's country and industry specialists in Washington, D.C., and as a result of the visit, Locknetics walked away with a massive compilation of global market opportunities by country and region that helped to confirm the company's priority export markets.

Foreign Distribution

The next obstacle involved obtaining foreign distribution. Through contacts with the U.S. Department of Commerce, Locknetics learned of conferences and trade shows that were sponsored and/or certified by the Department. For example, Scott participated in a safety and security industry trade show in Saudi Arabia, met with potential distributors from several Middle Eastern countries, and soon after signed distribution agreements.

Locknetics also took advantage of the services offered by the Department of Commerce and other international trade-related entities. In 1992, Scott requested the Gold Key Service in Japan, and the U.S. Department of Commerce Commercial Office in Japan arranged meetings with several potential distributors of safety and security equipment. As a result of these meetings, Locknetics signed a distributor in Japan. In 1993, the International Division of the State of Connecticut's Department of Economic Development led a group of Connecticut companies to the Rep-Com Trade Show at the U.S. International Trade Center in Mexico. Locknetics was one of these companies, and as a result of contacts made at the show, eventually signed distributors in Mexico.

Locknetics' marketing strategy has enabled the firm to continually increase sales in existing markets and expand into new countries. Scott explains, "We are committed to each market we enter for the long term and we keep our marketing and sales efforts in place even after distribution networks have been firmly established. If we encounter resistance when trying to enter a new export market, or if sales decline in an existing market, we simply shift our marketing focus in that country from the short-term to the long-term. In this way, no international markets are overlooked. This is one of the central tenets of our global marketing strategy and one of the reasons we have been successful in obtaining foreign distribution worldwide."

Dealer Relations

The fourth challenge dealt with dealer (distributor) relations, which Scott puts into perspective, "Another fundamental reason why we have been successful in obtaining such highly capable distributors for our products worldwide has been the loyal relationships Locknetics has built with international distributors." Recognizing that there is much to be gained from strengthening relationships with its foreign distributors, Locknetics has done much to make these relationships a central aspect of its global marketing effort. Not only has Locknetics tried to impart the value, quality, and technical specifications of its products to international distributors, the firm has also spent a good deal of time listening to its needs. As a result, both the company and the distributors have profited from the experience.

Product Design

The fifth challenge involved product design, which is in area where Locknetics has continued to be a step above its competition. The reason is that Locknetics has developed products that are specifically designed for the international marketplace. Scott explains, "upon closer examination, we realized that in order to successfully compete in many export markets, we would have to adapt our product line to meet the needs of our international customers." Through constant innovation and adaptation, the company's electromagnetic locks, electromechanical locks, key switches, power supplies, and monitoring consoles have been extensively used by major airports, schools and universities, hospitals, government facilities, and industrial/retail sites all over the world. The firm sees unlimited applications for its electronic security hardware products in the buildings of the future.

By overcoming these five challenges, Locknetics has become the world's leading manufacturer of electronic hardware security products. A sound marketing plan and recognition of the five obstacles are the reasons why Locknetics has achieved export success and become the world's leading manufacturer of electronic hardware security products. Jim Scott credits his staff and Locknetics' strong commitment to exporting as the keys to success: "Through a shift in our strategic marketing focus from one with a clear distinction between domestic and international sales to a long-term marketing strategy with a global focus, the aggressive marketing and sales efforts of our professional staff, a highly skilled and dedicated workforce, and a firm belief in the quantity and utility of our products and accessories, Locknetics Security Engineering continues to capitalize on the advantages of a global marketplace and looks forward to the promise and challenges of the 21st Century."

Fire-Lite Alarms, Inc./Notifier

Fire-Lite Alarms, Inc./Notifier, a Northford, Conn.-based manufacturer of fire alarm systems, access control systems, and voice evacuation systems, was awarded the President's Award for Excellence in Exporting ("E" Award) in December 1997. "It was a great surprise and honor to receive the "E" Award from the Department of Commerce. After many years of hard work and determination, exports of our products have expanded greatly and it is a real honor to be recognized with such a prestigious award," says Mark S. Levy, President of Fire-Lite Alarms, Inc./Notifier.

Fire-Lite Alarms, Inc. and Notifier are subsidiaries of Pittway Corporation, and in 1987, the two companies were merged and established operations in Northford, Conn. The merger provided Fire Lite Alarms, Inc./Notifier with the ability to produce innovative fire alarm systems and integrated voice evacuation systems for both commercial and industrial applications. Notifier's fire alarm systems monitor building environments for fire and emergency conditions, and have been installed in small establishments, as well as complex multi-story, multi-building facilities.

When a fire is detected, the panels activate local alarms, shut down air handling units, close fire doors and dampers, recall elevators, notify security operations, and alert a central station or the fire department directly, in accordance with how the system is programmed. Emergency voice evacuations, instructing occupants as to what actions are to be taken, are automatically activated by the fire alarm system. Voice evacuations are furnished in different languages.

When Fire-Lite Alarms, Inc./ Notifier (Notifier) were merged, total export sales consisted of a few global accounts. In 1989, Levy realized that the global market offered room for expansion and, in addition to the success that the firm was experiencing in domestic sales, he saw openings in the international market. Notifier subsequently approached the Middletown Export Assistance Center for international marketing information, and in particular, information on how the U.S. Department of Commerce could assist with locating foreign distributors.

The Middletown EAC provided market research reports, industry sector analysis, and international market insights for various countries on all continents; information on marketing U.S. products and how to conduct business from the Country Commercial Guides; and export statistics for Notifier's product type. The market data assisted Notifier in determining the key markets for the firm's products, and the next step involved visiting these markets to locate foreign distributors and to establish regional sales networks.

During visits to overseas markets, Notifier utilized the programs and services of the U.S. Department of Commerce's Foreign Commercial Service Offices. In some instances, Notifier participated in the Gold Key Service, whereby the Commercial Service Office arranged meetings with potential foreign distributors. The results of the briefings and Gold Key Service played a major part in Notifier signing distributors. Levy states, "The excellent support of the Middletown Export Assistance Center and the overseas Commercial Service Offices has played a very important role in our growth...their expertise and enthusiasm are always refreshing."

Another key to Notifier's export success is attributed to the establishment of regional sales networks. Since 1991, the company has opened regional sales offices in Canada, United Kingdom, Singapore, Brazil, Mexico, Jordan, Hong Kong, India, United Arab Emirates, Venezuela, and Australia. Notifier's international sales have increased from 12.8 percent of total sales in 1991, to approximately 50 percent in 1997. Employment in Notifier's international sales department grew considerably during that period, from 25 employees in 1991, to 103 in 1997. Notifier currently exports to 65 countries, and the company's 300 independent distributors are coordinated through 14 regional sales offices. Notifier is currently focusing its efforts on increasing sales to the Pacific Rim and Latin America, which represent fast-growing markets for the company's products.

Between 1991 and 1997, Notifier successfully identified and addressed three interrelated challenges in penetrating international markets: 1) Fire protection is frequently given a low priority in many foreign countries; 2) Foreign building codes and standards often do not incorporate protection standard; and 3) There is a considerable lack of specific marketing information in foreign markets. Notifier was able to systematically address these problems by targeting the key markets for its products; changing the attitudes and policies concerning fire protection by approaching the key players (government ministries, industry leaders) in each country; and locating the resources (Commercial Service Offices, industry associations) that provide information on the market potential. The reward for overcoming these challenges led to a dramatic increase in Notifier's international sales.

Notifier's philosophy of Global Resources, Local Response explains how the company continues to increase sales in each country, while venturing into new markets. Utilizing the network of the 14 regional sales offices, Notifier has conducted training sessions all over the world. The company strongly believes that all of its distributors must be properly trained and employ a full understanding of the fire protection standards and regulations in their own country.

Notifier has taken its firm's philosophy one step further by properly communicating with the marketplace. The company has translated all of its sales literature and promotions into the indigenous languages (French, Spanish, Portuguese, German, Japanese, and Chinese). Levy explains, "We have found it necessary and important to be able to communicate with the local market to explain the features, benefits, and advantages that our systems offer." In addition, Notifier has printed its operation and maintenance manuals in the indigenous languages to facilitate the installation and maintenance of their systems.

Even though there are many obstacles to maintaining and increasing international sales, Notifier continues to progress and expand its foreign presence. Levy notes, "While we have been pleased with our performance and progress, it has been an ongoing battle in the marketplace. As an ISO 9001-certified company, we compete partially by manufacturing cost advantages and partially by the brand name differentiation that our products have internationally as well as domestically. We have adapted our product and marketing efforts to meet the particular needs of each indigenous culture, and have successfully confronted the challenges outlined above." At present, Notifier is planning to venture into new markets, and looks forward to the opportunities that lie ahead. "Notifier is poised to expand export sales even more, thereby realizing our operation philosophy of global resources, local response," says Levy.

RELATED ARTICLE: Adjustments to U.S. Price

In order to calculate an ex-factory price, the following deductions are made to the export price:

* Discounts and rebates

* U.S. and foreign inland freight and insurance expenses

* U.S. import duties

* International freight

* U.S. and foreign brokerage, handling, and port charges

In addition to the export price adjustments, the following are deducted from the U.S. price in order to calculate the CEP:

* Commissions

* Direct expenses

* Assumptions of expenses

* Indirect expenses

* An amount for profit

* Expenses resulting from value added in the United States

Jim Scott is the Vice-Chairman of the Connecticut District Export Council, and has been a member since 1991. In 1992, Scott was the recipient of the Connecticut DEC's "Exporter of the Year" Award.

Mark S. Levy, President of Notifier, was the recipient of the Connecticut District Export Council's "Exporter of the Year" Award in 1998.

COPYRIGHT 1998 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group