The international cycle of buying and selling is generally called trade, and it's a vital concept for bringing in new wealth to the Wichita economy.
We often talk about globalization in terms of competition. While it's true that Wichita is often in direct competition with cities across the globe, companies and people around the world are also potential customers.
The international cycle of buying and selling is generally called trade, and it's vital for bringing new wealth into our community.
"Trade is not rocket science," says Karyn Page, president and CEO of Kansas Global Trade Services, a non-profit focused on facilitating international trade across the state. "This is a very crude way to say it, but it's just selling stuff to foreigners. That's it."
Trade is not rocket science. This is a very crude way to say it, but it's just selling stuff to foreigners. That's it.Karyn Page
In her role with Kansas Global Trade Services, Page helps to manage the Wichita region's export plan, which was formed with help from over 100 people across 10 counties. She says anywhere from 20 percent to 28 percent of the Wichita metro GDP comes from exports.
"One quarter — it just boggles my mind," she says. That makes the Wichita Metropolitan Statistical Area the largest exporter in the state. "About half of every export from the state actually comes from Wichita."
But not every business exports — and not every business should. We also need local businesses to provide uniqueness to the community. But the economic impact of each of these types of businesses is very different.
So what is that difference, and what does a good balance between businesses that bring in new wealth and businesses that trade local wealth look like?
CYCLING VS. CREATING
Page says a company that trades or recycles wealth within a community is kind of like a dog chasing its own tail.
"Or you have a dog that's running full speed ahead, and that's wealth coming into the community," she says. "This is not from my neighbors in Derby, this is money that's coming from outside. ... If we want to grow and prosper, we have to bring in new wealth into this community."
Dr. Gaylen Chandler, professor of entrepreneurship at Wichita State University's Center for Entrepreneurship, says this is called a multiplier effect. He says this effect is most noticeable in manufacturing.
"Most large-scale manufacturers export, and when they export broadly that means people from other places in the country and other places in the world are spending money here," he says. "And depending on the study you look at, for every manufacturing dollar that's produced in Wichita, it produces between a dollar and a half and two dollars of additional related spending."
The cities that have the best culture also have the industries that are bringing in money from outside of their region in order to provide the support for those kinds of things.Dr. Gaylen Chandler
In contrast, local businesses like restaurants, retailers and coffee shops come with a multiplier effect of 50 cents for every dollar.
"It's healthier for any region to have more multiplier effect businesses," Chandler says. "But when you have those businesses, you also have the multiplier effect that provides room for all of the local businesses to operate. So if you're only focused on local businesses, all you will do is trade money around in the city, and it doesn't bring additional money in, so it doesn't make people in the city better off collectively without an infusion from somewhere else."
This multiplier effect isn't just in manufacturing. It also happens in tourism by bringing outsiders in to spend money.
"In places like Las Vegas and Branson, people come from distances to spend money," he says. "So it's actually feeding money into that local economy."
Page says just about any company could become an exporting company as long as they deal in tradable goods and services.
"Tradable goods and services literally means it can be traded outside the defined economic region," she says.
Sectors that depend on a local customer, such as healthcare, retail and food service, don't have that tradable good or service. Things like software, manufacturing and agriculture can all be exported.
But that doesn't mean our local coffee shops, restaurants and retailers are a dead weight to the economy.
"For the culture of a city, I think it's good," Chandler says. "But the cities that have the best culture also have the industries that are bringing in money from outside of their region in order to provide the support for those kinds of things."
We also need these local businesses to help create attraction for new people to move in and to retain talent. After all, growing businesses require people to be able to sell their tradable goods and services far and wide.
"Those all come together to make an impression, which either helps us sell or doesn't," Page says. "It's part of the community that we knit together."
When we think of businesses that trade on a global level, they tend to be the big ones. In Wichita, it's Koch Industries, Spirit AeroSystems and Textron. But it's also smaller companies and entrepreneurs who have the opportunity to expand into new markets.
Kansas Global Trade Services works with many smaller companies and entrepreneurs in reaching out to new markets, including Aero Plains Brewing.
"We've been working with them on market prioritization to determine where in the world they might have an opportunity to export their craft beer," Page says. "Craft beer is actually created in the United States, so this is a really dense market for them. ... That means you have greater competition. So what if you could go into a market that's just really starting to discover craft beer?"
Page says any company that has a tradable good or service with the opportunity to do well overseas — or out of region — should seriously look into it.
"If we thought a company that we loved locally had an opportunity to export, I guarantee you we'd be knocking on their door," she says.
We don't see any reason why a company that is born in a tradable good or service can't put in their initial five-year plans when they're going to sell internationally.Karyn Page
Chandler agrees that any business that hopes to grow should be thinking about how their product or service could be exported out to other regions or countries. He says MoJack, a local manufacturer of lawn mower lifts, is a good example of a company that has successfully expanded to new markets through retailers like Home Depot.
"There's only a max amount that you can sell [in a single region]," he says. "So if you really want to grow a business, it is important to think bigger."
When companies do think bigger, they not only help themselves, but help the community. For Page, it's a no-brainer.
"If they have the appetite, and there's global demand, they should do it," she says. "When a company is born, it can scale domestically, or it can include in its initial plans to scale global. And we don't see any reason why a company that is born in a tradable good or service can't put in their initial five-year plans when they're going to sell internationally."
Just as entrepreneurs and small businesses often have the biggest opportunity for growth by expanding into new markets, communities often have the biggest opportunity by fostering growth in these smaller businesses. Unlike larger businesses, which typically grow more slowly and become more efficient with fewer workers, small businesses require more employees to grow.
"Small businesses are the ones that can grow into larger businesses that employ more," Page says. "We need to nurture them to help them grow. ... The contributions they make are significant."
So what resources are there to help small businesses expand into new markets? And how can we foster an international mindset among our business leaders and entrepreneurs?
CONNECTING RESOURCES FOR GLOBAL IMPACT
Just because small businesses often have the potential to scale globally doesn't make it easy to do so. Page says it often takes 12 to 18 months for a company to make its first international sale. That requires a lot of time and money — especially for a startup or small business that's already strapped for funding and resources.
Still, there are resources, including help from Kansas Global Trade Services and angel investors, which are becoming more formalized through e2e's new Accelerate Venture Partners.
But Chandler says the city is little help for small businesses and entrepreneurs.
"The city is not startup-friendly," he says. "The government infrastructure really is not friendly."
Page and Chandler agree there's also little help for entrepreneurs looking to take the jump from angel funding to more formalized rounds of funding like you'd get from venture capital.
"There's no infrastructure between the local and the big time," Chandler says.
We're not the only one who wants to be in those growing sectors. So we actually have to think more globally every day.Karyn Page
Page says the resources that are available can be hard to find, as well, due to a lack of marketing.
"I think the support is there. We just need to be more obvious that it's there," she says.
Getting these resources connected to ambitious companies needs to happen sooner rather than later, as well. Wichita indeed exists in a global economy, which means competition is everywhere. Even in the aviation industry, Page says one of our biggest competitors is actually Singapore.
Chandler says that, unfortunately, industries mature and go away over time. Pittsburgh was once the steel capital of the United States. But it went away, and they had to evolve.
"Wichita hasn't hit that dire straits kind of thing yet that has really forced the change," Chandler says. "But [aviation is] like any other industry. Industries mature, and there is more competition globally. ... It's really difficult to have an industry maintain the backbone of a city over many, many, many years."
And without that strong backbone, Wichita's exports would suffer. And without these exports, we're limiting the amount of wealth that can flow into the community.
"We're not the only one who wants to be in those growing sectors," Page says. "So we actually have to think more globally every day."