Expand Across the USA - Take a Bigger Piece of the American Pie
By [http://EzineArticles.com/expert/Ram_V_Iyer/1473838]Ram V Iyer
Business growth is always a goal of many medium-sized companies and SMBs (small and medium sized businesses). These days that elusive target butts heads with a sluggish economy that is notable for its false starts and mixed signals. If a company offers a good product or service and is well-managed, the bottom line grows as a natural by-product in a robust economy. But in these lean days of commerce, a firm has to go back to the four basics to achieve significant market growth: sell more to existing customers, find new customers, create new products/services for existing customers or find new customers for new products.
Here, we are going to focus on a midsize company's efforts to find new customers. One of the easiest ways to accomplish this is to take a firm's products to a new market. A great deal of attention is given to finding overseas locations to sell to. The United States Commerce Department is providing a great deal of support to this effort and it has paid off for some companies. After all, the world represents 95% of the available customers for industrial and consumer products. But the reality is that many SMBs and midmarket companies do not have the resources, knowledge or the will to branch out into international trade. Add to this the lack of patience to realize a return on exporting, and this quickly becomes unviable for a company looking for a quick boost in sales.
So, if a company does not want to go to other countries with their wares, they have to look at expanding at home - in America. And it is not like this is a second-best option to consider. After all we are still the largest economy in the world. The American GDP (gross domestic product - the total value of all goods and services produced within the country) is a whopping $15trillion. The American GDP is almost as much as the sum of the GDPs of the next three countries. For many midsize companies that do not have the resources or market knowledge to enter foreign lands, expanding across America is the best option - expand at home and take a bigger piece of the American pie! Developing part of the company's strategic plan for such an endeavor is easier than looking to trade internationally. By directing their efforts to enter new markets regionally or nationally, the company can more easily obtaining market data, deal with banks, and operate in familiar territories. Please look at the table listing the GDP of the top 15 countries in the world. Which country would you like to build your business in (and know well!)?
Any business that seeks to expand requires demand for its products/services (a market), infrastructure (equipment, tools, buildings, etc.), skilled labor, a clear business model on where and how to make money in the business, and finally the capital required to fuel all these elements.
Let's look at a small firm trying to grow its business. The American Yogurt Company is based in Princeton, New Jersey which has started a new rage after Greek yogurt called American yogurt. It runs a small factory that produces its yogurt for grocery stores and its own yogurt shops that do a brisk walk-up business. The management team realizes it has reached its maximum impact in the New Jersey area and it is time to move to other locations. Two plans are constructed and the executive board has to decide which way to go.
The first plan looks at taking the company to Western Europe and other European countries where there is considerable buzz about the new American yogurt. The potential customer base is enormous for both wholesale and retail but the obstacles to starting this process are daunting. The company would be dealing with a new business culture that they would have to operate in. This includes understanding a new culture, dealing with distance and across time zones, regulations, suppliers and channels in a new land, etc. In addition, the corporate business model that works in New Jersey would have to be greatly altered to function in these new countries. A decent investment would be needed to obtain pertinent market data and to do the actual marketing. There would be some real issues with finding local personnel and obtaining the necessary financing. Securing new capital is hard enough in the best of situations for a midsize company, but trying to get local banks to back such an overseas effort is harder
The other plan is to take the company into the New England and Chicagoland markets with new factories and stores. Research shows that grocery stores would be very receptive to selling American Yogurt's products and that the company's walk-up stores would also do well. Undertaking this process would be easier to implement for the company. It is simpler to determine the business incentives that both areas offer to figure out the best locations for factories and shops. The business model that has proven successful in New Jersey would be easily adaptable to the new metro areas within the United States. Many current suppliers can still be utilized with the new locations and the HR people can find local workers using current hiring practices. Market data is more easily available and understandable. Banks will be more comfortable lending money when the implementation risk is lower.
There are also a couple of great bonuses to following the domestic growth option. The management team is not going to have any cultural differences dealing with folks in NE or Chicago. (OK - not many cultural differences anyway - but it is a heck of a lot easier than learning and dealing with the Brits or the Germans or the French - you get the point). You can chitchat about football and baseball during meetings and the wind in Chicago or the New England winters. There is much in common. The other bonus is that American Yogurt is adding jobs and economic growth to locations right here in America - not in Europe.
Whether a company is manufacturing yogurt, car parts, or widgets, this example holds largely true. It is a lot easier to find new markets in your own country than going to an unfamiliar exotic land. Even if a company has a particular industrial niche, the American market is still the biggest economy in the world. And if the market data shows a place in the USA that is worth expanding to, finance experts are going to look at the company more favorably than if they want to set up a factory in Berlin. Reallocation of personnel, management assets, and using the existing supply chain all becomes easier and leads to a quicker increase of profits. Also, have you noticed that companies from countries that are prolific exporters see the US market as being ripe for further expansion. When German companies found markets in Asia slow down, they shifted their focus to increase market share in the US. Why can't American companies (and foreign companies already here) expand within the US market?
A small or midsize company may constantly find they are competing against foreign competition. It is time to use the home field advantage. Cities and states offer incentives to expand into their areas. There are some government programs a firm can take advantage of when establishing new facilities in the US and hiring local workers. America still has a great infrastructure that showcases ease of transportation, communication and the executing financial transactions.
Deciding to take the step of proactive expansion and actually doing it are two very different actions. A handicap many midsize companies have is that while they need to grow and have made the decision to do so, they lack the resources or know-how in carrying it out. By their nature, small and midmarket firms are lean and have a small team of overworked managers operating the business. It is difficult to reallocate personnel resources for such a major undertaking. And, often, there is not enough disposable cash around to bring in consultants to help formulate an expansion plan.
Rather than feeling like they are between a rock and a hard place, there is a new option for a medium-sized company to go to for help and guidance. Our website is a good resource for helping a business easily find the solutions to major business challenges including expansion. A recent report by the CIT group on the midmarket showed that the ability to construct a plan for any phase of operation is a primary issue for midsized companies. We provide a great deal of information and tools for establishing an expansion plan.
Go to the Midmarket Institute's section on growing in America: http://www.midmarket.org/special-sections/expand-across-america for additional content on expanding your company across America.
Ram V. Iyer is the President of the Midmarket Institute, a Princeton, NJ-based organization that focuses on helping midsize companies, SMBs and those that serve them - identifying important challenges and sharing solutions, tools, providers and events to help businesses overcome the challenges. You can reach him at ram (at) [http://www.midmarket.org]http://www.midmarket.org.
Article Source: [http://EzineArticles.com/?Expand-Across-the-USA---Take-a-Bigger-Piece-of-the-American-Pie&id=8232851] Expand Across the USA - Take a Bigger Piece of the American Pie