Steve Mathers, director at John McGavigan
John McGavigan is a manufacturer which earns most of its money selling overseas, but that doesn’t mean it is ignoring domestic markets.
Steve Mathers is a man on the move. Director of Glasgow-based manufacturer, and HSBC Scottish Exporter of the year 2017, John McGavigan, a three-week span of October and early November saw him in both Japan and Germany on business, before making his way back to Scottish soil. But this shouldn’t be surprising for the man at the helm of a firm exporting some 90% of its goods.
McGavigan is a manufacturer for a range of technical and decorative plastic components and assemblies for the global automotive industry. It supplies many of the global car brands around the world, from its manufacturing operations in Scotland and China. The company has exported for more than 30 of its 150-year history, with the geographic scope expanding as the client base has grown.
So, how’s business? “Very buoyant,” comes the unsurprising response. “We’re heading for another record sales year. Let me just work something out…” he says, trailing off as he taps the keys of a nearby calculator, “…further growth of about 36% this year, globally. Quite a busy year.”
McGavigan manufactures quite a range of items, ranging from printed components you see in the vehicle instrument cluster, interior plastic trim you’ll find in the door panel, and complete decorative plastic button and switch assembly units you’d use when you control the temperature in your car, or change the channel on the radio.
Most of its customers are established global brands, with manufacturing and assembly interests in each of the major economies, so in many ways those customers encouraged the international growth of the firm.
The firm exports to locations as far afield as Asia and the Americas, as well as more locally within Europe. Without strong export channels, the business would not exist in the way we recognise it now. Its export channels are often well trodden routes, so legislative and taxation matters are usually well defined – or are, in some instances, supported by the operations of its clients.
“We’re now shipping products into the Japanese markets, which has been quite a milestone for us, because it’s technically very difficult to enter into the supply chain in Japan. We’re also now supplying into Malaysia, which is also a growth area for us in the automotive sector.”
By contrast, and not unsurprisingly, not every market entry will go perfectly. “The US has been relatively slow,” Mathers says,” and we may need to look at extending or increasing our presence in the US market by putting manufacturing capabilities into Mexico. The discussion between partners of NAFTA, amongst other factors, means we’re holding back any significant investment decisions there, but it’s still very much on our radar.
“It’s not going to have a negative effect on the growth of our business; Asia, and our activities in central Europe, are very important and strategically central to what we’re going to do in the next three to five years, and we’re already working with many of those customers. The American market is more of an incremental opportunity for growth; we do supply products into the North American market already, but growing that is going to be, to some extent, influenced by the political and trade conditions that are in place over the next year or so.”
Exporting forms a huge part of its business, but that doesn’t mean that domestic business wins aren’t also celebrated. Of its growth this year, Mathers says: “We’ve experienced growth in our export markets but also domestic manufacturing, with new programmes for the UK automotive industry, mainly Nissan – we’re supplying the interior trim for the Nissan Qashquai.
“It’s been a big success; it’s been refreshing to see that as an organisation, despite some political turmoil, they’ve made a commitment as a long-term manufacturing platform for Europe, in Sunderland.
“For us, it’s a breakthrough to some extent,” he continues. “Whilst our revenue is predominantly going outside of the UK, which is great for export purposes, we wanted to get an increase balance in the UK domicile automotive industry. The programmes with Nissan, and a couple of other smaller programmes we’re just picking up, are playing an important part of balancing our business.
“From a strategic perspective, it’s good to have a business that is high export yield, but at the same time you don’t want to be entirely dependent upon export, because political changes can influence that. The ongoing discussion with Brexit is a consideration; we must make sure our business is sufficiently de-risked not to have a negative impact should there be a hard Brexit.
“We don’t see that as being a game changer, even if a hard Brexit happens, because the nature of applying World Trade Organisation rules to our business would be nominal,” he adds.
In March, the John McGavigan team was crowned large exporter of the year, and overall Scottish exporter of the year, at the HSBC Scottish Export Awards in association with Scottish Enterprise, a significant achievement and recognition for the 450-strong team working across its sites. The judges felt the company’s story was “an inspiring one”, having continuously innovated to meet changing customer demands.
“It was an excellent result, but it was recognition for the McGavigan team as a whole. The one thing that we pride ourselves on is working hard to satisfy customers; whilst it’s very easy to look at a company from a balance sheet perspective, the thing that really makes a difference is the relationship we have with them.
“That growth has come from building up long term, trusting relationships with our clients on a global scale. It’s important to continue. The reward itself was a recognition of the results from the hard work that’s gone in from the team, both here and in our Asia operation.”
But its winning streak actually kicked off in February, when it was placed at number 77 in the Sunday Times Lloyds SME Export Track 100. The league table ranks Britain’s small and medium-sized companies with the fastest growing international sales. McGavigan was up seven places from last year, one of just nine Scottish companies to be placed.
Hot on the heels of that listing, the director of its Suzhou facility, Lifeng Wang, picked up an award for best supplier collaboration at the YanFeng Visteon China Supplier meeting. Securing this kind of award demonstrates the time and effort it put into building relations with partners in its varied export markets.
To sell effectively within any region, whether inside Europe or further afield, cultural sensitivity and an appreciation of local business protocol is essential. What may fit for one market may easily not work in another. Mathers and his team have worked hard to make sure they understand and respect the cultural and professional expectations in each and every one of the countries they approach.
“It’s most important to research the markets that you’re entering into. Developing cultural sensitivity and understanding how trade is conducted; seeking expert advice, which is readily available from organisations like Scottish Enterprise through Scottish Development International (SDI), and also tapping into resources like the GlobalScot network. Talk to likeminded businesses.”
And that extends into his advice for newer exporters: “Don’t be daunted by the opportunity that exporting can bring. It is an opportunity that is very important to the economy but also the individual business. You can be large or small; the dynamics are exactly the same. If you’re going into a new market on a business-to-business or business-to-consumer basis, having local presence is extremely important, and establishing good relationships through trade organisations is a great way to start.”
Entering markets in Asia could be considered one of the trickier moves for a novice exporter; China cited as an example where it takes a little adjustment to understand the local customs and taxation regulations, so it’s important to have a local partner to help guide you through the processes. The same can be said for South American regions, where import tariffs can be challenging.
Indeed, simply being a firm with Scottish heritage is a unique selling point in most industries; the hardest part can be breaking down the whole world into penetrable markets. “Don’t be put off by the sheer scale, and the fear factor,” Mathers reinforces.
“You’ll quickly overcome it when you start to realise the value. Many nations are interested by products that are coming from Scottish markets, it gives you an advantage. Play to the cultural background and build upon it.”
Looking to 2018 and beyond, Mathers confidence in his team and in the way he does business shines through. They recognise that one of the interesting things about the business world is that it never stays still. “We are continuing to build,” he assures me. “And we’re probably going to increase our physical presence in key European markets, through the establishment of technical support offices initially in Germany, which will increase the level of support we can provide to customers in that market.
“It’s very much continuing to grow; the future of our growth is making sure that we’re close to our customer needs. We do a lot of listening.”
But when he does the talking, his words of wisdom apply to everyone. “Don’t let the fear factor get in your way,” he concludes. “Once you get past it, you’ll see growth in every aspect.”
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