One would certainly come to that conclusion after reading the Schumpeter Blog in The Economist January 12, 2017 – America Leaves Foreign Firms Out In The Cold. However, I would respectfully disagree, not with the facts described in the article, but with the contention that foreign firms can’t succeed in the U.S.
The article begins with a description of a litany of foreign businesses from various countries that have failed when entering the U.S. because of regulations, overpaying for assets/acquisitions, weak infrastructure, “septic politics”, a hodge-podge of local rules and regulations, and more. The article goes on to describe the promise of the U.S. market – “insatiable consumers and dazzling technology”.
It then cites three fundamental trends responsible for the declining success of foreign businesses in the US marketplace:
- Technology – U.S. consumers demand technology and U.S. firms dominate in its delivery
- Concentration – U.S. market is highly concentrated after decades of mergers and acquisitions and even a well-established foreign firm cannot easily break through
- Litigation – U.S. market is a minefield of lobbyists, regulations, and legal actions that dramatically increase costs of doing business and risks associated with it
I believe these are not new fundamentals, even though they may have strengthened over the years. The U.S. market has always been challenging and complex largely due to the size of the economy, the characteristics of the labor pool, and the complexity of labor regulations and tax laws. Regional and local conditions vary widely across the U.S. – a foreign company can fail in New York but be wildly successful in the San Francisco – Silicon Valley area by failing to anticipate regional and local differences.
Foreign businesses need not suffer the costs and delays associated with being uninformed or under-prepared for the constellation of laws, regulations and local market standards that differ state to state and often city to city. Instead of viewing the numbers in The Economist as a harbinger of failure, use them to knowledgeably plan and execute your successful entry to the U.S. market. A local country consulting CFO can work with the home office or with the foreign entrant’s local team to customize and, once approved, execute a market entry plan. Consulting CFOs have established relationships with bankers, attorneys, auditors and specialty service providers that will expedite your entry and develop finance, accounting, human resources and general administrative processes for scaling your company as it evolves and grows.
It is not that the U.S. is hostile to foreign firms as much as it has its own unique rules, regulations and culture; with significant regional diversity. Accessing local expertise will likely turn the negative numbers described by The Economist in your favor.