By Dwight Griesman, Chief
They say you can’t go home again, so why do so many companies try to do exactly that? When the domestic economy isn’t providing the growth opportunities businesses expect, pursuing international markets is a natural strategic decision. Most American companies heading abroad look toward countries that feel familiar: they target comfortable turf like the UK, EU, and Australia. That’s according to the CFOs and other senior finance executives who took part in a recent survey conducted jointly by High Street Partners and our partner
The results indicate that American executives continue to feel more comfortable expanding into developed economies similar to that of the U.S., where doing business tends to be simpler. But executives also expressed an increasing interest in expansion into emerging economies. As the
Outside of North America, respondents had the most experience doing business in the European Union, where only 13% considered themselves unfamiliar with the business environment. They also found the EU to be the smoothest place to do business outside of North America, with 41% indicating that it was “relatively easy."
Latin America represented something of a middle ground, with a large percentage of respondents, 40%, saying they didn’t find it either particularly easy or particularly difficult to do business there. In addition to physical proximity, lower linguistic and cultural barriers help ease some of the pain of doing business in this part of the world.
In the rest of the world — Eastern Europe, Asia, the Middle East, India, and Africa — the majority of respondents either found it difficult to operate or were unfamiliar with the business environment.
Of these parts of the world, the respondents were most familiar with China, and their experiences there offer a preview of what businesses can expect when they enter other emerging markets. The bad news is that more respondents, 44%, considered China a more difficult place to work than anywhere else in the world. Other emerging economies also present significant challenges with rapidly changing regulations, differing cultural and business mores, and the relatively greater instability that comes with fast developing markets.
Nevertheless, American businesses are going to have to become more adept at doing business in these parts of the world if they hope to compete in the global marketplace. Almost 6 in 10 respondents indicated that entering new markets in emerging economies would be moderately to critically important for them in the next three years.
The same factors driving American businesses to expand outside of the U.S. will increasingly push them to reach outside of their Western European comfort zone. While Europe feels comfortable to U.S. businesses, the growth outlook there is underwhelming. It’s those less well known regions that will provide the dynamic growth and increasing revenues that companies desire. Purchasing power is shifting to Asia, while the resource wealth of Africa — where an overwhelming 85% of respondents find business difficult or don’t know the local terrain — will make that continent an important frontier for business expansion.
At the end of the day, American executives are going to have to get comfortable being uncomfortable as they expand their horizons to include countries that look less and less like home. The benefits are considerable, and the risks controllable through
Want to dig deeper into the survey findings? Download the full report here.
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