Author Archives: cognegy

location…location…location

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That’s what a realtor will tell you when buying a home – it is not the house and its features but the location of your favorite piece of real estate that will determine its value.

Heeding this logic where should a new business in the US be located?

There are 3.8 million square miles (9.8m km2) to choose from…

Over the years COGNEGY has spoken and worked with many entrepreneurs who are faced with the very specific question where to start their new business. Surprisingly enough many of them do not pursue a rational process to reach such a decision. This article does not have the intention to promote either the ‘Big Apple’, ‘Big Peach’ or ‘Magic City’ – in fact we serve all three metro areas – but to provide a number of thought provokers leading to a well-founded business decision.

The East Coast offers many great choices, the question is: which one is right for you?

1. Time zones

Stay on the East Coast – a six-hour time difference is big a challenge enough. If the office closes at 5:00pm in Europe and the US starts at 8:30am – you only have 2.5 hours overlap. Move two time zones to the West and there is a mere 30 minutes left.

2. Customers and competition

This is the real question…where are your current customers and where are your prospects hiding. Also consider where your competition is located – you will want to hire (industry savvy) people without relocating them all across the US. It will be difficult to attract great employees if you are out there all on your own.

3. Vendors – transport

Where are your vendors based – having them drive out of their way to deliver your materials, components or supplies will drive up your costs unnecessarily. Also industry players tend to congregate in one geography, allowing negotiation for  better prices.

4. Incentives and support

Once decided on the larger geographical area it is time to talk to state representatives, county officials and local chambers alike and invite them to be creative with their entire incentive program to attract your business. Their enthusiasm will be directly proportional to the number of employees you plan to hire.

5. Quality of employees

Select a metro area if you want to attract the right caliber of executive and team. Not only for the quality of the schools for their kids, but also the quality of life. Blue-collar labor might be cheaper further away from a metro area, but you will struggle to find and retain the right caliber of management. The optimal solution will depend on your business. Do not hide out in the sticks.

We will look at 5 more elements in my next post. In the mean time, choose wisely, as the world famous Yogi Berra once said: “When you come to a fork in the road… Take it”.

Fill in the blank …

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I want to share with you a reply email I just sent to a European company who are looking at an opportunity on the USA market…

Fill in the <blank> for your product/service/solution and see if it also applies to you…

In this client’s case, having established that the market opportunity really exists, I observed that <blank>’s market is fast growing and therefore very attractive to many other players. In turn creating an environment prone to increased competitive pressure. Sounds familiar?

The <blank> opportunity

As a starting point, let us assume that the product/service/solution is competitive in its features, advantages and user benefits… Realize this (only) provides <blank> access to the market as a player, to become successful <blank> will first have to answer two key questions…

What is <blank>’s VALUE PROPOSITION

It is crucially important for <blank> to identify its differentiators versus its competitors

  • What makes <blank> a better total solution
  • Do not only think product or service – think solution package (sales, customer support, technical support, price, marketing, supply chain,…) through the eyes of  the customer

How does <blank> ACCESS the MARKET

  • What are the market segments with the highest return (depending on the company goal this can be profit, market share, volume, revenue, …)
  • Who are we talking to – who is asking, who is buying, who is paying, who is deciding, who is setting the selection criteria, …
  • What structure needs to be developed to access these markets, what channels are needed – an importer, a distributor, a fully owned structure, …

Formulate the answers to these two questions in a crystal clear manner and will know where to aim and how to get there.

Remember, there is no point worrying about execution (sales collateral, supply chain solutions, marketing, price, promotion, websites, import regulations,…) before these have been answered.

Do not draw a blank – come prepared!

What are you waiting for…?

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BELGIUM IS LEADING DIRECT FOREIGN INVESTMENT INTO THE US.

Data released on March 14, 2012 by the U.S. Bureau of Economic Analysis shows that in 2011 Belgium was the leading foreign direct investor into the United States. 

Foreign direct investment in the United States (FDIUS) measures the equity capital flows, reinvested earnings and intercompany debt flows between US affiliates and their parents abroad. In order words it is a measure for the ‘business activity’.

The key findings of the published document on FDIUS are:

  • Total investment in 2011 reached $227.9 billion which is only a small 4% decrease over the previous year
  • Belgium is the leading foreign investor with $43.8 billion (19.2%) followed by Switzerland ($29.2b) and Luxembourg ($19.4b)
  • Other leading countries were Japan, Canada, the Netherlands and Germany

It is remarkable that countries such as the UK, France, India, Brazil and China are absent from the top 10 list. The report also shows that Europe remains the most important region to invest into the US representing 65% of total investments.

The question is what have they seen that you have not?

The United States economy continues to pick up and various economic indicators are illustrating this steady – however slightly bumpy – ride north.

It enjoys a business success culture that puts up few hurdles to start a business, providing access to a huge homogeneous market with 312 million consumers who have a healthy appetite for things better and new.

What are you waiting for – it’s only one feasibility study away.

 ________________

All data used in this article are based on the ‘Foreign Direct Investment in the United States’ document released on March 14, 2012 by the Organization for International Investment. Data are preliminary and subject to revision.

 

To skimp or not to skimp…

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Many European companies enter the US domestic market on a shoestring budget, making them look anemic and quickly out of (budget) breath.

This is the wrong time to skimp. Prospective clients in their decision process to replace established domestic competition compare all your touch points with the reigning players in the market. Touch points are products, people, proposed pricing, marketing collateral (think print, website, brochures) etc… that should send the same consistent quality message.

In most cases the ‘budgeteers’ (those who have ‘zero’ responsibility over the Business Development effort and who are there to ‘protect’ the company) score easy points in two areas: marketing costs and people costs.

Marketing & Sales budget for a continent

Very often when a (too) quick return needs to be shown, ‘budgeteers’ skimp on the Marketing and Sales budgets. These are very easily cut, and unrealistic token budgets are left behind in the plan as sore reminders. Sales and Marketing budgets are treated as an expense/cost not as an investment to open a huge market.

To avoid the ‘inbound investment hangover’ one should earmark enough budget to be able to run a smart strategy at your laser targeted (by the market entry strategy) market segments. You will be unable to outspend established competition, but there are no rules against outsmarting them!

Budgets to hire the right people

European companies can struggle with the compensation requirements of high quality domestic players. We have heard the remark too often: “I cannot hire someone who makes that much (more) money (than I do)”. Most likely this indicates that the US project is not handled at the right executive level, it has become an operational effort and the manager responsible makes the wrong hiring choices. Opening a new market, building new business, displacing entrenched competition is hard, it is very hard and it should only be entrusted to the best candidates available.

So, in conclusion…Firstly, identify the right partners to help you budget realistically and spend specifically; and secondly, budget to invest – because it will take longer than you think/plan.

Is success optional…?

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We cannot underscore enough the importance of continuous support for the decision to open the US market at a business strategic level. The decision to enter such a demanding market will need the unequivocal support of the highest Executive levels.

It is not a short-term ‘boost the revenue line’ activity, it is an investment. It will take time to reap the fruits of your labor. Executive management needs to plan for a combination of lower margin and higher operating costs to get the business off the ground. Expectations of a quick return on investment will surely be met with disappointment.

Invest in building the right team – a strong combination of business development skills with mature market experience and strategic thinking – that finds the right blend of European company values and American requirements. A team that can quickly analyze and articulate the US domestic market needs back to ‘mother corporate’. Most importantly, provide the team with easy access to highest Executive levels who can quickly turn-on any vital company support – because it will not come naturally. Any functional management layer will have brighter and higher priority objectives (and pecuniary rewards) that will not necessarily fit with (the lower short-term impact of) the US market entry efforts.

Unless the support of the US entry is made strategic, success will remain optional.

Who cares?

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It is an eye-opening moment when an honest prospect tells you  “I do not care”…

Consider yourself the lucky one: you now realize that nobody cares about your successes in England, your market share in Germany, your loyal client base in France or your achievements in Europe. No prospective client in the US cares unless you have a unique value proposition for him.

The fact that a ‘proposition’ is not available on the US market can indicate three things: there is a massive opportunity (among the 312 million Americans nobody has thought of it), it is out there somewhere but you have not detected it or it does not fit the market needs.

Forget about how you do things at home, ask yourself why you do it that way and what customer needs you fulfill. Then think how to transpose these unique attributes to one of the most competitive markets on the planet and provide a unique answer to the market needs here. A thorough competitive market analysis will unearth what needs to be done to build a winning value proposition to beat the entrenched local competition.

Keep in mind that you will have to be better – equal won’t cut it.

DIY is a hobby not a profession…

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Unfortunately too many European companies enter the US domestic market relying solely on their own in-house resources (with the idea to save money) and count heavily on a high percentage of DIY. They forget that DIY is a hobby, not a profession.

It is important to surround oneself with the expertise one does not possess – it is important ‘to know what you do not know’ and not to remain blissfully ignorant. For immigration issues use an Immigration Lawyer who can advise on the right choices between all the possible E’s, L’s, P’s, R’s, H-1B’s,… . For tax issues get a CPA on board who knows both the US and European legislation, and can help you steer clear from issues such as double taxation. For recruitment use a partner who understands the requirements of the European parent and the needs of the American candidate. Outsource when possible it will accelerate growth.

The same logic applies to the business development efforts, the concept of “I will learn as I go along” is flawed – you will learn all right but your potential partner or client will have little or no patience for your learning at their expense. They will take their business somewhere else and will not come back. Although it might be commendable to want to try it on your own – after all it is part of the entrepreneurial DNA – but it is bad business practice.

Focus on your strengths – complement your weaknesses.

Meticulous preparation breeds success

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Unfortunately I ignore who said it first, but the proverb “fail to plan then plan to fail” is particularly appropriate in the case of a European business starting or growing its presence in the US.

Starting or significantly expanding one’s presence on the US market is not a tactical but a strategic endeavor that requires ample preparation. It also means that whatever worked in Europe might (will probably not) work in the domestic market place. Take time to check what part of the “magic marketing formula” can be transposed and what needs to be adapted, build a detailed timeline and adhere to it, assign a project manager who understands the pitfalls and give him/her the decision power to make the alterations for success. And once you move from planning into execution stick to the plan, review and adjust continuously but only change at preset intervals.

When the plan has been based on a thorough Market Feasibility Study these adjustments will never be strategic but tactical, swift and quick in nature. The secret sauce to start-up success.

China is different, but the US is the same…

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For many Europeans English is a second language (except for the Brits, obviously, who might ague that American English is a dialect) and they have been very much exposed to the American culture through music, movies and perhaps travel.

Therefore many European Business people assume doing business in the US is the same as at home. Although both the Unites States of America and Europe are Western cultures they operate along a very different set of values and unwritten rules. Ignore these and one will keep wondering why things did not happen your way. Do not confuse hospitality with closing a deal…

Many Europeans approach the entry onto the US market as a countrywide effort, where in reality it is a ‘continentwide’ endeavor. Doing business in the North East will be very different from closing a deal in the South, California is definitely not Massachusetts or South Carolina.

Consider this: when savvy businessmen want to do business in China they will seek local advice, find translators and hire facilitators or culture coaches, then why would all this suddenly become redundant because one speaks English?

WHAT SUCCESSFUL EUROPEAN COMPANIES DO RIGHT

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6 keys for European companies to be successful on the US Market

Entering the U.S. market is a strategic Business decision that requires preparation, planning and excellent execution to achieve the desired success. It is critical that all the stakeholders in this Business Development venture are in sync and are 100% committed to its outcome.

Over the years having worked with a multitude of Small and Medium Enterprises (SMEs) it is clear that these 6 keys are the same for every foreign investment into the US, but more particular to European based companies who have a tendency to underestimate their importance. COGNEGY has seen the good, the bad and the ugly, but also we have seen many ventures succeed mainly because they included all of the following 6 key contributing factors:

  1. Full awareness of the differences between Europe and the US
  2. Launched the project after meticulous preparation
  3. Considered the project as Business Strategic and provided Executive backing
  4. Backed the venture with sufficient funds for success
  5. Defined a great Value Proposition for the market
  6. Brought the right partners on board early

We will discuss these factors individually in our upcoming blogs.