Category Archives: strategy

Grow into the North American Aerospace Industry

Featured

Posted on by
Reply

Launch into the Aerospace Market in the Southeastern United States – update # 3

The Global Market Forecast and the new Chief Commercial Officer, Eric Schulz, Chief Commercial Officer by Airbus anticipates 37,400 new deliveries over the next 20 years with a current fleet of 21,500!

The value of it …$5.8 Trillion aircraft value!A320

10,600 aircraft will stay in service from these days.

Interesting to know that 54% ($3.2 Tn) in value is expected from small body i.e. 230 seats and 3,000 nm range and 25% ($1.4 Tn) from medium body i.e. 300 seats and 5,000 nm range.

Also, a growth of 10% ($0.6 Tn) in large body and 11% ($0.6 Tn) in XL categories are expected as well.

Backlog market shares of Airbus is 88% in medium body (A321 LR and A330 neo), 54% in smaller airplane (single-aisle plane). For larger plane, the backlog is 52% for L – A 350 XWB and 35% for the XL segment (A 380, A350-1000).

Like its peer, Boeing Current Market Outlook (CMO) is dedicated to forecasting new airplane demand over the next 20 years. In many ways, it paints a picture of the future of flight.

B737

Although the numbers do not match the analysis of the trends is the same.

Based on the CMO from Boeing, it anticipates 41,030 deliveries over the next 20 years with a current fleet of 21,500!   

The value of it …$6.1Trillion aircraft value!

3,070 additional planes will be flying over the US to reach 10,130 planes in active duty.

In a nutshell see the executive summary of this Market Outlook as below:

Boeing Global Forecast 2017-2037

Do you want a “piece of the Business”? Question is more …how, right? Then, let’s check below first…

Florida’s NASA rocket ships aren’t the only ones in the Southeast lifting off at high speeds. The aerospace industry is the fastest growing industry in the region. Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become an industry leader, with major firms setting up manufacturing sites all throughout the area.

See the map prepared by The Georgia Electric Membership Corporation below:

aerospace SE map 2018

Foreign firms are attracted to the U.S. aerospace market because it is the largest in the world and has a skilled and hospitable workforce, extensive distribution systems, diverse offerings, and strong support at the local and national level for policy and promotion. According to a study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. Investment in the U.S. aerospace industry is facilitated by a large pool of well-trained machinists, aerospace engineers, and other highly skilled workers with experience in the aerospace industry.

The graphic on the right below illustrates how aerospace exports in the Southeast have been outpacing overall U.S. aerospace exports, increasing by 180 percent from 2006 to 2016, 2.3 times the growth of U.S. exports. Georgia has been substantially overtaking both the Southeast and U.S. overall. Georgia’s aerospace industry exports account for 30 percent of all aerospace exports in the Southeast, followed by Florida with 25.9 percent and South Carolina with 24.7 percent.

Exports Aerospce GA

Georgia Aerospace economic impact has been estimated at $63.8B by the Georgia Economic Development ,12% increase over 2013. 99,000 highly skilled workers are employed by 800 + Companies.

Investors in the U.S. aerospace industry are supported by the Federal Aviation Administration’s (FAA) “gold standard” of aviation safety, boosting the confidence worldwide in the safety of aircraft and aircraft parts manufactured in the United States.

State Specialties

Each state has its own special advantages and contributions that strengthen the industry:

  • Georgia: According to PWC, Georgia ranks #1 overall for aerospace manufacturing attractiveness. Georgia houses more than 800 companies in the aerospace industry, along with a business climate consistently ranked as one of the best in the country with a business-friendly tax code and other incentives. Aircraft manufacturing accounts for more than 70 percent of all employment in Georgia’s aerospace industry, followed by other air transportation support activities and aircraft engine and engine parts manufacturing with 12.2 percent and 9.2 percent, respectively.
  • Florida ranks #2 among states for aviation and aerospace establishments, with more than 2,000 companies employing 82,500 workers. These businesses export more than $5.2 billion in goods annually, making Florida a national leader in these sectors.
  • North Carolina is now second in the U.S. in aerospace growth, and hosts two of the top 10 aerospace and aviation clusters in the South. The state justifies such growth due to unique industry research advantages, 9,500+ aerospace manufacturing employees, cost advantages, and more.
  • Mississippi is home to some of the world’s most renowned names in aerospace: GE Aviation, Airbus Helicopters, Rolls-Royce and Lockheed Martin. All rely on a skilled and productive workforce, comprehensive workforce training, a supportive business environment, a strategic location, low startup and operation costs, and cutting-edge R&D.
  • Over 300 aerospace companies from more than 30 different countries have chosen Alabama, including industry giants such as Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace. Another of these giants is Airbus, which now produces its A320 Family passenger jets at a new $600 million manufacturing facility in Mobile.
  • Some of the world’s top aerospace and defense companies operate facilities in Tennessee, including Vought Industries, Beretta USA, Eaton Corp., Standard Aero Alliance, Honeywell, Barrett Firearms Manufacturing, BAE Systems Ordinance and Bell Helicopters, with more on the way.
  • The total economic impact of aerospace on South Carolina’s economy is $19 billion per year. There are approximately 400 aerospace companies in South Carolina and four aviation related military facilities. These companies and facilities combined employ more than 53,000 people. Of the 17,000 employed in the private sector, approximately 72.2 percent of employees are in manufacturing, 17.8 percent of employees are in air transportation support, and 10 percent are in air transportation.

Ideal Business Environment

Many factors are guiding aerospace firms towards the Southeast:

  • Strong economy – the Southeast is one of the nation’s most robust economies, with a GDP of $3.8 trillion in 2015, which represents nearly 21 percent of the U.S. economy as a whole
  • Growing workforce – the region accounted for 17.9% of all U.S. workers in 2012
  • Growing population – population growth in the Southeast outpaces that of the U.S. overall due to the excellent weather and economic climate, and is currently home to 25.75% of the U.S. population
  • Well-educated population – the Southeast has some of the nation’s top colleges and universities
  • Low unionization – unionization rates in the Southeast are low and continue to decline
  • Low cost of doing business – for major cost measures, most Southeastern states are below the national average

Proximity to numerous space launch facilities in the Southeast helps aerospace firms lower the cost of doing business in logistics, manufacturing and R&D, while positioning them to capitalize on the emerging space market.

The Southeast can present a lucrative opportunity for any aeronautical company looking to invest. But given your company’s particular needs, what would be the ideal market entry strategy? Mergers and acquisitions? Setting up a U.S.-based sales office? Finding a partner to penetrate the market? Direct sales?

Each heterogeneous region of the United States presents its own unique advantages and challenges. Foreign firms need a partner – an expert hands-on in the region’s aerospace business environment – who they can count on. Proper planning and a well-researched approach can put companies on the right flight path for growth and profitability. And passion!

Please contact COGNEGY with any questions you might have: phil.jafflin@cognegy.com

Aircraft, Engine & Parts Manufacturing In the US: A Leaner, Quicker & Brighter Future

Featured

Posted on by
Reply

The aircraft, engine and parts manufacturing industry is climbing due to rising fleet replacement and global air travel, which is driving demand for more commercial aircraft and associated parts.

Key Statistics Snapshot according to IBISWORLD:

key statistics 2018

Market Shares for key US players:

The Boeing Comp 33.9%
GE Aviation 8.5%
Lockheed Martin Corporation 7.7%
United Technologies Corporation 6.7%

Airlines around the world are seeking to upgrade their fleet to newer, more fuel-efficient models. In particular, economic growth in the U.S. and in emerging markets has increased global air travel traffic and enticed airlines to expand their fleets. Year-over-year passenger travel growth for the past five years has averaged 6.2 percent. Low air fares, higher living standards with a growing middle class in large emerging markets, and the growth of tourism and travel relative to total consumer spending in major economies are all driving strength in the demand for air travel.[1] As a result, Boeing and Airbus have surplus demand for aircraft, with combined backlog orders of over 9,000 commercial aircraft.

Breakdown of the total US revenue of $240 B

breakdown of 240B

Key External Drivers:

  • Demand from air transportation
  • Federal funding for defense
  • Non-Nato defense spending
  • Trade-weighted index (The trade-weighted index (TWI) measures the value of the US dollar against the currencies of its largest trading partners. A decreasing TWI leads to lower export prices and higher import prices.

The United States is prepared to soak up this demand. The U.S. is the largest aircraft manufacturer in the world, and is home to the leading companies in the large commercial aircraft, combat aircraft, helicopters, unmanned aerial vehicles and engines segments. In the commercial aircraft segment, Boeing dominates, as it is the only U.S. manufacturer of medium to large size airliners. Since U.S. companies like Boeing hold such a strong market position, any increase in demand by international airlines for new aircraft typically leads to increased demand for U.S. planes.

In a 2015 PwC report, the U.S. was ranked as the top location for commercial aircraft manufacturing. Countries were ranked on several variables, including costs, industry size, and infrastructure/stability/talent. The U.S. ranked first out of 142 countries, despite only moderate grades in the cost and infrastructure/stability/talent categories, because it’s the largest in terms of industry size.

U.S. companies are seeing enormous opportunities to partner with foreign firms in hopes of gaining market shares in new regions. U.S. manufacturers across the supply chain – from makers of engines to electronics and communications systems to airframe parts – have already made quick strides to partner with emerging aviation manufacturers, but this looks to be simply the beginning of a much more globalized industry.

Expansion in global markets carries numerous risks, including but not limited to intellectual property protection, talent recruitment, training, and retention.

Finding a right partner for manufacturing in dollars might be a huge opportunity to drive your global business further.

COGNEGY has successfully worked with foreign companies in advanced industries who want to enter the U.S. marketplace. COGNEGY’s Atlanta, Washington, Philadelphia locations, staff of C-level executives and extensive experience provides foreign firms with a hands-on, trusted partner well versed in the local business climate to map out an partner search and acquisition or a customized plan for corporate growth.

Please contact COGNEGY with any questions you might have: e-mail phil.jafflin@cognegy.com  or call +1 (404) 917-7100 extension 903

 

[1] Boeing Current Market Outlook, 2017-2036, page 7

[2] http://usblogs.pwc.com/industrialinsights/2014/01/20/globalization-pressures-lessons-from-the-us-aircraft-industry/

Aerospace Market

Posted on by
Reply

Launch into the Aerospace Market in the Southeastern United States

Florida’s NASA rocket ships aren’t the only ones in the Southeast lifting off at high speeds. The aerospace industry[1] is the fastest growing industry in the region. Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become an industry leader, with major firms setting up manufacturing sites all throughout the area.

These include Airbus in Mobile, AL; Gulfstream in Savannah, GA; Boeing in North Charleston, SC; Honda Jets in Greensboro, NC, and United Technologies Corp. (UTC) in Charlotte, NC, and more. NASA and the U.S. Air Force launch rockets in Cape Canaveral, Florida.

Aerospace GA

 

 

 

 

 

 

 

 

 

The graphic on the right below illustrates how aerospace exports in the South

Exports Aerospce GA

east have been outpacing overall U.S. aerospace exports, increasing by 180 percent from 2006 to 2016, 2.3 times the growth of U.S. exports. Georgia in particular has been substantially overtaking both the Southeast and U.S. overall. Georgia’s aerospace exports account for 30 percent of all aerospace exports in the Southeast, followed by Florida with 25.9 percent and South Carolina with 24.7 percent.

Foreign firms are attracted to the U.S. aerospace market because it is the largest in the world and has a skilled and hospitable workforce, extensive distribution systems, diverse offerings, and strong support at the local and national level for policy and promotion. According to a study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. Investment in the U.S. aerospace industry is facilitated by a large pool of well-trained machinists, aerospace engineers, and other highly skilled workers with experience in the aerospace industry.

Investors in the U.S. aerospace industry are supported by the Federal Aviation Administration’s (FAA) “gold standard” of aviation safety, boosting the confidence worldwide in the safety of aircraft and aircraft parts manufactured in the United States.

State Specialties

Each state has its own special advantages and contributions that strengthen the industry:

  • Georgia houses more than 800 companies in the aerospace industry, along with a business climate consistently ranked as one of the best in the country with a business-friendly tax code and other incentives. Aircraft manufacturing accounts for more than 70 percent of all employment in Georgia’s aerospace industry, followed by other air transportation support activities and aircraft engine and engine parts manufacturing with 12.2 percent and 9.2 percent, respectively.
  • Florida ranks #2 among states for aviation and aerospace establishments, with more than 2,000 companies employing 82,500 workers. These businesses export more than $5.2 billion in goods annually, making Florida a national leader in these sectors.
  • North Carolina is now second in the U.S. in aerospace growth, and hosts two of the top 10 aerospace and aviation clusters in the South. The state justifies such growth due to unique industry research advantages, 9,500+ aerospace manufacturing employees, cost advantages, and more.
  • Mississippi is home to some of the world’s most renowned names in aerospace: GE Aviation, Airbus Helicopters, Rolls-Royce and Lockheed Martin. All rely on a skilled and productive workforce, comprehensive workforce training, a supportive business environment, a strategic location, low startup and operation costs, and cutting-edge R&D.
  • Over 300 aerospace companies from more than 30 different countries have chosen Alabama, including industry giants such as Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace. Another of these giants is Airbus, which now produces its A320 Family passenger jets at a new $600 million manufacturing facility in Mobile.
  • Some of the world’s top aerospace and defense companies operate facilities in Tennessee, including Vought Industries, Beretta USA, Eaton Corp., Standard Aero Alliance, Honeywell, Barrett Firearms Manufacturing, BAE Systems Ordinance and Bell Helicopters, with more on the way.
  • The total economic impact of aerospace on South Carolina’s economy is $19 billion per year. There are approximately 400 aerospace companies in South Carolina and four aviation related military facilities. These companies and facilities combined employ more than 53,000 people. Of the 17,000 employed in the private sector, approximately 72.2 percent of employees are in manufacturing, 17.8 percent of employees are in air transportation support, and 10 percent are in air transportation.

Ideal Business Environment

Many factors are guiding aerospace firms towards the Southeast:

  • Strong economy – the Southeast is one of the nation’s most robust economies, with a GDP of $3.8 trillion in 2015, which represents nearly 21 percent of the U.S. economy as a whole
  • Growing workforce – the region accounted for 17.9% of all U.S. workers in 2012
  • Growing population – population growth in the Southeast outpaces that of the U.S. overall due to the excellent weather and economic climate, and is currently home to 25.75% of the U.S. population
  • Well-educated population – the Southeast has some of the nation’s top colleges and universities
  • Low unionization – unionization rates in the Southeast are low and continue to decline
  • Low cost of doing business – for major cost measures, most Southeastern states are below the national average

Proximity to numerous space launch facilities in the Southeast helps aerospace firms lower the cost of doing business in logistics, manufacturing and R&D, while positioning them to capitalize on the emerging space market.

The Southeast can present a lucrative opportunity for any aeronautical company looking to invest. But given your company’s particular needs, what would be the ideal market entry strategy? Mergers and acquisitions? Setting up a U.S.-based sales office?

Each heterogeneous region of the United States presents its own unique advantages and challenges. Foreign firms need a partner – an expert in the region’s aerospace business environment – who they can count on. Proper planning and a well-researched approach can put companies on the right flight path for growth and profitability.

Please contact COGNEGY with any questions you might have: phil.jafflin@cognegy.com

[1] The industry includes aerospace products and parts manufacturing as well as other support activities for air transportation.

US MARKET PENETRATION BY ACQUISITION in 2018

Featured

Posted on by
Reply

Market Penetration by Acquisition

Mergers & Acquisitions – Buy Side

Corporations and private equity firms foresee an acceleration of merger and acquisition (M&A) activity in 2018, particularly in terms of the size of those transactions. From a sector perspective, technology and healthcare will drive M&A activity in North America because of the U.S.’s strength in tech innovation and the aging populations in advanced economies. Further consolidation within the energy and raw materials sectors should also continue to generate transactions in the coming years.

Companies involved in M&A have been most interested in acquiring relevant technologies. This in addition to expanding customer bases in existing markets, adding to product offerings and diversifying services rank as top three strategic imperatives. M&A also helps companies improve synergy, diversify, grow, expand their products and increase supply-chain pricing power and market share.

Some factors that have made foreign direct investors (FDIs) favor the U.S. for M&A deals include the recent slow international growth, political crises & ongoing wars in certain areas of the world, along with global economic uncertainty. Despite this uncertainty (listed as a key concern in Deloitte’s 2018 M&A Trends Report), M&A is rising to the forefront. FDIs can use M&A as a tool for both smaller, strategic, niche acquisitions as well as bold transformative deals.

In PwC’s Global CEO Survey, four out of 10 CEOs said their companies are targeting the U.S. for their growth prospects. That was reflected in the 6% rise in inbound deal volume through Q1 2017. A few months later, the pace picked up, with year-over-year volume up 10% through May. This could be a sign that overseas businesses are looking to the U.S. to compensate for uncertainties in markets such as China, South Korea and Russia, where economic prospects aren’t as stable. These survey findings are consistent with other analyses, such as a UNCTAD forecast that the U.S. will be the favorite investment destination of global business through 2018, followed by China and India.

As markets adjust to ongoing political and regulatory changes, the M&A market should be buoyed by strong fundamentals and the potential for pro-business policy changes. In particular, opportunities may emerge from potential new U.S. policies, such as cash repatriation, corporate tax reform and more modest regulation.

Fears of increasing protectionism in 2016 morphed into uncertainty about policy that could affect global trade. However, despite trade barrier speculation, cross-border M&A has already been a hallmark of deal making in 2017, with a resurgence of deals between the U.S. and Western Europe. Companies are looking everywhere for pockets of growth, although the main focus has shifted back to developed markets, according to the EY 16th Global Capital Confidence Barometer (CCB).

Sluggish economic growth slowly spread out throughout the world over the past six years has made it more difficult to find the right partner for accelerating business growth. Only 1 out of every 6 investments by venture capitalists in the U.S. delivers its projected return on investment.  With such dim prospects, how can FDIs take advantage of the M&A momentum, hasten their business growth, and overcome deal barriers?

Companies get the most out of their M&A deals with proper focus, preparation and execution. There is no substitute for a well-thought-out M&A strategy and a solid execution plan to improve prospects for the completion of a successful M&A deal.

COGNEGY can help FDIs every step of the way. COGNEGY has teamed with many foreign firms to identify the right target, engage in project discussions, perform both business and legal due diligence (with trusted partners), outline business valuation, craft deals, negotiate, integrate, and accelerate growth.

Please contact Phil Jafflin with any questions you might have: phil.jafflin@cognegy.com

Value Proposition and Trust

Posted on by
Reply

 

This article is about the difference between perception and reality, between what you think about the US market and what the US market thinks about you.

In other words, we are having a conversation about the reasons why Americans might hesitate to buy your product, even if it is clearly a superior one. It is about what needs to be done to bring them over the edge, and get them to sign an order, a distribution agreement, or a letter of intent.

The American market is abundantly supplied by US and established foreign producers, offering just about everything: quality, diversity, service, information and competitive prices.

Because of its size and high degree of sophistication and standardization, the US market attracts newcomers, American and foreigners, every day.

In other words, it is not an easy market to penetrate.

Thankfully, Europeans usually offer products with a great value proposition; products they think will be hard for Americans to resist. 

This may be true, but a great value proposition doesn’t tell the whole story.

Americans are often labeled as chauvinistic when they appear to prefer “Made in USA” products rather than the “superior solution” Europeans are offering.

In reality, US potential partners and customers are usually open to foreign-made products, as long as they can get something substantial (money, status…) out of them. Their first question will be: What’s in it for me?

But if this first question is easy to answer (great value proposition!), it is immediately followed by a number of worries, questions that may not be expressed, and boil down to trust. To his colleagues, your American contact may be saying something like: “Their product looks great, but can we trust these guys?” 

 

Let’s go over a few of these worries.

How long have they been doing business in this country?

Even if you export to 50 different countries from Lithuania to Malaysia, what your US partners are really concerned with is the South, or MidWest, or whichever region the market is. Worries: What is their local presence? Do they have US references? What have they already achieved in the US? Do they know the competition? Are they member of our industry association?

How important is the US market for them?

This question really means: How long will they stay here? No one likes to invest time and resources in a project that might be abandoned as soon as the Euro starts climbing again. If they have a feeling that you are over-optimistic or unprepared, they might worry about the unpleasant surprises you will face. Worries: How much funding have they set aside to sustain their market entry? What is their expected pay-back period? Who will manage the US operation? How profitable could their US operation be? How much personnel are they hiring?

Where is their US operation located?

Even when your market penetration strategy is based on a well-structured agreement with a US distributor, the frequency of your presence in the United States will often be critical to your success. European mid-sized companies have a tendency to be understaffed, especially the successful fast-growing ones. Travel time to, from and inside the USA takes a toll on overworked management. Worries: Who will take care of sales rep training and motivation programs? How and when will they visit our 178 points of sale? Will they attend our quarterly meetings? Who will prepare the next trade fair?

What are their marketing tools?

Even if English language literature is available, it may have to be put to the test. US terminology and spelling are considerably different from anything you have seen in Europe. Americans are not used to brochures in three different languages, and regular references to European standards or units will raise eyebrows. Poor English syntax or literal translations from a European idiom will make Americans smile, but are not conducive to a strong relationship. Worries: What do they mean with “spanner” and “gearbox”? Will they start using a US marketing agent? How good is their website SEO? Do they have a speaker for the upcoming conference?

Their technology looks great. How about their after-sales service?

Americans will hardly be reassured when told that “our technicians speak English”. They want to know where the service team is located, how long it will take them to fix a breakdown or replace critical parts. Your US partners don’t want to call and leave a voice message to a recorder located 6 or 9 time zones away. Worries: How many technicians do they have on the east coast? How were they trained? Do they also work for other companies? Where do they store spare parts?

Finally, the entire trust issue also depends on whether a bond is created between you and your American partner, between your people and theirs. This is chemistry. Inviting them to visit your company in Europe, or spending time visiting their offices and plant will go a long way.

 

All the above worries will have to be addressed, whether they have been expressed or not.

A market analysis, strategy, marketing and financial plan professionally prepared by US-based COGNEGY is likely to inspire the confidence that your US partners are seeking. You will have all the solutions ready to answer their worries. This is what we have done for over 30 mid-sized European companies in the last 30 months.

After all, if your company has spent decades to develop, produce and market great products all over the world, it would be a shame to stumble on America’s shores because of worries that have little to do with these products. 

Discover the hidden faces of the USA

Posted on by
Reply

You might even be surprised by Charleroi, Pennsylvania or come across Antwerp, Ohio, small towns offering an off-the-beaten-path familiarity to the Belgian tourist tired of the Yellowstone and Times Square.

Some 200,000 Belgians emigrated to this vast country since 1820 and left their mark; farmers, miners, crafts people, and skilled workers from the Walloon glass industry or the Flemish textile mills.

Just like all other settler groups, they stuck together at first, and so gave their region a unique character, a culture and appearance as different from other US regions as the Balkans are from Scandinavia.

Look at the State of Virginia, a member of the Union since 1787, a slave state then, known the world over for its prime tobacco, the proud home of the earliest (1607) settlers and of George Washington.

How could this state even remotely resemble Oregon, a northwestern state four time zones away, covered by huge forests, shaped by the imposing Rocky Mountains, producing some of the best wines I have ever tasted, and under British authority up to 1848?

While most people familiar with the vast expanse of the United States understand its geographic diversity (landscape and climate), they find it very comfortable to deal with just one currency, one language, one cell phone network, credit cards welcome everywhere and familiar benchmarks (from Burger King to Starbucks to Hampton Inn) in the most remote places.

For the Belgian entrepreneur, however, seeking to emulate the spirit of the earlier settlers, the hidden diversity of the various American states often comes as a surprise.

us states

50 Shades of USA

For starters, every single state, has been crafted by its history, natural resources and climate. The latest one, Hawaii, only joined the Union in 1959, 172 years after Delaware, the first state to ratify the Constitution.

Next, every single US state has a republican (with a small “r”) government, meaning one with three branches of government (executive, legislative and judicial). In all 50 states but one (Nebraska), the legislative branch has two chambers (House and Senate). Importantly, all states handle their own affairs, except for those delegated to the federal government.

In other words, if states reluctantly tolerate the federal government, they still influence a wide range of affairs: education, health insurance, most of the laws, economic development, welfare and employment rules, financial institutions, environment, energy, consumer protection, housing, agriculture…

Shaping the health, welfare and education of their people, steering the economy, stimulating or hindering businesses and in countless other ways, the 50 US states have achieved success, failure, and everything in between.

To illustrate how every state tells a story quite different from the America stereotypes prevailing abroad, 19 states have abolished the death penalty, with more to come. The life expectancy at birth is of 86.2 years in Minnesota, and 74.1 in Montana, a full 12 years less. Median household income is $70,004 in Maryland, $36,919 in Mississippi and on average, $50,502 for the entire United States.

Even more important than the present day disparities, in every American state and region things are changing fast and in different directions. Housing prices are recovering in a spectacular way in Florida, Arizona, Nevada… after the real estate meltdown of 2008. Employment in 2014 grew over 3% in states like Utah, Texas, Florida and Nevada, and more than 5% in North Dakota.

Some states see their population shrink through aging and emigration, while others attract certain categories of people: senior citizens in Florida and Arizona, young workers in North Dakota and Texas, high tech specialists in California or Colorado.

Oklahoma’s economy grew 4.2% in 2014, while Wyoming’s expansion was 7.6%.

If average weekly wages remain stuck at a low $794 in Montana and $826 in Maine, workers make $1,321 in New York and $1,315 in Massachusetts.

Why is this important to the Belgian entrepreneur?

Whether you are looking at a first-time US market penetration, the expansion and consolidation of your US “beachhead”, investing in logistics or production assets, setting up a joint-venture or the acquisition of a US company, your decisions need to be based on knowledge, not on fortuitous encounters.

Even if people or potential partners you have met coincidentally in the United States may help, your best decisions are usually made when you have a choice, when you can line up several options, and are able to choose the best ones among them.

Some distribution channels cater to the suburban affluent, others to progressive big city environmentalists.

In some areas, low wages could mean very low productivity, while high wages might reflect a crucial shortage of qualified workers.

In some regions your family or employees will thrive, in others a harsh winter will shut down your business for weeks.

Virginia, North Carolina and Georgia, all on the east coast, are among the top 4 US states ranking best in “regulatory environment”, a crucial component of the business friendly climate you would like to operate in. Do you really want to go through California’s jungle of earthquake-related rules and specifications, easily adding 20% to the cost of your greenfield production plant?

New York, arguably the most expensive US city, combines high labor costs and powerful unions, an unwelcome familiarity among a wealth of more attractive features.

Decisions, decisions… they are not that difficult to make once you possess all the relevant information.

U.S. gas export boom

Posted on by
Reply

It would be difficult to replicate U.S. shale boom, expert says

The shale boom will remain uniquely American for years to come, thanks to the combination of capital, talent, legal system, infrastructure and market that cannot be easily replicated, geopolitical strategist Peter Zeihan said. “This is not something that your average state-run thug can do.” He added.

I spent a full week attending the 2014 OTC Show (In Houston) early this month on behalf of a client distributing its offerings in the energy sectors. I have been quite impressed by the industry dynamics and how big is the boom. The past ten years has seen the global offshore industry bring on stream some of the largest and most complex projects ever attempted. (See more)

The International Energy Agency (IEA) and other expert sources expect oil to remain the fuel of choice up to at least 2035, with a 27% share (down from 33% today) whereas gas is expected be the only fossil fuel to increase its share. Global demand for natural gas is to grow by 64% by 2040. At the same time natural gas prices are to remain strong evidenced by a near term price increase, settling to $4.38/mmBtu in 2020, in the long term prices are expected to rise to $7.65 by 2040. Importantly, the US is projected to become a net exporter of LNG by 2016, spurring the development of new LNG terminals – currently 6 have been approved and 22 are under evaluation.

Whereas the market for Exploration and Production of fossil fuel is recognized to be very much an offshore operation, recent push towards both smaller and more remote fields have seen the growth of floating production systems: 154 new FPSO (Floating Production Storage and Offloading) ships have been identified as well as 5 FLNG (Floating Liquefied Natural Gas) projects that are fully financed.

Furthermore, LNG facilities that have been traditionally built onshore are moving offshore – under pressure of cost – with the increased use of Floating Storage and Regasification Units (FRSUs) located just offshore and connected by pipeline with the distribution facilities. This option is up to 50% cheaper than current onshore solutions.

It is important to note that the use of LNG has grown much faster outside of the US than it has domestically, therefore much of the research and development, design and testing activity has occurred in other countries. Consequently, the international standards applied to LNG operations – wherever they are located – have been heavily influenced by policies and regulations of countries such as Japan, South Korea and some European Nations. In the US LNG is regulated at a federal, state and local level, as well as by non-governmental regulators and standards organizations.

The market for the design and build of the FPSO and FLNG is dominated by a relatively small (but still …) number of players (KBR, TECHNIP, JGC, SBM Offshore, Modec, Bechtel, Teekay, Technip, Samsung, …) who are capable of delivering complex projects of this size, often operating as a consortium. Although often vertically integrated these FEED (Front End Engineering and Design) and EPIC (Engineering Procurement Installation Commissioning) capable companies rely on engineering specialist companies to actually deliver all the specific systems.

See you at OTC 2015!

Please contact me with any questions you might have,  phil.jafflin@cognegy.com

Competitive Manufacturing

Posted on by
1

Summary
How things change… A new BCG study released on April 25, 2014 throws away out-of-date perceptions on which countries have the lowest manufacturing costs. If China is still ranked #1 in terms of global competitiveness, its position is now under pressure with the United States a close second. The world is not divided anymore between “low cost” emerging countries and “expensive” advanced economies.
What does it mean for investors and decision makers? Where should your next production plant be located?

Manufacturing Cost Competitiveness (MCC)
BCG’s study tracked 25 major exporting countries, accounting for close to 90 percent of global exports of manufactured goods. Their MCC index is built on four pillars of manufacturing competitiveness: wages, productivity growth, energy costs and currency exchange rates. Adjustments were made to take into account other drivers influencing a nation’s competitive position, such as available infrastructure, security issues, ease of doing business, corruption level…

Ranking and evolution
Apart from China and the USA, the final Top Ten MCC ranking includes the U.K. (4), the Netherlands (6), Belgium (9) and France (10) but this “photo finish” doesn’t tell the full story. A clearer picture is offered when classifying the countries in four categories, reflecting the trend of their competitive position. Highlights:

   Under Pressure: Rapidly deteriorating competitiveness affects Brazil, Russia, China, Poland, Czech Republic…
   Losing Ground: High cost countries coping with rising energy costs, high wage costs and no productivity gains. Belgium, France, Italy, Sweden…
   Holding Steady: Countries maintaining their position relative to the global leaders: Netherlands, U.K., India, Indonesia.
   Rising Stars: Increased competitiveness with gains in all four index components: U.S.A., Mexico

Click here for the press release on the BCG study.

What are the implications for business leaders?
The first message is that decision makers need to keep track and adjust to dramatic and rapid changes. Old (as in ten-years-old) perceptions stand in the way of new realities. “Overall costs in the USA are 10 to 25 percent lower than those of the world’s ten leading goods-exporting nations other than China”, the report says, and on par with Eastern Europe.
Entrepreneurs do not move their production facilities based on the latest trend or hype. Such a move has huge implications, is very costly and requires an economic horizon of at least one, usually two decades. This is true for medium sized firms as much as for global corporations.
This is why managers and investors should base such a strategic decision on solid cost structure evidence and the analysis of long term trends. Just like when buying shares on the stock exchange, if you follow the mainstream opinion, your late move is likely to end up in painful losses.

Where should your production plant be located?
Whether looking at added capacity or transplanting production, the decision of where your new plant should be built is obviously the subject of a careful strategic analysis. You will make a first selection of countries where wages, energy costs, productivity and currency all point in the right direction, and where the other drivers (ease of doing business, infrastructure, stability, rule of law…) are consistently positive.
Each firm is however a unique case, only partially influenced by macroeconomics. After all, your first concern is with your market, your customers, your people and your identity. This is why you will also want to consider a broad range of company-specific criteria, such as:

  • Competitive sourcing and efficient supply chain
  • Location and dynamics (growth, innovation) of your main markets
  • Availability of skilled labor and qualified specialists
  • Ease of adjustment to the local culture
  • Global market prestige and local market access
  • Access to local funding.

Building a production plant in a distant, foreign country, is a major strategic decision, one that might ensure growth and profitability for decades to come, if done right. When deciding where to move, take a new look at today’s evidence and tomorrow’s evolution, not at yesterday’s performance.

Flemish exports reach record height in 2013

Posted on by
Reply

According to an article in the Flemish newspaper De Tijd exports from Flanders – one three regions in Belgium, the others are Wallonia and Brussels – grew in 2013 to a new record height. In comparison with the previous year exports increased by 1.64% to 294 billion euro. Flanders represents 83% of all Belgian exports. All the numbers originate from Flanders Investment and Trade.

Aside from all these positive macro-economic data, COGNEGY itself has seen a growing interest for the US market by many Belgian SMEs. More feasibility studies than ever before are being run, and more client businesses are enjoying our support with the execution of their growth strategies on the US market.
Another notable positive trend is the realization by many entrepreneurs that such a market entry has to be well prepared. Far more than in the recent past, they recognize the importance of early identification of ‘hurdles‘ and ‘springboards‘ (the opposite of a hurdle, an accelerator) and the understanding of competitive environments, which leads invariably to a stronger value proposition and in turn to more successful customer acquisition.
The original text was published in De Tijd – and can be found here http://www.tijd.be/r/t/1/id/9484774.
All numbers quoted originate from FIT – Flanders Investment & Trade.

 

Georgia #1 state for business

Posted on by
Reply

Georgia – that is the state in the US and not the country – has been named #1 state for business by the Site Selection Magazine.

In a press release by the office of Governor Nathan Deal, Site Selection editor Mike Ahrend was quoted saying:

“Executives at companies investing there regularly point to its many logistics advantages, cutting-edge workforce training programs, particularly Quick Start, and proactive economic developers on the state and local levels who understand the business requirements of today’s capital investors.”

Read the full press release here: http://gov.georgia.gov/press-releases/2013-11-04/georgia-named-no-1-state-us-business

So, just like Ray Charles you should have Georgia on your mind!