location…location…location

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”.

Adjust to local market conditions to penetrate the market …

Learn more when Airbus Americas Chairman speaks at Georgia Tech on March 13.

By establishing a manufacturing presence in the U.S. today, Airbus also improves its chances of being selected in the future for U.S. defense contracts, according to business analysts. Read full article by Phil Bolton. Read more

The French American Chamber of Commerce organizes this event, and thanks to the Chamber, COGNEGY is a proud sponsor. Register here.

Strategy: The Airbus investment in the Southeast raises the region’s profile as a center for aerospace development, and suppliers have already moved to the area since the Airbus announcement about opening a facility in Mobile last year. Penetrating a new market by following the tail of one’s customers is a great way to mitigate the risks. Needless to say, it costs a lot less to retain a customer than acquire a new one.

“You can observe a lot by watching. “ Yogi Berra (Yogi was elected to the National Baseball Hall of Fame in 1972.)

Comment les investissements des sociétés Françaises à l’étranger impactent – ils la production et l’emploi en France ?

En pleine crise économique, cette question parait encore plus légitime et apolitique à mon sens et toutes les parties prenantes d’une entreprise doivent se la poser. Mais comment répondre en faisant abstraction de certains préjugés et avec des faits ?

Dans son étude, l’Insee apporte une réponse. Son article évalue les performances des firmes multinationales dans l’industrie manufacturière Française, et les compare à celles des entreprises uniquement exportatrices et domestiques.

<< Les meilleures performances des entreprises implantées à l’étranger s’expliquent en partie par un effet de sélection : investir à l’étranger s’accompagne de coûts fixes importants et nécessite un niveau de productivité relativement élevé. Pourtant, l’implantation à l’étranger joue un rôle important dans la fragmentation des processus de production qui expliquerait en partie les bonnes performances à l’exportation des entreprises allemandes. (Fontagné et Gaulier, 2008).

EXPORT

Pour Crozet, Méjean et Zignago (2008), les exportateurs ont, en moyenne, une productivité supérieure de 11 % et cette prime se retrouve dans la différence de salaire moyen et de taux de marge. Pour Bellone et al. (2008), les firmes exportatrices produisent 2,5 fois plus que les firmes simplement domestiques ; elles sont deux fois plus grandes, plus intensives en capital de 24 % et versent des salaires plus élevés de 10 %. La productivité du travail serait supérieure de 40 % mais décroissante avec la taille de l’entreprise. En termes de Productivité Totale des Facteurs (PTF), la prime des exportateurs, qui se situe autour de 5 %, tend à augmenter avec la part de la production exportée.

IMPLANTATION

Les primes à l’implantation dépassent largement les primes à l’exportation, en tous points de la distribution.

Il apparaît que toutes les primes sont positives et significatives, et que les primes à l’implantation sont supérieures aux primes à l’exportation.

La prime de chiffre d’affaires s’accompagne d’une prime de valeur ajoutée : les entreprises implantées à l’étranger ne se contentent donc pas de revendre une production réalisée à l’étranger, mais se caractérisent bien par une contribution au PIB plus importante. Elles rémunèrent mieux leur personnel, ce qui reflète probablement un niveau de qualification plus élevé.

Enfin, la prime de productivité pour les entreprises implantées à l’étranger représente le triple de celle calculée pour les firmes exportatrices.

CONCLUSION

La comparaison exhaustive des performances des multinationales de l’industrie française avec celles des firmes seulement exportatrices et domestiques montre que les primes à l’implantation sont élevées et résistent à l’hétérogénéité de l’échantillon, comme à la prise en compte de caractéristiques non observables des firmes. Elles proviennent tout à la fois d’un effet de sélection et d’une amélioration des performances grâce à l’implantation à l’étranger. Ce dernier résultat est de nature à tempérer l’inquiétude que font peser les délocalisations sur l’emploi et l’activité en France. Il conviendrait toutefois d’approfondir ces résultats en décrivant plus précisément les mécanismes à l’œuvre derrière les effets d’apprentissage. >>

Il est clair que l’article provient d’un organisme statisticien mais cela permet de donner un éclairage dépassionné et factuel sur l’investissement à l’étranger.

En premier lieu comme pour tout investissement, il faut une réelle opportunité sur le marché qu’il convient de bien sélectionner et préparer au préalable.

Fill in the blank …

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!

Gateway to North American Market … What’s in it?

Even if you believe that you have a great business model, you still have to find a cost-effective way to market and sell your offer/products and services in the US. Wouldn’t you agree?

Let me tell you a true story. This is what an actual entrepreneur said: “I know the US market and how to approach it. My strategy is quite simple and I do not want to waste time and money on a business plan; I want to focus on selling. I need to find distributors and someone to call on prospects. I heard about some internship program, so I am going to hire a young talent and put her/him in a Business Center to sell my products.”

In other words, the entrepreneur wants to use under-experienced, under-skilled resources for prospecting. Although the training sounds great for the young talent, the model is quite unfair if the focus is on results.

Prospecting is costly because, in essence, the success rate is quite low. Getting the chance to talk or meet with the right prospect at the right level is part of your cost of sales, and the cost of sales is high in many markets. When you prospect, your first chance is quite often the last one.  Consequently, carpet bombing is not only expensive, but it can damage your brand forever.

Before you begin distributing, you need to identify how, where, and to whom you intend to sell the service. You also need to assess the competition and figure out how much money you need to start the business and keep it running until it is established.

The information we gather in the market feasibility enables us to:

  • List in detail all the things we need to make the business work;
  • Identify logistical and other business-related problems and solutions.

Beyond that first quick step, our gateway “a la carte” might help you decrease costs, mitigate risks and accelerate development. This business platform might be useful in your Business Development Activities (Legal, Marketing, Office, Finance, Logistic, Operations, Invoicing, Recruitment, etc.), Sales & Trading Support, and Implementation Support (JV, Acquisition, Strategic Alliance, Representation).

“You’ve got to be very careful if you don’t know where you’re going because you might not get there.” – Yogi Berra (Yogi was elected to the National Baseball Hall of Fame in 1972.)

What are you waiting for…?

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…

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…?

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.

Is the timing right to enter the US market?

According to Gregory L. Miller, Chief Economist of the SunTrust Bank, Inc., the US economy will grow by 3.5% in 2012 with unemployment rates decreasing to 6%, while the European zone will hit a recession. With such predictions you must be considering to enter the US Market either by acquisition or with a JV, a pilot or a partner?

In any case the first logical step is to kick off a market feasibility study. Now, if you have not done so yet, why didn’t you?

The market feasibility will determine the viability of the Biz with an emphasis on the identification of potential problems and will answer one key question:  Will the business be profitable and should I go ahead?

Before you even start writing the business plan, you need to identify how, where, and to whom you intend to sell your service or product. You want to assess the competition and figure out how much money is needed to start your business and keep it running until it has found traction. Wouldn’t you agree?

The information you gather and present in your feasibility study will help you to:

  • List in detail all the things to make the business work
  • Identify logistical and other business-related problems (technical feasibility, legal) and their solutions
  • Develop marketing strategies to convince investors, banks or even shareholders that your business is worth investing in
  • Serve as a solid foundation for the development of your business plan and the search for the right partners

Even if you believe that you have a great business proposition, a cost-effective way to ‘market and sell’ the offer (combination of products and services) onto the US market still has to be found.

Be the outcome ‘launch’ or ‘abort’, the investment in a solid market feasibility study is never a waste of time or money when deciding to enter such a highly competitive market.


Who cares?

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.