Consumers who make the effort to understand how markets in the US work can reap big rewards

The smiles on the faces of world leaders at this year’s G20 summit in Canada disguised some deep differences of opinion. European leaders – the UK included – have set about sharply cutting the deficits that threatened to overwhelm the continent. But across the Atlantic, US president Barack Obama seems more willing to spend to get out of recession. So this may not be a bad time to look at breaking the US market, which, historically, has been challenging. 

Some Welsh companies have already taken the plunge and located in the US. IQE, the computer chip technology company in Cardiff, has been there for 20 years. 

 

 

“We’ve grown since we’ve had a presence in the US,” says IQE’s Chris Meadows. “In terms of sales, it has given us a lot of confidence. And having that presence gives the Americans confidence in our company.”

 

 

Meadows recalls how many large companies in the US cannot call international numbers, creating an instant barrier for Welsh companies seeking to trade there. “That’s why it’s essential to have an American presence,” he says.

 

 

Another problem is scale. “There’s a tendency for Welsh companies to be insular and have a rather inward-looking approach to business in Wales,” adds Meadows. “We forget that the US is the equivalent to the whole of Europe. Two states could be as different as the UK and Poland. That’s why it is vital to have people on the ground.”

 

 

He also recommends using the Assembly Government’s International Business Wales arm, but notes that it is in line for changes under the Economic Renewal Programme.

 

 

 

Meadows sees the US as particularly precious when dealing with non-American companies. “There’s all the measures to prevent international trade in arms and moves to counter terrorism,” he says.

 

“The threat of terrorism affects so many facets of business over there that you would hardly even consider. Information sent on email, for instance, must be contained in the US and not elsewhere. That can hamper business growth.

 

“There’s also the Made in America movement designed to protect American jobs, which means your unique selling proposition has to be incredibly strong. You really have to make people sit up and look.”

 

Costs, too, can prevent companies breaking into the US. Steve Evans is sales director of Floating Offices in Cardiff, which provides custom-built water-borne office spaces.

 

“We have had interest from the US but the cost of shipping a unit is prohibitive,” he says. “Compared with two years ago, the number of ships crossing the Atlantic has halved; they go a lot slower to conserve fuel and cost up to five times as much to transport goods. We would have to be pretty certain of our market before we could even ship the moulds to make the units there.”

 

Another barrier is the cultural difference between doing business in Wales and making it happen in the US, which companies often fail to recognise.

 

“Don’t underestimate those differences,” says Frank Holmes, partner at Gambit Corporate Finance. “The amount that gets lost in translation between the two countries is staggering. We tend to think the language is the same and that our relationship goes back hundreds of years, but the way companies operate in the US is very different.”

 

Holmes believes that protectionism in the US market will become more marked in the near future: “The UK is far more likely to buy American products than the other way round,” he says.

 

He urges companies to do their research and focus on vital unique selling points. “Then find the right distribution channels,” he says. “Find an American partner who knows what you are trying to sell. You could even consider acquiring an established player with all the right credentials, a readymade customer base and an American workforce. Short of finding quality distribution with experts who get your products right to market, that’s the way I’d typically support.”

 

 

 

 

 

 

In many ways, suggests Holmes, there’s a fear in corporate UK of going it alone in the US. “After all, there’s a graveyard of companies that have been unsuccessful, because they’ve not done their research and not invested in the right partners.”

 

 

 

Kelly Waters, president of US-based advisory firm Waters Group Global, adds: “Knowing who the competition is, how they are positioned in the market and what their strengths and weaknesses are is critical. I advise trying to talk to your potential customer long before you are actually trying to sell to them. Only then will you know what the primary sales drivers are and where to place resources.”

 

 

 

 

She suggests studying websites, sales materials, advertising and tradeshow exhibits. “To determine what American citizens and corporations are buying, pay attention to what they are paying attention to,” she says. “Pay attention to what is on the cover of Time and Newsweek magazines. What’s being written about in our in-flight magazines? What stocks are performing well?”

 

 

 

More technical research can help, too. “Do your own assessment of risk,” says Sara Stacey, regional international commercial manager for HSBC. “Know what foreign exchange risks there are, because rates can be extremely volatile. And talk to advisers who have expert knowledge of the markets. The US is one of the most open and diverse markets so there are opportunities.”

 

 

 

So where are the growth areas for Welsh companies? Waters tips energy conservation, but: “Not in the same way as you are doing it in the UK. There are different drivers at work. We are also behind most of Europe when it comes to wide use and acceptance of in-home energy-saving products.”

 

 

 

She also suggests defence, where there is a long-standing alliance between the US and UK. “And, always, any service or technology that can evolve something that we already have an established market need for. A better mousetrap, so to speak.”

 

 

Share on:

Subscribe to receive our latest sector bulletins, thought leadership articles, deal completion reports and newsletters.

Read another insight

Gambit Corporate Finance LLP, has experienced a busy period in the past fortnight, announcing 4 transactions across the UK with...
Cwmtillery Glass Centre (CGC), one of the UK’s largest independent manufacturers of insulated glass units and toughened glass has been...
Trusted Data Solutions (TDS), the foremost expert in legacy data management, has sold its Communications Compliance Practice to Kerv. The...

Search Gambit Corporate Finance