Metrication Update

Two examples of metrication crossed my desk recently, demonstrating opposing approaches to implementing metric units in the building products industry.

1. One of my clients is converting its sales literature from inch-pound to metric (with inch-pound units also shown in parentheses).

#11 1-3/8" dia.

2. The Concrete Reinforcing Steel Institute (CRSI), reversing its decade-old endorsement of a soft-conversion to metric, now urges its members to use inch-denominated size markings.

The various approaches represent the different market conditions confronting each organization.

In the first instance, the US-based firm is aggressively moving into international markets and needs to speak the lingua franca used for most of the world's construction. The change will not harm domestic sales, since the company uses digital-fabrication to make bespoke parts without regard for the designer's system of measurement.

CRSI, on the other hand, focuses on regional and national promotion. As a commodity product, little quantities of rebar is exported. The industry began marking its product in nominal metric sizes when it looked like the Federal government was serious about enforcing a 1991 Presidential Executive Order mandating metrication. However, the Federal Highway Administration (FWA) retracted the requirement in 2008, and most building construction in the US remains firmly inch-pound. (The primary exceptions Government agencies such as the Department of Defense.)

Traditional rebar diameters are stated in 1/8 inch increments; #3 = 3/8 in. diameter, #12 = 12/8 in. = 1.5 in. These units just make sense when constructing a 1 ft. thick wall with 3/4 inch concrete coverage over rebar that must be spaced to allow passage of 1-1/2 in. dia. coarse aggregate. In CRSI's soft conversion, these correspond to #10 (9.525 mm) and #40 (38.1 mm) respectively. Soft conversion reduce the cost of producers, but frustrated everyone else. Builders using inch-pound had to convert sizes to traditional nomenclature to calculate positioning. And fractions of a millimeter confounded those used to using real metric sizes, where #30 bars have 30 mm dia.

LESSONS LEARNED
Many US industry sectors are now firmly metricated. (When was the last time you bought a fifth of whiskey?) Yet it is unlikely that there will be a comprehensive countrywide construction conversion anytime in the foreseeable future.

Until then, each building product manufacturer will have to "weigh and measure" whether and when to embrace metric based on their unique marketing "metrics."

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By the way:

"Metrication" is term for adopting metric measurements.
"Metrification" is term for using poetic meter.

G'day, USA: Australia's James Hardie is making a splash in the U.S. market

This is an encore of an article Michael Chusid wrote almost 20 years ago. Since then, the construction industry has been increasingly globalized. However, most of their observations about the North American market remain the same.

Hardie saw a previous recession as a great time to invest in a new market -- a potential that also exists in our current economic malaise. The firm has sold off its gypsum board and irrigation interests, but has established a solid brand and market leadership in the fiberboard category.  

There is good news about the U.S. construction products industry: We enjoy a productive and flexible work force and an excellent safety record. Our designers are open to new products and techniques. We are adventurous, ambitious, and independent. And, despite the recession, our economic prospects are robust enough to merit substantial investment.

That is the decidedly upbeat view as seen from  Australia, home of James Hardie Industries Ltd., whose U.S. subsidiary is rapidly becoming a major  player in the North American construction products industry. In just five years, Hardie has become a significant supplier here of gypsum board and a range of fiber-cement products. The company has quickly earned a reputation for quality products and efficient production. Sales at its U.S. unit, which also markets irrigation products and sprinkler fittings grew 21% to $145 million (US) in the fiscal year ending in March.

Hardie's trek into the U. S, market has not been without a few bumps, however. Hurt by the construction downturn and severe price-cutting in the gypsum market, the U.S. unit lost $14.5 million last year. The company has had a tough time, especially at first, getting U.S. contractors to try its high-cost fiber-cement products. And it took a few missteps to make Hardie realize it had to Americanize its marketing operations to be successful here.

Things are just now beginning to shape up. Don Manson, president of the Mission Viejo, CA-headquartered unit, says both sales and profits improved "significantly" in the first half of this year, thanks mostly to growth in the fiber-cement business. "I'll be very surprised if we're not profitable in fiscal 1994," Manson says.

If so, the U.S. unit will be on its way to following in the rather large footsteps of its Sydney-based parent, one of Australia's leading industrial manufacturers and a dominant producer of cladding there. For most of James Hardie's 100-year history, the company's chief product had been asbestos-cement board, popular in Australia's hot, humid coastal cities. But when health concerns about asbestos surfaced, Hardie switched in 1980 to a wood-fiber cement board. It retains most of asbestos' desirable properties, but it is stronger and easier to work with.

Coming to America
About that same time, the company began to diversify through a series of acquisitions and product developments. It grew into a billion-dollar company, but its development was limited by the size of its home markets of Australia aid New Zealand, whose combined population of 20 million is less than California's.

"The question then was, do we expand into other activities or do we take our knowledge to other parts of the world? We chose to do the latter," says Manson, formerly head of Hardie's New Zealand unit. "We had extremely good products and technology, so it was a question of how to capitalize on it. We looked to the United States because we saw somewhat similar building practices, an extremely large population, and a relatively common language."

Another factor was the mid-1980s collapse of Johns Manville, a leading U.S. supplier of asbestos-cement products. "We saw a vacuum here for [non-asbestos] cement panels," says Pat Collins, technical services manager for Hardie's U.S. building products division. Also, the U.S. market was not entirely new to Hardie. The company had already made inroads by bringing in its irrigation and sprinkler products in the 1970s.

Hardie's expansion into the United States began in earnest in 1987. That year Hardie bought a gypsum quarry and a gypsum board plant in Las Vegas and another plant in Seattle. It also began exporting some fiber-cement products to the United States, though by 1990, it was making those products at its Fontana, CA plant.

At first, the company combined the gypsum and fiber-cement operations, but it later reorganized them into two divisions. "They are separate businesses," Manson explains. While gypsum board is a price-sensitive commodity product, the high cost fiber-cement products are more proprietary and require missionary work to sell. And while Hardie's gypsum boards are marketed on the West Coast and exported to countries such as Korea, the fiber cement products are sold in the Sun Belt.

The company makes three types of fiber-cement products: siding, backer hoard, and roofing shingles. They are sold mostly in niche residential markets where their unique properties can be marketed at a higher cost. The backer board has shown the most market growth and potential. It can command a small premium because it provides the smooth finish necessary with vinyl flooring, and its water impermeability makes it ideal behind ceramic tiles in wet areas.

The roofing shingle has had a relatively high penetration in California, but Hardie won't be able to expand the market North until it perfects the shingle's freeze/thaw properties. The siding, which has had slow growth, has faced tough competition from other cladding, mostly wood, because of cost and aesthetic reasons. Its main selling point is its long life, and that's not as much of a concern in the United States as in Australia.

Though the Fontana plant is now running at only half its 100,000 tons per-year capacity, Hardie sees  enough market potential to warrant buying land near Tampa, FL for a second fiber cement plant.

Hardie has met with some frustrations, though. It has had difficulty getting U.S. contractors to get past their low-cost mentality and try Hardie's fiber-cement products. "The acceptance has taken a little longer than we anticipated," Manson says. "Even though our product may be clearly superior, if the tradesman has been used to doing things a certain way for 20 to 30 years, he's not going to change quickly.

"It has taken until this year. But now it's really coming on." U.S. sales of Hardie's fiber-cement products grew 14% in fiscal 1992 and that division cut its losses 15%. "And that's being achieved against a depressed economy," Manson says.

Fitting in
Hardie's initial projections underestimated the U.S. demand for fiber cement shingles, mainly because shingles are not popular in Australia. Such predisposed outlooks are one of the hazards of transporting a business from one country to another. Despite their similarities, Australia and the United States have much different marketing environments.

"It's taken five years to come to terms with and fit into American culture," Collin says. "The slowness in getting to that stage was due to Australian attitudes and traditions trying to be imposed onto American culture. It doesn't work. We had to become an American company run by Americans."

And that is exactly what Hardie became. The building products division, for example, is now run by an American, vice president and general manager Louis Gries, and a management team recruited from U.S. firms. Collins is one of the few Australian expatriates still in the United States. Both he and Manson, a New Zealander, see their roles as transitional and temporary.

One adjustment Hardie made after a few years in the U.S. market was to decentralize its marketing organization by putting senior staff in regional offices, rather than have them manage from afar. "That's made a powerful difference," Manson says.

As Collins explains it, a decentralized structure is not a necessity in the smaller Australia. But in the United States, it's a must. "This country is so large that we can't talk about just one country from a marketing or manufacturing point of view," he says. "In each place it has to be carefully done to fit the local requirements and culture. It's 50 different countries really."

Another difference Manson has observed in the U.S. market is its cavalier attitude towards quality. Australians, by contrast, are a less mobile people and tend to use higher quality building materials to build homes for a lifetime. "It surprised me that the expectations of consumers are not great here," he says. "I see enormous homes with high prices, but the quality is not dramatic.

"Our backer board is an excellent product, but it gets covered by tile and is out of sight. It's hard for the builder to justify an additional cost. How do you [charge a premium] when it's coming out of the builder's profits?'

The answer, says Mike Going, Hardie's U.S. marketing manager until his recent return to the New Zealand unit, is aggressive marketing that will convince contractors and home buyers that quality is worth the extra cost. "Hardie must foster an aggressive and creative marketing vision while at the same time doing all the small things that have to be done to carry out a successful marketing program."


Have a question you'd like us to answer?
Send an email to michaelchusid@chusid.com 

By Michael Chusid, Originally published in Construction Marketing Today, ©1992

If You Want to Sell Internationally, Look International

Here’s a tip for any US business seeking to sell on an international scale: revise your phone number.

At World of Concrete, I offered my client’s press kit to an Australian journalist.  He said, “Oh, I saw that on the table, but I didn’t bother because they’re not international.” 

I asked how he figured that out (since my client was adamant that he would sell anywhere in the world).  The journalist pointed to the telephone contact number at the bottom of every page of the press kit.  “They only have an 800-number.  Those don't work internationally.  If this company ever got or wanted international customers, they’d show the international calling code.”

An 800-number is great for your North American customers, prospects, etc., However, if it’s your only contact number, it’s a quick tip-off that you don’t have foreign customers and don't have experience doing business overseas.  An international caller to the US would expect the international calling prefix “1” to dial North America, sometimes referred to as a “plus code.” 

Thus, the international-friendly number for Chusid Associates would be shown as +1 818 774 0003. 

Go over your sales literature, press materials, website, letterhead, etc, and see if you’re projecting the international image you desire.

International Technology Transfer

I recently had two encounters that remind me how difficult it is bringing a building product technology from one part of the world to another:

• I had a discussion with a rep from a company that claims to be one of the leading European suppliers of accessories for planted, "green" roofs. The concept may be well established in Europe, but it is in its infancy in the US. The rep, taking clues from her European boss, had difficulty understanding that Americans want a roofing membrane manufacturer to warrant the planting accessories as part of a total roofing system. In Europe, apparently, the "waterproofing" and the "green roofing" are considered two completely separate trades, like we might consider the floor slab and carpeting to be almost completely separate. I tried to explain some of the differences, including a different legal system that assesses risk and liability differently.

• Today, I went through the sales and technical literature of a Turkish company that has an innovative, thin ceramic sheet. While the bilingual documents were translated into "English", possibly into "American," they were still in a foreign dialect with regards to the language of American construction. I will forgive them the use of metric -- Americans should get their head out of the sand on that point. But the tools the related materials such as underlayments and sealants were unfamiliar, the types of assemblages, and even the drawing conventions used in their details were all "weird".

Fortunately, Chusid Associates has had experience with many other off-shore building product manufactures coming to North American. We have been able to assist them to understand US markets and plot their best course.

In some cases, once they understood the market conditions here, they have decided to not risk coming to the US. But when they have decided the investment was worthwhile, we have been able to act as their guide through the maze of acculturation, testing and regulatory hurdles, and start-up.

Federal Assistance for Building Product Export

Several of our clients are getting through the rough economy by expanding sales overseas, China and the Gulf States included. These programs can be helpful to novice exporters:

The Ex-Im Bank has three financing products geared especially to small and medium-sized businesses:

Working Capital Guarantees: covers 90 percent of the principal and interest on commercial lenders' working capital loans for pre-export costs.

Export Credit Insurance: protects mostly small-business exporters and their lenders against the commercial and political risks of a foreign buyer defaulting on payment.

Loan Guarantees: enables American firms to offer foreign buyers competitive credit to win a sale of equipment and services.

The Office of International Trade at the SBA has two programs to enhance the ability of small businesses to compete in the global marketplace:

Export Working Capital Loan Program (EWCP): provides short term, transaction based financing up to $2 million to assist experienced U.S. exporters to fulfill specific export contracts purchase orders, or letters of credit from overseas buyers.

Export Express: provides loans up to $250,000 to assist with working capital funds for international marketing & promotion activities and long-term financing to support an exporter's acquisition of fixed assets.

For more information, visit the Ex-Im Bank's web site at www.exim.gov or the SBA's website at www.sba.gov/oit .