How to achieve your American dream
It’s the world’s largest economy, but the most competitive. So how do you make sure you’re among those who can crack the US market? Ahead of his keynote speech at UKTI East’s ‘Building Success in the US’ event on April 22, Santander UK’s America expert, Alvaro Alamillo takes us through the challenges and how they can be overcome to achieve your American dream.
Why should UK businesses look to the US as a market for export?
According to the Office for National Statistics, it is also the largest single export market for the UK. In 2014, it accounted for 13 per cent of all UK exports (£36.9 billion). Trade links between the UK and the US are extremely well established and the US is a great choice for UK exporters. Both countries are culturally very similar and, of course, speaking a common language can facilitate international operations.
The US economy has seen growth of at least 1.8 per cent since 2011 and a transparent and predictable government means relative stability. British products are also well known and respected in the US; indeed, the power of ‘Brand Britain’ can often be underestimated in the UK.
When is the best time for SMEs to start thinking about international expansion?
Before deciding fully to target the US, it pays to do some research into demand for relevant products and services, including analysis of the competitor landscape.
How many players are there in the market? Is it growing or shrinking? What are the relevant publications and newspapers saying about it? And what is the regulatory landscape like?
If possible, visiting the market is a must – trade fairs, for instance, are a fantastic and relatively direct and cost-effective way to showcase products and to research what else is already available in the market. It is also worth having initial (telephone) conversations with distributors, for instance, as well. They are usually very happy to make business connections and discuss market dynamics.
Preparation is vital for all stages of international expansion, from the very early stages of identifying the markets with the highest demand for their products or services, through to calculating shipping costs and understanding customs and labelling rules right through to understanding how you will distribute your products and identify and connect to potential customers. In the context of the US, these are all particularly apt.
Don’t be afraid to also use tools and seek advice from relevant trade bodies such as UKTI and associations, as well as the private sector – there is a wealth of information and support available for UK firms looking at the US as a growth market.
What do you think holds some companies back from exporting to the US? And how can these issues be overcome?
Exporting to any new market can be a daunting process. In our opinion the two biggest factors that hold businesses back are: a lack of knowledge and fear. Understanding the US market and all the particularities that come with it can be difficult. For instance, local tax and legal environments are often complex and without the right knowledge it can be hard to know where to turn. There is also the fear factor: how to ensure you receive payment for your goods; knowing which partners to trust; and connecting to potential customers are just a few examples.
One of the most common obstacles in the US is the sheer size of the market. While a large market means high consumer demand, it can also lead to market saturation.
The US is almost two and a half times the size of the European Union so a UK business cannot expect to conquer the whole market from day one. This means that choosing your entry point is crucial. A company exporting fertilisers, for example, may want to focus attention on the top US agricultural states of California, Iowa, Nebraska or Minnesota, whereas a biotech company would probably be better placed looking at the East Coast – Massachusetts in particular. This is again where preparation and research come into play.
While there are challenges associated with exporting to the US, the World Bank ranks the US as the seventh easiest country to do business with, so UK businesses should not be deterred from exploring the US as an export market.