Baltimore’s Maritime Applied Physics Finds Success in South KoreaFebruary 29, 2012
Doug Barry is an International Trade Specialist in the Trade Information Center, part of the U.S. and Foreign Commercial Service
Maritime Applied Physics is a small Baltimore-based engineering and manufacturing company. Founded 25 years ago, the firm has been exporting for about 10 years. Mark Rice is an owner of the company who was interviewed recently by Doug Barry of the Trade Information Center.
Barry: What does your company produce and what markets have you sold to?
Rice: We build marine components for ships as well as some advanced marine vehicles including unmanned boats. Some of our exports have been large rudder systems and bridge controls in South Korea. We’ve designed an America’s Cup hull for the Italians. We’ve done some advanced battery work in France. And we currently have a project in Scotland where we’re building a control system for a large piece of marine machinery.
Barry: Less than two percent of all U.S. companies export. What made you part of that less than two percent?
Rice: Well, we were originally an accidental exporter. We were contacted by a business agent from South Korea who found that we had done a project for the U.S. Navy that was very similar to one that was starting in South Korea. And he called and asked us to come to South Korea to Hyundai Heavy Industries, the largest shipyard in the world. And we decided to get on a plane and go, and ended up in a bidding war against a U.K. company that lasted about nine months. And at the end of that process, we won the bid against a much larger company and began the adventure of exporting.
Barry: What was the bid worth?
Rice: The bid was $2.3 million, which was about equal to 50 percent of our revenue at that point, so it was a huge export in terms of percentage.
Barry: You referred to yourself as an “accidental exporter.” Many U.S. companies would classify themselves as such, and you discussed with your partners at the time whether to do it or not. What was the mindset?
Rice: I think when we were first contacted we were intrigued, but probably had zero knowledge to base our decision on. So as we went through the process, we stumbled through a bunch of things and made a lot of mistakes. We almost violated the International Trafficking in Arms Regulations. That was our first problem. As we went into the bidding, I guess we got drawn into it. The competition took on a “we’ve-got-to-beat-these guys” sort of attitude. And so we made actually three trips to South Korea during that process. And in each case, the person who had originally contacted us gave us a little bit more of the South Korean culture, and we adapted.
Barry: And what were the most challenging cultural things that you ran into and how did you overcome them?
Rice: We were largely people who had not traveled internationally, so this was a whole new culture for us and a new experience. And in South Korea, businesses perform very differently than in the United States. Much to the chagrin of our business partner there, we made many mistakes as we went through this process, but found, as in most business relationships, a smile and a “thank you” and a “I’m sorry” every once in a while made up for all these things. And so at the end of the day, it was our technical background that really won the project.
Barry: Was there a memorable cultural faux-pas?
Rice: Probably the biggest mistake was in the bidding process. We were expected to start high and work our way down a significant amount. And, you know, we were told in the first round of the bid: “give us your best price.” And we did that, which gave us very little room to lower our price. And that, according to our business partner, was an insult to the Korean company. But in the end we won and our people grew immensely from the whole experience.
Barry: Intriguing that you mention the personal growth side of things. How did going outside your comfort zone enhance the abilities of your team?
Rice: I think one of the things that we noticed right away in South Korea is our Korean counterpart engineers were very experienced in exporting. They dealt with ship owners from all over the world. So we were at a real disadvantage, engineer to engineer, in these relationships. And I think that that comfort level with dealing on an international basis with another professional, exchanging information, what are the cultural norms and how do you build friendships and business relationships, was really what changed our people. So we came away not as insular as they were when they left the United States.
Barry: What was the key? A different attitude? New skills?
Rice: I think it’s removing the fear barrier. It’s confidence and the ability to take on something that you’re not sure of. It challenged us to get out of our established ways.
Barry: How did the U.S. Commercial Service of the Commerce Department help you?
Rice: In a very significant way. We came back from South Korea and our bank said, “This is too risky a deal. We’re going to withdraw our credit lines from your company.” So we had to go find a new bank. And key to that was the Baltimore Export Assistance Center (of the Department of Commerce) introducing us to the Small Business Administration and ultimately getting a 90 percent loan guarantee on the project. And that enabled us not only to do the job, but to survive that whole (economic) crisis. I’ve never seen an industry-government relationship that’s as helpful to a company as the one the Department of Commerce offers. It’s remarkable.
Barry: So the moral of the story is don’t miss the boat on the way to the Korean shipyard.
Rice: It’s don’t fear that world. And if you’re only thinking of the United States as your market, you’re missing a huge opportunity. Exporting may actually be a very necessary step that you take for your own survival as well as your growth. Go forward and engage and use the U.S. government to help you. And enjoy the great cultural experiences that will come with doing business.