In the last 3 years, it has become commonplace for German technology companies to expand to the US.  With the current downturn, many of these expansions have not been fruitful, and the pendulum has swung in the other direction.  This is testament to GBC’s experience in which expanding into the largest and most competitive market in the world needs patience, careful though, and a commitment to last short term market swings.  Based on statistics and experiences, to establish a viable business in the US will take between 2-3 years. After this time frame, the local business should be self-sustainable.

In working and observing German companies entering the US market over the last decade, there are some common themes that stand out.

• Companies often lack a clear strategy on market entry that can be executed against.  This strategy needs both tactical (short term) and long term components
• International subsidiaries need to be treated as independent businesses, with their own profit and loss statements, their own business plans, and a financial commitments for the first few years from HQ.
• There needs to be a consensus among the stakeholders: executive team, product unit heads, engineering, US team on the goals and strategies adopted.  Everyone needs to be on the same page.
• For the US market strategy to be successful, it can’t be a poor second in priorities.  Products will need to be modified and localized, marketing budgets invested.  A US market expansion must be a priority for any organization.

A company entering the US market should, in its strategic decision making and planning process, answer the following primary questions.

• What are the primary reason to enter the US market?
• Opportunities that have been identified till date?
• Do you have enough information on the US market to base your decisions?
• How do you need to change your operations to effectively execute in US, and manage its effects on German operations?
• Does your company recognize the “business culture” differences between Germany and the US?
• How do you execute against a plan?

What are the primary reason to enter the US market?
The following are some of the reasons that are prime motivations to enter the US market.

• Your customers’ global presence forces you to serve them on a global scale?
• To attack the competition as they are coming to the German market as well?
• The Internet has created a global market providing all kind of competitive information to your clients?
• Penetrating a market where the customer base is 3 times bigger than Germany?
• Access to new technologies to gain a head start against local competition?
• To find additional local funding sources?
• To build strategic alliances and technology partnerships?

In any case, all of these are valuable reason to enter the US market. Identifying the primary reasons are important, as some of them require a different strategy and actions.  While one or more reasons suffice, these must drive strategy.  A difference between motivation and strategy will lead to expectations not being met.

Opportunities that have been identified till date?
Who are the customers, partners, channels that are important, and have they been identified?  Are you aware of the differences between them and similar entities in the German market? Depending on the product offerings it is very important to recognize that your customer base might have different requirements (price, features, services) than what you have experienced in your own country. Looking for US customers that are similar or even equivalent to your existing one is efficient and most promising. Identifying the best opportunities and the requirements needed is very crucial to the success.

Identifying opportunities should be done with market analysis and a clear market segment to seek the “sweet spots”.  Too often, opportunities are based on a flying business visit, a one-off customer conversation, personal experiences of the executive team, an article in a trade journal, or an e-mail/phone request from one potential client.

Do you have enough information on the US market to base your decisions?
80% of the success in entering the US market is based on preparation – the market must be researched, analyzed, segmented, and the opportunity quantified.  While this is done as a matter of course domestically, often in entering the US market the information is not exhaustive – as sources are different, market research can be a time consuming market, and there are important regional differences.  This can lead to important decisions not being taken correctly.  For example, a retail electronics product in Germany may not necessarily be a fit into the US market.

A decision on entering the US market, and the correct strategy in doing so, must come from a variety of sources – internal and external.   Internal sources, from product managers, international sales manager, account managers, marketing departments, and executives, brings a unique perspective on the industry.  External sources range from market research and investors to focus groups.  Most importantly, external sources must incorporate perspectives that is local and knowledgeable of the US market.

The execution in the US is effected by operations in Germany.  Vice versa, a US expansion effects operations in Germany.  How do you need to change your operations to effectively execute in US, and manage its effects on German operations?
Some examples are:

• Are product units and engineering committed to supporting changes to the product required by US customers?
• Are staff committed to staying late to answer calls from your US subsidiary?
• How do you propagate technical information to the US subsidiary in English?
• How does US pricing (commonly lower than Germany), effect prices and gross margins in Europe?

Does your company recognize the “business culture” differences between Germany and the US?
American culture, especially “pop” culture is very familiar to people in Germany.  However, there are important differences in business culture, customer expectations, and partnership expectations between the two countries.  For example:

• Business communication is fundamentally different.
• Product delays are a more important concern that precision engineering.
• Return policies in the US are more flexible.
• The concept of 24x7 support and customer availability is ingrained in US businesses.
• Customers in the US have a different “feature/price” benchmark.
• Design and engineering features have different reactions in the US.

How do you execute against a plan?
Execution is the last, and most difficult bridge to cross.  The best of strategies may run into difficulty if execution falters.  Execution is not a “black science”, but needs several elements to fall into place for its success.  The people executing must know the US market, they must be able to communicate with Germany, and must have the complete support of the executive management.

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