With the largest economy in the world, and as the UK’s largest single export market, the US presents an abundance of opportunities for UK exporters. However, the market is also the world’s most competitive. Here, we have a look at why UK businesses should focus attention across the pond and the challenges each may need to overcome when exporting to there.
Why should UK businesses look to the US as a market for export?
For ambitious UK businesses, we believe that exporting should be a key part of any growth strategy. Santander’s own research has shown that businesses that export are four times less likely to default in times of economic turmoil than their purely domestic counterparts and businesses who invest in overseas markets achieve higher growth rates than those who don’t.
The US is a great choice for UK exporters, both for those who are looking to export for the first time as well as those who already have a presence in Europe and want to spread their international wings. Both countries are culturally very similar and speaking a common language can facilitate international operations. The US economy is the largest in the world and the size of the market means there is high consumer demand. The economy has seen growth of at least 1.8 per cent since 2011 and a transparent and predictable government means relative stability in the market.
Also, British products are also well known and respected in the US, just as they are in other parts of the world, the power of “Brand Britain” can often be underestimated in the UK.
So the opportunities are there, when is the best time for SMEs to start thinking about international expansion?
There is no one rule that will work for all when it comes to exporting. It is important to note that exporting is an investment. A business should be successful in a domestic market before looking to expand abroad. The benefits of exporting can be vast but are not always immediate so businesses need to ensure that teams are prepared to invest the time and money associated with international operations.
In terms of picking the right moment, sometimes exporting will arise as a natural progression for a business due to foreign demand, whereas for others, overseas expansion will be part of a strategic growth model.
The right time will depend on the size of the company, the sector operated in and the demand for the product, but in general terms a company needs to make sure it has considered several aspects before stepping onto the world stage – and this is where preparation is key.
Preparation is vital for all stages of international expansion, from the very early stages of identifying the markets with the highest demand for their products or services, through to calculating shipping costs and understanding customs and labelling rules and then right through to understanding how you will distribute your products and identify and connect to potential customers. Visiting the market is a must, and trade fairs are a great way to showcase products and to research what else is already available in the market.
Read more about exporting:
- Top 10 UK exports
- 8 quirky exporting rules you need to be aware of
- Working towards the government’s 2020 export target starts now
What do you think holds some companies back from exporting to the US? And how can these issues be overcome?
Exporting to any new market can be a daunting process, and we have identified the two biggest factors that hold back businesses are lack of knowledge, and fear. Understanding the local market and all the particularities that come with it can be difficult. Local tax and legal environments are often complex and without the right knowledge it can be hard to know where to turn. There is also the fear factor, how to ensure you receive payment for your goods, knowing which partners to trust and connecting to potential customers are just a few examples.
Specifically to the US, one of the most common obstacles is the sheer size of the market. Whilst a large market means high consumer demand, it can also lead to market saturation. On top of this, geographically, the US is almost two and a half times the size of the European Union, so a business cannot expect to conquer the whole market from day one.
This means that choosing your entry point is crucial, for example, a company who exports fertilisers may want to focus attention on the top US agricultural states of California, Iowa, Nebraska or Minnesota – whereas a biotech company would probably be better placed looking at the east coast – Massachusetts in particular. This is again where preparation and research come into play.
There are several places to find support, and Santander is focused on helping businesses to overcome all of these obstacles. We have a partnership with UK Trade & Investment and the Santander Group has also created a series of International solutions: The International Desk Network operates in Santander’s 14 geographies, including the USA and the UK and can facilitate businesses in the account opening process when looking to establish abroad.
Santander has also created the Santander Trade Portal, an online resource where companies can find information on every aspect of exporting. The Trade Portal can supply you with the contact data for over 200,000 importers and exporters as well as the details of over one million private and public tender opportunities and 25,000 market reports categorised by sector.
Additionally, the Santander Trade Club is an online community of customers from across the Santander footprint which aims to work against the fear factor that I mentioned earlier, as businesses know that the members are all Santander customers.
Whilst there are challenges associated with exporting to the US, the World Bank ranks the US as the 7th easiest country to do business with, so UK businesses should not be deterred from exploring the US as an export market. With the ability to support businesses on both sides of the Atlantic, Santander is ideally placed to help UK businesses achieve their international ambitions.
In the coming months we’ll also be hearing from Santander about exporting to Brazil, India and China – so stay tuned for more expert advice.