USA: Your options for accessing the market
One way to help you define your best route to your US market is by first defining your own objectives for such a significant undertaking. These might be objectives for profit levels, types of contract, human resource levels and calibre of your degree of control over the US operation, among others.
|Profits||Maximise over the long term||Reinvest for future growth??|
|Contracts||Detailed measurable results||Brief, adaptable, ambiguous??|
|Staffing||Employ maximum number of local people||Economies from production processes, not through people??|
|Control||Regular reporting on progress against objectives||Retain 51 per cent of shares in the venture company??|
Your main entry options are:
• Agents, distributors, representatives
• Mail order catalogues
• Own office with own staff
• Own office with partner’s staff
• Contract sales consultants
• Joint venture/strategic alliance
Despite the similarities in language and culture between the UK and USA, each year hundreds of UK companies make the foray but soon return home empty handed, having neglected some fundamental cultural and structural differences which could have saved them large amounts of time and money.
Some considerations for you and your team to consider include the following:
One option is the ‘go it alone’ route, which means putting your own managers and staff on the ground in the US and starting your office organically.
Another option is the ‘alliance’ – also sometimes called a joint venture, joint marketing agreement or strategic alliance – which usually means finding a mail-order bride and then gambling that the marriage is a long, faithful and rewarding one.
Then there’s the ‘virtual presence’ option, which involves having a US presence of some kind by way of a virtual office or staff who represent your interests in a more or less permanent way.
And then there’s the ‘hired taskforce’ method, which involves paying a marketing consulting firm, contract sales force or marketing organisation for a fixed period to go out and find leads for you in the US and feed them back to your UK base.
And last, but not least, you may want to ‘acquire’ a local company which already has a US presence in your target markets, some goodwill established and perhaps a reputation in the territory that helps your own products or services.
Go it alone
Let’s start with the positive elements of this approach. Not only does the ‘go it alone’ method mean you have management control on the ground, but it also means you have first-hand local market intelligence and direct access to customers. On the down side, the learning curve for exceptional performance in that US market will be long and steep and you will find you need to meet the financial costs up front, which will be high, and the risks/failures are all yours.
On the plus side, you have access to local market intelligence, access to customer bases through your partner and shared risk and rewards with another organisation, whether or not these involve customer development and retention. You might even find the alliance nets you some benefits in your UK market by way of your partner, reciprocally, needing your help to develop his UK business, or that the alliance gets you access to technologies you may not otherwise have.
On the other hand, with alliances you tend to lose some control as far as marketing, information systems, human resources and financial decisions are concerned.
The learning curve is a little shorter than the ‘go it alone’ path, but still pretty significant. The other factor weighing against your alliance is the fact that you are at the mercy of your partner’s reputation and actions in the local market, and what effects these will have on your brand, reputation and/or marketing strategy. Also let’s not forget that the time involved in screening and then negotiating with the series of alliance partners you’ll want to interview is extensive. You ought to budget about 12 months for the entire process, from courtship to marriage.
Not only is this a very affordable, ‘instant’ route to establishing your US base, but it gives the right impression to those with whom you are trying to do business – that you are taking the US market seriously enough to put a base there. The costs, however, are not merely the office and answering service you hire, but the fact that you can’t respond personally to your clients/customers who might need your help at short notice. Your control, therefore, over problem-solving is fairly limited. Your learning curve is even steeper than the ‘go it alone’ approach since you probably have noone from your team dedicated to feeding back market trends and intelligence.
By hiring a SWAT team in the States, you are able to flatten your learning curve and establish your base cost effectively and rapidly. But, do consider the fact that your ability to control the quality and speed of response of such experts might be limited by distance and time zones.
Getting local market information may also be sporadic, as the team is focused on developing your business rather than providing you with market research, which is a different business activity. The trick here is managing these experts well and defining in advance what you want from them within a realistic timeframe.
Lastly, you have the option to buy that market share in the form of a competitor or supplier that is already in the US. Not only does this get you instant presence, local market intelligence, access to customers and complete quality control, but also a going concern whose infrastructure is already in place.
Against these benefits is the price tag of your target, which might be quite high considering the real returns you achieve. The time involved in identifying and researching these targets can be monumental, and this often distracts your senior management to the detriment of your on-going business in the UK. Yet another cost to be considered is the legal fees for completing the transaction, which can also be significant if there are many subsidiaries or companies that you are purchasing.