Recent economic hard times in the United States have forced rising numbers of companies to look to overseas markets to bolster their bottom lines, a trend reflected in a study that found the majority of U.S. firms are considering or engaged in cross-border expansion.
The study, by IDC and TMF Group found that eight in 10 U.S. companies are now looking to invest in overseas markets and that increasing sales is the main motivating factor for setting up overseas.
It's all the more evident now that the U.S. economy has pulled out of the multi-year downturn of recent times, as they're better positioned to go ahead with capital outlays for international expansion, according to the IDC's John Simcox, who authored the report.
"The U.S. economy was one of the first recessionary economies to return to growth and this early domestic market recovery has meant that U.S. businesses, having stabilized their existing business, are now in a better position to consider international expansion in other regions ahead of their peers – particularly those headquartered in Europe," he said.
A Physical Presence Is Still Vital
The report involved interviews with top executives of firms that have headquarters in the United States and have already established presences overseas or are in the process of doing so. Companies were engaged in a range of sectors from technology and financial services to travel, pharmaceuticals, biotech and luxury goods. It was found that even though today cross-border trade is done with ease via the Internet, companies selling in other jurisdictions still have to have a local or regional base to serve those markets.
Local Knowledge Is Key
That's where American firms face a range of challenges: How do you effectively set up and run an office in a country or territory with vastly different legal, cultural and trading requirements?
Advisors help to ease the transition to international expansion by laying the groundwork with the essential elements that are required in different countries. That means first finding the right people who are going to help run the business – it's all the more important to get it right in a jurisdiction that is completely different to the U.S. and where you need to know local labor laws pertaining to hiring and firing. In addition, the recruitment process must identify people who won't pose any potential risks to the new enterprise and possibly cause reputational damage to the main U.S. operation should something go wrong.
Cutting through bureaucracy
Another critical matter is compliance and meeting all the legal and regulatory requirements in the country – often a particular challenge in places with high levels of bureaucracy, such as some countries in Southeast Asia and Latin America. Finding the right local partner firms, for such essentials as IT services and procurement, is another essential factor in successfully establishing yourself overseas.
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