US COMPANIES SHYING AWAY FROM GOING INTERNATIONAL

Global Trade Magazine,  November 2012

Export container cargo, mainly bound for Northern Europe and Asia, currently accounts for a full 67 percent of the Port of Charleston’s total volume. Credit: Port of Charleston, South Carolina

Nearly three-quarters of US middle market firms that currently sell and operate solely in North America do not intend to expand beyond the region in the next three years.

So concludes a new research report published by the National Center for the Middle Market, a collaboration between The Ohio State University’s Fisher College of Business and GE Capital.

The report – US Middle Market Firms and the Global Marketplace: Should I Stay or Should I Go? – was based on a recent survey of  more than 350 companies in fifteen industry sectors in 45 states conducted by the Economist Intelligence Unit.

Only 7 percent of those “domestic” firms – middle market companies with revenues between $10 million and $1 billion – are currently engaged in overseas expansion with “long-term growth prospects” being the greatest driver of their international business operations, the report said.

The companies surveyed ranged from small exporters to mid-sized manufacturers with overseas operations.

According to the majority of the companies surveyed, international expansion is “risky and expensive” with most of those saying that their focus on their “home market” is a strategic choice and that the costs of expanding abroad outweigh the benefits.

The leading reason given by “domestic” firms that intend to “stay at home” is a conviction that there is no market for their goods or services with the next most common responses being a lack of knowledge about foreign markets and difficulties in finding the right local partners.

On the other side of the coin, 57 percent of the firms surveyed that have expanded beyond North America say that overseas sales have met or exceeded expectations, while a further 24 percent believe that, although below expectations, revenue has been substantial.

International activity helps the business in other ways: 41 percent of respondents say it has made them better competitors domestically, compared with just 14 percent who disagreed.