International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Accessing the United States Market By Elliott Black President of EMBA Inc. The United States, with its 265,000,000 consumers and a $7.6 trillion gross national product, is a most inviting market for most companies. The opportunity is a big one with many rewards but with many challenges. What are the barriers to success? Where does one start? Entering the U.S. market is relatively simple. Businesses can enter in one of several ways. They can open their own facility in the U.S. with their own staff. Another way is by acquisition. Acquiring a company in the same or similar field can offer a jump start to a new market activity. A third way is by joint venture. This can take various forms, including private label, supplying on an OEM basis or jointly forming a company to market in the U.S. Whatever route is chosen, be advised that the majority of companies that enter the U.S. take three years to get to profitability. What are the barriers to entry? Generally speaking, there are none. There are no government approvals required of non-U.S. based individuals or businesses to invest in the U.S. or to acquire businesses, except in a few specific industries. The industries that have some restrictions on foreign involvement include banking, air transportation, coastal shipping and fishing, mining, electric and gas utilities, and broadcasting. Some states have differing limitations and requirements that must be met by both domestic and foreign investors. Outside of these, a foreign-based company is treated no differently than a domestically based U.S. company. There are no exchange controls or restrictions on any types of inbound or outbound payments except for political reasons on transactions involving certain specific countries. Profits, dividends, interest, royalties, and other income can be transferred without restriction other than the withholding of taxes where applicable. Since the dollar is freely convertible, business transactions can be accomplished in any major currency with equal facility. There are no limits on the amount of currency or travelers checks that either an American or foreigner can bring into the U.S. or take out, other than notification to customs of amounts greater than $10,000 or its foreign equivalent. U.S. currency is freely convertible into foreign currencies without restriction other than notification to the U.S. Treasury Department of transfers in excess of $10,000. This is done to monitor any possible transfer of funds involving drug trafficking. Exporting to the U.S. Most goods and services can be imported to the U.S. free of restrictions and without a special license. There are a very few items that are prohibited, some which are subject to annual quotas and some which are subject to extra tariffs. These items change periodically and it is a good practice to check with the appropriate U.S. trade office to determine what is on the current lists. What do I need to know about the U.S. market? As a business would not consider entering a new market without thoroughly researching the market and developing a business plan, entering the U.S. market is no different. The process should be the same.ÊAs mentioned above, entering the U.S. market is the easy part. Succeeding is a different issue. The U.S. is a competitive market and full of complexities. The business plan needs to be well researched, identifying the various factors for success, and spelling out both the strategy and tactics for properly positioning one's product/service in the U.S. marketplace. The U.S. marketplace The U.S., while viewed as being one country with a common currency, is anything but a single market. When considering selling to the U.S., the following elements need to be investigated: Size - both geographically and population-wise; diversity; regionality; structure - governmentally, culturally and business-wise; complexity; seasonality; channels of distribution The U.S. is a country of numbers. Its population is over 265 million people. The gross national product is $7.6 trillion, and its industries have been segmented into 9,999 classifications, including the infamous "catch-all" category "Not elsewhere classified" - better known as "Miscellaneous." The U.S. is made up of 50 states having a total of six-time zones and a wide range of climate and seasonal differences. A typical day could see temperature variations across the U.S. of 120 degrees. Communications between parts of the country must be carefully planned due to the time differences. (New York to San Francisco is three hours, with Hawaii and Alaska adding another two hours). Being a relatively new country, the U.S. has a culturally diverse base. Major groups include Caucasians, Hispanics, African Americans, Asians and American Indians. It is a true "melting pot" of cultures and backgrounds. Chicago alone has the second largest Polish population outside of Warsaw. Language is relatively common enough in the written word, but is definitely Americanese as compared to British English. There are numerous regional dialects that provide occasional confusion from one area to the next. New England (Maine, Vermont, Connecticut) has its own brand of conversational English, as does the Southeastern U.S. and areas such as New Orleans, Texas and Boston. There tends to be an unusually high number of cliches (slang) utilized in both verbal and written communications. Distribution There are three basic types of distribution channels found in the U.S.: 1. direct-to-user, where the manufacturer/marketer offers the product on a direct basis to the end user - be it consumer or industrial; 2. direct-to-reseller, where the manufacturer/marketer sells to the dealer/distributor, who, in turn, interfaces with the end user directly; 3. multi-level channels, where the manufacturer sells to a wholesaler/distributor, who, in turn, sells to a reseller/retailer/dealer, who, in turn, sells to the end user. Selling methods employed include: Private label/O.E.M. - selling directly to a marketer or manufacturer who either uses the merchandise as part of its product, or applies its label to the product and sells it under its marketing program. In these situations, all of the marketing and related expenses are handled directly by the customer. Direct sales force, where a team of sales people work directly for the supplier calling on the appropriate distribution channel. These people are company employees and, as such, are expected to be contributors to the company's success. Manufacturer's agents (reps) - These sales people represent more than one manufacturer and work on a strictly commission basis. While representing a variety of products, they do not have competing lines but, rather, have complimentary offerings. Marketplace complexity The marketplace in the U.S. is most complex. There are well over 10,000 trade shows/fairs/expos and over 22,000 trade associations. There are over 4,600 trade and industry publications. The business media consists of both print and broadcast, and is both local, regional and national in scope. Consumer media is even harder to sort through as the options presented are more varied. The last few years have seen a dramatic growth in electronic media (the Internet, e-mail, etc.). This will only grow over the next several years. Strategic issues to be considered When evaluating entrance into the U. S. marketplace, there are several strategic issues to be considered: The size of the market for the product/service. primary target market - who are the customers for the product/service. What is the nature of the distribution channel to get the product/service to the end user? Who are the major competitors and what are their strengths and weaknesses. What strategies do they employ to the marketplace. What are the trends in the marketplace. What is happening both near and mid-term. Customer identification when identifying the target market, the questions to be asked include: Who are the key customers? Where are they located? Who are the decision-makers within each customer? Who are the key influencers - the ones who impact the making of the decision? What are the "hot buttons" - what are the factors they are looking for that provide the difference in deciding on one product/service over another? The Rule of Seven As part of every marketing program, it is important to structure an integrated marketing communications plan, coordinating all the communication elements. It is important to keep in mind the "rule of seven" in putting your program together. Simply stated, the "rule of seven" states that one must impact a prospective customer at least seven times, in as many different ways as possible, to turn them from a prospect into a customer. The individual communication elements to be considered include: Advertising Public relations/publicity Trade shows Brochures/fliers/catalogs Direct marketing Newsletters Other Sales structure The structure of the sales activity, likewise, needs careful evaluation. The options to be investigated include: Direct sales force Master distributor Exclusive vs. non-exclusive distributors Manufacturer's reps Methods of warehousing and distribution of the product/service> Local, regional or national Improving U.S. buyers' understanding While it continues to improve, there is still a slight reluctance on the part of American buyers to understand the impact of global economics. It is important to improve the U.S. companies' understanding of your company's/country's core competencies. You need to stress the capabilities and value of doing business with your company/country. This can be done through various methods, including: Brochures Videos - a short 6-to-9 minute video showing your factory and its products can prove to be most beneficial. CD-ROMS Trade shows in your country Trade missions to the U.S. It is important that your message be consistent and frequent, that it capitalize on your company's/country's capabilities, and that it stresses the new product opportunities. While the above can be considered a general primer of information needed to effectively attack the U.S. market, there are specifics that will vary by product/service and by industry. Many of the distribution techniques found in the U.S. are in place in other world markets. Several remain unique, for the time being, to the U.S. In the grocery trade, it is quite common to encounter slotting (or placement) allowances. The retailers require the vendors to pay for the "privilege" of having a slot (position) on their shelves. This is primarily true for food items. In the computer software industry, much of the business and sales come through VARs (value-added resellers), who call on the end-users and assist them by recommending the proper products, installing them and bringing them up to speed. The VARs function as consultants, with the added capability of selling the product and assisting in its installation. When this article was first published, Elliott Black was president of EMBA Inc., a Northbrook, Illinois-based marketing and management consulting firm serving a wide range of small and mid-sized clients. Web Advertise on this site Put your company on this site!