BY WALT BOYES
American companies typically do less than 25%, while companies in Europe and Japan and Korea do on the order of 60% of their sales for export. Really few companies who could sell in North America do so. For example, there are many companies in India that make flow meters. Only two of them consistently sell into the North American market.
The North American Market is huge, so why aren’t more offshore companies here? In the automation and controls market segment, for example, the North American market produces about 35% of the world wide revenue for the segment. This is true for most market segments. So why don’t more companies in Asia, or Africa, or even Europe, market their products in the US and Canada?
Remember, the rest of the world is metric and North America is predominantly not. This impacts pipe sizes, flanges, screws, overall measurements, terminal connections, and a host of other issues. For some companies, this is too big an issue, and for many other companies, they simply act and plan as though it doesn’t matter, and their North American sales stall and suffer.
Second, business often operates somewhat differently in North America than it does in various other parts of the world. Selling and marketing styles, techniques, and campaigns that work well in, say, Germany, don’t work well in North America. Even the size of paper is different in North America, and the holes punched in catalog cuts are usually in the wrong place to fit into binders, and the binders themselves are the wrong size to fit on North American catalog shelves, emphasizing the product’s “foreignness.”
Many companies outside of North America simply are not willing to shoulder the expense of being able to redesign both their products and their literature to cope with the idiosyncrasies of the North American trade area.
Another very important issue is the cost of penetrating the North American market. I know many companies who, when told what it ought to cost, try to set up some sort of distribution agreement with a US or Canadian company. Sometimes the “exclusive US distributor” is somebody’s brother-in-law or cousin. Why do companies do this? Because it is cheap, and if nothing happens, the company isn’t out much money. Of course, the bad news is that almost always the “exclusive distributor” fails and it is a disaster. This reinforces the original notion of the offshore company that they should just give up the US and Canadian markets because they are too small a company, or it is too much trouble.
Some more adventurous companies have initially penetrated the US and Canadian markets by making private-label and alliance deals. These often turn into full presence in the North American markets, complete with existing customer base.
This strategy is very useful to those companies who are world-class producers, but who are challenged by poor currency conversion rates. Some companies are ready, willing and able to produce ANSI standard components, parts and products, but they cannot afford to field their own sales organization in North America, because it is too expensive to do it without financing from North America in dollars. Companies in India, South Africa, Israel, Brazil, and Eastern Europe come immediately to mind. For many companies, the fear of finding out that it isn’t financially feasible to move into North America keeps them from actually finding out.
You don’t have to learn to build the watch. A simple, easy and inexpensive feasibility study can tell you how to make an informed decision to proceed or not. What you really need to know is how saturated the North American market is for your products, and how distribution for your type of products works now. You need to identify key “showstoppers” that would immediately prevent you from proceeding, like too many competitors, difficult to penetrate distribution, and possibly standards issues. You don’t need a full dress market penetration study to decide what to do. Almost any company can afford this kind of study.
Commitment is the key. If you want to market in North America, you must be committed to doing it for the long term and you must do the things that are necessary to have a marketable product and a relevant sales organization, including being flexible and adaptable to different strategies than you currently use.
If you are interested in talking specifically about your global sales situation, call or email us so we can set up an appointment.