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Half of American Private Firms Plan to Do Business Overseas Within Next 1 to 2 Years

9/19/2011
A new PwC survey reveals that in the next one to two years, over half (51 percent) of American private companies plan on expanding into overseas markets, and 48 percent already have a global presence.

According to PwC's newest Private Company Trendsetter Barometer, most firms expanding internationally do so to broaden their customer base(80 percent), better serve global clients (43 percent), make up for slow growth in the U.S. (33 percent), want to be where competitors are (26 percent), or want to lower operating costs (24 percent).

The PwC survey captures the views of 236 CEO/CFOs (128 in the product sector, 108 in the service sector) with private companies averaging $278 million in enterprise revenue/sales; and includes giant $300 million-plus firms.

"Historically, companies expanded into international markets to lower their manufacturing and sourcing costs," said Ken Esch, a partner in PwC's Private Company Services practice. "The international expansion we're seeing now is well beyond cost arbitrage. It's about increasing sales and accessing new markets to grow the top line. To achieve those goals, many of our clients are looking abroad, compensating for weakened demand at home."

In general, 74 percent of the companies with a global presence are focused on emerging and fast-growing markets.

Canada, Western Europe and Mexico are the top three markets where these firms have a current or planned presence. About half of these globally active companies plan to, or have targeted, Brazil, Russia, India and China. Two-thirds (66 percent ) of private businesses operating abroad are exploring other fast-growing markets such as Indonesia, South Korea, South Africa, Poland and Turkey (Mexico also is found in this category of "other fast-growing" markets).

Another finding: Surveyed executives also estimate that during this one to two-year timeframe, international sales growth (14.8 percent) will outpace growth from domestic sales (11.6 percent).

The challenges to these expansion plans can be formidable, but not impossible to overcome. The top ones cited by internationally active respondents were: finding the right business partners (68 percent), establishing adequate cross-cultural management (64 percent), and finding sufficient local talent (56 percent).

Other challenges noted included security risks (49 percent), local regulatory requirements (48 percent) and corruption (46 percent). These challenges notably higher by firms doing business in Brazil, Russia, India and China.

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