location…location…location…act 2

In this two-part article we are discussing the fact that many entrepreneurs do not use a logical process to decide where to locate their new business when arriving in the USA.

In the first act we looked at the importance of: time zones, customers and competition, vendors and transport, incentives and support, and the quality of employees.

Let’s move on to act 2 and discuss the second set of 5 elements in play…

6.    Cost of living

Can be very different from area to area, a nice suburb in a metro area with great schools will be much higher than a location 100 miles out in the country side. New York is on average double of Atlanta and Miami alike – play around with different calculators:

–       http://money.cnn.com/calculator/pf/cost-of-living/

–       http://www.bestplaces.net/col/

7.    Legislation

Employment laws and the impact of unions differ greatly from the North to the South. Many southern states have so-called ‘at will employment’ laws enabling employers to adjust their workforce quickly to new opportunities or an economic contraction.

8.    Climate

The North has winters with truly disruptive snow and ice, if road transport is important to you, it might not be the right location. Florida sees the odd hurricane that can actually close down an entire state, and the South can be very hot and humid in the summer… take your pick with a clear mind.

US climate

–       http://www.usclimatedata.com/

9.    Connectivity

Doing business in the US means flying. How easy is it to get to the airport? How often are flights delayed? How many direct flights to most (all) of your destinations are available from your airport of choice?

How is the commute to and from work – map it out for your team.

–       http://www.aci-na.org/content/airport-traffic-reports

10. Family – schools – education

As it is your decision where to settle, it is your responsibility to think through the impact of the relocation, for you and many more after you. It has been abundantly shown that if the other half of the couple is not happy with the relocation choice – be it employment, the schools, shopping, entertainment, sport, culture, neighborhood, friends, … it will become the venture’s highest hurdle.

Most importantly, know how to weigh, balance and interpret all these elements in play. Do not hesitate to define the unique mix that is important to your venture’s success. Developing a ‘weighted criteria decision matrix’ comparing all the options can be a very helpful tool to remain objective.

Also – do not underestimate the power of the southeast – read Phil’s latest article:

https://doing-business-in-usa.com/category/phils-posts

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Where to start a Business in the US? One Example:

Location, location, location! As my colleague explains in his post, the approach to select a corporate site should be articulated. Let’s focus on the Southeast for example.

After defining the target markets, the marketing mix, the partner or target profile, along with other appropriate criteria for the operation like sourcing, financing and funding needs, economical impact and organizational implication, etc., the entrepreneur might have a good idea about the right place for successfully growing a venture.

Other factors that might play a role include infrastructure, access to talented resources, cost of living, economic growth rate, local market size, taxes, economic incentives, schools, prospective partner location, the cost of doing business relative to the U.S. average, and the time difference between the location and the home country.

An article written in French by journalist Jean-Pierre Gonguet describes the Southeast‘s vision and the strategy for becoming a global logistic platform and high-tech hub. “Atlanta veut se mettre à l’air et a l’eau.” Read more in La Tribune (If you do not read French and want more information, let’s have a conversation.) Gonguet was part of the delegation from France during the France-Atlanta 3rd edition last November.

Without being specific on a business model, focusing only on the economic environment makes sense. The Southeast—Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee— is the leading market for population and economic growth in the U.S.

The Southeast:

  • 7th largest economy (GDP) in the world at $3.15 trillion,
  •  home of 70 million people (+8 million in the last 10 years),
  • Atlanta airport is ranked # 1 in world in passenger volume and has 19 cargo-only carriers,
  • headquarters for 12 Fortune 500 and 15 Fortune 1000 in Metro Atlanta,
  • More than 80% of U.S. consumers can be reached from Atlanta in two flight hours or two truckload delivery days,
  • 40% of North American manufacturing and distribution locations are located within 800 kilometers of Atlanta,
  • Atlanta ranks # 2 among America’s most wired cities.

Cost of doing Business in teh US 001

“Source: KPMG’S 2010 Competitive Alternatives Study, Guide to international Business Location”

Despite the statistics, the best business location for a business model might be in San Francisco or in the Mid-West. This is perfectly fine! In other words, the best location for establishing a new venture is a complex decision indeed but key to successful operations.

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.

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.